By: Scott M. Baach

Commercial success of any new medical device usually requires not only break-through technology and regulatory approvals but also open access to the potential customer base. Last week’s release of a Code of Conduct by the Health Industry Group Purchasing Association (HIGPA), a trade group representing the group purchasing organization (GPO) industry, and this week’s adoption of additional principles by Premier, Inc., one of the nation’s largest GPOs, may signal a tidal change in the way new technology finds its way to the market.

GPOs enter into contracts with select medical device companies that set the terms and conditions pursuant to which the GPO members (hospitals, physicians and other health care providers) may purchase products from the selected vendors. While the members are generally free to purchase “off-contract,” many times the GPO negotiated contract offers the best pricing, terms and conditions since the GPO is able to leverage the purchasing power of its membership to extract favorable purchasing terms.

For some time, medical device companies shut out of the GPO contract market have complained that the largest GPOs collude in a number of ways with the largest manufacturers in an attempt to block competition and stifle innovation. Such methods, they allege, include exclusive contract awards, long-term commitments and lengthy review and approval process for new devices and technologies.

The recent developments come as a result of increased scrutiny of the GPO industry by the Antitrust Subcommittee of the United States Senate Judiciary Committee and other federal regulatory authorities and are intended to provide for a more “level” playing field for all vendors going forward.

For instance, HIGPA’s Code of Conduct is designed to create a set of principles for GPOs to incorporate into their businesses. In adopting the Code, HIGPA focused on a number of areas, including:

  • Eliminating potential conflicts of interests;
  • Ensuring open communications between members and vendors;
  • Establishing guidelines for the use of contracting tools; and
  • Requiring full disclosure to members of all vendor payments.

In addition, Premier’s additional principles include items such as:

  • Limiting group purchasing administrative fees to a specified percent;
  • Eliminating “up-front” administrative fees and marketing fees;
  • Eliminating administrative fees in the form of vendor equity; and
  • Implementing technology breakthrough and technology assessment programs that are fair, timely, confidential and unbiased, with an opportunity for review of decisions.