May 8, 2023

GPOs Cause Dangerous Shortages

GPOs Cause Dangerous Shortages

Another week, another middleman making it harder for patients to get the care that they need. This week, we learn more about Group Purchasing Organizations – also known as GPOs – and how they cause drug and supply shortages across the spectrum of...

Another week, another middleman making it harder for patients to get the care that they need. This week, we learn more about Group Purchasing Organizations – also known as GPOs – and how they cause drug and supply shortages across the spectrum of care.

And Terry and Bob dive into the healthcare news of the week, including an opinion piece in The Wall Street Journal that details a decision by the Federal Trade Commission which could end up restricting care for patients.

Don’t forget to register for the 2023 We the Patients Fly-In!

Dr. Nikki Johnson

Group Purchasing Organizations Impact Access to Medications, Increase Drug Shortages

Medical Middlemen: Broken system making it harder for hospitals and patients to get some life-saving drugs

Free2Care’s Rx for Reforming America’s Predatory Healthcare System

Patient Impact Report: Copay Accumulators

Patient Impact Report: PBMs

Watch! Always on Call


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The GPOs really have no stake in the patient care, the patient bottom line.  They don't make anything, they don't manufacture anything, they don't make any drugs, they don't do any type of research to see which products or pharmaceuticals are the best in the care of the patient.  All they are are contractors or agents in the middle of the game. So they don't have the patient's best interests at stake.  

Another middleman between the patient and the medicines they need.  Today, we're talking about group purchasing organizations, otherwise known as GPOs.

We'll explain what they are, how they operate, and why their practices are leading to medicine and supply shortages across the country.  That's up next.  

Welcome to the Patients Rising podcast.

I'm your host, Terry Wilcox, CEO of Patients Rising.  I'm joined by my co-host, who just finished brushing up on his Welsh for the new King's Coronation across the pond.  He's Dr.

Bob Goldberg, co-founder of the Center for Medicine in the Public Interest.  Well, my in which bod in Freinin, which means in Welsh, it's great to be king.  I think I mangled that pretty well. So now, Bob, you're up bright and early to watch.  Yes.  Well, I had an invite.

I actually spoke with Charles himself, but I'm lucky enough to be as I didn't go over to be part of that.  But I'm here, Terry, on the podcast to talk about the latest health care policy news that affects patients, caregivers, advocates in the chronic disease community.  And we do have a packed show for our listeners today.

Well, let's face it, Bob, health care can be wonky.  There are a lot of terms and a lot of acronyms, but that's why we're here to break it all down for you.  That's right.

And we have another one.  We got a new acronym, right?  Exactly.

We're going to speak with Nikki Johnson, Dr.  Nikki Johnson, who tells us all about GPOs, which stands for group purchasing organizations.  And later in the show, we will discuss the Federal Trade Commission, or otherwise known as FTC, leadership.

They're making some big decisions that could restrict care for patients.  But first, here's Dr.  Nikki Johnson.

She is a practicing pediatrician.  We spoke with Dr.  Johnson about GPOs, yet another middleman in the healthcare process.

So Terry, let's take it away with Dr.  Johnson.  

For your audience, it's already pretty familiar with pharmacy benefit managers. What the pharmacy benefit managers do for the outpatient side of things, the group purchasing organizations or GPOs do for the inpatient side.  So they write contracts between hospitals and insurance companies and device companies and manufacturers, medical supply companies to coordinate the best cost of those items for the hospital.  They make these contracts and patients get charged a certain fee, and then they make money off of how much the hospital uses that product in the form of rebates.

So they're very similar to the PBMs.  They're just the middlemen in between negotiating those contracts.  

There you have it. It's just another middleman, Bob.  You know, Terry, I think I said to the article today in the New York Times that some of the pharmaceutical companies are just cutting out the patient assistance programs because they're finding that the money that's supposed to go to the consumers is going to the PBMs and insurance companies because they're not making enough money on us, the consumer.  Now they have these contracts, which allows them to make more money by basically taking the buying power we provide them and profiting off it.

I got that right?  I think so.  Well, yeah. And I don't know that there's this clean line, you know, to take these things away when you're talking about all the supplies in a hospital.  I mean, we're going to hear a little bit more about what Nikki will tell us about where the GPOs fit in the supply chain, though a really good explanation is what she said.  It's more for inpatient supplies. So like the drugs and things that you need in the hospital, right?  Everything from saline, which we think is such a simple thing, which you can't believe how many times there have been saline shortages, and masks.  Remember when we couldn't get the masks at the beginning of COVID and it was like, you can't get the mask from here.

 It's because of GPOs.  It's sort of like when I went in with my coupon and CVS said, well, that's not going to count towards your deductible if you use this good RX thing, because I'm going outside the lines of what is making them money.

