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Sara E. Zeman
excerpted from: Sara E. Zeman, Regulation of Online
Pharmacies: a Case for Cooperative Federalism, 10 Annals of Health Law
105 (2001)
Changes in technology inevitably bring about changes in the legal
rules governing technology. The explosion of e-commerce in the last
several years has caused many to question whether the virtual realm
ought to be more specifically regulated. Health care providers and
consumers are among those contributing to the growth of e-commerce.
Increasingly, consumers have been using the Internet to obtain medical
information to complement their visits to clinical providers. Providers
are responding to consumer demand for availability of products and
services on the Internet, and consumers are responding to their
increased online options by obtaining medical products and services
online.
As with most online industries, the medical information, products,
and services that consumers are accessing through the *106 Internet are
of varying quality. Some health web sites are obviously reputable and
reliable, some are outright scams, and some are of unknown pedigree.
Basically, consumers are free to access whatever services are available
and to set their own standards for health care quality. This status
reflects the inherent freedom with which Internet businesses operate.
However, the unprecedented free access and consumption come with a
wealth of new problems.
This Article examines the regulatory challenges and responses arising
from online pharmacies. Issues in regulating online pharmacy sites
reflect the standard jurisdictional problems presented by e-commerce, as
well as the special issues surrounding the delivery of health care
services online. The article begins by describing the phenomena of
online pharmacies and presenting the practical benefits and risks they
pose. The particular regulatory challenges raised by online pharmacy
operations are considered. Recent indications of a federal regulatory
role will be explored, as well as voluntary efforts demonstrated by the
pharmaceutical industries. The movement among state governments to grasp
control of this nation-wide issue will be examined. Special
consideration is given to the efforts of several states' Offices of
Attorney General ("AG") to enforce state requirements on
elusive Internet sites and the practitioners affiliated with them. The
actions of attorneys general are surveyed and the role of the National
Association of Attorneys General ("NAAG") is introduced. The
authority of attorneys general to regulate pharmacies, pharmacists, and
physicians is briefly demonstrated, along with a discussion of the
efforts of other state agencies that emulate their actions. The major
limitation faced by state attorneys general is jurisdictional; this
problem and possibilities for overcoming it are examined. The section
ends with an assessment of the laws upon which the actions of attorneys
general are based and the ways state legislatures can contribute to the
ultimate success of these actions. A final note is made regarding the
viability of the actions of attorneys *107 general as an effective
precursor to a cooperative model of state-led regulation in the online
pharmaceutical services industry.
I. Online Pharmacies
Ever since the U.S. Food and Drug Administration's ("FDA")
implementation of the prescription and non-prescription classification
of drugs, pharmaceutical intervention has represented a type of health
care treatment where the boundaries between self-care and professional
care have been clearly delineated. However, such distinctions are
increasingly blurring as a result of the marketing of prescription drugs
directly to consumers. Armed with the information this advertising
imparts, patients have been requesting specific pharmaceutical
interventions for their health care needs. Thus, selling pharmaceutical
services online presents a marked potential for success.
Traditional, so-called brick-and-mortar, pharmacies realize this
opportunity, as do Internet entrepreneurs. In Fall 2000, the
pharmaceutical giant Merck & Co. announced that its online pharmacy
subsidiary, which combines pharmacy sales and pharmacy benefits
management, passed a milestone of selling more than 100,000
prescriptions in one week; sales are expected to double by Fall 2001. In
Summer 1999, the Rite Aid Corporation paid over $7 million for ownership
interests in an online pharmacy site; competitor CVS Corporation paid
$30 million for an online drugstore. Walgreens drug stores experienced a
boost in its stock value after announcing its plans to launch online
operations. More than half of Walgreens' recent quarterly sales of
almost $5 billion were in prescription drugs; their web *108 site was
processing upwards of 2,000 prescriptions a day. Healtheon/WebMD, the
much touted, Internet health services company, was founded by the
creator of the major Internet browser company Netscape. Healtheon
ultimately hopes to link physicians and consumers to nearly every health
care service they can conceivably get online, including pharmaceutical
services, and to digitize medical documentation processes such as drug
prescribing. Online pharmacies clearly have entered the mix of
e-commerce.
A. Benefits of Online Pharmacies
Online pharmacies offer elderly and disabled persons, as well as
persons living in remote areas, an increased ability to access
pharmaceutical services. Physicians and patients both may enjoy the
efficiencies created by online pharmacies. For instance, orders can be
placed directly from clinic examination rooms into systems that
incorporate patients' insurance information and formulary options. In
order to continue competing effectively with brick-and-mortar
pharmacies, innovative sites can be expected to incorporate rapid
delivery through affiliations with local pharmacies. Consumers also can
obtain comprehensive profiles of their prescription and over-the-counter
("OTC") drug records at these sites.
Online pharmacies increase consumers' ability to comparison shop for
drug price and availability. Sites whose operations are situated in
foreign nations operate from different pricing structures than American
retail pharmacies and may be able to offer substantially lower prices.
The increased price competition *109 that foreign pharmaceutical
retailers bring to drug sales can increase access to health care for
many of America's elderly and uninsured.
Some online pharmacies allow patients to use their insurance benefits
when filling prescriptions online, but most do not. Insured consumers
who willingly pay out-of-pocket may lose negotiated discounts, and
managed care enrollees risk incurring higher prices from patronizing
sites outside their retail pharmacy network or from accessing drugs
outside their formularies. As the number of sites that accept insurance
reimbursement and that are included in managed care networks rises,
however, savings can be expected. States already have begun to restrict
limitations that health plans may place on enrollees' ability to
patronize the pharmacy of their choice. "Any-willing-provider"
laws, which arose in response to managed care access restrictions,
prohibit health plans from excluding a provider from their networks, or
from otherwise discouraging the use of a provider, as long as the
provider is willing to agree to the plan's terms. "Any-willing-
provider" laws applied in the pharmacy context should allow managed
care enrollees to access online pharmacies without any financial penalty
or reduction in benefits.
