Top RX Pharmacy; Decision and Order, 26069-26086 [2013-10550]

Agencies

• Drug Enforcement Administration
• Department of Justice

[Federal Register Volume 78, Number 86 (Friday, May 3, 2013)]
[Notices]
[Pages 26069-26086]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-10550]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration

[Docket No. 12-59]


Top RX Pharmacy; Decision and Order

    On November 8, 2012, Chief Administrative Law Judge (ALJ) John J. 
Mulrooney, II, issued the attached Recommended Decision. Neither party 
filed exceptions to the Recommended Decision.
    Having reviewed the record in its entirety, I have decided to adopt 
the ALJ's recommended rulings, findings of fact, and conclusions of 
law, except as discussed below.\1\ I have also decided to adopt the 
ALJ's recommended order.
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    \1\ In his discussion of Factor Five--such other conduct which 
may threaten public health and safety--the ALJ cited the Agency's 
decision in Paul Weir Battershell, 76 FR 44359, 44368 n.27 (2011), 
for the proposition that ``although a registrant's non-compliance 
with the Food, Drug, and Cosmetic Act is not relevant under Factor 
Five, consideration of such conduct may properly be considered on 
the narrow issue of assessing a respondent's future compliance with 
the CSA.'' Recommended Decision at 53 (slip op.) (emphasis added). 
However, as Battershell makes clear, it is not the case that such 
conduct is irrelevant under factor five, but simply, that such 
conduct, by itself, is not dispositive of whether a respondent's 
continued registration is consistent with the public interest. See 
76 FR at 44368 n.27. Thus, evidence of non-compliance with 
provisions of the FDCA is relevant ``for the limited purpose of 
assessing the likelihood of [a] [r]espondent's future compliance 
with the CSA.'' Id. (citing Wonderyears, Inc., 74 FR 457, 458 
(2009)); see also 4 OTC, Inc., 77 FR 35031, 35032-33 (2012).
    Also, in his discussion of Respondent's failure to accept 
responsibility, the ALJ opined that ``[t]here is nothing in the 
record to rebut the persuasive record evidence that the conduct of 
the owner and PIC exceeded inaction and rose to the level of willing 
complicity in controlled substance diversion on a massive scale.'' 
Recommended Decision at 56. I agree that the evidence clearly shows 
that Respondent's principals knowingly diverted controlled 
substances. However, to the extent the ALJ's reasoning suggests that 
``inaction'' on the part of a pharmacy's principals in dispensing 
prescriptions does not violate their duty under federal law to 
dispense only those prescriptions which have been ``issued for a 
legitimate medical purpose by an individual practitioner acting in 
the usual course of his professional practice,'' 21 CFR 1306.04(a), 
it is inconsistent with federal law. See United States v. Seelig, 
622 F.2d 207, 213 (6th Cir. 1980) (upholding jury instruction that 
knowledge may be inferred from evidence that pharmacists 
``deliberately closed their eyes to what would otherwise be obvious 
to them''); Grider Drug #1 & Grider Drug #2, 77 FR 44070, 44097 
(2012) (quoting Ralph J. Bertolino, 55 FR 4729, 4730 (1990) (``When 
prescriptions are clearly not issued for legitimate medical 
purposes, a pharmacist may not intentionally close his eyes and 
thereby avoid [actual] knowledge of the real purpose of the 
prescriptions.'')). As these cases make clear, inaction on the part 
of a pharmacist who fills a prescription can by, itself, support a 
finding of a violation of 21 CFR 1306.04(a) and the revocation of a 
registration.
    As the ALJ noted earlier in his decision, when the circumstances 
surrounding a prescription present a red flag as to the 
prescription's legitimacy, that red flag must be resolved 
conclusively to show that the prescription is legitimate prior to 
dispensing it. Recommend Decision at 44. Indeed, the circumstances 
surrounding the prescription may be such that it cannot be 
dispensed. See Holiday CVS, L.L.C., d/b/a CVS/Pharmacy Nos. 219 and 
5195, 77 FR 62316, 62317-22 (2012).
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Order

    Pursuant to the authority vested in me by 21 U.S.C. 823(f) and 
824(a), as well as 28 CFR 0.100(b), I order that DEA Certificate of 
Registration FT3034117, issued to Top RX Pharmacy, be, and it hereby 
is, revoked. I further order that any pending application of Top RX 
Pharmacy, to renew or modify the above registration, be, and it hereby 
is, denied. This Order is effective immediately.\2\
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    \2\ Based on the egregious acts proven on this record, I 
conclude that the public interest necessitates that this Order be 
effective immediately. 21 CFR 1316.67.

    Dated: April 25, 2013.
Michele M. Leonhart,
Administrator.

Anthony Yim, Esq., and Frank Mann, Esq., for the Government
Jeffrey C. Grass, Esq., for the Respondent

RECOMMENDED RULINGS, FINDINGS OF FACT, CONCLUSIONS OF LAW, AND DECISION 
OF THE ADMINISTRATIVE LAW JUDGE

    Chief Administrative Law Judge John J. Mulrooney, II. On August 
1, 2012, the Administrator of the Drug Enforcement Administration 
(DEA), issued an Order to Show Cause and Immediate Suspension of 
Registration (OSC/ISO) immediately suspending and proposing to 
revoke the DEA

[[Page 26070]]

Certificate of Registration (COR), Number FT3034117, of the 
Respondent pursuant to 21 U.S.C. Sec.  824(a), and to deny any 
pending applications for registration, renewal or modification 
pursuant to 21 U.S.C. Sec. Sec.  823(f) and 824(a). On August 6, 
2012, the Respondent, through counsel, timely requested a hearing, 
which was conducted in Dallas, Texas on October 2, 2012.
    The issue ultimately to be adjudicated by the Administrator, 
with the assistance of this recommended decision, is whether the 
record as a whole establishes, by substantial evidence, that the 
Respondent's COR should be revoked as inconsistent with the public 
interest, as that term is used in 21 U.S.C. Sec. Sec.  823(f) and 
824(a).
    After carefully considering the testimony elicited at the 
hearing, the admitted exhibits, the arguments of counsel, and the 
record as a whole, I have set forth my recommended findings of fact 
and conclusions of law below.

The Allegations

    In its OSC/ISO \3\ and its Prehearing Statements,\4\ the 
Government alleges that the Respondent, through its owner, agents, 
and employees: (1) failed to create an initial inventory of 
controlled substances, in violation of 21 U.S.C. Sec.  827(a)(1) and 
21 C.F.R. Sec.  1304.11(b); (2) provided false information to 
controlled substance distributors; (3) failed to maintain accurate 
and complete records and failed to account for controlled substances 
in violation of 21 U.S.C. Sec. Sec.  827(a)(3) and 842(a)(5) and 21 
C.F.R. Sec. Sec.  1304.03, 1304.04 and 1304.21; (4) diluted 
promethazine syrup before dispensing, in violation of 21 U.S.C. 
Sec.  331; and (5) dispensed controlled substances under 
circumstances where it knew or should have known that the drugs were 
being diverted for illicit purposes and were not being dispensed for 
a legitimate medical purpose.
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    \3\ ALJ Ex. 1.
    \4\ ALJ Exs. 7, 8.
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The Stipulations of Fact

    The Government and the Respondent, through counsel, have entered 
into stipulations regarding the following matters:
    1) Top RX Pharmacy is registered with DEA as a retail pharmacy 
in Schedules III-V under DEA Certificate of Registration FT3034117 
at 2381 S. Collins Street, Arlington, Texas, 76014 with an 
expiration date of November 30, 2014.
    2) Top RX is currently licensed as a pharmacy in the State of 
Texas pursuant to license number 27844, which is currently active 
and set to expire on January 31, 2014.
    3) Top RX is owned by Mr. Jesse Sanders III. The pharmacist-in-
charge of Top RX is Mr. Alonzo Grape, R.Ph.

