For most shoppers, buying in bulk means stocking up at big-box retailers such as Costco and Walmart to save on groceries and other household goods. But the discounts found in bulk shopping go well beyond the home. For more than 30 years, hospitals have banded together to purchase expensive drugs at discounted rates. Now, a new effort has brought together academic research centers for a similar savings.
Companies such as Texas-based Novation have long provided what's known as group purchasing options (GPOs) for hospitals. But the supplies needed by basic biomedical research teams at academic medical institutions differ from those used by clinicians. To fill the gap, a group representing academic hospitals, the Academy for Medical Development and Collaboration (AMDeC), has created a GPO to enable its members to combine their purchasing power to yield savings on essential lab supplies.
According to Maria Mitchell, who has served as president and chief executive of AMDeC since its inception in 1997, the organization is uniquely qualified to head the new GPO operation, which was approved by its board late last year and in August closed its first purchasing deal with GenScript, a supplier in Piscataway, New Jersey, that produces reagents and other key lab necessities. It's a first for GenScript as well: although the company has worked with some large companies in the past on big orders, “this is the first time” that the company has made a purchasing agreement with a GPO, says Frank Zhang, its chief executive.
A penny-wise proposition
Unlike hospital GPOs, which focus on frequently used drugs and hospital equipment, AMDeC's GPO will focus more on “reagents, primers [and other] things that are used in laboratories day in and day out,” Mitchell says. The labs of AMDeC members typically spend a total of $400 million on these products annually, but if they take full advantage of the GPO, they stand to save around 10% of these costs, says Mitchell.
AMDeC is primarily made up of New York–based institutions such as New York University's Langone Medical Center and the Memorial Sloan-Kettering Cancer Center, but it has expanded to include medical labs affiliated with Rutgers, the State University of New Jersey, and it hopes to become nationwide, according to Mitchell. All institutions already a part of AMDeC are invited to participate in the GPO, and Mitchell estimates that 90–95% of them will do so.
The move is particularly important given that funding for research, whether through hospital budgets, philanthropic organizations or government grants, has decreased because of the poor economy, says Mitchell. Research-focused hospitals must “spend their dollars where they need them and not invest in the profit margins of companies” by overpaying for supplies.
GPOs have come under government scrutiny before because they can become large enough that they are able to dictate the market, edging toward a monopoly, says Einer Elhauge, a professor at Harvard Law School in Cambridge, Massachusetts. But Elhauge says that there is no reason not to launch one for basic biomedical labs looking for savings: “GPOs can be efficient and procompetitive when they do not command such a big share of the market as to have [illegal] market power.”
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Matthews, S. Group purchasing plan launched to save on research supplies. Nat Med 18, 1595 (2012). https://doi.org/10.1038/nm1112-1595