[Federal Register Volume 79, Number 133 (Friday, July 11, 2014)]
[Notices]
[Pages 40145-40160]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-16162]
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DEPARTMENT OF JUSTICE
Drug Enforcement Administration
[Docket No. 11-72]
Moore Clinical Trials, L.L.C.; Decision and Order
On August 8, 2011, the Deputy Assistant Administrator, Office of
Diversion Control, Drug Enforcement Administration, issued an Order to
Show Cause to Moore Clinical Trials, L.L.C. (Respondent), of North
Little Rock, Arkansas. The Show Cause Order proposed the denial of
Respondent's application for a DEA Certificate of Registration as a
researcher, on the ground that ``its registration would be inconsistent
with the public interest.'' ALJ Ex. 1, at 1 (citing 21 U.S.C. 823(f)).
The Show Cause Order alleged that on March 15, 2011, Ms. Greta B.
Moore submitted on Respondent's behalf, an ``application for a DEA
research registration for [s]chedule II controlled substances.'' Id.
The Show Cause Order alleged that while Ms. Moore would be the primary
person responsible for ordering and storing controlled substances, she
``has no prior experience with handling controlled substances.'' Id.
(citing 21 U.S.C. 823(f)(2)). The Show Cause Order then alleged that
``Ms. Moore initially informed DEA investigators that she had
experience researching with controlled substances but then admitted
this assertion was not true.'' Id. (citing 21 U.S.C. 823(f)(5)).
Next, the Show Cause Order alleged that ``[t]he only DEA registered
physician that plans to work at [Respondent] will have very limited
hours and contact with'' it. Id. at 2. The Show Cause Order further
alleged that ``[i]n 2006, the Arkansas State Medical Board suspended
this physician's medical license because . . . he . . . pre-signed
controlled substance
[[Page 40146]]
prescriptions, which were issued by his staff,'' and that ``[i]n 2008,
[he] was convicted of one count of Medicare fraud'' in federal district
court and subsequently ``excluded . . . from participating in the
Medicare programs as required by 42 U.S.C. 1320a-7(a).'' Id. (citing 21
U.S.C. 823(f)(5)).
Finally, the Show Cause Order alleged that the State of Arkansas
``has not granted [Respondent's] application for a research license,''
and that Respondent ``is currently without authority to handle
controlled substances in the State . . . in which [it] has applied for
a DEA . . . registration.'' Id. The Order thus alleged that ``DEA must
deny [its] application based upon its lack of authority to handle
controlled substances in the State of Arkansas.'' Id. (citing 21 U.S.C.
823(f)(1)).
On August 26, 2011, Respondent, through its owner Ms. Moore,
requested a hearing on the allegations, ALJ Ex. 2, and the matter was
placed on the docket of the Office of Administrative Law Judges (ALJ).
Thereafter, the Government moved for summary disposition on the ground
that Respondent did not possess the requisite Arkansas researcher's
license and therefore could not be registered pursuant to 21 U.S.C.
823(f); the Government's motion was supported by a letter from the
Deputy General Counsel of the Arkansas Department of Health stating
that Respondent's application for a state license had not been granted.
ALJ Ex. 3.
Respondent opposed the Government's motion, contending that it
possesses a temporary Arkansas license authorizing it to handle
controlled substances.\1\ ALJ Ex. 4, at 4. The Government then filed a
reply to the Respondent's opposition and included a further letter from
the aforementioned official, which again stated that Respondent did not
possess a valid state license but had been issued a temporary state
registration number in order to allow it to complete its DEA
application. ALJ Ex. 4, at 4-5. Thereafter, the ALJ found that there
was no dispute over the material fact ``that Respondent is presently
without state authority to handle controlled substances in Arkansas.''
Id. at 8-9. The ALJ thus granted the Government's motion and forwarded
the then-existing record to me for final agency action. Id. at 12.
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\1\ Notably, in forwarding the record to this Office, the ALJ
failed to include the Respondent's opposition to the Government's
motion. In addition, numerous other filings were not initially
forwarded to this Office, including the parties' pre-hearing
statements, motions and oppositions related to various rejected
exhibits, as well as the ALJ's order excluding these exhibits.
Accordingly, I ordered the ALJ to forward these documents to me.
Given that proper review of the record requires that the entire
record be forwarded to this office for review, these filings should
have been designated as ALJ Exhibits and forwarded as part of the
record.
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On April 16, 2012, while the matter was still pending before this
Office, the Government filed a motion to remand the case, noting that
on March 12, 2012, Respondent obtained a state controlled-substance
registration. ALJ Ex. 6, at 1. The Government observed, however, that
it had raised ``additional allegations under 21 U.S.C. 823(f) to deny
[Respondent's] application'' and that an evidentiary hearing was
required to litigate them. Gov. Mot. to Remand, at 1. In opposition,
Respondent contended that a hearing was no longer required because the
Government had ``abandoned'' its other claims by seeking summary
disposition and that ``[t]he re-litigation of these issues following
the [ALJ's] Order on the Government's Summary Judgment Motion would be
akin to res judicata.'' Response of Moore Clinical Trials LLC To The
Government's Motion To Remand, at 1-2. On June 4, 2012, I found neither
of Respondent's contentions persuasive and granted the Government's
motion to remand the matter to the ALJ ``for further proceedings.'' Id.
at 2-3.
Thereafter, on June 22, 2012, the Government filed a second motion
for summary disposition. ALJ Ex. 7. Therein, the Government asserted
that while Respondent ``had planned to hire a DEA registered physician,
Brian T. Nichol, M.D., . . . to administer and dispense the controlled
substances to the research subjects,'' it was its ``understanding that
[Respondent] now would not be hiring Dr. Nichol.'' Id. at 2. The
Government further argued that under Arkansas law, Respondent ``cannot
operate until and unless there is an authorized licensed physician in
the State . . . who will be hired by [it] to administer and dispense
the controlled substance that [it] seeks to use in its research
facility.'' Id. at 3. The Government thus contended that because
Respondent ``does not have such a person who will serve in this
capacity . . . [its] DEA application should be summarily denied.'' Id.
The Government did not, however, offer any evidence to support the
factual premise of its motion.
Respondent opposed the motion (although here again, the ALJ failed
to forward its filing), contending that it had entered into a contract
with Dr. Nichol (more precisely, his entity, Brinch Clinical Research),
to provide a licensed physician to administer or dispense the
controlled substances to the research subjects. ALJ Ex. 8 (citing
Respondent's Response, at 1-2). In contrast to the Government,
Respondent provide evidence to support is contention, specifically, a
copy of its contract with Dr. Nichol's entity. Id. at 2.
On July 6, 2012, the ALJ denied the Government's motion, finding
that ``there is a genuine dispute of material fact regarding Dr.
Nichol's employment with [Respondent] as the physician assigned to this
research project.'' ALJ Ex. 8, at 2. However, ``because the Government
asserts additional material factual allegations regarding Respondent's
application for a DEA registration, allegations which the Respondent
vigorously disputes,'' the ALJ set the matter for hearing. Id.
Following additional pre-hearing procedures, on September 19-21,
2012, the ALJ conducted a hearing in Little Rock, Arkansas. Recommended
Rulings, Findings of Fact, Conclusions of Law, and Decision of the
Administrative Law Judge (hereinafter, Recommended Decision or R.D.),
at 5. At the hearing, both parties called witnesses to testify and
submitted various documents for the record. Following the hearing, both
parties filed briefs containing their proposed findings of fact,
conclusions of law, and arguments.\2\
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\2\ Each party's brief is cited as Gov. Br. or Resp. Br.
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On November 30, 2012, the ALJ issued her Recommended Decision.
Therein, the ALJ reviewed the evidence with respect to the five public
interest factors. See R.D. at 25-35. With respect to factor one--the
recommendation of the appropriate state licensing board--the ALJ found
that the State of Arkansas ``has granted the Respondent a temporary
controlled substance registration.'' R.D. at 26. The ALJ thus concluded
that while this factor is ``not dispositive,'' because ``[t]he ultimate
responsibility to determine whether a registration is consistent with
the public interest has been delegated exclusively to the DEA'' and not
to state officials, the ALJ found that ``Respondent meets that
requirement for gaining a DEA registration.'' Id. (citing Edmund Chein,
M.D., 72 FR 6580, 6590 (2007), pet. for rev. denied, Chein v. DEA, 533
F.3d 828 (D.C. Cir. 2008)).
Likewise, with respect to factor three--Respondent's record of
convictions for offenses relating to the manufacture, distribution, and
dispensing of controlled substances--the ALJ found that there was no
evidence that Respondent has been convicted of such an offense. Id. at
27. However, the ALJ further noted that ``[w]hile this factor may
support the
[[Page 40147]]
granting of Respondent's application . . . [i]t is not dispositive [of]
the public interest determination.'' Id. at 27-28 (citing Morris W.
Cochran, 77 FR 17505, 17517 (2012)).
As for factor two--the applicant's experience in dispensing or
conducting research with respect to controlled substances--the ALJ
noted that under Agency precedent, both an applicant's lack of relevant
experience and an applicant's having ``previously poorly handled
controlled substances'' provide grounds to deny an application. R.D. at
26 (citing cases). The ALJ then found that ``the parties do not dispute
that Ms. Moore lacks experience in handling controlled substances in a
research project'' and that ``[s]he freely admitted that she is
unfamiliar with the documentary requirements for the maintenance of
inventories and other accountability purposes.'' R.D. at 27. The ALJ
thus found that ``this lack of experience weighs against granting her a
DEA registration to handle controlled substances.'' Id.
However, the ALJ then noted that ``Ms. Moore has extensive clinical
research experience,'' including ``experience maintaining documents
necessary for such research accountability.'' Id. While finding that
``the record contains no evidence of her success,'' the ALJ found ``the
fact that AstraZeneca granted her a research project indicative of her
documented experience at least to their satisfaction for purposes of
this study.'' Id. And while finding that ``Ms. Moore has struggled to
create a form document that will capture the facts necessary for an
accountability audit,'' the ALJ then found that ``the record amply
demonstrates her willingness to become compliant.'' Id. The ALJ then
offered the conclusion, which she herself deemed ``speculative,'' that
``[w]ith training, [Ms. Moore] should be able to convert her research-
required recordkeeping system into one compliant with DEA
requirements.'' Id. While the ALJ ``recommend[ed] that Ms. Moore take a
course in the handling of controlled substances by researchers,'' she
did not make an explicit finding as to whether this factor supported
either the granting or denial of Respondent's application. Id.
Turning to factor four--the applicant's compliance with applicable
laws related to controlled substances--the ALJ noted that registrants
who dispense controlled substances must comply with a number of
statutes and regulations, including various registration, recordkeeping
and security requirements. Id. at 28 (citations omitted). Moreover, the
ALJ found that ``Ms. Moore signed for a shipment of [a] controlled
substance when she was not registered to do so,'' and that ``[s]uch
handling of controlled substances without a registration is a violation
of DEA statutory and regulatory provisions.'' Id. at 29 (citing 21 CFR
1301.13(a)).
The ALJ also found that ``the documents kept by Dr. Nichol,'' who
was supervising the two clinical trials on behalf of Respondent, ``were
deficient'' and that the order forms for Schedule II controlled
substances (DEA-222) ``were lacking.'' Id. The ALJ also found that
``Dr. Nichol transported controlled substances to the Respondent's
location,'' where he was not registered to dispense them. Id. (citing
21 U.S.C. 822(e)). However, the ALJ declined ``to impute Dr. Nichol's
errors to the Respondent,'' reasoning that while Nichol was an
independent contractor, he did not act as Respondent's agent because
``Respondent's business is not meant to exercise control over the
doctor's medical judgment nor is the Respondent meant to be primarily
responsible for the research and recordkeeping.'' Id. at 31. In support
of her conclusion, the ALJ further explained that ``Respondent does not
even pay Dr. Nichol for his service in conducting research at
Respondent's place of business, but[ ] rather[,] Dr. Nichol's payment
is a `pass-through' system of payment in which the Respondent pays
[him] once [it] receives funds from the Sponsoring Organization.'' Id.
The ALJ thus reasoned that Dr. Nichol is not Respondent's agent
``because the Respondent does not exercise any control over Dr.
Nichol's work; rather, the Respondent only offers Dr. Nichol a facility
in which to conduct research.'' Id. at 32. Based on this conclusion,
the ALJ declined to impute to Respondent what she characterized as
``the alleged wrongdoing of Dr. Nichol regarding the transporting and
dispensing of the controlled substances at Respondent's location.'' Id.
``Although [she did] not attribute the past wrongdoings of Dr.
Nichol to the Respondent, [the ALJ] recognize[d] the Respondent's
responsibility in needing to maintain proper records.'' Id. (citing
United States v. Clinical Leasing Service, Inc., 759 F. Supp. 310, 312
(E.D. La. 1990)). However, the ALJ then explained that ``there has been
no evidence placed in the record of Respondent's recordkeeping'' and
that the ``[t]he records that were produced were Dr. Nichol's
records.'' Id. at 33. Thus, while the ALJ found that the evidence is
clear that Nichol's records did not comply with the Controlled
Substances Act or DEA regulations, ``the shortcomings of these records
are attributable to him'' and not Respondent. Id. The ALJ thus reasoned
that while ``Respondent has failed to maintain its own recordkeeping
system, it cannot be held responsible for all of the noncompliant
actions of Dr. Nichol'' and that ``Nichol's failure to meet his
responsibilities as a registrant is not a basis for refusing to grant
the Respondent a researcher registration.'' Id.
As for factor five--such other conduct which may threaten public
health and safety--the ALJ noted that DEA has consistently held that an
applicant's candor during an investigation and failure to accept
responsibility for its misconduct are ```important factor[s] when
assessing whether a . . . registration is consistent with the public
interest.''' Id. at 34 (quoting Jeri Hassman, M.D., 75 FR 8194, 8236
(2010), pet. for rev. denied, Hassman v. DEA, No. 10-70684, slip. op.
at 4 (9th Cir., Apr. 9, 2013)). In this regard, the ALJ
``acknowledge[d] that, from the Diversion Investigators' points of
view, Ms. Moore appeared to change her position on her research
experience and her experience [in] handling controlled substances.''
