Vendor Compliance

Drug Shortages, the Gray Market, and Vendor Credentialing

November 4, 2011 at 3:58 pm 1 comment

Discussion of drug shortages and the gray market is certainly rising.   And while the media frenzy may seem hyped, the storm has been brewing through most of this year.

The American Hospital Association released a survey in July of this year noting that a staggering 99.5% of all hospitals have experienced drug shortages in previous 6 months and 82% of them had to delay patient treatment due to these shortages.

On the heels of that, the Institute for Safe Medication Practices released a survey indicating that gray market vendors are soliciting 92% of hospitals.

In a gray market, vendors distribute through channels that while legal are unofficial, unauthorized, or unintended by the original manufacturer.  Typical prices of drugs in a gray market can exceed ten times the standard contract price.

The survey also noted that half of all hospitals had actually purchased from these gray market sources and 12% of respondents indicated some type of adverse reaction from using these products.

The combination of drug shortages, gray market vendors and reps working outside the system makes credentialing the pharmaceutical vendor company, distributors, and associated representatives critical.

An effective vendor credentialing program can help providers deal with some aspects of this situation.

1. Know your suppliers:  Use the company level information in your vendor credentialing program to highlight manufacturers and authorized distributors.  Identify Verified-Accredited Wholesale Distributor (VAWD).  Make this one of the credentials you track.  Try to restrict your purchasing to these sources.  Start reaching out to your distributor and manufacturer base now – before a shortage – to establish relationships that will help keep you from being surprise by shortages later.
2. Identify and track gray market rep activities:  Having reps register and sign in before visiting your clinicians or your buyers may be enough to put the brakes on aggressive sales actions.  At the very least, you’ll have more insight into the sources of gray market sales activities.
3. Run any gray market suppliers you do use through your vendor credentialing program before buying anything.  Credentialing at the corporate and rep level ensures the vendor is eligible to participate in federal reimbursement programs, is not on the FDA debarment list, the company is in good financial and legal health and that expectations for doing business with the health system have been properly set through policy presentment.
4. Reach out to your distributor and manufacturer base now – before a shortage – to establish relationships that will help keep you from being surprise by shortages later.  Stockpiling isn’t the answer.  Creating strong relationships with distributors and manufacturers during the good times will pay off during a crisis.

Entry filed under: Pharmaceuticals, vendor credentialing. Tags: drug shortage, gray market.