Washington Editor

WASHINGTON – In one of the largest forfeitures in U.S. history, Google Inc. agreed to pay $500 million for allowing online Canadian pharmacies to place advertisements through its AdWords program to target U.S. consumers, resulting in the illegal importation of prescription drugs.

As part of its settlement with the Department of Justice (DoJ) last week, Google acknowledged that it improperly assisted the Canadian pharmacies in their online advertising to U.S. residents and agreed to a number of compliance and reporting measures to prevent such conduct in the future.

The amount of the forfeiture represents the gross revenue Google received from the advertising and the Canadian pharmacies made from their U.S. sales, according to DoJ.

"The result of this investigation has been a fundamental transformation of internet pharmacy advertising practices, significantly limiting promotion to U.S. consumers by rogue online pharmacies," Kathleen Martin-Weis, acting director of the FDA's Office of Criminal Investigations, said in a DoJ press release.

Google was aware as early as 2003 that it was generally illegal for pharmacies to ship controlled and noncontrolled prescription drugs into the U.S. from Canada, DoJ said, as such imports violate the Federal Food, Drug and Cosmetic Act and, in some cases, the Controlled Substances Act.

Although Google took steps to block pharmacies in other countries from advertising in the U.S. through AdWords, it continued to allow Canadian pharmacies to do so. In addition, it provided customer support, from 2003 to 2009, to some of the online pharmacies to help them improve the effectiveness of their websites and place and optimize their AdWords ads, according to DoJ.

Google knew that many of the pharmacies distributed prescriptions, including controlled drugs, based on an online consultation rather than a doctor's prescription, and some of them charged a premium for the service, DoJ claimed.

Allowing individuals to get drugs without a valid prescription can expose consumers to unapproved and potentially counterfeit medicines from all over the world, Karl Uhlendorf, vice president of the Pharmaceutical Research and Manufacturers of America, said in response to the settlement.

In an investigation in 2005, the FDA found that drugs "promoted as being sourced from 'Canadian' pharmacies actually came from 27 other countries around the globe," Uhlendorf added.

Besides the possibility of being counterfeit, imported drugs may not be FDA-approved, meet FDA labeling requirements or be manufactured, stored and distributed under proper conditions. Although Canada regulates prescription drugs, Canadian pharmacies that ship drugs to U.S. residents are not subject to those regulations, DoJ said.

After Google became aware of the government's investigation in 2009, DoJ said it began requiring online pharmacy advertisers to be certified by the National Association of Boards of Pharmacy's Verified Internet Pharmacy Practices Sites program, which conducts site visits and has a standard against the issuance of prescriptions based on online consultations. The program does not certify Canadian online pharmacies.

Google also hired an independent company to help detect pharmacy advertisers that were exploiting flaws in its screening systems.

While DoJ was investigating Google's online ad policy, some lawmakers continued to push to have the restrictions on drug importations lifted. Sen. Olympia Snowe (R-Maine) re-introduced the Pharmaceutical Market Access and Drug Safety Act, S. 319, in February to permit regulated drug importation in an effort to lower prescription drug prices. Co-sponsored by 21 senators from both sides of the aisle, the bill is stuck in the Senate Committee on Health, Education, Labor and Pensions.

Snowe introduced a similar bill in 2005 and has joined other senators in subsequent efforts to pass legislation allowing drug imports from Canada and other countries. (See BioWorld Today, April 25, 2005, and Jan. 16, 2007.)

Intent Needed to Prove Inequitable Conduct

In a decision that strengthened its tougher standard for inequitable conduct, an appellate court ruled against Apotex Inc.'s patent challenge to Unigene Laboratories Inc.'s Fortical.

The U.S. Court of Appeals for the Federal Circuit affirmed a lower court's decision that Unigene's patent was valid and that no inequitable conduct was involved in the filing of the '812E patent.

In a Paragraph IV certification, Apotex, a generic drugmaker based in Toronto, challenged the patent on obviousness and then tried to breach the attorney-client privilege under the crime-fraud exception, claiming inequitable conduct.

Unigene used the 505(b)(2) pathway to gain FDA approval in 2005 for Fortical, a calcitonin-salmon (rDNA origin) nasal spray, to treat postmenopausal osteoporosis. Although it is a bioequivalent of Novartis International AG's Miacalcin calcitonin nasal spray, which was approved 10 years earlier, Fortical has a different formulation. (See BioWorld Today, Aug. 16, 2005.)

Miacalcin contains 0.10 mg of benzalkonium chloride that functions as a preservative, absorption enhancer and surfactant, whereas Fortical contains 20 mM of citric acid that functions as an absorption enhancer and stabilizer/buffer. The court determined this change was not obvious.

In claiming inequitable conduct egregious enough to warrant the breach of attorney-client privilege, Apotex pointed to two errors made in a table submitted in the patent filing and the failure of the inventor, William Stern, to disclose a previous patent that claimed citric acid in an oral tablet formulation.

Stern, who assigned the Fortical patent to Boonton, N.J.-based Unigene, notified the Patent and Trademark Office of the typographical errors as soon as he became aware of them, the court noted. Neither the errors nor nondisclosure, which the court found immaterial, was deemed sufficient to establish fraud because there was no evidence of an intent to deceive.

In an en banc ruling in May in Therasense v. Becton, Dickinson, the Federal Circuit tightened the standards for inequitable conduct, a principle widely used by generics in Paragraph IV challenges to brand patents. That split decision basically required patent challengers claiming inequitable conduct to prove intent to deceive, putting patent fraud cases on the same basis as other types of fraud. (See BioWorld Today, May 31, 2011.)