Id. Also, the ALJ found that Ms. Moore ``also vacillated in her
testimony concerning where the controlled substance was actually
dispensed.'' Id. The ALJ then explained that ``[t]his lack of candor
may weigh against her being granted a DEA registration.'' Id.
As for whether Ms. Moore had accepted responsibility, the ALJ
reasoned that while the ``[t]he record is filled with wrongdoing done
by Dr. Nichol, . . . his wrongdoing is not imputed to the Respondent,''
and that ``[e]xcept for Ms. Moore's signing for the receipt of one
shipment of the controlled substance, . . . the Government has not
cited to any regulatory or statutory provision resulting in a finding
of wrongdoing done by the Respondent.'' Id. at 34-35. While the ALJ
agreed with the Government's contention ``that Ms. Moore did not
express any remorse for this wrongdoing,'' she ``disagree[d] that this
one incident is enough to deny the Respondent a DEA registration.'' Id.
at 35.
The ALJ thus ``conclude[d] that the Government has proven that the
Respondent lacks experience in handling controlled substances as a
researcher,'' and that while ``in the past, this has served as a basis
for denying a DEA registration. . . . Respondent clearly has experience
in conducting drug research.'' Id. The ALJ then
[[Page 40148]]
observed that there was no evidence that ``Respondent's proposed
business plan is a sham or an excuse to gain access to controlled
substances for unlawful purposes.'' Id. The ALJ thus ``recommend[ed]
that the Respondent's application be granted'' subject to the condition
that ``Ms. Moore should be required to take a course in the handling of
controlled substances for researchers.'' Id. at 36. The ALJ further
explained that ``[i]n this way she will have the knowledge necessary to
both maintain the records required, and to interview future researcher
registrants to ensure they have the requisite knowledge and experience
to handle controlled substances in a research environment.'' Id.
The Government filed exceptions to the ALJ's Recommended Decision.
Thereafter, the ALJ initially forwarded the transcript and exhibits,
along with various filings, orders, and rulings (ALJ Exs. 1-10) to me.
Thereafter, I issued an order for the ALJ to submit the rest of the
record; on July 24, 2013, the ALJ complied.
Having considered the record evidence, I have decided to reject the
ALJ's Recommended Decision. While I adopt the ALJ's findings of fact
and conclusions of law with respect to factors one and three, I reject
her legal conclusion that Respondent is not liable for Dr. Nichol's
misconduct in dispensing controlled substances at its Office, where Dr.
Nichol was not registered (and when Respondent was not registered).
Moreover, I also conclude that Respondent is liable for failing to
maintain records which comply with the CSA. Because Ms. Moore (on
behalf of Respondent) has not acknowledged its misconduct in allowing
Nichol to dispense from an unregistered location and failing to keep
compliant records, I reject the ALJ's implicit conclusion that
Respondent's registration is consistent with the public interest. While
I agree with the ALJ that upon taking an appropriate course, Ms. Moore
may be able to demonstrate her ability to properly comply with
controlled substance laws and regulations, I will not grant
Respondent's application absent Ms. Moore's acknowledgement of her
wrongdoing. I make the following findings of fact.
Findings
Respondent is a limited liability company; its owner and Chief
Executive Officer is Ms. Greta B. Moore. GXs 1; 9; 10, at 2; Tr. 48. On
March 12, 2012, the Arkansas Department of Health, Pharmacy Services,
issued Respondent a temporary certificate for an Arkansas Controlled
Substances Registration. RX 19. According to the certificate, this
license was good for a period of six months and was due to expire on
September 12, 2012. Id. While Ms. Moore testified that her license had
been extended for ninety days, Tr. 505, the record (as forwarded by the
ALJ) contained no evidence as to whether this license remains current.
Accordingly, I issued an order directing Respondent to submit
evidence that it retains authority under Arkansas law to conduct
research with respect to controlled substances. Order (July 16, 2013).
On July 26, 2013, Respondent submitted an email from an official with
the Arkansas Department of Health stating that its state registration
was extended until December 31, 2013. Email from Marci Middleton-Yates
to Greta Moore (July 26, 2013).
On March 15, 2011, Ms. Moore submitted an application on behalf of
Respondent for a DEA Certificate of Registration as a researcher in
schedules II through V, with the proposed registered location of 3508
JFK Blvd., Suite 1, North Little Rock, Arkansas. GX 1. However, in July
2012, Respondent moved its office to 7510 Highway 107, Sherwood,
Arkansas. RX 26.
Between September 1989 and March 1997, Ms. Moore worked as a
respiratory therapist. RX 1, at 2; Tr. 374-75. However, as the ALJ
found, Ms. Moore's duties ``did not include keeping controlled
substance records, and she had very limited experience handling
controlled substances.'' R.D. at 6. More recently, from October 2007
through December 2007, Ms. Moore worked as a Clinical Research
Coordinator for Research Solutions, L.L.C., which was managing clinic
trials for a Dr. Derek Lewis. RX 1, at 1-2. Ms. Moore's duties included
the recruitment, retention, and randomization of patients. Tr. 371.
Thereafter, Dr. Lewis decided to no longer use Research Solutions
and hired Ms. Moore as his site manager. Id. at 372. Ms. Moore was
involved in managing some thirty clinical trials before she was
fired.\3\ Id. at 377, 517-18. However, none of these trials involved
controlled substances. See RX 1, at 3-5.
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\3\ Ms. Moore testified that she was not fired directly by Dr.
Lewis but by Dr. Lewis' subordinates. Tr. 517-18. She further
testified that she never learned the reason for her dismissal and
the record contains no evidence on the issue. Tr. 518.
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Subsequently, Ms. Moore decided to open her own business to provide
clinical research services and formed Respondent. Tr. 373. According to
Ms. Moore, her business is to ``talk with the doctor to determine what
the doctor needs'' and ``put together a program that will help the
doctor's clinical research programs,'' or to ``be a full-service
company, whereby a doctor can come into our site and perform studies in
our site, using our resources comparatively.'' Id. at 381. Ms. Moore
further explained that ``[s]ome doctors like to keep their clinic
practice and their clinical research practice separate,'' and that
``[e]ven when a doctor is doing clinical research in his office or his
practice, what you would generally find is that the clinical research
practice is a total [sic] separate entity'' and that ``[t]he staff is
totally different.'' Id. at 383. Ms. Moore also explained that while
the doctors ``do the medical things that patients need,'' unless the
``doctor is solely doing research . . . most of the recordkeeping is
going to be done by the coordinator.'' Id. at 384-85. Ms. Moore then
asserted that ``[u]ltimately the doctor is totally responsible for the
clinical research study.'' Id.
Ms. Moore also denied that she allowed anyone who was not licensed
to dispense at Respondent, stating ``[w]e don't dispense. We do
accountability. For instance, if a patient brings back the drug, then
we are responsible to document return[ed] tablets and things like
that.'' Id. at 386.
Ms. Moore proceeded to market Respondent to contract research
organizations (CROs), which are firms that drug manufacturers contract
with to provide support services for clinical trials. Id. at 386, 389.
In the meantime, Respondent entered into a contract with Dr. Brian
Nichol, an interventional pain management specialist, to perform
clinical research for it pursuant to contracts it might obtain from
CROs. Id. at 387; GX 10.
At some point in late 2010 or early 2011, Respondent received
information that Quintiles, a CRO, was managing clinical trials of the
drug Naloxol 6a-methoxyhepta(ethylene glycol) ether (hereinafter, NKTR-
118), for AstraZeneca, a large pharmaceutical manufacturer.\4\ Tr. 387-
90; GX 9. NKTR-118 is, however, a schedule II controlled substance. Tr.
266; RX 9.
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\4\ The name of the study was: ``An Open-Label 52-week Study to
Assess the Long-Term Safety of NKTR-118 in Opioid-Induced
Constipation (OIC) in patients with Non-Cancer-Related Pain.'' RX
14, at 1.
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Respondent applied to Quintiles to participate in the study and was
selected by the latter for a site visit which occurred on February 15,
2011. RX 3, at 1. During the visit, the Quintiles representative
discussed with Dr. Nichol, Ms. Moore, and Kianna Marshall (Respondent's
research project
[[Page 40149]]
coordinator, see GX 9, at 1) ``the protocol, . . . investigational
product storage, [the] document storage areas, lab area, patient exams
rooms, and monitoring areas.'' RX 4, at 1. The Quintiles representative
further advised Dr. Nichol and Ms. Moore of other requirements for
participating in the study, including that ``[t]he site must obtain a
DEA license for research with a controlled substance'' and provided
``[i]nformation for obtaining this license'' to Ms. Moore. Id.
Moreover, Ms. Moore testified that during the meeting with the
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Quintiles representative,
we were told that the drug had been scheduled by the DEA as a
controlled II substance, and we were also told that the pharma does
not believe that their drug has the properties of a controlled II
substance, but based on the scheduling, then the sites would need a
DEA license.
Tr. 400.
On March 30, 2011, Respondent (who was designated as the
``Institution'') and Dr. Nichol (who was designated as the
``Investigator'') entered into a Clinical Trial Agreement (CTA) with
Quintiles, to participate in the NKTR-118 long-term safety study, with
Quintiles acknowledging its agreement on April 5. RX 14, at 1-2, 16.
The CTA's terms required, inter alia, that ``Institution, Investigator
and their personnel shall perform the Study at Institution's facility
according to the Protocol and this Agreement, and shall comply with
all: (i) Applicable local, state and federal laws and regulations
relating to the conduct of the Study.'' Id. at 2 (emphasis added). In
addition, Respondent and Dr. Nichol:
each represent[ed], warrant[ed] and promise[d] that . . .
Institution and the Investigator have, at all times during the
course of the Study, the appropriate licenses, approvals and
certifications necessary to safely, adequately and lawfully perform
the Study in accordance with good clinical practice, FDA
requirements and all Applicable Laws and have no notice of any
investigations that would jeopardize such licenses, approvals or
certifications[.]
Id. at 2.\5\
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\5\ The CTA also provided ``that if [the] Site has not enrolled
at least one (1) subject by the Key Enrollment Date,'' RX 14, at 3,
which was ``100 Calendar Days after [the] Site Initiation Visit,''
id. at 1, then Quintiles could terminate the agreement. Id. at 3.
As stated above, on March 14, 2011, Ms. Moore applied on
Respondent's behalf for a DEA researcher's registration. GX 1. On March
31, 2011, a DEA Diversion Investigator (DI) with the Little Rock
District Office sent Ms. Moore a list of various items of information
that she should have available during the on-site inspection, RX 7, at
2; and on April 14, 2011, two DIs went to Respondent's then-location to
conduct a pre-registration investigation. Tr. 31. The DIs determined
that Respondent's facility was located on the ground floor of an office
building, and that while the entire building had an alarm system, if
another tenant turned off the alarm or left the building without
turning the alarm on, the building would not be secure. Tr. 158-59.
However, in response to the DIs' concerns, Ms. Moore installed an alarm
in her office. Id. at 159-60.
During the visit, the DIs interviewed Ms. Moore, who told them that
the proposed research involved studying the safety of NKTR-118 for use
on patients with opiate-induced constipation. Tr. 266. Ms. Moore told
the DIs that the drug would be supplied by Fisher Clinical Services and
stated that Respondent had a contract with Fisher to provide the drug;
however, when asked to provide the contract, Ms. Moore could not do so.
Id. at 267. Ms. Moore also told the DIs that Dr. Brian Nichol ``would
be the principal investigator.'' Id. at 297. A DI who conducted the
inspection testified that it was her understanding that Ms. Moore and
Ms. Marshall ``would dispense the drugs'' and that Dr. Nichol ``would
come into the clinic approximately two to three times a week and
basically review the charts and do the patient evaluations.'' Id. at
298.
At the conclusion of the interview, the Senior DI provided Ms.
Moore with a copy of the Code of Federal Regulations. Id. at 274. She
also reviewed the recordkeeping requirements of Part 1304, as well as
the requirements pertaining to the ordering of schedule II controlled
substances under Part 1305. Id.
On April 21, 2011, Ms. Moore sent a letter by fax to the Senior DI,
stating that Respondent had installed ``an in suite alarm.'' RX 12. On
April 27 (following a phone conversation two days earlier), Ms. Moore
sent an email to the DI explaining that Respondent had met all
requirements; Ms. Moore also wrote that it was ``not required to have
any site license(s) to conduct human subject research.'' RX 13, at 1.
Ms. Moore further noted that the DI had told her that the DI's
``superior had a couple of questions regarding our application'' and
advised that ``if there are more questions please email me.'' Id.
Following additional emails sent by Ms. Moore on April 29 and May 4,
2011 asking the DI if there were ``[a]ny further requirements,'' on May
6, the DI wrote Ms. Moore that she ``need[ed] a copy of your signed
contract with Fisher for further review of your application.'' RX 13,
at 1-2. Ms. Moore then emailed the Quintiles representative who had
performed the February on-site visit, asking if she had a copy of the
Fisher contract; the Quintiles Representative agreed to ``get right on
this.'' RX 13, at 3.
Less than a week later, Ms. Moore emailed the DI regarding the
issue and discussed a phone conversation the DI had with another
representative of Quintiles, who explained that Respondent did not have
a contract with Fisher but rather with Quintiles. RX 15, at 1. Ms.
Moore then stated that the Quintiles representative had advised her to
send a copy of Respondent's contract with Quintiles, as well as a
letter from the FDA's Controlled Substance Staff to Astra Zeneca. Id.
Ms. Moore testified that she sent these documents as an attachment to
the email. Tr. 450. Ms. Moore further wrote that ``[i]f I have not
proceeded properly, or additional information is needed please let me
know as soon as possible, as time is of the essence.'' RX 15, at 1. Id.
In response, the DI asked Ms. Moore to come to the DEA office ``to
discuss further details regarding [the] application. Id. at 2.
