[Federal Register Volume 78, Number 242 (Tuesday, December 17, 2013)]
[Notices]
[Pages 76322-76327]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-29956]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration


Thomas Neuschatz, M.D.; Decision and Order

    On July 2, 2013, the Deputy Assistant Administrator, Office of 
Diversion Control, issued an Order to Show Cause to Thomas Neuschatz, 
M.D. (hereinafter, Applicant), of Marysville, California. GX 9. The 
Show Cause Order proposed the denial of Applicant's application for a 
DEA Certificate of Registration as a practitioner, on the ground that 
his ``registration would be inconsistent with the public interest.'' 
Id. (citing 21 U.S.C. 823(f)).
    The Show Cause Order specifically alleged that on April 29, 2011, 
Applicant had surrendered his DEA registration, and that on May 30, 
2011, Applicant applied for a new registration as a practitioner. Id. 
Next, the Order alleged that a DEA investigation had found that 
Applicant ``prescribed and dispensed inordinate amounts of controlled 
substances . . . under circumstances where [he] knew or should have 
known the prescriptions were not for legitimate medical purposes.'' Id.
    Next, the Show Cause Order alleged that a medical Expert had 
reviewed the medical records of three of Applicant's patients (E.G., 
R.E., and J.G.) and concluded that he ``prescribed controlled 
substances to those patients without a legitimate medical purpose and/
or outside the usual course of professional practice.'' Id. at 1-2. 
More specifically, with respect to E.G., the Order alleged that over 
the course of E.G's first five visits, Applicant escalated the daily 
dose of medication from 22.5 mg of hydrocodone to 80 mg of hydrocodone 
and 320 mg of oxycodone. Id. at 2. The Order further alleged that 
``[f]rom approximately January 4, 2011 through April 16, 2011, 
[Applicant] prescribed Dilaudid to E.G. without conducting an in-person 
physical examination'' and during this period, E.G. made a single 
office visit. Id. The Order then alleged that based on

[[Page 76323]]

Applicant's ``prescribing of high dosages of opioid medications and 
failing to perform a diagnostic evaluation of E.G.'s pain complaints,'' 
the Expert concluded that Applicant's ``treatment of E.G. fell outside 
the usual course of professional practice.'' Id. at 2.
    After alleging that R.E. died of ``acute poisoning by multiple 
pharmaceuticals and illegal substances,'' the Show Cause Order alleged 
that Applicant had failed to inquire into the patient's history of drug 
abuse, notwithstanding that R.E.'s intake forms had suggested that such 
history existed, and that R.E. ``provided no medical records and was 
unable to list previous physicians or pharmacies.'' Id. The Order 
further alleged that Applicant ``performed limited physical 
examinations of R.E. over the course of approximately 11 office 
visits.'' Id. Based on Applicant's alleged ``failure to confirm R.E.'s 
medical history, [his] failure to determine R.E.'s source of pain, 
and'' that he ``escalated dosages of highly addictive pain medications 
despite an unconfirmed . . . diagnosis,'' the Order further alleged 
that the Expert had concluded that Applicant acted ``outside the usual 
course of professional practice'' in prescribing controlled substances 
to R.E. Id.
    With respect to J.G., the Show Cause Order alleged that Applicant 
violated federal law by prescribing methadone to treat J.G.'s ``opioid 
dependence'' because he was ``not authorized to prescribe [s]chedule II 
controlled substances to treat narcotic dependent patients.'' Id. 
(citing 21 U.S.C. 823(g)(1); 21 CFR 1306.07(a)). The Order further 
alleged that ``J.G. died of an apparent overdose of prescription 
medications'' after his last visit with Applicant. Id.
    The Show Cause Order, which also notified Applicant of his right to 
request a hearing on the allegations or to submit a written a statement 
regarding the allegations while waiving his right to a hearing, the 
procedure for electing either option, and the consequences for failing 
to elect either option, id. at 3, was served on Applicant by certified 
mail addressed to him at the address of his proposed registered 
location. GX 10, at 1. As evidenced by the signed return receipt card, 
service was accomplished on July 10, 2013. Id. at 2.
    On August 13, 2013, the Government submitted a Request for Final 
Agency Action. Therein, the Government noted that since the date of 
service of the Show Cause Order, Applicant had not requested a hearing. 
Request for Final Agency Action, at 4. The Government thus contends 
that Applicant has waived his right to a hearing and requests the 
issuance of a final order denying the application. Id. at 4, 7.
    Subsequently, on August 22, 2013, the Government filed an addendum 
to its Request for Final Agency Action. Therein, the Government noted 
that on July 23, 2013, the Medical Board of California (MBC) adopted a 
Stipulated Surrender of License and Order (hereinafter, Stipulated 
Surrender), pursuant to which Applicant surrendered his California 
Physician's and Surgeon's Certificate, and that the MBC's Order 
``became effective on August 22, 2013.'' Addendum to Request for Final 
Agency Action, at 1-2. The Government attached a copy of the MBC's 
Decision, the Stipulated Surrender of License and Order, and the 
Accusation, which alleged forty-nine (49) causes for discipline. The 
Government also served a copy of the addendum on Applicant.
    Based on the Government's submission, I find that since the date of 
service of the Order to Show Cause, neither Applicant, nor anyone 
purporting to represent him, has either requested a hearing on the 
allegations or submitted a written statement in lieu of a hearing. See 
21 CFR 1301.43(a) & (c). Accordingly, I find that Applicant has waived 
his right to a hearing or to submit a written statement. Id. Sec.  
1301.43(c) & (d). I therefore issue this Decision and Final Order based 
on the Investigative Record submitted by the Government. Id. Sec.  
1301.43(e). I make the following findings of fact.

