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Abstract ▼ AI-Helper

A group purchasing organization (“GPO”) is an entity that is created to leverage the purchasing power of a group of businesses to obtain discounts from vendors based on the collective buying power of the GPO members. This business concept has been developed mainly in the United States and one of t...

A group purchasing organization (“GPO”) is an entity that is created to leverage the purchasing power of a group of businesses to obtain discounts from vendors based on the collective buying power of the GPO members. This business concept has been developed mainly in the United States and one of the main fields in which a GPO has played its role has been the medical or healthcare industry. Recently, the health GPOs have vigorously run their businesses in South Korea and managed purchasing, logistics and inventories for general hospitals. However, in case such GPOs provide economic benefits to general hospitals in the course of their transaction, some legal issues arising from “Dual Punishment System” provisions in the Medical Services Act, Pharmaceutical Affairs Acts and Medical Devices Act could be raised by authorities concerned. Actually, the prosecution launched its investigation of 2 representative GPOs which provided excessive economic benefits under the name of “Information Use Fees” to medical institutions and charged them with illegal rebates. Considering GPO’s beneficial functions such as making hospitals’ financial status more sound and allocating social resources more efficiently, it seems unfair and groundless that denounce GPOs as conduits to get around regulations of the National Health Insurance System such as “Actual Transaction Price Reimbursement Principle” and tools to extort businesses from small-sized drug wholesalers and medical device dealers. Rather, it is required to draw limitations for GPOs to legally and legitimately run their businesses. In this context, economic benefits which are provided by GPOs to hospitals shall be generally limited to safe harbors of Dual Punishment System and payment of rents for in-house storage and information use fees can be permitted if such payments are exchanged for services needed for GPOs and within reasonable amount considering the value of such services.

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