[Federal Register Volume 77, Number 152 (Tuesday, August 7, 2012)]
[Notices]
[Pages 47096-47106]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-19221]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration

[Docket No. 11-52]


Physicians Pharmacy, L.L.C.; Decision and Order

    On December 15, 2011, Administrative Law Judge Timothy D. Wing 
issued the attached recommended decision.\1\ Thereafter, the Government 
filed Exceptions to the ALJ's decision.
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    \1\ All citations to the ALJ's opinion are to the slip opinion 
as originally issued.
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    Having carefully considered the ALJ's recommended decision and the 
record in light of the Government's Exceptions, I have decided to adopt 
the ALJ's rulings, findings of fact, and conclusions of law except as 
discussed below.\2\ Accordingly, I will order that Respondent's 
application be granted.
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    \2\ I do not, however, adopt footnote 20 of the ALJ's opinion. 
See Kwan Bo Jin, 77 FR 35021, 35021 n.2 (2012). Moreover, to the 
extent the ALJ's decision suggests that a practitioner does not have 
an obligation to maintain effective controls against diversion of 
controlled substances because this is not a statutory factor under 
the public interest standard of section 823(f), see ALJ at 25-26, it 
should be noted that factor four authorizes the Agency to consider 
an applicant's compliance with applicable federal and state laws 
``relating to controlled substances'' and DEA regulations require 
that an applicant or registrant ``provide effective controls and 
procedures to guard against theft and diversion of controlled 
substances.'' 21 CFR 1301.71(a).
     However, I agree with the ALJ's rejection of the Government's 
contention that ``in assessing the public interest, the nature and 
amount of diversion of controlled substances in a geographical area 
is a legitimate area of inquiry and concern when determining whether 
an applicant should be granted a DEA registration.'' ALJ at 25 
(quoting Gov. Br. 4). Contrary to the Government's understanding, 
DEA has held that the public interest inquiry is not a free-wheeling 
inquiry but is guided by the specific factors set forth by Congress 
for the applicable category of registration. Gregory D. Owens, 74 FR 
36751, 36757 (2009). With respect to a practitioner (which includes 
a pharmacy), see 21 U.S.C. 823(f), these factors primarily focus on 
an applicant's past conduct and the likelihood of future compliance. 
Nothing in the texts of any of the five factors set forth in section 
823(f) remotely suggests that Congress granted the Agency the 
authority to deny an application based on its assessment of ``the 
nature and amount of diversion of controlled substances in a 
geographical area.'' Gov. Br. 4. 
     Indeed, this is simply the other side of the community impact 
coin. However, in multiple cases, DEA has held that such evidence is 
not relevant to any of the public interest factors and further noted 
that a rule which takes into account the impact on the community 
caused by not registering (or de-registering through a revocation 
proceeding) a particular practitioner is completely unworkable. See 
Linda Sue Cheek, 76 FR 66972, 66973 n.4 (2011) (quoting Owens, 74 FR 
at 36757) (```the ALJ's reasoning begs the question of how many 
patients from underserved areas would a practitioner have to treat 
to claim the benefit of the rule''').
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The Government's Exceptions

    The Government's principal contention is that Mr. Lawrence James, 
Respondent's pharmacist-in-charge, ``will not adequately fulfill his 
corresponding responsibility to prevent drug diversion.'' Exceptions at 
1. Ignoring that Mr. James has nearly forty years of experience as a 
registered pharmacist and has never been cited for any violation of 
state or federal laws, the Government argues that various portions of 
Mr. James' testimony support its contention.
    First, the Government's argues that ``[i]n testifying how he would 
prevent diversion and fraud, [its pharmacist-in-charge's] testimony 
focused on fraudulent prescriptions, including prescriptions that had 
been altered, stolen or forged by the prospective patient.'' Id. at 1-2 
(citing Tr. 51). Continuing, the Government argues that ``Mr. James did 
not address the significant diversion problem that exists with pill-
pushing physicians and [which] is the exact type of pernicious drug 
diversion that plagues southern Ohio and surrounding areas.'' Id. at 2. 
The Government based this contention on the following colloquy:

    Q [by Government Counsel]: Are you aware of any diversion 
schemes where the doctor was in cahoots with the patient to issue a 
prescription that wasn't for a legitimate medical purpose?
    A That question is also very tough because it relies upon 
basically the equivalent of hearsay evidence. I have heard of and 
been told of some of those things, but at the same difference--and I 
am sure somewhere in Ohio, somewhere in the United States, there 
probably are doctors, like down in Florida, that will have an 
arrangement with a patient where they will supposedly--the doctor 
will write them a prescription, they'll get it filled, and the 
doctor either gets a cut of the pills or whatever. Have I ever 
actually seen any of that or am I totally aware of like any 
specifics? No, I am not.

Tr. 52.
    While the Government finds this testimony remarkable in light of 
Mr. James' extensive experience as a Registered Pharmacist and the 
scope of the diversion problem in southern Ohio, it did not ask Mr. 
James any further questions regarding his awareness of doctors writing 
unlawful prescriptions. Nor did the Government pose to Mr. James any 
hypothetical questions regarding how he would handle prescriptions 
which raise red flags due to the quantity and strength of the drug or 
combination of drugs prescribed, as well as other relevant 
circumstances. Thus, to the extent Mr. James did not address to the 
Government's satisfaction the problems posed by prescriptions issued by 
pill-pushing physicians, the Government ignores that it (and not 
Respondent) had the burden of proof in this proceeding, see 21 CFR 
1301.44(d), and that Mr. James was only required to

[[Page 47097]]

answer those questions posed by the Government.\3\
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    \3\ However, it is also noted that prior to this colloquy, Mr. 
James testified that he believed that diversion of controlled 
substances is ``a major problem'' in both Ohio and nationally. Tr. 
44. Mr. James then explained: ``[j]ust look at the state of Florida 
where they have six doctors who basically from what I understand 
work out of the back of their house, back of their car, writing 
prescriptions for anybody who has $200 to give them whatever they 
want.'' Id. This testimony would seem to address the problem of 
pill-pushing physicians.
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    The Government also argues that ``Mr. James testified that, in his 
view, the corresponding responsibility requirement [of 21 CFR 
1306.04(a)] exists so the Government can `nail pharmacists and not go 
after doctors.''' Id. While that is true, Mr. James then acknowledged 
that this ``may be incorrect assumption'' but that it seemed to him 
``that they are much harder on pharmacists than they ever are on 
doctors until very recently.'' Tr. 53. Contrary to the Government's 
view, Mr. James' expression of opinion, whether correct or not, is not 
probative of whether he is likely to violate federal law.
    The Government further contends that Mr. James ``testified that he 
would fill any prescription written by a properly licensed physician 
unless he had a `personal reason' not to do so.'' Id. (citing Tr. 52). 
No such statement occurs at the cited portion of the transcript and the 
Government ignores the following answer Mr. James gave when asked to 
describe the responsibilities and duties of a pharmacist:

    A pharmacist's duties and responsibilities are to fill all 
legitimate and legal prescriptions. We are allowed at any point to 
refuse to fill any prescriptions that our own personal conscience 
thinks is not correct * * * we don't even really have to have a 
reason. I think I've only turned down two in my life for personal 
purposes. But to verify that the prescription is legal, legitimate 
for lawful use, and then to fill the prescriptions, counsel the 
patient, make sure they understand what they're taken for, answer 
any questions they may have. That's the rough idea.

Tr. 36.

    Indeed, the only evidence that supports the contention that Mr. 
James would fill any prescription as long as it was written by a 
licensed physician, was the testimony of a DI regarding a round-table 
discussion he had with the various principals of Respondent:

    Throughout the discussions, we talked heavily about diversion. I 
talked to Mr. James or asked Mr. James with regards to his opinion 
of the diversion problem in southern Ohio, and he alluded basically 
that he didn't think there was a diversion problem. I asked him 
about other pharmacists not filling prescriptions for pain 
management clinics that were located in southern Ohio. Mr. James was 
clear that he thought that was totally wrong of the pharmacist to 
even turn down the prescriptions as it's a legitimate prescription 
and pharmacists need not to turn those away.

Id. at 138-39.

