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American ShipperShippingTrade and Compliance

Government indicts FedEx over Internet pharmacy deliveries

   A federal grand jury in San Francisco has indicted FedEx Corporation and two subsidiaries with conspiracy to traffic in controlled substances and mis-branded prescription drugs because of its role in distributing controlled substances and prescription drugs for illegal Internet pharmacies.
   “We will plead not guilty. We will defend against this attack on the integrity and good name of FedEx and its employees,” said Patrick Fitzgerald, senior vice president marketing and communications for FedEx, said in a statement.
   According to the indictment, Internet pharmacies started offering consumers prescription drugs, including controlled substances, beginning in approximately 1998. While some Internet pharmacies were managed by well-known pharmacy chains that required valid prescriptions and visits to the patient’s personal physician, others failed to require a prescription before filling orders and filled orders based solely on the completion of an online questionnaire, in violation of federal and state law.
   The government said at least as early as 2004, DEA, FDA and members of Congress and their staff informed FedEx that illegal Internet pharmacies were using its services to illegally ship drugs, and that the company knew it was delivering drugs to dealers and addicts.
   “FedEx’s couriers in Kentucky, Tennessee and Virginia expressed safety concerns that were circulated to FedEx senior management, including that FedEx trucks were stopped on the road by online pharmacy customers demanding packages of pills; that the delivery address was a parking lot, school, or vacant home where several car loads of people were waiting for the FedEx driver to arrive with their drugs; that customers were jumping on the FedEx trucks and demanding online pharmacy packages; and that FedEx drivers were threatened if they insisted on delivering packages to the addresses instead of giving the packages to customers who demanded them,” said the DOJ. “In response to these concerns, FedEx adopted a procedure whereby Internet pharmacy packages from problematic shippers were held for pick up at specific stations, rather than delivered to the recipient’s address.”
   The DOJ said that FedEx came out with an Online Pharmacy Credit Policy in 2004 that required credit approval before a new online pharmacy account could be opened. This move, the DOJ said, was to protect FedEx because state and local governments were shutting down these illegal pharmacies, and FedEx was left with large balances that would never be paid.
   In March 2013, the DOJ said it had entered into a non-prosecution
agreement with UPS in which the integrator agreed to forfeit $40 million
it received from illicit online pharmacies and to implement a
compliance program designed to ensure that illegal online pharmacies
will not be able to use UPS’ services to distribute drugs.
   U.S. Attorney Melinda Haag said that the indictment holds organizations that “knowingly enable illegal activity” accountable.
   “The advent of Internet pharmacies allowed the cheap and easy distribution of massive amounts of illegal prescription drugs to every corner of the United States, while allowing perpetrators to conceal their identities through the anonymity the Internet provides,” she said.
   FedEx spokesman Fitzgerald said his company has worked closely with the authorities for 42 years.
   “We’re proud to say that we have partnered with the FBI, the Department of Homeland Security, DEA, and other federal, state and local law enforcement teams around the world to help stop illegal drug activity and bring criminals to justice. These efforts include providing assistance to the DEA in combating rogue internet pharmacies,” Fitzgerald said. “We have repeatedly requested that the government provide us a list of online pharmacies engaging in illegal activity. Whenever DEA provides us a list of pharmacies engaging in illegal activity, we will turn off shipping for those companies immediately. So far the government has declined to provide such a list.”
   Fitzerald added that these charges put the privacy of FedEx customers at risk.
   “We want to be clear what’s at stake here: The government is suggesting that FedEx assume criminal responsibility for the legality of the contents of the millions of packages that we pick up and deliver every day. We are a transportation company — we are not law enforcement. We have no interest in violating the privacy of our customers. We continue to stand ready and willing to support and assist law enforcement. We cannot, however, do the job of law enforcement ourselves.”
   FedEx is charged in the indictment with conspiring with two separate but related Internet pharmacy organizations: the Chhabra-Smoley Organization, from 2000 through 2008, and Superior Drugs, from 2002 through 2010. In each case, FedEx is alleged to have knowingly and intentionally conspired to distribute controlled substances and prescription drugs, including Phendimetrazine (Schedule III), and Ambien, Phentermine, Diazepam, and Alprazolam (Schedule IV), to customers who had no legitimate medical need for them based on invalid prescriptions issued by doctors who were acting outside the usual course of professional practice.
   “Illegal Internet pharmacies rely on illicit Internet shipping and distribution practices. Without intermediaries, the online pharmacies that sell counterfeit and other illegal drugs are limited in the harm they can do to consumers,” said Philip J. Walsky, acting director of the FDA’s Office of Criminal Investigations. “The FDA is hopeful that today’s action will continue to reinforce the message that the public’s health takes priority over a company’s profits.”
   FedEx has been summoned to appear in federal court in San Francisco on July 29.

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Chris Dupin

Chris Dupin has written about trade and transportation and other business subjects for a variety of publications before joining American Shipper and Freightwaves.
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