Internet Pharmacies: Adding Disclosure Requirements Would Aid State and
Federal Oversight (Letter Report, 10/19/2000, GAO/GAO-01-69).

The first Internet pharmacies began online service in early 1999. Public
health officials are concerned about Internet pharmacies that do not
adhere to state licensing requirements and standards. Public officials
are also concerned over the validity of prescriptions and international
drugs that are not approved in the United States being sent by mail.
Congress is considering legislation to help prevent future problems that
could arise. The unique qualities of the Internet pose new challenges
for enforcing state pharmacy and medical practice laws because they
allow pharmacies and physicians to reach consumers across state and
international borders and remain anonymous.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GAO-01-69
     TITLE:  Internet Pharmacies: Adding Disclosure Requirements Would
	     Aid State and Federal Oversight
      DATE:  10/19/2000
   SUBJECT:  Pharmaceutical industry
	     Federal/state relations
	     Health care services
	     Drugs
	     Consumer protection
	     State law
	     Licenses
	     Law enforcement
	     Interstate commerce
IDENTIFIER:  Internet

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GAO-01-69

A

Report to Congressional Requesters

October 2000 INTERNET PHARMACIES

Adding Disclosure Requirements Would Aid State and Federal Oversight

GAO-01-69

Letter 3 Appendixes Appendix I: Scope and Methodology 30

Appendix II: Actions by 28 States to Regulate Internet Pharmacies and
Physicians Prescribing on the Basis of an Online Questionnaire 34

Appendix III: Survey of State Pharmacy Boards 40 Appendix IV: Survey of
State Medical Boards 49 Appendix V: GAO Contact and Staff Acknowledgments 56

Tables Table 1: Characteristics of Internet Pharmacies We Reviewed 10 Table
2: Analysis of Identified Web Sites 30

Table 3: Internet Pharmacy Licensure Information 32

Abbreviations

AG Attorney General AMA American Medical Association DEA Drug Enforcement
Administration FDA Food and Drug Administration FDCA Food, Drug, and
Cosmetic Act FSMB Federation of State Medical Boards FTC Federal Trade
Commission NAAG National Association of Attorneys General NABP National
Association of Boards of Pharmacy VIPPS Verified Internet Pharmacy Practice
Sites

Lett er

October 19, 2000 Congressional Requesters The Internet offers consumers a
convenient and sometimes cheaper method for purchasing, and obtaining
information about, their prescription drugs than traditional retail
pharmacies. The first Internet pharmacies began online service in early
1999, and federal officials estimated that between 200 and 400 businesses
were selling prescription drugs on the Internet by July of that year. Almost
10 million Americans used the Internet to shop for health products during
1999, spending an estimated $160 million on prescription drugs. 1

Public health officials agree that state- licensed Internet pharmacies offer
consumers an alternative to the traditional “brick and mortar”
corner drugstore. However, they are concerned about Internet pharmacies that
do not adhere to state licensing requirements and standards and enable
consumers to obtain prescription drugs without a prescription and adequate
physician supervision. Public health officials are also concerned because
prescription drugs obtained from Internet pharmacies without a valid
prescription have harmed several individuals.

The rapid growth in Internet sales of prescription drugs and the increase in
the practice of physicians prescribing to consumers on the basis of an
online questionnaire challenge traditional state and federal safeguards.
Moreover, these activities may occur anonymously across state and
international borders, hampering state and federal efforts to identify
noncompliant Internet pharmacies and physicians. State medical and pharmacy
boards, as well as several federal agencies, have expressed concerns that
their existing enforcement tools are not adequate to police Internet
practices.

Concerned that the increases in Internet pharmacies and online prescribing
may be outpacing formal state and federal controls, you asked us to review
the regulation of prescription drug sales on the Internet. Specifically, you
asked us to provide information on (1) the numbers and types of

1 E. Rickert and D. Anderson, Internet Pharmacy Practice: Legal and
Marketplace Issues, presentation at the American Pharmaceutical Association
Annual Meeting (Washington, D. C.: Mar. 10- 14, 2000), medscape. com/
Medscape/ CNO/ 2000/ APHA/ APHA- 06. html (cited July 20, 2000).

pharmacies practicing on the Internet, (2) state efforts to regulate
pharmacies and physicians practicing on the Internet, (3) the efforts of
federal agencies to regulate pharmacies and physicians practicing on the
Internet, and (4) proposals to regulate Internet pharmacies. (The complete
list of requesters appears at the end of this letter.)

To obtain information on the number of Internet pharmacies, we conducted
searches of the World Wide Web and obtained lists of Internet pharmacies.
For this study, we defined “Internet pharmacy” to include any
business that uses the Internet as the primary access point for customers,
as well as traditional corner drugstores and mail- order prescription drug
services that use the Internet to supplement their direct public access. To
assess state efforts and proposals to regulate Internet pharmacies and
physicians prescribing on the Internet, we surveyed pharmacy and medical
boards in all 50 states and the District of Columbia. We interviewed
officials from the National Association of Boards of Pharmacy (NABP), the
Federation of State Medical Boards (FSMB), the American Medical Association
(AMA), and the National Association of Attorneys General (NAAG), as well as
representatives from several leading Internet pharmacies. To assess federal
efforts and proposals to regulate Internet pharmacies and physicians
prescribing on the Internet, we interviewed officials and obtained documents
from the Food and Drug Administration (FDA), the Department of Justice, the
Federal Trade Commission (FTC), the Drug Enforcement Administration (DEA),
the U. S. Customs Service, and the U. S. Postal Service. We conducted our
work from May 1999 through September 2000 in accordance with generally
accepted government auditing standards. A detailed description of our scope
and methodology is provided in appendix I.

Results in Brief Determining the precise number of Internet pharmacies is
difficult because Web sites can be easily created and removed, and many
Internet

pharmacies use multiple sites to attract consumers. We identified 190
Internet pharmacies selling prescription drugs directly to consumers,
including 111 Internet pharmacies that required a prescription from a
physician, 54 that would provide a prescription if a consumer completed an
online questionnaire, and 25 that did not require a prescription. Many
Internet pharmacies, including those that required a prescription, did not
disclose enough information on their Web sites to allow consumers to
determine if the drugs they were purchasing were approved in the United
States and dispensed according to state and federal laws.

The licensing and regulation of pharmacies and physicians traditionally has
taken place at the state level. However, with the advent of Internet
pharmacies, pharmacies and physicians can anonymously reach across state
borders to prescribe, sell, and dispense prescription drugs without
complying with state requirements. Intent on shutting down Internet
pharmacies that are unlicensed and employ physicians to prescribe drugs on
the basis of their review of online questionnaires completed by consumers,
20 states have taken action against Internet pharmacies. But states have
found it difficult to identify and take enforcement action against the many
Internet pharmacies and physicians that may violate state laws. Moreover,
even when a state successfully prosecutes an Internet pharmacy and its
associated physicians and stops them from prescribing and dispensing drugs
to residents of that state, the court action applies only in that state.

At the federal level, FDA, Justice, DEA, Customs, and FTC have increased
their investigation and prosecution of Internet pharmacies and physicians
that illegally dispense and prescribe prescription drugs. For example, FDA
has taken enforcement action against Internet pharmacies dispensing
unapproved drugs, and Justice has prosecuted pharmacies and physicians for
dispensing prescription drugs without valid prescriptions. 2 The Customs
Service has also increased its seizures of drugs illegally entering the
country. While these agencies' actions are important, their efforts
sometimes do not support each other. For example, FDA relies on Customs to
implement FDA's guidance that restricts the importation of prescription
drugs through the mail, including those from foreign Internet pharmacies.
Yet, while Customs has expended resources to detain packages of prescription
drugs that may violate FDA's guidance, FDA routinely directs Customs to
release small packages of prescription drugs that have been detained. FDA
plans to clarify its policy and to work more closely with Customs officials
to better coordinate their efforts.

State and federal officials have proposed several approaches for improving
the oversight of Internet pharmacies. The association representing state
boards of pharmacy, NABP, has developed a voluntary program to certify
Internet pharmacies. As of September 1, 2000, 11 Internet pharmacies had

2 Unapproved drugs are any drugs, including foreign- made versions of U. S.-
approved prescription drugs, that have not been manufactured in accordance
with and pursuant to an FDA approval. Examples include unproven cancer
therapies and products containing gamma hydroxy butyrate, an unapproved drug
used recreationally for bodybuilding and for incapacitating victims of
sexual assaults.

been certified by NABP and 25 others had applied for certification. The
Congress is considering two bills that would require Internet pharmacies to
disclose certain identifying information and expand the authority of the
states and federal agencies to regulate Internet pharmacies. Specifically,
these bills would require mandatory disclosure or certification of Internet
pharmacies as well as grant authority to FDA and state Attorneys General to
shut down noncompliant Internet pharmacies nationwide in federal courts.