Findings

    Applicant previously held DEA Certificate of Registration 
BN5628194, which authorized him to dispense controlled substances, as a 
practitioner, in schedules II-V. GX 2, at 1. However, on April 29, 
2011, Applicant voluntarily surrendered this registration. Id. On May 
30, 2011, Applicant submitted an application for a new registration. GX 
1, at 1.
    Applicant also previously held a Physician's and Surgeon's 
Certificate which was issued by the MBC. However, on May 23, 2012, the 
MBC's Executive Director issued a forty-nine (49) count administrative 
complaint, which sought the revocation of Applicant's state license. 
See Accusation, In re Thomas Neuschatz, M.D., (M.B.C. 2012) (No. 02-
2009-199792). On June 25, 2013, Applicant voluntarily entered into the 
Stipulated Surrender, and on July 23, the MBC adopted the order, which 
became effective on August 22, 2013. Accordingly, I find that Applicant 
no longer possesses authority under California law to dispense 
controlled substances.
    In the Stipulated Surrender, Applicant ``agree[d] that, at a 
hearing, [the MBC] could establish a factual basis for the charges in 
the Accusation and that those charges constitute cause for 
discipline.'' Stipulated Surrender, at 3. Applicant agreed that if he 
``should ever apply or reapply for a new license or certification, or 
petition for reinstatement of a license, by any other health care 
licensing agency in the State of California, all of the charges and 
allegations contained in [the] Accusation . . . shall be deemed to be 
true, correct, and admitted by Respondent for the purpose of any 
Statement of Issues or any other proceeding seeking to deny or restrict 
licensure.'' Id. at 4-5.
    With respect to E.G. (Show Cause Order, at 2), the MBC alleged that 
Applicant ``prescribed excess quantities of controlled substances and 
dangerous drugs'' to her. Accusation, at 18. More specifically, the 
MBC, after noting the large doses that Applicant had prescribed to her, 
found that he:
    (1) ``failed to make a specific diagnosis regarding E.G.'s pain'';
    (2) never evaluated ``her psychological status'';
    (3) ``never followed up on x-rays that he ordered'';
    (4) never documented whether E.G. had complied with the exercise 
and stretching program he had recommended;
    (5) never specified the functional goals of treatment in the pain 
treatment plan;
    (6) increased her medications but never provided clear reasons for 
doing so in the medical record and found that the increases were 
``never based on [her] functional status'';
    (7) never documented that she brought in her pain medication 
bottles even though this was required by her pain contract;
    (8) ordered an x-ray for E.G., but there was no x-ray in E.G.'s 
chart and no further reference to the x-ray in ``later progress 
notes'';
    (9) never spoke with other physicians who had ordered various tests 
nor ``formally requested the results of these studies'';
    (10) found that ``[t]he only treatment [he] employed for E.G. was 
opiate mediations, the doses of which were increased with alarming 
rapidity[,] [and that] [d]uring the initial months of treatment[,] [he] 
doubled her opiate doses every month until at one point E.G. was 
receiving a mixture of opiate medications equal to 1,035 mg a day of 
oral morphine,'' which compares with ``the average dose . . . for 
patients with

[[Page 76324]]

cancer pain [of] between 100 mg to 200 mg per day'';
    (11) ``failed to document that he informed E.G. about the risks of 
opiate medications''; and
    (12) ``failed to document that E.G. was ever referred to physical 
therapy or any physician specialist for evaluation or treatment of her 
chronic pain condition.''

