Order Code RL32191
CRS Report for Congress
Received through the CRS Web
Prescription Drug Importation
and Internet Sales:
A Legal Overview
January 8, 2004
Jody Feder
Legislative Attorney
American Law Division
Congressional Research Service ˜ The Library of Congress

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Prescription Drug Importation and Internet Sales:
A Legal Overview
Summary
As prescription drug prices have escalated in recent years, so too has consumer
interest in purchasing less costly medications abroad. Meanwhile, in July, 2003, the
House of Representatives passed H.R. 2427, a bill that would allow wholesalers,
pharmacists, and consumers to import certain prescription drugs from 25 different
countries, including Canada, where drug prices are often lower than in the United
States. Although H.R. 2427 passed the House, the provisions allowing drug
importation faced opposition in the Senate and were not included in the conference
agreement on Medicare prescription drug benefits. Instead, the final Medicare bill,
H.R. 1, modified a provision of existing law that authorizes the Food and Drug
Administration (FDA) to allow the importation of prescription drugs if the Secretary
of Health and Human Services certifies that implementing such a program is safe and
reduces costs, a determination that no Secretary has made in the years since a similar
certification requirement was established in 2000.
Despite the compromise reached in the final Medicare bill, the debate about
drug importation continues. On the one hand, the FDA and some lawmakers remain
opposed to allowing prescription drugs to be imported from foreign countries,
arguing that the FDA cannot guarantee the safety of such drugs. On the other hand,
importation proponents, who claim that importation would result in significantly
lower prices for U.S. consumers, say that safety concerns are overblown and would
recede if additional precautions were implemented.
Just as the FDA has expressed concerns about the safety of imported drugs,
federal regulators have become increasingly worried about the risks posed by some
online pharmacies and Internet drug sales. Indeed, the regulation of prescription drug
importation and the oversight of online pharmacies often overlap because many
consumers use online pharmacies to purchase imported drugs. Regardless of whether
or not drugs purchased online are imported, the FDA is worried about the safety of
such medications because of its concern that a small number of online doctors and
pharmacies are exploiting regulatory gaps to prescribe and dispense illegal, addictive,
or unsafe drugs.
In response to concerns about prescription drug imports and Internet sales,
several congressional lawmakers have introduced the following bills: H.R. 616, H.R.
780, H.R. 847, H.R. 2497, H.R. 2652, H.R. 2717, H.R. 2769, S. 1781, S. 1974, and
S. 1992. Currently, the following federal and state agencies are involved in regulating
aspects of prescription drug importation and Internet sales: the Food and Drug
Administration, the U.S. Customs and Border Protection (CBP), the Drug
Enforcement Agency (DEA), state boards of pharmacy, and state medical boards.
Although this report is intended to focus on legal aspects of prescription drug
importation and Internet sales, both legal and policy issues are addressed because
they are closely linked. For a more complete analysis of policy issues, see CRS
Report RL31503, Importing Prescription Drugs and CRS Report RL32107,
Importing Prescription Drugs – Comparison of the Drug Import Provisions in the
Medicare Reform Bills, H.R. 2427, and Current Law.

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Contents
I. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
II. Prescription Drug Importation: Legal Regulation . . . . . . . . . . . . . . . . . . . . . . . 3
Reimportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Importation of Foreign Versions of Prescription Drugs . . . . . . . . . . . . . . . . 5
Penalties Under the FFDCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
The FDA’s Personal Importation Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
State and Local Importation of Prescription Drugs:
Violation of Federal Law? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Businesses That Facilitate Importation of Prescription Drugs . . . . . . . . . . . 12
Antitrust Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Federal Antitrust Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
State Antitrust Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
III. Internet Pharmacies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Federal Oversight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
State Oversight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
IV. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

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Prescription Drug Importation and
Internet Sales: A Legal Overview
This report explores the legal issues raised by prescription drug importation and
Internet sales. Although this report is intended to focus on legal analysis, both legal
and policy issues are addressed because they are closely linked. For a more complete
analysis of policy issues, see CRS Report RL31503, Importing Prescription Drugs
and CRS Report RL32107, Importing Prescription Drugs – Comparison of the Drug
Import Provisions in the Medicare Reform Bills, H.R. 2427, and Current Law.
I. Introduction
As prescription drug prices have escalated in recent years, so too has consumer
interest in purchasing less costly medications abroad. Meanwhile, congressional
legislators have been exploring a variety of legislative solutions to the problems
posed by rising drug costs. In July, 2003, the House of Representatives passed H.R.
2427, a bill that would allow wholesalers, pharmacists, and consumers to import
prescription drugs that are approved by the Food and Drug Administration (FDA) and
that are manufactured in FDA-approved plants. Under the bill, drugs could be
imported from 25 different countries, including Canada, where drug prices are often
lower than in the United States. Despite opposition from the leadership, H.R. 2427
easily passed the House, but the provisions allowing drug importation faced
opposition in the Senate and were not included in the conference agreement on
Medicare prescription drug benefits. Instead, the final Medicare bill, H.R. 1, modified
a provision of existing law that authorizes the FDA to allow the importation of
prescription drugs if the Secretary of Health and Human Services (HHS) certifies that
implementing such a program is safe and reduces costs, a determination that no
Secretary has made in the years since a similar certification requirement was
established in 2000.1
Despite the fact that the final Medicare bill did not make it easier to import
prescription drugs from Canada and other foreign countries, the debate about drug
importation continues. On the one hand, the FDA and some lawmakers remain
opposed to allowing prescription drugs to be imported from foreign countries.
Worried about the risk to consumers, these critics argue that the FDA cannot
guarantee the safety of such drugs,2 which they contend are more susceptible to being
mishandled, mislabeled, unapproved, or counterfeited than drugs sold domestically.
1 Pub. L. No. 108-173 [hereinafter Medicare Act]. The original certification provision was
contained in the Medicine Equity and Drug Safety (MEDS) Act. Pub. L. No. 106-387.
2 The Canadian government has also stated that it cannot guarantee the safety of drugs
exported to the U.S. from Canada. Marc Kaufman, Canadian Drug Position Misinterpreted,
WASH. POST, May 26, 2003, at A11.

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In addition, drug manufacturers and other opponents argue that allowing the
importation or reimportation of prescription drugs would stifle investment in the
research and development of new drugs.3 On the other hand, importation proponents,
who claim that importation would result in significantly lower prices for U.S.
consumers, say that safety concerns are overblown and would recede if additional
precautions were implemented. Arguing that drug manufacturers are actually
concerned about their profits and not about consumer safety, proponents of
importation contend that U.S. consumers should not subsidize the cost of research
and development and that consumers in other countries should share the burden.4
Linked to the issue of prescription drug importation is a debate about drug costs.
While some comparisons of U.S. and Canadian drug prices conclude that U.S. prices
are up to 70 percent higher than their Canadian counterparts,5 other studies conclude
that Canadian prices are actually slightly higher than U.S. prices when adjusted for
per capita income.6 In addition, there is an unresolved debate about whether allowing
drug imports would affect drug prices, with supporters arguing that drug prices would
drop due to competition if imports were allowed and opponents arguing that
increased demand for imported drugs and moves by manufacturers to limit supplies
of cheaper drugs would cause prices to rise both in the U.S. and abroad.7
Just as the FDA has expressed concerns about the safety of imported drugs,
federal regulators have become increasingly worried about the risks posed by some
online pharmacies and prescription drug sales over the Internet. Indeed, the regulation
of prescription drug importation and the oversight of online pharmacies often overlap
because many consumers use online pharmacies to purchase imported drugs.
Regardless of whether or not drugs purchased online are imported, the FDA is
worried about the safety of such medications because of its concern about the lack
of adequate physician supervision, the prospects for tampering with or counterfeiting
such drugs, and the possibility that such drugs may be handled, dispensed, packaged,
or shipped incorrectly.8
In response to concerns about prescription drug imports and Internet sales, a
number of congressional legislators have introduced bills that would make changes
to existing law in these areas. In addition to H.R. 2427, several other bills – including
H.R. 616, H.R. 780, H.R. 847, H.R. 2497, H.R. 2717, H.R. 2769, S. 1781, S. 1974,
and S. 1992 – would amend current importation policy, and at least three bills – H.R.
3 Marc Kaufman, FDA’s Authority Tested Over Drug Imports, WASH. POST, Nov. 9, 2003,
at A11.
4 Id.
5 Id.
6 Inside Washington Publishers, Canadians Pay More for Drugs When Per Capita Income
Adjusted, FDA WEEK, Dec. 19, 2003, at 1.
7 Gardiner Harris, The Nation: Prescriptions Filled; If Americans Want to Pay Less for
Drugs, They Will, N.Y. TIMES, Nov. 16, 2003, § 4, at 4.
8 FOOD AND DRUG ADMINISTRATION, Buying Medicines and Medical Products Online,
http://www.fda.gov/oc/buyonline/default.htm.

