Edge Pharmacy; Decision and Order, 72092-72114 [2016-25226]

Agencies

• Drug Enforcement Administration
• Department of Justice

[Federal Register Volume 81, Number 202 (Wednesday, October 19, 2016)]
[Notices]
[Pages 72092-72114]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-25226]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration


Edge Pharmacy; Decision and Order

    On October 8, 2014, the Deputy Assistant Administrator, Office of

[[Page 72093]]

Diversion Control, Drug Enforcement Administration, issued an Order to 
Show Cause to Edge Pharmacy (hereinafter, Respondent), which proposed 
the revocation of its DEA Certificate of Registration FE1512501, 
pursuant to which it was authorized to dispense controlled substances 
in schedules II through V, as a retail pharmacy, at the registered 
location of 2039 E. Edgewood Drive, Lakeland, Florida. GE 1, at 1. As 
ground for the proposed actions, which also include the denial of any 
pending applications, the Show Cause Order alleged that Respondent's 
``continued registration is inconsistent with the public interest.'' GE 
1, at 1 (citing 21 U.S.C. 824(a)(4) and 823(f)).
    More specifically, the Show Cause Order alleged that Respondent's 
``pharmacists repeatedly failed to exercise their corresponding 
responsibility to ensure that controlled substances they dispensed were 
dispensed pursuant to prescriptions issued for legitimate medical 
purposes by practitioners acting within the usual course of their 
professional practice'' and that its ``pharmacists ignored readily 
identifiable red flags that [the] controlled substances prescribed were 
being diverted and dispensed despite unresolved red flags.'' Id. 
(citing 21 CFR 1306.04(a); Holiday CVS, L.L.C., d/b/a CVS Pharmacy Nos. 
219 and 5195, 77 FR 62315, 62319 (2012)). The Show Cause Order further 
alleged that Respondent's ``pharmacists dispensed controlled substances 
when they knew or should have known that the prescriptions were not 
issued in the usual course of professional practice or for a legitimate 
medical purpose, including circumstances where the pharmacist knew or 
should have known that the controlled substances were abused and/or 
diverted by the customer.'' Id. at 2.
    The Show Cause Order then alleged that Respondent's ``pharmacists 
filled numerous controlled substance prescriptions despite customers 
exhibiting multiple `red flags' of . . . diversion that were never 
resolved before dispensing.'' Id. The Order alleged that these ``red 
flags''' included: (1) ``Multiple individuals presenting prescriptions 
for the same drugs in the same quantities from the same doctor''; (2) 
``individuals presenting prescriptions for controlled substances known 
to be highly abused, such as oxycodone and hydromorphone''; (3) 
``individuals paying high prices . . . for controlled substance 
[prescriptions] with cash''; and (4) ``individuals residing long 
distances from the pharmacy.'' Id.
    As more specific examples, the Show Cause Order alleged that ``[o]n 
January 10, 2011, one or more . . . pharmacists dispensed large and 
substantially similar quantities of'' oxycodone 30 mg tablets ``to at 
least nine persons, including one customer who resided more than four 
hundred (400) miles from [it], two customers who resided more than one 
hundred fifty (150) miles from [it], and six customers who resided more 
than ninety (90) miles from'' it. Id. The Order further alleged that 
these ``customers were all prescribed thirty milligram tablets of 
oxycodone by the same doctor in quantities ranging from 168 to 224 
tablets'' and that each of the prescriptions was ``facially invalid'' 
because it did not contain the patient's address. Id.
    The Show Cause Order also alleged that ``[f]rom January 6 through 
January 7[,] 2011, one or more . . . pharmacists dispensed large and 
substantially similar quantities of'' oxycodone 30 mg tablets ``to at 
least sixteen persons, including eight customers who resided more than 
one hundred fifty (150) miles from [it], and four customers who resided 
more than one hundred (100) miles from'' it. Id. The Order further 
alleged that ``these customers were all prescribed thirty milligram 
tablets of oxycodone by the same doctor in quantities ranging from 168 
to 224 tablets'' and that each of the prescriptions was ``facially 
invalid'' because it did not contain the patient's address. Id.
    Next, the Show Cause Order alleged that ``[f]rom October 7 through 
October 28[,] 2011, one or more . . . pharmacists dispensed large and 
substantially similar quantities of hydromorphone to seventeen 
[persons], ten of whom resided more than one hundred (100) miles from'' 
it, and ``two of whom resided more than four hundred (400) miles 
away.'' Id. The Order alleged that ``sixteen'' of these prescriptions 
``were written by the same doctor and only one . . . contained a 
patient address.'' Id. The Order then alleged that ``at least four'' of 
the hydromorphone prescriptions were ``in dosage amounts that, if taken 
as directed, far exceeded the recommended dosages of hydromorphone that 
should be taken on a daily basis'' and that ``[t]hese prescriptions 
were dispensed on October 21 and 27[,] 2011'' and July 5-6, 2012. Id.
    The Show Cause Order also alleged that ``[f]rom January 4 through 
23[,] 2013, one or more . . . pharmacists dispensed large quantities 
of'' of oxycodone 30 mg ``to at least'' 19 persons, 15 ``of whom 
resided more than 90 miles from [it] and eight of whom resided more 
than [150] miles away.'' Id. at 3. The Order alleged that ``[a]ll of 
these prescriptions were issued by the same doctor, and were purchased 
with cash by individuals willing to pay as much as eight dollars per 
tablet.'' Id. The Order also alleged that these prescriptions were 
facially invalid because they lacked the patient's address. Id.
    The Show Cause Order then alleged that Respondent's ``pharmacists 
knew or should have known that the vast increase of customers seeking 
controlled substance prescriptions and the large number of customers 
residing long distances from [its] location and/or their respective 
physicians created a suspicious situation requiring increased scrutiny, 
and nonetheless failed in carrying out their responsibilities as a DEA 
registrant.'' Id. Continuing, the Order alleged that Respondent's 
``pharmacists failed to exercise their corresponding responsibility'' 
under 21 CFR 1306.04(a) in dispensing controlled substances and either 
``knew, or should have known, that a large number of the prescriptions 
for controlled substances that it filled were not issued for a 
legitimate medical purpose or were issued outside the usual course of 
professional practice.'' \1\ Id. (citing cases).
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    \1\ In its Prehearing Statement, the Government provided notice 
that its expert witness in pharmacy practice would identify various 
red flags of diversion that were presented by the prescriptions 
``and that there is no evidence that any of the red flags were 
resolved prior to distributing the controlled substances to the 
customers.'' Gov. Prehearing Statement, at 5. Subsequently, in its 
Supplemental Prehearing Statement, the Government provided notice 
that its Expert ``will opine on 127 additional prescriptions which 
the Government provided to Respondent's counsel'' and ``that the 
prescriptions were issued to individuals residing long distances 
both from Respondent's pharmacy and/or the physician who issued the 
prescriptions.'' Gov. Supplemental Prehearing Statement, at 3.
    After identifing various cities where the patients resided, the 
Government provided notice that its Expert ``will testify that this 
type of red flag, with only a few exceptions, is not resolvable and 
the prescription should not be dispensed by a pharmacist exercising 
the appropriate standard of care and fulfilling his or her 
corresponding responsibility to ensure that a prescription for a 
controlled substances is issued for a legitimate medical purpose.'' 
Id. at 3-4. The Government also provided notice that its Expert will 
testify that ``exceptions'' [sic] that would make such a 
prescription resolvable were ``if a patient were travelling to a 
specialist of great renown, such as a physician working in a 
nationally recognized cancer treatment facility.'' Id. at 3 n.4. The 
Government then provided that its Expert ``will testify that he is 
unaware that any of the physicians prescribing the controlled 
substances at issue in this matter remotely fit that profile.'' Id.
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    Next, the Show Cause Order alleged that following the execution of 
an Administrative Inspection Warrant, DEA had obtained various records 
from

[[Page 72094]]

Respondent and determined that it ``failed to create and maintain 
accurate records in violation of 21 U.S.C. 842(a)(5).'' Id. at 3. More 
specifically, the Order alleged that:
    (1) Respondent's schedule II order forms did not contain the 
``receipt date or quantity received in violation of 21 U.S.C. 827(b) 
and 21 CFR 1305.13(e)'';
    (2) it ``failed to retain Copy 3 of'' its schedule II order forms 
``as required by 21 CFR 1305.13(a) and 1305.17(a) and 21 U.S.C. 
827(b)'';
    (3) it ``failed to create a record of the quantity of each item 
received and the date received'' for controlled substances it ordered 
using the Controlled Substances Ordering System and ``also failed to 
electronically archive and link these records to the original order,'' 
both being required by 21 CFR 1305.22(g);
    (4) that ``as supplier of controlled substances, [it] failed to 
forward Copy 2 of'' schedule II order forms to the Special Agent in 
Charge of the field division in which it is located, as ``required by 
21 CFR 1305.13(d)''; and
    (5) it also ``failed to record the date and quantity shipped'' on 
schedule II order forms, ``in violation of 21 CFR 1305.13(b).'' Id. at 
3-4.
    Finally, the Show Cause Order alleged that DEA conducted an audit 
of Respondent's handling of various schedule II drugs for ``the period 
[of] June 10, 2011, through February 4, 2013.'' Id. at 4. The Order 
then alleged that the audit found overages of the following drugs and 
amounts: 71,084 oxycodone 30 mg; 19,322 hydromorphone 8 mg; 10,460 
methadone 10 mg; 5,542 morphine 60 mg; 4,451 hydromorphone 4 mg; 3,033 
morphine 100 mg; and 1,338 morphine 30 mg. Id.
    On November 14, 2014, Respondent filed a timely hearing request 
with the Office of Administrative Law Judges. Thereafter, the matter 
was assigned to Chief Administrative Law Judge John J. Mulrooney, II 
(hereinafter, CALJ), who proceeded to conduct extensive pre-hearing 
procedures. On February 19, 2015, Respondent's original counsel 
withdrew and new counsel entered an appearance. The same day, 
Respondent's new counsel informed the ALJ's law clerk that Respondent 
would be ``filing a waiver of hearing along with a written position on 
the matters of fact and law in accordance with 21 CFR 1316.49.'' GE 1, 
at 10.
    Subsequently, on February 26, 2015, the Government filed a motion 
in limine to preclude Respondent from offering any of its evidence at 
the hearing. Respondent did not oppose the motion, and on March 3, 
2016, the ALJ granted the motion. Letter from CALJ to the former 
Administrator (Mar. 23, 2015) (hereinafter, CALJ Ltr.). The same day, 
Respondent's counsel telephoned the CALJ's staff and stated that he 
would be filing its waiver of hearing by March 9, 2015, and that if he 
``was unable to file the Hearing Waiver by that date, he would file a 
motion to allow a waiver of hearing with a subsequent filing of 
position.'' Id. However, on March 10, 2015, after Respondent failed to 
file the waiver or otherwise notify the ALJ as to why he had not done 
so, the CALJ's staff contacted Respondent's counsel to seek 
clarification. Id.
    On March 12, 2015, before the evidentiary hearing was to be 
conducted, Respondent's counsel emailed the CALJ's staff stating that 
he had not filed the hearing waiver because he had been unable to 
complete the written statement ``[d]ue to several unforeseen matters 
in'' another DEA proceeding in which he was involved. Email from 
Respondent's Counsel to CALJ's Law Clerk, at 1 (Mar. 12, 2015). 
Respondent's counsel further advised that he had not sought leave to 
file the waiver immediately and the statement of position later because 
the Government's counsel would not consent. Id. Respondent's counsel 
further represented that while he intended to file the waiver prior to 
the scheduled date of the hearing, he would not file the waiver until 
he was ready to file Respondent's written statement of position. Id.
    On March 16, 2015, the CALJ conducted a status conference after 
which Respondent's counsel filed a pleading in which Respondent waived 
its right to a hearing while seeking leave to file a written statement 
no later than March 21, 2015. CALJ Ltr., at 2. The CALJ then issued an 
order terminating the proceeding effective on March 21, 2015 while 
granting Respondent leave to file its written statement prior to that 
date. Id.
    On March 20, 2015, Respondent filed its Statement of Position. In 
his March 23, 2015 letter to the former Administrator regarding the 
status of the proceeding, the CALJ noted that under the plain language 
of the Agency's regulation which allows a respondent to file a written 
statement of position, the time period for filing a written statement 
had expired as Respondent had not requested an extension of the time 
for filing a response to the Order Show Cause. Id. at 3. Moreover, 
because Respondent did not oppose the Government's Motion in Limine, 
``it is foreclosed from offering hearing evidence.'' Id.
    The CALJ then explained that ``strict adherence to the regulations, 
because of the procedural choices made by the Respondent in the course 
of this litigation, would result in either a non-hearing decision 
without the option of filing a statement of position, or hearing 
procedures where it was precluded (by its own tactical choices) of 
presenting evidence in its defense.'' Id. Continuing, the ALJ reasoned 
that:

[a]lthough the Agency . . . has not been reticent in holding 
respondents responsible for the procedural omissions of their 
counsel, justice here will be better served by applying principles 
of reasonableness. In the interests of justice, I sua sponte find 
good cause to extend the Respondent's ability to respond to the 
Order to Show Cause in accordance with 21 CFR 1316.47(b), accept its 
Statement of Position on the Agency's behalf, and herein forward it 
to you for whatever consideration or actions (if any) you deem 
appropriate in this matter.

Id. (footnotes omitted).

    Thereafter, the Government filed a motion in which it sought to 
clarify its obligations prior to submitting its Request for Final 
Agency Action. More specifically, the Government sought clarification 
as to whether, in light of Respondent's waiver of its right to a 
hearing, it was required to serve any further pleadings on Respondent's 
counsel. Motion for Clarification, at 1. It also sought clarification 
as to whether Respondent was ``entitled to continue to litigate this 
matter'' given the waiver. Id. at 1-2.
    Respondent objected to the Government's motion. Resp. Objection to 
Motion for Clarification. In its objection, Respondent argued that 
while it had waived its right to a hearing, it was entitled to 
otherwise participate in the proceeding which was ongoing and to 
receive copies of any filings submitted by the Government and respond 
to them. Id. at 2-3.
    Respondent also asserted that while ``the Government was similarly 
entitled to participate in the proceeding, it chose not to do so and 
opted to sit in silence when Respondent submitted its evidence and 
[written] position . . . [and] when the ALJ unambiguously announced his 
intention to terminate the proceeding upon receipt of Respondent's 
position.'' Id. at 3-4. In Respondent's view, the Government was 
entitled to participate in the hearing and ``could have objected [sic] 
cancellation of the hearing'' or ``could have presented its evidence in 
writing.'' Id. at 8. Respondent further maintained that the Government, 
by failing to present its evidence to the CALJ, ``allow[ed] the record 
before the ALJ to close without presenting [its] case.'' Id. Respondent 
also argued that this Decision and Order ``must be based on [the] 
record''

[[Page 72095]]

submitted by the CALJ and that because that record contains no evidence 
to support the allegations, the Government had not met its burden of 
proof. Id. at 9-10.
    On review, I determined that it was unnecessary to decide whether 
either the Administrative Procedure Act or the Due Process Clause 
requires the Government to submit copies of any subsequent filings to 
Respondent. Order, at 3 (July 29, 2015). Rather, I exercised my 
discretion and directed the Government to provide a copy of its Request 
for Final Agency Action and the record submitted in support of its 
Request to Respondent. Id. at 3-4. Based on Respondent's waiver of its 
right to hearing, I concluded that Respondent had waived its right to 
submit evidence in refutation of the Government's case. Id. at 4. 
However, I again exercised my discretion and provided that Respondent 
could file a brief raising arguments challenging the sufficiency of the 
evidence, the Government's positions on matters of law, and the 
appropriate sanction. Id.
    However, I rejected Respondent's contention that the Government was 
not allowed to continue litigating the matter because it chose to forgo 
making a record before the ALJ.\2\ Id. at 4 n.2. Moreover, finding the 
reasons proffered by the CALJ insufficient to support a finding to 
excuse the untimely submission of its Statement of Position, I directed 
Respondent to address ``why there is good cause to excuse the 
untimeliness of its filing, paying particular attention as to why there 
is good cause to excuse the untimely submission of the attached 
affidavits.'' Id. And because the CALJ had issued an order terminating 
the proceeding effective March 21, 2015 and the CALJ did not rule on 
whether there was good cause to admit Respondent's Statement of 
Position until March 23, 2015 (after his jurisdiction had terminated 
pursuant to his own order), I directed Respondent to ``address whether, 
given the effective date of the ALJ's termination order, the ALJ had 
authority to admit its Statement of Position.'' Id.
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    \2\ I also rejected Respondent's contention that the Government 
had no procedural basis for requesting clarification and that I had 
no authority to respond to that motion. I did not, however, set 
forth my reasoning for rejecting these contentions.
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    Thereafter, Respondent filed a letter responding to my Order. 
Letter from Resp's. Counsel to the Acting Administrator (Aug. 7, 2015). 
Therein, Respondent asserted that it had faxed its Written Statement of 
Position on March 20, 1015, which is borne out by the fax cover 
sheet.\3\ Id. at 1-2. As for whether there was good cause to accept its 
Written Statement of Position, Respondent argues that the CALJ erred in 
relying on 21 CFR 1301.43 when he concluded that it was foreclosed from 
filing its written statement of position because the time period for 
filing its hearing request had passed. Id. at 3. Respondent argues that 
after it filed its hearing request under 21 CFR 1301.43(a), the 
provisions of part 1301 no longer apply and the provisions of part D of 
21 CFR part 1316 are controlling. Id. It further argues that 21 CFR 
1316.49, the provision of Subpart D which applies to the waiver of a 
hearing, ``contains no provision for cancellation of the hearing'' and 
that ``no provision in Subpart D . . . indicat[es] the time period 
within which [it] may waive its opportunity to participate in the 
hearing and file its written statement.'' Id. In Respondent's view, it 
has been denied ``fair notice'' that ``having requested a hearing, it 
had to waive its opportunity to participate in a hearing and file its 
Statement . . . within 30 days of being served with the'' Show Cause 
Order. Id. And Respondent argues that the requirement that it file its 
written statement within 30 days of the date on which it was served 
with the Show Cause Order ``does not apply to a waiver and written 
statement filed after requesting a hearing.'' Id.
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    \3\ In his letter, Respondent devoted considerable argument to 
discussing why portions of the fax were date stamped after the 
deadline imposed by the CALJ. That, however, was not the issue, and 
was not mentioned in my July 29, 2015 Order.
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    I reject these contentions because Respondent is simply trying to 
re-write the Agency's procedural rules to suit its own purpose. Under 
the Agency's rules, a person served with a Show Cause Order has two 
options for responding to it.\4\ First, it can, ``within 30 days after 
the date of receipt of the order to show cause,'' file a request for a 
hearing as Respondent initially did. 21 CFR 1301.43(a). Alternatively, 
it can, ``within the period permitted for filing a request for a 
hearing, file with the Administrator a waiver of an opportunity for a 
hearing . . . together with a written statement regarding such person's 
position on the matters of fact and law involved in such hearing.'' Id. 
Sec.  1301.43(c). See also id. Sec.  1316.49 (``Any person entitled to 
a hearing may, within the period permitted for filing a request for a 
hearing . . . waiver of an opportunity for a hearing, together with a 
written statement regarding his position on the matters of fact and law 
involved in such hearing.'').\5\
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    \4\ Of course, a person served with a Show Cause Order can also 
choose to not respond.
    \5\ While the wording of this provision clearly reflects a 
scrivener's error in that it is missing language to the effect that 
the person ``may file a'' waiver and written statement, it has never 
been construed as creating a right to file a written statement at 
any time thereafter.
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    Contrary to Respondent's contention, both the procedural rules 
found in 21 CFR part 1301 and Part 1316 apply to hearings conducted 
under 21 U.S.C. 823 and 824. See 21 CFR 1301.41(a) (``In any case where 
the Administrator shall hold a hearing on any registration or 
application therefore, the procedures for such hearing shall be 
governed generally by the adjudication procedures set forth in the 
Administrative Procedure Act (5 U.S.C. 551-559), and specifically by 
[21 U.S.C. 823-24], by Sec. Sec.  1301.42-1301.46 of this part, and by 
the procedures for administrative hearings . . . set forth in 
Sec. Sec.  1316.41-1316.67 of this chapter.'').\6\ Thus, while 
Respondent argues that no regulation in part 1316 provides for the 
cancellation of a hearing, Part 1301 contains a provision which states 
that ``[i]f all persons entitled to a hearing . . . waive or are deemed 
to waive their opportunity for the hearing . . . the Administrator may 
cancel the hearing, if scheduled, and issue his/her final order 
pursuant to 1301.46 without a hearing.'' 21 CFR 1301.43(e). Thus, 
contrary to Respondent's understanding, this provision applies to its 
waiver, notwithstanding that it had previously requested a hearing. In 
any event, given that a hearing is only held on request of ``a person 
entitled to a hearing'' and is held ``for the purpose of receiving 
factual evidence regarding the issues involved in the denial, 
revocation or suspension of any registration,'' 21 CFR 1301.42, it is 
indisputable that a hearing can be cancelled when a respondent 
initially requests a hearing but then decides to waive its right to it.
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    \6\ See also 21 CFR 1316.41 (``Procedures in any administrative 
hearing held under the Act are governed generally by the rule making 
and/or adjudication procedures set forth in the [APA] and 
specifically by the procedures set forth in this subpart, except 
where more specific regulations [set forth in other parts including 
parts 1301] apply.'').
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    Nor am I persuaded by Respondent's contention that it has been 
denied fair notice because once it requested a hearing, no provision in 
Subpart D sets forth the time period in which it was required to file 
its written statement if it subsequently decided to waive its right to 
a hearing. Resp's. Ltr., at 3. The Agency's regulations grant the right 
to file a written statement only when a hearing waiver is filed within 
the 30-day period or where a respondent establishes ``good cause'' for 
the

