FTC notes drug shortage, backs discount sales

The ongoing national drug shortage has reached such a critical state that the FTC has given a city-owned ambulance service permission to buy discounted pharmaceuticals from a local hospital as an “emergency humanitarian gesture,” even though such sales might potentially violate antitrust laws.

The Federal Trade Commission on Friday published a staff advisory opinion (PDF) that said the sale of certain bulk-discount drugs to Baytown EMS from Methodist Hospital System in Houston did not appear to violate laws prohibiting anti-competitive pricing of drugs because of a loophole in the law that allows such sales during crises.

Normally, the federal Robinson-Patman Act prohibits sellers from discriminating in how they set prices for different buyers if those decisions affect competition among the buyers. However, Methodist has proposed selling the drugs at the discounted price it gets through its group-purchasing organization until the drug shortage ends.

A July 25 letter to FTC from Methodist counsel Dionne Lomax (PDF) did not specify which drugs would be sold, but offered a legal reasoning that such sales would be legal under an exception to Robinson-Patman known as the Non-Profit Institutions Act (NPIA).

FTC staff members concluded that previous U.S. Supreme Court rulings and commission advisories would permit the sales “during a time of nationwide shortages of certain critical drugs,” regardless of Methodists' reasoning on the NPIA exception.

“Methodist's proposal, as presented, appears to be a permissible emergency humanitarian gesture,” the FTC staff opinion says. “We provide this opinion, under these unique circumstances of critical drug shortages, in an effort to provide reassurances that may be helpful to entities in their efforts to cope with the current drug shortages.”

The total number of active drug shortages has increased over the last year although the number of newly reported drug shortages has decreased. There were 282 drugs shortages in the third quarter of this year, compared to 256 in the third quarter of 2011, according to the University of Utah Drug Information Service (PDF). New shortages fell to 158 in the third quarter of this year from 267 in 2011.