U.S. v. Rx Depot, Inc.

• Decision Date: 06 November 2003
• Docket Number: No. 03-CV-0616-EA.,03-CV-0616-EA.
• Citation: 290 F.Supp.2d 1238
• Parties: UNITED STATES of America, Plaintiff, v. RX DEPOT, INC. and Rx of Canada, LLC, corporations, and Carl Moore and David Peoples, individuals, Defendants.
• Court: U.S. District Court — Northern District of Oklahoma

Page 1238

290 F.Supp.2d 1238

UNITED STATES of America, Plaintiff, v. RX DEPOT, INC. and Rx of Canada, LLC, corporations, and Carl Moore and David Peoples, individuals, Defendants.

No. 03-CV-0616-EA.

United States District Court, N.D. Oklahoma.

November 6, 2003.

Cathryn Dawn McClanahan, United States Attorney, Tulsa, Alan Phelps, U.S. Dept. of Justice, Washington, DC, for United States of America, plaintiff.

Gary L. Richardson, Fred Everett Stoops, Sr., Keith Allen Ward, Nancy C. Curtis, Richardson Stoops Richardson & Ward, Tulsa, OK, for Rx Depot, Inc., corporation, Rx of Canada, LLC, corporation, Carl Moore, individual, David Peoples, individual, defendants.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

EAGAN, District Judge.

This matter came on for hearing on October 8-9, 2003, on motion of plaintiff, United States of America, for preliminary injunction against defendants, Rx Depot, Inc., Rx of Canada, LLC, Carl Moore and David Peoples (Dkt.# 2); and motion by defendants for preliminary injunction (Dkt.# 10). Upon consideration of the pleadings and the evidence, the Court finds and concludes as follows:

I. FINDINGS OF FACT

A. Procedural History

1. The plaintiff instituted this suit on September 11, 2003, by filing a complaint for injunction (Dkt.# 1) and a motion for a preliminary injunction (Dkt.# 2). Plaintiff's complaint alleged violations by defendants of the Federal Food, Drug, and Cosmetic Act ("FDCA"), 21 U.S.C. §§ 331(d) and (t).

2. Defendants filed a response on October 6, 2003 (Dkt.# 10), wherein they moved for their own preliminary injunction against the plaintiff's attempt to enforce the FDCA. Defendants filed an answer and counterclaim on October 8, 2003 (Dkt.# 14).

3. On October 8-9, 2003, the Court heard and received evidence relating to both preliminary injunction motions. Plaintiff and the defendants presented witnesses and exhibits, and thereafter filed proposed findings of fact and conclusions of law.

B. The Plaintiff

4. Plaintiff brings this action in its own name pursuant to 21 U.S.C. § 337(a) to preliminarily and permanently enjoin alleged violations of the FDCA by defendants.

C. The Defendants

5. Defendant Rx Depot, Inc. ("Rx Depot"), was incorporated under the laws of the State of Nevada on December 2, 2002, and does business at 4908 South Memorial Drive, Tulsa, Oklahoma, within the jurisdiction of this Court. Appendix to Pl. Memorandum in Support of Plaintiff's Motion for Preliminary Injunction ("App.") Ex. A, Tab 1. Rx Depot does business throughout the United States.

6. Defendant Rx of Canada, LLC ("Rx Canada"), is a Nevada limited liability company. Rx Canada is owned by defendant Carl Moore's son, Joe-Max Moore. App. Ex. A, Tab 3.

7. Rx Canada's website, www.rxofcanada.net, is substantially similar to Rx Depot's website, www.rxdepot.com. On the Rx Canada website, links to many purported Rx Canada store locations are actually links to Rx Depot stores, including some stores located in the Northern District of Oklahoma. Similarly, links to some purported Rx Depot locations on the Rx Depot website actually lead to contact information for Rx Canada stores. Transcript of Proceedings, October 8-9, 2003 ("Trans.") at 66-69; Plaintiff's Preliminary Injunction Hearing Ex. ("Pl.Ex.") 11-12.

8. Defendant Carl Moore, an individual, is the President of Rx Depot and a member of its Board of Directors. He has overall responsibility for, and authority over, all operations of the corporation, including the sales arrangements involving ordering, purchasing, and shipment of prescription drugs from Canada. He performs these activities at 4908 South Memorial Drive, Tulsa, Oklahoma, within the jurisdiction of this Court. App. Ex. A, Tab 1; Pl.Ex. 6; Trans. at 50, 178.

9. Defendant David Peoples, an individual, is the Secretary of Rx Depot. He is responsible for receiving and processing orders for Rx Depot. He performs these activities at 4908 South Memorial Drive, Tulsa, Oklahoma, within the jurisdiction of this Court. App. Ex. A Tab 1; Pl.Ex. 6.

10. Defendants Carl Moore, David Peoples, Rx Depot, and Rx Canada (collectively, "defendants" or "Rx Depot") operate approximately 85 Rx Depot/Rx Canada stores located throughout the United States, which serve about 800 customers each day. Trans. at 188-89.

