DEA Decisions: Evidence of “Red Flags” of Drug Diversion

On November 10, 2016, the DEA issued its final decision and order in the case against Jones Total Health Care Pharmacy, L.L.C. (“Jones Pharmacy”) and SND Health Care L.L.C. (“SND”). The
Administrator ordered that the DEA deny Jones Pharmacy’s registration renewal application and also deny SND’s pending registration application. These orders were consistent with the Administrative Law Judge’s (“ALJ’s”) recommendations, which were largely based on circumstantial evidence that Jones Pharmacy ignored “red flags” that prescriptions it dispensed were not for a “legitimate medical purpose.” The Administrator also agreed with the ALJ’s determination that the “unlawful” dispensing practices at Jones Pharmacy should impact SND’s application request because the two pharmacies were “one integrated enterprise” under common individual ownership and operation.

DEA Red Flags Test

The ALJ’s recommendations in this case were largely based on evidence that Jones Pharmacy failed in its responsibility to address “red flags” based on the DEA’s three-part test set forth in Holiday CVS, LLC d/b/a CVS Pharmacy Nos. 219 and 5195.

Under the Holiday CVS “red flags” test, the DEA must prove that:

  1. The registrant dispensed a controlled substance;
  2. A red flag was or should have been recognized at or before the time the controlled substance was dispensed; and
  3. The question created by the red flag was not resolved conclusively prior to the dispensing of the controlled substances.

The Administrator agreed with the ALJ’s determination that Jones Pharmacy knew or should have known that it was dispensing controlled substances that were not for a legitimate medical purpose in violation of 21 C.F.R. § 1306.04 based on the following red flags: (1) patients traveled long distances for filling prescriptions, often from out of state; (2) prescriptions were filled for common “cocktail medications,” (i.e., short term pain relief); (3) prescriptions were issued by doctors prescribing outside their scope of practice; (4) prescriptions were dispensed on the same day to patients with the same out-of-state address for the same controlled substance; and (5) such prescriptions dispensed were paid for in cash.

The ALJ’s initial analysis focused on whether the red flags were “resolved” prior to dispensing the controlled substances in question. Based on expert testimony that the prescriptions at issue presented multiple red flags that were “unresolvable” on their face, and Jones Pharmacy’s failure to rebut this presumption, the ALJ determined that Jones Pharmacy failed to resolve the red flags. The ALJ also decided that because Jones Pharmacy did not “unequivocally” accept responsibility for the dispensing of prescriptions with red flags present, the ALJ would not consider the “remedial efforts” that Jones Pharmacy took. The Administrator agreed.

Key Takeaways: Red Flags Analysis

In adopting the ALJ’s conclusions that Jones Pharmacy knew or should have known of red flags of drug diversion, the Administrator made the following key observations that registrants should keep in mind when conducting a red flags analysis:

  • Circumstantial evidence, just like in Holiday CVS, can be enough to prove that a registrant ignored red flags even if no witness testifies that he or she had “personal knowledge” that drugs were being diverted;
  • DEA does not “have the resources to personally brief” every registrant on “red flags” following its discovery of new patterns of drug diversion;
  • Patients frequently traveling long distances from out-of-state and presenting multiple prescriptions for controlled substances, such as oxycodone, and paying in cash creates an “obvious and compelling” level of suspicion that the prescriptions lack a legitimate medical purpose;
  • Certain circumstances should raise “red flags” for a registrant, such as those described above, even prior to the DEA expressly stating in an agency opinion that such circumstances are red flags (i.e., Jones Pharmacy could not rely on the fact that the DEA did not identify cash payments as a “red flag” until its decision in East Main Street Pharmacy on October 27, 2010, for dispensing that occurred at Jones Pharmacy prior to that date);
  • When prices a pharmacy charges for controlled substances far exceed those charged by other pharmacies, the DEA may infer that the pharmacy is charging higher prices due to the fact that it is knowingly supplying the drugs to individuals seeking to abuse or divert controlled substances.

Additionally, this case provides another example that the DEA may view prescriptions with multiple red flags as per se “unresolvable,” consistent with the Administrator’s opinion in Holiday CVS. 77 Fed. Reg. 62,316, 62,317. In such cases, the registrant will be required to present evidence to rebut the presumption that it has failed the third prong of the Holiday CVS red flags test. Finally, this case serves as a reminder that when the DEA disciplines a registrant, it may also choose to take adverse action against another entity that is owned and operated by the same individual owner.

