[Federal Register Volume 64, Number 62 (Thursday, April 1, 1999)]
[Notices]
[Pages 15803-15805]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-7932]
-----------------------------------------------------------------------
DEPARTMENT OF JUSTICE
Drug Enforcement Administration
[Docket No. 97-19]
Cadiz Thrift-T Drug, Inc., Termination of Registration
On June 3, 1997, the Deputy Assistant Administrator, Office of
Diversion Control, Drug Enforcement Administration (DEA) issued an
Order to Show Cause to Cadiz Thrift-T Drug, Inc. (Respondent) of Cadiz,
Kentucky, notifying it of an opportunity to show cause as to why DEA
should not revoke its DEA Certificate of Registration BC5009421
pursuant to 21 U.S.C. 824(a)(1), (2) and (4), and deny any applications
for renewal of such registration as a retail pharmacy pursuant to 21
U.S.C. 823(f), for reason that the pharmacy ``falsified an application
for registration, an owner-operator of the pharmacy was convicted of a
felony related to controlled substances, and your continued
registration is inconsistent with the public interest. . . .''
By letter dated June 30, 1997, Respondent filed a request for a
hearing, and following prehearing procedures, a hearing was held in
Nashville, Tennessee on October 29 and 30, 1997, before Administration
Law Judge Gail A. Randall. At the hearing, both parties called
witnesses to testify and introduced documentary evidence. After the
hearing both parties filed proposed findings of fact, conclusions of
law and argument. On July 31, 1998, Judge Randall issued her Opinion
and Recommended Ruling, recommending that Respondent's DEA registration
be revoked, but that the revocation be stayed for three years.
On August 20, 1998 both parties filed exceptions to the Opinion and
Recommended Ruling of the Administrative Law Judge. In addition, on
August 20, 1998, Respondent filed a Motion to Dismiss arguing that
Respondent has ceased doing business
[[Page 15804]]
and surrendered its DEA Certificate of Registration and as a result
these proceedings are moot. The Government filed its Response to Motion
to Dismiss on August 25, 1998, arguing that the record is closed and
any consideration of new evidence ``ought to be rejected.'' The
Government also argued that if Respondent's motion is considered it
should be denied based upon a prior DEA decision. On September 10,
1998, Jude Randall transmitted the record of these proceedings to the
then-Acting Deputy Administrator.
The Deputy Administrator concludes that it is proper to consider
Respondent's Motion to Dismiss since it was filed before the record was
transmitted to him and because it raises the issue of whether there is
even a viable DEA registration capable of revocation in this matter.
Accordingly, the Deputy Administrator has considered the record in its
entirety, including Respondent's Motion to Dismiss and the Government's
response thereto, 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.
Respondent was issued DEA Certificate of Registration BC5009421 on
August 23, 1996. On June 30, 1997, DEA issued Respondent an Order to
Show Cause proposing to revoke its DEA registration. Specifically, the
Order to Show Cause alleged that:
1. On July 27, 1993, [Respondent] renewed its DEA registration,
AC1370597, as a retail pharmacy at a registration location of 11
Hospital Street, Cadiz, Kentucky. The registrant held Kentucky
Pharmacy permit #P01465. At that time, David C. Smith was the chief
pharmacist, as well as a co-owner and corporate president.
2. On August 4, 1994, the DEA Louisville Resident Office
conducted an inspection of the records of [Respondent], owned and
operated by David C. Smith. The audit revealed that there were
shortages and overages of Schedule II, III, and IV controlled
substances. Such discrepancies indicate a failure to keep complete
and accurate records in violation of 21 CFR 1304-21.
3. On or about September 15, 1994, David C. Smith admitted to an
inspector of the Kentucky Board of Pharmacy that the pharmacy had
dispensed or refilled prescriptions for patients without physician
authorization.
4. On or about November 16, 1994, the Kentucky Board of Pharmacy
entered an Agreed Order suspending the pharmacist's license of David
C. Smith for three months.
5. Pursuant to an Information before the United States District
Court for the Western District of Kentucky, David C. Smith was
charged with two counts of distributing the Schedule IV controlled
substances Xanax and propoxyphene on May 20, 1993, in violation of
21 U.S.C. 841(a)(1). On or about July 19, 1996, David C. Smith
entered a plea agreement with the United States Attorney, agreeing
to plead guilty to both felony counts.
