Health journalists received a few lessons in economics during a discussion last week on some alarming drug trends – largely the result of a broken market – that are threatening patient care and undermining the U.S. health care system.
At a New York City chapter event, Phil Zweig, a longtime financial journalist who also runs a group called Physicians Against Drug Shortages, spoke about the scarcity of generic drugs in hospitals and clinics – a problem that has persisted for years. Hospital group purchasing organizations (GPOs), which are not regulated and essentially negotiate supply purchases for hospitals, have the ability to charge market share to the highest bidder. Zweig said they can do this because the safe harbor provision in the 1987 Medicare anti-kickback law excluded GPOs from criminal prosecution for taking kickbacks from suppliers.
“The more you can pay to a GPO, the more market share you get,” Zweig said.
Because of the exclusive contracts that GPOs award, the number of competitors in the market shrinks, which has led to a shortage of generic prescription drugs – everything from sterile injectables to chemotherapy agents. Continue reading