    The DI offered no further testimony to the effect that he discussed 
with Mr. James the nature of the prescriptions that were being issued 
by the pain management clinics (the drugs, strength, and quantities, as 
well as other relevant circumstances which support a finding that the 
prescriptions were not legitimate) and which pharmacists were refusing 
to fill.\4\ Thus, this testimony does not support a finding that Mr. 
James will fill prescriptions even when he has reason to know that they 
have not been issued for a legitimate medical purpose.
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    \4\ In its Exceptions, the Government argues that the DI 
``provided an example of this model of drug diversion by one 
particular doctor in Ohio who prescribed large amounts of oxycodone 
and other controlled substances to individuals that resulted in 
numerous deaths.'' Exceptions at 3 (Tr. 130-31). Continuing, the 
Government argues ``[t]hese are the types of the prescriptions that 
Mr. James indicated that he would fill when he was interviewed by 
[the] DI.'' Id. (citing Tr. 138-39).
     It is true that the DI testified regarding the prescribing 
practices of Dr. Paul Volkman, an ex-registrant and now-convicted 
federal drug felon. However, the DI offered no testimony that he 
even discussed the type of prescriptions Volkman wrote with Mr. 
James, Tr. 130-31, let alone that Mr. James said he would fill such 
prescriptions. See id. at 138-39. Accordingly, there is no basis in 
the record to support the Government's contention.
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    While in determining the public interest, DEA is entitled to 
consider the likelihood of an applicant's future compliance with 
federal and state laws related to controlled substances, see 21 U.S.C. 
823(f)(4), federal law requires that the finding be based ``on 
consideration of the whole record'' and ``supported by * * * the 
reliable, probative, and substantial evidence.'' 5 U.S.C. 556(d) 
(emphasis added). The Government's Exceptions do not provide a 
persuasive reason to reject the ALJ's credibility findings with respect 
to Mr. James or his conclusion that Mr. James ``demonstrate[d] a 
sufficient understanding of a pharmacist's corresponding duties'' under 
21 CFR 1306.04.\5\ Accordingly, I adopt the ALJ's ultimate conclusion 
that the Government has not proved ``by substantial evidence that 
Respondent's registration would be inconsistent with the public 
interest as that term is used in 21 U.S.C. 823(f),'' ALJ at 29, and 
will order that Respondent's application for a DEA Certificate of 
Registration as a retail pharmacy be granted.\6\
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    \5\ The Government also takes exception to the ALJ's finding 
that Mr. Hillman, one of Respondent's owners ``was generally 
credible.'' Exceptions at 4. It argues that there are 
``inconsistencies between Mr. Hillman's answers to DEA's written 
questions * * * and his testimony at the hearing.'' Id. More 
specifically, the Government argues that while Mr. Hillman answered 
``no'' to a written question as to whether he had ``any interest, 
either personally or professionally'' in one of nine listed pain 
clinics, he testified at the hearing ``that he had a professional 
relationship with several clinics as their attorney.'' Id. (citing 
GX 2, at 4; GX 3, at 4; Tr. 123). Even ignoring that the written 
question is laced with ambiguity, on the questionnaire, Mr. Hillman 
answered ``yes'' to the question of whether he had ``ever 
represented owners and/or physicians in the above list in any civil 
or criminal procedures.'' See GX 2, at 5; GX 3, at 4.
     Furthermore, the Government offers no explanation as to why Mr. 
Hillman's representation of pain clinics in legal proceedings is 
relevant under any of the public interest factors.
    \6\ The Government takes exception to the ALJ's exclusion of a 
video recording on the ground that the Government failed to provide 
a written transcript of the recording as required by the ALJ's pre-
hearing ruling. Exceptions at 6. The Government contends that 
``[t]here is no statutory or regulatory requirement that a written 
transcript be provided.'' Id. However, under the Administrative 
Procedure Act, the ALJ is authorized to ``regulate the course of the 
hearing,'' 5 U.S.C. 556(c), and requiring the production of a 
transcript for a recording which a party seeks to admit into the 
record, clearly falls within this power. While it appears that this 
case was reassigned to the lawyer who tried it, the pre-hearing 
ruling was issued more than three months before the hearing, and 
thus, the Government had ample time to comply with the Judge's 
ruling. Moreover, while the Government noted that Respondent 
stipulated to the admission of the exhibit, it is the Judge (and not 
the parties) who runs the proceeding.
     Nor is it clear why the video, which according to the 
Government is of a meeting between Mr. Hillman and members of the 
community during which the latter expressed their concerns about 
diversion, is relevant to any of the public interest factors. In any 
event, the DVD was corrupted and could not be played. I therefore 
reject this exception.
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Order

    Pursuant to the authority vested in me by 21 U.S.C. 823(f) and 28 
CFR 0.100(b), I order that the application of Physicians Pharmacy, 
L.L.C., for a DEA Certificate of Registration as a retail pharmacy, be, 
and it hereby is, granted. This Order is effective immediately.

    Dated: July 25, 2012.
Michele M. Leonhart,
Administrator.
Paul E. Soeffing, Esq.,
D. Linden Barber, Esq., for the Government

Steven E. Hillman, Esq., for the Respondent

Recommended Ruling, Findings of Fact, Conclusions of Law and Decision 
of the Administrative Law Judge

I. Introduction

    This proceeding is an adjudication pursuant to the Administrative 
Procedure Act, 5 U.S.C. 551 et seq., to

[[Page 47098]]

determine whether the Drug Enforcement Administration (DEA, Agency or 
Government) should deny an application for a DEA Certificate of 
Registration (COR) as a retail pharmacy, pursuant to 21 U.S.C. 823(f) 
and 824(a)(4), on the grounds that such registration would be 
inconsistent with the public interest as that term is used in 21 U.S.C. 
823(f). Without this registration, the applicant, Physicians Pharmacy, 
LLC (Respondent) of Piketon, Ohio, will be unable to lawfully 
distribute, dispense or otherwise handle controlled substances.
    On May 11, 2011, the Deputy Assistant Administrator, DEA, issued an 
Order to Show Cause (OSC) to Respondent. The OSC provided notice to 
Respondent of an opportunity to show cause as to why the DEA should not 
deny Respondent's application for a DEA COR as a pharmacy, pursuant to 
21 U.S.C. 824(a)(4), alleging that such registration would be 
inconsistent with the public interest as that term is defined in 21 
U.S.C. 823(f). (ALJ Ex. 1, at 1.) The OSC alleged \1\ as a basis the 
following:
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    \1\ Represented to be a ``non-exhaustive summary of facts and 
law'' in support of the OSC. ALJ Ex.1, at 1.

    1. On January 12, 2011, [Respondent] applied to be registered 
with DEA as a pharmacy with a registered location of 727 Second 
Street, Piketon, Ohio.
    2. The owners and corporate officers of the pharmacy have no 
experience owning or operating a pharmacy.
    3. On behalf of [Respondent], corporate officer Steven Hillman 
told the mayor of Piketon and members of the public that 
prescriptions presented to the pharmacy will be filled so long as 
they contain a diagnostic code from the physician and match a 
facsimile or electronic version of the prescription that will be 
sent to the pharmacy by the physician. This statement fails to 
acknowledge the full scope of the ``corresponding responsibility'' 
of the pharmacist. See 21 CFR 1306.04(a).
    4. On behalf of [Respondent], corporate officer Steven Hillman, 
in response to DEA's request to explain the owners' understanding of 
diversion in the Piketon region, stated, ``I never have been told.'' 
The remainder of his response was not relevant to the question. The 
corporate officers were either deceptively avoiding answering the 
question or were willfully ignorant of the rampant pharmaceutical 
drug abuse problem in southern Ohio. The response by Mr. Hillman on 
behalf of [Respondent] evinces a likelihood that [Respondent] will 
ignore signs of diversion and abuse.
    5. [Respondent]'s pharmacist, Lawrence James, in response to 
DEA's asking if he was aware of the diversion of controlled 
substances in southern Ohio, stated that much of the problem stems 
from pharmacies not filling prescriptions from pain clinics. Mr. 
James stated that prescriptions from pain clinics were valid and 
should be filled.
    6. On behalf of [Respondent], corporate officer William Caserta 
advised DEA that [Respondent] would serve clinics south of Columbus, 
Ohio. Columbus is approximately 67 miles from Piketon. When asked if 
there were concerns over chronic pain patients travelling from 
significant distances to obtain controlled substances, corporate 
officer Don Wolery asserted that the problem was local pharmacies 
refusing to fill prescriptions because pharmacists believe that the 
some [sic] prescriptions are not for legitimate medical problems.
    7. The statements made by the corporate officers and pharmacist 
demonstrate a lack of understanding about the diversion and illicit 
use of pharmaceutical controlled substances. The statements indicate 
that [Respondent] will fill prescriptions issued by individual 
practitioners under circumstances that are indicative that the 
prescriptions are not issued in the usual course of professional 
practice or for a legitimate medical purpose.

    Following prehearing procedures, a hearing was held in Cincinnati, 
Ohio on October 4, 2011, with both parties represented by counsel.\2\ 
The Government called five witnesses and introduced documentary 
evidence. Respondent did not put on any evidence. After the hearing, 
both parties filed proposed findings of fact, conclusions of law, and 
argument. All of the evidence and post-hearing submissions have been 
considered, and to the extent the parties' proposed findings of fact 
have been adopted, they are substantively incorporated into those set 
forth below.
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    \2\ Respondent was represented by Steven Hillman, a member of 
Respondent with a fifty percent ownership interest. Mr. Hillman also 
testified in this matter.
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II. Issue

    Whether the record establishes that Respondent's application for a 
DEA COR as a retail pharmacy should be denied on the grounds that such 
registration would be inconsistent with the public interest pursuant to 
21 U.S.C. 824(a)(4) and 823(f).

III. Evidence and Incorporated Findings of Fact \3\
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    \3\ In addition to the evidence discussed in this Section, 
additional evidence and findings of fact are discussed in later 
Sections of this Recommended Decision.
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    I find, by a preponderance of the evidence, the following facts:

A. Background

    with a registered address of 727 Second Street, Piketon, Ohio 
45661. (Tr. 136; Gov't Ex. 1.) The application contains Mr. Hillman's 
e-signature and lists Mr. Caserta as the Respondent is a Limited 
Liability Company (LLC) that was initially formed in or about 2010 with 
three members, Don Wolery (Mr. Wolery), Steven Hillman (Mr. Hillman), 
and William Caserta (Mr. Caserta). (Tr. 14, 25-26, 96-97.) Respondent 
currently has two members, Mr. Hillman and Mr. Caserta, who each hold a 
one-half ownership interest. (Tr. 26, 97.) Respondent is currently 
licensed as a retail pharmacy with the Ohio State Board of Pharmacy.\4\ 
(Tr. 123; ALJ Ex. 2, at 4.) Lawrence James (Mr. James) is listed on 
Respondent's state pharmacy license as the ``Responsible Person.'' (Tr. 
40-41; ALJ Ex. 2, at 4.) On January 12, 2011, Respondent submitted an 
electronic application for a DEA COR as a retail pharmacy in Schedules 
II through V, contact person. (Tr. 136; Gov't Ex. 1.)
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    \4\ Respondent's state pharmacy license was issued in or about 
February 2011. (Tr. 123-24.)
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B. The Government's Evidence

