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Clinton targets online Rx
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December 28, 1999: 1:30 p.m. ET
Plan calls for new regulation of Internet prescription drug sales to halt abuse
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NEW YORK (CNNfn) - The Clinton administration announced plans Tuesday to seek federal regulation of online drug sales -- a move that reflects the rapidly expanding market for dispensing prescription drugs over the Internet and government’s struggle over how to regulate business in cyberspace.
The online drugstore market is considered one of the most potentially lucrative sectors in electronic retail, with traditional drugstore chains CVS (CVS) Rite Aid (RAD) and Walgreen (WAG) plus upstart online-only companies such as Drugstore.com (DSCM) and PlanetRx.com (PLRX) all launching Web pharmacies.
But there are also hundreds of small operators with dubious reputations, dispensing drugs without requiring a valid prescription or employing doctors who prescribe pills online to patients they have never met. Many customers flock to these sites because they are embarrassed to see a physician in person about a weight problem, hair loss, impotency or other sensitive medical problems.
"Probably hundreds of Web sites are selling prescription drugs such as (impotence drug) Viagra and (baldness remedy) Propecia -- the lifestyle drugs -- because of the anonymity of doing so over the Internet,” said Dr. David Steele, who studies online health care for Internet research firm Gomez Advisors. "Many of the sites are just writing prescriptions for them, or putting disclaimers on their sites, that the consumer should get a physician’s approval.”
The White House is seeking Congressional approval of an initiative to give the Food and Drug Administration control over reviewing and certifying all drug-dispensing Web sites. Internet pharmacy sites that sell drugs to people without a valid prescription would face fines of $500,000 for each infraction.
"Use of the Internet to buy medical products is growing rapidly ... Unfortunately, the safe use of the Internet by both consumers and businesses is now being threatened by fraudulent or disreputable Internet pharmacies that sell products illegally,” the White House said in a statement announcing the proposal.
Online pharmacy abuses include selling to patients in states where the pharmacies are not licensed or not employing licensed pharmacists.
Up until now, regulation of online pharmacies has rested in the hands of individual states -- which face problems with jurisdiction when a patient lives in one state, a pharmacist works out of another, and the Web site operator is based in a third location. Under the Clinton proposal, all pharmaceutical Web sites would have to be federally certified.
The plan would also provide $10 million to establish a team to investigate Internet prescription drug sales, and include a public education campaign on how to safely buy prescription drugs over the Internet.
The proposal will be part of Clinton’s 2001 budget plan that will be submitted to Congress in February.
For the legitimate Web pharmacies, the Clinton plan is a two-edged sword, Steele said.
"The bad thing is that these drugstores will have to spend more time meeting the FDA requirements. That can be burdensome and costly, directing funds away from improving their Web sites,” he said. "The good side is that the trust fostered with consumers will improve the demand for drugs on the Internet and over the long haul, that trust will benefit them.”
If these proposals are enacted, the major Web pharmacies may have to satisfy the FDA that patient information is kept private and that they have safety measures in place to ensure that they are taking prescriptions from genuine doctors, he said. The companies already are taking these steps, he said, but they may have to provide further documentation to regulators.
Steven Gerber, a pharmaceuticals analyst at CIBC Worldwide, said the regulations likely will lead to a shake out in the growing industry. "The large national operators ... probably benefit from regulations that make it much tougher for some of these smaller operators to survive,” he said.
But one problem that Steele foresees with the Clinton proposal is how to regulate Web pharmacy sites operated out of other countries, which often dispense prescription drugs that are not approved for use in the U.S.
Currently, online prescription drug sales total at least $100 million annually -- and as much as 60 percent of those sales are generated by Web sites that sell medications improperly, according to industry research by Gomez Advisors.
Online prescription drug sales are expected to jump to at least $1 billion by 2003, according to Gomez’s forecasts. That doesn’t include over-the-counter drug sales, vitamins and other drugstore items, which together with prescription drugs are expected to generate at least $2.5 billion in annual revenue by 2003. 
-- staff and wire reports
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