To ensure that the operators of Internet pharmacies shipping prescription
drugs to another state are easily discernable, we suggest that the Congress
amend the Food, Drug, and Cosmetic Act (FDCA) to require that Internet
pharmacies disclose certain identifying information on their Web sites. In
general, in commenting on a draft of this report, FDA, Justice, FTC, and
Customs, as well as the NABP and FSMB, agreed with our matter for
congressional consideration. However, FDA, FTC, and NABP suggested that our
matter be expanded to limit online prescribing, grant states nationwide
injunctive relief, and require independent verification of information
disclosed by Internet pharmacies. We believe that the current regulatory
structure permits state pharmacy and medical boards to restrict online
prescribing and verify disclosed information. In addition, an assessment of
granting nationwide injunctive relief was beyond the scope of our study.
Therefore, we did not modify our matter for congressional consideration.

Background Three types of Internet pharmacies selling prescription drugs
directly to consumers have emerged in recent years. First, some Internet
pharmacies

operate much like traditional drugstores or mail- order pharmacies: they
dispense drugs only after receiving prescriptions from consumers or their
physicians. Other Internet pharmacies provide customers medication without a
physical examination by a physician. In place of the traditional face- to-
face physician/ patient consultation, the consumer fills out a medical
questionnaire that is reportedly evaluated by a physician affiliated with
the pharmacy. If the physician approves the questionnaire, he or she
authorizes the online pharmacy to send the medication to the patient. This
practice tends to be largely limited to “lifestyle” prescription
drugs, such as those that alleviate allergies, promote hair growth, treat
impotence, or control weight. Finally, some Internet pharmacies dispense
medication without a prescription. Regardless of their methods, all Web
sites selling prescription drugs are governed by the same complex network of
laws and

regulations at both the state and federal levels that govern traditional
drugstores and mail- order drug services.

In the United States, prescription drugs must be prescribed and dispensed by
licensed health care professionals, who can help ensure proper dosing and
administration and provide important information on the drug's use to
customers. To legally dispense a prescription drug, a pharmacist licensed
with the state and working in a pharmacy licensed by the state must be
presented a valid prescription from a licensed health care professional.
Every state requires resident pharmacists and pharmacies to be licensed. The
regulation of the practice of pharmacy is rooted in state pharmacy practice
acts and regulations enforced by the state boards of pharmacy, which are
responsible for licensing pharmacists and pharmacies. The state boards of
pharmacy also are responsible for routinely inspecting pharmacies, ensuring
that pharmacists and pharmacies comply with applicable state and federal
laws, and investigating and disciplining those that fail to comply.

In addition, 40 states require out- of- state pharmacies- called nonresident
pharmacies- that dispense prescription drugs to state residents to be
licensed or registered. Some state pharmacy boards regulate Internet
pharmacies according to the same standards that apply to nonresident
pharmacies. State pharmacy boards' standards may require that nonresident
pharmacies do the following:

maintain separate records of prescription drugs dispensed to customers in
the state so that these records are readily retrievable from the records of
prescription drugs dispensed to other customers; provide a toll- free
telephone number for communication between

customers in the state and a pharmacist at the nonresident pharmacy and
affix this telephone number to each prescription drug label; provide the
location, names, and titles of all principal corporate officers; provide a
list of all pharmacists who are dispensing prescription drugs

to customers in the state; designate a pharmacist who is responsible for all
prescription drugs

dispensed to customers in the state; provide a copy of the most recent
inspection report issued by the home

state; and provide a copy of the most recent license issued by the home
state.

States also are responsible for regulating the practice of medicine. All
states require that physicians practicing in the state be licensed to do so.

State medical practice laws generally outline standards for the practice of
medicine and delegate the responsibility of regulating physicians to state
medical boards. State medical boards license physicians and grant them
prescribing privileges. 3 In addition, state medical boards investigate
complaints and impose sanctions for violations of the state medical practice
laws.

While states have jurisdiction within their borders, the sale of
prescription drugs on the Internet can occur across state lines. The sale of
prescription drugs between states or as a result of importation falls under
the jurisdiction of the federal government. FDA is responsible for ensuring
the safety, effectiveness, and quality of domestic and imported
pharmaceutical products under the FDCA. Specifically, FDA establishes
standards for the safety, effectiveness, and manufacture of prescription
drugs that must be met before they are approved for the U. S. market.

FDA can take action against (1) the importation, sale, or distribution of an
adulterated, misbranded, or unapproved drug; (2) the illegal promotion of a
drug; (3) the sale or dispensing of a prescription drug without a valid
prescription; and (4) the sale and dispensing of counterfeit drugs. If
judicial intervention is required, Justice will become involved to enforce
the FDCA. Justice also enforces other consumer protection statutes for which
the primary regulatory authorities are administrative agencies such as FDA
and FTC. FTC has responsibility for preventing deceptive or unfair acts or
practices in commerce and has authority to bring an enforcement action when
an Internet pharmacy makes false or misleading claims about its products or
services. Finally, Justice's DEA regulates controlled substances, which
includes issuing all permits for the importation of pharmaceutical
controlled substances and registering all legitimate

3 In most states, many nonphysicians have prescribing authority. For
example, according to a study by the AMA, advanced practice nurses have
prescribing authority in 48 states, physician assistants have prescribing
authority in 45 states, and optometrists are authorized to prescribe
pharmaceutical agents in all 50 states. See AMA, Report of the Council on
Medical Service on Non- Physician Prescribing, CMS Report 1- A- 99 (Feb.
1999), amaassn.

org (cited July 24, 2000). This report, however, discusses only the position
of state medical boards regarding the practices of physicians prescribing on
the Internet.

importers and exporters, while Customs and the Postal Service enforce
statutes and regulations governing the importation and domestic mailing of
drugs. 4

Universe of Internet The very nature of the Internet makes identifying all
pharmacies operating

Pharmacies Is on it difficult. As a result, the precise number of Internet
pharmacies selling

prescription drugs directly to consumers is unknown. We identified 190
Unknown

Internet pharmacies selling prescription drugs directly to consumers, 79 of
which dispense prescription drugs without a prescription or on the basis of
a consumer's having completed an online questionnaire (see table 1). 5 Also,
185 of the identified Internet pharmacies did not disclose the states where
they were licensed to dispense prescription drugs, and 37 did not provide an
address or telephone number permitting the consumer to contact them if
problems arose. Obtaining prescription drugs from unlicensed pharmacies
without adequate physician supervision, including an examination, places
consumers at risk of harmful side effects, possibly even death, from drugs
that may be inappropriate for them.

4 Under the Controlled Substances Act, all substances that are regulated
under existing federal law are placed in one of five schedules on the basis
of the substances' medicinal value, harmfulness, and potential for abuse or
addiction. Schedule I is reserved for the most dangerous drugs that have no
recognized medical use, while schedule V is the classification used for the
least dangerous drugs. The act also regulates the manufacture and
distribution of narcotics, stimulants, depressants, hallucinogens, anabolic
steroids, and chemicals used in the illicit production of controlled
substances. To prescribe controlled substances, licensed physicians must be
registered with the DEA.

5 App. I contains a detailed description of our methodology for identifying
Internet pharmacies.

Table 1: Characteristics of Internet Pharmacies We Reviewed Pharmacies that
issue Information on

Pharmacies that prescriptions after

Pharmacies that do not pharmacy's Internet

require a prescription reviewing questionnaires

require a prescription Total site

(n= 111) (n= 54)

(n= 25) (n= 190)

Mailing address or telephone number 108 31 14 153 (81%)

Information about available drugs 55 47 13 115 (61%)

Privacy statement 26 17 1 44 (23%) Requirement that consumers agree to a
liability waiver 0 45 18 63 (33%)

The Actual Number of Estimates of the number of Internet pharmacies range
from 200 to 400.

Internet Pharmacies Is However, it is difficult to determine the precise
number of Internet

Unknown pharmacies selling prescription drugs directly to consumers because

Internet sites can be easily created and removed and some Internet
pharmacies operate for a period of time at one Internet address and then
close and reappear under another name. In addition, many Internet pharmacies
have multiple portal sites (independent Web pages that connect to a single
pharmacy). We found 95 sites that at first appeared to be discrete Internet
pharmacies but were actually portal sites. As consumers click on the icons
and links provided, they are brought to an Internet site that is completely
different from the one they originally visited. Consumers may be unaware of
these site changes unless they are paying close attention to the Internet
site address bar on their browser. Some Internet pharmacies had as many as
18 portal sites.