The Evidence

The Government's Evidence

    The Government called four witnesses in support of its case-in-
chief. The Government's witnesses included Dale Newkirk, the lead 
(now retired) diversion investigator (DI) on the DEA case, Charles 
Pinkerton, an investigator from the Texas Department of Public 
Safety (DPS), Ronald White, an investigator from the Texas State 
Board of Pharmacy (Texas Pharmacy Board), and Heather Tippie, a 
pharmacy technician-in-training who was formerly employed at the 
Respondent Pharmacy.
    DPS Investigator Pinkerton testified that he has been an 
investigator with the Regulatory Services Division of DPS for eleven 
years, and was a thirty-year veteran of the Fort Worth Police 
Department prior to joining DPS. Tr. 14. Investigator Pinkerton 
testified that as a DPS investigator he conducts regulatory 
investigations of pharmacies, which can include random inspections, 
pill counts, and pharmacy paperwork assessments. Tr. 15. Pinkerton 
stated that he has received training at DPS, and that in his eleven 
years on the job has conducted 75-80 pharmacy inspections. Tr. 15-
16.
    Investigator Pinkerton testified that he first visited the 
Respondent pharmacy on March 13, 2012, pursuant to a tasking from a 
DPS supervisor, based on a report that the Respondent had not been 
transmitting required data to the Texas prescription monitoring 
program (PMP).\5\ Tr. 17-18. Upon his arrival at the Respondent 
pharmacy, Investigator Pinkerton and another DPS investigator, named 
Susan Furnas, spoke with the pharmacy owner, Jesse Sanders, III (Mr. 
Sanders). Tr. 18-19. The two DPS investigators informed Mr. Sanders 
that they were there to conduct an investigation/security audit 
(First DPS Audit) of the pharmacy.\6\ Tr. 19-20. Pinkerton explained 
the DPS pharmacy audit protocol as follows:

    \5\ Investigator Pinkerton testified that Texas pharmacies are 
required to transmit a weekly accounting of all scheduled drugs 
filled in the previous seven days. Tr. 17.
    \6\ On cross-examination, Investigator Pinkerton acknowledged 
that when he first arrived at the Respondent pharmacy he was under 
the misimpression that it had been in business for over a year. Tr. 
55. The evidence shows that the Respondent pharmacy opened its doors 
approximately two months prior to Investigator Pinkerton's March 13 
visit.
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    What we do . . . is we pick a particular drug, okay, and then we 
look at the invoices showing where [the pharmacy has] bought what 
[it has] bought. We also look at the dispensing logs, what [the 
pharmacy has] sold, if [the pharmacy has] any credits where [it has] 
transferred drugs or have bought anything. We look at that. And then 
we have a formula that we go through and we add all this together 
and determine whether or not there's a shortage or an overage of the 
drug.

Tr. 26.

    Investigator Pinkerton described the Respondent's invoices of 
controlled substances purchased and its ``storage of drugs'' as 
``messy.'' \7\ Tr. 20-21. According to Investigator Pinkerton, the 
invoices were not filed as they should have been, ``[t]hey were just 
laying on a desk . . . just kind of laying around haphazardly.'' Tr. 
21
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    \7\ Investigator Pinkerton also described the ``general 
condition of the pharmacy'' as ``unclean.'' Tr. 20. When asked 
whether this cleanliness observation related to a regulatory 
standard, Pinkerton explained: ``I guess it's more of an 
observation. I noted dust, dirt, in and around the edges of the 
place, of the walls. We have no training as far as that goes. That 
was just an observation that I did make on my own.'' Tr. 22. 
Although Pinkerton was unable to identify the applicable state 
authority on point, 22 Tex. Admin. Code Sec.  291.33(b) provides 
that ``[t]he pharmacy shall be arranged in an orderly fashion and 
kept clean.'' While maintaining an unclean or even unsanitary 
pharmacy is certainly unsavory, and may be a violation of state law, 
no clear nexus between Pinkerton's cleanliness observation and any 
law related to controlled substances is apparent in the record or 
proffered by the Government. See Gregg & Son Distributors, 74 Fed. 
Reg. 17517 n.1 ([I]t is the Government's obligation as part of its 
burden of proof and not the ALJ's responsibility to sift through the 
records and highlight that information which is probative of the 
issues in the proceeding.''). That Pinkerton felt the pharmacy was 
not sufficiently clean, at least as offered here, is not a relevant 
consideration in determining whether the Respondent can be entrusted 
with a DEA COR. See Judulang v. Holder, 132 S.Ct. 476, 556 U.S. ----
---- (2011) (actions of a regulatory agency must bear a rational 
relationship to the purposes of the statute it is charged with 
enforcing); Tony T. Bui, M.D., 75 Fed. Reg. 49979, 49989 (2010) 
(holding that in order for a registrant's ``conduct to be actionable 
under factor five, there must be a substantial relationship between 
the conduct and the CSA's purposes of preventing drug abuse and 
diversion, and that the conduct may constitute a threat to public 
health and safety.''); see also Paul Weir Battershell, N.P., 76 Fed. 
Reg. 44359 n.27 (2011) (to same effect).
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    Additionally, Pinkerton testified that, as part of the First DPS 
Audit, he asked for an initial inventory. Tr. 23. Investigator 
Pinkerton explained the Texas initial inventory requirement as 
follows:

    With the rules and regulations that we go by, an initial 
inventory is made by the pharmacy when they [sic] first start 
business. On the very first day of their [sic] business, they are to 
count all of their drugs, particularly the schedule drugs, to find 
out what they [sic] have on hand when they [sic] start their 
business.

Id. It was thus, Pinkerton's understanding that in Texas, the 
initial inventory requirement ripens on the first day a pharmacy 
opens.\8\ Pinkerton testified that when he asked the Respondent's 
Pharmacist-in-Charge (PIC) Alonzo Grape, and its owner, Mr. Sanders, 
to produce an initial inventory, both men conceded that none existed 
and that they were unaware of any requirement to generate one. Tr. 
23-24. According to Pinkerton, PIC Grape then stated that he did not 
think that he needed to have one until the pharmacy had been open 
six months. Tr. 24. Mr. Sanders, for his part, offered no 
explanation as to why the pharmacy had no initial inventory. Tr. 25. 
Further, the Respondent pharmacy staff was unable produce any 
dispensing logs. Id. Hard copies of prescriptions were the only 
dispensing records provided by the Respondent pharmacy. Tr. 25-26. 
On a positive note, Mr. Sanders did demonstrate to the DPS 
investigators that he had resolved his software issues sufficiently 
to transmit required weekly controlled substance reports

[[Page 26071]]