On May 16, Ms. Moore went to the DEA Office and met with the two
DIs who had made the onsite inspection and the Diversion Group
Supervisor (GS). Tr. 32-33. According to the GS, she was concerned as
to whether Ms. Moore was qualified to be a researcher ``because she did
not have MD, DO or Ph.D. behind her name'' and ``didn't know what kind
of qualifications, training, or experience she had.'' Id. at 34. The GS
testified that she checked the registration database to see ``if DEA
had granted any other registrations to persons who were not licensed in
that fashion,'' id. at 34-35, ``printed out all of Fisher's
customers,'' id. at 39, and determined that they were generally medical
doctors, doctors of osteopathy, or Ph.D.s ``affiliated with a hospital
or a university.'' Id. at 42.
During the interview, Ms. Moore was asked about her experience in
handling controlled substances. Id. at 49. According to the GS, Ms.
Moore ``at first . . . said she had quite a bit of experience, but upon
further questioning, it turned out [that] controlled substances were in
the facility, but she did not actually handle the drugs herself.'' Id.
Ms. Moore further stated that she did have research experience, which
primarily involved ``handling the paperwork.'' Id. at 50.
During the interview, Ms. Moore stated that Dr. Nichol would be
responsible for ordering and receiving the controlled substances at
[[Page 40150]]
Respondent, as well as keeping the controlled substance records for it.
Id. at 50-51. Ms. Moore also stated that Dr. Nichol ``would be present
at [Respondent] three to four days a week.'' Id. Dr. Nichol was
registered at 5106 McClanahan Drive, Suite B, North Little Rock,
Arkansas. Tr. 487 (testimony of Ms. Moore); RX 22.
According to Ms. Moore, during the meeting, the DIs told her that
her application was being denied because she did not met the
``criteria'' found in the U.S. Code. Id. at 457, 460. Ms. Moore
testified that when she asked what criteria she did not meet, a DI said
that Fisher (the drug supplier) ``only contracted with doctors.'' Id.
at 458. Ms. Moore testified that she had previously sent a copy of the
contract she had with Quintiles \6\ to the DI and clarified that ``I
did not have a contract with Fisher.'' Id. Upon reviewing the
provisions of the U.S. Code, the GS told Respondent that she did not
have a state license and lacked experience in dispensing controlled
substances. Id. at 462. The DIs eventually asked Ms. Moore to withdraw
her application; when Ms. Moore declined to do so, the DIs told her
that they would file an order to show cause. Id. at 464.
---------------------------------------------------------------------------
\6\ As found above, Ms. Moore had previously sent a copy of her
contract to the DI. RX 15.
---------------------------------------------------------------------------
In a subsequent phone conversation, Dr. Nichol confirmed to a DI
that he would be ordering the drugs and acting as Respondent's medical
director. Id. at 56. Dr. Nichol also stated that ``[a]fter the initial
work-up of a new patient coming to the clinic for the trial . . . he
would be at the clinic once a month for about 30 minutes or so to
dispense the medications.'' Id. at 56-57. However, according to the GS,
Dr. Nichol also stated that he was not ``going to do research at his
own facility, because he didn't have the staff.'' Id. at 57.
On some date which is not clear on the record, Ms. Moore started
recruiting patients by advertising the study on television. Id. at 473-
74. Following screening, which included a physical exam by Dr. Nichol,
various patients who met the criteria for participation were placed in
the study.\7\ Id. at 475-77. In total, eleven patients were selected
for the studies, with five being placed in the Kodiac 8 study (two of
whom dropped out) and six being placed in the Kodiac 5 study. Id. at
477, 481.
---------------------------------------------------------------------------
\7\ The criteria included that the patients could not be using
any prohibited medications, must be taking a specified amount of
opiates (which were prescribed by their regular doctor), and could
not ``have any GI conditions.'' Tr. 476-77.
---------------------------------------------------------------------------
Ms. Moore testified that she was aware that Dr. Nichol had a DEA
registration and it was her understanding that he could ``participate
in our study'' and ``dispense'' the drugs. Id. at 484-85. Ms. Moore
testified, however, that Dr. Nichol was registered at 5106 McClanahan,
Tr. 487, and not at Respondent's office. Ms. Moore further maintained
that the drugs were to go to Dr. Nichol's site and that ``he would be
required to dispense the drug to the patients'' and the drugs were not
to be stored at Respondent. Id. at 485. Ms. Moore denied that she
dispensed any of the drugs. Id. at 486. However, when asked where Dr.
Nichol dispensed the drugs, Ms. Moore testified that he ``dispensed the
drug in his site or MCT.'' Id.\8\ Ms. Moore admitted that she never
asked the DEA Investigators whether Dr. Nichol could lawfully transport
the controlled substances to Respondent and dispense them there. Id. at
538.
---------------------------------------------------------------------------
\8\ When asked why, at the beginning of the study, Dr. Nichol
would dispense at his office rather than at Respondent's location,
Ms. Moore offered the incoherent response that: ``He's a busy
doctor, and where it was an inconvenience to the patients to go
there, we would send the patients there, because he may not be able
to . . . meet them, so we would send them there, and he would
dispense there.'' Tr. 488.
---------------------------------------------------------------------------
Ms. Moore testified that in ``early 2012 \9\,'' she learned that
Dr. Nichol's relationship with DEA had changed and he ``was no longer
allowed to dispense from'' Respondent. Id. at 497-98. Ms. Moore
subsequently explained that this occurred around the time that Nichol
entered into a Memorandum of Agreement (MOA) with DEA. Id. at 615-16.
Ms. Moore maintained that following this, ``[a]ll the patients were . .
. dispensed from Dr. Nichol's office.'' Id. at 498. However, patients
would still come to Respondent for lab draws and EKGs, as there were
``different procedures that would need to be done where the equipment
was.'' Id. at 499.
---------------------------------------------------------------------------
\9\ Subsequently, Ms. Moore testified that she learned about the
MOA in ``[m]id-2012. I say in the middle range of the year.'' Tr.
631.
---------------------------------------------------------------------------
In November or December 2011, one or more of the DIs ``saw a
television commercial'' which sought patients to participate in the
NKTR-118 study. Id. at 58. In either February or March 2012, a DI
contacted the Arkansas Department of Health and asked an official if
Respondent had received a state license. Id. The official stated that
``Dr. Nichol had given them a letter, and . . . stated that he would be
transporting this NKTR drug to [Respondent] for the research project.''
Id. at 58-59.
Months later, in July 2012, the GS contacted John Wegner, a
Quintiles official and asked if Quintiles had approved Respondent for
participation in the NKTR-118 study. Id. at 61. The GS testified that
the reason why she had contacted Mr. Wegner was ``because we saw the
commercials on TV that [Respondent] was doing research.'' Id. It is
unclear, however, whether the impetus for this contact were the
commercials that the DIs had seen in late 2011 or more recent ones.
In any event, Mr. Wegner told the GS that Dr. Nichol was ordering
the controlled substances, which were being shipped to Nichol's
registered location, and that Dr. Nichol was transporting them to
Respondent, where they were being dispensed. Id. at 61-62; see also GX
16, at 2. The GS told Mr. Wegner that this ``was illegal because
[Respondent] was not a DEA-registered location.'' Tr. 62. The DI then
contacted Mr. Jim Phillips, Dr. Nichol's attorney, and asked him if
Nichol was involved in the research study and transporting controlled
substances to Respondent. Id. at 63. Mr. Phillips acknowledged that
Nichol was involved in the study and that he was transporting the
controlled substances to Respondent and dispensing them. Id. Moreover,
Mr. Phillips stated that this had been ongoing ``[a]t least since April
of 2012.'' Id. at 64. However, Mr. Phillips did not know if Dr. Nichol
had been doing this even earlier. Id.
The DI also requested of Mr. Phillips that Dr. Nichol provide his
records, including the dispensing records and the schedule II order
forms (DEA Form 222). Id. Two weeks later, Mr. Phillips contacted the
DI and explained that because the NKTR-118 study was double blinded,
neither the patient nor Dr. Nichol knew which patient received the
schedule II drug or the placebo. See GX 16, at 1-2. In the letter, Mr.
Phillips further wrote that ``Dr. Nichol will administer the drugs only
at his DEA approved address'' and that ``[w]e will notify the DEA in
advance of any upcoming trials involving controlled substances.'' Id.
at 2. Mr. Phillips then acknowledged that ``[a]ll of this has been
previously agreed upon and is clearly stated in the'' MOA.\10\ Id.
---------------------------------------------------------------------------
\10\ The MOA between DEA and Dr. Nichol was submitted into
evidence by Respondent. See RX 22. The Agreement recounts that
``[o]n September 27, 2011, DEA issued an Order to Show Cause'' to
Dr. Nichol, which proposed the revocation of his registration based
on three allegations. Id. at 1. First, that the Arkansas State
Medical Board had found that Dr. Nichol ``pre-signed controlled
substance prescriptions, which were then issued to patients by [his]
staff '' when he was ``not present and [was] not consulted by [his]
staff when [the] prescriptions were issued.'' Id. Second, that in
May 2008, he was convicted of health care fraud, in violation of 18
U.S.C. 1347, and was subsequently excluded from participating in
Medicare and Medicaid by the Department of Health and Human Services
pursuant to 42 U.S.C. 1320a-7(a). Id. Third, that he ``contracted
with a researcher to administer a controlled substance [NKRT-118] to
research subjects,'' but that ``[t]he owner/operator of this
research clinic has no experience handling controlled substances,
and that [he] and the owner/operator gave conflicting information
about the operation of this research clinic.'' Id. at 1-2.
Notwithstanding these allegations, the Agency allowed Dr.
Nichol to retain his registration subject to various terms and
conditions. Of relevance here, Dr. Nichol agreed that he ``will not
administer or dispense . . . controlled substances except in the
course of his own medical practice as an individual practitioner and
will administer or dispense . . . controlled substances only from
his DEA registered location. As the physician who is contracted to
administer the FDA approved study drug NKTR-118, Dr. Nichol will
administer that drug at either his DEA registered location or at an
approved site for the current drug study.'' Id. at 3. The Special
Agent in Charge approved the MOA on April 17, 2012, and Dr. Nichol
signed the agreement on April 20, 2012. Id. at 4.
---------------------------------------------------------------------------
[[Page 40151]]
In late July 2012, the GS was notified that Respondent was moving
its office. Tr. 69. On August 24, 2012, the GS and another DI went to
Respondent's new office to conduct an inspection, and met with Ms.
Moore and her attorney, Ashley Hudson. Id. at 70-71. According to the
GS, Ms. Moore ``explained her recordkeeping system to us, how she got
the drugs, how she made the records. She showed us how they logged
dispensations to the patients. She also had copies of the DEA 222 order
form in her notebook.'' Id. at 71-72. Ms. Moore explained, however,
that the records onsite were copies and that ``all the originals were
kept at Dr. Nichol's registered location.'' Id. at 72-73.
The GS testified that upon seeing the records, she asked Ms. Moore
where the NKTR-118 was being dispensed, and that Ms. Moore stated that
``the drugs were dispensed at Moore Clinical Trials.'' Id. at 72; see
also id. at 711 (testimony of second DI that during August 24
inspection, Ms. Moore ``stated that NKTR was dispensed from the new
location . . . in Sherwood, Arkansas,'' and that Ms. Moore never stated
that Nichol had dispensed the NKTR at his office). The GS further
testified that Ms. Moore also ``stated that Dr. Nichol had transported
[the] drugs to that location [Respondent's previous office] as well.''
Id. at 72.
After Ms. Moore told the GS that Nichol had been transporting the
drugs to Respondent and dispensing them, the GS told Ms. Moore that
this was illegal because Respondent's location was not registered. Id.
at 74. According to the DI, Respondent ``made no comment'' in response.
Id. Nor, according to the GS, did Ms. Moore ever assert that any of the
dispensings had occurred at Dr. Nichol's office.\11\ Id.
---------------------------------------------------------------------------
\11\ At the hearing, Ms. Moore denied that it was her
understanding that Respondent could not dispense controlled
substance until it got its DEA registration; she also testified that
she did not think that it was illegal for Dr. Nichol to bring the
controlled substances to Respondent and dispense them there. Tr.
537-39. Still later, Ms. Moore testified that she ``didn't
understand that [Respondent] was dispensing or ordering'' and
asserted that ``[w]e weren't dispensing or ordering any controlled
substances.'' Id. at 597.
---------------------------------------------------------------------------
On cross-examination, the Government asked Ms. Moore if she had
informed the DIs that she understood ``that Dr. Nichol was no longer
allowed to dispense NKTR from MCT.'' Tr. 534. Respondent answered:
I didn't understand that the investigators were coming to my
site to talk about Dr. Nichol. I thought they were coming to my site
to look at my site to get further information about my 225
application. I didn't inform them anything about Dr. Nichol until
the very end, when I was asked that very question.
Id. at 534-35.
The Government then asked Ms. Moore: ``[s]o you're asked, where is
Dr. Nichol dispensing the NKTR, and your answer to them was at MCT. Is
that correct?'' Id. at 535. Ms. Moore replied:
That is not correct. I was not asked that. Actually, there was a
statement made to me by [the] GS . . . that said, you know Dr.
Nichol is not supposed to dispense from MCT. And I said, Uh-huh-yes.
Id. However, Ms. Moore did admit that ``for part of the time,''
Respondent's arrangement was that Dr. Nichol ``was to receive the
controlled substances in his office'' and subsequently take them to
Respondent to dispense the drug to the research subjects. Id. at 538.
The GS also testified that the records did not indicate the name or
initials of the person who had dispensed the drugs. Id. at 73. The GS
then asked Ms. Moore who had dispensed the drugs; Ms. Moore said that
Dr. Nichol had. Id. at 73-74. Moreover, the GS testified that upon
reviewing the DEA Form 222s, the forms did not indicate the date the
drugs were received and the quantity received. Id. at 78.
