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Google was warned repeatedly by US state and Canadian regulators and independent watchdogs that it was running ads from online pharmacies that were breaking US laws, according to a report citing interviews with those involved in the situation, as well as public documents.

The Wall Street Journal reports that federal prosecutors are investigating whether Google employees knowingly accepted ads from illegal online pharmacies. If the employees were aware, it could lead to charges that the company aided illegal behavior.

Google did not immediately respond to a request for comment.

Earlier this month, The Journal reported that Google has earmarked $500 million to settle a criminal investigation into claims that it made hundreds of millions of dollars from ads purchased by illegal online pharmacies. The report came after Google said in an SEC filing that it had set aside $500m for a potential settlement with the US Department of Justice involving the use of Google advertising by "certain advertisers".

The latest report from The Journal says that undercover agents representing the Food and Drug Administration contacted Google in some way, posing as employees of illegal online drug sellers. The paper says it is unclear what evidence was gathered by these agents.

According to a 2008 study from the National Association of Boards of Pharmacy (NABP), roughly 96 per cent of online drug sellers were apparently violating laws. The NABP represents regulators in the US and Canada. In 1999, the group created an verification program designed to eliminate ads from illegal drug sellers, but Google did not adopt the program until 2010. Neither did Microsoft nor Yahoo!.

In 2003, the NABP sent a letter to Google warning the company that it was running ads from pharmacies that were not in its verification program. Google, according to The Journal, did not respond. But it 2004 and 2005, the company told Congress it was using third parties to verify rogue pharmacy ads. In 2006, Google began using one such third party, PharmacyChecker.com, to verify ads.

in 2008, the National Center on Addiction and Substance Abuse at Columbia University (CASA) wrote a letter to then–Google CEO Eric Schmidt warning that the company was running ads from illegal drug companies. That same year, the NABP again asked Google – and Microsoft and Yahoo! – to stop running rogue ads.

In August 2009, online-pharmacy verification outfit Legitscript.com and internet security operation KnujOn.com published reports on rogue online-pharmacy advertising on Microsoft's Bing search engine and the Yahoo! search engine. The pair did not release a report on Google, and LegitScript tells The Journal that it also conducted a review of Google. Google now partners with LegitScript to locate rogue online pharmacy ads.

In February 2010, the NABP said that Google had decided to accept ads only from online pharmacies accredited through its Verified Internet Pharmacy Practice SitesCM (VIPPSCM) program. Later that year, it made similar announcements about Microsoft and Yahoo!.

In a September 2010 blog post, Google said it was filing suit against advertisers it believed had broken its advertising rules, and the company acknowledged that such pharmacies had been a problem for years. "It’s been an ongoing, escalating cat-and-mouse game – as we and others build new safeguards and guidelines, rogue online pharmacies always try new tactics to get around those protections and illegally sell drugs on the web," wrote Google lawyer Michael Zwibelman.

"In recent years, we have noticed a marked increase in the number of rogue pharmacies, as well an increasing sophistication in their methods. This has meant that despite our best efforts – from extensive verification procedures, to automated keyword blocking, to changing our ads policies – a small percentage of pharma ads from these rogue companies is still appearing on Google." ®

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