Medical Supply Purchaser Premier Agrees to ‘Sweeping Changes’ in Its Business Practices
San Diego-based Premier Inc. -- a national hospital supply purchasing group that has come under fire for its questionable ties to medical supply companies -- has agreed to "sweeping changes" in its business practices, the New York Times reports (Meier/Walsh, New York Times, 8/6). Premier and Novation LLC came into question earlier this year when the New York Times reported that medical supply companies -- not hospitals -- finance the purchasing groups, and as a result, the groups take money from the very companies they are supposed to evaluate objectively. Each year, medical supply companies pay Premier and Novation hundreds of millions of dollars in fees that represent a percentage of hospital purchases. As a result, the more money that hospitals spend on medical supplies, the more Premier and Novation receive from medical supply companies. According to critics, the conflict of interest in these relationships can mean that the buying groups do not always choose the products that are best for patients and hospitals or the taxpayers and insurers that cover their costs (California Healthline, 3/4). In April, members of the Senate expressed concern about the business practices of Premier and Novation and said they would take action if the companies did not reform themselves (American Health Line, 5/1).
Premier officials yesterday announced that the company will attempt to "encourage competition" by contracting with more companies, halting its investments in medical suppliers and limiting the amount of money it receives from companies that get Premier contracts. Medical Device Manufacturers Association President Larry Holden said that Premier's plan should allow hospitals access to a "wider array of vital products." Thomas Shaw, CEO and president of Retractable Technologies, however, said that the proposed changes do not address the "inherent conflict" of a purchasing company taking money from medical suppliers. "You can't build anything ethical on an unethical premise," Shaw said. Shaw's company is suing both Premier and Novation, claiming that the two companies "effectively locked his company out of the hospital market." Meanwhile, congressional staffers continue to negotiate with officials from Novation, which purchases supplies for approximately 33% of the nation's hospitals. A Novation spokesperson said the company will likely submit its own reform package today. The Federal Trade Commission will continue its investigation into buying groups, including Premier and Novation, the Times reports (New York Times, 8/6).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.