On September 4, 2012, the GS received the dispensing records she
had previously requested from Mr. Phillips, Dr. Nichol's attorney. Id.
at 75-76; see also GX 14. While the GS testified that the records show
that the controlled substances were dispensed at Dr. Nichol's
registered address, id. at 76, only the first page of the forms, which
is not a dispensing record at all but rather a list of persons
designated by Dr. Nichol ``to access controlled substances at the above
location address,'' listed Dr. Nichol's address. See GX 14, at 1. With
the exception of a single shipping document entitled ``Blinded Shipment
Request,'' which appears to have been created by Astra Zeneca, see GX
14, at 13, all of the forms are designated as an ``MCTLLC Form'' with a
number,\12\ and stated that they were ``[c]reated by: Moore Clinical
Trials LLC'' on August 27, 2012. See generally GX 14.
---------------------------------------------------------------------------
\12\ More specifically, MCTLLC Form 5 lists the persons who Dr.
Nichol authorized to access the controlled substances, see GX 14, at
1; MCTLLC Form 4 lists the DEA Order Forms (222s) which were
submitted to Fisher Clinical Services, along with the amounts
ordered and received, as well as the dates of the orders and
receipts, see id. at 2; MCTLLC Form 2 lists the drug, the quantity,
the date received, the distributor, and the invoice number, id. at
4; MCTLLC Form 3 is a perpetual inventory which lists quantities on
hand, the amounts received in incoming shipments, the amounts
dispensed along with the study subjects' initials and subject
number, and the amounts returned by them, id. at 5; and MCTLLC Form
1 lists the inventory, including incoming shipments but not the
drugs dispensed. Id. at 8. The latter also includes a final entry,
dated August 27, 2012, the same date the document was created, that
lists the number of bottles unused and the number of tablets that
were returned by the study subjects. See id. at 9.
---------------------------------------------------------------------------
As for the shipping document, while it lists eighteen kits of
``[r]andomised (blinded) drug'' and Dr. Nichol's registered location as
the Shipping Address, it also listed Respondent's phone number as the
``shipping phone.'' Id. at 13; Tr. 84-85. The GS testified that Ms.
Moore had signed for the drugs. Tr. 85.
Regarding the records created by Respondent, the GS further
testified that they did not differentiate between the two strengths of
the drug. Tr. 88. And regarding Respondent's Form 1, an inventory
record for the Kodiac 5 arm, see GX 14, at 22; the GS testified that
the figure for the quantity on hand in the final entry of August 28,
2012 was erroneous. Id. at 90. The GS testified that the correct figure
should have been 3500 dosage units and not either the number 1120,
which was lined out, or the number 1373. Id. According to the GS, when
the numbers were added up--more specifically the 32 bottles (each
containing 35 dosage units) that were listed on the form as ``number of
kits/bottles received'') to the previous quantity on hand figure of
2380--the total was 3500. Id.; see also Tr. 134.
On cross-examination, the GS was asked to explain how she came up
with this figure. The GS maintained that she did so by ``following the
methodology that Ms. Moore used, that 32 bottles at 35 tablets apiece
is 1,120 tablets,'' and that she added these tablets to the previous
quantity on hand ``[b]ecause all the other entries were added in.'' Id.
at 131-32. When then asked what was listed in the August 28, 2012 entry
for the Shipment ID Number, the GS acknowledged that the entry stated:
``Kits Remaining Unused'' and that no shipment was listed. Id. at 132.
When
[[Page 40152]]
asked if she counted the 32 bottles as a new shipment, the GS testified
that: ``I counted it because it was the same methodology. Now, if it
had been just the number of tablets remaining, it would have been the
1,120, which is crossed out.'' Id. at 133. The GS then denied that the
math would have worked out if she had just calculated the 32 bottles as
``kits remaining unused'' and asserted that ``[t]he math works with the
1,373 number.'' Id.
Throughout her testimony, the GS insisted that in coming up with
the 3500 figure, she was following Ms. Moore's methodology.\13\ See id.
at 134-35. However, the GS acknowledged that she did not contact either
Ms. Moore or Dr. Nichol and ask them what ``kits remaining unused
meant.'' Id. Ms. Moore later explained that this term meant ``kits that
were never dispensed'' and that this entry did not reflect a new
shipment. Id. at 622.
---------------------------------------------------------------------------
\13\ Likewise, in determining the closing inventory for the
drugs that were received and dispensed in the Kodiac 8 study, the GS
determined that ``the correct math'' was 822 dosage units and not
192 dosage units as recorded on the form. See GX 14, at 9; Tr. 105-
07. However, the form was not a perpetual inventory, but rather, a
record of inventories taken periodically as well as when shipments
were received. See GX 14, at 8-9. Here again, the last entry (which
is dated August 27, 2012) does not list a ``Shipment ID Number.''
Id. at 9. Rather, it states ``unused/returned'' in this column and
indicates that 105 (3 kits) were unused and 87 tablets were
returned, for a total quantity on hand of 192. See id. The GS,
however, simply added up the figures for each shipment, as well as
the figures that were listed for August 27, and concluded that Dr.
Nichol should have had on hand 822 dosage units. See id; GX 15; Tr.
106-07.
---------------------------------------------------------------------------
The GS testified that using the records provided by Dr. Nichol's
attorney, she created a computation chart in which she added the
quantities of drugs received in each arm of the study to the initial
inventory (which was zero), to determine the total amount that Dr.
Nichol was accountable for; she then took what she called the closing
inventory and added to it the quantities which were distributed to
calculate the total amount Nichol could account for, and compared the
two. Tr. 95-100; GX 15. However, the closing inventory was not based on
an actual physical count performed by the DIs but on the records
provided by Dr. Nichol. Tr. 99, 623.
The GS further testified that she made two sets of calculations,
one based on the closing inventory figures Ms. Moore listed on the
documents, and the other based on what the GS called ``the correct
math.'' Id. at 105. Subsequently, the GS testified that this was not
``a normal DEA audit'' and that these ``are Dr. Nichol's records'' and
``not Ms. Moore's records.'' Id. at 142. Moreover, the GS testified
that she did not contact Dr. Nichol about the records. Id. at 143.
Regarding the records which were provided by Dr. Nichol's counsel,
Ms. Moore acknowledged that she had created them, and that they had
been created between August 24 and 27, 2012. Tr. 544-45. The Government
also asked about a computation chart (GX 18), which Ms. Moore had
created, with Ms. Moore testifying that the chart was based on Dr.
Nichol's records for the Kodiac 5 and 8 studies. Id. at 546-48. Ms.
Moore denied, however, that the chart should differentiate between the
12.5mg and 25mg strength dosage units, contending that because the
studies were blinded, she would not know which kits contained what
strength tablet; she also testified that the information could not be
discerned from the sponsor's records. Id. at 549.
Ms. Moore then testified:
I'm sorry . . . but I don't know anything about the true nature
of creating these records. My intent in creating these records was
simply to have [the GS] affirm to me that I was on the right track,
so this record is not a response to any of these other beings. I'm
simply trying to create records, because my understanding after the
visit with [the GS] was the DEA's main concern is compliance.
So my main concern after what I thought was my . . . on-site
visit at the second point was to attempt to be compliant with the
DEA, so I'm simply creating forms, not for the DEA. I didn't realize
that the DEA was going to get these forms. The reason that the forms
are not correct is because it was eleven o'clock at night when I did
the forms. My intention was to have an opportunity to think on,
[w]hy are my forms not balancing. But before I could do that, which
would have been the next day, when I went to Dr. Nichol's office,
the forms had been submitted to the DEA.
Id. at 550-51; see also id. at 563 (further testimony from Ms. Moore to
same effect).\14\ And on further questioning, Ms. Moore again re-
iterated that the bottles did not indicate whether they were 12.5 or 25
mg tablets. Id. at 553.
\14\ See also Tr. 564 (``So these records are simply trying to
be compliant with what I was told in my on-site visit, that we
needed to create records for being compliant. I used these numbers,
because this was what I had at hand, but I didn't use these for the
DEA. I used these to say, [i]f I were a DEA registrant and I was
going to do forms, then I have information I'm trying to put in here
to show, hey, I know how to do it; I'm trying to do it right. But it
may or may not balance, because it can be used like that. I'm trying
to figure out how to do the forms.'').
---------------------------------------------------------------------------
Regarding the computation chart Ms. Moore created (GX 18), the
Government attempted to show that the ``total accountable for'' figures
did not add up to the ``total accounted for.'' More specifically, the
Government noted that on the ``total accounted for'' side of the chart,
Ms. Moore had four columns: (1) the closing inventory, which included
the sum of the drugs returned and not dispensed (192); (2) the number
distributed/transferred (438); (3) the number of tablets returned
unused (87); and (4) the number of tablets not dispensed (105). Tr.
557; GX 18. According to Ms. Moore's chart, for the Kodiac 8 study, Dr.
Nichol was ``accountable for'' 630 tablets and ``accounted for'' 630
tablets. GX 18.
The Government then asked Ms. Moore how she arrived at the 630
figure, given the figures in the four columns totaled 822 and not 630.
Tr. 557-60. Ms. Moore testified that ``what I attempted to do was to
show the number of tablets that were received per these shipping
documents. That's 630, the number of tablets that were dispensed, the
number of tablets that were returned, the number of tablets that never
left the site, and the closing inventory.'' Id. at 560. Ms. Moore then
explained that ``[w]here the DEA's example of this sheet may balance
the way you're saying, that's not the balance, because the balance can
only be the number of tablets that were actually received per the
shipping documents.'' Id.
When the Government then asked if the ``total accountable for'' and
the ``total accounted for'' should be the same, Ms. Moore replied:
If I'm looking at this record, if I add 438, 87--perhaps I
should have done some lines more similar to this form, where you
could see double lines, but because I really didn't have any real
direction on how to do it, I'm simply making an example. This is not
for the DEA. This was simply just to try to be compliant, which is
what I was told.
Id. at 560-61; see also id. at 570 (``This is not a record for the DEA.
This is simply just to try to be compliant, to try to do what [the GS]
told me in my meeting that I did not realize was an audit.''). Ms.
Moore added that she was ``simply learning how to do the form, trying
to do the form properly, but you can't use this form as a proper
documentation of anything. This form balances to my sponsor form, which
is what is important to me, that my sponsor's count is correct.'' Id.
at 561.\15\ However, on redirect, Ms. Moore clarified that ``the number
of tablets returned unused, plus the number of tablets not dispensed''
equals the closing inventory. Id. at 625. She also testified that the
``number of tablets returned unused'' was documented ``[i]n
[[Page 40153]]
our sponsor's records\16\,'' and that ``every time the patient would
return drug, you're required to do accountability, because in the
study, there's a certain accountability that the patient has to
maintain to stay in the study.'' Id. at 636-37. Finally, Ms. Moore
testified that the numbers on the forms she created ``match my
sponsor's records'' and that ``[t]he sponsor has signed off on the
records.'' Id. at 638.
---------------------------------------------------------------------------
\15\ Ms. Moore further testified that the GS had told her she
``could email a form that I put together, and she would give me a
response on whether it was the information that was needed for the
DEA.'' Tr. 620. Ms. Moore asserted that she did send the GS a form
to review but received no response. Id. at 621; see also RX 25.
\16\ On rebuttal, Respondent also introduced copies of a Sponsor
Record entitled: ``NKTR-118 Accountability Form.'' RX 23. This form
includes a column for the date drugs were either received or
dispensed, a column for a shipment ID number, a column for a Subject
Number, Kit Number, number of tablets dispensed or returned, the
recorder's initials, the balance, and comments (the latter
indicating whether drugs were dispensed or returned, or a new
shipment was received). See RXs 23 & 24. While these records were
introduced into the record to refute the testimony of the DIs that
Dr. Nichol had continued to dispense controlled substances from
Respondent's new office, the documents show that a dispensing
occurred on August 3, 2012, two days after Ms. Moore said the new
office had opened. See RX 23, at 12; RX 26, at 2.
---------------------------------------------------------------------------
Regarding the forms she created (GX 14), Ms. Moore testified that
she used the sponsor's records to create them. Id. at 562. Ms. Moore
further explained that:
[t]hose are the records that are important to the sponsor and
important to the study. Nowhere in keeping records was there ever
any indication, until [the GS] came to my site, that we were to keep
two sets of books. I never heard that, but I'm not a registrant, so
maybe if I were, I would have heard it and known that. But this was
simply in response to the on-site visit in my office on 24th of
August 2012.
Id. at 564-65. Still later, Ms. Moore reiterated that she was not aware
that Dr. Nichol was required to keep controlled substance records for
the NKTR studies (for DEA) until the August 24, 2012 visit. Tr. 822-23.
Addressing the GS's computation chart (GX 15), Ms. Moore maintained
that the Kodiac 8 study had received only 630 dosage units and not 717
as asserted by the GS. Tr. 574. She also disputed the GS's conclusion
that using the ``correct math'' for the Kodiac 8 study resulted in an
overage of 630 dosage units. Id. at 575. And when asked about the
closing inventory figure for the Kodiac 5 study (GX 14, at 22), Ms.
Moore maintained that neither the GS's 3500 figure, nor the 1120 figure
(which was crossed out), were correct. Tr. 576. Instead, she explained
that 1373 (as is written on the form) was correct, because it included
both the bottles that were not dispensed (32, each with 35 tablets) and
the tablets that the patients returned.\17\ Id.
---------------------------------------------------------------------------
\17\ Having reviewed Respondent's Form 3 for the Kodiac 5 study,
see GX 14, at 14-20; I find that 253 tablets were returned by the
study subjects. When added to the number of dosages units that were
not dispensed (1120), the total is 1373.
---------------------------------------------------------------------------
The Government also asked Ms. Moore if she knew ``that it is a
required dispensing record to put down the location where the
controlled substances were dispensed from?'' Tr. 583. Ms. Moore
testified that she does not
know what is required, but as a compliant person, I'm more than
happy to learn what is required as a DEA registrant, because I am
prepared to do whatever needs to be done, as I do my clinical
research, because there are requirements that are required there as
well. So after I learn what is required . . . I'm fully prepared to
be compliant.