[[Page 72096]]

untimely filing. 21 CFR 1301.43(d). Thereafter, no provision in the 
Agency's hearing regulations affords a respondent the right to file a 
written statement of position and to submit evidence. Given that the 
Agency's regulations do not provide any right to file a written 
statement after the initial 30-day period for responding to the Order 
to Show Cause, Respondent cannot claim that it has been denied ``fair 
notice'' that it had to submit its hearing request within the 30-day 
period.
    Thus, while the Controlled Substances Act requires the Agency to 
provide a hearing conducted pursuant to the APA's procedures for 
adjudications, see 21 U.S.C. 824(c), the Agency provided Respondent 
with that opportunity and was prepared to provide it with that hearing. 
At that hearing, Respondent could have challenged the Government's 
evidence through, inter alia, the cross-examination of its witnesses. 
Respondent could also have presented evidence in its defense had it 
complied with the ALJ's pre-hearing orders. In short, the Agency is not 
required to provide Respondent with more procedural rights than 
Congress mandated in the CSA. Cf. Vermont Yankee Nuclear Power Corp. v. 
NRDC, 435 U.S. 519 (1978). And while the Agency has provided a limited 
right to submit a written statement, the Agency is not required to 
create a new procedural right to provide Respondent, which waived its 
right to a hearing only after months of largely unsuccessful pre-
hearing litigation, with an alternative way of presenting evidence.
    Respondent further argues that applying 21 CFR 1301.43 (the 
regulation requiring the filing of a written statement within 30 days 
of receipt of the Show Cause Order) to its circumstances, ``produces a 
result contrary to the Agency's interest in administrative 
efficiency.'' Resp's. Ltr., at 3. It argues that under the ALJ's 
interpretation, ``respondents who have made a timely request for 
hearing but later realize that they have no need or desire to 
participate in a hearing would be left with two choices: Continue to 
require the Agency to hold a hearing or abandon all opportunity to be 
heard in any manner whatsoever.'' Id. Respondent further argues that 
faced with this choice, ``such respondents would be strongly 
discouraged from waiving an unnecessary hearing and preventing a waste 
of Agency time and resources.'' Id. at 3-4.
    This choice is, however, no different than that frequently 
confronted in litigation when a party recognizes that his opponent has 
a strong case and is likely to prevail at trial. Moreover, Respondent's 
proposed new procedural right would actually create the opposite 
incentive: Instead of submitting its written statement at the outset, 
it induces a respondent to litigate, knowing that if things go badly, 
it can then take a different tack by submitting its written statement. 
Moreover, in Respondent's view, it is also entitled to submit 
testimonial evidence in the form of affidavits and thus preclude the 
Government from cross-examining its witnesses.
    Upon receipt of a Show Cause Order, a party is entitled to fair 
notice of the factual and legal basis for the actions proposed by the 
Government. 21 U.S.C. 824(c). And where a respondent chooses to 
litigate, the Government is obligated to provide a respondent with fair 
notice of the evidence it is likely to confront at the hearing. 
However, creating a new procedural right that allows a party, which has 
litigated for months on end, to then waive its right to a hearing on 
the eve of that hearing but nonetheless present its evidence in written 
form, does not in any sense promote administrative efficiency. To the 
contrary, it incentivizes litigation by providing two bites of the 
apple.\7\
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    \7\ Unexplained by Respondent is whether, in its view, there is 
any limit to when it could waive its right to a hearing and submit a 
written statement. For example, could it require the Government to 
put on its case in chief, determine how strong the case was, and 
then waive its right to a hearing and submit a written statement?
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    Respondent also takes issue with the CALJ's application of the 
``good cause'' standard in evaluating whether it Statement was timely 
submitted. Resp's. Ltr., at 4. And it further argues that even if the 
``good cause'' standard applies, it has satisfied the standard. Id. I 
disagree.
    As explained above, the two Agency rules that granted Respondent 
the right to file a written statement required it do so within the 30-
day period for requesting a hearing. Putting that aside, DEA has 
applied the ``good cause'' standard in a variety of contexts in 
assessing whether an untimely filing should be excused, including to 
the untimely submission of a statement of position. See Ronald A. 
Green, 80 FR 50031 (2015) (deeming physician's pleading captioned as 
``Response to First Amended Complaint and Motion to Dismiss,'' which 
was filed with the Agency more than three months after service of Show 
Cause Order as his statement of position, and applying ``good cause'' 
standard in assessing whether it was timely filed); see also Rene 
Casanova, 77 FR 58150, 58150 (2012) (upholding ALJ's application of 
good cause standard in denying untimely filed request for an extension 
to file exceptions); Daniel B. Brubaker, 77 FR 19322, 19323 (2012) 
(upholding ALJ's application of good cause standard in denying untimely 
motion to file supplemental prehearing statement out of time); Kamir 
Garces-Mejias, 72 FR 54931, 54932-33 (2007) (applying good cause 
standard in upholding ALJ's termination of hearing where respondent 
failed to comply with ALJ's order to file pre-hearing statement). See 
also 21 CFR 1301.43(d) (applying good cause standard in assessing 
whether an untimely hearing request should be excused); id. 1316.57 
(``All documentary evidence and affidavits not submitted and all 
witnesses not identified at the prehearing conference shall be 
submitted or identified to the presiding officer as soon as possible, 
with a showing that the offering party had good cause for failing to so 
submit or identify at the prehearing conference.'').
    Respondent further argues that even if the good cause standard 
applies to the submission of its written statement, it has satisfied 
the standard because the Agency has interpreted the standard ``with 
reference to case law'' applying the excusable neglect standard, and 
under that standard, it has demonstrated good cause. Resp's. Ltr., at 
4. Respondent is correct that the Agency has interpreted the good cause 
standard in a manner that aligns it with the good cause standard of 
various federal rules of procedure. See Keith Ky Ly, 80 FR 29025, 
29027-28 & n.2 (2015). Thus, Respondent's untimely filing of its 
Statement may be excused upon a showing of excusable neglect. 
Respondent, however, has failed to show excusable neglect.
    As the basis of its argument, Respondent's counsel argues that he 
did not become counsel for Respondent until February 2015 when original 
counsel withdrew, at which time he ``discovered that the DEA had 
refused to return Respondent's records in violation of Agency policy 
and the clear directions of the Magistrate Judge who issued the 
administrative inspection warrant.'' Resp's. Ltr., at 4. He further 
maintains that he ``also discovered that the scanned images of those 
documents which had been provided to Respondent contained annotations 
that were not on the records when the DEA removed them from the 
pharmacy [and] also found the images to be illegible in part.'' Id. 
Continuing, he argues that ``[i]t was impossible for Respondent to know 
within 30 days of receiving the Order to Show Cause that the Government 
would rely on portions of the documents that the DEA refused to return 
to Respondent, since the Government first

[[Page 72097]]

revealed this on December 2, 2014 when [Government counsel] filed the 
Government's prehearing statement.'' Id. According to Respondent's 
counsel, he ``determined that a hearing under these circumstances would 
be futile'' and Respondent decided to waive its right to a hearing.\8\ 
Id.
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    \8\ Respondent's counsel also devotes considerable discussion to 
the give and take between himself and Government counsel over the 
timing and filing of his written statement after he appeared in the 
proceeding. The discussion, however, adds nothing either way in 
determining whether Respondent has met the good cause standard as 
Respondent had been served with the Show Cause Order four months 
before it hired new counsel, and Respondent's prior counsel filed 
numerous pleadings on its behalf up until he withdrew.
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    These arguments do not establish excusable neglect (or any other 
form of good cause), and certainly not with respect to Respondent's 
delay in filing its statement until approximately five months after it 
was served with the Show Cause Order. As for the contention that the 
Agency violated ``the clear directions of the Magistrate Judge'' 
because it refused to return the records to Respondent, Respondent does 
not identify any language in the Administrative Inspection Warrant 
which set a date by which the Government was required to return its 
records. Nor does it identify any court order issued by the Magistrate 
Judge requiring the return of the records with which the Government 
failed to comply.\9\ As for Respondent's claims that some of the 
documents contained notations that were not on them when they were 
seized and that some of the documents were ``illegible in part,'' 
Respondent has not even identified which documents have these 
characteristics, let alone explain why these documents were relevant to 
the specific allegations raised by the Government. Moreover, to the 
extent the Government intended to rely on any document that was 
purportedly illegible, Respondent offers no explanation for why its 
previous counsel did not seek legible copies.
---------------------------------------------------------------------------

    \9\ The warrant required only that a prompt return of the 
warrant itself be made. It appears that copies of the records were 
provided to Respondent's original counsel on October 16, 2014, the 
date on which Respondent was served with the Show Cause Order.
---------------------------------------------------------------------------

    Also unpersuasive is Respondent's assertion that ``[i]t was 
impossible for [it] to know within 30 days of receiving the [Show 
Cause] Order that the Government would rely on portions of the 
documents that the DEA refused to return to'' it and that it did not 
know what documents it would rely on until December 2, 2014, when the 
Government filed its prehearing statement. The CALJ, however, granted 
Respondent an extension of time to allow it to file its prehearing 
statement on January 2, 2015, which it did. Moreover, even if 
Respondent did not know what documents the Government intended to rely 
on until December 2, 2014, this does not explain why Respondent then 
waited another three and a half months to file its written statement.
    I further reject the contention that these circumstances rendered 
the hearing futile. Indeed, in cases brought against two related 
pharmacies which Respondent's current counsel also participated in and 
made similar arguments regarding the Government's purported unlawful 
retention of its records, I rejected the Government's dispensing 
allegations as unsupported by substantial evidence. See Superior 
Pharmacy I and Superior Pharmacy II, 81 FR 31310, 31334-337 (2016). I 
also rejected various recordkeeping allegations as not being supported 
by either the CSA or DEA regulations. Id. at 31338. And while I 
accepted the Government's audit allegations in Superior, I noted that 
the respondents had approximately 80 days from the date on which they 
were served with the show cause orders (at which time they also were 
provided with copies of their records) to file their prehearing 
statements and had ample time to conduct their own investigation of the 
allegations. Id. at 31337 n.62.
    Notably, in the Superior matters, the respondents made similar 
arguments with respect to the audits and yet they provided charts which 
purported to show the results of their own audits when they filed their 
untimely exceptions to the ALJ's Recommended Decision. In declining to 
consider this evidence, I noted that there was no foundation for its 
consideration and that it was not newly discovered evidence; I also 
observed that Respondent ``did not identify any records that were 
necessary to complete their audits which were not provided to them when 
their records were returned.'' Id. So too here. Notably, as part of 
Respondent's Statement of Position, it submitted the affidavit of 
Victor Obi, the brother of Respondent's owner (and the owner of the two 
Superior Pharmacies), who avers that he is Respondent's independent 
pharmacy consultant. Resp.'s Position Statement, Attachment 3, at 1.
    In the affidavit, Mr. Obi avers that he reviewed the purchasing, 
return and dispensing records for the pharmacy for the same audit 
period as used by the Government; Obi further avers that he conducted 
an audit of the various drugs and dosage strengths audited by the 
Government and disputes the results of the Government's audit for the 
various drugs. Id. at 3-6. Notably, Obi executed the affidavit on March 
20, 2015. Id. at 6. Unexplained by Respondent is why Mr. Obi was unable 
to complete his audit before the date by which it was required to file 
its prehearing statement, or a supplemental prehearing statement which 
it could have filed without leave of the CALJ if it did so before 2 
p.m. on February 20, 2015. See Preliminary Order Regarding Scope of 
Proceedings, Prehearing Ruling, & Protective Order, at 7 (Jan. 13, 
2015).
    Of further note, in its Pre-hearing Statement, Respondent 
represented that it intended to call a witness who was a former DEA 
Diversion Program Manager who ``will testify regarding errors in the 
audits performed by the agents/investigators involved in the 
investigation of Edge Pharmacy.'' Resp. Prehearing Statement, at 5. 
Presumably, Respondent's prior counsel would not have made this 
representation without the proposed witness having conducted an 
investigation of the audit allegations and found that there were 
errors. Yet when the Government field its Motion in Limine to preclude 
this witness's testimony on the ground that Respondent had ``fai[ed] to 
identify a single error'' in the audits, Motion in Limine, at 6; 
Respondent's new counsel did not oppose the motion, thus suggesting 
that this proposed witness had not, in fact, performed an audit.
    Notably, Respondent's conclusion that a hearing would have been 
``futile'' came only after months of pre-hearing litigation, and to the 
extent the hearing would have been futile, this was largely the result 
of the strategic choices made by its counsel. Although the record does 
not establish when Mr. Obi finally performed his audit, Respondent 
clearly had ample time to investigate the allegations and disclose its 
proposed evidence prior to the hearing if it believed the allegations 
were untrue. And while Respondent's prior counsel may well have been 
neglectful in failing to thoroughly investigate the allegations, that 
neglect is not excusable. See Pioneer Inv. Servs. Co. v. Brunswick 
Assoc. Limited Partnership, 507 U.S. 380, 397 (1993) (one who 
``voluntarily chose [its] attorney as [its] representative in the 
action . . . cannot . . . avoid the consequences of the acts or 
omissions of this freely selected agent. Any other notion would be 
wholly inconsistent with our system of representative litigation, in 
which each party is deemed bound by the acts of [its] lawyer-agent and 
is considered to have notice of all facts, notice of which can be 
charged upon the attorney'') (int. quotation and citation omitted). See 
also

[[Page 72098]]

U.S. v. $29,410.00 in U.S. Currency, 600 Fed. Appx. 621, 623-24 (10th 
Cir. 2015) (excusable neglect not established where counsel failed to 
respond to an answer or interrogatories for over three months and 
offered no reasonable explanation); Brodie v. Gloucester Township, 531 
Fed. Appx. 234, 237 (3d Cir. 2013) (excusable neglect not established 
to support extension of time to file notice of appeal when client's 
counsel ``could have filed a notice of appeal, but chose not to do 
so''); A.W. Anderson v. Chevron Corp., 190 FRD. 5, 10 (D.D.C. 1999) 
(failure to oppose motion for attorneys' fees not excusable neglect 
when ``[t]he decision . . . was by any measure a calculated decision by 
[p]rior [c]ounsel''); see also id. at 11 (client ``bound by the 
strategic choices of her counsel that later turn out to be 
improvident'') (citing Douglas v. Kemp, 721 F.Supp. 358 (D.D.C. 1989)).
    Nor has Respondent otherwise demonstrated good cause for filing its 
written statement more than four months after the fact.\10\ Notably, in 
accepting Respondent's written statement, the CALJ noted that ``because 
of the procedural choices made by Respondent in the course of the 
litigation,'' specifically, its decision not to oppose the Government's 
Motion in Limine and its failure to file its written statement within 
the time allowed by the regulations, Respondent would be foreclosed 
from putting forward its defense. CALJ Ltr., at 4. Invoking 21 CFR 
1316.47(b), the CALJ, notwithstanding his previous discussion of 
Respondent's procedural choices, then asserted that the interests of 
justice ``will be better served by applying principles of 
reasonableness'' and found, sua sponte, that there was good cause to 
extend Respondent's ability to respond to the Order to Show Cause and 
accepted its statement on the Agency's behalf. Id. (citing 21 CFR 
1316.47(b)).
---------------------------------------------------------------------------

    \10\ Respondent could also have sought an extension of time to 
respond to the Show Cause Order, and upon a showing of good cause, 
the ALJ could have granted a reasonable extension of time to do so. 
21 CFR 1316.47(b). However, Respondent did not avail itself of this 
provision.
---------------------------------------------------------------------------

    Under this regulation, ``[t]he Administrative Law Judge, upon 
request and showing of good cause, may grant a reasonable extension of 
the time allowed for response to an Order to Show Cause.'' 21 CFR 
1316.47(b) (emphasis added). However, as explained above, in his August 
7, 2015 filing, Respondent asserted that this provision does not apply 
to the filing of its written statement even though the statement is now 
its ``response to'' the Show Cause Order, and in any event, Respondent 
never requested an extension of time to file its written statement. In 
short, the plain language of this provision does not contemplate sua 
sponte rulings by the ALJ. Rather, it explicitly requires that the 
respondent in a proceeding seek an extension and imposes on a 
respondent the affirmative obligation to show ``good cause,'' neither 
of which were done here.
    I am also unpersuaded by Respondent's after-the-fact assertion that 
there was good cause (in response to my Order) to excuse its belated 
filing because it could not prepare its Statement of Position until 
December 2, 2014, when the Government filed its Pre-Hearing Statement 
and notified it of what documents were to be used as evidence. Resp.'s 
Ltr., at 6. As set forth above, the regulation authorizes the granting 
of only ``a reasonable extension of time.'' 21 CFR 1316.47(b). While 
the reasonableness of an extension is dependent on the circumstances, 
here, Respondent's showing does not establish that it needed three and 
a half months after this date to file its written statement, and the 
extension clearly exceeds the bounds of reasonableness.
    To be sure, in Leonard Browder, d/b/a Lominick's Pharmacy, Family 
Pharmacy, Inc., Aiken Drug Co., Woodruff Drug Co., 57 FR 31214 (1992), 
the Agency's Decision noted that it had considered a respondent's 
statement of position, notwithstanding that it was not submitted until 
a year and a half after the respondent initially requested a hearing 
and after negotiations to settle the matter were unsuccessful. The 
decision is, however, bereft of any discussion as to the basis for 
accepting the respondent's statement of position and the then-
applicable regulations, and thus, the decision is of limited 
precedential value.\11\ No subsequent decision of the Agency has cited 
Browder, and as explained above, the Agency has long since made clear 
that the ``good cause'' standard is to be applied in determining 
whether to accept an untimely filing.
---------------------------------------------------------------------------

    \11\ For example, in Browder, the Government may have consented 
to the filing, thus rendering it unnecessary for the respondent to 
establish good cause.
---------------------------------------------------------------------------

