Washington, D.C. — Following the widespread devastation resulting from Hurricane Helene, which temporarily closed Baxter International’s intravenous (IV) solution factory in Marion, North Carolina that makes 60% of the nation’s supply, and B. Braun’s IV solution factory in Daytona Beach, Florida — which makes another 23% and lies in the path of Hurricane Milton — the American Economic Liberties Project released the following statement.

“With U.S. hospitals reporting life-threatening shortages of IV solution following Hurricane Helene, it’s clear that the healthcare concentration crisis is as much a public health emergency as it is an economic one,” said Emma Freer, Senior Policy Analyst for Health Care at the American Economic Liberties Project. “As with other persistent medical supply shortages, the major group purchasing organizations (GPOs) carry much of the blame. These medical middlemen leverage their market power to put downward price pressure on manufacturers, which end up consolidating — as evidenced by just two factories producing more than 80% of the nation’s IV solution — and embrittling the supply chain, leaving it unable to withstand one disaster, let alone two. The GPOs’ safe harbor from the federal anti-kickback statute enables these abuses and is now stranding vulnerable patients in the storm’s aftermath, which is why Congress must repeal it.”

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 control roughly 90% of the market. This gives them disproportionate leverage to whittle down how much revenue manufacturers of low-margin generic drugs and medical supplies 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 and leading to a lack of diversification in the industry.

Crucially, GPOs aren’t incentivized to change their anticompetitive negotiating tactics because their revenue comes from kickbacks paid by incumbent manufacturers, protected by a safe harbor to the federal anti-kickback statute granted by Congress in 1987. Before then, GPOs earned revenue through dues from their hospital members, aligning their interests.

Economic Liberties has repeatedly called on Congress to repeal the GPO safe harbor and successfully urged the Federal Trade Commission (FTC) to scrutinize the GPO industry, building on its ongoing investigation into another kind of medical middleman: pharmacy benefit managers (PBMs).

Just a few days ago, the American Hospital Association sent a letter urging the Biden Administration to “take immediate actions to increase the supply of IV solutions for the nation’s hospitals, health systems and other health care providers that are already struggling to provide care.” Senator Amy Klobuchar (D-MN) has also sent a letter to the U.S. Department of Health and Human Services (HHS), urging the agency to use its available authorities to resolve the shortage.

Read Economic Liberties’ 2024 comment to the FTC and U.S. Department of Health and Human Services to learn more.

Read “The Dirty Secrets of Drug Shortages” to learn more.

Read Economic Liberties 2022 letter to the FTC to learn more.

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.