    The Government's evidence included testimony from five witnesses: 
Mr. Wolery; Mr. Caserta; Mr. James; Mr. Hillman; and DEA Diversion 
Investigator (DI) Christopher Kresnak (DI Kresnak). In addition to 
testimonial evidence, the Government also introduced various 
documentary exhibits, to include: Respondent's master information for 
electronic application; \5\ correspondence between DEA and Respondent; 
\6\ an agenda and sign-in sheet for a regional meeting on prescription 
drug overdoses; \7\ Mr. James's work history; \8\ and three documents 
produced by Mr. James for use by Respondent, including a note to its 
customers, its mission statement, and information for physicians with 
pain patients.\9\
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    \5\ Gov't Ex. 1.
    \6\ Gov't Exs. 2-4.
    \7\ Gov't Ex. 6.
    \8\ Gov't Ex. 7.
    \9\ Gov't Exs. 8-10.
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    Mr. Wolery testified that he is an attorney, and that he and Mr. 
Hillman came up with the concept of opening a pharmacy. (Tr. 14.) He 
decided to become a member of Respondent because he wanted to make 
money and thought ``[i]t was a good business idea.'' (Tr. 14, 15.) Mr. 
Wolery testified that he contributed $1,330 to the business. (Tr. 18.) 
Mr. Wolery testified that he has no experience as a pharmacist, nor has 
he ever owned or operated a pharmacy. (Tr. 16.) He testified that he 
had no intentions of running the pharmacy: ``Mr. James had been chosen 
as a pharmacist to run it and had been given the latitude to run it as 
he saw fit, and given his experience in this matter, we felt that he 
was a good choice to run this operation in a lawful manner.'' (Id.)

[[Page 47099]]

Rather, Mr. Wolery's role in the business was ``helping set it up. I 
met with the Ohio Pharmacy Board to make sure that plans and 
specifications * * * met with their [sic] approval.'' (Tr. 16-17, 18.) 
In speaking with representatives at the Ohio Pharmacy Board, Mr. Wolery 
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testified that he asked them

what they would require for a pharmacy, what they would like to see 
as far as security for the pharmacy, the type of safe and things 
like that, show them the potential schematic of what it would look 
like and ask them if there was anything that they would like to see 
in order for this pharmacy to be licensed, * * *

(Tr. 23.)

    Mr. Wolery testified that he ended his membership on March 16, 
2011, for personal reasons, and expressly stated that he did not leave 
the business for financial reasons. (Tr. 15-16.) Mr. Wolery provided a 
resignation letter and walked away without getting any of his initial 
investment back. (Tr. 17-18.) Mr. Wolery testified that he told Mr. 
Hillman that if Respondent gets a DEA COR and eventually makes a 
profit, he'd like to get his $1,330 investment back. (Tr. 18.) Although 
Mr. Wolery stated that he would not become a member should Respondent 
be granted a DEA COR, he testified that he believes the business will 
be profitable because ``there's a need for it. * * * People can't get 
scripts filled, even those that deserve them. So there's a need and I 
think the pharmacy will meet that need, as any pharmacy.'' (Tr. 18.)
    Mr. Caserta testified that he has no experience as a pharmacist and 
has never owned or operated a pharmacy, but he became a member of 
Respondent after he was approached by Mr. Wolery and Mr. Hillman. (Tr. 
25-26.) He did not make an initial investment, but he currently owns a 
fifty-percent share and serves as a managing partner. (Id.) Mr. Caserta 
testified that part of his job with Respondent included interviewing 
applicants to serve as Respondent's pharmacist. (Tr. 29.) After 
interviewing several applicants, Mr. Caserta and the other members 
hired Mr. James ``because of his work record, it was impeccable. His 
background was very good. And he had a lot of experience in managing a 
pharmacy, * * *'' (Id.)
    Mr. Caserta testified that he spoke to the chief of police, the 
planning board, the zoning board, and the ``Assistant--to the County 
Attorney, the City Attorney'' for Piketon to ensure that they had no 
objections to Respondent opening in Piketon. (Tr. 30.) He testified 
that the chief of police told Mr. Caserta that if Respondent was not 
going to have a doctor and it was simply going to be an apothecary, 
then he had no objections. Similarly, none of the other people who Mr. 
Caserta spoke to had any objections. (Id.) Mr. Caserta testified that 
if Respondent receives a DEA COR, it will fill both non-controlled and 
controlled substance prescriptions for customers between an eighteen 
and forty-mile radius. (Tr. 27-28.) Mr. Caserta testified that the 
Kentucky border is approximately thirty miles away, but he ``ha[s] no 
idea'' if Respondent will get customers from Kentucky. (Tr. 28.)
    Mr. James testified that he completed two years of pre-pharmacy 
studies at Ohio Dominican College and then earned a Bachelor of Science 
degree in pharmacy from Ohio State University. (Tr. 32.) He graduated 
in June 1975, and has been a registered pharmacist in Ohio since August 
2, 1975. (Id.) Mr. James has worked continuously as a pharmacist in 
Ohio since he was registered, with the exception of ``no more than 
three weeks' break between any jobs.'' (Tr. 33; see Gov't Ex. 7.\10\) 
Mr. James has worked at seven retail pharmacies, one in-house pharmacy 
organization that filled prescriptions for patients released from the 
James Cancer Center, and one community hospital as the staff 
pharmacist. (Tr. 35; Gov't Ex. 7.) Mr. James has also worked for a 
company called HealthPro Staffing Agency, where he was given a nine-
month assignment to the Ohio Department of Mental Health, filling 
prescriptions for twenty-three prisons in central and south-central 
Ohio. (Tr. 43, 44.)
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    \10\ Mr. James testified that Government Exhibit 7 shows where 
he was working on September 15th of each year when he renewed his 
state pharmacy license. (Tr. 33.) Mr. James testified that the 
document accurately portrays his work history, with the following 
exceptions. First, ``for exactly one year to the day, I worked for a 
company called Ultimate Care Home Health Care, between Knox 
Community Hospital [in 1992] and Meijer [in 1993].'' (Tr. 34-35.) 
Second, Mr. James testified that he did not work at CVS Pharmacy in 
2010. He actually worked for HealthPro Staffing Agency in 2010. (Tr. 
43.)
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    Mr. James testified that he was put in touch with Mr. Caserta 
through an employment agent. (Tr. 38.) After speaking to Mr. Caserta 
and going to see Respondent's location, Mr. James agreed to work as the 
main pharmacist. (Id.) Mr. James testified that Respondent is located 
in an old brick building in Piketon, Ohio. (Tr. 48.) He believes there 
are approximately four other pharmacies within five or ten miles of 
Respondent's location. (Tr. 42.) None of the pharmacies in the area, 
however, are set up as ``strictly an apothecary-type business,'' as 
Respondent, but are all ``traditional pharmacies, including over-the-
counter drugs, * * * greeting cards, * * * deodorants and other 
things.'' (Tr. 91-92.) Although Mr. James is not involved in the 
business plan since he is not an owner, (Tr. 85), Mr. James testified 
that when he was hired, he understood that decisions as to how the 
pharmacy will operate will have to be approved by Mr. Hillman and Mr. 
Caserta. (Tr. 84, 92-93.) He testified, however, that ``nothing has yet 
been turned down by either'' of them. (Tr. 93.)
    Mr. James testified that Respondent currently has one other 
employee, Theresa Putnam (Ms. Putnam), but that if Respondent obtains a 
DEA COR, Mr. James and Mr. Caserta will likely hire a pharmacy 
technician as well. (Tr. 41.) Mr. James explained that when he and Mr. 
Caserta were previously looking to hire a technician, they both 
interviewed the candidates. Mr. James then ``ranked them in the order 
that I felt the people would be of interest to us.'' (Id.) Mr. Caserta 
then ranked the candidates ``and then he made the decision ultimately 
of which one [they] would hire.'' (Tr. 41-42.)
    Although Mr. James accepted the pharmacist position with Respondent 
in January 2011, he and Ms. Putnam have been furloughed since March 17, 
2011, because Respondent is non-operational. (Tr. 39, 40-41.) Mr. James 
testified that although Respondent has a pharmacy license from the 
state, it is unable to operate even in non-controlled substances 
because the wholesaler does not want to sell just non-controlled 
substances to Respondent. (Tr. 67; 80.) The wholesaler ``didn't want to 
sell anything to us until we got all licenses taken care of, including 
the DEA license.'' (Tr. 67.) Mr. James testified that he was ready and 
willing to start working for Respondent, selling just non-controlled 
substances. (Id.) The last he spoke with the wholesaler, it was ready 
to sell to Respondent, but Mr. Caserta later informed Mr. James that 
the wholesaler would not sell any drugs until Respondent got its DEA 
registration. (Tr. 82.)
    Mr. James testified that ``[a] pharmacist's duties and 
responsibilities are to fill all legitimate and legal prescriptions. We 
are allowed at any point to refuse to fill any prescription that our 
own personal conscience thinks is not correct according to--we don't 
even really have to have a reason.'' (Tr. 36.) Mr. James testified that 
he refused to fill two prescriptions during his career ``[f]or personal 
reasons.'' (Tr. 36.) He clarified later that he turned down two for 
``personal purposes,'' but that he turned down ``many forged 
prescriptions * * * not for personal

