November 10, 2003

A major U.S. pharmacy trade group is pressuring Web-based search engines to ban advertisements from unlicensed drug dealers, highlighting growing pains for the Net's newest marketing powerhouses.

The National Association of Boards of Pharmacy (NABP) said it will meet with Yahoo on Wednesday as part of an effort to clean up ads for prescription drugs, such as the painkillers Vicodin and OxyContin, that can be ordered freely by mail from some Web sites without a doctor's consent.

What's new:
A pharmacy group plans to meet with Yahoo in an effort to clean up ads for prescription drugs that can be ordered online without a doctor's consent. Search engines are widely credited with helping revive the online ad market, but as paid search programs have grown, regulators and the courts are demanding greater accountability.

NABP and Drugstore.com, one of the biggest online pharmacies, have contacted several sites, including search engine provider Google, Microsoft's MSN Web portal and America Online, saying that they have run ads from illegal distributors.

NABP and Drugstore.com want the sites to agree not to run ads from distributors unless they are certified by the industry organization. The association currently lists 14 certified pharmacies on its verified Internet pharmacy practices site (VIPPS), including Drugstore.com and Walgreen's online arm, Walgreen.com. "The concern is that there are literally hundreds of illegal sites selling pharmaceuticals such as OxyContin and Vicodin with no medical oversight," said Walter Conner, senior director for communications for Drugstore.com, which joined the NABP's campaign earlier this year. "Google is carrying ads for these sites...We feel that the major search engines have a social responsibility not to do this."

The debate goes to the heart of "pay per click" advertising programs sponsored by search engines such as Google and Overture Services, a segment that's expected to account for a quarter of the $6.3 billion online advertising market this year, according to Nielsen/NetRatings. Pharmacy ads make up a relatively small fraction of this total, but carry a high profile given the public health and safety issues at stake. Search engines are widely credited with helping revive the flagging online advertising market, thanks to auctions of high-impact text-based links that appear atop or adjacent to search results related to specific keywords, such as "digital cameras."

As they've grown, such programs have increasingly come under scrutiny from regulators and the courts, which are demanding greater accountability from providers. If successful, those demands would almost certainly raise costs for search engines by forcing them to more closely examine thousands of advertisers and listings in an industry that up until now has relied heavily on automation. Calls for increased accountability could also crimp revenue by winnowing demand for the keywords sold by search engines in Google's and Overture's pay-per-click advertising systems, which currently take place through auctions that are open to all comers.

The Federal Trade Commission (FTC), which regulates advertising in the United States, last year issued its first guidelines targeting advertising in search results, laying out best practices for disclosure of paid links but falling short of demanding formal changes. The agency recently indicated that it is continuing to examine Web search industry practices. Trademark holder eBay, meanwhile, recently asked Google to restrict the sale of the keyword "eBay," a move that could spark other trademark holders into action.

Although search companies say they are working hard to establish appropriate advertising guidelines, there are still kinks to be worked out, analysts said. "Paid search has created a world where keywords have fiscal value, but we haven't figured out how to enforce their meaning or who should enforce their meaning," said Matthew Berk, research director at Jupiter Research.

Regulators on the move
NABP's efforts to restrict online pharmacy ads come as concerns mount over illegal prescription drug imports from Canadian and overseas Web sites. Sites that sell low-cost medications with or without a prescription have proliferated online, littering Web search results pages and e-mail in-boxes with pitches for a range of restricted drugs, including the male sexual aid Viagra, the antidepressant Xanax and the sleeping pill Ambien. Pharmaceuticals sellers served some 2 billion advertising impressions in October, making them the second largest group of advertisers within the health industry on the Net, behind weight-loss marketers, according to researcher Nielsen/NetRatings. The health market made up about 5 percent of the total online ad sales in October, Nielsen reported.

