Washington, D.C. — Ahead of the House Energy and Commerce Subcommittee on Health’s hearing today on legislative proposals to address generic drug shortages, the American Economic Liberties Project released the following statement.

“Today, the committee is considering legislative proposals that do nothing to fix the root cause of the U.S.’s generic drug shortage crisis: group purchasing organizations (GPOs) and their kickback driven business model,” said Sara Sirota, Policy Analyst at Economic Liberties, “The committee is giving a platform to the trade group representing the major GPOs, but not to leaders like U.S. Food and Drug Administration Commissioner Robert Califf, who has repeatedly challenged the middlemen-driven market pressures head on.”

Patients who are being forced to take less effective and more expensive medications or forego treatment entirely will not find relief so long as Congress continues to ignore the GPO problem—the real reason generic drug makers are going out of business, moving overseas, and shutting down production.

GPOs are collectives of U.S. hospitals that arrange medical supply contracts with manufacturers on behalf of their members. Following years of consolidation, just three GPOs today represent 90% of the market. This gives them disproportionate leverage to whittle down how much revenue manufacturers of low-margin generic drugs can make, forcing them out of business and resulting in frequent shortages. They also award exclusionary contracts to single manufacturers, making it difficult for others to compete.

Crucially, GPOs aren’t incentivized to change their negotiating tactics on these products because their revenue comes from kickbacks from incumbent manufacturers, thanks to a safe harbor from the Anti-Kickback Statute that Congress granted in 1987. Before then, GPOs would take dues from their hospital members, aligning their interests.

Economic Liberties has already submitted comments to Chair McMorris Rodgers urging her to repeal the GPO safe harbor from the Anti-Kickback Statute.

Last November, Economic Liberties also led a group of organizations representing doctors, patients, and activists in requesting the Federal Trade Commission to launch a 6(b) investigation into the GPO industry.

See FDA Commissioner Califf’s recent comments on drug shortages here.

Learn more about Economic Liberties here. 

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The American Economic Liberties Project works to ensure America’s system of commerce is structured to advance, rather than undermine, economic liberty, fair commerce, and a secure, inclusive democracy. Economic Liberties believes true economic liberty means entrepreneurs and businesses large and small succeed on the merits of their ideas and hard work; commerce empowers consumers, workers, farmers, and engineers instead of subjecting them to discrimination and abuse from financiers and monopolists; foreign trade arrangements support domestic security and democracy; and wealth is broadly distributed to support equitable political power.