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Red Cross' Troubles Cloud Blood Supply

Health: The agency, vital to Southland hospitals, has been cited for safety lapses and criticized for price hikes. It says a turnabout is underway. By CHARLES ORNSTEIN and DANIEL HERNANDEZ, TIMES STAFF WRITERS

The American Red Cross, the nation's largest and best-known blood supplier, is struggling to overcome financial and regulatory problems that threaten to worsen an already dire national blood shortage, some health officials and experts say.

The Red Cross' troubles have spurred dramatically higher blood prices and left some hospitals scrambling to boost supplies at their own blood banks. The consequences are especially severe in places such as Southern California, where the Red Cross provides nearly all of the blood.

"The Red Cross has been reeling from problems," said Dr. Arthur Caplan, head of a federal advisory panel on the blood supply. "It's been a constant battle with the FDA and other regulatory agencies to keep them in business and not throw the whole American blood supply into a disastrous shortage." National Red Cross President Dr. Bernadine Healy acknowledged some challenges but called Caplan's comments "preposterous" and "ill-informed." Since she took over in September 1999, she said, top management has been replaced and is working hard to reestablish credibility with regulators, hospitals and donors.

"The organization from the top down, and particularly at the top, has gotten religion on this issue," Healy said in an interview. But she said she has come to realize that "we have a very long way to go."

Among the Red Cross' woes are run-ins with regulators, growing debt and waning credibility among hospitals:

* The Food and Drug Administration has cited the organization for a "long-standing and ongoing" failure to comply with federal regulations governing blood screening and handling.

After unwittingly distributing HIV-contaminated blood in the early to mid-1980s, the Red Cross in 1993 entered into a court-supervised agreement, called a consent decree, requiring it to improve management and quality control.

But during an inspection of the group's headquarters in April 2000, the FDA found widespread violations of the court order. These included a failure to properly quarantine potentially contaminated blood, to follow instructions on an HIV test kit, and to keep track of blood supplies and donor medical histories.

Healy acknowledged that she was alarmed and surprised by the seriousness of the findings. But she insisted that the Red Cross' violations overall have declined markedly in recent years and noted that several other blood suppliers are operating under similar consent decrees.

Still, these suppliers, all much smaller than the Red Cross, appear to be in compliance. The Red Cross has not yet satisfied the FDA, which is seeking authority to fine the organization up to $15,000 each time it violates the court order.

* The Red Cross is facing a staggering $339-million debt, largely because it had to pay for improved safety measures, a national computer system and construction of nine blood testing laboratories.

Its blood supply division has lost nearly $200 million since 1994. Meanwhile, its board recently was forced to tap a $100-million reserve fund to renovate and rebuild blood centers, increase employees' pay and upgrade computer systems.

To help it break even, the Red Cross raised the price of blood it supplies to hospitals by an average of 10% to 35% on July 1.

"Without a price increase, it's just a matter of time before we have to liquidate," Healy said. "You cannot run a business when you are selling your products below your cost."

Many hospitals have little choice but to pay because the Red Cross supplies 46% of the nation's blood. Massachusetts General Hospital in Boston, for instance, said its blood prices have doubled to about $4 million annually.

The American Hospital Assn. sent Healy a letter this month saying the "sudden and steep" increase will "cripple the ability of many of the nation's hospitals to meet the needs of their patients and communities."

A spokeswoman for America's Blood Centers, a large network of independent suppliers that together control 47% of the U.S. market, said its members generally charge lower rates than the Red Cross and their price increases have been smaller.

* The Red Cross and other blood centers are facing a severe and sustained national shortage.

The supply could dip even more in September when, to prevent the potential spread of mad cow disease, the Red Cross will begin prohibiting donations from anyone who has spent more than three months in the United Kingdom or six months in Europe since 1980.

To help rebuild the ranks of donors, the Red Cross is spending $8 million this year on advertising.

Paradoxically, critics fear any outcry about the Red Cross will only make the shortage worse--discouraging potential donors from giving. They are adamant that, whatever the agency's woes, blood donations are desperately needed.

"Anything that might cripple those efforts would only do everyone a disservice," said Dr. Emanuel Ferro, medical director of the Long Beach Memorial Medical Center blood bank.

But the Red Cross, a symbol to many of charity and good works, has already done some damage to its own credibility and mission, Ferro said.

"The more things they get embroiled in, the harder it is for them to collect blood and get blood to hospitals," he said.

