Crime in the Suites: An Analyis of Current Issues in White Collar Defense
Jan 04
2013

Are the Feds Enlisting FedEx to Police the Illegal Pharma Market?

The government may be coming up with a new cost-effective measure to help balance the federal budget – enlisting private companies to do their policing. A 2011 settlement between the Justice Department and Google for $500 million is one recent example. Under the settlement, Google acknowledged responsibility for improperly aiding rogue pharmacies by allowing the pharmacies to post ads through the search engine’s AdWords program. Google not only agreed to forfeit this sizable sum (one of the largest in history by a U.S. company), it also agreed to new compliance and reporting measures. And that is after the company, on its own initiative, took steps to block foreign-based pharmacies from advertising in the United States.

Currently in the works are similar investigations by the Drug Enforcement Agency of FedEx and UPS. The shipping companies have been targets of a criminal probe dating more than four years into whether they aided and abetted illegal drug sales from online pharmacies. As the investigations are still ongoing, it is unclear what the extent or type of evidence against them may be. What is clear is that at least one of the targets is asserting its innocence and plans to defend itself vigorously. While UPS has announced that it is in settlement talks that would involve upgrading its compliance program, FedEx has come out with gloves on, pronouncing that “settlement is not an option when there is no illegal activity.”

UPS’ (and Google’s) course of action is understandable: Companies commonly do a cost-benefit analysis between settling and defending and determine that settlement is a better business decision. But it is good to see FedEx taking the higher, though riskier, road. A brief review of relevant law supports FedEx’s stance. For instance, common carriers are specifically excluded from liability under the Prescription Drug Marketing Act (PDMA): the implementing regulations provide that “distributing” under the Act does not include “[d]elivering or offering to deliver a drug by a common carrier in the usual course of business as a common carrier.” Interestingly enough, the FDA “on its own initiative” had revised its final rule to exclude common carriers.

The FDA’s earlier determination to exclude common carriers made sense, as it would be prohibitively expensive and potentially crippling to put shipping companies on the hook for packages that pass through their system. But the tides are changing, and federal agencies seem less concerned with the broad and adverse economic impact upon private companies and are more focused on how they may use those companies to do their bidding. As FedEx spokesman Patrick Fitzgerald noted, the government wants to “deputize” FedEx delivery to help “catch criminals.”

This type of effort by the feds can be quite effective, as can be seen from the Google settlement and impending UPS settlement. A federal enforcement agency launches an investigation that may be both extensive and costly to a company. The company does its cost-benefit analysis and determines it more efficient to simply pay a fine and institute a government-directed compliance program than to defend itself. The government thereby has a direct and simplified road to instituting new policies, company-by-company, through its settlement agreements. And all this can be accomplished without having to trouble itself with notice and rulemaking procedures. This process plays out frequently, which is what makes FedEx’s stance so refreshing.

Ifrah Law is a leading white-collar criminal defense firm that focuses on healthcare.

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About Ifrah Law

Crime in the Suites is authored by the Ifrah Law Firm, a Washington DC-based law firm specializing in the defense of government investigations and litigation. Our client base spans many regulated industries, particularly e-business, e-commerce, government contracts, gaming and healthcare.

Ifrah Law focuses on federal criminal defense, government contract defense and procurement, healthcare, and financial services litigation and fraud defense. Further, the firm's E-Commerce attorneys and internet marketing attorneys are leaders in internet advertising, data privacy, online fraud and abuse law, iGaming law.

The commentary and cases included in this blog are contributed by founding partner Jeff Ifrah, partners Michelle Cohen, David Deitch, and associates Rachel Hirsch, Jeff Hamlin, Steven Eichorn, Sarah Coffey, Nicole Kardell, Casselle Smith, and Griffin Finan. These posts are edited by Jeff Ifrah. We look forward to hearing your thoughts and comments!

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