[Federal Register Volume 77, Number 198 (Friday, October 12, 2012)]
[Notices]
[Pages 62346-62348]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-25051]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration


Holiday CVS, L.L.C., d/b/a CVS/Pharmacy Nos. 219 and 5195; Denial 
of Request for Redactions

    On August 31, 2012, I issued a Decision and Final Order 
(hereinafter, Order) revoking the DEA Certificates of Registration 
issued to Holiday CVS, L.L.C., d/b/a CVS/Pharmacy Nos. 219 and 5195 
(hereinafter, Respondents). Prior to publication, counsel for 
Respondents contacted my staff to request a delay in the publication of 
the Order in the Federal Register, on the basis that it, as well as the 
Administrative Law Judge's Recommended Decision (R.D.), may contain 
trade secrets and confidential business information; Respondents sought 
leave to review the Order and to file a request for redactions. My 
staff agreed to the request, and on September 18, 2012, counsel for 
Respondents filed a letter proposing various redactions to both the 
Order and the ALJ's R.D.; therein, Respondents set forth four reasons 
in support of their proposed redactions. Letter of Catherine O'Neill, 
Esq., to Administrator, DEA (Sept. 18, 2012) (hereinafter, Resp. Req.). 
Thereafter, the Government was directed to file a response to 
Respondents' request. On September 29, 2012, the Government filed its 
Response (hereinafter, Gov. Resp.), objecting to the proposed 
redactions.
    Respondents' proposed redactions involve various portions of the 
Order and the ALJ's R.D. that discuss the manner in which information 
was obtained for Respondents' pharmacy information management system. 
Respondents maintain that this information contains ``trade secret[s] 
and confidential business information regarding Respondents' business 
practices,'' which ``is exempt from disclosure under the Freedom of 
Information Act (FOIA) and [that] its publication will cause 
significant, and irreparable, harm to their business operations.'' Id. 
at 1. In addition to these contentions, Respondents argue: (1) That the 
ALJ's Protective Orders and bench rulings support redaction of the 
Final Order; (2) that the ALJ's various rulings continue in effect 
after the termination of the proceeding; and (3) that adoption of the 
ALJ's Confidentiality Designations is consistent with the manner in 
which the Agency has treated confidential information in other cases. 
Id. at 3-5.
    Opposing the redactions, the Government argues that Respondents 
have not established that the information at issue involves trade 
secrets or confidential business information. Gov. Resp. at 1. The 
Government further argues that the information at issue ``is essential 
to an understanding of the ALJ's Recommended Decision and the 
Administrator's Final Order.'' Id. at 2. Having carefully reviewed the 
parties' submissions, I conclude that Respondents have not established 
their entitlement to the relief sought. See 5 U.S.C. 556(d) (``Except 
as otherwise provided by statute, the proponent of a rule or order has 
the burden of proof.'').
    As noted above, Respondents' first contention is that the proposed 
redactions involve trade secrets \1\ and

[[Page 62347]]

