FedEx insists FDA case over delivery of online drugs unwarranted

Delivery company FedEx ($FDX) continues to fight a federal indictment that claims it ignored obvious indications it was delivering drugs for online websites that were illegally selling prescription drugs.

The company will seek today to have the case dismissed, claiming it is exempt from having to check any of the packages it delivers, Bloomberg reports. Federal prosecutors counter that argument would allow any delivery service to become a tool of the worldwide drug trade, including Mexican drug cartels.

The hearing comes ahead of the trial on the charges that were instigated by the FDA in 2013, Bloomberg reports. While competitor UPS ($UPS) settled similar accusations that year for $40 million, FedEx has doggedly persisted in its innocence and so now faces penalties of $1.6 billion if it loses in court.

The 15-count indictment accuses the Memphis, TN-based global delivery company of handling deliveries of controlled substances and misbranded drugs like generic Xanax, Valium and Ambien, on behalf of illegal online pharmacies, even after being told by the FDA of the problem and in the face of the obvious. Court documents pointed out that some drivers even expressed concerns about having to make deliveries to addresses that turned out to be nothing more than parking lots, and even being "stopped on the road by online pharmacy customers demanding packages of pills."

The FDA has alleged that even as it was fighting the surge in illegal, online pharmacies, FedEx was growing its business from that sector. It says the company's accounts tripled to 600 in 2010, from 200 in 2004. In fact, the DOJ estimates that that FedEx has grossed more than $820 million from deliveries for online pharmacies, an amount that it is key since fines can be double that figure.

But FedEx has insisted that it will not settle. To do so, it has argued, would require it to break a key tenet of its business its pledge not to open customers' packages.

- read the Bloomberg story

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