THE BLOOD BROKERS; Fifth and last in a series.

Gilbert M. Gaul, Inquirer Staff Writer, PHILADELPHIA INQUIRER; Thur. September 28, 1989

Also visit The Blood Brokers:
Part 1 - How Blood, The 'Gift of Life,' Became a Billion Dollar Business
Part 2 - The Loose Way The FDA Regulates Blood Industry
Part 3 - Fear of AIDS Spurs Change
Part 4 - Red Cross: From Disaster Relief to Blood





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 medicines.

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 dollars.

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 in Lyon.

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 France.

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 say.

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 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 said.

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 given time.

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.


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 governments.

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 operations.

"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."

PHOTO (1), 1. Dr. Kasper had to decide whether to share safer Factor VIII with all her patients. (The Philadelphia Inquirer / J. KYLE KEENER),
CHART (2), 1. United States: The OPEC of plasma (SOURCE: Jack Reasor, The Marketing Research Bureau Inc.; American Blood Resource Assn.; industry interviews; The Philadelphia Inquirer / KIRK MONTGOMERY), 2. Rise in unit price for Factor 8 (The Philadelphia Inquirer), MAP (1), 1. Plasma collection centers on the border (SOURCE: FDA; The Philadelphia Inquirer / KIRK MONTGOMERY)

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