The Fraud Examiner

Online Pharmacies: Convenience, Privacy... and Fraud
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September 2012 

By Yasmin Vazquez 


The rising popularity of online pharmacies in today’s economy provides a new channel that is vulnerable to fraud. Pharmacies operating through the Internet offer convenience, low prices and privacy. As a sufferer of rosacea — a skin condition that causes redness in the face — I was prescribed a medicated wash by my dermatologist that, with insurance, costs nearly $250. The same prescription could easily be purchased online from a pharmacy located in another country for a fraction of the cost. But, would I receive the actual product or a counterfeit? Would I fall victim to a fraudulent or “rogue” online pharmacy?


Red Flags 

During an investigation, there are several red flags to be aware of when determining if an online pharmacy is operating a scam. A regular pharmacy requires a doctor’s prescription and has a pharmacist available either in person or by phone to answer any questions about a prescription. An online pharmacy that does not request a doctor’s prescription and cannot provide a person to speak with can be an indicator of a fraudulent site. A pharmacist is necessary to advise of any potential side effects of medications or interactions with other prescriptions. In one recent case, Alli, a popular weight loss tablet, was being sold online to customers, but these customers were receiving a counterfeit product that did not contain the active ingredient orlistat. Instead, the fake pill contained sibutramine, a controlled substance that needs to be monitored by a physician because of its potentially harmful interactions with other medications.


Additionally, if the location of the pharmacy cannot be identified, this should be a warning sign. Not knowing the source of a medication should be cause for concern regarding the safety and effectiveness of the prescription. For example, prescriptions received outside of the U.S. are not approved by the Food and Drug Administration (FDA) and, therefore, follow different quality assurance standards or none at all. The Therapeutic Goods Administration (TGA), which is the regulatory organization for medicines in Australia, also warns consumers that prescriptions ordered from other countries or unknown sources may not meet the same safety and quality criterion required by the TGA. 


In June 2012, Andrew Stempler was arrested in Florida for operating Mediplan Pharmacy, an online pharmacy selling counterfeit drugs. In 2005, the FDA intercepted prescriptions that patients ordered from Mediplan, which was advertising itself as a Canadian-based pharmacy. Upon inspection, more than three-quarters of their orders came from several other countries. Stempler now faces wire and mail fraud charges, which could mean 20 years in prison and up to $95 million in restitution. In another case, a combined operation between Spanish police and Europol resulted in the arrests of several people operating an online pharmacy with an unknown location that imported fake medicine from Asian countries and sold these products to individuals throughout Europe.


Drugs that do not show a lot number, expiration date or label could also be an indicator of a rogue pharmacy providing counterfeit drugs that are potentially ineffective or dangerous. In one instance, the U.S. FDA was alerted to a case involving patients who ordered sleeping pills online, but actually received an anti-psychotic drug. Some individuals who took the drug had to seek medical treatment for serious reactions, such as difficulty breathing and muscle spasms. In another FDA study, a counterfeit version of Adderall, which is prescribed for attention deficit hyperactivity disorder (ADHD), was found to contain the wrong active ingredient. The counterfeit was primarily derived of acetaminophen, which is used to treat pain, not ADHD symptoms. The UK Medicines and Healthcare products Regulatory Agency (MHRA) warns patients that counterfeit medicine might contain dangerous chemicals such as rat poison, boric acid and lead-based paint.


Spam from pharmacies advertising medications is another red flag of fraud. The perpetrators behind these fake sites recognize the consumer’s desire for privacy when ordering certain types of products, and jump on this vulnerability. The majority of spam messages received from rogue sites advertise erectile dysfunction drugs and controlled substances such as hydrocodone, Adderal and Ritalin. Spam emails from online pharmacies also increase the risk of credit card theft and viruses infecting the computer in use.