6. Thomas C. Smith submitted, on behalf of [Respondent], an
application for a DEA registration as a retail pharmacy dated July
30, 1996. The registered location was designated as 11 Hospital
Street, Cadiz, Kentucky. The applicant indicated that it held
Kentucky Pharmacy permit #P01465. Thomas C. Smith is a co-owner and
corporate officer, and the father of David C. Smith. The DEA
subsequently issued registration number BC5009421 to [Respondent].
7. The July 30, 1996, application contained a material
falsification by indicating ``no'' to a question which asked, in
part, ``has any officer, partner, stockholder or proprietor . . .
ever had a State professional license or controlled substance
registration revoked, suspended, denied, restricted, or placed on
probation.'' The corporation and its officers knew that on or about
November 16, 1994, the Kentucky Board of Pharmacy entered an Agreed
Order suspending the pharmacist's license of David C. Smith, President
and chief pharmacist of [Respondent], for three months.
8. [Respondent's] Certificate of Registration, AC1370597,
expired on August 31, 1996, and was not renewed.
9. On or about September 2, 1996, [Respondent] submitted
information to the Kentucky Pharmacy Board indicating a ``change in
ownership.'' As a result, Kentucky Pharmacy permit #P01465 was
``closed'' and a new Kentucky Pharmacy permit #06246 was issued to
[Respondent]. The DEA was not notified in accordance with the
requirements of 21 CFR Sec. 1307.14.
10. On November 25, 1996, David C. Smith, pursuant to the
earlier plea agreement, was sentenced to two years probation by the
United States District Court for the Western District of Kentucky.
11. [Respondent] has continued to employ David C. Smith as
pharmacist-in-charge in violation of 21 CFR 1301.76(a).
Following a hearing regarding the allegations raised in the Order
to Show Cause, Judge Randall issued her Opinion and Recommended Ruling
on July 31, 1998, recommending that Respondent's registration be
revoked but that the revocation be stayed for three years upon the
condition that David Smith not be allowed to work in Respondent
pharmacy without a DEA waiver of 21 CFR 1301.76(a).
Subsequently, on August 20, 1998, Respondent filed a Motion to
Dismiss with attachments indicating that Respondent was sold on May 24,
1998 and its DEA Certificate of Registration was surrendered to DEA.
Respondent argued that these proceedings are moot since Respondent
pharmacy is no longer in business and is not using the DEA registration
that is the subject of these proceedings. In its response to
Respondent's motion, the Government argued that ``the issue regarding
Respondent's continued registration is not rendered moot by any
unilateral decision of Respondent's officers to discontinue their
corporate form of business.'' The Government further argued that ``once
an order to show cause has been initiated, there is continued
jurisdiction over a registration consistent with DEA precedent.'' In
support of its arguments, the Government cited the case of Park and
King Pharmacy, 52 FR 13,136 (1987), where the then-Administrator
revoked the DEA registration even though the pharmacy was sold in the
midst of the proceedings.\1\ The then-Administrator found that a
registration subject to ongoing administrative proceedings cannot be
unilaterally terminated pursuant to 21 CFR 1301.62 \2\ by the
registrant by discontinuing business. Specifically, the then-
Administrator noted that ``permitting a registrant to terminate his
registration unilaterally, during the eleventh hour of a proceeding to
revoke that registration, would permit the registrant to avoid any of
the collateral effects of revocation and could require the
Administrator to grant the individual another full evidentiary hearing
should he decide to re-establish his business or professional practice
and apply for a new registration shortly thereafter.''
---------------------------------------------------------------------------
\1\ In Park and King Pharmacy, the pharmacy's DEA registration
also expired during the proceedings, however that aspect of the case
will not be discussed here since it is not relevant to the issues in
this proceeding.
\2\ At the time of the decision in Park and King Pharmacy the
provision regarding the termination of a registration was found in
21 CFR 1301.62. That provision has since been renumbered and can now
be found in 21 CFR 1301.52.
