Thoughts on the 'Novation 11'

Edition: May 2002 - Vol 10 Number 05
Article#: 1236
Author: Repertoire

To the Editor:

Recent announcements by Novation of awards of distribution contracts to 11 distributors for home health care, long term care and physician programs should not be taken lightly by those that will be on the outside looking in. What had once been a disjointed, disorganized effort to push acute care GPO programs into the alternate site through exclusively ''authorized'' distributors empowered with discriminatory pricing that many believe is illegal, now has substantial new momentum that can only be shrugged off at great peril.

Novation seems to have finally realized that previous methods to market their programs cannot deliver the penetration and revenue streams for which they lust. Novation has clearly stated that these 11 distributors will be ''responsible'' for marketing their alternate site programs. Competitive distributors can expect to see evidence of these efforts in the form of price lists in their accounts any day now. While we may scratch our heads about the long-term wisdom of distributors performing such services not only without compensation but while actually paying Novation for the privilege, our bafflement can't replace the food on the table that is at risk.

I disagree completely and strenuously with prevailing industry strategy on this issue, if it can be called that while consisting primarily of inaction. I can only speculate on the range of factors contributing to what many in our own company see as dangerously perplexing apathy on the part of other distributors and industry organizations. By clinging to the hope that they may be among the benefactors of future ''exclusive authorization'' by some other GPO, these seemingly disinterested distributors abandon principles of free choice and open competition.

Such an approach, along with other efforts at conciliation or compromise, delays the only action that can provide answers beyond a finger in the dike – that is, vigorously pursuing equal competitive access to all contracts by all distributors.

The long-term answer is in guaranteeing equal competitive access to all contracts by all distributors. Such access remains the holy grail, the singular achievement from which many other positive things could well flow (e.g., the end of administrative fees). Is it a slam-dunk? No. Is legal action required? Not necessarily, but unless the resources and resolve to pursue legal action if required are demonstrated, then we needn't bother to phone this one in.

That all of the ''Novation 11'' aren't the usual suspects is of no consolation to the rest of the distribution world. While it may be preferable to be put out of business by those you respect, if Novation is successful, you will be no less out of business.

The stakes remain very high, and recent scrutiny of GPO practices by congressional committees and the New York Times suggest the timing may be right to broadly revisit these issues. The question is, how many Neros will keep fiddling around while Rome approaches the kindling point?

Alan Grogan
Grogan's Healthcare Supply
Lexington, KY