Shades of gray
Skip to main content
MDHC_Logotype_white
Subscribe
  • My Account
  • Login
  • Subscribe
  • News
    • This Week's News
    • COVID-19
    • Providers
    • Insurance
    • Government
    • Finance
    • Technology
    • Safety & Quality
    • People
    • Regional News
    • Digital Edition
    • Ohio pharmacy suspended after 890 vaccine doses wasted
      Elizabeth Richter will serve as acting CMS administrator
      CHS' $1.8 billion bond offering another notch in slow turnaround
      UnitedHealthcare operating earnings fall by $2 billion in Q4
    • Ohio pharmacy suspended after 890 vaccine doses wasted
      CHS' $1.8 billion bond offering another notch in slow turnaround
      As virus surges, states reporting shortages of vaccine
      New CDC director takes over beleaguered agency amid crisis
    • Louisiana gets reports vaccine providers are discriminating
      'We know this is real': New clinics aid virus 'long-haulers'
      The Check Up: Trenda Ray
      The Check Up: Trenda Ray of the University of Arkansas for Medical Sciences
      Trenda Ray
      Q&A: Arkansas nursing leader looking for creative staffing solutions as COVID cases surge
    • UnitedHealthcare operating earnings fall by $2 billion in Q4
      CMS approves rule forcing insurers to ease prior authorization
      COVID-19 still a big uncertainty for insurers in 2021
      Health insurers' outlook boosted after Dems' Georgia win
    • CMS finalizes blood-based colon cancer screening coverage
      As virus surges, states reporting shortages of vaccine
      New CDC director takes over beleaguered agency amid crisis
    • Providers await new HHS coronavirus grant reporting deadline
      Operation Warp Speed Dr. Moncef Slaoui, Pfizer Group President Angela Hwang, Moderna CEO Stephane Bancel, CVS Health Executive Vice President Karen Lynch and McKesson CEO Brian Tyler participate in a panel discussion on the COVID-19 vaccine.
      Hospitals, drug companies strive to stand out virtually at JPM
      Intermountain, Trinity, Memorial Hermann behind $300M private equity fund
      Operation Warp Speed to bump up McKesson's stock price
    • A man in a room with servers.
      Momentum grows to outsource hospital tech functions in 2021
      5 things to know about Google's $2.1B Fitbit acquisition
      Providence bets on machine-learning, consolidating data centers
      Mental health treatment was most common telehealth service during COVID
    • As virus surges, states reporting shortages of vaccine
      Sticking to Mediterranean diet is good for the brain
      Chance of COVID-19 triage care looms over Arizona hospitals
      U.S. ramps up vaccinations to get doses to more Americans
    • Elizabeth Richter will serve as acting CMS administrator
      Providence names new chief financial officer
      Wisconsin's top health official departing for federal job
      Cone Health CEO, CFO to depart amid pending Sentara merger
    • Midwest
    • Northeast
    • South
    • West
  • Insights
    • ACA 10 Years After
    • Best Practices
    • InDepth Special Reports
    • Innovations
    • The Affordable Care Act after 10 years
    • New care model helps primary-care practices treat obesity
      doctor with patient
      COVID-19 treatment protocol developed in the field helps patients recover
      Rachel Wyatt
      Project to curb pressure injuries in hospitals shows promise
      Yale New Haven's COVID-19 nurse-staffing model has long-term benefits
    • Michellene Davis
      Healthcare leadership lacks the racial diversity needed to reduce health disparities
      Dr. James Hildreth
      How medical education can help fight racism
      Modern Healthcare InDepth: Breaking the bias that impedes better healthcare
      Videos: Healthcare industry executives describe their encounters with racism
      Quotes from rebadged employees
      Outsourcing IT, revenue cycle takes toll on internal culture
    • A woman with a wearable sensor talking to her provider.
      Wearable sensors help diagnose heart rhythm problems in West Virginia
      self service station
      COVID-19 pushes patient expectations toward self-service
      Targeting high-risk cancer patients with genetics
      A nurse holds up a phone with a message to a family member saying surgery has started.
      Texting, tablets help hospitals keep family updated on patient care
  • Transformation
    • Patients
    • Operations
    • Care Delivery
    • Payment
    • Highmark Health inks six-year cloud, tech deal with Google
      Study: 1 in 5 patients report discrimination when getting healthcare
      HHS proposes changing HIPAA privacy rules
      Android health records app launches at 230 health systems
    • California hospitals prepare ethical protocol to prioritize lifesaving care
      Amazon, JPMorgan Chase, Berkshire Hathaway disband Haven
      Digital pathways poised to reshape healthcare continuum in 2021
      Healthcare was the hardest hit by supply shortages across all U.S. industries
    • A woman with a wearable sensor talking to her provider.
      Wearable sensors help diagnose heart rhythm problems in West Virginia
      New care model helps primary-care practices treat obesity
      How hospitals are building on COVID-19 telehealth momentum
      Researchers: Hospital price variation exacerbates health inequities
    • MedPAC votes to boost hospital payments, freeze or cut other providers