Some Internet Pharmacies About 58 percent, or 111, of the Internet
pharmacies we identified told

Require a Prescription consumers that they had to provide a prescription
from their physician to

purchase prescription drugs. Prescriptions may be submitted to an Internet
pharmacy in various ways, including by mail or fax and through contact
between the consumer's physician or current pharmacy and the Internet
pharmacy. The Internet pharmacy then verifies that a licensed physician
actually has issued the prescription to the patient before it dispenses any
drugs. Internet pharmacies that require a prescription from a physician
generally operate similarly to traditional drugstore or mail- order

pharmacies. In some instances, the Internet site is owned by or affiliated
with a traditional drugstore.

Some Internet Pharmacies We identified 54 Internet pharmacies that issued
prescriptions and

Dispense Drugs on the Basis dispensed medications on the basis of an online
questionnaire. Generally,

of a Questionnaire these short, easy- to- complete questionnaires asked
about the consumer's

health profile, medical history, current medication use, and diagnosis. In
some instances, pharmacies provided the answers necessary to obtain the
prescription by placing checks next to the “correct” answers.
Information on many of the Internet sites indicated that a physician reviews
the questionnaire and then issues a prescription. The cost of the
physician's review ranged from $35 to $85, with most sites charging $75. 6
Moreover, certain illegal and unethical prescribing and dispensing practices
are occurring through some Internet pharmacies that focus solely on
prescribing and dispensing certain “lifestyle” drugs, such as
diet medications and drugs to treat impotence.

Some Internet Pharmacies We also identified 25 Internet pharmacies that
dispensed prescription drugs

Require No Prescription without prescriptions. In the United States, it is
illegal to sell or dispense a

prescription drug without a prescription. Nevertheless, to obtain a drug
from these Internet pharmacies, the consumer was asked only to complete an
order form indicating the type and quantity of the drug desired and to
provide credit card billing information. Twenty- one of these 25 Internet
pharmacies were located outside the United States; the location of the
remaining 4 could not be determined. Generally, it is illegal to import
prescription drugs that are not approved by FDA and manufactured in an FDA-
approved facility. 7 Obtaining prescription drugs from foreign- based
Internet pharmacies places consumers at risk from counterfeit or unapproved
drugs, or drugs that were manufactured and stored under poor conditions.

6 A recent study found that obtaining a prescription on the Internet was 40
percent more expensive than visiting a local managed care physician. See B.
S. Bloom and R. C. Iannacone, “Internet Availability of Prescription
Pharmaceuticals to the Public,” Annals of Internal Medicine, Vol. 131,
No. 11 (Dec. 1999), acponline. org/ journals/ annals/ 05oct99/ bloom. htm

(cited Oct. 25, 1999). 7 FDA officials may, on a case- by- case basis,
permit the importation of unapproved drugs for the treatment of serious
conditions and other reasons. See FDA's “Coverage of Personal
Importations,” Regulatory Procedures Manual( Washington, D. C.: FDA,
1997).

Internet Pharmacies' Web The Internet pharmacies that we identified varied
significantly in the

Sites Provide Varying information that they disclosed on their Web sites.
For instance, 153 of the

Information 190 Internet pharmacies we reviewed provided a mailing address
or

telephone number (see table 1). The lack of adequate identifying information
prevents consumers from contacting Internet pharmacies if problems should
arise. More importantly, most Internet pharmacies did not disclose the
states where they were licensed to dispense prescription drugs. We contacted
all U. S.- based Internet pharmacies to obtain this information. 8 We then
asked pharmacy boards in the 12 states with the largest numbers of licensed
Internet pharmacies (70 in all) to verify their licensure status. Sixty-
four pharmacies required a prescription to dispense drugs; of these, 22, or
about 34 percent, were not licensed in one or more of the states in which
they had told us they were licensed and in which they dispensed drugs.

Internet pharmacies that issued prescriptions on the basis of online
questionnaires disclosed even less information on their Web sites. Only 1 of
the 54 Internet pharmacies disclosed the name of the physician responsible
for reviewing questionnaires and issuing prescriptions. We attempted to
contact 45 of these Internet pharmacies to obtain their licensure status; we
did not attempt to contact 9 because they were located overseas. We were
unable to reach 13 because they did not provide, and we could not obtain, a
mailing address or telephone number. In addition, 18 would not return
repeated telephone calls, 3 were closed, and 2 refused to tell us where they
were licensed. As a result, we were able to obtain licensure information for
only nine Internet pharmacies affiliated with physicians that prescribe
online. We found that six of the nine prescribing pharmacies were not
licensed in one or more of the states in which they had told us they were
licensed and in which they dispensed prescription drugs. The ability to buy
prescription drugs from Internet pharmacies not licensed in the state where
the customer is located and without appropriate physician supervision,
including an examination, means that important safeguards

8 We did not attempt to contact foreign- based Internet pharmacies.
According to the Executive Director of NABP, pharmacies are licensed by the
state, and state laws do not include a provision for licensing foreign
pharmacies. Also, physicians located in foreign countries may not be
licensed to prescribe to U. S. citizens. Therefore, in some states obtaining
prescription drugs from foreign Internet pharmacies is tantamount to
receiving medicine illegally. Nevertheless, some states may waive physician-
licensing requirements and recognize foreign prescriptions. In these
instances, the states require a valid physician/ patient relationship and a
physical examination.

related to the doctor/ patient relationship and intrinsic to conventional
prescribing are bypassed.

We also found that only 44 Internet pharmacies (23 percent) posted a privacy
statement on their Web sites. As recent studies have indicated, consumers
are concerned about safeguarding their personal health information online
and about potential transfers to third parties of the personal information
they have given to online businesses. 9 The majority of these pharmacies
stated that the information provided by the patient would be kept
confidential and would not be sold or traded to third parties. Our review of
state privacy laws revealed that at least 21 states have laws protecting the
privacy of pharmacy information. While the federal Health Insurance
Portability and Accountability Act of 1996 called for nationwide protections
for the privacy and security of electronic health information, including
pharmacy data, regulations have not yet been finalized.

Regulating Pharmacies State pharmacy and medical boards have policies
created to regulate brick

and Physicians and mortar pharmacies and traditional doctor/ patient
relationships.

However, the traditional regulatory and enforcement approaches used by
Practicing on the

these boards may not be adequate to protect consumers from the Internet
Poses

potentially dangerous practices of some Internet pharmacies. Nevertheless,
Difficulties for State

20 states have taken disciplinary action against Internet pharmacies and
physicians that have engaged in illegal or unethical practices. Many of

Regulators these states have also introduced legislation to address illegal
or unethical

sales practices of Internet pharmacies and physicians prescribing on the
Internet. Appendix II contains details on state actions to regulate
pharmacies and physicians practicing on the Internet.

State Pharmacy Boards The advent of Internet pharmacies poses new challenges
for the traditional

Face New Challenges state regulatory agencies that oversee the practices of
pharmacies. While

Regulating Internet 12 pharmacy boards reported that they have taken action
against Internet

Pharmacies pharmacies for illegally dispensing prescription drugs, many said
they have

9 A recent study of the policies and practices of a sample of the most
trafficked consumer health Web sites found that inconsistencies exist
between the privacy policies and the actual practices of health Web sites
and that policies fall short of truly safeguarding consumers. See J.
Goldman, Z. Hudson, and R. M. Smith, Privacy: Report on the Privacy Policies
and Practices of Health Internet Sites( Washington, D. C.: California
HealthCare Foundation, Jan.

2000), ehealth. chcf. org/ priv_ pol3/ index_ show. cfm? doc_ id= 33 (cited
Feb. 10, 2000).

encountered difficulties in identifying, investigating, and taking
disciplinary action against illegally operating Internet pharmacies that are
located outside state borders but shipping to the state. 10 State pharmacy
board actions consisted of referrals to federal agencies, state Attorneys
General, or state medical boards.

Almost half of the state pharmacy boards reported that they had experienced
problems with or received complaints about Internet pharmacies.
Specifically, 24 state pharmacy boards told us that they had experienced
problems with Internet pharmacies not complying with their state pharmacy
laws. The problems most commonly cited were distributing prescription drugs
without a valid license or prescription, or without establishing a valid
physician/ patient relationship. Moreover, 20 state boards (40 percent)
reported they had received at least 78 complaints, ranging from 1 to 15 per
state, on Internet pharmacy practices. Many of these complaints were about
Internet pharmacies that were dispensing medications without a valid
prescription or had dispensed the wrong medication.

