LEXIS-NEXIS® Congressional Universe-Document

Search Terms: internet w/10 prescription, House or Senate or Joint

Document 16 of 60.

March 21, 2000, Tuesday

SECTION: PREPARED TESTIMONY

LENGTH: 4912 words

HEADLINE: PREPARED STATEMENT OF PETER M. NEUPERT PRESIDENT AND CHIEF EXECUTIVE OFFICER DRUGSTORE.COM

SUBJECT - THE BENEFITS OF ONLINE PHARMACIES

BEFORE THE SENATE COMMITTEE ON HEALTH, EDUCATION, LABOR AND PENSIONS

BODY:
Good morning Mr. Chairman and Members of the Committee. I am Peter Neupert, President and Chief Executive Officer of drugstore.com. I thank you for inviting me here today, and I am pleased to have the opportunity to speak with you about drugstore.com. drugstore.com is the nation's leading Internet pharmacy with over 695,000 customers. We were recently (Winter 1999) ranked the No. 1 online drugstore by Gomez Advisors, a provider of e-commerce research and analysis. This followed an October Forrester PowerRanking report naming drugstore.com the top Internet site in the Health Category. In addition to our broad selection of products and competitive prices, drugstore.com has been successful because of its dedication to providing customers with a convenient, private, safe, secure and informative shopping experience for their health care needs.

In my testimony, I will explain to you how drugstore.com operates, and provide examples of our dedication to offering high quality prescription services through our licensed pharmacy. I hope you will recognize that the drugstore.com pharmacy has many of the attributes of the traditional corner drugstore and the well-established mail service pharmacy, but brings many added consumer benefits, such as information, convenience, broad product selection and privacy.

Our mission is to help consumers manage their health and well-being by effectively using the World Wide Web. We seek to educate and inform consumers, while also helping them to save time and money. drugstore.com empowers consumers to make health-care decisions. While we offer the same safety and quality of community drugstores, our online pharmacy has five distinct and unique benefits:

Information -- Our site provides a deep and broad array of information-in-context whereby shoppers can find the information they need to make informed purchase decisions. This information includes: buying guides, a wellness guide, a medical reference, "Ask Your Pharmacist", "Frequently-Asked Questions" and shopping advisors. We provide comprehensive drug information where consumers can learn about their prescription drugs, including usage, cautions and possible side effects, as well as drug prices. In fact, the Web is the only place customers can conveniently price shop for prescription drugs. For each product, we display all the information a consumer could read on the package -- including all of the ingredients, directions, and product warnings -- in a format that is easy to read.

Privacy and Security-- Customers can shop at our drugstore in privacy, and thus avoid the potential embarrassment of buying personal items or asking personal questions in the presence of other people at retail drugstores. drugstore.com was one of the first online pharmacies certified by the Verified Internet Pharmacy Practice Sites ("VIPPS") certification program established by the National Association of Boards of Pharmacy. This program serves a valuable consumer awareness function in helping consumers to identify those pharmacies that are licensed in good standing with the appropriate state boards of pharmacy and other regulatory agencies, and that are in compliance with certain quality criteria. drugstore.com strongly supports voluntary compliance with the VIPPS program. The program is endorsed by the state pharmacy boards in the fifty states and by the American Medical Association.

Convenience -- Our site permits consumers to shop from wherever they have Internet access, and at anytime. Consumers can receive their products via direct delivery to their home or office. We make it easy for consumers to save time doing this chore, by saving their personal shopping list and by providing e-mail reminders on prescription drugs and other products.

Selection -- We offer a broad selection of products, more than 20,000 SKUs, as compared to approximately 6-8,000 in a traditional retail chain pharmacy, so that consumers can obtain products that best suit their health needs.

Communication -- Use of the Internet allows drugstore.com to communicate with its customers via e-mail. Our "Ask Your Pharmacist" feature, prescription refill reminders, monthly newsletters and online purchase order tracking information, enables continuing patient/pharmacist communication from the comfort of the patient's home.

It is important to note that the practice of pharmacy is the same on the Internet as it is in traditional "brick and mortar" stores. What's new here is the way we communicate with and inform customers. As with all licensed community and mail service pharmacies, our customers must have a prescription from their doctor -- we do not prescribe medication. Our prescription fulfillment is built on the long-standing procedures and infrastructure of walk-in and mail service pharmacies. The quality control we have established at drugstore.com incorporates the best practices of years and years of mail service and community pharmacies.