      Most Next Gen ACOs achieved bonuses in 2019
      Congress recalibrates Medicare Physician Fee Schedule after lobbying
      CMS approves rule to encourage value-based drug pricing
  • Data/Lists
    • Rankings/Lists
    • Interactive Databases
    • Data Points
    • Health Systems Financials
      Executive Compensation
      Physician Compensation
  • Op-Ed
    • Bold Moves
    • Breaking Bias
    • Commentaries
    • Letters
    • Vital Signs Blog
    • From the Editor
    • Wellstar CEO calls adapting for the pandemic her bold move
      Howard P. Kern
      Recognizing the value of telehealth in its infancy
      Dr. Stephen Markovich
      A bold move helped take him from family doctor to OhioHealth CEO
      Dr. Bruce Siegel
      Why taking a hospital not-for-profit was Dr. Bruce Siegel’s boldest move
    • Barry Ostrowsky
      Ending racism is a journey taken together; the starting point must be now
      Laura Lee Hall and Gary Puckrein
      Increased flu vaccination has never been more important for communities of color
      John Daniels Jr.
      Health equity: Making the journey from buzzword to reality
      Mark C. Clement and David Cook
      We all need to 'do something' to fight inequities and get healthcare right, for every patient, every time
    • Dr. Bruce Siegel
      By protecting the healthcare safety net, Biden can put us on the path to a stronger country
      Healing healthcare: some ideas for triage by the new Congress, administration
      Dr. Sachin H. Jain
      Medicare for All? The better route to universal coverage would be Medicare Advantage for All
      Connectivity: a social determinant of health that can exacerbate all the others
    • Letters: Eliminating bias in healthcare needs to be ‘deliberate and organic’
      Letters: Maybe dropping out of ACOs is a good thing for patients
      Letters: White House and Congress share blame for lack of national COVID strategy
      Letters: VA making strides to improve state veterans home inspections
    • Sponsored Content Provided By Optum
      How blockchain could ease frustration with the payment process
      Sponsored Content Provided By Optum
      Three steps to better data-sharing for payer and provider CIOs
      Sponsored Content Provided By Optum
      Reduce total cost of care: 6 reasons why providers and payers should tackle the challenge together
      Sponsored Content Provided By Optum
      Why CIOs went from back-office operators to mission-critical innovators
  • Awards
    • Award Programs
    • Nominate
    • Previous Award Programs
    • Other Award Programs
    • Best Places to Work in Healthcare Logo for Navigation
      Nominations Open - Best Places to Work in Healthcare
      Nominations Open - Health Care Hall of Fame
      Nominations Open - 50 Most Influential Clinical Executives
    • 100 Most Influential People
    • 50 Most Influential Clinical Executives
    • Best Places to Work in Healthcare
    • Health Care Hall of Fame
    • Healthcare Marketing Impact Awards
    • Top 25 Emerging Leaders
    • Top 25 Innovators
    • Top 25 Minority Leaders
    • Top 25 Women Leaders
    • Excellence in Nursing Awards
    • Design Awards
    • Top 25 COOs in Healthcare
    • 100 Top Hospitals
    • ACHE Awards
  • Events
    • Conferences
    • Galas
    • Webinars
    • COVID-19 Event Tracker
    • Leadership Symposium
    • Healthcare Transformation Summit
    • Women Leaders in Healthcare Conference
    • Workplace of the Future Conference
    • Strategic Marketing Conference
    • Social Determinants of Health Symposium
    • Best Places to Work Awards Gala
    • Health Care Hall of Fame Gala
    • Top 25 Minority Leaders Gala (2022)
    • Top 25 Women Leaders Gala
  • Listen
    • Podcast - Next Up
    • Podcast - Beyond the Byline
    • Sponsored Podcast - Healthcare Insider
    • Video Series - The Check Up
    • Sponsored Video Series - One on One
    • Carter Dredge
      Next Up Podcast: Ready, set, innovate! Innovation and disruption in healthcare
      Next Up Podcast: COVID-19, social determinants highlight health inequities — what next?
      Next Up Podcast: Saving Rural Health
      Ceci Connolly
      Next Up Podcast: How to navigate the murky post-election waters
    • An older man wearing a mask receiving a vaccine.
      Beyond the Byline: Verifying information on the chaotic COVID-19 vaccine rollout
      doctor burnout
      Beyond the Byline: How healthcare supply chain struggles contribute to employee burnout
      Beyond the Byline: Covering race and diversity in the healthcare industry
      Beyond the Byline: How telehealth utilization has impacted investor-owned company earnings
    • Leading intention promote diversity and inclusion
      Introducing Healthcare Insider Podcast
    • The Check Up: Chip Kahn
      The Check Up: Chip Kahn of the Federation of American Hospitals
      The Check Up: Trenda Ray
      The Check Up: Trenda Ray of the University of Arkansas for Medical Sciences
      The Check Up: Dr. Kenneth Davis
      The Check Up: Dr. Kenneth Davis of Mount Sinai Health System
      The Check Up: Dr. Thomas McGinn
      The Check Up: Dr. Thomas McGinn of CommonSpirit Health
    • Video: Ivana Naeymi Rad of Intelligent Medical Objects
  • MORE +
    • Advertise
    • Media Kit
    • Newsletters
    • Jobs
    • People on the Move
    • Reprints & Licensing
MENU
Breadcrumb
  1. Home
  2. Technology
October 10, 2011 01:00 AM