Additional Cases of Fraud 

These rogue online pharmacies also have an effect on the health care industry, as evidenced by the following cases:


Rakesh Saran operated two companies that distributed controlled substances through more than 20 online pharmacies. In his elaborate scheme, Saran used his companies to purchase prescriptions at wholesale prices, and then sold the controlled substances at inflated prices via the Internet. In his contracts with wholesale suppliers, he fraudulently stated he would only be using these drugs within prisons, rehabilitation hospitals and other similar institutions. Saran broke his contract by filling and shipping online orders for painkillers, appetite suppressants and mental illness drugs to paying customers without legitimate prescriptions. In addition, Saran paid licensed doctors located outside of the U.S. to approve the customers’ online requests. In November 2006, Saran pleaded guilty to charges of mail fraud, conspiracy to commit health care fraud and other U.S. federal offenses. He was sentenced to 33 months in prison and was ordered to forfeit all assets gained through his illegal actions and pay $400,000 in restitution. After his arrest, several other owners who operated rogue pharmacies through his companies were also arrested and convicted.


In January 2009, Steven Sodipo and Callixtus Nwaehiri, owners of NewCare Pharmacy, an online pharmacy, were each sentenced to five years in prison for selling hydrocodone online and for money laundering. The pair illegally sold the addictive drug to customers on the Internet. Similar to the previous case, NewCare Pharmacy was only authorized to distribute the issued painkillers to long-term care facilities and nursing homes. Doctors who were approving these orders were not licensed to practice in some of the states that shipments were being delivered. In their sentencing, the convicted were also ordered to pay $12 million each—the amount they earned through their illegal operation. Subsequently, they had to forfeit all of their assets to pay restitution.


One of the largest cases of online pharmacy fraud resulted in the indictment of 18 individuals in 2007 for their involvement in Affpower, an enterprise operating rogue online pharmacies around the world. The company distributed medications without doctors’ prescriptions and paid licensed doctors to review and approve requests from online customers. Affpower attempted to avoid being caught by locating its headquarters in Costa Rica, housing its computer servers in Cyprus and processing credit card transactions through a payment company in Israel. Additionally, the estimated $126 million in revenue from their fraudulent operation was deposited in bank accounts located in Cyprus. Charges included mail and wire fraud, money laundering and racketeering, amongst various other related charges.


Identifying Legitimate Online Pharmacies 

If investigating potential pharmacy scams within the U.S., a good starting point is to confirm that the online pharmacy in question has been verified by the National Association of Boards of Pharmacy (NABP). NABP created the Verified Pharmacy Practices Sites Program (VIPPS), which lists approved and authorized online pharmacies ( The site also provides a list of identified fraudulent sites to help avoid being scammed. Another program that the FDA refers patients to is LegitScript. According to its website, LegitScript ( has currently recognized about 240 safe online pharmacies and more than 42,000 fraudulent ones.


MHRA also understands the need to inform UK citizens of potentially fraudulent online pharmacies. The organization encourages medical professionals, as well as the public, to report suspicions of potential counterfeit or hazardous drugs being sold online. The MHRA provides a list of identified fake medicines distributed both online and in markets ( If the investigation is conducted in a different country, consult with the appropriate drug regulatory agency for both identified safe and fraudulent websites. 

Additional tips and considerations when trying to identify a legitimate website include:


Make sure the business provides a pharmacist or physician to answer patients’ questions.

Determine whether a prescription is required to place an order; legitimate online pharmacies will require a prescription from a physician.

Locate contact information for the online pharmacy. If a live person cannot be reached to consult with, this is a red flag.



According to the World Health Organization (WHO), more than 50 percent of prescriptions ordered online from unknown locations are counterfeit and either contain the wrong active ingredient or not enough of the active ingredient. WHO states that it is difficult to locate many of these rogue Internet pharmacies and intercept potentially dangerous counterfeit drugs. For this reason, it is even more essential for investigators to be aware of the red flags and combine efforts worldwide to combat the rising issue of fraudulent online pharmacies. 



Contact the ACFE
For more information, contact Sarah Hofmann, Public Information Officer, at (512) 478-9000 ext. 324 or