Medical device makers slam purchasing middlemen

The medical device lobby on Wednesday went after the intermediary companies that purchase their products on behalf of hospitals.

In a new report, the Medical Device Manufacturers Association (MDMA) is charging that Group Purchasing Organizations (GPOs) "fail to deliver" in their primary role: bringing down costs for hospitals.

“It is painfully clear that while hospitals and providers are trying to improve care and reduce costs for patients, the supplier-funded GPO model is costing the healthcare system billions,” MDMA CEO Mark Leahey said in a statement. “This study proves that GPOs not only fail to bend the cost curve for healthcare down, they are preventing hospitals and patients from getting the best products at the best prices."

The new MDMA study — conducted by researchers at the Brookings Institution and Georgetown University — found that repealing a 24-year-old anti-kickback exemption allowing GPOs to accept fees from device makers would cut federal health spending by $11.5 billion each year.

“This study bolsters our argument that Congress must pass legislation that will restore the illegality of kickbacks between suppliers and GPOs,” Leahey said.

GPOs are designed to cut costs by negotiating bulk prices with device companies on behalf of large groups of hospitals, nursing homes and other providers. But critics contend the anti-kickback exemption has created cozy relations — both between GPOs and hospitals and GPOs and device makers — that cut smaller companies out of the process at the expense of patients' access to treatments.

The issue hasn't been overlooked by Sen. Chuck Grassley (R-Iowa). Citing a new report from the Government Accountability Office (GAO), Grassley, the senior Republican on the Finance Committee, said there's no evidence GPOs are saving taxpayers anything.

"Whether Group Purchasing Organizations are able to help save money on medical supply costs, or not, impacts federal healthcare spending," Grassley said. "There’s no data with which to independently verify the effect, one way or another, and that’s a shortcoming in the current system."

The GPO lobby was quick to fight back. Curtis Rooney, president and CEO of the Health Industry Group Purchasing Association, said the GAO report "clearly demonstrates" that GPO efforts have created "increased transparency and low administrative fees in healthcare contracting."

“GAO and academic research have documented the significant cost savings and the wide range of valuable services that GPOs provide to hospitals, which is why virtually all American hospitals voluntarily contract with GPOs,” he said.