If you actually read the article, it happened due to the absence of regulation. Hospitals formed an entity (the GPO) to bargain collectively for lower prices from suppliers. This is a classic example of collusion. The GPO started negotiating with the suppliers for a cut of the contracts that they entered into on behalf of the hospitals. This is a classic example of the principal-agent problem. As a result, Retractable Technologies' couldn't break into the market.

Collusion and principal-agent problems arise naturally in free markets. Indeed, the usual response to them is regulation. Antitrust enforcement would've prevented the hospitals from colluding with respect to purchasing supplies, and as the article points out, Medicare's anti-kickback provision, had it been applied to the GPO, would have reduced the principal-agent problem.