Buyers of short-supply drugs are subject to

Premier, Inc., a leading group purchasing organization for hospitals, has polled its members to gather data on offers of drugs that are in short supply nationally, finding that the prices being offered for these drugs were marked up 650%, on average, and in one case, by 4,533%. Previous analysis by Premier and others suggests that the markups, combined with the extra labor in tracking down new sources for short-supply drugs, adds $416 million to hospital operating costs annually.

Behind this piece of news is the growing problem of drugs that are in short supply or essentially unavailable. FDA, Premier, the American Soc. of Health-System Pharmacists and others are reporting that 180 drugs (mostly generic, but including branded products) are in short supply—the highest in recent history. Many of these drugs are used in acute care or chemotherapy. There are efforts under way to require manufacturers to alert FDA to upcoming shortages; to import drugs from abroad; or to pass new legislation; but there is no one quick fix.

Premier gathered its latest data by soliciting reports from its member hospitals’ pharmacy staffs during April. In all, 1,745 offers were collected and then analyzed, with prices compared to what Premier pays to its existing suppliers. The highest markup was for labetalol, a generic beta blocker, with the 4,533% markup. Premier then goes on to highlight the risks of buying gray market products, which it defines as “unofficial, unauthorized or unintended by the original manufacturer.” Gray marketers “capitalize on the desperation of pharmacy directors and buyers who are finding it increasingly difficult to secure a sufficient supply of the drugs needed.” A spokesman for HDMA made this statement: “HDMA’s members are primary distributors, accounting for nearly 90% of all pharmaceutical sales in the country, who buy direct only from their drug manufacturing partners and deliver only to customers who hold appropriate licenses. As such, HDMA members do not participate in the ‘gray market’ nor do we condone price gouging.”

ADRs and pedigrees

Now, the qualifiers: Premier’s data are based on solicitations, not actual transactions with sellers; a Premier spokesperson said that it is outside their ability to collect actual transaction data for sales not within its own network. Additionally, Premier’s own “base contract prices” were used for the comparison—which is not necessarily an average sales price or manufacturer’s list price (or any of the other measures of a drug’s cost). Even so, a 650% markup leaves an enormous amount of room for factoring discounts in and still seeing a price gouge.

Other than noting that 18 specific vendors were identified in the data, Premier did not qualify these vendors as being authorized distributors of record (ADRs), or participants in the Verified-Accredited Wholesaler Distributor (VAWD) list maintained by the National Assn. of Boards of Pharmacies. It is possible that a non-full-line wholesaler (essentially, a non-member of HDMA) is an ADR—and one who can provide a pedigree on a drug it is selling—so that the entire transaction is as legitimate as one from an HDMA-member wholesaler, but at a different price. (It is also likely that some of the sellers of these drugs are opportunists looking to make a quick buck, and are not fully compliant with state or federal distribution regulations.) Premier offers a checklist of such requirements that pharmacy buyers should employ before making a gray market purchase.

Senator Robert Blumethal (D-CT), who participated in the Premier presentation, noted that a hearing will be held with FDA on Sept. 21 to address the issue, and that he has requested a GAO report on the matter. “This report is a game-changer,” he said, adding that ongoing drug shortages are “almost a matter of national security.”