Internet Pharmacies: Most Rogue Sites Operate from Abroad, and Many Sell Counterfeit Drugs
Published: 2014-02-27T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: While some Internet pharmacies are legitimate businesses that offer consumers a safe and convenient way to purchase their prescription drugs, the FDA and NABP have reported that thousands are fraudulent enterprises. Among other things, these rogue Internet pharmacies often sell counterfeit or otherwise substandard drugs. Consumers have experienced health problems as a result of purchasing drugs from rogue Internet pharmacies, and the proliferation and patronage of such entities has rendered them a public health threat. A number of federal and state agencies share responsibility for administering and enforcing laws related to Internet pharmacies, including FDA, DOJ, CBP, and ICE, as well as state boards of pharmacy.
This statement is based on GAO's July 2013 report, entitled Internet Pharmacies: Federal Agencies and States Face Challenges Combating Rogue Sites, Particularly Those Abroad ( GAO-13-560 ). In this report, GAO identified (1) how rogue sites violate federal and state laws, (2) challenges federal agencies face in investigating and prosecuting operators, (3) efforts to combat rogue Internet pharmacies, and (4) efforts to educate consumers about the risks of purchasing prescription drugs online. To conduct this work, GAO interviewed officials from federal agencies, reviewed federal laws and regulations, and examined agency data and documents. GAO also interviewed officials from stakeholders including NABP, drug manufacturers, and companies that provide services to Internet businesses.
section_title: What GAO Found
paragraphs: Although the exact number of rogue Internet pharmacies is unknown, one estimate suggests that there were over 36,000 in operation as of February 2014, and these rogue sites violate a variety of federal laws. Most operate from abroad, and many illegally ship prescription drugs into the United States that have not been approved by the Food and Drug Administration (FDA), including drugs that are counterfeit or are otherwise substandard. Many also illegally sell prescription drugs without a prescription that meets federal and state requirements. Foreign rogue Internet pharmacies use sophisticated methods to evade scrutiny by customs officials and smuggle drugs into the country. Their operators also often violate other laws, including those related to fraud and money laundering.
Rogue Internet pharmacies are often complex, global operations, and federal agencies face substantial challenges investigating and prosecuting those involved. According to federal agency officials, piecing together rogue Internet pharmacy operations can be difficult because they may be composed of thousands of related websites, and operators take steps to disguise their identities. Officials also face challenges investigating and prosecuting operators because they are often located abroad in countries that are unable or unwilling to aid U.S. agencies. The Department of Justice (DOJ) may not prosecute such cases due to competing priorities, the complexity of these operations, and challenges related to bringing charges under some federal laws.
Despite these challenges, federal agencies have conducted investigations that have led to convictions, fines, and asset seizures from rogue Internet pharmacies as well as from companies that provide services to them. FDA and other federal agencies have also collaborated with law enforcement agencies around the world to disrupt rogue Internet pharmacy operations. For example, FDA took action against 1,677 rogue Internet pharmacy websites in 2013 as part of a worldwide enforcement initiative. Other federal agencies such as U.S. Customs and Border Protection (CBP) and U.S. Immigration and Customs Enforcement (ICE) have also taken actions—for example, by interdicting counterfeit drug shipments from rogue Internet pharmacies at the border.
FDA and others have taken steps to educate consumers about the dangers of buying prescription drugs from rogue Internet pharmacies. FDA recently launched a national campaign to raise public awareness about the risks of purchasing drugs online, and the National Association of Boards of Pharmacy (NABP) posts information on its website about how to safely purchase drugs online. However, rogue Internet pharmacies use sophisticated marketing methods to appear legitimate, making it hard for consumers to differentiate between legitimate and rogue sites. NABP's recent analysis shows that 97 percent of the over 10,000 Internet pharmacies that it reviewed were out of compliance with laws or industry standards. Some rogue sites seek to assure consumers of the safety of their drugs by purporting to be “Canadian” despite being located elsewhere or selling drugs sourced from other countries.

