A group purchasing organization (GPO) relies on strength in numbers. Pharmacies join GPOs to take advantage of combined buying power, but too many of them are missing out on what’s coming to them.
In this blog post, we’ll show you why pharmacies are losing out when it comes to GPO pricing. Then, we’ll discuss how your pharmacy can avoid these issues and harness GPO membership to its full potential.
Lost GPO Benefits
GPOs negotiate product prices with manufacturers, wholesalers and vendors on behalf of their member pharmacies. They also offer pharmacies market share rebates for specific products as well as flat rebates for some products.
Between negotiated pricing and reimbursements, pharmacies can see significant savings. Unfortunately, that’s not always the case. Each year, SureCost’s Smarter Purchasing Report analyzes purchasing data from over 5,000 pharmacy professionals nationwide. This year’s report explored GPO pricing adherence and found some concerning discrepancies.
Incorrect pricing on GPO-qualified items costs pharmacies money they were meant to save. 15% of GPO-qualified products were priced incorrectly, meaning pharmacies experienced an average annual overcharge of $102,774. Some pharmacies spent nearly 55% of their GPO purchasing on these incorrectly priced items. Analyzing based on trade class, we found retail pharmacies experienced even higher overcharges.
The Smarter Purchasing Report provides a deep dive into these statistics. It’s staggering to see how much money pharmacies lose due to incorrect GPO pricing (among several other factors). But the takeaway is obvious: pharmacies must actively ensure adherence to GPO pricing or face substantial financial losses.
Consistent Vendor Compliance
An integrated solution for purchasing management is crucial when it comes to getting what you expect to pay for. Find technology that unifies all aspects of the process:
- Comparing up-to-date catalogs, pricing and availability
- Uploading purchase orders for all vendors through a single interface
- Receiving packages quickly, efficiently and accurately
- Reconciling invoices with accounts payable correctly every time
A unified solution tracks every purchase—whether through a GPO, primary vendor or any other trade partner—at each step to ensure you’re getting the right product at the correct amount for the agreed-upon price.
If a listed product doesn’t reflect the GPO price, an invoice shows incorrect pricing or a vendor fails to honor their contracted/negotiated price, the system will flag the issue at each step and alert you about the discrepancy. That means you won’t miss something and mistakenly pay an invoice for incorrectly priced items. You also avoid paying for the wrong items or insufficient quantities—problems that, as the Smarter Purchasing Report shows, are costly issues for too many pharmacies.
GPOs and vendors may issue purchasing reports that flag these errors, but you may only receive them monthly or quarterly. That’s too long to wait to recoup money you never should have spent. When you see an issue and need to rectify it, you’ll be glad to have your entire purchase history with sophisticated product data at your fingertips. You’ll have the documentation you need to address the issue immediately. You and your team won’t have to spend hours comparing invoices against purchase orders or sifting through multiple catalogs (i.e., manual processes that won’t guarantee you’ll find the best price or spot errors).
Enhanced Rebate and Reimbursement Potential
Beyond ensuring you’re paying the correct price, a smarter purchasing solution enables you to harness your GPO to its full potential. For example, when it comes to market share rebates, consistent compliance matters. You can program your purchasing management solution to drive to specific products to meet preset targets. If a team member selects another item, the system will automatically substitute the correct one (or prompt them to enter an explanation for overriding the item, like a customer request).
To maximize your reimbursement, you want to drive purchasing strategy based on GPO terms and primary vendor agreements in real time. Instead of relying on sporadic GPO or vendor reports regarding your market share rebates or compliance ratios, the best technology instantly analyzes and visualizes your performance: are you hitting the threshold for different tiers? Should you drive to a particular product? What are the potential benefits at higher levels?
Of course, the rebates from a GPO are only worth it if you actually receive your reimbursements. We see too many pharmacies lose money because they assume they’ll receive the correct rebates on time. Again, everyone makes mistakes: documentation gets lost, processes get delayed, and pharmacies never see their rebates. Trust, but verify.
With an integrated purchasing solution, pharmacies can easily track rebates for their GPO and all vendors: model potential reimbursements when making purchases, compare rebate sources, check the status of individual transactions and confirm receipt of accurate reimbursements.
Smarter Purchasing
GPO membership can be a huge asset to pharmacies, but only if pharmacies maximize their benefits every time. Issues with GPOs and solutions to optimize how pharmacies work with them are just some of the topics explored in the 2024 Smarter Purchasing Report.
Download the report and learn more about the issues and solutions around:
- Purchasing beyond the top 200
- Monitoring vendor substitutions
- Avoiding sudden vendor reorders
- Guaranteeing the value of received goods
