[Federal Register Volume 80, Number 96 (Tuesday, May 19, 2015)]
[Notices]
[Pages 28667-28689]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-12043]
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DEPARTMENT OF JUSTICE
Drug Enforcement Administration
[Docket No. 13-35]
JM Pharmacy Group, Inc., d/b/a Farmacia Nueva and Best Pharma
Corp; Decision and Order
On October 24, 2013, Chief Administrative Law Judge John J.
Mulrooney, II (hereinafter, ALJ), issued the attached Recommended
Decision. Neither the Government nor the Respondents filed exceptions
to the Recommended Decision.\1\
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\1\ All citations to the Recommended Decision are to the slip
opinion as issued by the ALJ.
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Having reviewed the entire record, I have decided to adopt the
ALJ's findings of fact including his credibility determinations except
as discussed below.\2\ I also adopt the ALJ's
[[Page 28668]]
conclusions of law that: (1) Respondents' principal (Mr. Moro Perez)
materially falsified each pharmacy's application by failing to disclose
that he had previously surrendered for cause each pharmacy's DEA
registration, and (2) that Respondents failed to demonstrate that they
can be entrusted with a new registration.\3\ However, for reasons
explained below, I do not adopt the ALJ's conclusions that Respondents
and their pharmacists violated their corresponding responsibility when
they dispensed controlled substance prescriptions issued by a physician
whose registration had expired.
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\2\ In the Recommended Decision, the ALJ observed that his
factual findings ``are entitled to significant deference.'' R.D. at
34 (citing Universal Camera Corp. v. NLRB, 340 U.S. 474, 496
(1951)). To make clear, the Agency is the ultimate factfinder and
considers an ALJ's factual findings ``along with the consistency and
inherent probability of testimony. The significance of [the ALJ's]
report, of course, depends largely on the importance of credibility
in the particular case.'' Universal Camera, 340 U.S. at 496. See
also Reckitt & Colman, Ltd., v. Administrator, 788 F.2d 22, 26-27
(D.C. Cir. 1986).
For reasons I have previously explained, see Top Rx Pharmacy, 78
FR 26069, 26069 n.1 (2013), I do not adopt the parenthetical
following the ALJ's citation to Paul Weir Battershell, 76 FR 44359,
44368 n.27 (2011). See R.D. at 36.
In his discussion of factor two (``the applicant's experience in
. . . dispensing controlled substances''), the ALJ explained that
this factor manifests Congress's ``acknowledgment that the
qualitative manner and the quantitative volume in which an applicant
has engaged in the dispensing of controlled substances may be [a]
significant factor'' in determining ``whether an applicant should be
(or continue to be) entrusted with a DEA'' registration. R.D. at 37
(emphasis added).
It is certainly true that evidence as to the volume of
dispensings (whether by a prescriber or a pharmacy) has been
admitted in these proceedings, by both the Government to show the
extent of practitioner's unlawful activities, and by practitioners
to show the extent of their lawful activities. That being said,
neither the text of factor two, nor the legislative history of the
1984 amendments which gave the Agency authority to consider the
public interest in determining whether to grant an application or
revoke (or suspend) an existing registration, compel the conclusion
that Congress considered ``the quantitative volume'' of an
applicant's or registrant's dispensings to be a significant factor
in the public interest analysis.
The word ``experience'' has multiple meanings. Among those most
relevant in assessing its meaning as used in the context of factor
two are: (1) The ``direct observation of or participation in events
as a basis for knowledge,'' (2) ``the fact or state of having been
affected by or gained knowledge through direct observation or
participation,'' (3) ``practical knowledge, skill, or practice
derived from direct observation of or participation in events or in
a particular activity,'' and (4) ``the length of such
participation.'' See Merriam-Webster's Collegiate Dictionary 409
(10th ed. 1998); see also The Random House Dictionary of the English
Language 681 (2d ed. 1987) (defining experience to include ``the
process or fact of personally observing encountering, or undergoing
something,'' ``the observing, encountering, or undergoing of things
generally as they occur in the course of time,'' ``knowledge or
practical wisdom gained from what one has observed, encountered, or
undergone'').
None of these meanings compels the conclusion that Congress
acknowledged that ``the quantitative volume'' of a practitioner's
dispensing activity may be a significant consideration under this
factor, and certainly none suggest that the Agency is required to
count up the number of times an applicant or registrant has
dispensed controlled substances in making factual findings under
this factor as suggested by another ALJ. See Clair L. Pettinger, 78
FR 61592, 61597 (2013) (rejecting reasoning in ALJ's recommended
decision that factor two ``requires evidence of both the qualitative
and quantitative volume of the Respondent's experience'' and that
``[w]here evidence of the Respondent's experience . . . is silent
with respect to the quantitative volume of the Respondent's
experience, and requires speculation to support an adverse finding
under Factor Two, this Factor should not be used to determine
whether the Respondent's continued registration is inconsistent with
public interest.'').
Prior to the 1984 amendment of section 823(f), the Agency's
authority to deny an application or revoke a registration was
limited to cases in which a practitioner: (1) Had materially
falsified an application, (2) had been convicted of a State or
Federal felony offense related to controlled substances, or (3) had
his State license or registration suspended, revoked, or denied. See
S. Rep. No. 98-225, at 266 (1983), as reprinted in 1984 U.S.C.C.A.N.
3182, 3448. Finding that the ``[i]mproper diversion of controlled
substances'' was ``one of the most serious aspects of the drug abuse
problem,'' and yet ``effective Federal action against practitioners
ha[d] been severely inhibited by the [then] limited authority to
deny or revoke practitioner registrations,'' id., Congress concluded
that ``the overly limited bases in current law for denial or
revocation of a practitioner's registration do not operate in the
public interest.'' Id.
The Senate Report thus explained that ``the bill would amend 21
U.S.C. 824(f) [sic] to expand the authority of the Attorney General
to deny a practitioner's registration application.'' Id. The Report
further explained that ``in those cases in which registration is
clearly contrary to the public interest, the amendment would allow a
swift and sure response to the danger posed to the public health and
safety by the registration of the practitioner in question.'' Id. at
267, as reprinted in 1984 U.S.C.C.A.N. at 3449. Accordingly, section
823(f) was amended to provide the Agency with authority to deny an
application based upon a finding that the issuance of a registration
``would be inconsistent with the public interest,'' upon
consideration of the five public interest factors, including the
experience factor. Id. See also 21 U.S.C. 824(a)(4). Nowhere in the
Report's discussion of the amendments to sections 823 and 824 is
there any support for the notion that Congress deemed the
quantitative volume of a practitioner's dispensings to be a
significant consideration in making findings under the experience
factor.
As in past cases, the parties may continue to introduce evidence
as to the extent of both a practitioner's lawful or unlawful
dispensing activities. However, under Agency precedent, proof of a
single act of intentional or knowing diversion remains sufficient to
satisfy the Government's prima facie burden and to impose on a
respondent, the obligation to produce evidence to show that it can
be entrusted with a registration. See Jayam Krishna-Iyer, 74 FR 459,
463 (2009); see also MacKay v. DEA, 664 F.3d 808, 819 (10th Cir.
2011) (``Although Dr. MacKay may have engaged in the legitimate
practice of pain medicine for many of his patients, the conduct
found by the Deputy Administrator with respect to K.D. and M.R. is
sufficient to support her determination that his continued
registration is inconsistent with the public interest.''). I
therefore do not adopt the ALJ's statement that Congress
acknowledged ``the quantitative volume'' of a practitioner's
dispensings to be a ``significant factor'' in assessing a
practitioner's experience.
\3\ I also adopt the ALJ's legal conclusion that the Government
did not sustain the record keeping allegation.
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The Material Falsification Allegations
As explained in the ALJ's decision, Mr. Moro Perez asserted that he
did not materially falsify the applications because he did not believe
that the surrenders were for cause.\4\ With respect to this allegation,
the evidence showed that on November 30, 2011, the Government executed
a search warrant at the two pharmacies and that Mr. Moro Perez, who had
been arrested at his residence, was taken to Best Pharmacy, where he
was presented with a voluntary surrender form (DEA From 104), and that
while the form was in English, its purpose and contents were explained
to Mr. Moro Perez by a Special Agent who spoke Spanish. Tr. 175-77.
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\4\ Question 2 on the DEA Application asked: ``Has the applicant
ever surrendered (for cause) or had a federal controlled substance
registration revoked, suspended, restricted or denied, or is any
such action pending?'' On each application, Mr. Moro Perez answered
no. GX 1 & 8.
Question 4 asked, in relevant part: ``If the applicant is a
corporation (other than a corporation whose stock is owned and
traded by the public), association, partnership, or pharmacy, has
any officer, partner, stockholder or proprietor . . . ever
surrendered or had a federal control substance registration revoked,
suspended, restricted, or denied . . . .? GX 1, at 1.
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The evidence further showed that the DI (through the Special Agent
who translated for him) explained to Mr. Moro Perez that the form
``dealt with the regulatory matter'' and ``his DEA registration
number,'' and that it was ``separate from any criminal allegations that
may be levied.'' Id. at 177. The DI also told Mr. Moro Perez that
``[i]f he chose not to sign the form, then we would move for an order
to show cause proceeding.'' Id. Mr. Moro Perez did not dispute this
testimony.
The evidence further showed that the DEA Form 104, which was used
by the DI to memorialize the surrender, contains two boxes which can be
checked with an accompanying statement. The first of these states, in
relevant part: ``In view of my alleged failure to comply with the
Federal requirements pertaining to controlled substances, and as an
indication of my good faith in desiring to remedy any incorrect or
unlawful practices on my part[.]'' GX 14, at 1. According to the DI,
this box had been checked prior to the form's presentation to Mr. Moro
Perez. Tr. 176. Mr. Moro Perez signed the form. Id.; see also GX 14, at
1.
Thereafter, Mr. Moro Perez was criminally charged with several
violations of the Controlled Substances Act including possession with
intent to distribute, see 21 U.S.C. 841(a)(1), and conspiracy to
possess with intent to distribute. See id. Sec. 860. However, on March
23, 2012, the charges, on motion of the Government, were dismissed with
prejudice. RX 3.
The ALJ took official notice that Respondents were previously the
subject of an Order to Show Cause Proceeding, and that either one or
both Respondents in this matter requested a hearing on the allegations,
which was deemed filed with the Office of Administrative Law Judges on
December 6, 2011, and assigned Docket No. 12-16. See R.D. at 10. The
ALJ also took official notice that the aforesaid proceeding was
terminated on June 29, 2012. Id.
The evidence further showed that Respondent Farmacia Nueva did not
complete a DEA Form 104. Tr. 72-74. However, the Government submitted
various emails, which were exchanged between Farmacia Nueva's counsel
in proceeding No. 12-16 (and who also represented Respondents in this
proceeding) and a DEA attorney, whom the ALJ found, upon taking
official notice of the Agency's records, served as the Agency's counsel
of record in that proceeding.\5\ GX 14, at 2-3; R.D. at 10.
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\5\ While the ALJ provided Respondent with the opportunity to
refute the various facts of which he took official notice,
Respondent did not do so. See R.D. at 9 n.29.
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The emails include a June 27, 2012 email, which was sent at 8:52
a.m., by DEA's counsel to Respondent's counsel stating: ``Wondering if
you've discussed the surrender issue with your client yet. Please let
me know if you have any other questions, thanks.'' GX 14, at 2. Later
that day (after exchanging emails as to when they could discuss the
matter), Respondent's counsel wrote to DEA counsel: ``Ok, anyway, I
discussed the case with my client. I think he will surrender it
voluntarily. Let me know where to find a form, or send it to me if you
have one.'' Id.
DEA counsel then replied: ``We can do it without the form if you'd
like, just send me an email stating your client agrees to surrender his
registration. I'll then file a joint motion to dismiss the
proceeding.'' Id.
The next day, Respondent's counsel emailed the following to DEA
counsel: ``My client, Farmacia Nueva, has decided to voluntarily
surrender its DEA registration at issue in the case Docket No. 12-16.
Please prepare a joint motion to dismiss the pending case. Thank you.''
Id.
In his testimony, Mr. Moro Perez denied that he had knowingly or
intentionally falsified both applications. He testified that he did not
believe that the surrenders of either pharmacy's registration were for
cause, maintaining that upon the dismissal of the criminal case against
him, he believed ``that there was no cause against'' him. Tr. 211.
Throughout his testimony he repeatedly adhered to this position.
However, as the ALJ explained, at the time he surrendered the Best
Pharma registration, the criminal case would not be dismissed for
another four months.\6\
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\6\ The record does not establish the date on which the criminal
case against Mr. Moro Perez was filed.
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Moreover, in signing the voluntary surrender form, Mr. Moro Perez
clearly acknowledged that he was doing so ``[i]n view of my alleged
failure to
[[Page 28669]]
comply with the Federal requirements pertaining to controlled
substances'' and that he was consenting to the termination and
revocation of the Best Pharma ``registration without an order to show
cause, a hearing, or any other proceedings.'' GX 14, at 1. Also, as the
ALJ found, Mr. Moro Perez was specifically told by the Diversion
Investigator that the voluntary surrender form involved his pharmacy's
registration and was separate from any criminal allegations that could
be levied against him. And most significantly, the Diversion
Investigator then told Mr. Moro Perez that if he did not sign the
voluntary surrender form, he would seek an Order to Show Cause.
Mr. Moro Perez thus knew that the DI was pursuing the voluntary
surrender based on the latter's belief that Best Pharma was engaged in
unlawful practices. And finally, in addition to the DI's testimony
(which the ALJ found credible) that he repeatedly explained to Mr. Moro
Perez that the voluntary surrender form addressed a regulatory matter
and was separate from any criminal charges that might be filed, it is
noted that the CSA explicitly provides that ``[p]roceedings to deny,
revoke, or suspend . . . shall be independent of, and not in lieu of,
criminal prosecutions . . . under this subchapter or any other law of
the United States.'' 21 U.S.C. 824(c).
As the ALJ recognized, DEA regulations do not define the meaning of
the term ``for cause'' as used on the various application for
registration forms. Moreover, the application does not define the term.
Nonetheless, persons of ordinary intelligence cannot dispute that a
surrender which occurs in response to allegations of misconduct raised
by the Agency's Special Agents and Diversion Investigators is ``for
cause,'' especially when those Agents and Investigators further advise
the registrant's principal that if he/she declines to surrender a
registration, the Agency will nonetheless initiate proceedings to
revoke it.\7\
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\7\ In its post-hearing brief, Respondents note that on the
application, the phrase ``for cause'' is in parentheses. Resp. Br.
22-23. Respondents then argue that ``[i]t must be in parenthesis
[sic] for some reason [and] [t]he idea cannot be and should not be
that any time an applicant who had surrendered his registration for
some reason answers `no' to this question, that applicant is
automatically falsifying facts.'' Id. at 23.
That is certainly true, as a pharmacy registrant may have
surrendered its registration previously because it went out of
business but has since reopened, just as a physician registrant may
have done so because he/she ceased professional practice but has
since resumed practicing medicine. The argument ultimately takes
Respondents nowhere because Mr. Moro Perez surrendered Best
Pharmacy's registration after he was accused of having violated the
CSA and was told that if he did not surrender the registration, the
Agency would pursue a proceeding to revoke its registration; as for
Farmacia Nueva's registration, the Agency was continuing to pursue a
Show Cause Proceeding to revoke its registration when Mr. Moro Perez
agreed to surrender its registration.
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Beyond this, as the ALJ recognized, if the dismissal of the
criminal proceeding transformed the earlier surrender of Best Pharma's
registration into a surrender which was no longer ``for cause,'' given
that the same allegations were raised with respect to both pharmacies,
there would have been no reason for the Agency to continue its pursuit
of the Show Cause Proceeding against the registration Mr. Moro Perez
held for Farmacia Nueva. Yet the Agency did pursue the Show Cause
Proceeding against Farmacia Nueva's registration until its principal
agreed to surrender its registration some three months after the
dismissal of the criminal case against Mr. Moro Perez. In his
testimony, Mr. Moro Perez offered no explanation as to why, if the
dismissal of the criminal case against him rendered the surrender of
Best Pharma's registration not ``for cause,'' he subsequently agreed to
surrender Farmacia Nueva's registration.\8\
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\8\ Respondent makes no claim that Mr. Moro Perez was unaware
that its attorney had surrendered Farmacia Nueva's registration.
Even if it had, `` `a principal is chargeable with the knowledge of,
or notice to, his agent that is received by the agent in the due
course of his employment and is related to the matters within his
authority.' '' McMillan v. LTV Steel, Inc., 555 F.3d 218, 230 (6th
Cir. 2009) (quoting Aetna Cas. & Sur. Co. v. Leahey Constr. Co., 219
F.3d 519, 541 (6th Cir. 2000)).
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In his testimony, Mr. Moro Perez also denied that he knowingly or
intentionally falsified the applications because he completed them,
``knowing and recognizing that you, the DEA office, are aware of, [and]
had knowledge and everything about me,'' Tr. 218, including his arrest.
However, whether Investigators at the local DEA office were aware of
Mr. Moro Perez is irrelevant in assessing his scienter; having answered
the liability question ``no,'' the only issues that are relevant are
whether he knew that he had surrendered his registrations and had done
so ``for cause.'' Because Mr. Moro Perez clearly knew that he: (1) Had
surrendered his registrations, (2) had done so in response to
allegations that his pharmacies had committed violations of the CSA,
and (3) did so to avoid proceedings to revoke the registrations, he
also clearly knew that he had surrendered ``for cause.''
I thus agree with the ALJ's conclusion that Mr. Moro Perez
knowingly and materially falsified \9\ the applications he submitted
for both Best Pharma and Farmacia Nueva. Id. These findings provide
reason alone to support the denial of his applications, especially when
coupled with the ALJ's findings that Mr. Moro Perez's testimony as to
why he falsified the applications ``is simply not credible.'' R.D. at
67.
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\9\ Respondents do not contend that the falsifications were
immaterial.
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The Corresponding Responsibility Allegations
The ALJ also found that Respondents' pharmacists violated their
corresponding responsibility under 21 CFR 1306.04, when, over the
course of some thirty-four months, they filled numerous controlled
substance prescriptions which were written by a physician who no longer
possessed a valid DEA registration. While I adopt the ALJ's finding
that Respondents dispensed the prescriptions at issue when the
physician no longer possessed a DEA registration, I reject his legal
conclusion that Respondents violated 21 CFR 1306.04(a) because the
Government failed to prove that the pharmacists acted with the
requisite scienter. However, based on Respondents' admissions, I find
that they committed acts inconsistent with the public interest when
they failed to verify that the physician remained registered at any
time for some thirty-four months.
With respect to this allegation, the evidence showed that a
physician named Dr. Hector J. Aguilar-Amieva (hereinafter, Dr. Aguilar)
had allowed his registration to expire and that his registration had
been retired by the Agency since January 31, 2009.\10\ The evidence
further shows that between January 30, 2009 and November 30, 2011 (when
the search warrants were executed at Respondents), Farmacia Nueva
filled 143 controlled substance prescriptions which were purportedly
issued by Dr. Aguilar (and which used his DEA registration) and that
Best Pharmacy filled thirty-two controlled substance prescriptions. GXs
5 & 10.
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\10\ According to the DI, Dr. Aguilar's registration expired
after he was convicted of a federal criminal offense; the record
does not, however, establish the offense of which he was convicted
nor the date of his conviction. Moreover, while there was evidence
that Dr. Aguilar's office was only a three to four minute walk from
Farmacia Nueva, Tr. 250, and that it was the closest pharmacy to his
office, the Government provided no evidence that Respondents'
pharmacists were aware of any enforcement actions that were brought
against Dr. Aguilar.
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Under 21 CFR 1306.03, a controlled substance prescription ``may be
issued only by an individual practitioner who is: (1) [a]uthorized to
prescribe controlled substances by the jurisdiction in which he is
licensed to practice his profession and (2) [e]ither registered or
[[Page 28670]]
exempted from registration [under] this chapter.'' Thus, Dr. Aguilar's
prescriptions were unlawful.\11\
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\11\ Respondents do not claim that Dr. Aguilar was exempt from
registration, and under the CSA, had they claimed as much, they (and
not the Government) would have had the burden of proof on the issue.
See 21 U.S.C. 885(a) (1).
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Mr. Moro Perez testified that there were ``many times'' when
Respondents' pharmacists refused to fill Dr. Aguilar's controlled
substances prescriptions because ``we knew that that patient didn't
require the use of the medication.'' Tr. 252; see also id. at 254. When
questioned by the ALJ as to whether he thought it was suspicious that
many of Dr. Aguilar's patients were presenting controlled substance
prescriptions that he (and his pharmacists) would not fill, Mr. Moro
Perez testified that ``we have been very careful with the dispensing''
and ``the amount of medications that were dispensed, the percentage
[was] very low.'' Id. at 253. Mr. Moro Perez then testified that he
never called Dr. Aguilar, and when asked why, claimed that he and his
pharmacists reviewed the patient's history and used their professional
judgment to evaluate whether a particular prescription was legitimate.
Id.
When questioned further as to why he did not call Dr. Aguilar, Mr.
Moro Perez testified: ``Because I understood, I was aware that the
doctor's license were [sic] up-to-date.'' \12\ Id. at 254. Mr. Moro-
Perez and his pharmacists never attempted to verify whether Dr. Aguilar
held a registration, id. at 193-94, even though, according to the DI,
they could have done so simply by calling the local DEA office.\13\ Id.
at 20.
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\12\ The ALJ was not impressed by this testimony, finding it to
be ``the obvious fruit of intentional equivocation.'' R.D. at 20.
That being said, the ALJ's finding does not establish that Moro-
Perez knew that Dr. Aguilar was no longer registered (as opposed to
simply being unaware of the status of Aguilar's license) when his
pharmacies filled the prescriptions and the ALJ made no such
finding. Moreover, it is not even clear on the record whether Moro-
Perez was testifying regarding Dr. Aguilar's DEA registration rather
than his state license.
\13\ The evidence also showed that since 2008, DEA has provided
a Web page, at which a DEA registrant can verify the registration
status of another person or entity. Tr. 22. However, other than
vague testimony suggesting that during an inspection an investigator
would tell a registrant that the Web site is available, id. at 90,
no evidence was put forward that this information was conveyed to
Respondents. Nor did the Government provide any evidence as to what
efforts have been made to notify the community of registrants as to
the Web page's availability.
It is noted that in publishing its Interim Final Rule on
Electronic Prescriptions for Controlled Substances, the Agency
explained that ``[i]f a pharmacy has doubts about a particular DEA
registration, it can now check the registration through DEA's
Registration Validation Tool'' which is available at the Agency's
Web site. See 75 FR 16236, 16266 (2010).
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Instead, Mr. Moro-Perez testified that he and his pharmacists
relied on the patients' insurance carriers (to which they submitted
claims for payment of medications) to determine whether a physician had
valid licenses and registrations by seeing if the claim was paid. Id.
at 200-1. Mr. Moro-Perez conceded that the insurance companies
continued to pay claims for prescriptions issued by Dr. Aguilar until
the date on which the search warrant was executed, which was nearly
three years after the latter's registration had been retired. Id. at
202. However, no evidence was adduced as to whether any claim for
payment was rejected by a patient's insurer, and there was obviously no
evidence as to whether in the event an insurer rejected a claim, it
would disclose the reason it did so.\14\
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\14\ Nor was any evidence put forward as to how many of the
Aguilar prescriptions were actually paid for with cash.
