Pharmacies Endorse Crackdown on Fraud
New York Times – Oct 24, 2005
WHEN the dot-com bubble burst five years ago, hundreds of would-be Internet kingpins exited the industry in shame. But at least they were not wearing handcuffs.
The same cannot be said for the online merchants caught in the latest bust – this one of a swindle, not a bubble. Late last month, federal drug investigators shut down 4,600 illegal Internet pharmacy sites and arrested 18 people who ran them from locations across the United States.
The authorities stopped short of claiming that the crackdown dismantled the illegal online market for Viagra, Propecia, Oxycodone and other black-market medications, but they said it could scare off some sellers who had operated with impunity for years. Law-abiding online pharmacies like Drugstore.com, KwikMed.com and others hope so, because driving out the bad eggs could mean more sales for them.
“The rogue pharmacies siphon off sales from legitimate consumers who happen to have a prescription,” said Greg French, a spokesman for Drugstore.com. “But the more significant issue is the impact they have on the reputation of legitimate players.”
Some consumers are avoiding Drugstore.com and other bona fide providers, Mr. French said, because they are unsure which sites are legitimate. With a little bit of graphic design flair and some HTML artistry, it is easy enough for unlicensed drug sellers to pass themselves off as being aboveboard.
To discerning viewers, though, the fraudulent sites are easy to spot. Many of the shuttered online stores purported to offer prescriptions by legitimate doctors, following “safe and secure” online diagnoses. These typically took the form of a short questionnaire – with the right answers already checked off – asking about the patient’s symptoms and general health.
The form would then supposedly be sent to the site’s licensed physician, who would write a prescription and forward it to a licensed pharmacist. In reality, many of the Web sites would either fill the orders themselves or send them to an illegal wholesaler for a commission.
The profits could be huge. Garrison Courtney, a spokesman for the United States Drug Enforcement Administration, which led the recent investigation, said customers typically paid $400 for drugs that would have cost $40 with a legal prescription.
What that means is that the customers who patronized these sites could not or would not get the prescriptions from their own doctors. That being the case, legitimate sites may not see much of a sales bump from the demise of so many black-market pharmacies, according to Lynne Bishop, a health industry analyst with Forrester Research, an online consulting firm. “These are two very different markets,” Ms. Bishop said. People who buy prescription drugs from lawful sites, she said, tend to be “in touch with costs, quality, researching medications and medical conditions, and they’ll bring these types of issues to their doctor.”
Not only are online prescription-drug customers rare; they seem to be growing rarer. So far this year, about 8 percent of America’s 150 million prescription-drug users have bought their medications online, down from 8.6 percent last year.
Ms. Bishop said online prescriptions might well be headed for an uptick, but it would not be because of drug busts. Rather, she said, the supply of illegal prescription drugs is shrinking as drug manufacturers crack down on unscrupulous distributors and step up efforts to authenticate drugs. At the same time, insurers are encouraging and sometimes even requiring customers to fill their prescriptions on the Internet as a way to cut costs. Some legitimate online pharmacists say the government’s pursuit of Internet outlaws is already helping the bottom line.
“Our business is increasing with the crackdown on these sites,” said Peter Ax, the chief executive of KwikMed, a privately held Scottsdale, Ariz., pharmacy that sells drugs for erectile dysfunction and baldness. “People are seeking out the legitimate providers.”
KwikMed appeals to those who are too embarrassed to see a doctor or to pick up prescriptions at the drugstore counter. KwikMed.com features a questionnaire devised by a real physician, requiring customers to answer anywhere from 20 and 200 questions.
If KwikMed’s doctors determine that a patient needs a prescription, they issue one and an outside pharmacist ships the medicine. (Adult signatures are required at the time of delivery, to verify the patient’s identity and age.) If the doctors conclude that a prescription is not warranted, the site records data like the applicant’s address, which can help KwikMed thwart further efforts by the same person to get pills.
KwikMed, which Mr. Ax said was a rogue pharmacy until he bought it for an undisclosed price in 2001, claims it is unique in its ability to issue online prescriptions without a physical examination. That distinction comes courtesy of the State of Utah, which in 2003 issued the company a license to operate after reviewing KwikMed’s diagnostic software and medical procedures.
The site’s prices are higher than traditional pharmacies charge. A 20-pill bottle of Viagra, for instance, costs roughly $300, compared with about $220 in a drugstore. Patients pay nothing for the online exam.
Mr. Ax, who was once head of the Lehman Brothers’ private equity division, said his company might eventually expand its roster of drugs, but not anytime soon. “We’ll only do it if we can operate under lawful guidelines with regulators working with us,” he said. “But we think we have a vision for what the nontraditional delivery of medicine can be.”
“And if we do things right, the bad guys who are less than ethical will go away, and our business will increase.”