GPOs: Strength in numbers

June 15, 2012

Joining a group purchasing organization can give an independent pharmacist the buying power of a big pharmacy chain

What can an independent pharmacy do when it is competing with the big chains and big-box stores, especially when a number of important branded prescription products are about to go off patent? The best idea - one that many pharmacies have already chosen - is to join a group purchasing organization (GPO).

Over the patent cliff

Within the next year, multibillion-dollar products, including Plavix, Seroquel, Singulair, and Actos, will go off patent.

GPOs can be funded by administrative fees paid by manufacturers or distributors, by fees paid by the buying members, or by a combination of these approaches. Fee structure may be set up as a percentage of the purchase or as an annual flat rate.

United Drugs, a subsidiary of American Associated Pharmacies (AAP), is a true cooperative, said Jon Copeland, RPh, president and chief executive officer of United Drugs in Scottsboro, Ala. The firm contracts with manufacturers and distributes products directly from its location to pharmacies. "As a true cooperative, any fees or margins that are made ultimately are returned to the pharmacies at the end of the year, if there is any excess profitability," said Copeland. United Drugs has approximately 2,000 member pharmacies across the country, he said.

Discounts that GPOs can provide vary by product and are based on the deals that a GPO can negotiate, said Clement. Those, in turn, depend on how much usage of a given drug can be promised to manufacturers. There are also GPOs that specialize in health and beauty aids and durable medical equipment.