If medical device manufacturers had their way, hospital group purchasing organizations would be little more than paper pushers, shuffling contracts between hospitals and vendors with almost no influence over the array of choices available to their hospital members.
GPOs would have to shed such mainstay practices as bundling products under one contract and awarding sole-source contracts. Their financial sustenance-the administrative fees charged to suppliers-would be severely restricted if not eliminated. And GPOs' marketing departments could shutter their doors in light of the fact that GPOs could no longer promote one product or vendor over any other that is also under contract.
Hospitals would have plenty of vendors from which to choose: GPOs would be compelled to contract with at least three bona fide vendors for every product offered to member hospitals, and they could not show any preference for any of them.
All that is judging from a proposed code of conduct that medical device manufacturers submitted last week to the Senate Judiciary antitrust subcommittee in answer to a draft code the GPO industry submitted earlier this month (June 10, p. 8). After years of complaints, the device industry has found an ear on the Senate panel, which ordered the GPO industry to remedy what it considered questionable business practices by formulating a code of conduct by July 30 (May 6, p. 6). Small device manufacturers charge that GPOs' and large suppliers' power, achieved through GPO consolidation over the past decade, is keeping innovative products from the marketplace.
The code, which was coordinated by the Medical Device Manufacturers Association, Washington, on behalf of more than 140 dues-paying members, also calls for a zero-tolerance policy on conflicts of interest involving vendors and GPOs, employees and board members. In a separate letter to Senate Antitrust subcommittee Chairman Herbert Kohl (D-Wis.), the MDMA also questioned "the ultimate efficacy" of a voluntary code of conduct for the GPO industry without some kind of " `enforcement' power through statutory direction." Also, the safe harbor completed by Congress in 1991 to immunize the GPO industry from the Medicare antikickback statute has run its course, the MDMA said.
"These guys have been given special protection from Congress. Because of that, they should open their books and live in the light of day," said Larry Holden, president of the MDMA.
The federal government plans to thoroughly review the antitrust safety zone that allows GPOs to amass hospitals' buying power to broker discounts. In a June 5 letter to Kohl, Federal Trade Commission Chairman Timothy Muris reported that he has ordered his staff to undertake a timely examination of GPO practices with an eye toward seeing if the antitrust safety zone as written in 1994 "adequately addresses existing market conditions." The letter, a copy of which was obtained by Modern Healthcare, was in response to Kohl's April 30 request that the FTC and the Department of Justice re-examine their joint policies that created the exception.
The MDMA said the draft submitted by the GPOs was "woefully lacking in addressing patient access to vital medical technologies."
The Health Industry Group Purchasing Association, which has coordinated efforts on the GPO side, responded in a written statement that healthcare providers are the best judges of their business practices-"not vendors, trade associations or other special interest groups.
"HIGPA's desire is not to pass judgment on specific business models but rather make certain that providers have the information they need when making such judgments."
Staffers for the Senate subcommittee declined to comment until July 30, when the 90-day process ends; and, presumably, they will complete a GPO code of conduct.