D. Operation of Rx Depot/Rx Canada

11. Rx Depot assists individuals in procuring prescription medications from pharmacies in Canada. Trans. at 178-79. Each Rx Depot/Rx Canada location has one or two employees who accept prescriptions from U.S. customers. Customers also are asked to fill out a medical history form and other forms provided by Rx Depot. Customers can deliver these documents to defendants' stores in person, or can mail or fax to the nearest Rx Depot/Rx Canada store. Trans. at 20-24, 44-46, 48, 51-52; Pl.Ex. 2, 6, 11-12.

12. Once an Rx Depot/Rx Canada customer has submitted the required forms and prescription to defendants, the papers and the customer's credit card information or a certified check are transmitted to a cooperating pharmacy in Canada. Trans. at 46, 184, 195. A Canadian doctor rewrites the prescription,¹ and the Canadian pharmacy fills the prescription, ships the prescription drugs directly to the U.S. customer, and bills the U.S. customer's credit card. Trans. at 22, 45-46, 48, 51-52; Pl. Ex. 6.

13. Defendants receive a 10 to 12 percent commission for each sale they facilitate for the Canadian pharmacies. The defendants also receive commissions for refill orders, which generally are arranged directly between customers and the Canadian pharmacies. Trans. at 189-90; Pl.Ex. 6.

14. Defendants are essentially commissioned sales agents for Canadian pharmacies. Trans. at 191.

15. An Oklahoma state court recently ordered the defendants' stores in Oklahoma to close after finding that the defendants acted as storefronts for Canadian pharmacies and, as such, were operating as unlicensed pharmacies. Trans. at 190-91; Pl.Ex. 25.

16. Defendants admit in their answer to the plaintiff's complaint that they are engaged in the business of causing the shipment of U.S.-manufactured and unapproved, foreign-manufactured prescription drugs from Canadian pharmacies to U.S. citizens. See Defendants' Answer and Counterclaims, Dkt. # 14, ¶ 6.

17. The defendants actively solicit other individuals to open "affiliate" Rx Depot/Rx Canada stores by distributing promotional materials that describe their business practices and the potential profits to be made from opening a franchise. Defendants estimate that an affiliate would receive an average 9% commission on each sale of Canadian prescription drugs, about $24.75. The net commissions for an affiliate in the first year would be an estimated $141,570, according to the defendants. Pl. Ex. 1. The defendants' affiliate "Agreement" also states, however, that the service "may at some date be determined to be unlawful or otherwise prohibited." Id. at 29.

E. Prescription Drugs from Foreign Countries

18. Although defendants presented evidence that the amount of prescription drugs shipped from Canadian pharmacies never exceeds a ninety-day supply, Trans. at 184; Pl.Ex. 24, that defendants do not allow Canadian pharmacies to ship temperature-sensitive drugs, Trans. at 193, and that defendants do not deal with any third parties, Trans. at 194, unapproved prescription drugs and drugs imported from foreign countries by someone other than the U.S. manufacturer do not have the same assurance of safety and efficacy as drugs regulated by the Food and Drug Administration ("FDA"). Because the drugs are not subject to FDA oversight and are not continuously under the custody of a U.S. manufacturer or authorized distributor, their quality is less predictable than drugs obtained in the United States. For instance, the drugs may be contaminated, counterfeit, or contain erratic amounts of the active ingredient or different excipients. Also, the drugs may have been held under uncertain storage conditions and therefore be outdated or subpotent. Trans. at 127-28, 141-42, 144; App. Ex. B (McGinnis Decl.) at ¶¶ 11, 14.

19. Prescription drugs obtained through Rx Depot frequently are dispensed in greater quantities than are requested by the prescribing physician. Although defendants presented evidence that the amount of prescription drugs shipped from Canadian pharmacies never exceeds a ninety-day supply, Trans. at 184; Govt's Ex. 24, Rx Depot advertises the availability of, and causes the importation of, preset quantities of drugs and dispenses these preset quantities regardless of the quantity of the drug the patient's U.S. physician prescribed and without directions to take the drug for only the number of days prescribed by the U.S. physician. Trans. at 46-47, 62-63, 97-98; Pl.Ex. 10, 11-12. American patients could, therefore, take a drug for many days more than their physicians intend without supervision. This practice can be dangerous in instances where drugs have potentially life-threatening side effects with continued use. Trans. at 98; App. Ex. C (Katz Decl.) at ¶ 14.

20. Prescription drugs obtained through Rx Depot also do not contain the FDA-approved patient package inserts included with certain prescription drugs in the United States. Nor are prescription drugs obtained through Rx Depot shipped in FDA-approved unit-of-use packaging. This type of packaging is used in the United States to help ensure that certain drugs received by customers arrive in designated dosages with the approved patient package insert. Trans. at 98-104; Pl.Ex. 10, p. 16-17, Ex. 18.

21. The fact that there are currently no known cases of someone being harmed by a drug received as a result of using Rx Depot, Trans. at 137-38, or that plaintiff is currently unaware of anyone being harmed by prescription medications ordered through Rx Depot and imported from Canada, Trans. at 85, does not diminish the legitimate safety concerns of the FDA with unregulated commercial reimportation...