The Evolution of GPO Contracting
By AmerisourceBergen |
Shrinking reimbursements. Cost control. Quality care in the face of financial pressures. None of these issues are new in the healthcare market. For providers, they mean having to carry inventory costs and optimize business practices and technologies to ensure they capture appropriate reimbursement. For manufacturers, these issues may mean reduced access to practices that seek to control costs if they don't adapt to customer concerns.
As financial pressures continue, contracting will become more and more valuable for providers who need to control their drug costs. And because of these and other market dynamics, the Group Purchasing Organization (GPO) model has evolved in significant ways.
To begin with, product lines have expanded, which means that contract types must evolve. Originally, the market saw a handful of big name blockbuster-type products. For example, oncology GPO ION Solutions historically managed 20-25 drug contracts from 2000 to 2010; as of October 2014, ION reports nearly 60 contracts. In the days of blockbuster brands, the ability to bring value to a physician practice with just four or five key contracts was a reality because the products had broad clinical indications and offered wide reach with daily use. The new products that have come to market in the last decade have been developed for increasingly more targeted therapies and second- or third-line use. As such, being able to identify the right patient at the right time has become more difficult for physicians. While there are still traditional GPO contracts, now these new products call for a contract model that supports narrower clinical indications and that encourage appropriate patient identification.
GPOs strive to assist manufacturers in meeting their market share and product performance goals while also adding value for their membership. Doing so creates a "win-win" environment. In the new age of specialty products and targeted therapies, it can mean creating contracts that fit the needs of the product. Some big branded products, for example, are looking at abandoning traditional market growth contracts and going to more creative growth or appropriate use contracts. These types of creative contracts might support branded products that recently received new indications or have data that support additional cycles of therapy and essentially measure the appropriate, indicated use of the product versus growth of that product. As products get more tumor-specific, GPOs and other stakeholders will have to continue to evaluate this contracting model and strive to increase the informatics available to help position the products more effectively.
Another issue affecting contracting is 340B, which can provide outpatient hospital settings with a 30 to 35 percent drug discount over community oncology practices. An analysis conducted by ION showed a double-digit decline in contracted products used in practices that have shifted to hospital 340B settings, meaning manufacturers are impacted by both the discount and shrinking utilization.
Despite the proliferation of product profiles and contract types, there is no question that GPO contracts deliver considerable value. They offer purchasing power for providers, market access for manufacturers and timely, appropriate therapies for patients. With cost control not likely to go away, leveraging evolving GPO contracts to meet market demands is how these partnerships will continue to flourish.