Drug Shortages Leading to Price Gouging, Possible Safety Issues, According to Research

- 1,745 unsolicited sales offers collected from “gray market” vendors, analysis shows average offered mark-up of 650 percent for drugs needed to treat critically ill patients

- Recommendations created to help providers make safe, reliable purchases

CHARLOTTE, N.C.--(BUSINESS WIRE)-- As healthcare providers deal with record rates of drug shortages, some “gray market" vendors are putting profits ahead of patients, offering drugs desperately needed at exorbitant price mark-ups. And in certain cases, the drugs being offered may be counterfeit, stolen, ineffective or unsafe.

A Premier healthcare alliance analysis, of unsolicited sales offers made by gray market vendors to hospitals, shows that the average mark-up for shortage drugs was 650 percent. The highest single recorded mark-up offered was 4,533 percent for a drug used to treat high blood pressure. Normally priced at $25.90, the offered price in this case was $1,200.

Research also showed that, of the mark-ups offered:

  • 96 percent (611) were at least double (100 percent) normal price;
  • 45 percent (288) were at least 10 times (1,000 percent) normal price; and
  • 27 percent (171) were at least 20 times (2,000 percent) normal price.

In other cases, offered mark-ups were as high as:

  • 3,980 percent for chemotherapy medicines to treat leukemia and non-Hodgkin’s lymphoma;
  • 3,170 percent for medicines to help cancer patients retain bone marrow;
  • 3,161 percent for sedation medicines for surgeries;
  • 2,979 percent for medicines to dilate veins and prevent brain or heart spasms; and
  • 2,642 percent for medicines to prevent damage during a heart attack.

Premier collected 1,745 unsolicited gray market sales offers in April-May 2011. Of the offers, the 636 that contained both price and proper drug identification information were analyzed. The offers covered 416 separate drugs with the highest mark-ups seen for medications needed to treat critically ill patients in the following care categories: critical care sedation and surgery; emergency care; chemotherapy; and fighting infectious disease.

Safety issues

Also known as a parallel market, the gray market operates outside the tightly controlled pharmaceutical distribution channel, which requires strict standards for storage and handling, as well as requirements to record the product’s chain of custody from manufacturer, to distributor, to pharmacy.

A recent report by the Pew Health Group found that drugs moving through the gray market can be bought and sold across state lines multiple times, moved in whole or partial lots, repackaged or relabeled. This leads to a complex web of transactions, involving multiple subsidiaries and trading partners, which can make it almost impossible to determine the product’s origin, the supply source or authenticity. Because of the profits that can be made off shortage products, as well as the ease with which product origins can be obscured, gray market vendors may turn to questionable sources for scarce supply.

In addition, drugs often have narrow ranges of temperature and climate conditions required for maintaining efficacy, and only a well-controlled supply chain channel can meet these requirements. Improper handling and storage of drugs may cause them to be inadequate or even harmful.

Gray markets largely have emerged due to the record high number of drug shortages, where scarcity has forced pharmacies and other providers to search for new sources of supply.

A bipartisan group of senators submitted a letter to Department of Health and Human Services Secretary Kathleen Sebelius in June, underscoring their concern over the urgency and adverse impacts of drug shortages. They urged her to work with the Food and Drug Administration and other divisions on convening a public meeting on the drug shortage issue.

Recommendations for providers

To help providers nationwide avoid gray market vendors, Premier developed the following series of actions that should be taken to ensure purchase of safe, reliable drug products. Click here for more information regarding these actions.

1. Understand risks to your hospital/health system and the patients you serve by engaging legal and risk departments.

2. Develop and widely communicate policies for decisions regarding purchases.

3. Carefully consider and document exceptions to existing purchasing policy.

4. Confirm with the State Board of Pharmacy or Department of Health that the seller is appropriately licensed and not subject to any current investigations, and verify with the product manufacturer that the distributor is an authorized distributor of record (ADR).

5. If the distributor is not an ADR, ask for and confirm receipt of a drug pedigree that records the products’ chain of custody from the original distributor, to the pharmacy, and confirm the distributor is a Verified-Accredited Wholesale Distributor through the National Boards of Pharmacy.

6. Keep records of sellers you have refused to do business with and reasons why.

7. If purchasing from a new supplier, compare and scrutinize the package, label and contents. Don’t use drugs if concerned.

8. Consider reporting suspect suppliers to appropriate local, state and national authorities and organizations.

“Due to existing drug shortages, many providers are already in impossible situations in trying to properly care for their patients,” said Premier Chief Operating Officer Mike Alkire. “When considering the use of a new supplier, hospitals should, at a minimum, follow these purchasing guidelines. They can help protect the hospital, as well as patients consuming medications, from unintended harm.”

Drug shortages background

The University of Utah forecasts more than 360 products reaching shortage levels by the end of the year, the highest in history. Analysis from the American Hospital Association, American Society of Health-System Pharmacists, University of Michigan and Premier found that the vast majority of hospitals nationwide are experiencing life-threatening shortages of medicines needed to provide essential patient care. Combined, these analyses suggest the shortage could cost U.S. hospitals at least $416 million annually through the purchase of more expensive generic or therapeutic substitutes and enhanced labor costs.

About the Premier healthcare alliance, Malcolm Baldrige National Quality Award recipient

Premier is a performance improvement alliance of more than 2,500 U.S. hospitals and 75,000-plus other healthcare sites using the power of collaboration to lead the transformation to high quality, cost-effective care. Owned by hospitals, health systems and other providers, Premier maintains the nation's most comprehensive repository of clinical, financial and outcomes information and operates a leading healthcare purchasing network. A world leader in helping deliver measurable improvements in care, Premier has worked with the Centers for Medicare & Medicaid Services and the United Kingdom's National Health Service North West to improve hospital performance. Headquartered in Charlotte, N.C., Premier also has an office in Washington. http://www.premierinc.com. Stay connected with Premier on Facebook, Twitter and YouTube.


Premier healthcare alliance
Alven Weil, 704-816-5797
[email protected]
Amanda Forster, 704-816-5797
[email protected]

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