Fringe elements within the medical device community with a direct financial interest in attacking group purchasing organizations (GPOs) have waged a decade-long legislative campaign against GPOs, during which they have relentlessly tried to generate negative headlines and undue scrutiny for the hospital purchasing partners. Through their efforts, they have attempted to link the
industry to virtually every emergent healthcare crisis, recently including drug
shortages. The below Myth vs. Fact explores some of the unsubstantiated claims
that Physicians Against Drug Shortages and its Executive Director Phillip Zweig have made about their organization
and about group purchasing organizations.
✗ Myth: Physicians Against Drug Shortages is a “grassroots coalition” with no
conflicts of interest or ulterior motives.
✓ Fact: Physicians Against Drug Shortages is
an ad-hoc group of only a handful of individuals with no
apparent experience, training or expertise in supply chain management.
✓ Fact: The Executive Director of Physicians Against Drug Shortages, Phillip
Zweig, has participated in a decade-long campaign against GPOs on behalf
of the medical device industry and trial attorneys who sue GPOs for
settlements. Phil Zweig has implicated GPOs in everything from the rise of the
AIDS virus to the murder of two U.S. attorneys, and has accused two
sitting U.S. Senators of conspiring to cover up widespread corruption.
✓ Fact: The
current home of Physicians Against Drug Shortages on the Internet is a website registered to a plaintiffs’
law firm that sues GPOs for settlements.
✓ Fact: Phil Zweig
has harassed academics whose research yielded positive conclusions about
GPOs in an effort to bully them into recanting their work, and has even tried
to have them disciplined by their universities.
✓ Fact: Phil Zweig
and Physicians Against Drug Shortages have approached a significant number of provider groups and individual
physicians to join their efforts but are unable to grow their group because
of their lack of credibility and baseless claims.
✗ Myth: GPOs are a root cause of
prescription drug shortages.
✓ Fact:
The U.S. Food and Drug Administration (FDA)[1],
HHS and Government Accountability Office (GAO)[2]
have extensively examined prescription drug shortages and identified
numerous root causes and GPOs are not among them.
✓ Fact: Hospira[3]
and Sagent[4],
manufacturers of sterile injectable drugs, have publicly stated that GPOs
have nothing to do with drug shortages.
✓ Fact: The true cause of drug shortages
is manufacturing problems, disruptions and barriers to entry in
getting new suppliers on line when there is a disruption in supply. GPOs are
taking a variety of creative and innovative steps to reduce drug shortages.[5]
✗ Myth: GPO contract practices have made it
unprofitable for manufacturers or otherwise negatively alter the market for
sterile injectable drugs.
✓ Fact: All
GPO contracts are voluntary and a product of competitive market
negotiations between sophisticated parties. All hospitals can purchase off
contract and often do. Contracts can be and are cancelled, and
pricing regularly adjusted. Manufacturers regularly and quickly adjust
pricing of GPO contracts when they experience shocks to production.
✓ Fact: Hospitals use GPOs to aggregate
their purchasing power. GPOs do not manufacture, compound, sell, or take
title to these drugs or any drugs in shortage. GPOs have every incentive to
ensure that patients get the medications they need when they need them. If
there is no product, there is no role for the GPO.
✓ Fact: GPOs do not have the ability—nor
would it be in the economic interest of GPOs—to force manufacturers into
contracts that undermine their ability to deliver product. In fact, GPOs
work vigorously with hospitals, manufacturers and distributors to help maintain
a safe and reliable supply of products for healthcare providers. GPOs are
aligned with their hospital member/clients and incented to ensure that there
are more suppliers and more competition in the market.
✗ Myth: GPOs are allowed to engage in anticompetitive
contracting practices, kickbacks, or market manipulation because of an
“obscure” law.
✓ Fact: GPO cost savings, administrative
structure and business practices have all been thoroughly reviewed by the U.S. Government
Accountability Office (GAO)[6],
Department of Justice (DOJ)[7],
Federal Trade Commission (FTC), the U.S. Supreme Court[8],
the 8th Circuit Court of Appeals[9],
academia and virtually all of America’s 5,000 hospitals.
✓ Fact: All independent, empirical,
and non-industry analyses[10]
of GPOs have found that GPOs deliver billions in cost savings every year to the
healthcare delivery system. GPOs deliver the best products at the best value
to their hospital, long-term care and healthcare provider partners.
✓ Fact: To protect the healthcare
cost savings and efficiencies that GPOs deliver to hospitals and healthcare
providers, and to protect the model under which GPOs had been operating for
nearly a hundred years, Congress codified the so-called GPO Safe Harbor in
1987, as detailed in a recent report by Richard P. Kusserow, former
Inspector General of the Department of Health and Human Services, and
Thomas E. Herrmann, who served in the DHHS Office of Inspector General
Counsel’s Office.[11]
✓ Fact: Former Representative Phil English (R-PA) and former Senators Byron Dorgan (D-ND) and Robert Bennett (R-UT) recently conducted a comprehensive industry review[12] and found that GPOs consistently maintain high ethical standards and business practices that promote innovation, transparency in the bidding process and compliance.
1 FDA Webinar on Drug Shortages, U.S. Food and Drug Administration,
September 30, 2011.
2 Drug Shortages: FDA’s Ability to Respond Should be Strengthened,
U.S. Government Accountability Office, December 15, 2011.
3 Letter from Hospira President Thomas Moore to Rep. Markey et al, November
19, 2012.
4 Letter from Sagent President and CEO Jeffrey Yordon to Rep. Markey etal, November 29, 2012.
5 See, e.g., Group Purchasing Organizations (GPOs) Workto Maintain Access to Product Supply for America’s Health Care Providers,
Avalere Health, 2012.
6 See, e.g., Services Provided to Customers andInitiatives Regarding Their Business Practices, U.S. Government
Accountability Office (GAO), GAO-10-738, Aug 24, 2010.
7 See, e.g., DOJ and FTC, Statements of AntitrustEnforcement in Health Care, Statement 7: Enforcement Policy on Joint PurchasingArrangements Among Health Care Providers (Washington, D.C.: August 1996).
8 See, e.g., NorthwestWholesale Stationers, Inc. v. Pacific Stationery and Printing Co., 472 U.S. 284
(1985).
9 Southeast MissouriHospital v. C.R. Bard, Inc., No. 09-3325 (8th Cir. June 8, 2011).
10 See, e.g., The Impact of Group Purchasing Organizationson Healthcare-Product Supply Chains, Schwarz, Hu and Uhan, Purdue
University Krannert School of Management, 2011; Group Purchasing Organizations (GPOs):Issues and Evidence, Lawton
R. Burns and Andrew Lee, Healthcare Management Review, 2008;
11 Activities and Perspectives of the Office of Inspector General in theU.S. Department of Health and Human Services Regarding Group PurchasingOrganizations (GPOs), Kusserow and Herrmann, 2013.
12 Healthcare Group Purchasing Industry Initiative Seventh Annual Reportto the Public, English, Dorgan, Bennett, 2012.