Id. at 17-18. Based on the above findings, the MBC concluded that 
Applicant's conduct ``constitute[d] excessive prescribing of controlled 
substances and dangerous drugs in the care and treatment of E.G.'' Id. 
at 18.

    With respect to R.E. (Show Cause Order, at 2), the MBC alleged that 
Applicant ``prescribed excess quantities of controlled substances and 
dangerous drugs'' to him. Id. More specifically, the MBC found that he:
    (1) failed to comment on R.E.'s history of drug abuse (which 
included one hospitalization and three rehabilitation programs) during 
any of ``R.E.'s 11 office visits, or on the `opiate risk tool' that 
[Applicant] used to evaluate his patient's risk of prescription 
misuse'';
    (2) prescribed controlled substances after performing a ``limited 
physical examination'' and without requesting previous medical records;
    (3) failed to document prescriptions in the medical records;
    (4) prescribed increased doses of opiates without any explanation 
in the medical records;
    (5) prescribed a muscle relaxer to R.E. despite his ``occupational 
function and physical improvement'';
    (6) prescribed 300 tablets of hydromorphone 8 mg and 150 tablets of 
methadone 10 mg to R.E. on April 23; then, only 14 days later, 
prescribed 128 tablets of oxycodone 30 mg and 80 tablets of methadone 
10 mg;
    (7) increased the dose of methadone from 50 mg to 70 mg per day 
``because his pain control is slightly down'';
    (8) prescribed controlled substances when the patient was in a 
detoxification program;
    (9) failed to document in the medical record any of the 
prescriptions he provided R.E. while he was in the detoxification 
program;
    (10) failed to address the patient's recent inpatient treatment for 
drug detoxification, and instead refilled all medications without 
adjusting the dosage;
    (11) increased the doses of opiate medications to a point where 
R.E. was receiving 740 mg of oral morphine every day, when ``the 
average dose of oral morphine required by patients with cancer pain is 
between 100 to 250 mg per day'';
    (12) failed to question R.E. when he ``should have suspected that 
R.E. was using the medications for a non-medical purpose'';
    (13) failed to record any formal referral to physical therapy; and
    (14) failed to order any traditional diagnostic tests, including 
laboratory studies, MRIs, or x-rays.

Id. at 19-23. Based on the foregoing, the MBC concluded that 
Applicant's conduct ``constitute[d] excessive prescribing of controlled 
substances and dangerous drugs.'' Id. at 24.

    With respect to J.G. (Show Cause Order, at 2), the MBC alleged that 
Applicant prescribed excess controlled substances to her. Id. at 29. 
More specifically, the MBC found that he:
    (1) knew that J.G. was receiving methadone from a drug treatment 
clinic, yet failed to document any substance abuse history for J.G.;
    (2) failed to order any diagnostic tests, such as laboratory 
studies, x-rays, or MRIs;
    (3) falsely documented that J.G. attended the methadone treatment 
clinic for chronic right shoulder pain and back pain instead of for her 
addiction;
    (4) began treating J.G.'s anxiety with narcotics instead of the 
previously prescribed non-habituated medications;
    (5) assumed responsibility for treatment of J.G.'s known addiction, 
``but inaccurately represented this as a treatment for a chronic pain 
condition'';
    (6) failed to discuss the care of J.G. with her primary physician 
or with any of the addiction specialists at the methadone clinic she 
was attending;
    (7) ``assumed the methadone maintenance of a known opiate addict 
despite his lack of qualification and without the guidance of qualified 
addiction specialists''; and
    (8) failed to document all of the medications J.G. was taking.

Id. at 25-28. Similarly, the MBC found that Applicant ``prescribed 
excess quantities of controlled substances and dangerous drugs to'' 
J.G. Id. at 29.