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As the ALJ recognized, under DEA's longstanding regulation, a
pharmacist has a corresponding responsibility to fill only those
prescriptions which are ``issued for a legitimate medical purpose by
[a] practitioner acting in the usual course of his professional
practice.'' 21 CFR 1306.04(a). Continuing, the regulation states that
``the person knowingly filling such a purported prescription, as well
as the person issuing it, [is] subject to the penalties provided for
violations of the provisions of law relating to controlled
substances.'' Id.\15\ (emphasis added).
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\15\ As the Supreme Court has explained, ``the prescription
requirement . . . ensures patients use controlled substances under
the supervision of a doctor so as to prevent addiction and
recreational abuse. As a corollary, [it] also bars doctors from
peddling to patients who crave the drugs for those prohibited
uses.'' Gonzales v. Oregon, 546 U.S. 243, 274 (2006) (citing United
States v. Moore, 423 U.S. 122, 135 (1975)).
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DEA has long interpreted this provision as prohibiting a pharmacist
from filling a prescription for a controlled substance when he either
``knows or has reason to know that the prescription was not written for
a legitimate medical purpose.'' Medic-Aid Pharmacy, 55 FR 30043, 30044
(1990) (emphasis added); see also Frank's Corner Pharmacy, 60 FR 17574,
17576 (1995); Ralph J. Bertolino, 55 FR 4729, 4730 (1990); United
States v. Seelig, 622 F.2d 207, 213 (6th Cir. 1980). Thus, proof of
actual knowledge is not necessary to establish that a pharmacist has
violated his/her corresponding responsibility to dispense only lawful
prescriptions.
However, in finding violations of the corresponding responsibility
where actual knowledge has not been proved, the Agency has explained
that ``[w]hen prescriptions are clearly not issued for legitimate
medical purposes, a pharmacist may not intentionally close his eyes and
thereby avoid positive knowledge of the real purpose of the
prescription,'' and thereafter fill the prescription ``with impunity.''
Bertolino, 55 FR at 4730 (citing United States v. Kershmann, 555 F.2d
198 (8th Cir. 1977); United States v. Hayes, 595 F.2d 258 (5th Cir.
1979)); accord Liberty Discount Drugs, Inc., 54 FR 30116, 30117 (1989).
See also Medic-Aid Pharmacy, 55 FR at 30044 (``The administrative law
judge concluded that it is not necessary to find that [the pharmacist]
in fact knew that many prescriptions presented to him were not written
for a legitimate medical purpose, for there is no question that a
conscientious pharmacist would have been suspicious of these
prescriptions and would have refused to fill them.''). Thus, both
Bertolino and Medic Aid Pharmacy applied the standard of deliberate
ignorance or willful blindness in assessing whether a pharmacist acted
with the requisite scienter. See Seelig, 622 F.2d at 213 (``the element
of knowledge may be inferred from proof that appellants deliberately
closed their eyes to what would otherwise be obvious to them'');
Kershmann, 555 F.3d at 200 (``the element of knowledge may be shown by
deliberate ignorance'').
In addition to the obligation imposed by 21 CFR 1306.04(a), ``[a]
prescription for a controlled substance may only be filled by a
pharmacist, acting in the usual course of his professional practice. .
. .'' 21 CFR 1306.06 (emphasis added). Thus, the Agency has also
repeatedly held that ``a pharmacist must exercise professional judgment
[and common sense] when filling a prescription.'' Bertolino, 55 FR at
4730; see also Medicine Shoppe-Jonesborough, 73 FR 363, 381, pet. for
rev. denied, Medicine Shoppe-Jonesborough v. DEA, 300 Fed. App'x 409,
412 (6th Cir. 2008); Trinity Health Care Corp., 72 FR 30849, 30854
(2007); 21 CFR 1306.06. Accordingly, the Agency has held that ``when a
customer presents a suspicious prescription, at a minimum, a pharmacist
has a duty to verify the prescription with the prescriber.'' Medicine
Shoppe-Jonesborough, 73 FR 364, 381; see also Medicine Shoppe, 300 Fed.
App'x at 412.
Moreover, even if a prescriber tells a pharmacist that a
prescription has been issued for a legitimate medical purpose, a
pharmacist cannot ignore other evidence that the prescription has not
been issued for a legitimate medical purpose or that the prescriber
acted outside of the usual course of his or her
[[Page 28671]]
professional practice and dispense the prescription. As one court of
appeals has explained:
Verification by the issuing practitioner on request of the
pharmacist is evidence that the pharmacist lacks knowledge that the
prescription was issued outside the scope of professional practice.
But it is not an insurance policy against a fact finder's concluding
that the pharmacist had the requisite knowledge despite a purported
but false verification. . . . What is required by [a pharmacist] is
the responsibility not to fill an order that purports to be a
prescription but is not a prescription within the meaning of the
statute because he knows that the issuing practitioner issued it
outside the scope of medical practice.
United States v. Hayes, 595 F.2d 258, 260 (5th Cir. 1979). See also
Medicine Shoppe, 300 Fed. App'x at 412 (quoting Bertolino, 55 FR at
4730) (`` `When [pharmacists'] suspicions are aroused as reasonable
professionals,' they must at least verify the prescription's propriety,
and if not satisfied by the answer they must `refuse to dispense.' '');
Holiday CVS, L.L.C., d/b/a CVS/Pharmacy Nos. 219 & 5195, 77 FR 62316,
62341 (2012); East Main Street Pharmacy, 75 FR 66149, 66163-64 (2010).
Under an Agency regulation, every controlled substance prescription
must contain ``the name, address and registration number of the
practitioner'' who issued it. 21 CFR 1306.05(a). However, the Agency's
regulation does not require that a practitioner provide the expiration
date of his registration on a prescription. See id.
Moreover, no Agency regulation requires that a pharmacist ascertain
that each prescription presented to him/her has been issued by a
practitioner who possesses a valid DEA registration. Indeed, the Agency
recognized this much in 2010, when it promulgated its Interim Final
Rule on Electronic Prescriptions for Controlled Substances. See 75 FR
16236, 16266 (2010). Therein, the Agency noted that it had proposed
requiring pharmacies ``to confirm that the [prescriber's] DEA
registration . . . was valid at the time'' the prescription was signed.
Id. However, several commenters objected ``that pharmacies are not
required to check DEA registrations for paper prescriptions unless they
suspect something is wrong with a prescription.'' Id.
In its response (which appears to be missing pertinent text), the
Agency stated that it ``agrees with those commenters that expressed the
view that, when filling a paper prescription, it is not necessary for a
pharmacist who receives an electronic prescription for a controlled
substance to check the CSA database in every instance to confirm that
the prescribing practitioner is properly registered with DEA.'' Id. The
Agency thus removed the requirement from the Interim Final Rule, but
``made clear that a pharmacist continues to have a corresponding
responsibility to fill only those prescriptions that conform in all
respects with the requirements of the [CSA] and DEA regulations,
including the requirement that the prescribing practitioner be properly
registered.'' Id.
As this pronouncement makes clear, a pharmacist is not obligated to
verify whether every prescription he fills has been issued by a
practitioner who holds a valid DEA registration. Of course, if a
pharmacist has actual knowledge that a prescriber does not hold a valid
registration, or acts with willful blindness to this fact, a pharmacist
violates the Controlled Substances Act if he proceeds to dispense that
prescription. 21 U.S.C. 843(a)(2). Thus, in United Prescription
Services, I held that a pharmacy violated its corresponding
responsibility by dispensing prescriptions issued by a physician, whose
registration had expired, where the pharmacy had on file a copy of the
physician's registration and thus, its pharmacists clearly knew, or
were willfully blind to the fact, that the physician was issuing
prescriptions on an expired registration and that the prescriptions
were therefore illegal.\16\ 72 FR at 50408.
---------------------------------------------------------------------------
\16\ In United Prescription Services, this particular
physician's registration had expired on February 28, 2003, and yet
the pharmacy was still dispensing prescriptions written by him in
September and October 2004. See 72 FR at 50408.
---------------------------------------------------------------------------
More recently, in Holiday CVS, L.L.C., 77 FR 62316 (2012), two
pharmacies continued to fill prescriptions written by two physicians
whose registrations had expired. Moreover, the registration of one of
the physicians had been revoked following a proceeding under 21 U.S.C.
824(a)(4) and the Agency's Decision and Order had been published in the
Federal Register (as well as on the DEA Office of Diversion Control's
public Web site) approximately one month before the Order became
effective. Id. Yet both pharmacies continued to dispense prescriptions
issued by this physician, including some which were issued more than
five months after the Order became effective. Id. Finally, the evidence
also showed that the pharmacies used a company wide information
management system which obtained updated registration data from a third
party aggregator (which obtained it from DEA) on a weekly basis and
that a prescribing physician's registration status was displayed to the
pharmacist when entering the prescription into the pharmacy's
dispensing software. Id. Thus, the pharmacists at each store had
knowledge that the physicians' registrations had expired at the time
they filled most of the prescriptions.\17\ Id. Here again, liability
was imposed on the pharmacies consistent with the corresponding
responsibility imposed on their pharmacists.\18\
---------------------------------------------------------------------------
\17\ I also noted that as participants in a highly regulated
industry, the pharmacies were required to keep abreast of regulatory
developments which affect their industry and that with respect to
the physician whose registration was revoked, publication of the
Decision and Order in the Federal Register ``provided [the
pharmacies] with reason to know'' that upon the effective date, the
physician ``would no longer be authorized to issue controlled
substance prescriptions.'' 77 FR at 62317 (citations omitted).
\18\ In the Show Cause Order, the Government cited Medicine
Shoppe--Jonesborough, 73 FR 364 (2008), as authority for the
violation. In Medicine Shoppe--Jonesborough, a pharmacy was found to
have filled over 124 controlled substances prescriptions which were
written by a veterinarian who no longer possessed either a state
license or a DEA registration. Id. at 381. However, I did not decide
whether the pharmacy violated its corresponding responsibility
because it dispensed the prescriptions when the veterinarian lacked
either state authority or a DEA registration. Id. Rather, I found
that even if the pharmacy's pharmacist-in-charge was unaware that
the veterinarian no longer possessed a DEA registration and state
license, it violated its corresponding responsibility based on the
expert testimony that the pharmacy had ignored various circumstances
that provided knowledge to its pharmacists that the prescriptions
were not issued for legitimate medical purposes (including that the
prescriptions were presented on a daily basis by the veterinarian's
brother and were for drugs, which according to the expert, would be
toxic for certain animals). Id.
However, in a footnote, I explained that ``[a] pharmacy has a
duty to periodically check to see that a practitioner retains the
authority to practice medicine and dispense a controlled
substance.'' Id. at n.45. Because of the evidence that the pharmacy
had violated 21 CFR 1306.04(a), I deemed it unnecessary to decide
whether the pharmacy had violated this duty. However, I noted my
agreement with the ALJ's reasoning that failing ``to do so could
threaten public health and safety because there is usually a good
reason for why a practitioner has lost his or her state license and
DEA registration.'' Id.
---------------------------------------------------------------------------
As the ALJ found, the Government put forward no evidence that Mr.
Moro-Perez or any of his pharmacists had actual knowledge that Dr.
Aguilar's registration was no longer valid at any point during the
thirty-four month period in which they filled his prescriptions. R.D.
51 n.86. The ALJ nonetheless concluded that the requisite knowledge
could be imputed to Respondents because their pharmacists entirely
failed to investigate whether Dr. Aguilar held a valid registration and
thus were willfully blind to the fact that Aguilar was no longer
registered and could not write a controlled substance prescription.
R.D. at 53 (citing United
[[Page 28672]]
States v. Katz, 445 F.3d 1023, 1031 (8th Cir. 2006)).\19\
---------------------------------------------------------------------------
\19\ See also United States v. Lawson, 682 F.2d 480, 482 (4th
Cir. 1982); United States v. Seelig, 622 F.2d 207, 213 (6th Cir.
1980); United States v. Kershmann, 555 F.2d 198, 200-01 (8th Cir.
1977).
---------------------------------------------------------------------------
Recently, however, the Supreme Court made clear that ``a willfully
blind defendant is one who takes deliberate actions to avoid confirming
a high probability of wrongdoing and who can almost be said to have
actually known the critical facts.'' Global-Tech Appliances, Inc., v.
SEB S.A., 131 S.Ct. 2060, 2070-71 (2011) (emphasis added) (citing and
quoting G. Williams, Criminal Law Sec. 57, p.159 (2d ed. 1961) (``A
court can properly find willful blindness only where it can almost be
said that the defendant actually knew.'')); see also id. at 2069
(quoting with approval American Law Institute, Model Penal Code Sec.
202(7) (Proposed Official Draft 1962) (``defining `knowledge of the
existence of a particular fact' to include a situation in which `a
person is aware of a high probability of [the fact's] existence, unless
he actually believed that it does not exist''')).
In Global-Tech, the Supreme Court further explained that even proof
that a defendant was reckless in that he knew ``of a substantial and
unjustified risk of wrongdoing'' does not establish willful blindness.
Id. at 2071. Rather, to establish willful blindness, proof is required
that: ``(1) the defendant must subjectively believe that there is high
probability that a fact exists and (2) the defendant must take
deliberate actions to avoid learning of that fact.'' Id. at 2070
(emphasis added).
Here, the Government offered no evidence to establish that Mr.
Moro-Perez, or any other of Respondents' pharmacists, subjectively
believed that there was a high probability that Dr. Aguilar was issuing
prescriptions on an expired registration. Moreover, notwithstanding
that Respondents put forward no evidence that it was objectively
reasonable to determine if Dr. Aguilar possessed a valid registration
by relying on whether the patients' insurance companies paid for their
prescriptions, there is no evidence that a claim for payment of any of
Dr. Aguilar's prescriptions was ever rejected by a patient's insurer.
Indeed, notwithstanding the ALJ's finding (with which I agree) that
this was an ``irresponsible practice'' and ``illogical manner'' of
determining a physician's registration status, he made no finding that
Moro-Perez (or any other pharmacist) ``subjectively believe[d] that
there was a high probability'' that Dr. Aguilar was writing on an
expired registration.
To be sure, in his testimony, Mr. Moro-Perez admitted that his
pharmacists had rejected controlled substance prescriptions issued by
Dr. Aguilar ``many times,'' because based on the patients' histories,
they did not consider the prescriptions to be legitimate for the
respective patients. This admission might well have established willful
blindness with respect to whether the Aguilar prescriptions which
Respondents filled lacked a legitimate medical purpose--had the
Government challenged the dispensing of any of the post-January 31,
2009 prescriptions on this basis. But it did not. Most importantly, it
does not establish that Moro-Perez or any of his pharmacists
subjectively believed that there was a high probability that Aguilar no
longer had a registration.\20\
---------------------------------------------------------------------------
\20\ Although both the Government and ALJ made much of Moro-
Perez's admission, ``many'' is an indefinite term and the record
does not clarify just how many prescriptions were rejected by
Respondents, and as of what date their pharmacists were aware of
this.
---------------------------------------------------------------------------
As for whether Respondents' pharmacists violated their obligation
to act within the usual course of professional practice, see 21 CFR
1306.06, because their suspicions as to Dr. Aguilar's lack of
registration should have been aroused as reasonable pharmacists and
they failed to investigate, the evidence is simply insufficient to
establish a violation. Notably, the Government does not cite to any
statute, Board regulation, or decision of either the Board or the
courts which requires a pharmacist to verify the status of a DEA
registration (or medical license) upon being presented with a
prescription which he/she suspects lacks a legitimate medical
purpose.\21\ Nor, notwithstanding the abundance of agency case law
applying the reasonable pharmacist standard, did the Government call an
expert to testify that the standards of professional pharmacy practice
require that a pharmacist who is confronted with prescriptions from a
particular physician which he/she suspects lack a legitimate medical
purpose, must also determine whether the physician possesses a valid
DEA registration.\22\
---------------------------------------------------------------------------
\21\ The ALJ also reasoned that ``[t]he absence of Dr. Aguilar's
[registration] is the most glaring of red flags that could and
should have been recognized by the Respondent upon the exercise of
even the most minimal due diligence. Conclusively resolving such a
fundamental red flag was a mandatory condition precedent to the
legal dispensing of a control substance. . . .'' R.D. at 52.
The term ``red flag'' is not defined in either the CSA or DEA
regulations. However, in the context of a pharmacy, a red flag is
simply a circumstance arising during the presentation of a
prescription, which creates a reasonable suspicion that the
prescription is not valid and which imposes on a pharmacist the
obligation to conduct further inquiry into whether the prescription
is valid or to not fill it all. See Holiday CVS, 77 FR at 62332.
Here, there was no evidence that Respondents' pharmacists ever
received any information that Dr. Aguilar was no longer registered
such as through a tip, the grapevine, or having seen media coverage
of Aguilar's putative arrest or trial. Moreover, while a red flag
includes additional facts developed during the investigation of
other red flags, here, the red flag was the illegality of the
prescriptions Respondents declined to fill. Because there is no
regulation which required Respondents to the check the registration
status of Dr. Aguilar, nor any testimony that the accepted standards
of professional practice required that they do so, I do not adopt
the ALJ's discussion that Dr. Aguilar's lack of a registration was
``the most glaring of red flags'' which should have been discovered.
\22\ As found above, in the Interim Rule on Electronic
Prescribing, the Agency noted that several commenters had objected
to the proposal that the DEA registration must be verified for all
electronic prescriptions, noting ``that pharmacies are not required
to check DEA registrations for paper prescriptions unless they
suspect something is wrong with a prescription.'' 75 FR at 16266.
While this may reflect the accepted standards of professional
pharmacy practice, the Interim Rule did not explain who the
commenters were and whether they speak for the profession as a
whole. Moreover, absent proof of either: (1) That a dispensing was
simply a drug deal, or (2) that the pharmacy violated an explicit
duty set forth in a statute, regulation, or case law, the standards
of professional practice must generally be established on the record
in any case. Accordingly, I place no weight on the statement
suggesting that a pharmacist is required to check a prescriber's
registration if he/she suspects there is something wrong with a
prescription.
---------------------------------------------------------------------------
In its post-hearing brief, the Government argues for the first time
that Respondents' pharmacists also violated their corresponding
responsibility because the prescriptions they filled also lacked a
legitimate medical purpose. As the Government argues, ``Mr. Moro-
Perez's most egregious conduct involves filling prescriptions for Dr.
Aguilar-Amieva despite the fact that he had previously flagged prior
prescriptions as being illegitimate.'' Gov. Post-Hrng. Br. at 22. The
Government then argues that ``Respondent[s] deliberately ignored their
own internal warnings when they continued to fill other prescriptions
for Dr. Aguilar-Amieva,'' that ``Moro-Perez failed to conduct any
investigation to resolve this flag,'' and that ``[a]ny reasonable and
prudent pharmacist would not have continued to fill prescriptions
without further investigation.'' Id. at 23.
Even ignoring that raising this theory for the first time in its
post-hearing brief is too late to provide fair notice (given that the
testimony did not occur until Moro-Perez was cross-examined by his own
counsel), the Government did not put on any evidence to show that any
of the Aguilar prescriptions filled by
[[Page 28673]]
Respondents also lacked a legitimate medical purpose.\23\ Indeed, there
is no evidence to refute Moro-Perez's testimony (which the ALJ
apparently found credible) that he and his pharmacists declined to fill
many prescriptions and thus complied, (at least with respect to those
prescriptions), with their corresponding responsibility.
---------------------------------------------------------------------------
\23\ Notably, in this portion of its brief, the Government makes
no reference to the status of Dr. Aguilar's registration. See Gov.
Post-Hrng. Br. 22-23.
While the Government obtained the prescriptions during its
investigation, it did not raise this theory in the Show Cause Order,
which, with regard to Respondents' dispensings, rested entirely on
the allegations that they dispensed ``prescriptions for controlled
substances issued by a medical doctor who did not possess a valid
DEA registration.'' ALJ Ex. 1, at 2. Moreover, in neither of its
pre-hearing statements, did the Government provide notice that it
was challenging the dispensings of the Aguilar prescriptions on the
ground that they were issued for other than a legitimate medical
purpose. See ALJ Exs. 4 & 8.
---------------------------------------------------------------------------
As for its contention that no reasonable and prudent pharmacist
would have filled the prescriptions, here again, there is no evidence
as to what a reasonable and prudent pharmacist would have done when
confronted with this information. Nor is there any expert testimony as
to at what point (i.e., after how many prescriptions), this information
would have prompted further investigation.\24\
---------------------------------------------------------------------------
\24\ Even were I to apply the ``reason to know'' standard of the
common law, see Novicki v. Cook, 946 F.2d 938, 941 (D.C. Cir. 1991),
which requires proof of something less than either actual knowledge
or willful blindness, the Government would not prevail on its
contention that Respondents violated 21 CFR 1306.04(a) because the
prescriptions were issued under an expired registration. In Novicki,
the D.C. Circuit looked to the Restatement (Second) of Agency (1958)
and the Restatement (Second) of Torts (1965) to give meaning to the
term. See id. (quoting Restatement (Second) of Agency Sec. 9 cmt. d
(1958) and citing Restatement (Second) of Torts Sec. 12(1)). As the
Restatement of Agency explains,
A person has reason to know of a fact if he has information from
which a person of ordinary intelligence, or of the superior
intelligence which such person may have, would infer that the fact
in question exists or that there is such a substantial chance of its
existence that, if exercising reasonable care with reference to the
matter in question, his action would be predicated upon the
assumption of its possible existence. The inference drawn need not
be that the fact exists; it is sufficient that the likelihood of its
existence is so great that a person of ordinary intelligence, or of
the superior intelligence which the person in question has, would,
if exercising ordinary prudence under the circumstances, govern his
conduct as if the fact existed, until he could ascertain its
existence or non-existence. . . . A person of superior intelligence
or training has reason to know a fact if a person with his mental
capacity and attainments would draw such an inference from the facts
know to him. On the other hand, ``reason to know'' imports no duty
to ascertain facts not to be deduced as inferences from facts
already known; one has reason to know a fact only if a reasonable
person in his position would infer such fact from other facts
already known to him.
Restatement (Second) of Agency Sec. 9 cmt. d (1958); see also
Restatement (Second) of Torts Sec. 12, cmt. a (`` `Reason to know'
means that the actor has knowledge of facts from which a reasonable
man of ordinary intelligence or one of the superior intelligence of
the actor would either infer the existence of the fact in question
or would regard its existence as so highly probable that his conduct
would be predicated upon the assumption that the fact did exist.'').
Because he is a licensed pharmacist (as are presumably his other
pharmacists), Mr. Moro-Perez is a ``person of superior intelligence
or training.'' Thus, it would be appropriate to consider whether a
person possessing the mental capacity and attainments of Mr. Moro-
Perez and his pharmacists would, based on the knowledge that Dr.
Aguilar was issuing prescriptions which lacked a legitimate medical
purpose, draw the further inference that he was no longer
registered. Here again, because the Government did not sponsor any
expert testimony, there is no evidence as to whether, based on the
prescriptions that he/she was rejecting, a reasonable pharmacist
would have inferred that Aguilar was not registered or would have
regarded the existence of this fact ``as so highly probable'' that
he would have refused to dispense the prescriptions.
