Gilbert M. Gaul, Inquirer Staff Writer
He sells blood. About 565 pints a month. To areas of the
country where people are less generous about donating blood
than people here in Appleton.
Cable is executive director of the Community Blood Center
Inc., the blood bank for this city of 58,000 people.
Unlike many big-city blood banks, Appleton has no trouble
meeting the needs of the four hospitals in this area to
which it sells blood. The blood center hasn't had to buy
blood from another center in six years.
Cable said his blood center "got into resource sharing"
in order to balance its inventory. Projecting the demands of
the four hospitals is difficult, he has said.
Sometimes those hospitals use 254 units of blood a month,
and sometimes they use as many as 1,000 units, Cable said.
To make certain there is always enough blood, the blood bank
routinely collects more than it needs, Cable said.
As that blood begins to get old, it is sold. (Blood can
be stored without freezing for as long as 42 days.)
Most of Appleton's blood sales are through a
clearinghouse operated by the American Association of Blood
Banks in Arlington, Va. Cable's center is paid $48 for each
pint it sells - $10 above what it charges local hospitals.
Cable said the profit helps underwrite his blood bank's
In 1988, Cable agreed to sell 50 pints of whole blood a
week to the Central Kentucky Blood Center in Lexington.
The Lexington blood bank's executive director, Walter
Watts, said he bought whole blood from Appleton to extract
platelets, a component that helps blood clot.
The remaining red cells were then resold to the Broward
Community Blood Center, near Fort Lauderdale, Fla.
"To get the platelets we need, we end up having excess
red cells," Watts said. "Say we need 50 (units of whole
blood) a week. We'll bring in 100.
Lexington charged Broward $47 a pint for the red cells,
Broward, in turn, resold the blood it bought from
Lexington, and thousands of other pints of red cells it
purchased from other blood banks, to hospitals in New York
City, Rouault said.
In all, Broward bought about 15,000 pints of blood under
contract in 1988, according to its president, Dr. Charles L.
Broward bought 10,000 pints more on the spot market,
bringing its total purchases to 25,000 pints.
Rouault is one of only two doctors licensed to sell blood
in New York City, records show.
He has connections to hospitals there, he said, from his
days as a medical resident and knows most of the blood-bank
Reports filed in 1988 with the New York State Department
of Health show that at least four hospitals purchased blood
from Rouault: Mount Sinai Medical Center, Columbia
Presbyterian Hospital, New York University Hospital and
Lenox Hill Hospital.
On average, Broward paid $42 a unit for the 25,000 units
it bought from Lexington and the other blood centers; after
markups, Broward sold that blood for $63 a unit, earning a
profit of $525,000, Rouault said.
Rouault says he is not making excess profits. "If we were
profiteering, we would charge $72, not $63."
PHOTO (1), 1. Dr. Charles L. Rouault's center sells blood
to New York City hospitals. (The Philadelphia Inquirer /
LARRY C. PRICE)
Blood sustains life itself, transporting vital oxygen and
nutrients to body tissues and removing carbon dioxide and other
wastes. It also helps fight infections and generates clotting
proteins that prevent undue blood loss from cuts.
Roughly 7 percent of the average American man's body
weight is made up of blood - about 10 to 12 pints. The
average American woman has about nine pints.
Each year, more than 4 million Americans receive
transfusions, using about 13.5 million units of blood. The
number of units transfused varies from as little as one pint
to dozens of pints for such procedures as liver transplants.
Blood can be stored without freezing for up to 42 days.
Here are some terms used in the blood industry:
UNIT. A measurement of blood; for example, a unit of red
cells or a unit of plasma. The volume in a unit varies,
depending on the blood component.
WHOLE BLOOD. Consists primarily of red blood cells,
plasma and platelets. A unit of whole blood is equal to 500
milliliters, or about a pint.
RED CELLS. Transport oxygen through the body and are used
to fight anemia. A unit of red cells is equal to about 250
milliliters, or about half a pint.
PLASMA. The solution in which red cells are suspended.
Transports nutrients and bolsters the immune system. The
source of a number of important proteins that promote
clotting and fight infections. A unit of frozen plasma is
equal to about 240 milliliters, or nearly half a pint.
PLATELETS. Cause blood to clot, are prescribed for
patients whose own cells have been destroyed during therapy
for leukemia and other forms of cancer. Platelets may be
recovered from whole blood or drawn separately from donors
in a process called hemapheresis. A unit of platelets is
equal to about 50 milliliters.
"We've never had it quite this tough," Alan W. Cable, executive
director of the nonprofit blood bank, told the local newspaper.