Additionally, online pharmacies offer an opportunity for increased
reporting of side effects and adverse drug reactions. The FDA relies on
reports of adverse effects and drug quality from consumers to monitor
and enhance the safety of drugs already on the market.
B. Risks of Online Pharmacies
The ultimate concern with online pharmacy operations is consumer
protection. In January 1999, an Illinois newspaper article *110 touted
online pharmacies for their convenience, provision of medical
information, and support group listings; it also explained how to locate
sites. Just five months later, that same newspaper reported the death of
an Illinois resident from a heart attack. The man had obtained an online
prescription for Viagra, a medication for erectile dysfunction, which
should have been contraindicated given his family history of heart
problems.
Patients who obtain their prescriptions through online pharmacies
place themselves at risk of drug-related injury. While injuries can
arise regardless of whether a patient obtains drugs through the Internet
or through in-person visits to a local clinic and pharmacy, the risks
can be amplified when prescription drug use is arranged exclusively
through online pharmacies. Patients may suffer physical injury or harm
as a result of taking improperly prepared drugs or drugs that are not
appropriate for their conditions. They may also suffer harm from
receiving poor quality medical or pharmaceutical advice, not learning of
alternative therapies, or not receiving physical examinations or
follow-up care. The fault for these injuries lies with various parties:
Patients may misrepresent their medical histories, physicians may not
deliver bona fide medical consultations, or pharmacists may not require
valid prescriptions.
II. Regulatory Challenges
The regulatory challenges that arise from the online practice of
pharmacy and from the practice of medicine facilitated by the online
pharmacies include professional practice standards and consumer
protection concerns, as well as health care fraud and abuse issues. A
brief introduction to these issues is presented below. Federal, state,
and industry responses to these concerns also will be considered.
A. Professional Standards
An obvious regulatory concern is ensuring that online pharmacies do
not provide an unfettered avenue for medical and *111 pharmaceutical
practitioners to avoid professional licensing requirements, or for
pharmacies to avoid quality and safety controls specific to preparing
and dispensing drugs. Generally, states require physicians to have
degrees from approved or accredited college medical educational programs
and to have satisfied internship and residency requirements. Physicians
must have undertaken certain courses of study and passed state
administered examinations to be licensed. Physicians also are subject to
scrutiny of moral character and must conform to professional conduct
codes.
Pharmacists must comply with state requirements that they be of good
moral character and fit to practice pharmacy. States generally require
that pharmacists hold pharmacy degrees from accredited programs and that
they have satisfactorily completed an internship. Pharmacists also are
required to pass an examination given by the state pharmacy board.
Pharmacies must comply with requirements as to the size and sanitation
of their physical space. They also must maintain specific records and
equip the pharmacy with the requisite supplies. A separate license may
be required for each physically distinct site of a pharmacy. The
stocking and dispensing of controlled substances requires pharmacies to
keep special inventory records and submit to on-site inspections.
State laws mandate pharmacist involvement in pharmacy operations to
various extents. Some states actually require pharmacies *112 to be
owned by pharmacists, but most states only require pharmacies to employ
licensed pharmacists in managerial positions. Pharmacists usually are
required to be on-site and directly involved in the filling,
compounding, and dispensing of prescriptions.
B. Consumer Protection
Identifying which entities are operating or affiliated with online
pharmacies is not an easy task. Consumers may be unable to identify the
pharmacies, pharmacists, physicians, and technicians serving them
through online pharmacies. Likewise, it may be difficult to identify who
has patronized the particular online services. Ordinary business
communications become difficult for consumers, other businesses, and
government agents in the context of the Internet. Thus, the virtual
pharmacy interferes with the efficacy of several traditional regulatory
functions. For example, it is difficult to know who should receive legal
notices for official investigations, administrative actions, or law
suits. Pharmacy inspections, including those of drug preparation and
dispensing facilities and of controlled substance records, may be
difficult to perform. Registration and disclosure of pharmacy ownership
and staff, therefore, will be necessary for effective regulation of
online pharmacy operations.
Increased drug injury from de facto self-prescribing and drug abuse
from prescriptions that are not medically indicated are problems
associated with the increased availability of prescription drugs through
online pharmacies. The increased use of direct-to-consumer advertising
has been shown to increase use of prescription drugs. The Internet has
vastly expanded the ability of consumers to access medical information
outside the *113 clinical context. Combining the services of online
pharmacies with the effects of direct-to-consumer advertising and the
plethora of information available online allows patients to
self-diagnose conditions and self-treat with prescription drugs in an
unprecedented way. This process circumvents the traditional notion that
physicians generally act as intermediaries between drug availability and
patient access to ensure safe use. The ease of obtaining and filling
prescriptions online removes the vital check physicians provide for
consumer safety.
Illicit use of prescription drugs is replacing recreational use of
street drugs. College students, looking to enhance their academics or to
just get high, risk death as a result of prescription drug abuse.
Pharmacists are an important link in monitoring prescription filling for
signs of abuse. They are called upon to judge whether prescriptions
presented by patients have been issued pursuant to illegitimate
physician-patient relationships or whether other factors are present
that indicate possible drug abuse. One such factor is whether patients
are traveling "unusual geographic distances" to see physicians
and pharmacists. Unfortunately, the use of online pharmacies weakens the
ability of pharmacists to conduct such monitoring. Although some sites
are incorporating patient prescription histories in their operations, it
may be impossible to track a customer's filling habits if multiple sites
are used.