    In accepting Respondent's statement, the CALJ also explained that 
he was ``applying principles of reasonableness.'' However, as explained 
above, courts generally do not allow parties to escape the consequences 
of deliberate strategic decisions made by their lawyers in litigation. 
See Pioneer, 507 U.S. at 397; $29,410.00 in U.S. Currency, 600 Fed. 
Appx. at 623-24; Brodie, 531 Fed. Appx. at 237; A.W. Anderson v. 
Chevron Corp., 190 FRD. at 10. Here, Respondent had ample opportunity 
to investigate the allegations and prepare a defense. Moreover, even 
after it failed to oppose the Government's Motion in Limine, it 
nonetheless could have gone to hearing, where it could have cross-
examined the Government's witnesses and attempted to show that the 
Government's evidence was not reliable.
    In short, the Agency's procedural rules are clear and provided 
Respondent with ample means to protect its interests.\12\ It could have 
filed its written statement within 30 days of receipt of the Show Cause 
Order. If Respondent had shown ``good cause,'' it could have filed its 
written statement even beyond the 30-day period for requesting a 
hearing if it did so within a reasonable period of time but not months 
later. And it could have gone to a hearing. Respondent does not, 
however, have the right to re-write the Agency procedural rules to fit 
its litigation strategy.\13\
---------------------------------------------------------------------------

    \12\ In its August 7, 2015 response to my Order, Respondent 
argued that the untimely filing of its Statement of Position does 
not prejudice the Government. Yet, as explained later in this 
Decision, in its Objection to the Government's Motion for 
Clarification, Respondent claims that the record is now closed 
(Objection, at 7), because the Government failed to object to the 
cancellation of the hearing. It further argues that because the 
Government did not submit a statement of position to the CALJ, his 
``report includes no evidence or argument in favor of the 
Government's case'' and thus, ``[t]he Government failed to carry the 
burden of proof assigned to it.'' Id. at 9. As Respondent 
Objection's make clear, its purpose in submitting its untimely 
Statement of Position is to prejudice the Government.
    \13\ In his letter to the former Administrator, the CALJ set 
forth in detail the procedural events which occurred from the date 
Respondent's former counsel withdrew and Respondent's new counsel 
entered an appearance, the various representations made by 
Respondent's new counsel, and as the CALJ explained, ``the failure 
on the part of Respondent's (new) counsel to honor the commitments 
made to the tribunal.'' CALJ Letter, at 2.
---------------------------------------------------------------------------

    In my Order addressing the Government's Motion for Clarification, I 
held that because Respondent had waived its right to a hearing, it had 
waived its right to submit any evidence in refutation of the 
Government's case.\14\ I further deemed it unnecessary to decide 
whether, under the Agency's regulations (21 CFR 1301.43), Respondent's 
waiver of its right to a hearing also precludes it from challenging the 
sufficiency of the Government's evidence, as well as the Government's 
position on matters of law and the appropriate sanction. Instead, I 
exercised my discretion to allow

[[Page 72099]]

Respondent to file a brief limited to these issues.
---------------------------------------------------------------------------

    \14\ In my Order, I directed the Government to provide 
Respondent with a copy of its Request for Final Agency Action as 
well as the record submitted in support of its Request. Order, at 4.
---------------------------------------------------------------------------

    While I adhere to that ruling in this matter, for future 
proceedings, I conclude that the waiver of the right to a hearing 
encompasses not only the waiver of the right to present evidence but 
the right to present legal arguments challenging the proceedings, 
including arguments challenging the sufficiency of the allegations, the 
sufficiency of the evidence, the Government's position on matters of 
law, and the appropriate sanction. In short, a party waiving its right 
to a hearing waives the right to be heard with respect to any issue 
under consideration.

Other Issues

    As noted above, after Respondent waived its right to a hearing, the 
Government filed its Motion for Clarification. Therein, the Government 
sought clarification as to its obligations to provide copies of any 
documents submitted to me as well as whether Respondent had the right 
to continue to respond to its submissions. Mot. for Clarification, at 
1-2.
    Respondent objected to the Government's motion. In its Objection, 
it raised several contentions beyond those discussed above. 
Specifically, Respondent argued that once it waived its right to a 
hearing and the ALJ transmitted the record, the Government was not 
allowed to continue to litigate the proceeding. Resp.'s Objection, at 
8-9. Respondent further argues that ``the Government had the 
opportunity to submit facts and arguments or present evidence at a 
hearing but chose not to do so'' even though it had the ``right to 
participate in a hearing.'' Id. at 6. Continuing, it argues that ``the 
Government made a strategic decision to allow Respondent to file its 
written position and sit in silence when the ALJ announced he would 
cancel the hearing'' and that ``[t]he Government could have objected 
[sic] the cancellation of the hearing'' or ``presented its evidence in 
writing'' but ``chose to remains mute while plotting to attempt to 
present its case directly to the Administrator in ex parte 
communications.'' Id. at 7. Thus, it argues that I must decide this 
matter based on the record transmitted to me by the ALJ. Finally, it 
argues that the Government has no basis for submitting its motion to me 
and that I have ``no authority under DEA regulations or the APA to 
respond to the Government's Motion.'' Id. at 9.
    I reject Respondent's arguments. While it is true that Agency's 
procedural rules do not explicitly authorize the filing of a motion for 
clarification, the rules also do not explicitly authorize the filing of 
a variety of motions, including motions to enlarge the time to file a 
prehearing statement (which Respondent filed and the ALJ granted), 
motions to compel (which Respondent also filed but which the ALJ did 
not grant because Respondent did not make a sufficient showing to 
establish its entitlement to relief), and motions in limine.
    Moreover, Respondent's position that while it was waiving its right 
to a hearing, it was entitled to continue to participate in the 
proceeding raised an issue of first impression. The Government was 
entitled to seek clarification of its obligations given the uncertainty 
created by Respondent's hearing waiver. As for Respondent's contention 
that I do not have authority to respond to the Government's motion, the 
APA specifically grants the Agency discretionary authority to ``issue a 
declaratory order to . . . remove uncertainty.'' 5 U.S.C. 554(e).
    I also reject Respondent's contention that the Government is now 
foreclosed from presenting to me its evidence in support of the 
proposed revocation. In Respondent's view, the Government is simply a 
``person'' under the Agency's regulation (21 CFR 1316.42(e)) entitled 
to a hearing or to participate in a hearing, or to submit a written 
statement of position. Respondent argues that ``a hearing may only be 
cancelled if all persons entitled to a hearing or to participate in a 
hearing waive their opportunity to participate in a hearing.'' Resp.'s 
Objection, at 6. It then argues that because ``the Government has the 
burden of proof . . . it must participate if a hearing is held'' and 
that ``a hearing can occur even if some, but not all parties choose not 
to participate.'' Id. And Respondent faults the Government for not 
objecting to the cancellation of the hearing or presenting its evidence 
in writing to the ALJ. Id. at 7.
    Notwithstanding that 21 CFR 1316.42(e) defines the ``[t]he term 
person [to] include[] an individual, corporation, government or 
governmental subdivision or agency,'' when the Government initiates an 
Order to Show Cause proceeding, it is not a ``person entitled to a 
hearing and desiring a hearing'' within the meaning of 21 CFR 1316.47 
(or 21 CFR 1301.43). Indeed, this language is fairly read as 
encompassing only the recipient of the Show Cause Order. See 21 CFR 
1316.47 (``Any person entitled to a hearing and desiring a hearing 
shall, within the period permitted for filing, file a request for a 
hearing . . . .''); 21 CFR 1301.43(a) (``Any person entitled to a 
hearing pursuant to Sec.  1301.32 or Sec. Sec.  1301.34-1301.36 and 
desiring a heating shall, within 30 days after the date of receipt of 
the order to show cause . . . file with the Administrator a written 
request for a hearing in the form prescribed in Sec.  1316.47 of this 
chapter.'') (emphasis added).
    For the same reason, i.e., because it initiated the proceeding, 
when the Government initiates an Order to Show Cause proceeding, it is 
not a ``person entitled to participate in a hearing pursuant to Sec.  
1301.34 or Sec.  1301.35(b).'' 21 CFR 1301.43(b). With respect to Sec.  
1301.34, this provision applies to a narrow category of cases which are 
not initiated by the Government--specifically where an applicant seeks 
a registration to import a schedule I or II controlled substance. Under 
this provision, the Agency is required to give notice to registered 
manufacturers as well as other applicants for registration to 
manufacturer the same basic substance, and upon request of such 
manufacturer or applicant, the Agency ``shall hold a hearing on the 
application.'' 21 CFR 1301.34(a). While the Government does not 
initiate the proceeding, it may intervene in the proceeding as a 
``person entitled to participate in a hearing.'' 21 CFR 1301.43(b). See 
also e.g., Chattem Chemicals, Inc., 71 FR 9834, 9834 (2006), pet. for 
rev. denied sub nom. Penick Corp, Inc., v. DEA, 491 F.3d 483, 493 (D.C. 
Cir. 2007); Penick Corp., Inc., 68 FR 6947, 6947 (2003), pet. for rev. 
denied sub nom. Noramco, Inc., v. DEA, 375 F.3d 1148, 1159 (D.C. Cir. 
2004). Indeed, this is the only circumstance in which the Government 
can be fairly described as a ``person entitled to participate in a 
hearing.'' \15\
---------------------------------------------------------------------------

    \15\ 21 CFR 1301.43(b) also refers to the provisions of 
1301.35(b), which allows for registered bulk manufacturers of a 
basic substance in schedule I or II (as well as applicants for 
registration to manufacture the basic substance) to ``participate in 
a hearing'' where the Government has issued a Show Cause Order 
proposing the denial of an application for registration ``to 
manufacture in bulk'' the same basic class and the applicant has 
requested a hearing. Here too, the Government is not a ``person 
entitled to participate in a hearing.'' Rather, it is the initiator 
of the proceeding.
---------------------------------------------------------------------------

    As for its argument that the Government could have presented ``its 
evidence at a hearing before the ALJ or filed . . . its written 
position on the matters of fact and law'' with the ALJ, and thus, it 
should be barred from submitting its evidence to me, the Agency's 
longstanding and consistent practice is that where a party waives its 
right to a hearing, the Government is entitled to present its evidence 
directly to the Administrator, who is the ultimate factfinder. Cf. 
Reckitt & Colman, Ltd. v. Administrator, 788 F.2d

[[Page 72100]]

22, 26 (quoting 5 U.S.C. 557(b) (``On appeal from or review of the 
initial decision, the agency has all the powers which it would have in 
making the initial decision. . . .'')).
    This is so, even where the respondent has initially requested a 
hearing but subsequently either waives its right to a hearing or is 
deemed to have waived its right to a hearing by failing to comply with 
an ALJ's orders. See Wheatland Pharmacy, 78 FR 69441 (2013) (explicit 
waiver); Al-Alousi, Inc., 70 FR 3561 (2005) (waiver deemed because of 
failure to file pre-hearing statement); J & P Distributor, 68 FR 43754 
(2003) (withdrawal of hearing request); DuVall's Drug Store, Inc., 54 
FR 15031 (1989) (``As a result of Respondent's withdrawal of the 
earlier request for a hearing, the Administrator concludes that 
Respondent has waived any opportunity for a hearing on the issues 
raised in the Order to Show Cause, and issues this final order based 
upon the information contained in the DEA investigative file.''); 
Faunce Drug Store, 47 FR 30122, 30122-23 (1982) (waiver of hearing 
based on failure to file prehearing statement; ``[t]he law does not 
require this agency to go through the useless and wasteful exercise of 
convening a hearing for the presentation of both sides of the 
controversy when one side has failed to show that it has a case to be 
heard . . . . This Administration cannot permit the parties that appear 
before it to choose which orders to obey and which orders to 
disregard'').
    Given Respondent's waiver of its right to a hearing, the Government 
was not required to put on its case before the CALJ or submit a written 
statement at that juncture. Rather, consistent with the Agency's 
longstanding practice, the Government was entitled to submit its 
Request for Final Agency Action and its supporting evidence directly to 
my Office.\16\
---------------------------------------------------------------------------

    \16\ A different result might obtain had Respondent sought 
summary disposition in its favor. Under that circumstance, the 
Government would have clearly been on notice that it needed to 
oppose the motion and demonstrate through affidavits the existence 
of disputed material facts, and thus failure to provide such 
affidavits/declaration at that juncture could well have been fatal 
to the Government's case. Respondent did not, however, move for 
summary disposition.
---------------------------------------------------------------------------

    While acknowledging that the CALJ's letter to the former 
Administrator ``does not conform to the typical format of a recommended 
decision,'' Respondent further argues that it is a recommended decision 
as ``it provides a statement of reasoning and is clearly intended to 
constitute a transfer of the record to the Administrator.'' Resp.'s 
Objection, at n.17. However, the CALJ's letter is not a recommended 
decision and does not purport to be a transmittal of the record.
    The CALJ's letter is not titled as a recommended decision and most 
importantly, it does not contain any of the required elements of a 
recommended decision, which include ``recommended findings of fact and 
conclusions of law, with reasons therefore; and [h]is recommended 
decision.'' 21 CFR 1316.65(a)(2). Indeed, the CALJ made no 
recommendation with respect to how the Agency should decide this 
matter. CALJ Letter, at 4 (``I . . . accept its Statement of Position 
on the Agency's behalf, and herein forward it to you for whatever 
consideration or action (if any) you deem appropriate in this 
matter.'').
    So too, the CALJ's letter contains no statement to the effect that 
it is the certification and transmittal of the record. Nor was the 
CALJ's letter accompanied by the pleadings of the parties (with the 
exception of the Respondent's statement), the CALJ's orders, or other 
materials such as a listing of the procedural exhibits and a docket 
sheet. And of course, it does not include any evidence other than the 
affidavits attached to Respondent's statement.
    That the CALJ's letter does not certify the record is for good 
reason, as his duty to certify the record exists only when a proceeding 
goes to a hearing or is resolved through summary disposition. 21 CFR 
1316.52. Upon Respondent's waiver of its right to a hearing, the CALJ's 
jurisdiction over the matter ceased. Indeed, in his letter to the prior 
Administrator, the CALJ specifically noted that ``the authority of the 
administrative law judge commences and ends with the existence of a 
valid hearing request by one entitled to a hearing.'' CALJ Letter, at 
4. I therefore also reject Respondent's contention that I am foreclosed 
from considering the Government's Request for Final Agency Action and 
the evidence submitted in support thereof.

The Unexecuted Declaration

    On review of the Government's submission, my Office noted that one 
of the declarations submitted by the Government had not been executed. 
On August 15, 2016, I issued an Order directing the Government to 
notify my Office as to whether an executed copy of the declaration 
existed. Order (Aug. 15, 2016). I further ordered the Government, if an 
executed copy exists, to provide the executed declaration as well as an 
explanation as to why the executed copy was not submitted with its 
Request for Final Agency Action. Id. I also ordered the Government to 
serve a copy of its response to my Order on Respondent and allowed 
Respondent to file a response to the Government's filing no later than 
five (5) business days from the date of receipt of the Government's 
filing. Id.
    On August 18, 2016, the Government filed its response to my Order 
and a motion to supplement/correct the record. Therein, the Government 
represented that while the declaration had been executed ``on August 
28, 2015, and provided to Government counsel via email that same day[,] 
. . . the executed page was inadvertently omitted from the version of 
the declaration that was submitted to the Acting Administrator.' '' 
Government's Response to Order and Motion to Supplement/Correct the 
Record, at 1-2. The Government further moved to enter the executed 
declaration into the record arguing that there was ``no prejudice'' to 
Respondent. Id. at 2. In addition to providing a copy of the executed 
declaration, the Government attached a copy of an email from the 
Diversion Investigator, who was the affiant, which was sent to 
Government counsel on August 28, 2015 and has the subject line of 
``Last page of Affidavit.'' Id. at 10. The email further states: 
``Attached is the last page of the affidavit with my signature per our 
conversation.'' Id.
    Respondent objects to the Government's motion. It argues that 
``[t]here is no precedent for the Administrator to allow the Government 
to establish the evidentiary foundation for documents in the 
Investigative File after the File has been transferred to the 
Administrator for final agency action.'' Respondent's Response to the 
Government's Response to Order and Motion to Supplement the Record, at 
2 (hereinafter, Response to Mot. to Supp.). It further argues that the 
Government is attempting to submit ``additional evidence into the 
record'' and that the Government has not made ``the requisite showing . 
. . to reopen the record'' or established ``good cause.'' Id. at 2-4 
(citing 21 CFR 1319.57, a regulation which does not exist). And 
Respondent also contends that it would be prejudiced if I ``allowed the 
Government to enter the [s]ignature [p]age into the record of these 
proceedings.'' Id. at 5.
    According to Respondent, ``[o]nce the Investigative File is 
transferred to [me] for final agency action, the Investigative File 
(and any pleadings or written statements) constitutes the record on 
which the'' final decision must be based. Id. at 3. Respondent then 
argues that the Government is seeking to reopen the record and 
therefore, the Government must show that the evidence ``was previously 
unavailable''

[[Page 72101]]

and that it ``would be material and relevant to the matter in 
dispute.'' Id. And Respondent contends that the Government's 
representation that it had received the signature page on August 28, 
2015 but inadvertently failed to include the page when it submitted the 
Investigative File establishes that the evidence was available to the 
Government when it submitted the declaration. Id.
    Contrary to Respondent's understanding, unlike in a proceeding 
conducted by an Administrative Law Judge, no rule of the Agency 
specifies the point at which the record is closed and can only be 
supplemented by filing a motion to re-open and demonstrating that the 
evidence was previously unavailable. Cf. 21 CFR 1316.65(c) (``Not less 
than twenty-five days after the date on which he caused copies of his 
report to be served upon the parties, the presiding officer shall 
certify to the Administrator the record. . . .''). Indeed, where a 
party has waived its right to a hearing and the Government has 
submitted a Request for Final Agency Action, the Government has, on 
occasion, filed a supplement to its Request for Final Agency Action and 
included additional information regarding criminal and state board 
proceedings. See Keith Ky Ly, 80 FR 29025, 29032 (2015); Algirdas J. 
Krisciunas, 76 FR 4940, 4941 n.3 (2011). As long as due process is not 
offended, such filings and the accompanying evidence have been accepted 
into the record without requiring any showing that the evidence was 
previously unavailable.\17\
---------------------------------------------------------------------------

    \17\ Respondent cites several Agency cases in support of its 
contention that a party must demonstrate that the evidence was 
previously unavailable when seeking to re-open the record. 
Respondent's Response to Government's Response to Order and Motion 
to Supplement the Record, at 3 (citing Wesley G. Harline, 64 FR 
72678 (1999); Robert M. Golden, 61 FR 24808 (1996); Bienvenido Tan, 
76 FR 17673 (2011)). However, in each of these proceedings, a 
hearing had been conducted by an ALJ and the record had been 
certified by the ALJ and transmitted to the Office of the 
Administrator/Deputy Administrator. See Harline, 64 FR at 72684-85; 
Golden, 61 FR at 24808. Moreover, in Tan, the ALJ had conducted the 
hearing and issued her recommended decision when the respondent 
sought to admit an affidavit addressing the ALJ's findings that he 
had failed to address several critical deficiencies identified by 
the ALJ in her decision. 76 FR at 17675. Thus, at that stage of the 
proceeding, the only remaining step for the ALJ (other than to 
address the respondent's request to re-open) was to certify and 
transmit the record.
---------------------------------------------------------------------------

