Putting The Hex On Rx

Forbes ASAP , May 28, 2000

The Pill Box pharmacy is the last place you'd look for radicals. A plain, freestanding structure in San Antonio's South Texas Medical Center, the shop smells of rubber and pills--splints and trusses and prescription drugs. There aren't rows of shampoos and greeting cards; it's a straightforward, and decidedly down-home, medical place.

But back in the mail room, away from public view, employees are bustling to make the DHL pickup deadline. Two 4-foot high stacks of prelabeled boxes wait to receive bubble-wrapped pill bottles bound for patients in Florida, Illinois, Ontario, and beyond. In his office down the hall, Pill Box owner Bill Stallknecht has a map of the world with pins marking customers' locations, some as exotic as Ethiopia, Bahrain, Uzbekistan, and Tibet.

Stallknecht doesn't seem like a cosmopolitan trendsetter, much less a scary revolutionary. An earnest, doughy guy in a bright blue Pill Box knit shirt, he grew up in a tiny town near Houston, where he used to help out the local doctor, and went to pharmacy school at the state university in Austin. He sings in a barbershop quartet--you can see a photo of that on the company's Web site--and speaks softly, with a country accent. He is the antithesis of slick.

Stallknecht and a partner started the Pill Box in 1971 with $2,000 in cash and a $25,000 loan co-signed by Stallknecht's mom and dad. What began as a "little bitty 800-square-foot store" grew to a small chain, including four pharmacies, a medical equipment shop, and a service center. Nowadays, small independents like the Pill Box can't make much money selling normal prescriptions, and Stallknecht won't accept insurance payments. ("I send my wife to Walgreen's," says Stallknecht.) Up until January 1999, the company got most of its revenue from home medical equipment, oxygen, and specially compounded preparations.

But the Internet has changed Stallknecht's business--and put him on the front lines of a clash between traditional regulation and consumer demand. With its ability to jump borders and serve niche markets, the Internet has spawned a wide range of online pharmacies. A few high-profile, well-funded operations, including Drugstore.com and PlanetRx.com, are essentially Web-based versions of chain drugstores and mail-order houses. They pose competitive challenges but no public-policy questions. At the other end of the spectrum are shady offshore businesses, selling mysteriously sourced products from unknown addresses. They're easily stigmatized as sleazy operations, whether or not the authorities can track them down. Again, no real challenge to traditional regulation.

The interesting action is in the middle, between the establishment companies and the fly-by-night operators. New online companies are forcing us to rethink exactly why and how we regulate pharmaceuticals--and to what extent the Internet can really act as a check on government power.

Both state and federal enforcers are focusing on American pharmacies that sell FDA-approved, American-made prescription drugs but use the Internet to relate to patients in unconventional ways. The central issue involves medical practice: Can a doctor legitimately prescribe a medication without meeting a patient in person, if the prescription is for a relatively safe drug and is based on information from a questionnaire tailored to that drug? Should the law require that doctors and pharmacists stick only to the old methods?

Over the past year, attorneys general and medical regulators in Missouri, Kansas, Illinois, Alabama, and Virginia have brought legal action against online pharmacies that allow customers to obtain prescriptions by filling out Web questionnaires. They've also threatened to revoke the licenses of doctors who issue such prescriptions. Although regulating pharmacies and doctors is a state matter, the FDA's Office of Criminal Investigations also has raided clinics selling pharmaceuticals online, handing out sealed indictments and turning over information to state regulators.

President Clinton wants to require pharmacy Web sites to get licenses from the FDA before they can go online. He also has proposed new federal fines, up to $500,000 per sale, for selling prescription drugs "without a valid prescription"--a standard that would require the feds to determine adequate grounds for writing a prescription. To enforce these new rules, the administration would give the FDA subpoena powers and $10 million in fiscal 2001. Stallknecht and his little Texas pharmacy chain are the most visible targets--and most prominent opponents--of this regulatory onslaught. What started as a vanity Web site a few years ago has become a source of prescription medicines for doctors and patients worldwide. Viagra is the big attraction featured on ThePillBox.com, along with Xenical (a weight-loss drug), Propecia (an antibaldness treatment), and Claritin (an allergy medication). Although ThePillBox.com started with faxed prescriptions from physicians, it helped to pioneer drug-specific Web questionnaires.

Even opponents of online questionnaires understand why consumers like them. "If you look at the drugs of choice that these pharmacies are putting out--Xenical, Propecia, Viagra--they're drugs that people want to try," says Tony Sanders, a spokesperson for the Illinois Department of Professional Regulation. "You want to lose weight, you want to grow hair, you want to have an erection, but you don't want to go to a doctor about such a sensitive issue."

To Sanders and his regulatory colleagues, the risk is too great to allow. On the Internet, no one knows if you're a dog... or a pregnant woman, or a skinny 15-year-old trying to get a weight-loss drug--and that could be dangerous. In November 1998, Sanders got a call from a USA Today reporter, asking about an Illinois physician who read questionnaires for ThePillBox.com and decided if the person had the symptoms and medical history required to qualify for the particular drug. That was the beginning of the end for Dr. Robert Filice, a family practice doctor in Naperville, a Chicago suburb. Iconoclastic and a bit of a computer geek, Filice was unapologetic about his online practice, which he believed helped patients who would not otherwise see a physician. The state threw the book at him in May 1999, jerking his medical license in a highly publicized "emergency" action.

