U.S. authorities are accusing two executives of a Canadian company of running a long-running scheme to illegally import prescription drugs into the United States, according to court records filed Tuesday.
Treasurer and company director John Thomas Howard was arrested Sunday on smuggling and conspiracy charges, records show.
His brother, Bob Howard, president and director of CANARX, is also wanted in the federal investigation, according to an affidavit from Dustin Dobbs, a special agent with the Food and Drug Administration’s Bureau of Criminal Investigation. He is not yet in custody.
In addition to conspiracy and smuggling, the arrest warrant states that John Thomas Howard is also charged with introducing counterfeit branded drugs into interstate commerce and importation of illegal drugs. No plea has been filed.
CANARX was featured in a CNBC investigation last year that revealed how it and other programs known as Alternative Funding Programs (AFPs) are becoming more popular across the United States as drug prices soar. The study found that these companies are infiltrating the country’s health care system by providing more affordable and expensive specialty medicines through private and public employers. In some cases, employers may require their employees to use AFP.
AFP often obtains medicines overseas and ships them directly to patients, a practice that federal authorities say is illegal and poses safety risks. CNBC traced the drugs from overseas to the United States through supply chains that were not authorized by the pharmaceutical companies that make them.
Founded in 2002 and based in Windsor, Ontario, Canada, CANARX described itself on its website as the first international prescription provider in the United States and the safest program in the industry. The company said it sources medicines from Canada, the United Kingdom, Australia and New Zealand.
However, the affidavit states that the FDA’s investigation found that “there is probable cause to believe that (CANARX) illegally imported prescription drugs into the United States or caused the illegal importation of prescription drugs.”
The affidavit does not specify which medicines authorities believe were illegally imported. The period covered by the criminal complaint is from February 22, 2017 to April 15, 2026.
“The Howards deny all charges, will vigorously defend themselves and look forward to being vindicated in court,” Joseph Morris, the company’s general counsel, told CNBC in a statement.
The company has been under FDA scrutiny for several years. Authorities seized a shipment of medicines from CANARX in 2023 that may have been counterfeited under a false brand, according to an email sent to patients obtained by CNBC.
And in 2019, the FDA sent a warning letter to the company, saying it was operating “in a manner that substitutes unapproved drugs for FDA-approved drugs prescribed by U.S. health care providers.” In response to the warning, Morris insisted that CANARX had not misled patients, but agreed that the company would stop importing medicines that must be administered by a doctor.
Morris said in an interview last year as part of a CNBC investigation that drugs shipped to patients in the United States come from countries with stricter regulations. He said CANARX is operating legally.
A central issue for AFP is the legality of importing prescription drugs into the United States for personal use. The FDA allows Americans to import drugs for personal use in some cases if the drug is not available domestically. This is the basis on which AFP built its model for delivering medicines directly to patients.
However, an FDA spokesperson told CNBC last year that “in most circumstances, prescription drugs cannot be imported into the United States from other countries as substitutes for FDA-approved drugs.”
In a separate civil lawsuit currently pending, Gilead Sciences has accused CANARX and other companies of illegally importing its HIV drug Biktarvy.
A Gilead spokesperson said in a statement to CNBC on Wednesday that the company “has taken strong legal action to protect our patients and the health of the U.S. drug supply chain. We welcome the government’s efforts to hold accountable those whose actions could put patients at risk.”
CANARX has not responded to Gilead’s lawsuit.
— CNBC’s Paige Tortorelli and Melissa Lee contributed to this report
