[Federal Register Volume 82, Number 213 (Monday, November 6, 2017)]
[Notices]
[Pages 51433-51439]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-24093]
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DEPARTMENT OF JUSTICE
Drug Enforcement Administration
ChipRX, L.L.C., d/b/a City Center Pharmacy; Decision and Order
On August 19, 2016, the former Acting Administrator issued an Order
to Show Cause and Immediate Suspension of Registration to ChipRX,
L.L.C., d/b/a City Center Pharmacy (hereinafter, Registrant), of
Hamlin, West Virginia. The Show Cause Order proposed the revocation of
Registrant's DEA Certificate of Registration and the denial of any
pending application to renew or modify its registration, on the ground
that its ``continued registration is inconsistent with the public
interest.'' Show Cause Order, at 1 (citing 21 U.S.C. 824(a)(4) and
823(f)).
As to the Agency's jurisdiction, the Show Cause Order alleged that
Registrant is registered as a pharmacy with authority to dispense
schedule II-V controlled substances under Registration No. FC3015915,
at the registered address of 8119 Court Avenue, Hamlin, West Virginia.
Id. at 1. The Order alleged that this registration was due to expire on
August 31, 2017. Id.
As to the substantive grounds for the proceeding, the Show Cause
Order alleged that Registrant is owned by George ``Chip'' Chapman and
Summer Chapman, and that George Chapman is Registrant's Pharmacist-in-
Charge (PIC). Id. The Show Cause Order alleged that on June 30, 2016,
DEA executed an Administrative Inspection Warrant (AIW) at Registrant
based on ``tips that PIC Chapman was frequently impaired and was
unlawfully removing controlled substances from the pharmacy.'' Id. at
2. The Order then alleged that during the inspection, DEA personnel
interviewed PIC Chapman and other pharmacy employees. Id.
With respect to the interview of PIC Chapman, the Show Cause Order
alleged that he made various material false statements to the
Investigators. Id. These included minimizing the quantity of oxycodone
and hydrocodone that had been lost ``in the last year,'' stating that
he had failed to reported all but one of the instances in which these
drugs were ``lost'' because they were ```not significant' losses,'' by
denying that he knew ``anything further about the nature of the
pharmacy's losses'' while ``claim[ing] that he was not abusing
prescriptions drugs,'' and stating ``that many of his per diem or fill-
in pharmacists were previous drug abusers.'' Id.
The Show Cause Order then alleged that in a subsequent interview
conducted on July 22, 2016, Chapman ``admitted that during the past
year, he diverted oxycodone or hydrocodone pills equivalent to `200-300
mg every day,' a total of approximately 25,000 pills.'' Id. at 3. The
Order also alleged that ``Chapman admitted that he routinely falsified
inventory records'' and that he ``shredded invoice and supplier
records, including DEA 222 forms and electronic Controlled Substances
Ordering System (`CSOS') records.'' Id. The Order further alleged that
``Chapman admitted that he had relapsed,'' and told ``DEA
[I]nvestigators that he `couldn't wait' for'' the expiration of the
Memorandum of Agreement (MOA) which he had previously entered into with
the Agency ``so he could begin diverting . . . drugs to feed his
addiction.'' Id. The Order then alleged that Chapman admitted to
[[Page 51434]]
abusing cocaine for the past two years. Id.\1\
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\1\ The Show Cause Order also alleged that during the June 30,
2016 interview, Chapman admitted that he regularly used marijuana.
Show Cause Order, at 3.
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The Show Cause Order also alleged that from January 12, 2015 \2\ to
the ``present,'' Registrant's owner had committed numerous violations
of the Controlled Substances Act. First, the Order alleged that Chapman
``unlawfully removed pills from the [p]harmacy.'' Id. (citing 21 U.S.C.
829(a) & (b), 841(a)(1), and 844(a)). Second, the Order alleged that
Chapman ``us[ed] the [p]harmacy to fuel his own drug addiction,'' in
that he ordered controlled substances other than in ``the conduct of
lawful business or professional practice.'' Id. (citing 21 U.S.C.
828(e)). Third, the Order alleged that Registrant ``failed to report
losses as required'' by DEA regulations. Id. (citing 21 CFR
1301.76(b)). Fourth, the Order alleged that Registrant ``has failed to
maintain effective controls against diversion and theft.'' Id. (citing
21 CFR 1307.71).\3\ Fifth, the Order alleged that Registrant ``has
failed to maintain accurate inventory controls'' in that ``Chapman
routinely manipulated computer inventory records.'' Id. at 4 (citing 21
U.S.C. 827(a) & (b); 842(a)(5)). Sixth, the Order alleged that
Registrant ``has routinely destroyed controlled substance ordering
records'' and that ``Chapman regularly shredded invoices . . . from its
suppliers to conceal the extent of his diversion.'' Id. (citing 21 CFR
1305.17 and 1305.27). Seventh, the Order alleged that on June 30, 2016,
Registrant ``provided a [c]losing [i]nventory certifying that it was
complete and accurate,'' but that ``[b]ased on . . . Chapman's
admissions, this report was not complete or accurate.'' Id. (citing 21
U.S.C. 824(a)(4)(A), 21 CFR 1304.03, 1304.04, 1304.11, and 1304.21).
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\2\ The Government alleged that the MOA expired on January 12,
2015. Show Cause Order, at 3.
\3\ The correct citation is to 21 CFR 1301.71(a).
