FedEx vows not to settle with feds on online pharmacy shipments

In April, UPS agreed to pay $40 million to U.S. authorities and admitted doing business with illegal online pharmacies in a deal that kept it from being prosecuted. Competitor FedEx is also a target of the investigation but does not intend to roll over so easily.

A FedEx executive insists the company has done nothing wrong and had cooperated with law enforcement on the matter for years. "Settlement is not an option because we haven't done anything wrong," said Patrick Fitzgerald, senior vice president of integrated marketing and communications.

Federal authorities have been cracking down on online pharmacies as more illegal and counterfeit drugs have made their way into the U.S. through their portals, but because they are situated overseas, it can be difficult to stop them. While online pharmacies can sell online, it takes a service to deliver their drugs, and so officials have been trying to disrupt their supply chain.

The recent settlement with UPS said law enforcement officials discovered that the shipper was not an unknowing dupe in the online pharmacy business. Investigators were chagrined to learn that one marketing group at UPS was actually courting their business, having figured out it could be lucrative. Some accounts were spending as much as $5,000 a day, and at least one made arrangements to get deliveries made in parking lots. UPS has agreed to a compliance program that will train employees to avoid being complicit in the online drug business.

Federal authorities will not confirm the investigation, but FedEx has said several times in public filings that law enforcement has asked for records.

Fitzgerald told Bloomberg that when the delivery service believes a customer is shipping illegally, it passes the information to authorities and discontinues service if an official investigation confirms their suspicion. But he said the company is not going to routinely give investigators access to customers' shipments. "The privacy of our customers is core to our business," he said. "It's a small issue in terms of revenue for our company, but a major issue in terms of privacy concerns it raises for our customers."

- read the Bloomberg story