Government Created Protections of the GPO Industry: Financial Burden of GPO Activities on the U.S. Healthcare Industry

A major culprit in the protection of the GPO industry and the resultant costs and economic inefficiencies can be found in the regulatory protections created by the federal government in the form of the GPO anti-kickback safe harbor and the joint purchasing antitrust safety zone. Notwithstanding their initial intent, the anti-kickback safe harbor and the antitrust safety zone have had significant unintended negative consequences. Rather than helping the hospitals in securing supplies at the least cost, they have created incentives for the GPOs to maximize their revenues without necessarily providing the hospitals with the most cost effective and least expensive products. Furthermore, by sheltering them from market competition, they have led to a massive consolidation of the GPO industry, a further weakening of the bargaining power of both their customers and suppliers, and, exploitation of the market power for the benefit of the GPOs.