Berks County Medical Society Medical Record Fall 2018 - 38

M e d i c a l R e c o R d F e at u R e

Drug Costs, Drug Shortages and
Group Purchasing Organizations

PHYSICIANS AGAINST
DRUG SHORTAGES
by Robert Campbell, M.D., Chairman
Delaware County Medicine & Health, Summer 2018 article printed with permission
by Delaware County Medical Society.

T

hroughout 2008 America endured an unprecedented
year-long financial crisis. The financial infrastructure of
the wealthiest nation in the world unraveled week by week
and month by month. It was not until years after the financial
marketplace collapsed that experts determined the root cause of
the collapse. Collateralized Debt Swaps (CDS), mysterious secret
contracts authored by obscure financial middlemen, were identified
as the fundamental cause of this financial calamity.
In 2018 history may be repeating itself. The healthcare
marketplace is plagued by similar contracts of mass destruction
promulgated by secretive middlemen. They are not really
middlemen in the truest sense of the word. They do not have
capital at risk or inventory of any kind. They mostly write
contracts for kickbacks. Why? Because in the healthcare supply
chain, Group Purchasing Organizations (GPOs) and Pharmacy
Benefit Managers (PBMs) have a unique ability to do so. They
have a Safe Harbor for Kickbacks which allows them to do this
without the usual criminal penalties. The GPO/PBM Safe Harbor
is an unfortunate government inducement for good people to do
bad things. Like Collateralized Debt Swaps of 2008 not many
people know much about GPO or PBM contracts in 2018. Still
physicians and patients would do well to learn about these things.
The author was fortunate to be invited to the White House
Rose Garden for President Trump's long promised prescription

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to lower the cost of medications. He went off from the prepared
teleprompter text one time when he said, "We are very much
eliminating the middlemen. The middlemen became very, very
rich, right? Wherever these middlemen are. And a lot of people
never even figured it out. They are rich. They will not be so rich
anymore."
He is right. So now let's try to understand his slightly cryptic
language. The Big Four GPOs are Vizient, Premier, Healthtrust,
and Intalere. The Big Three PBMs are CVS Health, Express
Scripts, and Optum RX. These companies never reveal their secret
contract terms with suppliers, insurers, hospitals, and pharmacies.
There are clues about the scale of the problem.
Pharmaceutical manufacturers which do research and create
new patented medications have a trade group called PhRMA.
They are the 35 largest research manufacturers. Their members
pay "Rebates" to get through the GPO and PBM middlemen.
"Rebates" is an inside the beltway euphemism for legalized
kickbacks. Legalized by one precious Safe Harbor for GPO/PBM
Kickbacks. Apparently in the first survey of its kind they have
discovered its members paid $144B last year in Kickbacks....I
mean Rebates. That kind of yearly outlay could cure Alzheimers
or Diabetes. Instead it simply is siphoned off and raises the cost of
medications. 37% of patent medication cost is kickbacks. Patients
pay them one way or another via insurance premiums, co-pays,
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Berks County Medical Society Medical Record Fall 2018

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