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In addition to the above, the Show Cause Order alleged that Chapman
``repeatedly deleted [p]harmacy video surveillance footage of his
unlawful removal of controlled substances from the [p]harmacy,'' that
``Chapman frequently exhibits signs of impairment or intoxication while
at work,'' and that ``[w]hile impaired, [he] has incorrectly filled
prescriptions.'' Id. The Order also alleged that ``[d]uring the course
of the last year, [p]harmacy personnel have repeatedly identified
significant losses in routine pill counts,'' including a loss of 100
oxycodone pills ``in the week preceding [the] June 30, 2016''
inspection. Id. The Order further alleged that ``[t]hese losses
occurred on a regular basis'' and involved ``oxycodone, hydrocodone,
oxymorphone, and ADHD pills,'' and that ``[t]hese losses were
consistently reported to . . . Chapman.'' Id.
Next, the Show Cause Order alleged that ``[d]espite knowing . . .
that DEA was actively investigating'' his pharmacy, Chapman diverted
oxycodone and other drugs ``on least [five] occasions between June 30,
2016 and August 5, 2016.'' Id. at 5. Specifically, the Order alleged
that ``[b]etween July 15 and July 18, 2016, Chapman took 64 oxycodone
pills,'' that ``[o]n July 21, 2016, Chapman removed oxycodone pills
from a locked cabinet and placed an unknown number of loose pills in
his pocket,'' that ``[o]n July 23, 2016, Chapman entered the [p]harmacy
outside of store hours and took a 100 count bottle of oxycodone
pills,'' and that ``[o]n August 3, 2016, Chapman again took oxycodone
pills from the [p]harmacy['s] stock.'' Id. The Order also alleged that
``[a]t least two of these incidents are recorded on video obtained by
DEA.'' Id.
The Show Cause Order further alleged that ``Chapman was
hospitalized for complications related to overdose on at least three
recent occasions, including . . . on approximately April 6, 2016, June
17, 2016, and July 18, 2016.'' Id. The Order alleged that on or about
these dates, Chapman ``tested positive'' for controlled substances
which included oxycodone at each test (as well as cocaine on July 18,
2016), even though records from the West Virginia Prescription
Monitoring Program ``indicate that [he] did not receive any
prescription for oxycodone or cocaine during the last year.'' Id.
Finally, the Show Cause Order alleged that ``[o]ther [p]harmacy
personnel have seen . . . Chapman using marijuana via [a] vaporizer
while working at'' Registrant. Id. After again alleging that Chapman
admitted to ``abus[ing] cocaine during the course of the last two
years,'' the Order alleged that ``Chapman's possession of illicit
controlled substances violates 21 U.S.C. 844(a).'' Id.
Based on his ``preliminary finding that controlled substances were
diverted from [Registrant] on numerous occasions in connection with
serious misconduct involving concealment, falsification of inventory
records, circumvention of security controls, and misuse of [its]
[r]egistration to order controlled substances for purposes other than
the conduct of lawful business or professional practice,'' the former
Acting Administrator concluded that Registrant's registration ``is
inconsistent with the public interest.'' Id. at 6. The former Acting
Administrator also made the ``preliminary finding'' that Registrant's
``continued registration during the pendency of these proceedings would
constitute an imminent danger to the public health and safety because
of the substantial likelihood . . . that death, serious bodily harm or
abuse of controlled substances will occur in the absence of this
suspension.'' Id. The former Acting Administrator thus concluded that
Registrant's continued registration during the pendency of the
proceeding ``constitutes an imminent danger to the public health and
safety'' and suspended its registration ``effective immediately.'' Id.
(citing 21 U.S.C. 824(d)). The former Acting Administrator's Order also
authorized the seizure or placement under seal of Registrant's
controlled substances. Id.
The Show Cause Order notified Registrant of its right to request a
hearing on the allegations or to submit a written statement while
waiving its right to a hearing, the procedures for electing either
option, and the consequence of failing to elect either option. Id.
(citing 21 CFR 1301.43). On the same day it was issued, a DEA Diversion
Investigator personally served the Order to Show Cause and Immediate
Suspension of Registration on Registrant's pharmacy manager at which
time the Investigators took custody of Registrant's controlled
substances and Certificate of Registration. GX 3, at 2 ] 7.
According to the Government, since the date of service of the
Order, Registrant has neither requested a hearing nor submitted a
written statement while waiving its right to a hearing. Request for
Final Agency Action, at 1-2. Based on the Government's representation,
I find that more than 30 days have now passed and Registrant has
neither requested a hearing nor submitted a written statement while
waiving its right to a hearing. I therefore find that Registrant has
waived its right to a hearing or to submit a written statement and
issue this Decision and Order based on reliable and probative evidence
submitted by the Government. See 21 CFR 1301.43(e). I make the
following findings.
Findings of Fact
Registrant is a limited liability company organized under the laws
of West Virginia; it owns and operates City Center Pharmacy, a retail
pharmacy located at 8119 Court Avenue, Hamlin, West Virginia. GX1; GX
3, at 1.
[[Page 51435]]
According to the records of the West Virginia Secretary of State,
George Chapman and his wife Summer Chapman are member-officers of the
company. GX 3, Appendix 2, at 2. George Chapman is the Pharmacist-in-
Charge (PIC). GX 3, at 2; see also id. at Appendix 3.
Registrant previously held DEA Certificate of Registration No.
