Gray Clouds Imperil Drug Firms

Still, some question why the giant wholesalers -- trusted with roughly half of the country's drug supply -- expose themselves to the gray market at all. Critics of AmerisourceBergen, in particular, think they know the answer.

"The wholesale drug industry is run at high volumes with razor-thin 1% profit margins," states a shareholder derivative lawsuit, filed last year after AmerisourceBergen lost its biggest customer following a scandal involving the secondary market. But "if a large wholesaler like Amerisource can purchase drugs for less than the manufacturer's price on the gray market, the spread goes straight to the bottom line -- making the company appear more profitable in the short run but resulting in tremendous potential liability" in the end.

AmerisourceBergen's stock, which peaked above $80 the summer Fagan's son received contaminated drugs, plunged below $50 after the company lost its giant contract with the Veterans Administration two years ago. The stock has since recovered much of that ground, however, ending down 29 cents to $74.38 on Thursday.

Invisible Victims

Fagan's son, Tim, was supposed to receive a powerful and expensive form of the anti-anemia medicine Epogen following his liver transplant. But he claims he wound up with a tainted and far weaker version, re-labeled in the secondary market, instead.

Counterfeiters, charging thousands for boxes of weak Epogen that should have cost hundreds, clear millions through such deals.

"The drugs most commonly trafficked in by secondary wholesalers are some of the most expensive made today," a Florida grand jury wrote two years ago in a scathing report on the drug supply chain. And "the potential profits available to corrupt wholesalers rival those found in narcotics trafficking."

Fagan's son was lucky, surviving the ordeal. But his New York City attorney, Eric Turkewitz, believes that most victims fare much worse.

For one thing, Turkewitz explains, the victims unknowingly destroy evidence of a crime when they take their counterfeit medications and throw the containers in the trash. For another, he says, they face difficulties proving that the fake medicine hurt them -- if they even realize it -- because they are often sick with serious illnesses, such as AIDS or cancer, already.