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VOL. 129 | NO. 139 | Friday, July 18, 2014

FedEx Charged With Illegal Pharmacy Deliveries

By Amos Maki

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FedEx’s couriers in several states told company officials they suspected they were delivering illegal prescription pills, saying that delivery addresses included schools, parking lots and vacant buildings where people were lined up waiting to retrieve their shipments.

FedEx trucks were stopped on the road by people seeking their packages of pills, and some FedEx drivers were threatened if they insisted on delivering packages to the addresses instead of giving the packages to customers who demanded them.

Those details emerged in a federal grand jury indictment accusing the Memphis-based company of conspiring to deliver prescription drugs for illegal Internet pharmacies.

Federal indictment
against FedEx

The indictment says FedEx knew for a decade that illegal Web-based pharmacies used their services and that the parcel delivery giant took steps to protect its business by setting up special credit policies for Internet pharmacies so it wouldn’t lose money if law enforcement shut the sites down.

“FedEx knew that it was delivering drugs to dealers and addicts,” the Justice Department said in a press release.

FedEx, which has been summoned to appear in federal court in San Francisco on July 29, denies any wrongdoing, saying it has a long history of cooperating with law enforcement.

“FedEx is innocent of the charges brought today by the Department of Justice,” said Patrick Fitzgerald, senior vice president for marketing and communications. “We will plead not guilty. We will defend against this attack on the integrity and good name of FedEx and its employees. FedEx has a 42-year history of close cooperation with law enforcement agencies.”

FedEx, the Memphis area’s largest private employer, said the government was unfairly assigning law enforcement responsibilities to a company that delivers more than 10 million packages a day.

“We want to be clear what’s at stake here: the government is suggesting that FedEx assumes criminal responsibility for the legality of the contents of the millions of packages that we pick up and deliver every day,” Fitzgerald said. “We are a transportation company – we are not law enforcement.”

The charges against FedEx involve deliveries between 2000 and 2010 of medications – including Ambien, Xanax and Valium – from pharmacies that required their customers only to fill out an online form, without any need for a doctor’s examination or prescription. The government wants FedEx to forfeit $820 million it says the cargo company earned by assisting the illicit pharmacies.

The indictment says FedEx knowingly shipped drugs for two illegal Internet pharmacies, the Chhabra-Smoley Organization and Superior Drugs. In 2003, the DEA shut down RxNetwork, one of the Chhabra-Smoley businesses, and arrested Vincent Chhabra on charges of violating the Controlled Substances Act.

High-level FedEx officials learned of the government crackdown on Internet pharmacies, which negatively affected the company’s revenue when the pharmacies were shut down, but continued to deliver the drugs anyway, according to the indictment.

In arguing for a new credit policy for the online pharmacies in 2004, FedEx’s managing director of revenue operations said “(a)s the past few weeks have unfolded it is becoming more apparent to us that many of these companies are fraudulent and doing business outside federal regulations.”

The credit policy was established in 2004 and required all Internet pharmacies to be approved by the company’s credit department to ensure they had adequate financial security.

On July 6, 2006, an enhanced credit policy – designed to minimize FedEx losses if the pharmacies were shut down by law enforcement – was circulated to FedEx’s managing directors of sales.

“Many of these companies operate outside federal and state regulations over the sale of controlled drugs. ... Drugs purchased from these sites may be diluted or counterfeit,” the policy stated. “Several sites have been shut down by the government without warning or simply disappeared, leaving large balances owing to FedEx.”

The government alleges FedEx even took detailed steps to ensure that Internet pharmacy deliveries continued after an employee expressed concern that recipients of the deliveries were “known to be selling and using” and that “some of the recipients have overdosed and died,” and other employees expressed concern over their safety.

In response to those concerns, FedEx approved a policy in which Internet pharmacy packages from problematic shippers were held for pickup at certain stations.

Fitzgerald, the FedEx spokesman, said the company has repeatedly asked the government for a list of illegal online pharmacies that it should stop serving.

“We have repeatedly requested that the government provide us a list of online pharmacies engaging in illegal activity,” Fitzgerald said. “Whenever DEA provides us a list of pharmacies engaging in illegal activity, we will turn off shipping for those companies immediately. So far the government has declined to provide such a list.”

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