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Lawmakers: Fake pharmacies price-gouging on drugs
Congress » “Gray marketers” accused of taking advantage of drug shortages to make money.


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Trenton, N.J. • Members of Congress investigating shortages of crucial drugs are targeting nearly two dozen fake pharmacies allegedly set up solely to buy and resell the drugs at huge markups.

Two senators and one U.S. representative on Wednesday sent letters to three individuals believed to have obtained licenses to operate both a pharmacy and a prescription drug wholesale business in a "shell game" — to make money by taking advantage of the drug shortage crisis that’s disrupting hospital and other patient care. The letters request detailed information by April 11 about the businesses and their purchases and resale of cancer and other lifesaving drugs.

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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.

Cummings sent letters to 19 other pharmacies that may be doing the same thing, but investigation of those companies is in an earlier stage.

The three lawmakers 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 speculating by buying prescription drugs in short supply from legitimate wholesalers, transferring those medicines to their own wholesale company and then selling them to other gray marketers at exorbitant markups.

"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.

Laws vary by state, but generally wholesalers may only buy drugs from manufacturers or other licensed wholesalers.

Drug shortages have been wreaking havoc in hospital pharmacies, forcing doctors to postpone chemotherapy and surgeries and give patients treatments that may be less effective, 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, including sedatives for surgery and powerful antibiotics and painkillers.

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. Future treatments also are endangered, as patient testing of new experimental medicines has been delayed or halted by lack of the standard medicines against which they must be compared.


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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. A distributor it owned called Tri-Med America allegedly soon 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 return calls seeking comment. Jessica Hoppe, who is listed as the president and owner of both LTC Pharmacy and International Pharmaceuticals, declined to comment.

"We are following this paper trail and intend to see whether people with life-threatening illnesses had trouble finding the medications they need because of these companies’ business practices," Rockefeller said in a statement.

Cummings noted a doctor who testified at a Nov. 30 hearing of his committee, Dr. Michelle Hudspeth of Medical University of South Carolina, said "she has to practice medicine as if she were in a Third World country because of the shortage of medicines."

LTC Pharmacy, which has been under investigation by the North Carolina Board of Pharmacy, surrendered its operating permit last September, and International Pharmaceuticals was denied a permit renewal. The two businesses shared offices in a building in Durham, N.C., but had no actual pharmacy, according to the board.

The letter to Hoppe noted it appears International Pharmaceuticals has active wholesaler licenses in at least 23 other states.

Manufacturing lapses and production shutdowns for contamination and other serious problems are behind many of the shortages, and there’s no quick fix for those problems. Other reasons include increased demand for some drugs, companies ending production of some drugs with tiny profit margins, consolidation in the generic drug industry and limited supplies of some ingredients.

Yet some gray marketers — who may not be licensed, authorized distributors — have used the crisis to make 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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