Published Online: Sunday, January 1, 2006

House Criminal Justice Subcommittee Chairman Mark Souder (R, Ind) put the blame on institutional pharmacies for encouraging "gray market" transactions in pharmaceuticals that may leave Americans vulnerable to dangerous counterfeit drugs. During hearings on the issue in Washington, DC, Souder said that "‘own use'pharmacies' at nursing homes or hospitals" are "primary sources for diversion" of pharmaceuticals today.

By agreeing to provide medication solely to their own patients, these institutional pharmacies are able to "acquire medication at a price much lower than wholesale," he said. "This opens the door to fraud," as some hospital and nursing home pharmacies obtain excess medication by overstating their patient populations, and then sell the surplus "at a higher price into the gray market." Citing World Health Organization estimates that 10% of global pharmaceutical commerce this year will be counterfeit, Rep Souder said gray market diverters were responsible for spreading these counterfeits to US pharmacies.

According to the FDA, "drug diversion was the entry point for every case investigated by that agency involving counterfeit drugs going into legitimate pharmacies," Souder told Congress. This creates "vulnerabilities that allow counterfeit or substandard drugs to end up in legitimate pharmacies" and could "expose this nation to devastating terrorist attacks through our medicines," he said.

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