C. Business Practices
Another challenge of online pharmacies is the potential for health
care fraud and abuse presented by affiliations among health care
providers. Physicians and online pharmacies are affiliating with each
other in order to enhance their respective issuing and dispensing of
prescriptions; this can be accomplished through dual operations at one
site or through links to another site offering the corollary service.
Some online pharmacies offer consumers the ability to obtain
prescriptions through online *114 physician consultations that are
requested concurrently with online drug prescription orders. One online
pharmacy links patients needing a prescription to a site that offers
physician consults and that also invites physicians who may be
interested in providing online consultations to join its referral staff.
Companies involved in creating linkages among physicians and online
pharmacies may pay physicians "commitment" fees, as well as
fees for each prescription order placed. Online pharmacies may hire
physician "consultants" to issue prescriptions to patients so
they can be filled on their site. Physicians who have set up Internet
practices may affiliate with online pharmacies to round out their
service offerings. While collaborative relationships between physicians
and pharmacists have been validated as crucial to serving the welfare of
patients, collaborations aimed at increasing revenues rather than
enhancing patient care are suspect.
To the extent health care providers and pharmacies deal with
enrollees in federal health care programs, online affiliations may give
rise to potential violations of Federal laws prohibiting self-referrals
and kickbacks for patient referrals. The Stark self-referral law
generally prohibits physicians from referring patients for outpatient
prescription drug services to entities in which they have vested
interests. The anti-kickback law generally prohibits pharmacies and
physicians from arranging to pay one another for patient referrals.
However, as these laws are limited to federal health programs, state
laws offer a better tool for widespread policing of abusive online
pharmacy arrangements. Increased potential for the federal government to
become *115 involved in regulating online pharmacies is currently being
considered; this will be examined in the next section.
These arrangements between physicians and online pharmacies may run
afoul of state laws prohibiting kickbacks and state requirements
regarding who may own pharmacies. State laws that can be applied in the
online pharmacy context to protect against abusive pharmacy/physician
arrangements model the federal fraud and abuse laws. State laws limit
the ability of physicians and their families or affiliates to own
pharmacies. States also may restrict the ability of pharmacies to pay or
split fees with prescribing providers or to operate exclusive
communications links with prescribing providers. These restrictions
represent a concern that physicians may not prioritize patient interests
when arranging prescriptions if they receive any type of financial
benefit from the patient filling the prescription. States also may
require pharmacies to be owned in whole or substantial part by
pharmacists. This requirement presumes that a pharmacist is more likely
to run a pharmacy in compliance with legal and professional standards.
A pharmacy may be denied state licensure or have its license revoked
for paying compensation to health care providers for their prescribing
activities. In California, for example, pharmacy referrals based on
volume or value may result in action *116 against a business' status as
a professional corporation. Such practices also may violate state fraud
and abuse laws.
III. Expanding Federal Oversight
The federal government is aware of the pressing need for the
regulation of online pharmacies. The legislative and executive bodies
have been contemplating the federal government's authority to become
involved in this arena, with a more active enforcement role being
postulated.
In late July 1999, Congress held a hearing to consider the benefits
and risks posed by online pharmacies. At this hearing, the Chairman of
the Commerce Committee called for the creation of a joint federal-state
task force to examine consumer protection in online pharmacies and to
suggest possible legislative improvements. The Chairman acknowledged the
benefits these sites can provide to elderly, disabled, and busy
consumers, but expressed concern regarding consumer reliance on those
sites, and the physicians affiliated with them, that are not licensed to
dispense drugs or that dispense drugs in manners violative of state or
federal laws. The Chairman endorsed state efforts to shut down rogue
sites and emphasized the need to construct oversight and regulation
carefully so as not to chill e-commerce development.
In Summer 1999, the Director of the FDA presented the agency's
position on regulating online pharmacies. The Director justified the
FDA's regulatory approach for online pharmacies based on the agency's
concern for public health and its "overall goal of developing and
implementing risk-based strategies to protect public health and
safety." Particularly relevant to the FDA's role in governing new
drug approval and drug promotion *117 is its concern that the Internet
may enable products to be marketed with false health claims and may
enable sales of unapproved new drugs, corrupted drugs, or prescription
drugs without a valid prescription. Protecting against the harms of
these practices was the founding mission of the FDA. The agency's
concern also extended beyond these traditional areas of FDA involvement
to the "apparent absence of a doctor- patient relationship in some
Internet transactions."
The FDA's advice for a regulatory policy was to allow the private
sector to spearhead safety initiatives and to restrict the federal
government's role to fostering certification programs, enforcing
existing drug laws, and making new laws sparingly and only when
necessary to protect consumers. While the FDA indicated its continuing
involvement in efforts to assess jurisdiction for online pharmacy
regulation, it stressed the need for the agency to retain its
"traditional regulatory role" and to work cooperatively with
state governments and other federal agencies in enforcing the Food, Drug
& Cosmetic Act ("FDCA"), applicable state laws, and
federal fraud laws.
The FDA's existing regulatory authority over activities that comprise
online pharmacy operations includes investigating cases and referring
them for criminal prosecution and civil enforcement. It already has
authority over some activities that comprise online pharmacy services,
including "the sale or dispensing of a prescription drug without a
valid prescription." The FDA's enforcement activities have included
issuing warning letters to domestic and foreign sites illegally selling
drugs online, requesting voluntary removal of sites that violate the
law, and enforcing drug marketing requirements in online drug
promotions. *118[ FN88] Offices within the FDA continuously investigate
possible violations of laws within the agency's purview.
In December 1999, then-President Clinton announced a proposal to
expand the FDA's ability to regulate online pharmacies. The proposal
included expanding the FDA's investigative authority, with provisions
granting subpoena power to the agency and an allocation of additional
staff and other resources. Federal certification of pharmacies would
have been required prior to selling online, and penalties would have
been imposed for selling drugs without a valid prescription. The
proposed budget for fiscal year 2001 allocated $10 million to the FDA
for this initiative.