The citizens did dig deep; last year, 15,000 pints of blood were
donated by Appleton residents to help save the lives of their
friends and neighbors.
What they didn't know, though - don't know to this day - was that
the same month the blood bank was appealing for blood, it sold 650
pints - half its monthly blood collection - at a profit to other
blood banks around the country.
Or that last year the blood center in Appleton contracted to sell
200 pints a month to a blood bank 528 miles away in Lexington, Ky.
Or that Lexington sold half the blood it bought from Appleton to
yet a third blood bank near Fort Lauderdale, Fla. Which in turn sold
thousands of pints it bought from Lexington and other blood banks to
four hospitals in New York City.
What began as a generous "gift of life" from people in Appleton
to their neighbors ended up as part of a chain of blood brokered to
hospitals in Manhattan, where patients were charged $120 a pint.
Along that 2,777-mile route, human blood became just another
The buying and selling of blood has become big business in
America - a multibillion-dollar industry that is largely unregulated
by the government.
Each year, unknown to the people who give the blood, blood banks buy
and sell more than a million pints from one another, shifting blood
all over the country and generating an estimated $50 million in
It is not uncommon for some blood banks to broker between 20
percent and 40 percent of what they collect. In Appleton, nearly
half the blood collected from donors in the last two years was sold
outside the area. In Waterloo, Iowa, the American Red Cross sold six
of every 10 pints collected last year to other blood banks.
They do it, blood bank officials say, to share a limited
resource. Although they have a monopoly, blood banks in dozens of
cities - Philadelphia among them - are unable to collect as much
blood as they need. To cover their shortfalls, they buy blood from
centers, such as Appleton, that collect more than they need.
Nobody disputes the value of sharing blood. But in the last 15
years, this trading in blood has become a huge, virtually
unregulated market - with no ceiling on prices, with nonprofit blood
banks vying with one another for control of the blood supply, with
decisions often driven by profits and corporate politics, not
In this marketplace, blood, a vital resource, gets less
government protection than grapes or poultry or pretzels. Dog
kennels in Pennsylvania are inspected more frequently than blood
And donors are rarely told what happens to their blood.
"People are being fooled," said Dr. Aaron Kellner, recently
retired president of the New York Blood Center, which buys 300,000
pints of blood a year. "Nobody is telling them that their blood is
going to us. They would be furious if they knew about it."
"I didn't give blood so someone else can make money from my blood. I
gave it to be used at the least expense by anyone who would need
it," Lynne Nelson, 24, of Appleton, said when told by a
reporter recently that some blood collected there is sold elsewhere.
It is not just a question of candor. As more and more blood is
traded around the country - changing hands two, three or four times
- it becomes much more difficult to keep track of which blood came
from where, or from whom. As the collection and distribution
network becomes more complex, chances of errors multiply.
errors at blood banks have increased dramatically in the last two
years as overworked technicians struggle to keep up with more and
more tests for detecting viruses in the blood, including those for
hepatitis and AIDS.
The potential for fatal mistakes is "a ticking time bomb," said
Frank E. Young, commissioner of the Food and Drug Administration.
Most blood sales take place through clearinghouses operated by
the American Red Cross and other nonprofit blood-collecting groups.
But there is also a spot market - not unlike the one for oil - where
hundreds, possibly thousands, of sales occur each year.
"It functions rather like the NASDAQ," a national system for
trading over-the-counter stocks, said Dr. Charles L. Rouault,
president of the Broward Community Blood Center near Fort
Lauderdale. "You pick up the phone and call somebody you know."
No one - not the federal government, not the blood banks
themselves - knows for sure how much blood is bought and sold on the
open market. There are no requirements that sales be reported; no
government agency keeps track.
All of which should be of grave concern to Americans, for the
very safety of the nation's blood supply is at stake.
A FLAWED SYSTEM
A yearlong examination of the American blood system by The
Inquirer has uncovered major flaws in the way blood is collected,
distributed and regulated. Among the findings:
* The federal government has failed to adequately police the
blood business, in essence allowing the industry to regulate itself.
* With no one overseeing prices, blood banks are free to charge
hospitals whatever the market will bear. Hospitals add their own
markups, often unrelated to their actual costs. And blood centers
facing shortages are left to scramble to find blood.
* Prices vary widely from region to region, and sometimes within
a region. Patients are charged by hospitals up to $300 a unit for
blood that was given free by donors.
* Nonprofit blood banks compete directly with commercial
companies in some lucrative areas of the blood business. Their
commercial competitors say the blood banks enjoy an unfair business
advantage because they are exempt from paying taxes.
