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FOR IMMEDIATE RELEASE
Contact: Carolyn Hickey
Phone: 703-243-9262

Arlington, VA (May 5, 2003) - In a letter recently sent to Department of Defense (DoD) Secretary Donald Rumsfeld by Chairman Sen. DeWine and Ranking Member Sen. Kohl, of the Senate Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights, they brief the military chief on their current examination of the group purchasing industry. However, in this two-and-a-half page letter, the Senators provide Secretary Rumsfeld with several inaccuracies of the savings GPOs provide to health care providers.

As the chief representative of the group purchasing industry, I believe it is the Health Industry Group Purchasing Association's (HIGPA) duty to provide Secretary Rumsfeld with the most accurate portrayal of how GPOs offer value to health care providers. HIGPA is addressing the issues raised in the May 2 letter to Secretary Rumsfeld in a full written response.

Since the early 1900's, hospitals in the United States have embraced group purchasing. Currently, nearly all hospitals utilize group purchasing techniques, supporting the fact that the GPO business model works for providers by saving hospitals time and money on the procurement of goods. Additionally, many agencies of the federal government model their purchasing practices after the GPO industry, including the collection of earned administrative fees from suppliers. These federal agencies include the General Services Administration, the Department of Veterans Affairs and the Department of Defense. Therefore, it is no surprise that the Department of Defense continues to seek out avenues to streamline their purchasing practices by soliciting contract bids from hospital group purchasing organizations.

In their letter to Secretary Rumsfeld, the Senators quote from an April 30, 2002 pilot study on the group purchasing industry by the General Accounting Office (GAO). This pilot study makes inaccurate conclusions about the savings the industry provides to hospitals, based on poor research methodology. In fact, the GAO pilot study was so flawed that this investigative arm of Congress has created a new team of researchers to conduct a more extensive analysis of the GPO industry. In HIGPA's letter to Secretary Rumsfeld, the Association will include an analysis, conducted by The Lewin Group, outlining the pilot study's flaws.

Additionally, the Senators mislead the Secretary in stating that GPOs "limit choice and flexibility" for hospitals. To the contrary, hospitals voluntarily belong to a GPO and may choose to purchase a product through a competing GPO or directly from the manufacturer if the desired product is not available on GPO contract. It is important to remember that GPOs are the agents of providers, and therefore must fulfill the needs of its clients or cease to survive in the marketplace.

HIGPA's GPO members have made positive changes through the adoption and implementation of the HIGPA GPO Code of Conduct, which addressed the Senators' concerns about the industry's practices. The Code is certain to foster even more savings and even greater availability of the best products to health care providers.

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. According to a recent study conducted by a former principal analyst at the Congressional Budget Office, hospitals save patients over $30 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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