Pay-to-Play: The Impact of Group Purchasing Organizations on Drug Shortages

Abstract

The United States prescription drug shortage crisis is a serious and preventable problem. Numerous reasons have been suggested as potential causes of the crisis; however, none are wholly satisfactory. This Note attempts to address the drug shortage crisis by arguing that the contracting practices of Group Purchasing Organizations (GPOs) create decreased pharmaceutical manufacturer diversity and a fragile supply chain. GPOs were formed with the purpose of consolidating buyer power for hospitals to secure the best possible prices for medical supplies, including prescription drugs, and the lowest possible cost for hospital patients. However, GPOs have strayed from this purpose, engaging in contracting practices that increase their profits at the expense of hospital patients and generic drug manufacturers. The contracting practices used by GPOs would be illegal under usual antitrust and fraud law, but GPOs enjoy several unique safe harbors that immunize them from prosecution. Eliminating the anticompetitive effect of GPOs will require significant reforms by both the executive and legislative branches. Repealing the safe harbors protecting GPOs from antitrust scrutiny will increase manufacturer diversity and lower manufacturer entry barriers. This will create a more robust healthcare supply chain capable of rapidly shifting production to meet demand in the face of potential shortages.

Keywords: Group Purchasing Organizations, GPO, antitrust, fraud, antitrust law, antitrust, fraud law