Premier's Innovation Institute: To Play, Must You Pay?

Medical Device & Diagnostic Industry Magazine
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An MD&DI June 1998 Column

This new GPO's program may put the squeeze on both large and small manufacturers.

Today, cost containment and consolidation rule the health-care world. Group purchasing organizations (GPOs), like Premier, strive to work with a limited number of suppliers in an effort to curtail costs. Several months ago Repertoire quoted Lynn Detlor, president of Premier Purchasing Partners in San Diego, as saying, "The cost of doing business with 400 or 500 vendors is not possible. We're not going to build a huge infrastructure. We won't deal with everyone in the industry." In fact, a new Premier program could further limit the number of suppliers with which the company does do business.

The Premier Innovation Institute, launched in February, aims to accelerate the introduction of innovative products and technology within the GPO. Institute-supported national experts will evaluate products and their use across the continuum of care. Those products that meet the criteria of superior clinical outcomes, cost savings, and safety after testing will then be marketed to the GPO's 1800-member hospital and health-care facilities. Success will be measured by how quickly and widespread new innovations are adopted.

Established as a freestanding, nonprofit corporation, the Institute will be managed by Premier, product tester Health Care Concepts (Austin, TX), and 10 to 15 participating companies—which is where critics of the program find a sticking point. Those vendors that sign on as partners must pay $1 million for each of two years. In return, the Institute will conduct one specific market penetration study per year for these companies, then market the results to its members.

What if your company can't afford the $1 million—per-year fee? Premier's senior vice president of corporate communications, Pat Poston, assures smaller companies that "the Institute will seek innovations from all sources to be evaluated."

The program has drawn its share of skepticism. Some say the fact that the Institute is funded by the same vendors whose products are being tested at the least raises the appearance of impropriety and calls into question the objectivity of the studies.

Others fear that smaller companies will get shut out of contracts. As one critic of this program—Ted Tyson, a business and marketing consultant based in Buffalo Grove, IL—told me recently: "Not many companies can afford this payment. If you want to be a major supplier, it's pay and play. In the guise of creating an institute that will assess value, Premier is coercing major suppliers into supporting another profit center for Premier and developing a way to increase its influence over the medical device industry."

Tyson continues, "If small medical device companies won't be able to do business with groups like Premier, which controls $8 billion to $10 billion of health- care purchases in the United States each year, it will stifle the very innovation Premier is striving to stimulate."

In addition to potentially knocking smaller companies out of contract contention, the new program also lends itself to the perception that it will favor one supplier over another. While Alan Weinstein, who is president of both Premier and the Institute, says "no study will result automatically in a group purchasing contract," one wonders if a new product given the Institute's thumbs-up could displace one already under contract.

While seeking to deliver new technologies to patients more rapidly is an admirable goal, Premier's methods may raise some questions for both industry members and providers alike. Both groups should consider the implications carefully before drawing a conclusion.

Stacey L. Bell

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