Full Service Drugstore

Before I describe our Internet pharmacy service in detail, I want to give you a snapshot of our entire site within the context of our industry. When we launched our full-service online drugstore in February, 1999, we anticipated a growing trend of consumers taking a bigger role in their own health care decisions. By January 2, 2000 -- just one year after launching our Web store -- drugstore.com has sold products to more than 695,000 customers. According to recent estimates, the number of consumers accessing the Internet for health and medical information has increased from 3.2 million in 1995 to 22.3 million in 1998, and it is only going higher. Worldwide business-to- consumer sales over the Internet are expected to increase from $11 billion in 1998 to $93 billion in 2002. More than 30% of these consumers are shopping for healthcare products on the Internet. Clearly, online sales of health care products are very popular with consumers, and it is safe to assume that these sales will only increase in volume.

drugstore.com is actually five stores in one -- providing products in the areas of health, beauty, wellness, personal care, and prescription drugs. The company focuses on those products designed to help people live longer and feel better, including medications used by consumers to treat chronic conditions. In a sense, there is nothing different about what drugstore.com offers its customers than a traditional "brick and mortar" pharmacy. What is new, however, is that online pharmacies and drugstores offer an exciting prospect for increasing public health awareness by providing customers with more convenient and informative access to health products and information. As I mentioned earlier, our goal is to empower consumers by helping them to make better-informed health-related purchases while saving both time and money.

drugstore.com is a Licensed Pharmacy As I have stated previously, filling prescriptions at drugstore.com works the same way as a community pharmacy and mail service pharmacy. We focus on dispensing medications used by consumers on a repeat basis for chronic conditions. For acute care needs, we recommend that customers pick up their prescriptions from a local pharmacy.

Filling a prescription at drugstore.com involves the same three steps as at any community or mail service pharmacy.

First, we are provided with a valid prescription from our customer's physician, or our customer's current pharmacy. The physician calls or faxes in (where permitted by law) the prescription order to us at 1- 800-drugstore. At the customer's request, we will call the physician to obtain the prescription order. The customer may also mail us their original prescription order, or request a transfer of their prescription from their current pharmacy. If a customer attempts to purchase a prescription drug without providing a valid prescription, or tries to fax or e-mail a prescription to us directly, the customer will be notified promptly via e-mail that drugstore.com cannot fill the order until we are given a valid prescription by an appropriately licensed health care provider. We do not provide prescription medications without a prescription, nor do we prescribe medications.

We also contact the prescribing doctor's office to verify prescription orders for those controlled substances that we dispense. We do not dispense Schedule II controlled substances due to their high potential for abuse.

Second, before we will fill a prescription, we require each customer to complete an individual patient profile of drug allergies, current medications, medical conditions, and preference for generic substitution. We then enter the prescription order into a computer and perform all of the same checks for drug interactions that you would expect from a local pharmacist. And third, once we have received and verified a new prescription, and cross-checked that prescription for interactions, we will then fill and mail the prescription.

We use state-of-the-art bar coding at each step of the process to ensure patient safety. We also use automated pharmacy systems to assist with the dispensing of medications. Our pharmacists then recheck each and every prescription for accuracy before a medication is sent to the customer's home or office. We always send drug-specific patient information with each prescription. The shipping method is based on consumer choice and the type of drug. Standard shipping via U.S. Postal Service Priority Mail is provided free of charge to the customer.

We ship prescription products to every state in the United States from our own state-of-the-art distribution facility in New Jersey. Our partnership with Rite Aid enables customers to order refills of their existing Rite Aid prescriptions on our site, and pick them up at a local Rite Aid store, or receive them through drugstore.com's mail service. To purchase a prescription, the customer provides us with a credit card number for the cash price or co-payment and insurance information.

Our prescription drug service saves consumers time. Our vast information on drugs, including drug prices, enables customers to save money and to make more informed decisions. We are committed to giving customers real value. drugstore.com's cash prices are on average lower than those of the national drug chains. We are leveraging the lower cost structure of the Internet to lower the costs of drugs to consumers.

Let me give you some examples of how our drug prices compare to those in "brick and mortar" drugstores. Smart Money Magazine recently surveyed the price of prescription drugs sold at online pharmacies, compared to full-price drugstores and discount drugstores. Their report was discussed on Good Morning America last week. In every case, the online drugstore prices were lower. For example: The cost of 30 caps of Lipitor at drugstore.com and four other legitimate online pharmacies ranged from $48 to $53; our price was $48.19. At the discount drugstores, the price ranged from $48 to $72, or about $61 on average. At full-price drugstores, the price ranged from $53 to $75 with an average of $65. They also compared prices 30 caps, 10 mg of Claritin which ranged from $56 to $66 online, compared to $69 to $75 at discount drugstores, and $69 to $85 at full-price drugstores. Consumers can save money particularly when purchasing their chronic use prescriptions online.