State pharmacy boards also reported that they have encountered difficulties
in identifying Internet pharmacies that are located outside their borders.
About 74 percent of state pharmacy boards reported having serious problems
determining the physical location of an Internet pharmacy affiliated with an
Internet Web site. Sixteen percent of state pharmacy boards reported some
difficulty, and 10 percent reported no difficulty. Without this information,
it is difficult to identify the companies and people responsible for selling
prescription drugs.

More importantly, state pharmacy boards have limited ability and authority
to investigate and act against Internet pharmacies located outside their
state but doing business in their state without a valid license. In our
survey, many state pharmacy boards cited limited resources, and
jurisdictional and technological limitations, as obstacles to enforcing
their laws with regard to pharmacies not located in their states. Because of
jurisdictional limits, states have found that their traditional
investigative tools- interviews, physical or electronic surveillance, and
serving subpoenas to produce documents and testimony- are not necessarily
adequate to compel disclosure of information from a pharmacy or pharmacist
located out of state. Similarly, the traditional enforcement mechanisms
available to state

10 See app. III for the results of our survey.

pharmacy boards- disciplinary actions or sanctions against licensees- are
not necessarily adequate to control a pharmacy or pharmacist located out of
state. 11 In the absence of the ability to investigate and take disciplinary
action against a nonresident pharmacy, state pharmacy boards have been
limited to referring unlicensed or unregistered Internet pharmacies to their
counterpart boards in the states where the pharmacies are licensed.

State Medical Boards Are State medical boards have concerns about the
growing number of Internet

Concerned About the pharmacies that issue prescriptions on the basis of a
simple online

Prescribing Services questionnaire rather than a face- to- face examination.
The AMA is also

Offered by Some Internet concerned that prescriptions are being provided to
patients without the

benefit of a physical examination, which would allow evaluation of any
Pharmacies

potential underlying cause of a patient's dysfunction or disease, as well as
an assessment of the most appropriate treatment. Moreover, medical boards
are receiving complaints about physicians prescribing on the Internet.
Twenty of the 45 medical boards responding to our survey reported that they
had received complaints about physicians prescribing on the Internet during
the last year. 12 The most frequent complaint was that the physician did not
perform an examination of the patient. As a result, medical boards in eight
states have taken action against physicians for Internet prescribing
violations. Disciplinary actions and sanctions have ranged from monetary
fines and letters of reprimand to probation and license suspension.

Thirty- nine of the 45 medical boards responding to our survey concluded
that a physician who issued a prescription on the basis of a review of an
online questionnaire did not satisfy the standard of good medical practice
required under their states' laws. Moreover, ten states have introduced or
enacted legislation regarding the sale of prescription drugs on the
Internet; including five states that have introduced legislation to prohibit
physicians and other practitioners from prescribing prescription drugs on
the Internet without conducting an examination or having a prior physician/
patient relationship. Twelve states have adopted rules or statements that
clarify their positions on the use of online questionnaires for issuing
prescriptions. Generally, these statements either prohibit online
prescribing or state that

11 In addition, no formal procedural mechanism exists for serving and
enforcing a subpoena across state lines, although a state may extend its
assistance to another state as a professional courtesy.

12 See app. IV for the results of our survey.

prescribing solely on the basis of answers to a questionnaire is
inappropriate and unprofessional (see app. II).

As in the case of state pharmacy boards, state medical boards have limited
ability and authority to investigate and act against physicians located
outside of their state but prescribing on the Internet to state residents.
Further, they too have had difficulty identifying these physicians. About 55
percent of state medical boards that responded to our survey told us they
had difficulty determining both the identity and location of physicians
prescribing drugs on the Internet, and 36 percent had difficulty determining
whether the physician was licensed in another state.

State Attorneys General Since February 1999, six state Attorneys General
have brought legal action

Have Sued to Halt Sales by against Internet pharmacies and physicians for
providing prescription

Internet Pharmacies drugs to consumers in their states without a state
license and for issuing

Offering Prescription prescriptions solely on the basis of information
provided in online

questionnaires. Most of the Internet pharmacies that were sued voluntarily
Services

stopped shipping prescription drugs to consumers in those states. As a
result, at least 18 Internet pharmacies have stopped selling prescription
drugs to residents in Illinois, Kansas, Michigan, Missouri, New Jersey, and
Pennsylvania. 13 Approximately 15 additional states are investigating
Internet pharmacies for possible legal action. 14

Investigating and prosecuting online offenders raise new challenges for law
enforcement. For instance, Attorneys General also have complained that the
lack of identifying information on pharmacy Web sites makes it difficult to
identify the companies and people responsible for selling prescription
drugs. Moreover, even if a state successfully sues an Internet pharmacy for
engaging in illegal or unethical practices, such as prescribing on the basis
of an online questionnaire or failing to adequately disclose identifying
information, the Internet pharmacy is not prohibited from operating in

13 One Internet pharmacy is suing the Attorney General of Michigan in
federal court, arguing that the Attorney General has, among other things,
unreasonably burdened interstate commerce by requiring pharmacies and
pharmacists to be licensed in Michigan before they distribute prescription
drugs in the state.

14 Since our survey, the Attorneys General for Texas and West Virginia have
each sued two online pharmacies to stop them from selling prescription drugs
to state residents. Also, according to FSMB, five additional states either
have taken action against a physician for violating state prescribing
practices or introduced/ enacted legislation regarding the sale of
prescription drugs on the Internet.

other states. To stop such practices, each affected state must individually
bring action against the Internet pharmacy. As a result, to prevent one
Internet pharmacy from doing business nationwide, the Attorney General in
every state would have to file a lawsuit in his or her respective state
court.

Federal Agencies Have Five federal agencies have authority to regulate and
enforce U. S. laws that

Increased Their Efforts could be applied to the sale of prescription drugs
on the Internet. Since

Internet pharmacies first began operation in early 1999, FDA, Justice, DEA,
to Regulate Internet

Customs, and FTC have increased their efforts to respond to public health
Prescription Drug

concerns about the illegal sale of prescription drugs on the Internet. 15
FDA Sales

has taken enforcement actions against Internet pharmacies selling
prescription drugs, Justice has prosecuted Internet pharmacies and
physicians for dispensing medications without a valid prescription, DEA has
investigated Internet pharmacies for illegal distribution of controlled
substances, Customs has increased its seizure of packages that contain drugs
entering the country, and FTC has negotiated settlements with Internet
pharmacies for making deceptive health claims. While these agencies'
contributions are important, their efforts sometimes do not support each
other. For instance, to conserve its resources FDA routinely releases
packages of prescription drugs that Customs has detained because they may
have been obtained illegally from foreign Internet pharmacies. Such
uncoordinated program efforts can waste scarce resources, confuse and
frustrate enforcement program administrators and customers, and limit the
overall effectiveness of federal enforcement efforts.

Federal Agencies Have FDA has recently increased its monitoring and
investigation of Internet

Increased Enforcement pharmacies to determine if they are involved in
illegal sales of prescription

Activity drugs. FDA has primary responsibility for regulating the sale,
importation,

and distribution of prescription drugs, including those sold on the
Internet. In July 1999, FDA testified before the Congress that it did not
generally regulate the practice of pharmacy or the practice of medicine.
Accordingly, FDA activities regarding the sale of drugs over the Internet
had until then focused on unapproved drugs. As of April 2000, however, FDA
had 54 ongoing investigations of Internet pharmacies that may be illegally
selling

15 The U. S. Postal Service has a minor role in regulating the practices of
Internet pharmacies. Limited to providing all international mail to Customs
for inspection, Postal Service officials told us that they do not have any
activities specifically targeted to Internet pharmacies.

prescription drugs. FDA has also referred to Justice for possible criminal
prosecution approximately 33 cases involving over 100 Internet pharmacies
that may be illegally selling prescription drugs. FDA's criminal
investigations of online pharmacies have, to date, resulted in the
indictment and/ or arrest of eight individuals, two of whom have been
convicted. In addition, FDA is seeking $10 million in fiscal year 2001 to
fund 77 staff positions that would be dedicated to investigating and taking
enforcement actions against Internet pharmacies. 16

Justice has increased its prosecution of Internet pharmacies illegally
selling prescription drugs. Under the FDCA, a prescription drug is
considered misbranded if it is not dispensed pursuant to a valid
prescription under the professional supervision of a licensed practitioner.
In July 1999, Justice testified before the Congress that it was examining
its legal basis for prosecuting noncompliant Internet pharmacies and
violative online prescribing practices. Since that time, according to FDA
officials, 22 of the 33 criminal investigations FDA referred to Justice have
been actively pursued. Two of the 33 cases were declined by Justice and are
being prosecuted as criminal cases by local district attorneys, and 9 were
referred to the state of Florida. In addition, Justice filed two cases
involving the illegal sale of prescription drugs over the Internet in 1999
and is investigating approximately 20 more cases. Since May 2000, Justice
has brought charges against, or obtained convictions of, individuals in
three cases involving the sale of prescription drugs by Internet pharmacies
without a prescription or the distribution of misbranded drugs.

