The partnership looked like a prescription for success.
Drugstore.com, the largest online pharmacy, launched a new section of its website in October 2003 devoted to alternative- health guru Dr. Andrew Weil and his herbal medicines.
Visitors to Drugstore.com could click the “Dr. Weil Recommends” link to learn about herbal remedies and purchase health and wellness products carrying Weil’s endorsement.
Under their contract, Drugstore.com had agreed to pay Weil $14 million over five years to be his exclusive online distributor through its own website and Weil’s. In return, the Phoenix-based physician and author agreed to promote his partner.
On Oct. 27, 2003, the day that Bellevue, Wash.-based Drugstore.com announced the new website, its stock shot up 8 percent.
“We are very excited about taking our relationship with Dr. Weil to the next level,” said Kal Raman, the company’s chief executive at the time.
Instead, the relationship fell apart, Drugstore.com said.
In a lawsuit filed Aug. 26 in U.S. District Court in Denver, the company said it has received little from Weil in return for $4.5 million it has paid him so far.
“Weil essentially has failed to perform any of his marketing obligations under the agreement,” the company said. “Weil’s marketing and promotion … was the primary reason that Drugstore.com entered into the agreement.
“His failure to fulfill his contractual obligations in this regard has resulted in greatly reduced traffic … and thus, reduced revenue, to Drugstore.com.”
Despite this, Drugstore.com said, Weil continues to demand monthly honorarium and quarterly royalty payments under the contract. Drugstore.com names Weil and his company, Weil Lifestyle, as defendants.
Drugstore.com is a publicly held company with a market capitalization of $347 million.
A Weil Lifestyle representative said last week the company is trying to resolve the issue with Drugstore.com out of court.
“We’re still hoping to come to a mutual agreement and go forward,” said spokeswoman Jennifer Pfahler. “We are talking to them. They’ve been an important partner for a long time, and we hope to work this out.”
She would not comment on specific allegations.
Drugstore.com attorney Alesia Pinney called the lawsuit “a measure of last resort … necessary to protect our business interests and resolve this situation.”
The link to Weil’s page at Drugstore.com remains active, and the company continues to promote and sell Weil’s custom vitamin line at his website, Pinney said.
Greg French, a spokesman for Drugstore.com, said the suit was filed in Denver because it is a “neutral location.” The company hired Denver-based Brownstein Hyatt & Farber to handle the case.
The suit describes in detail a variety of ways in which Weil has allegedly violated the agreement.
For example, Weil has rarely mentioned Drugstore.com or his ventures with the website during his media appearances, as called for in the contract, according to the complaint.
During appearances on CNN’s “Larry King Live” and MSNBC’s now discontinued “Deborah Norville Tonight,” both in late 2004, Weil “promoted all or most of his partners except Drugstore.com,” the suit alleges.
It claims Weil also has failed to sufficiently promote the Vitamin Advisor, a page on Weil’s website that sells vitamins via Drugstore.com.
“Weil has mentioned publicly the Vitamin Advisor only a few times,” the suit claims.
In another example cited in the complaint, Weil is required under the agreement to make at least one public appearance, “at Drugstore.com’s reasonable request,” to promote their mutual sites.
“Nevertheless, despite Drugstore.com’s reasonable requests, Weil refused to make a public appearance in 2004 and has thus far refused to do so in 2005,” the suit said.
University of Denver associate law professor Celia Taylor said Weil could argue that he fulfilled his obligations to a “commercially reasonable” standard. That would mean he acted in a reasonable manner under given circumstances, she said. According to the complaint, that is the standard called for in the contract.
“The question of what is commercially reasonable is a tough question of fact,” she said.
The relationship between Weil and Drugstore.com began in April 2003, when the online pharmacy acquired Custom Nutrition Services Inc., which had exclusive rights for online sales of Weil-endorsed vitamins.
Later that year they renegotiated and expanded the contract.
Staff writer Greg Griffin can be reached at 303-820-1241 or ggriffin@denverpost.com.