Shades of gray

Secondary drug distributors raise questions

Jaimy Lee
  • Tweet
  • Share
  • Share
  • Email
  • More
    Print
    A board at the University of Utah Hospital in Salt Lake city shows drugs in short supply, a problem that's grown nationally.

    Drug shortages have fueled questions about thousands of secondary distributors that provide hospitals and pharmacies with back-ordered drugs, often asking more than 10 times a product's average wholesale price.

    Hospital pharmacists and others in the industry are disconcerted by the lack of uniformity in the secondary market—referring to the businesses they view as less than savory as gray-market vendors—with some companies authorized by manufacturers and accredited by a national association and others with histories of revoked pharmacy licenses and allegations of price-gouging.

    “There's a lack of information,” said Michael Cohen, president of the Institute for Safe Medication Practices. “There's not a certification system or a sanction from all of our major group purchasing organizations that these guys are OK.”

    Only Kentucky, Maine and Texas have price-gouging laws that cover drugs. With no federal statute in place, regulation of drug prices does not fall under the Federal Trade Commission's purview, according to an agency spokesman.

    In fact, it is not clear that any agency regulates the secondary drug-distribution market at the federal level. The Food and Drug Administration said it does not; the Drug Enforcement Administration said it regulates only companies that distribute controlled substances, which include some prescription drugs such as narcotics or stimulants.

    Last week, Rep. Elijah Cummings (D-Md.) identified five secondary drug distributors that he says buy and sell drugs in short supply and requested information about their business practices. The closely held companies targeted by the lawmaker's letters are Allied Medical Supply, Miami; Superior (Colo.) Medical Supply; Premium Health Services, Columbia, Md.; PRN Pharmaceuticals, Rockville, Md.; and Reliance Wholesale, Miami.