    In any event, the declaration is not additional evidence. Rather, 
but for an executed signature page, the same exact declaration was 
submitted by the Government with its Request for Final Agency Action 
and the Government was directed to serve a copy of its filing on 
Respondent.\18\ Notably, Respondent did not move to strike the 
declaration as originally filed by the Government. Nor in its Reply to 
the Government's Request for Final Agency Action did Respondent raise 
any issue as to the validity of the declaration. Cf. Noblett v. General 
Electric Credit Corp., 400 F.2d 442, 445 (10th Cir. 1968) (holding that 
``[a]n affidavit that does not measure up to the standards of [old 
rule] 56(e) is subject to a motion to strike; and formal defects are 
waived in the absence of a motion or other objection'').
---------------------------------------------------------------------------

    \18\ No claim is raised by Respondent that the Government failed 
to provide it with the declaration when it was served with the 
Request for Final Agency Action.
---------------------------------------------------------------------------

    Respondent further argues that I should not accept the signed 
declaration because the Government has not established good cause \19\ 
but only that it ``inadvertently omitted'' the signature page when it 
submitted the Request for Final Agency Action.\20\ Response to Mot. to 
Supp., at 4. While Respondent argues that ``agency precedent does not 
recognized simple inadvertence as good cause,'' id. at 5; it is 
mistaken. For example, in Tony Bui, 75 FR 49979, 49980 (2010), the 
respondent's counsel used an incomplete address when he mailed the 
hearing request resulting in the hearing request being returned to 
respondent's counsel, and when the latter re-submitted the request, it 
was received out of time. While not specifically using the word 
``inadvertence'' to describe the act of Respondent's counsel, the 
Agency nonetheless upheld the ALJ's ruling that good cause had been 
shown to excuse the untimely filing.\21\
---------------------------------------------------------------------------

    \19\ Respondent cited to 21 CFR 1316.57 as support for its 
contention that the Government was required to establish ``good 
cause'' to accept its untimely filing. Respondent's Resp. to Motion 
to Supplement, at 4-5. This regulation applies, however, only where 
a hearing is being conducted by an ALJ. Nonetheless, for the purpose 
of this decision, I assume, without deciding that the ``good cause'' 
standard applies to the Government's motion.
    \20\ Actually, the Government did submit the signature page with 
its Request for Final Agency Action. The problem was that the page 
that was submitted did not include the DI's signature and date.
    \21\ Nor is this the only instance in which the Agency has 
excused negligent or inadvertence on the part of a respondent's 
attorney. In Mark S. Cukierman, Denial of Government's Interlocutory 
Appeal, 8-11 (No. 12-67) (unpublished), the Agency held that a 
respondent had established good cause to excuse the untimely filing 
of a hearing request when the attorney's assistant was directed to, 
but failed to file a hearing request before going on vacation, and 
on the due date, the attorney was unable to verify that the request 
was filed because he was undergoing dental surgery. Slip. Op., at 
10. The Agency held that there was good cause notwithstanding that 
it found that ``Respondent's counsel should have been more diligent 
in supervising his subordinate to ensure that she had filed the 
request.'' Id.
---------------------------------------------------------------------------

    To be sure, in determining whether to excuse an untimely filing, 
these cases have also looked at such factors as whether the offending 
party promptly corrected its omission and whether the opposing party 
was prejudiced. As for the first of these factors, upon being notified 
of the issue the Government has promptly corrected the omission. Cf. 
Fed. R. Civ. P. r.11 (a) (``The court must strike an unsigned paper 
unless the omission is promptly corrected after being called to the 
attorney's or party's attention.'').\22\
---------------------------------------------------------------------------

    \22\ Even if this provision does not apply to affidavits or 
declarations, it nonetheless supports the notion of allowing a party 
to correct an oversight with respect to its filing as long as it 
acts promptly. Of further note is Fed. R. Civ. P. r. 56(e)(1). It 
provides that ``[i]f a party fails to properly support an assertion 
of fact or fails to properly address another party's assertion of 
fact as required by Rule 56(c), the court may . . . give an 
opportunity to properly support or address the fact[.]''
---------------------------------------------------------------------------

    Respondent further argues that it will be prejudiced if the new 
declaration is admitted. Response to Mot. to Supp., at 5. Yet it makes 
no assertion that actually establishes prejudice. While the Government, 
in its Request for Final Agency Action, argued that Respondent failed 
to maintain accurate records and failed to electronically link CSOS 
records and specifically relied on the declaration, Respondent, in its 
Response to the Request for Final Agency Action, did not address the 
various recordkeeping allegations at all. Compare Request for Final 
Agency Action, at 28-30, with Respondent's Response to Request for 
Final Agency Action, at 2-27. Notably, Respondent offered no 
explanation as to why it did not address the allegations for which the 
declaration was offered, let alone argue that it deemed it unnecessary 
to do so because the declaration was legally insufficient.
    Moreover, even now in response to the Government's Motion to admit 
the signed declaration, Respondent does not maintain that it will be 
prejudiced because when it prepared its response to the Request for 
Final Agency Action, it determined that the unsigned declaration was 
not legally sufficient to provide evidentiary support for those 
allegations and therefore did not address them. See Resp. to Gov. 
Response to Order and Motion to Supplement the Record, at 5-6. In 
short, because Respondent offers only conclusory assertions of 
prejudice, I accept the signed the declaration into the record.\23\
---------------------------------------------------------------------------

    \23\ Respondent further argues that it ``believes that the 
Signature Page itself and the accompanying email [submitted by the 
Government] raise issues'' and that it ``cannot identify any point 
of relation between the Signature Page and the email to indicate 
that the two documents have any connections to each other 
whatsoever.'' Response to Gov. Motion to Supplement the Record, at 
4. Respondent further suggests that testimony or additional 
documentary evidence may be necessary to link the two documents. Id.
     The Government, however, has submitted to me the entire 
declaration, which is signed and dated below the statement: ``I 
hereby declare under penalty of perjury that the forgoing is true 
and correct pursuant to 28 U.S.C. 1746.'' GA 2, at 6 (corrected). As 
the declaration has been signed and dated under the penalty of 
perjury, I deem it unnecessary to inquire into the ``connections'' 
between the email and the signature page.

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[[Page 72102]]

Respondent's Surrender of Its Registration and Withdrawal Request

    On August 30, 2016, Counsel for Respondent notified my Office that 
it would surrender its DEA Certificate of Registration effective at 
11:59 p.m. that day. Letter from D. Linden Barber, Esq., to the Acting 
Administrator, at 1 (Aug. 30, 2011). Respondent's Counsel also advised 
that it had returned its unused order forms to the DEA Tampa Office and 
that it had delivered its controlled substances to a reverse 
distributor. Id.
    While Respondent's surrender of its registration rendered moot the 
issue of whether its registration should be revoked, during the course 
of the proceeding Respondent filed a renewal application. No regulation 
of the Agency provides that the surrender of a registration also acts 
as the withdrawal of a pending application. To the contrary, under an 
Agency regulation, when an applicant has been served with a show cause 
order, the applicant must either show that ``good cause'' exists to 
allow it to withdraw its application or that ``withdrawal is in the 
public interest.'' 21 CFR 1301.16(a). Accordingly, my Office notified 
Respondent by email (which was copied to the Government) that for the 
matter to be dismissed, Respondent needed to request permission to 
withdraw its application. See 21 CFR 1301.16(a). My Office thus 
directed Respondent to address whether it was willing to withdraw its 
application.
    Thereafter, Respondent's Counsel filed a letter requesting 
withdrawal. Letter from D. Linden Barber, Esq., to the Acting 
Administrator, at 1 (Aug. 31, 2011). Therein, Respondent's Counsel 
argued that withdrawal of its application ``is in the public interest 
as it accomplishes DEA's purpose in issuing the Order to Show Cause, 
namely, removing [Respondent's] authority to handle controlled 
substances.'' Id. Having considered Respondent's showing, I conclude 
that granting its withdrawal request is not ``in the public interest.'' 
21 CFR 1301.16(a).
    The Agency has set forth several factors it considers in 
determining whether the granting of a request to withdraw is in the 
public interest. See Vincent G. Colisimo, 79 FR 20911 20913 (2014); 
Liddy's Pharmacy, L.L.C., 76 FR 48887, 48888 (2011). These factors 
include the potential prejudice to the Government were the request 
granted, the nature of the misconduct, the extent to which the Agency's 
resources have been expended in the litigation and review of the 
matter, whether the respondent has remained in business or professional 
practice, and whether the respondent has agreed to not reapply for 
registration. See Colisimo, 79 FR at 20913; Liddy's, 76 FR at 48888.
    To be sure, Respondent's surrender of its registration serves the 
public interest to some degree by ending its authority to handle 
controlled substances. The Controlled Substances Act does not, however, 
prohibit a former registrant from reapplying for a registration for any 
particular period of time, and in fact, a former registrant can reapply 
immediately following its surrender of a registration. Notably, 
Respondent's counsel has represented only that his client ``ha[s] no 
intention of applying for a DEA Registration in the near future.'' 
Letter from D. Linden Barber, Esq., to the Acting Administrator, at 1 
(Aug. 30, 2016). Thus, it is clear that Respondent intends to remain in 
business and reapply for a DEA registration.
    Moreover, my Office has expended substantial resources in the 
review of this matter and the preparation of this Decision and Order. 
See id. As discussed below, that review has determined that 
Respondent's pharmacists committed egregious violations of the 
Controlled Substances Act.\24\ However, were I to grant its request to 
withdraw, Respondent would escape the consequences of the findings of 
fact and legal conclusions that are warranted by the record in this 
proceeding. Under these circumstances, the potential prejudice to the 
Government is substantial and the harm to the public interest is 
manifest. See Bobby D. Reynolds, et al., 80 FR 28643, 28643 n.2 (2015). 
I therefore conclude that granting Respondent's request to withdraw its 
application is not in public interest. 21 CFR 1301.16(a). I also 
conclude that Respondent has not demonstrated ``good cause'' to allow 
it to withdraw.
---------------------------------------------------------------------------

    \24\ Various agency proceedings clearly establish that the 
Superior Pharmacies and Edge were owned by brother (Mr. Victor Obi) 
and sister (Ms. Harrieth Aladiume). See Superior Pharmacy I and 
Superior Pharmacy II, 81 FR 31310 (2016). So too, agency proceedings 
establish that Hills Pharmacy was owned by Ms. Hope Aladiume, 
another sister of Mr. Obi and Ms. Harrieth Aladiume. Hills Pharmacy, 
L.L.C., 81 FR 49816 (2016).
    While Victor Obi was a consultant to both Hills Pharmacy and 
Edge Pharmacy and participated in both proceedings by attending the 
hearing in Hills and providing an affidavit in Edge, the record in 
Edge does not establish that he was actively involved in the 
operation and management of the latter pharmacy. Thus, 
notwithstanding the familial links, the findings rendered in my 
decisions regarding the misconduct committed by Superior Pharmacies 
I and II and Hills would likely not be entitled to preclusive effect 
were Edge Pharmacy to apply for a new registration and could cause 
substantial prejudice to the Government.
---------------------------------------------------------------------------

    Having considered the record submitted by the Government, and the 
parties' legal arguments as to the sufficiency of the evidence, I make 
the following findings of fact.

Findings of Fact

    Respondent is licensed by the Florida Board of Pharmacy as a 
Community Pharmacy. For much of this proceeding, Respondent was also 
the holder of DEA Certificate of Registration FE1512501, pursuant to 
which it was authorized to dispense controlled substances in schedules 
II through V as a retail pharmacy, at the registered address of 2039 E. 
Edgewood Drive, Lakeland, Florida. According to the registration 
records of the Agency, while Respondent's registration was due to 
expire on August 31, 2015, on July 8, 2015, it submitted a timely 
renewal application. This action kept its registration in effect until 
August 30, 2016, see 21 CFR 1301.36(i), when Respondent surrendered its 
registration. Letter from D. Linden Barber, Esq., to the Acting 
Administrator, at 1 (Aug. 20, 2016); see also 21 CFR 1301.36(i).
    However, while Respondent no longer holds a registration, for 
reasons explained previously, Respondent's application remains pending 
in this proceeding. This precludes a finding of mootness. See Liddy's 
Pharmacy, L.L.C., 76 FR at 48888.
    Respondent is owned by Harrieth Aladiume. Gov. Declaration 
(hereinafter, GA) 3, at 1. Ms. Aladiume's brother is Victor Obi-
Anadiume. Id. Mr. Obi-Anadiume is the owner of several pharmacies in 
the Tampa Bay area, including two pharmacies whose registrations I 
recently revoked.\25\ See Superior Pharmacy I and Superior Pharmacy II, 
81 FR 31309, 31341 (2016). Mr. Obi-Anadiume is also the owner of a 
third Tampa pharmacy (Jet Pharmacy); on March 31, 2015, Mr. Obi 
surrendered Jet's registration for cause.\26\ GA 3, at 2.
---------------------------------------------------------------------------

    \25\ The Superior pharmacies were located at 3007 W. Cypress 
Street, Suite I, Tampa, Fl. 33609 and 5416 Town `N' Country Blvd., 
Tampa, Fl. 33615.
    \26\ Jet Pharmacy was located at 2310 West Waters Ave., Suite J, 
Tampa, Fl.
---------------------------------------------------------------------------

    In addition, Mr. Obi-Anadiume owns or owned two pain clinics: (1) 
24th

[[Page 72103]]

Century Medical Clinic, located at 7747 W. Hillsborough Ave., Tampa, 
Fl., and (2) MD Plus Clinic, located at 2039 Edgewood Drive, Suite 
110B, Lakeland, Fl. Id. The MD Plus Clinic was located in a suite 
adjacent to that occupied by Respondent. Id.; see also Gov. Declaration 
1, Attachment B, at 1. On or about October 15, 2012, the State of 
Florida, Agency for Health Care Administration, served the MD Plus 
Clinic with an administrative complaint which sought to revoke its 
health care clinic license and impose administrative fines. GA 1, 
Attachment B, at 12-13. On March 26, 2013, Mr. Obi-Anadiume entered 
into a settlement agreement with the State on MD Plus's behalf, 
pursuant to which he surrendered its license.\27\ Id. at 14, 18.
---------------------------------------------------------------------------

    \27\ The record does not include the complaint, and in any 
event, Mr. Obi was not required to admit to any of the allegations. 
GA 1, Attachment B, at 15.
---------------------------------------------------------------------------

The Dispensing Allegations

    On February 4, 2013, DEA Investigators executed an Administrative 
Inspection Warrant (AIW) at Respondent, pursuant to which they seized 
the schedule II prescriptions and other documents pertaining to 
Respondent's purchases and distributions of controlled substance. GA 3, 
at 1-2. The Investigators also created a mirror image of Respondent's 
computer data. Id. at 2. A review of the data showed that from January 
1, 2011 through February 4, 2013, more than 93 percent of the schedule 
II dosage units dispensed by Respondent (463,392 out of 497,104 du) 
were dispensed pursuant to prescriptions written by six doctors 
employed by Mr. Obi-Anadiume, and nearly 85 percent of the dosage units 
were filled pursuant to prescriptions written by a single doctor, 
Victor Thiagaraj Selvaraj.\28\ GE 10, at 1. The data also showed that 
27 doctors (other than those employed by Mr. Obi) prescribed the 
remaining dosage units (33,742 du) dispensed by Respondent). Id.
---------------------------------------------------------------------------

    \28\ According to the online records of the Florida Department 
of Health (DOH), of which I take official notice, Dr. Selvaraj was 
Board Certified in Family Medicine but not pain medicine or 
anesthesiology. See 5 U.S.C. 557(c). Of further note, on November 5, 
2013, the DOH ordered the emergency restriction of Dr. Selvaraj's 
license to practice medicine based on findings which included that 
he ``prescrib[ed] large quantities and types of Schedule II-IV 
controlled substances to Patients without adequate supporting 
documentation and without any legitimate medical purpose.'' In re: 
The Emergency Restriction of the License of Victor Thiagaraj 
Selvaraj, M.D., at 65 (Fla. DOH, Nov. 5, 2013) (No. 2012-04201). The 
Board further concluded that ``Dr. Selvaraj violated Section 
458.331(1)(q), Florida Statutes,'' which prohibits ``[p]rescribing, 
dispensing, [or] administering . . . any controlled substance, other 
than in the course of the physician's professional practice.'' Id. 
at 73.
    Of further note, on March 21, 2016, Dr. Selvaraj voluntarily 
relinquished his medical license ``to avoid further administrative 
actions'' and ``agree[d] to never reapply for licensure as a Medical 
Doctor in the State of Florida.'' See Voluntary Relinquishment of 
License, at 1, In re: The License of Victor Thiagaraj Selvaraj, M.D. 
(Mar. 22, 2016). On August 16, 2016, the Florida Board of Medicine 
accepted Dr. Selvaraj's offer to voluntarily relinquish his medical 
license. See id. at Final Order, at 1-2.
---------------------------------------------------------------------------

    According to one of the Investigators, following the seizure of the 
prescriptions, the prescriptions and their labels were scanned 
electronically and provided to Robert Parrado, R.Ph., who reviewed them 
and provided his opinion. GA 2. Mr. Parrado holds a Bachelor of Science 
in Pharmacy from the University of Florida and has been licensed as 
pharmacist in Florida since 1971. GA 1, at 1. Mr. Parrado has practiced 
as a pharmacist in both the hospital and community pharmacy setting and 
owned two pharmacies for approximately 19 years. Id.
    Mr. Parrado was a member of the Florida Board of Pharmacy from 
December 2000 through February 2009 and served as both its Vice-
Chairman (in 2003) and Chairman (in 2004). Id. While on the Board, he 
``presided over numerous disciplinary matters,'' including some which 
involved the diversion of controlled substances. Id. Mr. Parrado 
testified that he is familiar with both federal and state laws and 
regulations applicable to the prescribing and dispensing of controlled 
substances including 21 CFR 1306.04(a); Florida Stat. Ann. Sec. Sec.  
465.016(1)(i), 465.023(1)(h), and 893.04(2)(a), and Fla. Admin. Code 
r.64B16-27.831. Id. at 1-2.
    Mr. Parrado then opined as to the various steps a Florida 
pharmacist must take to ensure that any prescription ``is written 
pursuant to an appropriate physician-patient relationship, as well as 
being clinically appropriate and safe to dispense.'' Id. at 2. These 
included reviewing ``the patient's age, gender, address, current or 
previous medical conditions, drug allergies and condition being 
treated, [the] physician's address and specialty or area of practice,'' 
the ``appropriateness of therapy'' and whether there is ``any 
therapeutic duplication.'' Id. In addition, Mr. Parrado testified that 
the prescription must be reviewed to determine if it contains all 
required information including the patient's name and address, the 
prescriber's name and address, the prescriber's DEA number, the drug 
name, dosage form, strength, quantity, and instructions for use. Id.
    Mr. Parrado further opined that when a controlled substance 
prescription is presented, a pharmacist must take additional steps to 
verify the legitimacy of the prescription and prevent potential abuse 
and diversion. Id. These include ``reviewing the quantity of the 
medication prescribed; appropriate dosage; the location of the 
patient's home from the physician and/or the pharmacy; trends in the 
physician's prescribing habits; and the number of pharmacies the 
patient has used for similar medications.'' Id. at 2-3. Mr. Parrado 
then opined that ``a reasonably prudent'' Florida pharmacist ``must be 
familiar with'' various indicia that create a suspicion that a 
controlled substance prescription may be abused or diverted. Id. Mr. 
Parrado termed these indicia ``red flags'' and explained that ``a `red 
flag' is anything about a prescription that would cause the pharmacist 
to be concerned that the prescription was not issued for a legitimate 
medical purpose in the usual course of professional practice.'' These 
include:

    1. There is a significant distance between the addresses of the 
patient and the prescriber and/or the pharmacy;
    2. The prescription is for the highest strength and/or large 
quantities;
    3. Multiple patients arrive at the pharmacy in close temporal 
proximity and present similar prescriptions which were issued by the 
same physician or clinic;
    4. Patients are willing to pay large amounts using cash or cash 
equivalents (check or credit card) for narcotics when the same drugs 
are available at other pharmacies for lower prices;
    5. The prescriber writes similar prescriptions for each patient 
for ``narcotics in identical or nearly identical quantities . . . 
regardless of the patient's individualized medical conditions'';
    6. The prescriber issues cocktail prescriptions for such drugs 
as oxycodone, benzodiazepines, and carisoprodol;
    7. The prescriber issues prescriptions for ``two or more'' drugs 
which are ``known to treat the same condition in the same manner,'' 
such as two immediate release opioids.