By the Spring of 1999, the FDA had embraced Clinton's proposal for
the agency to become more involved in regulating online pharmacies. In
testimony presented to Congress, the FDA Commissioner noted that while
the private sector has a role in providing consumers with information,
the FDA is the party challenged to give consumers the same protections
as if they were at a corner drugstore. The Commissioner mentioned the
potential for the avoidance of state licensing systems that online
businesses present. She expressed concerns over the inadequacy or lack
of bona fide physician- patient relations upon which online prescribing
and dispensing can be based. Recognizing the Agency's continued interest
in collaborating with other regulatory and association officials and the
plan for minimal federal involvement, the Commissioner welcomed the
proposed expansion of FDA authority.
*119 Federal legislation had already been introduced to expand FDA
authority over online pharmacies by the time Clinton made his proposal.
The Internet Pharmacy Consumer Protection Act proposed amending the FDCA,
which is under FDA implementation and enforcement authority. The bill
prohibited online pharmacies from dispensing prescription drugs unless
the web site disclosed information about who is selling the drugs. It
also required the identities of the pharmacist and medical consultant,
and where those persons are licensed to practice, to be disclosed. The
bill provided for primacy of state regulation where requirements for
online pharmacies are at least as strict as the federal requirements and
where sufficient resources are allocated for enforcement of those
provisions. A procedure was contemplated whereby states obtain federal
acknowledgment of their responsibility.
While Clinton's proposal to send a signal of "zero
tolerance" for rogue sites was laudable, not all were pleased with
his proposed expansion of FDA authority. The Chairman of the House
Commerce Committee believed the FDA's existing regulatory powers would
allow the Agency to pursue more extensive measures without the need for
new grants of authority. This Committee would need to approve
legislation to expand the FDA's authority, so reluctance on the part of
its Chair is significant. The recent change of Administration injects a
measure of uncertainty as to how, or whether, this debate will evolve.
The National Association of Boards of Pharmacy, which currently runs its
own certification program, is unconvinced of the need for a
certification program run by the FDA. States also are unlikely to
support a federal licensing system that would allow practitioners to
bypass state licensing and encourage reliance upon the federal
government as a primary enforcer of quality of care and professional
practice standards. States are launching their own campaigns to
comprehensively regulate online pharmacies; they may look to a narrowly
tailored federal registration *120 system to assist their investigation
and coordinate their enforcement efforts.
IV. Voluntary Controls
Industries often attempt self-regulation in the face of public
pressure for stricter oversight. Accordingly, the pharmaceutical
manufacturing and service industries have responded to the perceived
need for increased consumer protections in online pharmacies. The range
of self-regulatory measures spans from informal advisory communications
to the implementation of sound business practices to an organized
certification program. In August 1998, aware of widespread prescribing
based on informal physician-patient relationships, the pharmaceutical
company that manufactures Viagra requested that state medical boards
stress to their physicians the necessity of performing a patient
examination prior to prescribing the drug.
Online pharmacies can implement mechanisms to add greater legitimacy
to the services they provide. For example, sites may refuse to offer a
prescription issuing service and may implement procedures to verify the
legitimacy of prescriptions that consumers submit. One well-known online
pharmacy, Planet Rx, will not fill a prescription until it has verified
the prescription's validity with both the patient and the issuing
physician and has verified the physician's credentials with the Drug
Enforcement Agency. Furthermore, a pharmacist must verify the contact
information for the physician and that the proper drug and dosage have
been prescribed. Planet Rx dispenses the drug after two more accuracy
checks and maintains patient records to monitor refill behavior.
In Spring 1999, the National Association of Boards of Pharmacy
("NABP") entered the arena of online pharmacy regulation by
instituting a voluntary certification program for the pharmacies. NABP
is a collaborative organization of state and national pharmacy boards as
well as boards from Canada and Australia. NABP works to protect public
health by developing uniform regulatory standards that can be
implemented by *121 the member boards. NABP's Verified Internet Pharmacy
Practice Site ("VIPPS") program utilizes a verifiable logo at
an online pharmacy's web site to indicate that the pharmacy is
certified. NABP certification indicates the online pharmacy is in
compliance with the licensing laws and inspection requirements of the
states where they are located and where they dispense drugs. The
certification also indicates the site complies with other standards
dealing with matters that include patient privacy, authentication and
security of orders, quality assurance, and the "provision of
meaningful consultation between patients and pharmacists." NABP is
particularly concerned about the risks that arise when patients do not
visit a physician prior to patronizing an online pharmacy. At one point,
NABP had identified approximately 3500 sites operating as online
pharmacies, but had certified only a handful of them. NABP created the
VIPPS program criteria in consultation with government, industry, and
consumer groups. It is possible that increased FDA involvement would
utilize the VIPPS program.
Industry self-regulation on the part of pharmaceutical manufacturers
is laudable; it reflects an awareness of the effects of pharmaceutical
marketing and a desire to responsibly promote drugs in order to minimize
misuse and injury. Direct-to-consumer advertising certainly plays a role
in consumers' decisions to pursue and obtain prescription drugs online.
Consumers' willingness to obtain medical examinations prior to starting
drug therapy can be encouraged by the inclusion of strong, deliberate
warnings of the need to be examined, along with the provision of
information about contraindications, risks, and adverse effects of
potential pharmaceutical treatments. Additionally, manufacturers'
warnings that are crafted with online pharmacy operations in mind can
assist pharmacies and pharmacists in identifying when drugs can be
dispensed safely without a thorough clinical examination.
