[Federal Register Volume 90, Number 62 (Wednesday, April 2, 2025)]
[Notices]
[Pages 14476-14481]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-05591]
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DEPARTMENT OF JUSTICE
Drug Enforcement Administration
[Docket No. 24-21]
Prescript Pharmaceuticals; Decision and Order
On November 17, 2023, the Drug Enforcement Administration (DEA or
Government) issued an Order to Show Cause and Immediate Suspension of
Registration (OSC/ISO) to Prescript Pharmaceuticals of Pleasonton,
California (Respondent). OSC/ISO, at 1. The OSC/ISO informed Respondent
of the immediate suspension of its DEA registration, No. RP0177798,
pursuant to 21 U.S.C. 824(d), alleging that Respondent's continued
registration constitutes `` `an imminent danger to the public health or
safety.' '' Id. (quoting 21 U.S.C. 824(d)). The OSC/ISO also proposed
the revocation of Respondent's registration, alleging that Respondent's
continued registration is inconsistent with the public interest. Id.
(citing 21 U.S.C. 824(a)(4), 823(a)(1)).
More specifically, the OSC/ISO alleges that between 2020 and 2023,
Respondent, who is registered as a manufacturer engaged in repackaging
and relabeling activities, ordered Schedule II opioids from a supplier
without having requested or received any procurement quota from DEA, in
violation of 21 CFR 1303.12(b).\1\ Id. at 2; Tr. 99.
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\1\ The Government also alleged that Respondent ordered
pseudoephedrine-guaifenesin, a List I chemical, from a supplier
without having requested or received any procurement quota, in
violation of 21 CFR 1315.32(a). The Chief ALJ did not sustain this
allegation because, while pseudoephedrine is a List I chemical
subject to quotas, see 21 CFR 1315.32(a), 21 U.S.C. 802(34)(K), the
Chief ALJ found that the Government did not preponderantly establish
that pseudoephedrine is still a List I chemical when combined with
guaifenesin. RD, at 30 n.75. The Chief ALJ noted that the only
pertinent evidence on this subject was the testimony of a DEA
Diversion Investigator (DI), who equivocated on the stand about
whether pseudoephedrine-guaifenesin is a List I chemical. RD, at 9;
compare Tr. 140, 182 (``[T]he mix of the pseudoephedrine is a List I
chemical, which is contained within the Pseudoephedrine-
Guaifenesin.'') with Tr. 183 (``I don't know if the fact that it's
mixed would change the fact that it contains a Listed I chemical'').
In its post-hearing brief and Exceptions, the Government
observes that the CSA's implementing regulations (21 CFR 1315.11(a))
provide that among the Administrator's quota-related duties is the
duty to make an annual assessment regarding the maximum amount of
pseudoephedrine--including any chemicals that contain
pseudoephedrine--that may be manufactured or imported. ALJX 37, at
13; RD, at 30 n.75; Government's Exceptions, at 4-5. Furthermore,
there is no limiting language in DEA's regulations suggesting that
quota would not be required for pseudoephedrine when it is combined
with another chemical. DEA's regulations state that quota is
required for ``any person . . . who desires to use during the next
calendar year any . . . pseudoephedrine . . . for purposes of
manufacturing.'' 21 CFR 1315.32(a) (emphasis added). Respondent
apparently understood that pseudoephedrine-guaifenesin was a
chemical for which quota is required, because Respondent requested
quota from DEA for this chemical in 2017. GX 10, at 1 (requesting
quota for pseudoephedrine and pseudoephedrine/guaifenesin).
However, given the overwhelming nature of the evidence
establishing that Respondent's registration is inconsistent with the
public interest, the Agency need not make any findings related to
this allegation.
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A hearing was held before DEA Chief Administrative Law Judge John
J. Mulrooney, II (the Chief ALJ),\2\ who, on October 31, 2024, issued
his Recommended Rulings, Findings of Fact, Conclusions of Law, and
Decision (Recommended Decision or RD), recommending that Respondent's
registration be revoked. RD, at 37. The Government filed timely
exceptions to the RD.\3\ Having reviewed the entire record, the Agency
adopts and hereby incorporates by reference the Chief
[[Page 14477]]
ALJ's rulings,\4\ credibility findings,\5\ findings of fact,
conclusions of law, sanctions analysis, and recommended revocation
sanction as found in the RD, and summarizes and clarifies portions
thereof herein.
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\2\ On January 10, 2024, the Chief ALJ issued an order
terminating proceedings, which Respondent successfully appealed to
the Agency. RD, at 2; ALJX 10, 11, 12.
\3\ The Agency has reviewed and considered the Government's
exceptions and addresses them herein.
\4\ The Agency does not adopt the Chief ALJ's mootness analysis.
The Agency has repeatedly held since 2019 that the fact that a
registrant allows a registration to expire during the pendency of an
OSC does not impact the Agency's jurisdiction or prerogative under
the Controlled Substances Act to adjudicate the OSC to finality.
Jeffrey D. Olsen, M.D., 84 FR 68474, 68476-79 (2019). See also infra
n.20.
