Higher Prices, More Compromises

By Mary Pat Flaherty and Gilbert M. Gaul
Washington Post Staff Writers
Sunday, October 19, 2003

The faxes, e-mails and phone calls come in every morning to hospitals across the country, touting hard-to-find medications that small wholesalers have ready for sale -- at dramatically marked-up prices.

Medications in short supply from major wholesalers are pitched on those sales calls, confounding and enraging many hospital pharmacy managers who say they are held hostage to price-gougers.

The scramble for suddenly scarce drugs exposes patients to increased risk of medication errors, pharmacists said. When hospitals must use substitutes for their usual drugs, "it affects the quality of patient care in a huge way," said Rita Shane, pharmacy director for the vast Cedars-Sinai Medical Center in Los Angeles.

The small wholesalers offer everything from workhorse drugs to combat infections and nausea to lifesaving drugs for managing premature births and spinal injuries. The drugs are hawked at double or triple the usual price, dozens of solicitations obtained by The Washington Post show.

"It's a vile business practice," said Alyce Holmes, pharmacy director for the 101-bed Betsy Johnson Regional Hospital in Dunn, N.C.

Shortages often hit without warning, for reasons as varied as drops in raw materials, production delays, unexpected demand and phase-outs of brand-name drugs as cheaper generics enter the market.

"You open your order and look in the box, and what you wanted isn't there," said Tamra Kaplan, pharmacy director at Anaheim (Calif.) Memorial Medical Center. "That's one way you find out. It's even more aggravating when the first indication you get are the calls from these gray-marketers."

Anaheim has booked surgeries around its supply of Solu-Medrol, an anti-inflammatory. Earlier this year, it rationed the antifungal drug amphotericin B after it increased from $6 to $31 a vial.

When production of the snakebite treatment CroFab lagged last year, the price for a two-vial carton went from $1,720 to as much as $5,000. The average patient needs 20 vials. Some hospitals had to turn to veterinary drugs and medications from zoos, said Leslie Boyer, medical director of the Arizona Poison and Drug Information Center in Tucson.

When hydrocortisone supplies dropped and prices soared earlier this year, Cedars-Sinai scoured its 850-bed facility for every bit of the drug, a mainstay to treat severe allergic reactions. "It is absurd and perverse to me that something like flu vaccine or the drugs our anesthesiologists need can be out of supply from our usual, major wholesaler yet be available from very small secondary wholesalers," Shane said.

To avoid the small wholesalers, the hospital spent $250,000 in 2002 on expensive substitute drugs. "Sometimes we have six or eight people working all day to find a supplier we know because we don't deal with small wholesalers," said Ron Reinhart, a pharmacy buyer for Cedars-Sinai. "We've been a bit fearful of where they buy their product from."

At times, when urgent needs arise, there is no avoiding small wholesalers. "I try to keep up on who is who, and we look very closely at dating and packaging when it comes in," said Doris S. Craft, chief pharmacist at the 100-bed Wilson (N.C.) Medical Center. "But sometimes you're buying on faith that it's good and on the up-and-up because you have to have it."

Desperate for Solu-Medrol, Craft ordered with small suppliers who had approached her through faxes, paying $358 on July 11 and $263 on July 14 for the same amount of the drug, which is as much a staple to a hospital as milk is to a household. Two weeks later, she was able to buy from her regular wholesaler -- Cardinal Health Inc., one of the nation's biggest distributors -- for about $74.

"I don't care what they say about being smart business people, and knowing the marketplace and supply and demand," Craft said. "If I have to pay four or five times my usual price to get something my patients can't do without, then I'm being gouged."

In a letter to Craft, the wholesaler who charged her $358 wrote that providing hard-to-find drugs on short notice involved "a lot of legwork" and significant costs. "Our company is proud to be part of the healthcare delivery system and, in our view, we do not deserve a pejorative label like 'price gouger,' " wrote Trevor Yankoff, president of Zylex Pharmaceuticals of San Clemente, Calif. "If the price is too high we would recommend not buying from us."

Some small wholesalers say they build inventories by stocking medications nearing their expiration dates that other wholesalers need to sell quickly. Others take advantage of regional variations in supply. Still others pay painstaking attention to market forces that may cause drugmakers to alter production.

But other small wholesalers have obtained medications under less reputable circumstances.

During the shortage-plagued 2000 flu season, a New Jersey wholesaler bought steeply discounted vaccine for nursing home patients and pledged not to sell the drug on the open market. The wholesaler violated that contract, according to Food and Drug Administration records released under the Freedom of Information Act. The records show the wholesaler sold nearly half of the 15,000 doses it had purchased at $23.65 each to a wholesaler in Savannah, Ga., for $93, who sold to a Miami wholesaler for $95, who sold to various hospitals and clinics, charging $130 to two in New Jersey and $147 to one in Pittsburgh. That chain of sales took fewer than 11 days, the records show.

A General Accounting Office report found that wholesalers ignored pre-booked orders to sell to "the highest bidders." Hawaii's state health system ordered 12,000 flu vaccine doses at $2.80 in May, well before the outbreak. But its distributor cut the order, and the state had to pay double to other suppliers in September.

Shortages have risen since 2000 and are lengthening, according to a Web site for hospital pharmacy buyers maintained by the University of Utah.

From about 20 drugs per year before 1999, the list expanded to 80 in 2001 before dropping back to 39 last year -- but those shortages were more persistent.

As shortages rise so do the pitches from wholesalers, some hand-scrawled, some promising to "find anything you need" and loaded with exclamation marks.

© 2003 The Washington Post Company