[[Page 47100]]

purposes.'' (Tr. 60.) Mr. James explained that he turned down those 
prescriptions for ``legal purposes'' because he was confident that the 
prescriptions were fraudulent. (Tr. 60-61.)
    Mr. James testified that diversion is ``a major problem'' not only 
in southeastern Ohio, but across the entire country. (Tr. 44.) In 
addition to testifying that some patients try to alter prescriptions or 
bring in forged prescriptions, (Tr. 51), Mr. James testified that in 
Florida, for instance, ``they have six doctors who basically * * * work 
out of the back of their house, back of their car, writing 
prescriptions for anybody who has $200 to give them whatever they want, 
and then those people wind up coming all over the United States trying 
to get them filled.'' (Tr. 44-45.) Mr. James also testified that he is 
aware that there are some doctors who ``will have an arrangement with 
the patient where they will supposedly--the doctor will write them a 
prescription, they'll get it filled, and the doctor either gets a cut 
of the pills or whatever.'' (Tr. 52.) Mr. James has never ``actually 
seen any of that,'' nor is he ``totally aware of * * * any specifics.'' 
(Id.)
    Mr. James testified that he is aware of a pharmacist's 
corresponding responsibility under 21 CFR 1306.05. (Tr. 53.) He 
testified, however, that he does not believe that certain pharmacists 
are more diligent than others in checking prescriptions. (Tr. 77.) He 
agreed that some pharmacists are more fearful of the inspectors from 
the State Board of Pharmacy than others. (Tr. 77-78.) Mr. James later 
testified that ``I believe there are good pharmacists, I believe there 
are also bad pharmacists. I believe that people get themselves into 
situations that they sometimes think they can't control even though 
they really can control them.'' (Tr. 79.) He also testified that he 
``absolutely'' believes that some pharmacists fill bad prescriptions. 
(Id.) The Government attempted to clarify with the following colloquy:

    Q But you wouldn't characterize them as being less diligent than 
any other pharmacist?
    A In one case, he was more fearful that his supervisor would 
find out that he didn't fill it, and the supervisor would raise Cain 
for, ``Why didn't you fill this prescription?'' It didn't matter 
that it was a very questionable prescription for a very questionable 
quantity.
    The field of pharmacy is not a pretty field anymore. It has 
changed so much since the DEA laws of 1976 and what insurances did 
around that time that it's a whole different ballgame than it was 
back in my early years.

(Tr. 79-80.)

    Mr. James testified that he fulfills his corresponding 
responsibility by verifying that each prescription contains the 
customer's name and address, and by asking each customer for a valid 
phone number even though the law does not require that information. 
(Tr. 54-55.) Mr. James testified that he also observes each 
prescription to see what drug the customer is getting, and 
``[s]ometimes I'll ask the person questions like as to what they got 
this prescription for on controlled substances, * * * .'' (Tr. 55.) He 
explained: `` `It's my license,' I keep telling everybody. I don't care 
what these companies say to keep doing, it's my rear end that's on the 
line here. If my license gets suspended, it's my job. * * * I want 
guidelines for the actual pharmacist to be able to have honest input so 
he can decide whether this is really a legitimate prescription, * * * 
.'' (Tr. 53-54.)
    Mr. James testified that he would like to employ five additional 
safeguards as the pharmacist for Respondent. First, he would like to 
ask the prescribing physicians to provide an IDC-9 diagnosis code for 
each prescription so that Mr. James can ``verify that the prescription 
was indeed for a legal, legitimate purpose, which has always been a 
problem.'' (Tr. 46.) Mr. James testified that the IDC-9 code is 
typically used by insurance companies for billing purposes, and he has 
never seen it used by a pharmacy. (Tr. 47-48.) He explained, however, 
that he thinks it will be useful to pharmacists. (Tr. 47.) Although 
none of the pharmacies that Mr. James previously worked for implemented 
his idea, he testified that Mr. Hillman responded, ``You're the boss of 
the pharmacy, and if you think we need it, then we need it basically.'' 
(Tr. 86-87.)
    Second, Mr. James testified that he would like to request that the 
prescribing physicians fax a copy of each prescription directly to the 
pharmacy so that Mr. James can verify that nothing has been changed on 
the prescription carried into the pharmacy by the customer. (Tr. 47, 
87.) Mr. James testified that Mr. Hillman and Mr. Caserta agreed to 
implement this policy as well. (Tr. 87.)
    Third, Mr. James testified that he would like to use OARRS \11\ to 
help him determine if a prescription is valid by checking OARRS to see 
if the customer has had other controlled substances prescriptions 
issued and filled. (Tr. 90.) According to Mr. James, Mr. Hillman and 
Mr. Caserta liked this idea as well. (Tr. 91.) Mr. James testified that 
OARRS hasn't typically been used in this fashion, explaining that some 
of his colleagues think his idea is ``blasphemous'' and that he's 
``gotten some indication from the State Board of Pharmacy that they 
didn't like the idea that I was going to be checking with OARRS.'' (Tr. 
90-91.)
---------------------------------------------------------------------------

    \11\ OARRS refers to the Ohio Automated Rx Reporting System, a 
drug database established and maintained pursuant to Ohio law. Ohio 
Admin. Code R. 4731-11-11 (2011).
---------------------------------------------------------------------------

    Fourth, Mr. James testified that he would like to require that each 
customer provide a valid state-issued license or ID when picking up a 
prescription that Mr. James can keep on file. (Tr. 46.) He further 
explained that if a customer is unable to pick up a prescription, the 
customer will have to notify Respondent that another person will pick 
up the prescription on the customer's behalf and that person will have 
to provide a valid form of identification. (Tr. 46-47.) Mr. James will 
keep a copy of that identification in the customer's file, and 
testified that there were copiers for him to do that. (Tr. 87.)
    Finally, Mr. James testified that in addition to keeping a log of 
all Schedule II drugs, he would also like to keep a log of all other 
controlled substances, so that ``[a]ll controlled substances would have 
an exact inventory at all times.'' (Tr. 47, 88.)
    Mr. James also testified that in late February 2009, he prepared 
three documents for potential use by Respondent. (Tr. 57-58, 70-71, 71-
72.) Mr. James testified that he gave the documents to Mr. Caserta and 
Mr. Hillman to consider, but he did not think the documents had been 
approved for use, stating that ``until the other day when I saw these 
things inside the folder, as far as I was concerned, they were thrown 
away.'' (Tr. 58.)
    First, Mr. James created a document entitled ``Note to Our 
Customers with Pain'' that he would like to give to pain medication 
customers so that the customers ``understand exactly what were [sic] 
going to do to verify that their prescriptions were legitimate, legal, 
valid and under what circumstances I possibly would tell them, `Sorry, 
I cannot fill your prescription.' '' (Tr. 58; see Gov't Ex. 8.) Mr. 
James testified that the document informs customers that they need to 
fill all of their prescriptions with Respondent, not just their 
controlled substances prescriptions. (Tr. 58; see also Gov't Ex. 8.) He 
explained that this will help him identify any potential drug 
interactions and also demonstrates that he is not operating a pill 
mill. (Tr. 63.) He also testified that the document informs customers 
that if the insurance company ``rejects the claim as too early, we will 
not fill the

[[Page 47101]]

prescription until the proper time. Do not think that you can just pay 
cash and get it filled.'' (Tr. 65-66.) He also testified that the 
document informs customers that the prescribing physicians ``can speed 
up the process by faxing all prescriptions in advance to the pharmacy, 
along with the proper IDC-9 diagnosis code.'' (Tr. 68; see also Gov't 
Ex. 8.) He explained that this will save time for the customers because 
otherwise he will have to contact the prescribing physician after the 
customer comes into the pharmacy. (Tr. 68.) Mr. James testified that he 
assumes some form of this document will be used. (Tr. 59.)
    Second, Mr. James testified that he created a document entitled 
``Our Mission Statement.'' (Tr. 70-71; see Gov't Ex. 9.) Mr. James 
proposed that Respondent provide the mission statement to customers 
``to indicate to people what our business was, what we were and what we 
hoped to do.'' (Tr. 71.) The document informs customers that Respondent 
wants to be their ``local pharmacy for all of your prescription 
needs.'' (Gov't Ex. 9.) It also informs customers that Respondent does 
not offer over-the-counter medications and does not have a doctor on 
staff. (Id.)
    Third, Mr. James testified that he created a document entitled 
``Information for Doctors with Pain Customers.'' (Tr. 71-72; see Gov't 
Ex. 10.) Mr. James testified that this document was not approved for 
use yet. The draft document sets forth the security measures that Mr. 
James ``would like to put into place to protect the doctor, the patient 
and myself[.]'' (Tr. 73; see Gov't Ex. 10.)
    Mr. James also testified to the physical security measures 
implemented by Respondent. He testified that the main gate to the 
building has a ``good major gated lock, so it's harder to get into[.]'' 
(Tr. 48.) Once inside, the pharmacy department is to the right and the 
waiting area is to the left. (Id.) Mr. James testified that the 
``pharmacy has a thick door which has an opening, which has * * * 
bulletproof glass. * * * The windows into the pharmacy also have bars 
which I believe were actually requested by the State Board of 
Pharmacy.'' (Tr. 49.) Mr. James also testified that there is a walk-in 
safe in the pharmacy, approximately three feet deep, six or seven feet 
wide and tall enough for him to stand inside without ducking his head. 
He stated that it is the ``biggest safe I've ever seen inside a 
pharmacy.'' (Id.) Mr. James testified that this is the ``best security 
I've ever seen'' at a pharmacy. (Tr. 50.) He testified that when the 
inspector from the State Board of Pharmacy observed the safe, he made 
no negative comments, but simply said `` `Yes, that will do,' or 
something to that effect.'' (Tr. 88-89.)
    Mr. James did not know if the size of the safe was indicative of 
the volume of controlled substances that will be kept on hand. (Tr. 
50.) He did indicate, however, that he will keep all of the controlled 
substances, rather than just the Schedule II controlled substances, in 
the safe. (Id.) Mr. James testified that he does ``not really'' know 
what the percentage breakdown will be for controlled and non-controlled 
substances filled by Respondent once it opens for business. (Tr. 73.) 
Although Mr. James testified that he hopes the percentage is 
acceptable, he indicated that it has been ``rather confusing'' to 
determine what an acceptable percentage might be. (Tr. 73, 74.) For 
instance, he testified that the State Board of Pharmacy suggested that 
no more than twenty-five percent of all prescriptions filled by 
Respondent should be for controlled substances, but the wholesaler 
indicated that no more than thirty or thirty-five percent should be for 
controlled substances. Then, when Mr. James spoke to DI Kresnak, he got 
``a different percentage.'' (Tr. 74.)
    Mr. Hillman testified that on October 21, 2009, he attended a 
regional meeting in Scioto County, Ohio entitled ``Epidemic of 
Prescription Drug Overdoses: A Call to Action.'' (Tr. 109-10; Gov't Ex. 
6.) Mr. Hillman explained that the meeting ``was mostly political. * * 
* And they talked about * * * having to get better control over the 
prescription drugs.'' (Tr. 110.) Mr. Hillman testified that he did not 
find the meeting to be educational, explaining that ``I don't know a 
lot about drugs, but the people who were speaking knew less than I 
did.'' (Tr. 111.) Mr. Hillman initially planned to attend the meeting 
because ``somebody has to be blind not to understand that there's some 
serious drug problems,'' so he wanted to get involved. (Id.) Mr. 
Hillman explained that he wanted to get involved by talking with 
various officials about the fact that there were no laws in place at 
the time regarding licensing for businesses that treated pain patients. 
(Tr. 111-12.) He also informed the officials that he believed OARRS was 
inadequate, suggesting that it should be interactive so that 
pharmacists can enter a patient's personal information to determine 
what other prescriptions the patient has had filled with other 
pharmacies. (Tr. 112-13.) Mr. Hillman eventually started to work with a 
state representative who ``wound up sponsoring the bill,'' \12\ but the 
representative eventually stopped returning Mr. Hillman's calls. (Tr. 
113-14.) Mr. Hillman testified that he was not contemplating opening a 
pharmacy at the time of the town meeting. (Tr. 114.)
---------------------------------------------------------------------------

