By Rich Gardella and JoNel Allecia, msnbc.com
As patients in the U.S. struggle with ongoing shortages of critical prescription drugs, federal lawmakers are investigating so-called “fake pharmacies” that they say are trying to turn a profit by buying and reselling scarce medications.
When cancer patient Jay Cuetara, 50, of San Francisco arrived for a scheduled chemotherapy treatment last August, his infusion nurse told him one of his prescriptions, an injectable form of the drug fluorouracil, was out of stock.
“When my nurse told me that the drug wasn’t available, that I wouldn’t be able to do my chemo that day, I was literally shocked,” says Cuetara, who has stage IV rectal cancer. “How could this be happening in the United States of America?”
Cuetara’s experience is not uncommon. The number of drugs in shortage reached a record 267 in 2011, up from 211 the year before, according to the University of Utah Drug Information Service, which tracks the problem. Some of the drugs in shortage treat cancer and other life-threatening diseases.
At the same time Cuetara learned his chemo drug was out of stock, congressional investigators say, records show that a company called LTC Pharmacy, licensed as a pharmacy in Durham, N.C., was buying the same drug – fluorouracil – supposedly to fill its own patients’ prescriptions.
But when North Carolina regulators inspected LTC Pharmacy, they found what appeared to be just a shipping and receiving office – with no records, no dispensing equipment, no patients. Not even a pharmacist on duty.
Congressional investigators claim "fake pharmacies" are popping up around the country that purchase drugs in short supply, and then turn around and sell them at higher prices. NBC's senior investigative correspondent Lisa Myers reports.
“They had not dispensed any medications for a prescription,” said Bob Braswell, one of the inspectors who visited the company.
Suspicious, the inspectors opened an investigation and obtained prescription drug sales records, invoices and purchase orders, which they later shared with congressional investigators. The records showed that LTC Pharmacy was buying drugs – including some chemotherapy drugs in shortage – and then, sometimes on the same day, reselling them to a wholesale drug company called International Pharmaceuticals. That wholesale company, it turned out, was located at the same address as LTC Pharmacy, and was registered to the same individual.
The records showed that International Pharmaceuticals was then reselling the drugs to other companies, at higher prices.
According to Braswell, the records showed that approximately 26 percent of the drugs they were buying were in short supply.
Although the company was selling some drugs to health-care providers such as hospitals, Braswell told NBC News that it was reselling approximately two-thirds of the drugs it bought to other wholesale distributors.
Congressional investigators told NBC News and Reuters that all inspections and records showed that, although the company had applied for and received appropriate licenses, and although the wholesale part of the business was legitimate, the pharmacy was in fact a “fake.”
Rep. Elijah Cummings, D-Md., says the investigation he launched in October shows that so-called “gray-market” drug suppliers – sometimes operating as fake pharmacies – are reselling scarce medications at higher prices, while some hospitals and patients scramble for supplies. And making drug shortages worse.
“This is about greed,” Cummings, ranking member of the House Oversight and Government Reform Committee, told NBC News. “This is simply about greed, people wanting to make a quick buck at the expense of sick American people.”
Braswell’s supervisor, Dan Regan, director of the Food and Drug Protection Division of the North Carolina Department of Agriculture, told NBC News his office denied renewal of the International Pharmaceuticals’ wholesale license, effectively shutting it down in North Carolina. (It denied the renewal because of a rule violation. While International Pharmaceuticals had a wholesale license, LTC Pharmacy was reselling drugs without one.)
“We took it seriously enough to deny renewal of the license, Regan said. “That's about as significant as we can react.”
When NBC News reporters visited the building where LTC Pharmacy and International Pharmaceuticals had operated earlier this year – after the renewal of the license was rejected -- no one was there. A “for lease” sign stretched across one window. The interior space, glimpsed through blinds, appeared empty.
Documents filed with the State of North Carolina list Jessica Hoppe of Florida as president of both companies. A lawyer for Hoppe told NBC News that she is a smart businesswoman who is “helping, not hurting” the drug shortage problem by enabling medical facilities to get medications to their patients more quickly.
This spring, however, Hoppe acknowledged that she and her partners “decided to close” International Pharmaceuticals and that the company had “ceased operations” as of the end of last year. Her statements came in a letter to the State of Texas’ licensing office, requesting that it cancel its wholesale drug distributor license for International Pharmaceuticals. Congressional investigators released the letter, dated in March, a few weeks ago.
Congressional investigators say LTC Pharmacy is not an isolated case. They say they’ve found what appear to be fake pharmacies around the country, buying up medicines in short supply and then selling them at a profit.
“It’s definitely making the shortages worse," Cummings said.
Recently, two Senate committees – the Committee on Commerce, Science, and Transportation and the Committee on Health, Education, Labor, and Pensions – joined in Cummings’ investigation and are also making active inquiries.
In late May, Cummings introduced a bill H.R. 5853, the “Gray Market Drug Reform and Transparency Act of 2012,” to address the issues his investigation revealed. The bill “includes several provisions to address weaknesses in the drug supply chain, deter price gouging and improve drug safety and efficacy,” according to a statement from the House Committee on Oversight and Government Reform.
Meanwhile, the shortages of critical drugs continue. Cancer patient Jay Cuetara told NBC News this week that he is now experiencing new shortages of the drugs prescribed to treat his cancer. The same chemotherapy drug that was out of stock last summer, fluourouracil, is again unavailable, he said. And now another cancer-treating drug his doctor had prescribed, Leukovorin, is unavailable too.