Arlington, VA (July 16, 2003) - Given that group purchasing empowers health care providers to negotiate discounts from suppliers at virtually no cost to those providers, GPOs are the real untold success story in health care, said Robert Betz, Ph.D., president and CEO of the Health Industry Group Purchasing Association (HIGPA) in submitted testimony to the U.S. Senate Judiciary Antitrust Subcommittee for their July 16 hearing on health care group purchasing.

Today, group purchasing organizations (GPOs) are showing how their contracting practices are transforming to accommodate small manufacturers to bring innovative products to the marketplace and how GPOs benefit health care providers.

The Subcommittee's examination of GPOs launched an industry-wide evaluation of the benefits group purchasing offers health care providers, Dr. Betz stated in the testimony. This assessment clearly validated the industry's claim that GPOs benefit providers substantially. The written testimony cited a May 2003 Lewin Group research study, which contained three separate analyses that reached the same conclusion: GPOs provide measurable savings as well as non-financial benefits to hospitals and health systems. Dr. Betz highlighted in the testimony that this study became even more convincing following recent reaction by California health care providers in opposing state legislation which would weaken the GPO business model. Individual health care providers and the state hospital association, the California Healthcare Association, wrote and called senators to express their opposition to legislation that would ultimately increase supply costs to providers.

Included in HIGPA's testimony was the outline of the creation and implementation of the GPO Code of Conduct, which was adopted for the purpose of strengthening and improving the delivery of products and services to health care providers. In developing the Code of Conduct, Betz stated, "HIGPA focused on several areas, including: eliminating the potential for conflicts of interests, ensuring open communications between members and vendors; establishing guidelines for the use of contracting tools, requiring full disclosure to members of all vendor payments; and, establishing reporting and educational programs, including surveys to quantify the value of GPOs." Dr. Betz also noted, "Following the adoption of the HIGPA Code, some individual GPOs adopted standards which exceeded, or were in addition to, the principles set forth in our Code. A majority of these companies adopted measures that HIGPA could not address due to antitrust laws."

The testimony also highlighted that just a few months ago all of HIGPA's 28 American-based GPOs reported to the Association their compliance with the Code. Dr. Betz emphasized in his testimony that HIGPA's Code of Conduct "is the only Code in the health care industry that has a penalty for not complying with the principles. The penalty being, membership in the Association is revoked or denied if an Industry Member or prospective Industry Member fails to certify compliance with the Code." Moreover, Dr. Betz stressed, "HIGPA's Industry Members will be required to certify compliance each year to remain in good standing in the Association."

Dr. Betz warned the Subcommittee, that "if Congress weakens the ability of GPOs to negotiate contracts for their provider members, patients will not be better served. Rather the cost of health care will increase and manufacturers that would like to see GPOs severely weakened will realize greater financial success."

"The ripple effect of restricting GPO contracting practices will ultimately affect federal administered health care programs," Dr. Betz stated. In support of this assertion, HIGPA cited an October 2002 Muse & Associates industry study, which concluded implementing additional restrictions on the GPO business model in CY 2002 would have resulted in an increase in expenditures in 2002 for several public health care programs, specifically close to $1 billion for Medicare and Medicaid programs combined.

Additionally, Dr. Betz argued that though some believe the current GPO examination is an antitrust issue, the industry argues it is not. "Over the last 40 years the purpose of antitrust policy has been to protect consumer welfare, not competitors - such as medical device manufacturers represented on the panel today. GPOs enhance consumer welfare for their member health care providers by enabling hospitals, community clinics, nursing homes, surgical centers, oncology centers, blood centers, home health care and other providers to save money and help hold down health care costs. In addition to saving money, GPOs provide other services, such as contract negotiation, contract management, market surveying, and product evaluation that their members cannot perform as efficiently.

What we are talking about here is a health care policy issue: are patients getting the best products at the best prices? HIGPA emphatically asserts that they are. "I urge members of this Subcommittee to act with caution and not weaken a crucial mechanism that helps providers reduce their purchasing costs which allows them to commit more financial resources to patient care," Dr. Betz stated.

HIGPA is a chartered trade association of approximately 170 health care purchasing and supply chain organizations. HIGPA's Industry Members include purchasing groups, associations, 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.

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

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