to the Texas PMP, hence resolving the initial issue that spawned 
their visit. Tr. 19-20, 64.
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    \8\ Although Investigator Pinkerton was unable to furnish a 
citation for any authority related to the Texas initial inventory 
requirement (Tr. 27), 22 Tex. Admin. Code Sec.  291.17(b) requires 
that ``[a] new [community] pharmacy shall take an [initial] 
inventory on the opening day of business.''
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    The drug selected \9\ by Investigators Pinkerton and Furnas for 
review at the Respondent pharmacy at the First DPS Audit was 
alprazolam.\10\ Tr. 28. Pinkerton testified that, consistent with 
the DPS protocol, the audit was conducted on the pharmacy premises 
with pharmacy staff, and the audit counts recorded are the result of 
an agreement between the inspectors and the pharmacy personnel. Tr. 
29. Heather Tippie, a pharmacy technician-in-training employed at 
the Respondent, counted the drugs with Investigator Pinkerton, with 
PIC Grape standing beside her.\11\ Tr. 28-29, 59-60.
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    \9\ Investigator Pinkerton testified that the audit drug choice 
is selected at random. Tr. 18.
    \10\ Alprazolam is a Schedule IV controlled substance pursuant 
to 21 C.F.R. Sec.  1308.14(c)(1).
    \11\ There is simply no factual basis for the assertion made in 
the Respondent's post-hearing brief that the alprazolam counts were 
made exclusively by Ms. Tippie and that Investigator Pinkerton 
testified that ``this could be the reason why [Grape] and [Sanders] 
couldn't [sic] explain the variances that were resulting from Ms. 
Tippie's count.'' Resp't Brief at 4.
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    A copy of the audit results computation sheet prepared by the 
DPS investigators (DPS Computation Form 1) was received into 
evidence through Investigator Pinkerton's testimony. Gov't Ex. 3, at 
1; Tr. 53. Based on Mr. Sanders' representation that there was no 
initial inventory, a zero was placed in the column of DPS 
Computation Form 1, denoting the initial inventory amount on board 
as of the January 16, 2012 date that Sanders told Pinkerton that the 
pharmacy opened (pharmacy opening date).\12\ Gov't Ex. 3, at 1. A 
comparison of the total number of dosage units the Respondent 
pharmacy's paperwork reflects as having been purchased since the 
opening date, with the total amount of dosage units on hand 
(pursuant to the agreed-upon count), indicates that the pharmacy was 
5,469 dosage units shy of alprazolam amounts that should have been 
there. Gov't Ex. 3, at 1; Tr. 35. This translated into a 43.06% 
difference between the amount of alprazolam justified by the 
paperwork and the amount the pharmacy could find in the store. Gov't 
Ex. 3, at 1; Tr. 37. Pinkerton stated that neither Sanders nor Grape 
could supply any reason for the shortage. Tr. 36. Pinkerton asked 
Sanders and Grape for additional information to explain the shortage 
(such as additional invoices or sale records) but none were 
supplied. Id. Pinkerton stated that he gave Sanders and Grape an 
additional seven days to find paperwork to account for the shortage. 
Tr. 37. About a week later, Pinkerton received a phone call from Mr. 
Sanders, who informed him that additional paperwork and drugs had 
been discovered in the pharmacy back room. Tr. 37-39. Mr. Sanders 
also telephonically communicated to Pinkerton that he was in 
possession of a computer printout showing that the number of 
prescriptions during the First DPS Audit should not have been 480 
dosage units, but rather 690. Tr. 49.
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    \12\ During cross examination, Investigator Pinkerton 
acknowledged that although the Respondent's COR lists February 2, 
2012 as the date of issuance, based on his discussions with Mr. 
Sanders, he fixed the initial inventory date as January 16, 2012 on 
DPS Computation Form 1. Gov't Ex. 1; Gov't Ex. 3, at 1; Tr. 56-57.
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    Based on the follow up call from Mr. Sanders, Pinkerton and 
Alicia Alexander, another DPS investigator, returned to the 
Respondent pharmacy on March 20, 2012 \13\ and conducted another 
audit (Second DPS Audit). Tr. 39. The investigators re-counted, and 
the amount of alprazolam remained the same. Tr. 49-50. The results 
of the Second DPS Audit were memorialized by Pinkerton in another 
DPS computation form (DPS Computation Form 2). Gov't Ex. 3, at 2. In 
contrast to the First DPS Audit, which revealed a 5,469 dosage unit 
shortage, the Second DPS Audit, which was conducted ``from 
scratch,'' \14\ reflected a 2,275 dosage unit overage (17.91%) of 
alprazolam 2 milligram (mg). Gov't Ex. 3, at 2; Tr. 41. Mr. Sanders 
and PIC Grape were present at the Second DPS Audit, but neither 
offered any explanation as to how the previous shortage had now 
morphed into an overage. Tr. 42. Mr. Sanders told the investigators 
that he assumed that the pills discovered in the back room of the 
pharmacy would remedy the audit anomalies identified in the First 
DPS Audit. Id.
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    \13\ There was some confusion at the hearing as to the date 
contained on the audit form. Investigator Pinkerton testified that 
although the form states the date as ``3-19-12,'' it was not an 
accurate date. Gov't Ex. 3, at 2; Tr. 43. According to Pinkerton, 
the Second Audit was actually conducted on March 20, 2012, but he 
``[g]uess[ed he] just got the dates mixed up. . . .'' Tr. 43-44.
    \14\ Tr. 39.
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    On March 29, 2012, Sanders again telephoned Pinkerton and 
advised him that another invoice for 1,000 dosage units of 
alprazolam 2 mg had been discovered at the pharmacy. Tr. 45. 
Pinkerton did not return to the Respondent pharmacy, but based on 
Mr. Sanders' newest revelation, completed another drug computation 
form (DPS Computation Form 3), which incorporated the new 
information supplied by Mr. Sanders. Gov't Ex. 3, at 3; Tr. 45-46. 
Even assuming the accuracy of the purported newly-discovered 
invoice, DPS Computation Form 3 reflects a 1,275 dosage unit overage 
(9.3%) of alprazolam 2 mg. Gov't Ex. 3, at 3; Tr. 47. Investigator 
Pinkerton subsequently telephoned Mr. Sanders seeking further 
explanation of the overage, but the latter was unable to shed any 
light on the matter. Tr. 47.
    Investigator Pinkerton testified that he returned to the 
Respondent pharmacy in May of 2012 at the request of Ronald White, 
an investigator with the Texas Pharmacy Board. Tr. 51. Investigator 
White invited Pinkerton to provide assistance during an audit to be 
conducted by DEA (DEA Audit). Id. Pinkerton testified that it was 
his recollection that the DEA Audit (discussed in greater detail, 
infra) focused on the following controlled substances: 
hydrocodone,\15\ alprazolam, Soma,\16\ and promethazine with 
codeine.\17\ Tr. 52.
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    \15\ Hydrocodone is a Schedule III controlled substance pursuant 
to 21 C.F.R. Sec.  1308.13(e)(1).
    \16\ Soma is the brand name of a drug containing carisoprodol. 
5-S Attorneys' Dictionary of Medicine S-107381. Carisoprodol is a 
Schedule IV controlled substance pursuant to 21 C.F.R. Sec.  
1308.14(c)(5).
    \17\ Promethazine with codeine cough syrup is a Schedule V 
controlled substance pursuant to 21 C.F.R. Sec.  1308.15(c)(1).
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    Investigator Pinkerton presented as an impartial investigator 
who tendered testimony that was sufficiently detailed, consistent, 
and plausible to be fully credited in this recommended decision.
    The Government also presented the testimony of retired DEA DI 
Dale Newkirk. Newkirk testified that he worked as a diversion 
investigator with DEA in Fort Worth, Texas for thirteen years, and 
retired in September of 2012. Tr. 68. DI Newkirk testified that he 
has undergone multiple training evolutions as a DEA DI, and that 
prior to his employment at DEA, he spent twenty-five years as a 
police officer in El Paso, Texas. Tr. 69-70.
    Newkirk testified that he was aware of the Respondent pharmacy 
because he conducted its pre-COR investigation. Tr. 70. DI Newkirk 
recalled that the case came to him as a result of an application 
liability question, which alerted DEA that the Respondent's PIC, 
Alonzo Grape, had a history of discipline by the Texas Pharmacy 
Board. Tr. 70. Newkirk recalled that he approved the Respondent's 
application after he confirmed that the Pharmacy Board had resolved 
its issue with PIC Grape. Tr. 70-71. DI Newkirk testified that 
because of the issue encountered during the registration process, he 
periodically monitored ARCOS entries related to the Respondent, and 
observed that (at least in his opinion) the Respondent was ordering 
large amounts of hydrocodone. Tr. 71. According to DI Newkirk, 
because of his suspicions and the volume amounts reflected in the 
ARCOS data, he ``kept an eye on'' the Respondent.\18\ Id.
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    \18\ No context was elicited regarding why DI Newkirk 
characterized the amounts of hydrocodone he reviewed as ``large.'' 
Tr. 71. Similarly, the record contains no elucidation of what 
Newkirk meant by ``ke[eping] an eye on'' the Respondent. Id.
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    Newkirk testified that on May 7, 2012, DPS Investigator 
Pinkerton telephonically advised him of the shortage/overage audit 
results obtained from his visits to the Respondent pharmacy. Id. 
Based on this information, Newkirk conducted an inspection of the 
Respondent the following day (First DEA Visit). Id. In addition to 
Investigator Pinkerton, DI Newkirk was accompanied on his inspection 
visit to the Respondent pharmacy by his partner, DI Christopher 
Hull, DPS Investigators Susan Furnas and Alicia Alexander, and 
Investigator Ronald White from the Texas Pharmacy Board. Tr. 71-72.
    Newkirk testified that when the investigators arrived at the 
Respondent pharmacy, they were met by Heather Tippie (Ms. Tippie) at 
the window. Tr. 72. Newkirk recalled that Ms. Tippie ``represented 
herself as a pharmacy tech-in-training . . . told [the inspectors] 
that she had been through the required classes [to be a pharmacy 
technician], and [Newkirk observed that] her

