December 2005, Page 32

Internet Pharmacy: Gray Area With Big Profit And High Risks
By Patrick J. Egan

In September 21, 2005 the United States Attorney for the Northern District of Texas charged 16 defendants in a multi-million dollar healthcare fraud and Internet pharmacy scheme. The 201-count federal indictment was returned by a grand jury in Dallas. Twelve search warrants were executed in Dallas and four in Florida. In a press release the U.S. Attorney said, “More than $200 million in pharmaceuticals was fraudulently purchased from commercial pharmaceutical wholesalers and diverted for fraudulent and illegal distribution through rogue Internet pharmacies.”

The arrests were the culmination of a two and a half year joint investigative operation, called “CYBER X,” which included law enforcement officers from U.S. Food and Drug Administration, the Drug Enforcement Administration, the Bureau of Investigation, the Internal Revenue Service - Criminal Investigation, the U.S. Department of Veteran Affairs - Office of the Inspector General; the Texas Department of State Health Services and the Texas State Board of Pharmacy.

The past few years have seen an explosion in Internet pharmacy sites. These sites range from large tightly controlled sites managed by well known pharmacy chains to off-shore boiler-rooms selling counterfeit prescriptions. In between lies a continuum of prescription drug sales. Each business model presents different issues and legal challenges. Technology has moved at high speed access pace while legislation has limped along like a ten-year-old dial-up connection. Congress has been trapped in a Catch 22 between its desire to look tough on drugs, and the fear that it will be seen as opposed to reasonable cost prescription medicines. This has created a vacuum in which pharmacists willing to take the risk of significant legal exposure in order to reap the substantial profits readily available through sales of Internet prescriptions may face federal prosecution. This article will explore the state of the law, present industry practice and the government’s view of this growing area of commerce.

Internet Pharmacy Overview

Internet pharmacies come in several forms. They range from the dot-com Internet sites of brick-and-mortar pharmacies such as CVS and Rite-Aid to offshore sites that ship counterfeit pharmaceuticals into the United States and require no prescription whatsoever. These opposite ends of the spectrum pose few regulatory questions. The former are considered clearly legal; the latter patently criminal enterprises. It is the large group of Internet pharmacies that lie in between that pose significant legal questions. They are largely distinguished from the brick and mortar sites by their practice of filling prescriptions based on on-line questionnaires.

The DEA has forcefully taken the position that prescriptions written based on an on-line questionnaire are invalid. As authority for its position it cites to the controlled substances act from a statutory hybrid of 21 USC 841 and 21 CFR 1306. Section 841 is a broad tool with which the DEA can mark one guilty of committing a banned activity. It states, “it shall be unlawful for any person knowingly or intentionally to manufacture, distribute, or dispense, or possess with intent to manufacture, distribute, or dispense, a controlled substance.” To apply this statute to the sale of drugs via online questionnaires, the DEA melds § 841 with 21 CFR §1306.04, which states “a prescription for a controlled substance to be effective must be issued for a legitimate medical purpose by an individual practitioner acting in the usual course of his professional practice.” The DEA has openly stated this position in the Federal Register. “Prescriptions issued not in the ‘usual course of professional treatment’ are not ‘prescriptions’ for the purposes of the Controlled Substances Act and individuals issuing and filing such purported prescriptions are subject to the penalties for violating the CSA’s controlled substances provisions.” EZRX, 69 Fed. Reg. 63,179 (2004).

While the DEA’s position seems logical at first blush, there is no specific legal authority outlawing the practice of prescribing medicine through Internet consultation. There are several societal factors that vitiate in favor of such practices, including access to lower income patients. Furthermore, Internet consultation is rapidly growing among traditional and indeed cutting edge medical practices. The DEA however, taking its cue from the Food and Drug Administration, designates “rogue” pharmacies’ use of online questionnaires as undermining established medical supervision, and quotes the American Medical Association to establish as much. “According to AMA, this method of providing prescription medication falls well below the accepted standard of medical care.”1 Concerning “rogue” pharmacies, the opinions of both the DEA and the AMA mirror those held by the National Association of Boards of Pharmacy and the Federation of State Medical Boards.
 
Operation Pharmnet

In 2004, the Drug Enforcement Agency’s Office of Diversion Control informed state law enforcement officials that the Bush administration was cracking down on pharmaceutical drug abuse in the United States. In a report issued at a convention of state law enforcement officials in San Diego, the DEA informed attendees that Americans are now getting get high on pharmaceutical drugs in record numbers.2 According to the DEA report (citing the 2003 National Survey on Drug Use and Health), between the years 2002 and 2003, nonmedical use of Vicodin increased almost 20 percent and nonmedical use of OxyContin increased 47 percent. And the DEA report unequivocally communicated that the source of the pills is “rogue” online pharmacies, Internet pharmacies originally created to anonymously sell Propecia and Viagra that switched to painkillers to both satisfy and create an increasing demand for these and other drugs.