Id. at 3-4.

    Mr. Parrado testified that ``[w]hen confronted with a red flag or 
red flags concerning a prescription for controlled substances, a 
pharmacist must try to resolve the red flags to determine whether . . . 
the prescriptions is legitimate'' and must do so ``prior to filling the 
prescription.'' Id. at 4. He testified that the steps taken depend on 
the type of red flag and may include questioning the patient and/or 
contacting the physician. Id. He also testified that ``[w]hen a 
pharmacist contacts a physician to address red flags presented by the 
prescription, the standard practice in Florida is for the pharmacist to 
note it on the

[[Page 72104]]

prescription'' and ``[i]f there is no documentation on the prescription 
addressing the red flag and resolving the red flag, you can assume that 
the red flag was not resolved.'' Id.
    Mr. Parrado further testified that ``[w]hile some red flags can be 
resolved, there are other red flags (or combination and patterns of red 
flags) that a pharmacist cannot resolve by contacting the physician, 
running a State prescription monitoring search, or obtaining more 
information from the patient.'' Id. As an example, Mr. Parrado set 
forth a scenario in which a pharmacist is:

presented with (1) a group of patients who all travelled a 
significant distance to the pharmacy and/or to the physician to 
obtain controlled substance prescriptions; (2) patients arriving at 
the pharmacy on the same day with prescriptions from the same doctor 
for the same controlled substances; (3) . . . the controlled 
substance is a highly addictive and highly diverted drug.

Id. Mr. Parrado then explained that a phone call ``to the physician to 
verify the prescription would not resolve the red flag'' because while 
the ``call may establish that there is a relationship between the 
patient and the'' physician, there ``may not be a legitimate patient-
physician relationship, and the prescription may not be for a 
legitimate medical purpose.'' Id. at 4-5.
    Mr. Parrado then discussed various groups of prescriptions and 
whether the red flags presented by the prescriptions presented 
resolvable or unresolvable red flags. Id. at 5. The first of these were 
nine prescriptions for oxycodone 30 mg written on January 10, 2011 by 
Dr. Selvaraj of Mr. Obi-Anadiume's MD Plus Clinic which was located in 
the adjacent space. Id.; GE 3, at 1-9. Respondent filled each of the 
prescriptions the same day. GE 3, at 1-9.
    The prescriptions were issued in the following quantities to the 
following patients (with the approximate distances they travelled to MD 
Plus and Respondent): 224 du to J.R. of Port Orange (113 miles); 224 du 
to C.R. of Middleburg (173 miles); 224 du to R.M. of Wesley Chapel (41 
miles); 168 du to L.J. of Cocoa (96 miles); 168 du to D.J. of Melbourne 
(102 miles); 196 du to W.K. of Satsuma (141 miles); 224 du to J.H. of 
Ocala (98 miles); 196 du to C.S. of Jacksonville (197 miles); and 196 
du to C.W. of Milton (450 miles). GE 3, at 1-9; GE 17, at 1-21. Each of 
the patients paid with cash or a cash equivalent with the prices 
ranging from $560 to $686 depending on the quantity. GE 3, at 1-9.
    Regarding these nine prescriptions, Mr. Parrado testified:

    In my professional opinion, nine different individuals who (1) 
travel, on average, more than 156 miles to Respondent's pharmacy; 
(2) obtain prescriptions for large, and in some cases, identical 
amounts of 30 milligram oxycodone tablets from the same physician on 
the same day; and (3) pay between $560 and $686 for their 
prescriptions creates a situation that is too suspicious and 
indicates the prescriptions were not issued for a legitimate medical 
purpose. Therefore, the combination of events creates an 
unresolvable red flag which, applying the standard of practice of 
pharmacy in Florida, precludes a reasonably prudent pharmacist from 
dispensing these prescriptions.

GA 1, at 5.

    Mr. Parrado then discussed nine oxycodone 30 prescriptions which 
were issued by Dr. L.C. of the MD Plus Clinic and dispensed by 
Respondent on January 6, 2011. Id. The prescriptions were issued in the 
following amounts to the following patients: 224 du to J.D., 196 du to 
D.W., and 168 du to T.T., all of Jacksonville (197 miles); 196 du to 
S.H. of Palatka (148 miles); 168 du to E.R. and 196 du to J.B., both of 
Interlachen (139 miles); 196 du to D.N. of Winter Haven; 196 du to J.B. 
of Port Orange (113 miles), and 224 du to M.H. of Maitland (66 miles). 
GE 3, at 10-18; GE 17, at 18, 22-31. Each of the patients paid with 
either cash or cash equivalents and the prescriptions ranged in priced 
from $516 for 168 du to $672 for 224 du. GE 3, at 10-18.
    Regarding these prescriptions, Mr. Parrado testified:

    In my professional opinion, nine different individuals who (1) 
travel, on average, more than 134 miles to Respondent's pharmacy; 
(2) obtain prescriptions for large, and in some cases, identical 
amounts of 30 milligram oxycodone tablets from the same physician on 
the same day; and (3) pay between $516 and $672 for the 
prescriptions creates a situation that is too suspicious and 
indicates the prescriptions were not issued for a legitimate medical 
purpose. Therefore, the combination of events creates an 
unresolvable red flag which, applying the standard of practice of 
pharmacy in Florida, precludes a reasonable prudent pharmacist from 
dispensing the prescriptions.

GA 1, at 5.

    Next, Mr. Parrado discussed seven oxycodone 30 prescriptions issued 
by Dr. L.C. of the MD Plus Clinic and dispensed by Respondent on 
January 7, 2011. Id. at 5-6. The prescriptions were issued in the 
following amounts to the following patients: 224 du to J.T.,\29\ 196 du 
to K.W., and 196 du to R.D., all of Jacksonville (197 miles); 224 du to 
I.P. of St. Augustine (161 miles); 196 du to E.M. of Zephyrhills (30 
miles); 168 du to T.M. of MacClenny (183 miles); and 196 du to L.L. of 
Ocala (98 miles). GE 3, at 19-25. With the exception of the 
prescription issued to E.M., each of the prescriptions was paid for 
with cash or cash equivalents, with the prices ranging from $504 to 
$672 depending on the quantity. See id.; GE 17, at 31-35.
---------------------------------------------------------------------------

    \29\ Mr. Parrado also reviewed a medical record for J.T. which 
was provided by Respondent. I discuss Mr. Parrado's testimony 
regarding the medical record later in this decision.
---------------------------------------------------------------------------

    Regarding these prescriptions, Mr. Parrado testified:

    In my professional opinion, seven different individuals who (1) 
travelled, on average, more than 150 miles to Respondent's pharmacy; 
(2) obtained prescriptions for large, and in some cases, identical 
amounts of 30 milligram oxycodone tablets; (3) obtained these 
prescriptions from the same physician on the same day; and (4) six 
of them paid between $504 and $672 for the prescriptions creates a 
situation that is too suspicious and indicates the prescriptions 
were not issued for a legitimate medical purpose. Therefore, the 
combination of events creates an unresolvable red flag which, 
applying the standard of practice of pharmacy in Florida, precludes 
a reasonable prudent pharmacist from dispensing the prescriptions.

GA 1, at 6.

    Government Exhibit 3 contains additional prescriptions for 
oxycodone 30 that were issued by Dr. Selvaraj during the month of 
January 2013. Mr. Parrado testified that the prescriptions were ``all 
for large quantities of highly addictive opioids.'' GA 1, at 6. Among 
the prescriptions were those dispensed to the following patients, each 
of whom paid in cash or cash equivalents and who resided in the 
following towns (with the approximate distance to Respondent):
    L.J. of Cocoa (102 miles) for 168 du at a cost of $1344;
    E.V. of New Smyrna (113 miles) for 112 du at a cost of $896;
    A.B. of Lake City (172 miles) for 168 du at a cost of $1260 \30\;
---------------------------------------------------------------------------

    \30\ Later in his declaration, Mr. Parrado provided additional 
information regarding the legitimacy of A.B.'s prescription based on 
a partial patient file which was provided by Respondent and 
submitted by the Government with its Request for Final Agency 
Action. I discuss his testimony later in this decision.
---------------------------------------------------------------------------

    S.C. of Jacksonville (197 miles) for 150 du at a cost of $1200;
    T.W. of Milton (450 miles) for 168 du at a cost of $1344;
    L.M. of Lakeland (same town) for 168 du at cost of $1344;
    M.E. of Cantonment (474 miles) for 150 du at a cost of $1200;
    R.B. of Palatka (148 miles) for 168 du at a cost of $1344;
    R.R. of Lakeland for 140 du at a cost of $1120;
    C.C. of Cocoa for 140 du at a cost of $1120;

[[Page 72105]]

    L.S. of MacClenny (183 miles) for 100 du at a cost of $800.

GE 3, at 45-46, 49-50, 55-56, 59-60, 69-80; GE 17, at 49, 54, 57.

    Mr. Parrado opined that these and the other prescriptions \31\ 
presented unresolvable red flags based on: (1) The distances the 
patients were travelling, (2) the large quantities and in some 
instances identical amounts, (3) their issuance by a single doctor; and 
(4) the prices the patients were paying. GA 1, at 7. He then opined 
that ``based on the standard of practice of pharmacy in Florida,'' 
Respondent's pharmacists should not have filled the prescriptions. Id.
---------------------------------------------------------------------------

    \31\ The exhibit also includes multiple prescriptions for 
smaller quantities of oxycodone 30 which ranged from 56 du to 84 du. 
See generally GE 3. Here again, however, the patients were generally 
travelling long distances and paying in cash for the prescriptions.
---------------------------------------------------------------------------

    Mr. Parrado also addressed the 17 prescriptions contained in GE 12. 
Each of these prescriptions were issued by Dr. Selvaraj of the MD Plus 
Clinic between October 24 and October 29, 2012 and include 
prescriptions for oxycodone 30, Dilaudid (hydromorphone 4 and 8 mg), MS 
Contin (morphine sulfate continuous release 60 and 100 mg), and 
methadone. See GE 12. Earlier in his declaration, Mr. Parrado testified 
that ``the normal daily dose of hydromorphone is 24 milligrams.'' GA 1, 
at 6.
    The Exhibit includes prescriptions for 180 oxycodone 30 and 120 
Dilaudid 8 issued by Dr. Selvaraj on October 29, 2012 (and filled by 
Respondent the same day) to K.P. of Yulee, Florida, a distance of 222 
miles from Respondent. GE 12, at 1-4; GE 17, at 75. K.P. paid $1350 in 
cash or cash equivalents for the oxycodone and another $360 for the 
Dilaudid, for a total of $1710. GE 12, at 2, 4. Were K.P. a legitimate 
chronic pain patient, her yearly costs for these two drugs would have 
totaled more than $20,000.\32\
---------------------------------------------------------------------------

    \32\ Were K.P. a terminally ill patient, it does not seem likely 
that she would travel 222 miles each way to obtain her medication.
---------------------------------------------------------------------------

    Also on October 29, Dr. Selvaraj issued prescriptions for 70 
oxycodone 30 and 112 Dilaudid 4, which Respondent filled, to L.G. of 
Micanopy, a distance of 120 miles from Respondent. Id. at 5-8; GE 17, 
at 77. L.G. paid $525 for the oxycodone and $168 for the Dilaudid in 
cash or cash equivalents. Id. at 6, 8. The Exhibit also includes 
prescriptions issued on October 24, 2012 by Dr. Selvaraj to T.W. of 
Milton, a distance of 450 miles, which Respondent filled the same day. 
Id. at 31-34. T.W. paid in cash or cash equivalents $1260 for 168 
oxycodone 30 and $420 for 140 Dilaudid 8 mg, for a total of $1680. Id. 
at 32, 34.
    Exhibit 11 contains several additional prescriptions which were 
written by Dr. Selvaraj on October 29 and filled by Respondent the same 
day. These include prescriptions for 160 oxycodone 30 and 56 Dilaudid 4 
issued to S.K. of St. Augustine, the latter being 161 miles from 
Respondent. GE 11, at 55-58. S.K. paid $1200 for the oxycodone and $84 
for the Dilaudid in cash or cash equivalents. Id. at 56, 58.
    Also on October 29, Dr. Selvaraj issued prescriptions for 84 
Dilaudid 8 and 56 MS Contin 100 to D.K. of Interlachen (139 miles), 
which Respondent filled the same day.\33\ Id. at 49-53. The same day, 
Dr. Selvaraj issued a prescription for 140 Dilaudid 8 to S.C. of 
Hawthorne (127 miles). Id. at 53; GE 17, at 51. S.C. filled the 
prescription the same day, paying $420 in cash or cash equivalents. Id. 
And on October 29, Dr. Selvaraj issued a prescription to S.H., also of 
Hawthorne, for 56 MS Contin 60, which Respondent filled the same day. 
GE 12, at 9. Thus, here again, six out-of-town patients, all of whom 
travelled at least 126 miles to obtain the drugs, presented a total of 
10 prescriptions for schedule II controlled substances on a single day.
---------------------------------------------------------------------------

    \33\ D.K. paid $252 for the Dilaudid and $84 for the MS Contin. 
GE 11, at 50, 52.
---------------------------------------------------------------------------

    On October 26, Dr. Selvaraj issued a prescription for 168 Dilaudid 
8 to S.C. of Pensacola, Florida, a distance of 470 miles from 
Respondent. Id. at 11; GE 17, at 80. Respondent filled the prescription 
the same day, for which S.C. paid $504 in cash or cash equivalents. Id. 
at 12. (Of further note, the dosing instruction called for one tablet 
every four hours, id. at 11, or 48 mg per day, more than double the 
normal daily dose).
    The Exhibit contains still more prescriptions for Dilaudid 8 with 
quantities ranging from 112 to 168 du and dosing instructions that 
exceeded the 24 mg normal daily dose and which were issued to C.W-O. 
and C.M. of Interlachen (139 miles), id. at 13-14, 21-22; J.S. of 
Gainesville (132 miles), id. at 15-16; and L.L. and B.K. of Ocala (98 
miles). Id. at 19-20, 29-30. With respect to these prescriptions, each 
of the patients paid in cash or cash equivalents, with the 
prescriptions costing between $336 and $420. Id.
    With respect to the prescriptions in GE 12, Mr. Parrado testified:

    In my professional opinion, (1) the distances travelled by these 
customers; (2) the type and quantities of the controlled substances 
prescribed; (3) the fact that the prescriptions were all issued by 
the same physician; and (4) the high prices paid for oxycodone all 
created a situation that is too suspicious and indicates the 
prescriptions were not issued for a legitimate medical purpose. 
Therefore, the combination of events creates an unresolvable red 
flag which, applying the standard of practice of pharmacy in 
Florida, precludes the pharmacist from dispensing the controlled 
substances.

GA 1, at 7.

    With respect to the prescriptions found at pages 15-26 of GE 12, 
which were the Dilaudid prescriptions issued to C.W-O., C.M., J.S., 
L.L., as well the prescriptions for Dilaudid and methadone issued to 
T.P. of Satsuma (141 miles from Respondent) and dispensed on October 
25, 2012, Mr. Parrado offered additional testimony as to why these 
prescriptions presented unresolvable red flags. Id. He testified that:

based on my experience, no pharmacy would be confronted with six 
legitimate prescriptions issued to five different customers, all of 
whom resided at least 84 miles away from the pharmacy and acquired 
their prescriptions on the same day from the same physician. In 
reviewing the prescription number (``RX numbers'') printed on the 
labels . . . I can conclude that, out of ten consecutively filled 
schedule II prescriptions dispensed by this pharmacy on the same 
day, six of them were for out of town customers. This combination of 
events creates an unresolvable red flag which, applying the standard 
of practice of pharmacy in Florida, precludes a reasonably prudent 
pharmacist from dispensing the prescriptions.

Id. at 7-8. This reasoning applies equally to the prescriptions 
Respondent dispensed on October 29, 2012, when six patients, all of 
whom resided at least 126 miles from Respondent, presented 10 
prescriptions for schedule II narcotics.\34\

    \34\ The Rx numbers for the October 29 prescriptions begin at 
2010345 and end at 2010356, with two single number gaps. GE 12, at 
10; GE 11, at 50; see also GE 11, at 52, 54, 56, 58; GE 12, at 2, 4, 
6, 8.
---------------------------------------------------------------------------

    Government Exhibit 13 contains 10 prescriptions for schedule II 
controlled substances that were issued by Dr. Selvaraj on October 22, 
2012 and dispensed by Respondent the same day. GE 13, at 11-30. 
Notably, four of the patients received prescriptions for both oxycodone 
30 and Dilaudid 8.
    Specifically, Respondent dispensed 112 du of oxycodone 30 and 168 
du of Dilaudid 8 to H.W. of Satsuma (141 miles). Id. at 13-16. H.W. 
paid $840 for the oxycodone and $504 for the Dilaudid. Id. at 14, 16.
    Respondent dispensed 100 du of oxycodone 30 and 84 du of Dilaudid 8 
to C.T. of Jacksonville (197 miles). Id. at

[[Page 72106]]

17-20. C.T. paid $750 for the oxycodone and $252 for the Dilaudid. Id. 
at 18, 20.
    Respondent dispensed 112 oxycodone 30 and 56 Dilaudid 8 to SW., 
also of Jacksonville. Id. at 21-24. SW. paid $840 for the oxycodone and 
$168 for the Dilaudid. Id. at 22, 24.
    And Respondent dispensed 120 oxycodone 30 and 168 Dilaudid 8 to 
J.T. of San Mateo (136 miles), which is south of Jacksonville. Id. at 
27-30. J.T. paid $900 for the oxycodone and $504 for the Dilaudid.\35\ 
Id. at 28, 30.
---------------------------------------------------------------------------

    \35\ Other prescriptions dispensed by Respondent on this day 
include 56 Dilaudid 8 to C.H. of Palm Bay, Florida (approximately 
101 miles from Respondent) and 120 Dilaudid 8 to D.M. of Milton (450 
miles), both of whom paid cash or with cash equivalents. GE 13, at 
11-12, 29-30.
---------------------------------------------------------------------------

    Regarding these prescriptions (as well as those in this Exhibit 
dispensed on next day), Mr. Parrado noted that ``the combination of 
events surrounded [sic] these prescriptions created an unresolvable red 
flag.'' GA 1, at 8. Mr. Parrado specifically noted ``the distances 
travelled by these customers,'' ``the type and quantities of the 
controlled substances,'' ``that the prescriptions were all issued by 
the same physician,'' and ``the high prices paid for [the] oxycodone.'' 
Id. Mr. Parrado then added that:

the ten prescriptions dispensed by Respondent[ ] . . . on October 
22, 2012, create a situation that is too suspicious and indicates 
the prescriptions were not issued for a legitimate medical purpose. 
Based on my experience, no pharmacy would be confronted with ten 
legitimate prescriptions issued to six different customers, all of 
whom resided at least 104 miles away from the pharmacy and acquired 
their prescriptions on the same day from the same physician. 
Additionally, based on my review of the RX numbers printed on the 
labels,\36\ I can conclude that, out of ten consecutively filled 
schedule II prescriptions filled by this pharmacy on the same day, 
all ten were issued to out of town customers. Therefore, the 
combination of events surrounded [sic] these prescriptions creates 
an unresolvable red flag which, applying the standard practice of 
pharmacy in Florida, precludes a reasonably prudent pharmacists 
[sic] from dispensing the prescriptions.
---------------------------------------------------------------------------

    \36\ The RX numbers were consecutively numbered from 2010300 
through 2010309. See GE 13, at 14, 16, 18, 20, 22, 24, 26, 28, and 
30.

