Dirty Medicine

DIRTY MEDICINE…. Back when heath care reform was making its Bataan-like march through the legislative process, politicians and pundits spent countless hours parsing the once obscure workings of our health care system. All the major problems with that system were, if not solved, certainly aired. Right?

Wrong. Somehow, the health reform debate never focused on “group purchasing organizations,” or GPOs. These are companies that serve as middlemen for hospitals in buying supplies — everything from syringes to heart monitors. A handful of these GPOs control purchasing for roughly 90 percent of the nation’s hospitals. In theory, they’re supposed to lower health care costs by pooling the buying power of numerous medical facilities to negotiate better prices from manufacturers. But as Mariah Blake explains in the upcoming issue of the Washington Monthly, a little-known loophole exempts GPOs from federal anti-kickback laws. This allows them to collect generous commissions and fees — in other industries they might be called kickbacks or bribes — from the very suppliers they’re supposed to be haggling with. This arrangement gives large medical device manufacturers extra clout in negotiations, which they use to set prices and terms and shut out their smaller rivals, including innovative companies with potentially lifesaving products.

In fact, Blake has uncovered strong evidence that GPOs generally increase rather than lower the price of medical supplies — the second largest expenditure for our nation’s hospitals and clinics and a major contributor to the ballooning cost of health care, which consumes nearly a fifth of our GDP.

Learn more about GPOs and their hidden influence in our cover story, “Dirty Medicine.”