---------------------------------------------------------------------------
In their post-hearing brief, Respondents nonetheless concede that
by dispensing the Aguilar prescriptions they committed acts
inconsistent with the public interest, Resp. Post-Hrng. Br. 18, because
``it was wrong for him [Moro-Perez] and [the] pharmacies to rely on
[an] insurance company's system to notify [them] if a doctor's license
is expired, suspended, or revoked.'' Id. at 19. Respondents further
concede that doing so constitutes ``such other conduct which may
threaten public health and safety.'' Id. at 25.
I agree. As the ALJ found (and given Respondent's concession), it
was not objectively reasonable for Respondents' pharmacist to rely on
whether insurance companies rejected a claim for payment of a
prescription to determine whether a physician held a valid
registration. And as explained above, more than a year prior to the
conduct at issue here, I explained (albeit in a dictum) that ``[a]
pharmacy has a duty to periodically check to see that a practitioner
retains the authority to practice medicine and dispense a controlled
substance.'' Medicine Shoppe-Jonesborough, 73 FR at 381 n.45. However,
because it was not necessary to decide the case, Medicine Shoppe--
Jonesborough did not set forth the specific parameters of this duty.
See id.
I nonetheless conclude that Respondents breached this duty because
their pharmacists failed to verify that Dr. Aguilar remained registered
at any time during the thirty-four month period between the expiration
of his registration and the execution of the search warrants. However,
I place only nominal weight on this aspect of Respondents' misconduct.
The Government did not prove that Respondents' misconduct was
intentional or knowing. Moreover, while Respondents do not dispute that
their failure to verify Dr. Aguilar's registration at any time during
the aforesaid period constitutes conduct which may threaten the public
health and safety, the lack of specific guidance as to what steps are
necessary to comply with this duty diminishes its egregiousness to some
degree. Finally, Mr. Moro-Perez's material falsification of the
applications and failure to accept responsibility for the
falsifications, provide reason alone to deny the applications.
While it is indisputable that failing to verify a controlled-
substance prescriber's credentials at any time during a three year
period is a breach of the duty set forth in Medicine Shoppe--
Jonesborough, I conclude that if the Agency intends to enforce this
duty in other cases, it must provide the regulated community with
guidance as to its scope. However, while such guidance can be announced
in an adjudicatory proceeding, the process of adjudication is not well
suited for doing so. See I Richard J. Pierce, Jr., Administrative Law
Treatise Sec. 6.8, at 368-74 (4th ed. 2002). Accordingly, I decline to
set forth how frequently a pharmacy must verify that a prescriber is
registered.
In sum, I reject the allegations that Respondents violated Federal
law and DEA regulations when they dispensed controlled substance
prescriptions ``issued by a medical doctor who did not possess a valid
DEA registration.'' Show Cause Order (ALJ Ex. 1), at 2 ]] 4 & 8 (citing
21 U.S.C. 843(a)(2); 21 CFR 1306.04).\25\ However, I find that
Respondents breached their duty to periodically verify Dr. Aguilar's
registration status. See Medicine Shoppe-Jonesborough, 73 FR at 381
n.45.
---------------------------------------------------------------------------
\25\ I also do not adopt the ALJ's discussion in the
Recommendation section of his decision regarding the egregiousness
of Respondents' conduct in filling the Aguilar prescriptions and the
Agency's interest in deterring similar misconduct. Nor do I adopt
the ALJ's discussion rejecting Respondents' arguments which were
offered in mitigation of this violation.
---------------------------------------------------------------------------
Most significantly, I also adopt the ALJ's findings that Mr. Moro-
Perez materially falsified the application of each Respondent by
failing to disclose that he had previously surrendered each pharmacy's
registration for cause, as well as the ALJ's findings that Mr. Moro-
Perez has not acknowledged his misconduct in doing so. See R.D. at 53
(finding that Mr. Moro-Perez ``insistence that his false response to an
application query regarding whether each pharmacy had ever surrendered
a [registration] for cause was some sort of reasonable
[[Page 28674]]
misunderstanding is simply not credible and defeats the Respondents'
efforts to meet the Government's case''). Accordingly, I will deny each
Respondent's application.
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 JM Pharmacy Group Inc.,
d/b/a Farmacia Nueva, for a DEA Certificate of Registration as a retail
pharmacy, be, and it hereby is, denied. I further order that the
application of Best Pharma Corp, for a DEA Certificate of Registration
as a retail pharmacy, be, and it hereby is, denied. This Order is
effective immediately.
Dated: April 29, 2015.
Michele M. Leonhart,
Administrator.
Anthony Yim, Esq., for the Government.
Vladimir Mihailovich, Esq., for the Respondent.
RECOMMENDED RULINGS, FINDINGS OF FACT, CONCLUSIONS OF LAW, AND DECISION
OF THE ADMINISTRATIVE LAW JUDGE
Chief Administrative Law Judge John J. Mulrooney, II. On June
19, 2013, the Deputy-Assistant Administrator of the Drug Enforcement
Administration (DEA) issued an Order to Show Cause (OSC) proposing
to deny applications for two DEA Certificates of Registration (COR)
submitted on behalf of two pharmacies \1\ (collectively, the
Respondents). In its OSC and its prehearing statements, the
Government avers that the applications should be denied because they
were submitted with material falsifications,\2\ and because granting
the applications would be inconsistent with the public interest as
that term is defined under the Controlled Substances Act (CSA). 21
U.S.C. 823(f) (2006). On July 18, 2013, the Respondents, through
counsel, filed a timely request for hearing, which was conducted in
Arlington, Virginia, on September 3, 2013.
---------------------------------------------------------------------------
\1\ The two registrants were jointly captioned on a single OSC,
and neither party petitioned for severance.
\2\ 21 U.S.C. 824(a)(1) (2006) (providing a statutory basis for
discretionary revocation).
---------------------------------------------------------------------------
The issue ultimately to be adjudicated by the Administrator,
with the assistance of this recommended decision, is whether the
record as a whole establishes by substantial evidence that the
Respondents' applications for registrations with the DEA should be
denied on the grounds alleged by the Government.
After carefully considering the testimony elicited at the
hearing, the admitted exhibits, the arguments of counsel, and the
record as a whole, I have set forth my recommended findings of fact
and conclusions of law below.
The Allegations
In its OSC,\3\ the Government alleges that the COR applications
filed on behalf of both registrants should be denied as contrary to
the public interest.\4\ In its subsequently filed Prehearing
Statement,\5\ the Government supplemented its theory in support of
denial with additional allegations that the COR applications filed
on behalf of each Respondent contained material falsifications \6\
in that each application stated that the respective registrant had
never surrendered a COR for cause, when, in fact, both had.
---------------------------------------------------------------------------
\3\ ALJ Ex. 1.
\4\ 21 U.S.C. 824(a)(4).
\5\ ALJ Ex. 4.
\6\ 21 U.S.C. 824(a)(1).
---------------------------------------------------------------------------
In support of the denial it seeks regarding an application for a
COR filed by JM Pharmacy Corp., d/b/a Farmacia Nueva (Farmacia Nueva
or FN), based on the public interest, the Government avers that this
Respondent: (1) ``filled approximately 160 prescriptions for
controlled substances issued by a medical doctor who did not possess
a valid DEA registration in violation of'' 21 U.S.C. 843(a)(2) and
21 CFR 1306.04 (2013); and (2) ``failed to keep records of
approximately twenty-seven (27) prescriptions for controlled
substances'' from November 2009 through November 2011 in violation
of 21 U.S.C. 827(b)(1) and 21 CFR 1304.04.\7\
---------------------------------------------------------------------------
\7\ ALJ Ex. 1, at 2.
---------------------------------------------------------------------------
The Government alleges that the granting of the COR application
filed by Best Pharma Corp. (Best Pharma or BP) is inconsistent with
the public interest in that this Respondent: (1) ``filled
approximately thirty-two (32) prescriptions for controlled
substances issued by a medical doctor who did not possess a valid
DEA registration, in violation of'' 21 U.S.C. 843(a)(2) and 21 CFR
1306.04; and (2) ``failed to keep records of approximately seven (7)
prescriptions for controlled substances'' from November 2009 through
November 2011 in violation of 21 U.S.C. 827(b)(1) and 21 CFR
1304.04.\8\
---------------------------------------------------------------------------
\8\ Id.
---------------------------------------------------------------------------
Additionally, the Government alleges that both Farmacia Nueva
and Best Pharma ``materially falsified'' their applications for DEA
CORs.\9\
---------------------------------------------------------------------------
\9\ ALJ Ex. 8, at 1.
---------------------------------------------------------------------------
The Stipulations of Fact
The Government and the Respondents, through counsel, have
entered into stipulations \10\ regarding the following matters:
\10\ On August 28, 2013 (three business days prior to the
commencement of the hearing in this matter), a telephonic status
conference (Status Conference) was conducted with the parties,
wherein, inter alia, the Government concurred with Best Pharma's
position that several prescription events initially alleged by the
Government as involving controlled substances actually described
substances that were not controlled. The next day, the Government
filed a document styled ``Joint Stipulations'' (Joint Stipulations)
wherein the parties mutually agreed to the substitution of
previously-noticed versions of Proposed Government Exhibits 7(ID)
and 12(ID), and stipulated that six prescription events purportedly
detailed in Proposed Government Exibit 7(ID) and one prescription
event purportedly detailed in Proposed Government Exhibit 12(ID) do
not refer to controlled substances. ALJ Ex. 11. Notwithstanding the
purported exhibit substitution set forth in the Joint Stipulations,
at the hearing, the Government (errantly) represented that it had
withdrawn Proposed Government Exhibit 12(ID). Tr. 97-98.
Regrettably, the record is further confounded by the fact that none
of the seven non-controlled prescription events referenced in the
Joint Stipulations are depicted in the substituted Government
Exhibits 7 or 12(ID). The parties also agreed to forego objections
to numerous proposed exhibits. ALJ Ex. 11.
---------------------------------------------------------------------------
1) The owner of Farmacia Nueva and Best Pharma is Mr. Julio E.
Moro-Perez (Moro-Perez).
2) Farmacia Nueva previously held DEA COR BF9534187 as a retail
pharmacy in Schedules II-V.
3) Best Pharma previously held DEA COR FB1971565 as a retail
pharmacy in Schedules II-V.
4) Neither Farmacia Nueva nor Best Pharma currently possesses a
DEA COR.
5) On October 10, 2012, Moro-Perez applied on behalf of Farmacia
Nueva for a DEA COR as a retail pharmacy in Schedules II-V at URB
Raholisa #3, San Sebastian, Puerto Rico 00685.
6) On October 10, 2012, Moro-Perez applied on behalf of Best
Pharma for a DEA COR as a retail pharmacy in Schedules II-V at Carr
111 KM 5.2 Bo. Pueblo, Ave La Moca 300, Moca, Puerto Rico 00685.
7) A COR previously issued to Dr. Hector J. Aguilar-Amieva, M.D.
(Dr. Aguilar) was retired by DEA on January 31, 2009.
8) A criminal case against Moro-Perez, case no. 3:11-CR-00532-
006, was dismissed with prejudice by the United States District
Court for the District of Puerto Rico on March 23, 2012, upon
petition from the United States Attorney's Office for the District
of Puerto Rico.\11\
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\11\ The parties stipulated to this after the issuance of the
Prehearing Ruling in this matter. The Respondents, through counsel,
telephonically communicated their assent to this stipulation on
August 26, 2013, the business day after the Government proposed it
in its Supplemental Prehearing Statement. ALJ Ex. 8.
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The Evidence
The Government's Evidence
The Government's case-in-chief rested on the testimony of four
witnesses: DEA Diversion Investigator (DI) Ghensy Antoine, DEA
Digital Forensic Examiner (DFE) Amy L. Herrmann, DI George Taylor,
and Moro-Perez, the owner/president of Farmacia Nueva and Best
Pharma.
DI Ghensy Antoine testified that in the course of his duties as
a DI in the Ponce, Puerto Rico DEA field office, he was assigned as
the lead investigator for the COR applications filed by Moro-Perez
on behalf of the Respondents. Tr. 13-14, 76. Antoine explained that
these COR applications were designated for investigation because the
Respondents had a history of ``some issues with some minor
violations.'' Tr. 15. Specifically, regarding Farmacia Nueva,
Antoine stated that his application \12\ investigation preliminarily
revealed that on
[[Page 28675]]
November 30, 2011, the pharmacy had been the subject of a DEA-
executed federal criminal search warrant,\13\ which resulted in an
immediate suspension order.\14\ Tr. 14, 16. DI Antoine testified
that he learned that, between January 30, 2009 and November 30,
2011, Farmacia Nueva had dispensed 143 controlled substances \15\
based on prescription scrips issued by Dr. Aguilar,\16\ and that,
during that period of time, Dr. Aguilar did not possess a valid COR.
Tr. 17-18. DI Antoine stated that Dr. Aguilar's registration number
had been retired by DEA since January 31, 2009, following an
investigation and a federal criminal conviction, and that the status
of his COR would have been uploaded to the DEA Diversion Web site on
the date it was retired. Tr. 53-55. According to DI Antoine, there
were multiple, readily-available means for Farmacia Nueva personnel
to have ascertained that Dr. Aguilar lacked federal authorization to
prescribe controlled substances at the time the prescriptions were
filled. Tr. 20. Antoine related that Farmacia Nueva personnel could
have checked Dr. Aguilar's COR status by accessing a link that is
``clearly visible'' \17\ on the DEA Diversion Web site,\18\ by
consulting a list of registrants updated regularly by the Department
of Commerce, by contacting the local DEA field office directly, or
by contracting with a private company. Tr. 20-21.
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\12\ Farmacia Nueva's COR application was received into the
record. Gov't Ex. 1.
\13\ From the outset of the Government's case as detailed in the
OSC and its Prehearing Statement, the Government signaled its
intention to rely upon a theory of incomplete recordkeeping at
Farmacia Nueva, and made known that its case in this regard would be
principally established by an evaluation of records seized during
the course of a search warrant executed at the pharmacy on November
30, 2011 and supplemented by an administrative request for
information. ALJ Exs. 1, 4, at 4. Although it could hardly be a
surprise that details surrounding the adequacy of the execution of
the Farmacia Nueva search warrant could be an issue, instead of
presenting testimony from anyone present when the warrant was
executed, the Government elected to present hearsay testimony about
the details of the operation from only DI Antoine, who was not
present during the execution. Tr. 113-18. Over Respondents' timely
(and ultimately correct) objection, the Government elicited details
of conversations that occurred between DI Antoine and DIs Rosa Smith
and Jose Rodriguez, who apparently were present at Farmacia Nueva
when the search warrant was executed. DI Antoine was not certain
about when the conversation(s) took place. Tr. 119-20; see also ALJ
Ex. 24, at 7 n.1. The Government offered no indication that DIs or
other personnel present at the search warrant execution were in any
way unavailable and tendered no indicia of reliability that would
merit consideration of this hearsay testimony in support of a
substantial evidence finding. See Mireille Lalanne, M.D., 78 FR
47750, 44752 (2013) (holding that the proponent of a hearsay
statement in DEA administrative proceedings bears the burden to
demonstrate sufficient reliability to warrant consideration as
substantial evidence); see also Kevin Dennis, M.D., 78 FR 52787,
52796 (2013) (``[H]earsay may be substantial evidence depending on
its truthfulness, reasonableness, and credibility; hearsay
statements are highly probative where declarants are disinterested
witnesses, statements are essentially consistent, and counsel had
access to the statements prior to the agency hearing.''). DEA
applies the law in the relevant Circuit. Lalanne, 78 FR at 47751 &
n.4. Precedent in the applicable Circuits are in accord. Echostar
Commc'ns Corp. v. FCC, 292 F.3d 749, 753 (D.C. Cir. 2002) (holding
that hearsay evidence at an administrative hearing may be used to
support substantial evidence finding where it bears sufficient
indicia of reliability and is reliable and trustworthy); Hoska v.
U.S. Dep't of the Army, 677 F.2d 131, 138 (D.C. Cir. 1982) (holding
that hearsay statements admitted at an administrative hearing that
were tested for reliability and found wanting were thus insufficient
to support a substantial evidence finding); NLRB v. Serv. Wood Heel
Co., 124 F.2d 470, 472 (1st Cir. 1941) (finding hearsay evidence
adduced at an administrative hearing sufficiently trustworthy to be
considered in a substantial evidence finding where corroborated and
consistent with attendant circumstances). Inasmuch as the Government
did not even attempt to demonstrate any indicia of reliability
regarding the hearsay statements from DIs Smith and Rodriguez
received through DI Antoine, those statements cannot be properly
considered here, and were not considered in support of substantial
evidence.
\14\ An indictment issued against Moro-Perez was ultimately
dismissed with prejudice. Stip. 8; Tr. 76-77.
\15\ Tr. 78.
\16\ DI Antoine testified that documentary references to Dr.
Aguilar and Dr. Hector Aquilar refer to the same individual. Tr. 19.
\17\ Tr. 87-89.
\18\ DI Antoine testified that he was unable to recall the name
of the database, but was sure that it was free and available to
registrants and accessible as a link on the DEA Diversion Web site
and that it has been up and running continuously since 2008. Tr. 21-
22. A registrant must sign into the system to review the available
information. Id.
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Antoine testified that he also learned that, in 2008, DEA had
issued a letter admonishing Farmacia Nueva ``for failure to comply
with federal requirements of the [CSA]'' (Letter of Admonition). Tr.
19. The Letter of Admonition, which was received into evidence,\19\
presents as having been sent on April 3, 2008, from the DEA
Caribbean Division to Moro-Perez regarding Farmacia Nueva and, on
its face, purports to have been sent via certified mail. Gov't Ex.
3. The Letter of Admonition informs Moro-Perez that DEA
investigators discovered numerous record-keeping discrepancies
during a March 2008 investigation, to wit: (1) Failure to take a
biennial inventory; (2) failure to record on DEA Form 222 the number
of containers received and date on which such containers were
received; (3) failure to record the date of receipt of controlled
substances on commercial invoices; and (4) failure to submit DEA
Form 41. Id. Each noticed violation is accompanied by a
corresponding statutory and/or regulatory basis. Id. Although the
Letter of Admonition directs Farmacia Nueva to ``[p]lease advise
this office in writing within thirty (30) days, the action taken or
planned, to correct [the listed] violations,'' Antoine testified
that, although DEA has no record of any further correspondence
related to this admonition, the matter was closed without further
action. Tr. 82-86.
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\19\ Tr. 34.
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On the issue of Farmacia Nueva's records, DI Antoine testified
that he was furnished with data from the pharmacy's computer and
hard copies of prescriptions seized from Farmacia Nueva at the time
of a November 30, 2011 search warrant execution. Tr. 23-24. Although
Antoine's testimony was by no means a model of clarity, it appears
that when the DI compared the Dr. Aguilar-authorized controlled
substance dispensing events in the computer data with copies of the
seized hard-copy scrips, he was unable to match twenty-two
dispensing events in the data with corresponding hard-copy scrips.
Tr. 23-25, 91. Antoine added that, in the course of his
investigation, he also sent Moro-Perez a January 30, 2013 letter
(Administrative Request for Information), over the signature of his
DEA supervisor, requesting ``[c]opies of [p]rescriptions issued by
[Dr. Aguilar] within the period of January 31, 2009 to November 30,
2011, including any information related to the dispensing of such
prescriptions.'' Tr. 31-33; Gov't Ex. 4. Moro-Perez responded to the
Administrative Request for Information in a letter,\20\ dated March
4, 2013 (Response to Administrative Request for Information), which
included copies of additional prescription scrips. Tr. 36. The
Response to Administrative Request for Information represented that
``all of the requested prescriptions'' were included with the
correspondence. Gov't Ex. 4, at 3. DI Antoine presented a document
(Government FN Aguilar Scrips) that he described as copies \21\ of
controlled substance scrips obtained by the search warrant and later
supplemented by Moro-Perez in the Response to Administrative Request
for Information. Tr. 36-39; Gov't Ex. 5. Antoine testified that when
he compared the Aguilar dispensing events recorded in the Farmacia
Nueva computer data (FN Computer Data) to the Government FN Aguilar
Scrips, he was unable to locate twenty-two Aguilar scrips that,
based on the FN Computer Data, should have been there. Tr. 48.
Antoine testified that he used a sorting function to create a
spreadsheet from the FN Computer Data that listed every transaction
from the scrips contained in the Government FN Aguilar Scrips
package, or as he put it, ``exactly a mirror of what's included [in
the Government FN Aguilar Scrips].'' Tr. 44-47; Gov't Ex. 6. Thus,
the spreadsheet (Government FN Aguilar Scrips Spreadsheet) \22\
contains every dispensing event transaction depicted in the
Government FN Aguilar Scrips \23\ document created by the seized
scrips and supplemented by Moro-Perez pursuant to the Request for
Information. DI Antoine testified that he used the sorting feature
to tease out the dispensing events in the Government FN Computer
Data that did not have a corresponding scrip in the Government FN
Aguilar Scrips and made a spreadsheet (Government FN Aguilar No-
Scrip List).\24\
[[Page 28676]]
Gov't Ex. 7. Thus, the Government FN Aguilar No-Scrip List reflects
twenty-four \25\ Aguilar-authorized controlled substance dispensing
events at Farmacia Nueva where the combined efforts of DI Antoine's
seized records and Moro-Perez's supplemented records still did not
yield a copy of a scrip.
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\20\ The Government presented a copy of the Response to the
Administrative Request for Information in a translated format as
well as a copy of the original Spanish-language version. Gov't Ex.
4, at 2-3.
\21\ DI Antoine testified that hard-copy scrips seized from
Farmacia Nueva during the execution of the search warrant were
photocopied. Tr. 37.
\22\ Gov't Ex. 6.
\23\ Gov't Ex. 5.
\24\ Although not explained during the course of the hearing,
the three pages that comprise the Government FN Aguilar No-Scrip
List must be placed side-by-side and read across. Gov't Ex. 7.
Needless to say, this format is not optimal.
\25\ Although DI Antoine described twenty-two Aguilar dispensing
events without corresponding scrip copies, the Government FN Aguilar
No-Scrip List sets forth twenty-four dispensing events. Id. While no
explanation regarding this disparity was offered at the hearing, the
extra two entries appear to be refills of previously-filled
prescriptions. In any event, the variance, whatever its genesis, was
inconsequential to the resolution of the ultimate issues presented
in this case.
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DI Antoine testified that he also conducted the COR application
\26\ investigation of Best Pharma. Tr. 52. According to Antoine,
Best Pharma was also the subject of an executed criminal search
warrant on November 30, 2011, and prescription scrips were likewise
seized from its pharmacy, scanned into DEA computers, and returned.
Tr. 50, 52, 60-61; Gov't Ex. 10. As was the case at Farmacia Nueva,
data from the Best Pharma computers was extracted by DEA, and the
data was queried by DI Antoine to yield controlled substance
dispensing events on scrips authorized by Dr. Aguilar from the time
his COR was retired up to and including the date the search warrant
was executed. Tr. 65-69; Gov't Ex. 11. Antoine testified that an
examination of the seized documents revealed that, like Farmacia
Nueva, Best Pharma dispensed controlled substances on prescriptions
issued by Dr. Aguilar during a time when the doctor did not possess
a COR. Tr. 52-53. In his testimony, DI Antoine re-affirmed the
aforementioned methods that Best Pharma staff members had at their
disposal to ascertain Dr. Aguilar's COR status. Tr. 55.