[[Page 26072]]

[pharmacy technician-in-training] certificate was on the wall . . . 
to the left as you enter the pharmacy.'' Tr. 107-08. Ms. Tippie 
retrieved the Respondent's owner, Mr. Sanders, and upon the 
presentation of a DEA notice of inspection, Mr. Sanders executed the 
document and consented to the inspection. Tr. 72. Mr. Sanders 
inquired of Newkirk whether the inspectors had come to inquire about 
two recent burglaries at the Respondent pharmacy and was told that 
the break-ins would be discussed during the inspection. Tr. 73.
    Newkirk described the inspection procedure undertaken by 
himself, DI Hull, the Texas DPS investigators, and Investigator 
White. Tr. 72-74. DI Hull and the three DPS investigators conducted 
a closing inventory of all controlled substances and interviewed Ms. 
Tippie and PIC Grape. Id. Investigator White periodically assisted 
DI Newkirk in his conversations with Mr. Sanders. Tr. 73-74. Newkirk 
stated that during the inspection several violations were observed. 
Tr. 74. According to DI Newkirk, although the Respondent pharmacy 
had been ordering controlled substances \19\ since February 3, 
2012,\20\ it failed to take an initial inventory, did not maintain 
its records, and did not annotate inventories when product was 
received.\21\ Id. Newkirk also testified that the Respondent was 
transferring controlled substances to a pharmacy in Houston with 
documentation that did not comply with DEA regulations. Tr. 75. 
Specifically, Newkirk testified that the transfer records were 
deficient in that ``[t]hey [did not] contain the bottle size, the 
full name of the product or the amount of tablets or amount of 
liquid in the product [and] the receipts did not annotate who 
received the product, the date it was received or the correct amount 
received.'' Id.
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    \19\ Although DI Newkirk testified that the Respondent had been 
ordering controlled substances from multiple sources in various 
locations around the country, and that this was ``one of [his] 
reasons for concern about the pharmacy'' (Tr. 105-06), there was no 
development or explanation of this observation that would render it 
relevant to any issue that must or should be decided in these 
proceedings. See Alvin Darby, M.D., 75 Fed. Reg. 26993, 26999, n.31 
(2010) (``[U]nder the substantial evidence test, the evidence must 
`do more than create a suspicion of the existence of the fact to be 
established.' '') (citing NLRB v. Columbian Enameling & Stamping 
Co., 306 U.S. 292, 300 (1939).
    \20\ Tr. 104-05.
    \21\ Newkirk testified that when a pharmacy receives controlled 
substances on an invoice from a distributor, the person receiving 
the controlled substances must initial the inventory, date it, and 
verify the amount received. Tr. 74. Under 22 Tex. Admin. Code Sec.  
291.55(d)(4), pharmacists are required to ``verify that the 
controlled drugs listed on the invoices were actually received by 
clearly recording his/her initials and the actual date of receipt of 
the controlled substances.''
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    Newkirk also testified that he observed unmarked bottles 
containing promethazine with codeine, hydrocodone, and 
alprazolam.\22\ Tr. 75-76. According to DI Newkirk, he was able to 
identify the contents of the bottles containing hydrocodone and 
alprazolam by examining the pills, and the promethazine syrup by 
smelling it. Tr. 76. Although Newkirk conceded that he was unable, 
through his smelling process, to discern the presence or 
concentration of codeine in the syrup, Ms. Tippie and PIC Grape 
acknowledged the correctness of his assumption, and (as discussed, 
infra) samples of the contents were subsequently tested by DPS. Tr. 
76-78.
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    \22\ Photographs of the unlabeled bottles were received into the 
record without objection. Gov't Ex. 6, at 2-3; Tr. 85-86.
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    Newkirk testified about the results of the controlled substance 
audit conducted during the First DEA Visit. Tr. 87. Several 
controlled substances were audited, revealing both shortages and 
overages. Id. Following the audit, Newkirk conducted an exit 
interview with Mr. Sanders and PIC Grape. Tr. 89. Newkirk informed 
Sanders and Grape of the shortages and overages observed, along with 
the Respondent's lack of an initial inventory, and poor 
recordkeeping. Tr. 89-90. Newkirk informed them that in his view, 
poor recordkeeping was one of the reasons that the audit did not 
balance. Tr. 90. Newkirk also pointed out the lack of annotations on 
invoices, the fact that the pharmacy was dirty, and that there were 
bottles containing controlled substances that did not have labels as 
other issues he observed during his visit. Id. Mr. Sanders responded 
that he would correct those issues. Id. When Mr. Sanders explained 
to Newkirk that he was a new pharmacy owner, and that he did not 
understand DEA policies, Newkirk referred him to the DEA Web site 
for detailed information and suggested that he could even consult 
with his father, Jesse Sanders, II (Mr. Sanders, Sr.), who served as 
a PIC at another pharmacy, as well as an advisor to the Respondent 
pharmacy.\23\ Id.
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    \23\ Although the Respondent, in his post-hearing brief, 
provided some background information about Sanders, Sr.'s 
qualifications, no evidence on this subject (like many other factual 
elements set forth in the Respondent's brief) appears anywhere in 
the record. Resp't Brief at 3.
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    Newkirk returned to the Respondent pharmacy on May 22, 2012 
(Second DEA Visit) with another Notice of Inspection, accompanied by 
DI Hull, and Investigators White and Adrian Bower from the Texas 
Pharmacy Board. Tr. 91. The Second DEA Visit was initiated so that 
Newkirk could obtain copies of prescription records and so that 
Investigator White could procure samples to confirm his suspicion 
that the bottles he encountered during the First DEA Visit actually 
did contain promethazine with codeine.\24\ Id. Newkirk testified 
that he recollected that conditions there, in his estimation, had 
improved to the extent that the pharmacy appeared cleaner, and there 
was a new pharmacy technician, Danielle Colvin (Colvin). Tr. 100. 
During the Second DEA Visit, Mr. Sanders conceded that he still had 
not prepared an initial inventory. Tr. 92.
---------------------------------------------------------------------------

    \24\ Newkirk testified that the samples taken during this visit 
confirmed that the syrup was promethazine with codeine. Tr. 95. 
However, the testing detected no evidence of adulteration. Id.
---------------------------------------------------------------------------

    DI Newkirk testified that he returned to the Respondent pharmacy 
for a third time on July 31, 2012 (Third DEA Visit). Tr. 93. 
According to Newkirk, the Third DEA Visit was prompted by a request 
from the Houston DEA Office to investigate an intelligence lead that 
emerged from an investigation that was unrelated to Newkirk's prior 
two visits to the Respondent. Id. Upon his arrival at the Third DEA 
Visit to the pharmacy (which he observed to be in a cleaner 
condition, with no regulatory violations he could recall),\25\ he 
encountered PIC Grape, and Pharmacy Technician Colvin. Id. Newkirk 
informed Grape and Colvin that he was there to reexamine 
prescription records, and that he ``wanted to verify [the 
pharmacy's] daily dispensing report to see the drugs that [it was] 
dispensing and [that he] also wanted to get a month's printout of 
[the pharmacy's] dispensing records so that [he] could see what 
doctors were prescribing and the patients that were getting the 
drugs filled at the pharmacy.'' Tr. 93-94. A subsequent review of 
the prescription records obtained that day revealed to DI Newkirk 
that the three controlled substances most frequently dispensed at 
the Respondent pharmacy were hydrocodone,\26\ alprazolam, and 
promethazine with codeine cough syrup. Tr. 96. Although Newkirk 
referred to the combination of these medications as ``the trinity 
cocktail,'' he provided no explanation for that term. Id.
---------------------------------------------------------------------------

    \25\ Tr. 94.
    \26\ DI Newkirk testified that the hydrocodone was dispensed at 
``two different strengths, 10/650 and 10/325, which are both the 
strongest available.'' Tr. 96.
---------------------------------------------------------------------------

    Newkirk's fourth and final visit to the Respondent pharmacy 
occurred on August 2, 2012 (Fourth DEA Visit), when he served the 
OSC/ISO that is the subject of the present proceedings and seized 
all controlled substances on board at that location into DEA 
custody.\27\ Tr. 94.
---------------------------------------------------------------------------