FC3015915, pursuant to which it was authorized to dispense controlled
substances in schedules II through V as a retail pharmacy at the above
address. GX 1. This registration expired on August 31, 2017. Id.
According to the registration records of the Agency (of which I take
official notice, see 5 U.S.C. 556(e)), Registrant did not file a
renewal application. However, according to the declaration of the
Diversion Investigator, upon service of the Immediate Suspension Order,
the Government took custody of Registrant's controlled substances. GX
3, at 1.
In 2009, Chapman, who was then employed at a hospital pharmacy, was
convicted of a misdemeanor offense of embezzling controlled substances
from his employer and placed on probation.\4\ GX 3, Appendix 1, at 1-2.
Chapman, who pled guilty to the charge, was placed on probation for a
period of one year. Id. at 1. Thereafter, Chapman applied for a retail
pharmacy registration in schedules II through V, and was allowed to
enter into an MOA, which became effective on January 12, 2012, and
remained in effect for a period of three years, after which
Registrant's Registration became unrestricted. GX 3, Appendix 3, at 1-
4.
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\4\ According to the MOA, in the spring of 2009, Chapman injured
his back and was prescribed oxycodone and hydrocodone. GX 3,
Appendix 3, at 1-2. As his pain increased, Chapman began using more
drugs than were prescribed and stole several hundred tablets from
his employer. Id. at 1. Chapman, however, reported his drug problem
to his employer and entered into a recovery contract with the West
Virginia Pharmacy Recover Network (PRN), which required that he
attend Narcotics Anonymous/Alcoholics anonymous meetings, provide
random drug screens, and see an addiction psychiatrist. Id. at 2. At
the time he entered into the MOA, he had successfully completed the
PRN's requirements and was ``under contract for an additional three
year period.'' Id.
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The Investigation of Registrant
In June 2016, a DEA Diversion Investigator (DI) assigned to the
Charleston, West Virginia Resident Office received ``multiple tips''
that George Chapman ``often appeared impaired at work.'' GX 3, at 2.
The DI initiated an investigation and determined that Chapman had
previously pled guilty in state court ``to embezzling and abusing
approximately 800 hydrocodone and oxycodone pills from approximately
June through October 2009.'' Id. He also determined that Chapman had,
as a condition of obtaining a registration for the pharmacy, entered
into an MOA with the Agency. Id.
The DI obtained an Administrative Inspection Warrant (AIW), and on
June 30, 2016, he, accompanied by other Investigators, executed the AIW
at Registrant. Id. According to the DI, ``[t]he [p]harmacy's inventory
records were found to be so incomplete and unreliable that no formal
audit using the . . . records could be completed.'' Id. The DI further
stated that during the inspection, Chapman ``admitted that [the]
electronic inventory records had been repeatedly manipulated'' and the
``records were otherwise so disorganized that conducting a reliable on-
site audit was impossible.'' Id.
The DI further stated that during the inspection, ``several
[p]harmacy [employees] uniformly reported to [him] that . . . Chapman
regularly came to work impaired'' and ``[s]everal employees also
reported that pills were regularly missing from the [p]harmacy during
the last year.'' Id.
One pharmacy employee told the DI that on occasions when a ``per
diem [p]harmacist'' was working at Registrant, Chapman came to the
pharmacy, ``asked to use'' the employee's computer, after which he
``open[ed] the locked cabinet'' in which the oxycodone was kept and
[took] a 100 count wholesale bottle of oxycodone 15 mg'' out of the
cabinet, then ``went to his office'' and subsequently ``left the
pharmacy.'' Id. at 3. The employee told the DI that she subsequently
opened the cabinet to confirm that the bottle was missing; she also
``attempted to review the surveillance video'' only to find that ``it
had been deleted.'' Id. The employee also told the DI that she checked
the computer inventory records and found that 100 pills of oxycodone 15
mg had been removed from the count of drugs ``on hand.'' Id.
The same employee told the DI ``that the [p]harmacy regularly
experiences inventory losses'' and had been experiencing them ``for
more than a year.'' Id. The employee told the DI that on the very day
that the AIW was executed, her comparison of the computer inventory and
the actual count of drugs on hand found that 107 dosage units of
hydrocodone 10 mg were missing. Id. The employee also told the DI that
in the weeks prior to the AIW, one bottle of oxycodone 20 mg and one
bottle of oxycodone 15 mg went missing. Id.
The employee further told the DI that Chapman was impaired at work
on an almost daily basis and that he would ``spend the majority of his
day asleep in his office.'' Id. She also told the DI of an instance in
which Chapman ``had incorrectly filled a prescription'' which she
corrected and that ``she saw Chapman using a vaporizer at work to smoke
marijuana regularly.'' Id.
According to the DI, following the AIW, the same employee
``reported to [him] multiple other instances where . . . Chapman had
stolen oxycodone'' from Registrant; the employee stated that these
incidents occurred on July 18 and 23, as well as August 3, 2016. Id.
The employee also took a photograph showing Chapman ``passed out at his
desk on July 18, a day when he was . . . taken to the hospital''
because he overdosed. Id. at 3-4. According to the employee, on that
day, ``64 oxycodone pills were missing compared with a physical pill
count conducted on July 15, 2017.'' Id. at 4. The DI subsequently
subpoenaed the photo; the Government submitted the photo as part of the
evidentiary record. Id. at 3; see also Appendix 4.
