Congress releases results of gray market investigation - WTRF 7 News Sports Weather - Wheeling Steubenville

A joint investigation into "gray market" drug companies is complete, Sen. Jay Rockefeller, D-W.Va., announced July 25, and the results have been released.

Rockefeller, chairman of the Senate Committee on Commerce, Science and Transportation, has pushed for the investigation of gray markets, which raises health care costs. The investigation was launched by Rep. Elijah Cummings last fall. Staff from both the U.S. House and Senate conducted the investigation.

"There are some unscrupulous dealers who have found a way to make a quick buck at the expense of sick patients, hospitals and the entire health care system," Rockefeller said in a statement. "This isn't only bad for West Virginians, but for the whole country. These opportunists have figured out how to exploit the urgency of the health care system and buy short-supply drugs with their only intention being to resell the for a big profit. By the time the gray market has done its work, a cancer drug that originally cost $10 can cost $500 or even $1,000."

Rockefeller called the price gouging of life-saving drugs "disgusting and indefensible."

Key findings of the investigation include:

• Gray market drugs "leak out of authorized distribution chains. In more than 69 percent of the 300 drug distribution channels reviewed in the investigation, prescription drugs leaked into the gray market through pharmacies. Instead of dispensing drugs properly, these pharmacies re-sold the drugs to gray market wholesalers. Some pharmacies sold entire inventories into the gray market. The wholesalers then in turn sold the drugs, at significant markups, to other gray market companies.
• Gray market companies aggressively mark up drug prices. The markups in the distribution chain reflect the intent to take advantage of the demand for short-supply drugs by charging health care providers significantly higher prices. The drugs are marked up, sometimes to prices that are hundreds of times higher than the prices health care providers and hospitals typically pay.
• Gray market companies take advantage of drug shortages. During these drug shortages, hospitals are sometimes unable to buy drugs from their normal trading partners, usually one of three large national primary distributors. At the same time, they are deluged by sales solicitations from gray market companies offering to sell the same drugs, but at higher prices. Hospital pharmacists reluctantly pay gray market distributors for these life-saving drugs so they can treat patients.
• "Fake pharmacies" acquire prescription drugs from authorized distributors and sell them to the gray market. The investigation identified several businesses holding pharmacy licenses that appear to operate for the sole purpose of acquiring short-supply drugs that can be sold into the gray market.
• "Drug brokers" recruit pharmacies to purchase drugs for the gray market. Some gray market wholesales gain access to shortage drugs by engaging third-party brokers to recruit pharmacies to act as their purchasing agents.
• Gray market business practices are widespread. Pedigree and price information collected for five different short-supply injectable drugs found similar patterns of leakage and aggressive price markups. For the five drugs, units normally costing $10 to $20 were marked up to prices of $200 or more while they traveled through the gray market system.
• Gray market drugs are marked up quickly as they pass from owner to owner. On average, the prescription drugs reviewed in the investigation were owned by three or four different gray market businesses before being sold to a hospital. Most of the drugs traveled through the gray market in five days or fewer.
• Gray market companies sometimes charge hospitals different prices for the same drug on the same day. On the same day, for example, a gray market company sold a drug to a U.S. military hospital for $315 per unit then sold the same drug to another hospital for $215 per unit.

The report can be found on the Senate Commerce Committee's website at http://commerce.senate.gov.