In the 2004 report, the DEA presented the following ratio as a justification for their belief in the link between pill abuse and online pharmacies: Whereas controlled substances constitute 11 percent of the 181 prescriptions the average brick-and-mortar pharmacy fills a day, controlled substances constitute 95 percent of the 450 prescriptions the average online pharmacy fills per day.3 For the DEA, this ratio is proof of the connection between what it deems pervasive pill abuse by the American public and Internet pharmacies. And to break the distribution network, the DEA launched Operation Pharmnet, whose purpose, according to the DEA, is the following:

• National takedown of rogue Internet pharmacies and “Cyber Docs”

• “Warning Shot” to physicians and pharmacies who might become, or who already are, affiliated with these schemes

• Focus attention on the problem of rogue Internet pharmacies illegally dispensing controlled substances

• Send a clear message that the DEA is aggressively pursuing President’s prescription drug initiatives.4
 
When the DEA performs a “takedown” of a “rogue” Internet pharmacy, the DEA spreads the word. Under the auspices of Operation Pharmnet, the DEA Diversion Control Division conspicuously communicates play-by-play takedowns of “rogue” Internet pharmacies on its Web site. These communiqués are also recorded in the Federal Register and offer one an opportunity to see the government’s view of the law as executed in Operation Pharmnet.

The DEA first applies 21 USC 823 and 824 of the Controlled Substances Act to force an online pharmacy to cease operating. These statutes govern the granting and rescinding of licenses to dispense controlled substances. Section 823(f) specifically governs pharmacies’ whose applications may be denied if the Attorney General determines “the issuance of such registration would be inconsistent with the public interest.” The statute defines public interest as involving the recommendations of state licensing boards, an applicant’s experience in dispensing controlled substances, and conduct that may threaten public health and safety. Under 21 USC 824(d), federal authorities may deny, revoke, or suspend a pharmacy registered under section 823 if the pharmacy’s existence presents an imminent danger to the public health or safety.

The case of EZRX provides an example. EZRX, LLC Revocation of Registration, 69 Fed. Reg. 63,178 (2004). In 2003, Miami DEA shut down C&H Wholesale, a distributor of controlled substances, and Lifeline Pharmacy, an online retail pharmacy, both of which were owned by an entrepreneurial husband and wife. C&H distributed drugs to Lifeline and other South Florida pharmacies that filled prescriptions via the Internet and the DEA suspended both companies’ registrations under 21 U.S.C. sections 823 and 824 on the grounds they threatened the public safety. With their businesses closed in Florida, the owners opened a new Internet-based pharmacy in New Jersey and named it EZRX.

After learning of the existence of EZRX in New Jersey, Miami DEA made an undercover purchase from a Florida-based pharmacy website for a weight-loss medication by completing an Internet-based medical questionnaire. They sent the pharmacy a money order and received a package from EZRX in New Jersey containing the medication with an EZRX label. The issuing physician had no contact with the undercover investigator besides the Internet questionnaire. As a result of this undercover operation, the DEA ordered EZRX to show cause as to why not to revoke its license under 823(f) and suspended EZRX’s license to distribute drugs under 824(a) for reason that continued registration would be inconsistent with the public interest. “EZRX was further notified that its DEA registration was immediately suspended as an imminent danger to the public health and safety pursuant to 21 USC 824(d).” Id.
Charging EZRX with an actual crime, however, required a bit more creativity. The DEA charged EZRX with illegally and methodically marketing controlled substances via the Internet. This illegality results from the statutory hybrid of 21 USC 841 and 21 CFR 1306 set forth above. Therefore, the alleged crime was not that EZRX issued these prescriptions, but that they didn’t issue them in the usual manner in which prescriptions are administered.

It appears DEA is of two minds. The first is concerned with protecting the public as evidenced by their application of §§ 823 and 824 to control the pharmacy’s operations. The second is regulatory, concerned with fortifying the federally-sanctioned relationship between federal regulators, pharmaceutical manufacturers, pharmacists, physicians, and patients that no longer exists in its “traditional” capacity when a customer completes an online questionnaire and a physician writes a prescription that is filled by a pharmacy possibly in another state. As such, the illegal activity charged to EZRX was not just distributing a controlled substance, but distributing a controlled substance in a way the DEA deemed contrary to the usual course of professional practice. As evidenced by the statutes applied in the “takedown” of “rogue” pharmacy EZRX, the DEA was as equally concerned that EZRX acted in a manner different than a traditional pharmacy as they were with the pharmacy being a threat to public safety.