    The MBC relied on a medical report prepared by an Expert, who, 
after reviewing the medical files for E.G., R.E., and J.G., concluded 
that Applicant's conduct with respect to each patient ``reflect[ed] an 
extreme departure from the usual practice of general medicine.'' \1\ 
Expert Report, at 8-32. With respect to E.G., the Expert noted that 
Applicant increased the patient's dose of controlled substances from 
the equivalent of 157.5 mg/day oral morphine to 1,035 mg/day oral 
morphine over a seven month period (constituting a roughly 100% dose 
increase per month). Id. at 6. The Expert concluded that Applicant's 
``conduct reflect[ed] an extreme departure from the usual practice of 
general medicine, because, of his failure to ever render a diagnosis 
regarding [E.G.'s] pain complaints or to more thoroughly evaluate her 
psychological status.'' Id. at 8. The Expert noted that ``[n]o specific 
diagnosis corresponding to [E.G.'s] pain complaints was ever made'' and 
``[t]here [was] no specific evaluation of her psychological status 
other than frequent notations about her anxious affect.'' Id. Moreover, 
the Expert observed that while Applicant ordered an x-ray of E.G.'s 
lumbar spine, there was no report in E.G.'s record and while E.G. has 
supposedly undergone x-rays and CT spans which were ordered by her 
prior physicians, Applicant did not request the results. Id. at 9-10.
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    \1\ In reaching her conclusions, the Expert relied on the 
``Model Guidelines for the Use of Controlled Substance for the 
Treatment of Pain.'' Stipulated Surrender, at 4. California adopted 
these guidelines in 1994 and later revised them in 2007. See MBC, 
Guidelines for Prescribing Controlled Substances for Pain, http://www.mbc.ca.gov/pain_guidelines.html.
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    The Expert further observed that Applicant failed ``to develop a 
treatment plan with objectives,'' and that he rapidly increased the 
dosage of opioids ``with alarming rapidity.'' Id. Applicant did not, 
however, document a justification for the increases, which in the 
Expert's observation, were ``never based on [E.G.'s] functional 
status.'' Id. Finally, the Expert found that ``signs of misuse on the 
part of [E.G.] did not seem to affect [Applicant's] prescribing'' 
practices.\2\ Id. at 11. In sum, the Expert found that Applicant's 
``prescription treatment of patient [E.G.] fell outside the usual 
course of the professional practice of medicine.'' Id. at 13.
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    \2\ As example, the Expert noted that on November 4, 2008, 
Applicant increased E.G.'s dose of both OxyContin and Norco because 
``[s]he would like to go up on the Norco and I said fine.'' GX 4, at 
9.
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    As for R.E., the Expert noted that, notwithstanding that at the 
first visit, R.E. stated that he had previously taken Norco, OxyContin 
40mg, and was currently taking three OxyContin 80mg tablets a day for 
neck pain, he ``claimed not to know the name of his treating physician, 
the location of any pharmacy[,] nor was he able to produce a 
prescription bottle.'' Id. at 26. Moreover, the Expert noted that R.E. 
told Applicant that ``[h]e ha[d] no records.'' Id. Also, the Expert 
observed that on the medical history form which R.E. completed at the 
initial visit, R.E. had disclosed that in 2004, he had a ``drug 
related'' hospitalization. GX 7, at 32; GX 4, at 23.

[[Page 76325]]

    The Expert explained that under these circumstances, ``most 
clinicians [would] suspect drug seeking for non-medical uses,'' and 
that ``when aspects of [a] patient's case appear suspicious, the 
standard practice is to request medical records or to speak with the 
most recent treating physician in order to verify the patient's history 
and past treatment.'' GX 4, at 26. The Expert then found that there was 
no evidence in the medical record that Applicant ever confirmed the 
medical history or prior treatment of R.E. with prescriptions.'' Id.
    The Expert noted that at R.E.'s first visit, Applicant documented 
in the medical record that he had prescribed only 45 dosage units of 
oxycodone 30mg. Id. at 23. Yet, the Expert found that the actual 
prescription issued by Applicant authorized the dispensing of 240 
oxycodone 30mg. Id. at 23; GX 7, at 23 & 45.
    The Expert further found that Applicant failed ``to evaluate the 
reason for [R.E.'s] unremitting pain despite high doses of controlled 
substances.'' Id. at 27. Moreover, Applicant committed an extreme 
departure from the standard of care by failing to develop ``a treatment 
plan with clear functional objective.'' Id. at 30.
    Moreover, according to the Expert, Applicant failed to address 
numerous signs that R.E. ``was misusing or diverting medication.'' Id. 
The Expert found that at several visits, R.E. requested specific drugs 
such as oxycodone and methadone, sought an increase in Xanax, and 
reported that his medications had been stolen. Id. at 24 & 29. Yet the 
Expert also found that ``[a]t no time was laboratory testing done to 
confirm medication use by the patient and exclude [the] possibility of 
diversion'' [and] [a]t no time did [Applicant] document having 
performed a random pill count to confirm medication adherence.'' Id. at 
29. The Expert thus concluded that Applicant's continued treatment of 
R.E. ``with rapidly escalating doses of controlled substances despite 
an unconfirmed medical diagnosis,'' fell outside the usual course of 
the professional practice of medicine. Id. at 32.
    Finally, with respect to J.G., the Expert noted that Applicant 
never documented nor referenced her ``substance abuse history, although 
this was known to him'' from prior treatment and it was ``also . . . 
implied given her ongoing treatment at a methadone maintenance 
clinic.'' Id. at 16. The Expert noted that Applicant ``assumed 
responsibility for treatment of this known addict with methadone, but 
inaccurately represented his prescriptions for methadone as treatment 
for her chronic pain condition.'' Id. at 18; see also id. at 22 
(Applicant ``knowingly prescribed methadone to prevent opiate 
withdrawal rather than for the treatment of pain.''). Applicant did 
this ``despite his lack of qualification and without the guidance of a 
qualified addiction specialist.'' Id. at 20. As such, ``his 
misrepresentation that methadone was indicated for the treatment of her 
chronic pain rather than as treatment for her opioid addiction was 
patently false.'' Id. at 18. The Expert thus concluded that Applicant's 
``treatment of [J.G.] fell far outside the usual professional practice 
of medicine.'' Id. at 32.