And so they don't want you to go in that lane.  What we've also seen, similar to the PBMs, is that just a handful of GPOs control most of the market.  

They were given an exemption from the anti-kickback statute in 1987 so that they can draw up contracts any way they want and we will never get to see them. So we don't really know that they're practicing competitive practices and making the costs lower for patients.  We do know a few things, though, that since they were given that exemption from the anti-kickback statute, just three large GPOs control 90% of the supply of medications and supplies to hospitals.  In that sense, they have created large, almost monopolies to be able to control the prices and not even like not just the prices, the actual components of all the medical supplies.

So, not surprisingly, in addition to more profits for the middlemen, it's also been leading to shortages of drugs.  Now you would think, you know, if you were in control of a large supply of product, Terry, you'd probably be able to sort of identify and project ahead where the needs would be greatest and supply it.  But Dr. Johnson talks about the fact that just the opposite happened.  She gave an example from a special episode that 60 Minutes did on GPOs.  

They interviewed parents of children with leukemia about the shortage of the chemotherapy drug, a very standard chemotherapy drug in the treatment of childhood leukemia.

This drug has been around for many, many years.  It's very cheap, probably about, I believe it's about $5 a bag to make for a child who's admitted to the hospital or in their outpatient clinic at a hospital center getting an infusion of this drug.  What happened was the company that actually makes this drug stopped making the drug because they were not getting the rebate or part of that kickback that the GPO would receive.

They were not getting a substantial amount of money from that.  So they instead started making another drug and that was a drug that the GPOs contracted with the hospitals for patients to start using.  

See it's the same game, Bob. It's the rebate game.  People who really contribute nothing to the system, they're not making anything, they don't make anything, they don't even actually transport anything.  They don't do anything.

They're not even, you know, Amerisource Bergen or McKesson.  They're like, they don't do anything except negotiate secret contracts.  I just think, I mean, Dr. Johnson, she's very knowledgeable about this.  I've known her for several years now through our affiliation with Free to Care, who's very focused on the anti-kickback statute and the legalized kickbacks that were created for GPOs and PBMs both within that.  But here she lays it out perfectly.

And you know, it sort of defeats the purpose of going generic because, and this is one of the problems with relying too much or the way in which we want to use generics and biosimilar to a certain extent is being undermined by the fact that a GPO will do a sole source contract and that'll cut off the market for everybody else.  And that's, I think, inherently anti-competitive.  So that means that other companies will be forced to cut back production because they're not making as much, but there's still people that need that drug.

Now, Dr.  Johnson says that GPOs are also a health equity issue.  She gives one example of a woman of color going through pregnancy, who already have much higher mortality rates than their white counterparts.  Now, these GPO monopolies can and do cause drug shortages.  These drugs might be needed for a mother to keep her baby safe when going through a medical emergency during pregnancy, but hospitals might not have them.

Take a listen. 

The number one drug that we use to treat preeclampsia is magnesium sulfate.  It is an IV formulation. The magnesium sulfate injectable is on the drug shortage list.  

The second drug that we would use to help mature the baby's lungs, if the baby's premature enough, is steroids or cortical steroids.  The most common steroid medications that we use through the IV to give to the mother to mature the baby's lungs are also on the shortage list.

So now here we are with a mother in the hospital who's having a pregnancy complication and we are short the drugs we need to take care of her and her baby and bring forth a healthy delivery.  

And if they don't have the drugs to keep the baby in, then they need to get the baby out.  And the drug most effective for inducing labor?  Yeah, it's on the list.  So let's do a C-section.  Oh, wait!  The drugs needed for an epidural to numb a specific area of the body?  You guessed it, on the shortage list. 

 It would be funny if it wasn't so dangerous and just completely mind-blowing.

And Dr. Johnson really sums it up best, Terri.  

That to me is insane. It's mind-blowing that this is happening in this day and age and in the United States of America, one of the richest countries and most powerful countries in the world.  It shouldn't be, it does not have to be this way.  

She's right. I gotta tell you, I spent two days on Capitol Hill with Dr.  Johnson telling the story in many congressional leaders' offices.  And it never ceased to leave me sitting there with my mouth open, just unable to really believe that this is happening.

That these very simple, cheap medications that solve major problems in hospitals are difficult to get sometimes.  And that doctors on the front lines, like Nikki and others, are out there having to, for like, you know, jerry-rig it.  You're like, okay, well, what can we do?

We don't have that today.  No, it's right.  Now, instead of borrowing a cup of sugar, can I borrow some antibiotics?

Can I borrow a nerve-blocking agent for my delivery?  So everyone, for those of you that group purchasing organization or GPOs, this is new to you, I encourage you to continue to follow us on this topic.  We're gonna be doing some more education around it.