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616, H.R. 2652, and H.R. 2717 – would make changes to the law governing how
drugs are sold online.
Current regulation of prescription drug importation and Internet sales consists
of a patchwork of federal and state laws in an array of areas.9 At the federal level, the
Food and Drug Agency (FDA) regulates prescription drugs under the Federal Food,
Drug, and Cosmetic Act (FFDCA), which governs, among other things, the safety
and efficacy of prescription medications, including the approval, manufacturing, and
distribution of such drugs.10 It is the FFDCA that prohibits the importation or
reimportation of certain prescription drugs by anyone other than the manufacturer and
that requires that prescription drugs may be dispensed only with a valid
prescription.11 Meanwhile, U.S. Customs and Border Protection (CBP) has the initial
responsibility for examining imported goods at the nation’s borders and for detaining
any FDA-regulated products that appear to pose a health risk. In addition, the Drug
Enforcement Agency (DEA) administers the Controlled Substances Act, which is a
federal statute that establishes criminal and civil sanctions for the unlawful
possession, manufacturing, or distribution of certain addictive or dangerous
substances, including certain prescription drugs that share these properties, such as
narcotics and opiates.12 At the state level, state boards of pharmacy regulate pharmacy
practice, and state medical boards oversee the practice of medicine. Thus, some of
the laws that govern online pharmacies and doctors vary from state to state.
II. Prescription Drug Importation: Legal Regulation
At the federal level, the FDA regulates prescription drugs under the Federal
Food, Drug, and Cosmetic Act (FFDCA), which governs, among other things, the
safety and efficacy of prescription medications, including the approval,
manufacturing, and distribution of such drugs.13 Although many states also have their
own laws that regulate drug safety, the FDA maintains primary responsibility for
overseeing prescription drugs in the United States, while the DEA and CBP have
somewhat more limited regulatory authority over prescription drugs.
The FFDCA contains several provisions that apply to prescription drug imports.
First, the statute contains an outright prohibition that forbids anyone other than the
9 For other information on prescription drug importation and Internet sales, see CRS Report
RL31503, Importing Prescription Drugs; CRS Report RL32107, Importing Prescription
Drugs – Comparison of the Drug Import Provisions in the Medicare Reform Bills, H.R.
2427, and Current Law; and GAO Report GAO-01-69, Internet Pharmacies: Adding
Disclosure Requirements Would Aid State and Federal Oversight.
10 21 U.S.C. § 301 et seq.
11 Id. at § 353(b).
12 Id. at § 801 et seq. For more information on the Controlled Substances Act, see CRS
Report 97-141A, Drug Smuggling, Drug Dealing and Drug Abuse: Background and
Overview of the Sanctions Under the Federal Controlled Substances Act and Related
Statutes.
13 21 U.S.C. § 301 et seq.

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U.S. manufacturer from reimporting prescription drugs. This prohibition therefore
affects drugs that originally are made in the U.S. Second, the FFDCA contains a
number of other provisions relating to drug approvals and labeling that make it nearly
impossible for prescription drugs made for foreign markets to comply with the
extensive statutory requirements. These provisions generally affect foreign versions
of drugs that are approved for domestic sale.
Both reimportation of U.S.-manufactured prescription drugs and importation of
unapproved foreign versions of U.S.-approved prescription drugs are discussed in
this section, as are the penalties under the FFDCA, the FDA’s Personal Importation
policy, state plans to import prescription drugs, and businesses that facilitate the
importation of prescription drugs.
Reimportation
Currently, the FFDCA prohibits anyone other than the U.S. manufacturer of a
prescription drug from reimporting that drug into the United States.14 Thus, it is
technically a violation of the statute for individual consumers or online pharmacies
to reimport a prescription drug back into the country, even though the drug was, prior
to export, originally manufactured in the U.S. and even if the drug otherwise
complies with the FFDCA.15 Although critics of this law argue that there is no
rational justification for forbidding the reimportation of a drug that is theoretically
identical to its counterpart sold in the U.S., the FDA contends that the agency can no
longer guarantee the safety of a prescription drug once it has left the country and the
agency’s regulatory control. According to the agency, the FDA “cannot provide
adequate assurance to the American public that the drug products delivered to
consumers in the United States from foreign countries are the same products
approved by the FDA.”16
In response to concerns about the rising costs of prescription drugs, however,
Congress adopted importation amendments to the FFDCA in 2000. Under the
Medicine Equity and Drug Safety (MEDS) Act,17 the FDA was authorized to allow
pharmacists and wholesalers to import prescription drugs from foreign countries if
certain safety precautions were followed.18 The Act, however, stipulated that the
importation provision would not become effective until and unless the Secretary of
HHS determined that the implementation of the provision would “pose no additional
risk to the public’s health and safety; and [would] result in a significant reduction in
14 Id. at § 381(d)(1). The Secretary, however, is authorized to allow the importation of any
drugs that are required for emergency medical care. Id. at § 381(d)(2).
15 Under the FDA’s Personal Importation policy, however, the FDA currently does not
enforce this prohibition against individuals who import a limited supply of prescription
drugs for personal use. See infra notes 42-49 and accompanying text.
16 Letter from William K. Hubbard, Associate Commissioner for Policy and Planning, Food
and Drug Administration, to Robert P. Lombardi, Esq., The Kullman Firm 1 (Feb. 12, 2003),
http://www.fda.gov/ora/import/kullman.pdf [hereinafter Lombardi Letter].
17 Pub. L. No. 106-387.
18 21 U.S.C. § 384.

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the cost of covered products to the American consumer.”19 Citing safety concerns,
both the current and the former Secretaries declined to implement this provision.
In the recently enacted Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (hereinafter referred to as the Medicare Act),20 Congress
once again revisited the issue of prescription drug importation. Like the MEDS Act
it superseded, the Medicare legislation directs the FDA to allow pharmacists and
wholesalers to import prescription drugs if certain safety precautions are followed.
Unlike the MEDS Act, which covered prescription drugs from a specified group of
foreign countries, the Medicare Act allows imports from Canada only.21 In addition,
the Medicare Act, unlike the MEDS Act, also authorizes the FDA to allow, by
regulatory waiver, individuals to import prescription drugs for personal use under
certain circumstances.22 Despite these new importation provisions, the Medicare Act,
like the MEDS Act, stipulates that the importation provisions will not become
effective until and unless the Secretary certifies that the implementation of the
provision would “pose no additional risk to the public’s health and safety; and
[would] result in a significant reduction in the cost of covered products to the
American consumer.”23As noted above, the Secretary of HHS has thus far declined
to provide such certification. Absent such certification, the ban on the importation
and reimportation of prescription drugs remains in effect.
Importation of Foreign Versions of Prescription Drugs
Even if the FFDCA did not contain an explicit prohibition against drug
reimportation, the FDA maintains that consumer imports of prescription drugs from
foreign countries would almost certainly violate other provisions of the Act.24 For
example, such drugs are likely to be unapproved,25 mislabeled,26 or improperly
dispensed.27 According to the FDA:
The reason that Canadian or other foreign versions of U.S.-approved drugs are
generally considered unapproved in the U.S. is that FDA approvals are
manufacturer-specific, product-specific, and include many requirements relating
to the product, such as manufacturing location, formulation, source and
specifications of active ingredients, processing methods, manufacturing controls,
container/closure system, and appearance. . . . Moreover, even if the
19 Id. at § 384(l).
20 Medicare Act, supra note 1.
21 Id.
22 Id. This legislation, which is similar to the FDA’s Personal Importation policy, is
discussed in more detail in a separate section below.
23 Id.
24 Lombardi Letter, supra note 16 at 2.
25 21 U.S.C. § 355.
26 Id. at § 353(b)(2).
27 Id. at § 353(b)(1).

