Online Health Care Contends with Fraud

SAN MATEO (07/03/2000) - Online pharmacies are looking for a prescription for trust. By policing themselves, these health care retailers hope they can convince more customers to feel confident about buying drugs online and assuage regulators' growing concerns.

The situation is not unlike what other online retailers face. Whether dispensing information or shilling products over the Internet, dot-coms confront accuracy, privacy, and security issues, analysts say. But when it comes to selling prescription drugs, these issues can be a matter of life or death to consumers and a matter of financial health to legitimate online health care purveyors.

"That's what our whole business is about -- credibility," says Doug Callihan, president and CEO of, the Seattle-based online pharmacy of brick-and-mortar drugstore chain CVS Corp. "The customer hones in on, 'Do I feel comfortable having my health care needs being taken care of at this pharmacy?' "Major health retailers are employing self-policing efforts that include Verified Internet Pharmacy Practice Sites (VIPPS), certification from the National Association of Boards of Pharmacy (NABP), and Health Internet Ethics (HiEthics), a coalition of Internet health sites. VIPPS focuses on drug dispensation; HiEthics considers content labeling and the release of customer data.

Online pharmacies are also independently mounting efforts to increase the accuracy, privacy, and security of sensitive personal health information as data moves out of the doctor's office. Measures taken include dating online content and identifying sources, encrypting patient information and limiting the type of information sent via e-mail, and piloting programs to accept electronic prescriptions. (Currently, most online prescriptions are verified via the phone, fax, or mail.)Pressure is mounting for stiffer government regulations for Internet drug sales. Of particular concern are sales from foreign-based operations that don't bow to U.S. laws or sidestep rules meant to protect consumers.

During congressional committee hearings on the matter in May, Representative Tom Bliley, a Republican from Virginia, chairman of the full House Commerce Committee, was quoted as calling unapproved drugstore orders "the biggest problem we face."

A number of proposals have cropped up at both state and federal levels to tighten controls over online pharmacies. In May, the Food and Drug Administration sent to Congress the Internet Prescription Drug Sales Act. It would, among other things, strengthen government authorities' enforcement powers to shut down a law-breaking site's nationwide operations. Currently, a state might be able to stop a Web business from selling products in that state, but the site could still sell to customers elsewhere.

Online pharmacies hope the self-policing efforts will be satisfactory to government authorities because they aren't eager to deal with a variety of new regulations, notes Carmen Catizone, executive director of the NABP, in Park Ridge, Illinois. Online pharmacies already must comply with federal guidelines as well as the existing state laws of each state in which they operate or in which their customers dwell.

Some big dollars are at stake. According to Jupiter Communications, a New York-based research firm, pharmaceutical sales will account for about US$4.5 billion of the total $10 billion in health commerce spent in 2004. That's up from $200 million Jupiter estimated was spent on health products in 1999.

The purse could get bigger if more consumers can be convinced to replace a trip to the drugstore with a click of the mouse.

"Prescriptions are very high-trust purchases, and many consumers have a strong relationship with their pharmacists," says Elizabeth Boehm, an analyst at Cambridge, Massachusetts-based Forrester Research. "That's hard to replicate online."

Online pharmacies have to get a valid prescription before dispensing a drug, and currently that's costly and time-consuming, Boehm notes. Online drugstores must also forge relationships with insurers to assure consumers they can pay their expected co-payment and still get reimbursed, she adds.

Reputation and consumer trust is also a major factor in luring advertising dollars. Having a well-known, respected brand was the second most important factor after audience for a health care company to select a health site partner, according to Forrester Research findings.

To gain a VIPPS certification, an online drugstore must meet 17 criteria that consider patient confidentiality, prescription security, quality assurance, and patient-pharmacist consultation. HiEthics has established policies that include notifying users about the collection or use of any information about them and giving users the ability to opt out of the passing of that data, thus clearly labeling advertisements and disclosing financial backers.

"Until now there haven't been rules for ethical conduct" aimed at health care information sites, says Donald Kemper, chairman of HiEthics and CEO of Healthwise, a health information company in Boise, Idaho.

Some online pharmacies have independently employed practices to safeguard privacy and ensure the security of data. For example, when receives a customer's health information, the data is encrypted and split over several distinct databases, says Judith McGarry, vice president of strategic partnerships at, in Bellevue, Wash.

The central criticism with the self-regulation is that it's voluntary. "It just won't work with the rogue sites," says Tom McGinnis, director of Pharmacy Affairs at the FDA, in Rockville, Maryland.

But law-abiding pharmacies are eager to reveal rogues for what they are. "They [rogue sites] are no different than someone dealing drugs on a street corner," says CVS's Callihan, "they are just using the Internet."

Fraud wreaks havoc with E-Health

It can be difficult for the naive customer to tell a phony pharmacy from a legitimate one on the Internet, observers say. "When a customer enters into a brick-and-mortar pharmacy, they know that they are in a pharmacy," says Tom McGinnis, director of Pharmacy Affairs at the Food and Drug Administration, in Rockville, Maryland. "On the Net, [it's not] quite evident that you are in a real licensed pharmacy in the United States."

Many laws that govern pharmacies were created well before the rise of the Internet. Tending to focus on the neighborhood druggist, they "just don't fit very well" in today's borderless electronic world, McGinnis says. For example, he says, most states prohibit merchants from hanging out a shingle proclaiming the store is a "pharmacy" unless it's licensed from the state as such. It's not clear how that would apply in the virtual world.

Almost one-third of the 300 Web sites that sell prescription drugs are "rogue sites" that push products or practices online that are illegal offline, says Carmen Catizone, executive director at the National Association of Boards of Pharmacy, in Park Ridge, Illinois. They may seem more numerous than they actually are because they commonly showcase services under different names and Web pages feeding into the same sites, he says.

Widely reported cases of abuse include a 52-year-old Illinois man who died of a heart attack after he took the impotency drug Viagra, which he ordered over the Internet. Although the death could not be conclusively tied to Viagra, reports state that the man had a family history of heart trouble that perhaps should have been considered before allowing him to get the prescription drug.

FDA investigations involving products sold via the Internet have resulted in 43 arrests and 22 convictions, according to an FDA statement submitted to a congressional committee.

Legitimate players fear rogues will give them a black eye. "If [the legitimate online drugstores] get lumped with the pharmacies that are dangerous or illegal, then people won't turn to the Internet pharmacies for prescriptions; and [online pharmacies] could lose a significant piece of the marketplace," Catizone says.

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