Choosing a Group Purchasing Organization: How to Find the Best GPO for Your Independent Pharmacy

Choosing a Group Purchasing Organization: How to Find the Best GPO for Your Independent Pharmacy by Elements magazine |

Inside: Find out what traits and services make for a standout group purchasing organization.

After all the stress of negotiating with wholesalers and making purchasing decisions on your own, you’ve finally decided to take a leap and become a member of a group purchasing organization (GPO). Or maybe you’ve been with the same GPO for years and wonder if you could be getting a better deal.

While all purchasing organizations will give you the power in numbers you lacked when you did everything on your own, not all GPOs are created equal. While some go above and beyond to increase your profit margins, others provide bare-minimum, one-size-fits-all services. Careful vetting is crucial to getting the best deal on your inventory.

Learn what features and offers make a group purchasing organization stand out in order to get the optimize your pharmacy’s profitability.

Proven track record

The best group purchasing organizations will be able to increase your profit margins consistently. They won’t only help you secure the prescriptions you need; they’ll also optimize the buying process to save you money.

Between helping you secure a better cost of inventory and optimizing your purchasing, a GPO should improve your profit margins 2 to 6 percent.

If that number seems negligible, consider that for the average independent pharmacy, that’s between $70,800 and $212,400 annually. And that’s without having to invest any more of your time and effort into your business.

Contract expertise

You probably already realize the challenges of getting a favorable contract when you’re going it alone. But having just any old group purchasing organization negotiating on your behalf might not be much better.

Negotiators who have formal training or extensive experience will be able to get you a better cost of inventory, better rebates, and better terms on your wholesaler contract.

Look for a purchasing organization with experienced negotiators that will not only get you a good deal in general, but a good deal for your pharmacy. Don’t settle for a uniform approach, and instead insist on a fair, custom-fit agreement. Many GPOs present you with a contract they’ve already arranged and negotiated before ever considering your unique needs and desires. The best GPOs make negotiating, evaluating, and deciding on a new contract a collaborative approach–with you always holding the reins. They consult you, provide you with expert analysis and recommendations, and then they let you make the decision that’s right for you.

Multiple bids

When negotiating a salary, you wouldn’t settle for the first offer. Similarly, a group purchasing organization shouldn’t just receive one wholesaler bid on your behalf and call it a day.

By sourcing bids from multiple wholesalers, your purchasing organization motivates competition in the market. They will be incentivized to lower their prices to beat out the other offers, and you’ll have more control over the terms of your contract.

Even after you’ve committed to a primary wholesaler, they know you could be enticed away in the future. Because they are eager to keep your business, you have a power that you didn’t have when you negotiated as a solo pharmacy.

Quality backup supplier

You’ve signed a contract with a primary wholesaler that you’re happy with. But then, you find you need a medication they don’t have on hand. Do you have a qualified backup supplier you can count on?

Your group purchasing organization should not just establish a relationship with a primary supplier. To ensure price protections and reliable service, having a secondary supplier in your back pocket is crucial.

Like your primary supplier, your backup should have Drug Distributor Accreditation (formerly VAWD) so you know the products are meeting the strictest standards and coming directly from the manufacturer.

Purchasing optimization tools

The relationship with your group purchasing organization shouldn’t end once you’ve secured a great contract for a primary and backup supplier.

In addition to dogged negotiations, a GPO should also have metrics on hand and advanced technology to help you make the best decisions in your buying.

Every day, even with an excellent contract in place, you’ll be called on to make purchasing decisions that will affect your bottom line. Knowing when to purchase from your primary or secondary wholesaler to ensure you’re meeting all the volume and generic compliance requirements of your contract can mean the difference between big savings or money down the drain.

Big chain pharmacies have technologies that take the guesswork out of those decisions, and with the right GPO, you can too. Your GPO should offer a service that tracks all purchasing decisions and their outcomes to steer you towards the most lucrative buying decisions.

RELATED: How to Maximize Rebates and Profitability on Pharmacy Inventory

Extra perks

With a small staff and a big mission, independent pharmacies work hard to focus on their communities. Some GPOs stand out among the crowd by offering extra features that allow you to keep your concentration on your patients.

Vendor discounts, educational resources, a diligent customer care team, and access to exclusive trade shows with industry titans are all things you should look for when deciding on a GPO.

Guaranteed savings

Don’t settle for a GPO that’s merely acceptable. Look for one that’s great.

Seek out a GPO that will guarantee a better contract than you have now. They should be confident in their ability to offer you the best pricing, best rebates, and best payment terms on your wholesaler contract.

If they aren’t confident in their services, why should you be?

How do you know you’re getting the best deal from a GPO?

The answer is simple: Join ProfitGuard®, PBA Health’s group purchasing organization, which offers all these services and more. ProfitGuard is a different take on a buying group. Valuing the true uniqueness of independents, it gives members an entirely customized approach best suited to each pharmacy’s individualized needs. Whether you want a contract negotiated specially for you or you want to join a group that has already negotiated a lucrative deal, the choice is yours. ProfitGuard assists you in getting exactly what you want for your business. (It also guarantees a better contract than you have now. Period.)

ProfitGuard is also one of the only GPOs that isn’t tied to a single wholesaler. That means your pharmacy gets bids from multiple wholesalers who compete to win your business, getting you a deal that can’t be matched by a GPO with one wholesaler.

ProfitGuard also provides a proprietary tool to help pharmacies maximize wholesaler rebates and savings on their inventory every day. Using a comprehensive modeling system, it automatically analyzes every purchase and every contract incentive to ensure every drug you buy from your primary or secondary wholesaler results in maximal rebates and savings–giving you the lowest net cost of inventory for your pharmacy. For the average pharmacy, receiving your full rebates and savings could result in an extra $17,509 per month in pure profit.

A Member-Owned Company Serving Independent Pharmacies

PBA Health is dedicated to helping independent pharmacies reach their full potential on the buy-side of their business. Founded and owned by pharmacists, PBA Health serves independent pharmacies with group purchasing services, wholesaler contract negotiations, proprietary purchasing tools, and more.

An HDA member, PBA Health operates its own NABP-accredited secondary wholesaler with more than 6,000 SKUs, including brands, generics, narcotics CII-CV, cold-storage products, and over-the-counter (OTC) products — offering the lowest prices in the secondary market.


Editor’s Picks


Elements is written and produced by PBA Health, a buy-side solutions company.

Sign up for a FREE subscription to Elements magazine!


Sign up to receive PBA Health’s e-newsletter to get the latest Elements web articles in your inbox every other week, along with industry news, supply chain insights, and exclusive offers.

Related Articles

Popular Articles