Role of a GPO in the Pharmacy Business

Posted By: franchise | May 4, 2017

Group purchasing organizations or GPOs can leverage a group of businesses’ purchasing power to get discounts from vendors. Lower rates, incentives, and the likes are often obtained through the collective buying power of the members of a GPO.

There are several types of GPOs, classified under vertical and horizontal market. The vertical-market GPO includes those in the healthcare, pharmacy, food service or grocery, electrical, industrial manufacturing and non-profit GPO. However, the indirect spend or non-strategic is the only one under the horizontal market GPO.

According to the American Pharmacy Purchasing Alliance, the top GPOs for hospitals are Novation, Amerinet, Premier, Inc., MedAssets, Broadlane Group and HealthTrust Purchasing Group. All of these entities have contributed to the improvement of the healthcare industry and service delivery to patients.

Although GPOs have been around since 1910, it wasn’t until Medicare and Medicaid, introduced in 1974, that the number hit about 40. The numbers increased in 1986 when the Congress passed the GPO Safe Harbor Law. After all, the law protects the entities from statutes that consider practices linked to kickbacks as punishable.

Moreover, from 40, there are now over 600 organizations in the country, 30 of which negotiate large contracts.

However, what can GPO do for the pharmaceutical industry?

  • Support growth of small pharmacy chains and independent pharmacies by helping them acquire goods and services at better prices.
  • Provide opportunities for little pharmacies to compete or act like a big chain of pharmacy by leveraging the buying power of its members and negotiating discounts with vendors, manufacturers, and wholesalers.

Furthermore, the work of these organizations is very much celebrated where generic drugs are concerned. They have become an integral part of pharmacy business, as price negotiation has become a major challenge.

According to Valerie in her article dated October 10, 2016, Danny Cottrell, RPh, of Medical Center Pharmacy said: “to do some negotiations for you on generic prices you would just be twisting in the wind”. The company used APCI as their primary GPO.

The evolution of GPOs for the pharmacy business

The central function of a GPO is to get the best prices for their member pharmacies. However, they are now evolving to include other services that will benefit members. These include data collection and analysis, and market research.

If GPOs are to continue to help members save money in utilization and provide efficient services, they must keep a close eye on the data that will affect the industry, including specialty pharmacy.



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