Hallmarks of our pharmacy services are the patient counseling and customer support that we provide to help our customers use medications safely and effectively. Our popular "Ask Your Pharmacist" feature, which I mentioned earlier, is staffed by clinical pharmacists. It allows customers to ask questions online and receive personalized responses from our pharmacists within 24 hours. Our pharmacists have responded to over 35,000 questions from consumers since we opened our online pharmacy. Visitors and customers alike use this free service to ask about medications, over-the-counter drugs and herbals and their proper use, benefits, side effects, and precautions. An example of innovation is the development and publishing of standard responses to frequently asked questions, or FAQs, so consumers can get immediate responses to their questions. Our pharmacy FAQ feature is used by hundreds of consumers daily. The quality of our pharmacists' counseling is second to none. Our clinical pharmacists use only high quality, nationally recognized drug information sources and we have established an ongoing peer review process to improve and maintain quality.

drugstore.com also provides patients with a toll-free number to access a licensed pharmacist 24 hours a day, 7 days a week. Customers can always access their secure, individual medication profile, which contains a history of their prescription purchases at drugstore.com.

In addition, customers receive refill reminders via e-mail, notifying them when they need to place a refill order for their prescription drugs. This e-mail reminder service, which is, in essence, an extension of patient treatment, enables a whole new concept of customer care by allowing pharmacists to better promote their patients' compliance with a doctor-prescribed drug regimen. We believe that this added pharmacy service will benefit patient health in general and reduce the incidence of adverse patient events due to the well-documented problem of inconsistent compliance with prescription medications.

Privacy of Pharmacy Records

drugstore.com fully recognizes the legitimate privacy concerns of our customers and is committed to ensuring the confidentiality of their protected health information. We understand that the public's concern about the privacy of medical and pharmacy records provided the basis for the Department of Health and Human Services' newly proposed protections for such information. We treat all of the information provided by our customers with extreme sensitivity to privacy concerns above and beyond the current requirements of law. Take, for example, the manner in which we handle e-mail prescription reminders to our customers. Nothing is mentioned in the e-mail about the type of medication the customer is taking. For example, the e-mail reminder would read as follows:

Dear Mr. Jones, Thank you for choosing drugstore.com for your prescription needs. Our records indicate that you may be running low on the following prescription(s): Rx # 2049766. To protect your privacy, our policy is not to include the name of your prescription medication in e-mail messages. To find the specific prescription in question, please visit the Prescriptions Summary section of the drugstore.com pharmacy at http://www.drugstore.com/pharmacy... (The balance of the message instructs the customer on how to refill the prescription online.)

The patient can then view the pharmacy records that will identify the particular medications prescribed by going to the pharmacy section of the drugstore.com Web site and entering his or her previously-selected password to gain access to that information. Therefore, someone other than the patient, who might be able to read the patient's e-mail, would not have access to any confidential information unless the patient provides that person with the password.

No information is ever disclosed to anyone other than the patient, and certainly not to any third parties. It is our policy not to release prescription information in connection with any patient identification other than to the patient, our partner Rite Aid (which is only authorized to use the information in order to fill prescriptions), the patient's authorized representative, or the prescribing or authorized practitioner caring for the patient. In addition, all personal information and credit card information are encrypted using SSL encryption technology.

Finally, we are a licensee of the TRUSTe Privacy Program -- the nation's leading online privacy seal program. The seal is awarded to sites that adhere to established privacy principles and comply with ongoing oversight and consumer complaint resolution procedures.

The Growth Potential and Benefits of Online Pharmacies

Internet pharmacies show great potential to remain a strong component of the healthcare economy of the future, due to increases in demand for the services and products that they provide customers, in addition to general growth in the healthcare market nationwide. Currently, the U.S. healthcare market accounts for $1.2 trillion.

It is expected to rise to $1.7 trillion in 2004.

Several trends point to increases in demand for Internet provided health goods in the years ahead. First, the number of U.S. households with Internet access is expected to grow from 37.2 million in 1998 to 67.6 million in 2003. Over that period, the number of women online is expected to grow towards parity with the number of men online. Women consume and purchase a disproportionate share of health goods. Similarly, older U.S. residents, who also consume disproportionate amounts of health goods, are expected to comprise the fastest growing segment of online user groups, with 27.3 million online users over the age of 50 by 2003.

