[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]


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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.''
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    \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.
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    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.
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    \3\ This provision has since been renumbered as 21 CFR 
1301.16(a).
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    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.''
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    \4\ In that case, the Government also sought to revoke the new 
pharmacy's DEA registration and the proceedings were consolidated.
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    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