HEALTH-SYSTEM EDITION
BUSINESS/MANAGEMENT

Health-system R.Ph.s support GPO code of conduct

Health-system pharmacists are encouraged by the group purchasing organization (GPO) industry's adoption of a voluntary code of conduct. However, they remain cautiously optimistic about how well that code will be enforced. The code of conduct, delivered to the Senate Judiciary/Antitrust Subcommittee by the Health Industry Group Purchasing Association (HIGPA) in July, was prompted in part by press inquiries into the various business practices of the two largest GPOs—San Diego-based Premier Inc. and Novation, headquartered in Irving, Texas. Among other things, the subcommittee looked into allegations of conflict-of-interest and anti- competitive practices. The industry, via HIGPA, has vowed to clean up its act by urging GPOs to establish a self-certification process and to designate a compliance officer.

While some pharmacy directors contacted by Drug Topics commented that the press criticism of the GPO industry has been unduly harsh, they nevertheless endorse the idea of a code of conduct. "At least if you knew there was a standard to which you could hold accountable the people that are working for you, that's great, because in essence the GPOs work for us," said James Jorgenson, director of pharmacy at University Hospital in Salt Lake City.

William Gouveia, director of pharmacy at the New England Medical Center in Boston, said the recent inquiries have forced the GPO industry to reexamine its roles and functions. "When you have a partner, you have to be honest and open," Gouveia said. He added that in order for the self-imposed code of conduct to work, compliance officers have to be independent and must have the ability to look deep into the activities of a GPO and hold true to the code's recommendations.

One of the biggest criticisms leveled against GPOs is their business practice of charging vendors administrative fees based on volume of sales. While the code of conduct does not include the elimination of that practice, some pharmacy managers believe other aspects of the code will at least bring a level of consistency to GPO business practices. "Now at the federal level, CEOs have to abide by more formal types of agreements and establish consistent business practices, and that's a good thing. The code of conduct by GPOs adds another level of confidence," said Mary Inguanti, director of pharmacy at St. Francis Hospital and Medical Center in Hartford, Conn.

Among the new operating principles that will be adopted by Novation: assurance that member hospitals have timely access to new and innovative technologies; expansion of member access to a broad range of suppliers; and a guarantee that all vendors will have the opportunity to participate in Novation's bidding process. Premier's principles include: no group purchasing administrative fees in excess of 3%; no up-front administrative fees; no private-label programs; no bundling with unrelated products; and no vendor or public ownership in Premier.

At press time, the Federal Trade Commission was scheduled to conduct a workshop on Sept. 10 about whether the proposed code of conduct effectively addresses the concerns raised about GPOs. Among the speakers are Robert Betz of HIGPA and Larry Holden of the Medical Device Manufacturers of America.

Anthony Vecchione

Tony Vecchione. Health-system R.Ph.s support GPO code of conduct.

Drug Topics

2002;18:HSE35.