\5\ The Agency adopts the Chief ALJ's summary of each witness's
testimony, as well as the Chief ALJ's assessment of each witness's
credibility. See RD, at 8-17.
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I. Applicable Law
As already discussed, the OSC/ISO alleges that Respondent violated
multiple provisions of the Controlled Substances Act (CSA) and its
implementing regulations. As the Supreme Court stated in Gonzales v.
Raich, ``the main objectives of the CSA were to conquer drug abuse and
to control the legitimate and illegitimate traffic in controlled
substances. . . . To effectuate these goals, 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.'' 545 U.S. 1, at 12-13 (2005). In maintaining
this closed regulatory system, ``[t]he CSA and its implementing
regulations set forth strict requirements regarding registration,
labeling and packaging, production quotas, drug security, and
recordkeeping.'' Id. at 14. The OSC/ISO's allegations concern the CSA's
``strict requirements regarding . . . labeling and packaging [and]
production quotas'' and, therefore, go to the heart of the CSA's
``closed regulatory system'' specifically designed ``to conquer drug
abuse and to control the legitimate and illegitimate traffic in
controlled substances.'' Id. at 12-14.
The Allegation That Respondent Purchased Controlled Substances Without
Requesting or Obtaining Procurement Quota, in Violation of 21 CFR
1303.12(b)
The CSA requires manufacturers to obtain a registration from DEA
prior to procuring controlled substances or engaging in manufacturing
activities, 21 U.S.C. 823(a), (e), and authorizes DEA to place
restrictions on registrants' manufacturing activities. Congress has
provided the following definition of the term ``manufacture'':
[T]he production, preparation, propagation, compounding, or
processing of a drug or other substance, either directly or
indirectly or by extraction from substances of natural origin, or
independently by means of chemical synthesis or by combination of
extraction and chemical synthesis, and includes any packaging or
repackaging of such substance or labeling or relabeling of its
container . . . .''
21 U.S.C. 802(15); RD, at 21. The CSA's implementing regulations
similarly define manufacturing to include ``the producing, preparation
. . . or processing of a drug or other substance or the packaging or
repackaging of such substance, or the labeling or relabeling of the
commercial container of such substance . . . .'' 21 CFR 1300.01; RD, at
21.
Under the CSA and DEA's implementing regulations, the Attorney
General is authorized to establish an annual aggregate production
quota, which is defined as ``the total quantity . . . [of] each basic
class of controlled substances in schedules I and II . . . to be
manufactured each calendar year . . . .'' 21 U.S.C. 826(a); 21 CFR
1303.03(a); RD, at 21-22. The Attorney General is further authorized to
establish individual procurement quotas restricting the quantity of
controlled substances that manufacturers may procure each year for
purposes of engaging in manufacturing activities. 21 U.S.C. 826; 21 CFR
1303. DEA's implementing regulations create five subcategories of
manufacturing and procurement quotas, including one category for
``packaging/repackaging and labeling/relabeling'' activities. 21 CFR
1303.04(e). The regulations specify that this subcategory is limited to
manufacturers that package/repackage or label/relabel controlled
substances, without engaging in any other commercial production
activities:
This is the quota for the amount of material moved to a
registrant to undergo packaging and labeling activities. This quota
is limited to that activity only and only for the packaging/
repackaging and labeling/relabeling noted in the application; it may
not be used or substituted for commercial production.
Id.; see also 21 CFR 1315.30(b)(3) (``A procurement quota
authorizes a registered manufacturer to procure and use quantities of
each chemical for . . . [r]epackaging or labeling the chemical or
dosage forms.''); 21 CFR 1303.03(c) (defining ``procurement quota'' as
``the maximum quantity of each basic class of schedules I and II
controlled substances that a registered manufacturer may procure during
a calendar year for the purpose of manufacturing into dosage-forms or
other substances'').
DEA's regulations expressly delineate the obligations of
manufacturer registrants with respect to quotas, stating:
Any person who is registered to manufacture controlled
substances listed in any schedule and who desires to use during the
next calendar year any basic class of controlled substances listed
in Schedule I or II . . . for purposes of manufacturing, shall apply
. . . for a procurement quota for such basic class.
21 CFR 1303.12(b) \6\ (emphasis added); RD, at 22. In other words, any
entity that is registered with DEA to manufacture controlled substances
must apply for and obtain a procurement quota before purchasing a
Schedule I or Schedule II controlled substance for any manufacturing
activity, including repackaging and labeling. 21 U.S.C. 842(b)(2); 21
CFR 1303.12(b); see also Tr. 192, 272 (DEA Drug Science Specialist
testifying that manufacturer registrants engaged in packaging/
repackaging and labeling/relabeling of controlled substances must apply
for and obtain a procurement quota from DEA). The CSA prohibits a
registrant from ``manufactur[ing] a controlled substance in schedule II
. . . not expressly authorized . . . by a quota assigned to him . . .
or in excess of a quota assigned to him.'' 21 U.S.C. 842(b)(2); \7\
Gonzales v. Raich, 545 U.S. at 27; RD, at 27.
