Economic Liberties submitted the attached comment in response to the Federal Trade Commission and the Department of Health and Human Services’ joint request for information regarding the role of group purchasing organizations (GPOs) and drug wholesalers in America’s ongoing drug shortage crisis. The comment explains how GPOs contribute to shortages by pushing the price of generic drugs lower, imposing restricting and inflexible contract terms on medical providers, and undermine competition in pharmaceutical markets.

Today, a record number of treatments, for everything from lead poisoning to cancer, are unavailable—especially generics. The core driver of generic pharmaceutical shortages is that the prices manufacturers receive for producing these medicines are extraordinarily low, such that manufacturers find it uneconomical to produce the drug at all. As explained in the comment. the problem is greatly exacerbated by various middlemen in medical supply chains, especially group purchasing organizations (GPOs) and drug wholesalers.

The comment outlines how HHS and FTC can take action under their existing enforcement and rulemaking authorities. HHS would revise the safe harbors from the federal Anti-Kickback Statute that have been provider to GPOs, or revise the Medicare Conditions of Participation to require multi-source contracts for providers and GPOs. The FTC would be able to bring antitrust enforcement action against many of the anticompetitive contract terms used by GPOs and wholesalers.