Originally Published MDDI October
2004
NEWSTRENDS
New Legislation Could Alter GPO Payments |
| Perhaps
[the Senate] will look at other aspects of the antikickback law as well. —Mark Leahey |
The Department of Justice is investigating whether hospital purchasing practices
are fraudulently overcharging Medicare, Medicaid, and state health programs
for medical devices. The healthcare purchasing landscape could also be altered
by proposed legislation in the Senate that would tighten limits on what payments
device companies could make to hospital purchasing organizations.
The August 21, 2004, editions of The New York Times and The Hartford Courant
reported that more than a dozen device
companies received federal subpoenas. The companies were to answer questions
for an investigation into how products are sold to institutions serving Medicare
and Medicaid patients.
The Times reported that the investigation appears to be centering on the business
practices of Novation (Irving, TX), one of the country’s largest
group purchasing organizations (GPOs). In particular, the Department of Justice
(DoJ) appears to be interested in whether the rebate and fee systems used by
GPOs cause Medicare and Medi-caid to be charged for more than what the hospitals
are actually spending. The Times said the DoJ and the HHS Office of Inspector
General are seeking to learn “the nature of payments suppliers make to
Novation, how Novation picks which companies will be awarded contracts, and
what Novation does with the payments it receives” from device companies.
GPOs are exempt from certain antitrust laws covering gifts and payments to institutions
that receive Medicare money. They can accept payments from device companies
to be included in their contracts. But those payments cannot be more than 3%
of what each firm sells through those contracts.
The questions that remain are whether those payment levels have been exceeded
and whether different types of payments not covered under the “safe harbor”
of the law have been permitted.
Those laws may be altered soon, however. Following a Sept. 14 hearing, the antitrust
subcommittee of the Senate Judiciary Committee circulated a draft bill that
would require HHS to issue regulations outlining which hospital purchasing practices
violate antitrust laws. It would also ban collecting fees from device companies
to cover marketing costs and to cover the costs of converting from one brand
of device to another.
GPO business practices have come under fire in recent years from smaller device
companies. These smaller companies claim they have been shut out of GPO contracts
despite having less-expensive and more-effective products than competitors who
have contracts.
At the Sept. 14 hearing, senators from both parties said that they believe some
questionable practices have stopped but others remain, and that continued oversight
is needed to ensure abuses don’t return.
Mark Leahey is executive director of the Medical Device Manufacturers Association,
which has been a staunch advocate for GPO reform. Leahey says he hopes the investigation
“will shed light on the anticompetitive practices that we have raised in
the past. When they look at the areas of Medicare and Medicaid fraud, perhaps
they will look at other aspects of the antikickback law as well.”
Novation told the Times it would cooperate fully with the investigation.
Copyright ©2004
Medical Device & Diagnostic Industry