During the AIW, the DI also interviewed Chapman. GX 3, at 3. During
the interview, Chapman stated that the ``[p]harmacy had destroyed
approximately 70 Percocet pills sometime in the past and that . . . he
had adjusted the `inventory book' so that the records would reflect the
physical inventory.'' Id. Chapman admitted, however, that he did not
report ``this shortage'' to DEA. Id. He also maintained he had
``attempted to report a loss of 100 pills to DEA but did not attempt to
report other losses either to DEA or local law enforcement because he
considered them `not significant.' '' Id. Chapman further represented
``that 10-15 oxycodone or hydrocodone pills would be missing from the
[p]harmacy . . . perhaps 15-20 times in the prior year'' and that
``there was a total loss of perhaps 300 oxycodone and hydrocodone
pills.'' Id. at 3-4. Chapman stated that ``on those occasions when he
found a pill shortage in the physical inventory as compared with the
computer records, he adjusted the computer inventory to reflect the
losses.'' Id. However, ``Chapman admitted that he did not report a loss
for any of these losses.'' Id. at 4.
During the interview, ``Chapman denied that he was abusing
prescriptions drugs'' and stated ``that his fill-in pharmacists were
previous drug abusers he had hired from a West Virginia Pharmacy Board
facilitated drug rehabilitation program.'' Id. Chapman also ``denied
knowing
[[Page 51436]]
anything further about the nature of the [p]harmacy losses of''
controlled substances. Id.
During the June 30 interview, Chapman also admitted that he
``us[ed] marijuana illegally.'' Id. at 4. He told the DI that ``he uses
an electronic cigarette or vaporizer device as a delivery mechanism for
his marijuana.'' Id.
On July 19, 2016, the DI and a TFO served a search warrant on the
Cabell-Huntington Hospital for Chapman's records. Id. at 5. The records
show that on June 17, 2015,\5\ as well as April 6 and July 18, 2016,
``Chapman was admitted . . . due to complications from an overdose.''
Id. at 5. Chapman underwent urine drug tests on each occasion, with the
June 17, 2015 and April 6, 2016 test results showing that he was
``positive for opiates including oxycodone'' and the July 18 test
results showing that he ``was positive for'' both cocaine and
oxycodone. Id. The records for both the June 17, 2015 and April 6, 2016
admissions document that Chapman stated ``that he had taken Percocet
prior to being admitted.'' Id. See also Appendix 6A, at 2 (April 6,
2016 discharge summary) (``discussed his urine tox screen with him and
he states he took \1/2\ percocet''); Appendix 6B, at 15 (June 17, 2015
discharge summary: ``The pt. denied taking anything other than Percocet
several days prior to admission.'')
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\5\ While in his declaration, the DI stated that Chapman was
admitted to the hospital on June 17, 2016, the records clearly show
that this occurred on June 17, 2015. Appendix 6B.
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According to the DI, he queried the West Virginia Prescription
Monitoring Program (PMP) to determine what prescriptions Chapman had
been issued. GX 3, at 5. The query showed that ``Chapman had filled
prescriptions for Tramadol and one prescription for hydrocodone in
March 2016.'' Id. The query showed no prescriptions for other drugs.
Id.
On July 21, 2016, the DI received another report from a pharmacy
employee that Chapman had again taken oxycodone from the pharmacy. Id.
at 4. The next day, the DI, along with a Task Force Officer and a
Pharmacy Board Investigator again interviewed Chapman. Id. During the
interview, ``Chapman admitted that he had been diverting . . . 200 to
300 milligrams every day [of] oxycodone or hydrocodone'' for his
``personal use'' and had done so ``for approximately [one] year.'' Id.
Chapman admitted that he ``alter[ed] the [p]harmacy's computer and
inventory records'' and that he ``shredd[ed] invoices from suppliers
and destroy[ed] DEA 222 Forms and CSOS records.'' Id. He ``also
admitted that he had been using cocaine during the past two years,'' as
well as that ``his addiction was so strong that he couldn't wait for
[the] MOA . . . to expire so that he could begin using his . . .
[r]egistration to fuel his . . . addiction.'' Id.
On July 23, 2016, the DI received another report from the employee
that Chapman had taken drugs from the pharmacy, in particular, a 100-
count bottle of oxycodone. Id. at 4. On August 3, 2016, the DI received
still another report from the employee that Chapman had taken narcotics
from the pharmacy. Id. at 5.
The DI also attempted to conduct an audit of the pharmacy. Id.
While the DI subpoenaed the records from the pharmacy's suppliers and
was able to determine the total amount of drugs that the pharmacy had
obtained, according to the DI, ``the [p]harmacy's internal records were
so unreliable as to make an accurate count impossible.'' Id. Based on
the records he obtained from just one supplier, the DI found that
Respondent could not account for 20,000 pills of oxycodone 30 mg and
hydrocodone 10 mg. Id. The DI noted that Chapman had also admitted to
diverting oxycodone 15 mg. Id.
The DI also obtained a search warrant for the pharmacy's video
surveillance records; these videos were submitted as part of the
record. Id. According to the DI, these videos show ``Chapman entering
the pharmacy and removing pills on two separate occasions,'' including
one during which Chapman ``plac[ed] an unknown number of loose pills
into his pocket,'' and another, during which Chapman removed a pill
bottle from a locked storage cabinet. Id. at 5-6. In addition, the DI
obtained photographs showing the various areas of the pharmacy and the
location of the locked cabinet.\6\ Id. at 6. One of the videos does
show a person opening a locked cabinet at the pharmacy counter,
removing a plastic bottle from the cabinet, and leaving the pharmacy.
