Premier to Make Changes to Quell Senate Concern

Premier Inc., a San Diego company that purchases drugs and supplies for a quarter of the nation’s hospitals, has agreed to overhaul the way it operates to quell allegations of self-dealing, conflict of interest and anti-competitive practices.

Premier, an alliance of 1,600 nonprofit hospitals and health-care systems, said it would limit the fees it accepts from vendors and would open contracts with more companies. It also would no longer invest in supply companies.

An April hearing by the antitrust subcommittee of the Senate Judiciary Committee found that group purchasing organizations, particularly the two biggest, Premier and Novation, had engaged in anti-competitive conduct and usually didn’t help hospitals save money.

Doctors told the subcommittee they believed they were denied access to innovative medical devices because the organizations favored certain suppliers to the detriment of start-up medical device firms.

The subcommittee heard allegations that contracts were awarded to vendors that offered to pay higher commission fees and not to those that may have had better products or lower prices.

Premier said it would adopt a code of conduct released last week by the Health Industry Group Purchasing Assn. at the request of subcommittee members.

Under its new policies, Premier said it would cap fees paid by vendors at 3%, stop issuing contracts to single manufacturers and no longer bundle certain products into a single contract.

Investigations into the industry by the General Accounting Office and the Federal Trade Commission are continuing.

Some of Premier’s member hospitals in California applauded the steps it took. But they also said that contrary to criticisms, purchasing groups such as Premier did help save money.

“We’re convinced that our participation in Premier has brought significant value in reducing costs,” said Anne Pumpian, chief financial officer at Sharp Healthcare, a major nonprofit hospital operator in the San Diego area.