* At least 40,000 people a year contract hepatitis through blood
transfusions. Yet until the AIDS epidemic, doctors routinely ordered
transfusions for patients undergoing surgery, often unnecessarily
exposing them to risks of blood-borne infections.
* Blood collectors say they have done everything possible to
ensure the safety of the blood supply.
Yet confidential documents show the industry ignored or delayed
using readily available tests and procedures to make blood and
* At a time when AIDS was showing up in the blood supply in the
early 1980s, the FDA reduced its inspections of blood-collecting
facilities from once a year to once every two years.
* Thousands of pints of suspect blood and other blood components
have been released by blood banks and commercial plasma centers as a
result of testing errors, computer problems and other mistakes.
This haphazard system exists because the United States has failed
to develop a comprehensive blood program that ensures adequate, safe
supplies to all regions of the country at fair prices.
The United States is one of only a handful of Western nations
that leave the collection and distribution of blood scattered among
a patchwork of private and quasi-public groups.
"What we have is not so much a system as a non-system," said
Norman R. Kear, administrator of the Red Cross' blood center in Los
Angeles. "Blood-collecting groups like the Red Cross cooperate when
it is in their interest to cooperate, and when it's not in their
interest, they fail to cooperate."
MIAMI - In February 1987, Dr. Peter A. Tomasulo and two other
physicians associated with the American Red Cross blood bank in
Miami received an unusual warning.
Unless they stopped making what a rival blood bank said
were disparaging and defamatory statements to doctors,
hospital officials and patients, "our client has instructed
us to consider a civil lawsuit against you for substantial
damages," a letter said.
It was written by a lawyer representing the Broward
Community Blood Center in Lauderhill, Fla., near Fort
Lauderdale. But Dr. Charles L. Rouault, the blood bank's
president, freely acknowledges he was the force behind it.
A blood war is going on in South Florida.
"Dr. Tomasulo and I have been at war for years," Rouault
said. "We have been competing in virtually every way one
could compete in the blood-banking industry: supply, price,
quality of service, range of services. There's not much
It is a battle that in the last decade has spilled over
to the board rooms and surgical suites of some of Florida's
most prestigious hospitals, has divided school officials and
companies and has left many of those involved angry and
South Florida is one of only a handful of major
metropolitan areas in the nation where blood banks compete.
Economists and other observers say competition would be good
for blood banks, leading to lower prices.
But what is happening here could cause second thoughts.
Some blood bank administrators say they are appalled by
the rivalry in South Florida. "It's turned into a gasoline
price war," said Norman Selby, who formerly ran the New York
The competition between Rouault and Tomasulo has caused
hard feelings and forced people who deal with the blood
banks to take sides.
"It's a mess," Rouault said. "The blood business down
here . . . is the heart of darkness."
Each blames the other for allowing the situation to get
out of hand and wanting to put his rival out of business.
Tomasulo said Rouault had a "clear intention to increase
market share" at his expense and had raided some of his
blood bank's traditional donor groups.
Rouault countered that the Red Cross' South Florida Blood
Services raided Broward's groups first, and complained that
Red Cross has a "monopolistic mind-set. They want to operate
The two presidents locked horns again this year when
Tomasulo requested permission from the Broward County school
board to collect blood in high schools there. Rouault
protested, arguing that he had spent years building up a
successful program in the schools.
An arbitrator, Circuit Judge John A. Miller, scolded both
in a February report that supported most of Rouault's
"There has been a long history of negotiations . . . to
establish some kind of joint venture, but success has been
thwarted by each wishing to control the other. . . . It's
Therein lies the real story of this blood feud. What is
ultimately at stake is control of a product worth millions
"Leaving Broward and probably Palm Beach (Counties) would
have a grave negative impact on our bottom line," a
confidential Red Cross analysis prepared this summer said.
In 1988, South Florida Blood Services in Miami collected
approximately 105,000 pints and had revenues of more than
$10 million. A salary figure for Tomasulo was not available.
However, a 1987 tax return filed by the Red Cross shows
Tomasulo was paid $166,775 in salary and benefits.
Broward collected about 60,000 pints of blood in 1988 and
had revenues of more than $5 million. Rouault was paid about
$125,000 and had the use of a car provided by the blood
Rouault contends that the Red Cross in Miami has invaded
Broward and Palm Beach Counties because it can't collect
enough blood in its home turf of Dade County to meet the
needs of the 61 hospitals it serves. In 1988, it had to buy
about 40,000 pints of blood, at a cost of $1.5 million, from
other centers, according to Red Cross documents and
"If I couldn't collect enough blood . . . I would be
embarrassed," Rouault said. "We have a healthy, financially
viable operation here and I don't think Peter likes to be
reminded of that fact."
