Over a year ago drug wholesaler Cardinal Health announced it would stop trading drugs in the secondary market. Such trading was a lucrative sideline for Cardinal, offering the potential for much higher margins than the traditional wholesaling business. On the other hand it opened up the possibility of letting counterfeit drugs into the supply chain.
Recently, then New York Attorney General (now Governor) Eliot Spitzer settled a suit with Cardinal, which included an $11 million payment and additional changes in the company’s business practices. I heard about this from Attorney Eric Turkewitz, who represents counterfeit drug victim Tim Fagan. Some unsavory aspects of Cardinal’s conduct came out as a result of the suit. The upshot is that when Cardinal assessed the risks of secondary trading it focused too heavily on risks to its reputation and too little on the risks to patients.January 4, 2007