The Obama administration is notorious for crony capitalism, through which big businesses reap huge riches by virtue of their cozy association with government. Big oil, big car companies, big agrobusinesses, big banks, and big drug corporations are among the legally privileged cronies who are profiting at the expense of nonprivileged competitors and of customers who pay higher prices.
Now the Department of Justice (DOJ) is trying to institute the shipping version of a “no fly” list on behalf of the big pharmaceutical companies and in the name of the war on drugs. The DOJ wants America’s two largest courier/delivery services to open and report on the shipments from online pharmacies, allegedly to staunch the flow of illegal pharmaceuticals. Here’s the catch: the DOJ wants packages opened even when there is no reason to suspect illegal contents.
FedEx spokesman Patrick Fitzgerald explained, “sealed packages … are being sent by, as far as we can tell, licensed pharmacies. These are medicines with legal prescriptions written by licensed physicians.” Fitzgerald added, “We are a transportation company that picks up and delivers close to 10 million packages every day. They are sealed packages, so we have no way of knowing specifically what’s inside and we have no interest in violating the privacy rights of our customers.”
The courier companies have a long tradition of refusing service to shippers who are identified as criminal suspects by law enforcement. But the DOJ refuses to provide a list of what are called “rogue pharmacies” — that is, online pharmacies functioning without a license. Instead, the DOJ is broadly targeting shipments of online pharmacies that may be entirely legal. This is similar to giving airlines a “no fly” list that does not bar individuals but instead names an entire industry.
This step was foreshadowed by a $500 million settlement between Google and the DOJ in 2011. The company paid out to resolve a case in which it was accused of profiting from the paid ads of rogue pharmacies. At that time, RxRights — “a coalition concerned about the high cost of U.S. pharmaceuticals” — expressed concern about “a blanket backlash against all online pharmacies.” RxRights stated, “Preventing all safe and legitimate Canadian and International pharmacies from advertising online because of the illegal activities of some rogue pharmacies is simply unfair.” RxRights added, “Also, we’re very concerned about the next logical step.”
A “logical” step toward closing down online pharmacies seems to be already underway. Criminal charges have been threatened against both FedEx and UPS if they refuse to cooperate with DOJ demands, on the grounds that they are “aiding and abetting online pharmacies that illegally ship prescription drugs.” Fitzgerald stated, “What is unusual and really disturbing is it became clear to us along the way that FedEx was being targeted for some level [of] criminal activity as it relates to these medicines that are being shipped from pharmacies, and we find it to be completely absurd because it’s really not our role.”
The why of it economically
Online and foreign pharmacies are popular sources of legal pharmaceuticals because they usually offer low prices and high convenience. This competition constitutes a widening crack in the pharmaceutical monopoly that big drug companies would like to enjoy in the United States.
The financial stakes are massive. On September 5, 2012, a New York Daily News headline announced, “Arizona Woman Feeling the Pain from a $83,046 Bill for Anti-Venom Drug after Seeking Medical Treatment for Scorpion Sting.” The subtitle explained, “Marcie Edmonds was stung in Phoenix and needed two doses of the anti-venom Anascorp.” Because the drug is derived from readily available material, there seems to be no free-market reason for it being extraordinarily expensive. ABC News reported, “The drug is made from horse antibodies, and comes from Mexico, where it costs about $100 per dose, according to Kaiser Health News.” Edmonds would have saved $39,552 a dose if she had ordered the drug from a licensed Mexican pharmacy and had some on hand.
No one keeps the antidote for scorpion venom on hand. And Edmonds’s story may be an extreme one. But many people shop online for drugs for chronic conditions like diabetes or heart disease; many people save a healthy amount of money by doing so. Every time someone in America frequents an online source, big conventional pharmaceuticals lose a customer.
The why of it politically
When FedEx attempted to get a list of pharmacies suspected of illegal activities in order to refuse their packages, the DOJ’s response was telling. The DOJ refused because providing a list could violate the due-process rights of businesses named and thus open the DOJ to lawsuits. An interesting message is implicit in this refusal. If the government searches private packages without probable cause, then it is violating the Bill of Rights of the United States Constitution. Specifically, it would violate the Fourth Amendment guarantee that “the right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated.”
But the policies of a private company are not similarly restrained. The federal government uses complicit airlines as a way to sidestep the unconstitutionality of random searches at airports; if someone objects to the airline’s policy of screening customers, then he can forgo air travel. Equally, if a courier’s policy is to search packages, then a customer who objects could forgo their service. (It is not clear that customers of FedEx or UPS would be notified of the possibility of such a search in advance.) As Fitzgerald observed, “the government is assigning a role” to “us as law enforcement.”
UPS appears to be negotiating a settlement with the DOJ. In a November 1, 2012, filing on its quarterly earnings, UPS first disclosed the DOJ investigation: “We have received requests for information from the DOJ in the Northern District of California in connection with a criminal investigation relating to the transportation of packages for online pharmacies that may have shipped pharmaceuticals in violation of federal law.” The Seattle Times (Nov. 15, 2012) reported that UPS was cooperating with the investigation and was “exploring the possibility of resolving this matter.”
By contrast, FedEx has declared that “settlement is not an option for us when there’s no illegal activity on our part.”
Hopefully, the line FedEx has drawn is in cement, not sand. If the DOJ can order couriers to report the contents of any pharmaceutical shipment to ensure they do not contain illegal drugs, then it is not merely drug customers who will suffer. How long will it be before the DOJ orders the opening of financial material to fight money laundering? The Department of Justice is attacking the very concept of private mail in America.