Tomasulo said his blood center has "made great strides
toward becoming (self-) sufficient" in the last decade.
"Miami is like a number of other urban areas. There are many
challenges to collecting blood."
Until July 1986, South Florida Blood Services was a
private, nonprofit blood bank with no affiliations. But that
month, Tomasulo and his board of directors agreed to merge
with the Red Cross. The decision was prompted by many
factors, including the competition with Broward, Tomasulo
As part of the merger, the Red Cross agreed to supply
Tomasulo with blood to make up his deficits. Tomasulo, in
turn, agreed to not buy blood from non-Red Cross blood
banks, including Rouault's.
Following the merger, South Florida Blood Services cut
its price to compete with Broward, improved its collections
in Dade County and expanded its efforts to collect and sell
blood in counties to the north - including Broward and Palm
"Why they would want to sell blood here when they can't
even meet their own needs in Dade is beyond me," said John
H. Flynn, president of the Palm Beach Blood Bank in West
Palm Beach. Flynn has formed an alliance with Rouault to
For Rouault, the South Florida Blood Services and Red
Cross merger was a nightmare come true. "We can compete
successfully with Peter Tomasulo, but we can't compete
against all of Red Cross," he said.
In 1986, Rouault began selling blood to hospitals in New
York City and northern New Jersey to help finance his
battle. Last year he brokered about 25,000 pints of blood,
worth nearly $1.5 million.
Tomasulo and Red Cross management at national
headquarters in Washington were not happy when they found
out what Rouault was doing. Rouault said they "tried to
pressure some of the hospitals into not buying the blood."
Tomasulo denied that charge but acknowledged calling at
least one blood-bank director at a New York hospital. "We
would like it (the New York sales) stopped because it
provides them a tremendous economic advantage," he said.
More recently, a Red Cross official complained to the
Internal Revenue Service that the Broward blood bank had
refused to show him its tax return as required by law. (Even
though they pay no taxes, nonprofit blood banks file
statements of their income and expenses with the IRS.)
"We drove up there and asked to see it (the tax return)
and their administrator told us it wasn't there," said
Michael G. Hunter, financial administrator for the Miami Red
"It's a natural course of doing business to want to know
how your competition is doing. That's what I was doing. I
wanted to know what is their financial position, to make
Responded Jeffrey McNally, administrator of the Broward
Community Blood Center: "We'd be happy to turn over our
financial information if they would turn over theirs."
CAPTION: PHOTO (2), 1. The Broward center's Rouault
accuses the Red Cross of having a "monopolistic mind-set."
(The Philadelphia Inquirer / LARRY C. PRICE),
2. Dr. Peter Tomasulo heads the Miami Red Cross, which has
moved into Broward County. (The Philadelphia Inquirer /
LARRY C. PRICE)
PHOTO (5), 1. Tyson Thompson, 17, gives blood at Broward
Community Blood Center, near Fort Lauderdale. (The Philadelphia
Inquirer / LARRY C. PRICE), 2. Technician Claudene Talbott
catalogues units of whole blood at the Broward blood center. (The
Philadelphia Inquirer / LARRY C. PRICE), 3. Barbara Phillips enters
a bloodmobile in Appleton, Wis.; 15,000 pints of blood were given
there in 1988. (Special to The Inquirer / ALLEN FREDRICKSON), 4. At
the Red Cross center at 23d and Chestnut Streets, an employee
prepares freshly collected blood for processing. (The Philadelphia
Inquirer / SHARON J. WOHLMUTH), 5. Medical technician Judy
Goodermote monitors the plasma machine as Bob Barlament donates
blood in Appleton. (Appleton Post-Crescent), MAP (1), 1. Who buys
and sells blood: The top five blood centers (SOURCE: Interviews with
blood bank officials; The Philadelphia Inquirer / KIRK MONTGOMERY),
CHART (3), 1. From donor to patient: How blood is collected and
priced (SOURCE: Crozier Chester Medical Center, American Red Cross;
The Philadelphia Inquirer), 2. What one hospital charges for blood
(SOURCE: Crozier Chester Medical Center, American Red Cross; The
Philadelphia Inquirer), 3. Prices charged by blood banks for a pint
of red blood cells, 1988 (SOURCE: Interviews with blood bank
officials, American Red Cross; The Philadelphia Inquirer / KIRK
Not for commercial use. Solely to be used for the educational
purposes of research and open discussion.