[Federal Register Volume 69, Number 5 (Thursday, January 8, 2004)]
[Notices]
[Pages 1304-1307]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-346]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration


City Drug Company; Denial of Application

    On November 19, 2002, the Deputy Assistant Administrator, Office of 
Diversion Control, Drug Enforcement Administration (DEA), issued an 
Order to Show Cause to City Drug Company (City Drug) notifying the 
applicant of an opportunity to show cause as to why DEA should not deny 
its pending

[[Page 1305]]

application for DEA Certificate of Registration as a retail-pharmacy 
pursuant to 21 U.S.C. 823(f). As a basis for the denial, the Order to 
Show Cause alleged that City Drug's registration would be inconsistent 
with the public interest. The Order to Show Cause also notified City 
Drug that should not request for a hearing be filed within 30 days, its 
hearing right would be deemed waived.
    The Order to Show Cause was sent by certified mail to City Drug at 
its proposed registered location in Opp, Alabama and was received on 
November 26, 2002. DEA has not received a request for hearing or any 
other reply from City Drug or anyone purporting to represent the 
pharmacy in this matter.
    Therefore, the Acting Deputy Administrator of DEA, finding that (1) 
30 days having passed since the attempted delivery of the Order to Show 
Cause at the applicant's last known address, and (2) no request for 
hearing having been received, concludes that City Drug is deemed to 
have waived its hearing right. See David W. Linder, 67 FR 12579 (2002). 
After considering material from the investigative file in this matter, 
the Acting Deputy Administrator now enters her final order without a 
hearing pursuant to 21 CFR 1301.43(d) and (e) and 1301.46.
    The Acting Deputy Administrator finds that on February 8, 2002, a 
new application was submitted on behalf of City Drug for DEA 
registration as a retail pharmacy. The application was submitted and 
signed by Joseph G. Grimes, the President and owner of City Drug, and 
that application is the subject of the current proceedings.
    The Acting Deputy Administrator finds that prior to the submission 
of its most recent registration application, City Drug previously 
possessed DEA Certificate of Registration AC5430450. On August 29, 
1996, an Order to Show Cause was issued proposing to revoke that 
registration, and deny any pending applications for registration under 
21 U.S.C. 823(f), for reason that City Drug's continued registration 
would be inconsistent with the public interest pursuant to 21 U.S.C. 
824(a)(4).
    Following an April 15, 1997, administrative hearing in Mobile, 
Alabama, the presiding Administrative Law Judge Gail A. Randall (Judge 
Randall) recommended that City Drug's DEA Certificate of Registration 
be revoked. Judge Randall further recommended however that favorable 
consideration be given to any future application for registration 
submitted by City Drug, should the pharmacy provide persuasive evidence 
of procedural changes for the dispensing of controlled substances. 
While the then-Acting Deputy Administrator did not adopt the latter 
recommendation, he did adopt Judge Randall's recommendation with 
respect to revocation of City Drug's Certificate of Registration. 
Accordingly, City Drug's previous DEA registration was revoked, 
effective November 13, 1997. See 62 FR 53338 (October 14, 1997).
    In revoking City Drug's DEA registration, the then-Acting Deputy 
Administrator relied upon evidence that in 1992, an investigation 
revealed that between January 1990 and January 1992, the pharmacy 
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 City Drug 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 City Drug'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 City Drug 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 City 
Drug violated 21 U.S.C. 827, by failing to maintain complete and 
accurate records of controlled substances, as evidenced by the 
pharmacy'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. With respect to the failure of Joseph Grimes to 
accept responsibility for past improper conduct, the then-Acting Deputy 
Administrator found 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 
demonstrates that [City Drug] 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.

