BREAKING NEWS: Fed Officials Said Job Gains May Bring Faster Rate Increase

Search

Google Agrees to Pay U.S. $500 Million in Drug-Advertising Settlement

By Brian Womack and Sara Forden
August 24, 2011 4:24 PM EDT
Google Inc. signage is displayed at the company's headquarters in Mountain View, California.
Photographer: Tony Avelar/Bloomberg
Google Inc. signage is displayed at the company's headquarters in Mountain View, California.

Google Inc. (GOOG) agreed to pay $500 million to settle U.S. allegations that advertising for online Canadian pharmacies on its website allowed illegal imports of prescription drugs.

Google was aware as early as 2003 that the shipment of prescriptions to the U.S. from outside the country is illegal, the Department of Justice said in a statement. The payment represents revenue that Google generated from the ads and that Canadian pharmacies reaped from online drug sales to American consumers, the DOJ said.

“This settlement ensures that Google will reform its improper advertising practices with regard to these pharmacies while paying one of the largest financial forfeiture penalties in history,” Deputy Attorney General James Cole said in the statement.

Google, owner of the world’s most popular search engine, is grappling with increasing scrutiny from governments around the world, including an investigation of its business practices by the U.S. Federal Trade Commission. As part of the settlement today, there will be “a number of compliance and reporting measures,” the DOJ said, without providing further details.

Google had $29.3 billion in revenue last year, almost entirely from advertising. The Mountain View, California-based company said in May that it had set aside $500 million to resolve an investigation of its ad business.

‘Banned Advertising’

“We banned the advertising of prescription drugs in the U.S. by Canadian pharmacies some time ago,” Google said in an e-mailed statement today. “However, it’s obvious with hindsight that we shouldn’t have allowed these ads on Google in the first place.”

In 2009, after becoming aware of the investigation, Google began to take steps to prevent the unlawful sale of drugs, according to the DOJ. Google said that it would only accept U.S. and Canadian ads from pharmacies certified by the National Association of Boards of Pharmacy’s Verified Internet Pharmacy Practice Sites program, known as VIPPS, and the Canadian International Pharmacy Association.

In December 2010, Google joined Microsoft Corp. (MSFT), Yahoo! Inc. and other companies in helping establish a nonprofit organization to fight illegal Internet pharmacies. Counterfeit drug sales account for about $75 billion in global sales, the National Association of Boards of Pharmacy said at the time. About 1 percent to 2 percent of prescription medicines in North America are counterfeit, according to the pharmacy group.

Drug Safety

Shipping prescriptions to the U.S. from outside the country is generally illegal because the Food and Drug Administration can’t ensure such medicines are safe or effective, the DOJ said.

“The result of this investigation has been a fundamental transformation of Internet pharmacy advertising practices, significantly limiting promotion to U.S. consumers by rogue online pharmacies,” said Kathleen Martin-Weis, acting director of the FDA’s Office of Criminal Investigations, in the statement.

Google rose $4.47 to $523.29 at 4 p.m. New York time on the Nasdaq Stock Market. The shares have dropped 12 percent this year.

To contact the reporters on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net; Sara Forden in Washington at sforden@bloomberg.net

To contact the editors responsible for this story: Tom Giles at tgiles5@bloomberg.net; Fred Strasser at fstrasser@bloomberg.net

Comments
More related content »