Close to half a million dollars worth of donated blood is at the heart of a lawsuit between Oklahoma Blood Institute and a Minneapolis-based blood broker.
But it’s the details revealed in court filings and interviews about the high-dollar market for human blood and blood products that may come as a shock to donors, who give away the valuable product for free.
Donors often believe their blood is given to local hospitals, and all donations stay in the community — neither of which is true. A pint of blood in America sells to hospitals for $180 to $300, depending on the market, and expired blood often is sold to research laboratories, said Ben Bowman, chief executive of General Blood, the blood broker engaged in a legal tussle with Oklahoma City-based OBI.
Bowman’s company, formed four years ago, acts as a middleman between blood suppliers, like blood donation centers, and buyers such as hospitals and research laboratories.
It’s an unusual industry because the product is completely dependent on donors, who aren’t paid for their donation. Yet selling the blood — which technically is a pharmaceutical product—makes millions of dollars for nonprofit entities such as Oklahoma Blood Institute.
“We have a charitable side, which is trying to motivate people to do an amazing thing to help their fellow man or woman,” said Dr. John Armitage, OBI’s chief executive officer. “You turn that around: We are providing a drug. On the business side of what we do, the comparison is to a pharmaceutical company.”
According to tax forms filed with the IRS, OBI generated $85.6 million in the tax year ending March 31, 2013.
And its top executives are well paid. Armitage reported earning $421,561 from OBI that year. Numerous others were making six-figure salaries, including Chief Financial Officer Randall Stark, who reported earning $202,886, and Chief Medical Officer James W. Smith, who earned $273,597.
The organization has six vice presidents, all making $140,000 or more.
Armitage, who spoke with The Oklahoman on Thursday, says the compensation is fair and comparable to similar large, nonprofit companies in Oklahoma City.
On its tax form, OBI describes one of its key programs as managing the blood donations from more than 209,000 people each year. The blood is tested and processed by OBI, then distributed “to patients across the states we serve,” a task that cost $65 million but generated $75 million in the 2012 tax year.
“Technically, we like to say the blood is free, but they (hospitals) pay a service charge” for the blood bags and testing and drivers to get the unit there, Armitage explained. “It’s arranged, so it’s a service fee.”
Bowman says at one time, OBI was spending $2 million annually with his company.
“They were running an efficient operation and had good pricing and for whatever reason ... they slowly stopped sending us product,” Bowman said.
On June 13, OBI filed suit against General Blood in Hennepin County (Minn.) District Court, asking a judge to award the organization the $426,302 it claims General Blood owes. Several bi-weekly invoices were included, each ranging from $21,000 to $101,000.
General Blood fired back in court filings, denying it had failed to pay its bills and instead accusing OBI of violating a confidentiality agreement, costing the company $15 million in a deal with a Utah laboratory.
Armitage says OBI is no longer doing business with General Blood.
“They essentially constructed an argument that we know has zero merit,” he said. “We think their claims are groundless.”
One reason OBI works with blood brokers is to avoid waste, something donors should appreciate, Armitage said. “If a unit of blood is about to expire, we try to find a home for it,” he said.
Red blood cells generally are considered expired after 42 days. More specialized products, such as platelets, last just five days.
Bowman explains why his company’s payments to OBI stopped. “It’s not like we ran out of money. ... We’re running a very robust business. But it was just, ‘Hey, if you really damaged us to the tune of over $14 million by breaching your agreement of confidentiality and non-circumvent, we want to see that play out before we cut any checks.’”
Bowman says he wishes there was more transparency in the blood donation industry.
“The general public — 99 percent of Americans — don’t know that blood is sold,” he said.
Armitage said since blood banks can’t pay donors, they have to inspire them with the altruistic side of what they are doing.
“That’s why we spend so much time focused on the amazing, giving front end of what we do,” Armitage said. “On the back end, we are supplying an FDA-approved drug with all the traceability and trackability and quality parameters behind it out to hospitals who, in a lot of places, think of us as a specialty pharmaceutical product.”