Do GPO contracts help manufacturers grow their business?

By Elizabeth Hilla

Though they often don’t want to admit it, the answer can sometimes be ‘yes’

I’ve been around the healthcare distribution business long enough to have heard some heated conversations about group purchasing organizations (GPOs). Some suppliers yearn for GPO contracts, while others – or sometimes the very same ones – loudly gripe about the administrative fees that fund the GPO model.

Interestingly, I think the tide is turning, at least a little. I don’t mean that suppliers love admin fees any more than they used to, but most now seem to accept that providers will always want to pool their purchasing power to get better pricing – and that GPOs help that happen. And many now view GPOs as partners in reaching healthcare customers.

I recently led a webinar on working with GPOs, and during it we did an audience poll. With about 100 manufacturers and distributors on the line, I asked how folks felt about the importance of GPO contracts for their business:

• More than 32 percent said “GPO partnerships help us significantly grow our business,” the most positive response that was available.
• Others felt the contracts were necessary (if not a huge benefit). Seven and a half percent saw GPO contracts as necessary only in the hospital market, while 35 percent saw them as necessary in all market segments.
• Only about 16% percent said they believe they can succeed without GPO contracts.

Still, winning and managing GPO contracts isn’t easy. And even if a supplier wins a bid, they aren’t guaranteed to get the business. Often, regional aggregation groups ask for further concessions in return for a more certain volume commitment.

The webinar participants offered some great insights on navigating these challenges, and we recorded the program. If you’d like the recording, email Cindy Chen (chen@hida.org) and she’ll send it to you.

Elizabeth Hilla is senior vice president, Health Industry Distributors Association