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manufacturer has FDA approval for a drug, the version produced for foreign
markets usually does not meet all of the requirements of the U.S. approval, and
thus it is considered to be unapproved. Virtually all shipments of prescription
drugs imported from a Canadian pharmacy will run afoul of the Act, although it
is a theoretical possibility that an occasional shipment will not do so. Put
differently, in order to ensure compliance with the Act when they are involved
in shipping prescription drugs to consumers in the U.S., businesses and
individuals must ensure, among other things, that they only sell FDA-approved
drugs that are made outside of the U.S. and that comply with the FDA approval
in all respects.28
In addition to complying with the requirements regarding FDA approvals,
imported drugs must also meet FDA requirements regarding labeling and dispensing.
For example, mislabeling a drug is a violation of the FFDCA, as is the act of
introducing or receiving a mislabeled drug in interstate commerce.29 In order to be
properly labeled, prescription drugs must be labeled in accordance with the FDA’s
extensive labeling requirements.30 Furthermore, the FFDCA requires that prescription
drugs may be dispensed only with a valid prescription.31 Therefore, it is a violation
of the Act to import prescription drugs without a legitimate U.S. prescription.
According to the FDA, a recent inspection of prescription drug shipments by
U.S. Customs and Border Patrol found that 1,019 of 1,153 drug shipments from
foreign countries violated the FFDCA because they “contained unapproved drugs”
that “could pose clear safety problems.”32 Although the reason for the violation
varied depending on the shipment, the FDA and CBP found shipments of drugs that,
among other things, had never been approved by the FDA, were inadequately labeled
(e.g., lacked instructions or were labeled in a foreign language), had been withdrawn
from the U.S. market due to safety concerns, could cause dangerous interactions,
required monitoring by a doctor, or were controlled substances.33
Penalties Under the FFDCA
If a business or consumer violates the FFDCA by importing unapproved or
misbranded prescription drugs, there are a number of criminal and civil penalties that
may apply. Although the penalties vary depending on the offense, violations of the
Act’s general prohibitions are a misdemeanor offense punishable by up to a year in
prison or a fine of up to $1,000, or both.34 A violation that occurs after a prior
28 Lombardi Letter, supra note 16 at 3.
29 21 U.S.C. §§ 331 (a)-(c), 353(b)(2).
30 21 C.F.R. §201.100(c)(2).
31 21 U.S.C. § 353(b)(1).
32 Press Release, Food and Drug Administration, FDA/U.S. Customs Import Blitz Exams
Reveal Hundreds of Potentially Dangerous Imported Drug Shipments (Sept. 29, 2003),
http://www.fda.gov/bbs/topics/NEWS/2003/NEW00948.html.
33 Id.
34 21 U.S.C. § 333(a)(1). In addition, misdemeanor violations of the Act are strict liability
(continued...)

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conviction for violating the Act or that is committed with the intent to defraud or
mislead is a felony offense punishable by up to three years of imprisonment or up to
a $10,000 fine, or both.35 If a business or consumer knowingly violates the
reimportation provision, then the violation is a felony offense punishable by up to 10
years in prison or up to $250,000 in fines.36 In addition, federal courts are authorized
to issue injunctions in order to enjoin violations of the Act.37
It is important to note that “[t]hose who aid and abet a criminal violation of the
Act, or conspire to violate the Act, can also be found criminally liable.”38 Federal
criminal law generally makes it a separate crime to aid or abet any criminal offense
against the United States or to conspire to commit a criminal offense against the
United States,39 so illegal importers could potentially be charged with these offenses
as well. In addition, the FFDCA explicitly forbids certain acts, as well as the causing
of such prohibited acts.40 Thus, businesses that facilitate the importation of
unapproved prescription drugs or the reimportation of U.S.-manufactured
prescription drugs may be liable if they are deemed to be “causing” violations of the
Act.
Despite the range of penalties that FDA has available to punish those who
import prescription drugs in violation of the Act, the agency has clarified that its
“highest enforcement priority would not be actions against consumers.”41 Indeed, the
FDA exercises its enforcement discretion leniently in this regard by allowing
consumers to import certain otherwise illegal prescription drugs under certain
circumstances. This enforcement policy, known as the Personal Importation policy,
is described in detail below.
The FDA’s Personal Importation Policy
Although importing unapproved prescription drugs is a violation of the FFDCA,
it is the U.S. Customs and Border Patrol (CBP), not FDA, that has the initial
responsibility for examining imported goods at the nation’s borders. Accordingly,
CBP notifies the FDA if it has detected a mail or baggage shipment of “an FDA-
regulated article intended for commercial distribution, an article that FDA has
specifically requested be detained, or an FDA regulated article that appears to
34 (...continued)
offenses. United States v. Dotterweich, 320 U.S. 277, 284 (1943).
35 21 U.S.C. § 333(a)(2).
36 Id. at §§ 333(b)(1), 381(d)(1).
37 Id. at § 332.
38 Lombardi Letter, supra note 16 at 1.
39 18 U.S.C. §§ 2, 371.
40 21 U.S.C. § 331.
41 Lombardi Letter, supra note 16 at 4.

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represent a health fraud or an unknown risk to health.”42 In order to assist agency
personnel in determining when to allow or refuse entry to imported drugs, the FDA
developed its Personal Importation policy.
Under the FDA’s Personal Importation policy, the FDA exercises its
enforcement discretion to permit consumers to import otherwise illegal prescription
drugs for purposes of personal use. Recognizing that the agency’s limited
enforcement resources are best directed at commercial shipments of imported drugs
rather than personal imports, the FDA may, at its discretion, refrain from taking legal
action against illegally imported drugs under the following circumstances:
a) the intended use is unapproved and for a serious condition for which effective
treatment may not be available domestically either through commercial or
clinical means;
b) there is no known commercialization or promotion to persons residing in the
U.S. by those involved in the distribution of the product at issue;
c) the product is considered not to represent an unreasonable risk; and
d) the individual seeking to import the product affirms in writing that it is for the
patient’s own use (generally not more than 3 month supply) and provides the
name and address of the doctor licensed in the U.S. responsible for his or her
treatment with the product, or provides evidence that the product is for the
continuation of a treatment begun in a foreign country.43
Ultimately, the Personal Importation policy is designed to set forth guidance for
agency personnel regarding the FDA’s enforcement priorities for imported drugs, but
it is not intended to grant a license to consumers to import unapproved prescription
drugs into the United States.44 Indeed, the FDA emphasizes that even if all of the
factors above are met, “the drugs remain illegal and FDA may decide that such drugs
should be refused entry or seized.”45 Furthermore, this policy does not apply to
commercial shipments of unapproved prescription drugs, nor is it intended to permit
the importation of foreign versions of drugs that are already approved in the United
States. Thus, it appears that personal importations of cheaper versions of prescription
42 OFFICE OF REGULATORY AFFAIRS, FOOD AND DRUG ADMINISTRATION, Coverage of
P e r s o n a l I m p o r t a t i o n s , R E G U L A T O R Y P R O C E D U R E S M A N U A L ,
http://www.fda.gov/ora/compliance_ref/rpm_new2/ch9pers.html.
43 Id. See also, OFFICE OF REGULATORY AFFAIRS, FOOD AND DRUG ADMINISTRATION,
I m p o r t a t i o n o f P r e s c r i p t i o n M e d i c i n e s / D r u g s ,
http://www.fda.gov/ora/import/traveler_alert.htm; OFFICE OF REGULATORY AFFAIRS, FOOD
AND DRUG ADMINISTRATION, Information on Importation of Drugs (April 3, 1998),
http://www.fda.gov/ora/import/pipinfo.htm.
44 OFFICE OF REGULATORY AFFAIRS, FOOD AND DRUG ADMINISTRATION, Coverage of
P e r s o n a l I m p o r t a t i o n s , R E G U L A T O R Y P R O C E D U R E S M A N U A L ,
http://www.fda.gov/ora/compliance_ref/rpm_new2/ch9pers.html.
45 OFFICE OF REGULATORY AFFAIRS, FOOD AND DRUG ADMINISTRATION, Importation of
Prescription Medicines/Drugs, http://www.fda.gov/ora/import/traveler_alert.htm.

