Application to SpecificTypes of Joint Purchasing Arrangements

• Pages: 35-45

A Primer on the Law of Joint Purchasing

IV. Application of the Law to Specific Types

of Joint Purchasing Arrangements

A. Health-Care Industry. The health-care

industry has been a lightning rod for contro-

versy regarding group purchasing. Unremit-

ting cost-cutting pressures have encouraged

large numbers of health industry players, most

notably hospitals, to join one or more group

purchasing organizations that buy or negoti-

ate the purchase of a vast array of medical

equipment and supplies. The activities of these

groups—their fees and expenses, their power

in the marketplace, and their ability to buy at

low prices—have been questioned and exam-

ined in the press and in congressional commit-

tee hearings. The same basic antitrust

principles discussed above, however, govern

joint purchasing in the health-care context.

Some differences in how these principles may

be applied in the health-care industry are dis-

cussed below.

1. “Quality” as a Monopsony Power Concern.

The classic “evil” of monopsony buying power

is the suppression of market demand and

prices below competitive levels, which can

cause producers to exit and output to fall.

Monopsony power can also potentially cause

sellers to “cheapen” the quality of products

in order to stay solvent. If the “sellers” are

health-care services providers, e.g., physi-

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