Flu-Shot Firms Subpoenaed in Price-Gouging Inquiry

Times Staff Writer

The state attorney general’s office subpoenaed three Southern California flu-shot distributors Friday as part of an investigation into possible price gouging by companies selling the scarce vaccine.

The subpoenas seek information about flu vaccine sales and pricing from San Diego-based Dubin Medical Inc., Nationwide Medical Surgical Inc. of Van Nuys and Laguna Hills-based Advanced Medical Sales.

None of the companies was charged with any wrongdoing, although Dubin Medical already is facing a lawsuit in Texas over alleged price gouging.


The attorney general’s office had not received complaints of improper pricing by any of the firms that were subpoenaed, said Tom Dresslar, a spokesman for Atty. Gen. Bill Lockyer.

“We believe the information these distributors will provide ... will help us understand how this market is working and how prices are being set,” said Dresslar, who wouldn’t specify why the three firms were targeted. “We will not rush to court. But if we have a solid basis, Lockyer will swiftly and aggressively take action against gougers.”

None of the firms returned phone calls seeking comment.

Reports of vaccine price gouging have circulated since Chiron Corp. announced Oct. 5 that its flu-shot production for this year would be eliminated because of bacterial contamination at the company’s plant in Britain. That cut the U.S. supply almost in half and forced health officials to recommend the vaccine be given only to the elderly, children and others most at risk of getting sick.

In Southern California, the shortage has led to long lines at drug stores and clinics as worried residents, especially seniors, have tried to get vaccinated before the supply runs out. Businesses are worried that absenteeism could soar because of flu outbreaks this winter, while the Southland’s overburdened emergency rooms are bracing for a wave of virus victims.

Meanwhile, pharmacy directors in recent weeks have reported drug distributors offering to sell flu vaccine for as much as 10 times its usual cost of $70 to $80 for a 10-dose vial.

“Whenever there is a shortage of medicine, we see this,” said Dan Dong, pharmacy director for UC San Francisco Medical Center. “It’s like gasoline.”


It’s not always clear when corporate pricing practices cross the line from a savvy reading of the marketplace to illegal gouging.

In the medical world, a small number of distributors -- distinct from the giant wholesalers that typically sell to hospitals and pharmacies -- often buy up drugs on speculation that there will be a shortage. Their hope is that they can then turn a quick profit when demand outstrips supply.

“To one degree or another, they do this all the time,” said Bill Schaffner, chair of the department of preventive medicine at Vanderbilt University School of Medicine in Nashville. “But jacking up your prices is one thing. Taking advantage of a disaster is another.”

In a survey released by a trade group last week, more than half of the 677 U.S. hospitals that took part said they had been offered scarce flu vaccine at highly inflated prices since the Chiron crisis began.

Richard Carvotta, a pharmacy director at Los Robles Hospital and Medical Center in Thousand Oaks, told The Times that a distributor -- whom he declined to identify -- had offered a 10-dose vial of the flu vaccine for $800. But he told his staff, “Forget it.”

The reports of high-priced vaccine have drawn nationwide attention and, in some cases, action by authorities.


In its lawsuit against Dubin Medical, the Texas attorney general’s office alleged that the company and another firm offered flu vaccine for as much as $950 a vial and demanded cash on delivery. Dubin was accused of violating the Texas Deceptive Trade Practices Act and of committing fraud.

Last week, Kansas officials sued a Florida-based company for allegedly trying to sell flu vaccine in Kansas City at inflated prices.

Price gouging is not a federal offense and laws governing it vary from state to state. In California, price gouging is forbidden during a natural disaster or man-made emergency, such as a riot. Florida has a similar law.

In the current situation, profiteering drug suppliers could be prosecuted under state laws governing consumer protection and unfair business practices, Lockyer spokesman Dresslar said.

If the attorney general’s office were to uncover evidence of price gouging, a lawsuit could be filed seeking a preliminary injunction or temporary restraining order, he said. In addition, civil charges could be brought with potential fines of $25,000 for each instance of wrongdoing. Restitution also could be sought, Dresslar said.