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Recently, HSCA submitted letters to Senators Max Baucus (D-MT), Orrin Hatch (R-UT), Mike Enzi (R-WY), and Tom Harkin (D-IA), explaining the role that GPOs play in the drug shortage issue.
The letters were sent by HSCA President Curtis Rooney in response to a recent Senate Health, Education, Labor and Pensions (HELP) Committee hearing held on December 15, 2011, regarding the prescription drug shortage issue. The hearing briefly discussed the subject of GPO contracting practices, and indicated that there may be a misconception of GPO contracts and the role they play in this issue. Specifically, it may have been suggested that certain products are not manufactured simply because GPOs have negotiated a lower price. Rooney stated:
“GPOs negotiate vigorously on behalf of our hospital members and clients. These negotiations are between extremely sophisticated parties and while GPOs have continually demonstrated our success in lowering prices to bring savings to our members, clients and taxpayers, we do not have the ability—nor would it be in our interest— to force manufacturers into contracts that undermine their ability to deliver product.
“Contract pricing is a constantly moving target, and drug companies regularly adjust pricing of GPO contracts based on market conditions such as manufacturing capacity, raw material availability, and competitive suppliers. That means when manufacturers experience shocks to production, such as a higher input price, they have the ability to change the contracts quickly to reflect these shocks. GPOs manage thousands of price changes annually, both increases and decreases.”
Mr. Rooney also expanded on the GPO mission and role of contracts in these relationships, and explained how GPOs are working to solve the drug shortage crisis, including: working with manufacturers to ensure appropriate supply of products and encourage distributors to provide a pedigree of products to providers; working with supplier partners to communicate product demands from our provider members; and alerting our members and clients of potential access issues.