---------------------------------------------------------------------------
\26\ The Best Pharma COR application was received into the
record. Gov't Ex. 8.
---------------------------------------------------------------------------
Antoine also indicated that when he compared the Best Pharma
computer-stored dispensing events with the controlled substance
prescription scrips seized in connection with the search warrant, he
was unable to identify ``four or five'' scrips that corresponded to
dispensing events. Tr. 96.
Government-supplied declarations from the DEA Registration and
Program Support Section Chief reflect that a COR was issued to
Farmacia Nueva in 2005 and to Best Pharma in 2010. Gov't Exs. 2, 9.
The DEA Best Pharma Declaration indicates that Best Pharma
surrendered its COR for cause on December 14, 2011. Gov't Ex. 9. The
Government also submitted a DEA Form 104 (Best Pharma Surrender
Form) that indicates that Moro-Perez executed a voluntary surrender
for cause on November 30, 2011.\27\ Gov't Ex. 14, at 1. On the Best
Pharma Surrender Form, Moro-Perez signed below a checked box, which
provides: ``In view of my alleged failure to comply with the Federal
requirements pertaining to controlled substances, and as an
indication of my good faith in desiring to remedy any incorrect or
unlawful practices on my part . . . I hereby voluntarily surrender
my Drug Enforcement Administration Certificate of Registration. . .
. ''Id.
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\27\ Although no explanation has been tendered to explain this
disparity, the anomaly does not impact any issue dispositive to a
resolution of the ultimate issues in this case.
---------------------------------------------------------------------------
The DEA Farmacia Nueva Declaration states that Farmacia Nueva
surrendered its COR for cause on June 28, 2012. Gov't Ex. 2, at 2.
Also offered in support of the proposition that Farmacia Nueva
surrendered for cause in 2012 was a copy of what purports to be
email correspondence (printed out under DI Antoine's email header)
between the Respondents' present counsel and an individual to whom
counsel was seeking to surrender its COR. Gov't Ex. 14, at 2-4.
Although the Government presented no explanation or context
regarding the email traffic or any witness testimony regarding the
participants, the exhibit (which was received in the absence of
objection), on its face, includes this unambiguous statement:
My client, Farmacia Nueva, has decided to voluntarily surrender
its DEA registration at issue in the case Docket No. 12-16. Please
prepare a joint motion to dismiss the pending case.
Id. at 2. Official notice is taken that the same Respondents
captioned in this matter were also the subject of DEA administrative
proceedings under Docket Number 2012-16 (Case 2012-16), an action
that was commenced with a request for hearing filed on December 6,
2011, and which culminated in a termination order dated June 29,
2012.\28\ Further notice is taken that the records of the Agency
reflect that the recipient of the email served as the Government
counsel of record in Case 2012-16. DEA has no record of a DEA Form
104 executed on behalf of Farmacia Nueva, but Antoine testified that
it is his understanding that the email surrender occurred while the
case was in active administrative enforcement proceedings. Tr. 72-
74. In his testimony, DI Antoine explained that while it is his
``practice [to] always get a [DEA Form] 104,'' and that he has
procured a DEA Form 104 in all but one case where he has accepted a
registrant's surrender for cause, it was his understanding of the
law that the email correspondence offered by the Government in this
case was sufficient to memorialize the event. Tr. 73-74.
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\28\ The Administrative Procedure Act and the DEA regulations
authorize the identification, recognition, and inclusion of material
facts in the administrative record by the taking of official notice.
5 U.S.C. 556(e); 21 CFR 1316.59(e); Attorney General's Manual on the
Administrative Procedure Act Sec. 7(d) (1947). To the extent either
party seeks to challenge the factual predicate of the official
notice taken in this matter, it may file an appropriate motion no
later than fifteen days from the issuance of this recommended
decision.
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DI Antoine stated that he visited Farmacia Nueva and Best Pharma
on August 14, 2013 (twenty days prior to the commencement of the
hearing in this matter), and spoke with Nelson Vale and Miriam
Castro Andujar, the respective pharmacists-in-charge (PICs).\29\ Tr.
106-11. According to Antoine, in response to his query of them on
the subject, both PICs indicated that they were aware of no written
procedures issued for their respective pharmacies on the subject of
the handling of controlled substances. Tr. 107. The PICs did,
however, relate to DI Antoine that they believed that the owner
planned to install a computer monitor in each pharmacy to facilitate
some measure of access to verify the COR status of prescribing
practitioners, and that there was also a plan to check prescriber
statuses once per month. Tr. 112. PIC Castro told Antoine that she
had recommendations for the handling of controlled substances that
she would like to make to the pharmacy owner. Id.
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\29\ See Fed. R. Evid. 801(d)(2)(E).
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DI Antoine's testimony was, at times, difficult to understand
and not always clear. That said, his testimony was sufficiently
detailed, plausible, and internally consistent to be deemed credible
in this recommended decision.
The Government also presented the testimony of DFE Amy Herrmann,
a digital forensic examiner employed by DEA. DFE Herrmann has been a
DFE at the DEA Digital Evidence Laboratory since March 2008, and
holds degrees in Information Technology, Network Security-Computer
Forensics, and Financial Services. Tr. 122-25; Gov't Ex. 13. DFE
Herrmann is certified as a Global Information Assurance Forensic
Examiner and as an Information Systems Security Professional. Gov't
Ex. 13. In the absence of objection, DFE Herrmann was accepted as an
expert in the field of digital forensics.\30\ Tr. 126.
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\30\ DFE Herrmann's CV was received into the record. Gov't Ex.
13.
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DFE Herrmann stated that she was assigned to the investigations
concerning the Respondent pharmacies that were conducted in November
2011. Id. She explained that another DFE who works in her office,
Ryan Gladieux,\31\ extracted the information from the Farmacia Nueva
computer by imaging the computer to a wiped and sterile DEA hard
drive. Tr. 128-29. Herrmann testified that the
[[Page 28677]]
technique employed by Gladieux \32\ for imaging the computer makes a
complete copy of all data contained therein and provides an alert to
indicate if certain files are unreadable.\33\ Tr. 139-41. DFE
Gladieux then provided the hard drive to the DEA office in Ponce
where it was checked in as non-drug evidence. Tr. 131. From there it
was forwarded to the DEA laboratory in Lorton, Virginia, and checked
into the digital evidence vault. Tr. 122-23, 131. Herrmann stated
that she then created a virtual machine with which to run Farmacia
Nueva's RX30 program,\34\ enabling her to access the program as if
she were accessing it from Farmacia Nueva's own computer at the
moment the data was extracted.\35\ Tr. 141-42. Herrmann testified
that she generated a report of all prescriptions dispensed by the
pharmacy from January 1, 2009 to December 31, 2011, and converted
the report into an Excel file. Tr. 142-43. According to Herrmann,
she ran another report of the same data, but excluded any
prescriptions that were noted as ``on hold'' (no-holds run). Tr.
143-44. The no-holds run generated fewer dispensing events than the
first report, but she never attempted to run a report to isolate the
dispensing events in the ``on hold'' status. Tr. 145-47. Some of the
dispensing event transaction numbers in the no-holds run are
preceded by the letter ``H.'' See Gov't Ex. 7. When Herrmann was
queried about whether the ``H'' indicated that these events really
were ``on hold,'' she conceded that she did not understand what the
``H'' meant and that she did not know why some transaction numbers
bore that designator. Tr. 152-53, 161-62. Whatever ``H'' meant, DFE
Herrmann testified that the report she ran on the data from the
Farmacia Nueva computer excluded any dispensing event that was in an
``on hold'' status. Tr. 143-44, 151-52, 160-61.
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\31\ During the Direct Examination of DFE Herrmann, the
Government offered into evidence a declaration from DFE Ryan
Gladieux. Tr. 133-37; Gov't Ex. 15. In his declaration, Gladieux
states that he made complete copies of the hard drives seized during
the investigations of Farmacia Nueva and Best Pharma on November 30,
2011. Gov't Ex. 15. Gladieux declares that the copies of the hard
drives are complete and accurate. Id. In objecting to the admission
of the declaration, the Respondents raised the (fair) point that in
contrast to the declarant, who had actual knowledge as to how the
evidence was extracted, DFE Herrmann, ``has testified only to the
things she has heard from someone that that happened.'' Tr. 135-36;
see also Tr. 149-50. In explaining its election to present a
declaration in lieu of testimony from Gladieux, the Government
acknowledged that Gladieux was available, but stated ``[t]he reason
was that the [G]overnment felt that a declaration would have been
sufficient insofar as that it was properly noticed in the prehearing
statement and that an indicia of reliability would have been given
during this hearing [sic].'' Tr. 135. Regarding the Government's
proposed transcript errata correction (ALJ Ex. 20, at 2) in this
regard, the version set forth in the official transcript is
consistent with my recollection. Gladieux's declaration was received
into the record over the Respondents' hearsay objection, and
although all parties were granted leave to present his live
testimony, none did. Tr. 136. As explained more fully, infra, the
Respondents' objection more correctly reflected on the weight to be
afforded the content of the exhibit than it did on the document's
admissibility.
\32\ Herrmann acknowledged that she had no personal knowledge of
exactly what Gladieux did and/or how well he did it beyond reading
reports he prepared. Tr. 149-50.
\33\ The imaged files copy each piece of data from the original,
and a DEA program creates something called a ``hash'' for every
file. Tr. 128. The hash is an algorithm that uniquely fits a piece
of data and creates a certain value. Tr. 132. If a piece of data is
altered in any way from the original data extracted from the
computer, the hash value will change, notifying the DEA of the
alteration. Tr. 132, 148. Herrmann testified that she verified that
all hash values matched when she commenced her analysis of the data
extracted from the computer. Tr. 133. Herrmann clarified that
although error is always a possibility, the software she utilized is
designed to alert the examiner if the reports generated do not match
the amount of records contained in the data. Tr. 154-56.
\34\ RX30 appears to be a software program that enables
pharmacies to manage and record their dispensing events. Tr. 91,
138, 142.
\35\ Herrmann acknowledged that the reports could have been run
using Farmacia Nueva's computer instead of from an image of the data
extracted from the computer. Tr. 163-65.
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DFE Herrmann testified that she used ``essentially the same
steps'' \36\ employed on the Farmacia Nueva computer data to analyze
the information extracted from Best Pharma's RX30 program. Tr. 147.
Regarding those matters of which she did have first-hand knowledge,
her testimony was sufficiently detailed, plausible, and internally
consistent to be fully credited in this recommended decision.
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\36\ There is no indication in the record why Herrmann
characterized the steps as ``essentially'' the same.
---------------------------------------------------------------------------
George Taylor, a DI stationed at the DEA Des Moines Resident
Office, was called as a witness for the Government regarding his
role as the team leader in charge of executing the search warrant at
Best Pharma on November 30, 2011. Tr. 168-69. DI Taylor testified
that his team of seven to nine federal and local agents and analysts
seized all prescription records, controlled substances, and other
specific items listed on the warrant. Tr. 170, 172. DI Taylor stated
that the search warrant team was assisted by a Best Pharma
pharmacist \37\ who directed them where to find the items listed on
the warrant. Tr. 170. Controlled substances were seized and
inventoried on the premises, and hard copies of controlled substance
scrips and other records were collected and transported back to the
staging area and then to the DEA Ponce Resident Office. Tr. 170-71,
187. Taylor testified that, with the guidance of the Best Pharma
pharmacist (who he assessed as cooperative), it is his opinion that
the team seized all controlled substance prescription scrips that
were on hand at the pharmacy, including paperwork from the
prescription counter. Tr. 186-88.
---------------------------------------------------------------------------
\37\ DI Taylor testified that a female Best Pharma pharmacist
assisted his team in the execution of the search warrant, but he was
unable to recall her name. Tr. 170.
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DI Taylor also testified that he was with Moro-Perez at the time
the latter signed the Best Pharma Surrender Form. Tr. 175; Gov't Ex.
14, at 1. On November 30, 2011, DI Taylor, accompanied by DEA
Special Agent Juan Hernandez, signed the form as a witness and
presented it to Moro-Perez while the latter was in custody.\38\ Tr.
175; Gov't Ex. 14, at 1. DI Taylor directed Special Agent Hernandez
to explain, in Spanish, to Moro-Perez that the form was a voluntary
surrender of his controlled substances privileges. Tr. 176, 184.
Special Agent Hernandez also read the entire form to Moro-Perez in
Spanish. Tr. 178. DI Taylor testified that Moro-Perez questioned him
regarding the nature of the surrender and whether it was related to
the criminal charges against him. Tr. 179. DI Taylor stated that he
explained that the surrender specifically related to the DEA
registration number and was separate from any criminal allegations,
and he testified that he dealt only with the regulatory matter. DI
Taylor explained to Moro-Perez that if he did not sign the form, the
DEA would move for an OSC proceeding. Tr. 176-77. DI Taylor stated
that in his conversations with Moro-Perez, he never linked the
voluntary surrender to the ongoing criminal investigation. Tr. 177.
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\38\ It is clear from DI Taylor's testimony that Moro-Perez was
in custody in the rear of a government vehicle when he signed the
Best Pharma Surrender Form. Tr. 179-83. The Respondents have raised
no issue related to the voluntariness of the Surrender Form
execution, and no genuine issue in this regard is supported by the
record evidence.
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Moro-Perez also testified at the hearing.\39\ He stated that he
is the president and original owner of both Farmacia Nueva and Best
Pharma. Tr. 192, 219, 222, 238. He stated that he has been a
pharmacist since he completed his training at medical school in
Puerto Rico in 1999, worked as a pharmacist at another pharmacy, and
served as chief pharmacist at Farmacia Nueva. Tr. 194, 202, 223-24.
He acknowledged that he had received training regarding the
prevention of the unauthorized distribution of controlled
substances, and that he learned in his training that the pharmacy is
``ultimately responsible for ensuring the integrity and the veracity
of the prescription.'' Tr. 194. He also acknowledged that, from
February 2009 to October 2011, both Respondent pharmacies filled
prescriptions for (the un-registered) Dr. Aguilar. Tr. 193. Farmacia
Nueva filled approximately 143 prescriptions, and Best Pharma filled
approximately 32 prescriptions. Id. Moro-Perez conceded that at no
point during that time period did any of the pharmacies attempt to
verify the COR status of any of the doctors for whom they filled
prescriptions. Tr. 194.
---------------------------------------------------------------------------
\39\ Although Moro-Perez was noticed as a witness by the
Respondents, his testimony was elicited by the Government as part of
its case-in-chief. Tr. 190-191, 268.
---------------------------------------------------------------------------
During the course of Moro-Perez's testimony, he described the
physical layout and operational procedures utilized at the
Respondent pharmacies. Regarding Farmacia Nueva, Moro-Perez
explained that the three-story establishment is manned by twenty-two
employees and that Nelson Vale is and has been the pharmacist-in-
charge (PIC) since 2010. Tr. 224-25. According to Moro-Perez, Best
Pharma is located in a two-story building with sixteen employees.
Tr. 240-41. The departments in each store are divided between the
various floors. Tr. 224, 240. Moro-Perez testified that his role as
a pharmacist and company president requires that he ensure that
every prescription has a regular and legal use; that all
administrative duties are carried out; and that each prescription is
dispatched faithfully to the patient as the doctor prescribed it.
Tr. 226-27. He then explained the following procedure for when a
patient enters the FN pharmacy with a prescription: The patient,
first, turns in his prescription at the pharmacy's receiving area.
Tr. 227. Next, a pharmacy employee verifies the prescription, the
name on the prescription, the address of the patient, the date, the
medication, the quantity to be dispatched, the instructions on how
to use the medication, the doctor's signature, and, if it is a
prescription for a controlled substance, the DEA license, the AMSSCA
license,\40\ and the state medical registration or license as found
on the pharmacy's RX30 program. Tr. 227-28, 230. The employee then
verifies if the prescription and medication are bioequivalent. Tr.
228. If the patient accepts the medication, the back of the
prescription is stamped and signed, and then the patient signs the
document to acknowledge acceptance of the exchange of medication.
Id. Next, pharmacy personnel enter the patient's name, phone number,
address, driver's license, and medical plan information into
[[Page 28678]]
the RX30 system. Tr. 228-29. The prescription is then scanned, and
the pharmacy enters the doctor's information. Tr. 229. The pharmacy
staff verifies that all of the prescriber's information (including
COR and license numbers) is found in the system, and enters the
medication, including the amount to be dispensed and the dosage
instructions. Id. After obtaining and entering all this information,
the pharmacy staff submits the information to the appropriate
insurance carrier, which will determine whether it will reimburse
based on the information submitted. Id. The pharmacy staff then
counts out the medication, puts it in a basket, and presents it to a
pharmacist for verification. Id. Upon successful verification, the
prescription is placed in dispatch, and the pharmacy contacts the
patient who signs for the prescription, collects the medication,
receives instructions on use, and pays any applicable deductible.
Tr. 229-30.
---------------------------------------------------------------------------
\40\ Regrettably, neither side provided any additional details
as to what this organization is, or what the letters stand for.
---------------------------------------------------------------------------
Moro-Perez stated that Best Pharma uses the same process of
dispensing prescriptions as Farmacia Nueva. Tr. 245. He testified
that Farmacia Nueva dispenses 500 prescriptions per day, with
controlled substances accounting for approximately 10-15% of those
sales. Tr. 244-45. Best Pharma dispenses 200-300 prescriptions per
day, with approximately 10-15% of those sales derived from
controlled substances. Tr. 245.
Moro-Perez testified that, for prescriber COR verification, his
Respondent pharmacies have relied upon a system of entering
information into their internal computers, submitting the
information to medical insurance providers through pharmacy
software, and basing the assumption of up-to-date doctor licensing
on the receipt of insurance provider ``confirmation'' \41\ of
payment approval. Tr. 195-96, 230-32. Moro-Perez represented that
both pharmacies purchased the RX30 system for their computers from a
company named Ontime Soft, Inc. Tr. 196-97, 244. Pharmacy staff
inputted a list of prescribing doctors and the doctors' information
into the program. Tr. 199-200. Moro-Perez then explained that, when
a patient visits one of the pharmacies with a prescription, the
following information is entered into the system and then
transmitted to the insurance providers: the patient, the patient's
information, the doctor's information, the medication, the amount of
medication, the directions for using the medication, and the amount
of days that the medication will be supplied. Tr. 201. Moro-Perez
eventually admitted that the pharmacies' method of ensuring the
validity of the prescribing doctors' DEA licenses was to check,
prior to dispensing, that the insurance company was willing to
reimburse based on the electronically-transmitted claim. Tr. 200-01.
He even conceded that although this was the method they employed to
verify the prescribers' registration status,\42\ the insurance
companies never represented that reliance upon the benefits claim
determination was an appropriate method to check COR status.\43\ Tr.
202. Moro-Perez stated that he does not know why the insurance
companies kept reimbursing based on Dr. Aguilar's controlled
substance prescriptions when he no longer had a COR, and he even
agreed that the Respondent pharmacies would likely never have
stopped dispensing (unregistered) Dr. Aguilar's prescriptions if the
DEA had not executed its search warrant on November 30, 2011. Tr.
202-03. Moro-Perez acknowledged that the Respondents made a mistake
and that they erred in not calling the DEA to verify Dr. Aguilar's
COR. Tr. 201-02.
---------------------------------------------------------------------------
\41\ The witness never made clear what information was actually
being transmitted or confirmed in the ``confirmation.''
\42\ Moro-Perez also said that pharmacy staff checked prescriber
licenses in the RX30 system. Tr. 230-31. However, since the
pharmacies' internal systems were only updated by pharmacy staff,
who relied exclusively on payment approvals from insurance
companies, this step added little to the aggregate safeguards in
place.
\43\ Actually, the record contains no evidence that would
objectively support a decision to rely on this approach or even
support a conclusion that this method would be an effective manner
to garner this information.
---------------------------------------------------------------------------
When questioned regarding the Government's list of purportedly
missing prescriptions from Farmacia Nueva,\44\ Moro-Perez insisted
that, when he was told that the DEA identified those scrips as
missing, he queried the system by medication name and was able to
locate and identify all but one of the missing scrips in the
Farmacia Nueva Computer and found a hard copy of the single missing
(apparently unscanned) scrip in the pharmacy.\45\ Tr. 203-05. Copies
of the imaged Dr. Aguilar scrips he purportedly printed from the
pharmacy computer and supplemented with the single hard-copy scrip
were received into the record (Moro-Perez FN Aguilar Scrips). Resp't
Exs. 1, 2. Also received into evidence was a package of imaged
prescription scrips that Moro-Perez testified he produced by
querying the dispensing event numbers corresponding to the Dr.
Aguilar controlled substance scrips that DEA alleged as missing
(Moro-Perez FN Aguilar Found Scrips).\46\ Resp't Ex. 4; Tr. 263. The
Moro-Perez FN Aguilar Found Scrips document contains nine scrips
that, according to Moro-Perez, he was able to create by querying the
Farmacia Nueva RX30 system with the dispensing event numbers that
DEA told him they were unable to match with Government FN Aguilar
Scrips.\47\
---------------------------------------------------------------------------
\44\ Gov't Ex. 7.
\45\ The supplemented scrip was identified by Moro-Perez as page
143 of Respondents Exhibit 2. According to Moro-Perez, the computer
automatically affixes identifier information at the top of each
prescription image it produces. Tr. 235. The scrip that Moro-Perez
added to the package does not have the identifier heading on it.
Resp't Ex. 2, at 143.
\46\ The witness testified that the first five pages of the
package contain Best Pharma scrips (identified by 5-digit dispensing
event numbers) and the balance reflects Farmacia Nueva scrips
(identified by 6-digit dispensing event numbers). Tr. 260-65.
\47\ However, only two of the nine scrips (Resp't Ex. 4, at 191,
192) contained in the Moro-Perez FN Aguilar Found Scrips document
correspond to Aguilar Farmacia Nueva dispensing events listed by the
Government as missing scrips in its Government FN Aguilar No-Scrip
List. Gov't Ex. 7. This is likely the result of a pre-hearing motion
submitted by the Respondents (ALJ Ex. 10) wherein they pointed out
that numerous scrips noticed by the Government (apparently including
seven of the nine FN scrips contained in the Moro-Perez FN Aguilar
Found Scrips document (Resp't Ex. 4, at 184-90)) refer to non-
controlled substances. As a result of the Respondents' motion, the
Government substituted the current version of Government Exhibit 7,
which evidently omits reference to the non-controlled substances.
---------------------------------------------------------------------------
Although, in a prehearing motion,\48\ Farmacia Nueva averred
that multiple dispensing events set forth in the Government FN
Aguilar No-Scrip List document were the result of typographical
errors, an analysis of the documents does not bear this out. Both of
the purportedly mistyped dispensing events (00735388 & 00784686)
were actually supplied by the Respondent in the Moro-Perez FN
Aguilar Found Scrips document.\49\
---------------------------------------------------------------------------
\48\ ALJ Ex. 10, at 2. In their motion, the Respondents
represented that when the typographical errors are factored into the
equation, ``no prescription is missing.'' Id. at 3.
\49\ Resp't Ex. 4, at 191, 192.
