Fake Pharmacies and Drug Shortages

Last October, Congress began investigating where secondary wholesalers got access to products in short supply. See Congress Asks Where Gray Market Drugs Come From.

Yesterday, we learned one possible explanation—at least three small wholesalers set up fake pharmacies to purchase drugs, and then resold the heavily marked-up drugs as a gray market vendor. Yikes!

While we don’t have all the facts, I wonder: were the state boards of pharmacy asleep at the wheel? Read on for more on this latest diversion scandal by shady secondary wholesalers.

BLURRING THE BOUNDARIES

Here’s the summary from Congress’ Gray Market investigation website:

Rep. Elijah E. Cummings, Ranking Member of the House Committee on Oversight and Government Reform, Senator John D. Rockefeller, Chairman of the Senate Committee on Commerce, Science, and Transportation, and Senator Tom Harkin, Chairman of the Senate Committee on Health, Education, Labor, and Pensions, sent letters requesting documents from licensed pharmacies that are buying up drugs that are desperately needed to treat cancer and other illnesses and are in critically short supply, and are selling these drugs back into the gray market instead of providing them to patients who need them.

This picture shows how the game is played:

Letters were sent to three pharmacy/wholesale combinations:

• LTC Pharmacy and International Pharmaceuticals 
• Priority Healthcare and Tri-Med America (Note: This is NOT the same Priority Healthcare that was acquired by Express Scripts in 2005.)
• Columbia Med Services and Columbia Medical Distributors 

Apparently, 19 more pharmacies will get letters soon.

WHERE WERE THE PHARMACY BOARDS?

This latest scandal echoes the “phantom pharmacy” phenomenon (PPP)—“empty store fronts, apparently without customers, that nonetheless billed millions of dollars to private insurers.” See Phantom Pharmacies: Glad they get paid promptly! However, the newly-identified fake pharmacies were focused on diversion, not on fraudulent reimbursement.

The FDA has no direct influence on wholesale or pharmacy licensing. Each state board of pharmacy has the authority to license, control, and regulate any establishment or person that distributes, manufactures, or sells drugs in that state.

So, how exactly did these “fake pharmacies” get licensed? Why were wholesale operations permitted to get pharmacy licenses at the very same address? What happened to physical inspections that would have immediately spotted the problems?

Last August's Drug Shortages and Gray Market Profiteering led to a bunch of whining comments—anonymous, of course—about how I pick on hard-workin’, honest secondary wholesalers. Whatever. Perhaps secondary wholesalers will now start to see why no one trusts them.