Gray Clouds Imperil Drug Firms

"The best Bergen can do in its dealings, negotiations and contractual arrangements with suppliers is to insist on and require compliance with all laws," Nicholes Ghnouly, legal counsel for what was then known as Bergen Brunswig, wrote to Florida health officials at the time. "Anything beyond that, which requires Bergen to actively police its suppliers and actively monitor their compliance with such laws, is administratively prohibitive."

The company then went on to argue that it would need to hire "numerous personnel whose sole task would be to do nothing other than sit in front of a computer all day," checking out other suppliers, in order to comply with the law.

Katherine Eban, author of Dangerous Doses: How Counterfeiters Are Contaminating America's Drug Supply, finds such claims ironic. After all, she points out, the giant drug distributors have always insisted that they purchase just a fraction of their drugs from the secondary wholesalers they would be expected to monitor.

The Florida grand jury has attacked the industry's argument as well.

"The industry puts forth the assertion that verifying and passing on pedigree papers would be so costly and time-consuming that their operations would cease or they would go bankrupt," the grand jury states in its 2003 report. "We believe this claim is absurd. ... If oyster harvesters and metals recyclers can do what is required of them, then we believe that drug wholesalers -- who handle approximately $93 billion of pharmaceutical products nationally -- can come up with a methodology to authenticate the products they are buying and selling."

Back Door

In the meantime, however, giant drug distributors continue to trade in the secondary market without that extra documentation.

AmerisourceBergen offered its reasons for doing so in an April regulatory filing that disclosed Spitzer's investigation. The company said that it purchases drugs from alternative sources when the drugs are in short supply -- "and, in some cases, to improve its margin" -- but stressed that it deals with fewer than 20 licensed wholesalers that are required to obey its product integrity program.

Since that filing, competitor Cardinal has actually closed its secondary trading division. But critics stress that the company, nevertheless, continues to buy drugs in the secondary market. Cardinal didn't return calls seeking comment.