Price gouging of chemo drugs hits some hospitals hard

As the cancer drug shortage drags on, some smaller hospitals and cancer centers across the United States say some suppliers are jacking up the prices of the lifesaving medications. 

Debbie Davis, the director of clinical operations at Pacific Cancer Care in Monterey, California, was in desperate need of more carboplatin, a chemotherapy drug that usually sells for around $50 a vial. 

The cancer center’s regular supplier of the drug, however, couldn’t keep it in stock, Davis said. 

Running out of options, Davis found that she could buy the carboplatin she needed from a different supplier — one she’d never worked with before. The problem was the price: The new supplier wanted $500 per vial, 10 times what she usually paid, she told NBC News.

After an unusual negotiation process, Davis ultimately chose not to make the purchase — the clinic couldn’t take on the extra cost.

“I was really devastated when this whole thing happened,” Davis said. “It was so disheartening to know that I wasn’t going to be able to provide my patients with the medication that they so desperately needed.”

Pacific Cancer Care isn’t the only center facing price hikes for lifesaving cancer drugs. 

NBC News spoke to seven hospitals and cancer clinics in the U.S. that said they are being asked to pay five to 10 times more for vital cancer drugs, putting patients at risk of losing access to the lifesaving treatments if the providers are unable to cover the marked-up cost. 

The culprits behind the price gouging, they say, are so-called gray market vendors who exploit drug shortages by buying desperately needed medications from distributors or pharmacies and then selling them to hospitals or clinics at inflated prices.

Eat the costs, if you can

Although the practice is not illegal, doctors warn it poses a significant risk of cancer patients not getting the treatments they need to live, especially if they are being treated at smaller hospitals or cancer centers that can’t afford the price hikes.

“Paying 10 times more for a lifesaving cancer drug, or any other drug — I don’t think it should be allowed,” said Dr. Lucio Gordan, a medical oncologist and president of the Florida Cancer Specialists and Research Institute, a network of clinics. 

In recent months, the institute has seen the price of carboplatin surge from about $29 to about $365, Gordon said. The price for another chemotherapy drug, cisplatin, jumped from around $39 to about $195.

These two drugs, essential for treating a number of cancers of the brain, throat, lung and ovaries, among others, have been in short supply for months, according to the Food and Drug Administration. 

Patients with insurance don’t necessarily see the price increase reflected in their medical bills, though in some cases, hospitals may bill more than the copay set by the insurance provider. 

But copayment amounts, and the amount that the hospital is paid by the insurance company, don’t change, even if the cost of the drug goes up, meaning the hospital is forced to eat the added cost. That means that if the agreed-upon reimbursement for a drug was $10, the hospital would receive $10 whether they bought the drug for $10 or $100. 

Larger hospitals can usually absorb this added cost, and while the costs of carboplatin and cisplatin may increase by 1,000%, the drugs are relatively inexpensive to begin with compared to brand-name drugs. 

For smaller hospitals and clinics, however, with limited negotiating power and serving patients with lower income levels and less insurance coverage, even a modest increase in drug prices can have a significant impact. If the added expense is beyond their means, providers may be forced to purchase fewer doses and ration what they have left.

The gray market

The pharmaceutical gray market is not a new phenomenon, according to Erin Fox, a supply chain expert and senior pharmacy director at the University of Utah. 

At the height of a drug shortage crisis in 2011, pharmacists at more than 200 hospitals reported receiving daily offers from up to 10 different gray market vendors to purchase medications that were no longer available through their manufacturer or usual wholesaler, according to a survey by the Institute for Safe Medication Practices, a nonprofit group. A 2012 report published by three congressional committees also highlighted how drugs can sometimes “leak” into gray market distribution networks.

Unlike the three major drug distribution companies in the U.S. — McKesson Corp., Cardinal Health and AmerisourceBergen Corp. — gray market vendors typically operate outside the regulations and industry standards for supplying drugs, Fox said. 

These vendors may get their products from unauthorized or unofficial channels, such as retail pharmacies or physician groups, she said, which can result in an increased risk of counterfeit or ineffective medications. They typically don’t keep very much product on hand, providing hospitals only a quick fix to their supply gap.

“They follow drug shortages lists very closely, and they will work to purchase products, sometimes from retail pharmacies, and then sell them at a markup,” Fox said. “It’s always there, and hospitals can choose to purchase or not.”

Jessica Daly, vice president for strategic sourcing at Premier, a group purchasing organization for hospitals, said about three-quarters of its members have seen price increases of 40% to 75% for cisplatin and carboplatin. Such increases are not uncommon during a shortage, she said.

“This is really just unfortunately indicative of the world we live in,” Daly said. Her organization will try to get involved when significant price challenges arise, she added, though that hasn’t happened for its members yet. 

In the meantime, hospitals and clinics will have to bear the burden of higher costs of lifesaving medications.

At Lake Region Healthcare Cancer Care and Research Center Fergus Falls, Minnesota, the price of cisplatin has doubled within the last month.

“We paid roughly $30 before for 100 milligrams and recently it was a little over $60,” said Renae Lien, the center’s pharmacy director.

What’s most disappointing is the impact on patients, she said.

“Not being able to treat patients, having to alter their doses, and I think that’s ultimately the most frustrating,” she said, adding that “luckily” the center hasn’t had to resort to those measures yet.

Other patients may not be so lucky, and may have to go to extreme lengths to get their medications.

Peggy Ashworth, 87, was diagnosed with ovarian cancer in early 2021. In February, her doctors informed her that because of the shortage, they would no longer be able to supply carboplatin. Instead, she would need to drive two hours from her home on Hilton Head Island, South Carolina, to the Medical University of South Carolina in Charleston to get her treatment.

On one occasion, she had to spend the night in a hotel to make an early morning appointment. 

“It seemed kind of unreal, to tell you the truth,” Ashworth said. “You just kind of wonder how in this day and age that can happen.”

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