    \12\ While not entirely clear from the record which ``bill'' Mr. 
Hillman is referring to, his testimony is consistent with a 2011 
Ohio House Bill Number 93, which is now codified at Ohio Rev. Code 
Ann. Sec.  4729.51 (2011).
---------------------------------------------------------------------------

    Mr. Hillman further testified that he has no experience as a 
pharmacist and has never owned or operated a pharmacy. (Tr. 98.) Mr. 
Hillman also testified that he is not familiar with DEA's Controlled 
Substance Ordering System (CSOS), explaining that he ``would never 
order controlled substances,'' so he has ``[n]o reason to become 
familiar.'' (Tr. 98-99.) Mr. Hillman explained that he will have ``very 
little'' to do with running the pharmacy. (Tr. 97.) Rather, Mr. James 
will be the pharmacist in charge and that he ``will be 100 percent in 
control'' of verifying prescriptions. (Tr. 99.)
    Mr. Hillman testified that he was aware of pain management clinics 
in southern Ohio, but that all except for one of the clinics have 
closed. (Tr. 103-04.) The pain management clinic that Mr. Hillman 
believes is still open is located about forty or fifty miles from 
Respondent. (Tr. 104.) Mr. Hillman does not know if Respondent will get 
customers from that pain management clinic, but he testified that 
Respondent will not advertise in that area. (Id.) Mr. Hillman testified 
that he does not know where the patients of the other pain clinics now 
receive medical care; nor does he know where the patients of those 
clinics filled their prescriptions before the pain clinics closed. (Tr. 
105.)
    Mr. Hillman testified that Respondent is located in ``a 160-year 
old farmhouse'' that has two rooms on the first floor and two rooms on 
the second floor. (Tr. 101.) Upon entering the front door, there is a 
room to the right, which will be the actual pharmacy, and a room to the 
left, which will be the waiting area. (Tr. 101.) Mr. Hillman testified 
that he contacted the City Attorney for Piketon and invited him to look 
around the pharmacy and ask any questions. (Tr. 116-17.) The City 
Attorney accepted the invitation, and went to the pharmacy with the 
chief of police, the mayor, some city council members, as well as some 
citizens.\13\ (Tr. 118.)
---------------------------------------------------------------------------

    \13\ The Government offered a video recording of the meeting, 
obtained from the Internet, arguing that the recording was relevant 
to show ``the diversion problems in southern Ohio, concerns 
expressed by the community and the knowledge * * * of Mr. Hillman 
and the steps that he had proposed to take to remain in compliance 
with the requirements of DEA in stemming diversion and satisfying 
the local community.'' (Tr. 119-20.) I excluded the exhibit as both 
irrelevant and noncompliant with the June 28, 2011 Prehearing 
Ruling, (Tr. 120), which required that ``[a]ny audio or video 
recordings must include a written transcript.'' (ALJ Ex. 6, at 2 
n.3.)

---------------------------------------------------------------------------

[[Page 47102]]

    Mr. Hillman testified that Respondent has been licensed by the Ohio 
Board of Pharmacy since early 2011. (Tr. 123-24.) Respondent has not 
opened for business yet, however, because the wholesaler will not even 
supply Respondent with the non-controlled drugs until it obtains its 
DEA COR. (Tr. 124.) If Respondent obtains a DEA COR, Mr. Hillman 
testified that, at the outset, Respondent will not sell anything other 
than prescription drugs. (Tr. 100.) If, however, Mr. James determines 
that there is a need for any over-the-counter medications, then 
Respondent may start to sell those medications. (Tr. 100-01.) Mr. 
Hillman testified that all of the medication will still be kept behind 
the glass with Mr. James, and there will be no displays in the waiting 
area. (Tr. 101.)
    Mr. Hillman testified that ``if `diversion' is controlled 
substances going to someplace they shouldn't be,'' then he believes it 
exists in southern Ohio, citing a 2008 case where twenty-two people 
died from prescription drug overdoses even though none of them had a 
lawful prescription. (Tr. 106, 107-08.) Mr. Hillman was not aware of 
any other specific incidents, claiming that ``[o]nce Scioto County gave 
me that information, they stopped giving me any additional 
information.'' (Tr. 108.) He stated, however, that ``when people walk 
into our pharmacy, those people that the medications are sold to will 
be sold to appropriate people, period. If the pharmacist believes for 
one second that there's something wrong, he'll deal with it.'' (Id.) 
Mr. Hillman also testified that to prevent diversion, he would like 
Respondent to maintain contact with the prescribing physicians. (Tr. 
100.) He also stated that Respondent has ``adopted'' all of Mr. James's 
suggestions, including requiring prescribing physicians to fax a copy 
of all prescriptions to the pharmacy and requiring customers to present 
photo identification before obtaining their medications. (Id.)
    DI Kresnak \14\ testified that southern Ohio, northeastern 
Kentucky, and West Virginia, were formerly ``thriving'' with labor-
intense jobs, leading to a population of coal miners, railroad workers, 
and steel workers. (Tr. 130.) According to DI Kresnak, these industries 
have left the area over the past couple of decades, and ``a population 
of drug dealers moved in the area.'' (Id.) Many of the drug dealers are 
supplied by questionable doctors in the area. (Id.) DI Kresnak 
testified that he obtained information from local coroners and law 
enforcement officials indicating that ``Kentucky is averaging almost 
three bodies a day for prescription drug overdose. The State of Ohio 
has indicated they're close to that number for prescription overdose.'' 
(Tr. 131-32.) DI Kresnak also testified that from approximately 2005 to 
2008, southern Ohio had an increase of prescription drug overdoses of 
approximately 280 percent. (Tr. 132.)
---------------------------------------------------------------------------

    \14\ DI Kresnak has been a DI with DEA for approximately eight-
and-one-half years in Cincinnati. (Tr. 127-28.) Prior to working 
with the DEA, DI Kresnak received a four-year degree in management 
from Park University, and then completed work in a master's program 
at Central Michigan University. (Tr. 128.) DI Kresnak also spent 
twenty-two years in the United States Marine Corps, where he retired 
as a Master Sergeant. (Id.)
---------------------------------------------------------------------------

    In addressing Mr. Hillman's testimony that most of the pain clinics 
in the area had closed, DI Kresnak explained that prior to summer 2011, 
when House Bill 93 was enacted by the Ohio Legislature, the majority of 
the pain clinics in southern Ohio were owned by convicted felons who 
would bring in physicians who had previously faced disciplinary action. 
(Tr. 132-33.) House Bill 93, however, required that ``if you were a 
pain clinic, you had to be a licensed practitioner. I believe you had 
to be associated with a hospital. There were several other caveats to 
the law that I'm not familiar with.'' (Tr. 132.) DI Kresnak explained 
now that ``there are individuals trying to undermine the current law.'' 
\15\ (Tr. 132.)
---------------------------------------------------------------------------

    \15\ Respondent's counsel questioned DI Kresnak what he meant by 
that statement, asking whether DI Kresnak meant these individuals 
were actually violating the law ``or just that they're obeying it to 
the extent that you don't like it?'' (Tr. 151-52.) DI Kresnak 
testified that ``it's not a matter of I don't like it. There's 
probably more to that answer that I'm not at liberty to say at this 
time, sir.'' (Tr. 152.)
---------------------------------------------------------------------------

