Laws fail to slow gray market

Drug pedigree laws in place in 29 states have done little to deter a largely unregulated gray market in which secondary distributors sell drugs in short supply to hospitals and health systems.

Pharmacists and healthcare executives say that patient safety remains a concern, despite the requirements that secondary distributors become licensed, such as by a state pharmacy board, and that they track the sale, purchase and trade of a drug.

Secondary distributors market drugs in short supply—which include chemotherapy drugs such as doxorubicin and propofol, an anesthetic—to hospitals that are often faced with the choice to stop patient care, find an alternative product or buy from a gray-market vendor at often 20 times the price of a contracted drug or more.

According to the University of Utah Drug Information Service, there were 210 reported drug shortages as of Sept. 26, compared with 211 for the full year of 2010. In the past month, the Food and Drug Administration and a Senate subcommittee have held hearings on the shortages, and Sen. Michael Bennet (D-Colo.) urged the FDA to establish a uniform pedigree standard that would track drugs through the U.S. supply chain.

The American Hospital Association's Roslyne Schulman said during a Sept. 26 FDA meeting that while recommendations for advanced notification of shortages would be helpful to hospitals, so would additional information about drugs sold by secondary distributors. “If hospitals and other providers are forced to purchase drugs off-contract from secondary distributors—and I'm not just talking about gray market, I'm talking about legitimate secondary distributors—what would be extremely helpful would be some additional transparency about where those drugs came from and whose hands they had been in,” Schulman said.

uying drugs from alternative suppliers that do provide pedigrees still raises concerns about price-gouging, secondary distributors' practice of not returning drugs as traditional wholesalers do, and falsified pedigrees, Bona Benjamin, director of medication-use quality improvement for the American Society of Health-System Pharmacists, and Joseph Hill, the association's director of federal legislative affairs, said an interview.

William Shaw, director of statewide pharmacy purchasing and logistics for Indiana University Health, said fears about whether a drug was stored or handled properly, or if it was counterfeited, still exist even when secondary distributors provide a pedigree.

Indiana and Florida were the first states to enact pedigree laws, in 2006. FDA regulation requires unauthorized distributors to maintain pedigrees that can be traced back to the manufacturer or the last authorized distributor of record—the agency proposed in July to remove a regulation that would require a more detailed pedigree after it was sued by secondary distributors in 2006.

Florida's law, which mainly aimed to prevent counterfeit drugs from entering the supply chain, requires a wholesaler to be authorized to receive and distribute a drug and tracks drugs by the lot, said Martin Dix, a shareholder in the law firm Akerman who represents drug wholesalers. The law also prevents a wholesaler from being licensed at the same address as a healthcare provider, meaning that Florida hospitals cannot sell drugs to other wholesalers, which is one way that drugs have entered the gray market (Sept. 5, p. 8).

Dix said it's understood that smaller businesses with shady practices went out of business after the law was enacted, and the process remains challenging for licensed participants. “It's a complex paperwork process and even sophisticated distributors can make mistakes with it,” he said.

California's law, which goes into effect in 2015, is expected to be one of the most stringent pedigree laws. It will require the individual dose or vial of a drug to be tracked.

The mass serialization of individual doses and vials is where the federal chain-of-custody standard should be, according to Bill Woodward, a senior director of pharmacy contracting at group purchasing organization Novation. He said he encourages Novation members to buy only from secondary distributors that will provide a pedigree and then to authenticate the pedigree, a task that he says is cumbersome because some pedigrees can include up to 10 distributors. “Pedigrees don't necessary protect the customer unless someone validates them,” Woodward said.