commercial information which is exempt from disclosure under Exemption 
4 of the Freedom of Information Act (FOIA). See 5 U.S.C. 552(b)(4). 
Notwithstanding their assertion that publication of the information 
will cause them ``significant, and irreparable, harm to their business 
operations,'' Resp. Req., at 1, they invoke the standard from Critical 
Mass Energy Project v. NRC, 975 F.2d 871 (D.C. Cir. 1992), which does 
not require any showing of competitive harm where trade secrets or 
confidential business information are voluntarily provided to an 
agency, to argue that because they voluntarily provided this 
information to the Agency, it is exempt from disclosure ``if it `would 
customarily not be released to the public by the person from whom it 
was obtained.' '' Resp. Req. at 3 (quoting 975 F.3d at 879). 
Respondents thus contend that ``[i]t is proper and consistent with FOIA 
for this information to remain protected from public disclosure.'' Id.
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    \1\ Respondents err in contending that the information 
constitutes a trade secret. As the D.C. Circuit has explained, a 
trade secret is ``a secret, commercially valuable plan, formula, 
process, or device that is used for the making, preparing, 
compounding, or processing of trade commodities and that can be said 
to be the end product of either innovation or substantial effort.'' 
Public Citizen Health Research Group v. FDA, 704 F.2d 1280, 1288 
(D.C. Cir. 1983). Moreover, there must be a ``direct relationship'' 
between the trade secret and the productive process. Id. As the D.C. 
Circuit has further explained, this definition ``narrowly cabins 
trade secrets to information relating to the `productive process' 
itself.'' Center for Auto Safety v. NHTSA, 244 F.3d 144, 151 (D.C. 
Cir. 2001). As these authorities make clear, because Respondents' 
pharmacy management information system is not used to make, prepare, 
compound or process a trade commodity, the information is not a 
trade secret.
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    However, in Chrysler Corp. v. Brown, 441 U.S. 281, 292 (1979), the 
Supreme Court held ``[t]hat the FOIA is exclusively a disclosure 
statute.'' In so holding, the Court examined the FOIA's ``provision for 
judicial relief,'' which grants the federal district courts only `` 
`jurisdiction to enjoin the agency from withholding agency records and 
to order the production of any agency records improperly withheld from 
the complainant.' '' Id. (quoting 5 U.S.C. 552(a)(4)(B)). As the Court 
explained, this ``provision does not give the authority to bar 
disclosure.'' Id. The Court further explained that ``the FOIA by itself 
protects the submitters' interest in confidentiality only to the extent 
that this interest is endorsed by the agency collecting the 
information.'' Id. at 293. The Court thus held that the FOIA's 
exemptions ``were only meant to permit the agency to withhold certain 
information, and were not meant to mandate nondisclosure.'' Id. at 294.
    Respondents point to no other provision of law which bars the 
Agency from disclosing the information in the Decision and Order.\2\ 
Instead, they cite to two prior Agency orders which adopted an ALJ's 
ruling that certain information was entitled to protection. Resp. Req. 
at 4-5 (citing Penick Corp., 68 FR 6947 (2003); Johnson Matthey, 67 FR 
39041 (2002)). Yet neither of these cases explains what legal standard 
was applied by the Agency in making the determination to continue to 
protect the information from disclosure in the final order. See Penick, 
68 FR at 6948; Johnson Matthey, 67 FR at 39041. Moreover, each of these 
cases involved a challenge to an application of an entity to import 
schedule II controlled substances by competitors of the applicant. See 
Penick, 68 FR at 6947, 6949; Johnson Matthey, 67 FR at 39043.
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    \2\ Respondents do not contend that the Trade Secrets Act, 18 
U.S.C. 1905, bars the disclosure of the information. Nor could they, 
as the statute does not prohibit those disclosures which are 
``authorized by law.'' Id.
     Shortly after the Supreme Court issued its decision in Chrysler 
Corp. v. Brown, the Office of Legal Counsel issued an Opinion upon 
the request of the Federal Mine Safety and Health Review Commission 
on the issue of whether the Commission could publish confidential 
financial information about a mine operator in an opinion or order. 
Memorandum Op. for the Gen. Counsel, Federal Mine Safety and Health 
Rev. Comm'n, 3 U.S. Op. Off. Legal Counsel 201 (1979). Therein, the 
Office of Legal Counsel noted its prior opinion that ``the phrase 
`authorized by law' does not require that an otherwise prohibited 
disclosure be specifically authorized by law. `[I]t is sufficient if 
the activity is ``authorized in a general way by law.'' ' This 
includes an authorization that is reasonably implied.'' Id. at 203 
(citing 41 Op. Att'y Gen. 166, 169 (1953) (other citation omitted)).
     The Office of Legal Counsel then noted that while ``[t]here is 
no statute that specifically authorizes the Commission to publish, 
in its opinions or orders, information within the scope of the 
prohibitions of Sec.  1905[,] * * * the Commission is a quasi-
judicial body with the authority both to hold hearings in the first 
instance and to review decisions made by its administrative law 
judges.'' Id. (citation omitted). Because the Commission's 
``decisions * * * must be based upon the record as well as the 
law,'' and ``[i]t is authorized and directed to make findings of 
fact, which must be sustained on judicial review if supported by 
substantial evidence[,] * * * the Commission is * * * authorized by 
clear implication of law to include in its opinions and orders a 
recitation of evidence in the record upon which its findings and 
legal conclusions are based.'' Id. at 203-04 (citations omitted). 
The Office of Legal Counsel thus concluded that ``[t]his is 
sufficient authorization by law, within the meaning of Sec.  1905, 
to allow the Commission to publish in its opinions and orders 
evidence of record that would otherwise be protected from 
disclosure.'' Id. at 204.
     In performing its functions under 21 U.S.C. 823 and 824, DEA 
likewise acts as a quasi-judicial body and the Agency's decisions 
and orders ``must be based upon the record as well as the law.'' Id. 
at 203; see also 21 U.S.C. 824(c) (``Proceedings to deny, revoke, or 
suspend shall be conducted pursuant to this section in accordance 
with subchapter II of chapter 5 of Title 5.''). So too, the Agency 
``is authorized and directed to make findings of fact, which must be 
sustained on judicial review if supported by substantial evidence.'' 
3 U.S. Op. Off. Legal Counsel, at 203; see also 21 U.S.C. 877 
(``Findings of fact by the Attorney General, if supported by 
substantial evidence, shall be conclusive.'').
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    By contrast, this matter involves an enforcement proceeding brought 
to protect the public interest pursuant to 21 U.S.C. 824(a). It is 
manifest that in such a proceeding, the Government has a substantial, 
if not a compelling interest, in ensuring that both the public and the 
regulated industry fully understand the basis for the Agency's action. 
See FCC v. Schreiber, 381 U.S. 279, 293 & n.20 (1965) (noting ``the 
general policy favoring disclosure of administrative agency 
proceedings''); see also Bartholdi Cable Co., Inc., v. FCC, 114 F.3d 
274, 282 (D.C. Cir. 1997) (upholding FCC's conclusion ``that the public 
ha[d] a compelling interest in the [confidential business] 
information'' submitted by an applicant, ``as it [bore] directly on 
[its] fitness as a license applicant''); 21 CFR 1316.67 (requiring that 
Agency publish its final orders in the Federal Register). The Agency's 
Final Order establishes precedent for future cases and the Agency has 
an obligation to provide fair notice to the regulated industry of what 
conduct it deems constitutes an act which renders a registration 
``inconsistent with the public interest.'' 21 U.S.C. 824(a)(4); see 
also 5 U.S.C. 552(a)(2) (``A final order [or] opinion * * * that 
affects a member of the public may be relied on, used, or cited as 
precedent by an agency against a party other than an agency only if * * 
* it has been * * * published * * * or * * * the party has actual and 
timely notice of the terms thereof.'').
    This is not to say that the redaction of bona fide trade secrets 
and confidential business information will never be warranted in an 
enforcement proceeding brought under 21 U.S.C. 824. But Respondents' 
proposed standard, which focuses entirely on whether the information is 
of the type which they customarily release to the public and requires 
no showing of how the disclosure will result in competitive harm, 
clearly ill-serves the public interest.
    In any event, here, the Government demonstrated that much of the 
information regarding the operation of Respondents' pharmacy management 
information system (as well as its use of a third-party data 
aggregator) is publicly available through a Google search. See Gov. 
Resp. at 2 and Attachments. This alone shows that most of the 
information, which Respondents proposed be redacted, is not treated as 
confidential by CVS.
    To be sure, the evidence that local stores were previously allowed 
to input prescriber information into the database; that the database 
formerly displayed

