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A group purchasing organization (GPO) is an entity that contracts with healthcare providers — such as hospitals, nursing homes, and home health agencies — aggregates purchasing volume and uses that leverage to negotiate discounts with manufacturers, distributors, and other vendors. We find out on this issue of the McCullough Report that GPOs commonly place executives from health systems on their boards in order to buy their complicity in a pricing scheme that leads to increased per-unit costs of hospital supplies that are passed on to the consumer.

To make matters worse, GPOs use tactics to squeeze out small suppliers of medications and intentionally create drug shortages of commonly used generic agents in order to replace them on the formulary with more expensive options. Since GPOs make a percentage of the sale of products, their overall revenues increase with these manufactured drug shortages.

Physicians Against Drug Shortages indicates: “These massive shortages are simply unacceptable in what is supposed to be a free market economy. To end this crisis, which was entirely preventable, we believe it is essential to focus on the underlying cause, not the symptoms. Having thoroughly examined this issue, we’re now convinced that the anticompetitive contracting practices, kickbacks, market manipulation, and other abuses of giant hospital group purchasing organizations (GPOs) are the root cause.

This buyers’ monopoly, which controls the purchasing of an estimated $250 billion in goods annually for some 5,000 hospitals, has made it unprofitable for many generic drug companies to safely manufacture these inexpensive, low-margin drugs. In a nutshell, their “pay to play” business model has badly damaged a market that for decades could be relied on to supply lifesaving generic drugs to patients worldwide.

It is no coincidence that virtually all of the drugs in short supply are sold to healthcare facilities through GPO contracts, rather than directly to consumers at retail pharmacies or pharmacy benefit managers (PBMs). The GPOs have decimated the injectables market by undermining the laws of supply and demand that govern virtually every other U. S. industry, from autos to zucchini. Indeed, these cartels have stifled competition in the entire hospital supplies industry, including medical devices, capital equipment, and other supplies, from catheters to garbage bags and surgical towels.

There is extensive documentation on these questionable practices, focusing largely on the role of GPOs in undermining competition and innovation in the medical device industry in the years leading up to the drug shortage crisis. This material includes four hearings before the Senate Antitrust Subcommittee; investigations by the Government Accountability Office (GAO), the Office of the Inspector General of the Department of Health & Human Services, and the Connecticut Attorney General’s office; media reports, including a prize-winning 2002 investigative series in The New York Times entitled “Medicine’s Middlemen”; numerous successful antitrust lawsuits filed by entrepreneurial medical device firms against GPOs and/or their dominant supplier partners; independent academic research, and even a book entitled “Group Purchasing Organizations: An Undisclosed Scandal in the U. S. Healthcare Industry.” Many of these documents appear on www.physiciansagainstdrugshortages.com.”

Michael Levison is a courageous consultant who spent time on the McCullough Report to blow the whistle on this corrupt and collisional development in healthcare delivery. So, the next time you ask why is your hospital bill so expensive, ask what GPO was used to crank up the charges in order for them to get a bigger take off their contracted percentages.

So let’s get real, let’s get loud; on America Out Loud Talk Radio, this is The McCullough Report!

The McCullough Report: Sat | Sun 2 PM ET – Internationally recognized Dr. Peter A. McCullough, known for his iconic views on the state of medical truth in America and around the globe, pierces through the thin veil of mainstream media stories that skirt the significant issues and provide no tractable basis for durable insight. Listen on iHeart Radio, our world-class media player, or our free apps on Apple, Android, or Alexa. Each episode goes to major podcast networks early in the week and can be heard on-demand anywhere in the world.

https://premierinc.com/about/our-people/board-of-directors

https://www.physiciansagainstdrugshortages.com/our-mission-1.html

https://www.linkedin.com/in/michael-levison-1391081a/

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