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\6\ On November 28, 2023, substantive modifications were made to
21 CFR 1303.12(b), and it was redesignated as 21 CFR 1303.15. See
Mgmt. of Quotas for Controlled Substances and List I Chems., 88 FR
60117-02, 60128 (2023). This Decision cites to the original version
at 21 CFR 1303.12(b), which was in place when the relevant
misconduct occurred.
Respondent argues that the November 28, 2023 modifications added
the requirement for packagers/repackagers to request quota, and that
prior to this modification, packaging and repackaging activities did
not require quota. Tr. 413, 482. Not only is Respondent's argument
directly contradicted by the plain language of the statutes and
regulations discussed herein, but it is directly contradicted by the
order summarizing the modifications to 21 CFR 1303.12(b), which
states that ``packaging and repackaging are manufacturing activities
defined in the CSA and CFR and already require quota,'' and that
``[q]uota for Packaging/Repackaging and Labeling/Relabeling are
already being utilized by DEA with full cooperation from all
registrants.'' 88 FR at 60126, 60133.
\7\ The Agency need not adjudicate the criminal violations
alleged in the instant OSC/ISO. Ruan v. United States, 597 U.S. 450
(2022) (decided in the context of criminal proceedings).
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II. Findings of Fact
The Allegation That Respondent Purchased Controlled Substances Without
Requesting or Obtaining Procurement Quota, in Violation of and 21 CFR
1303.12(b)
Respondent is a manufacturer of controlled substances in
Pleasanton, California, primarily engaged in pharmaceutical repackaging
and
[[Page 14478]]
relabeling. GX 1; RD, at 8, 13-14. William Hartig is the founder and
president of Respondent. Tr. 112-13, 144-46, 340-41; RD, at 8, 13-14.
Respondent first obtained authority to handle Schedule II controlled
substances in 2010. Tr. 379.
Respondent has a long history of refusing to obtain procurement
quota from DEA prior to purchasing Schedule II controlled substances,
despite repeated encounters with DEA employees who cautioned Mr. Hartig
that quota was required. See infra Section IV.A. These encounters
included email communications with a DEA General Supervisor (GS) and
other DOJ employees in 2013, 2017, and 2020; a Letter of Admonition
(LOA) from DEA in 2014, and additional conversations with DEA employees
during scheduled inspections. See infra Section IV.A.
The Government's allegations involve Respondent's failure to obtain
procurement quota for Schedule II opioids in 2020 through 2023. ALJX 1,
at 2-4.
In October 2021 and August 2023, DEA issued administrative
subpoenas to obtain details about Respondent's purchases of controlled
substances from a drug distributor. GX 2, 3; Tr. 102-06, 174; RD, at 9.
The distributor's invoices showed that Respondent had ordered
hydrocodone and oxycodone every year from 2020 through 2023. GX 4; Tr.
133-35, 155; RD, at 9-10. Hydrocodone and oxycodone are Schedule II
controlled substances for which registered manufacturers must obtain
procurement quota from DEA. 21 CFR 1308.12(b)(1) (identifying
hydrocodone and oxycodone as Schedule II controlled substances); id.
Sec. 1303.12(b) (requiring registered manufacturers who ``desire[ ] to
use during the next calendar year any basic class of controlled
substances listed in Schedule I or II for purposes of manufacturing''
to apply for procurement quota).
DEA queried internal databases \8\ and confirmed that Respondent
had not requested or received any procurement quota from DEA for
hydrocodone or oxycodone, and Mr. Hartig testified that Respondent did
not apply for procurement quota from 2020 to 2023. Tr. 107-08, 115,
132-34, 157, 243-45, 439-40; Stipulations (Stips.) 6-10; RD, at 9.
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\8\ The internal database was queried by a DEA Drug Science
Specialist (DSS), who testified at the hearing about the Agency's
process for reviewing and issuing procurement quotas to registrants.
Tr. 243-45; RD, at 10. DSS testified that the internal ``quota
management system'' has been operational since 2011 and records a
registrant's application history, such as when the registrant
applied, how much quota the registrant requested, and the result of
the agency's adjudication of the application. Tr. 222, 227; RD, at
11.
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On August 11, 2022, DEA conducted a scheduled inspection at
Respondent. Tr. 98, 107, 143-44; RD, at 8. At the inspection, DEA
investigators told Mr. Hartig that they had not found any paperwork
indicating that Mr. Hartig had requested quotas from DEA for the
controlled substances that Respondent had purchased. Tr. 156-58; RD, at
9. Mr. Hartig told DEA investigators that, in his opinion, Respondent
was not required to request quota, and that he had no intention of
requesting quota in the future unless DEA convinced him that the quota
rules applied to Respondent's business activities. Tr. 157-58, 166; RD,
at 9. The inspection team informed Mr. Hartig that Respondent was in
violation of the regulations. Tr. 166-67; RD, at 9.