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\6\ The DI also obtained a copy of court records showing that on
September 8, 2016, Chapman entered into a guilty plea to a state
court information which charged him with the felony offense of
``Obtaining Possession of a Controlled Substance by Fraud.'' GX 3,
at 6.
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Finally, the DI stated that ``[i]f Chapman had been candid about
his role in the diversion of controlled substances during the June 30
AIW, I and my DEA colleagues would have pursued immediate criminal
action against Chapman. We would also have been able to take additional
steps--including seeking immediate administrative sanctions--to prevent
additional diversion of controlled substances from the [p]harmacy.''
Id.
Discussion
Mootness
As found above, the registration at issue in this proceeding
expired on August 31, 2017. According to the registration records of
the Agency, Chapman has not filed either a renewal application or a new
application for the pharmacy. Accordingly, there is neither a
registration to revoke nor an application to act upon.
While ordinarily these facts would render this proceeding moot, see
Ronald J. Riegel, 63 FR 67132, 67133 (1998), simultaneously with the
issuance of the Show Cause Order, the former Acting Administrator
ordered that Registrant's registration be immediately suspended.
Pursuant to the authority granted by 21 U.S.C. 824(f), the former
Acting Administrator authorized the seizure or placement under seal of
the controlled substances possessed by Registrant pursuant to its
registration. As found above, the Government seized various controlled
substances pursuant to the Immediate Suspension Order. GX 3, at 2.
Under section 824(f), ``[u]pon a revocation order becoming final,
all such controlled substances'' which have been seized or placed under
seal ``shall be forfeited to the United States'' and ``[a]ll right,
title, and interest in such controlled substances shall vest in the
United States upon a revocation order becoming final.'' 21 U.S.C.
824(f). DEA has previously held that a registrant, who has been issued
an immediate suspension order, cannot defeat the effect of this
provision by allowing its registration to expire. See Meetinghouse
Community Pharmacy, Inc., 74 FR 10073, 10074 n.5 (2009); RX Direct
Pharmacy, Inc., 72 FR 54070, 54072 n.4 (2007). Thus, this proceeding
presents the collateral consequence of who has title to the controlled
substances that were seized. Accordingly, I hold that this case is not
moot and proceed to the merits.
The Merits
Under the CSA, ``[a] registration pursuant to section 823 of this
title to manufacture, distribute, or dispense a controlled substance .
. . may be suspended or revoked by the Attorney General upon a finding
that the registrant . . . has committed such acts as would render [its]
registration under section 823 of this title inconsistent with the
public interest as determined under such section.'' 21 U.S.C.
824(a)(4). In the case of a retail
[[Page 51437]]
pharmacy, which is deemed to be a practitioner, see id. Sec. 802(21),
Congress directed the Attorney General to consider the following
factors in making the public interest determination:
(1) The recommendation of the appropriate State licensing board
or professional disciplinary authority.
(2) The applicant's experience in dispensing or conducting
research with respect to controlled substances.
(3) The applicant's conviction record under Federal or State
laws relating to the manufacture, distribution, or dispensing of
controlled substances.
(4) Compliance with applicable State, Federal, or local laws
relating to controlled substances.
(5) Such other conduct which may threaten the public health and
safety.
Id.
``[T]hese factors are . . . considered in the disjunctive.'' Robert
A. Leslie, M.D., 68 FR 15227, 15230 (2003). It is well settled that I
``may rely on any one or a combination of factors, and may give each
factor the weight [I] deem[ ] appropriate in determining whether'' to
suspend or revoke an existing registration. Id.; see also MacKay v.
DEA, 664 F.3d 808, 816 (10th Cir. 2011); Volkman v. DEA, 567 F.3d 215,
222 (6th Cir. 2009); Hoxie v. DEA, 419 F.3d 477, 482 (6th Cir. 2005).
Moreover, while I am required to consider each of the factors, I ``need
not make explicit findings as to each one.'' MacKay, 664 F.3d at 816
(quoting Volkman, 567 F.3d at 222); see also Hoxie, 419 F.3d at 482.\7\
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\7\ In short, this is not a contest in which score is kept; the
Agency is not required to mechanically count up the factors and
determine how many favor the Government and how many favor the
registrant. Rather, it is an inquiry which focuses on protecting the
public interest; what matters is the seriousness of the registrant's
or applicant's misconduct. Jayam Krishna-Iyer, 74 FR 459, 462
(2009). Accordingly, as the Tenth Circuit has recognized, findings
under a single factor can support the revocation of a registration.
MacKay, 664 F.3d at 821.
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Also, pursuant to section 824(d), ``[t]he Attorney General may, in
his discretion, suspend any registration simultaneously with the
institution of proceedings under this section, in cases where he finds
that there is an imminent danger to the public health or safety.'' 21
U.S.C. 824(d)(1). Congress has defined ``the phrase `imminent danger to
the public health or safety' [to] mean[ ] that, due to the failure of
the registrant to maintain effective controls against diversion or
otherwise comply with the obligations of a registrant under [the CSA],
there is a substantial likelihood of an immediate threat that death,
serious bodily harm, or abuse of a controlled substance will occur in
the absence of an immediate suspension of the registration.'' Id. Sec.
(d)(2).
