The New York Times has published a report announcing that Google will pay $500 million to settle U.S. government charges that it has been running illegal ads for online Canadian pharmacies in the U.S. It’s the first time an Internet search engine is being held responsible for the illegal distribution of drugs.

The fine, which the U.S. Justice Department said is one of the largest such penalties ever imposed, covers revenue that Google earned from the illegal advertisers and revenue that the Canadian pharmacies received from United States customers.

As part of the settlement, Google acknowledged that it improperly aided the Canadian pharmacies – which operate illegally by failing to require a prescription or selling counterfeit drugs – in advertising through its AdWords program. This ad network is a major moneymaker for Google, expected to generate more than $30 billion in revenue this year.

So perhaps this new $500 million penalty is not as painful as it seems at first blush? 

Meanwhile, after a separate U.S. Food and Drug Administration investigation into drugs that claimed to be manufactured in Canada, Kathleen Martin-Weis, acting director of the FDA’s Office of Criminal Investigations, told Bloomberg Business Week:

“We found that 85% of the drugs examined came from 27 different countries, including some that were found to be counterfeit.”

Investigators snared Google’s ad system by creating seven undercover websites that went live for four months, offering prescription drugs to be sold without a prescription or the completion of an online medical questionnaire, Martin-Weis said.

“An undercover investigator informed Google employees who were creating the advertising for the products that they were manufactured overseas and did not require customers have a valid prescription.

“In each instance, despite this knowledge, Google employees created a full advertising campaign for each of the undercover websites.”

Bloomberg also reported that drug and health care advertising generated about $1 billion in Internet spending last year, and is expected to grow to nearly $1.9 billion by 2015, according to the research firm eMarketer Inc.

Since 2010, when Google became aware of the investigation, it has required that all Canadian online pharmacy advertisers be certified by the Canadian International Pharmacy Association, and has also specified that they can advertise only to Canadian customers. American pharmacy advertisers must be certified by the National Association of Boards of Pharmacy.

Google said in a statement on August 24, 2011:

“We banned the advertising of prescription drugs in the U.S. by Canadian pharmacies some time ago. However, it’s obvious with hindsight that we shouldn’t have allowed these ads on Google in the first place. Given the extensive coverage this settlement has already received, we won’t be commenting further.”

How can you tell if an online pharmacy is legitimate? It should:

• require a prescription from a licensed physician by phone, email or mail. If by fax, they’ll call the doctor to verify;
• require you to submit a detailed medical history;
• clearly state their privacy, payment and shipping policies,
• use secure connections for all transactions;
• be a licensed pharmacy and in good standing with regulatory agencies like the National Association of Boards of Pharmacy or the Canadian International Pharmacy Association;
• have a pharmacist available to answer questions by phone or email.