*122 Well-intentioned physicians who enable online pharmacy
operations through online consultations and prescribing can be assisted
in their ability to discern when an online consultation is not
sufficient treatment with the help of manufacturer guidelines that
contemplate online services. A change in prescribing standards could
require a notation with each prescription indicating whether an
in-person or online physician-patient consultation gave rise to the
prescription. Notation of an online consultation then could alert
pharmacists to implement a specified set of patient inquiries to further
ensure that an in-person consultation would not be more desirable.
Relying on manufacturers' efforts to warn consumers, pharmacists, and
physicians, however, will not ensure that substandard prescribing and
dispensing of online pharmacies will cease. To be successful, this
approach requires physicians and pharmacies to heed informal
manufacturer notices, yet not all online pharmacies and their enabling
physicians will be well- intentioned. While there are benefits to
involving manufacturers in changing drug labeling and promotion to
reflect the online prescribing and dispensing phenomenon, a more
systematic method of regulation is necessary to police more
opportunistic online pharmacy ventures. A voluntary certification for
online pharmacies is similarly limited; it will protect consumers only
to the extent they are aware of and utilize the program. More
comprehensive regulatory efforts are being undertaken by state
governments, especially within states' Offices of Attorney General.
V. Cooperative Federalism
State efforts to control online pharmacies may entail applying
existing legal requirements for pharmacies, pharmacists, and physicians
to those operating online. States also can enact new legislation
specifically addressing online pharmacies to improve their enforcement
capacity. Several states' Offices of Attorney General are spearheading
enforcement actions against online pharmacies and physicians affiliated
with them, using both established and new laws to target potentially
harmful practices. These initiatives contribute to a broader,
collaborative movement among state governments to retain authority over
practice standards and to protect against consumer fraud.
*123 A. The Enforcement Actions of Attorneys General
Actions by states' attorneys general have been a widely publicized,
recent state-level enforcement trend in regulating online pharmacies.
With much fanfare, the Offices of Attorney General of a handful of
states have been filing law suits against online pharmacies based on
undercover investigations of the sites' involvement in the issuing of
prescriptions and dispensing of prescription drugs across state lines.
The suits seek to enjoin online pharmacies' operations for violating
state medicine and pharmacy licensing requirements and state consumer
fraud laws. With these actions, attorneys general are setting precedents
for assessing these online practices. The attorneys general are
supported in their endeavors by the National Association of Attorneys
General ("NAAG"), an instigator of their actions and a general
advocate for state regulatory authority. Together, the attorneys general
and NAAG are staking a substantial claim for states' roles in the future
online pharmacy regulatory framework.
1. National Association of Attorneys General
NAAG has been conducting a working group for online pharmacies and
has indicated future attorney general enforcement actions can be
expected. NAAG is a coalition of federal, state, and regional attorneys
general that works to "facilitate interaction among Attorneys
General . . . thereby enhancing [their] performance . . . to respond
effectively to emerging state and federal issues." NAAG's goals
include apprising Offices of Attorneys General of legal developments
through workshops, helping these offices exert coordinated efforts on
interstate matters, and influencing state and national policy
development.
At its recent conference exploring the impact of the Internet on
attorney general functions, NAAG stressed the importance of attorneys
general in fighting crime and protecting consumers while fostering
access and privacy in the boundary-less realm of *124 the Internet. AG
actions are occurring in criminal and civil contexts other than the sale
of prescription drugs; financial fraud and crimes against children also
are being addressed. Indeed, NAAG sees attorneys general as pivotal in
ensuring the Internet is made safe for all persons in all activities
and, to this end, is advocating that they become involved in broader
public protection initiatives. NAAG asserts that attorneys general are
well-suited to examine current laws that protect the public for their
relevancy to the Internet context. NAAG recommends that attorneys
general propose new legal policies where necessary and undertake
cooperative preventive efforts as well as enforcing existing laws
online.
Given NAAG's involvement in online pharmacy regulation, it is not
surprising that the actions against online pharmacies brought by a
handful of attorneys general, thus far, are based on similar
investigations, allegations, and policy concerns. In June 1999, the
Kansas Attorney General, who now acts as NAAG's President, brought the
first AG action against online pharmacies. This action was basedon a
violation of state licensing and registration requirements for
pharmacies. Within weeks, other offices of attorneys general also
initiated lawsuits.
2. Attorney General Actions
In July 1999, the Missouri Attorney General filed suit against online
pharmacy sites based on their failure to confirm patients' health
information, received through online consultations, prior to issuing
prescriptions and dispensing drugs. The Attorney General indicated the
pharmacies' operations violated a state law requiring a Missouri license
to issue and dispense prescriptions to Missouri residents and the
state's consumer deception law. Along with permanent injunctions barring
the Texas-based online pharmacy operations from dispensing in Missouri,
*125 the Attorney General was able to have $15,000 penalties imposed on
the clinic, pharmacy, and physician defendants. The sites now must
indicate they cannot serve residents of Missouri and will be subject to
additional $5,000 fines if they do.
The Missouri Attorney General intended its action to be a symbol of
the State's intention to enforce its pharmacy and medical licensing
requirements in the online context. Licensed pharmacy services must only
fill prescriptions issued by Missouri licensed prescribers, and any
patient consultations must include actual, physical patient examinations
by physicians. The Attorney General noted that these types of online
pharmacy services are available for Missouri residents; the lawsuit did
not target several sites that met these standards. The Attorney General
stressed that those who prescribe and dispense drugs in conformity with
state's licensing laws offer consumers a greater degree of protection
from health risks. Essentially, the Attorney General's main concern was
the offering of prescriptions to consumers who were deemed in need of
more substantial physician consultation than they obtained online.
