[Federal Register Volume 64, Number 211 (Tuesday, November 2, 1999)]
[Notices]
[Pages 59212-59214]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-28602]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration
[Docket No. 98-20]


City Drug Co.; Denial of Application

    On February 24, 1998, the Deputy Assistant Administrator, Office of 
Diversion Control, Drug Enforcement Administration (DEA) issued an 
Order to Show Cause to City Drug Company (Respondent) of Opp, Alabama, 
notifying it of an opportunity to show cause as to why DEA should not 
deny its application for registration as a retail pharmacy under 21 
U.S.C. 823(f), for reason that such registration would be inconsistent 
with the public interest.
    By letter received by DEA on March 30, 1998, Respondent requested a 
hearing on the issues raised by the Order to Show Cause. Following 
prehearing procedures, a hearing was held in Mobile, Alabama on October 
28, 1998, before Administrative Law Judge Mary Ellen Bittner. At the 
hearing, both parties called witnesses to testify and introduced 
documentary evidence. After the hearing, both parties submitted 
proposed findings of fact, conclusions of law, and argument. On June 
30, 1999, Judge Bittner issued her Opinion and Recommended Ruling, 
Findings of Fact, Conclusions of Law and Decision, recommending that 
Respondent's application for a DEA Certificate of Registration be 
denied. Neither party filed exceptions to Judge Bittner's opinion and 
on August 10, 1999, Judge Bittner 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. 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 Respondent is a pharmacy that 
is located in Opp, Alabama. Joseph Grimes was Respondent's owner and 
pharmacist in charge until November 12, 1997. Respondent previously 
possessed DEA Certificate of Registration AC5430450, which was revoked, 
following a hearing, by the then-Acting Deputy Administrator in a final 
order dated October 7, 1997, and effective November 13, 1997. See 62 FR 
53338 (October 14, 1997).
    In revoking Respondent's previous DEA registration, the then-Acting 
Deputy Administrator concluded that a 1992 investigation revealed that 
between January 1990 and January 1992, Respondent violated 21 U.S.C. 
829 and 21 CFR 1306.04 by dispensing over 25,000 dosage units of 
controlled substances without a physician's authorization. The then-
Acting Deputy Administrator based this conclusion on affidavits 
submitted by 11 physicians who reviewed prescriptions found at 
Respondent that were attributed to them, compared these prescriptions 
to their patient charts, and then swore that they had not authorized 
the prescriptions. The then-Acting Deputy Administrator found 
unpersuasive Respondent's argument that the physicians had forgotten to 
note the issuance of the prescriptions in the patient charts, stating 
that it was ``highly unlikely that eleven different physicians forgot 
to note numerous prescriptions in the patient charts which accounted 
for the dispensing of over 25,000 dosage units of controlled 
substances.'' The then-Acting Deputy Administrator also found that the 
patients' affidavits submitted by Respondent were less reliable than 
the physicians' affidavits since the physicians' affidavits were 
``based upon a review of [their] patient records which were prepared 
and maintained during the relevant time period, whereas the patients' 
affidavits [were] based upon their recollection more than six years 
after the event.''
    The then-Acting Deputy Administrator further concluded that 
Respondent violated 21 U.S.C. 827, by failing to maintain complete and 
accurate records of controlled substances, as evidenced by Respondent's 
inability to account for more than 80,000 dosage units of Schedule III 
and IV substances, and to explain an overage of 859 dosage units of 
oxycodone 5 mg., the only Schedule II controlled substance that was 
audited.
    In revoking Respondent's previous DEA Certificate of Registration, 
the then-Acting Deputy Administrator states that:

    (Joseph) Grimes has failed to acknowledge that he and his 
pharmacy have done anything improper. An unexplained shortage of 
80,000 dosage units and the unauthorized dispensation of over 25,000 
dosage units of controlled substances are not merely minor technical 
violations. The egregious nature of the violations in this matter 
demonstrate that Respondent has failed miserably in its 
responsibility as a DEA registrant to protect against the diversion 
of controlled substances from the legitimate chain of distribution.