Based on the factual findings above, the Agency agrees with the
Chief ALJ and finds substantial record evidence that: (1) Respondent
was registered as a manufacturer during all times relevant to the
charged misconduct, GX 1; RD, at 8, 13-14; (2) Respondent was engaged
in packaging/repackaging or labeling/relabeling of controlled
substances, which is activity that fits squarely within the statutory
\9\ and regulatory \10\ definitions of manufacturing,\11\ ALJX 1, at 2
] 1; GX 1, 7, 8, 11, 15, 16, 18, 20, 23; RD, at 21-22; and (3)
Respondent did not request procurement quota from DEA for the
hydrocodone or oxycodone that it purchased in 2020 through 2023. Stips.
6-10; see also ALJX 2, at 2-3 ]] 8, 11, 14, 17, 18; GX 4, 5; RD, at 5-
6, 29.
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\9\ 21 U.S.C. 802(15).
\10\ 21 CFR 1300.01.
\11\ At the hearing, Respondent argued that it was not required
to request quota because the activities that Respondent engaged in
did not constitute manufacturing. RD, at 22-29. The Chief ALJ
comprehensively addressed this argument in the RD, and the Agency
hereby incorporates that analysis. Id. The Agency agrees that
Respondent's arguments are contradicted by the plain language of the
CSA and DEA's implementing regulations, as well as by DEA's Quota
User Manual (see infra Section IV.A) and the consistent guidance
that Respondent received from numerous DEA officials over several
years. Id. As the Chief ALJ correctly observes, ``every relevant
definition of manufacturing in the CSA and regulations include
packaging/repackaging-labeling/relabeling activity. 21 U.S.C.
802(15); 21 CFR 1300.01. . . . The manufacturer registrant's
obligation is clear: if an entity intends to engage in any form of
Schedule I and II manufacturing, it must apply for quota,
irrespective of whether the Administrator will grant one or not.''
RD, at 23, 25.
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III. Discussion
A. The Controlled Substances Act (CSA)
Under Section 304 of the CSA, ``[a] registration . . . 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 his
registration under [21 U.S.C. 823] . . . inconsistent with the public
interest as determined under such section.'' 21 U.S.C. 824(a)(4). In
the case of a ``manufacturer,'' Congress directed the Attorney General
to consider six factors in making the public interest determination.
Id. Sec. 823(a)(1-6).\12\ The six factors are considered in the
disjunctive. Gonzales v. Oregon, 546 U.S. 243, 292-93 (2006) (Scalia,
J., dissenting) (``It is well established that these factors are to be
considered in the disjunctive,'' citing In re Arora, 60 FR 4447, 4448
(1995)); Robert A. Leslie, M.D., 68 FR 15227, 15230 (2003); Direct
Wholesale Denial of Application, 69 FR 11654, 11655 (2004) (``As with
the public interest analysis for practitioners and pharmacies pursuant
to subsection [(g)(1) \13\] of section 823, these factors are to be
considered in the disjunctive.''); Alra Laboratories, Inc., 59 FR
50620, 50621 (1994), aff'd Alra Labs. v. DEA, 54 F.3d 450 (7th Cir.
1995). Each factor is weighed on a case-by-case basis. Morall v. Drug
Enf't Admin., 412 F.3d 165, 173-74 (D.C. Cir. 2005). Any one factor, or
combination of factors, may be decisive. Penick Corp. v. Drug Enf't
Admin., 491 F.3d 483, 490 (D.C. Cir. 2007); Morall, 412 F.3d. at n.2;
David H. Gillis, M.D., 58 FR 37507, 37508 (1993).
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\12\ The six factors of 21 U.S.C. 823(a) are:
(1) maintenance of effective controls against diversion of
particular controlled substances . . . into other than legitimate
medical, scientific, research, or industrial channels . . .;
(2) compliance with applicable state and local law;
(3) promotion of technical advances in the art of manufacturing
these substances and the development of new substances;
(4) prior conviction record of applicant under Federal and State
laws relating to the manufacture, distribution, or dispensing of
such substances;
(5) past experience in the manufacture of controlled substances,
and the existence in the establishment of effective control against
diversion; and
(6) such other factors as may be relevant to and consistent with
the public health and safety.
These six factors are applicable to manufacturers of controlled
substances in schedules I and II. The factors applicable to
manufacturers of controlled substances in schedules III through IV
are substantially similar. See id. Sec. 823(e).
\13\ Effective December 2, 2022, the Medical Marijuana and
Cannabidiol Research Expansion Act, Public Law 117-215, 136 Stat.
2257 (2022) (Marijuana Research Amendments or MRA), amended the
Controlled Substances Act (CSA) and other statutes. Relevant to this
matter, the MRA redesignated 21 U.S.C. 823(f), cited here, as 21
U.S.C. 823(g)(1).
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According to DEA regulations, ``[a]t any hearing for the revocation
. . . of a registration, the . . . [Government] shall have the burden
of proving that the requirements for such revocation . . . pursuant to
. . . 21 U.S.C. 824(a) . . .
[[Page 14479]]
are satisfied.'' 21 CFR 1301.44(e); see also Morall, 412 F.3d. at 174.
