The Thing About GPOs when Launching New Medical Technology

As a go-to guide for med-tech companies, I have seen that our market is very fragmented.

Acquisition and purchase services demand administered by GPOs is fragmented.

What happens outside the US is very different from what happens internally – regarding hospital purchasing methods, group purchasing agreements, networks, and hospital chains.

GPO contracts can be beneficial.

GPOs or group purchasing organizations support healthcare providers, such as hospitals and clinics, to save money through skillful contract negotiation of products/services.

Integrating them into your strategy is vital because they can be allies in securing better pricing and terms, validating your product, and ensuring it reaches a broader audience in the healthcare market.

ADVANTAGES OF GPOS:
GREATER PURCHASING POWER

GPOs can reduce healthcare providers’ costs, enabling new technology adoption. You can facilitate more efficient access to a broad network of healthcare facilities. Because GPOs can conduct strict and detailed evaluations, obtaining a product on their list can drive credibility.

FACTORS FOR CONSIDERATION

GPOs are valuable for healthcare providers and key stakeholders.

You might not have a solid contract when you first go to market. That also depends on the nature of your launch and where you are in the lifecycle of your healthcare business.

You may be working on securing a lucrative contract before a more significant medical product launch. So, you are likely aiming to check off the first 15 to 20 items.

But it’s okay not to have a contract if you have innovative technology.

The sales teams need to get the product out quicker, which may be more complex. A lot of contracts also have innovative technology clauses. If the launch is significant in achieving groundbreaking results, you may have an opportunity to sell to those hospitals.

THE REALITY ABOUT GPOs

From experience, having a GPO is a nice-to-have factor, but it’s not a must-have in all cases.

I think people simply place too much weight on GPOs.

GPO aims to negotiate prices with suppliers, manufacturers, and distributors. A GPO strives to build a trusted alliance between its member hospitals or individuals and their suppliers. They aim to ensure that both sides benefit from the negotiations while sustaining a patient care focus.

However, that shared aim does not always happen in this complex healthcare market.

Their sales team is often ill-equipped to navigate the complex process concerning GPOs.

As far as the history of GPOs, they evolved in the 1970s and rose with the emergence of Medicaid and Medicare.

Yet, contracts cost a lot of money and time.

Nearly $300 billion+ in provider spending flows through GPOs.

DIFFERENT TYPES OF GPOs

Yet, not all GPOs are the same – there are three types – single-source, dual-source, and multi-source GPOs.

Single-source GPOs usually only partner with proven, established market leaders.

On the other hand, you might fare well with the dual-source if you have conducted your value-analysis. Two companies are often positioned in the same product categories, fostering competition among two contracted suppliers. Coaching may be invaluable here!

Multi-source GPOs may be the most accessible because they prefer to put smaller and regional suppliers on contract, so they offer more choice to their members.

EXPLORING THE ALTERNATIVES

Alternatively, let’s flip the scenario: putting GPOs aside for a moment, let’s focus on your value proposition. What is the 3 to 5-year return on the device or capital expenditure?

Compliance is key, and the license for the team to hunt may be challenging.

Several hospitals and places are available to secure technology. If you have done a clinical study, a LMR, that technology is already within some healthcare system’s terms and conditions.

However, the bottom line is that you must be strategic about where to sell the product first.

YOU NEED A CLINICAL CHAMPION!

If you are not equipped with a clinical champion, you will likely struggle. Once you have one, then think about other key stakeholders, financial models, and other details.

Many people say, “Steve, we are not on this contract, so we cannot get buy-in.”

Wait. There are a host of other factors to consider first.

It would help if you got initial feedback, though.

You also need to train the right sales team, and employ the right messaging when these conversations arise. Remember that you need exemplary leadership on these calls who will lead the team to say: “This is why we can sell to that organization, and this is how we will do it.”

Numerous people are working on large contracts for many years in the US build commercial organizations. Some people truly understand the landscape and how to bring new technology to that market – including what GPOs are needed and compliance factors.

If you want to bring in an innovative technology valuable and have the right business and financial model and team with early technology, you are already making gains.

On the flip side, if more mature technology is involved and a market share of several millions in revenue is involved, some competitors may take advantage. To scale your business from a few million to at least $50 million, you need a definitive plan to tackle GPOs or integrative networks and decision-makers. It’s not as simple as it’s cracked up to be.

This strategy all depends upon the lifecycle of your business and where the product is.

MANAGING GPOs

There are seven steps involved when navigating GPOs:

1. Research: Determine which GPOs are essential to your target market. You need to understand their membership base and what product types they usually support.
2. Engagement: Form trusted relationships with GPOs early in the development process. Engage in industry conferences, network with GPO representatives, and understand their needs.
3. Value Proposition: Communicate the value of your technology. Showcase cost-effectiveness, enhanced patient outcomes, and efficiency increases.
4. Regulatory Compliance: Provide detailed documentation and data supporting the safety and effectiveness of your technology for evaluation.
5. Pilot Program: Consider proposing pilot programs or trials with GPO members, which can demonstrate the value of your product in real-world settings.
6. Negotiation: Skillfully negotiate terms. As GPOs often seek the best deal for their members, so be flexible in your pricing and contract terms.
7. Feedback Loop: Once your technology is running, compile constructive feedback from GPO members to refine your offering and support ongoing adoption.

ASSESSING YOUR UNIQUE VALUE PROPOSITION

Figure out how are you very different from your competitor’s – price or feature?

What is the buying motivator?

Highlight potential savings for GPO members. Emphasize improved patient care outcomes and operational efficiencies. Prepare clinical data, case studies, and testimonials supporting your product’s effectiveness.

This strategy takes careful research, analysis, and information gathering.

Many companies struggle to scale or get boxed out if they have a compliant contract or a large vendor with multiple products or divisions.

The unique value proposition must be clear to ensure a competitive advantage.

THE ADVANTAGES OF NETWORKING

Many healthcare organizations and executives don’t dedicate enough time or lead their teams to develop relationships, starting from the customer experience focus.

Developing alliances is not merely distributing business cards and waiting for the call. It involves attending industry conferences, trade shows, and GPO-specific events to address some tough questions and ultimately, connect with decision-makers.

Then, use direct outreach by initiating contact via email or phone to introduce your product and express interest in collaboration.

Of course, the maintenance part of networking – engaging in feedback and continuous engagement pre- and post-implementation is important.

Additionally, collect and analyze constructive feedback from GPO members using your technology to identify areas for improvement.

Lastly, maintain ongoing alliances and regular communication with GPOs to update them on product developments and new offerings.
By following a solid plan, you can effectively target GPOs, build strong relationships, and position your medical technology for successful adoption in the healthcare market.
However, consider all the pros and cons of GPOs first – before you proceed.
GPOs operate in a seriously competitive and unconcentrated procurement market, and if changes are made to the vendor funding model, costs will increase. The GPO industry is constantly evolving.
And not to mention, the mountain of data that awaits you.
At any rate, do your DUE DILIGENCE.

You’ve got this.
Stay in action (the right ones),
-Steve Sapot