    \27\ Although DI Newkirk testified that on the Fourth DEA Visit 
he observed ``some unmarked bottles'' (Tr. 94), the record did not 
indicate what, if anything, was contained in those unmarked bottles. 
Similarly, although DI Newkirk testified to his understanding that 
on the day of the Fourth DEA Visit the Respondent pharmacy did not 
accept credit cards or Medicare or Medicaid Insurance plans, and was 
a cash-only business (Tr. 94-95, 102-03), the record did not contain 
competent expert testimony or sufficient contextual background 
information that would have rendered this information relevant to 
any issue that must be adjudicated in these proceedings. See Alvin 
Darby, M.D., 75 Fed. Reg. 26993, 26999 n.31 (2010) (``[U]nder the 
substantial evidence test, the evidence must `do more than create a 
suspicion of the existence of the fact to be established.''') 
(citing NLRB v. Columbian Enameling & Stamping Co., 306 U.S. 292, 
300 (1939)).
---------------------------------------------------------------------------

    Retired DI Newkirk presented as an impartial investigator whose 
testimony was sufficiently detailed, consistent, and plausible to be 
fully credited in this recommended decision.
    The Government also called Investigator Ronald White from the 
Texas Pharmacy Board. Investigator White testified that he has been 
an investigator with the Board for a little over two years. Tr. 111. 
Before becoming an investigator, White worked as an investigative 
analyst on a project with the federal government, a city marshal, 
and as a corrections officer. Id. In his current role, White 
testified that he investigates violations of the Texas Pharmacy Act, 
and that he has some diversion training and some college. Tr. 111-
12.

[[Page 26073]]

    The Government elicited testimony from Investigator White about 
his observations during the First DEA Visit. White testified that 
when he accompanied Newkirk to the Respondent pharmacy on May 8, 
2012, it was his first time on the premises, and although he went 
there looking to evaluate the pharmacy for recordkeeping violations, 
he ``ended up conducting an actual audit.'' Tr. 113-14.
    Investigator White testified as to the physical appearance of 
the Respondent pharmacy, which is situated in what White 
characterized as a ``strip shopping center.'' Tr. 114. According to 
White, a customer entering the establishment traverses a short 
hallway which leads to a ``small [waiting] area with just a few 
chairs.'' Id. To the right of the windows looking out to the parking 
lot is a wall with two small openings \28\ for prescription drop-off 
and pick-up, as well as a door opening into the back of the 
pharmacy. Id. Neither of the approximately 1.5 feet by 1.5 feet 
windows was adorned with a counter. Tr. 115. White said that bars on 
the outside door and windows of the pharmacy had been added to the 
structure after the First DEA Visit. Tr. 117. White testified that 
there were no other items available for sale as one might ordinarily 
see in a retail store. Tr. 116.
---------------------------------------------------------------------------

    \28\ During his testimony, Mr. Sanders indicated that the 
windows were designed to limit the ability of customers to see into 
the pharmacy area. Tr. 267.
---------------------------------------------------------------------------

    Upon arrival at the Respondent pharmacy for the First DEA Visit, 
White testified that he looked through one of the openings and 
observed that Pharmacy Technician-In-Training Tippie was filling 
prescriptions. Tr. 117-18, 189. White explained that ``[s]he 
appeared to be counting tablets into a bottle.'' Id. White stated 
that under ``our guidelines'' a pharmacy technician is not permitted 
to fill prescriptions without a pharmacist present. Tr. 118. He said 
it was also a violation of Texas Pharmacy Board regulations \29\ for 
a pharmacy technician-in-training to fill prescriptions without a 
pharmacist present. Tr. 117-18, 121. White testified that PIC Grape 
was not present when White observed Ms. Tippie filling 
prescriptions. Tr. 118. White testified that he believed that Mr. 
Sanders was in his office at the time and that Ms. Tippie offered to 
go and retrieve him. Tr. 118-19. After agreeing to bring back Mr. 
Sanders, Tippie returned to the fill counter and resumed her 
activity filling prescriptions.\30\ Tr. 119. White recalled that 
when he asked Tippie and Sanders about the current whereabouts of 
PIC Grape, they told him that he was likely on his way into the 
pharmacy. Tr. 190. White said PIC Grape did indeed appear later 
during this visit. Id.
---------------------------------------------------------------------------

    \29\ White could not provide the citation for the relevant 
regulation, saying ``I believe it's under 219, and I can't tell you 
the exact section.'' Tr. 124. 22 Tex. Admin. Code Sec.  291.32(d)(2) 
provides that the ``nonjudgmental and technical duties associated 
with the preparation and distribution of prescriptions drugs'' do 
not include duties enumerated under 22 Tex. Admin. Code Sec.  
291.32(c)(2) that must be performed by a pharmacist. Included among 
the enumerated pharmacist-only duties are ``interpreting drug 
orders,'' ``selection of drug products,'' and ``performing the final 
check of the dispensed prescription before delivery to the patient 
to ensure that the prescription has been dispensed accurately as 
prescribed.'' Id.
    \30\ During cross examination, White agreed although true that 
by filling prescriptions without a pharmacist present, Ms. Tippie 
was acting in violation of the regulations, no disciplinary actions 
have been lodged against her in this regard. Tr. 191.
---------------------------------------------------------------------------

    White observed that the bottles Ms. Tippie filled during the 
visit were unlabeled, but that he could tell by the markings on the 
pills that Tippie was filling hydrocodone prescriptions. Tr. 120. 
White also saw Ms. Tippie fill some labeled bottles for specific 
patients' prescriptions and fill some prepackaged unlabeled bottles 
for customers visiting the pharmacy later in the day. Id. White 
explained that ``[p]harmacies are allowed to prepackage some drugs 
if they know a particular quantity of pills or a particular drug and 
quantity is what a doctor prefers and [the pharmacy] fill[s] a lot 
of scrip[]s for that doctor.'' Tr. 121. Although supplying no 
authority for the proposition, White testified that when a pharmacy 
prepackages bottles, the label must ``have the name of the drug, the 
strength of the drug, the expiration date, the National Drug Code 
(NDC) number, and the quantity of pills that are in the container.'' 
Tr. 122-23. However, according to Investigator White, there were no 
labels on the bottles Ms. Tippie prepackaged. Tr. 123.
    White observed that Ms. Tippie was using the ``basket system for 
production,'' in which the wholesale bottle of the drug is placed in 
a small bread basket, along with the vial that they filled, the 
labels, and hard copies of the script. Id. Although, according to 
White, the ``basket'' system is not an uncommon procedure at 
pharmacies, the procedure being utilized at the Respondent pharmacy 
that day was infirm in that instead of keeping the hard copy 
prescriptions with the bottles, Mr. Tippie (who, at least in White's 
view, was not authorized to do this on her own) was filing the hard 
copy prescriptions away. Tr. 127-28. Ms. Tippie's explanation for 
this was that the prescriptions referred to in the hard copies had 
already been filled. Tr. 128. White testified the standard of 
practice for filling a prescription is to use a basket with hard 
copies of the prescriptions and the label on the wholesale 
manufacturer's bottle in order to identify the drug being filled. 
Tr. 127. When White pointed out to Ms. Tippie that it was a 
violation of Texas regulations for her to fill the prescriptions 
without any pharmacist present, she told him that Sanders had 
instructed her to fill the prescriptions, and explained that she was 
not familiar with all of the rules because she was just a 
technician-in-training. Tr. 126-27.
    White then checked the shelves where the Respondent stored its 
controlled substances. Id. White observed that there were eight-
ounce bottles of syrup on the shelf that did not have labels. Id. 
When White asked PIC Grape about the contents of the unlabeled 
bottles, the latter explained to the former that the bottles 
contained promethazine with codeine. Tr. 128-29. White testified 
(again, without supplying authority in support of his assertion) 
that it is a violation of Texas Board of Pharmacy regulations to 
store promethazine with codeine in an unlabeled bottle. Tr. 129.
    White discussed several photographs that he took during his 
visit to the Respondent pharmacy. The photographs were offered by 
the Government and received into evidence as Government Exhibit 6. 
Among the photographs were several depicting the unlabeled bottles 
which PIC Grape had informed White contained promethazine with 
codeine. Gov't Ex. 6, at 2-4; Tr. 131. White also identified a 
picture showing an open, empty medication bottle lying on the ground 
with a ``white speck that's just a little ways forward from that 
bottle.'' Gov't Ex. 6, at 6; Tr. 133. The investigators determined 
that the white speck was a tablet of hydrocodone. Tr. 133.
    White testified that he conducted an audit during the First DEA 
Visit.\31\ Tr. 134. White began by asking Mr. Sanders for an initial 
inventory, which according to him, a pharmacy is required to prepare 
for controlled and non-controlled substances on the first day it is 
open for business. Tr. 135.\32\ When White asked PIC Grape about the 
initial inventory, the latter replied that he was not sure that one 
had been prepared. Id. White then asked Sanders for Respondent's 
initial inventory. Id. Sanders told White that he also believed that 
an initial inventory had not been generated because he was not aware 
that one was required. Id. When White asked PIC Grape why an initial 
inventory had not been created, Grape referred White back to Mr. 
Sanders. Id. White also requested the Respondent's dispensing 
records for the drugs White planned to audit, along with any 
invoices, credits or returns, and any records of losses. Tr. 136.
---------------------------------------------------------------------------