---------------------------------------------------------------------------
A detailed analysis of the dispensing event exhibits from both
sides presents a nuanced and initially confusing picture that would
have benefitted greatly from explanation at the hearing. An
examination of the Moro-Perez FN Aguilar Scrips \50\ and the Moro-
Perez FN Aguilar Found Scrips \51\ documents reveals that they
contain all but two of the dispensing events depicted in the
Government FN Aguilar No-Scrip List \52\ that was created by DI
Antoine.\53\ This testimony was offered by Farmacia Nueva in support
of its contention that Moro-Perez, with some level of diligence, was
able to retrieve all of the scrips that DEA identified to him as
missing.
---------------------------------------------------------------------------
\50\ Resp't Ex. 1-2.
\51\ Resp't Ex. 4.
\52\ Gov't Ex. 7.
\53\ The following is a list of each entry found in the
Government FN Aguilar No-Scrip List (Gov't Ex. 7), which listed the
prescriptions missing from Farmacia Nueva. After each listed
prescription event number entry, a corresponding citation to where
that prescription can be found in the Respondents' exhibits (if at
all) is provided: #00581227: Resp't Ex. 2, at 165; #00592053: Resp't
Ex. 2, at 167; #00594763: Resp't Ex. 2, at 168; #00603582: Resp't
Ex. 2, at 169; #00615341: Resp't Ex. 2, at 170; #00680204: Resp't
Ex. 2, at 143-44; #00696609: Resp't Ex. 1, at 49; #00735388: Resp't
Exs. 1, at 52, 4, at 191; #00739096: Resp't Ex. 1, at 28; #00740774:
Resp't Ex. 1, at 29; #00748164: Resp't Ex. 1, at 31; #00750564:
Resp't Ex. 1, at 92; #H00751567: no record; #00760079: Resp't Ex. 1,
at 93; #00760079: Resp't Ex. 1, at 93; #00784105: Resp't Ex. 2, at
123; #00784686: Resp't Ex. 4, at 192; #00785359: Resp't Ex. 2, at
124; #00785837: Resp't Ex. 2, at 125; #00785837: Resp't Ex. 2, at
125; #00798150: Resp't Ex. 2, at 126; #00805523: no record;
#00806899: Resp't Ex. 2, at 127; #H00784094: Resp't Ex. 4, at 190.
---------------------------------------------------------------------------
One of the two unaccounted-for dispensing events bears a
dispensing event number preceded by an ``H'' (H00751567). Gov't Ex.
7. No witness who testified at the hearing explained the
significance of an ``H'' affixed to a dispensing event number, but
since a second ``H''-designated number (H00784094) was eventually
paired with a scrip \54\ by Moro-Perez, it seems unlikely that the
``H'' presents a reasonable explanation for the scrip's absence. DFE
Herrmann testified that ``hold'' was a status setting available
within the RX30 software structure, but she did not
[[Page 28679]]
know what it signified. Tr. 144-46. Moro-Perez likewise offered no
explanations about the significance of an ``H'' before a dispensing
event number, or ``hold'' status.\55\ The second missing dispensing
event (00805523) was never matched up with a corresponding scrip.
---------------------------------------------------------------------------
\54\ Resp't Ex. 4, at 190.
\55\ To the extent that the Respondents' closing brief avers
that the ``H'' described in the record refers to a dispensing event
being in a ``hold'' status (ALJ Ex. 24, at 8, 17), that assertion is
simply not supported in the record. This record does not contain an
explanation of the meaning of an ``H'' before a dispensing event
transaction number.
---------------------------------------------------------------------------
Moro-Perez testified that DEA personnel left the Respondent
pharmacies in considerable disarray after the simultaneous execution
of the search warrants, and that the agents left ``a lot of
controlled [substance] prescriptions'' in drawers at ``both
pharmacies.'' Tr. 243-44. At the hearing, when Moro-Perez was shown
the Government's Administrative Request for Information to Farmacia
Nueva \56\ in which DEA requested the pharmacy to supply copies of
all prescriptions issued by Dr. Aguilar during the period in
question and dispensed by the pharmacy, he responded that he
``provided [DEA] everything that the system provided and all the
prescriptions were submitted.'' Tr. 206-08.
---------------------------------------------------------------------------
\56\ Gov't Ex. 4.
---------------------------------------------------------------------------
Moro-Perez explained that RX30 creates a separate number for
each dispensing event, and that once that number is created, it
cannot be altered or manipulated manually.\57\ Tr. 235. He offered
his assurance that he has not nor would ever attempt to do so. Id.
Moro-Perez indicated that Farmacia Nueva has had the same computer
for about five years and that it has never left the pharmacy except
for when the DEA took possession of it for about five days at the
time the search warrant was executed. Tr. 232-33. Best Pharma's
computers have also been in the business since it opened, and
inasmuch as DEA extracted data from them on the date of the search
warrant execution, these computers have never left the pharmacy. Tr.
242.
---------------------------------------------------------------------------
\57\ Although the relevance of this testimony was likely linked
to dispel any notion that Moro-Perez or other pharmacy personnel
could have manually placed an ``H'' before certain dispensing event
numbers, the lack of any witness to explain what an ``H'' signifies
greatly diminishes the utility of this testimony. Stated
differently, since the record never says what the ``H'' signifies,
it does not much matter whether anyone could have manually added it
to the transaction numbers or anywhere else.
---------------------------------------------------------------------------
Moro-Perez testified that Farmacia Nueva dispensed approximately
two to three prescriptions authorized by Dr. Aguilar every two weeks
and that there was sometimes a few months between prescriptions. Tr.
250. He also explained that Farmacia Nueva was about a three-to-four
minute walk from Dr. Aguilar's office.\58\ Tr. 250-51. Stunningly,
Moro-Perez testified that personnel at Farmacia Nueva ``many times''
declined to fill controlled substance prescriptions authorized by
Dr. Aguilar because they were deemed illegitimate. Tr. 252. Moro-
Perez explained that, quite often, ``many'' patients brought
controlled substance prescriptions issued by Dr. Aguilar where the
Farmacia Nueva pharmacists ``knew that that patient didn't require
the use of that medication [and] we told them that we were not going
to dispense the prescription.'' Id. Notwithstanding the close
proximity of Dr. Aguilar's practice to Farmacia Nueva (three to four
minutes on foot), and the frequency with which the pharmacy declined
to dispense controlled substances he prescribed, Moro-Perez provided
the astonishing revelation that he never contacted Dr. Aguilar about
any of his (bad) prescriptions. Tr. 252-54. When pressed as to why
Dr. Aguilar's routine prescribing misconduct did not arouse any
heightened scrutiny on the part of his pharmacies, Moro-Perez
offered that ``if you analyze the amount of medications that were
dispensed, the percentage is very low.'' Tr. 253. In other words,
the Respondents knew Dr. Aguilar was regularly providing illegal
controlled substance prescriptions to Respondents' customers, but no
one on staff checked his registration in any serious way or even
took the minimal step of reaching out to speak with him about his
prescribing practices because ``the percentage [was] very low.'' Id.
Moro-Perez stated that he never contacted Dr. Aguilar because ``I
was aware that the doctor's license was up to date.'' Tr. 253-54. In
addition to the fact that Dr. Aguilar was not, in fact, ``up to
date'' on his DEA registration, Moro-Perez's answer is patently
illogical and presents as intentional equivocation.
---------------------------------------------------------------------------
\58\ Moro-Perez testified that, of the dozen or so pharmacies in
San Sebastian that dispensed controlled substances, Farmacia Nueva
was the pharmacy located closest to Dr. Aguilar's office. Tr. 251.
---------------------------------------------------------------------------
At the hearing, Moro-Perez identified a printed copy of the
online registration application that he submitted on behalf of
Farmacia Nueva. Tr. 210; Gov't Ex. 1; see also Stip. 5. He confirmed
that he understood the application and Question 2 (asking whether
the applicant had ever surrendered a COR for cause), agreed that he
entered a ``no'' response, and explained that his reason for doing
so was because he understood that, ``in relation to the criminal
case, there was no cause against me.'' \59\ Tr. 211. Moro-Perez
conceded that no one from DEA told him that his former criminal case
(which was actually dismissed three months prior to the surrender)
was linked in any way to the surrender,\60\ but he insisted that he
believed that Farmacia Nueva's surrender was associated with his
criminal case because ``all this is a consequence of the dispatch of
the medications of Dr. Aguilar.'' Tr. 212-13. The witness persisted
in this answer, even when pressed by the Government about how he
could think that the nature of the Farmacia Nueva surrender could be
affected by an event (the indictment dismissal) that preceded it.
Tr. 212-13, 215. In response to a question asked by the Government,
Moro-Perez responded that if Question 2 did not contain the words
``for cause,'' he would have answered ``yes'' to the question. Tr.
216-17, 219. Moro-Perez explained that he never wanted to lie to DEA
because ``[t]hey are aware of the arrest that they executed.'' Tr.
216. Later in his testimony, Moro-Perez offered this:
---------------------------------------------------------------------------
\59\ A copy of the March 28, 2012 federal criminal indictment
dismissal where Moro-Perez was a defendant was received into the
record (Resp't Ex. 3) and was also the subject of testimony (Tr.
212) and a stipulation between the parties (Stip. 8).
\60\ Tr. 213, 218-19.
Really in relation to this particular case I'll repeat again. I
answered no knowing and recognizing that you, the DEA office, are
aware of, had knowledge and everything about me. Therefore, I have
never had intentions [sic] to lie. I'm going to say the truth, and
---------------------------------------------------------------------------
that's the truth.
Tr. 218-19. Moro-Perez clarified that the rationale he used for
answering Question 2 in the negative on the Farmacia Nueva
application was the same approach employed by him when answering the
same question in the Best Pharma application. Tr. 222.
Although Moro-Perez acknowledged at the hearing that Question 2
was erroneously answered,\61\ he expressed no remorse. In like
manner, he stood by his ability to retrieve required records from
the Respondent pharmacies' computers and questioned the thoroughness
of DEA's search warrant execution, see Tr. 243-44. On the other
hand, he readily accepted that the procedure previously employed for
ensuring that controlled-substance prescribers had valid CORs was a
``mistake.'' Tr. 236. He offered that if the Respondent pharmacies
are granted CORs, they would take several preventative steps to
ensure that the doctors who wrote prescriptions for dispensing at
the pharmacy had the requisite authority to do so.\62\ Id. Moro-
Perez represented that if the pharmacies were again registered, an
employee would verify the registration status of prescribing
physicians with the appropriate DEA Web site every month. Tr. 236-
37. He also represented that he is ``establishing a new system of
computers so the pharmacy will be able to study the patient file and
the doctor's file'' and ``demand'' documentation that the patient is
being treated by a specialist ``mostly on the narcotic medications,
the pain medications and any other that we understand that is being
used for alleged medical use [sic].'' Tr. 237-38. Moro-Perez also
offered that the current PICs of both Farmacia Nueva and Best Pharma
have spent a significant number of years practicing in the field.
Tr. 241-42.
---------------------------------------------------------------------------
\61\ Tr. 216.
\62\ Although he directed his initial comments regarding
remedial steps to Farmacia Nueva, Moro-Perez testified that the same
measures would be taken at Best Pharma. Tr. 245-46.
---------------------------------------------------------------------------
The testimony of Moro-Perez cannot be deemed entirely credible.
There were times during his testimony where he offered answers that
were intentionally equivocal and made no sense. For example, when
asked why no increased scrutiny or contact resulted from ``many''
instances where Dr. Aguilar's patients attempted to fill bad
prescriptions at the pharmacies and were refused, Moro-Perez
responded that no action was taken because the percentages were very
low and because he knew Aguilar's licenses were current.\63\ These
answers were inconsistent with his earlier recognition that the
responsibility for accurate dispensing rests with the
[[Page 28680]]
pharmacy,\64\ bear little relation to the question, and are the
obvious fruit of intentional equivocation. In like manner, Moro-
Perez initially testified that when claims were submitted to
insurance carriers, the pharmacies would receive a ``confirmation''
that the prescribers had valid licenses. Tr. 196. Later in his
testimony, it became apparent that the ``confirmation'' from the
insurance providers informed the pharmacy staff only that the
reimbursement claim would be approved. Tr. 200-01. It was the same
sort of equivocation employed when Moro-Perez testified that
pharmacy staff would check prescriber licenses through RX30, a
system that depended exclusively on input from staff who depended
exclusively on the fact that claims were being approved.\65\ When
questioned as to why, at the hearing, he was able to produce scrips
that were apparently not forwarded to DEA as part of his compliance
with the Request for Information, Moro-Perez never explained why the
new scrips were so late in coming or suggested that DEA did not have
the complete set he forwarded, but merely continued to insist that
he ``provided them everything that the [RX30] system provided, and
all the prescriptions were submitted.'' Tr. 208. These answers
presented inconsistencies, were less than complete, and were
certainly less than candid. Similarly, when explaining his rationale
for answering ``no'' to application Question 2, Moro-Perez adhered
to the position that the nature of the June 2012 Farmacia Nueva
surrender was somehow altered by the dismissal of a criminal
indictment against him (not the pharmacies) that occurred three
months earlier. It is inescapably illogical to insist that an event
which occurred prior to the surrender would somehow alter its
characterization from ``for cause'' to otherwise. Inasmuch as Moro-
Perez is an educated and experienced pharmacist, to suggest that
this non sequitor was the result of naivet[eacute] or inexperience
is patently unreasonable. The answer was deceitful, intentionally
so, and he well knew it. Similarly, when explaining his position on
the negative response entered on Question 2, Moro-Perez qualified
his testimony by twice adding that DEA knew about his arrest. Tr.
216, 218-19. Again, this is a non-answer, since the arrest, the
indictment dismissal, and DEA's knowledge about those events do not
bear any relation to the issue he was addressing, to wit, the ``no''
response to the question of whether the Respondents' registrations
had been surrendered for cause. Thus, Moro-Perez tendered testimony
that was at times implausible and inconsistent, and he substituted
intentional equivocation for detail. His testimony, then, cannot be
deemed fully credible in this recommended decision. That is not to
say that all of his testimony is not worthy of belief, but in those
places where his testimony conflicts with other record evidence, it
must be considered with heightened vigilance.\66\
---------------------------------------------------------------------------
\63\ Tr. 250-54.
\64\ Tr. 194.
\65\ Tr. 229-31.
\66\ The Government has argued in its closing brief that Moro-
Perez ``frequently gave evidence that directly conflicted with the
Government's evidence.'' ALJ Ex. 23, at 27. This misses the point.
It is not that his testimony is lacking in credibility because it is
incongruous with testimony elicited by the Government, but, rather,
it is worthy of diminished credibility based on a dispassionate
review of its own merits.
---------------------------------------------------------------------------
The Respondents' Evidence
In addition to the testimony from Moro-Perez that was elicited
on cross examination, the Respondents' presented the testimony of
Mr. Nelson Vale. Tr. 268. Mr. Vale testified that he has worked at
Farmacia Nueva since February 2009 and has served as the chief
pharmacist since August 2010. Tr. 272. Vale acknowledged that he was
employed at the pharmacy during the time period when it was
dispensing controlled substances on Dr. Aguilar's expired COR. Tr.
281. Before working at Farmacia Nueva, he worked as a pharmacist and
chief pharmacist at two Walgreens pharmacies. Tr. 272-73. Vale
testified that his role at Farmacia Nueva requires ensuring ``that
the medication is dispensed properly'' and that the pharmacy
maintains a correct inventory. Tr. 273. Consistent with other
witnesses who have testified on the subject, Vale stated that the
pharmacy uses the RX30 program, that the system automatically
assigns dispensing event numbers to each prescription, and that the
program cannot be manipulated to change the dispensing event numbers
once they have been assigned. Tr. 273-74. Vale testified that a
prescription dispensing event can be looked up on the RX30 program
by its dispensing event number, by the type of medication, or by the
doctor's name. Tr. 276. Further, Vale indicated that he could
identify all prescriptions in the system that were authorized by Dr.
Aguilar. Tr. 277. He also stated that, ``to the best of his
knowledge,'' no one has ever tried to manipulate the numbers for
Farmacia Nueva's RX30 program, that he has never tried to do so, and
that he was never directed to do so. Tr. 276-77.
Vale described the dispensing process at Farmacia Nueva. Tr.
274. Vale's account of FN pharmacy operations was in substantial
accord to the explanation provided by his boss, Moro-Perez. Tr. 274-
75.
Vale also testified that he and Moro-Perez have discussed
remedial improvements they intend to implement if Farmacia Nueva is
granted its COR. Tr. 278. Among their plans is the future pursuit of
a strict policy regarding dispensing controlled substances, a
``program'' \67\ that will alert pharmacy personnel when a
physician's license is expired in real time, and a plan to have
staff access the DEA Web site at least once a month to ascertain
prescriber COR status. Tr. 278-79.
---------------------------------------------------------------------------
\67\ No further explanation was offered as to what sort of a
``program'' is contemplated, how it would work, or how it would
alert pharmacy staff when a prescriber's COR expires. This proposal
was described by the witness in terms that seemed more ethereal than
concrete.
---------------------------------------------------------------------------
Vale conceded that these safety measures could have been
implemented before the execution of the search warrant on November
30, 2011. Tr. 280. He also admitted that, since November 30, 2011,
he has not asked DEA whether they provide training against illegal
distribution and he has not taken any training regarding anti-
diversion efforts or anti-illegal distribution efforts. Tr. 281-82.
Vale likewise acknowledged that the planned remedial measures stem
from enforcement actions already taken by DEA as well as a desire to
avoid the specter of future sanctions. Tr. 282.
Mr. Vale's testimony was sufficiently plausible, detailed, and
internally consistent to be deemed credible in this recommended
decision.
Additional facts required for a disposition of this case are set
forth below.
The Analysis
The Government alleges two bases for denial of the Respondents'
applications: (1) that Respondents' owner/president, Moro-Perez,
materially falsified the Respondents' applications for CORs; and (2)
that the granting of the Respondents' applications would be
inconsistent with the public interest. These bases are addressed
below, in seriatim.
Material Falsification
The Government has alleged that the Respondents' respective
applications for CORs should be denied because each application
contains a material falsification,\68\ which, under the CSA, is a
ground for a sanction against an existing COR. 21 U.S.C. 824(a)(1).
The Agency may revoke or suspend a DEA COR upon a finding that the
registrant has materially falsified any application filed to obtain
it. Id. Under the theory that the law would not require issuance of
a COR that should be revoked ab initio, a long line of Agency
precedent has consistently held that the grounds for the revocation
or suspension of an existing registration are also properly
considered in adjudicating an application for a COR. The Lawsons,
Inc., 72 FR 74334, 74335 (2007); Samuel S. Jackson, D.D.S., 72 FR
23848, 23852 (2007); Dan E. Hale, D.O., 69 FR 69402, 69405-06
(2004); Anthony D. Funches, 64 FR 14267, 14268 (1999); Alan R.
Schankman, M.D., 63 FR 45260, 45260 (1998); Kuen H. Chen, M.D., 58
FR 65401, 65402 (1993). Thus, in the same way that materially
falsifying an application provides an independent basis for revoking
an existing registration without proof of any other misconduct, it
also provides an independent and adequate ground for denying an
application for a new COR. The Lawsons, 72 FR at 74338. It is
settled Agency precedent that ``[s]ince DEA must rely on the
truthfulness of information supplied by applicants in registering
them to handle controlled substances, falsification cannot be
tolerated,'' Bobby Watts, M.D., 58 FR 46995, 46995 (1993), and that
a ``cavalier attitude toward the importance of accurately executing
[a registration] application suggests a lack of concern for the
responsibilities inherent in a DEA registration.'' Chen, 58 FR at
65402.
---------------------------------------------------------------------------
\68\ ALJ Ex. 4, at 3-5.
---------------------------------------------------------------------------
To serve as a basis for an adverse application determination, it
is incumbent upon the Government to establish that an applicant has
provided false information in his or her application, and that the
false
[[Page 28681]]
information provided is material. 21 U.S.C. 824(a)(1). The
Government must prove that the false information is material by
``clear, unequivocal, and convincing'' evidence. Hoi Y. Kam, M.D.,
78 FR 62694, 62696 (2013) (quoting Kungys v. United States, 485 U.S.
759, 772 (1988)). A material falsification requires a showing that a
statement tendered in a COR application is one that `` `has a
natural tendency to influence, or was capable of influencing, the
decision of the decisionmaking body to which it was addressed.' ''
The Lawsons, 72 FR at 74338 (citing Kungys, 485 U.S. at 770); see
also Robles v. United States, 279 F.2d 401, 404 (9th Cir. 1960),
cert. denied, 365 U.S. 836 (1961). Proof that any Government
decision, including the decision regarding the registration
application, was actually influenced is not required. The Lawsons,
72 FR at 74339. The touchstone is whether the statement had the
capacity to influence. See United States v. Alemany Rivera, 781 F.2d
229, 234 (1st Cir. 1985), cert. denied, 475 U.S. 1086 (1986); Alvin
Darby, M.D., 75 FR 26993, 26998 (2010). Since a materiality
determination turns on an analysis of the relevant substantive law,
Kungys, 485 U.S. at 772, the allegedly false statement must be
analyzed in the context of the application requirements sought by
DEA and provided by the applicant. The falsification must relate to
a ground that could affect the decision, not merely a basis upon
which an investigation could be initiated. Darryl J. Mohr, M.D., 77
FR 34998, 34998 n.2 (2012); Harold Edward Smith, M.D., 76 FR 53961,
53964 (2011); Scott C. Bickman, M.D., 76 FR 17694, 17701 (2011). The
entire application will be examined to determine whether there was
an intention to deceive the agency. See Jackson, 72 FR at 23852-53.
Furthermore, the correct analysis hinges on whether the
applicant knew or should have known that he or she submitted a false
application. Hale, 69 FR at 69406; The Drugstore, 61 FR 5031, 5032
(1996); Watts, 58 FR at 46995. Although even an unintentional
falsification can serve as a basis for adverse action regarding a
registration, lack of intent to deceive and evidence that the
falsification was not intentional or negligent are all relevant
considerations. Funches, 64 FR at 14268.
The Government has alleged that each of the Respondent
pharmacies surrendered a COR for cause and that, when Moro-Perez
stated otherwise on their COR applications, he knew or should have
known that his statement in this regard was untrue. In their closing
brief, the Respondents assert that ``the Government did not submit
any evidence to prove that Farmacia Nueva's registration was revoked
or surrendered (for cause).'' ALJ Ex. 24, at 22. Although the record
evidence tells a story somewhere between the parties' contentions,
it is the Government's view that is better supported.
The DEA regulations related to COR termination provide, in pertinent
part, that: In the case of a surrender, termination shall occur upon
receipt by any [DEA employee] of a duly executed DEA Form 104 or any
signed writing indicating the desire to surrender a registration.
21 CFR 1301.52(a).
The evidence of record here clearly demonstrates that Best
Pharma surrendered its registration through the execution of a DEA
Form 104. Gov't Ex. 14, at 1. However, with respect to Farmacia
Nueva, the Government has tendered neither a DEA Form 104 nor ``any
signed writing indicating a desire to surrender a registration.'' 21
CFR 1301.52(a) (emphasis supplied). The Government tendered an
unsigned email exchange and brought no witness with any personal
knowledge about the circumstances underlying the exchange or even
one able to identify the participants. However, the existence and
validity of the Farmacia Nueva surrender was never challenged at the
hearing. Additionally, the identification (through official notice
regarding Government counsel and notice of appearance of FN's
current counsel) of the names on the face of the email traffic,
coupled with the fact that Farmacia Nueva filed an application for a
new COR, provide a sufficiently reliable basis upon which to
conclude that the COR was surrendered and that Farmacia Nueva
accepts that as fact. In any event, the language employed in the
surrender/termination provision \69\ cited above appears more
focused on fixing an effective date for when a surrender ripens into
a termination than on circumscribing the exclusive means to
surrender a COR.\70\
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\69\ 21 CFR 1301.52(a).
