Clampdown on the Rx gray market: Striking a balance amid drug shortages

How can Congress plug the leaks in the pharmaceutical supply chain and dry up the stream of gray market drugs without making the current drug shortage even worse? And can federal regulators shut down gray market profiteers without limiting “the ability of pharmacies to take care of their patients?”

That was the challenge posed by John Coster, SVP government affairs for the National Community Pharmacists Association, in testimony on July 25 before the Senate Committee on Commerce, Science and Transportation. The NCPA, like other pharmacy groups, supports a federal clampdown on unscrupulous "shell pharmacies ... that seem to have been established for the sole purpose of buying medications in short supply from primary wholesalers in order to sell them to seemingly unethical secondary wholesalers," in Coster's words. But he urged Congress not to apply a regulatory sledge hammer to the problem.

"Pharmacies should ... be allowed to continue selling pharmaceutical products to other pharmacies, because it helps to alleviate temporary shortages, especially in rural areas where daily wholesaler deliveries may be more sporadic," Coster told the committee. And pharmacies serving every channel, including community drug stores and hospitals, should be free to use secondary wholesalers "as alternatives to ensure their inventory remains properly stocked," he warned.

Coster noted that the prescription drug shortages plaguing the nation's health system "have been most acute at hospitals with relation to injectable and infusion drugs." The gray market purveyors skillfully are playing into those shortages, and in some cases, are holding hospitals hostage by exploiting their devotion to their primary mission: To put patients' wellbeing and treatment priorities above all other considerations.

"Even within a budget, patient care trumps budgets," one pharmacy administrator for a hospital group in the upper Midwest told me. Another pharmacy manager at the same health system told me that the direct costs of having to use alternate suppliers for some scarce medicines range from $25,000 to $50,000 or more a month.

Another hospital pharmacy leader for a health system on the West Coast told me that the shortage has made gray market suppliers "very tempting because of clinical needs," but adds that she avoids that alternative supply channel. What stops her, she said, are concerns over a gray market drug's pedigree and the fact that those products are sometimes "five times more than we normally pay."

The drug supply crunch is particularly serious for sterile injectables and infused medicines in such treatment areas as "pain medication, anesthesia, cancer care, emergency care — all the drugs related to surgeries," said Roslyne Schulman, director of policy for the American Hospital Association. The AHA polled more than 800 hospitals last year and found that virtually all of them were affected by one or more drug shortages in the first half of 2011, and that 82% of hospitals had “delayed patient treatment as a result of a drug shortage.” Schulman called that finding “stunning” and “record-breaking.”

What's more, "The vast majority of all types of hospitals reported increased drug costs as a result of drug shortages," AHA reports, as they've resorted to buying more expensive alternative drugs from secondary sources.

As Drug Store News senior editor Mike Johnsen reports, the sellers can jack up the prices of drugs in critically short supply, sometimes by many multiples of their original price. And hospital pharmacy buyers sometimes feel they have little choice but to pay the exorbitant costs to get critically needed meds to their patients.

If you're a hospital pharmacist trying to cope with the drug shortage, I'd like to hear from you. Have you had to routinely turn to secondary or even gray-market sources to plug the holes on your pharmacy's shelves? And are you concerned that a clampdown on the gray market also could negatively impact the availability of needed medicines from even legitimate secondary suppliers?