Physicians Against Drug Shortages
Lobbying for reform of hospital group purchasing organizations (GPOs)
PADS POSITION STATEMENT
Our position on the role of hospital group purchasing organizations (GPOs) in causing the generic drug shortages is presented in our March 2013 statement to the Food and Drug Administration, in response to the agency's request for comment on a strategy to prevent shortages.
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Physicians Against Drug Shortages
Agency: Food and Drug Administration, HHS
Docket No. FDA-2013-N-0124
Food and Drug Administration Drug Shortages Task Force and Strategic
Plan; Request for Comments
March 12, 2013
Physicians Against Drug Shortages(PADS) greatly appreciates the opportunity to comment on the development of a strategic plan to prevent generic drug shortages, in accordance with the provisions of the Food and Drug Administration Safety and Innovation Act and the Federal Register Notice Request for Comments of February 12, 2013. PADS also recognizes the FDA’s dedication and commitment to ensuring the safety, adequacy and effectiveness of America’s drug supply and believes the agency has done everything within its statutory authority to mitigate the devastating clinical impact of the generic drug shortages.
However, the root cause of this crisis is economic and therefore beyond the FDA’s purview, a point that the agency has made publicly. Consequently, the solution is also outside the FDA’s jurisdiction. Still, the FDA must make every effort to understand the origins of this problem and exercise its moral authority and influence with the White House and Congress to end what has become a global public health emergency. That is why PADS is submitting these comments.
PADS is a grassroots coalition of physicians whose goal is to end these chronic, unprecedented shortages by restoring integrity and free market competition to the broken generic prescription drug industry. We organized PADS for one reason and one reason only: doctors simply cannot get the drugs they need to properly treat their patients. As a result, millions of patients are suffering needlessly, and in many cases dying. Most of the drugs in short supply are sterile injectable chemotherapies and anesthetics administered in hospitals, outpatient facilities and clinics.
These massive shortages are simply unacceptable in what is supposed to be a free market economy. To end this crisis, which was entirely preventable, we believe it is essential to focus on the underlying cause, not the symptoms. Having thoroughly examined this issue, we’re now convinced that the anticompetitive contracting practices, kickbacks, market manipulation and other abuses of giant hospital group purchasing organizations (GPOs) are the root cause.
This buyers’ monopoly, which controls the purchasing of an estimated $250 billion in goods annually for some 5,000 hospitals, has made it unprofitable for many generic drug companies to safely manufacture these inexpensive, low-margin drugs. In a nutshell, their “pay to play” business model has badly damaged a market that for decades could be relied on to supply lifesaving generic drugs to patients worldwide.
It is no coincidence that virtually all of the drugs in short supply are sold to healthcare facilities through GPO contracts, rather than directly to consumers at retail pharmacies or pharmacy benefit managers (PBMs). The GPOs have decimated the injectables market by undermining the laws of supply and demand that govern virtually every other U. S. industry, from autos to zucchini. Indeed, these cartels have stifled competition in the entire hospital supplies industry, including medical devices, capital equipment, and other supplies, from catheters to garbage bags and surgical towels.
There is extensive documentation on these questionable practices, focusing largely on the role of GPOs in undermining competition and innovation in the medical device industry in the years leading up to the drug shortage crisis. This material includes four hearings before the Senate Antitrust Subcommittee; investigations by the Government Accountability Office (GAO), the Office of the Inspector General of the Department of Health & Human Services, and the Connecticut Attorney General’s office; media reports, including a prize-winning 2002 investigative series in The New York Times entitled “Medicine’s Middlemen”;numerous successful antitrust lawsuits filed by entrepreneurial medical device firms against GPOs and/or their dominant supplier partners; independent academic research, and even a book entitled “Group Purchasing Organizations: An Undisclosed Scandal in the U. S. Healthcare Industry.” Many of these documents appear on www.physiciansagainstdrugshortages.com.
These anticompetitive practices include, but are not limited to:
- Exclusionary, sole source, long-term contracts awarded to vendors in return for huge but undisclosed administrative, marketing, advance and other fees (a/k/a kickbacks) as well as prebates and rebates;
- Tying and bundling of product lines to give the advantage to large incumbent suppliers and discourage competition from smaller, entrepreneurial companies with fewer products;
- Forced compliance programs that impose stiff penalties on hospitals and wholesalers if the volume of their purchases from manufacturers on contract drops below 95%, in many cases, for a particular product or product line;
- A Byzantine system of manufacturers’ rebates to large, favored distributors that ensures that only those distributors can sell to GPO-member hospitals. READ OUR ENTIRE STATEMENT