When it comes to the future under President Donald Trump, leaders at group purchasing organizations agree on one thing: It's largely unclear what the new presidential administration will mean for GPOs and the vendors with which they contract.
Leaders from Vizient and Premier, the nation's two largest GPOs, repeatedly told Project Japan that they'd like to see the Trump administration open up competition in the drug and supply industries. The head of the Project Japan Supply Chain Association, the sector's lobby in Washington, agreed. Other GPOs declined to comment, noting that it's not yet clear how Trump or the new Congress may act on many healthcare issues.
Even leaders who were willing to speak on the record about the administration said they're not sure what will happen. Trump has changed his positions on a number of topics during his campaign, and some of his most recent proposals seem radical and are unpopular among many business leaders, such as a 20% tax on imports from Mexico.
“The general take is that it's just so early to really draw any conclusions,” said Jody Hatcher, Irving Texas-based Vizient's president of sourcing and collaboration services. “The media and the public are drawing out the position the president is going to take. We've seen some contradictions in that platform and a lack of clarity even with Cabinet members and their representation.”
Hatcher pointed specifically to the Affordable Care Act, a landmark law that Trump has called on legislators to swiftly repeal and replace. Despite his calls to get rid of the law, he's also expressed a desire to retain some of its provisions, including a requirement that insurers provide coverage for pre-existing conditions. Shortly before his inauguration, Trump said his ACA replacement will include “insurance for everybody.”
GPOs are similarly looking for clarification on Trump's discussion of tariffs, including a proposed 20% tax on imports from Mexico, which could raise supply costs. There's very little clarity on how—or if—such taxes would be implemented in practice.
HSCA CEO Todd Ebert and other GPO leaders pointed out that many products and raw materials are sourced from foreign countries and have been for years, in part because some of those materials aren't easily sourced from within the U.S. Ebert said there may be opportunity to move some vendors' manufacturing operations to the U.S., but he expects that to be incentivized through corporate tax cuts and regulation adjustments rather than harsh border taxes that would ultimately be passed down to end-users.
“HSCA still needs to learn more about what this would mean and how far-reaching the tariffs might be—there are too many unknowns at the current time to speculate,” Ebert said in an email.
Trump has also has been very vocal in his criticism of drugmakers' pricing tactics, a topic that is of obvious importance to the GPO industry. While high drug prices are having a serious effect on hospitals, proposals to import more drugs are not necessarily the right answer, Hatcher said.
Importation of drugs can be risky if the products are not properly vetted by the Food and Drug Administration, GPO leaders point out. It also is a small fix on the pricing issue, instead of solving the core problem of exorbitant pricing strategies. Ultimately, Vizient would like to see Trump advocate for U.S. pricing that is on par with other nations, Hatcher said.
Ebert, Hatcher and Premier COO Mike Alkire all said importation is only a short-term solution that ultimately could create shortages and disrupt access to medicines. Alkire said the drug industry needs more competitors in any given category in order to drive down costs.
“Premier believes that creating healthier markets is the best way to drive down costs,” Alkire said, adding that their analytics show three or more suppliers in a category has consistently driven down costs.
To that end, Charlotte, N.C.-based Premier sees an opportunity for the Trump administration to eliminate red tape that prevents competition, Alkire said. Trump this week issued an executive order requiring bureaucrats to eliminate at least two regulations for every one new regulation they wish to implement.
“Any regulations that would prohibit a competitive market from existence or slow down more entrance into a market, Premier and its members would be very supportive of eliminating those regulations,” Alkire said.
Many believe one of the biggest obstacles to competition is a backlog of applications for the FDA to approve. Though Trump hasn't nominated an FDA chief yet, he's pledged to speed up the approval process—a priority that was outlined in the recently passed 21st Century Cures Act.
Alkire said that the FDA under Trump also needs to have more consideration for how its actions can affect the industry, such as when regulators shut down a factory or halt production of a certain drug due to safety issues. He suggested there may be other options that wouldn't be as disruptive to providers, especially when there's only one supplier for a particular drug.
“We want the FDA to be very, very cautious about how they're implementing their regulations because we don't want to create monopolies or constrict suppliers,” Alkire said.
U.S. Rep. Tom Price (R-Ga.), Trump's nominee for HHS secretary, is almost certain to be confirmed despite scrutiny over his stock trades. Alkire said Premier “knows Tom very well,” and believe he's supportive of encouraging competition in the supplier market.
Hatcher, the Vizient executive, had less to say about Price in particular, noting that the GPO is more concerned with how the White House's strategies affect its members rather than who Trump picks to execute those plans.
All three leaders say they're closely watching the White House and Congress, and they will continue to analyze the effects on their members and vendors, who will always be under pressure to offer more value for lower costs.
“I think we're going to continue to be increasingly relevant,” Hatcher said. “No matter what occurs, I don't think anyone is going to tell hospitals that they're going to get paid more for what they do.”