Congress probes whether small wholesalers are gouging drug prices

Congress is investigating whether some small drug wholesalers are gaming the system by setting up their own pharmacies to get their hands on drugs in short supply, diverting them to their wholesale operations and gouging prices.

The investigation, started in October, has found that some of these operations are selling drugs at hundreds of times their regular prices, reports Reuters.

The FDA reports that the number of drugs on its shortage list was 220 in 2011, a four-fold increase from 5 years ago.

While most drugs go from manufacturers to providers through three major distributors--AmerisourceBergen ($ABC), Cardinal Health ($CAH) and McKesson ($MCK)--smaller wholesalers handle distribution where those don't reach. It is here where opportunists might be slipping in.

According to information released Wednesday, one company, shut down in North Carolina late last year, hired a pharmacist and then ran a so-called pharmacy out of its wholesale offices. It then sold drugs in short supply through its wholesale operation at steeply inflated prices. The pharmacist surrendered her license when the operation was discovered during a routine inspection, Reuters reports.

Investigators said it is unclear where the pharmacies obtained the drugs or how much profit they have made.

"If it's not illegal, we need to make it illegal," said Rep. Elijah Cummings (D-MD), the senior minority member of the House Committee on Oversight and Government Reform, who initiated the investigation.

- read the Reuters story