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GPO Initiative Fails to Advance Medical Technology Industry
Jul 15, 2005
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According to a statement from the Medical Device Manufacturers Association (MDMA), a so-called “voluntary initiative” intended to forestall congressional action that would improve patient care through access to innovative technologies, won’t solve fundamental problems in the hospital supply marketplace.

The “Healthcare Group Purchasing Industry Initiative” purports to offer new standards of transparency and ethics in the business practices of certain large Group Purchasing Organizations (GPOs). These GPOs have been the subject of a 3-year investigation by the Senate Judiciary Antitrust, Competition Policy and Consumer Rights Subcommittee, and several investigative reports by The New York Times. The investigations focused on questionable contracting practices, possible kickback arrangements, and denial of access to innovative medical technologies.

MDMA Executive Director Mark Leahey said: "MDMA is eager to see the GPO industry clean up its own act. But this initiative fails to address the anticompetitive and other questionable practices by certain GPOs that have long prevented cost-effective medical technologies from reaching the market. These artificial barriers to innovation prevent health professionals from obtaining the most innovative technologies with which to care for their patients. Congress must act to reform the industry in a meaningful way."

According to MDMA, the GPO initiative fails on four counts:

  • First, it outlines general principles yet fails to establish any uniform contracting practices. Mr. Leahey said: In fact, the proposed initiative actually allows the GPOs to utilize the same codes that the Government Accountability Office (GAO) criticized as insufficient.”

    In its testimony to Congress on July 16, 2003, the GAO stated: "The conduct codes are not uniform in how they address GPO business practices. Moreover, some GPOs’ conduct codes include exceptions and qualified language that can limit the potential of the codes of conduct to effect change. "

  • The initiative contains no independent oversight mechanism. Noting that the initiative’s oversight coordinator has been employed by the nation’s second largest GPO since 2002, MDMA’s Mr. Leahey said: "It will be virtually impossible for a GPO-sponsored coordinator to independently evaluate GPO practices to determine whether they are preventing access to patients or harming innovation."

  • The initiative fails to have any real penalties for non-compliance. "The reason the GPO industry finds itself in the position it is in today is precisely because it has failed to enforce ethical behavior within its ranks," said Mr. Leahey. "The only ‘penalty’ in the initiative is that a particular GPO member of the initiative group might see its membership suspended or refused for cause. Is this really a deterrent to anti-competitive behavior?” MDMA believes that only financial penalties -- including the suspension and revocation of the GPO’s "safe harbor" status from the Medicare anti-kickback statue -- will have any real impact on modifying behavior.

  • Finally, the initiative fails to address the U.S. $1.6 billion dollars in excess fees collected by six GPOs over a 3- to 5-year period. Two recent Department and Health and Human Services Office of Inspector General reports found that many GPOs withheld hundreds of millions of dollars from their member hospitals, MDMA said. Furthermore, the majority of those hospitals receiving monies did not accurately reflect these funds in their costs reports to Medicare.

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