Physicians Against Drug Shortages

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.

FactPhysicians 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.
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.
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;