---------------------------------------------------------------------------
In addition, the then-Administrator found in Park and King Pharmacy
that 21 CFR 1301.37(a) \3\ ``effectively precludes an applicant's
abrupt and unilateral termination of proceedings by requiring the
Administrator's permission for withdrawal of an application at any time
after issuance of the Order to Show Cause.'' The then-Administrator
reasoned that it is the ``application'' and not the applicant that is
the subject of the proceedings and found that it is similarly the
``registration,'' and not the registrant who possessed it, that becomes
the subject of revocation proceedings. As a result, the then-
Administrator concluded that a registration cannot be withdrawn without
the Administrator's prior approval.
---------------------------------------------------------------------------
\3\ This provision has since been renumbered as 21 CFR
1301.16(a).
---------------------------------------------------------------------------
The Government in its response to Respondent's motion also argued
that Respondent did not ``surrender'' its DEA registration but merely
tendered it to
[[Page 15805]]
DEA for retirement, ``and that no action has been taken, nor is any
action contemplated . . . for reason that Respondent's registration
record currently has an administrative code ``O'' placed on it, which
forecloses all administrative action pending the outcome of a show
cause proceeding. Accordingly, DEA has not accepted this tender.''
The Deputy Administrator agrees with the Government that the
chronology of this case is similar to that of Park and King Pharmacy.
Respondent was sold after the Order to Show Cause was issued.
Therefore, according to the decision in Park and King Pharmacy,
Respondent's registration should not be considered terminated and
should be capable of revocation. However, the Deputy Administrator is
troubled by the decision in Park and King Pharmacy. The Deputy
Administrator can find nothing in the statute or regulations nor any
other notice to the public that a registration does not terminate upon
the sale of a pharmacy if an Order to Show Cause has been issued.
Pursuant to 21 CFR 1301.16, permission is needed to amend or withdraw
an application once an Order to Show Cause has been issued, but there
is no similar provision regarding a registration. Therefore, no
permission is needed to terminate a registration. In fact, 21 CFR
1301.52(a) specifically states that, ``the registration of any person
shall terminate if and when such person dies, ceases legal existence,
or discontinues business or professional practice.'' (emphasis added)
The Deputy Administrator recognizes the then-Administrator's
concerns in Park and King Pharmacy that to permit termination after an
Order to Show Cause has been issued allows a registrant to avoid the
consequences of a revocation. However, pursuant to 21 CFR 1301.52(a) a
registration automatically terminates when a pharmacy ceases legal
existence or discontinues business or professional practice. The Deputy
Administrator can find no authority to support the prevention of a
termination, and therefore finds no authority to support the then-
Administrator's conclusion in Park and King Pharmacy that a
registration does not terminate upon the sale of a pharmacy if an Order
to Show Cause has been issued.
In fact in AML Corporation, d/b/a G & O Pharmacy, and G & O
Pharmacy, 61 Fed. Reg. 8973 (1996), decided subsequent to Park and King
Pharmacy, the then-Deputy Administrator concluded that a pharmacy's
registration terminated upon the sale of the pharmacy even though the
sale occurred in the midst of administrative proceedings regarding the
registration.\4\ The then-Deputy Administrator noted ``that pursuant to
21 CFR 1301.62, the transfer of ownership of G & O Pharmacy to AML
effectively terminated all authority granted under DEA Certificate of
Registration, AG2999691, previously issued to G & O Pharmacy.''
---------------------------------------------------------------------------
\4\ In that case, the Government also sought to revoke the new
pharmacy's DEA registration and the proceedings were consolidated.
---------------------------------------------------------------------------
Accordingly, the Deputy Administrator concludes that DEA
Certificate of Registration BC5009421, previously issued to Cadiz
Thrif/T Drug, Inc. terminated as of May 24, 1998, when it discontinued
business upon its sale to Hospital Street Pharmacy, Inc. Therefore
there is no viable DEA Certificate of Registration capable of
revocation as proposed in the June 3, 1997 Order to Show Cause. This
order is effective immediately.
Dated: March 15, 1999.
Donnie R. Marshall,
Deputy Administrator.
[FR Doc. 99-7932 Filed 3-31-99; 8:45 am]
BILLING CODE 4410-09-M