[Also see: "How FDA, in Cahoots with DOJ, Brought Google Down
" and "Google Accepted Ads from Illegal Online Drug Stores
Google Was Warned on Rogue Drug Ads
By THOMAS CATAN And AMIR EFRATI
WASHINGTON—Google Inc. was warned repeatedly by a group of state regulators and industry watchdogs that many of the online drugstores advertising on its network were violating U.S. laws, according to interviews and documents reviewed by The Wall Street Journal.
Federal prosecutors have been looking into whether Google employees knowingly accepted business from illegal drug sellers which, legal experts say, could open it up to allegations that it aided illegal online activity.
As part of the criminal investigation, undercover agents for the Food and Drug Administration contacted Google posing as representatives from rogue Internet pharmacies, according to people familiar with the matter.
It's unclear what kind of evidence, if any, was gathered through the operation and why Justice Department prosecutors, who are working with the FDA, are apparently training their attention on Google, at least so far.
A Yahoo Inc. spokeswoman and Microsoft Corp. spokesman said they believed their companies were not under investigation related to pharmacy ads on their search engines.
The Microsoft spokesman said that in recent years the company has spoken with industry and government officials, including Justice Department representatives, about ways to combat online advertising by illegal pharmacies and changed its practices as a result.
Google and its smaller rivals in recent years earned around $1 billion a year from online pharmacies and health care companies that paid to place text ads on the search engines, according to research firm eMarketer.
It is unclear how much of that revenue was from illicit pharmacies. About 96% of Internet drug outlets appeared to be violating pharmacy laws or standards, according to a 2008 study by the National Association of Boards of Pharmacy, or NABP, a group representing state regulators in the U.S. and Canada.
The problems included failing to require a doctor's prescription, improperly selling controlled substances or peddling fake or tainted drugs. Many illicit pharmacies appear to be based in Canada but often ship drugs from places like India, Barbados or China, according to the FDA.
Earlier this month, Google said it was setting aside $500 million to potentially resolve a Justice Department investigation. It didn't reveal the focus of the probe, saying only that it involved "the use of Google advertising by certain advertisers."
Google is currently in talks with federal prosecutors to settle the case before it reaches court, according to people familiar with the matter. The Justice Department and FDA declined to comment.
The company declined to comment for this article. But in a Sept. 21, 2010 blog post, Google lawyer Michael Zwibelman wrote that the company has struggled with the problem of online pharmacies for years.
"Despite our best efforts—from extensive verification procedures, to automated keyword blocking, to changing our ads policies—a small percentage of pharma ads from these rogue companies is still appearing on Google," he wrote.
For a decade, Google and the other search engines declined to use a verification program created in 1999 by a group representing U.S. state pharmacy regulators to weed-out rogue online drug sellers. Instead, Google used a third-party company that pharmacy regulators and others say often failed to catch illicit drug sellers.
"On the basis of our analysis, I think they were turning a blind-eye," said Bryan Liang, a California Western School of Law professor who published a 2009 report that found Google and others were profiting from online ads paid for by illegal drug sellers. "They were making a lot of money on this."
Outside groups and lawmakers raised concerns with Google about online pharmacy advertising on numerous occasions during the past eight years.
In 2003, the NABP wrote a letter to Google warning about advertising from online drug outlets that weren't verified by a NABP screening program. The organization was "deeply concerned that these rogue Internet sites could be a front for criminals seeking to introduce adulterated medications, counterfeit drugs, or worse, to the American market," wrote Mary Dickson, the NABP's associate executive director. The NABP says Google didn't respond.
In Congressional testimony in 2004 and 2005, Google executives said they used "trusted" third-party verification services to ensure they weren't accepting ads from illicit drug sellers, and that the company had a dedicated team enforcing its policies for online pharmacy ads.
In 2006, Google began using a company called PharmacyChecker.com LLC to vet its pharmacy advertisers. Yahoo and Microsoft later hired the same company.
But several groups subsequently told Google and the other search engines the system failed to stop illicit drug sellers from advertising on its network.
In July 2008, the National Center on Addiction and Substance Abuse at Columbia University (CASA) wrote to Eric Schmidt, then Google's chief executive, saying it found "prominent displays of ads for rogue Internet pharmacies" in a Google search for controlled drugs.
"This suggests that Google is profiting from advertisements for illegal sales of controlled prescription drugs online," wrote Joseph Califano, CASA's director and a former U.S. health secretary. CASA says it never got a response.
PharmacyChecker denies it knowingly approved illicit drugstores, but said some of them had "gamed" its system "from time to time."
