Lawmakers: Fake pharmacies price gouging on drugs

March 21, 2012 - 10:55 AM

TRENTON, N.J. (AP) — Members of Congress investigating shortages of crucial drugs are targeting fake pharmacies allegedly set up solely to buy and resell the drugs at huge markups.

Two senators and one U.S. representive on Wednesday sent letters to about two dozen operators of pharmacies, requesting detailed information about their business, particularly their purchases and resale of cancer and other life-saving drugs.

Three of the targets are individuals believed to have obtained licenses to operate both a pharmacy and a prescription drug wholesale business — solely to make money by taking advantage of the growing drug shortage crisis that's disrupting hospital and other patient care.

Twenty other letters were sent to pharmacies that may be doing the same thing, but investigation of those companies is in an earlier stage.

The letters were sent by Rep. Elijah Cummings, the ranking Democrat on the House Oversight and Government Reform Committee, along with Sen. John D. Rockefeller, chairman of the Senate Committee on Commerce, Science, and Transportation, and Sen. Tom Harkin, chairman of the Senate Committee on Health, Education, Labor and Pensions.

The three have been investigating the role of the wholesalers, known as "gray marketers," together with government agencies and hospital and pharmacy groups. Their letters state that they've found evidence of pharmacies buying prescription drugs from legitimate wholesalers, transferring those medicines to their own wholesale company and then selling them to other wholesalers for a substantial profit.

"If it's not illegal, we're going to have to find a way to make it illegal, because this threatens virtually every person in the country," Cummings told The Associated Press in an interview.

Drug shortages have been wreaking havoc in hospital pharmacies, forcing doctors to postpone chemotherapy and surgeries and give patients second- or third-best treatments that may have more serious side effects or cost substantially more.

Patients have had to endure unnecessary discomfort, preventable complications and longer hospital stays, which is costing hospitals millions of extra dollars. Most of the drugs that are unavailable or hard to find are generic injectable drugs that normally would be cheap.

An Associated Press investigation last fall found at least 15 deaths since 2010 have been caused by the shortages, which have set a record high in each of the past five years. And future treatments also are being endangered, as patient testing of new experimental medicines has been delayed or halted due to the lack of the standard medicines against which they must be compared.

The lawmakers' investigation found evidence of one transaction where a licensed pharmacy called Priority Healthcare bought a chemotherapy drug called fluorouracil for $6.77 per vial. It then "sold" it to a distributor it owned called Tri-Med America for $50 per vial, although that company does not appear to have taken possession of the drug. Tri-Med America then allegedly sold the cancer medicine to another company for more than 10 times the initial price — $69 per vial.

The other two pairs of companies under investigation are Columbia Med Services and Columbia Medical Distributors, and LTC Pharmacy and International Pharmaceuticals Inc.

The presidents of Priority Healthcare/Tri-Med America and Columbia Med Services/Columbia Medical Distributors did not immediately return calls seeking comment. The phone at International Pharmaceuticals went unanswered Wednesday morning and a telephone listing for LTC Pharmacy could not immediately be found.

"It appears that you essentially established a fake pharmacy in order to gain greater access to drugs that are in critically short supply and are desperately needed to treat patients with cancer and other diseases. What remains unclear is how much you may have profited from this illegal activity," the lawmakers stated in a letter to Jessica Hoppe.

She is listed as the president and owner of both LTC Pharmacy and International Pharmaceuticals. The two businesses share offices — but don't have an actual pharmacy — in a building in Durham, N.C., that has been investigated by authorities there. Both businesses have since surrendered their operating licenses, but it's unclear whether they have closed or moved elsewhere.

Manufacturing lapses and production shutdowns for contamination and other serious problems are behind many of the shortages, and there is no quick or easy fix for the problem.

Yet some gray marketers — who may not be licensed, authorized distributors — have used the crisis as a way to make lots of money by cornering the market on drugs in short supply and then offering them to desperate hospital pharmacists and cancer clinics at outrageous markups.

Currently, there are 268 prescription drugs in short supply in the U.S. That includes 34 new shortages reported this year, 204 that began in 2010 or 2011 and remain unresolved, and others that have persisted even longer, according to Erin R. Fox, manager of the University of Utah Drug Information Service, which tracks national drug shortages.

A report based on a survey last summer said that hospitals forced to buy crucial drugs from wholesalers outside their normal distribution chain were being charged markups averaging 650 percent. In one case, a drug for dangerously high blood pressure, normally priced at $25.90 per dose, was being offered to hospitals for $1,200.

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Linda A. Johnson can be followed at http://twitter.com/LindaJ_onPharma