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drugs that are already available in the U.S. do not conform to the FDA’s Personal
Importation policy.46
Meanwhile, in the recent Medicare Prescription Drug, Improvement, and
Modernization Act of 2003, Congress authorized the FDA to allow individuals to
import prescription drugs for personal use under certain circumstances.47 Specifically,
the Act requires the Secretary of HHS to allow individuals to import prescription
drugs from Canada if the drug:
(A) is imported from a licensed pharmacy for personal use by an individual, not
for resale, in quantities that do not exceed a 90-day supply;
(B) is accompanied by a copy of a valid prescription;
(C) is imported from Canada, from a seller registered with the Secretary;
(D) is a prescription drug approved by the Secretary . . .
(E) is in the form of a final finished dosage that was manufactured in [a registered]
establishment . . .
(F) is imported under such other conditions as the Secretary determines to be necessary
to ensure public safety.48
Although the new individual importation provisions in the Medicare Act appear
similar to the FDA’s Personal Importation policy, the legislation contains one
important restriction: It stipulates that the new importation provisions will not
become effective until and unless the Secretary certifies that the implementation of
the provision would “pose no additional risk to the public’s health and safety; and
[would] result in a significant reduction in the cost of covered products to the
American consumer.”49 The current Secretary of HHS, however, has declined to
provide such certification in the past, and it is unclear what direction the agency will
take in the future. Thus, the new individual importation provisions do not appear to
represent a codification of the FDA’s Personal Importation policy.
State and Local Importation of Prescription Drugs:
Violation of Federal Law?
Just as individual consumers have sought to buy cheaper prescription drugs from
foreign sources, several state and local governments are currently considering plans
to reimport prescription drugs in order to save money on medicines which they
reimburse for or provide to their residents and employees. For example, states such
as California, Iowa, Illinois, Minnesota, and New Hampshire have begun exploring
the prospect of drug importation, and at least one locality, Springfield,
Massachusetts, has already begun to import drugs.50 Contending that carefully
46 OFFICE OF REGULATORY AFFAIRS, FOOD AND DRUG ADMINISTRATION, Information on
Importation of Drugs (April 3, 1998), http://www.fda.gov/ora/import/pipinfo.htm.
47 Medicare Act, supra note 1 at § 1121.
48 Id.
49 Id.
50 Pam Belluck, Boldly Crossing the Line for Cheaper Drugs, N. Y. TIMES, Dec. 11, 2003,
(continued...)

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structured state programs will provide a sufficient degree of safety, states argue that
they have a duty to explore innovative methods for providing more affordable
prescription drugs to their residents, even at the risk of violating federal law.
Each state and local importation plan varies somewhat in the details.
Springfield, for example, has been facilitating the purchase of Canadian drugs as part
of a plan to provide cheaper medications to city employees, and the city estimates
that it has saved it least $750,000 since beginning the program in the summer of
2003.51 Meanwhile, officials in New Hampshire plan to import prescription drugs
from Canada for state prison inmates and certain Medicaid recipients that receive
medications through state drug plans. The state also intends to establish a web site
for New Hampshire residents to purchase drugs from Canadian pharmacies that are
licensed in Canada and approved by the state.52 In addition, Vermont has petitioned
the FDA in hope that the agency will, as it has done with regard to personal drug
importation, exercise its enforcement discretion and allow Vermont to provide
imported Canadian drugs to state employees.53
Despite the efforts of such state and local governments, the FDA continues to
maintain that importing unapproved prescription drugs is unsafe and illegal. Indeed,
FDA representatives have met with and sought to convince state officials to change
their minds about importing drugs in apparent violation of federal law. At the same
time, the agency has notified certain states of its legal position regarding drug
imports. For example, according to the FDA’s response to an inquiry from California
officials, “if an entity or person within the State of California (including any state,
county, or city program, any public pension, or any Indian Reservation) were to
import prescription drugs into the State of California from Canada [or any other
foreign country], it would violate FFDCA in virtually every instance.”54
The FDA provides several legal arguments for reaching its conclusion that state
and local drug importation is a violation of the FFDCA. First, the statute prohibits
anyone other than the manufacturer from reimporting drugs that were originally
50 (...continued)
at A38.
51 Id.
52 Id.
53 Inside Washington Publishers, Vermont Wants FDA to Allow Drug Reimportation for
State Employees, FDA WEEK, Dec. 19, 2003, at 3. The new Medicare bill authorizes the
FDA to provide waivers for individual importation, and some lawmakers are arguing that
the individual importation waiver authority extends to state importation plans because such
plans are intended to provide prescription drugs to individual state residents. The FDA,
however, notes that the waiver provisions in the Medicare bill become effective only upon
certification by the Secretary that drug importation is safe and reduces costs. Kelly Field,
Battle Brewing Between Administration, Local Officials Over Drug Importation Issue, CQ
TODAY, Dec. 19, 2003.
54 Letter from William K. Hubbard, Associate Commissioner for Policy and Planning, Food
and Drug Administration, to Gregory Gonot, Deputy Attorney General, State of California
2 (Aug. 25, 2003), http://www.fda.gov/opacom/gonot.html [hereinafter California Letter].

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CRS-11
manufactured in the United States. Second, even if an FDA-approved drug is
manufactured outside the U.S., the imported version of the drug will almost certainly
violate statutory requirements regarding drug approvals, labeling, and dispensing.55
These first two arguments are identical to the arguments that FDA has made when
explaining why the agency views business and consumer imports of prescription
drugs to be statutory violations.56 Therefore, the FDA considers virtually any imports
of prescription drugs, as well as virtually any act that causes such imports, to be
illegal, regardless of whether such imports are conducted by businesses, consumers,
or governmental entities.
Finally, the FDA contends that any effort by states to enact legislation
authorizing prescription drug imports would be preempted by federal law.57 Although
the FDA sets forth several legal arguments for its position, preemption of the Act’s
importation provisions does not appear to have been tested in court, and there are
several instances in which other prescription drug provisions in the FFDCA have
been held not to preempt state law.58
Despite the FDA’s position regarding state and local imports of prescription
drugs, it appears that the agency is currently refraining from taking legal action
against state and local governments that are importing such drugs. Although “FDA
and industry officials say the agency has not ruled out possible future legal action,”
“the agency wants to first win its case against Rx Depot, giving FDA bargaining
power for the more difficult task of taking formal action against states and local
governments.”59 In the Rx Depot case, which is discussed in detail in the following
section, the FDA is pursuing legal action against a private company that helps
individual consumers import prescription drugs.
55 Id. at 3.
56 See supra notes 14-33 and accompanying text.
57 California Letter, supra note 54 at 5-7. The preemption doctrine derives from the
Supremacy Clause of the Constitution, which establishes that the laws of the United States
“shall be the supreme law of the land; and the judges in every state shall be bound thereby,
any thing in the Constitution or laws of any State to the contrary notwithstanding.” U.S.
CONST. art. VI, cl. 2. In applying this constitutional mandate, courts have recognized both
express and implied forms of preemption, which are “compelled whether Congress’
command is explicitly stated in the statute’s language, or implicitly contained in its structure
and purpose.” Gade v. National Solid Wastes Management Association, 505 U.S. 88, 97
(1992) (quoting Jones v. Rath Packing Co., 430 U.S. 519, 525 (1977)).
58 Many of these cases, however, deal with prescription drug labeling, not importation, and
state common law claims, not state statutory law. David R. Geiger and Mark D. Rosen,
Rationalizing Product Liability for Prescription Drugs: Implied Preemption, Federal
Common Law, and Other Paths to Uniform Pharmaceutical Safety Standards, 45 DEPAUL
L. REV. 395, 408 (1996). It is also important to note that the FFDCA expressly preempts
state law with regard to over-the-counter drugs and medical devices but not with regard to
prescription drugs. As a result, it is more difficult to predict the outcome of a preemption
challenge to state laws on prescription drugs. A detailed examination of the preemption
issue, however, is beyond the scope of this report.
59 Inside Washington Publishers, FDA To Resolve Rx Depot Suit Before Taking on States,
FDA WEEK, Oct. 31, 2003, at 1, 1, 8.

