Advocates Urge the FTC to Investigate GPOs’ Impacts on Drug, Medical Equipment Shortages and Rising Healthcare Costs

November 22, 2022 Press Release

Washington, D.C. — A coalition of 9 advocacy organizations today wrote to the Federal Trade Commission, urging the agency to investigate group purchasing organizations’ under-appreciated role in diminishing medical supply market resilience, weakening patient care, and threatening national security.

“Take a look at the FDA website, and you’ll see scores of essential drugs that are in short supply. Doctors and their patients even have trouble getting medications as crucial as amoxicillin, which is totally unacceptable,” said Sara Sirota, Policy Analyst at the American Economic Liberties Project. “Federal regulators at the FTC must investigate the little-known middlemen in medical supply markets called group purchasing organizations. This industry is so concentrated after years of mergers and acquisitions, that just three companies control about 90% of $250 billion in hospital purchases annually, all the while accepting kickbacks from suppliers with next to no oversight.”

Group purchasing organizations (GPOs) negotiate procurement contracts for hospitals, nursing homes, and other providers. Thanks to a government-sanctioned exemption from the federal Anti-Kickback Statute, GPOs can make manufacturers to pay up if they want to sell their products while forcing providers to buy from certain suppliers at locked prices regardless of market conditions. Right now, glaring shortages in medical equipment markets, skyrocketing healthcare costs, and over-reliance on sole-sourced, overseas production jeopardize patient safety and national security, especially by incentivizing dependence on Chinese manufacturing of key medical supplies.

The letter argues that GPOs play a key and under-scrutinized role in fostering and exacerbating shortages and the offshoring of production, while their influence on costs remains chronically under-analyzed. The FTC has not conducted a study into this consolidated sector and its relationship with medical shortages, but the commission has the authority to fill this gap by conducting a 6(b) study — a similar action that the Commission took to investigate pharmacy benefit managers. In addition to the American Economic Liberties Project, the letter is cosigned by Center for Economic and Policy Research, Demand Progress Education Fund, Free to Care, Our Revolution, Physicians Against Drug Shortages, Practicing Physicians of America, Public Citizen, Revolving Door Project.

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The American Economic Liberties Project works to ensure America’s system of commerce is structured to advance, rather than undermine, economic liberty, fair commerce, and a secure, inclusive democracy. Economic Liberties believes true economic liberty means entrepreneurs and businesses large and small succeed on the merits of their ideas and hard work; commerce empowers consumers, workers, farmers, and engineers instead of subjecting them to discrimination and abuse from financiers and monopolists; foreign trade arrangements support domestic security and democracy; and wealth is broadly distributed to support equitable political power.