In October 1999, the Illinois Attorney General filed suit against
four online pharmacies, alleging violations of the state's medical and
pharmacy licensing requirements and violations of the state's consumer
fraud law. The Attorney General announced the lawsuits with
representatives at his side from the American Medical Association,
Illinois State Medical Society, Illinois Department of Professional
Regulation, and the Illinois Pharmacists Association. The AG cases
assert that the pharmacies acted illegally by having doctors not
licensed in the state *126 issue prescriptions to Illinois residents, by
having pharmacists not licensed in the state dispense prescription drugs
to Illinois residents, and by representing to consumers that it is
lawful for a pharmacy to deliver prescription drugs to Illinois
residents without being properly registered. The Attorney General's
primary concern was that the prescriptions dispensed by the pharmacies
did not arise from a "proper patient-physician relationship."
In December 1999, the Michigan Attorney General threatened to sue ten
online pharmacies. The Attorney General alleged violations of the
state's consumer protections laws: The sites were not licensed in
Michigan and did not disclose this lack of licensing to consumers. The
state's undercover investigations of the pharmacies revealed inadequate
patient care. By mid-January 2000, all ten of the threatened businesses
had agreed to discontinue sales of prescription drugs to residents of
Michigan.
In March 2000, the New Jersey Attorney General brought suit against
eight online pharmacies. The complaints are strikingly similar to other
attorney general actions, including the lack of state licensing of the
pharmacists and physicians involved, their failure to disclose this lack
of state licensing to consumers, and the inadequacy of the physicians'
online examinations of patients. The remedies sought were familiar, too,
and included financial penalties and injunctions to prevent the
pharmacies from doing business in New Jersey. The Attorney General,
while recognizing the prevalence of e-commerce, stressed the need to
protect consumers from fraud and injury, noting that *127 "[p]harmacies
and pharmacists must follow state laws whether they do business in New
Jersey neighborhoods or on the Internet."
The policy lessons derived from the actions of the attorneys general
deal with the state governments' roles in protecting public health. The
attorneys general primarily are concerned with the increased ability of
consumers to obtain prescriptions through quickly performed, online
consultations with physicians and pharmacists whom the states cannot
control. The ability to impose quality standards on those patient
consultations will arise from the authority over the physicians and
pharmacists that the practice of licensing gives to state agents.
States' attorneys general clearly have authority to participate,
along with specified state agencies, in enforcing professional pharmacy
and medical practice requirements and state consumer protection laws.
The attorneys' general initiatives, however, may suffer for a lack of
broad-scale remedial impact. They also require applicability of the
state laws they seek to enforce-those dealing with licensing, disclosure
and quality of care-to out-of- state, online practices. These policy
issues are being addressed by state legislatures and attorneys general
nationwide. NAAG is involved in efforts to improve the effectiveness and
impact of attorneys general law enforcement on the Internet and can be
expected to apply these principles in the context of online pharmacy
regulation. State legislatures are actively amending and drafting
legislation to ensure online pharmacies do not escape their regulatory
purview.
B. Enforcement Authority
The powers of attorneys general are enumerated by state legislatures
and in state constitutions. As states' main law officers, they generally
provide legal advice and services to state agencies and legislatures, as
well as on behalf of the citizenry. They have authority over the legal
affairs of state agencies and the ability to be involved in any legal
matters affecting state interests. *128[ FN149] Additionally, their
authority to enforce certain laws may be specified in statutory
provisions.
State medical and pharmacy boards, and the state agencies of which
they are a part, traditionally have been the primary regulators of
medical and pharmacy practices. These boards enforce state laws
pertaining to physician and pharmacy licensing, which include standards
for quality of care and professional conduct. With their broad legal
powers, attorneys general may investigate and prosecute violations of
laws that other state agencies have responsibility to execute, including
the enforcement of licensing requirements. The initiatives of states'
attorneys general may encourage other agencies to follow their lead in
regulating online pharmacy practices.
In May 1999, the Illinois Department of Regulations temporarily
suspended the license of an Illinois physician for his online
prescribing. The physician practiced in an Illinois clinic but was
disciplined for his work as a consultant for the Pill Box Pharmacy in
San Antonio, which included prescribing Viagra over the Internet without
direct patient interaction. The Department solicited the physician's
online services undercover and then filed charges against him. The
Department expressed concern about the inability of the physician to
verify patients' medical information. Within weeks of the suspension, a
settlement was reached whereby the physician's license was reinstated,
but he was fined $1,000 and given two years of probation, during which
time he could not prescribe drugs over the Internet. The agency
emphasized the need to convey a tough *129 enforcement stance and to set
a precedent for similar disciplinary actions in the future.
In February 1999, the Wisconsin Department of Regulation and
Licensing filed a complaint against a physician for activities that
included his online prescribing practices. While the physician did not
perform consultations or issue prescriptions online, these services were
provided to patients solicited through the physician's online and
newspaper advertisements for his prescribing service. The physician also
provided prescribing services for a Missouri pharmacy that solicited
patient information online and forwarded it to his e-mail. Ultimately,
the physician's license to practice medicine was temporarily suspended
and his authority to prescribe drugs was permanently revoked. The
physician's willingness to issue prescriptions without examining
patients, along with his failure to inform patients of possible
underlying illnesses and alternative treatments, violated the State's
law on minimum competency requirements for physicians.
The extent to which state laws require patient examinations prior to
prescribing drug treatments seems to be an important element in
determining whether licensing agencies will scrutinize physician
behavior. Authorities in both Illinois and Wisconsin expressed concern
about the quality of medical consultations being provided prior to the
issuance of prescriptions.