    \31\ A copy of the written audit results completed by 
Investigator White was received into the record. Gov't Ex. 4; Tr. 
158. A Combined Receipt Log was included in the audit results, and 
consists of a compilation of orders placed by the Respondent for 
controlled substances from distributors. Gov't Ex. 4, at 2-7. Also 
included in the audit results was a Combined Sales Log, representing 
a combination of the Respondent's dispensing, losses, and transfers 
out. Gov't Ex. 4, at 8-9. The Computation Chart documents the 
results of the audit of the following drugs: hydrocodone 10/650; 
hydrocodone 10/325; alprazolam 2 mg; carisoprodol 350 mg; and 
promethazine with codeine. Gov't Ex. 4, at 1. The audit results 
demonstrate a shortage of 17,119 dosage units of hydrocodone 10/650, 
an overage of 5,890 dosage units of hydrocodone 10/325, a shortage 
of 2,363 dosage units of alprazolam 2mg, a shortage of 2,800 dosage 
units of carisoprodol, and a shortage of 4,767 dosage units of 
promethazine with codeine syrup. Id.
    \32\ While 21 C.F.R. Sec.  1304.11(b) requires that the initial 
inventory be taken on the date that the pharmacy ``first engages in 
the * * * dispensing of controlled substances,'' the initial 
inventory requirement under Texas regulations is slightly different. 
Under Texas regulations, the initial inventory must be taken ``on 
the opening day of business.'' 22 Tex. Admin. Code Sec.  
291.17(b)(1). However, regardless of the difference, the evidence 
establishes that the Respondent pharmacy did not take an initial 
inventory on either date, and thus was in violation of both federal 
and state regulations.
---------------------------------------------------------------------------

    White testified that in the course of conducting his audit, he 
consulted two DEA Report of Theft or Loss forms (DEA Form 106) 
documenting losses sustained during two break-ins to Respondent's 
pharmacy.\33\

[[Page 26074]]

Tr. 136-37. White said the forms ``were submitted by Top RX [to the 
DEA] in regards to the two nighttime burglaries.'' \34\ Tr. 138. 
White witnessed a conversation between Newkirk and Sanders regarding 
the accuracy of these forms, wherein Newkirk asked Sanders ``how 
could these records be accurate if you didn't have a starting point 
and an ending point to figure the numbers.'' Tr. 138-39. White 
testified that Sanders admitted that the numbers he reported in the 
DEA Form 106s were ``really just guesses or an estimate.'' \35\ Tr. 
140; see also Tr. 210.
---------------------------------------------------------------------------

    \33\ Two DEA 106 Report of Theft or Loss of Controlled 
Substances Forms prepared on behalf of the Respondent were received 
into evidence. Gov't Ex. 2; Tr. 211. The first form, dated April 25, 
2012 (April 25, 2012 Form), identifies the Respondent as the 
registrant, and states the date of theft as April 24, 2012. Gov't 
Ex. 2, at 2. The Form identifies the filer as the owner of the 
pharmacy, Jesse Sanders. Id. It lists the following controlled 
substances as being stolen: (1) 10,000 tablets of hydrocodone/APAP 
10-650; (2) 5,000 tablets of hydrocodone/APAP 10-500; (3) 5,000 
tablets of carisoprodol 350 mg; (4) 10,000 tablets of hydrocodone/
APAP 10-325; (5) 2,000 tablets of alprazolam 2 mg; and (6) 4,000 
tablets of hydrocodone/APAP 10-325. Id. The second form, dated May 
3, 2012 (May 3, 2012 Form), identifies the Respondent as the 
registrant, and states the date of theft as May 2, 2012. Gov't Ex. 
2, at 3. The Form identifies the filer as the owner of the pharmacy, 
Jesse Sanders. Id. It lists the following controlled substances as 
being stolen: (1) 473 ml of promethazine-codeine syrup; (2) 1,000 
tablets of hydrocodone/APAP 10-650; and (3) 500 tablets of 
hydrocodone/APAP 10-500. Id.
    \34\ Contrary to the assertion made in the Respondent's post-
hearing brief, no video tapes regarding the purported burglary were 
offered or admitted into the record. Resp't Brief at 10.
    \35\ There is no portion of a DEA Form 106 that queries the 
preparer to note whether the numbers provided are estimates or the 
result of a particular metric or method of calculation.
---------------------------------------------------------------------------

    White stated that he consulted the DEA Forms 106 when completing 
his audit, along with invoices from wholesale distributors, transfer 
forms, and dispensing records. Tr. 146. With regards to the 
invoices, White said that he consulted the invoices available on the 
pharmacy premises and also requested wholesale records from the 
distributors supplying Respondent with controlled substances. Id. 
White testified that fifty (50) invoices were missing from the 
pharmacy, but copies of the missing invoices were made available by 
the distributors. Tr. 148. White added that under Texas law there is 
a requirement that pharmacies must keep all invoices regarding 
purchases of controlled substances. Tr. 149. Regarding the missing 
invoices, Mr. Sanders placed the blame on his pharmacy technician-
in-training, explaining to Investigator White that Ms. Tippie ``had 
not taken care of the records properly.'' Tr. 150.
    White described the records he created during the First DEA 
Visit to the Respondent pharmacy. White testified to creating a 
computation chart, combined receipt log for all of the drugs that 
came into the pharmacy, and a combined sales log of all of the drugs 
that were dispensed from the pharmacy. Tr. 150. White explained that 
he created these records from the invoices gathered from the 
wholesalers and the Respondent. Tr. 153. White said that these 
records are in a format traditionally used by the Texas Pharmacy 
Board, and were prepared using an Access-based software program. Id. 
White testified that his supervisor reviewed the file he prepared to 
check its accuracy. Tr. 153-54.
    White testified that he physically counted the controlled 
substances on the premises. Tr. 154. A copy of the results from 
White's count was received into evidence. Gov't Ex. 4; Tr. 158. The 
counts were certified as being ``true and correct'' by PIC Grape. 
Tr. 154. White testified that he entered zero for the initial 
inventory of hydrocodone, with the concurrence of Mr. Sanders, and 
PIC Grape. Tr. 155. White stated that the audit revealed a shortage 
of hydrocodone 10/650, alprazolam 2 mg, carisoprodol 350 mg, and 
promethazine with codeine, and an overage of hydrocodone 10/325. 
Gov't Ex. 4, at 1; Tr. 157-59.
    White testified that he also requested what he characterized as 
an annual inventory \36\ from the Respondent during his first visit. 
Tr. 168. No annual inventory was produced and no one indicated to 
him what date they planned to conduct one. Id. White testified that 
the regulations require that an annual inventory be completed on May 
1 of every year, but the regulations allow pharmacies the 
flexibility to choose their own date. Id. White testified that in 
practice, a majority of pharmacies take an annual inventory on May 
1, but there are some exceptions. Tr. 170. Furthermore, like initial 
inventories, annual inventories require notarization within 72 hours 
of completion. Tr. 184. On cross-examination, White admitted that 
the pharmacy had only been open three or four months and that 
Respondent was not obligated to take the annual inventory on May 1. 
Tr. 196.
---------------------------------------------------------------------------