    The Acting Deputy Administrator also finds that on November 13, 
1997, City Drug submitted an application for a new Certificate of 
Registration as a retail pharmacy. The application was submitted on 
behalf of City Drug by Louie Grimes, a pharmacist and the nephew of 
Joseph Grimes. DEA again issued an Order to Show Cause on February 24, 
1998, seeking the denial of City Drug's previous application, and a 
hearing was held in Mobile, Alabama on October 28, 1998, before 
Administrative Law Judge Mary Ellen Bittner (Judge Bittner). On June 
30, 1999, Judge Bittner issued her Opinion and Recommended Ruling, 
Findings of Fact, Conclusions of Law and Decision, recommending that 
City Drug's application for a DEA Certificate of Registration be 
denied. Accordingly, and effective November 2, 1999, DEA denied City 
Drug's previous application for registration. 64 FR 59212 (November 2, 
1999).
    In that final order, the then-Deputy Administrator found that on 
November 12, 1997, the day before the effective date of the revocation 
of City Drug'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 
City Drug to Louie Grimes. The ``other good and valuable 
consideration'' noted in the Bill of Sale was an oral agreement that 
Joseph Grimes would continue to work at City Drug 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 was authorized to transfer his life estate in city Drug 
but that the pharmacy would revert back to Joseph Grimes upon his 
nephew's death.
    As noted in the November 2, 1999, final order, evidence was 
presented from the 1992 investigation concerning Louie Grimes' 
involvement in the operation of the pharmacy at that time, including 
his dispensation of 870 dosage units of controlled substances that had 
not been authorized by a prescribing physician. The then-Deputy 
Administrator also found that while Louie Grimes was the owner of City

[[Page 1306]]

Drug, he was also a pharmacist at City Drug working three days a week, 
during 1990 to 1992, when unlawful dispensing practices were 
documented. The then-Deputy Administrator further referenced evidence 
which 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. The then-Deputy Administrator 
concluded that Louie Grimes was responsible for the unlawful 
dispensation of approximately 1,400 dosage units of controlled 
substances.
    In addition, despite the apparent change of ownership of City Drug, 
the then-Deputy Administrator nevertheless found that Joseph Grimes 
continued to receive employment, salary and rent from City Drug, and he 
held a reversionary ownership interest in the pharmacy. The then-Deputy 
Administrator concluded that Joseph Grimes continued to derive a 
benefit from City Drug's operation. The then-Deputy Administrator 
further concluded 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 [City Drug] are too close to ensure that Joseph Grimes will 
have no influence in the operation of [City Drug].''
    The Acting Deputy Administrator's review of the investigative file 
reveals that with respect to City Drug's most recent application for 
registration, DEA personnel from the Mobile, Alabama Resident Office 
(the Mobile R.O.) requested from Joseph Grimes information on whether 
he had attained any subsequent education with respect to the handling 
of controlled substances and whether any steps were taken towards 
improvement in recordkeeping. On March 22, 2002, the Mobile R.O. 
received from Joseph Grimes a five page facsimile consisting of a cover 
page, and accompanied by a photocopy of the Pharmacist's Manual, 
Certificate of Continuing Education Participation titled ``Pain 
Management for the RPh.,'' Certificate of Continuing Education 
Participation titled ``Pain Management for the Pharmacists,'' and 
Statement of Continuing Pharmaceutical Education Credit titled ``Use of 
Opiods in Chronic Non-Cancer Pain.''
    On the face of the cover page was a handwritten index which listed 
the following: ``(1) Continuing Education material, (2) Pharmacist 
Controlled Substances Manual, (3) Proposal to keep accurate records for 
controlled drugs, [and] (4) Conscientious effort to comply with all 
requirements involved with DEA certificate.'' The index was signed 
``J.G. Grimes, RPh.'' Listed under heading number (3) ``Proposal to 
keep accurate records,'' et. al., were the following:
    (A) File prescriptions separately;
    (B) Careful control of order books;
    (C) Identify time and name of persons calling in prescriptions that 
are allowed by phone;
    (D) Careful scrutiny of controlled drug prescriptions in 
determining authenticity of prescriptions, and ,
    (E) Large red color ``C'' on each narcotic or controlled 
prescription.
    Absent from the supplied materials was any information 
demonstrating Joseph Grimes' familiarity with controlled substance 
regulations, diversion prevention or recordkeeping. In addition, Joseph 
Grimes did not provide information on specific procedures that would be 
employed at City Drug for maintaining accurate controlled substances 
inventories and accountability.
    Pursuant to 21 U.S.C. 823(f), the Acting Deputy Administrator may 
deny an application for a DEA Certificate of Registration if she 
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 Acting 
Deputy Administrator may rely on anyone or a combination of factors and 
may give each factor the weight she 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, there is no information before the Acting 
Deputy Administrator with respect to the State licensure status of City 
Drug. In prior DEA proceedings involving City Drug however, the agency 
found that the pharmacy was in fact licensed to handled controlled 
substances in Alabama. But as Judge Bittner noted in the prior 
proceeding, ``inasmuch as State licensure is a necessary but not 
sufficient condition for a DEA registration * * * this factor is not 
determinative.'' 64 FR at 59212.
    Factors two and four, City Drug'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. 
City Drug's previous DEA registration was revoked based upon the then-
Acting Deputy Administrator's findings that City Drug could not account 
for over 80,000 dosage units of controlled substances and that the 
pharmacy had dispensed more than 25,000 dosage units of controlled 
substances without a physician's authorization. The then-Acting Deputy 
Administrator did not find City Drug'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).
    Factors two and four are also relevant to evidence presented at a 
prior DEA proceeding that Louie Grimes, the purported new owner of City 
Drug was responsible for the unlawful dispensation of approximately 
1,400 dosage units of controlled substances. 64 FR 59212. Louie Grimes' 
prior contentions that physicians were mistaken, that they had in fact 
authorized the prescriptions in question, as well as others, were 
rejected by the then-Acting Deputy Administrator, and those conclusions 
remain binding for purposes of this proceeding. Id.
    Regarding factor three, there is no evidence that City Drug or its 
owner or employees have ever been convicted under State or Federal laws 
relating to the manufacture, distribution, or dispensing of controlled 
substances. As to factor five, while not necessarily relying on such 
evidence, the then-Deputy Administrator nevertheless referenced 
evidence presented by the government at a prior proceeding questioning 
the legitimacy of the transfer of City Drug from Joseph Grimes to Louie 
Grimes and also the role that Joseph Grimes would play in City Drug's 
future management. Id. at 59212.
    The Acting Deputy Administrator concludes that City Drug's 
registration would be inconsistent with the public

