Group purchasing organization (GPO)
Reviewed by Dasha ShakovVP Marketing, Proton
Updated
What is GPO?
A group purchasing organization (GPO) is an organization that negotiates supply contracts for members that buy and use the products, such as hospitals. It negotiates with manufacturers and distributors on behalf of hospitals, clinics, restaurants, schools and similar members, which then buy at the GPO’s contract prices through participating distributors.
How it works
GPOs are most prominent in healthcare and also operate in foodservice and education. For a distributor, a customer’s GPO membership decides which contract pricing applies, and in healthcare the gap between the distributor’s cost and the contract price is commonly recovered from the manufacturer through a chargeback.
GPO example
A new clinic names its GPO when it opens an account. Once the CSR links the account to that GPO’s contract, the clinic’s exam gloves price at the contract rate rather than the distributor’s standard price.
Related terms
- Buying groupA buying group is an organization that negotiates prices, rebates and programs with manufacturers on behalf of many independent distributors.
- Contract pricingContract pricing is a set of fixed prices agreed with a specific customer for specific items over a set period, after a negotiation, bid, RFP or GPO deal.
- ChargebackA chargeback is money taken back after a sale, either as a customer’s penalty on a supplier or as a distributor’s claim on a manufacturer.
- Request for proposal (RFP)A request for proposal (RFP) is a formal document in which a buyer describes a need and invites suppliers to propose how they would meet it.