While DEA has no efforts formally dedicated to Internet issues, it has
initiated 20 investigations of the use of the Internet for the illegal sale
of controlled substances during the last 15 months. DEA has been
particularly concerned about Internet pharmacies that are affiliated with
physicians who prescribe controlled substances without examining patients.
For instance, in July 1999 a DEA investigation led to the indictment of a
Maryland doctor on 34 counts of providing controlled substances to patients
worldwide in response to requests made over the Internet. Because Maryland
requires that doctors examine patients before prescribing medications, the
doctor's prescriptions were not considered to be legitimately provided. The
physician's conduct on the Internet also

16 The appropriations bill for FDA (H. R. 4461), which as of October 18,
2000, had passed both the House and the Senate, provides $5 million for
investigating and taking action against violative Internet pharmacies.

violated an essential requirement of federal law, which is that controlled
substances must be dispensed only with a valid prescription.

The U. S. Customs Service, which is responsible for inspecting packages
shipped to the United States from foreign countries, has increased its
seizures of prescription drugs from overseas. Customs officials report that
the number of drug shipments seized increased about 450 percent between 1998
and 1999- from 2, 139 to 9,725. Most of these seizures involved controlled
substances. Because of the large volume, Customs is able to examine only a
fraction of the packages entering the United States daily and cannot
determine how many of its drug seizures involve prescription drugs purchased
from Internet pharmacies. Nevertheless, Customs officials believe that the
Internet is playing a role in the increase in illegal drug importation.
According to Customs officials, fiscal year 2000 seizures are on pace to
equal or surpass 1999 levels.

FTC reports that it is monitoring Internet pharmacies for compliance with
the Federal Trade Commission Act, conducting investigations, and making
referrals to state and federal authorities. FTC is responsible for combating
unfair or deceptive trade practices, including those on the Internet, such
as misrepresentation of online pharmacy privacy practices. In 1999, FTC
referred two Internet pharmacies to state regulatory boards. This year, FTC
charged individuals and Internet pharmacies with making false promotional
claims and other violations. Recently, the operators of these Internet
pharmacies agreed to settle out of court. According to the settlement
agreement, the defendants are barred from misrepresenting medical and
pharmaceutical arrangements and any material fact about the scope and nature
of the defendants' goods, services, or facilities.

Foreign Internet The sale of prescription drugs to U. S. residents by
foreign Internet

Pharmacies Challenge pharmacies poses the most difficult challenge for U. S.
law enforcement

Federal Regulators authorities because the seller is not located within U.
S. boundaries. Many

prescription drugs available from foreign Internet pharmacies are either
products for which there is no U. S.- approved counterpart or foreign
versions of FDA- approved drugs. In either case, these drugs are not
approved for use in the United States, and therefore it is illegal for a
foreign Internet pharmacy to ship these products to the United States. In
addition, federal law prohibits the sale of prescription drugs to U. S.
citizens without a valid prescription. Although FDA officials said that the
agency has jurisdiction over a resident in a foreign country who sells to a
U. S. resident in violation of the FDCA, from a practical standpoint, FDA is
hard- pressed

to enforce U. S. laws against foreign sellers. 17 As a result, FDA
enforcement efforts against foreign Internet pharmacies have been limited
mostly to requesting the foreign government to take action against the
seller of the product. FDA has also posted information on its Web site to
help educate consumers about safely purchasing drugs from Internet
pharmacies.

FDA officials have sent 23 letters to operators of foreign Internet
pharmacies warning them that they may be engaged in illegal activities, such
as offering to sell prescription drugs to U. S. citizens without a valid, or
in some cases without any, prescription. Copies of each letter were sent to
regulatory officials in the country in which the pharmacy was based. In
response, two Internet pharmacies said they will cease their sales to U. S.
residents, and a third said it has ceased its sales regarding one drug but
is still evaluating how it will handle other products. FDA has since
requested that Customs detain packages from these Internet pharmacies.

Customs has been successful in working with one foreign government to shut
down its Internet pharmacies that were illegally selling prescription drugs
to U. S. consumers. In January 2000, Customs assisted Thailand authorities
in the execution of search and arrest warrants against seven Internet
pharmacies, resulting in the arrest of 22 Thai citizens for violating
Thailand's drug and export laws and 6 people in the United States accused of
buying drugs from the Thailand Internet pharmacy. U. S. and Thailand
officials seized more than 2. 5 million doses of prescription drugs and 245
parcels ready for shipment to the United States.

According to FDA, it is illegal for a foreign- based Internet pharmacy to
sell prescription drugs to consumers in the United States if those drugs are
unapproved or are not dispensed pursuant to a valid prescription. But FDA
permits patients and their physicians to obtain small quantities of drugs
sold abroad, but not approved in the United States, for the treatment of a
serious condition for which effective treatment may not be available
domestically. FDA's approach has been applied to products that do not
represent an unreasonable risk and for which there is no known
commercialization or promotion to U. S. residents. Further, a patient
seeking to import such a product must provide to FDA the name of the
licensed physician in the United States responsible for his or her treatment

17 FDA confronts the same obstacles facing other U. S. regulatory and law
enforcement agencies seeking to hold foreign parties accountable for
violations of federal law.

with the unapproved drug or provide evidence that the product is for
continuation of a treatment begun in a foreign country. 18

FDA has acknowledged that its guidance concerning importing prescription
drugs through the mail has been inconsistently applied. At many Customs mail
centers, FDA personnel rely on Customs officials to detain suspicious drug
imports for FDA screening. Although prescription drugs ordered from foreign
Internet pharmacies may not meet FDA's criteria for importation under the
personal use exemption, FDA personnel routinely release illegally imported
prescription drugs detained by Customs officials. FDA has determined that
the use of agency resources to provide comprehensive coverage of illegally
imported drugs for personal use is generally not justified. Instead, the
agency's enforcement priorities are focused on drugs intended for the
commercial market and on fraudulent products and those that pose an
unreasonable health risk. FDA's inconsistent application of its personal use
exemption frustrates Customs officials and does little to deter foreign
Internet pharmacies trafficking in prescription drugs. Accordingly, FDA
plans to take the necessary actions to eliminate, or at least mitigate to
the extent possible, the inconsistent interpretation and application of its
guidance and work more closely with Customs.

FDA's approach to regulation of imported prescription drugs could be
affected by enactment of pending legislation intended to allow American
consumers to import drugs from certain other countries. Specifically, the
appropriations bill for FDA (H. R. 4461) includes provisions that could
modify the circumstances under which the agency may notify individuals
seeking to import drugs into the United States that they may be in violation
of federal law. According to an FDA official, it is not currently clear how
these provisions, if enacted, could affect FDA's ability to prevent the
importation of violative drugs.

18 Agency guidance is contained in FDA's “Coverage of Personal
Importations,” Regulatory Procedures Manual( Washington, D. C.: FDA,
1997).

Initiatives for Initiatives at the state and federal levels offer several
approaches for

Improving State and regulating Internet pharmacies. The organization
representing state boards

of pharmacy, NABP, has developed a voluntary program for certifying Federal
Oversight of

Internet pharmacies. In addition, state and federal officials believe that
Internet Pharmacies

they need more authority, as well as information regarding the identity of
Internet pharmacies, to protect the public's health. The organization
representing state Attorneys General, NAAG, has asked the federal government
to expand the authority of its members to allow them to take action in
federal court. In addition, the administration has announced a new
initiative that would grant FDA broad new authority to better identify,
investigate, and prosecute Internet pharmacies for the illegal sale of
prescription drugs.

Concerned that consumers have no assurance of the legitimacy of Internet
pharmacies, NABP is attempting to provide consumers with an instant
mechanism for verifying the licensure status of Internet pharmacies. NABP's
Verified Internet Pharmacy Practice Sites (VIPPS) is a voluntary program
that certifies online pharmacies that comply with criteria that attempt to
combine state licensing requirements with standards developed by NABP for
pharmacies practicing on the Internet. To obtain VIPPS certification, an
Internet pharmacy must comply with the licensing and inspection requirements
of the state where it is physically located and of each state to which it
dispenses pharmaceuticals; demonstrate compliance with 17 standards by, for
example, ensuring patient rights to privacy, authenticating and maintaining
the security of prescription orders, adhering to recognized quality
assurance policy, and providing meaningful consultation between customers
and pharmacists; undergo an on- site inspection; develop a postcertification
quality assurance program; and submit to continuing random inspections
throughout a 3- year certification period. VIPPS- certified pharmacies are
identified by the VIPPS hyperlink seal displayed on both their and NABP's
Web sites. 19 Since VIPPS began in the fall of 1999, its seals have been
presented to 11 Internet pharmacies, and 25 Internet pharmacies have
submitted applications to display the seal.