\70\ The Agency Final Rule promulgating the modification stated
that the language is designed to ``clarify that a voluntary
surrender of a registration signed by a registrant using any format
has the legal effect of immediately terminating the registrant's
registration without any further action by DEA.'' Voluntary
Surrender of Certificate of Registration, 76 FR 61563, 61563 (Oct.
5, 2011). Thus, the primary focus appears to have been on providing
clarity regarding the date upon which the surrender became
effective, not the nature of the instruments required to make the
surrender valid.
---------------------------------------------------------------------------
Whether the surrenders were ``for cause'' is yet even more
nuanced. Neither the Best Pharma Surrender Form nor Farmacia Nueva's
email exchange contain the words ``for cause.'' Gov't Ex. 14. In
fact, the only mention of a surrender ``for cause'' is set forth in
two regulatory sections devoted to security matters, each of which
provides that:
For purposes of [the two security subsections], the term ``for
cause'' means a surrender in lieu of, or as a consequence of, any
federal or state administrative, civil, or criminal action resulting
from an investigation of [a current or prospective employee's]
handling of controlled substances. . . .
21 CFR 1301.76(a), 1309.72(a). There is no ``for cause'' definition
set forth in the regulations related to COR surrender. 21 CFR
1301.52.
Agency precedent has looked into the circumstances surrounding a
surrender to determine whether it was properly characterized as
being ``for cause'' and whether a registrant is properly charged
with understanding that characterization. See, e.g., Shannon L.
Gallentine, D.P.M., 76 FR 45864, 45866 (2011) (holding that the
signing of a DEA Form 104 during a search warrant execution where
the investigator was asking questions about prescribing practices
and lack of documentation to justify prescriptions constituted
circumstances sufficient to establish that COR applicant knew or
should have known that his COR surrender, which occurred two years
earlier, was ``for cause''); see also Robert M. Brodkin, D.P.M., 77
FR 73678, 73679 (2012) (holding that an executed DEA Form 104 and
subsequent federal and state disciplinary proceedings were
circumstances sufficient to characterize a surrender as ``for
cause''). The Best Pharma Surrender Form was executed by Moro-Perez
while the investigators were executing a search warrant at the
pharmacy, and they explained to him that the Form 104 ``dealt with
the regulatory matter [and that i]f he chose not to sign the form
then [DEA] would move for an order to show cause proceeding.'' Tr.
177. Thus, unrefuted testimony establishes that DI Taylor, through
an interpreter, told Moro-Perez that the surrender related only to
the administrative proceedings, and not any criminal case. There was
no evidence as to why Moro-Perez would not take the DI at his word
that the surrender related only to administrative issues, not a
criminal case. The Farmacia Nueva surrender was effected by counsel
via email while administrative revocation proceedings were
apparently underway before the Agency. Gov't Ex. 14, at 2-4. The
circumstances surrounding each surrender provided sufficient notice
to Moro-Perez that DEA was intent upon seeking revocation based on
what its agents perceived to be serious regulatory violations. While
the record is not optimal in this regard, there is sufficient,
unrefuted evidence \71\ to establish that the BP and FN CORs were
surrendered for cause and that Moro-Perez had reason to know this
was the case.\72\
---------------------------------------------------------------------------
\71\ In their closing brief, the Respondents argue that DI
Antoine testified that he did not know what ``for cause'' meant. ALJ
Ex. 24, at 13, 23. Even the record citation (Tr. 105-06) provided by
the Respondents makes clear that Antoine testified that he did not
know why the words ``for cause'' were in parentheses, not that he
did not know what the phrase meant. In any event, highlighting this
point does nothing to further the Respondents' position. If
placement of the phrase ``for cause'' somehow renders it optional or
diminishes its import, that would leave Question 2 as asking whether
a COR had ever been surrendered (for any reason). A ``no'' answer
tendered in response to a question interpreted thus would be false
here irrespective of the Respondents' illogical association of the
``for cause'' clause to his indictment dismissal.
\72\ In its brief, the Government points out that Moro-Perez
``never contacted [DI Antoine] to inquire as to what `for cause'
meant.'' ALJ Ex. 23, at 6. To be clear, there was no burden on Moro-
Perez to contact DEA to ascertain the meaning of the language in the
BP voluntary surrender form or the consequences of the surrender
effected by counsel during the FN administrative proceedings. The
language and circumstances of the voluntary surrender were
sufficiently clear to find that the surrender here was ``for cause''
and that Moro-Perez knew it, whether he made inquiry or not. If the
language and circumstances were not sufficiently clear, the absence
of any efforts by Moro-Perez to contact DI Antoine would not advance
the Government's case in any measure.
---------------------------------------------------------------------------
The COR surrenders for cause that were errantly denied in
Question 2 of the Respondents' applications were founded in
controlled substance recordkeeping and corresponding responsibility
violations
[[Page 28682]]
uncovered by DEA in the course of a criminal search warrant
execution, and those violations would have supported the denial of
the Respondents' applications. See Kam, 78 FR at 62697 & n.7
(holding that a material falsification, to be material, must be such
that the truthful disclosure of the facts would have supported the
denial of the Respondent's application). One of the CORs was
surrendered during the course of DEA administrative hearing
procedures. As discussed more fully, infra, allegations that the
dispensing of controlled substance prescriptions authorized by an
unregistered physician that resulted in their surrender for cause
provided ``actionable grounds'' sufficient to merit a COR sanction.
Kam, 78 FR at 62697. Hence, it is beyond argument that the alleged
falsifications, if established, ``had the capacity to influence the
Agency's decision to grant [the] application[s]'' and, thus, were
material. Id.
Regarding Moro-Perez's position that he was confused about the
whether the surrenders retained their ``for cause'' character based
on his indictment dismissal, the timeline of events is key. Moro-
Perez testified that he has owned Farmacia Nueva and Best Pharma
since each establishment was opened. Tr. 192, 222, 238. A COR was
issued to Farmacia Nueva in 2005 and to Best Pharma in 2010. Gov't
Exs. 2, 9. The Best Pharma Surrender Form was executed by Moro-Perez
\73\ on November 30, 2011.\74\ Gov't Ex. 14, at 1. The DEA COR
applications that are the subject of these proceedings include four
liability questions that require the applicant to choose a ``yes''
or ``no'' answer. The second liability question (Liability Question
2) contains the following language:
---------------------------------------------------------------------------
\73\ Moro-Perez testified at the hearing with the benefit of a
Spanish-language interpreter. Tr. 191. Uncontroverted record
evidence establishes that the Best Pharma Surrender Form was read
and explained to Moro-Perez in Spanish at the time it was executed.
Tr. 175-78. At the hearing, the Respondents raised no issue
regarding any impediment presented by language regarding Moro-
Perez's execution of the Best Pharma Surrender Form or the COR
applications he filed on their behalf. The Farmacia Nueva COR
surrender was effected via email by its present counsel, who
possessed sufficient command of the Spanish language to communicate
with Moro-Perez throughout these proceedings and to offer numerous
challenges during the hearing to translations supplied by the
official hearing interpreter. See, e.g., Tr. 195-96, 200, 206, 214-
15, 220, 224. Thus, this record does not support any level of
cognizable confusion on the part of Moro-Perez borne of a language
barrier in understanding the COR surrenders or the filed
applications.
\74\ The Government also provided a certification by the Chief
of the DEA Registration and Program Support Section (Farmacia Nueva
Certification) that the same voluntary surrender took place on
December 14, 2011. Gov't Ex. 9, at 2. Although no explanation was
offered for the disparity, the date variance does not impact the
outcome of the case.
Has the applicant ever surrendered (for cause) or had a federal
controlled substance registration revoked, suspended, restricted or
---------------------------------------------------------------------------
denied, or is any such action pending?
Gov't Exs. 1, 8. Moro-Perez included a ``no'' response to Liability
Question 2 on the online application he submitted for each
Respondent. Gov't Exs. 1, 8. Notwithstanding the less-than-ideal
sentence structure in Liability Question 2, since both CORs were
surrendered for cause by Moro-Perez prior to the filing of the
applications, the ``no'' response in each application is
indisputably untrue. The principal issue remaining is whether the
negative response entered by Moro-Perez on each application was
objectively reasonable.
Moro-Perez testified that, while he now acknowledges that he
should have answered the surrender for cause questions in the
affirmative, he misunderstood the question at the time, and there
was never an intention on his part to deceive DEA. Tr. 216-17.
Specifically, Moro-Perez posits that the dismissal of an indictment
against him led him to believe that the surrenders of the two CORs
by the Respondents were not for cause. Tr. 211-13. When viewed
against a backdrop of the timeline of events delineated in the
evidence of record, Moro-Perez's explanation makes no sense.
As set forth in the table below, Moro-Perez surrendered the Best
Pharma COR at the time of his arrest during the early morning hours
of November 30, 2011. Tr. 72, 175, 181; Gov't Exs. 2, at 2, 14, at
2-4. The indictment referenced by Moro-Perez was dismissed on March
23, 2012, some four months later. Stip. 8; Resp't Ex. 3; Tr. 212.
The Farmacia Nueva COR was surrendered for cause by counsel on June
28, 2012, three months after the indictment dismissal and seven
months following the Best Pharma surrender for cause. Gov't Exs. 2,
14. The online COR applications that are the subject of these
proceedings were submitted by Moro-Perez on October 10, 2012, eleven
months after the for-cause surrender of Best Pharma's COR, four
months following the Farmacia Nueva for-cause surrender, and (most
significantly) seven months following the dismissal of the
indictment against Moro-Perez. Gov't Exs. 1, 8; Stips. 5, 6.
------------------------------------------------------------------------
Date Event
------------------------------------------------------------------------
November 30, 2011....................... Best Pharma COR Surrender Form
Executed by Moro-Perez.
March 23, 2012.......................... Indictment Against Moro-Perez
Dismissed.
June 28, 2012........................... Farmacia Nueva COR Surrendered
by Counsel via Email.
October 10, 2012........................ Respondents' COR Applications
Submitted by Moro-Perez.
------------------------------------------------------------------------
As is apparent in the table above, the indictment dismissal, the
single event to which Moro-Perez ascribes the confusion that spawned
his false answers on the COR applications, occurred between the for-
cause surrenders of Best Pharma and Farmacia Nueva. The Farmacia
Nueva surrender happened after the indictment dismissal \75\ and was
effected through counsel. In effect, Moro-Perez testified that he
believed that the dismissal of the criminal charges (against
himself) somehow washed away the sins of Best Pharma, resulting in
what had previously been a surrender for cause being transformed
into a surrender not for cause. Then, as if this gift was not good
enough, he also asserted that not only did the dismissal of the
indictment (against himself) forgive the sins of one of his
pharmacies, but somehow it preemptively pardoned another pharmacy
that surrendered for cause after the date of dismissal by
characterizing that surrender as ``not for cause.'' But this cannot
be. If the dismissal of indictment really cleaned up all issues
surrounding Moro-Perez and his pharmacies, why would there even need
to be a subsequent surrender of Farmacia Nueva's COR? And, in light
of the subsequent surrender of Farmacia Nueva's COR, why would it be
reasonable to believe that the dismissal of the criminal charges
against Moro-Perez magically deemed a subsequent surrender for cause
as a surrender not for cause?
---------------------------------------------------------------------------
\75\ Gov't Ex. 14, at 2.
---------------------------------------------------------------------------
There is simply no logical manner in which a rational person
(much less an educated, experienced registrant holder) would or
could reason that a surrender that was ``for cause'' when effected,
could somehow morph into one that was not ``for cause'' by an action
(the dismissal) that preceded it. Even if it were assumed, arguendo,
that Moro-Perez's account that he subjectively believed the
dismissal of an indictment against him (not the Respondents) could
somehow change the character of the surrender for cause, no
indictment dismissal or other operative fact occurred after the
surrender of Farmacia Nueva's COR that could alter its character.
Thus, even if credit were afforded to Moro-Perez's account that it
was the dismissal of the indictment against him that led him to
believe that the surrenders of the CORs were not for cause, this
theory of ignorance, even in its best (most na[iuml]ve) light, only
covers the Best Pharma surrender that was signed before the
indictment dismissal, not the Farmacia Nueva surrender, which
occurred three months after the dismissal. Even putting aside the
reality that, as a veteran registrant holder, Moro-Perez had the
experience and bore the responsibility to understand the meaning of
his answers to the applications he was filing, he failed to present
a logical theory of subjective ignorance that corresponds with the
facts. At the hearing, Moro-Perez acknowledged that he understood
the question concerning the surrender for cause and his response to
it. Tr. 210-11. The indictment dismissal occurred prior to the
surrender for cause, and there is simply no rational view of the
facts that could lead any reasonable person, much less an
experienced COR holder, to believe that the surrender was suddenly
no longer ``for cause'' due to a dismissal that came first. It is
not insignificant that Moro-Perez (not the Respondents) was
captioned in the indictment, and, given the timeline of events, the
dismissal added no level of cognizable confusion here. Moro-Perez's
assertions to the contrary are simply not credible. The ``provision
of truthful information is absolutely essential to effectuating
th[e] statutory purpose'' of determining whether the granting of an
application is consistent with the public interest. Darby, 75 FR at
26998 (quoting Peter A. Ahles, M.D., 71 FR
[[Page 28683]]
50097, 50098 (2006)); see VI Pharmacy, 69 FR 5584, 5585 (2004);
Terrence E. Murphy, M.D., 61 FR 2841, 2846 (1996). This finding,
standing alone, is sufficient to recommend denial of both
applications. Cf. Gallentine, 76 FR at 45866. It is clear that the
Respondents, through their common owner, Moro-Perez, knew or should
have known \76\ that the answers provided to Question 2 were false,
and that their COR applications contained material falsifications.
The absence of any logical basis for confusion and the past
experience of Moro-Perez as a registrant holder and pharmacist
preponderantly support a finding that the misrepresentations were
intentional, not negligent.\77\ The Respondents are accountable for
the actions of Moro-Perez as their owner/president,\78\ and, even
standing alone, the denial of the Respondents' COR applications is
adequately supported on this record based on the material
falsifications set forth in the filed applications.
---------------------------------------------------------------------------
\76\ See Hale, 69 FR at 69406; The Drugstore, 61 FR 5031, 5032
(1996); Watts, 58 FR at 46995.
\77\ See Funches, 64 FR at 14268.
\78\ See Top Rx Pharmacy, 78 FR 26069, 26081-82 (2013); EZRX,
LLC, 69 FR 63178, 63181 (2004); Plaza Pharmacy, 53 FR 36910, 36911
(1988); Syncon Pharm., Inc., 53 FR 15155, 15156 (1988); see also
Neil Labs., Inc. v. Ashcroft, 217 F. Supp. 2d 80, 87-88 (D.D.C.
2002).
---------------------------------------------------------------------------
Public Interest Determination: The Standard
The Government also seeks denial of the Respondents' respective
COR applications based on a theory that each has committed acts
inconsistent with the public interest. Pursuant to 21 U.S.C. 823(f),
the Administrator \79\ is permitted to deny an application for a COR
if persuaded that an applicant ``has committed such acts as would
render [its] registration . . . inconsistent with the public
interest.'' \80\ The following factors have been provided by
Congress in determining ``the public interest'':
\79\ This authority has been delegated pursuant to 28 CFR
0.100(b) and 0.104.
\80\ 21 U.S.C. 824(a)(4).
---------------------------------------------------------------------------
(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.
21 U.S.C. 823(f) (2006 & Supp. III 2010).
``[T]hese factors are considered in the disjunctive.'' Robert A.
Leslie, M.D., 68 FR 15227, 15230 (2003). Any one or a combination of
factors may be relied upon, and when exercising authority as an
impartial adjudicator, the Administrator may properly give each
factor whatever weight she deems appropriate in determining whether
an application for a registration should be denied. Id.; David H.
Gillis, M.D., 58 FR 37507, 37508 (1993); see Morall v. DEA, 412 F.3d
165, 173-74 (D.C. Cir. 2005); Joy's Ideas, 70 FR 33195, 33197
(2005); Henry J. Schwarz, Jr., M.D., 54 FR 16422, 16424 (1989).
Moreover, the Agency is ``not required to make findings as to all of
the factors,'' Hoxie v. DEA, 419 F.3d 477, 482 (6th Cir. 2005);
Morall, 412 F.3d at 173, and is not required to discuss
consideration of each factor in equal detail, or even every factor
in any given level of detail. Trawick v. DEA, 861 F.2d 72, 76 (4th
Cir. 1988) (holding that the Administrator's obligation to explain
the decision rationale may be satisfied even if only minimal
consideration is given to the relevant factors and that remand is
required only when it is unclear whether the relevant factors were
considered at all). The balancing of the public interest factors
``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. . .
.'' Jayam Krishna-Iyer, 74 FR 459, 462 (2009).
In the adjudication of an application for a DEA COR, the DEA has
the burden of proving that the requirements for registration are not
satisfied. 21 CFR 1301.44(d). Where the Government has sustained its
burden and established that an applicant has committed acts
inconsistent with the public interest, that applicant must present
sufficient mitigating evidence to provide assurance that it can be
entrusted with the responsibility commensurate with such a
registration. Steven M. Abbadessa, D.O., 74 FR 10077, 10078, 10081
(2009); Medicine Shoppe-Jonesborough, 73 FR 364, 387 (2008);
Jackson, 72 FR at 23853. Where the Government has met this burden,
the registrant must show an acceptance of responsibility for its
misconduct and a demonstration that corrective measures have been
undertaken to prevent the re-occurrence of similar acts. Jeri
Hassman, M.D., 75 FR 8194, 8236 (2010). In determining whether and
to what extent a sanction is appropriate, consideration must be
given to both the egregiousness of the offense established by the
Government's evidence and the Agency's interest in both specific and
general deterrence. David A. Ruben, M.D., 78 FR 38363, 38364, 38385
(2013).
Normal hardships to the practitioner, and even the surrounding
community, which are attendant upon the denial of a registration,
are not a relevant consideration. Linda Sue Cheek, M.D., 76 FR
66972, 66972-73 (2011); Gregory D. Owens, D.D.S., 74 FR 36751, 36757
(2009). The Agency's conclusion that past performance is the best
predictor of future performance has been sustained on review in the
courts, Alra Labs., Inc. v. DEA, 54 F.3d 450, 452 (7th Cir. 1995),
as has the Agency's consistent policy of strongly weighing whether a
registrant who has committed acts inconsistent with the public
interest has accepted responsibility and demonstrated that he or she
will not engage in future misconduct, Hoxie, 419 F.3d at 483; see
also Ronald Lynch, M.D., 75 FR 78745, 78754 (2010) (holding that the
Respondent's attempts to minimize misconduct undermined acceptance
of responsibility); George Mathew, M.D., 75 FR 66138, 66140, 66145,
66148 (2010); George C. Aycock, M.D., 74 FR 17529, 17543 (2009);
Abbadessa, 74 FR at 10078; Krishna-Iyer, 74 FR at 463; Medicine
Shoppe, 73 FR at 387.
While the burden of proof at this administrative hearing is a
preponderance-of-the-evidence standard, see Steadman v. SEC, 450
U.S. 91, 100-02 (1981), the Agency's ultimate factual findings will
be sustained on review to the extent they are supported by
``substantial evidence.'' Hoxie, 419 F.3d at 481. While ```the
possibility of drawing two inconsistent conclusions from the
evidence''' does not limit the Administrator's ability to find facts
on either side of the contested issues in the case, Shatz v. U.S.
Dep't of Justice, 873 F.2d 1089, 1092 (8th Cir. 1989) (quoting
Trawick, 861 F.2d at 77), all ``important aspect[s] of the
problem,'' such as a respondent's defense or explanation that runs
counter to the Government's evidence, must be considered, Wedgewood
Vill. Pharmacy v. DEA, 509 F.3d 541, 549 (D.C. Cir. 2007); see
Humphreys v. DEA, 96 F.3d 658, 663 (3d Cir. 1996). The ultimate
disposition of the case ``must be `in accordance with' the weight of
the evidence, not simply supported by enough evidence `to justify,
if the trial were to a jury, a refusal to direct a verdict when the
conclusion sought to be drawn from it is one of fact for the
jury.''' Steadman, 450 U.S. at 99 (quoting Consolo v. Fed. Mar.
Comm'n, 383 U.S. 607, 620 (1966)).
Regarding the exercise of discretionary authority, the courts
have recognized that gross deviations from past agency precedent
must be adequately supported, Morall, 412 F.3d at 183, but mere
unevenness in application does not, standing alone, render a
particular discretionary action unwarranted. Chein v. DEA, 533 F.3d
828, 835 (D.C. Cir. 2008) (citing Butz v. Glover Livestock Comm'n
Co., 411 U.S. 182, 188 (1973)), cert. denied, 555 U.S. 1139 (2009).
It is well settled that since the Administrative Law Judge has had
the opportunity to observe the demeanor and conduct of hearing
witnesses, the factual findings set forth in this recommended
decision are entitled to significant deference, Universal Camera
Corp. v. NLRB, 340 U.S. 474, 496 (1951), and that this recommended
decision constitutes an important part of the record that must be
considered in the Agency's final decision, Morall, 412 F.3d at 179.
However, any recommendations set forth herein regarding the exercise
of discretion are by no means binding on the Administrator and do
not limit the exercise of that discretion. 5 U.S.C. 557(b) (2006);
River Forest Pharmacy, Inc. v. DEA, 501 F.2d 1202, 1206 (7th Cir.
1974); Attorney General's Manual on the Administrative Procedure Act
Sec. 8(a) (1947).
Factors 1, 3, and 5: The Recommendation of the Appropriate State
Licensing Board or Professional Disciplinary Authority; Any Conviction
Record Under Federal or State Laws Relating to the Manufacture,
Distribution, or Dispensing of Controlled Substances; Such Other
Conduct Which May Threaten the Public Health and Safety
Regarding Factor 1, the record contains no evidence of a
recommendation by any state
[[Page 28684]]
licensing board, body, or authority related to the Respondent
pharmacies. However, the fact that a state has not acted against a
registrant's state authority is not dispositive in this
administrative determination as to whether continuation of its
registration is consistent with the public interest. Patrick W.
Stodola, M.D., 74 FR 20727, 20730 (2009); Krishna-Iyer, 74 FR at
461. It is well-established Agency precedent that ``state
[authority] is a necessary, but not sufficient condition for
registration.'' John H. Kennedy, M.D., 71 FR 35705, 35708 (2006)
(quoting Leslie, 68 FR at 15230). DEA bears an independent
responsibility to determine whether a registration is in the public
interest. Mortimer B. Levin, D.O., 55 FR 8209, 8210 (1990). The
ultimate responsibility to determine whether a registration is
consistent with the public interest has been delegated exclusively
to the DEA, not to entities within state government. Edmund Chein,
M.D., 72 FR 6580, 6590 (2007), aff'd, Chein v. DEA, 533 F.3d 828
(D.C. Cir. 2008), cert. denied, 555 U.S. 1139 (2009). Congress
vested authority to enforce the CSA in the Attorney General, not
state officials. Stodola, 74 FR at 20735 n.31. Thus, on these facts,
the absence of a recommendation by a state licensing board does not
weigh for or against a determination as to whether granting the
Respondents' applications would be consistent with the public
interest. See Roni Dreszer, M.D., 76 FR 19434, 19444 (2011) (``[T]he
fact that the record contains no evidence of a recommendation by a
state licensing board does not weigh for or against a determination
as to whether continuation of the Respondent's DEA certification is
consistent with the public interest.'').