Congress

Congress has created much talk but no action on the issue of regulating Internet pharmacies. On February 16, 2005, the Senate and the House of Representatives drafted bills titled “The Ryan Haight Internet Pharmacy Consumer Protection Act.” S. 399, 109th Cong., 1st Sess. (2005). Ryan Haight was a Southern California high school student who overdosed on hydrocone that he purchased online. Both bills are currently in committee and if either becomes law will likely exist in the realm of amendments passed to modernize the Controlled Substances Act (21 USC 351 et seq). The bill proposes significant changes in the function of online pharmacies.

If passed in its present form, the bill would strip doctor’s of their anonymity in reviewing online prescriptions, require a valid prescription in the United States, require at lease one in-person medical evaluation, and give the states authority to file civil or criminal actions against “rogue” pharmacies.

However, passage of the bill, either altered or in its current form, is impossible to divine. There is momentum to pass legislation governing Internet pharmacies, but such legislation stirs the issue of buying drugs from Canadian pharmacies and may pull into the discussion the contentious issue of drug prices. “We have two serious problems,” Senator Susan Collins (R-Me) acknowledged concerning Internet pharmacy regulations in Washington Internet Daily.5 “U.S. prescription drug users are seeking cheaper medication ‘but may receive counterfeit drugs,’ while addicts ‘are looking for ways to get drugs to which they are not entitled.’” Deep divisions exist over the Canadian drug issue, with Senator’s from border states lined up against Senators from big pharmacy states.
In the background lurks the issue of regulatory logistics and market forces. Internet pharmacies by their nature are capable of quick adaptation and relocation, as evidenced by the creation of EZRX in New Jersey after the DEA shut down the proprietors’ Florida ventures. Couple this mobility with American’s desire for cheaper drugs and the increased online presence of foreign Internet pharmacies selling their merchandise to Americans, and effectively regulating Internet pharmacies proves a complicated task.

In June 2004, the U.S. Senate Committee on Governmental Affairs published Internet Pharmacies, Some Post Safety Risks for Consumers, a report addressing the issue of imported pharmaceutical drugs procured via online transactions. Though most samples from Canada were found to be legitimately-filled prescriptions, drugs imported from other countries such as Pakistan and Argentina arrived in compact disc cases and soda cans. Dangerous medications lacked warnings. Yet testimony illustrated it would require a veritable regulatory fortress to keep these packages out of the United States. Customs officials at JFK International Airport estimate that 40,000 packages containing drugs enter the country through JFK alone each day. This is the estimate quoted by former New York Mayor Rudolph Giuliani, whose consulting firm is studying drug reimportation for the Pharmaceutical Research and Manufacturers of America. “While the GAO study ‘talked about 68 samples,’” Washington Internet Daily quoted Giuliani as saying, “‘this is a miniscule percentage’ compared to the “40,000 packages a day allegedly containing medicine’ arriving at JFK.” Giuliani estimated that of those 40,000 packages, 90 percent move through customs uninspected.

Present State Of The Law

In September 2004, a Federal Jury sitting in the Eastern District of Virginia, acquitted Prescription USA and its owner Sunil Sehti of charges brought by the government on the theories set forth above. The acquittal was based, in defense counsel’s view, on the lack of any clear statutory authority for the criminalization of prescriptions based on Internet questionnaires. Others charged in the case were less fortunate. Several doctors and pharmacists pleaded guilty rather than expend the substantial legal fees or be exposed to the enormous sentences that potentially would have been imposed after trial.

As a practical matter, the law gives little comfort to the Internet pharmacist. As long as DEA views this area of commerce to be illegal, the potential cost in both legal fees and psychological trauma of a full blown government investigation will remain prohibitive. Any pharmacist engaged in this area should be advised that they are opening themselves up to serious risk. On the other hand, Internet pharmacies are potentially lucrative businesses that are not strictly proscribed by law. Until Congress takes some action, Internet pharmacy cases will continue to be brought. The outcome of those cases will depend largely on the specific details of the manner in which the pharmacies operate their business model.

Notes

1. Id., p. 25

2. Report by the Drug Enforcement Agency’s Office of Diversion Control to the 2004 National Association of State Controlled
Substance Authorities Annual Conference can be found at: http: //www.nascsa.org/2004confer/Presentations/Good.pdf

3. Id., p. 28

4. Id., p. 32

5. Vol. 5, No. 117 (June 6, 2005). n


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