Increasing use of group purchasing organizations among veterinarians

by | Mar 1, 2013

If you want to resonate with veterinarians running independent practices in today’s fast-changing economy, offer them bargaining power with big corporate vendors and a way to compete financially with chain-owned hospitals and big-box retailers.

That’s the hope, anyway, of many companies offering group purchasing for veterinarians, an arena in expansion mode. Coping with the growing pressures brought by big corporations is a recurring theme in marketing pitches such as these:

“As a strategic alliance of veterinary practices, we have the power to … negotiate buying deals like VCA, Walmart, etc. … As a member, you are now one of the big boys, getting the big boy discounted prices.”

“Compete in the marketplace against big box stores, pharmacies and online providers.”

“Competing with the corporate practices for the type of favorable pricing they receive has been impossible until now.”

Group purchasing is not a new concept, but it hasn’t been common in the veterinary community. However, the trend of consolidation — players becoming fewer as large companies buy out smaller ones, or entities merge — has opened what purchasing-group entrepreneurs perceive as a prime opportunity.,/p>

Richard Morris, CEO and co-founder of The Veterinary Cooperative, maintains that purchasing cooperatives and group purchasing organizations (GPOs) can save a consolidating profession from succumbing completely to mega-corporate ownership.

A former adjunct professor at the Lake Forest Graduate School of Management in Illinois and consultant to cooperative purchasing organizations, Morris said the average time it takes for independent ownership to disappear during a “roll-up” is 12 years, but that outcome isn’t inevitable.

“When do independents survive?” he said in an interview. “What I’ve found in my research is that they survive when a cooperative — or a GPO, for that matter — inserts itself into the industry. The poster child is the hardware industry.”

The hardware cooperatives True Value, Ace and Do-it-Best represent virtually all independent hardware stores in the country, according to Morris. Banded together by their respective cooperatives, the independents have been able to hold their own against the national chains Lowes and Home Depot, he said.

Another sector that relies heavily on group purchasing is human health care. According to The Veterinary Club, some of whose executives have backgrounds in health-care group purchasing, 72 percent of purchases hospitals make are done under GPO contracts.

While trying to appeal to small, independent practices is common among purchasing organizations, some welcome practitioners and practices that are part of chains, as well. Generally, purchasing groups argue that they have the expertise to negotiate the best deals on behalf of their members, whoever they are.

“We bring clarity to the marketplace,” said Dr. Scott Crawford, president of Veterinary Purchasing Group in Fall River, Mass. “It’s a very foggy world.”

For example, Crawford said, supply distributors are given discretion by manufacturers in what they charge for certain goods. “Every hospital out there is paying a different price for those products — syringes, gauze, generic antibiotics,” he said.

Leaders of other group purchasing organizations say the same.

“We’ve (seen) large referral practices paying more on an item-by-item basis than a single-doctor practice,” said Dr. Richard Wilkes, president of Purchasing Services, Inc., based in St. Petersburg, Fla.

Jan Miller, president and co-founder of the Veterinary Group Purchasing Organization in Hillsboro, Ore., and a practice-management consultant, said practices often are assured by their vendors that they’re getting great deals when, actually, they’re not.

“More often than not, I hear, ‘Oh, I’m getting special pricing from XYZ. I say, ‘Tell me what that is,’ and they give me an example, and I know for a fact that the guy down the road is getting it for half that,” Miller said. “The sad situation is that the practice owner believes (the salesperson), that that’s the best they can do, and they have no way of validating it.”

To help practitioners navigate the expanding world of group purchasing, the VIN News Service has compiled answers to some basic questions and composed a guide to active players in the field.

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