Drug Shortages Pave Way for Price 'Gougers'

Hospitals report calls from drug scalpers trying to profit from shortages.

ByABC News
August 19, 2011, 5:56 PM

Aug. 22, 2011— -- Ryan Stice, pharmacy director at Porter Adventist Hospital in Denver, says he gets inundated daily with phone calls, emails and faxes from pharmaceutical vendors who promise to provide drugs that are in short supply at his hospital. But there is a catch -- their prices are high, and their practices can seem questionable.

"I have a story about one of these vendors calling on a Friday night, lying to a staff member to get approval for shipment, and sending their products for Saturday delivery to avoid our normal safeguards on bogus shipments and invoicing," Stice said.

Operating in the semi-legal "gray market" of pharmaceuticals, this network of distributors works outside the normal drug supply chain, stockpiling vital drugs and offering to sell them to hospitals and clinics at inflated prices.

According to an analysis by Premier Healthcare Alliance, a national organization that collects and analyzes clinical and financial data from its member hospitals, recent unprecedented drug shortages have enlivened this "gray" pharmaceutical market.

The Food and Drug Administration currently lists 180 drugs that are in short supply around the nation, including drugs used to treat cancer and sedate patients for surgery and care. Mike Alkire, the chief operating officer at Premier Healthcare Alliance, which published data on drug price-grouging practices last week, said these shortages have left many hospitals scrambling for supplies of these vital medicines.

"When quantity decreased, demand increased, and so did the price," said Alkire.

Premier analyzed nearly 2,000 sales offers from "gray market" distributors and found an average price markup of 650 percent for drugs used to treat cancer and other critical illnesses, as well as sedate patients for surgery, that have been in short supply in recent months. The analysis found that 96 percent of the markups offered were at least double the normal price of the drugs. The highest markup was for the drug lebetalol, used to treat high blood pressure. Lebetalol usually sells for $25.90, but "gray market" offers priced it at $1,200.