The penalties licensing agencies may impose on physicians prescribing
online are uncertain at this stage. Although a prosecutor in the
Wisconsin case indicated the action was one of the more serious actions
undertaken recently, the physician who was disciplined in that case had
been involved in significantly unprofessional conduct, such as
inappropriate sexual and physical contact with minor children. It is not
likely that such a *130 severe license restriction would have been
imposed absent the egregious circumstances of that case. Given the lack
of prevailing standards, the penalties in the Illinois case-the fine and
probation-seem more proportionate for activities presently characterized
as license violations.
Investigative methods and penalties remain unclear, and a trend
toward increasing online pharmacy practice and physician involvement
does not provide a shield from actions against licenses. While the
attorney for the Illinois physician noted that his client was just one
of many online prescribers, the state clearly desired to set an example.
C. Jurisdictional Limitations
The type of relief sought by the state attorneys general actions does
not implement any broad remedies against the online pharmacies; the main
goal is to limit offending pharmacies' sales in particular states. While
this approach does not systematically prevent injury or protect public
safety, actions in many states increase the possibility that online
pharmacy operations will be affected more broadly. If sites were to
become blocked from business in a significant number of states unless
they were to obtain licensing and demonstrate the offering of bona fide
patient consultative services, there might be a surge of compliance in
order to recapture business. It is easy to imagine parties blocked in
one or two states continuing their operations elsewhere or in blocked
states under aliases. It is not likely, however, that larger, more
reputable online pharmacies will sacrifice name recognition and large
revenue opportunities in order to avoid licensing and quality of care
requirements.
The jurisdictional limitations of the attorney general actions are
not going unexamined. The possibility for a large-scale effect arising
from the individual actions of states' attorneys general reflects NAAG's
method of affecting state and federal policy on interstate issues
through facilitating uniform responses by attorneys general. NAAG also
is involved in formulating specific programs to more directly achieve
broad impact from state attorney general actions.
At its Internet conference, NAAG revealed proposals to further its
vision of a concerted attorney general enforcement scheme. These
proposals include calls for legislation to enable *131 cross-state
investigations and to expand state attorney general authority to bring
actions in federal courts and obtain injunctions effective throughout
all states. NAAG plans to hold regular meetings for state attorneys
general to share information on their online actions and investigations.
Common access to data is seen as vital to a collaborative enforcement
strategy.
The realization of NAAG's vision of a dominant state attorney general
regulatory presence may actually depend upon federal involvement in
licensing and registration of online pharmacies. This type of federal
regulatory role could address gaps in state regulation while respecting
the states' ability and willingness to set standards and prosecute
offenders. The ability of state attorney general actions to have broad
scale impact relies on collaborative efforts. State-wide enforcement
efforts can be assisted by a federal system of registration; a national
data bank of online pharmacies and their affiliated practitioners can
allow uniform communication of enforcement actions and enable
collaborative investigations. This type of system could emulate the
interstate sharing of adverse license action information among state
medical boards. Programs such as the National Practitioner Data Bank
represent a federal policy of assisting states in cooperative policing
of physicians who practice in multiple states, without the need to
implement an actual federal licensing program.
The type of plan laid out in the federal legislation proposed in Fall
1999 contemplated a measure of federal involvement that would respect
states' traditional and primary authority in regulating medical and
pharmacy practices. Care must be taken, however, in considering new
federal proposals to ensure expansions of federal power do not encroach
too heavily on states' authority to regulate practice standards and
their ability to protect consumers. Where coordinated state enforcement
is lacking, minimal federal requirements and enforcement actions could
help.
*132 D. Legal Bases for Action
The attorneys general actions against online pharmacies all are based
on similar legal theories-allegations of violations of state licensing
laws and laws requiring physicians to prescribe medications only
pursuant to bona fide physician-patient relationships. Whether efforts
by attorneys general to prosecute online pharmacy practitioners and
physicians are successful depends on the applicability of state laws to
online prescribing activities.
States may apply practice standards that do not regulate online
pharmacies per se to these pharmacies' prescribing and dispensing
activities. They also may amend existing pharmacy and medical
regulations to specifically bring online pharmacies within their scope.
Alternatively, states may pass comprehensive legislation setting
particular standards for online pharmacies operating within their
borders; both the Kansas and New York legislatures recently considered
bills that included licensing, disclosure, and quality provisions. New
York's proposed Internet Pharmacy Consumer Protection Act clearly
designated violations by online pharmacies, pharmacists, or health care
practitioners as professional misconduct and as misdemeanors. The
proposed Kansas Internet Pharmacy Consumer Protection Act designated
that violations would be deemed violations of the state's consumer
protection, pharmacy practice, and healing arts acts. These types of
specific penalty provisions would assist state agency and attorney
general enforcement efforts in establishing clear violations.
Other states' legislatures have been undertaking careful
consideration of the effects of online pharmacies and formulating
legislative policies in response. In January 2000, Michigan formed a
task force to examine the sale of prescription drugs online. The task
force included representatives from the state licensing agency, health
care providers, and major purchasers of health benefits and was charged
with the goal of forming legal *133 recommendations for the state's
licensing agency. The group's scope of review included online
pharmaceutical trends, relevant state and federal laws, and security and
privacy issues. Similarly, the Iowa legislative council was formally
asked by the state's legislature to study the provision of pharmacy
services through the Internet as a prelude to legislative action.
Following is an examination of the laws upon which the state attorney
general actions rely and a survey of the types of recent legislative
initiatives that can advance states' abilities to regulate pharmacies on
the Internet.
1. Licensure and Disclosure
The attorney general actions complain of pharmacists and physicians
who practice within their respective states without being licensed; they
also complain of pharmacies dispensing to residents of their states
without being registered. The claim that pharmacists and physicians
arepracticing in a particular state when they prescribe and dispense
drugs to residents of that state from outside that state finds some
precedent in established non-resident and telemedicine licensure
provisions.
