[Federal Register Volume 60, Number 216 (Wednesday, November 8, 1995)]
[Notices]
[Pages 56354-56356]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-27676]



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DEPARTMENT OF JUSTICE
[Docket No. 94-27]


Hugh I. Schade, M.D.; Denial of Application

    On February 25, 1994, the Deputy Assistant Administrator, Office of 
Diversion Control, Drug Enforcement Administration (DEA), issued an 
Order to Show Cause to Hugh I. Schade, M.D., (Respondent) of San Jose, 
California, notifying him of an opportunity to show cause as to why DEA 
should not deny his pending application, executed on August 28, 1992, 
for registration as a practitioner under 21 U.S.C. 823(f), as being 
inconsistent with the public interest. Specifically, the Order to Show 
Cause alleged that: (1) In September and October 1987 a DEA inspection 
of the Respondent's registered location revealed discrepancies in his 
recordkeeping and security, including the storage of controlled 
substances at an unregistered location, and an audit revealed overages 
and shortages of controlled substances, including a shortage of 4,193 
dosage units of Diazepam, a Schedule IV controlled substance; (2) 
during the DEA audit, the Respondent and his wife admitted to 
personally using acetaminophen with codeine products and Anexsia, a 
Schedule III controlled substance, out of office stock, since 1985, 
without recording the usage; (3) on September 12, 1989, the Respondent 
was arrested on thirty-one counts of violating the California Health 
and Safety Code by prescribing controlled substances without a 
legitimate medical purpose and not in the usual course of professional 
practice; (4) on December 18, 1991, the Respondent was convicted in the 
Superior Court of California, Santa Clara County, of thirteen felony 
counts of issuing controlled substance prescriptions without medical 
cause and one count of manslaughter, arising out of a patient's drug 
overdose death.
    On March 1, 1994, the Respondent, through counsel, filed a timely 
request for a hearing, and following prehearing procedures, a hearing 
was held in San Francisco, California, on October 26 and 27, 1994, 
before Administrative Law Judge Paul A. Tenney. At the hearing, both 
parties called witnesses to testify and introduced documentary 
evidence, and after the hearing, counsel for both sides submitted 
proposed findings of fact, conclusions of law and argument. On January 
12, 1995, Judge Tenney issued his Findings of Fact, Conclusions of Law, 
and Recommended Ruling, recommending that the Respondent's application 
for registration be denied, and also writing that ``the Respondent is 
encouraged to reapply in about one year from the effective date of any 
final decision in this case.'' Neither party filed exceptions to his 
decision, and on February 15, 1995, Judge Tenney transmitted the record 
of these proceedings to the Deputy Administrator.
    The Deputy Administrator has considered the record in its entirety, 
and pursuant to 21 CFR 1316.67, hereby issues his final order based 
upon findings of fact and conclusions of law as hereinafter set forth. 
The Deputy Administrator adopts, in full, the Opinion and Recommended 
Ruling, Findings of Fact, Conclusions of Law and Decision of the 
Administrative Law Judge, and his adoption is in no manner diminished 
by any recitation of facts, issues and conclusions herein, or of any 
failure to mention a matter of fact or law.
    The Deputy Administrator finds that the parties have stipulated to 
the following: (1) That Anexsia, a brand name for a product containing 
hydrocodone, is a Schedule III narcotic 

