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