In this matter, while all of the 21 U.S.C. 823(a) factors have been
considered, the Agency finds that the Government's evidence in support
of its prima facie case is confined to factor five (past experience in
the manufacture of controlled substances).\14\ RD, at 19, 27, 30-31.
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\14\ Respondent introduced evidence that it has employed
software and packaging that results in significant potential public
benefit to those who choose to utilize its services. Tr. 354, 360-
79; RX 27; RD, at 30. The Chief ALJ found that ``[t]his evidence
reflects favorably on Public Interest Factor Three (promotion of
technical advances in the art of manufacturing) in the Respondent's
favor.'' RD, at 30 (citing 21 U.S.C. 823(a)(3)). However, the Chief
ALJ also found that ``juxtaposed against this favorable evidence is
the balance of the sustained allegations, which militate strongly
and decisively in favor of the sanction sought by Government under
Public Interest Factor Five (the Respondent's past experience in the
manufacture (packaging/repackaging-labeling/relabeling) of
controlled substances).'' RD, at 30. The Agency agrees with the
Chief ALJ that any evidence of innovation is outweighed by the
substantial evidence that Respondent disregarded federal laws
relating to the manufacture of controlled substances.
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Having reviewed the record and the RD, the Agency agrees with the
Chief ALJ, adopts the Chief ALJ's analysis, and finds substantial
record evidence that the Government satisfied its prima facie burden of
showing that Respondent's continued registration is ``inconsistent with
the public interest.'' 21 U.S.C. 824(a)(4); RD, at 37.
B. Allegation That Respondent's Registration Is Inconsistent With the
Public Interest
Factor Five--Respondent's Past Experience in the Manufacture of
Controlled Substances
As found above, Respondent repeatedly failed to request procurement
quota prior to purchasing hydrocodone and oxycodone to engage in
manufacturing activities. 21 CFR 1303.12(b); Gonzales v. Raich, 545
U.S. at 27; RD, at 22-29. The Agency agrees with the Chief ALJ and
finds substantial record evidence that the CSA and its implementing
regulations required Respondent to request and obtain procurement quota
from DEA prior to purchasing hydrocodone and oxycodone to engage in
manufacturing activities. RD, at 22-29; 21 CFR 1303.12(b); Gonzales v.
Raich, 545 U.S. at 27. The Agency finds substantial record evidence
that Applicant violated 21 CFR 1303.12(b), and therefore finds that
Factor Five weighs in favor of revoking Respondent's registration.
In sum, the Agency finds substantial record evidence that the
Government established a prima facie case that Respondent's continued
registration is inconsistent with the public interest, that Respondent
did not successfully rebut that prima facie case, and that there is
substantial record evidence supporting the revocation of Respondent's
registration. 21 U.S.C. 824(a)(4).
IV. Sanction
Where, as here, the Government has met its prima facie burden of
showing that Respondent's continued registration should be revoked due
to its blatant violations of the CSA, the burden shifts to Respondent
to show why it can be entrusted with a registration. Morall, 412 F.3d.
at 174; Jones Total Health Care Pharmacy, 881 F.3d 823, 830 (11th Cir.
2018); Garrett Howard Smith, M.D., 83 FR 18882 (2018); supra sections
II and III.
The issue of trust is necessarily a fact-dependent determination
based on the circumstances presented by the individual respondent.
Jeffrey Stein, M.D., 84 FR 46968, 46972 (2019); see also Jones Total
Health Care Pharmacy, 881 F.3d at 833. Moreover, as past performance is
the best predictor of future performance, DEA Administrators have
required that a registrant who has committed acts inconsistent with the
public interest must accept responsibility for those acts and
demonstrate that it will not engage in future misconduct. Jones Total
Health Care Pharmacy, 881 F.3d at 833. A registrant's acceptance of
responsibility must be unequivocal. Id. at 830-31. In addition, a
registrant's candor during the investigation and hearing has been an
important factor in determining acceptance of responsibility and the
appropriate sanction. Id. Further, DEA Administrators have found that
the egregiousness and extent of the misconduct are significant factors
in determining the appropriate sanction. Id. at 834 and n.4. DEA
Administrators have also considered the need to deter similar acts by
the respondent and by the community of registrants. Jeffrey Stein, 84
FR at 46972-73.
A. Acceptance of Responsibility
Here, the Chief ALJ found, and the Agency agrees, that there is
substantial record evidence that Respondent failed to unequivocally
accept responsibility for its repeated violations of federal law. RD,
at 31-33. When given several opportunities to accept responsibility at
the hearing, Mr. Hartig refused to concede that Respondent had done
anything wrong. Tr. 442, 445. He maintained that it was ``a gray
area,'' and that it is ``up for grabs'' whether he had violated the
law. Tr. 442, 445; RD, at 17, 34. Respondent's position and Mr.
Hartig's testimony are particularly problematic given the clarity of
the laws and regulations and DEA's repeated communications regarding
quotas. 21 U.S.C. 802(15); 21 CFR 1303.12(b), 1300.01.
