Dr. Marvin Shepherd: Grey Market Vendor Activities and Drug Shortages in Texas Acute Care Hospitals


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Dr. Marvin Shepherd: Grey Market Vendor Activities and Drug Shortages in Texas Acute Care Hospitals

  1. 1. ―Grey Market‖ and ―Opportunistic‖ Vendor Activities and Drug Shortages in Texas Acute Care Hospitals Marv Shepherd, Ph.D. President Partnership for Safe Medicines and Director Center for Pharmacoeconomic Studies College of Pharmacy University of Texas at Austin Email: marvshepherd@austin.utexas.edu
  2. 2. The focus of this research was to explore a possible source of diverted drugs— hospital pharmacies. As we know the counterfeit drug trade is directly linked to the diverted drug trade, when drug diverters have used falsified drugs to meet their supply issues. Diverted drugs may be expired, diluted, contaminated, stored under the wrong conditions (excessive heat, shaken or shock, exposed to sunlight, extreme cold temperatures) or relabeled with wrong information.
  3. 3. Definition of Prescription Drug Diversion    Prescription drug diversion is the unlawful removal of an approved pharmaceutical product from the legal distribution system and subsequent distribution to an illicit market place. Diversion can occur anywhere in the legal chain of distribution from pharmaceutical manufacturer, drug packager, transporter, wholesaler, to the retail pharmacies, clinics and hospitals or the patient. Diverted pharmaceuticals can be distributed to legal and illegal markets.
  4. 4. A group of wholesalers and 23 people have been accused of generating $605 million in sales from 2007 through 2011 in selling diverted prescription drugs NOT approved by FDA to chain and independent pharmacies in Detroit Miami, New York, Los Angeles, and Washington DC. The press release stated, “There was evidence that the drugs were expired and had counterfeit labels, some with incorrect dosages.‖
  5. 5. Some of the drugs listed were Advair®, Celebrex®, Lipitor®, Nasonex®, Valtre x® and Viagra® and drugs to treat HIV, cancer and depression, according to an indictment. The indictment stated: “The pedigrees falsely stated the drugs were obtained from authorized distributors when they actually originated from a network of unlicensed suppliers based mostly in California and New York.”
  6. 6. The indictment listed 61 charges against 23 individuals including three wholesalers. The majority were unlicensed suppliers to three Puerto Rico wholesale operations and one Arizona wholesaler. The indictment stated the unlicensed suppliers usually obtain diverted pharmaceuticals by buying pills from patients, from “closed-door” pharmacies or by putting fake labels on expired drugs (drugs from reverse distributors).
  7. 7. The indictment lists the diverted drugs came from: 1.“Rozemberg Group‖ network of suppliers ( California Pharmaceutical Specialist, Infinite Health Wholesaler, Global Health Advocates). Falsely stated pedigree came from McKesson. Products came from various sources. Sold $69 million diverted drugs. Only one in the group had a CA license and it was temporary. 2. RTL Health Source, Hawaii Conducted business w/o a license in CA. Falsely stated pedigrees came from H.D. Smith, McKesson and AmerisourceBergen. Sold $91 million diverted drugs. 3. EMED Medical Products, Missouri license—Distributed product in CA w/o a license. Obtained products from Rozemberg Group and other groups, unknown sources. Sold million diverted drugs. $21
  8. 8. 4. BowRX Inc. and Oahu Wholesalers BowRx licensed in New Hampshire, Oahu licensed in Hawaii. Both shipped drugs from a UPS store in CA w/o a license. Drug source unknown. Sold $34 million diverted drugs 5. Arbudol Corp, Columbus Wholesale and Cimax Corp. Located in MD and PA. Shipped drugs w/o license from UPS stores in New York City. Sold $169 million diverted drugs to DDLL and LLC.
  9. 9. That’s a lot of “buy backs” from consumers, acquisitions of expired drugs and buys from “closed door” pharmacies. However, from the FBI news release on Monday (10-21-13) which names 48 people allegedly involved in a massive consumer Medicaid drug buy back program, I now consider ―buy backs‖ a major source.