Discussion

    Section 303(f) of the Controlled Substances Act (CSA) provides that 
an application for a practitioner's registration may be denied ``if the 
Attorney General determines that the issuance of such registration . . 
. would be inconsistent with the public interest.'' 21 U.S.C. 823(f). 
In making the public interest determination, Congress directed that the 
following factors be considered:

    (1) The recommendation of the appropriate State licensing board 
or professional disciplinary authority.
    (2) The applicant's experience in dispensing . . . 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.

21 U.S.C. 823(f). ``These factors are . . . considered in the 
disjunctive.'' Robert A. Leslie, M.D., 68 FR 15227, 15230 (2003). I 
``may rely on any one or a combination of factors and may give each 
factor the weight . . . [I] deem[] appropriate in determining whether . 
. . an application for registration [should be] denied.'' Id.; see also 
Kevin Dennis, M.D., 78 FR 52787, 52794 (2013); MacKay v. DEA, 664 F.3d 
808, 816 (10th Cir. 2010).

    The Government has the burden of proving, by a preponderance of the 
evidence, that the requirements for a denial of an application, 
pursuant to 21 U.S.C. 823(f), are met. 21 CFR 1301.44(e). This is so 
even in a non-contested case. Gabriel Sanchez, M.D., 78 FR 59060, 59063 
(2013). Having considered all of the factors,\3\ I conclude that the 
Government's evidence with respect to factors two and four establishes, 
prima facie, that the issuance of a DEA Certificate of Registration to 
Applicant ``would be inconsistent with the public interest.'' 21 U.S.C. 
823(f).
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    \3\ The Government presented evidence that, as of August 22, 
2013, Applicant no longer possessed a state license to practice 
medicine. Stipulated Surrender, at 4-5. The CSA only permits the 
Attorney General to register practitioners ``if the applicant is 
authorized to dispense . . . controlled s ubstances under the laws 
of the State in which he practices.'' 21 U.S.C. 823(f). As such, the 
CSA requires the denial of an application for registration when the 
applicant's state license has been suspended or revoked. Sheran 
Arden Yeates, M.D., 71 FR 39130, 39131 (2006); Dominick A. Ricci, 58 
FR 51104, 51105 (1993). Applicant's loss of his state license thus 
provides an independent ground to deny his application for a DEA 
Certificate of Registration.
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Factors Two and Four--The Applicant's Experience in Dispensing 
Controlled Substances and Compliance With Applicable Laws Related to 
Controlled Substances

A. The Preclusive Effect of the MBC Order

    Under the doctrine of collateral estoppel, the MBC's findings of 
fact and conclusions of law are entitled to preclusive effect in this 
proceeding if the parties had an adequate opportunity to litigate the 
issues. Robert L. Dougherty, M.D., 76 FR 16823, 16830 (2011); Univ. of 
Tenn. v. Elliot, 478 U.S. 788, 797-98 (1986) (``When an administrative 
agency is acting in a judicial capacity and resolves disputed issues of 
fact properly before it which the parties have had an adequate 
opportunity to litigate, the courts have not hesitated to apply res 
judicata[.]'') (internal quotations and citations omitted). Moreover, a 
State Board's findings may be entitled to preclusive effect even where 
an Applicant/Registrant chose not to dispute the allegations and 
entered into a consent agreement or stipulated settlement. David A. 
Ruben, 78 FR 38363, 38365 (2013) (holding that findings of a consent 
agreement which supported state board's disciplinary action were not 
subject to relitigation before DEA, because, inter alia, physician 
agreed that he could not contest the findings in any future proceeding 
involving the Board or other state agency); cf. Jose G. Zavaleta, M.D., 
78 FR 27431, 27433-34 (2013) (holding that the findings of a prior DEA 
proceeding are entitled to preclusive effect in a subsequent DEA 
proceeding notwithstanding that the Applicant/Registrant waived his 
right to a hearing in the first proceeding).
    Thus, in Ruben, the Administrator held that the findings of a 
consent agreement were entitled to preclusive