Witnesses at the hearing--including Mr. Hartig--described a decade
of communications between Respondent and numerous DEA employees
regarding Respondent's refusal to obtain procurement quota. For
example, Mr. Hartig testified that in 2013, a DEA General Supervisor
(GS) notified him of the quota requirement and emailed him materials
about quotas. Tr. 380-83; RD, at 13-14. The next year, after an
inspection in 2014, DEA sent a Letter of Admonition (LOA) to Respondent
explaining that Respondent was in violation of DEA's regulations due to
its failure to obtain procurement quota for the controlled substances
that it had purchased. Tr. 420, 431; RD, at 12, 14. Over the following
years, DEA repeatedly told Mr. Hartig verbally and in writing that
Respondent was required to request quota. See, e.g., Tr. 166-67; 394-
96; GX 19; RX 4; RX 9 (February 8, 2017 email), 10 (March 10, 2017
email), 17 (August 24, 2020 email). For example, GS sent Mr. Hartig an
email on February 14, 2017 (three years after the formal LOA and four
years after GS's initial email) with citations and attachments to the
relevant statutes and regulations and a summary of Respondent's failure
since 2010 to request quota. Despite DEA's repeated and explicit
warnings, Respondent continued to assert that he did not believe that
Respondent's activities constituted manufacturing--a position that was
directly contradicted by the relevant statutes and regulations. See
e.g., RX 9, 10, 17.
At the hearing, Mr. Hartig expressed his frustration that the law
is ``confusing,'' and ``doesn't seem to apply to what [he does].'' \15\
Tr. 403. He
[[Page 14480]]
criticized DEA for not releasing compliance guides for industry
participants, like other agencies do, and testified that ``DEA has not
put out a single compliance guide that [he's] aware of with respect to
this policy.'' Id. at 403. Contrary to Respondent's testimony, DEA's
2017 Quotas User Manual, which is available online \16\ and is cited in
Respondent's Prehearing Statement, see ALJX 17, at 5 ] 11, reiterates
what the regulations make clear: That ``[t]he procurement quota form
DEA 250 is required for . . . labelers/relabelers, and packager/re-
packagers.'' DEA Quotas User Man. at 2 sec. 1.1; RD, at 16. Further, in
its published final orders, the Agency has repeatedly and explicitly
stated that: (1) manufacturing includes relabeling/repackaging
activities; and (2) repackagers/relabelers of controlled substances and
List I chemicals must apply for (and receive) a procurement quota
before they conduct regulated activities under the CSA.\17\
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\15\ As the Chief ALJ observed, it became clear during Mr.
Hartig's testimony that his refusal to comply with quota regulations
was a business decision, rather than a sincere belief that
procurement quota was not required for Respondent's business
activities. RD, at 16-17. Mr. Hartig believed that compliance with
quota regulations might limit the potential growth of his company,
because ``if you restrict how much product [he] can buy from a
supplier, that restricts how much [he] can sell.'' Tr. 404, 446; RD,
at 16. The Chief ALJ reminded Mr. Hartig that registrants may submit
a request to DEA to increase their quota,\15\ to which Mr. Hartig
replied: ``I happened to talk to other repackagers, and one, in
particular, said that they've applied for increases three years in a
row and have been denied every time.'' Tr. 405; RD, at 16. In other
words, Mr. Hartig's reticence to abide by federal law was based on
his concern that DEA might not grant an increase in quota and would
thereby hinder his prospects at growing his business. RD, at 16, 30.
Respondent also wrote in an email to DEA on February 8, 2017, that
it would be ``incredibly anti-competitive'' for DEA to ``further
restrict how much product can be distributed by any one
registrant,'' suggesting that it would not make sense that ``[a]
small business can only grow by a preset quota.'' RX 9, at 1.
\16\ https://www.deadiversion.usdoj.gov/quotas/quotas_userguide.pdf.
\17\ See Technical Amendments and Corrections to DEA
Regulations, 77 FR 4228, 4233 (2012) (``Manufacture means the
producing. . . or the packaging or repackaging of such substance, or
the labeling or relabeling of the commercial container of such
substance''); Registration Requirements for Importers and
Manufacturers of Prescription Drug Products Containing Ephedrine,
Pseudoephedrine, or Phenylpropanolamine, 75 FR 4973, 4974 (2010)
(``[U]nder the CSA, `manufacture' is defined to include all of the
following . . .: The packaging or repackaging of the processed
substances or chemicals or labeling or relabeling of containers
holding the chemicals.''); Import and Production Quotas for Certain
List I Chemicals, 73 FR 73549, 73551 (2008) (``[B]ecause repackagers
and relabelers handle products that are covered by other procurement
or import quotas, DEA may need more details on customers from those
seeking procurement quotas to ensure that it is not double counting
quantities. This issue may arise particularly in reference to OTC
products, where a manufacturer may produce dosage units that are
repackaged or relabeled to be sold under multiple store brand
labels.''); Schedules of Controlled Substances: Rescheduling of
Hydrocodone Combination Products From Schedule III to Schedule II,
79 FR 49661, 49671 (2014) (``Procurement quotas are typically issued
to dosage form manufacturers and repackagers or relabelers for
manufacturing activities. As related to [Hydrocodone Containing
Products], a procurement quota is required . . . for a company to
receive bulk finished dosage units for relabeling or
repackaging.''); RD, at 26.
