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Some US pharmacies "selling entire inventories to gray market"

World News | July 31, 2012


Lynne Taylor

Some US pharmacies "selling entire inventories to gray market"

Some US pharmacies are selling their entire inventories to "gray" marketeers, who make enormous profits by buying hard-to-find drugs and re-selling them at huge mark-ups, a joint Congressional investigation has found.

Moreover, prescription drugs had leaked into the gray market through pharmacies in 69% of the distribution chains examined for the probe. "Instead of dispensing the drugs in accordance with their professional duties, state laws and the expectations of their trading partners," the pharmacies had resold them to gray wholesalers, says the report of the investigation, which was begun last autumn by Representative Elijah Cummings, ranking member (Democrat) of the House Committee on Oversight and Government Reform.

Pedigree and price information collected by the investigation for five different short-supply injectable drugs showed similar patterns of leakage and aggressive price mark-ups. For all five drugs, units normally costing $10-$20 were regularly marked up to prices of $200 or more while they travelled through the gray market, the members of Congress found.

"By the time the gray market has done its work, a cancer drug that originally cost $10 can cost $500 or even $1,000," said Senator Jay Rockefeller  IV, chairman of the Senate Committee on Commerce, Science and Transportation, who conducted the investigation with Rep Cummings and Senator Tom Harkin, chairman of the Senate Committee on Health, Education, Labour and Pensions (HELP).

"These gray market companies seen to know when drugs are in shortage, even before the hospitals do. And they always seem to be able to get their hands on short-supply drugs, even when authorised prescription drug distributors don't have them in stock," said Sen Rockefeller, opening a Senate hearing on the problem last week, held as part of the Congressional probe.

The report on the investigation also reveals that:

- during drug shortages, hospitals may be unable to buy drugs from their normal trading partners, usually one of the thee large national "primary distributors." At the same time, they are deluged by sales solicitations from gray market companies offering to sell the shortage drugs for prices that are often hundreds of times higher than the prices they normally pay. "Hospital pharmacists reluctantly pay gray market distributors for life-saving drugs needed to treat patients," it says;

- "fake pharmacies" acquire prescription drugs from authorised distributors and then sell them into the gray market. The investigation has identified a number of businesses holding pharmacy licenses that appear to operate for the sole purpose of acquiring short-supply drugs that can be sold into the gray market;

- on average, the prescription drugs examined for the investigation were owned by three to four different gray market businesses before being sold to a hospital, and most of the drugs travelled through the gray market in five days or less; and

- gray market companies sometimes charge hospitals significantly different prices for the exact same product on the same day. For example, one such firm sold a drug to a US military hospital for $315 per unit, and charged $215 per unit for the same drug to another hospital that same day.

The investigation has revealed that there are weak points in the US drug distribution system and that gray market companies know how to exploit them, Sen Rockefeller told the hearing, adding: "we need to close down this gray market, and do a better job making sure prescription drugs are safe and affordable."

He also noted that that not even the gray market companies are willing to defend this "disgusting and indefensible" form of "price gouging."

"I invited the five companies we looked at in this investigation to testify at this hearing. They all declined my invitation. They know what they're doing is wrong," he said.

- In May, Rep Cummings introducing legislation aimed at lacking the problem. His Gray Market Reform and Transparency Act of 2012 would, among other measures, prohibit wholesalers from buying drugs from pharmacies and create a national wholesaler database that would allow state boards of pharmacy to share information more easily and monitor enforcement actions in other states.

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