Under the Agency's regulation, ``[a]t any hearing for the
revocation or suspension of a registration, the Administration shall
have the burden of proving that the requirements for such revocation or
suspension pursuant to . . . 21 U.S.C. 824(a) . . . are satisfied.'' 21
CFR 1301.44(e). In this matter, I have considered all of the factors
and find that the Government's evidence with respect to factors four
and five,\8\ establishes that Registrant, through its owner, has
committed acts which render its registration ``inconsistent with the
public interest'' and which support the suspension of its registration.
21 U.S.C. 824(a)(4). I further find that the Government's evidence
establishes that Registrant's misconduct satisfies the imminent danger
standard of 21 U.S.C. 824(d), in that, Registrant's failure ``to
maintain effective controls against diversion or otherwise comply with
the obligations of a registrant under'' the CSA created ``a substantial
likelihood of an immediate threat that . . . abuse of a controlled
substance will occur in the absence of an immediate suspension of [its]
registration.''
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\8\ The Government submitted no evidence as to Factor One. As to
Factor Three, the Government submitted evidence that after issuance
of the Show Cause Order, Chapman pled guilty in state court to
Obtaining Possession of a Controlled Substance by Fraud. While the
evidence also includes a Post-Conviction Procedural Order but not a
Judgment, the Government did not allege Chapman's conviction for
this offense as grounds for the proceeding. However, even if a
Judgment has been issued, the Government did not provide him with
notice that it intended to rely on either Factor Three or 21 U.S.C.
824(a)(2). Thus, I consider Chapman's guilty plea only as additional
evidence to support the allegations (not that such evidence is
needed).
In its Request for Final Agency Action, the Government did not
address the applicability of Factor Two (the Registrant's experience
in dispensing controlled substances) to the various acts of
misconduct that were alleged and proved. As explained in this
Decision, the record establishes that Registrant engaged in the
unlawful distribution of controlled substances and committed various
recordkeeping violations. These acts of misconduct are relevant in
assessing both Registrant's compliance with applicable laws related
to controlled substances as well as its experience in dispensing
controlled substances.
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Factor Four--Compliance With Applicable Laws Related to Controlled
Substances
As found above, the evidence shows that Chapman, Registrant's PIC,
was diverting narcotic controlled substances from the pharmacy's stock
for his own misuse. This evidence includes: (1) The videos showing him
unlocking the cabinet in which controlled substances were stored,
removing a bottle of medication, and leaving the pharmacy; (2) the
statements of a pharmacy employee to the DI as to various instances in
which oxycodone went missing, including the July 18, 2016 incident,
when he passed out at his desk and was hospitalized; (3) the UDS
results for the various hospitalizations including the July 18, 2016
positive result for oxycodone (which was also positive for cocaine);
(4) his subsequent admission to Investigators during the July 21, 2016
interview that he had been diverting 200 to 300 milligrams every day of
oxycodone or hydrocodone for approximately one year; (5) the DI's
finding that at least 20,000 dosage units of oxycodone 30 mg and
hydrocodone 10 mg could not be accounted for; and (6) the DI's
statement that his query of the state PMP showed that Chapman had
filled only prescriptions for tramadol and one hydrocodone prescription
in March 2016.
Under the Controlled Substances Act, it is ``unlawful for any
person knowingly or intentionally to possess a controlled substance
unless such substance was obtained directly, or pursuant to a valid
prescription or order, from a practitioner, while acting in the course
of his professional practice, or except as otherwise authorized by this
subchapter.'' 21 U.S.C. 844(a). While Chapman, as the PIC of a
registered pharmacy, was authorized to order controlled substances for
the pharmacy and to possess controlled substances in his capacity as
the Registrant's PIC, he was generally authorized to do so only for the
purpose of dispensing the controlled substances to patients ``pursuant
to the lawful order of a practitioner,'' i.e., a prescription.\9\ See
21 U.S.C. 822(b) (``Persons registered by the Attorney General under
this subchapter to . . . dispense controlled substances . . . are
authorized to possess . . . distribute, or dispense such substance . .
. to the extent authorized by their registration and in conformity with
the other provision of this subchapter.'') (emphasis added); id. Sec.
823(f) (``The Attorney general shall register practitioners (including
pharmacies, as distinguished from pharmacists) to dispense . . . .'').
id. Sec. 802 (``The term `dispense' means to deliver a controlled
[[Page 51438]]
substance to an ultimate user . . . by, or pursuant to the lawful order
of, a practitioner''); see also 21 CFR 1300.01(a) (``Prescription means
an order for medication which is dispensed to or for an ultimate user
but does not include an order for medication which is dispensed for
immediate administration to the ultimate user . . . .''). As
Registrant's PIC, Chapman was not authorized to then distribute the
controlled substances to himself. Moreover, because under West Virginia
law, a limited liability company has legal personality (see West Va.
Sec. 841(a)(1)) and Chip RX, L.L.C., held the registration, it
unlawfully distributed controlled substances to Chapman in violation of
21 U.S.C. 841(a)(1) (``Except as authorized by this subchapter, it
shall be unlawful for any person knowing or intentionally . . . to
distribute . . . a controlled substance.'').