[[Page 1307]]

interest. As noted by my predecessors, from 1990 to 1992, City Drug 
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. The Acting Deputy Administrator 
remains concerned that City Drug has yet to 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.
    The Acting Deputy Administrator however notes that Joseph Grimes 
has apparently directed his efforts toward educating himself on the 
proper handling of controlled substances, as evidenced by the 
information provided with his most recent DEA registration application. 
Such evidence may be given favorable consideration in conjunction with 
a future application for registration. However, without credible 
evidence of any procedural changes having taken place at City Drug, and 
the lack of acknowledgement or explanation for previous shortages of 
large quantities of controlled substances, the Acting Deputy 
Administrator remains unconvinced that the granting of the pending 
application of City Drug is consistent with the public interest.
    The Acting Deputy Administrator acknowledges that many of the 
violations recited above took place more than 10 years ago. However, in 
light of City Drug's failure to request a hearing in this matter, and 
the absence of evidence to rebut the above allegations, the Acting 
Deputy Administrator is left with the conclusion that the applicant has 
not corrected the deficiencies which led to the revocation of its 
previous Certificate of Registration and the denial of a previous 
application for registration. City Drug, although given the opportunity 
to request a hearing or to submit a written statement, has failed to do 
either. Thus, the facts recited above stand uncontroverted. See, 
Ruggero Angiolicchio, M.D., 58 FR 14426 (March 17, 1993). In view of 
the foregoing, the Acting Deputy Administrator reiterates that City 
Drug cannot be entrusted to handle controlled substances, and the 
granting of its application would not be in the public interest.
    Accordingly, the Acting Deputy Administrator of the Drug 
Enforcement Administration, pursuant to the authority vested in her by 
21 U.S.C. 823 and 824 and 28 CFR 0.100(b) and 0.104, hereby orders that 
the application for DEA Certificate of Registration executed by City 
Drug Company be, and it hereby is, denied. This order is effective 
February 9, 2004.

    Dated: December 18, 2003.
Michele M. Leonhart,
Acting Deputy Administrator.
[FR Doc. 04-346 Filed 1-7-04; 8:45 am]
BILLING CODE 4410-09-M