A Stepwise Replicable Approach to Negotiating Value-driven Supply Chain Contracts for Orthobiologics

Area of Science:

• Orthobiologics and Tissue Engineering
• Health Systems Management
• Supply Chain Optimization

Background:

• Orthobiologics are increasingly utilized for tissue healing, yet health systems often fail to realize expected cost savings from high-volume purchasing.
• A gap exists in optimizing the procurement of these valuable biological products within healthcare settings.

Purpose of the Study:

• To evaluate an institutional program designed to prioritize high-value orthobiologics.
• To incentivize vendor participation in value-driven contractual agreements to reduce healthcare costs.

Main Methods:

• A three-step approach involving surgeon expertise in purchasing, defining eight orthobiologic formulary categories with capitated pricing, and a competitive bidding process.
• Pricing benchmarks were set at the 10th percentile for multi-vendor products and 25th for rare products, based on institutional and market data.
• Clinicians and supply chain leaders jointly awarded contracts to vendors meeting pricing expectations.

Main Results:

• Achieved actual annual savings of $542,216, exceeding the projected estimate of $423,946.
• Seventy-nine percent of savings originated from allograft products, with average pricing decreasing across seven of eight formulary categories.
• Vendor consolidation reduced the total number of vendors from 14 to 11, with returning vendors securing larger, multi-year contracts.

Conclusions:

• A replicable three-step strategy effectively increases institutional savings for orthobiologic products.
• Engaging clinician experts and strengthening vendor relationships through consolidated contracts enhances value for health systems.
• This vendor consolidation model creates a win-win scenario, reducing complexity for health systems and increasing market share for vendors.