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Price-gougers hike costs of vital drugs during shortage

Amid growing shortages of life-saving drugs, some back-door suppliers are capitalizing on the problem, jacking up prices for medications for cancer, high blood pressure and other serious problems by as much as 4,500 percent, a new hospital survey shows.

So-called “gray market” medical suppliers — vendors who operate through unofficial channels — inflated prices by an average of 650 percent on drugs that were either back-ordered or completely unavailable. They included widely used but hard-to-get drugs aimed at fighting cancer, ensuring sedation during surgery or treating patients who need emergency care.

That’s according to new research by Premier, a North Carolina-based alliance of 2,500 hospitals and 73,000 other health care sites in the United States. During a two-week period earlier this year, 42 of Premier’s acute care hospitals reported receiving 1,745 unsolicited offers from drug suppliers proffering vital medications that are in short supply.

“The marketing offers were often in the form of e-mails and fliers that contained language such as: ‘We only have 20 of this drug left and quantities are going fast,'” said the Premier report released Tuesday.

Of the drugs offered by 18 gray market providers, 96 percent were double the normal price, 45 percent were 100 times the normal price and 27 percent were at least 20 times the normal price, Premier found.

Price jumps from $25.90 to $1,200

The drug with the highest mark-up was labetalol, a blood pressure medication that has been in shortage for more than a year. Normally priced at $25.90 per unit, the drug was offered at $1,200 a unit, a 4,533 percent increase, the report said.

“It did sort of shock us,” said Mike Alkire, Premier’s chief operating officer. “There are a lot of people who take advantage of issues like this in the market.”

The survey quantified the effect of price gouging amid the worst-ever 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, which tracks the problem. As of July 31, 180 drug shortages have been logged this year, with estimates suggesting that the number could double by the end of 2011.

Federal Food and Drug Administration officials say the shortages are caused by manufacturing problems, firms that simply stop making drugs and production delays. The agency has no power to compel manufacturers to make certain drugs, or even to inform health care providers in a timely fashion. Shortages often occur without warning and with no clear indication of when they’ll end.

A bill pending in Congress, the Preserving Access to Life-Saving Medications Act, would require that drug makers notify FDA early if shortages are likely to occur. A Senate work group is focused on stopping the shortages.

Patients and doctors have grown increasingly desperate as the shortages have forced ill people to delay or cancel treatment, or to substitute medications that can be less effective or have unwanted side effects.

“It’s like having a revolver to your head,” said Bob Dierker, a 66-year-old lawyer from Fairfax, Va., who couldn’t get a vital colorectal cancer drug, leucovorin, during his treatments last year. Gray-market vendors offered leucovorin at a 3,170 percent mark-up, the new report showed.

“When you’re desperate, you’re willing to pay anything,” said Dierker, whose disease is in remission. “At a 10,000 percent mark-up, I would have paid it, if I could have.”

'Bad operators can enter the market'

The gray-market vendors are part of the so-called “parallel market,” in which drugs are sold outside authorized channels. Drug makers typically distribute medications through large, national suppliers. Sometimes, however, a third-party supplier is able to purchase quantities of drugs and then re-sell them, often at a higher cost, to hospital pharmacists desperate to find drugs to treat patients.

While there are only a few large wholesale drug suppliers, including McKesson Corp., Cardinal Health Inc., Amerisource Bergen Corp., and Morris and Dickson Co., there may be hundreds of smaller, gray-market suppliers that operate under state-by-state regulations, said Joe Hill, director of federal legislative affairs for the Association of Health-System Pharmacists.

“It’s not that all secondary distributors are bad, but it’s the area where the bad operators can enter the market,” Hill said.

It’s not clear who sells to gray-market suppliers — or who buys from them, said Amanda Forster, a spokeswoman for Premier. Part of the reason for the group’s survey was to help raise awareness about the problem, she said.

Premier forwarded a copy of Tuesday's report to the FDA. Premier officials declined to identify the 18 gray market vendors who approached their members, but Forster said they sent the list to unspecified "government authorities," but would not say which agency.

An FDA spokeswoman said such a matter could be considered by the FDA's Office of Criminal Investigations.

In addition to concerns about cost, there are worries that drugs sold through gray-market sources may be of questionable quality, may not be handled properly or may come from improper sources, or may even be counterfeit or stolen, the Premier report said.

Many hospitals contend that they won’t buy from gray-market sources. That’s the policy at the University of Michigan Medical Center, where Dr. Jeffrey Smerage is medical director of the Cancer Center Infusion Division.

Most of his experience with drug shortages involves helping patients and doctors grapple with the disappearing medications. The idea that third-party suppliers would inflate prices, too, is disturbing, he said.

“Certainly it doesn’t seem fair from the perspective of a patient, and you would have to say it doesn’t seem fair from the perspective of a provider,” Smerage said.