    DI Kresnak testified that he became familiar with Respondent's 
application for a DEA COR, which was filled out by Mr. Hillman. (Tr. 
135; see Gov't Ex. 1.) Although DI Kresnak does not typically conduct 
an on-site visit for a new retail pharmacy application, he did conduct 
one in this case. (Tr. 136-37.) DI Kresnak contacted Mr. James and went 
to the pharmacy in February 2011. (Tr. 137.) DI Kresnak had a round-
table discussion with Mr. James, Mr. Caserta, Mr. Wolery, and Ms. 
Putnam. (Id.) He did not interview them individually, but instead 
discussed as a group ``why the pharmacy was going to be open, the need 
for the pharmacy in the area.'' (Tr. 138.) They also talked about 
diversion, and according to DI Kresnak, Mr. James ``alluded basically 
that he didn't think there was a diversion problem.'' DI Kresnak 
testified that Mr. James thought it was wrong that other pharmacists 
would not fill prescriptions for pain management clinics located in 
southern Ohio. (Id.)
    DI Kresnak testified that he discussed the procedures that Mr. 
James would implement at the pharmacy, including ``the need for doctors 
to fax the prescriptions over to verify correctness and accuracy.'' 
(Tr. 139.) DI Kresnak testified that Mr. James also wants to request 
IDC-9 codes from prescribing physicians. (Tr. 148.) DI Kresnak refused 
to ``comment on'' whether he thought it was a good idea ``because it's 
above what DEA requires.'' (Id.) DI Kresnak also refused to comment on 
whether it was a good idea to have the prescribing physician fax the 
prescription to Mr. James to compare to the prescription brought in by 
the customer, stating ``I'm not a pharmacist. I don't run pharmacies.'' 
(Id.) He agreed, however, that this would ``help get the ultimate user 
the prescription.'' (Tr. 148-49.)
    DI Kresnak also testified that Mr. Caserta informed him that 
Respondent would fill prescriptions for ``anything south of Columbus.'' 
(Tr. 139.) When DI Kresnak asked how they would feel about pain 
patients traveling so far to have their prescriptions filled, ``Mr. 
Wolery stated that he felt that it was a shame that they had to travel 
that far, that they were legitimate prescriptions and that it's just a 
darned shame they have to travel that far.'' (Id.) This concerned DI 
Kresnak because ``there isn't a pharmacist that is filling for these 
pain clinics with exception to one or two, and the ones that were 
filling for the one or two, people were traveling great distances. * * 
* These customers all of a sudden weren't going to have to be traveling 
much longer because there was going to be a pharmacy opening up in the 
area.'' (Tr. 140.)
    DI Kresnak testified that he is not aware of a guideline setting 
forth the percentage of controlled substances that should be sold out 
of a pharmacy. (Tr. 149.) He testified that ``the DEA is not going to 
put limits or percentages within a business.'' (Tr. 150.) DI Kresnak 
explained security measures in place at Respondent, based on his 
inspection of the building. (Tr. 138, 141.) DI Kresnak testified that 
there are numerous cameras on the outside of the building, pointing in 
all directions. (Tr. 141.) The windows of the building are secured by 
iron bars on the inside. (Tr. 143.) DI Kresnak testified, however, that 
having bars on the windows does not ``bother[] me.'' (Tr. 156.) The 
front door to the

[[Page 47103]]

building is ``gated with an iron gate with a padlock.'' (Tr. 141.) Once 
inside the building, DI Kresnak testified that the pharmacy is to the 
right, and the waiting room is to the left. Beyond the waiting room is 
an office where Ms. Putnam ``would be accepting the prescriptions and 
payment.'' (Id.) DI Kresnak testified that there is a door and 
``heavily fortified, very thick, almost bulletproof glass with a 
sliding drawer to allow the payment and the prescription to come 
through.'' (Tr. 141.) DI Kresnak testified that there is another 
``heavily fortified'' door with several glass windows leading to the 
pharmacy section. (Id.) The door contains a speaker hole so the 
pharmacist can communicate with customers, as well as a four-inch hole 
where the pharmacist pushes the medication through to a basket on the 
customer's side of the door. (Tr. 142.)
    DI Kresnak testified that inside of the pharmacy area, there is a 
very large vault, approximately ``eight feet wide and four feet deep 
[with] a Class V door on it, which is a very heavy steel door with a 
combination lock on it.'' (Tr. 142.) DI Kresnak testified that he's 
never seen a vault in a pharmacy; he's only seen safes in pharmacies. 
(Tr. 143.) He added, ``This is a distributor's vault. This is something 
that a small mom and pop distributor would have for their Schedule II 
narcotics.'' (Id.) ``[P]harmacies typically have ``3x3 combination 
safes with a door on the front.'' (Tr. 144.) DI Kresnak testified, 
however, that with regards to diversion, ``[t]here's nothing wrong with 
being cautious, * * * .'' (Tr. 147.) He also testified that there is 
nothing wrong with having that kind of security. (Tr. 156.)
    DI Kresnak testified that Mr. Hillman was not present when he 
conducted the roundtable and site inspection of Respondent's location. 
(Tr. 152-53.) DI Kresnak arranged to meet Mr. Hillman in person, but DI 
Kresnak did not show up. (Tr. 155.) As a result, DI Kresnak submitted 
written questions to Mr. Hillman. (Tr. 152; see also Gov't Ex. 2.) On 
March 7, 2011, Mr. Hillman submitted his responses to DI Kresnak. 
(Gov't Ex. 3.) \16\
---------------------------------------------------------------------------

    \16\ Although Government Exhibits 2 and 3 were admitted into 
evidence by stipulation, (Tr. 7), the Government offered no 
testimony pertaining to these exhibits. Nor are they addressed in 
the Government's post-hearing brief. I find these exhibits generally 
consistent with other evidence of record.
---------------------------------------------------------------------------

    Notably, when Government counsel asked DI Kresnak if he believed 
granting a DEA COR to Respondent will threaten the public health and 
safety, DI Kresnak responded:
    I worked in an area which diversion--I claim it as a pandemic 
when it comes to prescription drugs. I have seen what it's done to 
families. We talked about the history of Portsmouth in regards to 
when industry was there. That was a town that you could leave your 
bicycle on the sidewalks. It was a town where everybody knew 
everybody. It's a ghost town when it comes to neighborly love 
anymore because you have to lock everything up. You cannot leave 
anything out.
    The diversion problem is so bad. It's an underground economy, 
sir. The underground economy is that of pills. When people have to 
make their mortgage payment or their rent payment or their utility 
payments and they're short, they know they can trade their medicines 
for cash, for something that will help them continue to survive 
until the next payday.
    There is just countless numbers of incidents that I've been 
involved in. I've sat at the tables and talked to the family members 
of overdose victims, and yes, they'll all say that, ``Yes, they took 
their pills.'' But the physicians and the pharmacists that filled 
those, two of them are in prison right now. It is a major problem in 
that area.
    It was a long answer to your question sir. It is not in the--
I've talked to civic leaders, I've talked to the police chief. They 
don't want this, they feel that it is not in the best public 
interest to have this apothecary in their community.

(Tr. 144-45.) After Respondent's counsel interposed a relevance 
objection, stating that ``this has absolutely nothing to do with 
Physicians Pharmacy in Piketon, Ohio,'' (Tr. 145), Government counsel 
effectively conceded the point and again asked DI Kresnak specifically, 
``why will giving a registration to Physicians Pharmacy, this specific 
pharmacy, in your opinion, why would that pose a threat to the public 
health and safety?'' (Tr. 146.) DI Kresnak stated, ``I know from the 
addicts I've talked to, they can't wait for it to open.'' (Id.)

C. Respondent's Evidence

    As noted above, Respondent did not produce any testimonial or 
documentary evidence at the hearing, relying instead on the testimony 
and evidence introduced during the Government's presentation of its 
case, the majority of which involved testimony by witnesses affiliated 
with Respondent.

IV. Discussion

A. The Applicable Statutory and Regulatory Provisions

    The Controlled Substances Act (CSA) provides that any person who 
dispenses a controlled substance must obtain a registration issued by 
the DEA in accordance with applicable rules and regulations.\17\ The 
CSA further provides that the ``Attorney General shall register 
practitioners (including pharmacies, as distinguished from pharmacists) 
to dispense, or conduct research with, controlled substances * * * if 
the applicant is authorized to dispense, or conduct research with 
respect to, controlled substances under the laws of the State in which 
he practices.'' \18\ An application for registration may be denied if 
the ``Attorney General determines that the issuance of such 
registration * * * would be inconsistent with the public interest.'' 
\19\
---------------------------------------------------------------------------

    \17\ 21 U.S.C. 802(10), 822(a)(2).
    \18\ 21 U.S.C. 823(f).
    \19\ Id. The Attorney General has delegated this authority by 
regulation to the Administrator of the Drug Enforcement 
Administration. 28 C.F.R. Sec.  0.100(b). See e.g. Lawrence Lerner, 
M.D., 54 FR 8,014, 8,015 (DEA 1989).
---------------------------------------------------------------------------

B. The Public Interest Standard

    The CSA, at 21 U.S.C. 824(a)(4), provides, insofar as pertinent to 
this proceeding, that the Administrator may deny an application for a 
COR if she finds that an applicant has committed such acts as would 
render his registration inconsistent with the public interest as that 
term is used in 21 U.S.C. 823(f). Pursuant to 21 U.S.C. 823(f), the 
Administrator may deny an application for a DEA COR if she determines 
that such registration would be inconsistent with the public interest. 
In determining the public interest, the Administrator is required to 
consider the following factors:

    (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.\20\

    \20\ I conclude that the reference to ``other conduct which may 
threaten the public health and safety'' would as a matter of 
statutory interpretation logically encompass the factors listed in 
Sec.  824(a). See Kuen H. Chen, M.D., 58 FR 65,401, 65,402 (DEA 
1993).
---------------------------------------------------------------------------

    As a threshold matter, the factors specified in Section 823(f) are 
to be considered in the disjunctive: The Administrator may properly 
rely on any one or a combination of those factors, and give each factor 
the weight she deems appropriate, in determining whether a registration 
should be revoked or an application for registration denied. See David 
H. Gillis, M.D., 58 FR 37,507, 37,508 (DEA 1993); see also D & S Sales, 
71 FR 37,607,

[[Page 47104]]