This is an example of how they factor into our everyday lives here in this country.  And what do I think the solution is?  What I've always thought the solution is, which is to repeal their exemption from the anti-kickback statute, as well as the PBMs.

This is a tough ask, and not one I think we'll see on the table anytime soon, but it is definitely worth pointing out that it would solve a lot of problems. 

 I wanna thank Dr.  Nikki Johnson today for taking the time to speak with us.

A link to her website is in the show notes.  

Marion Mass and David Belat, two friends of the podcast, have also written an entire physician-led roadmap to patient-centered medical care.  Inside is a section all about GPOs. You'll find a link to that also in the show notes.  

We are rapidly approaching the Patients Rising Now, We the Patients' second annual fly-in.  Make sure you register now to secure your place in the nation's capital and make your voice heard.

You've wanted your opportunity to speak with other patient advocates, participate in meaningful round tables, and get your healthcare story in front of actual legislators to make a difference?  Well, this is your chance.  The We the Patients fly-in takes place in Washington, DC on June 12th and June 13th.

The link to register is in the show notes.  

Patients Rising Now has released not one, but two new patient impact reports.  One is on copay accumulators and the second is on PBMs.

Both contain real stories from real patients about how they're impacted by these issues.  We have a link to both of those in the show notes.  

And in case you missed it, we've also launched our next video podcast, Always On Call, that features the stories of caregivers who care for a loved one with Alzheimer's. It's hosted by Chris McCabe, who cares for her grandmother, Mary, and we just released our first episode, so be sure to give that a listen.  A link is also in the show notes.  

And now let's move on to an opinion piece in the Wall Street Journal.

It's entitled Lena Khan Blocks Cancer Cures and is written by John Tamney.  Now, Terry, it discusses how the Federal Trade Commission Chairman, Lena Khan, is blocking Illumina's acquisition of Grail, a company whose sole mission is to detect cancer early when it can still be cured.  I wish that Lena Khan would focus more on GPOs where there is monopoly than inventing ones regarding the development and the access to next generation early testing for cancer.

Yeah, this is baffling to me.  Now, it's also the EU blocked the deal last September as well.  What is her underlying reasoning here, Bob? What's the underlying reason for the block?  I mean, because it always baffles me when I hear about blocks like this, because I'm like, and you let CVS buy Aetna?  Like, I don't get it.

Like, once you start doing that, I'm like, what are you talking about?  Well, you know, you asked and answered the question beautifully, because yeah, what are you looking at?

Now, their rationale is, well, back in the day when Microsoft launched its browser on Windows, Microsoft was sued for being anti-competitive because you might not be able to use other people's browsers, even though you could download other people's browsers.  The fact that it was installed on Windows became a huge thing.  Of course, where are we now? I mean, there are dozens and dozens of browsers you can use, not a problem.  No one's access was impeded.  Illumina makes the tests and machines that do the analysis of the blood that Grail uses to determine if there is an early signal of cancer.

Now, Illumina is also still selling its equipment to other companies that are in the same space as Grail.  The reason that Illumina wants to acquire Grail, it obviously is to develop a market share in this space, but also because one way to reducing the cost of these tests is to make them widely available through a distribution network.  So the analogy really is just like, you know, AT&T or Verizon or whatever uses their fiber optics and wireless and sell some of the bandwidth to other providers and provides content.  There's still plenty of room for other people and other groups to compete.  But at the same time, what they're doing is in fact driving up the cost of testing and limiting the access, particularly to those communities where access to routine testing is not available.  The other thing I want to point out is, and I think we've discussed this in our interview with Jeff Fenstrom of Grail, that multi-cancer early detection tests can look at 52 to 60 different types of cancers. Only one in seven cancers are being detected through routine screening.  So obviously, just like with the CVS merger, they're not looking at the public health benefit here.  I seriously, I'm never going to get it. I mean, CVS is the PBM for all Aetna plans.  I know this because I have Aetna.  So CVS is our PBM, right?  But CVS is also the PBM for many other plans.  People can go in CVS, the pharmacy, and purchase whatever.  They don't have to belong to Aetna and vice versa.

I just, I don't understand their point.  And that's that way across the board in the three giant mergers that have taken place in healthcare.  So I just, I don't understand this.

I hope they resolve it and get it back on track.  It's an interesting case for sure.  You can find this opinion piece in the show notes.

Thank you for listening to today's episode of the Patients Rising podcast.  Make sure you share this episode with someone you think it might make a difference for.  Remember, we're all patients in one way or another.

And click the follow button so you don't miss out on any of our upcoming episodes.  We'll be right back here on Monday with another new episode.  Until then, for Bob and everyone at Patients Rising, I'm Terry Wilcox.

Stay healthy.

Nikki Johnson, M.D.Profile Photo

Nikki Johnson, M.D.