EFFECTIVE RESULTS

Group Purchasing Organizations and Buying Cooperatives

Pepper Hamilton LLP is experienced in the group purchasing and buying cooperative industries. We help group purchasing organization (GPO) and cooperative (co-op) clients conduct business transactions, negotiate with vendors and members (as well as other GPOs and co-ops) and navigate government regulation so that they can grow and prosper. Whether you are seeking capital, restructuring your business, acquiring or disposing or spinning off businesses, or resolving regulatory matters, chances are a Pepper lawyer has already handled a matter like yours.

Our clients include a wide range of purchasing groups and buying cooperatives, including hospital; physician (including orthopedics, cardiology, oncology and optometry); pharmacy (including retail, specialty and long-term care) and home infusion; durable medical equipment and home health; and dietary food and hospitality groups. Our work for purchasing groups is enhanced by our strong practice representing health care providers and suppliers and investors, and our nationally recognized practice representing pharmaceutical and medical device manufacturers, and a wide range of biotechnology and other life sciences companies.

Below is an outline of the services we most frequently provide to group purchasing and buying cooperative industry clients.

Transactions

We assist our GPO and co-op clients with mergers and acquisitions, joint ventures and partnering arrangements, restructurings and reorganizations, dispositions and carve-outs, and venture capital and other transactions. We also advise clients on a wide range of agreements with vendors, suppliers, payors, PBMs, PDPs, wholesalers, and member customers. We are experienced in advising purchasing group clients on the regulatory compliance issues attendant to transactions, including fraud and abuse issues, safe harbor regulations, and regulatory issues impacting relationships with other participants in the medical supply chain.

Frequently, transactions involve such disparate legal areas as health care, tax, antitrust, environmental, real estate, labor and employee benefits. Our transactional lawyers regularly team with lawyers in these and other practice areas to resolve client problems. For example, our transactional lawyers work closely with the firm’s tax group to employ structures designed to maximize the tax benefits available to our clients and evaluate the impact of UBTI and taxation of for-profit ventures in the buying cooperative context. Transactional lawyers also work closely with the antitrust group in advising clients on the proper structure of buying groups and rules and regulations concerning competition and information sharing.

Regulatory

We represent GPOs and co-ops in dealing with regulatory issues affecting commercial health care transactions, as well as those involving members in the medical and pharmaceutical supply chains, including pharmaceutical and medical device manufacturers and suppliers, hospitals, physicians, outsourcing companies and other providers.

These issues generally fall under fraud and abuse laws, (including the federal Anti-Kickback Statute and safe harbors), Stark, civil monetary penalties law, the False Claims Act, health care fraud statutes and the Health Insurance Portability and Accountability Act of 1996 (HIPAA).

We also advise clients about their membership in or relations with group purchasing organizations, including advice about compliance with the federal Anti-Kickback Statute, and how to take advantage of the “safe harbors” that may be available. Generally, there are three payment streams in the GPO-medical supply chain that implicate the federal Anti-Kickback Statute and necessitate safe harbor protection, including: administrative fees from suppliers to the GPO, discounts or rebates from suppliers to GPO members, and dividend or distribution payments to GPO member-owners. Our regulatory team brings years of experience in structuring these arrangements in compliance with applicable safe harbors.

We counsel, advise and represent GPOs and co-ops in their arrangements with payors, PBMs and PDPs and in dealing with issues of competition, regulation, and transparency, and help these purchasing groups carefully evaluate and structure those relationships to avoid government scrutiny.

We also advise on the federal and state law regulatory issues affecting the practice of member customers, including hospital, physician, pharmacy and DME and home health. Additionally, certain purchasers, such as health plans and PBMs, use formularies to promote safe, effective and cost-effective drug use. The U.S. Office of the Inspector General has identified several PBM practices as potential risk areas, including relationships with formulary committee members, payments to PBMs, and formulary placement payments. We also assist GPOs and co-ops in dealing with member billing, reimbursement and claims issues, including issues under Medicare Parts A, B and D, Medicaid and commercial payor requirements.