The Continued Evolution of DEA’s Due Diligence Requirements

Pills production Line

On May 11, 2016, the Drug Enforcement Administration filed its brief in Masters Pharmaceutical, Inc. v. Drug Enforcement Administration (Docket No: 15-1335), in the United States Court of Appeals for the District of Columbia. The vast majority of the Government’s brief addresses whether “substantial evidence” (the applicable standard of review) supports Acting Administrator Rosenberg’s decision to revoke Masters’ DEA registration. Curiously, the Government does not dedicate much effort to one of the seminal issues in the case: whether DEA imposed new obligations on registrants in violation of the Administrative Procedure Act.

Rather than attempt to defend the indefensible, the Government invoked a creative reading of the Masters Final Order that is starkly at odds with Administrator Rosenberg’s decision. In its brief, DEA states that Administrator Rosenberg’s decision “did not impose any new duties on distributors.” In defending this position, the Government’s brief goes on to say the following:

Most of the “new duties” that Masters and amici cite in their briefs were obligations that Masters had voluntarily imposed on itself through its own compliance program. [citation omitted] The Administrator cited Masters’ failure to perform many of these duties – such as obtaining utilization reports or asking customers for explanations of unusually large orders – because Masters sought to rely on its compliance program to justify its reporting failures. However, in highlighting Masters’ disregard for its own program’s requirements, the Administrator did not impose those same requirements on all registered distributors.

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DEA Decisions: Clarifying a Respondent’s Right to the Presentation of Remedial Evidence and Discovery

On February 18, 2015, the DEA issued its final decision and order in the case against prescriber Hatem M. Ataya (“Ataya”). The Administrator ordered Ataya’s registration to be revoked and his pending applications for additional registrations to be denied on the grounds that Ataya has, since the proceedings began, lost the authority to dispense controlled substances under state law. Still, the Administrator’s decision also details the bases on which he agreed with the Administrative Law Judge’s (ALJ’s) findings that Ataya issued controlled substance prescriptions without a legitimate medical purpose (in violation of 21 CFR § 1306.04(a)) and violated federal and state law when he authorized more than five refills of schedule IV controlled substances, failed to include patients’ addresses on numerous prescriptions, and post-dated a prescription. Continue Reading

Improving Regulatory Transparency for New Medical Therapies Act Heading to the President as Amended by the Senate

On November 16, 2015, the House of Representatives agreed to the Senate’s amended version of the Improving Regulatory Transparency for New Medical Therapies Act (H.R. 639). We previously described how the version of H.R. 639 originally passed by the House gave manufacturers clarity and security on the timing of DEA actions related to the entrance of new drugs into the market. The Senate’s amendment maintains these provisions and then sweetens the deal, with one exception.

What’s New:  H.R. 639 allows for re-exportation among EEA countries without prior approval by DEA

Now, H.R. 639 incorporates the provisions of H.R. 2340, another bill introduced this session by Congressman Pitts. These provisions amend the Controlled Substances Import and Export Act to remove regulatory barriers to the re-exportation of controlled substances among members of the European Economic Area (the free trade zone uniting the EU member states and Iceland, Liechtenstein, and Norway) (“EEA”). The Controlled Substances Act (“CSA”) and DEA regulations currently impose conditions under which a drug in Schedule I or II or a narcotic drug in Schedule III or IV may be exported to a “first country” and then re-exported to one or more than one “second country.” If H.R. 639 becomes law, re-exportation within the EEA would change in the following ways: Continue Reading

DEA Decisions: Community Impact Factor Still Relevant to Pharmacy Registrations

On November 13, 2015, the DEA issued its final decision and order in the case against Perry County Food & Drug (“PCFD”). The Administrator denied PCFD’s pending application to renew its registration based on stipulations by PCFD that its pharmacist-in-charge, who happened to be the son of PCFD’s owner, created and filled fraudulent prescriptions and committed numerous other acts that each amounted to “an outright drug deal.” The Administrator also found that the owner was informed of his son’s diversion activities on multiple occasions by long-standing employees and other family members. With facts like these, the Administrator’s order denying PCFD’s application is not surprising. But the decision is noteworthy for its clarification of DEA precedent concerning “community impact.”