NAAG strongly supports the VIPPS program but maintains that the most
important tool the federal government can give the states is nationwide

19 The seal posted on certified sites incorporates as an integral part of
its design the words “Click to verify.” When a cursor passes
over the VIPPS seal, a pop- up flag appears telling the visitor to click to
verify the credentials of the Internet pharmacy. A code underlying the seal
controls the flag and links the visitor to NABP's Web site.

injunctive relief. Modeled on the federal telemarketing statute, nationwide
injunctive relief is an approach that would allow state Attorneys General to
take action in federal court; if they were successful, an Internet pharmacy
would be prevented from illegally selling prescription drugs nationwide.

Two federal proposals would amend the FDCA to require an Internet pharmacy
engaged in interstate commerce to include certain identifying language on
its Web site. The Internet Pharmacy Consumer Protection Act (H. R. 2763)
would amend the FDCA to require an Internet pharmacy engaged in interstate
commerce to include a page on its Web site providing the following
information:

the name, address, and telephone number of the pharmacy's principal place of
business; each state in which the pharmacy is authorized by law to dispense

prescription drugs; the name of each pharmacist and the state( s) in which
the individual is

licensed; and if the site offers to provide prescriptions after medical
consultation, the

name of each prescriber, the state( s) in which the prescriber is licensed,
and the health professions in which the individual holds such licenses.

Also, under this act a state would have primary enforcement responsibility
for any violation involving the purchase of a prescription drug made within
the state, provided the state had requirements at least as stringent as
those specified in the act and adequate procedures for enforcing those
requirements.

In addition, the administration has developed a bill aimed at providing
consumers the protections they enjoy when they go to a drugstore to have
their prescriptions filled. For example, when consumers walk into a
drugstore to have a prescription filled, they know the identity and location
of the pharmacy, and the license on the wall provides visual assurance that
the pharmacy meets certain health and safety requirements in that state.
Under the Internet Prescription Drug Sales Act of 2000, Internet pharmacies
would be required to be licensed in each state where they do business;
comply with all applicable state and federal requirements, including the
requirement to dispense drugs only pursuant to a valid prescription; and
disclose identifying information to consumers. Internet pharmacies also
would be required to notify FDA and all applicable state boards of pharmacy
prior to launching a new Web site. 20 Internet pharmacies that met all of
the requirements would be able to post on their

Web site a declaration that they had made the required notifications. FDA
would designate one or more private nonprofit organizations or state
agencies to verify licensing information included in notifications and to
examine and inspect the records and facilities of Internet pharmacies.
Internet pharmacies that do not meet notification and disclosure
requirements or that sell prescription drugs without a valid prescription
could face penalties as high as $500,000 for each violation.

While it supports the Internet Prescription Drug Sales Act of 2000, Justice
officials have recommended that it be modified. Prescription drug sales from
Internet pharmacies often rely on credit card transactions processed by U.
S. banks and credit card networks. To enhance its ability to investigate and
stop payment for prescription drugs purchased illegally, Justice has
recommended that federal law be amended to permit the Attorney General to
seek injunctions against certain financial transactions traceable to
unlawful online drug sales. According to Justice officials, if the
Department and financial institutions can stop even some of the credit card
orders for the illicit sale of prescription drugs and controlled substances,
the operations of some “rogue” Internet pharmacies may be
disrupted significantly.

Conclusions The unique qualities of the Internet pose new challenges for
enforcing state pharmacy and medical practice laws because they allow
pharmacies and

physicians to reach consumers across state and international borders and
remain anonymous. Internet pharmacies that fail to obtain licensure in the
states where they operate may violate state law. But the Internet pharmacies
that are affiliated with physicians that prescribe on the basis of an online
questionnaire and those that dispense drugs without a prescription pose the
most potential harm to consumers. Dispensing prescription drugs without
adequate physician supervision increases the risk of consumers' suffering
adverse events, including side effects from inappropriately prescribed
medications and misbranded or contaminated drugs. Some states have taken
action to stop Internet pharmacies that offer online prescribing services
from selling prescription drugs to residents of their state. But the real
difficulty lies in identifying responsible parties and enforcing laws across
state boundaries.

20 An Internet pharmacy that is already operational would also have to
notify FDA and all applicable state boards of pharmacy.

Enforcement actions by federal agencies have begun addressing the illegal
prescribing and dispensing of prescription drugs by domestic Internet
pharmacies and their affiliated physicians. Enactment of federal legislation
requiring Internet pharmacies to disclose, at a minimum, who they are, where
they are licensed, and how they will secure personal health information of
consumers would assist state and federal authorities in enforcing existing
laws. In addition, federal agencies have taken actions to address the
illegal sale of prescription drugs from foreign Internet pharmacies.
Cooperative efforts between federal agencies and a foreign government
resulted in closing down some Internet pharmacies illegally selling
prescription drugs to U. S. consumers. However, it is unclear whether these
efforts will stem the flow of prescription drugs obtained illegally from
other foreign sources. As a result, the sale of prescription drugs from
foreign- based Internet pharmacies continues to pose difficulties for
federal regulatory authorities.

Matter for To help ensure that consumers and state and federal regulators
can easily

Congressional identify the operators of Web sites selling prescription
drugs, the Congress

should amend the FDCA to require that any pharmacy shipping Consideration

prescription drugs to another state disclose certain information on its
Internet site. The information disclosed should include the name, business
address, and telephone number of the Internet pharmacy and its principal
officers or owners, and the state( s) where the pharmacy is licensed to do
business. In addition, where permissible by state law, Internet pharmacies
that offer online prescribing services should also disclose the name,
business address, and telephone number of each physician providing
prescribing services, and the state( s) where the physician is licensed to
practice medicine. The Internet Pharmacy Consumer Protection Act and the
administration's proposal would require Internet pharmacies to disclose this
type of information.

Agency Comments and We obtained comments on a draft of this report, from
FDA, Justice, FTC,

Our Response and Customs, as well as NABP and FSMB. In general, they agreed
that

Internet pharmacies should be required to disclose pertinent information on
their Web sites and thought that our report provided an informative summary
of efforts to regulate Internet pharmacies. Some reviewers also provided
technical comments, which we incorporated where appropriate.

However, FDA suggested that our matter for consideration implied that online
questionnaires were acceptable as long as the physician's name was properly
disclosed. We did not intend to imply that online prescribing was proper
medical practice. Rather, our report notes that most state medical boards
responding to our survey have already concluded that a physician who issues
a prescription on the basis of a review of an online questionnaire has not
satisfied the standard of good medical practice required by state law. In
light of this, federal action does not appear necessary. The disclosure of
the responsible parties should assist state regulatory bodies in enforcing
their laws.

FTC suggested that our matter for congressional consideration be expanded to
recommend that the Congress grant states nationwide injunctive relief. Our
report already discusses NAAG's proposal that injunctive relief be modeled
after the federal telemarketing statute. While the NAAG proposal may have
some merit, an assessment of the implications of this proposal was beyond
the scope of our study. FTC also recommended that the Congress enact federal
legislation that would require consumer- oriented commercial Web sites that
collect personal identifying information from or about consumers online,
including Internet pharmacies, to comply with widely accepted fair
information practices. Again, our study did not evaluate whether a federal
consumer protection law was necessary or if existing state laws and
regulations may already offer this type of consumer protection.

NABP did not agree entirely with our assessment of the regulatory
effectiveness of the state boards of pharmacy. It indicated that the boards,
with additional funding and minor legislative changes, can regulate Internet
pharmacies. Our study did not assess the regulatory effectiveness of
individual state pharmacy boards. Instead, we summarized responses by state
pharmacy boards to our questions about their efforts to identify and take
action against Internet pharmacies that are not complying with state law,
and the challenges they face in regulating these pharmacies. Our report
notes that many states identified limited resources and jurisdictional
limitations as obstacles to enforcing their laws. NABP also suggested that
our matter for congressional consideration include a requirement for
independent verification of the information that Internet pharmacies are
required to disclose on their Web sites. In our view, the current state
regulatory framework would permit state boards to verify this information
should they choose to do so.

