BLOOD BROKERS - AMERICA: THE OPEC
OF THE GLOBAL PLASMA INDUSTRY
THE BLOOD BROKERS; Fifth and last in a series.
Gaul, Inquirer Staff Writer, PHILADELPHIA INQUIRER; Thur. September 28, 1989
visit The Blood Brokers:
Part 1 - How Blood, The 'Gift of Life,' Became a Billion Dollar
Part 2 - The Loose Way The FDA Regulates Blood
Part 3 - Fear of AIDS Spurs Change
Part 4 - Red Cross: From Disaster Relief to
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UNKNOWN TO MOTHERS,
PLACENTAS COLLECTED FOR DRUGS
Each year, more than one million American women give a part
of their bodies to make valuable vaccines used throughout the world.
In return, they don't even get a thank you.
But these women - all of whom have just given birth - might
be surprised to learn that their "gifts" are part of a multimillion-dollar
business involving hospitals, brokers and an international conglomerate based near Paris.
The business: buying and selling placentas, the vital mass
of tissues that nourishes the fetus during pregnancy.
The maternal blood contained in placentas provides a
valuable source of plasma proteins used to make vaccines for rabies, as well as other
For one French company, Institut Merieux in Lyon, placentas
are an important source of income. The firm buys 15 tons of placentas a day - five million
placentas a year - and processes them into products sold in about 100 countries, including
the United States.
In 1987, the most recent year for which data were
available, Merieux reported profits of $35 million on sales of more than a half-billion
That year, more than 1.7 million pounds of frozen placentas
- 776 metric tons - were shipped from U. S. ports overseas, shipping records show. Most
went to Merieux.
A placenta weighs about one pound.
Merieux is by far the largest commercial company in the
world that uses placental blood plasma to make medicines. Its supplies come from hospitals
in 30 countries, including Canada, Cuba and the Soviet Union.
Sometimes Merieux pays hospitals for their placentas and
other times it negotiates a fee with agents operating on its behalf, according to
documents and interviews.
One such agent is R. P. International, a privately held
company in North Wales, Montgomery County. Shipping records show that in 1987 this firm
sent nearly 401,000 pounds of frozen placentas to Le Havre, France, for Merieux's facility
Roland Roth, the head of R. P. International, declined to
be interviewed. However, Henry Portner, an attorney representing the company, described
its operations this way:
"We are in essence the middle person between the
hospital and the manufacturer. We place freezer units at the hospitals and nurses at the
hospitals are given special instructions on how to take the placenta from the mother and
to place it in special bags in the freezer. At some point, we come . . . into the
operating room and acquire the placentas."
Portner would not say how much Roth's firm pays hospitals
for the placentas. "Honestly, I'm not sure. I know we're paid by Institut Merieux.
I'm assuming there is probably some payment," he said.
Jacques Francois Martin, Merieux's general manager, said it
was impossible to say what the company pays on average for placentas because the fee
varies according to location and transportation costs.
Dr. Arthur J. Shulthise, president of Bio-Med HU Inc., a
Louisville, Ky., company that also gathers placentas, said he pays hospitals "on the
basis of quantities and weights. We pay for the electricity and the space. It's basically
a remuneration for these things."
He declined to say how many placentas he purchases from
hospitals. However, records show his firm shipped more than 703,000 pounds of frozen
placentas overseas in 1987.
Shulthise said the placentas would probably be destroyed,
at a cost to the hospital, if they weren't sold to Merieux. By using them to make
medicines, Merieux is providing a valuable service, he said.
"It's still part of the human body. It still has
benefits and that's what we're interested in," Shulthise said.
Of course, Merieux makes a profit in the process. The
company's 1987 annual report notes that the firm sells vaccines, albumin and other
products in nearly 100 countries. About 50 percent of the company is owned by the French
conglomerate Rhone-Poulenc S. A.
