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April 3, 2006
For Immediate Release
Media Contact: Michael McShane
Vice President, Government Relations, HIGPA
(202) 367-1237
mmcshane@smithbucklin.com

WASHINGTON – Top leaders of the health care group purchasing industry told Chairman Mike DeWine (R-OH) and ranking member Herbert Kohl (D-WI) of the U.S. Senate Antitrust Subcommittee that proposed legislation currently being considered would drive up U.S. health care costs by about $30 billion over ten years and, as such, would harm thousands of hospitals that belong to, and rely on, group purchasing organizations (GPOs). The written comments were made in response to a request from the Subcommittee following a March 15 hearing on how GPOs promote competition and cost savings in the health care supply chain.

The nine CEOs who founded the Healthcare Group Purchasing Industry Initiative (HGPII) responded as a group to the Subcommittee’s request. The GPO leadership raised concern that a small group of self-interested and well-funded medical device manufacturers were asserting GPOs block access of new and innovative technologies to hospitals, physicians, caregivers and, ultimately, patients.

The CEOs also reiterated that the Subcommittee has heard testimony and received endorsements, ranging from many individual hospitals to the American Hospital Association as well as the Ohio Hospital Association and the Wisconsin Hospital Association (two organizations representing the interests of hospitals in the Senators’ home states). The testimony and endorsements all affirmed that GPOs in no way pose barriers to access of new and innovative technologies or to small companies in the medical device industry. Additionally, federal antitrust regulators had carefully scrutinized the GPO industry and had concluded that no further regulations are needed to ensure competition in this sector.

The CEOs expressed their fear over the impact these legislative proposals would have on hospitals and the already-rising costs of health care, stating that “these legislative proposals would severely limit, if not eliminate altogether, the ability of GPOs to provide to our member hospitals, including small and rural hospitals, the purchasing power that enables them to buy expensive equipment and critical supplies at group discount rates.” Among other things, these proposals would create an onerous, complex system of regulations and would substantially increase the direct supply management costs to hospitals and, therefore, the indirect costs born by patients and other payers like the federal government.

As evidence of the above points, the written testimony also pointed to a recent study by Muse & Associates which estimated that the legislative proposals, if enacted, would increase direct U.S. health care spending by as much as $34.6 billion over ten years and would increase the cost to Medicare and Medicaid by between $8.2 billion and $9.7 billion over the same ten year period.

Al LoBiondo, Chair of the Health Industry Group Purchasing Association (HIGPA), submitted a letter to the Subcommittee supporting the CEOs’ written statement. “The proposed bills would be highly detrimental to the competitive nature of today’s GPO industry where companies compete to offer hospitals the best prices on the best products – products that can mean the difference between life and death,” said LoBiondo, in a later statement. “Hospitals rely on GPOs to help control costs while improving patient care. With health costs skyrocketing out of control, we must not restrict their ability to work with GPOs.”

In his letter, LoBiondo also referenced HGPII’s industry self-governance effort. Referred to as the Initiative, this effort was launched in 2005 at the urging of the Antitrust Subcommittee’s leaders and staff and is focused on increasing the transparency of the GPO industry as well as promoting and monitoring best ethical and business practices. LoBiondo related to the Subcommittee that “GPOs exist to help hospitals improve patient care and control health care costs–and GPOs are doing it with greater transparency than ever before.”

LoBiondo related that the new HGPII effort, in essence, makes any legislation regulating the GPO industry unnecessary. He went on to write, “The GPO industry is serious in its efforts to create a workable self-regulatory framework that will function in the best interests of hospitals and the patients they serve. It is appropriate that the Senate give this serious initiative a chance to work.”

Copies of the CEOs’ submission as well as information from the March 15 hearing can be found on HIGPA’s web site at www.higpa.org.

The Health Industry Group Purchasing Association (HIGPA) is a broad-based trade association that represents 31 purchasing organizations. HIGPA's group purchasing industry members include for-profit and not-for-profit corporations, purchasing groups, associations, multi-hospital systems and health care provider alliances.

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