    \36\ The Respondent pharmacy had not yet been open for a year.
---------------------------------------------------------------------------

    White discussed the audit results with Mr. Sanders and PIC Grape 
on July 31, 2012. Tr. 159. When White pointed out the discrepancies, 
Grape stated that he was surprised that the number was so high for 
hydrocodone 10/650. Tr. 160.
    White then testified that he gave Mr. Sanders and PIC Grape two 
weeks to produce documents that could assist in accounting for the 
inconsistencies in the audit. Tr. 162. White advised that only 
authenticated documents, such as computer records from the 
pharmacy's software, would be helpful, and specifically informed 
Sanders and Grape that he could not accept an initial inventory at 
this point, in view of the fact that they had already told him that 
none had been prepared. Tr. 162, 197. White took all of the invoices 
obtained during the First DEA Visit with him at the conclusion of 
the audit. Tr. 197. Although White had afforded two weeks for the 
provision of additional documents, he waited for a total of four 
weeks before finalizing his audit, completing his case file and 
forwarding the file through his Texas Pharmacy Board channels. Tr. 
163, 198, 202. No additional documents were provided by the 
Respondent. Tr. 198.
    White returned to the Respondent pharmacy with DI Newkirk on May 
22, 2012 (this event was previously described as the Second DEA 
Visit) to obtain samples of promethazine with codeine. Tr. 163. 
White's desire to take samples of promethazine with codeine was 
based on Ms. Tippie's representation that the pharmacy was diluting 
it. Tr. 164. White stated that during the Second DEA Visit, an 
inspector took approximately twelve samples and White helped the 
inspector send the samples to a laboratory for testing. Tr. 164-65. 
The results of the testing \37\ indicated no dilution or 
adulteration. Tr. 192.\38\ While the samples were collected, White 
testified that once again he observed unlabeled bottles of 
promethazine with codeine. Tr. 166. White pointed this fact out to 
PIC Grape, who insisted that, at least in his opinion, putting the 
manufacturer's bottle of promethazine with codeine in front of the 
other bottles on the shelf was sufficient identification of the 
contents of the unmarked bottles. Id. During the Second DEA Visit, 
White also noted ``[t]hey had done some cleaning, but still things 
were not that unchanged from the first visit.'' Tr. 170.
---------------------------------------------------------------------------

    \37\ No lab reports were offered or admitted into the record.
    \38\ See also Tr. 95.
---------------------------------------------------------------------------

    White testified that he met with Ms. Tippie on May 23, 2012 at a 
restaurant. Tr. 171. According to White, DIs Newkirk and Hull had 
already interviewed Ms. Tippie, but White arranged a meeting to 
obtain more information. Id. White confirmed that at the time this 
conversation took place, Ms. Tippie was no longer employed by the 
Respondent. Tr. 174. Tippie said that on numerous occasions she 
observed Mr. Sanders and his father (Mr. Sanders, Sr.) diluting 
bottles of promethazine with codeine by mixing seven ounces of 
promethazine with codeine with one ounce of regular promethazine; 
and that this dilution would typically be done in Mr. Sanders' 
office. Tr. 171-72. Ms. Tippie said that Mr. Sanders ``would do it 
full strength'' initially and then would start diluting it down to 
the point that customers started complaining. Tr. 172. Ms. Tippie 
told White that it got to the point that customers would ask to 
taste the promethazine with codeine before they bought it. Id. 
Eventually, employing a unique application of the caveat emptor 
principle, Mr. Sanders directed Ms. Tippie that she was not to allow 
customers to taste the promethazine with codeine before purchasing 
it. Tr. 173. White testified that Ms. Tippie told him there were 
times when the pharmacy would run out of promethazine syrup before 
the day was over. Tr. 173-74.
    According to White, Ms. Tippie told him that the typical 
dilution routine involved diluting the mixture in Sanders' office as 
soon as it arrived at the Respondent pharmacy. Tr. 174. Ms. Tippie 
said that customers knew to come in the afternoon between 1:00 and 
1:30 p.m. when the promethazine with codeine would be ready for 
dispensing. Id. White recalls Ms. Tippie saying that she confronted 
Sanders about the dilutions and that they ``got into some type of 
argument, which led to her leaving.'' Tr. 174-75.
    White testified that Ms. Tippie told him there was also a 
``suspicious . . . set of doctors'' that the Respondent pharmacy 
accepted prescriptions from. Tr. 176. Ms. Tippie said that it was 
her observation that these doctors would prescribe the same

[[Page 26075]]

strength and quantity of pills to multiple patients. Id. White 
remembered Tippie saying that if an individual customer came in and 
did not agree with the strength or quantity of drug prescribed by 
one of these doctors, these doctors would easily approve an 
increase. Id. Tippie said that with some doctors, there was an 
understanding that it was acceptable for the Respondent to increase 
the dosage strength or quantity of the prescription, while other 
doctors required Tippie to contact them for approval. Tr. 177. On 
cross examination, White acknowledged that of the physicians 
referenced by Ms. Tippie, he was aware of only one, a Dr. Cruz, who 
had been the subject of professional discipline.\39\ Tr. 193. White 
also testified that he discussed several customers with Ms. Tippie. 
Tr. 176-77. Tippie told White that a caller would phone the pharmacy 
and inquire about whether a multitude of prescriptions for multiple 
patients were ready for pick up. Id. Then, the controlled substances 
dispensed in the names of the multiple patients would be provided to 
a single individual who would arrive to retrieve them. Tr. 177.
---------------------------------------------------------------------------

    \39\ During his testimony, Mr. Sanders stated that the 
Respondent pharmacy did not fill prescriptions for Dr. Cruz 
``because more or less even if we hear of any bad reputations of 
medical doctors, we decide not to fill those prescriptions.'' Tr. 
281.
---------------------------------------------------------------------------

    White recalled a discussion with Ms. Tippie regarding the prices 
charged for promethazine at the Respondent pharmacy. Tr. 177-78. Ms. 
Tippie advised White that the Respondent was charging $400.00 for a 
pint of promethazine,\40\ which, in White's experience, is many 
times higher than the price charged at a typical chain pharmacy, and 
is consistent, in White's experience, with the ``black market'' 
prices charged ``on the street,'' in Texas. Tr. 182-83. On cross 
examination, White testified that ``as far as [he is] aware,'' 
Respondent has continued to conduct business involving non-
controlled substances after DEA suspended Respondent's controlled 
substances registration. Tr. 194.
---------------------------------------------------------------------------

    \40\ Tr. 178.
---------------------------------------------------------------------------

    Investigator White presented as an impartial investigator who 
tendered testimony that was sufficiently detailed, plausible, and 
internally consistent to be fully credited in this recommended 
decision.
    The Government also presented the testimony of the Respondent's 
former Pharmacy Technician-in-Training, Heather Tippie. Tr. 213. Ms. 
Tippie testified that she graduated from Remington College, and that 
her major was in the pharmacy technician field.\41\ Tr. 214-15. 
Tippie testified that she became registered as a pharmacy 
technician-in-training while enrolled at Remington. Tr. 215. She 
explained that ``[t]hey registered me right then about three months 
into the program as a tech-in-training.'' Id. Tippie clarified that 
this registration was with the State of Texas. Id.
---------------------------------------------------------------------------

    \41\ Tippie testified that a college degree is not required to 
become a certified pharmacy technician-in-training in Texas. Tr. 
214.
---------------------------------------------------------------------------

