GPOs (Group Purchasing Organizations) and PBMs (Pharmacy Benefit Managers) are uniquely shielded by Congressional Safe Harbor Protections, allowing legal racketeering in the United States via a pay to play system that hurts US consumers and their caregivers under the guise of savings.
These entities favor select vendors and suppliers while sidelining competitors, fostering monopolistic, duopolistic, and monopsonistic contracting environments. The “sharebacks” or “fees” they collect lack transparency, and the “strict contract adherence” culture undermines caregivers’ ability to access safer, higher-quality products essential for the well-being of both providers and patients. Some of these even offer their suppliers “Protection from competitive threats and rebidding.” This is extremely anticompetitive in nature.
Such practices hinder a truly competitive market, as evidenced during the COVID-19 pandemic and more recently, when Hurricane Helene disrupted the national IV and sterile injectables supply chain by damaging a North Carolina facility. This recent Baxter supply issue mirrors the situation in Puerto Rico during Hurricane Maria a few years ago.
Baxter International dominates the sterile injection and IV bag market, producing approximately 60% of these products for the U.S., likely holding over 90-95% market share through GPO contracts. With limited alternatives available, and none capable of quickly scaling to meet demand due to restricted access to the healthcare market, smaller, innovative, and cost-effective suppliers struggle to compete. This is just one example of inflated market share protections that hurt competition, cost competitiveness, and supply chain resilience/redundancy.
Although some GPOs and healthcare organizations promote DEI (Diversity, Equity, and Inclusion) supplier initiatives, these considerations often take a backseat when a vendor engages with a GPO-controlled hospital. As a seasoned anesthesia provider with over 20 years of experience, I can attest to being told that purchasing “off contract” is not an option. This is what almost all healthcare providers are lead to believe day in and day out. This contradicts statements from the HCSA (Healthcare Supply Chain Association), which asserts that participation in GPO contracts is entirely voluntary. According to their FAQ (FAQ – HSCA), hospitals and suppliers are not obligated to use GPOs, and many healthcare facilities do purchase “off contract.” In fact, a 2010 GAO report noted that hospitals typically belong to multiple GPOs, which compete for their business. This is rarely true. When it does happen, the process is made extremely difficult for healthcare providers to navigate. Vendors who can’t obtain contracts are severely marginalized under these “Safe Harbors”, and their ability to grow value and jobs within the US are greatly hindered.
We advocate for legislation that safeguards innovative and emerging US companies, empowers healthcare institutions and providers with choice, and imposes penalties on those companies and their employees who block innovative solutions from entering the market.
Currently, the U.S. ranks 11th in healthcare innovation compared to other emerging economies, trailing 10-20 years behind in innovation and adoption despite spending $4.5 trillion on healthcare in 2022—equivalent to $13,493 per person and 17.3% of the GDP, nearly five times our national defense budget (NHE Fact Sheet | CMS).
We propose the following legislative measures, at either the state or federal level, to protect small businesses and innovators seeking access to the U.S. healthcare market:
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Exempt companies earning less than $50 million to $100 million annually from GPO contracting requirements, granting them unrestricted access to all facilities receiving government (tax payer) reimbursements. This can also include traditional DEI businesses (Veteran owned, Minority, Women owned businesses, etc.) by exempting them from the contracting process, thereby allowing them to engage with healthcare companies. Tying this to federal/CMS reimbursement compliance would help with compliance.
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Establish a mechanism for enforcement and conduct comparative clinical trials for facilities benefiting from federal grants and reimbursements when newer products or alternative products are used for patient care. GPOs do NOT conduct comparative product trials, yet force choice of contracted products onto their customers and their caregivers.
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Eliminate third-party GPO corporate oversight personnel embedded in the healthcare supply chain to prevent contract compliance steering.
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Mandate GPOs to rigorously test products they contract if compliance enforcement is to be applied to providers without accessible alternatives, extension of proposal #2.
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Prohibit any clinicians or administrators from GPO-affiliated hospitals from also serving on GPO boards they are a member of to avoid conflicts of interest.
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Hold GPOs accountable for negative health outcomes and CMS deficiencies that result from mandatory contracting practices, particularly when viable alternatives have been proposed and dismissed. This also allows investigations into Federal “false claims” liabilities that may result under CMS’s rules of participation, especially when products designed to improve care provider or patient safety under state and federal laws are ignored and not allowed to contract with the hospital or GPO.
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Ensure transparency by making all contracted products and fee schedules publicly available. If hospitals must disclose cost estimates to consumers under CMS rules, why shouldn’t the costs of goods and services necessary for those procedures also be transparent? Require quarterly reports detailing products by line item, administrative fees, and any incentive payments made by the contracted supplier, vendor, or GPO/PBM.
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Enforce innovation clauses in GPO contracts, allowing hospitals to purchase off-contract when a significantly superior product is available, especially when a product or service does not fit into an existing contract category.
This rudimentary legislative framework is designed to foster a more equitable, innovative, and competitive healthcare landscape in the U.S.