The increased consumption of healthcare products including prescription drugs, by Americans will further fuel the demand for online health goods. The total market for health goods, combining both off-line and online purchases, is expected to grow from $133.6 billion in 1998 to $370 billion in 2004. Online consumer purchases of health goods are expected to grow from approximately $2.4 million in 1998 to over $22 billion in 2004. The online prescription drug market will grow from virtually zero in 1998 to $15 billion by 2004. Still, this $15 billion number will represent only about 9% of the total retail prescription drug market nationwide in 2004. Clearly, there is significant room for growth in this market.

The increased convenience of our Internet pharmacy has proven crucial for many of our customers. We continually receive e-mail messages from customers that highlight the advantages of online shopping, as well as those that commend and thank us for our innovative and personalized service, including the value of our pharmacists' consultations.

Indeed, our research has shown us that although all consumers benefit from the reduced cost, greater convenience and broad product choice offered by Internet pharmacies, four types of consumers are most likely to purchase health care products over the Web. Women, who are the primary shoppers of health care products for their families, and who have more and more demands placed on them, use the Internet to save time performing chores and save money. Seniors, which comprise a small, but one of the fastest growing components of the Internet economy, enjoy the benefits of home shopping and home delivery, which mean fewer trips to the store in inclement weather. Our senior customers also seem to appreciate the e-mail reminders, which give them sufficient notice to refill their prescriptions without missing a dosage. For homebound persons, Internet pharmacies can provide a degree of independence never before experienced. Individuals unable to leave their homes due to injury or illness now have the power to shop at home and to have deliveries sent directly to them. And finally, persons living in rural areas -- often far from the nearest pharmacy will benefit, like seniors and homebound customers, from Internet pharmacy's home delivery.

Regulation of Internet Pharmacies

The scrutiny of online sales of prescription drugs was prompted by concern over those Web sites that are engaged in the practice of illegally selling prescription drugs without a prescription, or prescriptions based on the customers' answers to a brief questionnaire rather than a medical examination of the patient by a licensed doctor. Other concerns were raised about foreign-based pharmacies that sell unapproved new, illegal, counterfeit and poor quality drugs.

drugstore.com and other legitimate pharmacies are complying with all applicable state and federal laws and regulations governing the provision of drugstore products and information over the Internet. Moreover, I can assure you that we will comply with any future laws which the states or the Congress see fit to enact. However, we hope that this Committee will consider that there are already extensive laws and regulations in place which affect online drugstores.

We strongly recommend that, before passing new laws and regulations, a careful analysis be made of the existing legal structure and its adequacy to address the rogue Web site problem. Such an analysis is supposed to be one of the missions of the Interagency Internet Working Group established last August by Presidential Executive Order. We encourage the completion of such an analysis as soon as possible. We were surprised when the Administration announced its intention to propose additional regulation before the Working Group report was completed.

The existing legal structure includes but is not limited to:

* State boards of pharmacy, which are responsible for regulation, and licensing, of pharmacists and pharmacies, including out-of-state pharmacies. * State medical boards, which regulate the practice of medicine, including licensing of practitioners. * The Food and Drug Administration, with jurisdiction to address misbranding of product labels appearing on packaging; misleading prescription drug advertising; importation, sale, or distribution of adulterated drugs, misbranded drugs or unapproved new drugs; and the sale or dispensing of prescription drugs without a valid prescription. * The Drug Enforcement Agency, which regulates the importation, sale or distribution of controlled substances including narcotics and other drugs deemed potentially dangerous due to potential for abuse and inherent danger. * The Department of Justice, which enforces civil consumer protection statutes and criminal violations of the Federal Food, Drug, and Cosmetic Act. * The U.S. Customs Service and U.S. Postal Service, which enforces statutes and regulations governing the importation and domestic mailings of drugs.

The rogue Web sites which are offering prescription drugs for sale to consumers without a valid prescription, among other illegal practices, are violating one, if not all, of those laws. In addition, Internet companies domiciled outside of the U.S. are also currently violating a number of federal and state laws by sending drug products into this country, and may be violating the laws of the company's home country as well. Such practices jeopardize consumer safety and the integrity of our current regulatory framework governing prescription drug products. drugstore.com supports additional efforts to hold these rogue sites accountable for their noncompliance. I strongly believe, however, that additional regulatory burdens placed on legitimate Internet pharmacies would only make it more difficult to operate a legitimate online pharmacy and potentially diminish the consumer benefit of such valid Internet pharmacies.

It is my view that the Web sites illegally dispensing drugs is not the result of a lack of appropriate laws and regulations. The real impediments to controlling rogue sites are (1) lack of funding for enforcement of current laws against domestic operators, (2) the need for greater state and federal resources for "cybertracking" technology, and (3) lack of jurisdiction over foreign operators.

