Congressman investigates sellers on drug shortages

October 5, 2011 - 5:55 PM

TRENTON, N.J. (AP) — A congressman investigating worsening shortages of hospital drugs is demanding that secondary drug distributors reveal where they're getting scarce, lifesaving medicines — and explain the huge markups they charge hospitals.

Letters from a House committee cite an Associated Press report that the shortages are responsible for at least 15 patient deaths and that secondary distributors are selling drugs for chemotherapy, anesthesia and infections for hugely inflated prices, in extreme cases up to 80 times the normal price.

Rep. Elijah E. Cummings, the ranking Democrat on the House Oversight and Government Reform Committee, has given five distributors — companies hospitals say have been offering them hard-to-find drugs at dramatic markups — two weeks to answer his questions. The questions cover where the distributors are buying these drugs, what their profit is and how much their executives are being paid.

"For people to be taking advantage under these circumstances, it ought to be criminal," Cummings told the AP.

There is no federal law against price gouging on medicine. Cummings said he's trying to learn as much as possible about the causes of the drug shortages and the high prices. He said his staff has found that big markups mainly are for "life-or-death drugs."

The Food and Drug Administration says the biggest cause of the shortages is manufacturing-quality problems that cause drugmakers to shut down production while they make improvements. In addition, the generic drug industry has been consolidating and some generic drugmakers have stopped making certain drugs because they bring little profit. When the maker of a particular generic drug stops producing it, other companies don't have enough capacity or time to make up the shortfall before the halt starts hurting patients.

Experts testifying at a Sept. 23 hearing held by another House committee suggested requiring alerts of upcoming shortages and expediting approvals for other drugmakers to help cover gaps would alleviate the shortages.

Hospitals and pharmacists say they suspect brokers have been cornering the market on scarce drugs and driving up prices to make a big profit.

"The idea that people would be charging these kind of prices, taking advantage of people in vulnerable positions and driving up our health care costs, should be a concern to all of us," Cummings said.

He's set up an Internet tip site for anyone with information about price gouging on drugs in short supply.

One of the companies Cummings is investigating, PRN Pharmaceuticals of Rockville, Md., will comply with the information request and is not doing anything wrong, CEO Steve Greenwald said.

"We don't charge excessive prices," Greenwald told the AP. "We're here to fill the need during a short period of time while there is a shortage (of particular drugs). We are not hoarding drugs."

He said his company has to pay many times the usual price when it acquires drugs in short supply.

The number of new drug shortages reported this year has hit 213, two more than the record set for all of last year, according to the University of Utah Drug Information Service, which tracks the shortages.

The total is three times the roughly 70 shortages per year from 2003 to 2006. And dozens of shortages from before this year still are not resolved.

The shortages mainly involve injected generic drugs on the market for many years that ordinarily are cheap. They range from widely used cancer drugs and medicines for potentially deadly infections to nausea medicines and components of liquid nutrition for critically ill patients.

Increasingly, hospitals are learning drugs they order regularly aren't available from their regular suppliers, usually with no advance notice and little information on how long the shortage will last.

A recent AP investigation found at least 15 deaths in the past 15 months have been blamed on the shortages, because the right drug wasn't available or because, while resorting to alternative treatments not normally used, staff made dosing errors or contaminated medicine being mixed by hand.

The shortages also have forced hospitals to give less-effective treatments, delayed surgeries and cancer treatments, and left patients in unnecessary pain. That's resulted in complications and longer, more-expensive hospital stays, extra costs that hospitals will soon have to pass on to insurers and patients.

And hospitals buying from secondary vendors can't always be sure drugs coming from those suppliers have been stored properly and aren't stolen or counterfeit.

How secondary distributors get between major wholesalers and hospitals remains a murky area.

On Wednesday, Cummings' staff faxed letters asking five distributors to explain markups reported on specific drugs, mainly cancer treatments.

The letters cited a specific drug allegedly marketed to hospitals by each distributor and the price charged to hospitals, such as the cancer drug cytarabine. It normally sells for about $12 per vial but was allegedly offered by Allied Medical Supply Inc. of Miami for more than $990 per vial.

Allied's CEO, Anthony Minnuto, did not return a call from the Associated Press seeking comment. Top executives at another distributor, Superior Medical Supply Inc. of Superior, Colo., also did not call back, and a woman at Reliance Wholesale Inc. of Miami repeatedly said no one was available to speak to a reporter and then hung up.

Late Wednesday, owner Dan Herlihy of Premium Health Services Inc. of Columbia, Md., sent a statement that he will provide the information Cummings requested.

"I look forward to meeting Congressman Cummings to highlight the inefficiencies that have led to the shortages we are facing," Herlihy wrote.

At PRN, the Rockville distributor, Greenwald said he's not making a big profit, citing one case where he had to pay $399 for a cancer drug that would normally sell for $30, because of the layers of distributors that handled the drug and added their own profit before his company purchased it.

"We have put on as little as 15 percent" markups to hospitals over his company's acquisition and handling costs, Greenwald said. "The markups that we have are legitimate and fair."

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Tip site for information on price gouging on scarce drugs: http://democrats.oversight.house.gov