Arresting the Deliveryman

When people ship illegal drugs via shipping services, are the shipping services to blame?

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By Paul Gaita

08/21/14

Until recently, news about companies charged with trafficking prescription drugs and other substances read much likethe case against Pharmalogical, Inc., a Long Island-based pharmaceutical company accused of selling $17 million in misbranded or counterfeit medications. Even a casual perusal of Internet news sources will yield dozens of stories along those lines – brick-and-mortar companies attempting to use their anonymity as stand-alone suburban businesses to grab fast and easy cash by supplying the staggering demand for pills. The facts are essentially the same – only the names and locations are different.

But in July of this year, the shipping giant Federal Express found itself among the company of operations like Pharmalogical, Inc. when it was indicted on 15 federal charges for distributing prescription drugs on behalf of two Internet companies that had been shut down for sale of pharmaceuticals to customers with “no legitimate medical need.” The indictment alleged that from 2000 to 2010, FedEx and two subsidiaries conspired with a pair of online pharmacies to deliver prescriptions for Xanax, Ambien and other controlled substances to buyers in highly suspect locations – vacant lots and abandoned homes – and drivers even reportedly being accosted by individuals while en route to these destinations. 

Reportedly, FedEx continued to deliver prescriptions for their alleged co-conspirators – Chhabra-Smoley and Superior Drugs – even after company members, operators and medical professionals associated with both pharmacies had been indicted, arrested and convicted of illegally distributing drugs. A conviction for the company amounted to five years of probation and $2.5 million in fines, or a financial penalty equal to double the profits earned by the illegal shipments, which was estimated at $820 million, for a total penalty of $1.6 billion.

FedEx pleaded not guilty to the charges in a San Francisco court, and argued that the Drug Enforcement Agency's allegation that they had been warned on six separate occasions to stop working with the two companies was false. The company also claimed that their profits from the shipments were far below the $820 million claim. But the case took on a more dire tone this month, when federal prosecutors added money laundering to the list of charges filed against FedEx. The new indictment, filed on August 15, alleged that Chhabra-Smoley and Superior Drugs paid their shipping fees with money obtained through illegal means. The indictment also stated that shipments delivered by the company resulted in the death of several individuals, but no official charges related to these incidents were filed against FedEx.

The case against FedEx is by no means an isolated event. In March 2013, United Parcel Service, Inc. (UPS) entered into a Non-Prosecution Agreement with the United States Attorney’s Office over charges that between 2003 and 2010, the company was using its services to distribute prescription meds for Internet pharmacies using invalid prescriptions. UPS also agreed to forfeit $40 million in payments received from the pharmacies, and institute a compliance program that would ensure that such businesses would not be able to use the company for distribution purposes in the future. A Slate.com essay feature filed in May 2014 also alleged that Amazon.com has offered a wide array of prescription drugs, including antibiotics and anabolic steroids, which require strict medical supervision. Unlike UPS and FedEx, however, the retail giant has so far avoided the attentions of both the Federal Drug Administration (FDA) and Customs and Border Protection (CBP) by the sheer volume of its daily global shipments. Third-party sellers in foreign countries can also circumvent CBP intervention by marking their product as a gift, but in some cases, Amazon itself fulfills orders from its own warehouses, making them complicit in the sale and distribution of these substances. To date, neither the FDA nor Drug Enforcement Administration (DEA) has launched any official inquiry into Amazon’s business practices.

Time will tell whether Amazon will find itself facing indictments similar to those filed against FedEx, or if they will take the path of least resistance adopted by UPS and simply turn over funds to avoid charges. But as drugs continue to crisscross the United States and even the globe in ever-increasing numbers – according to the U.S. Postal Service, arrests for shipping illegal substances with their service is up 33 per cent from 2013 – government agencies will continue to adopt a hardline approach to trafficking through shipping companies and retailers. Chances are, these seemingly untouchable giants may be the Pharmalogical, Inc.’s of the future.

Paul Gaita is a Los Angeles-based writer. He has contributed to The Los Angeles Times, LA Weekly, Amazon and The Los Angeles Beat, among other publications and sites.