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Respondent also attempted to pass blame to DEA failing to
officially reprimand Respondent sooner, stating through counsel, ``you
see the Government repeatedly coming to him, hearing his explanation
and shrugging its shoulders and saying maybe we'll get back to you and
dropping the issue for many, many years.'' Tr. 495; see also id. at
494. Respondent's attempts to shift blame for Respondent's violations
to DEA--especially where DEA has issued guidance regarding
manufacturers' obligations and expended significant resources to bring
Respondent into compliance--further detract from Respondent's
acceptance of responsibility. See, e.g., Ester Mark, M.D., 86 FR 16760,
16762 (2021) (finding that the respondent did not accept responsibility
because she ``passe[d] blame on DEA for not telling her how to comply
with recordkeeping requirements'').
Regarding these matters, there is no record evidence that
Respondent takes responsibility, let alone unequivocal responsibility,
for the founded violations. Instead, Respondent incredibly denies that
it is engaged in manufacturing activities, denies that it is required
to obtain quotas, and suggests that DEA's failure to issue an OSC
sooner is evidence supporting his claims. It is simply not reasonable
to believe that Respondent's future controlled substance-related
actions will comply with legal requirements. Accordingly, Respondent
did not convince the Agency that he can be entrusted with a
registration.
B. Deterrence and Egregiousness
In addition to unequivocally accepting responsibility, the Agency
considers both specific and general deterrence when determining an
appropriate sanction. Daniel A. Glick, 80 FR at 74810. In this case,
the Agency agrees with the Chief ALJ and finds substantial evidence
that ``the interests of specific deterrence weigh powerfully in favor
of the revocation sanction sought by the Government.'' RD, at 35.
Respondent has repeatedly signaled to DEA for more than a decade that
he has no intention of complying with federal law, and he has
maintained this position throughout DEA's enforcement proceeding. RD,
at 34-35. Based on Mr. Hartig's continued assertions that the law is
ambiguous, and that DEA has not provided him with sufficient clarity,
it is clear that DEA cannot trust Respondent to follow DEA's quota
regulations, or any other federal laws that Mr. Hartig deems confusing
or inconvenient.
The Agency further agrees with the Chief ALJ that the interests of
general deterrence compel a similar result. RD, at 35. As the Chief ALJ
states, ``[w]here the record demonstrates that the Respondent lacked
motivation to invest even moderate efforts to file the modest paperwork
required to seek quota authorization for dangerous controlled
substances, and was unwilling, even after specific warnings on the
subject, to come into compliance, the unmistakable message to the
regulated community would be that such conduct can be tried once (or
more than once) with little or no consequence.'' Id. (citing Kaniz F.
Khan-Jaffery, M.D., 85 FR 45667, 45690 (``The interests of general
deterrence in discouraging practitioners from ignoring their legal
obligations and not genuinely complying with important recordkeeping
provisions . . . weigh in favor of a sanction of revocation.'')). If
the Agency permitted Respondent to retain its registration, it would
signal that registrants may selectively choose which rules apply to
them, even when those rules are crucial to preventing the abuse and
diversion of dangerous controlled substances.
The Agency further agrees with the Chief ALJ that Respondent's
actions were egregious. RD, at 36. The Agency has held that ``unlawful
manufacturing is an egregious violation and warrants the revocation of
registration.'' Pronto Pharmacy, LLC, 86 FR 64714, 64744 (2021) (noting
the registration renewal interval is only one year long for
manufactures as compared to the three-year interval for practitioners);
RD, at 36. As the Chief ALJ observed, ``the Respondent's president
understood the rules and consciously, and over a lengthy period of
time, elected to disregard them intentionally.'' Id.
The Agency has held manufacturer registrants ``to higher standards
than practitioners with respect to recordkeeping, reporting, security,
and frequency of renewing registration'' \18\ because Congress has
found that ``[t]he illegal importation, manufacture, distribution, and
possession and improper use of controlled substances have a substantial
and detrimental effect on the health and general welfare of the
American people.'' 21 U.S.C. 801 (emphasis added); Gonzales v. Raich,
545 U.S. at 12 n.20 (2005) (citing 21 U.S.C. 801); RD, at 27-28.
Respondent's actions fell far below the Agency's standards for all DEA
registrants, and even further below the Agency's heightened standards
for manufacturers.
[[Page 14481]]
Despite DEA's entreaties over more than a decade that Respondent follow
the straightforward, inexpensive, and statutorily required process of
requesting quota, Respondent refused to do so and instead violated the
law year-after-year.\19\ Mr. Hartig's decision to repeatedly assert
frivolous and incorrect arguments reflects a lack of respect for
Respondent's obligations as a manufacturer and a lack of appreciation
for DEA's important mission to protect the public from dangerous
controlled substances.
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\18\ See also Wedgewood Vill. Pharmacy, 71 FR 16593, 16594
(2006); (``The requirements for registration of manufacturers and
distributors of controlled substances are more stringent than for
those registered as practitioners to dispense controlled substances.