  10. 10. Source: http://www.fbi.gov/newyork/press-releases/2012/manhattan-u.s.-attorneyannounces-charges-against-48-individuals-in-massive-medicaid-fraud-schemeinvolving-the-diversion-and-trafficking-of-prescription-drugs
  11. 11. Initially what gained my interest with the Puerto Rico Case was the acquisition of drugs from ―closeddoor‖ pharmacies. Also, the total amount of diverted drugs being supplied was startling– extraordinarily high at $400 million in product cost.
  12. 12. What is a closed-door pharmacy? A closed-door pharmacy is one that usually does not provide pharmaceuticals to “walk-in” patients such as a community pharmacy. Most common “closed-door” pharmacies are: Hospital Inpatient Pharmacies which only dispense to inpatients. Plus it is illegal for these pharmacies to compete with community pharmacies due to their huge discounts. Pharmacies which are only dedicated to longterm care facilities.
  13. 13. The indictment did not delineate the proportion or amounts by source: ―closed-door‖ pharmacies, ―buy-back‖ drugs from patients or expired drugs obtained from reverse distributors.
  14. 14. So where do diverted drugs come from?
  15. 15. Drug Sources for Gray Market Diverters Drugs intended for export to charitable foreign missions Counterfeit drugs Special priced drugs obtained illegally from closed pharmacies, hospitals, p hysician offices Stolen drugs Unauthorized or foreign source distributors/ Internet operations ―Gray Market‖ Diverted Drug Distributors Closed-door pharmacies Drug samples ―Buy-Back‖ drugs from consumers Medicaid, Medicare, 3rd party patients Repackaged foreign drugs
  16. 16. Stolen drugs may be a source. However, when you examine U.S. major cargo pharmaceutical thefts, the totals are relatively small compared to $400 million. In 2013, pharmaceutical cargo drug theft is estimated tol be close to $3.5 million and this is a record setting year. FYI, we have already had over 56 cargo thefts.
  17. 17. To reiterate, it was the ―closed-door‖ pharmacies, specifically inpatient hospital pharmacies that interested me. To what extent are hospitals a supplier for diverted drugs? My graduate student, Tawfik Rabid, and I conducted a study on how acute care Texas hospitals manage drugs in short supply. So I added a couple questions to the questionnaire to explore the buying and selling by “opportunistic” wholesalers which may be “grey market” vendors.
  18. 18. These results are preliminary and we are still exploring the data, but I believe you will find it most interesting. A total of 313 Texas acute hospital pharmacy directors were surveyed. We received 125 completed questionnaires (39.84%).
  19. 19. Responses to: ―In regard to your facility, have hospital pharmacy staff been contacted by ―grey market vendors‖ or ―opportunistic‖ vendors in the last month (April 2013)?‖ N= 2 1.6% N=16 12.8% Yes No N=107 85.6% Don't Know
  20. 20. Number of times ―grey market‖ vendors contacted the hospital pharmacy personnel in the last month (April, 2013), (N=73) Number of Frequency (%) times Number of Frequency (%) 14 1 (1.4%) times 15 2 (2.7%) 1 1 (1.4%) 20 6 (8.2%) 2 1 (1.4%) 22 1 (1.4%) 3 7 (9.6%) 25 3 (4.1%) 4 7 (9.6%) 30 2 (2.7%) 5 8 (11.0%) 35 1 (1.4%) 6 5 (6.8%) 45 1 (1.4%) 7 1 (1.4%) 50 2 (2.7%) 8 2 (2.7%) 80 1 (1.4%) 9 2 (2.7%) 100 4 (5.5%) 10 11 (15.1%) 200 1 (1.4%) 11 1 (1.4%) Total 73 (100%) 12 2 (2.7%)
  21. 21. How often hospital pharmacy staff were contacted by grey market or opportunistic vendors for the purpose of SELLING their drugs. Times Contacted Daily Number Percent 57 53.3% Weekly 43 Monthly 5 Less than once 2 a months 40.2% 4.7% 1.9%
  22. 22. When asked if their hospital was contacted by ―grey market vendors‖ to try to BUY drug from the hospital, a total of 82 pharmacy directors indicated ―no‖ they were not contacted to sell their drug inventory.