Enforcement and Tracking

State prosecutors are taking legal action against Web sites that are operating in their states without being licensed, or registered to do business, in those states. To be successful, they must be able to hire sufficient trained personnel to continuously monitor Web sites and investigate and move against questionable sites. However, some states have acknowledged that their technological know-how is not what it could be and that they need more resources to implement new methods of enforcement against rogues who operate in the virtual world. The technology to address illegal Internet practices already exists, and is being improved every day. One recent example is the successful effort of law enforcement using available technology to track down and bring to justice the perpetrator who launched the Melissa virus, which threatened serious disruption to millions of computer systems. I believe that the collaborative efforts, such as those between the FDA, the National Association of Boards of Pharmacy and the Federation of State Medical Boards, which commit those organizations to share information, prosecute violations, and enforce existing federal and state laws against illegal domestic sales of prescription drugs on the Web should be given high priority and sufficient time to prove their effectiveness before we conclude that more regulation is the only answer to the rogue problem.

Off-shore Web Sites In terms of both regulation and enforcement, the foreign-based sites pose the most difficult and challenging problem. The federal laws which apply to domestic businesses cannot be enforced against sites operating from locations in foreign countries. Such off-shore locations are attractive to those operators who want to profit from their activity, but not be held accountable for the significant risk presented to consumers by drugs which may be counterfeit, unapproved, or of poor quality.

The lack of legal jurisdiction over foreign-based sites creates such as huge loophole that any efforts to tightened our system of federal and state laws which can be enforced against domestically-based businesses could be mooted by the ability of sites to simply move offshore and continue to operate in the same unscrupulous manner, unimpeded by any controls.

The United States must work with foreign governments under the principle of reciprocity to address this problem, and look to increased import surveillance.

Consumer Education

The most practical approach in differentiating the legitimate and illegitimate pharmacies is by educating consumers and providing them the tools and means, such as what the VIPPS program achieves, to identify the safe, legitimate online pharmacies. The reliance on a program like VIPPS, in conjunction with existing state regulatory agencies, by legitimate Web sites results from the realization that the Internet does benefit consumers as long as they are provided with a means of making intelligent choices. In an effort to help consumers avoid fraud when buying prescription drugs and medical products over the Internet, FDA has established a Web site that includes such information. It advises consumers on what to look for in legitimate sites, and actions FDA and other agencies can take against illegal activities. We believe that such efforts will be the most valuable to consumers in the long-run.

Regulation of Rogue Doctors Illegally Prescribing

In part, the rogue problem arises from physicians conducting online medical examinations and evaluations and illegally prescribing drugs. The American Medical Association has come out against such online practices because the person-to-person contact between the patient and the physician is eliminated, as is any opportunity for the continuing medical supervision during the patient's course of medication. Thus, steps should be taken by the states to curtail such practices. While it must be noted that this approach would not address illegal pharmacies that simply supply pharmaceuticals without obtaining proof of a valid prescription, it would address those sites most likely to dupe the consumer into thinking they are obtaining a valid prescription.

White House/FDA Proposal

The White House is proposing an initiative that requires federal approval of online pharmacies, strengthens penalties for selling prescription drugs without a valid prescription, grants FDA subpoena power to conduct investigations, boosts staff and computer resources to investigate online pharmacies, and conducts public awareness campaigns about safe ways to buy drugs online. I would prefer to reserve any detailed comment until the particulars of the proposal are disclosed; however, I can make some general comments. First, I am supportive of additional educational and consumer awareness efforts. Empowered with knowledge, consumers will make the right choices for themselves and their families. Second, any additional resources that can be applied to enforcement will not be misspent since there are so many existing laws that can provide a basis for tracking and prosecuting illegal operators. Third, I do not believe that FDA should supplant or duplicate the regulatory role of the states, and would be opposed to any new regulation that imposed additional burdens on legitimate sites. This would not, in my view, preclude consideration of any proposal narrowly drafted to target only the rogue sites. In my view, those sites are not "pharmacies" anyway and should not be labeled as such for the convenience of defining a regulatory approach.

While there are challenges to be addressed, we hope that we can work together to enable legitimate online drugstores to continue providing efficient consumer service.

Thank you very much for the opportunity to speak with you today. I would be pleased to answer any questions you may have.

END

LOAD-DATE: March 23, 2000

Document 16 of 60.


Search Terms: internet w/10 prescription, House or Senate or Joint
To narrow your search, please enter a word or phrase: