# [Docket Number 2004N-0115]{.underline}

# 

# Peter Neupert, chairman, drugstore.com

# Submitted Statement

# FDA Drug Importation Hearing

# April 14, 2004

Dear Mr. Chairman:

Thank you for the opportunity to speak today. I am Peter Neupert,
chairman of drugstore.com, inc. drugstore.com is a leading online
provider of health, vision, beauty and pharmacy products. Back in 1999,
I testified in Congress regarding options to maximize the benefits of
the Internet while protecting consumers. It is in our role as a leading
Internet pharmacy that I address you today. I hope you will agree that
what I have to say is in the best interest of consumers and helps move
the debate between safety versus affordability forward.

To date, you have heard from consumer groups who say that drug
importation is already happening. They're right. You have heard from
industry representatives who have said the current practice of
importation is unsafe. And they're also right.

The Internet has empowered consumers to comparison shop for their
prescriptions. For example, drugstore.com was the first to make all of
its prescription drug prices available online to any consumer -- and
that's because we believe that empowerment is a positive thing. However,
it is the same medium -- the Internet -- that has made it so easy for
unscrupulous, unregulated and untouchable entrepreneurs to take
advantage of and put U.S. consumers at real risk for their health.
Whatever you decide about importation, it is crucial that your
recommendations include steps to make the Internet safe for pharmacy
shoppers. The only way to accomplish that is with uniform verification
and certification standards for all online pharmacies, whether foreign
or domestic, coupled with restrictions on e-commerce enablers, such as
payment systems, search engines and shippers, to help enforce those
standards.

Since opening in 1999, drugstore.com has been committed to -- and has
significantly invested in -- making our Internet store a safe,
affordable channel for prescription drug delivery. We've always wanted
to ensure that anyone ordering prescription drugs and submitting
sensitive health information over the Internet had confidence in the
integrity of our product. Our safety and privacy claims have been
substantiated by a thorough audit conducted by a trusted, unbiased,
independent organization, the National Association of Boards of
Pharmacy. Trusted verification is especially important on the Internet,
because the consumer does not have the visual cues available in the
physical world -- such as neighborhood, cleanliness, orderliness and the
like. Because we are certified by the NABP, our customers know that we
comply with state licensing and inspection requirements, as well as with
other stringent pharmacy practice criteria established by the NABP. Our
customers know that they're getting good drugs.

Consumers don't have that certainty with many online pharmacies. There
is no doubt that serious problems exist with the practices of some
Internet pharmacies, and in particular with some sites outside the
United States. The FDA's own studies have shown that some shipments are
counterfeit, some sub-potent, some superpotent, some contaminated, some
expired. Some online pharmacies ship drugs improperly, others ship
without a prescription. Perhaps the risk is small, perhaps not. Not
knowing cannot be the right answer when the consequences can be life
threatening. Without uniform oversight by a reliable authority, there is
no sure way to know who to trust or how great the problem really is.

As the phenomenon of cross-border importation of prescription drugs
becomes more popular and widespread, the problems will get only worse --
exponentially. This is the nature of the Internet. Trends accelerate at
breakneck pace. Consumer demand will create supply while even more
marginal players set up shop to tap into a bigger and more lucrative
market. Any problems that exist with the current laissez-faire approach
of cross-border importation, from therapeutic failures to
life-threatening events, will only be exacerbated. An uncontrolled
free-for-all without mandatory certification and enforcement can never
claim to put the patient's health interests first. Today, bad actors can
too easily set up camp, take advantage of consumers and get out of town
before the authorities arrive and the number of illegitimate players
will continue to multiply at Internet speed unless we take action.

By harnessing the Internet, we think drugstore.com is on to something
quite important -- and possibly revolutionary. To date, drugstore.com
has safely dispensed more than 2.3 million prescriptions to consumers in
all 50 states. We leverage the power of the Internet to provide
discounts of 20 to 30 percent off the prices of traditional
brick-and-mortar pharmacies. Moreover, we are providing important health
information that can improve health outcomes. These added value services
range from e-mail refill reminders, to an Ask Your Pharmacist
question-and-answer page to eMed Alert for more timely announcements.
And we do all this while conforming to all applicable federal, state,
and local regulatory controls. For the safety of consumers and the
viability of the Internet as lower cost drug delivery channel, it is
critical that all Internet pharmacies, whether here or outside the
United States, play by the same rules. Today, far too few Internet
pharmacies follow the regulations designed to protect consumers, thereby
putting consumers at risk. drugstore.com is already delivering drugs
safely and more affordably than many, if not most, of our domestic
counterparts. And generic drugs are already cheaper on the drugstore.com
web site than most sites in Canada and other nations with price
controls. With respect to branded drugs, however, even our lower prices
cannot compete with prices in countries with price controls. But price
cannot be the only consideration here. Without appropriate standards and
enforcement mechanisms in place, opening our borders undermines
confidence in the safety, reliability and affordability of the Internet
distribution channel. Our non-verified counterparts outside the United
States, even if "legitimate" in their own country, are not required to
follow any rules when selling drugs to Americans. Health Canada, for
example, does not regulate pharmacies catering to U.S. citizens. And
with U.S. pharmaceutical companies increasingly limiting their drug
shipments to amounts needed by Canadian citizens, more and more
cross-border pharmacies are turning to the illegal gray market -- with
its illicit operators, questionable manufacturing conditions, and
counterfeit suppliers -- to procure the drugs they sell.

