Cited by 82Supply Chain and Inventory ManagementMerger and Competition AnalysisPharmaceutical Economics and Policy

The DOI matches its Crossref record.

Controversial Role of GPOs in Healthcare‐Product Supply Chains

Hu, Qiaohai (Joice), Schwarz, Leroy B.·2011·Production and Operations Management

Abstract

This paper examines the controversial role that Group Purchasing Organizations (GPOs) play in the supply chains for healthcare products. Among the controversies, perhaps the most fundamental one is whether or not GPOs reduce purchasing costs for their members. However, the fiercest controversy is around the “contract administration fees (CAFs)” that GPOs charge to manufacturers. We examine these and other controversies using a Hotelling duopoly model. Among our conclusions: GPOs increase competition between manufacturers and lower prices for healthcare providers. However, GPOs reduce manufacturers' incentives to introduce innovations to existing products. We also demonstrate that the existence of lower off‐contract prices is not, per se, evidence of anticompetitive behavior on the part of GPOs. Indeed, we demonstrate that, under certain circumstances, the presence of a GPO lowers off‐contract prices. We also examine the consequences of eliminating the “safe harbor” provisions that permit healthcare GPOs to charge CAFs to manufacturers, and conclude that it would not affect any party's profits or costs.

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Crossref · 10.1111/j.1937-5956.2010.01121.x

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Research works printed but not linked: 12

  1. Burns L. R., 2002, The Health Care Value Chain: Producers, Purchasers, and Providers
  2. Burns L. R., 2008, Utilization, services, and performance, 33, 203
  3. Cachon G., 2003, Handbooks in Operations Research and Management Science: Supply Chain Management
  4. 10.2307/3087440 · DOI
  5. 10.1016/j.ijindorg.2007.10.002 · DOI
  6. 10.1108/13598540510578333 · DOI
  7. 10.1111/j.1430-9134.1997.00755.x · DOI
  8. 10.1016/S0969-7012(99)00034-9 · DOI
  9. Schneller E. S., 2005, The Value of Group Purchasing in the Healthcare Supply Chain
  10. Schneller E. S., 2006, Strategic Management of the Health Care Supply Chain
  11. 10.1016/j.ejor.2007.03.009 · DOI
  12. 10.1287/mnsc.1030.0168 · DOI

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Metadata

Authors
Hu, Q. (., & Schwarz, L. B.
Affiliations
Purdue University West Lafayette (US)
Venue
Production and Operations Management
Published
2011-01
Volume
20
Issue
1
Pages
1-15
ISSN
  • 1059-1478 (ISSN-L)
  • 1937-5956
OpenAlex
W1775696543
Cited by
82
References
0
Citations by year
2026: 4 · 2025: 8 · 2024: 8 · 2023: 6 · 2022: 4 · 2021: 8 · 2020: 6 · 2019: 3 · 2018: 9 · 2017: 4 · 2016: 9 · 2015: 3 · 2014: 3 · 2013: 6
FWCI
4.44
Type
journal article
Language
en
Open access
closed
Locations
Production and Operations Management (publishedVersion)
Topics
  • Social Sciences › Decision Sciences › Management Science and Operations Research › Supply Chain and Inventory Management
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Merger and Competition Analysis
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Pharmaceutical Economics and Policy
Keywords
group purchasing organizations, manufacturer competition, anticompetitive practices, innovation incentives, safe harbor provisions

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