[[Page 56355]]
controlled substance pursuant to 21 CFR 1308.13(e); (2) that codeine is 
a Schedule III narcotic controlled substance pursuant to 21 CFR 
1308.13(e); (3) that Tylenol No. 3, Tylenol No. 4, and Empirin with 
codeine, brand names for products containing codeine, are Schedule III 
narcotic controlled substances pursuant to 21 CFR 1308.13(e); and (4) 
that Diazepam is a Schedule IV narcotic controlled substance pursuant 
to 21 CFR 1308.14(c).
    In October 1986, an investigation was opened by the DEA after a 
Diversion Investigator received information that the Respondent had 
purchased controlled substances containing codeine and dihydrocodeinone 
in quantities in excess of average U.S. and California practitioners. 
An administrative inspection warrant was served on the Respondent's Los 
Gatos Boulevard location in September 1987. Prior to serving the 
warrant, the investigators determined that the Respondent had only one 
valid DEA registration, which was for his Los Gatos Boulevard office. 
However, investigators discovered that the Respondent was storing 
controlled substances at unregistered locations, to include his medical 
office on Crown Boulevard in San Jose, and his Almaden Valley 
residence. The investigators also discovered that the Respondent had 
failed to take a beginning inventory, to conduct a biennial inventory, 
and to properly complete DEA Form 222 for Schedule II controlled 
substances.
    An audit was conducted, and the Respondent was unable to account 
for approximately 3,000 dosage units of acetaminophen with codeine. 
Although he maintained that he did not know what happened to these 
dosage units, the Respondent admitted to the investigator that he and 
his wife had personally used this substance out of office stock without 
recording the usage. There were also overages and shortages of other 
controlled substances. Police reports reflected that in late 1983 and 
early 1984, controlled substances were stolen from the Respondent's 
office, but such thefts had not been reported to DEA, as required. 
However, the Respondent had a theft and loss of controlled substances 
in 1976 and reported that loss to both the local police and the DEA. 
Also, he testified that he was aware of the requirement to report such 
incidents to the DEA.
    The investigators also examined the physical security provided for 
the storage of controlled substances, noting that the storage room door 
was left ajar more than once, and since no staff members controlled 
access to the area, patients could enter and leave the room undetected. 
Investigators also learned from the Respondent that storage cabinets 
containing controlled substances were accessible to drug company 
representatives as well as patients, without staff supervision.
    Following the investigation, the Respondent was charged and 
convicted in a California Superior Court of involuntary manslaughter 
and 13 counts of unlawfully prescribing controlled substances. The 
Respondent appealed the conviction, and the appellate court affirmed 
the involuntary manslaughter conviction, and, with one judge 
dissenting, reversed the conviction for unlawfully prescribing 
controlled substances, finding that the trial court's failure to 
instruct sua sponte on the definition of the term ``addict'' was 
reversible error. See People versus Schade, 25 Cal. App. 4th 1605 (Cal. 
Ct. App. 1994).
    The manslaughter conviction stemmed from the Respondent's treatment 
of John Barker from December 11, 1985, until his suicide by means of an 
overdose of Tylenol and Darvon on September 17, 1987. The Report of the 
Respondent's Probation Officer, made of record, contained factual 
details concerning the manslaughter conviction. Specifically, in 
treating Mr. Barker, the Respondent prescribed codeine and depressants 
such as Restoril, Soridol, Soma, and Ativan. On September 9, 1986, the 
Respondent began prescribing Darvon or Darvocet to Mr. Barker, as well 
as Dalmane and Halcion. The Physicians' Desk Reference indicates a 
warning that Darvon should be prescribed with caution when the patient 
is also taking tranquilizers such as Halcion, Restoril, or Ativan.
    On August 21, 1987, Mr. Barker was hospitalized after a suicide 
attempt in which he took an overdose of multiple medications. The 
Respondent noted on Mr. Barker's record on August 24, 1987, that he was 
extremely depressed and had stated that he did intend to take his own 
life. On September 3, 1987, the Respondent prescribed a depressant, 
Xanax, and on September 11, 1987, the Respondent prescribed 100 tablets 
of Darvocet. After Mr. Barker's suicide attempt, relatives confronted 
the Respondent regarding the prescribed medications and their fear that 
Mr. Barker again would attempt suicide. The relatives were also 
concerned that the Respondent had released Mr. Barker too soon after 
his admission for the suicide attempt, for he was released from the 
hospital in less than 24 hours after his admission. On September 17, 
1987, Mr. Barker was found in his car with the engine running, and the 
initial impression of the coroner was death by carbon monoxide 
poisoning. However, results of an autopsy indicated a blood-alcohol 
level of 0.13 percent and toxic levels of Darvocet, while his carbon 
monoxide level was a low two percent.
    At the trial, Dr. Drottar, an emergency room physician, testified, 
among other observations, that the Respondent's dispensing of 100 
Darvocet tablets three days after a serious suicide attempt was 
criminal negligence. Psychiatrist Dr. Keins, who evaluated Mr. Barker 
at the Emergency Psychiatric Services on September 4, 1987, testified 
that giving Mr. Barker 100 Darvocet tablets at that time would be 
``like handing him a loaded gun,'' given his mental status and his 
depression.
    At the hearing before Judge Tenney, the Respondent testified that 
he had given no specific warnings to Mr. Barker concerning the use of 
Darvocet with alcohol. He also testified that at the time of his last 
visit with Mr. Barker, he did not seem depressed and was not 
threatening suicide. However, the Respondent also testified that, at 
that time, he did not know about the earlier emergency room overdose 
treatment.
    The Respondent has practiced medicine since 1962 and has a current 
California license to practice medicine. There are no current actions 
pending against him before the Medical Board of California. Several of 
the Respondent's patients testified on his behalf, recounting their 
friendship with him and his skill as a physician. The Respondent also 
testified, stating the corrective actions taken after DEA investigators 
informed him of the need for a DEA Certificate of Registration for each 
location where he dispensed controlled substances.
    Pursuant to 21 U.S.C. 823(f), the Deputy Administrator may deny an 
application for a DEA Certificate of Registration if he determines that 
such registration would be inconsistent with the public interest. 
Section 823(f) requires that the following factors be considered in 
determining the public interest:
    (1) The recommendation of the appropriate State licensing board or 
professional disciplinary authority.
    (2) The applicant's experience in dispensing or conducting research 
with respect to controlled substances.
    (3) The applicant's conviction record under Federal or State laws 
relating to the manufacture, distribution, or dispensing of controlled 
substances.
    (4) Compliance with applicable State, Federal, or local laws 
relating to controlled substances.

