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National group buying organization Medbuy is ultimately responsible for 1,202 cancer patients in Ontario and New Brunswick receiving diluted chemotherapy drugs in 2012, an Ontario legislative committee has concluded.

The company did not do its due diligence in arranging a $2.6-million contract with Marchese Health Care, which provided the drug mixtures, the all-party committee said in a report released late Tuesday.

Extra saline in the bags containing cyclophosphamide and gemcitabine, which were prepared by its subsidiary Marchese Hospital Solutions, effectively watered down the prescribed drug concentrations by up to 10 per cent.

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The hospitals that received the drugs were unaware the bags contained extra saline and did not adjust the doses accordingly.

Medbuy, which arranged the contract on behalf of the hospitals, did not specify the drug concentration in the finished product, which led to the confusion between the hospitals and Marchese.

The problem was caught when a pharmacy assistant at a Peterborough, Ont., hospital that had just started using the Marchese products noticed that the label listed only the amount of the drug in the bag, not the final concentration of the drug per millilitre of saline.

Medbuy had a whole stable of licensed pharmacists who oversaw the contract process, but failed to notice the contract's lack of clarity, the report said.

The document also raised concerns about the financial practices of group purchasing organizations such as Medbuy, saying it was unable to follow the public money that went to the company.

Medbuy works under contract to health care organizations that make up both its membership and its shareholders, the report said.

Hospitals do not pay Medbuy directly for its services, said NDP health critic and committee member France Gelinas.

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Rather, Medbuy gets a "rebate" from the pharmacy based on how much is spent on their contracts.

"We tried really hard to follow the money," Ms. Gelinas said. "It was impossible to see where the money went back, was it used for patient care – I have no idea."

In 2012, Medbuy's members spent $647-million on contracts, the report said. Medbuy's annual budget is in the range of $7-million.

The committee said it was skeptical that Medbuy operates like a not-for-profit and doesn't retain earnings.

It was told by Medbuy that the company had five employees that made more than $100,000 a year, the report said. In fact, it was 17 employees and the committee was "disturbed by the discrepancy."

Medbuy's board of directors is "reviewing changes to our legal status to bring it in line with our long-standing practice of retaining no profits or earnings," CEO Kent Nicholson said in a statement.

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Among its six recommendations which also include standardized labelling, the committee is urging the Ontario government to provide oversight of group purchasing organizations like Medbuy, such as salary disclosure and audits by Ontario's auditor general.

Health Minister Deb Matthews said she's introduced legislation that would authorize the College of Pharmacists to inspect, license and set standards for hospital pharmacies.

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