Do GPOs Promote or Stifle Competition in Healthcare-Product Supply Chains?

Authors

Qiaohai Hu, Purdue Krannert School of Management, West Lafayette, IN
Leroy B. Schwarz, Purdue Krannert School of Management, West Lafayette, IN; Regenstrief Center for Healthcare Engineering, Purdue University, West Lafayette, IN

Abstract

This paper uses economic modeling to examine 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 GPO-contracted prices are the lowest available. 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.

Keywords

supply chains, economic modeling, Group Purchasing Organizations, GPOs, healthcare products

Date of this Version

August 2008