Should a Device Startup Work With a GPO?

Usually yes, and early. Startups tend to run away from group purchasing organizations because of the fee. But the major GPOs have breakthrough technology pathways, and that stamp goes with you into value analysis. A fee of roughly 3% on zero revenue costs you nothing today, and it can open hospital doors.

What does a GPO actually do for a startup?

If you're the market leader, a GPO may not do much for you other than take its fee. That's where the bad reputation comes from. A new company is in a different spot. Each of the major GPOs has a breakthrough technology category. If you get on it, your product walks into a value analysis committee with a stamp that says this is breakthrough, innovative technology worth a serious look. It puts you in a different category.

The alternative is slow. You can wait a year and a half trying to get onto an integrated delivery network on your own. A GPO pathway works more like a red carpet to the hospital.

It also shapes everything downstream. Whether you have a GPO contract or not goes a long way toward determining how you work with each individual account. That's why your GPO and IDN strategy belongs in your plan early, not after your first big account asks for it. Going into an IDN goes better when you're already playing nice with the GPO.

Should I sign with one GPO or all of them?

I was asked exactly that on a call, and my answer was all of them, of course. Why not? If you've built the fee into your price, each contract is another door, not another cost. Then, if you have something that is truly breakthrough, go tell your breakthrough story to each one. The pathway exists for companies like yours.

How do I handle the fee?

Build it into your list price from day one. If you want your list price to be $5,000, make it $5,150. That's roughly 3% added on top, and nobody notices it at launch.

The fee hurts when you add it late. Nobody pays much attention to 3% when you have zero revenue. When you have a $25 million business, or a $100 million one, giving up 3% is a real haircut. I'd rather pay it today than pay it later.

Be ready for the hospital mindset too. As one person who has worked closely with hospital buyers put it to me, cost containment drives these decisions now. The bar has moved from clinically superior toward clinically acceptable, and then the question is what it costs.

Will my device qualify as breakthrough?

Check each GPO's criteria before you assume either way. They typically have a definition framework that says, to be considered for breakthrough technology, you must meet a set list of requirements. Read it line by line against your clearance and your evidence.

Don't rule yourself out too fast. A known procedure isn't breakthrough by itself, but doing it in a new setting, where nobody does it today, might be. That is the kind of angle worth testing against the criteria.

Price plays a part too. A technology that will carry a premium price can be very GPO friendly, because the price is going to be up there anyway. In that case the fee is a small part of the story, and the stamp of approval is the bigger prize when you reach the committee.

Where to start

Right after clearance, pull the breakthrough criteria for each major GPO and score your device against them. Add the fee into your list price before you quote anyone. Start the contract paperwork now, because getting on a GPO contract can take six to nine months, and there's no reason to wait.