Cardinal latest wholesaler to curb secondary dealing

Drug Store News,  May 23, 2005  by James Frederick

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Following Spitzer's subpoena, Kilpatric said Amerisource-Bergen is cooperating with the New York governor's office and providing them materials."

Moves by Spitzer and other regulators to shed light on the secondary market for drugs are part of a broader effort among states and regulatory agencies to tighten the pharmaceutical supply chain and crack down on illegitimate or counterfeit drugs. In fact, Florida, Indiana and other states are adding or considering new laws that require pharmaceutical wholesalers and retailers to document--either by paper or an electronic trail--the pedigree of every prescription drug distributed and sold in the state.

At this point, Spitzer's investigation of secondary-market drug supplies seems to be confined to the Big Three wholesalers. Henry "Dale" Smith Jr., president and chief executive officer of HD Smith Wholesale Drug Co. in Springfield, Ill., told Drug Store News that despite the company having customers in New York state, "We have not received a subpoena to my knowledge. I think [Spitzer's] focus is on the larger companies.

"As the secondary market goes, there are certainly legitimate reasons for products to be sold other than from the manufacturer--overstocks, specials that people get from time to time, promotional allowances," said Smith.

HD Smith, like its larger counterparts, does take advantage of those opportunities, but doesn't operate a formal trading division. "We do have sales people who sell to chains," Smith explained. "A company like ours is not going to be a full-line provider to some of the large chains, but there are certain items that we will price to them more aggressively than our larger competition.

"Part of the reason for that is the pricing in the wholesale business is not even, and the same margin is not applied to all items," he added. "There are certain items within contracts that the larger wholesalers have with the chains where frankly they're making more margin than they need to be to offset losses in other areas."

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