Proposed Code of Conduct for Group Purchasing Organizations
Submitted by IMDA
July 23, 2002
IMDA is an association of regional companies that function as specialty distributors and representatives. These companies introduce and sell new medical technologies to hospitals and clinicians, and train clinicians for proper, effective and efficient utilization of these products. IMDA comprises 70 member companies around the country, with combined annual sales of approximately $500 million.
Among the technologies our U.S. member companies have introduced over the years are pulse oximetry, tympanic thermometry, closed tracheal suctioning, artificial heart valves, electrosurgical devices, electronic fluid infusion and blood filtration. Once considered the cutting edge of technology, today they are the standard of care. And without exception, even though costs were incurred to introduce these technologies to the market, those costs were offset by systemic savings in the form of shortened lengths of patient stay, improved patient outcomes, reduced errors, time-savings for caregivers, or a combination of all of these.
We believe that innovation in medical devices that provide enhanced care at lower overall cost must be allowed to flourish. If it is not, the economics of health care will deteriorate over the next 15 to 20 years, and levels of care will diminish, resulting in a situation that will not resonate with the American public and voter. Any business process that impedes the introduction of such technology is harmful to the U.S. health care system.
IMDA recognizes that group purchasing organizations can play a significant role in contracting for products that are not differentiated by anything other than price. In fact, some of our members benefit from group purchasing contracts on commodity-type items, that is, those that represent mature technologies. However, to the extent that GPOs inhibit the introduction of new technologies, they run counter to the public good.
That said, IMDA offers the following points:
1. In order to make sure that so-called “breakthrough technology” clauses do indeed have teeth, GPOs should be required to submit in writing an annual report to the federal government and the public that would: a) Identify all technologies that were submitted as potential “breakthrough technologies”; b) Provide a full description of the process by which the group purchasing organization considered the merits of the technologies, including the names of the individuals who studied them; and c) Document the disposition of the submissions, including whether or not contracts were signed, and if not, why not.
2. If any hospital or group of hospitals (comprising 2,000 beds or more) recommends that a product or products be added to the GPO’s contract portfolio, the GPO should pursue the contract(s). To allow GPO staffers to be the sole decision-makers about which products to include under contract is to imply that clinicians are incapable of making sound clinical and/or product decisions for their institutions.
3. GPO contracts should be limited to two to three years in length. Small companies with innovative devices cannot afford to “sit on the sidelines” longer than that.
4. GPOs must allow their members to receive products from their distributor(s) of choice. Often, manufacturers with truly innovative devices lack the funds to hire a direct sales force. Instead, they rely on specialty sales and marketing organizations, such as the members of IMDA, to introduce new technologies and teach clinicians how to use them. By failing to allow specialty distributors to carry these innovative technologies into their members’ hospitals – or by forcing manufacturers to use only those distributors under contract – GPOs effectively stop the flow of new technologies to their members.
5. GPOs should end the practice of bundling together non-related products. Instead, they should contract with vendors on a line-by-line, product-pricing basis only. Vendors should not offer – nor should GPOs accept -- rebates in return for the inclusion of additional product groups or categories in a contract. Rather, if vendors choose to "bundle" products, they should offer their incentives in a straight reduction of price to the hospital – not to the GPO in the form of rebates.]
6. To avoid potentially detrimental conflicts of interest, group purchasing organizations (or their subsidiaries, divisions and management personnel) should be prohibited from investing in medical device (or service) companies with which they either do or potentially could have a contract. Furthermore, they should be required to divest themselves of any interests they currently have in such companies. In addition, they must be prohibited from receiving stock options or other forms of equity from medical companies or from soliciting monies for “research” or similar purposes from them. Research monies should go to hospitals, not to group purchasing organizations.
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