Regarding the third factor (convictions relating to the
manufacture, distribution, or dispensing of controlled substances),
the record in this case does not contain evidence that the
Respondents, their owner, or any pharmacist or key employee of
either pharmacy has been convicted of (or charged with) a crime
related to any of the controlled substance activities designated in
the CSA.\81\
---------------------------------------------------------------------------
\81\ The parties stipulated that Moro-Perez was indicted, but
that the indictment was ultimately dismissed. Stip. 8; Resp't Ex. 3.
The indictment itself was not offered into the record. The mere fact
that Moro-Perez was the subject of a criminal indictment does not
establish culpability for the acts charged by the indictment, and
the dismissal in this matter has been considered only under the
narrow mens rea theory upon which the Respondents offered it. See
Paul Weir Battershell, N.P., 76 FR 44359, 44364 n.17 (2011)
(concluding that an indictment is an instrument containing
accusations, not proof of a respondent's actions).
---------------------------------------------------------------------------
The standard of proof in a criminal case is more stringent than
the standard required at an administrative proceeding, and the
elements of both federal and state crimes relating to controlled
substances are not always co-extensive with conduct that is relevant
to a determination of whether registration is within the public
interest. Still, evidence that a registrant has been convicted of
crimes related to controlled substances is a factor to be evaluated
in reaching a determination as to whether he or she should be
entrusted with a DEA certificate. The probative value of an absence
of any evidence of criminal prosecution is somewhat diminished by
the myriad of considerations that are factored into a decision to
initiate, pursue, and dispose of criminal proceedings by federal,
state, and local prosecution authorities. See Robert L. Dougherty,
M.D., 76 FR 16823, 16833 n.13 (2011); Dewey C. Mackay, M.D., 75 FR
49956, 49973 (2010) (``[W]hile a history of criminal convictions for
offenses involving the distribution or dispensing of controlled
substances is a highly relevant consideration, there are any number
of reasons why a registrant may not have been convicted of such an
offense, and thus, the absence of such a conviction is of
considerably less consequence in the public interest inquiry.''),
aff'd, Mackay v. DEA, 664 F.3d 808 (10th Cir. 2011); Ladapo O.
Shyngle, M.D., 74 FR 6056, 6057 n.2 (2009). Therefore, on the
present record, the absence of criminal convictions (Factor 3), like
the absence of a recommendation from any state licensing authorities
(Factor 1), militates neither for nor against the COR denials sought
by the Government.
The fifth statutory public interest factor directs consideration
of ``[s]uch other conduct which may threaten the public health and
safety.'' 21 U.S.C. 823(f)(5) (emphasis added). Existing Agency
precedent has long held that this factor encompasses ``conduct which
creates a probable or possible threat (and not only an actual
[threat]) . . . to public health and safety.'' Dreszer, 76 FR at
19434 n.3; Michael J. Aruta, M.D., 76 FR 19420, 19420 n.3 (2011);
Beau Boshers, M.D., 76 FR 19401, 19402 n.4 (2011); Jacobo Dreszer,
76 FR 19386, 19386 n.3 (2011). Agency precedent has generally
embraced the principle that any conduct that is properly the subject
of Factor Five must have a nexus to controlled substances and the
underlying purposes of the CSA. Terese, Inc., 76 FR 46843, 46848
(2011); Tony T. Bui, M.D., 75 FR 49979, 49989 (2010) (stating that
prescribing practices related to a non-controlled substance such as
human growth hormone may not provide an independent basis for
concluding that a registrant has engaged in conduct which may
threaten public health and safety); cf. Paul Weir Battershell, N.P.,
76 FR 44359, 44368 n.27 (2011) (noting that although a registrant's
non-compliance with the Food, Drug, and Cosmetic Act is not relevant
under Factor Five, consideration of such conduct may properly be
considered on the narrow issue of assessing a respondent's future
compliance with the CSA).
Similar ``catch-all'' language is employed by Congress in the
CSA related to the Agency's authorization to regulate controlled
substance manufacturing and List I chemical distribution, but the
language is by no means identical. 21 U.S.C. 823(d)(6), (h)(5).
Under the language utilized by Congress in those provisions, the
Agency may consider ``such other factors as are relevant to and
consistent with the public health and safety.'' 21 U.S.C. 823(h)(5)
(emphasis added). In Holloway Distributing, the Agency held this
catch-all language to be broader than the language directed at
practitioners under ``other conduct which may threaten the public
health and safety'' utilized in 21 U.S.C. 823(f)(5). 72 FR 42118,
42126 n.16 (2007). Regarding the List I catch-all language, the
Administrator, in Holloway, stated:
[T]he Government is not required to prove that the
[r]espondent's conduct poses a threat to public health and safety to
obtain an adverse finding under factor five. See T. Young, 71 [FR]
at 60572 n.13. Rather, the statutory text directs the consideration
of ``such other factors as are relevant to and consistent with the
public health and safety.'' 21 U.S.C. 823(h)(5). This standard thus
grants the Attorney General broader discretion than that which
applies in the case of other registrants such as practitioners. See
id. Sec. 823(f)(5) (directing consideration of ``[s]uch other
conduct which may threaten the public health and safety'').
Id.\82\ Thus, the Agency has recognized that, while the fifth
factor applicable to List I chemical distributors--21 U.S.C.
823(h)(5)--encompasses all ``factors,'' the Factor Five applied to
practitioners--21 U.S.C. 823(f)(5)--considers only ``conduct.''
However, because Sec. 823(f)(5) only implicates ``such other
conduct,'' it necessarily follows that conduct considered in Factors
One through Four may not be considered in Factor Five.
---------------------------------------------------------------------------
\82\ In Bui, the Agency clarified that ``an adverse finding
under [Factor Five did not require a] showing that the relevant
conduct actually constituted a threat to public safety.'' 75 FR at
49988 n.12.
---------------------------------------------------------------------------
The Government has not alleged any conduct against either
Respondent in these proceedings that implicates Factor Five. Indeed,
those portions of each party's closing briefs dedicated to Factor
Five are exclusively (and mistakenly) devoted to a discussion of the
burdens established under Agency precedent and the exercise of some
of the appropriate discretionary considerations. Accordingly,
consideration of the record evidence under Factors One, Three, and
Five weigh neither for nor against the Governments' petition to deny
the Respondents' COR applications.
Factors 2 and 4: The Respondents' Experience in Dispensing Controlled
Substances, and Compliance With Applicable State, Federal, or Local
Laws Relating to Controlled Substances
The Government's public-interest-factors case seeking COR
application denials for both Respondents is based exclusively on
conduct properly considered under Factors Two and Four. The
Government alleges and relies on recordkeeping and dispensing
activity conducted by the Respondent pharmacies' pharmacists, staff,
and management.
Regarding Factor Two, in requiring an examination of an
applicant's experience in dispensing controlled substances, Congress
manifested an acknowledgement that the qualitative manner and the
quantitative volume in which an applicant has engaged in the
dispensing of controlled substances may be significant factors to be
evaluated in reaching a determination as to whether an applicant
should be (or continue to be) entrusted with a DEA COR. In some (but
not all) cases, viewing an applicant's actions
[[Page 28685]]
against a backdrop of how its regulated activities have been
performed within the scope of its registration can provide a
contextual lens to assist in a fair adjudication of whether
registration is in the public interest. In this regard, however, the
Agency has applied principles of reason, coupled with its own
expertise, in the application of this factor. For example, the
Agency has taken the reasonable position that this factor can be
outweighed by acts held to be inconsistent with the public interest,
and will be afforded scant weight in the face of proven allegations
of intentional diversion. Krishna-Iyer, 74 FR at 463; see also
Hassman, 75 FR at 8235 (acknowledging Agency precedential rejection
of the concept that conduct inconsistent with the public interest is
rendered less so by comparing it with a respondent's legitimate
activities that occurred in substantially higher numbers); Paul J.
Cargine, Jr., 63 FR 51592, 51560 (1998) (``[E]ven though the
patients at issue are only a small portion of Respondent's patient
population, his prescribing of controlled substances to these
individuals raises serious concerns regarding [his] ability to
responsibly handle controlled substances in the future.'').
Similarly, in Cynthia M. Cadet, M.D., the Agency determined that
existing List I precedent \83\ clarifying that experience related to
conduct within the scope of the COR sheds light on a practitioner's
knowledge of applicable rules and regulations would not be applied
to cases where intentional diversion allegations were sustained. 76
FR 19450, 19450 n.3 (2011). The Agency's approach in this regard has
been sustained on review. Mackay, 664 F.3d at 819.
---------------------------------------------------------------------------
\83\ See, e.g., Volusia Wholesale, 69 FR 69409, 69410 (2004).
---------------------------------------------------------------------------
Regarding Factor Four (compliance with laws related to
controlled substances), to effectuate the dual goals of conquering
drug abuse and controlling both legitimate and illegitimate traffic
in controlled substances, ``Congress devised a closed regulatory
system making it unlawful to manufacture, distribute, dispense, or
possess any controlled substance except in a manner authorized by
the CSA.'' Gonzales v. Raich, 545 U.S. 1, 13 (2005). Under the
regulations, ``[t]he responsibility for the proper prescribing and
dispensing of controlled substances is upon the prescribing
practitioner, but a corresponding responsibility rests with the
pharmacist who fills the prescription.'' 21 CFR 1306.04(a). Under
this language, a pharmacist has a duty ``to fill only those
prescriptions that conform in all respects with the requirements of
the [CSA] and DEA regulations, including the requirement that the
prescribing practitioner be properly registered.'' Electronic
Prescriptions for Controlled Substances, 75 FR 16236, 16266 (Mar.
31, 2010). In short, a pharmacist has a ``corresponding
responsibility under Federal law'' to dispense only lawful
prescriptions. Liddy's Pharmacy, L.L.C., 76 FR 48887, 48895 (2011).
``The corresponding responsibility to ensure the dispensing of valid
prescriptions extends to the pharmacy itself.'' Holiday CVS, 77 FR
62316, 62341 (2012) (citing Medicine Shoppe, 73 FR at 384; United
Prescription Servs., Inc., 72 FR 50397, 50407-08 (2007); EZRX, LLC,
69 FR 63178, 63181 (2004); Role of Authorized Agents in
Communicating Controlled Substance Prescriptions to Pharmacies, 75
FR 61613, 61617 (Oct. 16, 2010); Issuance of Multiple Prescriptions
for Schedule II Controlled Substances, 72 FR 64921, 69424 (Nov. 19,
2007)). Settled Agency precedent has interpreted this corresponding
responsibility as prohibiting the filling of a prescription where
the pharmacist or pharmacy ``knows or has reason to know'' that the
prescription is invalid. E. Main St. Pharmacy, 75 FR 66149, 66163
(2010); Bob's Pharmacy & Diabetic Supplies, 74 FR 19599, 19601
(2009) (citing Medicine Shoppe, 73 FR at 381); see also United
Prescription Servs., 72 FR at 50407-08 (finding a violation of
corresponding responsibility where the pharmacy ``had ample reason
to know'' that the practitioner was not acting in the usual course
of professional practice). The pharmacy registrant's responsibility
under the regulations is not coextensive or identical to the duties
imposed upon a prescriber, but is, rather, a corresponding one. 21
CFR 1306.04(a). The Government has averred that for a period of over
two years, the Respondents filled controlled substance prescriptions
for Dr. Aguilar, a physician who did not possess a valid COR. These
allegations impact both Factor 2 \84\ and Factor 4.
---------------------------------------------------------------------------
\84\ This case contained no allegation (or evidence) of
intentional diversion, but the Respondents offered no evidence or
argument regarding the length and character of their experience in
dispensing controlled substances. ALJ Ex. 24, at 24-25. Thus, it is
unnecessary to determine whether such evidence would have been
relevant to a disposition of the case. See Cadet, 76 FR at 19450
n.3; Krishna-Iyer, 74 FR at 463.
---------------------------------------------------------------------------
To show a violation of a pharmacy registrant's corresponding
responsibility, ``the Government must establish three elements: (1)
the registrant dispensed a controlled substance; (2) a red flag was
or should have been recognized at or before the time the controlled
substance was dispensed; and (3) the question created by the red
flag was not resolved conclusively prior to the dispensing of the
controlled substance.'' Holiday CVS, 77 FR at 62341. ``The steps
necessary to resolve the red flag conclusively will perforce be
influenced by the nature of the circumstances giving rise to the red
flag.'' Id. (emphasis added). When considering whether a pharmacy
has violated its corresponding responsibility, the Agency considers
whether the entity, not the pharmacist, can be charged with the
requisite knowledge. See United Prescription Servs., 72 FR at 50407
(finding that the Respondent pharmacy violated its corresponding
responsibility because ``an entity which voluntarily engages in
commerce [to] other States is properly charged with knowledge of the
laws regarding the practice of medicine in those States'' (emphasis
added)); see also Pharmboy Ventures Unlimited, Inc., 77 FR 33770,
33771 n.2 (2012) (``DEA has long held that it can look behind a
pharmacy's ownership structure `to determine who makes decisions
concerning the controlled substance business of a pharmacy.'''
(quoting Carriage Apothecary, 52 FR 27599, 27599 (1987))); S & S
Pharmacy, Inc., 46 FR 13051, 13052 (1981) (holding that the
corporate pharmacy acts through the agency of its PIC). Knowledge
obtained by the pharmacists and other employees acting within the
scope of their employment may be imputed to the pharmacy itself. See
United States v. 7326 Highway 45 N., 965 F.2d 311, 316 (7th Cir.
1992) (``Only knowledge obtained by corporate employees acting
within the scope of their employment is imputed to the
corporation.''). Agency precedent has consistently held that the
registration of a pharmacy may be revoked as the result of the
unlawful activity of the pharmacy's owners, majority shareholders,
officers, managing pharmacist, or other key employees. Holiday CVS,
77 FR at 62340; EZRX, 69 FR at 63181; Plaza Pharmacy, 53 FR 36910,
36911 (1988). Thus, it is necessary and appropriate to analyze the
relevant conduct of each pharmacy's personnel, including Moro-Perez,
who serves as the owner/president of each.\85\
---------------------------------------------------------------------------
\85\ Tr. 192, 219, 222, 223, 226, 238.
---------------------------------------------------------------------------
The DEA regulations provide that a controlled substance
prescription may only be issued by a practitioner with state and
federal authority to do so. 21 CFR 1306.03(a). For a controlled
substance prescription to be effective, it must be issued by a
practitioner. 21 CFR 1306.04(a). To be a ``practitioner'' under the
CSA in this context, an individual must possess authority to
prescribe controlled substances. 21 U.S.C. 802(21). Thus, a
controlled substance prescription issued by one who lacks authority
to prescribe is issued by a non-practitioner and is ineffective. A
pharmacy registrant who dispenses a controlled substance based on an
ineffective prescription, in the face of a red flag that was
recognized or should have been recognized, has violated its
regulatory corresponding responsibility. 21 CFR 1306.14; Holiday
CVS, 77 FR at 62341. The question then devolves to whether Dr.
Aguilar's lack of a COR is a red flag that should have been
recognized. As discussed, infra, this question must be answered in
the affirmative.
On the present record, it is beyond argument that controlled
substances were dispensed by the Respondent pharmacies on scrips
issued by (unregistered) Dr. Aguilar (Element 1). The remaining
issues concern whether this was done in the face of an unresolved
red flag that should have been recognized \86\ before the
prescriptions were filled (Elements 2 & 3).
---------------------------------------------------------------------------
\86\ The Government has not alleged or proved actual knowledge
on the part of Moro-Perez or the staff at the Respondent pharmacies
that Dr. Aguilar lacked a valid COR at the time the dispensing
events in issue occurred.
---------------------------------------------------------------------------
The unrefuted evidence of record establishes that, for over two
years, the Respondent pharmacies filled controlled substance
prescriptions without checking COR status beyond insurance payment
confirmation. From Antoine's testimony, it appears that, from the
period of January 31, 2009 to November 30, 2011, Dr. Aguilar's lack
of a DEA COR had no perceptible impact on either the enthusiasm with
which he issued controlled substance prescriptions,
[[Page 28686]]
nor the Respondents' willingness to fill them. Tr. 17. As
acknowledged by Moro-Perez during his testimony, during that thirty-
four month period, Farmacia Nueva and Best Pharma made no attempt
(that was reasonably calculated for success) to ascertain whether
Dr. Aguilar (or apparently any other physician for whom they were
filling controlled substance prescriptions) had a valid COR. Tr.
194. Moro-Perez testified that his pharmacy staff assumed the
validity of all prescriber CORs if insurance carriers provided
notification that the patients were covered and the claims related
to the prescription would be paid. Tr. 196. He indicated that the
pharmacies would only have had reason to know that a doctor's COR
had expired if, regarding a particular scrip, the insurance company
signaled its intent to decline payment. Tr. 201. At no point during
the hearing did Moro-Perez give any basis to establish that
insurance providers would know whether medical practitioners were
authorized to prescribe controlled substances, much less why
insurance companies would have a legal or contractual duty (or even
an inclination) to pass on COR information to dispensing pharmacies.
Moro-Perez testified that his pharmacies relied on the approvals
they received from insurance providers, but he did not even attempt
to describe why such a practice was rational or supported by any
level of common sense, much less why such a practice could be a
responsible discharge of the authority of a registrant. The only
notification apparently provided by the insurance companies'
notifications is that the claim would be paid--and that is
apparently the point at which these registrants' interest in the
subject waned.
The responsibility for ensuring the authority of the
practitioner writing the controlled substance prescription is
abjectly integral to the pharmacy registrant's corresponding
responsibility. The uncontroverted evidence of record establishes
that, as DEA pharmacy registrants, the Respondents could have
checked the COR status of Dr. Aguilar (and all prescribing doctors)
by accessing a link on the DEA Diversion Web site, by consulting a
list of current registrants that is regularly updated by the
Department of Commerce, by contacting the local DEA office, or by
contracting with a private company to perform due diligence in this
regard. Tr. 20-21. The Respondents' irresponsible practice of ending
their COR inquiry at the moment an insurance company agrees to remit
payment speaks volumes on the subject of whether these Respondents
should be entrusted with the responsibility of a controlled
substance registrant. That the Respondents chose a patently
ineffective and illogical manner to check COR statuses cannot
absolve them of their responsibility to ensure this most basic of
requirements. The Agency has never been, and cannot be, persuaded by
a policy of ``see no evil, hear no evil.'' Cf. Gonzalez, 76 FR at
63142. Even in a criminal context regarding prescriptions
illegitimately issued, the courts have held that a factfinder ``may
consider willful blindness as a basis for knowledge.'' United States
v. Katz, 445 F.3d 1023, 1031 (8th Cir. 2006). The absence of Dr.
Aguilar's COR is the most glaring of red flags that could and should
have been recognized by the Respondents upon the exercise of even
the most minimal due diligence. Conclusively resolving such a
fundamental red flag was a mandatory condition precedent to the
legal dispensing of a controlled substance, and the Respondents'
failure to do so (on multiple occasions) was a clear breach of their
corresponding responsibility under the regulations. 21 CFR
1306.04(a). ``It would be difficult to imagine a duty of a pharmacy
registrant that is more fundamental to the law and spirit of the CSA
than the obligation to ensure that controlled substance
prescriptions are issued only on the authority of those empowered to
prescribe by the DEA.'' Holiday CVS, 77 FR at 62341; see also
Liddy's Pharmacy, 76 FR at 48895. Absent confirmation of a COR, a
prescription written by one without COR authority would authorize
the routine distribution of dangerous narcotics on the approval of
anyone from the uninformed to the malevolent. The DEA's Pharmacist's
Manual specifically provides that controlled substance prescriptions
may only be issued by a practitioner who is, inter alia,
``[r]egistered with DEA or exempted from registration.'' DEA,
Pharmacist's Manual Sec. IX (2010).
It is hardly insignificant that more than serving merely as the
owner/president of both pharmacies, Moro-Perez has been a trained
pharmacist since 1999. He acknowledged at the hearing that he had
received training regarding the lawful procedures for handling
controlled substances. Tr. 194. In addition to the readily available
means for checking COR statuses outlined by DI Antoine, it is worthy
of note that, with minimal effort, Aguilar's office could have been
contacted or even (in light of its close proximity to FN)
visited.\87\ The Respondent pharmacies knowingly pursued a course of
deliberate ignorance, satisfying themselves in a sort of collective
shrug that if there was ever a problem with a physician's COR, the
insurance company would deny the claim. Tr. 201. Passively waiting
to receive an insurance carrier claim rejection is not a responsible
manner to discharge the duties of a registrant, and it certainly
does not satisfy a registrant's obligation to ensure the authority
of the issuer of the prescription. It is merely an effective manner
to ensure payment.
---------------------------------------------------------------------------
\87\ Tr. 250-51.
---------------------------------------------------------------------------
The practice of relying on insurance carrier claim rejections as
the principal means of due diligence is particularly egregious here.
Moro-Perez testified that both pharmacies denied ``many'' of the
controlled substance prescriptions written by Dr. Aguilar based on a
review of the scrips submitted by his patients. Tr. 252-53. The
pharmacies declined to fill these prescriptions based on the
(repeated) professional judgment of the pharmacists that the scrips
were invalid. Tr. 252. Yet, even armed with the knowledge that Dr.
Aguilar was engaged in writing ``many'' illegitimate controlled
substance prescriptions that could not legally be filled, Moro-Perez
testified that his pharmacies never looked into Dr. Aguilar's
practice or COR status in any way. Tr. 252-54. Instead, the
Respondents blithely continued to fill Dr. Aguilar's prescriptions--
and presumably, the pharmacies continued to receive payments. Tr.
250-52. Thus, it is clear on the present record that even though Dr.
Aguilar had repeatedly given the professional staff working at both
Respondent pharmacies reason to suspect his bona fides as a
legitimate controlled substance prescriber, none of the Respondents'
personnel was inspired to employ even the minimal effort that would
have been required to check the status of his registration. Over and
over again, the Respondents' pharmacists rendered their professional
judgment that Dr. Aguilar was writing unsupported controlled
substance prescriptions that were so sufficiently irregular that
they were refused, yet they did not check into his authority beyond
ensuring insurance carrier approvals for payments. It is a testament
to the Respondents' irresponsibility (and exclusive focus on
remuneration) that Moro-Perez acknowledged that if the DEA had not
executed its search warrant on November 30, 2011, Farmacia Nueva
would still be filling Dr. Aguilar's (unauthorized) controlled
substance prescriptions. Tr. 202-03.
The Government's evidence established that, for thirty-four
months, Farmacia Nueva filled over 140 prescriptions for controlled
substances written by Dr. Aguilar on his expired COR. Gov't Ex. 5.