    Cummings said in the letters that he is concerned the companies are engaging in “drug speculation.”

    “It's just not true,” said Steven Greenwald, CEO of PRN Pharmaceuticals. Greenwald said because PRN has to buy drugs at higher prices—PRN does not purchase from the large wholesalers—it also has to sell its products at a higher rate than hospitals and pharmacies typically pay.

    A statement from Allied Medical Supply said the company will cooperate with the investigation and that it plays “a vital role” in ensuring hospitals and patients get the drugs they need.

    Several solicitations sent to hospitals show that some distributors have offered drugs in short supply at substantially higher prices that what a hospital may receive on contract with its wholesaler. The number of drug shortages, which has steadily increased since 2006, is on track to exceed 280 this year.

    An offer provided by a hospital pharmacist to Modern Healthcare shows that Premium Health Services charged $277 for acetylcyst, a mucolytic used to thin mucus secretions in the lungs and bronchial tubes, which has an average wholesale price of $19.56.

    A solicitation sent by Superior Medical Supply to another hospital priced doxorubicin, a chemotherapy drug, at $125 per vial, as compared with the hospital's contracted price of $25.48.

    In 2008, Superior Medical Supply agreed to pay $200,000 to the DEA to settle allegations that it violated the Controlled Substances Act by keeping incomplete records and selling large quantities of hydrocodone to retail pharmacies and failing to report the orders. The company denied the allegations. Earlier this year, the Tennessee Board of Pharmacy deferred granting a license to Superior Medical Supply in the wake of additional allegations made by California's pharmacy board.

    Calls to Superior Medical Supply and Reliance Wholesale were not returned.

    Dan Herlihy, owner of Premium Health Services, said in an e-mailed statement that he has met with Cummings' staff on several occasions, in part because of the company's efforts to enact a federal pedigree law. “I look forward to meeting Congressman Cummings to highlight the inefficiencies that have led to the shortages we are facing,” Herlihy said. “That would include the role of the GPOs and their effect on industry pricing and product availability.”

    A chief complaint among secondary distributors is that they are required to provide drug pedigrees that track the purchase of a drug. The requirement does not extend to wholesalers and authorized distributors of record.

    Generally, pharmacists say that distributors do not provide information about where they obtain drugs, unless they are operating within a state that has a pedigree law (Oct. 3, p. 14). Secondary distributors purchase drugs from a number of sources, including manufacturers, other wholesalers, hospitals, pharmacies and physicians offices.

    “These are the kinds of things that you hope the manufacturer and the authorized distributors are monitoring,” Cohen said.

    Some companies, such as Superior Medical Supply and Premium Health Services, are authorized vendors for Hospira. Superior is also authorized to work with Merck. But concerns about price-gouging have led some manufacturers to sever connections to secondary distributors.

    Hospira and APP Pharmaceuticals have said they cut ties with distributors involved in the gray market. An APP Pharmaceuticals spokeswoman said in an e-mail that the company recently informed seven companies suspected of gray-market activity that it will no longer work with them.

    “In a further attempt to prevent its products from being distributed by gray-market re-sellers and to discourage price gouging of drugs currently on shortage, APP Pharmaceuticals sells to authorized wholesalers and distributors,” said spokeswoman Debra Lynn Ross. “In addition, healthcare facilities that purchase direct from APP must go through the company's account approval process and continue to be in good standing with each order placed.”

    A 2007 news report found that about 5,500 wholesalers made up an estimated 5% to 10% of the drug distribution market, while McKesson Corp., Cardinal Health and AmerisourceBergen Corp. controlled about 90% to 95% of the market.

    At the state level, more attention is paid to regulating secondary distributors. State boards of pharmacy are responsible for licensing distributors in states where the companies are headquartered and in states where they ship products. In California, there are 1,225 licensed wholesalers, including those based in the state and those with headquarters outside of California. The number also includes large wholesalers with multiple facilities within the state.