Indiana brings both Internet pharmacies as well as mail-order
pharmacies under the purview of the state's professional licensing
agency by requiring them to either be located in Indiana or be licensed
as non-resident pharmacies. California law specifically prohibits
practicing medicine from California into another state or country
without first satisfying the other jurisdiction's requirements for
practicing medicine. The New York proposal required online pharmacies to
comply with New York licensing requirements in order to deliver
prescription drugs into New York. In 1999, Illinois passed a law that
specifically brings Internet pharmacies within the regulatory purview of
the State Board of Pharmacy of the Department of Professional Regulation
by classifying them as mail-order pharmacies. The New *134 Hampshire
legislature recently enacted a similar bill to bring Internet pharmacies
into the scope of professional licensing regulations affecting
mail-order pharmacies.
In the Illinois Attorney General actions, the online pharmacies
allegedly violated the State's Consumer Fraud Act by failing to disclose
to patrons that they were not licensed in Illinois and by representing
to consumers that it "is lawful for doctors not licensed in
Illinois to issue prescriptions drugs to Illinois residents, when . . .
it is not lawful . . . ." One of these allegations should fail,
however, for pharmacies that represent it is lawful for them to dispense
without a particular license cannot simultaneously fail to disclose that
they are dispensing without such a license. The question of what is
disclosed to consumers influences not just the substantive foundations
for state actions, but the very ability of states to bring actions.
States need comprehensive information about who is operating online
pharmacies in order to consistently apply their consumer protection
standards. The family of the Illinois man who died from a heart attack
after taking Viagra that he obtained from an online pharmacy could not
pursue criminal or civil enforcement actions because the drug's origin
was unknown. Until harm can be linked to specific providers,
prosecutions may proceed based on symbolic goals. The Illinois physician
who faced suspension of his license, restrictions on his practice, and a
fine was not investigated or indicted based on allegations of patient
harm.
States recognize this problem and are considering policies that would
require disclosure to consumers of who is operating online pharmacies.
The Kansas bill required sites to disclose names and addresses of
parties involved in issuing and dispensing prescriptions and sites'
abilities to obtain liability waivers. New York's proposed law also
required the disclosure of pharmacies' and pharmacists' names, principal
addresses, and phone numbers, as well as proof of compliance with New
York licensure and registration laws.
*135 2. Quality of Care
Prescribing drugs without conducting a physical examination can be
violative of a state's professional conduct standards. California law
prohibits prescribing and dispensing prescription drugs without first
conducting a good faith examination and determining proper medical
indication. A bill recently passed in California's Legislature
specifically prohibits online prescribing without a good faith prior
medical examination and online dispensing without a valid prescription
that is based on a good faith prior medical examination. Kansas's
comprehensive bill required pharmacists and providers to conform to
existing Kansas law setting standards for consultations that result in
issuance of prescriptions. The New York bill mandated verification of
prescriptions and placed restrictions on liability waivers. A separate
New York bill prohibited the dispensing of controlled substances
pursuant to an online pharmacy consultation or sale.
There is precedent outside of the online context for disciplinary
actions against physicians who prescribed drugs without establishing
proper physician- patient relationships. The physicians involved were
prescribing drugs without performing medical examinations and without
otherwise verifying medical indications. Although these cases generally
involved illicit prescribing of drugs classified as controlled
substances, the discipline actions arose from the physicians'
willingness to conduct a professional activity (issuing prescriptions)
outside the bounds of professional standards (not performing physical
exams or assuring proper medical indication).
*136 New York recently passed rules requiring pharmacists to
personally provide patient counseling in order to ensure patients
receive professional pharmaceutical advice; the rules also require
pharmacies to maintain patient drug profiles and check for drug
interactions as part of their counseling. The rules allow prescriptions
to be filled electronically, rather than just pursuant to written or
phone orders. In addition to meeting secure transmittal requirements,
electronic prescriptions must be marked to indicate that they are from
an authorized prescriber. Rules such as these, along with clear legal
requirements for medical examinations, present a counterbalance to the
effects of inadequate online patient consultations and failure of online
pharmacists to verify prescriptions.
VI. Conclusion
State attorneys general have exhibited an early willingness to commit
consumer protection resources to abusive online pharmaceutical
practices. State legislatures are contributing to their abilities by
tailoring laws to apply traditional pharmacy and medical standards to
evolving Internet practices. State licensing officials are following the
lead of the attorneys general in experimenting with disciplining online
activities. A narrowly crafted federal regulatory approach, such as the
information disclosure requirements recently proposed by the U.S. GAO,
could complement these state enforcement efforts.
The demonstration of cooperative federalism that the attorney general
actions present does not ensure a consistent level of enforcement
nationwide. It is impossible to guarantee all states will participate in
forming comparable programs to police online pharmacies. If enough
states with major populaces do participate, however, it is likely that
their requirements will influence business practices. Some fear
interstate cooperation because of the lack of publicaccountability that
comes from *137 agency-level creation and implementation of policies. In
fact, NAAG has been criticized as a "shadow Congress." Many
state legislatures, however, are becoming active in formulating policy
for online pharmacies that is consistent with the assertion of
cooperative state power represented by the attorney general actions.
These laws and proposals lend credibility to the identification of a
public safety threat by the attorneys general and validate their early
efforts to control that threat.
. Sara E. Zeman, J.D., L.L.M., is Assistant Regional Counsel in the
Office of the General Counsel of the Social Security Administration,
Region V. This article was written by Ms. Zeman in her private capacity.
No official support or endorsement by the Social Security Administration
is intended or should be inferred. The author wishes to thank Professor
John Blum, John J. Waldron Research Professor at Loyola University's
Institute of Health Law, for his guidance in conceiving this article, as
well as Professor Louise G. Trubek at the University of Wisconsin Law
School for her guidance in examining the evolution of health care
regulation.
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