“Community impact” is a factor that respondents have raised to turn the Agency’s “public interest” determination on its head: instead of focusing on whether the respondent’s registration is inconsistent with the public interest, this factor looks at whether the revocation of the respondent’s registration would be inconsistent with the public interest. But when PCFD made its community impact argument based on Pettigrew Rexall Drugs, the CALJ summarily dismissed the argument as having been “rendered irrelevant by Agency precedent,” citing to several cases involving a physician or dentist. Continue Reading

DEA Releases 2015 National Drug Threat Assessment Summary

iStock_000017279422_FullOn November 4, 2015, DEA Acting Administrator Chuck Rosenberg announced the results of the 2015 National Drug Threat Assessment Summary (NDTA). In addition to reporting in-depth findings regarding the availability and use of nine drugs of abuse, the 2015 NDTA focuses on the increasing threat of transnational criminal organizations (“TCOs”), confirming Michelle Leonhart’s testimony before her departure from the Agency about the integral role of TCOs in the “new face of organized crime.”    Continue Reading

Court Puts Hold on DEA Final Order

The Chronicles welcomes guest blogger, Julia Hudson, an associate in the Q&B Health Law Group. 

Final Order on Hold!
   Final Order on Hold!

On September 15, 2015, the DEA issued a sweeping decision that revoked the registration of Masters Pharmaceutical, Inc. and left many with a lot of questions about the scope of a distributor’s compliance obligations under the CSA.  For any readers still trying to work their way through the Administrator’s 300-page order (or come to terms with it), take pause — at least for now. 

On October 14, the D.C. Circuit Court of Appeals granted Masters’ Emergency Motion for Stay Pending Review.  Masters filed a Petition for Review of the DEA’s decision on September 21, 2015 and then the Emergency Motion on October 1, 2015.  In its Motion, Masters argued, among other things, that the Final Order imposes duties on distributors that do not appear in the DEA’s regulations.  The Court’s brief order simply stated that Masters “satisfied the requirements for a stay.”  One of the requirements for a stay is that the petitioner has shown a likelihood of success on the merits.  The outcome in this matter will have significant implications for DEA registrants.

The Chronicles will follow this case, so stay tuned. 



Amendment to CSA Closer to Becoming Law

DEA Chronicles welcomes guest blogger Julia Hudson, a Q&B Health Law attorney.

On September 30, 2015, the Improving Regulatory Transparency for New Medical Therapies Act moved one step closer to becoming federal law by passing the Senate Health, Education, Labor and Pensions Committee.  The bill, which was introduced on February 2, 2015 and passed in the House on March 16, 2015, is now heading to the full Senate for discussion and possible vote.

We herald the progress of this bill with particular enthusiasm given that it has arrived on the same day as the D.C. District Court’s decision to grant the FDA’s Motion for Summary Judgment in the case initiated by Eisai, Inc.  Eisai is a drug manufacturer who was forced to wait a year for the DEA to schedule two of its drugs that had already received FDA-approval.  After unsuccessfully taking up the issue with the DEA and facing an entire year of lost market exclusivity, Eisai took the FDA to court, challenging the FDA’s interpretation that a period of new chemical entity exclusivity begins when the FDA approves the product.  However, the court found itself bound to defer to the FDA’s position.

The court’s decision in Eisai suggests that the only relief in sight for manufacturers may be through legislative action.  The Improving Regulatory Transparency for New Medical Therapies Act promises to provide the solution that manufacturers like Eisai have been hoping for.  The Act would provide manufactures with clarity and security on timing for the following milestones:

  • Market exclusivity begins after the date of DEA scheduling, rather than after FDA-approval.
  • The DEA must schedule a controlled substance no later than 90 days after it receives a recommendation for controls or FDA-approval.
  • The DEA must act on applications to manufacture a Schedule III, IV, or V drug for use in a clinical trial within 180 days of receiving the application.
  • The DEA must act on an application to manufacture a Schedule I or II drug for use in a clinical trial within 90 days of the close of the notice period, which must be opened no later than 90 days after the application is accepted for filing.

We will continue to provide updates on the progress of this bill as it moves forward.


DEA Administrator Overrules ALJ, Revokes Distributor Registration in Sweeping Decision

The Chronicles welcomes guest blogger Katea Ravega, a Q&B Health Law attorney.

In a 308-page decision dated September 8, 2015, the new Acting Administrator of the DEA, Chuck Rosenberg, issued an Order revoking the DEA registration of wholesale distributor Masters Pharmaceuticals, Inc. (“Masters”). In doing so, the Administrator rejected the recommendation from DEA’s own Administrative Law Judge (“ALJ”) that Masters retain its DEA registration.