Id. at 53343.
    On November 12, 1997, the day before the effective date of the 
revocation of Respondent's previous DEA Certificate of Registration, 
Joseph Grimes executed a Bill of Sale that transferred, ``in 
consideration of ten dollars and other good and valuable 
consideration,'' a life estate in Respondent to Louie Grimes. Louie 
Grimes is Joseph Grimes' nephew and is also a pharmacist. The ``other 
good and valuable consideration'' noted in the Bill of Sale was an oral 
agreement that Joseph Grimes would continue to work at Respondent two 
days per week in return for $1,500 per month, and that he would also 
receive rent of $1,500 per month on the building in which the pharmacy 
is located. According to the attorney who drafted and notarized the 
Bill of Sale, Louie Grimes may transfer his life estate in Respondent 
but that the pharmacy would revert back to Joseph Grimes upon his 
nephew's death.
    Louie Grimes testified that when he took over operation of 
Respondent he withdrew the funds from the pharmacy's bank account and 
used those funds to open a new account in a different bank in 
Respondent's name. The utilities and business license fees are paid 
from this account, and Joseph Grimes is not authorized to sign any 
business check for Respondent. However, Louie Grimes was unaware that 
the utilities for the property where Respondent is located are listed 
in Joseph Grimes' name.
    On November 13, 1997, Louie Grimes executed the application that is 
the subject of these proceedings on behalf of Repondent. On the 
application, Louie Grimes answered ``No'' to a question which asked 
whether ``the applicant ever surrendered or had a Federal controlled 
substance registration revoked.''

[[Page 59213]]

    At the hearing regarding Respondent's pending application for 
registration, evidence was presented from the 1992 investigation 
concerning Louie Grimes' involvement in the operation of Respondent at 
that time. During the execution of the search warrant at Respondent on 
March 2, 1992, Joseph Grimes indicated that Louie Grimes worked part-
time at Respondent as a pharmacist. According to Louie Grimes, he 
worked three days a week and Joseph Grimes worked three days a week 
during the relevant time period. As discussed above prescription 
records were seized from Respondent and DEA investigations generated a 
computer report with information from these prescriptions, including 
the initials of the dispensing pharmacist. This information was later 
shown to eleven physicians who allegedly authorized a number of the 
prescriptions. Each of these physicians, after reviewing their patient 
charts, swore in written declarations that they did not prescribe most 
of the controlled substances attributed to them. The declarations of 
two of the physicians indicated that Louie Grimes dispensed 870 dosage 
units of controlled substances that they had not authorized. In 
addition, the declarations revealed eight instances, when Louie Grimes 
refilled controlled substance prescriptions more than five times or 
more than six months after issuance of the original prescription in 
violation of 21 U.S.C. 829(b), for a total of 550 dosage units.
    Louie Grimes testified at the hearing that he never dispensed a 
controlled substance without a physician's authorization and that he 
never refilled a controlled substance prescription more than five times 
or after six months from its being issued. In an effort to refute the 
physicians' declarations, Louie Grimes argued that nurses frequently 
telephone in prescriptions for physicians to pharmacies and in these 
instinces probably failed to note them in the patient charts. This 
explanation was rejected by the then-Acting Deputy Administrator in 
revoking Respondent's previous DEA registration as unlikely given the 
volume of authorized dispensation.
    Louie Grimes also argued that another possible explanation for his 
initials appearing next to the unauthorized prescriptions is that 
Respondent uses (and used during the relevant time period) a pharmacy 
software program to track prescriptions that requires the pharmacist on 
duty to enter his initials into the computer when he begins work. 
According to Louie Grimes, these initials remain in the system until 