Demand is there, too. As drug prices rise, many people are turning to Internet stores to buy less-expensive alternatives from abroad. Officials say that the trade of unlicensed prescription drug sales online will be worth between $800 million and $1 billion this year. Regulators are beginning to crack down. Following a complaint from the Food and Drug Administration, a federal judge in Tulsa, Okla., shuttered Rx Depot, a Web site that sold low-cost prescription drugs from Canada.

Rx Depot could not immediately be reached for comment. In a message posted on its Web site, the company said it plans to appeal the decision. Richard Cleland, the FTC's assistant director for the division of advertising practices, acknowledged that there are some legal gray areas concerning the reimportation of drugs from licensed Canadian dealers. But he said he believes a substantial portion of online drug sales likely violate some aspect of U.S. law.

Search engines that run ads for distributors that are deemed illegal could put themselves in legal jeopardy, he added. "I'm not convinced that they won't (face private lawsuits) if some minor purchases a controlled substance through facilities based on ads they've allowed to run," Cleland said.

In recent months, the battle against unlicensed online prescription drug distributors has widened to include online marketing campaigns that promote such sites, rather than just the distributors themselves, which are frequently beyond the easy reach of the U.S. legal system. Those efforts come as Google is reportedly preparing for an initial public offering that is expected to value the company at more than $15 billion, due in part to profits earned on its growing keyword advertising business.

A Google search on the term "Vicodin" by CNET News.com on Friday revealed 10 sponsored results for distributors that do not apparently require buyers to provide prescriptions. Google spokesman David Krane said the company's policy is to accept ads only from pharmacies that require customers to provide appropriate evidence of authorization, such as a doctor's prescription or consultation, before fulfilling orders.

"We have a large advertiser base that is constantly changing," he said. "When we're made aware that a company is violating our terms of service we take appropriate action." Krane said Google is exploring the adoption of more stringent measures, including limiting sales of pharmaceutical ads to VIPPs-certified companies, among other options.

But Google must consider its audience beyond the United States, Krane added, given that a large portion of its traffic originates overseas, where laws may be different. The company wants to provide the broadest set of commercial options to advertisers and visitors, he said. The nuances of keyword advertising are also hard to police. By disabling keyword advertising on the term "Vicodin," for example, Google could be restricting an organization that wants to promote a Vicodin addiction recovery program, Krane said.

NABP has itself purchased advertising tied to the term "Vicodin" on Google, sponsoring an ad warning consumers about the dangers of ordering drugs online. Drugstore.com is also a major Google advertiser, and would likely benefit from a reduction in the number of advertisers competing for keywords through lowering its own advertising costs. Drugstore.com's Conner said the company did not expect to increase sales through this effort, however, since it already requires customers to produce a prescription for the drugs they buy.

Drugstore.com has also contacted AOL about the issue. The online giant licenses Web search and sponsored search results from Google, and ads for unlicensed pharmacies have appeared within AOL search results in the past, according to NABP. AOL spokesman Andrew Weinstein said the company's advertising practices are in line with policies advocated by Drugstore.com and the NABP, as a matter of long-standing policy.

"We do not accept ads from any offshore pharmaceutical companies. We only accept ads from pharmacies accredited by VIPPS," Weinstein said. "We work with search partner Google to try to ensure that all the search links, the sponsored search links, are in line with that standard. I say 'try' because occasionally things slip through and we try to bring them down right away." Overture, the commercial search arm of Yahoo, is evaluating its options in the arena of pharmaceutical advertising.

"We are currently evaluating a third-party program to help identify legitimate online pharmacy advertisers that are appropriate for Overture's marketplace. In addition, we are continuing to explore other alternatives to help us achieve this goal," Overture said in a statement. Lisa Gurry, MSN group product manager, said that the Microsoft unit is "working closely with our top partner for paid search ads, Overture, and others in the industry to ensure any concerns regarding online pharmacies are addressed."

Article by Stefanie Olsen
Source: C-NET News

        

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