---------------------------------------------------------------------------
Id. (citing GE 13, at 11-30).

    Still other examples of this are found in GE 14, which contains 
eight prescriptions for various schedule II drugs which were written on 
December 5, 2012 by Dr. Selvaraj and dispensed by Respondent on the 
same day for patients who lived in Ocala (98 miles), Interlachen (139 
miles), Middleburg (173 miles), Citrus Springs (88 miles), Jacksonville 
(197 miles), and Holt (432 miles). GE 14, at 35-50. All but one of the 
patients paid with cash or cash equivalents. See id. The prescriptions 
include oxycodone 30 for 168 du dispensed to J.D. of Middleburg for 
$1260 and 150 du dispensed to D.E. of Jacksonville for $1125. Id. at 
39-40, 43-44. Other prescriptions include Dilaudid 8 for 180 du to D.J. 
of Holt for $540 and 168 du to T.W. of Interlachen for $504, both of 
which provided for a dosing approximately double the normal daily dose 
of 24 mg. Id. at 45-46, 49-50.
    Other prescriptions in GE 14 include those issued on December 10, 
2012 by Dr. Selvaraj to C.R. of Citrus Springs for 112 Dilaudid 8 and 
168 oxycodone 30, which Respondent filled the same day. GE 14, at 1-4. 
C.R. paid $1260 for the oxycodone and $336 for the Dilaudid in cash or 
cash equivalents. Id. at 2, 4. Also on December 10, 2012, Dr. Selvaraj 
issued to M.E. of Cantonment (474 miles) a prescription for 150 du of 
oxycodone 30, which Respondent filled the same day. Id. at 9-10. M.E. 
paid $1125 in cash or cash equivalent for the oxycodone. Id. at 10.
    On December 6, 2012, Dr. Selvaraj issued a prescription to C.C. of 
Cocoa (96 miles) for 140 oxycodone 30, which Respondent filled the same 
day. Id. at 25-26. C.C. paid $1050 in cash or cash equivalents for the 
drugs. Id. at 26.
    Also on December 6, 2012, Respondent filled prescriptions issued 
the same day by Dr. Selvaraj to M.K. of Jacksonville for 112 Dilaudid 
4, 168 oxycodone 30, and 56 MS Contin 60. Id. at 27-32. M.K. paid $1260 
for the oxycodone, $168 for the Dilaudid, and $70 for the MS Contin, in 
cash or cash equivalents. Id. at 28, 30, 32.
    On December 6, Respondent filled a prescription issued the same day 
by Dr. Selvaraj for 168 oxycodone 30 to L.B., who also provided a 
Jacksonville address. Id. at 33-34. L.B. paid $1260 in cash or cash 
equivalents for the drugs. Id. at 34. Of further noted, Respondent's 
dispensing software assigned the prescription number 2010572 to L.B.'s 
prescription and the numbers 2010573 through 2010575 to M.K.'s 
prescriptions, which suggests that the prescriptions were presented in 
close temporal proximity. Id. at 28, 30, 32.
    On December 4, 2012, Respondent filled prescriptions issued the 
same day by Dr. Selvaraj for 112 oxycodone 30 and 84 Dilaudid 8 to 
J.M., of Satsuma. GE 14, at 55-58. J.M. paid $840 for the oxycodone and 
$252 for the Dilaudid in cash or cash equivalents.\37\ Id. at 56, 58.
---------------------------------------------------------------------------

    \37\ GE 14 contains a total of 31 prescriptions which were 
written by Dr. Selvaraj for schedule II drugs and were filled by 
Respondent during the month of December 2012. The closest any of the 
patients lived from the MD Plus Clinic and Respondent was 69 miles. 
See GE 14, at 51-52 (S.C., who provided a Bradenton address).
---------------------------------------------------------------------------

    Regarding the prescriptions in this Exhibit, Mr. Parrado testified 
that they presented the red flags of ``the distances travelled by [the] 
customers,'' ``the types and quantities of the controlled substances''; 
``that the prescriptions were all issued by the same physician,'' and 
``the high prices paid for [the] oxycodone.'' GA 1, at 8. While Parrado 
explained that these ``must be resolved prior to dispensing,'' thus 
suggesting that the red flags were resolvable, he concluded otherwise 
with respect to the eight prescriptions Respondent dispensed on 
December 5, 2012. GA 1, at 8-9. Specifically, he testified that:

the eight prescriptions dispensed by Respondent[] on December 5, 
2012 create a situation that is too suspicious and indicates the 
prescriptions were not issued for a legitimate medical purpose. In 
my experience, no pharmacy would be confronted with eight legitimate 
prescriptions issued to seven different customers, all of whom 
resided at least 93 miles away from the pharmacy and acquired their 
prescriptions on the same day from the same physician. Also, after 
reviewing the RX numbers printed on the labels, I can also conclude 
that, out of ten consecutive schedule II prescriptions filled by 
Respondent on the same day . . . at least eight were issued to out 
of town customers. This combination of events creates an 
unresolvable red flag which, applying the standard of practice of 
pharmacy in Florida, precludes a reasonably prudent pharmacist from 
dispensing the prescriptions.

Id. at 8-9 (citing GE 14, at 35-50).

    Mr. Parrado offered similar testimony with respect to the 
prescriptions dispensed by Respondent on November 26 and 29, 2012, 
which are found in GE 15. Each of the eleven prescriptions dispensed by 
Respondent on November 26 was issued by Dr. Selvaraj on the same day, 
with the patients travelling from Gibsonton (38 miles), Hawthorne (2 
patients; 127 miles), St. Augustine (161 miles), New Smyrna (113 
miles), Yulee (222 miles), Lake City (172 miles), Davenport (28 miles) 
and Micanopy (120 miles).\38\ GE 15, at 35-56. Here again, Mr. Parrado 
explained that:
---------------------------------------------------------------------------

    \38\ The prescriptions included 180 oxycodone 30 and 120 
Dilaudid 8 issued to K.P. of Yulee, who paid $1350 for the oxycodone 
and $360 for the Dilaudid, GE 15, at 43-46; as well 168 oxycodone 30 
and 112 Dilaudid 4 issued to L.G. of Micanopy, who paid $1266 for 
the oxycodone and $168 for the Dilaudid; both patients paid with 
cash or cash equivalents. Id. at 44, 46; 53-56. The prescriptions 
also included 168 oxycodone 30 issued to A.B. of Lake City, who paid 
$1260 in cash or cash equivalents. Id. at 47-48.

[t]hese prescriptions contained red flags that are too suspicious 
and indicate the prescriptions were not issued for a legitimate

[[Page 72107]]

medical purpose. In my experience, no pharmacy would be confronted 
with eleven legitimate prescriptions issued to nine different 
customers, seven of whom resided at least 113 miles away from the 
pharmacy and acquired their prescriptions on the same day from the 
same physician. In reviewing the RX numbers printed on the labels, I 
can conclude that, out of fifteen consecutive schedule II 
prescriptions filled by the pharmacy at that time, eleven were for 
customers who resided at least 28 miles away from the Respondent's 
pharmacy. Therefore, the combination of events surrounding the 
prescriptions dispensed on November 26, 2012 . . . creates an 
unresolvable red flag which, applying the standard of practice of 
pharmacy in Florida, precludes a reasonably prudent pharmacist from 
---------------------------------------------------------------------------
dispensing the prescriptions.

GA 1, at 9-10. See also id. at 9 (discussing prescriptions dispensed by 
Respondent on Nov. 29, 2012 to: S.M. of Lake City (172 miles) for 
methadone and MS Contin; B.J. of Navarre (463 miles) for MS Contin; 
S.D. of Valrico (28 miles) for Dilaudid; W.B. of Interlachen for 
Dilaudid (139 miles); and T.A. of Ocala (98 miles) for Dilaudid) (``The 
combination of events surrounded [sic] these prescriptions creates an 
unresolvable red flag which, applying the standard of practice of 
pharmacy in Florida, precludes a reasonably prudent pharmacists [sic] 
from dispensing the prescriptions.'').

    As noted above, Mr. Parrado also reviewed the medical records of 
several patients (whose prescriptions are discussed above) that 
Respondent provided to the Government as proposed exhibits prior to 
deciding to waive its right to a hearing.\39\ These included those of 
A.B., who travelled from Lake City (172 miles) and filled a 
prescription for 168 oxycodone 30 on January 21, 2013. According to 
A.B.'s record, she first saw Dr. Selvaraj on September 20, 2011; 
according to the progress note, at this visit he prescribed 168 
oxycodone 30, 56 Xanax 1 mg (a benzodiazepine) and 56 Soma 
(carisoprodol) 350 mg to her. RE 9, at 344-46.\40\
---------------------------------------------------------------------------

    \39\ According Mr. Parrado's declaration, Respondent's owner had 
stated in a sworn affidavit that it ``obtain[s] copies of certain 
medical records from the prescribing physician for [Respondent's] 
files.'' GA 1, at 11.
    \40\ While labeled at RE 9, the patient files were actually 
submitted by the Government as attachments to Mr. Parrado's 
declaration. However, the files were not assigned a GE number.
---------------------------------------------------------------------------

    As Mr. Parrado noted, on the day of her initial visit to the MD 
Plus Clinic and Dr. V.S., A.B. was subjected to a drug screen and 
tested negative for opiates/morphine and benzodiazepines. Id. at 314. 
As Mr. Parrado then explained, her negative test was:

an indication she may have been opiate na[iuml]ve at the time she 
obtained her prescriptions. However, the medical records indicate 
[that] she was prescribed a large dose of oxycodone (168-thirty 
milligram tablets) and a large dose of alprazolam, a benzodiazepine 
(Xanax, 56-one milligram tablets). These are also red flags for 
diversion.

GA 1, at 12.

    Mr. Parrado further noted that at A.B.'s first visit, she was also 
prescribed carisoprodol, a drug that was placed in schedule IV of the 
CSA effective on January 12, 2012.\41\ Id.; see also DEA, Schedules of 
Controlled Substances: Placement of Carisoprodol Into Schedule IV, 76 
FR 77330 (2011). As Mr. Parrado testified, ``[t]he combination of these 
three drugs (oxycodone, alprazolam, and carisoprodol) constitutes one 
of the most commonly abused drug cocktails in the State of Florida and 
is an additional red flag for diversion.'' GA 1, at 12.
---------------------------------------------------------------------------

    \41\ However, at the time of A.B.'s first visit on September 20, 
2011, carisoprodol was controlled under Florida law. See Fla. Sta. 
Ann. Sec.  893.03(4)(jjj) (2011).
---------------------------------------------------------------------------

    Mr. Parrado further noted that the visit notes contained ``various 
diagnoses [which] appear inconsistent and suspicious.'' Id. 
Specifically, the note for A.B.'s Dec. 13, 2011 visit lists a diagnosis 
of DDD or Degenerative Disc Disease yet the note for her next visit on 
January 10, 2012 contains no such notation and instead suggests she had 
a rotator cuff/shoulder issue. Compare RE 9, at 339 with id. at 336. 
Yet the former diagnosis then reappears in the notes for a February 
2012 visit ``without explanation.'' GA 1, at 12 (citing RE 9, at 334).
    Also, the notes for A.B.'s October and November 2011 visits 
indicate that the diagnosis was spondylosis, as that is the 
justification provided by the physician for prescribing more than a 
``72 hour dose of [a] controlled substance . . . for chronic non/
malignant pain.'' RE 9, at 341 (Nov. 15, 2011 visit) and id. at 343 
(Oct. 18, 2011 visit). Yet this diagnosis does not appear in the note 
for her December 2011 or any subsequent visit. See id. at 308 (3/19/
13), 310 (2/18/13), 311 (1/21/13), 317 (12/21/12), 319 (11/26/12), 321 
(9/21/12), 323 (8/7/12), 325 (7/9/12), 327 (6/8/12), 329 (5/11/12), 332 
(3/6/12), 334 (2/7/12), 336 (1/10/12), 339 (12/13/11).
    Mr. Parrado also found that some visit notes intermittently listed 
a diagnosis of a disc bulge. Specifically, he noted that this diagnosis 
was listed in the December 13, 2011 note, but not in the January 10 and 
February 7, 2012 visit notes, only to re-appear in the March and May 
2012, before disappearing until the December 21, 2012 note. GA 1, at 
12; see also RE 9, at 339, 336, 334, 332, 329, 327, 325, 323, 321, 319, 
317.
    Mr. Parrado also reviewed the medical files provided by Respondent 
for J.T., one of the three patients from Jacksonville who, on January 
7, 2011, obtained a prescription for a large dose of oxycodone 30 (224 
du) from Dr. Selvaraj and filled it at Respondent. Included as an 
attachment to Mr. Parrado's declaration were two more oxycodone 
prescriptions that J.T. obtained from Dr. Selvaraj and filled at 
Respondent. GA 1, at Attachment A, at 3-6. These prescriptions, which 
were issued and filled on July 15, 2011, provided J.T. with 224 
oxycodone 30 and 84 Percocet 10/325 (oxycodone/acetaminophen). Id.
    As Mr. Parrado explained, J.T.'s medical record for his July 15, 
2011 visit states: ``Looks like he has taken too much of medication 
[S]oma or Xanax.'' RE 9, at 1646; see also GA 1, at 12. The visit note 
further states ``Slurred Speech'' and that ``Pt is reluctant to go to 
ER'' but that he ``went to [the] ER eventually.'' RE9, at 1646; see 
also GA 1, at 12. Yet the visit note also has check marks indicating 
that J.T. was ``alert'' and ``oriented.'' RE9, at 1646; see also GA 1, 
at 12. Dr. Selvaraj nonetheless noted that he was keeping J.T. on the 
``[s]ame meds as before.'' RE 9, at 1647.\42\
---------------------------------------------------------------------------

    \42\ Mr. Parrado further noted that J.T.'s chart ``never 
explained why [he] would travel from Jacksonville to Edge[] in order 
to obtain narcotics, a trip of approximately 197 miles.'' GA 1, at 
12-13.
---------------------------------------------------------------------------

Respondent's Challenges to the Government's Evidence on the Dispensing 
Allegations

    Respondent raises a variety of challenges to the Government's 
evidence on the dispensing allegations. Foremost are its challenges to 
Mr. Parrado's testimony and his credibility. These include: (1) That he 
has provided testimony that is inconsistent with testimony he gave in 
another proceeding; (2) that his opinions are invalid because they were 
based on incomplete information in that he was not provided with the 
pharmacy's due diligence records on the patients, and (3) that he 
expressed opinions outside of his expertise when he commented on the 
medical records. Respondent's Reply to Govt. Request for Final Agency 
Action, at 2-13. Respondent also argues that the Government has not met 
its burden of proof because it has not shown: (1) That the 
prescriptions were invalid, and (2) that its pharmacists did not 
resolve the red flags prior to

[[Page 72108]]

dispensing the controlled substances.\43\ Id. at 13-21.
---------------------------------------------------------------------------

    \43\ Respondent also argues that I should reject the 
Government's request that I draw the adverse inference that 
Respondent's pharmacists did not resolve the red flags because 
Respondent did not produce any documentary evidence to support the 
assertions in the affidavits of its pharmacists that they resolved 
red flags. Respondent's Reply, at 21-24. I discuss my resolution of 
this issue later in this decision.
---------------------------------------------------------------------------

The Challenges to Mr. Parrado's Credibility

    Respondent challenges Mr. Parrado's credibility arguing that the 
opinions in his declaration ``are in critical respects a direct 
contradiction to the sworn testimony that [he] gave in the Hills 
Pharmacy matter on March 10, 2015.'' Resp.'s Reply, at 4. Of greatest 
potential consequence here \44\ is Respondent's contention that Mr. 
``Parrado's previous testimony directly contradicts his offered opinion 
that the prescriptions submitted by the Government in [this matter] 
contain red flags that are unresolvable.'' Id. at 6.
---------------------------------------------------------------------------

    \44\ Respondent also takes issue with Mr. Parrado's testimony 
that if a pharmacist does not document the resolution of red flags 
on the prescription itself, ```you can assume that the red flag was 
not resolved,''' arguing that there is no authority for this 
assertion and that ``pharmacists are also permitted to and commonly 
do maintain documentation in a separate file or in a computer 
system.'' Resp. Reply, at 4-5 (GA 1, at ] 13). Respondent further 
notes Mr. Parrado's testimony in Hills Pharmacy acknowledging that 
under Florida law governing a pharmacist's obligation to verify a 
patient's identity, a pharmacist can make a Xerox copy of the 
patient's identity and need not also document his resolution of this 
issue on the prescription. Id.
     The Hills Pharmacy transcript is not part of the record of this 
proceeding, and in any event, because I find credible Mr. Parrado's 
testimony to the effect that the combination of red flags attendant 
with many of the prescriptions which were presented to the pharmacy 
on the same day or days rendered the red flags unresolvable, the 
issue of whether the pharmacists documented their attempted 
resolution of red flags is irrelevant.
---------------------------------------------------------------------------

    According to Respondent, in the Hills Pharmacy matter (see 81 FR 
49816 (2016)), Mr. Parrado ``testified that all of the red flags, even 
in combination, are resolvable.'' Resp.'s Reply, 6. As support for this 
contention, Respondent cites to three excerpts from Mr. Parrado's 
testimony in that matter.
    Contrary to Respondent's understanding, Mr. Parrado's testimony in 
the Hills Pharmacy matter is not part of the record in this proceeding. 
Rather, as 5 U.S.C. 556(e) makes clear, ``[t]he transcript of testimony 
and exhibits, together with all papers and requests filed in the 
proceeding, constitutes the exclusive record for decision in accordance 
with section 557 of this title'' (emphasis added).
    While Respondent attached various snippets of Mr. Parrado's 
testimony to its Reply to the Government's Request for Final Agency 
Action, I previously made clear that because Respondent waived its 
right to a hearing, it is barred from submitting any evidence in 
refutation of the Government's case. Order at 5 (July 29, 2016). This 
includes evidence of prior and purportedly inconsistent statements. 
Notably, Respondent's counsel also represented the respondent in Hills 
Pharmacy, whose hearing was held on March 10-11, 2015 and prior to 
Respondent's decision to waive its right to a hearing in this matter, 
and the Government's prehearing statements informed Respondent that Mr. 
Parrado would also testify that numerous prescriptions presented 
unresolvable red flags (Gov. Supplemental Prehearing Statement, at 3). 
Thus, if Respondent's counsel believed that Mr. Parrado would then give 
materially inconsistent testimony in this proceeding, he should have 
pursued impeachment of the testimony through the hearing process.
    However, lest there be any concern on the part of the Court of 
Appeals that I have credited testimony which is inconsistent with his 
prior testimony, I have reviewed Mr. Parrado's testimony in the Hills 
matter and find that Respondent both ignores relevant portions of his 
testimony and otherwise mischaracterizes those portions cited in its 
Reply. For example, in its direct examination, the Government asked Mr. 
Parrado: ``are some red flags unresolvable?'' Tr. 60, Hill Pharmacy, 
L.L.C., 81 FR 49815 (2016). After answering ``yes,'' Mr. Parrado was 
asked: ``[c]an you cite any examples?'' Id. Mr. Parrado answered: 
``[r]ight off the top of my head, a group of multiple people traveling 
a long distance, all getting the exact same or very similar 
prescriptions from one physician and all coming in with very, very 
large quantities of cash, that would be unresolvable to me.'' Id. at 
60-61. Then asked by the Government: ``And those would be prescriptions 
that you as a pharmacist would refuse to fill?'' Mr. Parrado answered: 
``[a]bsolutely.'' Id. at 61. Mr. Parrado offered similar testimony that 
a prescription for oxycodone 30 which was presented by a patient who 
had travelled from St. Augustine and paid $784 in cash raised an 
unresolvable red flag when these red flags were occurring ``over and 
over every day.'' Id. at 70-71. See also id. at 84 (``[C]ould something 
like this happen once occasionally a person travels a long way and pays 
cash? Of course. Does it happen consistently day after day after day? 
No. That's what would be a nonresolvable red flag.'').
    It is true that when asked on cross-examination if ``every red flag 
you've talked about today could potentially be resolved?'' Mr. 
Parrado's answered ``[t]hat's correct.'' Tr. 127. However, the question 
did not ask if the combination of the red flags (i.e., that multiple 
patients, who travelled long distances and obtained prescriptions for 
large doses of oxycodone 30, a known drug of abuse, from the same 
doctor, presented those prescriptions to Respondent on the same day and 
at times in sequence, and were willing pay large sums of cash for the 
drugs) was resolvable.\45\ Accordingly, I reject Respondent's 
contention that Mr. Parrado has given prior inconsistent testimony on 
the issue of whether certain prescriptions presented unresolvable red 
flags.
---------------------------------------------------------------------------

