OK, so here I am at @theprospect on how one important market - pharmaceuticals - ended up being so dominated by China and so at risk from coronavirus. Turns out these hospital buying groups called GPOs decimated the domestic generic drug industry. prospect.org/health/behind-…
@theprospect Here's the story on this: GPOs are these bulk purchasing groups for medical supplies and drugs used in hospitals. Buy more, get discounts, everyone wins, right? Wrong.
In 1987, Congress added an exemption to the anti-kickback statute so GPOs could be paid by the suppliers, not the hospitals. GPOs now "make money by selling sole-source contracts to the highest bidder." They stick up the suppliers for access. prospect.org/health/behind-…
As a result, generic drug manufacturers have a hard time staying in business. One company was paying an amount equivalent to 56.25 percent of its overall sales on one drug to access the contract of a major GPO. prospect.org/health/behind-…
This has put lots of the industry out of business, and what remains keeps their margins up by moving for cheaper labor and lower environmental compliance, mostly to China. It's the GPO contracts that has concentrated the supply chain. prospect.org/health/behind-…
