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Nov. 24, 2014


WATCHDOG DEFANGED: Group purchasing organization (GPO) lobby shuts down Government Accountability Office investigation into GPO role in causing drug shortages and fungal meningitis outbreak.


The GPOs have dodged yet another bullet. They killed the GAO investigation that was requested on November 15, 2012 by then-Rep. Ed Markey and five senior House colleagues in this letter to Gene Dodaro, Comptroller General of the United States.
That means there is little hope for an end to generic drug shortages and skyrocketing prices anytime soon.


Instead, on November 24,  the Government Accountability Office released a sham report entitled “Group Purchasing Organizations: Funding Structure Has Potential Implications for Medicare Costs”:http://www.gao.gov/products/GAO-15-13." This report, like the drug shortage crisis itself, is a travesty, to put it mildly. It has nothing to do with drug shortages. Indeed, the term “drug shortages” is mentioned only three times in passing, including one footnote.  It is a cover-up, pure and simple. But it also demonstrates beyond any doubt that the GPOs knew that they  could not survive a thorough, honest GAO investigation. 

In October 2012, we brought this matter to the attention of Rep. Markey, whose staff conducted their own due diligence after reviewing our documentation.  Immediately after Markey et al released their letter, Curtis Rooney, president of the Healthcare Supply Chain Association (HSCA), the GPO trade group, and his cohorts began pulling out all the stops to quash the investigation. Initially, it appeared that the requesters and the GAO would stand up to pressure from this powerful cabal. We met with the GAO health care staff in April 2013 and over the next 18 months continued to provide them with extensive documentation on how GPOs have caused the failure of the generic injectable drug marketplace. At no time did they give us any indication that the original probe had been derailed.

We were further encouraged by the conclusions of the February 10, 2014 GAO study, “Drug Shortages: Public Health Threat Continues, Despite Efforts to Help Ensure Product Availability," which was mandated by the Food and Drug Administration Safety and Innovation Act of 2012 (FDASIA): http://www.gao.gov/products/GAO-14-194.  It identified GPOs as a “potential underlying cause" [see p. 33] while describing other putative causes—manufacturing delays, quality problems, raw materials shortages and the like—as "immediate” or proximate causes. Further, the report noted that three of the five generic drug makers the GAO interviewed pointed to GPOs as a major cause of the shortages. 


[Incredibly, a February 10, 2014 HSCA press release  completely misrepresented the GAO's conclusions about the causes of the crisis. There was no mention, of course, that the GAO report cited GPOs as a "potential underlying cause."]

On October 21, 2014, Modern Healthcare published a story, entitled “Healthcare GPOs promote positive influence ahead of GAO report,” indicating that the GPOs were scrambling to preempt the long-awaited GAO report. Obviously, they succeeded, in part by unleashing a barrage of spurious “studies”—all bought and paid for by the GPO cabal, of course—falsely claiming, among other things, that GPOs save billions for hospitals.  


We are  astonished that this report is based on little more than the responses of the five largest GPOs to a GAO questionnaire. The rest  is a rehash of earlier reports and investigations by the GAO, HHS and other agencies. The GPOs were even given a draft copy of the report for their comments. We were not, even though we were instrumental in initiating this investigation. The GPOs were even able to arrange for the report to be released three days before Thanksgiving, when it would receive little media attention. Note also that PADS was cited in the February 10 report as one of the organizations interviewed for the study. There was no mention of PADS in the November 24 report.

The GPOs and their cohorts would have policymakers, Obama Administration officials, the healthcare community, and the public believe that the causes of this unprecedented crisis are "complex and multifactorial"--- in other words, one of the great unsolved mysteries of the universe.  Since early 2011, when drug shortages started making headlines, the GPO spin machine has churned out an endless stream  of bogus "studies" and press releases claiming that they were caused by unscrupulous "gray market" distributors, "just-in-time" inventory methods, manufacturing problems,  allegedly "over zealous" FDA inspections, government price controls, even raw materials shortages. The causes of cancer are surely complex and multifactorial, but not the causes of the shortages of  drugs used to treat it. There is one underlying cause: GPOs. Their "pay-to-play" scheme has decimated the U. S. generic injectable industry and unleashed a global public health emergency.

Still, the GPOs managed to co-opt the White House, Food and Drug Administration, the Department of Health and Human Services, Congress,  the media, and  contributors and editors of respected medical journals like the New England Journal of Medicine. They all drank the GPO Kool-AID. The GPO industry's latest flackery would have us believe that the GPOs are working heroically to end the shortages, as reflected in this April 21, 2014 Novation press release: Click HERE .

Now they've co-opted the GAO, which has long prided itself as the “independent, non-partisan investigative arm of Congress.” It is clear now that the GAO, like Congress itself, is a prisoner of special interests. Every American should be very  concerned about this. We had hoped that this report would pave the way for an end to drug shortages and surging generic  prices through the repeal of the 1987 Medicare anti-kickback safe harbor, which would restore market competition and integrity to the hospital supply chain. Now we see no end in sight to this crisis. This is political corruption at its most venal. 

Rest assured that we will not give up the fight. The GPO industry could fill Yankee Stadium with 50,287 well-heeled lobbyists, lawyers and spinmeisters denying any role in the drug shortages, but that would not change the fact that their anticompetitive contracting and pricing practices, self-dealing and kickbacks have broken this marketplace. We won’t stop fighting until  affordable, lifesaving generic drugs are once again immediately available to every patient and provider who needs them.


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In addition to the February 10, 2014 GAO drug shortage report, other developments show that the truth is getting out:


  • "Correcting Misperceptions Related to Chemotherapy Drug Shortages in the United States" [Letter to the Editor, Journal of Oncology Practice, by Sherry A. Glied PhD, former assistant secretary, Department of Health & Human Services]

        Journal of Oncology Practice, Dec. 23, 2014

        READ LETTER


  • "Drug Bust"

        Slate, Nov. 20, 2014

        READ ARTICLE


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

​        American University Washington Law School Business Law Review, Spring 2014

        READ ARTICLE


  • "Solving Drug Shortages Requires Incentivizing Reliability, Infrastructure Quality"

        ​Bloomberg Brief, Nov. 11, 2013

        READ ARTICLE


  • "Strategic Plan for Preventing and Mitigating Drug Shortages"

        Food and Drug Administration, Oct. 31, 2013

        READ REPORT  (see page 22)

       [To read the comments PADS submitted for this report, click HERE].​