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GROUP PURCHASING ACCOUNTS FOR OVER $63 BILLION

September 29, 2005

Group Purchasing Organizations (GPOs) accounted for over $63 billion in revenue in 2004 and are estimated to reach nearly $140 billion in 2011, wielding enormous bargaining power in the U.S. device market, a recent report finds.

Device manufacturers will have to significantly alter their pricing strategies if they do not hold up against the bargaining power of these GPOs, Frost & Sullivan's U.S. Medical Device Outlook finds. GPOs negotiate 75 to 85 percent of all medical and surgical supply revenue, and represent almost 100 percent of hospitals in the U.S., the report states.

"GPOs sign contracts-- mostly long-term ones -- with only a few medical device manufacturers, thereby blocking out the smaller companies and market entrants," says Frost & Sullivan research analyst Vaishnavi Ananthanarayanan. "The larger GPOs partner with hospital chains, thus creating a monopolistic market over a large geographic area."

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