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Some Suppliers Jack Up Flu Vaccine Price

By Mary Pat Flaherty
Washington Post Staff Writer
Thursday, October 14, 2004; Page A02

With many health care facilities struggling to find flu vaccine, some small suppliers have capitalized on the acute shortage by demanding as much as 10 times the usual price.

Pharmacy purchasers for hospitals across the country said they began receiving from various wholesalers faxes, e-mails and phone calls touting the marked-up supplies within hours of the Oct. 5 announcement that the nation's flu vaccine supply would be drastically cut because of contamination at the plant of one of the two manufacturers of the vaccine.


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Fluzone, which is made by Aventis Pasteur and is the only vaccine remaining on the market for this season, had been available for between $8 and $9 a dose before the announcement. It quickly soared in price to double that and more in the hands of small wholesalers that specialize in medicines in short supply.

To hospital pharmacists such as Rich Carvotta of Los Robles Hospital and Medical Center in Thousand Oaks, Calif., the price markups are "gouging, disgusting and a disgrace to the industry." His counterpart at St. Francis Hospital in Charleston, W.Va., Nate Kahn, deemed the offers "aggravating -- no, make that an outrage, and I'm one who believes in the free-enterprise system."

Their hospitals did not buy at the dramatically higher prices they were offered because they were able to get cheaper, although limited, supplies through local public health systems that began redistributing the vaccine they had on hand.

To one of the distributors who made the offers, the higher prices simply reflect the heightened demand for a scarce item. Gene Alley, chief executive of Stat Pharmaceuticals Inc. of El Cajon, Calif., said: "It's a commodity, although some in the medical business don't want to admit that."

His company, Alley said, sold its last supply of Fluzone a week ago at between $15 and $30 a dose but could have asked more. He did not, he said, "because, at some point, it becomes bad business to sell only to the highest bidders and get lumped in with people who are price gougers."

In Fort Lauderdale, Meds-Stat offered supplies of Fluzone as late as last Friday, according to a copy of a fax offering. That same day, the company offered a Kansas City pharmacy the vaccine at a price that amounted to $90 a dose, according to a lawsuit filed by the Kansas attorney general. The pharmacy was seeking flu shots for nursing home patients. The suit accused Meds-Stat of violating consumer rights.

Meds-Stat said in a written response yesterday that it had not seen the lawsuit but was "confident that we have done nothing wrong."

The rapid price increases in the wake of a shortage are not unique. They occur daily with hundreds of medicines needed by hospitals and doctors' offices. But the flu vaccine markups are especially acute because nearly half of the country's expected supply was lost because of a contamination problem at Chiron Corp.'s British plant. That left Aventis Pasteur as sole supplier.

Officials at more than half a dozen hospitals across the Washington region -- from large to small, urban to rural -- said they did not receive any price-spiked solicitations in the past week. Toni Keiser, a vice president at Atlantic General Hospital in Berlin said she had heard indirectly of such gouging but had not encountered it herself.

Federal health authorities announced this week a plan to reallocate the available flu vaccine to high-risk patients, but by then nearly two-thirds of Aventis Pasteur's vaccine had already been distributed, including to commercial suppliers. The largest of those are often authorized by drug manufacturers to serve as distributors of their products.

The larger companies are also free to sell to smaller distributors, who then sell to even smaller suppliers that are willing to place orders for flu vaccine early in the season at high prices on the chance that they will be able to resell it for even more when the flu season hits hard. That bet pays off particularly well when dramatic shortages occur.

A salesman for Stat, in a Sept. 13 e-mail sent to pharmacy buyers, predicted this year's turn of events, saying that it was "my favorite time of the year! Hospital beds are filling up" and "all the little darlings are back in school coughing up their diseases . . . " Chiron was having production problems, he wrote, and if that continued, wholesalers "can pretty much ask and get what ever the old market will bare," a copy of the e-mail shows.

Alley said his salesman was writing tongue-in-cheek, and that "no one wants to see kids hacking." But the pricing comments, he said, are "the truth. It's happened for the last seven flu seasons."

Nevada and Florida recently passed regulations limiting the number of times certain drugs and vaccines can be resold by distributors, both to try to control costs and to improve safety and handling. Most states, however, do not have such constraints. And although the Centers for Disease Control and Prevention has an advisory group on immunizations that looks at distribution problems, it has no authority to intervene in alleged price gouging, spokesman Llelwyn Grant said.

Aventis Pasteur issued a statement by Phil Hosbach, a vice president, saying that "the company does not control prices charged by distributors to their customers. However, the company does monitor pricing in the marketplace, and consults with the proper authorities on its findings."

The American Society of Health-System Pharmacists, based in Bethesda, surveyed its members last weekend and was told of the tenfold price increases.

Also yesterday, Chiron announced that the Securities and Exchange Commission has launched an informal inquiry into how Chiron handled the disclosure of its problems. The Food and Drug Administration and the British Medicines and Healthcare Products Regulatory Agency said they will cooperate to address the concerns related to Chiron's production problems.

Staff writer Susan Levine contributed to this report.

© 2004 The Washington Post Company


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