section_title: Letter
paragraphs: I am pleased to be here today as you discuss the danger posed by  counterfeit drugs. One source of counterfeit drugs is Internet  pharmacies. While some Internet pharmacies are legitimate businesses  that offer consumers a safe, convenient, and cost-effective way to obtain  their medications, the Food and Drug Administration (FDA) and the  National Association of Boards of Pharmacy (NABP) have reported that  thousands are fraudulent enterprises. In addition to counterfeit drugs,  these “rogue” Internet pharmacies often sell prescription drugs that have  not been approved for sale in the United States, are substandard and  have no therapeutic value, or are harmful to consumers. Drugs sold by  rogue Internet pharmacies have been found to contain too much, too little,  or no active pharmaceutical ingredient, or the wrong active ingredient.  They have also been found to contain dangerous contaminants, such as  toxic yellow highway paint, heavy metals, and rat poison. Consumers who  have taken prescription drugs purchased from rogue Internet pharmacies  have experienced health problems, required emergency treatments, and  died. Despite the risks, buying prescription drugs on the Internet is not  uncommon. According to a recent survey conducted by FDA, nearly one  in four adult U.S. Internet consumers surveyed reported purchasing  prescription drugs online. At the same time, nearly 30 percent said that  they lacked confidence about how to safely purchase medicine online.  The proliferation and widespread patronage of rogue Internet pharmacies  has prompted public officials to identify them as a continuing public health  threat.
Like brick-and-mortar pharmacies, Internet pharmacies are subject to  federal and state statutes and regulations that are designed to ensure the  safety, efficacy, and proper administration of medications. No one federal  agency is designated as the lead in combating rogue Internet pharmacy  activity. Instead, a number of federal and state agencies share  responsibility for regulating prescription drugs that are marketed and sold  to U.S. consumers, including by Internet pharmacies. The federal  agencies have separate and distinct roles and often work together. For  example, FDA is responsible for ensuring the safety and effectiveness of  prescription drugs, and FDA approval is required prior to marketing  prescription drugs in the United States. U.S. Customs and Border  Protection (CBP) is responsible for enforcing laws prohibiting the illegal  importation of goods, including prescription drugs that have not been  approved for marketing in the United States by FDA. U.S. Immigration  and Customs Enforcement (ICE) is responsible for, among other things,  investigating violations of customs and trade laws, including those related  to trafficking in counterfeit goods. ICE also operates the National  Intellectual Property Rights Coordination Center, the mission of which is  to share information across 17 federal government agencies and four  foreign regulatory agencies, coordinate enforcement actions, and conduct  investigations related to intellectual property theft—including those that  occur through rogue Internet pharmacies. The Department of Justice  (DOJ) may investigate and prosecute an operator of an Internet  pharmacy that is suspected of violating federal laws. State agencies  regulate the practice of pharmacy through state boards of pharmacy and,  similarly, the practice of medicine though state medical boards.
My statement will highlight some of the key findings from our July 2013  report on Internet pharmacies, and includes selected updates to the  report. Among other things, our report identified (1) how rogue Internet  pharmacies are selling prescription drugs in violation of federal laws,   (2) challenges associated with federal investigations and prosecutions of  rogue Internet pharmacies, (3) efforts to combat rogue Internet  pharmacies, and (4) efforts to educate consumers about the risks of  rogue Internet pharmacies and how to recognize legitimate online  pharmacies.
To identify how rogue Internet pharmacies are selling prescription drugs  in violation of federal laws, we interviewed officials from federal agencies  such as FDA, CBP, ICE, and DOJ, reviewed federal laws and regulations,  and examined agency documents. To obtain additional information, we  interviewed a variety of knowledgeable stakeholders, including NABP and  LegitScript, an online pharmacy verification service, both of which  routinely review Internet pharmacy websites to determine compliance with  federal and state laws.