Id. at 584. Ms. Moore also testified that in her discussion with the GS
regarding the records, the GS ``did not'' tell her that she needed to
have a column to indicate where the drugs were dispensed.\18\ Id. at
620.
\18\ Respondent also called as a witness a former DEA Diversion
Investigator from the Little Rock office, who asserted that Ms.
Moore's application was not handled in the same manner as other
researchers' applications, which apparently he routinely approved in
a perfunctory fashion such as by not even writing the required
reports. Tr. 657-58, 716. In addition to expressing his typically
erroneous views on various issues (such as whether NKTR-118 was
subject to being removed from the schedule of controlled substances
or moved to a less-restrictive schedule, see id. at 685-86, 714),
the former DI also alleged that one of the subordinate DIs involved
in the investigation of Respondent had been the subject of an
investigation by the Office of Professional Responsibility into her
use of racial slurs made to a roommate at the DEA Academy, and that
someone intervened to prevent her termination. Tr. 665. The former
DI also provided an affidavit, in which he stated: ``I speculate
that when the Investigators learned of Ms. Moore's race, that this
may have contributed to an Investigator requesting Ms. Moore's
application be denied. The Investigator has a history of racial
problems.'' RX 21, at 2. However, when asked what information he had
that there was a specific complaint that the DI had engaged in
racist conduct, the former DI replied: ``What information do I have?
You want details on the allegation?'' Tr. 695. The former DI then
further acknowledged that he did not have the names of those
involved in the purported incident. Id.
The former DI did not identify any incidents on the part of the
Investigator beyond the purported incident described above, and on
rebuttal, the GS testified that she had checked with the Agency's
Office of Professional Responsibility and determined that no
complaint had ever been filed against the DI. Tr. 715.
Moreover, the former DI admitted that he had been denied a
permanent promotion to Group Supervisor and had resigned after the
Agency proposed his removal for failing to meet medical standards.
Id. at 697, 700. Thereafter, the former DI filed an EEO complaint, a
petition before the Merit Systems Protection Board, and two lawsuits
against the Agency challenging his removal on various grounds. Id.
at 696-701. However, the former DI lost every challenge. See id. Of
further note, the DI, who he had accused of racism, had testified
against him in a federal court proceeding in which he unsuccessfully
sought to enjoin his removal. Id. at 697-98.
As did the ALJ, I reject the former's DI contention that Ms.
Moore was treated differently on account of her race. See R.D. at 8
n.3. While there is evidence that other researchers' application
were approved during the former DI's time in Little Rock without an
on-site inspection, as the GS testified, Ms. Moore was neither a
medical doctor nor a Ph.D., as is typically the case with researcher
applicants, and she also had no experience in conducting research
with respect to controlled substances. Beyond the fact that Agency
personnel have discretion to conduct an on-site inspection whenever
they deem it necessary, the unique circumstances posed by this
applicant clearly warranted an on-site inspection.
---------------------------------------------------------------------------
On cross-examination, the Government also asked Ms. Moore whether,
prior to entering into the contract with Dr. Nichol in 2010, she was
aware of his history with the Arkansas Medical Board, which had
suspended him for pre-signing controlled substances prescriptions. Id.
at 590. Ms. Moore answered that she was not aware of his history, but
was aware that he had a current medical license. Id. Ms. Moore then
added that she found out ``some things'' later, but could not say when
she did. Id.
The Government then asked Ms. Moore whether, prior to entering into
the contract with Dr. Nichol in 2010, she was aware that he had been
convicted of felony health care fraud in federal district court. Id.
Apparently referring to an un-admitted exhibit, Ms. Moore testified
that she had ``never seen this before'' but that she ``would like to
have . . . documentation to just confirm . . . what you're saying is
true.'' Id. at 590-91. Ms. Moore then testified that she did not know
this information, and that she ``can't just confirm it, based on what
you're showing me here.'' Id. at 591. When the Government followed-up
by asking whether, regardless of the documentation (that was not
admitted), she knew, prior to entering into the contract, that Dr.
Nichol had been suspended by the state board and been convicted of
health care fraud, Ms. Moore testified that she did not ``know the
answer to that'' but did ``know that in our relationship, I knew it.''
Id. at 592. Ms. Moore then explained that when she ``met Dr. Nichol, he
had a valid license, and he was not under any restrictions on the
license that I obtained, and so in my estimation of our business
relationship, he was okay to do research.'' Id.
Discussion
Section 303(f) of the Controlled Substances Act (CSA) provides that
``[t]he Attorney General shall register practitioners . . . to
dispense, or conduct research with, controlled substances in schedules
II, III, IV, or V . . . if the applicant is authorized to dispense, or
conduct research with respect to, controlled substances under
[[Page 40154]]
the laws of the State in which [s]he practices.'' 21 U.S.C. 823(f).
However, ``[t]he Attorney General may deny an application for such
registration . . . if the Attorney General determines that the issuance
of such registration . . . would be inconsistent with the public
interest.'' Id. In making the public interest determination, the CSA
directs 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 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.
Id.
``[T]hese factors are . . . considered in the disjunctive.'' Robert
A. Leslie, M.D., 68 FR 15227, 15230 (2003). It is well settled that 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 MacKay v.
DEA, 664 F.3d 808, 816 (10th Cir. 2011); Volkman v. DEA, 567 F.3d 215,
222 (6th Cir. 2009); Hoxie v. DEA, 419 F.3d 477, 482 (6th Cir. 2005).
Moreover, while I am required to consider each of the factors, I ``need
not make explicit findings as to each one.'' MacKay, 664 F.3d at 816
(quoting Volkman, 567 F.3d at 222); see also Hoxie, 419 F.3d at
482.\19\
---------------------------------------------------------------------------
\19\ In short, this is not a contest in which score is kept; the
Agency is not required to mechanically count up the factors and
determine how many favor the Government and how many favor the
registrant. Rather, it is an inquiry which focuses on protecting the
public interest; what matters is the seriousness of the registrant's
or applicant's misconduct. Jayam Krishna-Iyer, 74 FR 459, 462
(2009). Accordingly, as the Tenth Circuit has recognized, findings
under a single factor can support the revocation of a registration.
MacKay, 664 F.3d at 821. Likewise, findings under a single factor
can support the denial of an application.
---------------------------------------------------------------------------
The Government has ``the burden of proving that the requirements
for . . . registration . . . are not satisfied.'' 21 CFR 1301.44(d).
However, where the Government has met its prima facie burden of showing
that issuing a new registration to the applicant would be inconsistent
with the public interest, an applicant must then ``present sufficient
mitigating evidence'' to show why she can be entrusted with a new
registration. Medicine Shoppe-Jonesborough, 73 FR 364, 387 (2008)
(quoting Samuel S. Jackson, 72 FR 23848, 23853 (2007) (quoting Leo R.
Miller, 53 FR 21931, 21932 (1988))).
In this matter, I have considered all of the factors. I agree with
the ALJ's finding that Ms. Moore violated federal law when she signed
for and took possession of a shipment of controlled substances and
Respondent was not registered. Moreover, I further agree with the ALJ's
finding that Dr. Nichol violated federal law when he dispensed
controlled substances at Respondent's office without being registered
at that location.
However, for reasons explained below, I reject the ALJ's conclusion
that Dr. Nichol's misconduct cannot be imputed to Respondent because
the Government has not proved that he acted as Respondent's agent.
Contrary to the ALJ's understanding, the Government was not required to
prove an agency relationship existed in order to impute Dr. Nichol's
violations to Respondent and Ms. Moore. Rather, Dr. Nichol's violations
can be imputed to Ms. Moore and Respondent because at a minimum, the
evidence shows that they aided and abetted his violations of federal
law in dispensing controlled substances at Respondent, which was not
registered. Moreover, I find that Ms. Moore and Respondent failed to
maintain complete and accurate records as required by the CSA. Because
Ms. Moore has failed to accept responsibility for both the dispensing
and recordkeeping violations, and, as found by the ALJ, lacked candor
in her testimony regarding the dispensing violations, I conclude that
she has not rebutted the Government's prima facie case.
Factor One--The Recommendation of the State Licensing Authority
Pursuant to 21 U.S.C. 823(f), ``[t]he Attorney General shall
register practitioners . . . to dispense, or conduct research with,
controlled substances in schedule II, III, IV, or V . . . 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.'' See also 21 U.S.C. 802(21) (``The term `practitioner'
means a physician, dentist, veterinarian, scientific investigator . . .
or other person licensed, registered, or otherwise permitted, by the
United States or the jurisdiction in which he practices or does
research, to distribute, dispense, conduct research with respect to,
administer, or use in teaching or chemical analysis, a controlled
substance in the course of professional practice or research.''); id.
Sec. 824(a)(3) (authorizing the suspension or revocation of a
registration ``upon a finding that the registrant . . . has had his
State license or registration suspended, revoked, or denied by
competent State authority and is no longer authorized by State law to
engage in the manufacturing, distribution, or dispensing of controlled
substances'').
As explained above, the Government initially sought to deny
Respondent's application on the ground that it did not hold authority
under state law to engage in research with respect to controlled
substances. However, on March 12, 2012, Respondent obtained a temporary
Arkansas Controlled Substance Registration, which was due to expire on
September 12, 2012. RX 19. Moreover, Respondent's state registration
has since been extended until December 31, 2013.
However, while the possession of state authority is an essential
condition for obtaining a practitioner's (and researcher's)
registration, it ```is not dispositive of the public interest
inquiry.''' George Mathew, M.D., 75 FR 66138, 66145 (2010), pet. for
rev. denied, Mathew v. DEA, No. 10-73480, slip op. at 5 (9th Cir., Mar.
16, 2012); see also Patrick W. Stodola, 74 FR 20727, 20730 n.16 (2009).
As the Agency has long held, ``the Controlled Substances Act requires
that the Administrator . . . make an independent determination [from
that made by state officials] as to whether the granting of controlled
substance privileges would be in the public interest.'' Mortimer Levin,
D.O., 57 FR 8680, 8681 (1992). Ultimately, because I conclude that
other grounds exist to deny Respondent's application, I hold that this
factor is not dispositive and give it nominal weight in the public
interest analysis.\20\
---------------------------------------------------------------------------
\20\ As for factor three, there is no evidence that Respondent
has been convicted of an offense ``relating to the manufacture,
distribution or dispensing of controlled substances.'' 21 U.S.C.
823(f)(3). However, there are a number of reasons why even a person
who has engaged in misconduct may never have been convicted of an
offense under this factor, let alone prosecuted for one. Dewey C.
MacKay, 75 FR 49956, 49973 (2010), pet. for rev. denied, MacKay v.
DEA, 664 F.3d 808 (10th Cir. 2011). The Agency has therefore held
that ``the absence of such a conviction is of considerably less
consequence in the public interest inquiry'' and is therefore not
dispositive. Id.
---------------------------------------------------------------------------
Factors Two and Four--The Applicant's Experience in Dispensing, or
Conducting Research with Respect to Controlled Substances and The
Applicant's Compliance with Applicable Laws Related to Controlled
Substances
As found above, it is undisputed that Ms. Moore was previously
employed as
[[Page 40155]]
a Respiratory Therapist and as a Clinical Research Coordinator. As the
ALJ found with respect to Ms. Moore's employment as a Respiratory
Therapist, Ms. Moore had limited experience handling controlled
substances and no experience in keeping controlled substance records.
R.D. at 6. As for her more recent employment as a Clinical Research
Coordinator, while Ms. Moore was involved in managing a number of
clinical trials, none of these involved controlled substances.\21\ Id.
at 7.
---------------------------------------------------------------------------
\21\ I place no weight on the fact that Ms. Moore was fired by
her previous employer or that she failed to produce letters of
recommendation. See Gov. Br. at 24. The Government produced no
evidence regarding the circumstances surrounding her termination.
Nor has it cited any authority that DEA requires an applicant for a
research registration to produce letters of recommendation.
---------------------------------------------------------------------------
Indeed, Ms. Moore's lack of experience in research with respect to
controlled substances was manifested throughout her testimony. For
example, Ms. Moore denied that she understood that Respondent could not
dispense controlled substances until it obtained a DEA registration,
Tr. 537-38, and--as if the law isn't clear enough--did so
notwithstanding that the Quintiles representative had advised her in
writing that her ``site must obtain a DEA license for research with a
controlled substance.'' RX 4. Ms. Moore also testified that she did not
think it was illegal for Dr. Nichol to bring the controlled substances
to Respondent's office and dispense them there. Tr. 538-39.
Subsequently, and notwithstanding that at the very first DEA visit, the
DIs provided Ms. Moore with a copy of the Code of Federal Regulations
and reviewed the recordkeeping requirements found in Part 1304, Ms.
Moore testified that she was not aware that Dr. Nichol was required to
keep controlled substance records until the August 24, 2012 visit.\22\
Id. at 822-23.
---------------------------------------------------------------------------
\22\ The Government also argues that ``Dr. Nichol's past
experience with controlled substances does not qualify him . . . to
handle controlled substances.'' Gov. Br. 24. As support for this
assertion, the Government cites Dr. Nichol's state board suspension
and his exclusion from participation in federal health care
programs. Id. The Government does not explain why it nonetheless
entered into an MOA with Dr. Nichol, pursuant to which it allowed
him to keep his registration and did so even after it became aware
that he was transporting controlled substances to Respondent's
office and dispensing them. I thus reject its contention.
---------------------------------------------------------------------------
Later, when asked if the dispensing record was required to include
the location of where the controlled substances were dispensed from,
Ms. Moore testified that she does not ``know what is required, but as a
compliant person, I'm more than happy to learn what is required as a
DEA registrant, because I am prepared to do whatever needs to be done.
. . . So after I learn what is required . . . I'm fully prepared to be
compliant.'' Id. at 584. Thus, while there is some evidence to support
Ms. Moore's contention that she is prepared to be compliant (e.g., her
installation of the alarm, provision of information to the DIs, and
attempts to create compliant records), it is shocking that even at the
time of the hearing, Ms. Moore still lacked knowledge of several of the
fundamental requirements imposed by the CSA and Agency regulations.