[[Page 62348]]

both the data obtained from HMS (the third-party aggregator), as well 
as that inputted at the local stores; and that CVS obtained updated 
data from HMS on a weekly basis; is not specifically addressed by the 
attachments. Yet even with respect to this information, Respondents 
offered no evidence that CVS treats this information as 
confidential.\3\
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    \3\ Thus, even under the Critical Mass standard, Respondents are 
not entitled to the redactions.
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    Moreover, Respondents offer absolutely nothing in the way of 
evidence to support their claim that ``publication [of this evidence] 
will cause significant, and irreparable, harm to their business 
operations.'' Resp. Req. at 1. In short, Respondents have offered no 
more than conclusory assertions of competitive harm, which are 
manifestly inadequate to overcome the substantial public interest in 
publication of the Order without the proposed redactions.
    Nor do Respondents' remaining contentions support their proposed 
redactions. While the ALJ's protective order did protect against the 
disclosure of ``commercially sensitive information,'' see Resp. Req. at 
3-4, the protective order defined this term to ``mean[] information 
that, if publicly disclosed, would be a windfall to Respondents' 
competitors and would put Respondents at a competitive disadvantage.'' 
ALJ Ex. 20, at 3. Respondents thus had notice that they were required 
to establish that the publication of any information, which they seek 
to protect from disclosure, would cause them competitive harm. Yet not 
only did Respondents fail to elicit any testimony from CVS's Vice 
President explaining why public disclosure of the information as to the 
workings of its pharmacy management information system ``would be a 
windfall'' to their competitors or place them ``at a competitive 
disadvantage,'' id., they also failed to submit any such affidavits 
establishing such facts in support of their request for redactions.
    Contrary to Respondents' contention, the ALJ's explanation for 
closing the hearing during the testimony of the CVS Vice President does 
not support the proposed redactions. While the ALJ explained that ``[a] 
party will be seeking to introduce evidence that is likely to 
compromise a trade secret and/or commercially sensitive information,'' 
he also explained that this ruling was based on ``information 
represented by counsel for the Respondent.'' Tr. 1225-26. The ALJ's 
ruling does not constitute a finding that Respondents had satisfied 
their burden of showing that disclosure of the information would cause 
competitive harm, and while the ALJ appropriately proceeded with 
caution given the representation of Respondents' counsel, ultimately, 
no such evidence was forthcoming. I thus reject this contention.
    Finally, Respondents' contend that the ``publication and 
dissemination to non-covered individuals of the unredacted Final Order 
is inconsistent with the Protective Order because it is a transmittal 
of information to any person `not entitled to access pursuant to [the] 
Protective Order,' '' which remains in effect even after the 
termination of the proceeding. Resp. Req., at 4 (quoting ALJ Ex. 20, at 
]]7 and 9). However, the Protective Order does not (and cannot) bind 
the Administrator, and indeed, it expressly provides that after the ALJ 
transmits the record, the Order may be modified by the Administrator. 
ALJ Ex. 20, at ] 7.
    In any event, as explained above, Respondents have not established 
that any of the information which they seek to redact is confidential. 
Nor have they established that publication of the information will 
cause them any competitive harm. Accordingly, I reject their request 
for redactions. I also conclude that modification of the protective 
order is warranted and will direct that the ALJ remove the confidential 
and protected designation from those portions of the record which are 
marked as such based on Respondents' assertion that they include trade 
secrets or confidential business information.
    It is so ordered.

    Dated: October 4, 2012.
Michele M. Leonhart,
Administrator.
[FR Doc. 2012-25051 Filed 10-11-12; 8:45 am]
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