The Procompetitive Benefits of GPOs

Group purchasing organizations (“GPOs”) face unique antitrust compliance concerns because of the fundamental structure of a GPO — e.g., a group of purchasers, some of whom may be competitors, who collectively could have “monopsony power” — i.e., significant market power or bargaining power. Whereas monopoly power relates to the power of a particular seller in a market, monopsony power relates to the power of a particular purchaser in a market. Like monopoly power, monopsony power requires a certain level of market share. Antitrust risks increase as the purchasing power increases. Nevertheless, group purchasing arrangements through GPOs are generally permissible under the antitrust laws. These arrangements usually reduce costs, and thus have the potential to benefit consumers through lower prices, and rarely result in the loss of competition in any market.

The Seventh Statement of the Statements of Antitrust Enforcement Policy in Health Care (“Statement”), issued by the U.S. Department of Justice (“DOJ”) and the Federal Trade Commission (“FTC”), recognizes the procompetitive benefits of group purchasing, while weighing the concern of monopsony power. The Statement describes an antitrust safety zone for certain GPOs among health care professionals. This safety zone provides that “absent extraordinary circumstances,” neither the DOJ nor the FTC will challenge a joint purchasing arrangement among health care providers if two conditions are met:

(1) the purchases account for less than 35 percent of the total sales of the purchased product or service in the relevant market; and (2) the cost of the products and services purchased jointly accounts for less than 20 percent of the total revenues from all products or services sold by each competing participant in the joint purchasing arrangement.

A GPO that does not fall within the safety zone does not necessarily violate the antitrust laws, but the GPO must be analyzed to determine whether its procompetitive effects (lower prices and benefits to consumers) are sufficient to outweigh any monopsonization concerns.

For additional information about the issues discussed above, or if you have any other antitrust concerns, please contact the Epstein Becker Green attorney who regularly handles your legal matters, or one of the authors of this Antitrust Byte: