GPOs Back Obama Order on Drug Shortages

John Commins, for HealthLeaders Media , November 2, 2011

"There are things the government can do that are positive, but there are things we need to do in the private sector," he said. "We need to work with manufacturers and distributors to manage or mitigate the disruptions that occur in the market. How do we help ensure that the products are shared broadly and allocated effectively, that there is a heads up so that folks are preparing when there is an impending shortage. Those are the things we talk to distributors about."

Childs believes that much of the president executive order will do little if anything to solve the short-term shortage of prescription drugs. "But it will help reduced the problems in the longer term. The ultimate long term solution is they need to speed approval at FDA and also for both the new generic products and the active pharmaceutical ingredients," he said.

AHA Executive Vice President Rick Pollack said in a prepared statement that the order "comes at a critical time and is welcome news for hospitals and the patients they care for. The number of drug shortages has tripled in the last six years and the shortages are affecting patient care."

An AHA survey this year found that nearly 100% of hospitals reported a shortage in the past six months, but that most of them rarely -- if ever -- received advance notification of these drug shortages.
"Clinicians need more notice from drug manufacturers so they have time to act to ensure that patient care is not disrupted," Pollack said. "Hospitals are doing their best to reduce the impact of shortages by increasing inventories, buying alternative drugs and training clinical staff on how to deal with drug shortages."

While AHA supports the president's order, Pollack says Congress must step up to pass bipartisan legislation that requires drug companies to tell the FDA as soon as possible of interruptions in supply or discontinuations.

"In addition, we believe that obstacles must be removed so that FDA is able to streamline approval of drugs in shortage," Pollack said.

John Commins is a senior editor with HealthLeaders Media.

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1 comments on "GPOs Back Obama Order on Drug Shortages"

Phil (11/6/2011 at 12:20 PM)
Sorry, Mr. Lucio, but the U. S. market for healthcare supplies, devices and drugs is NOT a free market. That's the problem. It's a market that's distorted by the perverse incentives of the kickback-based GPO business model, which was created in 1987 when Congress enacted an obscure statute called the Medicare antikickback "safe harbor" exemption. This is the closest thing in the U. S. economy to the disgraced Soviet economic model. Under this pernicious arrangement, GPOs are able to take kickbacks from healthcare vendors (mostly dominant ones). In return, the vendors get exclusive access for their often inferior, obsolete and unsafe products to about 5,000 GPO-member hospitals. It is a pay-to-play scheme that harms (and even kills) patients and healthcare workers, discourages competition, medical innovation, and job creation, and inflates healthcare supply costs by tens of billions a year. When and if unbiased investigators look into the real reasons behind the recent drug price spike and shortages, I have no doubt they will find that GPO kickbacks are at the root of the problem. This is a monopsony in which a few giant GPOs contract with a limited number of large suppliers, excluding other existing and would-be suppliers, thereby resulting in a concentrated market and higher prices. So when there's a spike on the demand side, there are no other suppliers around able to fill the gap. Competition reduces prices, cartels (in this case purchasing cartels) inflate them. The only way to restore integrity and free market competition to this marketplace is for Congress to repeal the antikickback "safe harbor." For more information on this, see two Feb. 2005 articles by Michael Hiltzik in the Los Angeles Times on how GPOs grossly inflated cancer drug prices at UCLA Medical Center and "Cut Kickbacks to Hospital Group Purchasing Organizations, NOT Medicare and Medicaid," by Paul Danziger in Roll Call of Oct. 21, 2011. For more articles and documents on the GPO issue, see




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