Similarly, the Government's evidence demonstrated that during the
same period, Best Pharma filled 32 controlled substance
prescriptions written by Dr. Aguilar. Gov't Ex. 10. Respondents
clearly violated their ``fundamental'' duties under the CSA by
failing to ensure that Dr. Aguilar's COR was valid. Holiday CVS, 77
FR at 62341. In so doing, they breached their corresponding
responsibilities as pharmacy registrants under Federal law to
dispense only lawful prescriptions. Liddy's Pharmacy, 76 FR at
48895.
Thus, in addition to Element 1, the Government's evidence
preponderantly established that the absence of a valid COR is a
``red flag'' that should have been known prior to dispensing
(Element 2), and that (inasmuch as the deficiency revolved around
Dr. Aguilar's lack of a valid registration) it was not and could not
have been adequately resolved prior to dispensing controlled
substances (Element 3). Having established all three elements, there
is no question that each Respondent violated its corresponding
responsibility under the regulations.
The record of both pharmacies indicates a clear disregard for
following proper legal procedures designed to protect the public
from the dangers of the unregulated dispensing of controlled
substances. Furthermore, both pharmacies displayed a lack of
motivation to follow through even the most basic of procedures, such
as verifying a prescribing physician's COR. The Government's
evidence that the Respondent pharmacies continued, for thirty-four
months, to recklessly fill Dr. Aguilar's controlled substance
prescriptions when he was unregistered and when they had actual
knowledge that he was writing ``many'' illegitimate prescriptions
negatively impacts
[[Page 28687]]
both Factor 2 (experience in dispensing) and Factor 4 (compliance
with federal controlled substance laws) and militates strongly in
favor of the application denial sought by the Government.\88\
---------------------------------------------------------------------------
\88\ In view of the lengthy (34-month) period of time during
which the scrips of (unregistered) Dr. Aguilar were filled, it is
not necessary to discern exactly when the duty to re-check COR
credentials emerges. A more precise divination of that issue may
require resolution on different facts in another case.
---------------------------------------------------------------------------
The Government's allegations regarding missing records/poor
recordkeeping also relate to considerations under Factor Four. It is
beyond argument that accurate and reliable records are an obvious
bedrock safeguard that is essential to ensure the integrity of the
closed regulatory system designed by Congress. See Gonzales v.
Raich, 545 U.S. at 13. ``Recordkeeping is one of the central
features of the CSA's closed system of distribution. . . . `A
registrant's accurate and diligent adherence to this obligation is
absolutely essential to protect against the diversion of controlled
substances.' '' Satinder Dang, M.D., 76 FR 51424, 51429 (2011)
(internal punctuation and citations omitted) (quoting Paul H.
Volkman, 73 FR 30630, 30644 (2008)). There is no question that the
maintenance of accurate records by registrants is key to DEA's
ability to fulfill its obligations to regulate controlled
substances. See Volkman, 73 FR at 30644, aff'd, Volkman v. U.S. DEA,
567 F.3d 215, 224 (6th Cir. 2009) (specifically upholding the DEA
Administrator's reliance on recordkeeping violations in denying a
COR application). Thus, where established by reliable evidence,
recordkeeping deficiencies may provide a reason--``which is
sufficient by itself''--to find that the granting of a registration
would be inconsistent with the public interest. Id. DEA has also
held that non-compliance with recordkeeping obligations can lend
``substantial credence'' to allegations that a registrant is engaged
in ``massive diversion.'' Grider Drug #1 & Grider Drug #2, 77 FR
44069, 44101 (2012). However, the Agency has also held that where
non-egregious recordkeeping errors are acknowledged and remedied
promptly, revocation may not always be required. Terese, 76 FR at
46848.
In Terese, substantial evidence established that the registrant
had failed to conduct an initial inventory as required under 21 CFR
1304.11(b), failed to execute a power of attorney form as required
by 21 CFR 1305.05(a), and failed to include dates on DEA Forms 222
as required by 21 CFR 1305.13(e). Id. In declining to revoke
Terese's registration, the Agency, emphasizing that the registrant
had accepted responsibility for its violations and had instituted
corrective actions, determined that, under the circumstances, the
three recordkeeping violations did not render its continued
registration inconsistent with the public interest. Id. at 46848. In
Ideal Pharmacy Care, Inc., an audit of the registrant's records
showed a shortage of 150,000 dosage units of hydrocodone, 83,000
dosage units of alprazolam, and 1.6 million milliliters of
promethazine with codeine. 76 FR 51415, 51416 (2011). However, in
contrast to Terese, the Agency found \89\ that Ideal Pharmacy's
failure to maintain accurate records constituted an act that
rendered its continued registration inconsistent with the public
interest. Id. at 51416. Taken together, Ideal and Terese indicate
that, when considering recordkeeping violations, the Agency has
coupled consideration of the degree of severity of the non-
compliance with an analysis of whether the registrant has both
acknowledged culpability and demonstrated credible efforts aimed at
correction. The current state of the Agency's precedent, thus,
provides a logical framework upon which the current evidence can be
evaluated.
---------------------------------------------------------------------------
\89\ The registrant in Ideal waived its right to a hearing and
presented no evidence to the Agency on its behalf. Ideal, 76 FR at
51415.
---------------------------------------------------------------------------
DEA regulations provide that ``[e]very registrant required to
keep records pursuant to Sec. 1304.03 \90\ shall maintain on a
current basis a complete and accurate record of each substance . . .
imported, received, sold, delivered, exported, or otherwise disposed
of by him/her, except that no registrant shall be required to
maintain a perpetual inventory.'' 21 CFR 1304.21(a). The regulations
also mandate that ``every . . . record[] required to be kept under
this part must be kept by the registrant and be available, for at
least 2 years from the date of such . . . records, for inspection
and copying by authorized employees of the [DEA].'' Id. Sec.
1304.04(a). Pharmacy registrants, such as the Respondents used to
be, are required to maintain separate records of Schedule II
controlled substances, and to maintain records of controlled
substances listed in Schedules III-V ``either separately from all
other records of the pharmacy or in such form that the information
required is readily retrievable from the ordinary business records
of the pharmacy.'' Id. Sec. 1304.04(h). Readily retrievable is
defined in the regulations as records kept ``in such a manner that
they can be separated out from all other records in a reasonable
time . . . .'' 21 CFR 1300.01(b).
---------------------------------------------------------------------------
\90\ Section 1304.03(a) provides that ``[e]ach registrant shall
maintain the records and inventories and shall file the reports
required by this part, except as exempted by this section.'' 21 CFR
1304.03(a). The record contains no contention that any of the Sec.
1304.03 exemptions apply in this case.
---------------------------------------------------------------------------
On this record, the Government's allegations regarding alleged
infirmities in the Respondents' recordkeeping are simply not
supported by the presentation it made at the hearing. It is
uncontroverted that both pharmacies used a computer program called
``RX30'' to manage and record prescriptions and corresponding
dispenses. Tr. 234, 244. While DI Antoine testified that, consistent
with the Government's allegations, there were missing records from
the computer systems of both pharmacies,\91\ the Government only
offered exhibits relating to the missing records at Farmacia Nueva.
Gov't Exs. 5-7.
---------------------------------------------------------------------------
\91\ Tr. 23-25, 96.
---------------------------------------------------------------------------
Exhibits supplied by both the Government and Farmacia Nueva
purport to constitute copies of all controlled substance
prescription scrips filled for Dr. Aguilar's patients between
January 31, 2009 to November 30, 2011. Gov't Ex. 5; Resp't Exs. 1,
2. It is uncontroverted that the RX30 system employed at Farmacia
Nueva automatically affixes an informational heading at the top of
each copy of a scrip that has been scanned into the system. Tr. 263.
Both the Government's version and Farmacia Nueva's version contain
scrip copies that display the informational heading and copies that
do not.\92\ DI Antoine testified that he assembled the Government's
version of Dr. Aguilar's Farmacia Nueva scrips from material seized
at the search warrant execution and from material forwarded by Moro-
Perez in response to DEA's Supplemental Information Request. Tr. 23-
25.
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\92\ Resp't Ex. 2, at 143-44; Gov't Ex. 5, at 1-6.
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Moro-Perez, for his part, testified that he was able to generate
a copy of all but one of every Aguilar controlled substance
prescription scrip through a query of the Farmacia Nueva RX30
program. Tr. 203-04, 248; Resp't Exs. 1, 2. While it strains
credulity that Moro-Perez would intentionally hold back material
that could have conceivably cleared up the issue of missing scrips
until the hearing process commenced, the Government (who bears the
burden on this issue) presented no testimony or other evidence that
would explain why its version should be deemed the more complete
one. The Government presented no testimony from anyone who was
present at the search warrant execution at Farmacia Nueva. Likewise,
instead of calling DFE Gladieux, who extracted the digital
information, the Government presented a terse, barebones
declaration.\93\ Gov't Ex. 15.
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\93\ At the hearing, Government counsel represented that
Gladieux was local and available, but not called as a witness
because he felt that the declaration was sufficient. Tr. 135-37.
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On the state of the present record, there is no way to determine
which party has presented the more persuasive set of the Aguilar
prescription scrips maintained at Farmacia Nueva. DFE Herrmann, the
DEA digital forensic examiner who analyzed the data pulled from FN's
RX30 program, acknowledged the possibility of a ``margin for
error,'' \94\ but testified that she was able to create a duplicate
of the Farmacia Nueva computer as it existed on the day the data was
extracted from it. Tr. 141-42. The Government initially alleged that
Best Pharma and Farmacia Nueva did not maintain controlled substance
scrips authorized by Dr. Aguilar, but withdrew and/or did not
proceed on all of the Best Pharma scrips \95\ and many of the
Farmacia Nueva scrips when the Respondents pointed out in a
prehearing motion \96\ that the noticed scrips included non-
controlled substances. Farmacia Nueva was able to produce purported
copies of scrips for all but two (H00751567 & 00805523) of the
(reduced number of) Aguilar scrips that the Government alleged as
missing.\97\ Resp't Exs.
[[Page 28688]]
1-2, 4. While admittedly true that Farmacia Nueva did little to
explain the origin, structure, or reliability of its own scrip-
related exhibits, the Government produced no credible challenge to
Farmacia Nueva's purported scrip copies and declined to challenge
their admission into evidence. Tr. 249, 257, 264-65. Even though he
was not unavailable, DFE Gladieux, the technician who imaged the
Farmacia Nueva computer, was not called as a witness to explain the
data extraction process or defend its integrity and completeness. It
is also worth noting here that Moro-Perez never explained why, if
the FN scrips in question did exist and were available from the
outset, they were not forwarded to the Government with his Response
to Government Administrative Request for Information,\98\ wherein he
provided the assurance that ``all of the requested prescriptions''
were included--a position he re-affirmed during his testimony. Tr.
206-08. Still, the Government presented no evidence whatsoever in
support of its BP recordkeeping allegations, and, with respect to
Farmacia Nueva, its evidence was confusing and wholly unpersuasive.
It would be virtually impossible on the present record to assign one
party's batch of copied, purported prescriptions more credibility
than the other party's batch in any manner that could be logically
defended on appeal. In this mutually confusing contest of admitted
evidence, it was the Government that bore the burden to establish
the violations of the laws it had alleged. Regarding the
recordkeeping allegations, its burden was simply not carried.
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\94\ Tr. 155.
\95\ In its closing brief, the Government made no mention of the
Best Pharma recordkeeping allegations. ALJ Ex. 24, at 25.
\96\ ALJ Ex. 10.
\97\ So much of the Government's evidence in this regard was
withdrawn or readily contradicted by evidence offered by the
Respondent that it would be difficult to assign persuasive weight to
even the two instances where the Respondent did not produce
corresponding scrips. Stated differently, the Government's
evidentiary presentation in this regard was simply too shaky and
shifting to merit sufficient confidence to sustain the allegations.
But even if the Government's evidence was deemed sufficiently
reliable to believe that two Aguilar scrips were not maintained in
accordance with the regulations, Agency precedent provides support
for the proposition that, standing alone, these two missing scrips
would not have been a sufficient violation to merit the application
denial the Government seeks. See Terese, 76 FR at 46848 (determining
that three recordkeeping violations that were acknowledged and
timely corrected were insufficient to warrant COR revocation).
\98\ Gov't Ex. 4, at 2-3.
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Accordingly, to the extent the Government alleged that the
Respondents violated 21 U.S.C. 827(b)(1) and 21 CFR 1304.04 by
failing to maintain controlled substance scrips authorized by Dr.
Aguilar, those allegations are not sustained.
That said, the Respondents' actions in filling Dr. Aguilar's
controlled substance prescriptions over the course of over two and a
half years without checking his (expired) COR status in any logical
manner, even though pharmacy personnel had rejected ``many'' of his
prescriptions as illegitimate, balance powerfully in favor of
denying both COR applications under Factors Two and Four.
Recommendation
Based on the foregoing, the Government has established that the
Respondents have submitted COR applications that bear material
falsifications \99\ and have committed acts that are inconsistent
with the public interest. 21 U.S.C. 823(f). Accordingly, the
Government has sustained its prima facie burden to establish that
the Respondents' COR applications should be denied. Hence, under
established Agency precedent, the burden is shifted to the
Respondents to demonstrate that each can be entrusted with a DEA
registration.
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\99\ 21 U.S.C. 824(a)(1).
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``[T]o rebut the Government's prima facie case, [the Respondents
are] required not only to accept responsibility for [the
established] misconduct, but also to demonstrate what corrective
measures [have been] undertaken to prevent the re-occurrence of
similar acts.'' Hassman, 75 FR at 8236; see Hoxie, 419 F.3d at 483;
Lynch, 75 FR at 78754 (holding that a respondent's attempts to
minimize misconduct undermined acceptance of responsibility);
Mathew, 75 FR at 66140, 66145, 66148; Aycock, 74 FR at 17543;
Abbadessa, 74 FR at 10078; Krishna-Iyer, 74 FR at 463; Medicine
Shoppe, 73 FR at 387. The acceptance of responsibility is a
condition precedent for the Respondents to prevail once the
Government has established its prima facie case. Mathew, 75 FR at
66148. This feature of the Agency's interpretation of its statutory
mandate on the exercise of its discretionary function under the CSA
has been sustained on review. Mackay, 664 F.3d at 822. In
determining whether and to what extent a sanction, such as denial of
an application, is appropriate, consideration must be given to both
the egregiousness of the offenses established by the Government's
evidence and the Agency's interest in both specific and general
deterrence. Ruben, 78 FR at 38364, 38385.
The issue of acceptance of responsibility presents something of
a mixed bag for the Respondents. Moro-Perez, the owner/president of
both Respondent pharmacies, spoke on their behalf and, through
counsel, represented their interests. As discussed in more detail,
supra, the pharmacies are responsible for his actions. See EZRX, 69
FR at 63181; Plaza Pharmacy, 53 FR at 36911. Moro-Perez acknowledged
that he and his staff substituted what was essentially affirmative
payment notification by insurance carriers in place of their
responsibility to ensure that prescribing physicians, such as Dr.
Aguilar, have valid CORs. The representations rendered by Moro-Perez
and echoed by Farmacia Nueva PIC Nelson Vale regarding their intent
to be more careful and purchase computer screens in the future were
too amorphous to provide evidence sufficient to engender enough
confidence that the pharmacies should be entrusted with CORs in the
future. The Farmacia Nueva and Best Pharma PICs told DI Antoine
that, as recently as two weeks prior to this hearing, no written
controlled substance handling procedures had been promulgated by
either pharmacy.\100\ Tr. 107. Even if the tacit admissions of
wrongdoing by Moro-Perez were embraced as sufficient acceptance of
responsibility to carry the pharmacies' burden (a dubious
proposition), the showing of remedial measures is too weak to carry
the day. In like manner, the intentional decision by an experienced
registrant to have his staff substitute insurance approvals for COR
checks over the course of over two years is bad enough, but when
coupled with the actual knowledge by the Respondent pharmacies that
Dr. Aguilar had written ``many'' bad controlled substance
prescriptions, it elevates the level of egregiousness to a point
where it militates powerfully in favor of denial of the CORs. While
true that the Government's failure to sustain its recordkeeping
allegations substantially diminishes the gravity to be attached to
the 2008 Letter of Admonition,\101\ it is still relevant that Moro-
Perez had been counseled once by the Agency to exercise an
appropriate level of care, and that the Agency's warning did not
inspire sufficient vigilance to check the COR status of a
prescribing physician who was engaged in writing ``many'' bad
controlled substance prescriptions. To grant registrations in the
face of such conduct would be a statement to the regulated community
of pharmacy registrants that employing a patently infirm system of
COR checks for prescribing physicians can serve as an effective
shield to the consequences of failure to exercise due care. Thus,
the Agency's interests in deterrence also weigh in favor of denial
of the requested registrations.
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\100\ While Moro-Perez made a fleeting reference to a
``continuing education'' that he participated in after the execution
of the search warrant (Tr. 203), there was no evidence as to what
the class covered or whether it was in any way related to controlled
substance diversion issues.
\101\ Gov't Ex. 3. Indeed, none of the deficiencies cited in the
Letter of Admonition are the basis of any allegation in these
proceedings.
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In their closing brief, the Respondents argue that mitigation is
found in: (1) what they posit as a relatively modest number of
dispensed prescriptions issued by (unregistered) Dr. Aguilar; (2)
``minimal'' pecuniary gain to the registrants that resulted in
filling Dr. Aguilar's scrips; (3) their continuing representation
that the Respondents' pharmacists actually turned down ``many'' of
Dr. Aguilar's controlled substance prescription that were
illegitimate; (4) the fact that forty employees working at the
Respondent pharmacies stand to lose their jobs upon an unfavorable
decision by the Agency on the applications; and (5) that the
Government offered no evidence that any of the scrips in question
were for other than a legitimate medical purpose. ALJ Ex. 24, at 20-
21, 26. None of these arguments, all but one of which are offered
under an apparent theory that ``it could have been worse,'' are
persuasive on the present record.
While the Respondents characterize the number of the Dr. Aguilar
scrips during the relevant period as modest in comparison to the
pharmacies' other business, their numbers (even if assumed as
accurate) do not further their cause. These dispensing events were
executed during a time when the pharmacies had no rational system
for checking the COR status of any of the prescribers whose scrips
they were filling. To compare the Dr. Aguilar scrips with the scrips
of other physicians while the pharmacy was not checking anyone's COR
[[Page 28689]]
status confounds logic. Stated differently, the level of care
exercised on Dr. Aguilar's scrips was the same as every other
controlled substance scrip issued during the relevant period. The
Agency has revoked based on as few as two acts of intentional
diversion, and it held that one such act can be sufficient. MacKay,
75 FR at 4997; Krishna-Iyer, 74 FR at 463. While the dispensing acts
proven on this record may not have been intentional, there were
certainly well more than one or two.
Similarly, that the Respondents argue (without specific figures)
that they have made ``minimal'' pecuniary gain due to their lack of
care helps their respective causes not at all. A reduced profit
margin is no more persuasive evidence in the context of a registrant
pharmacy as it would be in the case of a street dealer in illicit
drugs. The focus is on maintaining a closed regulatory system that
protects the public from the unlawful distribution of controlled
substances. Gonzales, 545 U.S. at 13. A registrant's voluntary
decision to abandon the most basic of its registrant obligations
should not result in any profit. Further, as is true with the
Respondents' argument regarding the relative percentage of scrips
that can be attributed to Dr. Aguilar, in an environment where no
serious COR checking was employed, there is no basis in reason for
evaluating the money Moro-Perez's pharmacies made from prescriptions
authorized by Dr. Aguilar as compared to those by other
practitioners. Who knows which of the issuing prescribers were
actually registered? Hence, that the ``pecuniary benefits gained''
from dispensing controlled substances on Dr. Aguilar's scrips ``is
minimal'' \102\ means nothing and mitigates nothing.
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\102\ ALJ Ex. 24, at 21.
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As discussed in detail, supra, the Respondents argument that
they turned down ``many'' of Dr. Aguilar's prescriptions they
thought to be illegitimate actually exacerbates the pharmacies'
positions. Turning down ``many'' prescriptions from Dr. Aguilar that
pharmacists determined to be illegitimate should have caused
increased circumspection about dispensing on Aguilar's scrips.
Instead, even by their own account, the pharmacies identified Dr.
Aguilar as a problematic prescriber, never checked his COR status,
and kept dispensing many of the prescriptions he authorized.
In their closing brief, the Respondents ask that, in making its
decision on the COR applications, the Agency consider that ``[t]here
are . . . more than 40 employees among two pharmacies whose welfare
depend on their jobs at the pharmacies [and that in] small towns
like San Sebastian and Moca in Puerto Rico, this means a lot.'' ALJ
Ex. 24, at 21 (internal transcript citations omitted). Even setting
aside for a moment Moro-Perez's testimony that controlled substances
account for only 10-15% of the prescription medications dispensed at
each of the Respondent pharmacies,\103\ any blame for the lost jobs
must properly be laid at the feet of the Respondents themselves, and
Moro-Perez in particular. It is settled Agency precedent that normal
hardships to the practitioner, and even the surrounding community,
which are attendant upon the denial of a registration, are not a
relevant consideration in determining whether status as a COR
registrant is in the public interest within the meaning of the CSA.
Cheek, 76 FR at 66972-73; Owens, 74 FR at 36757; Abbadessa, 74 FR at
10078.
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\103\ Tr. 244-45.
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Finally, insofar as the Respondents point to the fact that the
Government's theory of the case and its evidence have never relied
on the absence of a legitimate medical purpose (LMP) for any of the
scrips in question, it is certainly true that the Agency has looked
at the LMP issue where prescriptions were issued by a prescriber who
lacked proper authorization. Kam, 78 FR at 62698. However, that the
Government has advanced no LMP evidence does not mitigate the
evidence that was received regarding the Respondents' breach in
their respective duties of due care in ensuring that controlled
substance prescriptions were authorized by a practitioner with a
valid COR.
Regarding the material false misrepresentations intentionally
placed into the COR applications, Moro-Perez doggedly adhered to his
illogical position that he was reasonable in representing on the COR
applications that neither pharmacy had ever surrendered a
registration for cause. By Moro-Perez's intractable logic, the
dismissal of an indictment against him (not either pharmacy) that
occurred after the for-cause surrender of Best Pharma's COR, but
before the for-cause surrender of Farmacia Nueva's COR, rendered
both surrenders no longer ``for cause.'' Moro-Perez is an
experienced COR holder and an educated, veteran pharmacist. His
insistence that his false response to an application query regarding
whether each pharmacy had ever surrendered a COR for cause was some
sort of reasonable misunderstanding is simply not credible and
defeats the Respondents' efforts to meet the Government's case. The
false misrepresentation regarding the errant denial of the
Respondents' prior surrenders for cause are sufficiently egregious
on their face to warrant sanction, and the denial of the
Respondents' applications here serve the Agency's interest in
deterring false statements on the applications that it depends upon
in its decisionmaking.
The Respondents have, thus, failed to rebut the Government's
prima facie case regarding either material falsification of their
applications or a balancing of the public interest factors. Further,
consideration of the egregiousness of the offenses, coupled with the
Agency's interest in both specific deterrence regarding these
pharmacies, and general deterrence among the regulated community,
supports the denial of both COR applications. Accordingly, the
Respondents' respective applications for DEA Certificates of
Registration should be DENIED.
Dated: October 24, 2013.
s/JOHN J. MULROONEY, II,
Chief Administrative Law Judge.
[FR Doc. 2015-12043 Filed 5-18-15; 8:45 am]
BILLING CODE 4410-09-P