For example, regarding Dr. Nichol's dispensings at Respondent's
office, the CSA provides that ``[a] separate registration shall be
required at each principal place of business or professional practice
where the applicant . . . dispenses controlled substances.'' 21 U.S.C.
822(e). Interpreting this provision, the Fifth Circuit has held that
``[i]f a physician intends to dispense controlled substances from a
particular location several times a week or month, he must first file a
separate registration for the location. This aspect of the registration
provisions is beyond cavil.'' United States v. Clinical Leasing Serv.,
Inc., 930 F.2d 394, 395 (5th Cir. 1991) (emphasis added). See also id.
Sec. 822(b) (``Persons registered by the Attorney General under this
subchapter to . . . dispense controlled substances . . . are authorized
to possess . . . or dispensed such substances . . . (including any such
activity in the conduct of research) to the extent authorized by their
registration and in conformity with the other provisions of this
subchapter.) (emphasis added); see also 21 CFR 1301.12(a); Jeffery
Becker, M.D., 77 FR72387, 72387-88 (2012).
As for Ms. Moore's testimony that she was not aware that Dr. Nichol
was required to keep controlled substance records until August 24,
2012, the CSA provides that ``every registrant . . . shall . . . as
soon . . . as such registrant first engages in the . . . dispensing of
controlled substances . . . make a complete and accurate record of all
stocks thereof on hand.'' 21 U.S.C. 827(a)(1). So too, the CSA requires
that ``every registrant . . . dispensing a controlled substance . . .
shall maintain, on a current basis, a complete and accurate record of
each such substance . . . received, sold, delivered, or otherwise
disposed of by him, except that this paragraph shall not require the
maintenance of a perpetual inventory.'' Id. at Sec. 827(a)(3)(emphasis
added).
As the Agency has previously explained, ``the CSA creates `a closed
regulatory system making it unlawful to manufacture, distribute,
dispense, or possess any controlled substance except in a manner
authorized by the [Act].' '' Daniel Koller, D.V.M., 71 FR 66975, 66981
(2006) (quoting Gonzales v. Raich, 545 U.S. 1, 13 (2005) (citing 21
U.S.C. 841(a)(1), 844(a))). Of particular relevance here, the Supreme
Court has noted that `` `[t]he CSA and its implementing regulations set
forth strict requirements regarding registration . . . and
recordkeeping.' '' Koller, 71 FR at 66981 (quoting Raich, 545 U.S. at
14). See also Paul H. Volkman, 73 FR 30630, 30644 (2008)
(``Recordkeeping is one of the CSA's central features; a registrant's
accurate and diligent adherence to this obligation is absolutely
essential to protect against the diversion of controlled
substances.''). In short, the requirements that a practitioner be
registered at each principal place of professional practice where he
dispenses controlled substances and maintain complete and accurate
records of the controlled substances he handles are not arcane rules;
rather, they are two of the fundamental features of the closed
regulatory system created by the CSA. Yet Ms. Ms. Moore claimed to be
unaware of these rules. Ms. Moore's lack of experience in conducting
research with respect to controlled substances, when coupled with her
lack of knowledge of these essential requirements, provides ample
reason to conclude that her registration ``would be inconsistent with
the public interest.'' 21 U.S.C. 823(f).\23\
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\23\ In assessing Respondent's experience in conducting research
with respect to controlled substances, the ALJ found ``the fact that
Astra Zeneca [actually, Quintiles] granted her a research project
indicative of her documented experience at least to their
satisfaction for purposes of this study.'' R.D. at 27. As explained
above, the determination of whether granting a researcher's
registration is consistent with the public interest is vested in the
Agency (by delegation from the Attorney General) and not in
pharmaceutical companies or CROs. Accordingly, I reject the ALJ's
rumination as totally irrelevant.
---------------------------------------------------------------------------
Moreover, the record clearly establishes that Dr. Nichol violated
both the separate registration provision and DEA recordkeeping
requirements. As for Dr. Nichol's violations of the separate
registration provision, it is true that Ms. Moore disputed the
testimony of the GS and another DI that during the August 24, 2012 on-
site inspection, she was asked where Dr. Nichol was dispensing the
drugs and said they had been dispensed at Respondent's offices, and
that Ms. Moore never claimed that Nichol had dispensed the controlled
substances at his office. Tr. 72, 710-11. Of note, Ms. Moore
specifically denied that she was even asked if Dr. Nichol was
dispensing the drugs at Respondent. Tr. 535; see also id. at 726-27.
[[Page 40156]]
While the ALJ's opinion contained inconsistent findings on the
issue of whether Nichol was still dispensing the drugs at Respondent
after he entered the MOA,\24\ the ALJ did find that Ms. Moore
``vacillated in her testimony concerning where the controlled substance
was actually dispensed,'' and most significantly, that she lacked
candor. R.D. at 34. In any event, even accepting Ms. Moore's testimony
that Dr. Nichol stopped dispensing at Respondent's offices following
his entering into the MOA, I would still conclude that Nichol violated
the separate registration provision by dispensing controlled substances
at Respondent.\25\ In short, the evidence shows that Dr. Nichol made
the dispensings on a regular and non-random basis, even if he did so
only a few times a month. See Jeffery J. Becker, D.D.S., 77 FR 72387,
72388 (2012). Indeed, for purposes of Dr. Nichol's activities as a
researcher, Respondent's office was in every sense an `` `important or
consequential' '' place of professional practice. Clinical Leasing
Serv., 930 F.2d at 395; see also id. (``If a physician intends to
dispense controlled substances from a particular location several times
a week or month, he must first file a separate registration for the
location.'').
---------------------------------------------------------------------------
\24\ More specifically, the ALJ found that the GS had spoken
with the John Wegner, a Quintiles representative and ``confirmed
that the controlled substance was being dispensed from MCT. The drug
was being ordered by Dr. Nichol, sent to his office location, and
transported to MCT for dispensing. This procedure was ongoing from
at least April of 2012.'' R.D. at 10 (citing Tr. 61-64) (emphasis
added and citations omitted). As found above, the record indicates
that while the GS spoke with Mr. Wegner in July 2012 and was told
that Dr. Nichol was taking the drugs to Respondent, where they were
dispensed, she then contacted Dr. Nichol's attorney, who confirmed
that his client had been doing this ``[a]t least since April of
2012.'' Id. at 64.
Yet later in the R.D., the ALJ found that ``[a]t some
unspecified time in 2012, Ms. Moore became aware that Dr. Nichol's
relationship with the DEA had changed. She understood that Dr.
Nichol could no longer dispense controlled substances from the
Respondent's location. Thereafter, patients were dispensed
controlled substances from Dr. Nichol's office.'' R.D. at 16 (citing
Tr. 497-98; 531-35, 631). However, the evidence shows that Nichol
did not enter into the MOA until the middle of April 2012. RX 22, at
4.
\25\ Given the ALJ's finding that Ms. Moore vacillated in her
testimony and lacked candor on the issue of where the dispensings
occurred, as ultimate factfinder I give no weight to her testimony
that even before Nichol entered into the MOA, he made some of the
dispensings at his office. Indeed, the Clinical Trial Agreement
expressly required that the ``Institution, Investigator and their
personnel shall perform the Study at Institution's facility.'' RX
14, at 2 (emphasis added).
---------------------------------------------------------------------------
Moreover, while Ms. Moore maintained that if she is granted a
registration, the physicians Respondent contracts with will be
responsible for the dispensing and recordkeeping of the controlled
substances, as the ALJ recognized, under federal law, if controlled
substances were dispensed at Respondent's office, it was responsible
for maintaining complete and accurate records. United States v.
Clinical Leasing Serv., Inc., 759 F. Supp. 310, 313 (E.D. La. 1990),
aff'd 925 F.2d 120, 123 (5th Cir. 1991). As the court explained:
The clinic is charged with failure to maintain proper records.
The law clearly requires every ``person'' (including a corporation)
to maintain proper records if that person dispenses controlled
substances. By employing physicians to dispense drugs in connection
with its operation, the clinic is a dispenser of controlled
substances. Therefore, the clinic, as well as the physicians it
employs, must maintain the proper records required by law.
759 F. Supp. at 312 (emphasis added).
The court expressly rejected the clinic's contention that ``it was
not required to maintain records,'' because ``the record keeping
requirements pertain only to `registrants,' '' noting that 21 U.S.C.
842(a)(5) ``does not require that one who refuses or fails to make,
keep, or furnish records be a `registrant,' '' but applies to ``any
person,'' including `` `an individual, corporation . . . business
trust, partnership, association, or other legal entity.' '' Id. at 313
(quoting 21 CFR 1301.02(j)). Multiple federal courts have likewise
rejected the contention that the CSA's recordkeeping requirements do
not apply to non-registrant owners of clinics which dispense controlled
substances. See United States v. Robinson, 2012 WL 3984786, *6-7 (S.D.
Fla., Sept. 11, 2012) (holding non-registrant owner of cosmetic surgery
clinic liable for recordkeeping violations under section 842(a)(5);
statute ``includes the broader term of `any person' and does not limit
application of the subsection to registrants''); United States v.
Stidham, 938 F.Supp. 808, 813-15 (S.D. Ala. 1996) (holding non-
registrant owner of methadone clinic liable for recordkeeping
violations); United States v. Poulin, 926 F.Supp. 246, 250-51 (D. Mass.
1996) (``The recordkeeping provisions of the [CSA] apply to all persons
who dispense drugs, even if they have not registered as required under
the Act'' and holding both pharmacy's owner/proprietor and corporate
entity liable for recordkeeping violations); see also 21 U.S.C.
842(a)(5).
Of note, the GS testified that during the August 24, 2012
inspection of Respondent's new office, she examined the Schedule II
order forms and noted that they had not been completed by indicating
the date the drugs were received and the quantity received. Tr. 78; see
also 21 CFR 1305.13(e). The evidence also shows that in response to the
GS's request (through Dr. Nichol's attorney) for Dr. Nichol's
dispensing records, Nichol provided the GS with the records found in
Government Exhibit 14. Tr. 75.
Notably, it is undisputed that the dispensing record for each
study--which Dr. Nichol provided--was not created until August 27,
2012, well after all of the dispensings were made. See GX 14, at 5-7
(Kodiac 8); id. at 14-20 (Kodiac 5). The CSA requires, however, that a
dispensing record be ``maintain[ed], on a current basis.'' 21 U.S.C.
827(a)(3). Thus, the records presented to the GS by Dr. Nichol clearly
did not comply with federal law.
As for whether Ms. Moore was maintaining the records which complied
with the CSA, the ALJ's decision again contains several inconsistent
findings and conclusions. For example, the ALJ found that ``it is
unknown whether Ms. Moore's sponsor-required records would satisfy the
DEA's recordkeeping requirements, since neither party made them
exhibits in this matter.'' R.D. 20; see also id. at 32 (``Evidence of
Ms. Moore's Sponsor Records was not entered into this record.'').
However, Ms. Moore testified that the NKTR-118 Accountability Forms,
which were introduced into the record at RXs 23 and 24, were ``my
sponsor's record[s].'' Tr. 811; see also id. at 813-23 (discussing
notations in records made by the sponsor's representative or CRA).
The ALJ nonetheless concluded that because ``[e]vidence of Ms.
Moore's Sponsor records was not entered into this record . . . the
Government has failed to prove by a preponderance of the evidence that
the Respondent's records are deficient.'' R.D. at 33. Yet the ALJ then
explained that ``[a]lthough Respondent has failed to maintain its own
recordkeeping system, it cannot be held responsible for all of the
noncompliant actions of Dr. Nichol.'' Id. (emphasis added). And later,
the ALJ explained that Ms. Moore ``clearly lacks experience in handling
controlled substances, for she has not prepared the paperwork required
in remaining accountable for the controlled substances in Dr. Nichol's
charge.'' R.D. at 35 (emphasis added).
Moreover, regarding the obligation to keep records under the CSA,
Ms. Moore testified that ``I only learned on the 24th of August 2012,
when the DEA came into my site for onsite inspection, that there was a
requirement to have separate books. So I wasn't keeping records for the
DEA.'' Tr. 811. As for the sponsor record, Ms. Moore testified that she
``was simply recording everything
[[Page 40157]]
. . . we were just to count the drug and send it away.'' Id. at
811.\26\ Ms. Moore then reiterated that ``I was not keeping records for
the DEA.'' Id. at 812.
---------------------------------------------------------------------------
\26\ Notably, Respondent does not argue that Respondent's
Exhibits 23 and 24 (the NKTR-118 Accountability Forms) comply with
the CSA and DEA regulations, notwithstanding that they document
various dispensings. See generally Resp. Br. Indeed, in seeking
admission of these documents, Respondent's counsel represented to
the ALJ that they were offered ``for a very limited purpose, only
with regard to the date of [the] last dispensal'' [sic] and that
``[w]e do not offer them for anything else with regard to the
dispensal [sic] records.'' Tr. 750. The ALJ thus admitted these
records--over the Government's objection--only ``for the limited
purpose of'' showing the dates of the last dispensings. Id.
In any event, the records support the conclusion that
Respondent failed to comply with federal recordkeeping obligations.
Indeed, a review of these records shows that multiple entries are
not in chronological order, thus indicating that these logs were not
maintained on a current basis as required by federal law, but were
created after the fact. See RX 24, at 3 (listing entries dated in
following order: 25 Oct. 2011, 09 Nov. 2011, 15 Sep. 2011, 26 Sep.
2011, 22 Nov. 2011, 20 Dec. 2011); id. at 5-6 (single entry
containing crossed-out date of 18 Aug., and two dates of 18 July
2012 and 15 Aug 2012). See also RX 23, at 11-13 (listing more dates
of dispensings which are not in chronological order).
