Role of Supply Chain Intermediaries in Steering Hospital Product Choice: Group Purchasing Organizations and Biosimilars

Abstract

Over 95% of hospitals in the United States use pooling alliances, known as Group Purchasing Organizations (GPOs), to purchase medications, devices, and supplies. While GPOs create savings for hospitals through lowered prices and reduced administrative burden, critics allege that these supply chain intermediaries reduce competition, particularly if GPOs concentrate purchasing from larger, dominant manufacturers. Using a mixed-method design, we studied whether GPOs influence hospital purchasing behavior and explored the contracting mechanisms used by GPOs. Focusing on four high-cost biologic molecules that face competition from generic-like biosimilars between 2015-2019, we found that biosimilar uptake was 16-23% higher among Traditional Medicare patients in hospitals associated with two of the three top GPOs as compared to smaller GPOs. The increase in biosimilar use was driven by single biosimilar brands that varied by GPO. Based on qualitative interviews, these two GPOs used more aggressive contracting strategies to steer member hospitals to specific biosimilar brands. To date, the use of GPOs and these aggressive contracting strategies appear to have increased biosimilar use, suggesting savings for payers and patients. However, single-source GPO contracting could inhibit competition or create shortages in the long term. Transparency on GPO practices and pricing strategies is needed for further GPO evaluations.