Merieux occupies a unique niche in the worldwide market for
plasma medicines. Under French law, only the government's nationalized transfusion service
can collect blood and plasma from human donors. However, a loophole in the law allows
Merieux to collect and make medicines from placentas, nearly all of which are sold outside
Merieux operates a state-of-the-art facility in Lyon where
the frozen placentas are minced into small balls, more or less like a wine press, thawed
and then processed. Proteins from the maternal blood are separated, purified and made into
albumin and vaccines.
Where do the U. S. placentas come from? Few hospitals will
The Inquirer contacted four of the largest hospital
maternity services in the region to ask what they did with placentas. None of the four
presently sell placentas, according to spokesmen. One of them, Abington Memorial Hospital,
used to sell its placentas to Roth's company but stopped.
Donna Greenberg Root said the hospital stopped selling them
in 1987. "We stopped because of the AIDS situation. We would have to make sure the
placenta was not infected. There was also a question of confidentiality. The whole thing
got to be such a nightmare."
FOR ONE HEMOPHILIAC, A DIFFICULT
For David Schmitt, a hemophiliac, the choices were stark:
Stay in England, where he could get all the Factor VIII
blood-clotting concentrate he needed from the National Health Service and pay nothing. Or
come home to Philadelphia, where friends and a new job waited but where he faced a severe
shortage of Factor VIII and costs of more than $52,000 a year.
"I was extremely concerned," Schmitt, a
31-year-old architect, recalled in a recent interview back in Philadelphia. "At the
time, (in London) I was able to get all of the medicine I needed and I didn't want to be
constantly worrying if I would have enough and would have to change the style of life I
was accustomed to."
Schmitt had moved to London in September 1983 to study and
work. By the time he was ready to return to Philadelphia just before Christmas last year,
the world that he and 20,000 other American hemophiliacs knew had changed dramatically.
Six of every 10 American hemophiliacs had been infected
with the AIDS virus as a consequence of taking Factor VIII made from tainted blood plasma.
Nearly 800 hemophiliacs had developed full-blown symptoms of the disease.
Available supplies of Factor VIII had dropped by nearly
half, forcing hemophiliacs to cancel elective surgery and to ration the amount of medicine
they used. Some had to quit jobs, stop exercising and abandon travel so they could be near
a hospital or clinic in case of an emergency.
Meanwhile, the average wholesale price of available Factor
VIII had risen nearly 700 percent - from 9 cents a unit to 68 cents a unit in the case of
one manufacturer. Hospitals added their own markups - in some cases as high as 100
percent. So hemophiliacs or their insurers ended up paying $1.30 a unit or more.
It is not uncommon for hemophiliacs with the severest form
of the disease, Hemophilia A, to use 50,000 or more units a year. More than half the
20,000 hemophiliacs in the United States, including Schmitt, suffer from Hemophilia A.
To control bleeding, Schmitt injects himself six times a
month with the clotting factor. Each injection or dose contains 874 units of the medicine.
So he uses 5,244 units a month, or 62,928 units a year - $52,230 worth a year.
"I never really added it up before," he said.
"I wish I made that much myself."
Compared to some hemophiliacs, Schmitt is relatively lucky.
He has a good health insurance plan that covers most of his expenses. And a Pennsylvania
program picks up most of his out-of-pocket costs.
Some hemophiliacs are less fortunate. Schmitt has heard
stories about patients who have become impoverished paying for their clotting medicine.
And he is by no means immune. At current prices, hemophiliacs with $1 million worth of
health insurance - like Schmitt - will exhaust their coverage in 10 to 15 years.
"It seems to me the pharmaceutical companies are
making a lot of money by charging exorbitant prices to people who have no choice," he
Manufacturers say the higher prices are the result of
costly new technologies used to make a safer version of Factor VIII.
When Schmitt moved to England in 1983, he continued to use
clotting factor that he had purchased in the United States. But when his supplies were
exhausted, he turned to the British National Health Service, receiving treatment at the
hemophilia center at the Royal Free Hospital in London.