---------------------------------------------------------------------------
Accordingly, I find that substantial evidence supports the
conclusion that neither Dr. Nichol nor Respondent was maintaining
dispensing records for the two studies which complied with federal
law.\27\ And because federal law requires that both the physician and
the clinic are required to maintain records, see Clinical Leasing, 759
F. Supp. at 312; I conclude that Respondent violated federal law when
it failed to maintain on a current basis, complete and accurate records
of its dispensings of controlled substances. I thus reject the ALJ's
conclusion that ``the Government has not cited to any regulatory or
statutory provision resulting in a finding of wrongdoing done by the
Respondent'' other than the violation which Ms. Moore committed when
she accepted a shipment of controlled substances.\28\ R.D. at 35; see
also GX 14, at 13 (receipt for shipment of drugs signed by Ms. Moore on
July 31, 2012).
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\27\ In its post-hearing brief, the Government makes extensive
arguments, based largely on the GS's audit, that the dispensing
records Ms. Moore created were inaccurate. Gov. Br. 28-32. However,
the Government never performed a physical count of the drugs on hand
for the closing inventory. Instead, as found above, it based its
closing inventory figures on records which showed inventories taken
on various dates. GX 14, at 22. However, the GS ignored that these
records (MCT Form 1) were not perpetual inventories. Thus, the GS
simply added any quantities received in a new shipment to the
previous balance, ignoring that the last count was dated weeks
earlier and that dispensings had been ongoing. Tr. 90, 133. The GS
also treated the last entry on each form as if it was a new shipment
(adding it to the previous figure) when the forms indicated that the
quantities were of the drugs that were ``unused/returned'' and
``kits remaining unused.'' Id. at 133. Moreover, the GS acknowledged
that she did not ask either Dr. Nichol or Ms. Moore to explain what
these entries showed. Id. at 134-35. As for the GS's testimony that
she was simply following Ms. Moore's methodology, the GS never asked
Ms. Moore to explain her methodology. Id.
Accordingly, I find the Government's contention not proved.
\28\ As relevant here, under the CSA, it is ``unlawful for any
person knowingly or intentionally to possess a controlled substance
. . . except as otherwise authorized by this subchapter.'' 21 U.S.C.
844(a); see also id. Sec. 822(b) (``Persons registered by the
Attorney General under this subchapter to . . . distribute, or
dispense controlled substances . . . are authorized to possess . . .
distribute, or dispense such substances . . . to the extent
authorized by their registration and in conformity with the other
provisions of this subchapter.'').
---------------------------------------------------------------------------
The ALJ also declined to impute Dr. Nichol's violations of the
separate registration provision to Respondent, reasoning that under
Arkansas law, an employer is not responsible for the acts of its
independent contractor. R.D. at 30. As support for her conclusion, the
ALJ noted that Dr. Nichol's contract with Respondent stated that he was
an independent contractor and not an employee. Id. at 31 (citing RX 16,
at 6). The ALJ then explained:
Ms. Moore testified that her vision of the Respondent's business is
to provide site resources for the doctor who is conducting the
research. Respondent's business is not meant to exercise control
over the doctor's medical judgment nor is the Respondent meant to be
primarily responsible for the research and recordkeeping.
Additionally, the Respondent does not even pay Dr. Nichol for his
services in conducting research at Respondent's place of business,
but, rather, Dr. Nichol's payment is a `pass-through' system of
payment in which the Respondent pays Dr. Nichol once the Respondent
receives funds from the Sponsoring Organization. Simply put, Dr.
Nichol is not an employee or an agent of the Respondent because the
Respondent does not exercise any control over Dr. Nichol's work;
rather, the Respondent only offers Dr. Nichol a facility in which to
conduct research.
R.D. at 31-32 (citing Tr. 381, 383-85; RX 16).
Not only is the ALJ's reasoning counterfactual, it reflects a
stunning misunderstanding of the CSA. As for the ALJ's reliance on Ms.
Moore's vision, it is beside the point.\29\ Indeed, here, the evidence
shows that Respondent did far more than ``provide site resources for
[a] doctor who is conducting research.'' Id. Rather, the evidence shows
that Ms. Moore sought out, and contracted with Dr. Nichol, to perform
clinical research for Respondent, pursuant to contracts it might obtain
from contract research organizations, id. at 387, and that upon
receiving information that Quintiles would be managing clinical trials
of NKTR-118, Ms. Moore applied for Respondent to participate in the
study. RX 3, at 1.
---------------------------------------------------------------------------
\29\ So too, the fact that Respondent was not contractually
required to pay Dr. Nichol until it was paid is beside the point.
---------------------------------------------------------------------------
Moreover, upon Respondent's being approved by Quintiles, Ms. Moore
(on behalf of Respondent) and Dr. Nichol jointly agreed with Quintiles
to ``perform the Study at [Respondent's] facility according to the
Protocol and th[e] [Clinical Trial] Agreement.'' RX 14, at 2. Thus, the
evidence shows that Respondent did not simply provide a facility for
Dr. Nichol to undertake the research. To the contrary, Ms. Moore, on
behalf Respondent, undertook to perform the clinical trials.
Furthermore, it is clear that there was an agreement between Ms. Moore
and Dr. Nichol to dispense controlled substances at Respondent's
office. See also Tr. 57 (Ms. Moore's statement during May 2011
interview that Dr. Nichol ``would be present at the clinic [Respondent]
three to four days a week.'').
Notwithstanding that Dr. Nichol was an independent contractor and
not Respondent's employee, he was still obligated to comply with the
terms of his agreement with Respondent, which required that he ``act in
accordance and compliance with any and all applicable Federal, State,
and local laws, rules, regulations, guidelines, including but not
limited to the . . . CFR . . . as amended.'' RX 16, at 4. Indeed,
Respondent had the power to terminate the agreement ``upon the breach
of'' the agreement by Dr. Nichol and his failure to cure the breach.
Id. at 5. Thus, even if Respondent could not exercise control over Dr.
Nichol's medical decisions, she still retained authority to supervise
various other aspects of his activities and to ensure that he complied
with the requirements of federal law, including the CSA.\30\
Accordingly, whether Dr. Nichol was an agent under the standards set
forth in the Restatement of the Law (Third) Agency (2006), see R.D. at
31, the evidence shows that he clearly acted on Respondent's behalf in
performing the Clinical Trial Agreement and Ms. Moore clearly knew that
Dr. Nichol was dispensing controlled substances at Respondent. See 21
U.S.C. 802(3). Thus, Dr. Nichols' misconduct in dispensing controlled
substances at Respondent's unregistered location is properly imputed to
Respondent.
---------------------------------------------------------------------------
\30\ It is not uncommon that pharmacies utilize the services of
relief pharmacists, who are not employees, but rather independent
contractors. Under the ALJ's theory, a pharmacy owned by a non-
pharmacist could not be held liable for violations committed by a
relief pharmacist who is an independent contractor.
---------------------------------------------------------------------------
Indeed, even if the evidence is not sufficient to establish the
existence of an
[[Page 40158]]
agency relationship between Dr. Nichol and Respondent, the ALJ was
simply mistaken in concluding that proof of an agency relationship was
necessary to impute Nichol's misconduct to Respondent. Contrary to the
ALJ's understanding, the CSA recognizes the principle of agency for the
purpose of allowing ``an authorized person who acts on behalf of or at
the direction of a manufacturer, distributor, or dispenser,'' 21 U.S.C.
802(3), to handle controlled substances without having to be registered
as well. See id. Sec. 822(c) (``The following persons shall not be
required to register and may lawfully possess any controlled substance
. . . under this subchapter: (1) An agent or employee of any registered
manufacturer, distributor, or dispenser of any controlled substance . .
. if such agent or employee is acting in the usual course of his
business or employment.''). The CSA's agency provision does not,
however, limit the liability of a person for the misconduct of another
to the circumstance in which the latter acts as an agent of the former.
Thus, while obviously any misconduct in handling controlled substances
which is committed by an agent in the course of the agency is properly
imputed to his principal, see Mediplas Innovations, 67 FR 41256
(2002),\31\ this is not the only basis for imputing Dr. Nichol's
violations of the separate registration requirement to Respondent and
Ms. Moore.
---------------------------------------------------------------------------
\31\ Citing Mediplas Innovations, 67 FR 41256 (2002) and Daniel
Koller, D.V.M., 71 FR 66975 (2006), the ALJ explained that these
decisions ``regarding imputing a worker's conduct to an employer
turn on the fact that the worker was deemed an agent of the
employer.'' R.D. at 31. The ALJ misread both cases.
In Mediplas, the Agency held that a firm, which sought to import
list I chemicals, was liable for the failure of its customs broker
to timely file import notification forms (DEA--486), explaining that
the firm had a statutory duty to file the forms and that under the
law of agency, it was liable ``for its agent's failure to timely
file'' the forms. 67 FR at 41262 (citing, inter alia, Restatement
(Second) of Agency Sec. Sec. 272, 275, 277 (1958)). While the
liability of a principal for the acts committed by an agent in the
course of its agency is hardly disputable, Mediplas simply does not
address whether, absent an agency or employment relationship, a
person can be held liable under the CSA for the misconduct of
another person, such as a co-conspirator.
Nor does Koller support the ALJ's reasoning. Rather, Koller
simply addressed whether a relief veterinarian, who was an
independent contractor and not an employee of a clinic owner, could
act as an agent of the owner and lawfully dispense controlled
substances under the exemption from registration provided under 21
U.S.C. 822(c). See 71 FR 66975.
---------------------------------------------------------------------------
Significantly, Dr. Nichol's violations can be imputed to Respondent
because Ms. Moore knowingly aided and abetted Dr. Nichol's violations.
Cf. 18 U.S.C. 2; FDIC v. First Interstate Bank of Des Moines, N.A., 885
F.2d 423, 431 (8th Cir. 1989) (noting that ``under the common law,
liability is sufficiently established by an aider-abettor's knowledge
of the wrong and its awareness of its assistance in furthering the
scheme'') (citing Restatement (Second) of Torts Sec. 876 comment d
(other citation omitted)). Here, in addition to the Clinical Trial
Agreement (by which Respondent, through Ms. Moore, and Dr. Nichol
agreed with Quintiles to ``perform the Study at [Respondent's]
facility,'' RX 14, at 2), the evidence shows that Ms. Moore provided
Respondent's facility to Dr. Nichol for the purpose of performing the
clinical studies.
Moreover, the evidence shows that Respondent did not have a
registration to conduct research, Tr. 62, and that during the February
15, 2011 site selection visit, Quintiles' representative informed both
Ms. Moore and Dr. Nichol that ``[t]he site must obtain a DEA license
for research with a controlled substance.'' RX 4, at 1; see also Tr.
400 (testimony of Ms. Moore that sponsor told her and Nichol that
``based on the scheduling [of NKTR-118], then the sites [sic] would
need a DEA license''). So too, the evidence shows that Dr. Nichol was
not registered at Respondent and Ms. Moore knew this. \32\ Tr. 487; RX
22, at 1. Finally, the evidence further shows that Dr. Nichol proceeded
to dispense controlled substances at Respondent's office when neither
he, nor Respondent, held a registration at this location and did so on
numerous occasions through at least April 2012.\33\ Thus, the evidence
establishes that Ms. Moore and Respondent aided and abetted Dr.
Nichol's violations of section 822(e), by allowing him to dispense at
Respondent's office, which was not registered.
---------------------------------------------------------------------------
\32\ Obviously, Dr. Nichol knew that he was not registered at
Respondent.
\33\ As for Ms. Moore's testimony that she did not think it was
illegal for Dr. Nichol to bring the controlled substances to
Respondent and dispense them there, this is not a mistake of fact,
but rather, a mistake of law. As such, even if I deemed it credible,
it offers no comfort to Respondent.
Moreover, the record shows that at the April 2011 meeting, the
DIs provided Ms. Moore with the Code of Federal Regulations. Among
the regulations contained therein are 21 CFR 1301.11, which requires
that ``[e]very person who . . . dispenses . . . any controlled
substances or who proposes to engage in the . . . dispensing of any
controlled substance shall obtain a registration unless exempted by
law or'' regulation, and as well as 21 CFR 1301.12, which provides
that ``[a] separate registration is required for each principal
place of professional practice at one general physical location
where controlled substances are . . . dispensed by a person.'' See
also 21 CFR 1301.12(b)(3) (exempting from the separate registration
requirement, ``[a]n office used by a practitioner . . . where
controlled substances are prescribed but neither administered nor
otherwise dispensed as a regular part of the professional practice
of the practitioner at such office, and where no supplies of
controlled substances are maintained.'') (emphasis added).
As the Fifth Circuit has recognized, the statute (21 U.S.C.
822(e)) and regulation provide fair notice such that:
A physician of ordinary means and intelligence would understand
that the federal registration provisions apply to each important or
consequential place of business where the physician distributes
controlled substances. It is sufficiently clear that the application
of the provisions is not limited to a single important or
consequential place of business where controlled substances are
distributed.
Clinical Leasing Serv., 925 F.2d at 123 (emphasis added).
Moreover, Ms. Moore admitted that she never asked DEA whether Dr.
Nichol could lawfully transport the controlled substances to
Respondent and dispense them there. Tr. 538. See Clinical Leasing
Serv., 925 F.2d at 122 (``licensing or registration requirements,
are afforded considerable deference in the vagueness analysis
because the regulated party may `have the ability to clarify the
meaning of the regulation[s] by its own inquiry, or by resort to an
administrative process''') (quoting Village of Hoffman Estates v.
Flipside, Hoffman Estates, Inc., 455 U.S. 489, 498 (1991)).
---------------------------------------------------------------------------
I therefore reject the ALJ's conclusion that Dr. Nichol's
violations of section 822(e) cannot be imputed to Ms. Moore and
Respondent.\34\ Moreover, as
[[Page 40159]]
discussed above, Ms. Moore and Respondent violated federal law by
failing to maintain complete and accurate dispensing records. These
findings support the conclusion that granting Respondent's application
``would be inconsistent with the public interest.'' 21 U.S.C. 823(f).
