Affiliates promoting pharmaceuticals online can earn lifetime commissions and five-figure paychecks while helping consumers purchase the drugs they need for a fraction of what they would pay at the corner drugstore. But the price also can be unacceptably high.

It certainly was for Ryan Haight. Using a debit card his parents gave him to buy baseball cards, the 18-year-old honor student went online and purchased 100 tablets of hydrocodone, the generic version of the painkiller Vicodin. He died after mixing the pills with morphine and other drugs.

“What happened to my son shows that kids today can easily buy drugs online,” said Haight’s mother, Francine. “It’s just like buying candy in a candy store. I was worried about the street drugs like marijuana, cocaine, and the other drugs you hear about, not prescription drugs.”

The tragedy illustrated the enormous risks that cloud one of the fastest-growing and most controversial areas of affiliate marketing. While the vast majority of affiliates and merchants conduct business in a safe and ethical manner, the lack of clear regulations and potential for abuse have resulted in a chaotic marketplace of conflicting laws and even criminal conduct.

Online pharmacies offer rich rewards to affiliate marketers who accept the risks. It’s not uncommon for affiliates to make thousands of dollars a month in commissions, largely through pharmacies located outside the US. The US Food & Drug Administration (FDA) estimates American consumers received 5 million offshore drug shipments in 2003 alone. That was up from 1 million in 2001 and 2 million in 2002.

Industry on the Edge

The bigger the business gets, the more attention it attracts from consumers, affiliates, online drugstores, regulators, prosecutors and others with a stake in the industry. “The business is teetering to the point that it may be gone tomorrow or it may survive,” said Marc Lesnick, who organizes the Conference for Online Pharmaceuticals. “The odds are stacked against the affiliate.”

The FDA has no regulations that specifically address the online sale of pharmaceuticals, although there are many laws related to traditional drug sales that may apply in certain cases. The US Drug Enforcement Agency (DEA) does have regulations about online drug sales, but has difficulty enforcing them. Therefore, the responsibility for making sure programs are safe and legal often lies in the hands of each affiliate marketer and director. That’s a lot of responsibility, and potential liability, to be leaving in the hands of the very people who earn revenue by marketing the products.

The problems inherent with self-regulation hit home recently for Brian Johnson, an affiliate marketing manager for MyRxForLess.com. A recent news report aired by Dallas TV station WFAA alleged the Mexico-based pharmacy sold Zoloft that had nearly 20 times the acceptable level of certain heavy metals. When Revenue contacted Johnson, he said he didn’t have enough information to comment. “I’m just an affiliate running a business,” he said. “A lot of people can say a lot of things, but the jury is still out. Besides, what online pharmacy isn’t being investigated by the FDA? Until it’s illegal, I’ll keep doing it.” Indeed, as we went to press, no charges had been filed against either Johnson or the pharmacy.

Numerous other affiliate marketers who were contacted for this story declined to discuss their efforts. Their tendency to shy from publicity is in stark contrast to their colleagues in more traditional industries. Lesnick understands this reluctance to enter the debate in an industry where, essentially, there are no guarantees. “If I was an affiliate, my name would be Billy Joe Bob, and that’s all you get,” he said. “The bottom line is that affiliates may try their best to promote a reputable pharmacy, but they don’t know what these guys are doing.”

Lesnick notes it can be tough to avoid legal problems when they arise. “In pharmaceutical cases, the lawyer names every single person involved, from the hospital to the doctor to the insurance company to the pharmacy to the Web site. There are some affiliates I know who stay away because it is a legal nightmare.”

A New Wave Is Coming

Indeed, this industry has been placed under the microscope, and as proposed new laws and regulations threaten to restrict the market many affiliates have stayed away from this potential moneymaker altogether because of the uncertain future.

“We need regulations because we have seen a significant increase in bad operators, drugs being given without prescriptions, and offshore transportation of drugs, which is illegal,” said Drugstore.com CEO Peter Neupert. “The bottom line is people are looking for low-cost alternatives. They find those lower prices online, but it comes at the price of their safety.”

To promote safety between affiliates and pharmacies, the Internet Pharmacy Board (IPB), a nonprofit association, promotes safe tele-medicine practices in compliance with the national and state boards of pharmacy and medicine, federal agencies, the medical community and patients. “I suggest the IPB to any affiliates or pharmacies that are getting involved in this area of online marketing,” said Aaron Sallade, CIO and affiliate program director for Millennium Pharmaceuticals.

It’s easy to see that other changes are on the way. One is a new program from National Health Services and Millennium Pharmaceuticals that, in theory, will make the affiliate marketing of prescription drugs safer. The program follows a legal and ethical code and screens for drug abuse patterns. If abuse is suspected, those records will be sent to a doctor for review. “We are creating a health care network rather than a pill store,” Sallade said. “It’s a program that we feel will be fully supported by the FDA and DEA.”

Affiliate marketers can also be more selective in the drugs they promote. Millennium is among the companies that make a good profit without selling controlled drugs. Sallade said his top affiliate averages 300 orders a day. With an average commission of $30, that earns the affiliate $270,000 a month. The average affiliate earners complete five orders daily, for about $4,000 per month, he said.