"For a chronic disease like hemophilia, it really was
a superb system," Schmitt said. "The big difference between here and there was
there was a shared responsibility. They didn't treat you like a clinical object."
Although there also was a shortage of Factor VIII in
England in 1988, Schmitt said he never had a problem getting medicine. "Never. And I
never paid for anything," he said.
About 70 percent of the Factor VIII used by England's
estimated 7,000 hemophiliacs is manufactured at three government-owned facilities,
including one in London. The remaining 30 percent is purchased on the open market, with U.
S.-based companies supplying most of it.
In the United States, hospitals, hemophilia treatment
centers and private pharmacies buy Factor VIII from manufacturers and sell it to
hemophiliacs. There is also a growing home-care business, in which companies deliver the
concentrate to customers' residences for a fee.
Schmitt decided to return to Philadelphia, in part because
he found a home-care company in California willing to supply him with older, less
expensive Factor VIII. And he had three months' worth of British medicine that he could
bring home with him.
"By the time I used that up, the shortage had eased
and I was able to get what I needed at Jefferson (Thomas Jefferson University Hospital,
where Schmitt bought his medicine)."
Even so, Schmitt said he was considering switching to the
older, heat-treated form of Factor VIII, if he can find it. It costs less than half of
what he's now paying.
"It just doesn't seem right to pay that much," he
said. "I may just go back with the California company."
PHOTO (2), 1. David Schmitt injects himself six
times a month with clotting factor - $52,230 worth a year., 2. Back in Philadelphia from
London, Schmitt keeps his refrigerator stocked with Factor VIII. (The Philadelphia
Inquirer / REBECCA BARGER)
In the spring of 1988, Dr. Carol Kasper
began to have problems purchasing Factor VIII, the lifesaving blood-clotting concentrate
she uses to treat hemophiliacs.
With it, hemophiliacs can lead relatively normal lives; without it,
they can bleed to death from a minor cut.
By fall, as a nationwide shortage of Factor VIII deepened, the
supply at the hemophilia clinic that Kasper runs in Los Angeles had dwindled to one-third
of usual levels, and she faced a wrenching choice:
Should she save her limited supply of a new, safer Factor VIII for
the children, or share it among all 500 hemophiliacs she treats - including many adults
already suffering from AIDS?
The children had not yet been exposed to the AIDS virus. But by that
time, 60 percent of all adult hemophiliacs in America had become infected, as a result of
using clotting factor made from blood plasma contaminated with AIDS.
While the doctor wrestled with her life-and-death decision, U.
S.-based manufacturers of Factor VIII were making decisions of their own.
Several companies stopped making Factor VIII as long as three months
before introducing their new, safer clotting concentrate; one company raised prices nearly
20 percent at the height of the shortage, and three manufacturers continued to export
large amounts to Japan and Europe, where they could charge higher prices.
As a result, America's 20,000 hemophiliacs faced not only a health
crisis but a financial one as well - a crisis that continues today, even though the
shortage has eased.
The average cost to hemophiliacs soared from about $8,000 a
year in 1987 to more than $50,000 a year today. Hemophiliacs who must use large amounts of
the clotting medicine pay as much as $80,000 a year.
Manufacturers denied they were profiteering. They cited higher
production costs and said that profits from the worldwide sale of clotting factor helped
underwrite lower prices paid by Americans.
In many ways, though, their justifications underscored a fundamental
tenet of business: Companies will try to sell their products wherever the most profit can
be made. That is as true in the blood business as it is in the oil or steel industries.
The buying and selling of blood is a multibillion-dollar
business. And plasma, from which many medicines are made, is the most commercial part of
the blood business. The plasma industry had sales of more than $2 billion in 1988.
Unlike blood banks, the plasma industry operates on a global
scale, is highly competitive and experiences dramatic swings in the availability and price
of its products - as with Factor VIII last year.
Plasma and the medicines made from it are bought and sold like other
commodities, with decisions made in one country often causing sharp price changes or
shortages in other countries.