---------------------------------------------------------------------------
\34\ So too, liability can be imputed based on proof that a
conspiracy existed, even where the conspiracy had a lawful objective
but was carried out through unlawful means. See 21 U.S.C. 846 (``Any
person who . . . conspires to commit any offense defined in this
subchapter [i.e., the CSA] shall be subject to the same penalties as
those prescribed for the offense, the commission of which was the
object of the . . . conspiracy.'').
To establish the existence of a conspiracy, the Government
``must prove there was a conspiracy with an illegal purpose, that
the defendant was aware of the conspiracy, and that [s]he knowingly
became a part of it. Moreover, there must be evidence that the
defendant entered into an agreement with at least one other person
and that the agreement had as its objective a violation of law.''
United States v. Fitz, 317 F.3d 878, 881 (8th Cir. 2003) (citations
omitted). Proof of the existence of an agreement ```does not require
evidence of a formal or express agreement''' but only evidence
```that the parties have a tacit understanding to carry out the
prohibited conduct.''' United States v. Nusraty, 867 F.2d 759, 763
(2d Cir. 1989) (quoting United States v. Rubin, 844 F.2d 979, 984
(2d Cir. 1988)) (other citation omitted).
However, because the act of entering into a conspiracy is itself
an actionable offense, the Government was required to allege this in
either the Show Cause Order or its Pre-Hearing Statements. I
therefore do not rely on this theory.
By contrast, the aiding and abetting statute does not create a
separate offense, but simply ``abolishes the distinction between
common law notions of `principal' and `accessory.''' United States
v. Kegler, 724 F.2d 190, 200 (D.C. Cir. 1983). Accordingly, in a
criminal prosecution, ``[a]iding and abetting . . . need not be
alleged in the indictment.'' United States v. Alexander, 447 F.3d
1290, 1298 (10th Cir. 2006). See also United States v. Good Shield,
544 F.2d 900, 952 (8th Cir. 1976) (``Aiders and abettors and those
causing an act to be done are punishable as principals. The
indictment may charge a defendant as a principal, and need not
specifically allege that he aided and abetted in the commission of
the crime.'').
Of significance here, `````[p]leadings in administrative
proceedings are not judged by the standards applied to an indictment
at common law.''''' Citizens States Bank of Marshfield v. FDIC, 751
F.2d 209, 213 (8th Cir. 1984) (quoting Aloha Airlines v. Civil
Aeronautics Bd., 598 F.2d 250, 262 (D.C. Cir. 1979)) (quoted in
George Mathew, M.D., 75 FR 66138, 66146 n.20 (2010)). ``An agency is
not required ``to give every [Respondent] a complete bill of
particulars as to every allegation that [he] will confront.'''
Boston Carrier, Inc., v. ICC, 746 F.2d 1555, 1560 (D.C. Cir. 1984)
(quoted in Mathew, 75 FR at 66146 n.20). ``Thus, the failure of the
Government to disclose an allegation in the Order to Show Cause is
not dispositive, and an issue can be litigated if the Government
otherwise timely notifies a respondent of its intent to litigate the
issue.'' Mathew, 75 FR at 66146 n.20. See also Darrell Risner,
D.M.D., 61 FR 728, 730 (1996) (``the parameters of the hearing are
determined by the prehearing statements''); accord Nicholas A.
Sychak, 65 FR 75959, 75961 (2000).
Here, the Government provided adequate notice that it intended
to litigate the issue of Dr. Nichol's transporting controlled
substances to Respondent's office to dispense them there and that
this was illegal because he was not registered at that location. See
Gov. Second Supplemental Prehearing Statement, at 1-2. More
specifically, the Government disclosed that it intended to sponsor
testimony from the GS that she was told by a Quintiles employee that
``the MCT study situation was unique in that they had to send the
drugs to Dr. Nichol who then transported them to MCT to dispense.''
Id. at 1. The Government further disclosed that the GS would testify
that she contacted Dr. Nichol's attorney and ``informed him of the
problems with transporting and dispensing drug from an unregistered
location and that it was not legal to do so unless the location was
registered'' and that ``Dr. Nichol needed to be registered at the
MCT location if he wished to dispense there.'' Id. The Government
then disclosed that the GS would testify that on August 22, 2012,
she received a letter from Dr. Nichol's attorney which ``assured her
that Dr. Nichol would administer the controlled substances for
research at his DEA approved address.'' Id. at 2.
Finally, the Government disclosed that the GS would testify
that during the August 24, 2012 meeting with Ms. Moore, the latter
``admitted that Dr. Nichol was dispensing [NKTR-118] from MCT both
at the new and old locations for MCT.'' Id. I thus conclude that
Respondent had adequate notice that the issue would be litigated.
---------------------------------------------------------------------------
Sanction
Under Agency precedent, where, as here, ``the Government has proved
that [an applicant] has committed acts inconsistent with the public
interest, [the applicant] must ` ``present sufficient mitigating
evidence to assure the Administrator that it can be entrusted with the
responsibility carried by such a registration.'' ' '' Medicine Shoppe-
Jonesborough, 73 FR 364, 387 (2008) (quoting Samuel S. Jackson, 72 FR
23848, 23853 (2007) (quoting Leo R. Miller, 53 FR 21931, 21932
(1988))). ``Moreover, because `past performance is the best predictor
of future performance,' ALRA Labs, Inc. v. DEA, 54 F.3d 450, 452 (7th
Cir. 1995), [DEA] has repeatedly held that where [an applicant] has
committed acts inconsistent with the public interest, the registrant
must accept responsibility for its actions and demonstrate that it will
not engage in future misconduct.'' Medicine Shoppe, 73 FR at 387; see
also Jackson, 72 FR at 23853; John H. Kennedy, 71 FR 35705, 35709
(2006); Prince George Daniels, 60 FR 62884, 62887 (1995). See also
Hoxie v. DEA, 419 F.3d at 483 (``admitting fault'' is ``properly
consider[ed]'' by DEA to be an ``important factor[]'' in the public
interest determination). So too, in making the public interest
determination, ``this Agency also places great weight on an
[applicant's] candor, both during an investigation and in [a]
subsequent proceeding.'' Robert F. Hunt, 75 FR 49995, 50004 (2010)
(citing The Lawsons, Inc., t/a The Medicine Shoppe Pharmacy, 72 FR
74334, 74338 (2007) quoting Hoxie, 419 F.3d at 483 (``Candor during DEA
investigations properly is considered by the DEA to be an important
factor when assessing whether a . . . registration is consistent with
the public interest.'')).
While an applicant must accept responsibility and demonstrate that
it will not engage in future misconduct in order to establish that
granting its application is consistent with the public interest, DEA
has repeatedly held these are not the only factors that are relevant in
determining the appropriate sanction. See, e.g., Joseph Gaudio, 74 FR
10083, 10094 (2009); Southwood Pharmaceuticals, Inc., 72 FR 36487,
36504 (2007). Obviously, the egregiousness and extent of a registrant's
misconduct are significant factors in determining the appropriate
sanction. See Jacobo Dreszer, 76 FR 19386, 19387-88 (2011) (explaining
that a respondent can ``argue that even though the Government has made
out a prima facie case, his conduct was not so egregious as to warrant
revocation''); Paul H. Volkman, 73 FR 30630, 30644 (2008); see also
Gregory D. Owens, 74 FR 36751, 36757 n.22 (2009).
Moreover, as I have noted in several cases, `` `[n]either Jackson,
nor any other agency decision, holds . . . that the Agency cannot
consider the deterrent value of a sanction in deciding whether a
registration should be [suspended or] revoked.' '' Gaudio, 74 FR at
10094 (quoting Southwood, 72 FR at 36503 (2007)); see also Robert
Raymond Reppy, 76 FR 61154, 61158 (2011); Michael S. Moore, 76 FR
45867, 45868 (2011). This is so, both with respect to the respondent in
a particular case and the community of registrants. See Gaudio, 74 FR
at 10095 (quoting Southwood, 71 FR at 36504). Cf. McCarthy v. SEC, 406
F.3d 179, 188-89 (2d Cir. 2005) (upholding SEC's express adoption of
``deterrence, both specific and general, as a component in analyzing
the remedial efficacy of sanctions'').
The ALJ reasoned that while ``[t]he record is filled with
wrongdoing done by Dr. Nichol . . . his wrongdoing is not imputed to
Respondent'' and that the only violation Respondent ``had . . . to be
remorseful about,'' was Ms. Moore's act of signing for, and taking
possession of, the July 31, 2012 shipment of controlled substances.
R.D. at 35. While acknowledging that ``Ms. Moore did not express any
remorse for this wrongdoing,'' the ALJ concluded that ``this one
incident is [not] enough to deny the Respondent a DEA registration.''
Id.
As explained above, the ALJ's conclusion rests upon the erroneous
premise that Ms. Moore is only responsible for her act of taking
possession of a shipment of controlled substances. Rather, the evidence
shows that Ms. Moore aided and abetted Dr. Nichol's violations of the
CSA by dispensing controlled substance at an unregistered location. See
21 U.S.C. 822(e), 841(a)(1), 846. As explained above, this misconduct
constitutes a violation of one of the CSA's core provisions.
Yet Ms. Moore utterly failed to acknowledge her misconduct,
insisting that she did not understand that: (1) Respondent could not
dispense controlled substances without first obtaining a DEA
registration, Tr. 537, 539; and (2) it was illegal for Dr. Nichol to
dispense controlled substances at Respondent. Id. at 539. Not only is
Ms. Moore's ignorance of the law no excuse, see Sigrid Sanchez, M.D.,
78 FR 3933, 39336 (2013); her assertions are extraordinary when
considered in light of the facts that: (1) She was explicitly told by
the Quintiles representative that Respondent must obtain a DEA license,
RX 4; (2) she was provided with a copy of the Code of Federal
Regulations, Tr. 274; and (3) she admitted that she never asked DEA
Investigators if Dr. Nichol could lawfully transport the drugs to
Respondent and dispense them there. Id. at 538.
Ms. Moore also failed to accept responsibility for Respondent's
recordkeeping violations. Ms. Moore did not address at all the failure
to properly annotate the Schedule II order forms with the date of
receipt and quantity of drugs received. Moreover, while both
[[Page 40160]]
Respondent and Dr. Nichol failed to maintain dispensing records on a
current basis, see 21 U.S.C. 827(a)(3); 21 CFR 1304.21(a), Ms. Moore
asserted that she was not aware that Dr. Nichol was required to keep
controlled substances records for the studies until August 24, 2012.
Tr. 822-23. As for Respondent's failure to keep records, Ms. Moore
asserted that ``[n]owhere in keeping records was there ever any
indication, until [the GS] came to my site, that we were to keep two
sets of books. I never heard that, but I'm not a registrant, so maybe
if I were, I would have heard it and known that.'' Id. at 565.
However, as stated above, during the April 2011 on-site inspection,
Ms. Moore was provided with the Code of Federal Regulations. Tr. 274.
And during the visit, one of the DIs explained the recordkeeping
requirements to Ms. Moore. Id. Regardless of whether Ms. Moore was
required to keep two sets of books, Respondent was obligated to
maintain current records of the controlled substances that were
received and dispensed by Respondent and Dr. Nichol. Here again, Ms.
Moore's testimony manifests that she does not accept responsibility for
the failure of Respondent and Dr. Nichol to keep records that complied
with the CSA. Indeed, Ms. Moore's testimony is all the more remarkable
in light of the fact that it occurred at a hearing at which the issue
was whether her entity should be granted a registration. Cf. 4 OTC,
Inc., 77 FR 35031, 35035 (2012) (``it is not too much to expect that an
applicant seeking to show its intent to comply with applicable state
laws, would produce [Standard Operating Procedures] which were not
riddled with misstatements of those laws and which correctly reflected
those States where its proposed method of operations would be
unlawful'').
I therefore hold that Ms. Moore has failed to accept responsibility
for her (and Respondent's) misconduct. See Jeffery P. Gunderson, 61 FR
62884, 62887 (1996). While there is no evidence that any of the drugs
that were dispensed in the NKTR-118 study were diverted, both the
registration and recordkeeping violations involve core provisions of
the CSA. Moreover, Respondent's violations of the registration
requirements were clearly intentional. Accordingly, Ms. Moore's failure
to acknowledge her wrongdoing provides ample reason to reject
Respondent's application. This conclusion is buttressed by the ALJ's
finding that Ms. Moore lacked candor when she testified ``concerning
where the controlled substance was actually dispensed.'' R.D. at 34
(citing Jeri Hassman, M.D., 75 FR 8,194, 8236 (2010), pet. for rev.
denied, Hassman v. Office of the Deputy Administrator, No. 10-70684
(9th Cir., Apr. 9, 2013)).
To be sure, Ms. Moore put on some evidence of her willingness to
comply with the CSA and Agency regulations, including her installation
of the alarm, her timely provision of information to investigators, and
her efforts to create compliant records. However, where, as here, the
evidence shows that an applicant has engaged in knowing or intentional
misconduct, Agency precedent has long held that the acknowledgement of
such misconduct is an essential element of rebutting the Government's
prima facie case. See Hoxie v. DEA, 419 F.3d at 483; see also Medicine
Shoppe, 73 FR at 387; Kennedy, 71 FR at 35709; Daniels, 60 FR at 62887.
And in any event, the weight to be given Ms. Moore's evidence of her
willingness to comply is greatly diminished by her aiding and abetting
Dr. Nichol's violations of federal law when he dispensed at an
unregistered location. Moreover, Ms. Moore's testimony shows that she
still does not understand the scope of the recordkeeping obligations of
a DEA registrant.
Accordingly, I conclude that Respondent's application should be
denied.
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 Moore Clinical Trials,
L.L.C., for a DEA Certificate of Registration as a Researcher, be, and
it hereby is, denied. This Order is effective immediately.
Dated: July 2, 2014.
Michele M. Leonhart,
Administrator.
[FR Doc. 2014-16162 Filed 7-10-14; 8:45 am]
BILLING CODE 4410-09-P