the user exits the program or a pharmacist affirmatively changes the 
initials. Therefore if two pharmacists were on duty at the same time, 
one could not be absolutely sure which pharmacist filled a particular 
prescription.
    However, the Government entered into evidence a ``Daily Transaction 
Report'' created by Respondent for May 22, 1991, which lists orginal 
prescriptions in the order that they were dispensed at the pharmacy and 
the initials of the pharmacist that allegedly filled each prescription. 
This report indicates that Louie Grimes dispensed ten original 
prescriptions, Joseph Grimes then dispensed three original 
prescriptions, Louie Grimes then dispensed another four original 
prescriptions, and finally Joseph Grimes dispensed another ten original 
prescriptions.
    Louie Grimes testified at the hearing that although the Alabama 
State Board of Pharmacy required pharmacies to maintain a Daily 
Transaction Report on which the dispensing pharmacist for each 
prescription is identified by his initials, he could not be completely 
sure which pharmacist dispensed controlled substances at any given 
time. However, he also testified that ``we could pretty much go by 
initials,'' and that he believed that during the relevant time period, 
Respondent complied with 21 CFR 1304.24 and 1306.22, which required a 
pharmacy to maintain certain information, including the initials of the 
pharmacist who dispenses or refills a controlled prescription.
    After receiving Respondent's November 12, 1997 application for 
registration, DEA investigated whether ownership of Respondent had in 
fact been transferred. Louie Grimes produced documents pertaining to 
the transfer of ownership and a copy of his State pharmacy permit. As 
of November 13, 1997, Respondent has not been authorized to dispense 
controlled substances. Louie Grimes works as the pharmacist at 
Respondent four days per week and Joseph Grimes is the pharmacist two 
days per week. However, should Respondent become registered with DEA, 
Respondent would need a waiver of 21 CFR 1306.04(a) to continue to 
employ Joseph Grimes with access to controlled substances, in light of 
the earlier revocation of Respondent's DEA Certificate of Registration.
    Louie Grimes testified at the hearing in this matter that he has 
taken certain measures to ensure that no prescription drugs are 
dispensed without a prescription authorized by a physician. 
Specifically, he testified that for oral prescriptions, he notes the 
person who called in the prescription and the time of the call. 
Further, Respondent no longer uses doctors' prescription pads to reduce 
oral prescriptions to writing.
    A DEA investigator testified at the hearing that she had not 
received any complaints regarding Louie Grimes from physicians or the 
general public. Louie Grimes testified that he has never been charged 
with a crime and has never had any action taken against him by DEA or 
the State of Alabama. He further testified that he has never received 
any complaints from customers or anyone else regarding his conduct as a 
pharmacist.
    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 
the granting of a 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.
    (5) Such other conduct which may threaten the public health and 
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 a registration should be revoked or an application for 
registration denied. See Henry J. Schwartz, Jr., M.D., 54 FR 16422 
(1989).
    Regarding factor one, it is undisputed that Respondent is currently 
licensed to handle controlled substances in Alabama. But as Judge 
Bittner noted, ``inasmuch as State licensure is a necessary but not 
sufficient condition for a DEA registration, * * * this factor is not 
determinative.''
    Factors two and four, Respondent's experience in the dispensing of 
controlled substances and its compliance with applicable laws, are 
clearly relevant in this matter in determining the public interest. 
Respondent's previous DEA registration was revoked based upon the then-
Acting Deputy Administrator's findings that Respondent could not 
account for over 80,000 dosage units of controlled substances and that 
the Respondent had

