The ongoing shortages of needed meds is, not surprisingly, attracting gray marketeers. Consider that the average mark-up for drugs in short supply was 650 percent and the biggest price hike was 4,533 percent for the Labetalol high blood pressure med, which normally sells for $25.90, but fetched $1,200, according to a survey by the Premier buying cooperative for hospitals.

The shortage problem is causing a stir nationwide as doctors and hospitals grapple with insufficient supplies, particularly of cancer drugs, and subsequent medication errors. The University of Utah Drug Information Service reported a record high of 180 shortages during the first half of 2011. Premier reports that more than 240 drugs were either in short supply or completely unavailable, and more than 400 generic versions were back-ordered for five or more days between last July 1 and December 31.

The reasons for the ongoing shortages are largely traced to consolidation among generic suppliers, since many of the meds are made by rather few manufacturers, and increased enforcement of manufacturing standards by the FDA. A Boehringer Ingelheim unit that supplies other drugmakers last week disclosed plans to leave contract manufacturing after Canadian regulators banned some of its meds following ongoing problems (see this and this).

However, the gray market has been exacerbating the problem, which federal officials believe may be mitigated by creating a national stockpile. Unfortunately, higher prices do not automatically prompt other drugmakers to enter a market where meds are difficult and expensive to produce. Besides, additional competition could mean that prices might start falling again.

In its survey, Premier collected 1,745 unsolicited gray market sales offers in April and May from 42 acute care hospitals. Of the offers, Premier analyzed 636 that contained both price and proper drug identification information, or NDCs. The offers were for 416 drugs with the highest mark-ups seen for critical care sedation and surgery; emergency care; chemotherapy; and fighting infectious disease.

Off the mark-ups offered, 96 percent, or 611 were at least double the normal price; 45 percent, or 288, were at least 10 times the normal price; and 27 percent, or 171 were at least 20 times normal price. In other cases, offered mark-ups were as high as 3,980 percent for chemotherapy meds to treat leukemia and non-Hodgkin’s lymphoma; 3,170 percent for meds to help cancer patients retain bone marrow; 3,161 percent for sedation meds for surgeries; 2,979 percent for meds to dilate veins and prevent brain or heart spasms; and 2,642 percent for meds to prevent damage during a heart attack.

Looked at another way, the average mark-up imposed by the vendor with the largest number of drugs available - 118 - was 757 percent. Another vendor with 109 drugs charged an average mark up of 391 percent. The marketing offers, by the way, were often made in the form of emails and fliers that contained language such as: “We only have 20 of this drug left and quantities are going fast,” according to Premier (here is the analysis).

pic thx to joguldi on flickr