    Of the estimated 5,500 wholesalers in the U.S., fewer than 500 have been accredited by the National Association of Boards of Pharmacy's Verified-Accredited Wholesale Distributors program.

    Few of the 482 accredited wholesale distributors are secondary distributors, says Carmen Catizone, executive director for the NABP.

    Three of the five distributors that received letters from Cummings are not listed as VAWD-accredited. PRN Pharmaceuticals is accredited, under the name Premium Rx National, while Reliance Wholesale is cited as “reaccreditation in process,” according to the program's website.

    Letter
    to the
    Editor

    Send us a letter

    Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

    Recommended for You
    Momentum grows to outsource hospital tech functions in 2021
    Momentum grows to outsource hospital tech functions in 2021
    5 things to know about Google's $2.1B Fitbit acquisition
    5 things to know about Google's $2.1B Fitbit acquisition
    Sponsored Content
    Get Free Newsletters

    Sign up for free enewsletters and alerts to receive breaking news and in-depth coverage of healthcare events and trends, as they happen, right to your inbox.

    Subscribe Today

    The weekly magazine, websites, research and databases provide a powerful and all-encompassing industry presence. We help you make informed business decisions and lead your organizations to success.

    Subscribe
    Connect with Us
    • LinkedIn
    • Twitter
    • Facebook
    • RSS
    • Instagram

    Stay Connected

    Join the conversation with Modern Healthcare through our social media pages

    MDHC_Logotype_white
    Contact Us

    (877) 812-1581

    Email us

     

    Resources
    • Contact Us
    • Advertise with Us
    • Ad Choices Ad Choices
    • Sitemap
    Editorial Dept
    • Submission Guidelines
    • Code of Ethics
    • Awards
    • About Us
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Modern Healthcare
    Copyright © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • News
      • This Week's News
      • COVID-19
      • Providers
      • Insurance
      • Government
      • Finance
      • Technology
      • Safety & Quality
      • People
      • Regional News
        • Midwest
        • Northeast
        • South
        • West
      • Digital Edition
    • Insights
      • ACA 10 Years After
      • Best Practices
      • InDepth Special Reports
      • Innovations
    • Transformation
      • Patients
      • Operations
      • Care Delivery
      • Payment
    • Data/Lists
      • Rankings/Lists
      • Interactive Databases
      • Data Points
    • Op-Ed
      • Bold Moves
      • Breaking Bias
      • Commentaries
      • Letters
      • Vital Signs Blog
      • From the Editor
    • Awards
      • Award Programs
        • 100 Most Influential People
        • 50 Most Influential Clinical Executives
        • Best Places to Work in Healthcare
        • Health Care Hall of Fame
        • Healthcare Marketing Impact Awards
        • Top 25 Emerging Leaders
        • Top 25 Innovators
        • Top 25 Minority Leaders
        • Top 25 Women Leaders
      • Nominate
      • Previous Award Programs
        • Excellence in Nursing Awards
        • Design Awards
        • Top 25 COOs in Healthcare
      • Other Award Programs
        • 100 Top Hospitals
        • ACHE Awards
    • Events
      • Conferences
        • Leadership Symposium
        • Healthcare Transformation Summit
        • Women Leaders in Healthcare Conference
        • Workplace of the Future Conference
        • Strategic Marketing Conference
        • Social Determinants of Health Symposium
      • Galas
        • Best Places to Work Awards Gala
        • Health Care Hall of Fame Gala
        • Top 25 Minority Leaders Gala (2022)
        • Top 25 Women Leaders Gala
      • Webinars
      • COVID-19 Event Tracker
    • Listen
      • Podcast - Next Up
      • Podcast - Beyond the Byline
      • Sponsored Podcast - Healthcare Insider
      • Video Series - The Check Up
      • Sponsored Video Series - One on One
    • MORE +
      • Advertise
      • Media Kit
      • Newsletters
      • Jobs
      • People on the Move
      • Reprints & Licensing