GPOs contribute to the effectiveness and efficiency of PBMs in managing drug costs for their clients.
The big three pharmacy benefit managers (PMBs), CVS, Express Scripts, and OptumRx, have been involved in Group Purchasing Organizations (GPOs) to manage rebate negotiations for their commercial clients.
PBM’s interest in GPOs
The purpose of PBM-created GPOs is to aid with rebate negotiations. The main objective of GPOs is to take over the rebate negotiations with the manufacturers, aiming to reduce costs for PBM clients and their members. This is achieved by negotiating lower costs with manufacturers, which in turn lowers the costs of prescription drugs for members.
There are several other reasons why PBMs have created GPOs. Some of these reasons include:
- Standardization and quality control: Ensure clients that the manufacturers have been vetted and meet safety and quality standards through the processes within GPO’s.
- Access to a wider range of products: A PBM has access to the manufacturers that the GPO has established agreements with, which broadens the range of products at competitive prices.
- Efficient procurement process: PBMs are able to reserve resources that typically would be utilized to negotiate with separate manufacturers as the GPO handles these negotiations.
GPOs influence in the health care industry
The FTC has several concerns regarding the influence of GPOs on the pharmacy drug market.
GPOs possess significant buying power when negotiating contracts with manufacturers, which in turn can greatly impact the drugs that are deemed preferred by PBMs. This affects the drugs that the members use, as preferred medications typically have lower copays.
PBMs in the U.S. are required to adhere to rebate reform rules, which make it more challenging for them to profit from rebates obtained from clients. To circumvent these rules, PBMs establish GPOs in other countries, like Switzerland, where these rebate regulations do not apply and are more difficult to audit. While PBMs typically charge administrative fees for their services, there are limitations on these fees. However, with GPOs, there are no such restrictions, and clients should carefully review the fees associated with working with GPOs to ensure transparency.
FTC investigations into GPOs
The Federal Trade Commission has had a growing interest in the practices of GPOs, specifically when it comes to the negotiating of rebates. Compulsory orders were issued in early 2023 to Zinc Health Services, LLC, and Ascent Health Services.1 The FTC is requiring these two GPOs to provide them with records of the practices that they conduct.
Contact our pharmacy practice to learn more about the potential concerns of Group Purchasing Organizations (GPOs).
“FTC Deepens Inquiry into Prescription Drug Middleman,” Federal Trade Commission, accessed October 23, 2023, https://www.ftc.gov/news-events/news/press-releases/2023/05/ftc-deepens-inquiry-prescription-drug-middlemen