Masters was accused of failing to report hundreds of suspicious orders. Focusing on just 7 of Masters’ pharmacy customers located in Florida, the Administrator concluded that Masters’ registration should be revoked because (1) Masters failed to report suspicious orders from the pharmacies on numerous occasions; (2) Masters failed to acknowledge its misconduct; (3) senior Masters’ officials acknowledged that they were well aware of the oxycodone epidemic in Florida; (4) Masters did not follow its own Policies and Procedures for detecting and reporting suspicious orders (including components of the Policies and Procedures that require more than the applicable laws); and (5) revocation is justified by DEA’s interest in deterring future misconduct on the part of Masters and others in the industry.

The Administrator provided a thorough assessment of the parties’ exceptions to the ALJ’s recommended decision and analyzed in detail the evidence involving orders placed by the seven Florida pharmacy customers. The lengthy opinion discusses compliance obligations, entrenches the concept of “due diligence” on customers into the Agency’s case law, and provides insight into the Agency’s expansive concept of what makes an order “suspicious.”   Look for future blog posts with detailed discussion on the effects that this Final Order may have on compliance obligations and practices for other registrants.

The full Decision and Order is available here.  It will be published in the Federal Register on September 15, 2015.  Masters has 30 days to file a Petition for Review with the U.S. Circuit Court of Appeals.

GAO Issues Another Report Involving DEA

On July 27, 2015, the Government Accountability Office (GAO) released a report titled, Prescription Drugs: More DEA Information about Registrants’ Controlled Substances Roles Could Improve Their Understanding and Help Ensure Access.  GAO’s report examined, (1) to what extent registrants interact with DEA about their CSA responsibilities, and registrants’ perspectives on those interactions, (2) how state agencies and national associations interact with DEA, and their perspectives on those interactions, and (3) stakeholders’ perspectives on how DEA enforcement actions have affected prescription drug abuse and diversion and access to those drugs for legitimate needs.

GAO’s survey results concluded, among other things the following:

  • Registrants vary in the extent of their interaction with DEA and awareness of DEA resources, and while generally satisfied, some want additional information and guidance.
  • State agencies and national associations interact with DEA through joint task forces or meetings, and while generally satisfied, some associations want improved communication.
  • Many registrants have changed certain business practices as a result of DEA enforcement actions and reported these changes have limited legitimate access.
  • While providing additional guidance to registrants about their CSA roles and responsibilities cannot ensure that registrants are meeting them, by doing so DEA will have a greater assurance that registrants understand their CSA responsibilities.

GAO’s report recommended that DEA take the following three actions:

  • Identify and implement means of cost-effective, regular communication with distributor, pharmacy, and practitioner registrants, such as through listservs or web-based training.
  • Solicit input from distributors, or associations representing distributors, and develop additional guidance for distributors regarding their roles and responsibilities for suspicious orders monitoring and reporting.
  • Solicit input from pharmacists, or associations representing pharmacies and pharmacists, about updates and additions needed to existing guidance for pharmacists, and revise or issue guidance accordingly.

In response to this report, DEA described the actions that it plans to take to implement the three recommendations, although in some instances the agency asserts that the survey results are based on anecdotal data.  DEA officials also indicated that they do not believe there is a need for more registrant guidance or communication.  However, DEA has stated that its goal is bringing registrants into compliance rather than taking enforcement actions, and DEA can move closer towards this goal by improving its communications and information sharing with registrants, consistent with federal internal controls standards.


Amanda Klopt, Legal Intern, Washington, D.C. Office


DEA to Continue Take Back Programs


On September 23, 2014, DEA announced that its ninth Take Back Day would be the agency’s last.  The announcement was made shortly after DEA published the Final Rule implementing the Secure and Responsible Drug Disposal Act of 2010.  The regulations promulgated by DEA allow “authorized collectors” the opportunity to receive and securely dispose of prescription medications.

The moratorium on conducting Take Back Days was short lived.  DEA’s new Acting Administrator, Chuck Rosenberg, recently announced that DEA would revive the Take Back Program.  Administrator Rosenberg issued a challenge to the American people: “We need you to clean out your medicine cabinet; we need you to give us the stuff in your medicine cabinet that can hurt you or your loved ones.”

Take Back Programs have proven to be an effective tool in reducing the supply of unused and unwanted medication.   During the four years that DEA conducted nine Take Back Days, the agency collected approximately 2,411 tons of unused prescription medication.  That is an astounding figure which leads to an obvious question.  Are doctors prescribing more medication than patients need?  While DEA often states that pharmacies are “the last line of defense,” prescriptions originate with doctors.  The amount of unused medication collected from the general public should cause the medical community to do a thorough self-assessment.  Better education and self-enforcement of the medical community when it comes to prescribing controlled substances is a crucial part in protecting the public health and safety from prescription drug abuse.

We applaud DEA’s efforts in reviving the Take Back Program.