FOR IMMEDIATE RELEASE
Contact: Mark Leahey
Executive Director, MDMA
202.496.7150
Innovation,
Competition Stifled By Hospital Group Purchasing Schemes
FTC, Justice Department Urged to Curb “Continuing Marketplace Abuses”
WASHINGTON, DC,
September 29, 2003 – Anticompetitive practices in the
hospital supply market by the
nation’s largest “Group Purchasing Organizations”
(GPOs) threaten the quality of patient care by stifling
medical innovation, industry experts told a government inquiry
last Friday.
The inquiry, conducted jointly by the Federal Trade Commission and the Justice Department, focused on a number of issues including product bundling, lengthy manufacturer/GPO sole source contracts, high hospital/GPO commitment contracts, and a decade-old policy statement known as “Health Care Policy Statement 7”. The policy statement was originally intended to shield GPOs from antitrust enforcement action so that they could reduce health care costs through volume purchasing of hospital supplies. Testimony at the hearing called for a revision of “Health Care Policy Statement 7” on the grounds that anticompetitive behavior by some large GPOs has resulted in disincentives to competition in the marketplace, stifled innovation and failure to reduce health care costs overall. Harvard University Professor Einer Elhauge, a nationally recognized antitrust expert, submitted comments for the record in which he called for reform in this area.
Said Hilal, CEO
of Applied Medical Resources Corporation of Ranch Santa Margarita,
California, told the
FTC/DOJ inquiry that “some GPOs have created de facto
monopolies for large medical product suppliers, thusshutting
out more innovative, entrepreneurial R&D companies from
the hospital supply industry.” Hilal asserted: “This
market dominance, coupled with the highly questionable administrative
fees that manufacturers must pay to GPOs in order to obtain
hospital supply contracts, actually has diminished our nation’s
ability to reduce health care costs.”
Friday’s hearing reiterated the antitrust concerns expressed during a two-year investigation by the Senate Judiciary Antitrust Subcommittee. The New York Times also has cast a harsh spotlight on anticompetitive GPO behavior in a multi-part series of investigative reports which began in March 2002.
Lynn James Everard, a hospital supply chain expert, warned: “Our nation cannot possibly contemplate caring for millions of aging Baby Boomers and uninsured people, unless competition and innovation in health care are maximized. Statement 7 fails to do that in the current environment.” Everard is co-founder of the Foundation for Healthcare Integrity.
Underlying Friday’s hearing was a lingering concern about the appearance of kickbacks in the guise of "administrative fees" paid by large hospital suppliers in exchange for GPO contracts, and the almost complete lack of evidence of health care cost savings since GPOs were created.
"This inquiry, following closely the investigation by the Senate Antitrust Subcommittee, demonstrates ongoing concern about continuing marketplace abuses by certain large GPOs that have a clear adverse impact on the health care delivery system and the cost of care," said Mark Leahey, executive director of the Medical Device Manufacturers Association.
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The Medical Device Manufacturers Association (MDMA) is the voice of the research-based, entrepreneurial sector of the medical technology industry. The MDMA staff, Board of Directors and members collaboratively formulate and advocate MDMA policy which seeks to provide patients with safe and effective, innovative, cost-competitve technologies as quickly as possible.