Online Pharmacy Risks Rising, Report Finds

Online pharmacies are becoming more popular among consumers and criminals, raising the possibility of online fraud and counterfeit medicines.

Consumers are looking to save money because pharmaceuticals are expensive and the economy is weak. Trademark tracking service MarkMonitor estimates that while the actual number of online pharmacies declined from 3,160 last summer to 2,986 today, sales have risen from $4 billion to $12 billion and the average number of daily visitors at pharmacy sites has risen from 32,000 last year to 99,000 this year.

Criminals meanwhile are looking to take advantage of consumer interest by offering counterfeit drugs and spamming to drive sales at online pharmacies. In a report issued in June, Cisco's Ironport found that 80% of Storm botnet spam advertised online pharmacy brands.

Irfan Salim, president and CEO of trademark tracking service MarkMonitor, says that pharmaceutical companies need to do more to prevent their customers from buying fake and potentially dangerous medicines.

The U.S. Food and Drug Administration has expressed similar concerns for years. Last year, the FDA warned that "a number of Americans who placed orders for specific drug products over the Internet (Ambien, Xanax, Lexapro, and Ativan), instead received a product that, according to preliminary analysis, contains haloperidol, a powerful anti-psychotic drug."

According to MarkMontor's Summer 2008 Brandjacking Index, brandjackers -- those who attempt to hijack other company's brands for their own gain -- spent $26 million last year on keyword advertising for six drug brands. Of 11,836 search ads analyzed, the firm found that none of the ads was paid for by the legitimate trademark holder.

More than two-thirds of the ads showed trademark abuse, MarkMonitor's report says. All the online pharmacy ads it tested led to misleading sites and none of the sites were certified under the Verified Internet Pharmacy Practice Sites standard established by the National Association of Boards of Pharmacy.

Of the 2,986 online pharmacies studied by MarkMonitor, only 2 were VIPPS-certified.

The report also found that 64% of these online pharmacies put their customers' data at risk by not using SSL encryption for e-commerce.

Cybersquatting -- registration of domain names associated with established trademarks -- rose 35% last year for drug brands, the report says.

"Brand abuse is increasing, but more important than the sheer volume is that the level of sophistication is increasing too," the report concludes. "Cybersquatting continues to be the top tool of choice for brandjackers, and the number of first-time phishing targets is on the rise. Online drug brands continue to see some very aggressive marketing from fraudsters who have established businesses with a growing supply chain and sophisticated paid search eco-system."