How blood, the 'gift of life,' became a billion-dollar business

Last December, the Community Blood Center in Appleton, Wis., made a public appeal for blood. Residents were asked to "dig farther, wider and deeper" than ever before to keep local blood supplies at desired levels.

"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 commodity.

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 revenues.

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 medical concerns.

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 banks.

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.

In fact, 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 transfusions safer.

* 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."

*

The blood industry is in the spotlight today as never before because of AIDS.

A total of 2,668 patients have contracted the disease through transfusion of infected blood since June 1981, when the federal Centers for Disease Control began tracking AIDS cases. That is a small percentage of the 4 million transfusions each year but enough to have caused widespread concern about the safety of blood.

Spokesmen for the industry, while conceding past problems, contend that the blood supply today is safe. They say the period of greatest risk was from 1978, when AIDS was first recognized, to 1985, when testing of blood for the virus began. The tests have virtually eliminated the risk of getting AIDS from blood transfusions, blood industry spokesmen say.

And they say a new test for hepatitis, expected to be available in 1990, should help reduce the risk of contracting that disease.

But recent research on AIDS and blood has brought new concerns. A study by University of California, Los Angeles, researchers published in July found that some infected people may carry the AIDS virus for up to three years before they begin to produce antibodies, which are what the AIDS screening tests detect. The research raised the possibility that the screening methods used by blood banks may be less reliable than thought.

In addition, the sheer volume of tests performed by blood banks - each unit of blood undergoes six tests for infectious diseases - and the need for massive record keeping have led to overload at many blood centers.

From March 1988 to March 1989, blood banks and commercial plasma centers had to recall nearly 100,000 blood components and medicines made from blood that had been erroneously released, FDA records show.

"Blood banks can keep telling the public that the blood supply is as safe as it can be, but the public isn't buying that anymore because they sense it isn't true," said Dr. Cory SerVass, a member of the Presidential Commission on AIDS, which issued its final report in June 1988.

While questions of blood safety are paramount, The Inquirer's examination of the system by which blood is collected and distributed revealed other causes for concern.

The blood business has grown so large and complex, with so much emphasis on sales and profits, that many "nonprofit" blood banks have become virtually indistinguishable from other big businesses, critics inside and outside the industry say.

"The pathetic thing is that the idea of blood as a resource being shipped around the country strikes me as perfectly reasonable. The problem is it has gotten too commercial. There's too much dollars and cents about it," said Norman Selby, a consultant hired in 1987 to help deal with a financial crisis at the New York Blood Center, the nation's biggest buyer of blood.

A judge in Florida who was brought in to arbitrate a dispute between two blood banks wrote much the same thing in his ruling: "Serving your fellow man and supporting your community makes nice-sounding verbiage, but the bottom line is that both groups sell this blood to these hospitals," he wrote. ''They will tell you that it is at cost, that this is nonprofit, but between cost and nonprofit is a lot of 'expense,' including many jobs and many salaries. "

HOW THE BLOOD BUSINESS WORKS

Nonprofit blood banks generate at least $1 billion a year in revenues, tax returns examined by The Inquirer show. Exact figures are impossible to obtain; there are no comprehensive government or industry estimates.

Blood is processed into a number of finished products. Whole blood, collected by nonprofit blood banks, is separated into red blood cells, platelets and plasma. Plasma collected by for-profit centers is used to make a variety of medicines, such as Factor VIII clotting concentrate and hepatitis vaccines.

Three organizations - the American Red Cross, the American Association of Blood Banks and the Council of Community Blood Centers - make up the blood- banking business in the United States. All are incorporated as nonprofit organizations.

The Red Cross is by far the largest. With 56 regional blood centers, it accounts for at least half the estimated 13.5 million pints of blood collected each year.

The Red Cross blood program had revenues of more than $500 million last year. Operating profits from its blood program, which the Red Cross calls ''excesses over expenses," totaled more than $300 million from 1980 through 1987, according to the organization's tax returns.

Other "nonprofits" also make substantial profits from the sale of blood. Some blood banks have built up large reserves of cash and investments, and pay their officers salaries of $150,000 a year or more, plus expensive company cars and other perks.

Blood-bank officials say the proceeds are put back into their operations and are used for such things as construction and equipment. These "excesses" also help build up financial reserves, a cushion against future losses.

But the distinction between nonprofit and for-profit sometimes gets blurred.

In one case, a nonprofit blood bank in Oklahoma City has begun to sell donated blood to a for-profit company in Los Angeles, which marks up the price and sells it to hospitals. The director of the nonprofit blood bank is one of three owners of the for-profit company.

These are the nonprofit organizations - 2,024 facilities - that collect the blood used by hospitals for transfusions.

There is also a thriving commercial business in plasma, the protein-rich liquid part of blood from which many medicines are made. Unlike blood banks, the multibillion-dollar for-profit plasma industry pays donors for the plasma collected at 400 centers - from $8 to $25 for each donation.

At one time blood banks paid donors, too. As recently as the late 1960s, about 15 percent of the blood supply came from paid donors. They received about $10 for a unit of whole blood, which contains oxygen-carrying red cells (used in transfusions and to combat anemia), platelets (used to promote clotting) and plasma.

Paid donors were driven from the system in the early 1970s because of fears that vagrants, alcoholics and other unhealthy donors who sold their blood were spreading hepatitis through the blood supply.

So today, the blood banks depend almost exclusively on volunteer donors. And blood banks are extremely sensitive about doing anything that could upset these donors.

"There is a tendency to tell donors . . . the least amount they need to know," said Nancy R. Holland, former executive director of the American Blood

Commission, an advisory group made up of industry, consumer and government representatives.

In Appleton, for instance, donors were not told that their blood was being sold until July, after an Inquirer reporter had raised questions. The blood center then began to give donors a written statement saying that "only leftover blood and blood components that would otherwise be lost" are sold.

"The needs of our local hospitals and their patients have, and always will, come first; they are why the Community Blood Center exists," the statement said.

Interviews with more than a dozen Appleton donors found that they interpreted the two-page statement to mean that only a small amount of blood was being sold outside the area.

"As I understand it, the only way it would be sold is if they have an overabundance at the blood bank here and instead of throwing it out . . . they would sell it," said Steve Hermsen, 30, a sales representative for an Appleton paper company.

"It's used locally and sold to people at cost or close to cost," said donor Randy Jones, 33.

In fact, nearly half of all blood collected by the Appleton Community Blood Center is sold outside the area - information left out of the blood center's statement. In 1988, the blood center sold 6,800 pints to other centers, or 46 percent of the 14,700 pints it distributed that year. In 1987, it sold 6,900 out of 14,600 pints - 47 percent.

The blood center earned $10 for each pint it sold, according to executive director Alan Cable. That was in addition to the standard charge to hospitals of $33 a pint in 1988 - a fee that since has been raised to $38.

Cable said the money from outside sales helps keep Appleton's blood charges among the lowest in the nation. By collecting more blood than is needed locally, Appleton also has a buffer against emergencies, Cable said.

Moreover, he said, Appleton's medical community would never stand for blood imported from outside. "They don't want blood coming in from anyplace else

because of AIDS and the hepatitis risk," he said.

WHAT DONORS ARE NOT TOLD

Cable was asked about his appeal for donors last December. If his center had excess blood to sell, why did he tell the local newspaper, "We've never had it quite this tough"?

His recruiters were having to work harder to get donors, Cable said. "When my staff has to make twice as many phone calls to get in that number of donors, that becomes a real concern," he said.

"I confess there's a lot about any blood program the donors are probably not aware of. It's not as a result of not wanting to tell somebody. It's a matter of (their) not asking the right questions," Cable said in an earlier interview.

Appleton isn't the only blood center that has kept donors in the dark. Interviews in the last year with 70 blood-bank officials found that none told donors explicitly that their blood might be sold for a profit.

In Waterloo, where 60 percent of the blood collected is sold to hospitals in other areas, Red Cross administrator Michael Liesch said recruiters work with donor groups "to make it very clear up front that blood is a national resource. " But Liesch acknowledged "we don't tell the individual donors as they come in" that their blood may be sold elsewhere.

The Red Cross and many other blood banks recruit donors by appealing to their sense of community responsibility. "This joining of individual action in the interest of maintaining a reliable community blood supply is what the Red Cross means by community responsibility in blood service," one Red Cross document notes.

"Blood bankers have for years fooled the American public. They have built up their regional centers on the idea of community pride, and to change that now would be very difficult and would probably cost them blood," said Kear, the Red Cross official in Los Angeles.

Kear's boss at Red Cross national headquarters in Washington, Dr. Lewellys F. Barker, said: "As far as we're concerned . . . your neighbor is someone who is in need. It is not necessarily someone in the nearest hospital or even in the same town or county or municipality. "

Why doesn't the Red Cross tell donors that their blood may be sold outside the area?

"I guess if we thought that it was of great interest or concern, we would deal with it more aggressively. Maybe it is," Barker said. "I don't think we know that this is of great interest or concern to donors. In fact, when we talk to donors, what they want to know is that the patient who needs blood is going to benefit from their donation. "

"If you're going to do it, you have to tell people up front, publicize the fact," said Kellner of the New York Blood Center. "People are being fooled now. They don't know. It's unethical. "

Donors in Oklahoma City do not know, for example, that some of their blood is being sold by their blood bank directly to a for-profit company.

Under an agreement made in July, the Oklahoma Blood Institute, a nonprofit blood center, is selling 300 pints of blood and blood products a week to the American Blood Institute, a for-profit company in Los Angeles.

Dr. Ronald O. Gilcher, who in 1987 earned $159,000 as director of the nonprofit blood center, is a medical director-consultant and part-owner of the for-profit company that is buying blood from his center, according to licensing records filed with the California Department of Health. The company sells the blood to hospitals in the Los Angeles area at a profit.

In an interview, Gilcher said his Oklahoma blood center charges the American Blood Institute the same price it charges nonprofit blood banks. Gilcher declined to say what that price was.

Gilcher's blood bank sells a pint of red cells to Oklahoma City hospitals for $58. Blood from the same blood bank is sold to Los Angeles-area hospitals for $67 to $69 by the for-profit American Blood Institute.

Asked about his dual roles, Gilcher said, "They have given me a very small amount of stock in ABI. " He said his "relationship with American Blood Institute was cleared by the executive committee (of his board of directors) so I can act as medical consultant" to the company.

Dr. Joseph J. Stone, one of Gilcher's co-owners in American Blood Institute, said the company was receiving no unfair advantage because of Gilcher's dual roles. "There has been no compromise of integrity or ethics. I quite frankly think it is a smoke screen. The argument just doesn't hold at all. "

REGIONAL MONOPOLIES

Most Americans think of blood banks as struggling community agencies that provide an essential service to local residents at cost. That is the image the blood banks have worked hard to foster through their regular media appeals.

In fact, they are regional monopolies, granted exclusive rights to collect blood through a government-industry pact worked out in the early 1970s with the goal of ensuring an adequate blood supply.

With only a few exceptions, blood banks have geographic franchises over the blood supply. In this respect, they are like utility companies that are allowed a monopoly because it is the most efficient way to provide an important service.

But while government regulators limit how much electric and telephone companies may charge and monitor their business activities through public utility commissions, no comparable public agency oversees blood banks.

If a blood bank's officials choose to raise their prices, increase their profits or build up their cash reserves and investments, they are free to do so. The government, which does regulate safety matters, rarely involves itself in blood banks' business decisions.

If they decide to collect more blood than they need and sell it elsewhere at a profit, no outsider questions that.

"They're local monopolies providing a vital public service without the regulation," said Harvey M. Sapolsky, a political scientist at Massachusetts Institute of Technology and co-author of a 1982 book on blood banks. "When there is competition, in the couple of instances where that has occurred, the price falls. That's good evidence that there is monopoly pricing. "

In general, regions that sell blood tend to be near small cities, with few hospitals or indigents. Many are in the Midwest, which some in the industry refer to as the nation's "blood basket. "

"The people have a tendency to be very altruistic in nature," said Liesch, the blood-bank administrator in Waterloo.

That contrasts sharply with the situation in a big city like Chicago, where blood banks have a long history of being unable to collect enough blood. In 1987, one of every four pints of blood tranfused in metropolitan Chicago came

from outside the area.

In New York City, need for blood so outstripped collections that nearly one of every three pints of blood supplied to hospitals by the New York Blood Center in 1988 was purchased from other blood centers, including Red Cross centers in Europe.

The economics of blood-bank sales are a closely guarded secret. While it is impossible to say with certainty how many centers buy and sell blood, this much is clear: The number of transactions has grown dramatically since the early 1970s, when fewer than 200,000 pints of blood changed hands, industry documents show.

As part of its examination of the blood industry, The Inquirer was able to track the movement of nearly 500,000 pints of blood last year - about half the amount believed to be brokered.

It found a brisk business in the demand for blood. Centers with blood to spare can charge whatever they want and centers facing shortages have to ante up. When supplies tighten, as they have for the last year, prices go up. And when demand for a particular type of blood is great, such as it now is for O Positive, bidding wars can occur.

"I've heard of some centers asking $100 for a unit (pint) of O Positive," said Rouault of the Broward Community Blood Center in Lauderhill, Fla.

On a smaller scale, the Community Blood Bank of Southern New Jersey in Cherry Hill has purchased several hundred pints of blood on the spot market for several years, marked it up and resold it to local hospitals.

"We can make a business deal with it and still make a slight profit on it," said the center's director, Emilio Louis Fanjul.

Even without shortages, there are big differences in what blood centers charge. Prices for some services varied as much as 400 percent in The Inquirer survey.

For example, people who set aside their own blood before surgery at a blood bank in Grand Rapids, Mich., last year were assessed a surcharge of $40. In Springfield, Ill., and a dozen other cities, there was no surcharge. In Philadelphia, there was a $25 charge until last October, when the fee was dropped.

In Waco, Texas, a pint of red blood cells cost hospitals $33 as of June 30, 1988. In San Jose, Calif., the same pint of red cells sold for $79 - a 139 percent difference. In Philadelphia, it was $46.80; it has since been raised to $53.40.

The price for cryoprecipitate, a blood component used to treat bleeding disorders, varied nationwide from $10 a unit to $39 a unit - a difference of 290 percent. In Philadelphia, it was $15.90.

These prices are what the blood banks charge hospitals, not what the public pays. The prices that hospitals charge patients also vary dramatically.

One hospital may charge as little as $15 to "crossmatch" blood against a patient's antibodies to ensure that the blood to be transfused is compatible. Another may charge more than $100 for the same procedure.

When the cost of administering the blood and the hospital's profit are tacked on, those charges can soar.

For example, in 1988 a patient at Crozer-Chester Medical Center in Delaware County receiving two units of blood during surgery would have been charged $497, according to the hospital's former blood-bank director. A patient at Abington Memorial Hospital in Montgomery County would have been charged $439.60. And a patient at Temple University Hospital would have been charged $591.60.

Hospital officials are often at a loss to explain such variations or even how they set their charges for blood and blood products.

"Do you want the sensible answer or the honest answer?" asked Elizabeth Borowski, the former director of the blood bank at Crozer-Chester who now works for the Red Cross. "The truthful answer is the way hospitals do their cost analysis is not very standardized. In fact . . . hospitals often don't know their costs. "

The decisions frequently are made by hospitals' financial departments, which may apply a uniform markup without considering the actual costs.

Some critics are outraged at prices of up to $300 a pint for something that was donated to begin with.

Blood-bank officials say that they charge hospitals fees for processing blood, not for the blood itself. These fees include the costs of recruiting donors, collecting blood, separating the components of whole blood, testing for viruses, distributing the blood to hospitals, administration, overhead, and any "excess," or profit.

Some blood-bank officials say price variations exist because it costs more to operate in some areas of the country than others. Salaries differ. Real estate costs vary. Workers at some centers are unionized, while those at other centers are not.