[[Page 76326]]

effect in a DEA proceeding, even though the registrant had not actually 
litigated them, noting that under the relevant State's law, a judgment 
entered by stipulation or consent ```may be conclusive, with respect to 
one or more issues, if the parties have entered an agreement 
manifesting such intention.' '' 78 FR at 38366 (quoting Chaney Building 
Co. v. City of Tucson, 716 P.2d 28, 30 (Ariz. 1986)). Because in Ruben, 
it was clear that the parties intended that the findings of the consent 
agreement would be binding between them and could not be relitigated in 
a subsequent proceeding before the state board (or another state 
agency), and under the relevant state law, the agreement was entitled 
to preclusive effect, the Administrator rejected the contention that 
the findings were subject to relitigation before this Agency.\4\ Id.
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    \4\ The Administrator also rejected the contention that the 
parties could, by their agreement, prevent DEA, as an Agency of the 
United States, from ``giv[ing] the same effect to the factual 
findings and legal conclusions as would exist in a subsequent state 
administrative proceeding.'' 78 FR at 38367 (citing U.S. Const. art. 
VI, cl.2; Howlett v. Rose, 496 U.S. 356, 371 (1990) (citing FERC v. 
Mississippi, 456 U.S. 742, 776 n.1 (1982) (opinion of O'Connor, J.) 
(``State may not discriminate against federal causes of action''))).
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    Relevant to the Order at issue here, the Supreme Court of 
California has held that ``a stipulated judgment may properly be given 
collateral estoppel effect, at least when the parties manifest an 
intent to be collaterally bound by its terms.'' Cal. State Auto. Assn. 
Inter-Ins. Bureau v. Super. Ct., 50 Cal.3d 658, 665 (1990). The crux of 
the issue is whether the parties, in agreeing to the settlement order, 
``manifest[ed] an intent to be collaterally bound by its terms.'' Id.; 
see also Landeros v. Pankey, 46 Cal. Rptr. 2d 165, 167 (Cal. App. 1995) 
(discussing same).\5\
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    \5\ A ``stipulated judgment'' is akin to a stipulated 
settlement, as a stipulated judgment arises when ``parties to [a] 
pending litigation stipulated . . . for settlement of the case.'' 
Cal. State Auto. Assn., 50 Cal.3d at 665.
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    Here, I conclude that the terms of the Stipulated Surrender and 
Disciplinary Order manifest that the parties agreed to be bound by the 
stipulation in subsequent proceedings. Applicant, who was represented 
by counsel, ``voluntarily, knowingly, and intelligently'' waived his 
right to a hearing before the Board, id. at 2, at which he could have 
``contest[ed] that cause for discipline exists based on'' the Board's 
charges. Id. at 3.
    Most significantly, Applicant ``agree[d] that, at a hearing, [the 
MBC] could establish a factual basis for the charges in the Accusation 
and that those charges constitute cause for discipline.'' Stipulated 
Surrender, at 3. The Order further provided that ``if [Applicant] 
should ever apply or reapply for a new license or certification, or 
petition for reinstatement of a license, by any other health care 
licensing agency in the State of California, all of the charges and 
allegations contained in [the] Accusation . . . shall be deemed to be 
true, correct, and admitted by Respondent for the purpose of any 
Statement of Issues or any other proceeding seeking to deny or restrict 
licensure.'' Id. at 4-5.\6\ Accordingly, because Applicant and the MBC 
manifested their intent to be bound by the terms of the Stipulated 
Surrender, the Board's findings are entitled to preclusive effect in 
this proceeding. Ruben, 78 FR at 38366.