To identify challenges involved in investigating and prosecuting rogue  Internet pharmacies, as well as efforts to combat rogue Internet  pharmacies, we interviewed officials from federal agencies, including  FDA, CBP, ICE, and DOJ. We obtained data from several federal  agencies that summarize their efforts to combat Internet pharmacies. We  discussed these data with agency officials, reviewed them for  reasonableness and consistency, and determined that they were  sufficiently reliable for our purposes. We also interviewed officials from  stakeholders involved in combating rogue Internet pharmacies, drug  manufacturers, and private companies that provide services to Internet- based companies. Finally, we reviewed published reports on rogue  Internet pharmacy operations.
To identify efforts to educate consumers about the risks of rogue Internet  pharmacies and how to recognize legitimate online pharmacies, we  interviewed officials from federal agencies and stakeholders to discuss  their consumer education efforts. We also reviewed available educational  campaign materials.
We conducted the work for the report on which this statement is based  from October 2012 to June 2013, and made selected updates in February  2014, in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
subsections: section_title: Most Rogue Internet Pharmacies Operate From Abroad and Many Violate a Variety of Federal Laws, Including by Selling Counterfeit Drugs
paragraphs: Although the exact number of rogue Internet pharmacies is unknown,  most operate from abroad. According to LegitScript, an online pharmacy  verification service that applies NABP standards to assess the legitimacy  of Internet pharmacies, there were over 36,000 active rogue Internet  pharmacies as of February 2014. Federal officials and other stakeholders  we interviewed consistently told us that most rogue Internet pharmacies  operate from abroad, and many have shipped drugs into the United  States that are not approved by FDA, including counterfeit drugs. In doing  so, they violate Federal Food, Drug and Cosmetic Act (FDCA) provisions  that require FDA approval prior to marketing prescription drugs to U.S.  consumers, as well as customs laws that prohibit the unlawful importation  of goods, including unapproved drugs. Many rogue Internet pharmacies  sell counterfeit, misbranded, and adulterated drugs, in violation of FDCA  provisions. Counterfeiting and trafficking or selling counterfeit drugs also  violate laws that protect intellectual property rights. Many also illegally  sell certain medications without a prescription that meets federal and  state requirements. Indeed, nearly 10 years ago, we made sample  purchases from a variety of rogue sites without a prescription and we  subsequently received several drugs that were counterfeit or otherwise  not comparable to the product we ordered.
To sell drugs to their U.S. customers, foreign rogue Internet pharmacies  use sophisticated methods to evade scrutiny by customs officials and  smuggle their drugs into the country. For example, rogue Internet  pharmacies have misdeclared the contents of packages, in violation of  customs laws. Rogue Internet pharmacies have disguised or hidden  their drugs in various types of packaging; for example, CBP has found  drugs in bottles of lotion and in tubes of toothpaste. Some of the drugs we  obtained when conducting work for our 2004 report were shipped in  unconventional packaging, including in a plastic compact disc case and in  a sealed aluminum can that was mislabeled as dye and stain remover   In addition, rogue Internet pharmacies also often violate other  wax.federal laws, including those related to fraud and money laundering.
section_title: The Complex and Global Nature of Rogue Internet Pharmacies Poses Substantial Challenges for Federal Investigators and Prosecutors
paragraphs: Rogue Internet pharmacies are often complex, global operations, and  federal agencies face substantial challenges investigating and  prosecuting those involved. According to federal agency officials, piecing  together rogue Internet pharmacy operations can be difficult because they  may be composed of thousands of related websites, and operators take  steps to disguise their identities. The ease with which operators can set  up and take down websites also makes it difficult for agencies to identify,  track, and monitor rogue websites and their activities, as websites can be  created, modified, and deleted in a matter of minutes. Officials also face  challenges investigating and prosecuting operators because they are  often located abroad, with components of the operations scattered in  several countries. For example, as displayed in figure 1, one rogue  Internet pharmacy registered its domain name in Russia, used website  servers located in China and Brazil, processed payments through a bank  in Azerbaijan, and shipped its prescription drugs from India.
