The U.S. Attorney for the Northern District of California has indicted the FedEx Corporation, FedExExpress, Inc. and FedEx Corporate Services, Inc. (collectively, FedEx) for conspiring with two separate—but related— online Internet pharmacy organizations, the Chhabra-Smoley Organization and Superior Drugs, to distribute controlled substances and prescription drugs to U.S. consumers who had no legitimate medical need for them based on invalid prescriptions.
Since 1998, when Internet pharmacies first began offering consumers prescription drugs, some of these pharmacies have been filling orders based only on the completion of an online questionnaire, without a physical examination, a proper diagnosis, or a face-to-face meeting with a physician. This practice violates both federal and state laws governing the distribution of prescription drugs and controlled substances.
Warnings Made to FedEx
According to the indictment, as early as 2004, FedEx had been warned by the FDA, the Drug Enforcement Administration (DEA), and Congressional members and their staff that illegal Internet pharmacies where using FedEx services to distribute prescription drugs and controlled substances in violation of the FDC Act, the Controlled Substances Act (CSA), and other state laws.
Knowledge of Illegality Alleged
The indictment also alleges that in response to these warnings, FedEx established an Online Pharmacy Credit Policy requiring that all online pharmacy shippers be approved by the Credit Department prior to opening a new account. FedEx purportedly established a Sales policy in which all online pharmacies were assigned to a “catchall” classification to protect the commission-based compensation of its sales professionals from the volatility caused by online pharmacies moving shipping locations often to avoid DEA detection.
The indictment further alleges that, as early as 2004, FedEx clearly knew that it was delivering drugs to dealers and addicts because FedEx’s couriers expressed safety concerns to management that FedEx trucks were stopped on the road by online pharmacy customers demanding drugs, that the delivery address was a parking lot, school, or vacant home, and that FedEx drivers were threatened if they insisted on delivering packages to an address instead of giving the packages to individuals who demanded them. In response, the indictment alleges that FedEx merely held Internet pharmacy packages for problem shippers for pick up at specific stations, rather than delivering them.
FedEx’s employees are also alleged to have known that the Chhabra-Smoley and Superior Drugs online pharmacies had been shut down, and that their owners, operators, pharmacists, and doctors had been indicted, arrested, and convicted of illegally distributing drugs. Nevertheless, FedEx allegedly continued to deliver controlled substances and prescription drugs for these organizations.
Specific Statutory Violations
The indictment specifically charges FedEx with knowingly and intentionally conspiring with the Chhabra-Smoley Organization (from 2000 through 2008) and Superior Drugs (from 2002 through 2010) to violate the CSA, 21 U.S.C. Secs. 841 and 846, and the FDC Act, 21 U.S.C. Secs. 331, et seq., by distributing controlled substances and prescription drugs, including Phendimetrazine (Schedule III); Ambien, Phentermine, Diazepam, and Alprazolam (Schedule IV), to customers who had no legitimate medical need for them based on invalid prescriptions.
FedEx must appear in federal court in San Francisco on July 29, 2014, to answer the charges.