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    \6\ It is noted that the Stipulated Surrender contains a 
provision which states that ``[t]he admissions made by Respondent 
herein are only for the purposes of this proceeding, or any other 
proceedings in which the Medical Board of California or other 
professional licensing agency is involved, and shall not be 
admissible in any other criminal or civil proceeding.'' Stipulated 
Surrender, at 3.
     Under the Controlled Substances Act, ``[t]o issue lawful 
prescriptions'' for any controlled substance, a ``physician[] must 
`obtain from the Attorney General a registration issued in 
accordance with the rules and regulations promulgated by him.' '' 
Gonzales v. Oregon, 546 U.S. 250-51 (2006) (quoting 21 U.S.C. 
822(a)(2)). Thus, DEA is a professional licensing agency with 
respect to the dispensing of controlled substances. Moreover, even 
if Applicant and the MBC intended to limit the preclusive effect of 
the Stipulated Surrender to proceedings involving other California 
health care licensing agencies, they cannot prevent an Agency of the 
United States from giving preclusive effect to the proceeding when 
they have agreed that such effect shall be given in a subsequent 
proceeding between Applicant and the State. See supra n.4.
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(A) Analysis of the Public Interest Factors
    Under a longstanding Agency regulation, ``[a] prescription for a 
controlled substance [is not] effective [unless it is] issued for a 
legitimate medical purpose by an individual practitioner acting in the 
usual course of [his] professional practice.'' 21 CFR 1306.04(a). This 
regulation further provides that ``an order purporting to be a 
prescription issued not in the usual course of professional treatment . 
. . is not a prescription within the meaning and intent of [21 U.S.C. 
829] and . . . the person issuing it, shall be subject to the penalties 
provided for violations of the provisions of law relating to controlled 
substances.'' Id. See also Cal. Health & Safety Code Sec.  11153(a) (a 
``prescription for a controlled substance shall only be issued for a 
legitimate medical purpose by an individual practitioner acting in the 
usual course of his or her professional practice,'' and ``an order 
purporting to be a prescription which is issued not in the usual course 
of professional treatment'' is not a legal prescription).
    As the Supreme Court has explained, ``the prescription requirement 
. . . ensures patients use controlled substances under the supervision 
of a doctor so as to prevent addiction and recreational abuse. As a 
corollary, [it] also bars doctors from peddling to patients who crave 
the drugs for those prohibited uses.'' Gonzales, 546 U.S. at 274 
(citing United States v. Moore, 423 U.S. 122, 135, 143 (1975)); United 
States v. Alerre, 430 F.3d 681, 691 (4th Cir. 2005), cert. denied, 574 
U.S. 1113 (2006) (prescription requirement stands as a proscription 
against doctors acting not ``as a healer[,] but as a seller of 
wares'').
    Under the CSA, it is fundamental that a practitioner must establish 
and maintain a legitimate doctor-patient relationship in order to act 
``in the usual course of . . . professional practice'' and to issue a 
prescription for a ``legitimate medical purpose.'' Zavaleta, 78 FR at 
27440. What constitutes a legitimate doctor-patient relationship is 
generally determined by the applicable state law. Id.
    Under California law, a physician must first conduct ``an 
appropriate prior examination,'' and determine that there is ``a 
medical indication'' for prescribing a controlled substance. Cal. Bus. 
& Prof. Code Sec.  2242(a); see also id. Sec.  725(c). Moreover, as the 
Expert explained, the MBC has issued extensive guidelines setting forth 
the standards of professional practice in prescribing controlled 
substances for the treatment of pain. Expert's Report, at 4. These 
standards provide that:

    A medical history and physical examination must be accomplished. 
This includes assessment of the pain, physical and psychological 
function; a substance abuse history; history of prior pain 
treatment; an assessment of underlying or coexisting diseases or 
conditions; and documentation of the presence of a recognized 
medical indication for the use of a controlled substance.

MBC, Guidelines for Prescribing Controlled Substances for Pain. As also 
set forth in the Expert's Report, the Guidelines also address such 
other areas as the development of a treatment plan, the need to obtain 
informed consent for treatment, the importance of conducting periodic 
review of a patient's response treatment, the need to refer a patient 
for additional evaluations and consultation, especially where a patient 
presents the ``risk for misusing [his] medications,'' the obligation to 
keep complete and accurate records, and the obligation to comply with 
both federal and state controlled substances laws and regulations. Id.
    With respect to patients E.G. and R.E., the MBC found that 
Applicant overprescribed controlled substances without documenting a 
medical necessity, thereby practicing outside the usual course of 
professional practice.