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Businesses That Facilitate Importation of Prescription Drugs
As noted above, the FDA is currently refraining from taking legal action against
both states and individual consumers who import prescription drugs in violation of
the FFDCA because the agency has instead chosen to focus its initial enforcement
effort on pursuing businesses that facilitate the importation of such drugs. Unlike
pharmacies, which receive orders from consumers and dispense drugs directly, some
businesses facilitate drug sales without dispensing drugs directly. Rather, these
companies, many of which are online, act as middlemen between consumers, who
provide medical and payment information, and foreign (typically Canadian)
pharmacies, which then ship drugs directly to consumers. The FDA is currently
pursuing legal action against one such business. That case is discussed in detail in
this section, while separate but related issues involving online pharmacies are
discussed in a separate section below.
In United States v. Rx Depot,60 the Department of Justice (DOJ), acting on
behalf of the FDA, filed suit against Rx Depot, a storefront operation that helps U.S.
consumers obtain prescription drugs from Canada.61 According to the suit, DOJ
contends that Rx Depot is violating two provisions of the FFDCA, namely the
provision prohibiting reimportation and the provision prohibiting the introduction
into interstate commerce of any drug that violates the Act’s approval requirements.62
Although Rx Depot is not directly importing drugs, the company admits that it is
“engaged in the business of causing the shipment of U.S.-manufactured and
unapproved, foreign-manufactured prescription drugs from Canadian pharmacies to
U.S. citizens.”63
Rx Depot has countered that the FDA is not actually concerned about the safety
of imported drugs because the agency never tested the drugs it bought from Rx Depot
60 No. 03-CV-0616-EA (M), 2003 U.S. Dist. LEXIS 20135 (D. Okla. Nov. 6) (order granting
preliminary injunction).
61 DOJ initiated this lawsuit after Rx Depot failed to respond to the agency’s warning letter
and continued to facilitate the reimportation of prescription drugs and the importation of
unapproved drugs. See Letter from David J. Horowitz, Esq., Director, Office of Compliance,
Center for Drug Evaluation and Research, Food and Drug Administration, to Harry Lee
J o n e s , S t o r e M a n a g e r , R x D e p o t , I n c . , ( M a r c h 2 1 , 2 0 0 3 ) ,
http://www.fda.gov/foi/warning_letters/g3888d.htm. FDA has sent similar warning letters
to other businesses that facilitate the importation of prescription drugs. See, e.g., Letter from
David J. Horowitz, Esq., Director, Office of Compliance, Center for Drug Evaluation and
Research, Food and Drug Administration, to G. Anthony Howard, President, CanaRx
Services, Inc., (Sept. 16, 2003), http://www.fda.gov/cder/warn/2003/RHoward.pdf. CanaRx
is the business that currently assists Springfield, Massachusetts in importing prescription
drugs. Press Release, Food and Drug Administration, CanaRx Illegally Supplying
P r e s c r i p t i o n D r u g s ( N o v . 6 , 2 0 0 3 ) ,
http://www.fda.gov/bbs/topics/NEWS/2003/NEW00973.html.
62 United States v. Rx Depot, 2003 U.S. Dist. LEXIS 20135 (D. Okla. Nov. 6) (order granting
preliminary injunction). See also, 21 U.S.C. §§ 331(d), 331(t), and 355.
63 Id. at *6-*7.

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as part of a sting operation against the company.64 Similar complaints have been
voiced by other businesses that facilitate the importation of prescription drugs. Critics
of FDA’s importation stance also argue that it “fails to protect the public health
because it allows individuals to import drugs, while prohibiting ‘commercial’
operations that are in the best position to develop safeguards,”65 and allege that the
FDA’s importation policy may violate international trade agreements.66 Ultimately,
critics argue that the FDA’s policy protects the profits of drug manufacturers at the
expense of consumer pocketbooks.67
Despite these arguments, the district court held against Rx Depot during a
preliminary ruling in the case. Concluding that “Rx Depot’s importation of
prescription drugs clearly violates the law,” the district court issued a preliminary
injunction enjoining Rx Depot from facilitating the importation of prescription
drugs.68 While the court’s order is not actually a final order on the merits of the case,
it does indicate that DOJ has a substantial likelihood of prevailing in the lawsuit.
Indeed, the court appeared particularly concerned with the safety of imported drugs:
[U]napproved prescription drugs and drugs imported from foreign countries by
someone other than the U.S.-manufacturer do not have the same assurance of
safety and efficacy as drugs regulated by the Food and Drug Administration. . .
Because the drugs are not subject to FDA oversight and are not continuously
under the custody of a U.S. manufacturer or authorized distributor, their quality
is less predictable than drugs obtained in the United States. For instance, the
drugs may be contaminated, counterfeit, or contain erratic amounts of the active
ingredient or different excipients. Also, the drugs may have been held under
uncertain storage conditions, and therefore be outdated or subpotent.69
With regard to Rx Depot, the court specifically noted that drugs ordered through
the company were often dispensed in quantities greater than prescribed and did not
contain the required package inserts. Although the court acknowledged that the cost
of prescription drugs in the U.S. is high and that there are no known cases of an
individual who has suffered harm from drugs imported through Rx Depot, the court
nevertheless concluded that the FDA has legitimate safety concerns and that
Congress is in the best position to resolve the tension between prescription drug
safety and cost.70
64 Inside Washington Publishers, Rx Depot: FDA Alleged Safety Concerns With
Reimportation Are Bogus, FDA WEEK, Nov. 7, 2003, at 15.
65 Id. at 16.
66 Inside Washington Publishers, CanaRx Says FDA’s Reimportation Policy Violates Trade
Agreements, FDA WEEK, Nov. 7, 2003, at 16. An analysis of international trade agreements
is beyond the scope of this report.
67 Marc Kaufman, FDA’s Authority Tested Over Drug Imports, WASH. POST, Nov. 9, 2003,
at A11.
68 United States v. Rx Depot, 2003 U.S. Dist. LEXIS at *23, *36.
69 Id. at *8.
70 Id. at *8-*9, *16-*18.

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As noted above, the district court’s decision to issue a preliminary injunction
against Rx Depot is not a final decision on the merits of the case. Meanwhile, as the
legal battle continues, many companies like Rx Depot remain in business, and an
increasing number of states and localities have begun to contemplate their own
importation programs. In response, several drug manufacturers have begun limiting
sales of their drugs to Canadian pharmacies in an effort to prevent the drugs from
being resold in the U.S. at cheaper prices. These actions have raised questions about
whether such behavior violates federal antitrust laws, a topic that is discussed in the
following section.
Antitrust Laws
As noted above, several major prescription drug manufacturers have responded
to the rise in the number of businesses and consumers that are reimporting cheaper
drugs into the U.S. by reducing the supply of such drugs to distributors and
pharmacies in Canada, where most of the reimported drugs originate. Such moves
appear to be intended to limit Canadian distributors and pharmacies to selling
prescription drugs to Canadian consumers only, rather than selling excess supplies
of prescription drugs to U.S. consumers at cheaper prices than such consumers would
pay for similar drugs in the U.S. As a result, several members of Congress have
questioned whether these drug manufacturers are violating federal antitrust laws,71
and several bills introduced in the 108th Congress would prohibit such sales tactics.72
In addition, at least one state has launched an investigation into whether or not the
drug manufacturer GlaxoSmithKline (GSK) has violated state antitrust laws.73 This
section discusses the potential federal and state antitrust issues raised by the decision
of certain drug manufacturers to limit the supply of drugs to Canadian distributors
and pharmacies.
Federal Antitrust Law.
Under federal law, the Sherman Act,74 one of the major federal antitrust statutes,
makes illegal “[e]very contract, combination in the form of trust or otherwise, or
conspiracy, in restraint of trade or commerce . . .”75 The statute does not, however,
prohibit independent action by a single entity; the Supreme Court has specifically
stated:
The Sherman Act contains a ‘basic distinction between concerted and
independent action.’ The conduct of a single firm is governed by § 2 alone and
is unlawful only when it threatens actual monopolization. . . . Section 1 of the
Sherman Act, in contrast, reaches unreasonable restraints of trade effected by a
71 Inside Washington Publishers, Lawmakers Seek DOJ Anti-Trust Probe of Firms Limiting
Sales to Canada, FDA WEEK, Nov. 7, 2003, at 3.
72 See, e.g., H.R. 2497, H.R. 2769, S. 1992.
73 Inside Washington Publishers, Judge Wants More Info Before Deciding Motion to Compel
Against GSK, FDA WEEK, Nov. 21, 2003, at 10.
74 15 U.S.C. §§ 1-7.
75 15 U.S.C. § 1.