A spot check by drugstore.com identified literally hundreds of websites
that dispense drugs. Many claim to offer free physician consultations
solely for the purpose of selling these drugs. Many appear to be located
internationally. I admit, many of these Internet pharmacies may be
legitimate. But the average consumer cannot say, with any degree of
confidence, which foreign sites are safe and which are not. It's one
thing to make a trip on a bus and check it out -- it is another to go to
the Web, where a store can be built in a day and product shipped from a
basement or garage or a site that appears to be located in the U.S. or
Canada might actually be operating from Bangladesh or Pakistan. Right
now, the situation is buyer beware. Is that the way we want to run our
health care system?

With the current practice of drug re-importation, consumers are on their
own. But they are not given the right tools or information to help them
make health decisions in their best interest. Without a certification
standard, there is no reasonable assurance that the people doing
business on the other end of the line are honest, reputable or truly
concerned about your health. In fact, the General Accounting Office
reports that as many as a third of the \"pharmacies\" operating online
appear to have no safeguards to protect the consumer. And if something
goes wrong, there's no authority with oversight to help remedy the
situation. That is, if you can find an address or phone number in the
first place.

According to a recent drugstore.com analysis of pharmacies listed on
Google and other popular search engines:

-   Many don't provide a company address or phone number.

-   Many provide medications without a prescription or with a
    prescription procured through a short online "consultation"; and

-   Many dispense compounds that are either illegal or subject to
    special controls here in the U.S.

Below is just one example of a suspicious operator:

![](media/image5.wmf)

apprentice

I would venture to say that this site is not FDA approved, even though
the "FDA approved" logo appears to be making that claim. This site
undermines the doctor patient relationship -- and patient safety -- by
requiring no prior prescription. It showcases the U.S. flag, presumably
to look like a U.S. company, but the address is in Canada. There are
thousands more suspicious sites like this. I would guess that we all
have received ads similar to this one in e-mail boxes.

To address the problems that I have described, drugstore.com recommends
that, in order to legally sell pharmaceuticals online to U.S. consumers,
an organization -- domestic or foreign -- would have to meet a uniform
certification standard. I recommend that we adopt a standard similar to
the National Association of Boards of Pharmacy's Verified Internet
Pharmacy Practice Sites, or VIPPS, program. Through VIPPS, drugstore.com
customers know that when they do business with us they are dealing with
a company that makes safety and health a priority. And that is my point
here today. No matter who they are dealing with, consumers should have a
reasonable assurance that they are trusting their health to a pharmacy
committed to safety; that asks for a physician's prescription every
time; that treats controlled substances carefully and mitigates any
potential for abuse; that checks for drug interactions; that takes the
time to collect a health history to identify possible contraindications
before dispensing medications; and that protects private, confidential
health information. It is one thing to say we are doing this, as every
Internet pharmacy claims. It is quite different when a reputable,
independent organization with rigorous standards like the NABP says so.

Once such a uniform standard has been adopted and introduced, I
recommend the following three-tiered approach to help enforce that
standard:

1.  Make it illegal for online pharmacies to advertise on search engines
    unless they meet the approved certification standard and prohibit
    search engines from accepting advertisements from online pharmacies
    that are not properly certified.

2.  Stop credit card payments to pharmacies that do not meet the
    certification standard criteria (i.e., illegal pharmacies), to stop
    funding at the source. This would be similar to efforts by Congress
    to starve funding of illegal Internet gambling sites. The activities
    of uncertified pharmacies would be illegal under U.S. law, by
    definition, and should be stopped. Stemming the flow of funds to
    these sites will largely help to accomplish that goal.

3.  Motivate third party shippers to refuse shipments from pharmacies
    who do not meet the certification standard. One of the benefits of a
    clear certification standard is that the e-commerce enablers (media,
    payment, and delivery companies) can identify legitimate pharmacies
    vs. illegal operators.

Buying drugs online should be superior experience: convenient,
affordable, and private. The Internet enables comparison shopping and
empowers the consumer. But in today's world, purchasing drugs online is
fraught with peril, because the Internet can serve as a simple disguise
for bad actors and unscrupulous hucksters. It is hard to tell the honest
from the dishonest; the ethical from the unethical. And without
standards and certification, we are asking everyday citizens to make
decisions about whether a product is contaminated or harmful, whether it
is counterfeit, or the right dose, dispensed with a proper prescription
or delivered with appropriate instructions. Is it reasonable to expect
consumers to be able to tell the difference?

Yes, affordability is a big issue. There's no doubt that the Internet is
part of the answer. But encouraging consumers to embark on a worldwide
shopping spree based on lowest price -- without regard to safety -- is
no solution either. There must be a way to create a system that is
appropriately balanced, allowing for innovation and the creation of
miracle drugs for our children and grandchildren while allowing tiered
pricing for those with special needs, including the nations of
sub-Saharan Africa who are fighting the AIDS pandemic, or seniors in our
country with limited sources of income.

I do not pretend to have all the answers. I do know that seniors -- and
all Americans --deserve a system they can trust. This means finding a
solution that combines safety with affordability. We deserve to be
protected from fly-by-night operations and unscrupulous profiteers who
set aside all safety concerns to make a buck. We require a system where
Internet pharmacies all play by the same rules and the rules ensure
consumer safety is not compromised.

Thank you.