Even when federal agencies are able to identify rogue Internet pharmacy  operators, agency officials told us that they face jurisdictional challenges  investigating and prosecuting them. Agencies may need assistance from  foreign regulators or law enforcement in order to obtain information and  gather evidence. However, rogue Internet pharmacies often deliberately  and strategically locate components of their operations in countries that  are unable or unwilling to aid U.S. agencies. In addition, foreign law  enforcement authorities that are willing to aid investigations can be slow  in responding to requests for help, according to officials from several  federal agencies.
As a result of competing priorities and the complexity of rogue Internet  pharmacies, federal prosecutors may not always prosecute these cases.  Such cases are often resource intensive and often involve the application  of specialized investigative techniques, such as Internet forensics and  undercover work. Components of DOJ routinely prioritize cases for  prosecution by applying minimum thresholds associated with illicit  activities in order to focus their limited resources on the most serious  crimes. Accordingly, agencies may not pursue cases if it appears that  such cases do not meet relevant thresholds.
In addition, basing a prosecution on violations of the FDCA can be  challenging, which may contribute to prosecutors declining to pursue  rogue Internet pharmacy cases. Though rogue Internet pharmacy activity  clearly violates the FDCA, proving violations of the act’s misbranding and  counterfeiting provisions can be difficult, according to a DOJ official. In  addition, violations of these provisions of the FDCA are subject to  relatively light criminal penalties, which may limit prosecutors’ interest.  When federal prosecutors pursue charges against rogue Internet  pharmacy operators, they often charge them for violating other laws, such  as smuggling, mail fraud, wire fraud, or money laundering, since such violations can be less onerous to prove and carry stronger penalties.
section_title: Federal Agencies Have Taken a Variety of Steps to Combat Rogue Internet Pharmacies
paragraphs: Despite these challenges, federal agencies and others have taken actions  to combat rogue Internet pharmacies. Federal agencies have conducted  investigations that have led to convictions, fines, and asset seizures from  rogue Internet pharmacies as well as from companies that provide  services to them. Agencies have investigated rogue Internet pharmacies  independently and conducted collaborative investigations with other  federal agencies through ICE’s National Intellectual Property Rights  Coordination Center. Since our report was published in July 2013, DOJ  has continued to pursue those that import and traffic in counterfeit drugs,  as well as those that purchase from them. In addition, FDA formed a  Cyber Crimes Investigation Unit in 2013, and in 2014, the agency  announced its plans to expand its law enforcement presence overseas by  placing its first permanent agent at Europol—the European Union’s law  enforcement agency.
Agencies have also collaborated with law enforcement agencies around  the world to disrupt rogue Internet pharmacy operations. For example,  FDA and other federal agencies have participated in Operation Pangea,  an annual worldwide, week-long initiative in which regulatory and law  enforcement agencies from around the world work together to combat  rogue Internet pharmacies. In 2013, FDA took action against 1,677 rogue  Internet pharmacy websites during Operation Pangea. FDA officials told  us that the effect of such shutdowns is primarily disruptive since rogue  Internet pharmacies often reopen after their websites get shut down;  officials from federal agencies and stakeholders we spoke with likened  shutting down websites to taking a “whack-a-mole” approach. One  stakeholder noted that rogue Internet pharmacies own and keep websites  in reserve so that they can redirect traffic and maintain operations if any  of their websites get shut down.
Federal agencies responsible for preventing illegal prescription drug  imports have also interdicted rogue Internet pharmacy shipments. For  example, from fiscal years 2010 through 2012, CBP reported seizing  more than 14,000 illicit shipments of prescription drugs. However, FDA  officials noted that the sheer volume of inbound international mail  shipments makes it difficult to interdict all illicit prescription drug imports.
section_title: FDA and Others Have Taken Steps to Educate Consumers about the Risks of Purchasing Prescription Drugs from Internet Pharmacies, but Challenges Remain
paragraphs: FDA and others have taken steps to educate consumers about the  dangers of buying prescription drugs from rogue Internet pharmacies. In  September 2012, FDA launched a national campaign to raise public  awareness about the risks of purchasing drugs online. The campaign  provides information about the dangers of purchasing drugs from rogue  Internet pharmacies, how to identify the signs of rogue Internet  pharmacies, as well as how to find safe Internet pharmacies. Other  federal agencies have also taken steps to educate consumers about the  dangers of purchasing drugs online; for example, by posting information  on their websites.