Other companies have reported similar results. “We have paid out over $100,000 per month to our top performers and have numerous affiliates that earn five-figure commission checks each month,” Steve Yasher, affiliate director of Medical Web Services LLC, said in an email interview. About 90 percent of the company’s revenue comes from affiliates.

Commissions paid to affiliates depend on the program, and there are two popular types. One provides lifestyle drugs such as Viagra, Propecia or diet pills. The other provides maintenance medications such as blood pressure, birth control or antidepressant medications.

Lifestyle medication programs pay out an average of $40 to $50 per order. These programs often offer a hybrid payout model, which is a flat rate per each sale plus a percentage of the sale. Lifestyle programs are popular not only because of the higher payout, but also because they give affiliate marketers more control, allowing them to set their own price. Maintenance medication programs typically pay a commission of about 10 percent – comparable to many other areas of affiliate marketing.

From a business perspective, who wouldn’t be attracted to lifetime commissions? And getting into the business is not difficult. Some programs will provide you with a pre-made template to give you a jump-start. No degree or medical experience is required. Like other affiliate programs, you just need patience, Internet marketing knowledge, dedication and creativity.

“The biggest downfall of new affiliates is that they feel that they can quickly make good money with little effort or maintenance,” Yasher said. “Internet marketing and the online prescription industry are both evolving very rapidly, and if you do not stay on top of your marketing strategies, you can very quickly waste your money
on ineffective campaigns in a very competitive marketplace.”

Under the Microscope

You may be asking yourself, if buying pharmaceuticals online is so risky, why do so many people do it? The answer is simple. It’s convenient, private and, most importantly, relatively inexpensive.

“As long as the astronomical costs of pharmaceuticals remain in [the US], we will always be the better alternative, providing the cheaper, authentic product, with fast reliable and professional service,” said Laura Hunt, affiliate director of US-based Impact Health Care.

David Gross, senior policy adviser for AARP’s Public Policy Institute, said his group tells members to do their homework before attempting to buy prescription drugs, whether online or otherwise. “If someone is going to buy offshore, which we don’t recommend, they need to make sure they’re getting a pharmacy that is licensed, that is accredited,” Gross said.

“The bottom-line is people are looking for low-cost alternatives. They find those lower prices online, but it comes at the price of their safety,” said Neupert of Drugstore.com.

No Doctor in the House

Another risk lies in the fact that people who order prescription drugs online often are not required to consult a physician in person or, even worse, at all. The DEA has a problem with that. According to the agency’s guidelines regarding dispensing and purchasing controlled substances over the Internet, “It is illegal to receive a prescription for a controlled substance without the establishment of a legitimate doctor-patient relationship, and it is unlikely for such a relationship to be formed through Internet correspondence alone.”

Ryan Haight bought his drugs from Main Street Pharmacy, a Norman, Okla. company that exemplifies what authorities call “rogue” pharmacies. The only requirement to order his lethal dose of drugs was the completion of a medical history statement, which then is reviewed by a doctor who consults for the online pharmacy.

Daniel Guess, an assistant US attorney in Dallas, successfully prosecuted 33-year-old Clayton Fuchs, owner of Main Street Pharmacy, on six felony counts that carried penalties of up to 20 years in prison. “Online pharmacies that tell a patient they ‘don’t need a prescription’ should be a red flag to consumers,” Guess said.

“When you think of a drug dealer, you think of a person standing on a corner selling marijuana or cocaine,” the prosecutor said. “These guys online selling pill after pill after pill are really no different. But they are perceived differently. There are no differences between the online pharmacy and the typical cocaine or marijuana dealer.

“We’ll start looking at them that way.”

Rogue pharmacies make most of their money by pushing highly addictive medications like hydrocodone or dangerous diet drugs over the Internet. Trouble is, diagnosing or confirming a medical condition is complicated and cannot be accurately done without a physical exam.

“The biggest risk ordering prescription drugs from an online source is that since you aren’t seeing a doctor, you are essentially diagnosing yourself and just choosing what medication you need,”said Dr. Vince Iannelli, professor of pediatrics at the University of Texas Southwestern Medical School. “Figuring out a medical problem is much more complicated than that since many conditions have similar symptoms. And an evaluation is never complete without a physical exam, which isn’t possible when ordering prescriptions online. Simply filling out a generic form isn’t enough.”

Haight’s story proves that. And the publicity it has generated has inspired self-regulation in high places. Internet search engines Google, Yahoo and Microsoft have all barred advertising from unlicensed pharmacies. Others, like pay-per-click search engine Overture, have amended contracts and policies to address the issue of online pharmacies.

What can affiliates do to make sure they’re promoting safe and legal companies? “I would ask the affiliate program to provide me with the DEA registration for their pharmacy and doctors, and I would request a copy of their professional license,” Sallade said. “If an online pharmacy states that they are certified, the question to ask is, ‘Where did the certification come from and what were the requirements for that certification?'”

The bottom line is that, at least for now, caution is the order of the day. Says Yasher: “I would advise all affiliates to engage the services of legal counsel to review their business practice.”

LAURA SCHNEIDER is the marketing editor for About.com. Her articles on marketing have been published by more than 4,000 Web sites and magazines. She is also partnership development and marketing manager for Revenue Partners, where she has developed and managed online marketing ventures for a decade.