Editorial: Regulators go after gray market in drugs

Tuesday, Oct. 23, 2001 | 8:33 a.m.

In 1987 Congress passed legislation that prevents pharmacies, hospitals and physicians from selling their drugs to wholesalers. Exempted from the law, however, were the so-called "closed-door pharmacies" that provide prescription drugs for medical facilities. This means that these suppliers can divert drugs, some intended for nursing homes, and instead sell them to other wholesalers. From there the drugs can go anywhere, and even end up on the shelves of retail drug stores. Regulators say that not only do these medicines sometimes fetch higher prices at retail pharmacies than they should, but they also may not be taken care of properly -- such as a wholesaler's failure to store them at safe room temperatures -- which can harm a drug's potency.

Last week the Nevada Board of Pharmacy took action to close the loophole, which has created a gray market for drugs. Under the Board of Pharmacy's decision, which makes Nevada the first state in the nation to impose such restrictions, drug wholesalers won't be able to sell more than 10 percent of their inventory to other wholesalers, a curb the board believes will put a dent in the gray market. Nevada's action was warranted, but it can only go so far. Companies hurt by the regulation simply will pick up and move to other states where this remains legal. Ideally, other states would follow Nevada's lead, but this could take years, if not longer, to become a reality. Ultimately, Congress should pass legislation that will make sure that the medicine is cared for properly and ends up in the right hands.

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