    \45\ Respondent's counsel points to a further colloquy in the 
Hills matter, in which on cross-examination, he asked: ``Well, in 
fact . . . you said everything could be a red flag, right?'' and Mr. 
Parrado answered: ``And everything could be resolvable.'' Tr. 145 
(quoted in Resp. Reply, at 6). However, Respondent's counsel then 
stated: ``No. Am I not asking'' to which Mr. Parrado replied: ``I'm 
sorry if I misunderstood your question.'' Tr. 145. In response, 
Respondent's counsel again asked: ``You have said everything could 
be a red flag, right?'' prompting the Government to object that Mr. 
Parrado ``did not say that'' and the ALJ sustained the objection. 
Id. The colloquy thus does not support Respondent's assertion that 
Mr. Parrado ``testified that all of the red flags, even in 
combination, are resolvable.'' Resp. Reply., at 6.
---------------------------------------------------------------------------

    Respondent also argues that Mr. Parrado's opinions were based on 
inadequate information because he ``did not review any of Respondent's 
Due Diligence Checklists . . . when formulating his opinion'' and 
relied solely on the prescriptions and the printouts showing the 
distances between where the patients resided and Respondent. Resp. 
Reply, at 7. Once again, Respondent relies on Mr. Parrado's testimony 
from the Hills matter \46\ notwithstanding that it is not evidence in 
the proceeding.
---------------------------------------------------------------------------

    \46\ That testimony involved a series of questions in which Mr. 
Parrado acknowledged that in determining ``whether a pharmacist 
followed the standard practice of pharmacy in filling a 
prescription, it would be helpful . . . to know what the pharmacist 
knew about the patient,'' the patient's condition, ``the patient's 
history with opioids'' and what the pharmacist knew about the 
prescriber. Tr. 177-78, Hills Pharmacy, 81 FR 49816. Even 
considering Mr. Parrado's testimony in Hills, as Mr. Parrado 
explained in this proceeding, ``given the nature and pattern of the 
red flags associated with these prescriptions, it appears the clinic 
and/or physicians may be complicit in the diversion of controlled 
substances. Thus, even if the pharmacist contacted the physicians to 
verify the prescriptions, that act would not resolve all the red 
flags presented by the prescriptions.'' GA 1, at 10.
---------------------------------------------------------------------------

    However, here too, the Government had disclosed to Respondent the 
substance of Mr. Parrado's testimony in this proceeding prior to 
Respondent's decision to waive the hearing and Respondent's counsel was 
familiar with Parrado's testimony in the Hills matter.

[[Page 72109]]

Thus, if Respondent believed that Mr. Parrado's testimony in Hills was 
inconsistent with his testimony in this proceeding that numerous 
prescriptions presented unresolvable red flags, he should have pursued 
this by going to hearing where he could have cross-examined Mr. 
Parrado.
    Moreover, as Mr. Parrado explained:

    While some red flags can be resolved, there are other red flags 
(or combination and patterns of red flags) that a pharmacist cannot 
resolve by contacting the physician, running a State prescription 
monitoring search, or obtaining more information from the patient. . 
. . For example, if you are presented with (1) a group of patients 
who all travelled a significant distance to the pharmacy and/or to 
the physician to obtain controlled substance prescriptions; (2) 
patients arriving at the pharmacy on the same day with prescriptions 
from the same doctor for the same controlled substances; (3) and the 
controlled substance is a highly addictive and highly diverted drug, 
such a combination of facts indicated that the physician may be 
complicit in the diversion. As a result, a call to the physician to 
verify the prescription would not resolve the red flag. The phone 
call may establish that there is a relationship between the patient 
and the practitioner, but there still may not be a legitimate 
patient-physician relationship, and the prescription may not be for 
a legitimate medical purpose.

GA 1, at 4-5. Indeed, as found above, Mr. Parrado identified multiple 
instances in which prescriptions were filled by Respondent, 
notwithstanding that the combination of red flags rendered the red 
flags unresolvable. Unexplained by Respondent is why, given the 
compelling level of suspicion created by the combinations of red flags, 
knowing the patient's history with opioids or purported condition would 
alter the conclusion that Dr. Selvaraj issued the prescriptions without 
a legitimate medical purpose.

    Finally, Respondent argues that Mr. Parrado provided opinions 
outside of the scope of his expertise as a pharmacist when he offered 
various opinions on the contents of the medical records. Resp. Reply, 
at 11-13. However, with respect to Pt. A.B., it was entirely within Mr. 
Parrado's expertise as a pharmacist to note that she was prescribed a 
large dose of oxycodone, notwithstanding that on the day of her initial 
visit to Dr. Selvaraj she was subjected to a drug test and tested 
negative for opiates thus suggesting that she was opiate na[iuml]ve, as 
well as that she was prescribed a large dose of alprazolam, while also 
testing negative for benzodiazepines. It was also clearly within Mr. 
Parrado's expertise as a pharmacist to note that the medical records 
show she was prescribed oxycodone, alprazolam and carisoprodol, and 
this combination of drugs ``constitutes one of the most commonly abused 
drug cocktails in the State of Florida and is an additional red flag 
for diversion.'' GA 1, at 12. Indeed, under the rules of the Florida 
Board of Pharmacy, a pharmacist is required to conduct prospective drug 
use review on each prescription and identify such issues as ``[o]ver-
utilization,'' ``[d]rug-drug interactions,'' ``[i]ncorrect drug 
dosage,'' and ``[c]linical abuse/misuse.'' Fla. Admin. Code R.64B16-
27.810 (1).
    As for Mr. Parrado's discussion of Dr. V.S's frequently changing 
diagnoses of A.B., with the diagnoses disappearing only to reappear 
months later, even a lay person can recognize the inherently suspicious 
nature of this. While Respondent now argues that it did not obtain the 
records ``so that [its] pharmacists could review them and evaluate the 
physician's medical judgment, but . . . to ensure that a valid patient-
prescriber relationship exist,'' Resp. Reply, at 12; Respondent fails 
to address why any pharmacist who reviewed these records \47\ would 
believe that a valid patient-prescriber relationship existed given: (1) 
That A.B. tested negative for opiates at the first visit and yet Dr. 
Selvaraj prescribed a large dose of oxycodone to her, (2) that Dr. 
Selvaraj also prescribed other controlled substances to A.B., including 
alprazolam and carisoprodol which were known to be highly abused as a 
drug cocktail and did so at her first visit, and (3) the changing 
nature of the diagnoses.
---------------------------------------------------------------------------

    \47\ Mr. Parrado acknowledged that ``it is not within the 
standard of practice of pharmacy to regularly review medical 
records.'' GA 1, at 14. However, as he also explained, ``if 
Respondent's pharmacist had reviewed these records, they would have 
had additional reasons not to fill the prescriptions for controlled 
substances issued to A.B. [and] J.T.'' Id. Of further note, I adopt 
Mr. Parrado's discussion of the medical records only with respect to 
A.B. and J.T.
---------------------------------------------------------------------------

    Likewise, with respect to J.T., given that a pharmacist is required 
under the Board's rule to conduct prospective drug utilization review 
on every prescription and identify such issues as ``[c]linical misuse 
and abuse,'' Fla. Admin. Code R. 64B16-27.810, it is clearly within Mr. 
Parrado's expertise to opine on the appropriateness of dispensing the 
prescriptions (for 224 oxycodone 30 and 84 Percocet 10) given that 
J.T.'s medical record documents that his speech was slurred and that it 
``looks like he has taken too much medication [S]oma or Xanax.'' 
Accordingly, I reject Respondent's contention with respect to Mr. 
Parrado's discussion of the medical records of these two patients.

The Recordkeeping Allegations

    In support of its recordkeeping allegations, the Government 
submitted the declaration of a Diversion Investigator (DI) who 
participated in the execution of the AIW at Respondent. GA 2, at 2. 
According to the DI:

    During the execution of the AIW, DEA personnel conducted various 
activities on the premises, including copying/seizing pharmacy 
records, receipts, and prescriptions. . . . Also seized was a copy 
of Respondent's controlled substance inventory. See GE 6. Based on 
this inventory, prescriptions, and the records of receipt which were 
provided by the pharmacy, DEA conducted an audit of Respondent's 
controlled substances. The results of the audit showed significant 
overages of seven different controlled substances[:] oxycodone 30 
mg; methadone 10 mg; hydromorphone 4 mg and 8 mg; and morphine 30 
mg, 60 mg, and 100 mg. See GE 4. For instance, the audit showed that 
Respondent had dispensed and/or disposed of twice as many 30-
milligram oxycodone tablets as it had acquired.

Id.

    The Government's other evidence regarding the audit includes a 
computation chart created by the DI showing the audit results for these 
drugs and dosage forms for the period of June 10, 2011 through February 
4, 2013 which purports to show various overages. GE 4. Also submitted 
for the record is a drug inventory taken on June 10, 2011 which is 
signed by Respondent's pharmacy manager, GE 5, and a document which 
appears to be a spreadsheet of the schedule II orders placed by 
Respondent during 2011 (which includes the name of the distributor, the 
transaction date, order form number, quantity and package size, and the 
drug and its dosage). GE 6, at 1-5. While this Exhibit also includes 
the supplier's copy of several schedule II order forms \48\ (as well as 
an invoice and a notice from an unidentified distributor stating that 
it was not filling the entire order), the Exhibit does not include a 
closing inventory. Moreover, at no point in her declaration did the DI 
state that a closing inventory was done on February 4, 2013 as listed 
on the computation chart. See GA 2, at 2. Nor did she otherwise explain 
how she performed the audit. See id. Accordingly, the Government has 
not

[[Page 72110]]

established a sufficient foundation for giving weight to the audit 
results.
---------------------------------------------------------------------------

    \48\ DEA Schedule II order forms have three copies: A purchaser 
is required to submit the first two copies to the supplier and 
retain the third copy for its records. 21 CFR 1305.13)(a); see also 
id. at 1305.17(a). The supplier retains copy one and submits copy 
two to the Special Agent in Charge ``in the area in which the 
supplier is located.'' Id. Sec.  1305.13(d). If, however, the 
supplier does not accept the order, ``the supplier must return'' 
copies one and two ``to the purchaser with a statement as to the 
reason.'' Id. Sec.  1305.15(b).
---------------------------------------------------------------------------

    The DI, however, provided credible testimony that Respondent was 
missing various schedule II records. According to the DI, ``during the 
execution of the AIW, Respondent was unable to locate any records of 
receipt for 2011,'' and when Respondent's attorney was asked if the 
records ``could be located, [he] replied that he `could not make 
records appear if they weren't here.' '' Id. The DI further testified 
that the attorney ``then called Respondent's [PIC] who confirmed that 
the receipt records for 2011 could not be located.'' Id.
    According to the DI, she subsequently obtained information from the 
Agency Automation of Reports and Consolidated Orders System (ARCOS). 
Id. (discussing GE 3, at 1-5). Under DEA regulations, registered 
manufacturers and distributors are required to report to the Agency 
both acquisition and distribution transactions for various controlled 
substances included all schedule II drugs. 21 CFR 1304.33(c). The 
information was compiled in the document found at GE 6, at 1-5, which 
lists each filled schedule II order by distributor, transaction date, 
order form number, drug name, package size and quantity for the year 
2011. Reviewing the list, the DI determined that Respondent was missing 
its Copy 3 for 103 different orders, these being the orders placed on 
or after February 4, 2011.\49\ GA 2, at 3.
---------------------------------------------------------------------------

    \49\ While the ARCOS data includes orders placed in January 2011 
and on February 1, 2011, see generally GE 6, at 1; the DI did not 
include any orders before February 4, 2011, GA 2, at 3; as federal 
law only requires that an order form be ``preserve[d] . . . for a 
period of two years.'' 21 U.S.C. 828(c)(2).
---------------------------------------------------------------------------

    The DI also testified ``that Respondent failed to properly complete 
various'' Schedule II order forms ``by failing to state the number of 
packages shipped and/or the date shipped.'' Id. As an example, the DI 
cited an order form (GE 6, at 6) Respondent submitted on February 8, 
2011 to Lifeline Pharmaceutical on which it listed two separate orders 
for 24 packages of 100 dosage units of oxycodone 30 mg tablets. GA 2, 
at 3. Apparently referring to the second line item which contains no 
entries for the national drug code, packages shipped, and date shipped, 
the DI testified that the order form ``shows an order for 24 packages 
of oxycodone 30 mg tablets but fails to show . . . how many, if any, of 
those packages were shipped.'' Id. The DI made the same assertion with 
respect to line items on several other order forms, noting that the 
order forms did not show the ``quantity received or dates received.'' 
Id.
    According to the DI, these were violations of 21 CFR 1305.13(e). 
Id. The Government did not, however, produce any evidence showing that 
any portion of these particular line items was actually shipped.
    The DI also testified that she found an order form which listed 
Respondent as the supplier of 6 packages of 100 du of Dilaudid 8 to 
Bellco Drug Corp. of North Amityville, New York, but that Respondent 
did not list the number of packages shipped and the date shipped. GA 2, 
at 3 (citing GE 9). The DI alleged that this was a violation of 21 CFR 
1305.15(b). Id. at 4. The DI also testified that she found that 
Respondent ``failed to forward Copy 2 of the form to the Special Agent 
in Charge . . . of the DEA in the area where Respondent is located,'' 
which she alleged was a violation of 21 CFR 1305.13(d). Id. However, 
while the Government submitted a copy of a Return Authorization Form 
issued by Bellco which authorized Respondent to return the drugs to it, 
GE 8, at 2; it provided no further evidence that Respondent actually 
returned the drugs.
    Finally, the DI testified that she examined records of Respondent's 
orders that were placed using the Controlled Substances Ordering 
System, which is an electronic system for ordering controlled 
substances. GA 2, at 4. According to the DI, ``Respondent presented 
only paper printouts and did not have any complying electronic data'' 
for 42 orders that it placed using the system. Id. at 4-5. The DI 
alleged that this was a violation of 21 CFR 1305.27(a).

Discussion

    Under the CSA, ``[t]he Attorney General may deny an application for 
[a practitioner's] registration . . . if the Attorney General 
determines that the issuance of such registration . . . would be 
inconsistent with the public interest.'' 21 U.S.C. 823(f). In the case 
of a retail 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 
deny an application. 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.\50\
---------------------------------------------------------------------------

    \50\ 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. Likewise, findings under a single factor 
can support the denial of an application.
---------------------------------------------------------------------------

    Under the Agency's regulation, ``[a]t any hearing for the denial of 
a registration, the Administration shall have the burden of proving 
that the requirements for such registration pursuant to . . . 21 U.S.C. 
[Sec.  ]823 . . . are not satisfied.'' 21 CFR 1301.44(d). In this 
matter, while I have considered all of the factors, the Government's 
evidence in support of its prima facie case is confined to factors two 
and four.\51\ I find that the record provides

[[Page 72111]]

substantial evidence that Respondent's pharmacists violated their 
corresponding responsibility when they dispensed many of the 
prescriptions at issue. I also find that the Government has established 
by substantial evidence that Respondent has failed to maintain accurate 
records, as well as other violations. Accordingly, I conclude that the 
Government has made a prima facie showing that granting Respondent's 
pending application ``would be inconsistent with the public interest.'' 
21 U.S.C. 823(f). Because Respondent's written statement of position 
and its accompanying affidavits were not timely submitted and 
Respondent has not otherwise shown good cause for its untimely 
submission, I hold that Respondent has not rebutted the Government's 
prima facie showing. Because I find that Respondent's misconduct is 
egregious, I will order that Respondent's pending application be 
denied.
---------------------------------------------------------------------------

    \51\ As to factor one, there is no evidence that the Florida 
Department of Health has either made a recommendation to the Agency 
with respect to Respondent, or taken any disciplinary action against 
Respondent. See 21 U.S.C. 823(f)(1). However, even assuming that 
Respondent currently possesses authority to dispense controlled 
substances under Florida law and thus meets a prerequisite for 
obtaining a new registration, this finding is not dispositive of the 
public interest inquiry. See Mortimer Levin, 57 FR 8680, 8681 (1992) 
(``[T]he Controlled Substances Act requires that the Administrator . 
. . make an independent determination [from that made by state 
officials] as to whether the granting of controlled substance 
privileges would be in the public interest.''). Accordingly, this 
factor is not dispositive either for, or against, the granting of 
Respondent's application. Paul Weir Battershell, 76 FR 44359, 44366 
(2011) (citing Edmund Chein, 72 FR 6580, 6590 (2007), pet. for rev. 
denied, Chein v. DEA, 533 F.3d 828 (D.C. Cir. 2008)).
    As to factor three, I acknowledge that there is no evidence that 
Respondent, its owner, its manager, or any of its pharmacists, has 
been convicted of an offense under either federal or Florida law 
``relating to the manufacture, distribution or dispensing of 
controlled substances.'' 21 U.S.C. 823(f)(3). However, there are a 
number of reasons why even a person who has engaged in criminal 
misconduct may never have been convicted of an offense under this 
factor, let alone prosecuted for one. Dewey C. MacKay, 75 FR 49956, 
49973 (2010), pet. for rev. denied, MacKay v. DEA, 664 F.3d 808 
(10th Cir. 2011). The Agency has therefore held that ``the absence 
of such a conviction is of considerably less consequence in the 
public interest inquiry'' and is therefore not dispositive. Id.
---------------------------------------------------------------------------

Factors Two and Four--The Respondent's Experience in Dispensing 
Controlled Substances and Compliance With Applicable Laws Related to 
Controlled Substances

The Dispensing Allegations

    ``Except as authorized by'' the CSA, it is ``unlawful for any 
person [to] knowingly or intentionally . . . manufacture, distribute, 
or dispense, or possess with intent to manufacture, distribute, or 
dispense, a controlled substance.'' 21 U.S.C. 841(a)(1). Under the Act, 
a pharmacy's registration authorizes it ``to dispense,'' id. Sec.  
823(f), which ``means to deliver a controlled substance to an ultimate 
user . . . by, or pursuant to the lawful order of, a practitioner.'' 
Id. Sec.  802(10).
    The CSA's implementing regulations set forth the standard for a 
lawful controlled substance prescription. 21 CFR 1306.04(a). Under the 
regulation, ``[a] prescription for a controlled substance to be 
effective must be issued for a legitimate medical purpose by an 
individual practitioner acting in the usual course of his professional 
practice.'' Id. Continuing, the regulation provides that:

[t]he responsibility for the proper prescribing and dispensing of 
controlled substances is upon the prescribing practitioner, but a 
corresponding responsibility rests with the pharmacist who fills the 
prescription. An order purporting to be a prescription issued not in 
the usual course of professional treatment . . . is not a 
prescription within the meaning and intent of section 309 of the Act 
(21 U.S.C. 829) and the person knowingly filling such a purported 
prescription . . . shall be subject to the penalties provided for 
violations of the provisions of law relating to controlled 
substances.\52\
---------------------------------------------------------------------------

    \52\ As the Supreme Court has explained, ``the prescription 
requirement . . . ensures patients use controlled substances under 
the supervision of a doctor so as to prevent addiction and 
recreational abuse. As a corollary, the provision also bars doctors 
from peddling to patients who crave the drugs for those prohibited 
uses.'' Gonzales v. Oregon, 546 U.S. 243, 274 (2006) (citing United 
States v. Moore, 423 U.S. 122, 135, 143 (1975)).