[[Page 59214]]

dispensed more than 25,000 dosage units of controlled substances 
without a physician's authorization. The then-Acting Deputy 
Administrator did not find Respondent's explanation persuasive 
regarding the unauthorized dispensing of controlled substances. The 
then-Acting Deputy Administrator's findings regarding the previous 
revocation are res judicata for purposes of this proceeding. See 
Stanley Alan Azen, M.D., 61 FR 57893 (1996), Liberty Discount Drugs, 
Inc., 57 FR 2788 (1992).
    Louie Grimes is now the owner of Respondent. However, Louis Grimes 
was also a pharmacist at Respondent, working three days a week, during 
1990 to 1992, when the above violations occurred. Louie Grimes insists 
that he never dispensed a controlled substance in violation of Federal 
laws and regulations. But, the Government presented evidence that Louie 
Grimes was responsible for the unlawful dispensation of approximately 
1,400 dosage units of controlled substances.
    Louie Grimes' contention that the physicians were mistaken and that 
they had in fact authorized the prescriptions in question was rejected 
by the then-Acting Deputy Administrator, and his conclusions are 
binding for purposes of this proceeding.
    Louie Grimes' other contention that his initials appeared next to 
unauthorized dispensations because changes were not made in the 
computer is also rejected by the Deputy Administrator. The Daily 
Transaction Report generated by Respondent for May 22, 1991, shows 
that, at least on that day, the pharmacist's initials were changed 
throughout the day. Further, Louie Grimes' own testimony at the hearing 
was contradictory. On the one hand, he maintained that Respondent's 
computer program made it impossible to be certain who dispensed a 
controlled substance prescription when two pharmacists were on duty at 
the same time. But, he also testified that he was ``a hundred percent'' 
certain that he was always in compliance with State and Federal laws 
requiring that the dispensing pharmacist's initials appear next to each 
dispensation in the pharmacy's records.
    As Judge Bittner noted, this explanation was first raised at that 
hearing. Judge Bittner concluded that ``Louie Grimes' testimony 
regarding Respondent's computer program was a last-ditch attempt at 
avoiding responsibility for his actions during the relevant time period 
and that Louie Grimes did in fact on numerous occasions dispense 
controlled substances without a physician's authorization, or refill a 
prescription more than five times or after six months from its original 
issuance.''
    Regarding factor three, there is no evidence that Respondent or its 
owner or employees have ever been convicted under State of Federal laws 
relating to the manufacture, distribution, or dispensing of controlled 
substances.
    As to factor five, the Government contends that the legitimacy of 
the transfer of Respondent from Joseph Grimes to Louie Grimes and also 
the role that Joseph Grimes will play in Respondent's future management 
should be considered. ``The [Deputy] Administrator has long held that 
applications for registration should be denied where there is a 
likelihood that a transfer of ownership or control of business is 
actually an attempt to contravene the effects of a revocation.'' 
Hilltop Pharmacy, 53 FR 35936 (1988) (citing Darrow Drug, Inc., 49 FR 
39246 (1984) ). Similarly, the Deputy Administrator may look to who 
exerts influence over the registrant; sometimes the bonds linking the 
former owner to the new owner are too close to ensure that the former 
owner will have no influence over the operation of the pharmacy. See 
Monk's Pharmacy, 52 FR 8988 (1987), Carriage Apothecary, 52 FR 27599 
(1987).
    Judge Bittner did not make findings regarding the legitimacy of the 
transfer of ownership since the Government did not pursue this issue 
but instead focused on the immediate and potential future effect of the 
transfer. The then-Acting Deputy Administrator found that during the 
time that Joseph Grimes was Respondent's owner and managing pharmacist, 
Respondent ``failed miserably in its responsibility as a DEA 
registrant.'' Joseph Grimes continues to receive employment, salary and 
rent from Respondent. In addition, he holds a reversionary interest in 
Respondent. Therefore the Deputy Administrator concludes that Joseph 
Grimes continues to derive a benefit from Respondent's operation. The 
Deputy Administrator agrees with judge Bittner that `'Joseph Grimes' 
continued interest in Respondent, considered in conjunction with the 
Grimes' familial relationship and the nominal consideration for the 
life estate, lead * * * to the conclusion that the bonds linking Joseph 
Grimes with Louie Grimes and Respondent are too close to ensure that 
Joseph Grimes will have no influence in the operation of Respondent.''
    The Deputy Administrator agrees with Judge Bittner's conclusion 
that Respondent's registration would be inconsistent with the public 
interest. From 1990 to 1992, Respondent could not account for over 
80,000 dosage units of controlled substances and dispensed more than 
25,000 dosage units of controlled substances without a physician's 
authorization. During that time, Louie Grimes worked three days a week 
as a pharmacist at Respondent and some of the unauthorized 
dispensations are attributable to Louie Grimes. Yet Louie Grimes 
continues to lay blame elsewhere, with the physicians or the computer 
program, rather than accept responsibility for his actions. In 
addition, Respondent did not present any persuasive evidence of 
meaningful procedural changes since 1992 that would ensure that it will 
not again fail to account for controlled substances or dispense 
controlled substances without authorization. Further, the Deputy 
Administrator is troubled by Joseph Grimes' continued involvement with 
Respondent and his reversionary interest in Respondent.
    Accordingly, the Deputy Administrator of the Drug Enforcement 
Administration, pursuant to the authority vested in him by 21 U.S.C. 
823 and 824 and 28 CFR 0.100(b) and 0.104, hereby orders that the 
application for registration, executed by Respondent, be, and it hereby 
is , denied. This order is effective November 2, 1999.

    Dated: October 25, 1999.
Donnie R. Marshall,
Deputy Administrator.
[FR Doc. 99-28602 Filed 11-1-99; 8:45 am]
BILLING CODE 4410-09-M