[[Page 56356]]

    (5) Such other conduct which may threaten the public health or 
safety.

These factors are to be considered in the disjunctive; the Deputy 
Administrator may rely on any one or a combination of factors and may 
give each factor the weight he deems appropriate in determining whether 
an application for registration should be denied. See Henry J. Schwarz, 
Jr., M.D., Docket No. 88-42, 54 FR 16422 (1989).
    In this case, all five factors are relevant. As to factor one, the 
Respondent has a current California license to practice medicine, and 
there are no current actions pending before the State medical board. 
Regarding factors two, ``experience in dispensing * * * controlled 
substances,'' and four, ``compliance with applicable State, Federal, or 
local laws,'' 21 U.S.C. 827(a)(3) and 21 CFR 1304.21 and 1304.24 
require a registrant who dispenses a controlled substance to maintain a 
current, complete, and accurate record of every such dispensing of the 
substance. Also sections 1304.11 to 1304.13, and 1305.06 of the Code of 
Federal Regulations establish requirements for inventory procedures and 
for completing DEA Form 222. Yet, the record contains evidence that the 
Respondent failed to conduct required inventories, was unable to 
account for about 3,000 dosage units of acetaminophen with codeine, 
incurred other shortages and overages of controlled substances 
relegated to his care, and failed to completely and accurately fill out 
the DEA Form 222. Additionally, both the Respondent and his wife 
personally used acetaminophen with codeine out of the office supply 
without recording their personal usage. Such disregard of recordkeeping 
requirements exemplify the basis for concern about potential diversion 
of controlled substances resulting from such improper accountability; 
concerns properly addressed under factors two and four.
    Also, 21 CFR 1301.23 requires a separate registration for each 
location in which controlled substances are to be dispensed, and 21 CFR 
1301.71 establish security requirements. Yet the Respondent stored 
controlled substances at his Crown Boulevard location and at his home, 
despite the lack of a valid DEA registration for either of those 
locations. Such actions demonstrate a disregard for these regulatory 
requirements. Further, the lax security procedures resulting in 
patients and drug company representatives having access to drug storage 
areas further demonstrate a disregard for security regulations.
    Finally, concerning factor five, the Respondent was convicted in 
State court of one count of involuntary manslaughter arising out of a 
patient's drug-overdose death in September 1987. The conviction was 
affirmed upon appeal. The Deputy Administrator assigns substantial 
weight to the pattern of behavior exhibited by the Respondent in his 
prescribing practices to this patient. The threat to the public health 
and safety of such practices directly impacts upon the public interest.
    Although the Deputy Administrator has taken into account the length 
of time the Respondent has practiced medicine, the lack of prior 
convictions or adverse State board action, and the testimony of the 
Respondent's witnesses concerning his contribution to his community and 
their opinion of his professional care, he also notes the lack of any 
evidence which provides assurances that the Respondent's future 
practice will include closer monitoring of patient symptoms and 
treatment, as well as compliance with Federal and State laws and 
regulations concerning the dispensing and storage of controlled 
substances. Such lack of mitigating evidence, coupled with the severity 
of the circumstances surrounding the involuntary manslaughter death of 
Mr. Barker, result in a conclusion that the granting of the 
Respondent's application for a DEA Certificate of Registration at this 
time would be inconsistent with the ``public interest'' under 21 U.S.C. 
823(f). Therefore, the Deputy Administrator finds that the public 
interest is best served by denying the Respondent's application for a 
DEA Certificate of Registration. If the Respondent reapplies and 
submits evidence showing corrective actions taken to bring his practice 
into conformance with DEA regulations, his application may receive more 
favorable consideration.
    Accordingly, the Deputy Administrator of the Drug Enforcement 
Administration, pursuant to the authority vested in him by 21 U.S.C. 
823, and 21 CFR 0.100(b) and 0.104, hereby orders that the Respondent's 
Application for a DEA Certificate of Registration be, and it hereby is, 
denied. This order is effective December 8, 1995.

    Dated: November 2, 1995.
Stephen H. Greene,
Deputy Administrator.
[FR Doc. 95-27676 Filed 11-7-95; 8:45 am]
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