Hospitals operate under a system in which group purchasing organizations (GPOs) and manufacturers enter into long-term, exclusive contracts that use financial penalties to effectively prohibit the purchase of products outside the contract. This makes it almost impossible for new and innovative products from small companies to penetrate the market, even when those products incorporate lifesaving technology.
The United States General Accounting Office, in its Report GAO-02-690T, published in April 2002 the results of a pilot study on GPO abuses. The title of the report is Group Purchasing Organizations, and its subtitle, which flatly states the problem, is Pilot Study Suggests Large Buying Groups Do Not Always Offer Hospitals Lower Prices. The pilot study was limited to two medical devices: pacemakers and safety needles. Page 12 of the report says: “For different safety needle models, median GPO-negotiated prices exceed prices negotiated by a hospital buying on its own by from 1 to 5 percent.” The 23-page pilot study is available online at: http://www.gao.gov/new.items/d02690t.pdf.
Amazingly, a little-known federal statute, the Medicare anti-kickback “safe harbor” exemption, permits huge GPOs to receive billions of dollars in kickbacks from medical suppliers.
From its very beginning, Retractable Technologies has struggled for market access. Often our salespeople are not even allowed to show our products to hospital materials managers because restrictive GPO contracts effectively preclude their purchase of our products, regardless of their effectiveness in preventing needlestick injuries.