Congress Targets Colorado Company In Drug Markup Investigation

WESTMINSTER, Colo. (CBS4) - Members of Congress sent letters on Wednesday to several suspected fake pharmacies asking for information about their businesses. They're targeting so called "gray marketers," allegedly set up to buy and resell drugs at huge markups.

The practice is contributing to shortages of crucial medications for cancer and other illnesses. CBS 4 Health Specialist Kathy Walsh has learned a Colorado company is part of the gray market investigation.

The company is Superior Medical Supply Inc. It's being investigated by a Congressional committee to determine why prices for life-saving medications -- a cancer drug in particular -- are being sold at higher rates.

The company attorney told CBS4 the allegation is not true.

"We're a fully-licensed and legitimate company trying to do the right thing," attorney Gabe Carter said.

Superior Medical Supply, a drug wholesaler, operates out of a Westminster office complex.

"We do not price gouge," Carter said.

But last October Superior got a letter from a congressional committee requesting documents about the company's purchase and sales of the drug paclitaxel, also known as Taxol. According to the Food and Drug Administration, the medication is used to treat breast and ovarian cancer and is in critically short supply.

The House Committee on Oversight and Government Reform alleges that while the drug sells typically for $65 a vial, Superior offered to sell it for $500 a vial, more than seven times a typical price.

"We purchase at a much higher acquisition cost to begin with and employ standard commercially reasonable margins," Carter said. "Our standard margin on it is less than 36 percent."

After another letter from the committee and later a congressional subpoena, Superior provided the documents to a senator.

"I think that we've established that we don't hoard drugs or price gouge and that's what they were concerned about," Carter said.

But a congressional staffer told CBS4 the House committee has yet to see the paperwork and its investigation of Superior is definitely not over.

Carter offered his own suspicions.

"The folks who put the allegations of price gouging out there are very large companies interested in potentially taking our market share," Carter said.

He said Superior is a very small company that doesn't have the physical capacity to actually affect the drug supply nationwide.

CORRECTION: An earlier version of this story stated incorrectly that the letters went out on Wednesday to two dozen suspected fake pharmacies.