37,610 (DEA 2006); Joy's Ideas, 70 FR 33,195, 33,197 (DEA 2005); Henry 
J. Schwarz, Jr., M.D., 54 FR 16,422, 16,424 (DEA 1989). Application of 
the public interest factors requires an individualized determination 
and assessment ``tethered securely to state law * * * and federal 
regulations.'' Volkman v. DEA, 567 F.3d 215, 223 (6th Cir. 2009). 
Additionally, in an action to deny a practitioner-registrant's\21\ 
application for a COR, the DEA has the burden of proving that the 
requirements for denial are satisfied.\22\ The burden of proof shifts 
to a respondent once the Government has made its prima facie case.\23\
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    \21\ The term ``practitioner'' includes pharmacy. 21 U.S.C. 
802(21).
    \22\ See 21 CFR 1301.44(d). ``The Government has the burden of 
proof in a hearing for the denial of an application for registration 
by a practitioner.'' (Gov't Br. at 3.)
    \23\ See Medicine Shoppe--Jonesborough, 73 FR 364, 380 (DEA 
2008); see also Thomas E. Johnston, 45 FR 72,311, 72,311 (DEA 1980).
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D. The Factors To Be Considered

Factors 1 and 3: The Recommendation of the Appropriate State Licensing 
Board or Professional Disciplinary Authority and Conviction Record 
Under Federal or State Laws Relating to the Manufacture, Distribution 
or Dispensing of Controlled Substances
    In this case, regarding Factor One, it is undisputed that 
Respondent currently holds a valid unrestricted pharmacy license in 
Ohio. (Tr. 123.) Although not dispositive, Respondent's possession of a 
valid retail pharmacy license in Ohio weighs against a finding that 
Respondent's registration would be inconsistent with the public 
interest. See Robert A. Leslie, M.D., 68 FR 15,227, 15,230 (DEA 2003) 
(state license is a necessary, but not a sufficient condition for 
registration, and therefore, this factor is not dispositive).
    Regarding Factor Three, there is no evidence that any of the 
members of Respondent, including Respondent's Ohio-licensed pharmacist, 
have ever been convicted under any federal or state law relating to the 
manufacture, distribution or dispensing of controlled substances. I 
therefore find that this factor, although not dispositive, see Leslie, 
68 FR at 15,230, weighs against a finding that Respondent's 
registration would be inconsistent with the public interest.
Factors 2, 4 and 5: Respondent's Experience in Handling Controlled 
Substances; Compliance With Applicable State, Federal or Local Laws 
Relating to Controlled Substances; and Such Other Conduct Which May 
Threaten the Public Health and Safety
    Regarding Factors Two and Four, the Government argues in substance 
that Respondent's application for registration is inconsistent with the 
public interest because Respondent's owners do not have ``experience as 
a pharmacist or as the owner or operator of a pharmacy,'' further 
arguing that they have ``demonstrated a limited knowledge of diversion 
and the issues surrounding diversion.'' \24\ (Gov't Br. at 4.) 
Additionally, while facially acknowledging that Respondent's pharmacist 
``does have experience,'' the Government argues in substance that his 
testimony at hearing ``did not address the significant diversion 
problem that exists with pill-pushing physicians,'' nor did he have 
sufficient experience with refusing to fill prescriptions from 
``unscrupulous physicians'' over his thirty-six-year career. (Id.)
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    \24\ The Government conceded at hearing that the relevant 
consideration under Factor Two would be the experience of the 
pharmacist rather than the experience of owners or members who have 
no expected operational role in the handling of controlled 
substances. (Tr. 161.)
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    The credible evidence of record with regard to Respondent's 
ownership, operation, and employees, as it pertains to experience in 
handling controlled substances, does not support a finding by a 
preponderance of the evidence that registration would be inconsistent 
with the public interest. As an initial factual matter, it is 
undisputed that Respondent is licensed by the State of Ohio as a retail 
pharmacy, and Respondent's pharmacist-in-charge, Mr. James, has been a 
registered pharmacist in Ohio since 1975. (Tr. 32, 67, 80.)
    Agency precedent establishes the relevant parameters of assessing 
the conduct of individuals associated with a pharmacy-applicant. ``DEA 
has consistently held that a pharmacy operates under the control of 
owners, stockholders, pharmacists, or other employees, and the conduct 
of these individuals is relevant in evaluating a pharmacy's fitness to 
be registered with DEA.'' Bradford's Pharmacy Conditional Grant of 
Registration, 63 FR 58,418, 58,420 (DEA 1998) (pharmacist-owner 
convicted of felony conduct). For example, DEA has consistently held 
that a corporate registration may be revoked or denied where ``a 
natural person who is an owner, officer, or key employee, or who has 
some responsibility for the operation of the registrant's controlled 
substance business, has been convicted of a felony offense relating to 
controlled substances.'' Spoon's Pharmacy, 50 FR 46,520, 46,520-21 (DEA 
1985).
    The evidence of record pertaining to Respondent's LLC members and 
key personnel is undisputed. One former member, Mr. Wolery, credibly 
testified that he is an attorney but ended his relationship with 
Respondent in March 2011, but had no intention of having an active role 
in the operation of Respondent. (Tr. 16.) With regard to the operation 
of the pharmacy, Mr. Wolery testified in pertinent part:

    Mr. James had been chosen as a pharmacist to run [Respondent] 
and had been given the latitude to run it as he saw fit, and given 
his experience in this matter, we felt that he was a good choice to 
run this operation in a lawful manner. He had no dings, he had no 
problems. He had been a manager of a pharmacy. He knew all the ins 
and outs. He knew everything that needed to be known in a pharmacy, 
and so we felt that he would be the right person to run it. We're 
not pharmacists. We had no intentions of running the pharmacy or 
telling him how to do his job.

(Tr. 16.)

    A second member of the LLC, Mr. Caserta, credibly testified that he 
is a retired pilot and businessman, and currently owns a fifty-percent 
share in Respondent, serving as a managing partner. (Tr. 24-26.) A 
third member, Mr. Hillman, credibly testified that he is a self-
employed attorney, and a current member of Respondent, having half-
ownership along with Mr. Caserta. (Tr. 97.) The testimony by Mr. 
Caserta and Mr. Hillman unequivocally and credibly maintained that Mr. 
James, Respondent's pharmacist, will be responsible for the handling of 
all controlled substances. Testimony by Mr. James was fully consistent. 
(Tr. 86-87, 92-93.) There is simply no evidence of record of any 
misconduct or other ``acts'' by any past or current member-owner of 
Respondent, or employee that is inconsistent with the public interest. 
See 21 U.S.C. 824(a)(4). Nor is there any evidence that anyone other 
than Respondent's pharmacist will have an active role in the handling 
of controlled substances, unless under the direct supervision of the 
pharmacist.
    The Government correctly acknowledges the extensive experience of 
Respondent's pharmacist, Mr. James, which spans over three decades. I 
find the Government's argument that Mr. James did not adequately 
address in testimony the ``significant diversion problem that exists 
with pill-pushing physicians'' or demonstrate a sufficient 
understanding of a pharmacist's

[[Page 47105]]

corresponding duties pursuant to 21 CFR 1301.04, (Gov't Br. at 4), to 
be both legally and factually unpersuasive, given the evidence of 
record. Of significance, it is the Government that bears the initial 
burden of proof in this proceeding, not Respondent. 21 CFR 1301.44(d).
    Mr. James credibly and consistently testified at hearing that 
diversion is a major problem not only in southeastern Ohio, but across 
the entire country. (Tr. 44.) Mr. James further testified that over his 
career he has turned down two prescriptions for ``personal reasons,'' 
explaining that to mean a refusal ``to fill any prescription that our 
own personal conscience thinks is not correct.'' (Tr. 36.) Of 
significance, Mr. James further testified that over the course of his 
career he has turned down many prescriptions for legal reasons, such as 
forged prescriptions. (Tr. 60-61.) With regard to his corresponding 
duty as a pharmacist, Mr. James credibly testified that he fully 
understands the parameters of applicable regulations. (See e.g. Tr. 53-
60, 69-70, 85-94.) In addition to the required safeguards, Mr. James 
also explained in detail his intent to employ five additional 
safeguards to ``verify that the prescription was indeed for a legal, 
legitimate purpose, which has always been a problem.'' (Tr. 46.)
    In addition to the foregoing testimony, the record also reflects 
that Mr. James has extensive experience as a pharmacist in Ohio, to 
include recent employment as a pharmacist at CVS Pharmacy, Columbus, 
Ohio, from 2003 to 2009.\25\ (Gov't Ex. 7.) The record is devoid of any 
evidence that Mr. James has had any issues pertaining to his 
professional qualifications or practice as a pharmacist in Ohio from 
1975 to present. Mr. James presented his testimony in a serious and 
professional manner. His testimony was internally consistent and 
consistent with other credible evidence of record. I find Mr. James's 
testimony fully credible and in accord with his over thirty-year, 
unblemished record as a licensed pharmacist in Ohio.
---------------------------------------------------------------------------

    \25\ In 2010, Mr. James worked as a pharmacist at HealthPro 
Staffing Agency. See supra note 10.
---------------------------------------------------------------------------

