UPS settles with DoJ over facilitating illicit online-pharmacy shipments

Article

DoJ praises company for being a "good corporate citizen" while slamming it with a $40-million penalty

Eyes in the pharma distribution industry were rolling last year when word came out that the Drug Enforcement Administration and the US Attorney’s Office for Northern California were investigating UPS, and also FedEx, for shipping pharmaceuticals sold illegally via online “pharmacies” (which are often fronts for counterfeit drug sellers). The problems are, first, that except for a very rigorous program, Verified Internet Pharmacy Practice Sites (VIPPS) maintained by the National Assn. of Boards of Pharmacy, online drug selling continues to be a loosely regulated and poorly enforced arena of commerce; and second, that the Controlled Substance Drug Act (which brought DEA to life) puts a burden on many types of drug distributors, including wholesalers, to police its clientele for illegal activity—for which the distribution intermediaries have only limited ability to do.

Nevertheless, UPS and DoJ have now entered into a “non-prosecution agreement” where, for the next two years, UPS will maintain an “online pharmacy compliance program” and hire an independent program auditor who will report to DoJ. The program includes training all UPS staff, setting up an anonymous internal reporting program, and investigating claims.

The DoJ news release includes an attachment detailing the progression of incidents involving UPS small-parcel business and its marketing activities, dating back to 2003 and continuing into 2010, showing that “Despite being on notice that [illegal] Internet pharmacies were using its services, UPS did not implement procedures to close the accounts of those pharmacies, permitting them to ship controlled substances and prescription drugs.”

In a statement released on April 1, UPS said: “UPS has entered in to a non-prosecution agreement with the U.S. Department of Justice (DOJ) to resolve issues involving the shipment of drugs sold through illegal Internet pharmacies. UPS cooperated with the DOJ throughout the investigation. We believe we have an obligation and responsibility to help curb the sale and shipment of drugs sold through illegal Internet pharmacies. UPS will pay a $40 million penalty and has agreed to enhance its compliance policies with respect to Internet pharmacy shippers.”

Suspicious order monitoring

Another attachment to the DoJ release details what UPS will be obligated to do, the key being not “to knowingly pursue the business of online pharmacies that are violating state and federal laws regarding the distribution of prescription pharmaceuticals.” An “online pharmacy” is one that “permits a consumer to obtain prescription drugs without any written prescription, or … a pharmacy that provides prescription drugs to consumers where the prescription was issued solely through the completion of an online questionnaire without an in-person medical evaluation.” No mention is made of the VIPPS program in the agreement (although that would be prima facie evidence of a legitimate online pharmacy); moreover, while there is a contorted way of negotiating DEA and state-pharmacy rules to keep UPS on the right side of the law, in fact, some states allow for prescriptions to be made without face-to-face medical evaluations.

All these technicalities are similar to the situation faced a year ago by Cardinal Health, whose Lakeland, FL, DC is still prohibited from distributing controlled substances while the company puts in place a more robust suspicious-order monitoring (SOM) system. When Cardinal’s facility was temporarily under license suspension by DEA, its management argued that they were being compelled to police a market where they had insufficient evidence to differentiate proper from improper controlled-substances distribution. But ultimately, Cardinal settled with DEA. There are also parallels with the DoJ settlement with Google a couple years ago, wherein Google paid a $500-million fine for knowingly accepting illicit online-pharmacy advertising (which cuts down on the consumer click-throughs, but does little to prevent such pharmacies from appearing in search results).

It was reported, when the DEA/DoJ investigation of UPS and FedEx new broke, that FedEx had no plans to plea bargain with the Dept. of Justice. In its latest 10Q report, filed in March, FedEx reiterated that “We do not believe that we have engaged in any illegal activity and will vigorously defend ourselves in any action that may result from the investigation.”

To the extent that pharma manufacturers can hand off SOM and related worries to their 3PLs and wholesalers, they can avoid much of this logistical complexity. And any measures that throttle the trade in either counterfeit or gray-market branded pharmaceuticals via illicit online sources, provides better protection to the industry, as well as patients. Still, the growing complexity of distributing controlled substances and managing pharmaceutical e-commerce will add a cost.

Related Videos
© 2024 MJH Life Sciences

All rights reserved.