October 15, 2010—Group purchasing organizations (GPOs) have made their business practices more transparent in response to recent congressional criticism, but the effects of those changes vary among the organizations, their customers and their vendors, according toa new Government Accountability Office (GAO) report.
Many hospitals and other health care providers buy drugs through GPOs to obtain lower prices. Most covered entities enrolled in 340B, however, cannot use them for outpatient drugs. Rural hospitals just added to the program are perhaps the most noteworthy exception.
The report was commissioned by Senate Finance Committee Ranking Member Chuck Grassley (R-Iowa) and released earlier this month. It found that GPOs have improved their practices in the wake of concerns about anti-competitive behavior, but the results of these changes vary.
Congressional Scrutiny
Congress raised concerns in 2002 about excessive GPO contract administrative fees, limiting contracts to one vendor and providing discounted prices for groups of products. The report found that average vendor fees paid to GPOs in 2008 were between 1.22 percent and 2.25 percent of customer purchases. Although the report found that GPOs revised their codes of conduct to create more transparency, most customers and vendors did not comment on the revisions’ effects.
Grassley, meanwhile, responded to the report by saying he had more questions for GPOs, and the Republican staff of the Finance Committee released its own report based on information provided by the organizations. The minority report also addressed concerns about the value of GPOs. “At issue is not the existence of GPOs but rather the incentive system under which they operate and whether or not they, in fact, achieve savings for the health care system,” the report said.