Others say the differences can't be explained that easily, especially where price fluctuations exist within a single state.

In California, for instance, the price that hospitals paid for a pint of red cells in 1988 ranged from $50 to $79, a variation of nearly 60 percent. And prices for some specialized blood products and services varied by 200 percent.

"That has always mystified me," said Dr. Edgar Engleman, director of the Stanford University Medical Center blood bank. "One of the reasons we formed our own blood bank here was that we thought the charges of the local (San Jose Red Cross) blood bank were too high. "

What few blood-bank officials say publicly is that there are also huge variations in the productivity of their centers. Some blood banks are more efficient than others at collecting blood. Some are more productive in making components from whole blood.

In Appleton, for example, the center collected an average of nearly 3,000 pints of blood for each full-time employee. By comparison, the blood bank in Tampa, Fla., collected just 377 pints per worker per year.

The average, according to The Inquirer's review of 70 blood banks, was 821 pints of blood per worker. In Philadelphia, the Red Cross collected 600 pints per worker.

"The implication is that there is a great deal of opportunity for improvements in productivity in blood services," Edward Wallace, a professor of management at the State University of New York at Buffalo and an adviser to the Red Cross' blood program, told a group of blood-bank administrators in 1986.

But because blood banks rarely face competition or outside scrutiny, they are not always pressured to operate in the most efficient manner. And hospitals, stuck with a single supplier of blood, have rarely pressured blood banks to keep their prices low.

PASSING COSTS ALONG

"For years and years, there was no impetus to be efficient. You just passed costs along to the hospitals. Those bad habits die hard. That's what you're looking at," said John H. Flynn, executive director of the Palm Beach Blood Bank in Florida.

Until recently, hospitals were able to pass along any price increases to patients' insurance companies with few challenges.

Nonprofit blood centers often base their prices on what the local market will bear - not their actual costs in processing the blood.

An advisory from Red Cross national headquarters to regional blood centers on "cost-accounting guidance" noted that the prices set by its blood centers ''must be primarily market-based. For example, the product cost of platelets (a blood component that causes clotting) might be $15, but market forces permit a price of $27.50 to be charged. In this case, platelets would be making a contribution to joint (total blood center) costs of $12.50 per unit," the advisory, dated December 1984, said.

In other words, if a center could make platelets for $15 but sell them for $27.50, it should do so and use the profits to cover other expenses and build up financial reserves. Such cost-accounting continues to be practiced by the Red Cross.

There is one other key element in the determination of blood prices: competition. In the few cases where blood banks do not have monopolies, the results are revealing.

In South Florida, for instance, where rival blood banks are engaged in fierce competition, prices are among the lowest in the nation. The Miami Red Cross charged hospitals $38 a pint at the time of The Inquirer survey last year; the Broward Community Blood Center charged $39.

"It's all very obvious," said Rouault, president of the Broward Community Blood Center. "The centers with $39 prices have competition. Those with $67 prices (and higher) are those without competition. "

When the Red Cross' monopoly in Tucson, Ariz., was broken by the arrival in 1985 of another nonprofit blood bank that offered blood for lower prices, the Red Cross cut its price of $53.35 a pint by nearly $20 to meet the challenge

from United Blood Services.

By lowering its price, the Red Cross succeeded in protecting its lock on Tucson. Several years later, United Blood Services left Tucson, after it had trouble persuading enough hospitals to buy its blood.

"It didn't matter what we put our price at. They (the Red Cross) would have put their price at $20 if we had," said Joseph Dockery, former director of United Blood Service's Tucson operation. Dockery now works for the Red Cross.

The results were predictable, said Sapolsky, the MIT political scientist. ''The voluntary sector can't be expected to provide (its own) regulatory control. They have a financial interest. You can't expect them to do it. There has to be some governmental oversight."

*

Ten years ago, in June 1979, a congressional subcommittee questioned why prices for blood varied so widely from region to region.

"I am . . . distressed by the impact of inflated blood-product charges on health-care costs," said Richard S. Schweiker, then a Republican senator from Pennsylvania. "What is the advisability of allowing unregulated public and nonprofit agencies to exercise monopoly power? "

In 1979, Schweiker introduced a bill that would have required government officials to collect and analyze data on the cost of blood and to determine ''fair and reasonable exchange rates" for blood.

It was never enacted. Today, the blood industry remains without any such regulatory oversight on pricing.

And a group that was supposed to represent consumers and help shape national policies related to blood has fallen on hard times.

The American Blood Commission, an advisory group, was formed in 1975 amid concerns about the safety, supply and cost of blood. As part of its mission, the commission was to collect and analyze data on prices and blood use. It did for awhile.

But by 1981 those efforts had collapsed, in part because of problems getting blood banks to disclose their financial data, former commission officials say. And so the database intended to be used to monitor prices never materialized.

"Nothing much was ever really done about that . . . and so we've been operating on data that really goes back to the surveys done in 1979 and 1980," said Douglas MacN Surgenor, chairman of the Center for Blood Research in Boston, which is affiliated with Harvard University. "I think that's been a critical shortcoming. "

It is because of the American Blood Commission that most blood banks today may set prices without pressure from competitors.

"When the ABC was first established, it was considered sacred and the right and proper thing to do to have one blood center serve an area. It espoused monopolies," said Nancy Holland, former executive director of the

commission.

But while the commission encouraged the development of large regional blood centers, it failed to monitor how those blood centers set prices or conducted their business.

The reason may have had something to do with the makeup of the commission, which came to be dominated by representatives from the blood-banking industry, according to Holland and others. And they were reluctant to address controversial issues that could hurt blood sales - such as AIDS or methods for reducing blood use.

"I think the blood bankers came to believe that our role was to help them achieve their goals. The blood-banking organizations do not want the ABC shaping their policies," Holland said.

The commission played virtually no role in formulating critical public policies on AIDS and the blood supply. The one conference on AIDS that it sponsored in 1985 received little publicity; blood-bank representatives feared bad publicity would hurt their blood collections, Holland said.

In early 1988, the American Association of Blood Banks withdrew from the

commission, saying it no longer played an important role in policy issues and was competing with the association by sponsoring seminars and conferences.

Other members criticized the commission for failing to adequately represent consumers or develop safe standards for using blood.

A consultant's study made public this year was critical of the commission's failure to take a leadership role during the AIDS crisis. It recommended the

commission assume a consumer-advocacy role or shut down.

The government's track record is not much better. The Food and Drug Administration, the agency charged with ensuring blood safety, does not even know how much blood is collected or how it is used and must rely on the industry for such data.

"We tried to get funds allocated for collecting this type of data but without much success. The attitude (under the Reagan and Bush administrations) has not been to add regulation, but one of deregulation," said Dr. Kathleen Sazama of the FDA's Division of Blood and Blood Products.

While the government does track AIDS cases contracted through blood, it still keeps no records of hepatitis-linked deaths from blood - even though hepatitis is the most common infection contracted from blood.

A reporter calling the hepatitis division at the federal Centers for Disease Control in Atlanta was told no figures were kept for hepatitis deaths attributable to blood transfusions. "Try calling the Red Cross," a CDC physician suggested.

Staff cuts have hurt the FDA's inspection ability at a time when problems in blood banks have been mounting. Even with recent hires, the agency still suffers from a serious shortage of inspectors.

The FDA estimates that approximately 130 inspectors spend some time during the year inspecting the 2,424 blood banks and commercial plasma centers nationwide. All told, the agency has the equivalent of 28 full-time employees who work on blood issues.

Compare that with the U. S. Department of Agriculture, which has 7,200 agents conducting daily inspections of the nation's 6,300 meat and poultry processing plants.

"We can't have a cop on every corner," said Young, the FDA commissioner. Without additional money, the FDA will be forced to juggle inspectors from emergency to emergency, Young said. "That's the most efficient way to use our limited resources. "

The government's lackadaisical oversight of the blood industry can be seen in one recent action:

In July, the FDA published a proposed rule that would change the way blood banks label blood. It came seven years and one month after the issue was first recommended by an FDA advisory panel.