Google to Pay $500 Million in FDA Investigation of Pharmacy Ads Settlement
August 25, 2011 9:50 AM
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The Department of Justice stated that Google was aware that these ads were illegal since as early as 2003
The U.S. Food and Drug Administration (FDA) launched an investigation against Google in 2009 regarding whether the search leader knowingly accepted pharmacy ads online that were illegal. But Google is now paying a hefty sum in order to
settle these allegations
According to the Department of Justice (DOJ), shipping prescriptions to the United States from outside of the country is "generally illegal" because they are not FDA-approved for safety. The DOJ stated that Google was aware of this since as early as 2003, concluding that it knowingly accepted these
Only when the FDA investigation began in 2009 did Google make an effort to put a stop to the unlawful drug sales, said the DOJ. Google began accepting U.S. Canadian ads from certified pharmacies only at that point, and in 2010, it joined Microsoft and Yahoo as well as others in developing a nonprofit organization for the fight against illegal Internet pharmacies.
In May 2011, Google said it was
setting aside $500 million USD
for antitrust settlements, and now, that's exactly the amount it is paying to settle these FDA-related allegations.
"We banned the advertising of prescription drugs in the U.S. by Canadian pharmacies some time ago," said Google in a statement. "However, it's obvious with hindsight that we shouldn't have allowed these ads on Google in the first place."
The DOJ said that along with the $500 million payment would be "a number of compliance and reporting measures" as well.
"This settlement ensures that Google will reform its improper advertising practices with regard to these pharmacies while paying one of the largest financial forfeiture penalties in history," said Deputy Attorney General James Cole.
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8/25/2011 3:54:01 PM
This is exactly what's going on. It's essentially region-encoding for prescription drugs. If there were one universal price for a drug, it would be either ridiculously cheap in the U.S., or ridiculously expensive in developing countries.
So the pharmaceutical companies have essentially managed to piece together laws giving them region-encoding powers for drug pricing. They can price the drug high in the U.S. to make lots of profit, price it low in developing countries so they can still make sales and some profit, and not worry about people buying the drug in the developing countries carrying it back to the U.S. for resale.
Canada's price just happens to be significantly lower than the U.S. because they don't participate in the region-encoding to as great an extent. As others have posted, you can get prescription drugs in Canada which are manufactured in developing countries. Shipping drugs from developing countries -> Canada -> U.S. bypasses the region encoding, which is why the pharmaceutical companies are so intent on squashing that trade.
Unlike region-encoding for DVDs (which should be illegal), I'm uncertain how justifiable this is. I haven't seen the financial figures for R&D costs and pricing necessary to recoup those costs. The pharma companies claim they are actually selling the drugs in developing countries at below their cost (if you include R&D), because it would be unethical to deny those people lifesaving medicines simply because while they can afford the manufacturing costs, they cannot afford the R&D costs. So prices in the U.S. and other first world nations are higher because that's where they're recouping their R&D. So they claim.
"We basically took a look at this situation and said, this is bullshit." -- Newegg Chief Legal Officer Lee Cheng's take on patent troll Soverain
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