. . . Recordkeeping, reporting and security requirements are also
more rigorous for those who manufacture and distribute controlled
substances.''); RD, at 27.
\19\ Respondent applied for and obtained procurement quota in
2017. See RX 13-15.
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In sum, Respondent has not offered any credible evidence on the
record that despite its violations it can be entrusted with the
responsibility of registration. Accordingly, the Agency will order that
Respondent's registration be revoked.\20\
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\20\ Respondent's DEA registration expired on March 31, 2024,
during prehearing proceedings. ALJX 1, at 2, 14, at 2, 17, at 3, 19
at n.2; GX 1; RD, at 2. As of the date of the RD, Respondent had not
submitted a renewal application. RD, at 2. Accordingly, the Chief
ALJ ``recommended that either the Agency render the case MOOT by
virtue of the fact that the Respondent's [registration] has expired
without a renewal application, or alternatively, that the
Government's application to revoke the Respondent's [registration]
be GRANTED.'' Id. at 37.
The Agency has determined that its jurisdiction to adjudicate a
matter to finality is not dependent on whether the respondent has an
active DEA registration. Jeffrey D. Olsen, 84 FR 68474, 68475-80
(2019). Instead, the Agency's jurisdiction in an administrative
action is over the registrant, not the registration. See Abdul
Naushad, M.D., 89 FR 54059, 54060 (2024) (``[O]ne way that the
Administrator carries out the CSA is by investigating and
administratively adjudicating a registrant's CSA-relevant actions
and inactions. When the registrant's actions or inactions call for
it, the sanction may be suspension or revocation of the registrant's
registration. 21 U.S.C. 824(a). While the sanction involves the
registration, the sanction is levied on the registrant and remains
in the record throughout the rest of the registrant-Agency
relationship, regardless of whether that relationship is either
continuous or intermittent'') (emphasis added). When it serves the
Agency's and the registrant's interests to litigate an expired
registration to finality--for example, when a respondent intends to
engage in regulated activity in the future, and memorializing a
registrant's compliance (or non-compliance) with the CSA will aid
the Agency's future relationship with the registrant--the Agency has
determined that issuing a final order may be done in a manner that
is with the Constitution, the CSA, applicable legal authority, and
sound law enforcement principles. Jeffrey D. Olsen, 84 FR at 68475-
80.
In the instant case, Respondent's prehearing filings reflect an
intent to continue to engage in regulated activity, ALJX 17, at 2
n.1; RD, at 4, and he requested a sanction of ``time served'' so
that he could resume manufacturing, Tr. 468-69, which suggests that
Respondent will likely reapply for a DEA registration in the future.
See also Tr. 456-61 (Respondent's counsel offering to apply for
renewal if necessary to cure the Chief ALJ's mootness concerns).
Additionally, Respondent represented that controlled substances were
seized by DEA when the OSC/ISO was served, ALJX 17, at 10-11; RD, at
4, and the disposition of these substances remains outstanding. 21
U.S.C. 824(f); Brewster Drug, Inc., 85 FR 19020, 19021 (2020)
(issuing a final order revoking an expired registration, pursuant to
21 U.S.C. 824(f), because the ``[d]isposition of Registrant's seized
controlled substances inventory remains outstanding even though
Registrant discontinued business, and, therefore, its registration
is terminated.''). Thus, issuing a final order in this matter will
clarify the disposition of those assets, memorialize the allegations
and evidence in this matter, and communicate the Agency's
expectations to other current and prospective registrants engaged in
similar activities. See Jeffrey D. Olsen, 84 FR at 68479. The facts
in this case, such as the status of Respondent's registration and
Respondent's intent to continue with regulated activity, are
consistent with the Agency's analyses in Jeffrey D. Olsen. Id. at
68475-79.
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V. Order
Pursuant to 28 CFR 0.100(b) and the authority vested in me by 21
U.S.C. 824(a), I hereby revoke DEA Certificate of Registration No.
RP0177798 issued to Prescript Pharmaceuticals. Further, pursuant to 28
CFR 0.100(b) and the authority vested in me by 21 U.S.C. 823(a), (e), I
hereby deny any pending applications of Prescript Pharmaceuticals to
renew or modify this registration, as well as any other pending
application of Prescript Pharmaceuticals for additional registration in
California. This Order is effective May 2, 2025.
Signing Authority
This document of the Drug Enforcement Administration was signed on
March 25, 2025, by Acting Administrator Derek Maltz. That document with
the original signature and date is maintained by DEA. For
administrative purposes only, and in compliance with requirements of
the Office of the Federal Register, the undersigned DEA Federal
Register Liaison Officer has been authorized to sign and submit the
document in electronic format for publication, as an official document
of DEA. This administrative process in no way alters the legal effect
of this document upon publication in the Federal Register.
Heather Achbach,
Federal Register Liaison Officer, Drug Enforcement Administration.
[FR Doc. 2025-05591 Filed 4-1-25; 8:45 am]
BILLING CODE 4410-09-P