We are sending copies of this report to the Honorable Donna E. Shalala,
Secretary of Health and Human Services; the Honorable Jane E. Henney,
Commissioner of FDA; the Honorable Janet Reno, Attorney General; the
Honorable Donnie R. Marshall, Administrator of the DEA; the Honorable Robert
Pitofsky, Chairman of the FTC; the Honorable Raymond W. Kelly, Commissioner
of the U. S. Customs Service; the Honorable Kenneth C. Weaver, Chief Postal
Inspector; appropriate congressional committees; and other interested
parties. We will make copies available to others upon request.

If you or your staffs have any questions about this report or would like
additional information, please call me at (202) 512- 7119 or John Hansen at
(202) 512- 7105. See appendix V for another GAO contact and staff
acknowledgments.

Janet Heinrich Director, Health Care- Public Health Issues

List of Requesters The Honorable John D. Dingell Ranking Minority Member
Committee on Commerce House of Representatives

The Honorable Thomas J. Bliley, Jr. Chairman Committee on Commerce House of
Representatives

The Honorable Ron Klink Ranking Minority Member Subcommittee on Oversight
and Investigations Committee on Commerce House of Representatives

The Honorable Sherrod Brown Ranking Minority Member Subcommittee on Health
and Environment Committee on Commerce House of Representatives

The Honorable Henry A. Waxman House of Representatives

Appendi Appendi xes xI

Scope and Methodology To obtain information on the number of pharmacies
practicing on the Internet, we conducted searches of the World Wide Web and
obtained a list of 235 Internet pharmacies that the National Association of
Boards of Pharmacy (NABP) had identified by searching the Web and a list of
94 Internet pharmacies identified by staff of the House Committee on
Commerce by searching the Web. After eliminating duplicate Web sites, we
reviewed 296 potential sites between November and December 1999. Sites
needed to meet two criteria to be included in our survey. First, they had to
sell prescription drugs directly to consumers. Second, they had to be anchor
sites (actual providers of services) and not portal sites (independent Web
pages that connect to a provider). Most portal sites are paid a commission
by anchor sites for displaying an advertisement or taking the user to the
service provider's site through a “click through.” We excluded
129 Web sites from our survey because they did not meet these criteria. See
table 2 for details on our analysis of the Web sites that we excluded.

In April 2000, we obtained a list of 326 Web sites that FDA identified
during March 2000. We reviewed all the sites on FDA's list and compared it
to the list of Internet pharmacies we had previously compiled. We found 117
Internet pharmacies that duplicated pharmacies on our list. We also excluded
186 Web sites that did not meet our two criteria and added the remaining 23
Internet pharmacies to our list.

Table 2: Analysis of Identified Web Sites Original a FDA b Total Total Web
sites identified 296 326 622

Duplicate sites 0 117 117

Web sites excluded from our survey

Did not sell prescription drugs 25 91 116 Did not offer online ordering of
prescription drugs 7 3 10 Were portal sites 40 55 95 Were under construction
or empty, could not be entered, or were not yet opened 13 4 17

Were closed 8 7 15 Could not locate 36 26 62

Total Web sites that were excluded 129 303 432 Total Web sites that sold
prescription drugs directly to consumers 167 23 190

a Reviewed between November and December 1999. b Reviewed April 2000.

To categorize Internet pharmacies, we analyzed information on the Web site
to determine if the Internet pharmacy (1) required a prescription from the
user's physician to dispense a prescription drug, (2) in the absence of a
prescription, required the user to complete an online questionnaire to
obtain a prescription, or (3) dispensed prescription drugs without a
prescription. We also collected data on the types of information available
on each Internet pharmacy Web site, including information about the
pharmacy's licensure status, its mailing address and telephone number, and
the cost of issuing a prescription.

Using the domain name from the uniform resource locator, we performed online
queries of Network Solutions, Inc. (one of the primary registrars for domain
names) to obtain the name, address, and telephone number of the registrant
of each Internet pharmacy. We then telephoned all U. S.- based Internet
pharmacies to obtain information on the states in which they dispensed
prescription drugs and the states in which they were licensed or registered.
See table 3 for details on our licensure information inquiry. Finally, we
clustered Internet pharmacies by state and asked the pharmacy boards in the
12 states- 10 of these had the largest number of licensed/ registered
Internet pharmacies- to verify the licensure status of each pharmacy that
told us it was licensed in the state. 1

1 We verified the accuracy of licensure data in California, Colorado,
Florida, Illinois, Maine, Nebraska, New Jersey, New York, North Carolina,
Ohio, Pennsylvania, and Texas.

Table 3: Internet Pharmacy Licensure Information Require

Issue prescription prescription No prescription Total

Web sites that sold prescription drugs directly to consumers 111 54 25 190
Licensure information obtained 71 9 0 80 Licensure information not obtained
40 45 25 110

Declined to provide information 7 2 0 9 Did not return calls 11 18 0 29
Unable to contact 5 13 0 18 Closed, no longer providing services 9 3 0 12
Foreign Internet pharmacies 8 9 25 42

To assess state efforts to regulate Internet pharmacies and physicians
prescribing over the Internet, we conducted two mail surveys in December
1999. To obtain information on state efforts to identify, monitor, and
regulate Internet pharmacies, we surveyed pharmacy boards in all 50 states
and the District Columbia. After making follow- up telephone calls, we
received 50 surveys from the pharmacy boards in 49 states and the District
Columbia, or 98 percent of those we surveyed. The survey and survey results
are presented in appendix III. We also interviewed the executive directors
and representatives of the state pharmacy boards in nine states- Alabama,
Iowa, Maryland, New York, North Dakota, Oregon, Texas, Virginia, Washington-
and the District of Columbia. In addition, we interviewed and obtained
information from representatives of the NABP, the American Pharmaceutical
Association, the National Association of Attorneys General, pharmaceutical
manufacturers, as well as representatives of several Internet pharmacies.

To obtain information on state efforts to oversee physician prescribing
practices on the Internet, we surveyed the 62 medical boards and boards of
osteopathy in the 50 states and the District of Columbia. 2 After follow- up
telephone calls, we received 45 surveys from the medical boards in 39
states, or 73 percent of those we surveyed. The survey and survey results
are presented in appendix IV. We also interviewed officials with the medical
boards in five states: California, Colorado, Maryland, Virginia, and

2 We excluded the Florida Board of Osteopathic Medicine from our analysis
because the executive director told us that the Florida Board of Medicine
was the appropriate respondent.

Wisconsin. In addition, we interviewed and obtained information from
representatives of the American Medical Association and the Federation of
State Medical Boards (FSMB).

To assess federal efforts to oversee pharmacies and physicians practicing on
the Internet, we obtained information from officials from the Food and Drug
Administration; the Federal Trade Commission; the Department of Justice,
including the Drug Enforcement Administration; the U. S. Customs Service;
and the U. S. Postal Service. We also reviewed the report of the President's
Working Group on Unlawful Conduct on the Internet. 3

The availability of prescription drugs on the Internet has attracted the
attention of several professional associations. As a result, over the past
year, several associations have convened meetings of representatives of
professional, regulatory, law enforcement, and private sector entities to
discuss issues related to the practice of pharmacy and medicine on the
Internet. We attended the May 1999 NABP annual conference, its September
1999 Executive Board meeting, and its November 1999 Internet Healthcare
Summit 2000 to obtain information on the regulatory landscape for Internet
pharmacy practice sites and the Verified Internet Pharmacy Practice Sites
program. In January 2000, we attended a meeting convened by the FSMB of top
officials from various government, medical, and public entities to discuss
the efforts of state and federal agencies to regulate pharmacies and
physicians practicing on the Internet. We also attended sessions of the
March 2000 Symposium on Healthcare Internet and ECommerce and the April 2000
Drug Information Association.

We conducted our work from May 1999 through September 2000 in accordance
with generally accepted government auditing standards.

3 The President's Working Group on Unlawful Conduct on the Internet, The
Electronic Frontier: The Challenge of Unlawful Conduct Involving the Use of
the Internet( Washington, D. C.: Mar. 2000).