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\9\ Under a DEA regulation, a pharmacy is also allowed to
distribute a small quantity of controlled substances to another
practitioner ``without being registered to distribute,'' provided
that ``[t]he practitioner to whom the controlled substance is to be
distributed is registered under the Act to dispense that controlled
substance.'' 21 CFR 1307.11(a). Those distributions cannot, however,
exceed, on a ``calendar year'' basis, ``5 percent of the total
number of dosage units of all controlled substances distributed and
dispensed by the practitioner during the same calendar year.'' Id.
Chapman's distribution of controlled substances to himself does not
come within this exemption.
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The evidence also shows that Registrant (and Chapman) violated the
CSA by failing maintain ``a complete and accurate'' record of each such
[controlled] substance . . . received, sold, delivered or otherwise
disposed of . . . .'' 21 U.S.C. Sec. 827(a)(3). Specifically, Chapman
admitted that he shredded invoices from suppliers. See id., see also 21
CFR 1304.04(a) (requiring that records be kept ``for at least 2 years
from the date of such inventory or records''); id. Sec. 1304.22(c)
(incorporating 21 CFR 1304.22(a)(2)(i), (ii), (iv), (vii), (ix)).
Indeed, Registrant was required to maintain records of its distribution
to Chapman.
Moreover, Chapman admitted that he destroyed both schedule II order
forms and CSOS (Controlled Substance Ordering System) electronic
records. Chapman's admission establishes that Registrant violated 21
U.S.C. 828(c)(2), which requires that a purchaser of a schedule II
controlled substance retain a duplicate copy of a DEA Order Form ``if
such order is accepted'' by a supplier and ``preserve such duplicate
for a period of two years and make it available for inspection or
copying.'' Chapman's admission also establishes that Registrant
violated section 828(c)(2) by failing to maintain CSOS records. See
also 21 CFR 1305.27(a) (``A purchaser must, for each order filled,
retain the original signed order and all linked records for that order
for two years.'').
Thus, the evidence with respect to Registrant's compliance with
applicable laws related to controlled substances establishes that
Registrant committed numerous violations of the CSA by unlawfully
distributing controlled substances to Chapman in violation of 21 U.S.C.
841(a)(1); it also shows that Registrant and Chapman violated the
recordkeeping provisions of 21 U.S.C. 827(a)(3), as well as provisions
requiring the maintenance of schedule II order forms. 21 U.S.C.
828(a)(2). Finally, the evidence also shows that Registrant's principal
and PIC violated 21 U.S.C. 844(a) by obtaining controlled substances
other than by means ``pursuant to a valid prescription . . . from a
practitioner, while acting in the course of his professional practice,
or except as otherwise authorized by'' the CSA.
Factor Five--Such Other Conduct Which May Threaten Public Health and
Safety
The Agency has also long held that self-abuse of a controlled
substance constitutes such other conduct which may threaten public
health and safety. See Tyson D. Quy, 78 FR 47412 (2013); Tony T. Bui,
75 FR 49979 (2010); Kenneth Wayne Green, Jr., 59 FR 51453 (1994); David
E. Trawick, 53 FR 5,326 (1988). While Registrant is not an individual
but rather a limited liability company, the Agency has long held that
the misconduct of an entity's principal is properly considered in
determining whether to revoke the entity's registration. See G & O
Pharmacy of Paducah, 68 FR 43752, 43753 (2003). That Chapman's personal
abuse of controlled substances, which includes his abuse of cocaine,
narcotics, and marijuana on the job, may have threatened public health
and safety is indisputable given the evidence that he incorrectly
filled a prescription and pharmacy staff had to correct his error.\10\
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\10\ Factor Five does not require that the Government prove an
actual threat to public health or safety and thus, the Government is
not required to identify any specific instance in which a
practitioner's (or its employee's) self-abuse created an actual
threat to the health and safety of its patients.
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The Government also alleged that Chapman made several materially
false statements to agency Investigators. As recognized by the Sixth
Circuit,''[c]andor during DEA investigations, regardless of the
severity of the violations alleged, is considered by the DEA to be an
important factor when assessing whether a [practitioner's] registration
is consistent with the public interest.'' Hoxie v. DEA, 419 F.3d 477,
483 (6th Cir. 2005). To be actionable, the Government is required to
show that the statement was false and material to the investigation.
See Roy S. Schwartz, 79 FR 34360, 34363 n.6 (2014); Belinda R. Mori, 78
FR 36582, 36589 (2013).
As the Supreme Court has explained, a false statement is material
if it `` `has a natural tendency to influence, or was capable of
influencing the decision of the decisionmaking body to which it was
addressed.' '' Kungys v. United States, 485 U.S. 755, 770 (1988)
(quoting Weinstock v. United States, 231 F.2d 699, 701 (D.C. Cir.
1956)). The Court has further explained that:
it has never been the test of materiality that the misrepresentation
. . . would more likely than not have produced an erroneous
decision, or even that it would more likely than not have triggered
an investigation. Rather, the test is whether the misrepresentation
. . . was predictably capable of affecting, i.e., had a natural
tendency to affect, the official decision.
485 U.S. at 770-71. ``It makes no difference that a specific
falsification did not exert influence so long as it had the capacity to
do so.'' United States v. Alemany Rivera, 781 F.2d 229, 234 (1st Cir.
1985).