By: Sam Magnuson, Associate, Milwaukee Office

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DEA Changes Longstanding Registration Policy

reminder round orange grungy vintage isolated stamp

DEA recently announced a significant change to its registration renewal process.

For several years, DEA’s registration unit has allowed for a grace period for registrants who file an untimely application for renewal.  While DEA’s regulations do not contemplate such a grace period, registrants, especially individual practitioners, were allowed to keep their existing registration number — which was considered valid and active during the grace period — despite the failure to file a timely renewal application and despite multiple notifications from DEA. Continue Reading

Surgeon General Seeks Support from Doctors to End Opioid Epidemic

Pills

Last week, the U.S. Surgeon General, Dr. Vivek H. Murthy, sent a letter to 2.3 million American health professionals asking them to lead a national movement to “turn the tide” on the nation’s prescription opioid epidemic.  After visiting communities hardest hit by the opioid epidemic, Dr. Murthy’s appeal to clinicians was personal:

 

“Everywhere I travel, I see communities devastated by opioid overdoses. I meet families too ashamed to seek treatment for addiction. And I will never forget my own patient whose opioid use disorder began with a course of morphine after a routine procedure.”

Dr. Murthy wrote that health care providers “have the unique power to end the opioid crisis.”  He asked providers to commitment to this cause by pledging to:

  1. Educate ourselves to treat pain safely and effectively.
  2. Screen our patients for opioid use disorder and provide or connect them with evidence-based treatment.
  3. Talk about and treat addition as a chronic illness, not a moral failing.

Continue Reading

DEA Will Not Reschedule Marijuana

 

Marijuana is less dangerous than some substances in other schedules, but it will stay in Schedule I for now, DEA said Thursday. The agency also said that it supports marijuana research, is developing an online application system to apply for Schedule I research registrations, and will allow more manufacturers to grow marijuana for research.

DEA says FDA analysis shows marijuana’s medical effectiveness has not been proven

In a letter to the governors of Rhode Island and Washington and a resident of New Mexico, who had asked that marijuana be removed from Schedule I, DEA Acting Administrator Chuck Rosenberg said it is wrong to think of the federal drug schedules “as an escalating ‘danger’ scale,” like the Richter scale for earthquakes.  Instead, he said, the schedules are determined by statutory criteria based on medical and scientific evidence.

DEA cannot reschedule marijuana, Rosenberg said, because an analysis by FDA and the National Institute on Drug Abuse (“NIDA”) showed marijuana’s effectiveness in treating medical conditions has not been proven; it has a high potential for abuse; and it lacks accepted safety for use under medical supervision.  DEA’s full responses to the rescheduling petitions are available here and here.

DEA’s decision to keep marijuana in the class of drugs with “no currently accepted medical use” puts the federal government at odds with 25 states and the District of Columbia, all of which have passed laws allowing the use of marijuana for medical purposes.

Rosenberg said that marijuana must be studied further in scientifically-valid, well-controlled clinical trials under investigational new drug applications.  He also said that the drug approval process is the proper way to assess whether a product derived from marijuana or its constituent parts is safe and effective for medical use.

DEA will increase the number of authorized marijuana manufacturers that supply researchers

Also on Thursday, DEA announced a policy change that will expand the number of DEA-registered marijuana manufacturers.  The move could provide researchers with a more varied and robust supply of marijuana.  Currently, only the University of Mississippi is authorized to grow marijuana for the 350 individuals and institutions registered to research marijuana, marijuana extracts, derivatives, and tetrahydrocannabinols (“THC”).  Research is being conducted on marijuana’s effectiveness in treating conditions such as epilepsy and chronic pain, among others.

“[W]e will – as we have for many years – support and promote legitimate research regarding marijuana and its constituent parts,” Rosenberg wrote in the letter.  He pledged that DEA will work with NIDA to ensure that there is a “sufficient supply of marijuana and its derivatives (in terms of quantity and the variety of chemical constituents) to support legitimate research needs.”

 

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.

Continue Reading

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. 

 

 

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