Actions by 28 States to Regulate Internet Pharmacies and Physicians
Prescribing on the

Appendi xII

Basis of an Online Questionnaire Policy Pharmacy

Medical State Legislative actions clarifications board actions board actions
Legal actions

Alabama Adopted rule that prescribing solely on the basis of answers to a
set of questions is inappropriate and unprofessional

Arizona Introduced bill defining Censured one

unprofessional conduct physician and placed

to include prescribing another on probation

drugs without conducting a physical examination or having a prior
relationship

California Introduced bill Neither in- state nor

Issued monetary fines Placed one physician prohibiting prescribing,

out- of- state on probation and

dispensing, or physicians may

issued monetary fines furnishing dangerous

prescribe to state and a letter of

drugs on the Internet residents without

reprimand without a good- faith

meeting the patient, prior examination and

even if the patient medical indication, with

completes an online a civil penalty of

questionnaire. $25, 000 per violation

Colorado Internet exchange does not qualify as an initial medical
examination, and no legitimate patient/ physician relationship is
established by it.

Florida Introduced bill requiring Physicians

physicians practicing in prescribing a

the state using specific drug to

telecommunications to residents without

be licensed and to being licensed in

provide certain the state may be

identifying information criminally liable.

Physicians prescribing on the Internet must follow standards of care.

(Continued From Previous Page)

Policy Pharmacy

Medical State Legislative actions clarifications board actions board actions
Legal actions

Illinois Enacted bill amending Suspended a

AGfiled suit against the Pharmacy Practice

physician's license for four out- of- state

Act to include prescribing online

online pharmacies pharmacies providing

without personally for selling,

services via the examining, meeting,

prescribing, Internet to be regulated

or interviewing dispensing, and

as nonresident patients; placed a

delivering pharmacies and

physician on prescription drugs

requiring out- of- state probation; and

without the pharmacies dispensing

referred another pharmacies or

drugs to residents to physician to the

physicians being obtain nonresident

medical board in licensed and with

special pharmacy another state

no physical registration

examination. Indiana Enacted bill requiring

online pharmacies to comply with licensure laws in the state where the
pharmacy is located

Iowa Conducted undercover buys from four Internet pharmacies and turned the
information over to the AG for possible criminal prosecution

Kansas Introduced bill requiring Referred Internet

Referred one AG filed lawsuits

Internet pharmacies to pharmacy( ies) to AG for

physician to the against 10 online

comply with federal possible criminal

medical board in pharmacies and

laws and be properly prosecution and filed

another state and obtained restraining

licensed; practitioners lawsuits against the

obtained an injunction orders against the

to comply with unauthorized practice of

against a physician; companies to stop

regulations; foreign pharmacy

the Kansas Board of them from doing

sites register with the Healing Arts also filed

business in Kansas Secretary of

a lawsuit against a Kansas; filed

State; and Internet physician for the

lawsuits against 7 pharmacies to display

unauthorized practice companies and

identification of medicine.

individuals selling information about the

prescription drugs pharmacy, pharmacist,

over the Internet. and practitioner

Kentucky Required an Internet pharmacy to obtain a state license

(Continued From Previous Page)

Policy Pharmacy

Medical State Legislative actions clarifications board actions board actions
Legal actions

Louisiana Dispensing Referred two

medication without physicians to the

physical medical boards in

examination other states

represents conduct that is inconsistent with the prevailing and usually
accepted standards of care and may be indicative of professional or medical
incompetence.

Maine Introduced bill making it Issued monetary fines

illegal to sell any drug, medicine, or pharmaceutical or medical preparation
on the Internet

Maryland Warned licensed doctors that online prescribing is subject to peer
review and that physicians not licensed in the state providing consultations
or prescribing online to residents may be fined $50, 000

Michigan AG filed notices of intended action against 10 Internet pharmacies
for illegally dispensing prescription drugs.

Missouri Referred Internet AG filed suit and

pharmacy( ies) to AG for obtained

possible criminal permanent

prosecution. injunctions against

two online pharmacies and physicians for practicing without state licenses.

(Continued From Previous Page)

Policy Pharmacy

Medical State Legislative actions clarifications board actions board actions
Legal actions

Nevada Interpreted its laws Internet pharmacy( ies)

Interviewed two to define

agreed to discontinue physicians and

malpractice to business following

suggested they stop include prescribing

investigation prescribing over the

a specific drug for a Internet; they

new patient without complied.

conducting a physical examination; proposed regulation to require
pharmacists to verify that a bona fide physician/ patient relationship
exists before filling prescriptions for out- of- state patients from out-
of- state doctors

New Hampshire Introduced bill requiring mail- order pharmacies to be
licensed and obtain permit

New Jersey AG filed suits charging nine Internet pharmacies with consumer
fraud violations for selling prescription drugs over the Internet without a
state license.

New York Introduced bill Recommended

Referred Internet prohibiting the

registration of outof- pharmacy( ies) to AG and

dispensing of controlled state

other state boards substances through an

pharmacies; views Internet consultation or

the failure to sale

conduct a physical examination of a patient prior to prescribing medications
as a violation of state law that defines appropriate medical conduct

(Continued From Previous Page)

Policy Pharmacy

Medical State Legislative actions clarifications board actions board actions
Legal actions

North Carolina Adopted the Referred Internet

position that pharmacy( ies) to a

prescribing drugs federal agency

over the Internet solely on the basis of an online questionnaire is
inappropriate and unprofessional

North Dakota Referred four pharmacies to pharmacy and medical boards in
other states

Ohio Adopted regulations An Ohio doctor was

prohibiting indicted on 64

physicians from felony counts of

prescribing or selling dangerous

dispensing drugs and drug

controlled trafficking over the

substances or Internet. The

dangerous drugs to Medical Board may

patients they have have his license

not examined and revoked.

diagnosed in person; pharmacy board adopted rules for the sale of drugs
online, requiring licensure or registration of pharmacy and disclosure.

Oregon Referred Internet pharmacy( ies) to state medical board, FDA, and U.
S. Customs Service

Pennsylvania AG filed lawsuits against three online companies and various
pharmacies and physicians for practicing without proper licensing.

Rhode Island Introduced bill making it illegal to sell prescription drugs
over the Internet

(Continued From Previous Page)

Policy Pharmacy

Medical State Legislative actions clarifications board actions board actions
Legal actions

Texas Established that prescribing controlled substances without a
physician/ patient relationship is unprofessional conduct

Washington Referred three Placed one physician physicians to the state

on probation and medical board

charged him with monetary fines

Wisconsin Regards prescribing Placed one physician

of a specific drug on probation and

via the Internet suspended another

without examining the patient as unprofessional conduct

Note: State pharmacy and medical boards' actions obtained from surveys (see
apps. III and IV).

Appendi xI II Survey of State Pharmacy Boards

Appendi xI V Survey of State Medical Boards

Appendi xV

GAO Contact and Staff Acknowledgments GAO Contact Gloria E. Taylor, (202)
512- 7160 Staff

The following individuals made important contributions to this report:
Acknowledgments

John C. Hansen directed the work; Claude B. Hayeck collected information on
federal efforts and, along with Darryl Joyce, surveyed state pharmacy
boards; Renalyn A. Cuadro assisted in the surveys of Internet pharmacies and
state medical boards; Susan Lawes guided survey development; Joan Vogel
compiled and analyzed state pharmacy and medical board survey data; and
Julian Klazkin served as attorney adviser.

(101821) Lett er

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GAO United States General Accounting Office

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Contents

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Appendix I

Appendix I Scope and Methodology

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Appendix I Scope and Methodology

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Appendix I Scope and Methodology

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Appendix II

Appendix II Actions by 28 States to Regulate Internet Pharmacies and
Physicians Prescribing on the Basis of an Online Questionnaire

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Appendix II Actions by 28 States to Regulate Internet Pharmacies and
Physicians Prescribing on the Basis of an Online Questionnaire

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Appendix II Actions by 28 States to Regulate Internet Pharmacies and
Physicians Prescribing on the Basis of an Online Questionnaire

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Appendix II Actions by 28 States to Regulate Internet Pharmacies and
Physicians Prescribing on the Basis of an Online Questionnaire

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Appendix II Actions by 28 States to Regulate Internet Pharmacies and
Physicians Prescribing on the Basis of an Online Questionnaire

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Appendix III

Appendix III Survey of State Pharmacy Boards

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Appendix III Survey of State Pharmacy Boards

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Appendix III Survey of State Pharmacy Boards

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Appendix III Survey of State Pharmacy Boards

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Appendix III Survey of State Pharmacy Boards

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Appendix III Survey of State Pharmacy Boards

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Appendix III Survey of State Pharmacy Boards

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Appendix III Survey of State Pharmacy Boards

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Appendix IV

Appendix IV Survey of State Medical Boards

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Appendix IV Survey of State Medical Boards

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Appendix IV Survey of State Medical Boards

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Appendix IV Survey of State Medical Boards

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Appendix IV Survey of State Medical Boards

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Appendix V

United States General Accounting Office Washington, D. C. 20548- 0001

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Postage & Fees Paid GAO Permit No. GI00
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