Meanwhile, some hospitals, such as Long Beach Memorial and UCLA Medical Center, are seeking donors to build their own reserves. These centers, which are independent of the Red Cross, supply blood on site at a lower cost.

"We're not waiting and seeing if the Red Cross is going to be able to supply us blood," said Dr. Priscilla Figueroa, co-director of the UCLA blood bank.

There are signs that regulators are losing patience with the Red Cross as well.

According to the FDA, the Red Cross has not complied with the federal Food, Drug and Cosmetic Act since at least 1985. Ten times since 1993, the FDA has sent the Red Cross letters detailing significant violations of the court decree.

The Red Cross' "current violations are of deep concern to FDA because of the impact they may have on the safety of the nation's blood supply," the FDA said in a court filing in November.

Faced with the prospect of a $15,000 fine per violation, the Red Cross has challenged the FDA's right to impose such penalties. The organization is seeking a court-appointed mediator to broker a deal.

Consumer advocate Dr. Sidney Wolfe, a critic of the Red Cross, said the FDA should seek to hold the Red Cross in contempt of court for its constant violations.

"They have been promising to improve for 16 years, and they haven't fulfilled their promises," said Wolfe, director of Public Citizen's Health Research Group in Washington.

Regulators have been particularly troubled by a Red Cross blood center in Salt Lake City.

The Red Cross took over the blood center in 1997 at the request of the FDA, which had suspended the license of Intermountain Health Care Inc. But the Red Cross' management hasn't fully satisfied regulators either.

FDA inspectors found 34 violations during a May inspection. Among the most serious: The office failed to quarantine blood despite missing test results, then released the blood for shipment. The FDA report does not discuss whether anyone was harmed.

In another instance, an ineligible donor who had traveled to an area at high risk for malaria was allowed to donate. The blood was labeled for distribution before the error was caught.

"All of that is unacceptable," Healy said. But she added that the organization, despite its many safety checks, cannot root out human error entirely.

It doesn't help, Healy said, that 30% to 50% of Red Cross employees in some offices leave each year, many because of poor pay. That forces officials to continually train new employees in crucial procedures.

Still, Healy insisted, the Red Cross has made steady progress. Of the 27 Red Cross sites inspected by the FDA this fiscal year, 15 have had no violations, she said. In addition, total violations logged by the FDA dropped to 103 last year from a high of 633 in 1994.

"We have the best of the best within our system, and we have some problem children," Healy said. "The FDA has told us as recently as a week ago that they are holding us to a higher standard."

The Red Cross, she added, isn't alone in drawing scrutiny from the FDA. In 1996, for example, both United Blood Services--which operates collection sites in Thousand Oaks, Simi Valley and Ventura--and the New York Blood Center entered into consent decrees to im-

prove operations.

But in contrast to the Red Cross, both of these major suppliers are meeting regulators' demands for their reform, according to an FDA annual report in 2000.

Hospitals simply want the Red Cross to meet their needs at a reasonable cost. The recent price increases, some say, defy reason.

"We would deeply regret the [Red Cross] falling victim to the kinds of allegations, such as market manipulation and price gouging, that have dogged commercial medical suppliers," warned American Hospital Assn. President Dick Davidson in a recent letter.

Healy strongly defended the price increases.

The blood services division has a negative cash flow of between $30 million and $60 million each month, Healy said. In addition, the Red Cross' debt has ballooned to $339 million from $151 million in 1994.

At the same time, Healy said, the Red Cross has embraced costly new techniques to improve the safety and purity of the blood supply. Chief among them is an effort to remove leukocytes from all of its blood products.

Leukocytes, or white blood cells, can cause symptoms including fever and chills among transfusion recipients. They also can make patients less able to tolerate future blood transfusions.

Adding to costs, as well, is the Red Cross' recent adoption of nucleic acid testing to detect viruses such as HIV before the body forms antibodies for them.

"The financial picture is not pretty, . . ." Healy said. "I'm absolutely confident we can finally turn this around, but we can't do it without a price increase."

Both critics and supporters say the health system would pay dearly if the Red Cross falters.

"While they may not be doing what some people might consider the optimal job, they are doing a job that is very hard and not very rewarding right now," the UCLA blood bank's Figueroa said.

"If the Red Cross weren't there, things would be a whole lot worse than they are."

-- Martin Thompson (, July 30, 2001

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