The evidence establishes that Chapman made several materially false
statements to the Investigators. First, Chapman told the Investigators
during the June 30, 2016 interview that ``10 to 15 oxycodone or
hydrocodone pills would be missing from the [p]harmacy . . . perhaps
15-20 times in the prior year'' and that Registrant had ``a total loss
of perhaps 300 oxycodone and hydrocodone pills.'' Second, during the
June 30, 2016 interview, Chapman ``denied that he was abusing
prescription drugs'' and attributed the diversion to fill-in
pharmacists he employed who were previous drug abusers and were hired
through a State Board rehabilitation program. He also ``denied knowing
anything further about the nature of the [p]harmacy's losses'' of
controlled substances.
Chapman's statements regarding the scope of the diversion of drugs
from Registrant were false because the diversion was far more extensive
than what he claimed during the June 30 interview, as he ultimately
admitted during the July 22, 2016 interview, when he acknowledged
diverting 200 to 300 milligrams per day of oxycodone or hydrocodone for
personal use. So too, his statements during the June 30 interview in
which he denied that he was abusing drugs, as well as that he knew
anything further about the nature of the pharmacy's losses, were also
false as he ultimately admitted during the July 22 interview that he
was abusing narcotic prescription drugs and was diverting large
quantities on a daily basis.
I further conclude that these statements were capable of
influencing the decisionmaking process of the Agency because Chapman
attempted to minimize the scope of the criminal conduct that was
occurring at
[[Page 51439]]
Registrant, both with respect to the volume of drugs being diverted and
by denying that he was engaged in diverting and abusing the controlled
substances. As explained above, Registrant's and Chapman's misconduct
in diverting drugs, which the latter personally abused, was actionable
misconduct under both Factor Four (compliance with applicable laws
related to controlled substances) and Factor Five (other conduct which
may threaten public health and safety). As the DI explained, had
Chapman been candid during the June 30, 2016 interview, he and his
colleagues ``would have pursued immediate criminal action against
Chapman'' as well as administrative action against Registrant. Indeed,
Chapman's subsequent admissions during the July 22, 2016 interview
supported both criminal charges against Chapman and the Immediate
Suspension Order.
Accordingly, I conclude that the evidence with respect to Factor
Five establishes that Registrant's principal was abusing controlled
substances and that he made several materially false statements to DEA
investigators. I also conclude that these acts constitute actionable
misconduct which may threaten public health and safety.
Summary of Factors Four and Five and Imminent Danger
As found above, the Government's evidence establishes that
Registrant unlawfully distributed controlled substances to Chapman and
failed to maintain required records. The evidence also establishes that
Registrant's principal and pharmacist in charge unlawfully possessed
controlled substances, destroyed records that Registrant was required
to maintain, abused controlled substances and made materially false
statements to DEA Investigators. I therefore find that Registrant has
committed such acts as to render its registration inconsistent with the
public interest. 21 U.S.C. 824(a)(4).
For purposes of the imminent danger inquiry, these findings also
support the conclusion that Registrant has ``fail[ed] . . . to maintain
effective controls against diversion or otherwise comply with the
obligations of a registrant under'' the CSA. 21 U.S.C. 824(d)(2). Also,
the evidence that Chapman was diverting 200 to 300 milligrams of
narcotics per day, which he then abused (along with the evidence
showing that he was hospitalized for an overdose on multiple
occasions), establishes that there was ``a substantial likelihood of an
immediate threat that death, serious bodily harm, or abuse of a
controlled substance [would] occur in the absence of the immediate
suspension of [Registrant'] registration.'' Id. I therefor affirm the
issuance of the Immediate Suspension Order.
Pursuant to 21 U.S.C. 824(f), ``[u]pon a revocation order becoming
final, all . . . controlled substances'' seized pursuant to a
suspension order ``shall be forfeited to the United States'' and
``[a]ll right, title, and interest in such controlled substances shall
vest in the United States upon a revocation order becoming final.'' As
the Agency has previously held, a registrant cannot defeat the effect
of this provision by allowing its registration to expire.'' S & S
Pharmacy, Inc., d/b/a Platinum Pharmacy & Compounding, 78 FR 57656,
57659 (2013) (citing Meetinghouse Community Pharmacy, Inc., 74 FR
10073, 10074 n.5 (2009); RX Direct Pharmacy, Inc., 72 FR 54070, 54072
n.4 (2007)). Registrant had the right to challenge the Immediate
Suspension Order before the Agency but chose not to. And had Registrant
not allowed its registration to expire, I would have revoked it.
Accordingly, I will order that the controlled substances seized
pursuant to the Immediate Suspension Order be forfeited to the United
States. 21 U.S.C. 824(f). I will also declare that ``[a]ll, right,
title, and interest in'' the controlled substances that were seized
pursuant to the Suspension Order have vested in the United States. Id.
Order
Pursuant to the authority vested in me by 21 U.S.C. 824(a) and (d),
as well as 28 CFR 0.100(b), I order that the Order of Immediate
Suspension issued to Chip RX d/b/a City Center Pharmacy be, and it
hereby is, affirmed. Pursuant to the authority vested in me by 21
U.S.C. 824(f), I order that all controlled substances seized pursuant
to the Order of Immediate Suspension be, and they hereby are, forfeited
to the United States. Pursuant to the authority vested in me by 21
U.S.C. 824(f), I also declare that all right, title, and interest in
all controlled substances seized pursuant to the Order of Immediate
Suspension be, and they hereby are, vested in the United States. This
Order is applicable December 6, 2017.
Dated: October 31, 2017.
Robert W. Patterson,
Acting Administrator.
[FR Doc. 2017-24093 Filed 11-3-17; 8:45 am]
BILLING CODE 4410-09-P