NABP also posts information about its quarterly review of Internet  pharmacies, which most recently showed that 97 percent of the over  10,000 Internet pharmacies that it reviewed were out of compliance with  federal or state laws or industry standards. NABP also directs  consumers to purchase medicines from legitimate Internet pharmacies  that it has accredited. To assist consumers in more readily identifying  legitimate online pharmacies, NABP is working to launch a new top-level  domain name called .pharmacy. The association intends to grant this  domain name to appropriately licensed, legitimate Internet pharmacies  operating in compliance with regulatory standards—including pharmacy  licensure, drug authenticity, and prescription requirements—in every  jurisdiction that the pharmacy does business. LegitScript also helps  consumers to differentiate between legitimate and rogue Internet  pharmacies. It regularly scans the Internet and, using NABP’s standards,  classifies Internet pharmacies into one of four categories: (1) legitimate,  (2) not recommended, (3) rogue, or (4) pending review. When visiting its  publicly available website, consumers can enter the website address of  any Internet pharmacy and immediately find LegitScript’s classification.  As of February 3, 2014, LegitScript had classified 213 Internet  pharmacies as legitimate and therefore safe for U.S. consumers, on the  basis of NABP standards.
Despite these actions of agencies and stakeholders, consumer education  efforts face many challenges. In particular, many rogue Internet  pharmacies use sophisticated marketing methods to appear professional  and legitimate, making it challenging for even well-informed consumers  and health care professionals to differentiate between legitimate and  rogue sites. For example, some Internet pharmacies may fraudulently  display an NABP accreditation logo on their website, despite not having  earned the accreditation, or may fraudulently display Visa, MasterCard,  PayPal, or other logos on their website despite not holding active  accounts with these companies or being able to process such payments.  Figure 2 displays a screenshot of a rogue Internet pharmacy website that  may appear to be legitimate to consumers, but whose operators pled  guilty to multiple federal offenses, including smuggling counterfeit and  misbranded drugs into the United States.
Some rogue Internet pharmacies seek to assure consumers of the safety  of their drugs by purporting to be “Canadian.” Canadian pharmacies have  come to be perceived as a safe and economical alternative to pharmacies  in the United States. Over the last 10 years, several local governments  and consumer organizations have organized bus trips to Canada so that  U.S. residents can purchase prescription drugs at Canadian brick-and- mortar pharmacies at prices lower than those in the United States. More  recently, some state and local governments implemented programs that  provided residents or employees and retirees with access to prescription  drugs from Canadian Internet pharmacies. Despite FDA warnings to  consumers that the agency could not ensure the safety of drugs not  approved for sale in the United States that are purchased from other  countries, the prevalence of such programs may have contributed to a  perception among U.S. consumers that they can readily save money and  obtain safe prescription drugs by purchasing them from Canada. Many  rogue Internet pharmacies seek to take advantage of this perception by  purporting to be located in Canada, or sell drugs manufactured or  approved for sale in Canada, when they are actually located elsewhere or  selling drugs sourced from other countries.
Chairman Murphy, Ranking Member DeGette, and Members of the  Subcommittee, this completes my prepared statement. I would be  pleased to respond to any questions that you may have at this time.
section_title: GAO Contact and Staff Acknowledgments
paragraphs: If you or your staff have any questions about this testimony, please  contact me at (202) 512-7114 or crossem@gao.gov. Contact points   for our Offices of Congressional Relations and Public Affairs may be  found on the last page of this statement. GAO staff who made key  contributions to this statement include Geri Redican-Bigott, Assistant  Director; Michael Erhardt; Patricia Roy; and Lillian Shields.
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