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‘contract, combination . . . or conspiracy between separate entities. It does not
reach conduct that is wholly unilateral.’76
Nevertheless, a formal contract may not be necessary to show collective action
that violates section 1 of the Sherman Act.77 To define how much proof is necessary
to find an “inference of agreement”78 a number of cases have examined the question
of what constitutes the establishment of collective action. For example, American
Tobacco Co. v. United States,79 an early Supreme Court case in this area, defined
agreement as “a unity of purpose or a common design and understanding or a
meeting of minds in an unlawful arrangement.”80 Later decisions have reasoned that
these agreements may be found even without verbal statements among the parties.81
In Monsanto Co. v. Spray-Rite Service Corp.,82 the Supreme Court established a
standard for determining whether concerted action exists:
The correct standard is that there must be evidence that tends to exclude the
possibility of independent action by the [parties]. That is, there must be direct
or circumstantial evidence that reasonably tends to prove that [the parties] had
a conscious commitment to a common scheme designed to achieve an unlawful
objective.83
Courts often use the term “conscious parallelism” or “consciously parallel
behavior” to refer to actions by competitors that are based on a pattern of uniform
business conduct. In the early case Interstate Circuit, Inc. v. United States,84 the
Supreme Court held that the nearly identical restraints imposed by eight motion
picture distributors concerning the licensing of first run “feature” pictures was
sufficient to infer that the distributors acted in concert and thereby violated the
federal antitrust laws.
76 Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 767-68 (1984)(citations
and footnote omitted).
77 See, e.g., United States v. General Motors Corp., 384 U.S. 127, 142-43 (1966) (stating “it
has long been settled that explicit agreement is not a necessary part of a Sherman Act
conspiracy”).
78 ABA SECTION OF ANTITRUST LAW, ANTITRUST LAW DEVELOPMENTS 4 (4th ed. 1997).
79 328 U.S. 781 (1946).
80 Id. at 810.
81 See e.g., United States v. General Motors Corp., 384 U.S. 127, 142-43 (1966) (stating
that “although we regard as clearly erroneous and irreconcilable with its other findings the
trial court’s conclusory ‘finding’ that there had been no ‘agreement’ among the defendants
and their alleged co-conspirators, it has long been settled that explicit agreement is not a
necessary part of a Sherman Act conspiracy–certainly not where, as here, joint and
collaborative action was pervasive in the initiation, execution, and fulfillment of the plan”).
82 465 U.S. 752 (1984).
83 Id. at 768.
84 306 U.S. 208 (1939).

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It is elementary that an unlawful conspiracy may be and often is formed without
simultaneous action or agreement on the part of the conspirators. Acceptance by
competitors, without previous agreement, of an invitation to participate in a plan,
the necessary consequence of which, if carried out, is restraint of interstate
commerce, is sufficient to establish an unlawful conspiracy under the Sherman
Act.85
However, in Theatre Enterprises v. Paramount Film Distributing Corp.,86 the
Supreme Court held that parallel behavior by itself is not necessarily proof of a
conspiracy. The Court stated:
The crucial question is whether respondents’ conduct toward petitioner stemmed
from independent decision or from an agreement, tacit or express. To be sure,
business behavior is admissible circumstantial evidence from which the fact
finder may find agreement. But this Court has never held that proof of parallel
business behavior conclusively establishes agreement or, phrased differently, that
such behavior itself constitutes a Sherman Act offense. Circumstantial evidence
of consciously parallel behavior may have made heavy inroads into the
traditional judicial attitude toward conspiracy; but “conscious parallelism” has
not yet read conspiracy out of the Sherman Act entirely.87
Lower courts, in following these Supreme Court decisions, have seemed for the
most part to hold that conscious parallelism by itself does not show that the parties
have violated the Sherman Act.88 The courts have required that other factors be
looked at in conjunction with parallel behavior to find concerted action resulting in
a Sherman Act violation. Some of these other factors include artificial
standardization of products89 and raising prices in time of surplus.90 Less persuasive
is evidence that indicates merely that the parties had an opportunity to collude.91
Based upon these cases and assuming that there is no evidence that the drug
manufacturers in question conspired or colluded when reducing drug supplies to
Canadian distributors and pharmacies, it would appear difficult to sustain a charge
that the drug companies that limit sales to Canada have violated the Sherman Act.
Indeed, there may be lawful reasons for their actions. For example, the manufacturers
85 Id. at 227 (citations omitted).
86 346 U.S. 537 (1954).
87 Id. at 540-41 (citations omitted).
88 See, e.g., Wallace v. Bank of Bartlett, 55 F.3d 1166, 1168 (6th Cir. 1995), cert. denied 116
S.Ct. 709 1996) (stating that “parallel pricing, without more, does not itself establish a
violation. . . . Courts require additional evidence which they have described as ‘plus
factors’”). See also, Todorov v. DCH Healthcare Auth., 921 F.2d 1438, 1456 (11th Cir. 1990)
(stating that “we require more than mere evidence of parallel conduct by competitors to
support an inference of a conspiracy”).
89 C-O-Two Fire Equip. Co. v. United States, 197 F.2d 489 (9th Cir. 1952), cert. denied, 344
U.S. 892 (1952).
90 American Tobacco Co. v. United States, 328 U.S. 781 (1946).
91 See, e.g., Greater Rockford Energy & Tech. Corp. v. Shell Oil Co., 998 F.2d 391 (7th Cir.
1993).

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may be capable of supplying only the United States market and to a lesser extent
foreign markets because of limited production capacity. They may also need to
recoup research and development costs by obtaining a profit margin through sales
primarily in the U.S. However, if one were able to show that the drug companies did
in fact conspire or collude or that they engaged in parallel behavior accompanied by
other factors, a case might be made for a Sherman Act violation.
Despite the apparent lack of violation of federal antitrust law, drug
manufacturers that limit sales of prescription drugs to Canadian distributors and
pharmacies may still violate state antitrust laws. Because antitrust laws vary from
state to state, this section does not provide an exhaustive analysis of state antitrust
laws, but rather describes the current legal dispute against GlaxoSmithKline (GSK)
in Minnesota as an example of potential liability under state antitrust statutes.
State Antitrust Law.
Although most states have their own antitrust laws, enforcement of these
statutes differs from state to state. In October 2003, the Minnesota Attorney General
(AG), who is investigating whether GSK violated state antitrust laws, filed a court
motion seeking to compel GSK to release information about the company’s decision
to stop selling drugs to Canadian pharmacies that then sell the drugs to U.S.
consumers. According to the AG, GSK conspired to limit drug sales to Canada, and
“GSK’s refusal to supply prescription drugs to Canadian pharmacies that sell drugs
to Minnesota buyers violates state laws.”92 Meanwhile, GSK contends that
“importing drugs from Canada is illegal and a drug company can take steps to stop
illegal sales of its products.”93 The company further argues that federal law preempts
Minnesota’s antitrust laws, but the Minnesota AG challenges that assertion. Although
no lawsuit has actually been filed against GSK, the Minnesota AG may decide to file
such a suit if the court grants its motion to compel GSK’s release of documents and
if the AG subsequently finds evidence of an antitrust violation.94
III. Internet Pharmacies
Just as the FDA has expressed concerns about the safety of imported drugs,
federal regulators have become increasingly worried about the safety of online
pharmacies and prescription drug sales over the Internet. Indeed, the regulation of
prescription drug importation and the regulation of online pharmacies often overlap
because many consumers use online pharmacies to purchase imported drugs.
Regardless of whether or not drugs purchased online are imported, the FDA is
worried about the safety of such medications because of concerns about the lack of
adequate physician supervision for consumers who purchase prescription drugs
online, the prospects for tampering with or counterfeiting such drugs, and the
92 Inside Washington Publishers, Judge Wants More Info Before Deciding Motion to Compel
Against GSK, FDA WEEK, Nov. 21, 2003, at 10, 10.
93 Id.
94 Id.