In response, Filice issued a statement saying that he was guilty only of "being a pioneer in a new and unexplored area." Regulators, the statement charged, had taken his license "with the hope and intention of crushing innovation and seeing to it that as a result of his experience no other qualified, competent, and caring physician will dare enter the area of online medicine." They were largely successful.

"I think that we sent a pretty clear message to doctors that we don't want them doing this," says Sanders. "Dr. Filice was pretty vocal at the beginning that he didn't see a problem in this. I think he's changed his ways on that." Indeed he has. Filice got back his license after paying a $1,000 fine and accepting two years' probation. But, says his attorney, "after the case was put to bed, he didn't want to talk to anyone anymore." Filice left clinical practice in December, and his phone does not accept messages.

The moral of Filice's sad story, says Stallknecht, is, if you want to avoid attention from medical regulators, don't put up a Web site. And if you want to stay in business online, you'd better keep your name and address off your site and out of the newspapers. If you hide your identity, however, you are likely to be called a fly-by-night operator. Stallknecht's own highly public operation has cost him around $70,000 in legal expenses, including $15,000 to settle an action brought against the Pill Box by the Missouri state attorney general's office. "The assistant attorney general was so ugly," says Stallknecht. "I dream about him often, and not in a good way."

To make their case, undercover Missouri investigators lied on their questionnaires in the sting. A pregnant assistant attorney general said she was a man and requested Propecia, an antibaldness drug that can cause birth defects if handled by a pregnant woman. In another case, an investigator said she was a man and ordered Viagra. Their targets had no way of knowing the patients weren't who they said they were. That was exactly the point.

States rely on stings to bring charges against online pharmacies because consumers haven't themselves complained. Unlike many regulatory actions, these aren't driven by public outcry or high-profile tragedies. There is no public demand for a crackdown, though any story that features both the Internet and Viagra--the sexiest topics of the past couple of years--is bound to get good media play.

Regulatory stings tend to get positive press in part because the public debate idealizes off-line medical practice, i.e., every doctor knows and carefully examines every patient before ever issuing a prescription. In congressional testimony, an American Medical Association representative declared that before prescribing a medication a physician must perform a physical exam and "initiate additional interventions and follow-up care."

Reality is a lot more varied. Even Sanders of the Illinois Department of Professional Regulation, for instance, volunteers that his doctor--who has known him for 10 years--often gives him antibiotics for sinus infections without a checkup. By contrast, Filice, whose online prescribing so offended Illinois regulators, told a reporter he'd never issue a prescription for an antibiotic without a physical exam.

Reasonable care is a subtle concept; there isn't one best way of dealing with each and every patient. Defending Filice was difficult, says Chicago attorney Gerald Goldberg, because no doctor would step up and testify to what everyone knows: that conscientious physicians can and do sometimes issue prescriptions based solely on the sort of information that online questionnaires provide.

"It's going to take some credible people to come forward and start small and show the regulators that in some things it's OK," says Goldberg. That's a tough order, since regulators can put such dissidents out of business with heavy fines and license revocation.

Some online pharmacies are trying safety in numbers, banding together in a trade association. The Online Pharmaceutical Providers Association (OPPA) seeks to defend the industry against legal attacks and to develop and enforce a code of conduct and standardized forms for member sites. But OPPA wouldn't tell me its members' names, even off the record. For online pharmacies, going public is "like Chechen rebels sticking their heads out in Grozny--they are going to get blown away by the Russians," says Dr. William Feinstein, the New York City pharmaceutical consultant organizing the group. It's hard to plead your case if you're in hiding.

Which brings us back to the down-home pharmacy in San Antonio. ThePillBox.com no longer uses Web questionnaires, because the Texas Board of Medical Examiners banned the practice for Texas doctors in December. But Stallknecht is still fighting. Despite his mild-mannered appearance, he is indeed a radical--a Libertarian Party activist who until recently tried to keep his business and politics separate. Stallknecht strives to adhere to the letter of the law, but he pushes it as far as he can in the direction of consumer freedom. He doesn't even believe in legally enforced prescriptions.

"Tagamet, Pepcid, Zantac, Coricidin, Afrin--all of these were prescription drugs," he says. "Then they went over-the-counter, and all they had on [the package] was a sheet that told you the dangers. So why did they become safe one day, when they were dangerous the day before? And why were you stupid one day, to have to have somebody lead you through this, and all you have to do the next day is read the paper?" He believes the drugs he offers with Web questionnaires will eventually be sold without prescriptions anyway. In the meantime, the online questionnaires offer patients a more convenient, less intrusive way of providing the necessary information to a physician.

Stallknecht has filed suit in federal court to overturn Missouri's requirement that out-of-state pharmacists get Missouri licenses before they can ship prescriptions there. It's a long-shot constitutional challenge, but simply by fighting back in public, Stallknecht is changing the regulatory dynamic.

The Internet may enable new ways of doing business, but technology alone cannot protect online enterprises from police raids and court orders--at least not without destroying the aboveboard practices and information that protect consumers from truly sleazy operators. Internet freedom requires not only technological innovators but stubborn, unapologetic activists. Time will tell whether Stallknecht has the sophistication or the resources to counter the attacks on this new industry. But he certainly has the conviction.