Yielding some market power in the fight to control healthcare supply costs, the group purchasing industry said it would use with greater discretion controversial contracting tools such as sole-source agreements, product bundling and committed volume. And, when the potentially money-saving but monopoly-inducing methods are used, the industry pledged to take extra steps to ensure that innovative technologies aren't blocked from the market.
The concession didn't go far enough for Sen. Herbert Kohl (D-Wis.), who as chairman of the Senate Judiciary antitrust subcommittee convened a hearing on the industry, in particular the influence of market-dominant GPOs Premier and Novation. The panel imposed a July 30 deadline for the industry to clean up its practices or potentially face remedial legislation. "Sen. Kohl was disappointed and did not think (the industry proposal) went far enough," Kohl's spokeswoman said. "He is continuing to work on the issue."
The hearing was convened in response to complaints from small medical device manufacturers.
The board of directors of the Health Industry Group Purchasing Association, Washington, unanimously adopted the final draft, which was released today. The trade group described the code as "tough and comprehensive" but said it was meant as a floor for ethical conduct rather than a ceiling.
Meanwhile, sources at Premier and Novation told Modern Healthcare's Daily Dose that the groups are still negotiating the language of their own documents to address questions about business practices with more specificity. The two GPOs, which have taken the brunt of the criticism in recent months, endorse the industrywide code as well. "We are committed to meeting the letter and spirit of every principle in the code," Premier Chairman and CEO Richard Norling said in a written statement.
For the most part, the final industrywide code expands somewhat a preliminary draft submitted to the subcommittee in June. Key elements include ways to eliminate potential conflicts of interest, ensure open communications between GPO members and vendors, and establish guidelines for using contracting tools such as sole-source agreements.
Falling short of prohibiting GPOs from holding equity interests in participating vendors, the code specifies that the investment must demonstrably benefit the GPO's members by creating a source for an otherwise limited product or service. In addition, the GPO must fully disclose its interest to its members and cannot obligate members to purchase goods or services from the vendor.
As for enforcement, HIGPA said it would require its members to certify annually their compliance with the principles of the code. Incorporating a suggestion from small devicemakers, the code requires GPOs to appoint compliance officers responsible for overseeing its implementation. HIGPA said it would publish an annual report on compliance and create and support a Web-based directory open to all vendors of healthcare products and services.
Funding for the initiative hasn't been determined, a HIGPA spokesman said.
At deadline the Medical Device Manufacturers Association had received a copy of the document but had not had time to analyze it, the group's president, Larry Holden, said.