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possibility that such drugs may be handled, dispensed, packaged, or shipped
incorrectly. This section discusses current laws and regulations that govern online
pharmacies and physicians who prescribe medications over the Internet. Specifically,
this section provides an overview of the various federal and state laws that regulate
this field, including laws covering prescription drugs, controlled substances,
pharmacies, and the practice of medicine.
With the advent of the Internet, many individuals have turned from traditional
neighborhood to large chains with a neighborhood presence and online pharmacies
to purchase prescription drugs, and an increasing number of physicians have
incorporated the Internet and email into their medical practice. Use of this technology
has many advantages for both the doctor and the patient, including cost savings,
convenience, accessibility, and improved privacy and communication.95 Although
many online pharmacies are legitimate businesses that offer safe and convenient
services similar to those provided by traditional neighborhood pharmacies, other
online pharmacies – often referred to as “rogue sites” – engage in practices that are
illegal, such as selling unapproved or counterfeit drugs or dispensing drugs without
a prescription.96 Some rogue sites operate in a legal gray area in which the online
pharmacy, as mandated by federal law, requires a prescription before dispensing
prescription drugs, but allows patients to secure a prescription by completing an
online questionnaire that is reviewed by a doctor who never examines or speaks to
the patient. This practice, though potentially unsafe for patients who may be
diagnosed incorrectly, is not necessarily illegal.
Current regulation of online pharmacies and doctors consists of a patchwork of
federal and state laws in an array of areas. At the federal level, the FDA regulates
prescription drugs under the FFDCA, which governs, among other things, the safety
and efficacy of prescription medications, including the approval, manufacturing, and
distribution of such drugs.97 It is the FFDCA that requires that prescription drugs may
be dispensed only with a valid prescription.98 The DEA enforces the Controlled
Substances Act (CSA), which is a federal statute that establishes criminal and civil
sanctions for the unlawful possession, manufacturing, or distribution of certain
addictive or dangerous substances, including certain prescription drugs that share
these properties, such as narcotics and opiates.99 At the state level, state boards of
pharmacy regulate pharmacy practice, and state medical boards oversee the practice
95 Food and Drug Administration, U.S. Department of Agriculture, Buying Drugs Online:
It’s Convenient and Private, But Beware of ‘Rogue Sites’ (2001), at
http://www.fda.gov/fdac/features/2000/100_online.html.
96 Id.
97 21 U.S.C. § 301 et seq.
98 Id. at § 353(b).
99 Id. at § 801 et seq. For more information on the Controlled Substances Act, see CRS
Report 97-141A, Drug Smuggling, Drug Dealing and Drug Abuse: Background and
Overview of the Sanctions Under the Federal Controlled Substances Act and Related
Statutes.

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of medicine.100 Thus, some of the laws that govern online pharmacies and doctors
vary from state to state. The laws that govern each of these areas are described
separately below.
Federal Oversight
As noted above, the CSA is a federal statute that establishes criminal and civil
sanctions for the unlawful possession, manufacturing, or distribution of addictive or
dangerous substances.101 Although the CSA is generally known for prohibiting illegal
drugs like heroin and cocaine and does not include many drugs legally available by
prescription, the statute does cover certain prescription drugs that have addictive
properties, such as narcotics and opiates that are often used in the treatment of pain.
It is the latter category of prescription painkillers that appear to be among the
drugs most heavily dispensed by certain Internet pharmacies in accordance with
prescriptions that are issued based on online questionnaires.102 This practice has
sometimes been abused by rogue sites that dispense large quantities of addictive
substances to customers apparently seeking access to prescription painkillers, and it
has lead to instances of addiction, overdose, and death. In response to cases in which
online doctors have written thousands of prescriptions for controlled substances
without examining their patients, the federal government has begun prosecuting
certain doctors under the CSA by charging them with the illegal distribution of
controlled substances.103 Penalties under the CSA vary depending on the amount and
type of substance involved but generally include monetary fines, forfeiture, and
imprisonment.104
As noted above, prescription drugs are also regulated by the FDA under the
FFDCA.105 Although state law also governs the prescribing of drugs, the FFDCA
covers certain aspects of the prescribing process, including the requirement that
prescription drugs may not be dispensed without a valid prescription.106
Although federal law requires that prescription drugs be dispensed in
accordance with a prescription, the FFDCA does not define the meaning of
“prescription.” Rather, each state defines what constitutes a valid prescription under
its pharmacy laws. Because such definitions differ from state to state, there is no
100 The FFDCA excludes the practice of medicine from its jurisdiction. 21 U.S.C. § 396.
101 Id. at § 801 et seq.
102 See, e.g., Gilbert M. Gaul and Mary Pat Flaherty, Doctors Medicate Strangers on Web,
WASH. POST, Oct. 21, 2003, at A1.
103 Id.
104 21 U.S.C. § 841 et seq.
105 Id at § 301 et seq.
106 Id. at § 353(b).

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uniform, national definition of the term “prescription.”107 Thus, certain activities,
such as prescribing drugs without performing an in-person examination, may be
explicitly illegal in one state but of ambiguous legal status in another.
Concerned about reports of rogue online pharmacies, Congress has considered
legislation to establish a federal definition of what constitutes a valid prescription.108
During the Clinton Administration, for example, legislators contemplated requiring
online pharmacies to disclose information about themselves and about the doctors
approving prescriptions on their sites, but the legislation ultimately faded.109 In the
wake of recent reports of abuses by online pharmacies, however, interest in such
legislation has revived, and Congress recently held hearings to discuss legislative
solutions, including the establishment of a single federal standard for prescriptions.110
Congress is also exploring the possibility of controlling the means by which
allegedly rogue sites do business, namely by restricting their ability to advertise on
search engines, make credit card sales, and ship prescription drugs to consumers. For
example, Google, an Internet search engine, recently announced that it no longer
accepts advertising from unlicenced pharmacies and now prohibits the use of certain
controlled substances as keywords for search purposes.111 Meanwhile, at least three
congressional committees are investigating “the roles played by Visa International,
MasterCard Inc., FedEx Corp. and United Parcel Service Inc. in the Internet sales,”112
as well as exploring the prospects for establishing a certification program that would
make it easy for such companies to determine when they are doing business with a
legitimate site.113 Because federal and state regulators face many legal barriers when
attempting to exercise jurisdiction over rogue pharmacies based in foreign
countries,114 placing limits on the degree to which search engines, credit card
companies, and shipping entities facilitate prescription drug purchases from rogue
sites may be one of the only ways to control illicit sales by foreign online pharmacies.
107 Inside Washington Publishers, FDA May Back Changing Law to Define Internet
‘Prescription’, FDA WEEK, March 28, 2003, at 1, 10.
108 Id. at 1.
109 Gilbert M. Gaul and Mary Pat Flaherty, Doctors Medicate Strangers on Web, WASH.
POST, Oct. 21, 2003, at A1.
110 Point, Click, Self-Medicate: A Review of Consumer Safeguards on Internet Pharmacy
Sites: Hearing Before the House Comm. On Government Reform, 108th Cong. (2003),
http://reform.house.gov/UploadedFiles/Online%20Pharmacies%20Final%20Print.pdf.
111 Gilbert M. Gaul and Mary Pat Flaherty, Google to Limit Some Drug Ads, WASH. POST,
Dec. 1, 2003, at A1.
112 Id.
113 Inside Washington Publishers, FDA Rep: Internet Pharmacy Certification Could Be Easy
Process, FDA WEEK, Dec. 19, 2003, at 5.
114 “The enforcement of a state action or the initiation of a mutual action by a foreign
licensing body is virtually unheard of, making it difficult, if not impossible, for state actions
to have any effect on foreign pharmacies.” National Association of Boards of Pharmacy,
Position Paper on the Importation of Foreign Prescription Drugs 6 (March 2003), at
http://www.nabp.net.

