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Managing The Drug Shortage: Many Hospitals Are Buying “Gray Market” Drugs

Severe shortages for life-saving medications have driven a “gray market” in the wholesale drug supply industry, a watchdog group reports.

And the mark-up on gray market drugs is a budget-buster, reports the Institute for Safe Medication Practices, a Philadelphia-based nonprofit organization devoted entirely to medication error prevention and safe medication use. Purchasing agents and pharmacists at 549 hospitals responded to a survey on gray market activities associated with drug shortages.

The report includes chilling anecdotes from the respondents about pressure from physicians and administrators to ensure drugs are available, and drastic price gouging from the gray market suppliers. Price mark-ups of 10 times or more than the contract price were reported by about a third of respondents from critical access hospitals and community hospitals, and more than half of university hospitals. Examples include a box of calcium gluconate that cost $750 instead of the contract price of $50 (1,400% mark-up), and a supply of propofol that cost $25,000 instead of $1,500 (1,567% mark-up). Oh, and there’s exorbitant shipping and handling fees, too.

More than half (52%) of respondents reported buying one or more drugs from gray market vendors during the past two years. Most (80%) of these respondents said gray market purchases increased as drug shortages grew. While most respondents (54%) reported buying products from only one or two gray market vendors, a quarter (25%) of university hospitals reported purchases from more than five.

Even in states that require documentation of authenticity for pharmaceuticals, 50% of respondents bought medications from the gray market during the past two years. Of these, only 35% reported always receiving the required documentation of authenticity. Approximately two-thirds of all respondents never checked the manufacturer’s website to see if the secondary distributor was authorized by the manufacturer. Most were unaware that this information is available.

And, 56% of respondents get daily solicitations to buy medications no longer available through the manufacturer or usual wholesaler. They often contain high-pressure pitches more suitable to QVC than to health care, such as, “We only have 20 of this drug left and quantities are going fast.” And 13% of respondents also are solicited to sell their stocks of drugs into the gray market.

In general, the most common reasons respondents did not buy gray market drugs were concerns about authenticity (74%), ethics (66%), cost (69%), and storage conditions (58%).

Up to 12% of respondents reported awareness of a product authenticity issue, medication error, or adverse drug reactions associated with the use of gray market products in the past two years. Most cited errors include a different product strength, improper storage, recalled or stolen products, illegally imported drugs, questionable chain of custody, and sale of counterfeit products and placebos.

The Institute for Safe Medication Practices suggests a four-pronged strategy:

–The Food and Drug Administration (FDA) needs greatly enhanced authority to manage drug shortages.

–Stronger regulations are needed for pharmaceutical distribution, such as a national law to limit distribution of pharmaceutical products to authorized distributors of record, and to limit price gouging during shortages.

–Minimize the need for buying gray market drugs by planning ahead, forming local coalitions to cooperatively borrow from each other, back-ordering or direct ordering from the manufacturer, and seek out alternatives for drugs in short supply.

–Take stronger regulatory and law enforcement action against illegal activities, such as counterfeiting and theft. Five drug makers are seeking stronger penalties for stealing chemotherapy drugs, for example.

*This blog post was originally published at ACP Hospitalist*

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