"The one thing that bugs me most about this whole thing is that anyone would ever believe that we would approve a dangerous, rogue pharmacy on purpose," said Gabriel Levitt, PharmacyChecker's vice president. "It's just completely not true."
PharmacyChecker said it received a subpoena from the FDA in 2009 to produce all its communications with Google regarding pharmacy verification policies. It said it was a witness rather than a target in the case.
Separately, the NABP in 2008 again asked Google, Microsoft and Yahoo to stop illicit online drugstores from advertising on their sites and to replace PharmacyChecker.
In an emailed response, a Google director of policy at the time, Alana Karen, requested NABP's list of hundreds of problematic pharmacy advertisers. She later wrote that Google found the list "helpful" and the company was "using your list to augment our filters for sites that violate our policies."
Yet problematic pharmacies continued to advertise on Google, according to Carmen Catizone, NABP's executive director, as well as several other researchers.
In 2009, LegitScript LLC, which monitors online drug sellers, published reports alleging that 80% and 90% of Yahoo and Microsoft's respective online drug advertisers were breaking the law.
John Horton, who runs LegitScript, said his company also conducted in 2009 an unpublished review of Google's ads and found the same level of problems. LegitScript is now employed by Google to help identify problem sites, he said.
"PharmacyChecker approved illicit Internet pharmacies as part of its paid verification program, thus shooting them into Google's advertising pool," said Mr. Horton, a former prosecutor.
In early 2010, the three major search engines dropped PharmacyChecker and agreed to use NABP's list of verified pharmacies—more than a decade after it was first established.
Write to Thomas Catan at email@example.com
and Amir Efrati at firstname.lastname@example.org
Readers Comments (selected):
Google has been warned about thousands or millions of violations, from illegal copyrights of music and visuals on its YouTube site to turning a blind eye on illegal contraband in advertisements. When your making a killing off illegal products and content while the Feds drag there feet, they just keep getting bigger and more powerful. Sad watching whole illegal industries emerge as major music companies get eating up by the Pirate Bays of the world.
What lobby firm does Google hire to keep this machine floating?. Better yet, what Politicians do they have in there pocket. Imagine Google knowing which porno site our elected officials visit, then calling them for a little help to boost there value which today stands close to 200 billion dollars. Wow...it pays to do big crime in cyber space.
This article wrongly blames PharmacyChecker.com for Google's problems with Rogue pharmacies. This reporter's distortions and omissions of fact are immense. Virtually all of the expert sources used in this article are connected to the U.S. pharmacy or pharmaceutical industry that do not want Americans buying less expensive drugs from safe international online pharmacies. Anyone who cares to look around further will find this rather quickly.
Regarding the CASA report: in its analysis of Google’s ad platform it identified 23 sites as rogue. I told the reporter that 19 of those sites had never even applied to our program and that the other four were not rogue online pharmacies. Fortunately we have this data to prove this.
Regarding the LegitScript.com report that 80% to 90% of advertisers were “illicit”: the reporter does not bother to mention that safe Canadian-based online pharmacies that require a prescription and have served uninsured Americans ethically and safely for many years comprise most of this so called “illicit” group. And, yes, such safe online pharmacies do work with pharmacies in other countries. Those, too, are verified and safe as well.
The only real advertiser policy change Google made last year was to exclude all Canadian and other foreign pharmacies from advertising to the United States. It also seemed to have initiated a technical block on rogue pharmacy advertisers that was not in place when it worked with PharmacyChecker.com.
Most importantly, we have major public health crisis in our country that has nothing to do with rogue online pharmacies. According to the U.S. Centers for Disease and Prevention, 25 million Americans did not take their medication due to cost in 2009. According to a Kaiser/Harvard study in 2008, 40% of Americans reported struggling to afford prescription medication. That so many Americans are going without needed medication shows the sad state of our union.
Buying safe and affordable medication online from Canada and other safe foreign pharmacies that meet high standards has been a lifeline to millions of Americans over the past decade – despite the statutory ban on the practice. To the best of my knowledge, the FDA has never arrested anyone for personally importing their medication.
I have no idea why Thomas Catan wrote this incredibly biased and distorted article that slanders our company. I do know, from direct experience, that there’s very little the pharmaceutical industry is unable to accomplish when it comes to media and government relations. For those independently minded readers of the Wall Street Journal – we all know that’s true.
Google continued evading using the NABP's verification system for a decade because it did not want to use an effective procedure to exclude illicit drug sellers. The company was making too much money off them. Pharmacy Checker was, basically, an alibi. Google could cite it as cover while not really policing the site, knowing Pharmacy Checker was purposely ineffective. (Purposely, because the results could not have happened by accident.)