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State Oversight
As noted above, state boards of pharmacy are primarily responsible for
regulating pharmacy practice,115 although the FFDCA does provide some federal
oversight of pharmacies. Because virtually all states require a pharmacy that sells
drugs in the state to be licensed with the state, a state board of pharmacy traditionally
may exercise regulatory authority over pharmacies and pharmacists located within
the state, as well as those that dispense medication across state lines to citizens within
the state.116
Because each state board of pharmacy sets its own policies with regard to both
online and traditional pharmacies, state pharmacy laws regarding Internet pharmacies
and doctors differ from state to state. While some state laws specify whether or not
prescriptions based on online questionnaires are valid, other state laws fail to address
the issue, thus rendering it difficult for some states to prosecute doctors who
prescribe drugs without performing an in-person evaluation. For this reason, some
critics of the current system have proposed establishing a federal definition of what
constitutes a valid prescription.117
In addition, some organizations have begun to promote uniform national
standards for the industry. For example, the National Association of Boards of
Pharmacy (NABP), whose members include all 50 state boards, is an organization
that helps state boards of pharmacy by developing uniform standards on pharmacy
practice. In response to the proliferation of online pharmacies, NABP established the
Verified Internet Pharmacy Practice Sites (VIPPS) program, a certification program
that “identifies to the public those online pharmacy practice sites that are
appropriately licensed, are legitimately operating via the Internet, and that have
successfully completed a rigorous criteria review and inspection.”118
According to NABP, the VIPPS program was developed in order to improve the
safety of online pharmacy practices and to “provide a means for the public to
115 National Association of Boards of Pharmacy, Verified Internet Pharmacy Practice Sites
(VIPPS): Most Frequently Asked Questions (2001), at http://www.nabp.net.
116 Id. “These requirements allow state boards of pharmacy to order non-resident pharmacies
to stop shipping product into the state. Within the US, such orders can be enforced by the
board of pharmacy where the violation took place, or by mutual action by the board of
pharmacy in the state where the pharmacy is located.” National Association of Boards of
Pharmacy, Position Paper on the Importation of Foreign Prescription Drugs 6 (March
2003), at http://www.nabp.net. Foreign shipments of prescription drugs may also violate
state laws if the foreign pharmacy is not licensed in the state, although states often face legal
barriers when attempting to exercise jurisdiction over foreign pharmacies.
117 Inside Washington Publishers, FDA May Back Changing Law to Define Internet
‘Prescription’, FDA WEEK, March 28, 2003, at 1, 1. See also, supra notes 107-10 and
accompanying text.
118 National Association of Boards of Pharmacy, Verified Internet Pharmacy Practice Sites
(VIPPS): Most Frequently Asked Questions (2001), at http://www.nabp.net.

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distinguish between legitimate and illegitimate online pharmacy practice sites.”119
Although NABP notes that legitimate online pharmacies outnumber rogue sites and
acknowledges that there are many advantages to ordering drugs online, the
Association specifically warns consumers against buying prescription drugs online
without obtaining an in-person examination and valid prescription from a doctor.
Like pharmacy practice, the practice of medicine has historically been regulated
at the state level by state medical boards. According to the Federation of State
Medical Boards (FSMB), which coordinates policy among all 50 state medical
boards, “[t]he primary responsibility and obligation of a state medical board is to
protect consumers of health care through proper licensing and regulation of
physicians.”120 Traditionally, states enact laws that regulate the practice of medicine,
and state medical boards implement and oversee state policies.121 If a doctor violates
a state law or regulation, state medical boards generally have the authority to
discipline the doctor through modification, suspension, or revocation of the doctor’s
license to practice medicine in that state. In reality, however, laws regarding medical
practice vary widely in strength and effectiveness from state to state. While some
states have strong laws that explicitly prohibit activities such as prescribing drugs
without conducting an in-person examination, other states have weak laws, lax
enforcement, or both.
Like NABP, FSMB has developed a specific policy with regard to online
pharmacies and doctors that prescribe drugs over the Internet. According to FSMB’s
model guidelines on the subject, electronic technology “should supplement and
enhance, but not replace, crucial interpersonal interactions that create the very basis
of the physician-patient relationship.”122 To that end, FSMB guidelines declare that
doctors who use the Internet as part of their medical practice should conduct a
physical evaluation of the patient before providing treatment. Although FSMB
recognizes the benefits of online pharmacies, the organization emphasizes that
“[t]reatment, including issuing a prescription, based solely on an online questionnaire
or consultation does not constitute an acceptable standard of care.”123 FSMB further
urges that doctors who prescribe drugs on the Internet should be licensed in all states
in which their patients reside,124 a practice that would subject doctors to the oversight
of the medical boards in each state in which their patients lived.125 These professional
119 Id.
120 Federation of State Medical Boards, What is a State Medical Board?, at
http://www.fsmb.org.
121 Id.
122 Id.
123 Federation of State Medical Boards, Model Guidelines for the Appropriate Use of the
Internet in Medical Practice (2002), at http://www.fsmb.org.
124 Id.
125 FSMB is not the only medical organization to promulgate standards of professional
conduct regarding the prescribing of drugs over the Internet. Several other professional
associations, such as the American Medical Association (AMA), have also established
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standards, however, are not legally enforceable in the absence of state laws
establishing such requirements.
IV. Conclusion
The current legal framework for regulating online pharmacies and doctors is a
patchwork of federal and state laws regarding controlled substances, prescription
drugs, pharmacies, and the practice of medicine. Although many doctors and
pharmacies who use the Internet prescribe and dispense drugs in a responsible, safe,
and legal fashion, others have exploited gaps in the current system to prescribe and
dispense potentially dangerous quantities of highly addictive prescription drugs. To
combat such abuses, legislators and interest groups have proposed an array of
solutions, including establishing a federal definition of what constitutes a valid
prescription, requiring doctors to conduct in-person examinations, mandating that
online pharmacies disclose identifying information about themselves and the doctors
who work for them, giving state prosecutors the authority to seek nationwide
injunctions against rogue sites, educating consumers about the potential dangers of
buying drugs online, and establishing certification programs to identify legitimate
online pharmacies.
Meanwhile, the debate about importing prescription drugs continues as well.
Although the FDA maintains that it cannot guarantee the safety of imported drugs,
many U.S. consumers, in search of affordable prices, continue to purchase such drugs
in increasing numbers. As a result, legislators and interest groups have suggested a
variety of changes to current law, including encouraging the development of more
generic drugs, negotiating lower drug prices through bulk purchase programs,
increasing prescription drug insurance coverage, allowing drug imports but restricting
ports of entry, educating consumers about the dangers of imported drugs, and
allowing drug imports from approved Canadian pharmacies only
125 (...continued)
policies regarding the safe practice of online medicine. For example, the AMA guidelines,
like the FSMB guidelines, state that doctors should perform a physical evaluation of patients
before prescribing medication and should be licensed in every state in which their patients
reside. The AMA guidelines further advise against prescribing drugs to patients solely on
the basis of online communications such as questionnaires. American Medical Association,
Guidance for Physicians on Internet Prescribing (H-120.949) (2003), at
http://www.ama-assn.org/.

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