[[Page 76327]]

See Cal. Bus. & Prof. Code Sec.  725(c) (requiring a medical basis for 
prescribing controlled substances); 21 CFR 1306.04(a) (``A prescription 
for a controlled substance to be effective must be issued for a 
legitimate medical purpose''). Applicant only treated the patients with 
controlled substances, failed to document treatment plans, failed take 
into account the patient's past history of drug abuse, and continuously 
prescribed high doses of opiates without documenting any explanation 
for doing so in their medical records. Stipulated Surrender, at 17-23.
    Moreover, as the Expert explained, Applicant ignored signs of 
misuse with respect to E.G., and signs of misuse and diversion with 
respect to R.E. Expert's Report, at 11 (``signs of misuse on the part 
of [E.G.] did not seem to affect [Applicant's] prescribing 
practices''); id. at 29-30 (noting that R.E. requested specific 
controlled substances, reported stolen opioids, and ``reported 
persistent or increased pain at almost every visit'' notwithstanding 
that ``the opioid . . . doses had been significantly increased'' and 
that Applicant ``fail[ed] to respond to clues that [R.E.] was misusing 
or diverting medication''). Most significantly, with respect to both 
E.G. and R.E., the Expert concluded that Applicant's treatment ``fell 
far outside the usual professional practice of medicine.'' Id. at 32.
    I therefore find that Applicant violated the CSA's prescription 
requirement when he prescribed controlled substance to E.G. and R.E. 21 
CFR 1306.04(a). I also find that Applicant unlawfully distributed 
controlled substances to E.G. and R.E. See 21 U.S.C. 841(a)(1); see 
also Moore, 423 U.S. at 142-43 (noting that evidence established that 
physician ``exceeded the bounds of `professional practice,''' when ``he 
gave inadequate physical examinations or none at all,'' ``ignored the 
results of the tests he did make,'' and ``took no precautions against . 
. . misuse and diversion'').
    Finally, with respect to patient J.G., the evidence shows that 
Applicant ``assumed the methadone maintenance of a known opiate addict 
despite his lack of qualification and without the guidance of qualified 
addiction specialists.'' Id. at 28. Applicant did so notwithstanding 
that he did not hold the registration required by the CSA to dispense 
narcotic drugs for the purposes of providing maintenance or 
detoxification treatment. See 21 U.S.C. 823(g)(1) (``practitioners who 
dispense narcotic drugs to individuals for maintenance treatment or 
detoxification treatment shall obtain annually a separate registration 
for that purpose.'') (emphasis added); George C. Aycock, M.D., 74 FR 
17529, 17543 n.32 (2009) (``Under federal law, a practitioner must meet 
extensive requirements and be separately registered to lawfully 
dispense narcotic drugs for maintenance or detoxification 
treatment.'').
    Applicant further violated federal law when he prescribed 
methadone, a schedule II narcotic, for the purpose of treating J.G.'s 
opioid dependency. Expert Report, at 22. Under a DEA regulation, a 
practitioner (who is properly registered), ``may administer or dispense 
(but not prescribe) a narcotic drug . . . to a narcotic depend[e]nt 
person for the purpose of maintenance or detoxification treatment.'' 21 
CFR 1306.07(a). Applicant thus also violated this provision when he 
prescribed methadone to treat J.G.'s opioid dependency.\7\
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    \7\ To similar effect, California law provides that a physician 
cannot ``administer dangerous drugs or controlled substances to a 
person he or she knows or reasonably believes is using or will use 
the drugs or substances for a nonmedical purpose.'' Cal. Bus. & 
Prof. Code Sec.  2241(b). Thus, ``an order for an addict or habitual 
user of controlled substances, which is issued not in the course of 
professional treatment or as part of an authorized narcotic 
treatment program, for the purpose of providing the user with 
controlled substances,'' is illegal. Cal. Health & Safety Code Sec.  
11153(a)(2); People v. Gandotra, 14 Cal. Rptr. 2d 896, 901 (Cal. Ct. 
App. 1992) (``[S]ection 11153 . . . prohibits practitioners from 
writing controlled substance prescriptions that . . . are outside 
the course of their usual professional practice.'').
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    Accordingly, I hold that the evidence with respect to factors two 
and four supports the conclusion that Applicant's registration ``would 
be inconsistent with the public interest.'' 21 U.S.C. 823(f). Because 
Applicant waived his right to a hearing or to submit a written 
statement in lieu of hearing, there is no evidence to the contrary. 
See, e.g., Medicine Shoppe-Jonesborough, 73 FR 364, 387 (2008) 
(internal quotation marks omitted). Accordingly, I will deny 
Applicant's application.

Order

    Pursuant to the authority vested in me by 21 U.S.C. 823(f), as well 
as 28 CFR 0.100(b) and 0.104, I hereby order that the application of 
Thomas Neuschatz, M.D., for a DEA Certificate of Registration as a 
practitioner be, and it hereby is, denied. This order is effective 
immediately.

    Dated: December 6, 2013.
Thomas M. Harrigan,
Deputy Administrator.
[FR Doc. 2013-29956 Filed 12-16-13; 8:45 am]
BILLING CODE 4410-09-P