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FOR IMMEDIATE RELEASE
Contact: David McDonough
Phone: 703-243-9262

WASHINGTON, D.C. (April 29, 2002) - Health care group purchasing organizations (GPOs) are pro-competitive, socially beneficial agents of hospitals and other health care providers, according to a ground breaking new study conducted Herbert Hovenkamp, a professor of law at the University of Iowa, College of Law, and a highly respected antitrust authority.

In his study, which was commissioned by the Health Industry Group Purchasing Association (HIGPA), Professor Hovenkamp applied fundamental principles of antitrust law to group purchasing organizations and found "no reasons, either structural or behavioral, for finding their activities to be anticompetitive."

Indeed, he found that "there are many reasons for thinking that GPO group purchasing increases output, reduces prices, and is procompetitive."

For example, Professor Hovenkamp found that "[t]he buying market in which GPOs operate is highly competitive. The products purchased through GPOs are identical with those purchased by thousands of other buyers large and small. Approximately 800 GPOs collectively contract for about 45% of the supplies and equipment purchased by health care institutions. No GPO has a market share larger than 15%, and only two have shares exceeding 10%. The small size of GPOs in relation to the entire market, the large number of GPOs and intense competition with purchasers who do not use a GPO makes monopolistic practices or price-fixing among GPOs virtually impossible."

Professor Hovenkamp went on to state that "[t]his competitiveness in purchasing is enhanced by the fact that most hospitals are members of several GPOs and play them off against each other. If one GPO does not provide a hospital with desired products the hospital can turn to another GPO, or in some cases drop its membership altogether. As a result there have been significant shifts in the market shares of GPOs as they compete with each other to serve their members. Further, there are no significant barriers to entry because GPOs own no specialized assets. If a GPO were to earn monopoly profits, new GPOs would quickly be formed to take its place."

Professor Hovenkamp also found that "while GPOs do not 'impose' products on their members, they do provide them with incentives to purchase a certain percentage of their products through the GPO's contracts. But such incentive arrangements are output enhancing. They have uniformly been found procompetitive under the antitrust laws."

Professor Hovenkamp is the Ben V. & Dorothy Willie Professor of Law, University of Iowa. He is the author of Antitrust Law: an Analysis of Antitrust Principles and Their Application; Federal Antitrust Policy: the Law of Competition and its Practice; and several other books and approximately 50 articles in the general field of antitrust law. Professor Hovenkamp has been widely cited by media organizations as a leading expert in antitrust law. The New York Times, has called him "an antitrust scholar," the Washington Post an "antitrust expert," and the Chicago Tribune "a top antitrust expert."

To obtain copies of the report visit HIGPA's web site-www.higpa.org-or contact David McDonough, HIGPA Director of Communications, at 703-243-9262.

HIGPA is a chartered trade association of over 165 health care purchasing and supply chain organizations that serve approximately three out of every four U.S. acute care hospitals, as well as most of the long term care, home care and medical group practice markets. HIGPA's Industry Members include purchasing groups, associations, multi-hospital systems, and health care provider alliances. HIGPA's Trading Partner members include many of the world's leading health care product manufacturers, distributors, wholesalers and related suppliers. According to a recent study conducted by a former principal analyst at the Congressional Budget Office, hospitals save patients approximately $20 billion each year by purchasing products through group contracts.

To learn more about HIGPA or the group purchasing industry, visit www.higpa.org or call 703-243-9262.

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