    The Government also argues with regard to Factors Two and Five that 
``in assessing the public interest, the nature and amount of diversion 
of controlled substances in a geographical area is a legitimate area of 
inquiry and concern when determining whether an applicant should be 
granted a DEA registration,'' \26\ citing by analogy Southwood 
Pharmaceuticals, Inc., 72 FR 36,487, 36,491 (DEA 2007) (requirement for 
manufacturer of controlled substances to manifest due diligence in 
approving new customer). While not addressed in the Government's brief, 
the statutory requirements for a manufacturer with regard to ``due 
diligence for new customers'' differ markedly from those imposed on a 
practitioner-applicant. For example, in the case of manufacturers of 
controlled substances in Schedules III through V, the public interest 
factors include consideration of ``maintenance of effective controls 
against diversion of particular controlled substances * * * [and] the 
existence in the establishment of effective controls against 
diversion.'' 21 U.S.C. 823(d)(1) and (5). In addition to the statutory 
differences, there are numerous material regulatory differences in the 
treatment of different categories of registrants.\27\ Finally, unlike a 
practitioner-applicant, ``[a]t any hearing on an application to 
manufacture any controlled substance listed in Schedule I or II, the 
applicant shall have the burden of proving that the requirements of 
such registration * * * are satisfied.'' 21 CFR 1301.44(a).
---------------------------------------------------------------------------

    \26\ Gov't Br. at 4.
    \27\ Compare, e.g., 21 CFR 1301.74(a) and (b), with Sec.  
1301.75.
---------------------------------------------------------------------------

    For the foregoing reasons, I decline to apply public interest 
factors applicable to other categories of registrants by analogy or 
otherwise, since to do so would conflict with the clear and unambiguous 
statutory language that sets forth specific public interest factors 
that Congress directed be considered for distinct categories of 
registrants.\28\ Robinson v. Shell Oil Co., 519 U.S. 337, 340 (1997) 
(``[I]nquiry must cease if the statutory language is unambiguous and 
`the statutory scheme is coherent and consistent.''' (citation 
omitted)).
---------------------------------------------------------------------------

    \28\  Cf. Cynthia M. Cadet, M.D., 76 FR 19,450, 19,450 n.3 (DEA 
2011).
---------------------------------------------------------------------------

    In light of the foregoing, I have carefully considered the 
Government's various arguments along with the evidence of record 
pursuant to the applicable factors under 21 U.S.C. 823(f). In so doing, 
the paucity of evidence in support of the OSC's allegations that 
Respondent's registration is inconsistent with the public interest was 
striking. The only Government witness called to testify in support of 
the allegations contained within the OSC was DI Kresnak, who testified 
in substance that he was the investigator that handled Respondent's 
application for a DEA registration as a pharmacy.\29\ (Tr. 134-35.) 
While generally credible, DI Kresnak offered little to no substantive 
evidence as to why Respondent's registration would be inconsistent with 
the public interest. On direct examination, Government counsel asked DI 
Kresnak in substance why Respondent posed a threat to the public health 
and safety. Initially, DI Kresnak provided a lengthy and non-responsive 
answer, essentially concluding that members of the community informed 
him ``they don't want this.'' \30\ (Tr. 144-45.) Government counsel 
again asked DI Kresnak to explain specifically why Respondent posed a 
threat to the public health and safety, to which DI Kresnak responded: 
``I know from the addicts I've talked to, they can't wait for it to 
open.'' \31\ (Tr. 146.)
---------------------------------------------------------------------------

    \29\ Presumably, DI Kresnak's investigative findings would have 
informed the Agency's initial decision not to approve Respondent's 
application for registration, but rather to issue an OSC ``as to why 
DEA should not deny [Respondent's] application for a DEA 
registration.'' (ALJ Ex. 1, at 1.)
    \30\ Notably, other credible evidence of record establishes that 
local community leaders were consulted in advance by Respondent but 
apparently voiced no significant objections. (Tr. 29-30.) Of greater 
relevance, Respondent is actively licensed by the Ohio Board of 
Pharmacy, and also has obtained all requisite local permits. (Tr. 
30, 123.) Testimony at hearing also revealed that some of the 
security measures employed by Respondent, including the vault, were 
put in place at the specific direction of the Ohio Board of 
Pharmacy, prior to granting Respondent a license. (Tr. 16-17; 23; 
49-50.) (``From what I've been told, State Board of Pharmacy said 
that they wanted a certain kind of safe, and that's the one they 
bought.'' Tr. 50.) The Government did not call any local or state 
officials from Ohio to testify at hearing.
    \31\ This served as DI Kresnak's full answer to the serious and 
very relevant question asked by Government counsel, which was not 
posed a third time. (Tr. 146, 157.)
---------------------------------------------------------------------------

    DI Kresnak's testimony demonstrates a remarkable lack of evidence 
of any articulable reason to support a finding that Respondent's 
application for registration may be inconsistent with the public 
interest. DI Kresnak's reference to statements by ``addicts'' was 
devoid of context or any evidence to support the basis, let alone 
credibility, for such vague hearsay statements. On cross-examination, 
DI Kresnak offered little more in the way of substantive testimony 
other than to suggest there might be other evidence that he was not at 
liberty to share at hearing. (Tr. 152.) While DI Kresnak credibly 
testified to a serious drug abuse and diversion problem in Ohio, not 
unlike other regions of the United States, he offered no testimony 
linking that issue specifically to Respondent or anyone associated with 
Respondent. Nor did the testimony substantively address the fact that 
Respondent possesses all requisite state authority to operate as a 
pharmacy in Ohio.
    The Government's public interest argument relative to illicit drug 
abuse and diversion problems within a given

[[Page 47106]]

community, without linkage to specific conduct by a proposed 
registrant, is also at odds with analogous Agency precedent. For 
example, in East Main Street Pharmacy, 75 FR 66,149 (DEA 2010), the 
Agency rejected as irrelevant evidence that the respondent was located 
in a high crime area to include the fact that the owner-pharmacist 
carried a gun. The ``principle issue * * * was whether [the r]espondent 
was dispensing controlled-substance prescriptions which it either knew 
or had reason to know lacked a legitimate medical purpose and were 
issued outside the usual course of professional practice.'' Id. at 
66,155. In other contexts, the Agency has also rejected an expansive 
reading of the public interest factors, focusing instead on specific 
conduct or acts by the registrant. ``The public interest standard of 21 
U.S.C. [Sec.  ] 823(f) is not a freewheeling inquiry but is guided by 
the five specific factors which Congress directed the Attorney General 
to consider * * * which focus primarily on the acts committed by a 
practitioner.'' Gregory D. Owens, D.D.S. 74 FR 36,751, 36,757 (DEA 
2009).
    In the instant case, the Government's evidence of a serious 
diversion problem in Ohio was credibly established through the 
testimony of DI Kresnak, but there is simply no credible evidence of 
record establishing that Respondent will be a contributing source of 
drug diversion through any acts or omissions by any owner-member or 
employee of Respondent. As the record evidence reveals, Respondent's 
Ohio-licensed pharmacist-in-charge has over thirty years of unblemished 
experience and expects to adhere to standards of dispensing above those 
required by existing law and regulation.
    The Government's further argument that the size of the ``walk-in 
vault'' alone supports a finding by a preponderance of the evidence 
``that the pharmacy intends to do a large business in controlled 
substances and this, coupled with the diversion problem that exists in 
southern Ohio, would not be in the public interest'' \32\ is equally 
unpersuasive. The credible testimony at hearing from Respondent's 
pharmacist, Mr. James, established that he did not know the volume of 
controlled substances that would be kept at the pharmacy, since there 
was no way to know that until the pharmacy was operational. (Tr. 50.) 
Similarly, Mr. Hillman testified that he did not know the volume of 
expected sales of controlled substances until the business was 
operational. (Tr. 100.) He credibly explained that he believed there 
was enough business in the area for the pharmacy to be successful, 
noting that if ``there's not enough business, I'll go broke.'' (Tr. 
122.)
---------------------------------------------------------------------------

    \32\ Gov't Br. at 5.
---------------------------------------------------------------------------

    Although Respondent did not establish a specific quantity of 
controlled substances expected to be sold once operational, it had no 
burden to do so. 21 CFR 1301.44(d). The Government's argument that a 
walk-in vault constitutes de facto evidence of the volume of controlled 
substances Respondent will handle, and further proof that this will 
contribute to the diversion problem in southern Ohio is at best 
speculative. ``Speculation is, of course, no substitute for evidence, 
and a decision based on speculation is not supported by substantial 
evidence.'' White ex rel. Smith v. Apfel, 167 F.3d 369, 375 (7th Cir. 
1999) (citing Erhardt v. Sec'y, DHS, 969 F.2d 534, 538 (7th Cir. 
1992)). More importantly, the Government did not prove by a 
preponderance of evidence at hearing that Respondent's handling of 
controlled substances, whether in a large volume or small, would be 
contrary to applicable state and federal law. In fact, testimony from 
DI Kresnak pertaining to various precautions Respondent's pharmacist 
intended to take to prevent the diversion of controlled substances were 
``above what DEA requires.'' (Tr. 148.) DI Kresnak also testified that 
there was nothing wrong with the kind of security measures taken by 
Respondent to protect against diversion. (Tr. 147.)
    After careful consideration of the entire record, I find that the 
Government has failed to establish by a preponderance of the evidence 
any acts or demonstrable conduct by any member or employee of 
Respondent, that would support a finding by substantial evidence that 
Respondent's registration would be inconsistent with the public 
interest as that term is used in 21 U.S.C. 823(f). I therefore find 
that Respondent's registration under Factors Two, Four, and Five would 
not be inconsistent with the public interest.

V. Conclusion and Recommendation

    I find that the Government has not established by substantial 
evidence a prima facie case in support of denying Respondent's 
application for a DEA COR as a retail pharmacy. The Government has 
failed to demonstrate by a preponderance of the evidence that such 
registration would be inconsistent with the public interest as that 
term is used in 21 U.S.C. 824(a)(4) and 823(f). Accordingly, I 
recommend approval of Respondent's application for a DEA COR as a 
retail pharmacy pursuant to 21 U.S.C. 823(f).

    Dated: December 15, 2011.

Timothy D. Wing,
Administrative Law Judge.

[FR Doc. 2012-19221 Filed 8-6-12; 8:45 am]
BILLING CODE 4410-09-P