---------------------------------------------------------------------------
Id. (emphasis added).

    As the Agency has made clear, to prove a violation of the 
corresponding responsibility, the Government must show that the 
pharmacist acted with the requisite degree of scienter. See JM Pharmacy 
Group, Inc., d/b/a Farmacia Nueva and Best Pharma Corp., 80 FR 28667, 
28669 (2015). Thus, the Government can prove a violation by showing 
either that: (1) The pharmacist filled a prescription notwithstanding 
his/her actual knowledge that the prescription lacked a legitimate 
medical purpose; or (2) the pharmacist was willfully blind (or 
deliberately ignorant) to the fact that the prescription lacked a 
legitimate medical purpose. See id. at 28671-72. As to establishing 
that a pharmacist acted with ``willful blindness, proof is required 
that: `(1) the defendant must subjectively believe that there is a high 
probability that a fact exists and (2) the defendant must take 
deliberate actions to avoid learning of that fact.' '' Id. at 28672 
(quoting Global-Tech Appliances, Inc., v. SEB S.A., 563 U.S. 754, 769 
(2011)).
    As found above, Mr. Parrado gave extensive testimony that numerous 
prescriptions that were written by Dr. Selvaraj (as well as other MD 
Plus doctors) presented ``red flags'' which created a strong suspicion 
as to whether the prescriptions were issued for a legitimate medical 
purpose. While Mr. Parrado testified that some of the red flags were 
potentially resolvable, he also identified numerous prescriptions that 
presented multiple red flags such that the combination of red flags 
created a level of suspicion of such compelling force that the issue of 
the legitimacy of the prescriptions was unresolvable. Specifically, Mr. 
Parrado identified as such those instances when on the same day, 
multiple patients, who had travelled long distances, presented 
prescriptions for large quantities of oxycodone 30 (and Dilaudid) which 
had been written by Dr. Selvaraj of the pain clinic, which was located 
next door and was owned by the brother of Respondent's owner, and were 
willing to pay large sums in cash (or cash equivalents) for the 
prescriptions.\53\
---------------------------------------------------------------------------

    \53\ Because I agree with Mr. Parrado's analysis that numerous 
prescriptions presented combinations of red flags that were 
unresolvable even if the pharmacist called Dr. Selvaraj (and the 
other MD Plus doctors) or questioned the patient, the Government's 
failure to produce the patient profiles or the so-called ``due 
diligence checklists'' is irrelevant.
---------------------------------------------------------------------------

    Respondent nonetheless argues that the Government's proof was 
inadequate to prove that its pharmacists knowingly dispensed (or were 
willfully blind to the fact) that the prescriptions lacked a legitimate 
medical purpose. Resp. Reply, at 15-18. It suggests that the Government 
must put forward ``direct evidence'' to show that prescriptions were 
issued unlawfully. Id. at 15.
    Contrary to Respondent's understanding, the invalidity of a 
prescription can be proved by circumstantial evidence. See, e.g., 
United States v. Leal, 75 F.3d 219, 223 (6th Cir. 1996); United States 
v. Veal, 23 F.3d 985, 988 (6th Cir. 1994) (per curiam); United States 
v. Hayes, 595 F.2d 258, 261 (5th Cir. 1979). Indeed, Respondent 
undercuts its argument when it notes that in Holiday CVS, ``[t]he 
Agency has also found . . . that certain prescriptions were invalid due 
to a particular combination of `red flags' apparent during a dispensing 
event: Multiple patients with addresses outside the state coming to the 
pharmacy to pay cash for the same `high alert' medications in the same 
or similar quantities written by the same physician, who practices 
hundreds of miles away from the pharmacy.'' Resp. Reply, at 15-16 
(citing 77 FR at 62318, 62345 n.105). Thus, circumstantial evidence can 
support a finding that a controlled substance prescription was issued 
without a legitimate medical purpose and that a pharmacist dispensed 
the prescription either having actual knowledge of that fact or acted 
with willful blindness to that fact.
    Respondent attempts to distinguish Holiday CVS, arguing that the 
combination of red flags at issue there differs significantly from 
those at issue here. Id. at 16. Specifically, Respondent argues that in 
Holiday CVS, the patients travelled long distances from the doctors to 
the pharmacies, whereas here, the patients filled their prescriptions 
next door to their doctor and thus did what most people do--fill their 
prescription at a pharmacy near the doctor's office. Id. at 16-17. It 
also

[[Page 72112]]

argues that because the MD Plus Clinic (whose doctors issued the 
overwhelming majority of the prescriptions) was a pain management 
clinic, ``it is not reasonable to expect Respondent's pharmacists to be 
suspicious when a higher than average number of customers from the 
clinic next door fill a prescription for an opioid, even if the 
quantity is high.'' Id. at 17. And finally, Respondent argues that in 
Holiday CVS, the prescriptions were presented by persons from out-of-
state and that ``[n]one of the prescriptions in this case were filled 
for customers from out-of-state'' and that ``the customers who 
travelled from out-of-town did so to visit his or her physician in a 
particular specialty practice, not Respondent's pharmacy.'' Id. at 17-
18. Respondent then argues that the ``customers also travelled a 
significantly shorter distance, by hundreds of miles, to visit the 
prescribing physician than the customers traveled in Holiday CVS.'' Id. 
at 18.
    Respondent's proffered distinctions are not persuasive. As for the 
distinction that the customers were not from out-of-state and did not 
travel as far as the customers did in Holiday CVS, many of them 
nonetheless travelled substantial distances from their residences to 
the MD Plus Clinic to obtain the prescriptions when undoubtedly, there 
were legitimate pain management clinics located far closer to where 
they lived. As for the argument that the customers did not travel long 
distances to fill their prescriptions but simply did so next door, 
putting aside that it is not normal that patients would travel long 
distances to see a doctor for a legitimate medical condition unless 
that doctor was a specialist of some renown, the fairer inference, 
given that the clinic was owned by the brother of Respondent's owner, 
is that the patients filled the prescriptions at Respondent because 
they knew they could do so with no questions asked.
    Nor am I persuaded by Respondent's contention that because the MD 
Plus Clinic was a pain clinic, it was not reasonable for Respondent's 
pharmacists to be suspicious of the prescriptions, even though they 
were frequently for a high quantity. As found above, doctors employed 
by Victor Obi, the brother of Respondent's owner, accounted for more 
than 93 percent of the schedule II dosage units dispensed by Respondent 
and Dr. Selvaraj's prescriptions alone accounted for nearly 85 percent 
of the schedule II dosage units dispensed. Significantly, Dr. Selvaraj 
had no specialty training in pain management and yet repeatedly 
prescribed large quantities of highly abused schedule II narcotics, to 
include oxycodone 30 and Dilaudid. And finally, the evidence shows that 
the patients were willing to pay large sums in cash or cash equivalents 
(frequently more than $1,000) for the prescriptions, which, if they 
were legitimate chronic pain patients, they would need on a monthly 
basis.
    In short, the combination of red flags attendant with many of the 
prescriptions provided compelling circumstantial evidence that the 
prescriptions issued by Dr. Selvaraj lacked a legitimate medical 
purpose. Because I agree with Mr. Parrado that in various situations, 
the combination of red flags rendered the issue of the prescriptions' 
legitimacy unresolvable, I conclude that Respondent's pharmacists had 
actual knowledge that the prescriptions lacked a legitimate medical 
purpose. 21 CFR 1306.04(a). And because many of the prescriptions were 
clearly illegitimate, it does not matter that the Government, in 
support of its theory that some of the prescriptions presented 
resolvable red flags which were not resolved, produced only the 
prescriptions (which lacked documentation that the red flags were 
resolved) and no other evidence showing that the red flags were 
unresolved. As the Fifth Circuit has explained:

    Verification by the issuing practitioner on request of the 
pharmacist is evidence that the pharmacist lacks knowledge that the 
prescription was issued outside the scope of professional practice. 
But it is not an insurance policy against a factfinder's concluding 
that the pharmacist has the requisite knowledge despite a purported 
but false verification. . . . What is required by [a pharmacist] is 
the responsibility not to fill an order that purports to be a 
prescription but is not a prescription within the meaning of the 
statute because he knows that the issuing practitioner issued it 
outside the scope of medical practice.

United States v. Hayes, 595 F.2d 258, 260 (5th Cir. 1979). I therefore 
also reject Respondent's contention that the Government has not proved 
that its pharmacists violated 21 CFR 1306.04(a) because the Government 
did not present sufficient evidence to show that the red flags were not 
resolved prior to dispensing the prescriptions.\54\ Reply to Request 
for Final Agency Action, at 18-19.
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    \54\ Because I conclude that many of the prescriptions presented 
unresolvable red flags and that the Respondent's pharmacists knew 
the prescriptions lacked a legitimate medical purpose, I need not 
address Respondent's contention that imposing liability based on its 
pharmacists' failure to document the resolution of red flags on the 
prescriptions ``defies the fundamental notion of fair notice.'' 
Reply to Request, at 19. In short, Respondent and its pharmacists 
had fair notice of what was required of them from the text of the 
Agency's corresponding responsibility rule, which provides that 
``[a]n order purporting to be a prescription issued not in the usual 
course of professional treatment . . . is not a prescription within 
the meaning and intent of section 309 of the Act (21 U.S.C. [Sec.  
]829) and the person knowingly filling such a purported 
prescription, as well as the person issuing it, shall be subject to 
the penalties provided for violations of the provisions of law 
relating to controlled substances.'' 21 CFR 1306.04(a).
    Based on Respondent's failure to produce evidence showing that 
it had resolved the red flags, the Government seeks an adverse 
inference that Respondent did not resolve the red flags. Req. for 
Final Agency Action, at 35-36. However, because I find persuasive 
Mr. Parrado's testimony that the circumstances surrounding the 
presentation of many of the prescriptions rendered the suspicion 
created by the attendant red flags unresolvable, I need not address 
Respondent's contention that the Government was inappropriately 
seeking to shift the burden of proof to it. See Reply to Req., at 
21.
    As for the Government's contention that Respondent dispensed 
prescriptions ``in an improper manner,'' because the prescriptions 
as issued lacked the patient's address, see Req. for Final Agency 
Action, at 28; for reasons explained elsewhere, I reject its 
contention. See Superior Pharmacy I and Superior Pharmacy II, 81 FR 
at 31336 n.58.

    I therefore find that the record supports the conclusion that 
Respondent's pharmacists dispensed numerous prescriptions for schedule 
II narcotics, including oxycodone 30 and Dilaudid, knowing that the 
prescriptions were not issued for a legitimate medical purpose by a 
practitioner acting in the usual course of professional practice. 21 
CFR 1306.04(a). This finding is relevant in assessing both Respondent's 
experience in dispensing controlled substances (Factor Two) and its 
compliance with applicable laws related to controlled substances 
(Factor Four). Most significantly, Respondent's dispensing violations 
are egregious and provide reason alone to conclude that its 
registration ``would be inconsistent with the public interest.'' 21 
U.S.C. 823(f).

The Recordkeeping Allegations

    The Government further argues that Respondent failed to keep 
accurate records. Request for Final Agency Action, at 28-30. As support 
for the allegations, the Government argues that after the DIs conducted 
the audit, Respondent ``was unable to account for significant overages 
[or] shortages of oxycodone, hydromorphone, and morphine.'' Id. at 28. 
It further argues that Respondent: (1) Failed to properly maintain its 
DEA Schedule II Order Forms to show the date on which it received 
controlled substances and the quantity received; (2) failed to retain 
Copy 3 of the Order Forms ``to the supplier''; (3) ``failed to 
accurately

[[Page 72113]]

complete executed'' Schedule II Order Forms; (4) ``failed to accurately 
complete'' a Schedule II Order form ``when it acted as a supplier of 
controlled substances'' and ``failed to forward this form to the local 
DEA Special Agent in Charge''; and (5) failed to electronically link 
its receipts to the original orders it placed through the Controlled 
Substance Order System. Id. at 29-30.
    As for the audit allegations, as found above, the Government's 
evidence does not provide a sufficient foundation to consider the audit 
results. I thus reject the audit allegations.
    Nonetheless, the Government did put forward substantial evidence to 
support several of its recordkeeping allegations. As found above, 
during the execution of the AIW, Respondent could not produce its 
records of receipts for calendar year 2011 and upon review of the 
orders that were reported to the Agency's ARCOS database by 
Respondent's suppliers, the DI ultimately determined that Respondent 
was missing its copy of the Schedule II Order Forms (Copy 3) for 103 
orders which were placed after February 4, 2011. Respondent was 
required to maintain these documents for two years. See 21 U.S.C. 
828(c)(2) (``Every person who gives an order required under subsection 
(a) of this section shall, at or before the time of giving such order, 
make or cause to be made a duplicate thereof on a form to be issued by 
the Attorney General . . . and shall, if such order is accepted, 
preserve such duplicate for a period of two years and make it available 
for inspection and copying . . . .''). Respondent thus violated federal 
law by failing to maintain these order forms.\55\
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    \55\ As for the allegations that various Order Forms contained 
entries which showed that drugs were ordered but that Respondent 
never completed the form to show how much of the order was received 
and the date it was received, the Government put forward no evidence 
to show that Respondent received any portion of the particular line 
items for which no quantity or date of receipt was noted. To the 
extent the Government believes that Respondent was obligated to note 
on the Order Form that no part of a particular line item was 
received, as I have previously explained, the regulation requires 
only that a purchaser record ``the number of commercial or bulk 
containers furnished on each item and the dates on which the 
containers are received by the purchaser.'' 21 CFR 1305.13(e). As I 
have previously explained, if no portion of a line item is received, 
then there is no date on which it is received. See Superior 
Pharmacy, 81 FR at 31338 & n.64. Thus, I reject the allegation.
    The Government also alleged that Respondent had failed to 
provide a copy of an Order Form for the return of Dilaudid to a 
supplier to the Special Agent in Charge, as well as that it had 
failed to note on the Form the number of packages shipped and the 
date shipped. Req. for Final Agency Action, at 29-30. As the 
Government produced no evidence that Respondent actually returned 
the drugs, I reject the allegation.
---------------------------------------------------------------------------

    The DI further found that upon reviewing Respondent's records of 
the orders it placed using the Controlled Substance Order System, there 
were 42 orders for which Respondent documented the receipt of 
controlled substances and the date received on a paper copy of the 
order form. Respondent did not, however, electronically link these 
records ``to the original order'' and archive the record. Respondent 
thus violated DEA's regulation. See 21 CFR 1305.22(g) (``When a 
purchaser receives a shipment, the purchaser must create a record of 
the quantity of each item received and the date received. The record 
must be electronically linked to the original order and archived.'').
    The evidence with respect to Factor Four thus establishes that 
Respondent has failed to comply with several of the CSA's recordkeeping 
requirements. Of these violations, Respondent's failure to retain 103 
schedule II order forms is especially egregious and provides further 
support for the conclusion that its registration ``would be 
inconsistent with the public interest.'' 21 U.S.C. 823(f).

Sanction

    Where, as here, the Government has established grounds to deny an 
application, a respondent must then ``present[ ] sufficient mitigating 
evidence'' to show why it can be entrusted with a new registration. 
Samuel S. Jackson, 72 FR 23848, 23853 (2007) (quoting Leo R. Miller, 53 
FR 21931, 21932 (1988)). `` `Moreover, because `past performance is the 
best predictor of future performance,' ALRA Labs, Inc. v. DEA, 54 F.3d 
450, 452 (7th Cir. 1995), [DEA] has repeatedly held that where [an 
applicant] has committed acts inconsistent with the public interest, 
the [applicant] must accept responsibility for [its] actions and 
demonstrate that [it] will not engage in future misconduct.'' Jayam 
Krishna-Iyer, 74 FR 459, 463 (2009) (citing Medicine Shoppe, 73 FR 364, 
387 (2008)); see also Jackson, 72 FR at 23853; John H. Kennedy, 71 FR 
35705, 35709 (2006); Cuong Tron Tran, 63 FR 64280, 64283 (1998); Prince 
George Daniels, 60 FR 62884, 62887 (1995).
    While an applicant must accept responsibility for its misconduct 
and demonstrate that it will not engage in future misconduct in order 
to establish that its registration is consistent with the public 
interest, DEA has repeatedly held that these are not the only factors 
that are relevant in determining the appropriate disposition of the 
matter. See, e.g., Joseph Gaudio, 74 FR 10083, 10094 (2009); Southwood 
Pharmaceuticals, Inc., 72 FR 36487, 36504 (2007). Obviously, the 
egregiousness and extent of an applicant's misconduct are significant 
factors in determining the appropriate sanction. See Jacobo Dreszer, 76 
FR 19386, 19387-88 (2011) (explaining that a respondent can ``argue 
that even though the Government has made out a prima facie case, his 
conduct was not so egregious as to warrant revocation''); Paul H. 
Volkman, 73 FR 30630, 30644 (2008); see also Paul Weir Battershell, 76 
FR 44359, 44369 (2011) (imposing six-month suspension, noting that the 
evidence was not limited to security and recordkeeping violations found 
at first inspection and ``manifested a disturbing pattern of 
indifference on the part of [r]espondent to his obligations as a 
registrant''); Gregory D. Owens, 74 FR 36751, 36757 n.22 (2009).
    So too, the Agency can consider the need to deter similar acts, 
both with respect to the respondent in a particular case and the 
community of registrants. See Gaudio, 74 FR at 10095 (quoting 
Southwood, 71 FR at 36503). Cf. McCarthy v. SEC, 406 F.3d 179, 188-89 
(2d Cir. 2005) (upholding SEC's express adoption of ``deterrence, both 
specific and general, as a component in analyzing the remedial efficacy 
of sanctions'').
    As found above, the record establishes that Respondent's 
pharmacists engaged in egregious misconduct by knowingly dispensing 
numerous controlled substance prescriptions for such highly abused 
narcotics as oxycodone 30 and hydromorphone that were issued outside of 
the usual course of professional practice and lacked a legitimate 
medical purpose. 21 CFR 1306.04(a). This misconduct strikes at the core 
of the CSA's purpose of preventing drug abuse and diversion. See 
Gonzales v. Oregon, 546 U.S. at 274. Respondent's failure to maintain 
numerous schedule II order forms is also egregious misconduct. The 
Agency has a manifest interest in deterring registrants from engaging 
in similar misconduct with respect to both the dispensing of controlled 
substances and the maintenance of required records.
    Thus, the record fully supports the conclusion that Respondent's 
registration ``would be inconsistent with the public interest'' and 
that its application should be denied. 21 U.S.C. 823(f). And because 
Respondent failed to timely submit its Position Statement and the 
attached affidavits and has not demonstrated good cause to excuse its 
untimely filing, I do not consider whether the affidavits provide 
sufficient evidence to refute the Government's

[[Page 72114]]

prima facie case. Accordingly, I will deny Respondent's application.

Order

    Pursuant to the authority vested in me by 21 U.S.C. 823(f) and 28 
CFR 0.100(b), I order that the application of Edge Pharmacy, L.L.C., 
for a DEA Certificate of Registration as a retail pharmacy, be, and it 
hereby is, denied. This Order is effectively immediately.

    Dated: October 11, 2016.
Chuck Rosenberg,
Acting Administrator.
[FR Doc. 2016-25226 Filed 10-18-16; 8:45 am]
 BILLING CODE 4410-09-P