  23. 23. However, 25 respondents (23.4%) indicated ―yes,‖ ―grey market‖ vendors contacted them to BUY pharmaceuticals from the hospital.
  24. 24. How often hospital pharmacy staff were contacted by such vendors for the purpose of BUYING drugs from the hospital. Times Contacted Number Percent Weekly Daily Monthly 5 8 3 20.0% 32.0% 12.0% Less than monthly Total 9 36.0% 25 100.0%
  25. 25. Admittedly, the results were startling. If 25% of vendors are contacting hospitals to buy drugs from hospitals, then it seems obvious that some hospitals must be selling pharmaceuticals to vendors. To legally do this in Texas, the hospital must have a wholesale license. I contacted the Texas Drug Wholesaler licensing group and found that the number is extremely low—only in special cases does a hospital have a wholesaler license.
  26. 26. Illegal Wholesaler Collusion with Hospital Secondary Wholesaler Wholesaler approaches the hospital to buy more drugs than needed from manufacturer. Wholesaler pays the hospital, and diverts the drug to the retail market or other markets. Drug Manufacturer Primary Wholesaler Distributors--Includes Regional Wholesalers Hospital Community Pharmacy
  27. 27. The most popular methods these vendors used to contact the hospital staff was by telephone, followed by email. Fax was used infrequently. U.S. mail and personal visits were seldom used.
  28. 28. Further analysis revealed that there was: 1. No statistical significant association between size of hospital (number of beds) and number of contacts hospital received from these vendors. 2. No statistical significant association between type of hospital ownership (Non-chain versus chain hospital) and number of contacts by these vendors. 3. No statistical association between location of hospital (rural, small city, and large metropolitan area) and number of contacts by these vendors. These vendors are NOT choosy about whom they solicit.
  29. 29. Numbers of times hospital pharmacy personnel were contacted by vendors controlling for facility size (N = 73) Facility Size Number of Grey Market Contacts Total (%) 1 - 10 Greater than 10 22 68.8% 10 31.3% n Row % 12 63.2% 7 36.8% Greater than n 250 beds Row % 11 50.0% 11 50.0% (100%) 45 28 73 (61.6%) (38.4%) (100%) Less than 100 n beds Row % 100 – 250 beds Total (%) Chi-Square Test: 2 = 1.963, n = 73, df = 2, p = 0.375 32 (100%) 19 (100%) 22
  30. 30. Numbers of times hospital pharmacy personnel were contacted by vendors controlling for the facility type (N = 73) Facility Type Number of Grey Total Market Contacts (%) 1 - 10 Greater than 10 Non – n 22 18 40 Chain Row % 55.0% 45.0% (100%) Hospitals Chain n 23 10 33 Hospitals Row % 69.7% 30.3% (100%) Total (%) 45 28 (61.6%) (38.4%) 73 (100%) Chi-Square Test: 2 = 1.652, n = 73, df = 1, p = 0.199
  31. 31. Numbers of times hospital pharmacy personnel were contacted by grey market vendors controlling for the facility location (N = 73) Facility Location Rural/Semi- n Urban Row % Small/Mediu m Metropolitan Large Metropolitan Number of Grey Market Contacts 1 - 10 Greater than 10 11 10 52.4% 47.6% Total (%) 22 (100%) 21 75.0% 7 25.0% n Row % 13 54.2% 11 45.8% (100%) 45 28 73 (61.6%) Total (%) n Row % (38.4%) (100%) Chi-Square Test: 2 = 3.442, n = 73, df = 2, p = 0.179 28 (100%) 24
  32. 32. Although we have more data to examine, the fact that 25% of the acute care Texas hospitals were contacted by ―grey market,‖ or ―opportunistic‖ vendors to BUY pharmaceuticals from the hospitals was revealing. I do not believe the size of this market is extremely large, but I do believe that it exists and needs to be monitored.
  33. 33. It is time for me to mosey on back to my chair. Thanks for attending the Interchange and for your attention. Glad I had the opportunity to share some of research. Thanks so much, Marv Shepherd