    Tippie testified that she worked at the Respondent pharmacy for 
``three or four months'' as a pharmacy technician-in-training. Id. 
Ms. Tippie was unequivocal in her assertion that she never told Mr. 
Sanders that she was licensed. Tr. 233. Rather, Tippie stated that 
she told Mr. Sanders that she had taken her licensure test, but had 
not paid the $80 to have the ``tech[nician]-in-training'' title 
removed from her name. Id.
    Tippie related that she initially learned of this position from 
her mother, who was working at a restaurant when she encountered Mr. 
Sanders and his father (Mr. Sanders, Sr.) as patrons. Id. Tippie's 
mother, upon overhearing the two Sanders discussing their business, 
seized upon the opportunity to solicit employment for her daughter, 
who had training in the pharmacy technician field. Id. For her 
efforts, Tippie's mother received a business card from Mr. Sanders, 
and following separate interviews with Mr. Sanders and his father, 
Ms. Tippie was ultimately rewarded with a position at the Respondent 
pharmacy. Tr. 213-14. Ms. Tippie acknowledged that personal health 
issues had resulted in roughly a year of unemployment prior to 
obtaining work at the Respondent pharmacy. Tr. 213-14, 233.
    Ms. Tippie testified that while she was working at the 
Respondent pharmacy, she routinely dealt with several men she 
characterized as ``runners.'' Tr. 215. According to Tippie, these 
runners would ``come in several times throughout the week,'' and 
``drop off multiple prescriptions, 5, 10, sometimes 20 prescriptions 
all at the same time.'' Id. Tippie said that the prescriptions were 
not for the runners themselves, but for other people. Tr. 216. Along 
with the prescriptions, the runners brought the drivers' licenses of 
the individuals whose names appeared on the scrips. Id. Tippie 
testified that these runners came into the pharmacy ``once or twice 
a week, on the upwards of five times a week.'' Id.
    Tippie described her encounters with some of the runners in 
greater detail. One such runner, who called himself ``Mike,'' would 
frequently visit the pharmacy. Tr. 216-17. Tippie testified that on 
several occasions ``while I was outside smoking he would--we would 
talk, or in the pharmacy we would talk.'' Tr. 217. Tippie learned 
Mike's real name when Mike ``came into the pharmacy one day'' and 
confided to her ``that he had to actually see the doctor to get 
prescriptions for himself.'' Id. Mike told Tippie that his real name 
was ``Alfonso Jones,'' and presented his driver's license. Id. 
Tippie clarified that Mike told her that he ``had to see the doctor 
[himself] because [he] didn't have anybody else.'' Tr. 218. It was 
Ms. Tippie's opinion that Alfonso Jones, a/k/a ``Mike,'' is a drug 
dealer. Id. Her opinion was principally founded in a conversation 
between the two outside the pharmacy during a smoking break where he 
admitted as much. Tr. 219. During their conversation, Mike offered 
to Ms. Tippie ``that if I--if you ever need anything, you just let 
me know.'' Id. Mike also asked Ms. Tippie if she could ``slip him a 
couple extra'' pills when dispensing the drugs. Id. Ms. Tippie 
stated that she spoke several times with Mr. Sanders about her 
conversations with drug-dealer Mike. Id. Ms. Tippie testified that 
she told Mr. Sanders, ``that's what they're doing with the pills.'' 
Id. Ms. Tippie testified that Mr. Sanders responded, ``what they do 
outside once they leave the pharmacy, I can't do anything about it. 
It's none of my business.'' Id. Ms. Tippie said that PIC Grape was 
present ``[m]ost of the time'' when Mr. Sanders made these 
statements regarding the runners. Id. Ms. Tippie testified that she 
raised these concerns with Mr. Sanders every time the runners came 
in to the Respondent pharmacy, which was ``[f]ive times a week, just 
about every day that [Tippie] was there for three months.'' Tr. 220. 
Tippie testified that Mr. Sanders provided her with the same 
response each time she raised her concerns. Id.
    Tippie also testified that she overheard a remarkable 
conversation between Mike and Mr. Sanders. The interaction, as 
described by Ms. Tippie, proceeded this way:

    Mike had come in one day, and I was making photocopies of the 
driver's licenses, and he had said, I don't need the non-controls, 
if you want to just keep them, and I'll pay for them, that's okay 
with me because I just end up throwing them away anyway. And I kind 
of looked at [Mr. Sanders] and [PIC Grape], and he was told by [Mr. 
Sanders] that he had to take them because it would mess up our 
inventory.

Tr. 220-21. Ms. Tippie testified that after Sanders explained to 
Mike that he would have to take the non-controlled substances so 
that there would be no inventory anomaly, none of the participants 
to the conversation had anything further to add on the matter. Tr. 
222.

    Ms. Tippie testified that she also encountered a two-man runner 
team who employed the monikers ``Jay'' and ``Uncle Bo.'' Id. Jay and 
Uncle Bo worked in tandem, with Uncle Bo dropping off the 
prescriptions and Jay picking up the filled prescriptions. Id. 
During her testimony, Ms. Tippie recounted how the enterprise, based 
in a Dallas homeless shelter, was explained to her by Uncle Bo and 
Jay:

    Uncle Bo said they were running a homeless shelter. Jay told me 
what they did is they take these people at this homeless shelter to 
the doctors, and they pay them to get their prescriptions, and then 
they bring their prescriptions to a pharmacy. . . . Jay and Uncle Bo 
pay for the prescriptions, and they keep them. They don't give them 
to the people that are actually going to the doctor.

Tr. 222-23.

    Ms. Tippie testified that she approached Mr. Sanders and told 
him, ``you know, you know what they're doing with these. They're 
distributing them themselves out on the street.'' Id. Ms. Tippie 
recalled that Mr. Sanders replied, ``what they do is none of my 
business.'' Id. Ms. Tippie stated that PIC Grape overheard these 
conversations with Mr. Sanders. Tr. 223-24.
    Ms. Tippie stated that Jay and Uncle Bo were not the only 
runners who used the address of the Dallas homeless shelter to fill 
prescriptions. Tr. 224, 231. Sometimes Mike would use the address, 
as would another runner, who referred to himself as ``Wendell.'' Tr. 
224. Ms. Tippie said that Wendell came in to the Respondent 
pharmacy, and ``explained that he was running this homeless shelter 
along with

[[Page 26076]]

Uncle Bo.'' Id. Ms. Tippie testified Wendell would not deal with 
her, but ``would always ask for [Mr. Sanders or Mr. Sanders, Sr.]'' 
Tr. 224-25. Ms. Tippie estimated that ``a couple hundred 
[prescriptions] I guess'' came from the homeless shelter, and 
testified that she specifically raised her concerns about the common 
address of so many prescriptions with Mr. Sanders. Tr. 231.
    Ms. Tippie also testified that she also dealt with a runner who 
referred to himself as ``Polo.'' Tr. 225. Ms. Tippie said that Polo 
would bring in several prescriptions for other people and carried 
large quantities of cash. Id. Ms. Tippie stated that Polo ``made it 
very well-known that he had 2--, 3--, $4,000 on him at a time,'' and 
usually sought Xanax, hydrocodone, and promethazine with codeine. 
Tr. 225-26.
    Ms. Tippie testified that while working at the Respondent 
pharmacy she also grew suspicious of some prescribing physicians. 
For example, the pharmacy frequently filled prescriptions from a 
physician named Dr. Vandervoot.\42\ Tr. 234. Ms. Tippie testified 
Dr. Vandervoot was prescribing to Mike, as well as to other runners. 
Id. In addition, Tippie said she filled prescriptions from a 
practitioner named Dr. Okechku \43\ and also the U.S. Physicians 
Group. Tr. 235. Ms. Tippie testified that the runners dropped off 
prescriptions written by these physicians and the prescriptions were 
written for Xanax,\44\ hydrocodone, and promethazine with codeine. 
Tr. 226, 239. According to Ms. Tippie, the runners paid for these 
prescriptions in cash; never by credit card. Tr. 226.
---------------------------------------------------------------------------

    \42\ Ms. Tippie testified that while Mike brought prescriptions 
exclusively from Dr. Vandervoot's office, other runners, such as 
Polo, Jay, and Uncle Bo, also presented prescriptions from Dr. 
Vandervoot and other physicians to the pharmacy. Tr. 233-35.
    \43\ Ms. Tippie testified that Jay and Uncle Bo brought 
prescriptions from the offices of Dr. Okechku and Dr. Vandervoot. 
Tr. 234-35.
    \44\ Xanax is the brand name of a drug containing alprazolam. 6-
X Attorneys' Dictionary of Medicine X-125138. