Image: JoNel Aleccia
By JoNel Aleccia Health writer
updated 8/26/2011 8:25:45 AM ET 2011-08-26T12:25:45

Amid growing reports of price-gouging for life-saving drugs, half of hospital officials said they’ve bought medications from back-door suppliers during recent drug shortages, a new survey shows.

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Fifty-two percent of hospital purchasing agents and pharmacists reported they’d bought drugs from so-called “gray market” vendors during the previous two years, according to a just-released survey of 549 hospitals by the Institute for Safe Medication practices, an advocacy group.

Gray-market suppliers are those that operate outside official channels, often buying drugs from uncertain sources and reselling them at a steep profit. A report issued last week by a one hospital association found their average mark-up was 650 percent.

Pressures from demanding doctors and desperate patients helped fuel the transactions, making hospital staffers feel like they had no choice but to buy drugs in short supply at steep prices.

“Our physicians DO NOT want to hear that a drug is ‘unavailable,’” wrote one hospital pharmacist who submitted comments to the anonymous survey.

That doesn’t surprise Jennifer Reddan, director of drug policy for the Indiana University Health System, who said that purchasers know they may be providing a market for unscrupulous suppliers, but have a difficult time turning down vital medications for cancer patients, say, or premature babies.

“We are in such a tight situation with some of these drugs,” she said. “I hate it.”

More than half of respondents to the ISMP survey, some 56 percent, said they were bombarded daily with solicitations from up to 10 gray market vendors, with requests coming by phone, e-mail and fax.

About a third of respondents from critical access and community hospitals who had purchased drugs from gray-market sources said they paid at least 10 times the contract price for the medications.

“I think it is criminal that pharmacies are ‘held hostage’ to these scalpers who charge excessive fees to obtain critically needed medications,” one hospital staffer commented in the survey.

Worst-ever drug shortage
The new focus on gray-market suppliers comes amid the worst drug shortage in U.S. history. Last year, 211 vital drugs were reported in short supply, according to the University of Utah Drug Information Service. As of July 31, 180 drug shortages have been reported this year, with estimates that number could double by the end of 2011. Most are drugs to treat cancer, sedate patients during surgery or treat critically ill patients during emergencies.

Federal Food and Drug Administration officials have struggled with the shortages. The agency has no power to compel manufacturers to make certain drugs, or even to inform health care providers in a timely manner.  The agency says the shortages are caused by a variety of factors, including manufacturing problems, raw materials shortages, firms that simply stop making drugs and overall production delays.

Gray-market suppliers take advantage of the ongoing shortages, monitoring drug availability and then exploiting the vulnerable supply chain, said Mike Cohen, president of the ISMP. There are worries that the drugs may be of questionable quality, may not be handled properly or may even be counterfeit or stolen.

The ISMP report calls for aggressive reforms to address the gray-market problems, including greater authority for the FDA to address the problem, a national pedigree law to replace a hodge-podge of state rules and stricter control of illegal activities such as counterfeiting and theft.

The root of the problem, however, is the shortage itself, Cohen said.

“Until we tackle that problem, there’s always going to be a gray market,” he said.

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