Feds arrest top official of healthcare company, alleging illegal drug importation

U.S. authorities are accusing the two top officials of a Canadian company of operating a long-running scheme to illegally import prescription drugs into the U.S., according to court records filed Tuesday.

John Thomas Howard, treasurer and a director of the company, CANARX, was arrested Sunday on smuggling and conspiracy charges, according to the records.

Bob Howard, his brother, who is president and a 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 Office of Criminal Investigations. He has not yet been taken into custody.

Besides conspiracy and smuggling, the arrest warrant said John Thomas Howard was charged with introducing misbranded drugs into interstate commerce and illegal drug importation. No plea has been filed.

CANARX was featured in a CNBC investigation last year that revealed how the company and others known as alternative funding programs, or AFPs, are becoming more pervasive around the U.S. as drug costs skyrocket. The investigation found these companies have penetrated the country's healthcare system by offering high-cost specialty drugs at more affordable prices through private and public employers. In some cases, employers are requiring their staff to use an AFP.

AFPs often obtain the medications overseas and ship them directly to patients, a practice that federal authorities have said is illegal and poses safety risks. CNBC traced the trail of drugs from abroad to the U.S. via a supply chain that the pharmaceutical companies producing the medications have not authorized.

On its website, CANARX, founded in 2002 and based in Windsor, Ontario, Canada, described its business as the first international prescription provider for the U.S. and the safest such program in the industry. The company said it sources its medications from Canada, the United Kingdom, Australia and New Zealand.

But the affidavit said that the FDA's investigation found "there is probable cause to believe that (CANARX) illegally imported or caused the illegal importation of prescription drugs into the United States…"

The affidavit does not specify which medications the agency believes were illegally imported. The criminal complaint covers the period from Feb. 22, 2017 through April 15, 2026.

The company's general counsel, Joseph Morris, told CNBC in a statement: "The Howards deny all the charges against them, will defend vigorously, and expect to be vindicated in court."

The company has been under FDA scrutiny for several years. In 2023, the agency seized medication being shipped by CANARX that it says was potentially misbranded and counterfeit, according to an email sent to a patient that was obtained by CNBC.

And in 2019, the FDA sent a warning letter to the company, saying it was operating "in a manner that substitutes the FDA-approved drugs prescribed by the U.S. healthcare provider with unapproved drugs." Morris, in response to that warning, argued CANARX was not misleading patients, but agreed for the company to stop importing drugs that need to be administered by a doctor.

In an interview as part of the CNBC investigation, Morris said last year that the medicines shipped to U.S. patients come from highly regulated countries. He said CANARX was operating legally.

The central question for AFPs is the legality of importing prescription drugs into the U.S. for personalized use. The FDA allows Americans to import medications for individual use in some cases if the drug is not available domestically. That is the basis on which the AFPs built their models for shipping medicines directly to patients.

But an FDA spokesperson told CNBC last year that "in most circumstances, a person cannot import prescription drugs from other countries into the U.S. ... as substitutes for FDA-approved drugs."

In a separate civil lawsuit that is pending, Gilead Sciences accused CANARX and other companies of illegally importing Biktarvy, its medication to treat HIV.

In a statement to CNBC on Wednesday, a Gilead spokesperson said the company "has taken strong legal action to protect patients and the integrity of the U.S. medicines supply chain. We welcome the government's efforts to hold accountable those whose conduct may put patients at risk."

CANARX has not responded to the Gilead lawsuit.

— CNBC's Paige Tortorelli and Melissa Lee contributed to this report