"It's like selling hog bellies or wheat or beef. It gets sold
all over," said Thomas M. Asher, chairman of Hemacare Co., a for-profit company in
Sherman Oaks, Calif., that trades in plasma and other blood products.
And if U. S.-based manufacturers choose to sell plasma medicines
such as Factor VIII to other countries while there's a shortage here, they are free to do
so. The U. S. government makes no attempt to restrict exports of such medicines during
shortages to ensure an adequate domestic supply.
When it comes to selling blood, the United States has the most
liberal standards in the world for how often a person may sell his own plasma.
Federal regulations allow individuals to sell up to 60 liters
a year (nearly 127 pints) of their own plasma - a maximum of two donations a week. That is
twice the amount allowed by the next country, Canada. And it is four times the amount - 15
liters a year - recommended by the World Health Organization. (A liter is a little more
than a quart.)
Result: More than half the estimated 12 million liters of plasma
used in medicines worldwide comes from the United States.
"The U. S. is the OPEC of the plasma business," said
Thomas O. Hecht, chairman and chief executive officer of Continental Pharma Cryosan Inc.,
a Montreal-based distributor of plasma products. "You know what that stands for: the
Organization of Plasma Exporting Countries."
To put the 60-liter figure in human terms, the average American male
could each year sell the equivalent of 21 times the amount of plasma in his veins at any
Most of this plasma is collected at the nearly 400 commercial
centers that operate nationwide. The centers pay between $8 and $25 for a donation of
plasma, which is extracted as whole blood and then put into a centrifuge, which spins out
and separates the plasma. The oxygen-carrying red blood cells are then transfused back
into the donor.
Many plasma centers offer bonuses to encourage frequent
donations Some advertise special Christmas deals, with the message that selling your
plasma is a good way to earn money for Christmas gifts.
While U. S. donors are the source of more than 60 percent of the
world's plasma, foreign owners dominate the business. Four of the six largest plasma
companies in the United States are owned or controlled by foreign corporations based in
Japan, West Germany, Austria and Canada.
JAPAN BUYS THE MOST
These companies collect and buy more than three million liters of
plasma in America annually and sell them overseas to other companies, brokers or foreign
They also sell the majority of their plasma medicines abroad. Japan
is the single biggest customer, each year importing more than $300 million worth of plasma
and plasma medicines. In 1988, 90 percent of plasma products used in Japan were made from
blood collected in the United States.
On a per-capita basis, the Japanese use about three times more
plasma medicine than either the French or English, according to a World Health
Organization report. But Japan collects only about 10 percent from its own donors.
In this international market, it is not uncommon for plasma to
change hands several times. Sometimes plasma brokers - middlemen who profit by bringing
together those who have plasma with those who need it - are involved.
Even in industry circles, brokers are considered a secretive lot.
There are no lists of brokers and finding one is no small task. Locating one willing to
talk is even harder.
Asked to describe his business during a brief telephone
conversation, one of them, Eric Jarrett, a Woodland Hills, Calif., broker said: "We
sell plasma to whoever wants to buy it."
"No one knows how much they control," said Joseph Rosen,
vice president of Sera-Tech Biologicals Inc., a New Jersey company. "One broker may
sell to another broker, who again may sell it to me or to a company in Europe."
Tracking this plasma once it leaves the country is difficult at
best, industry officials and government regulators say.
Besides a registration requirement, the federal Food and Drug
Administration does not regulate the activities of brokers and does not inspect their
"Whether or not sterility is ever a problem, we do not really
know," P. Ann Hoppe, assistant director of the FDA's Division of Blood and Blood
Products, told an industry meeting last November. "The storage conditions often are
such that bacterial contamination could proliferate if there were any present. So
sterility may be less than 100 percent." *
* "The U. S. is the OPEC of
the plasma business," said Thomas O. Hecht, chairman and chief executive officer of
Continental Pharma Cryosan Inc., a Montreal-based distributor of plasma products.
"You know what that stands for: the Organization of Plasma Exporting Countries."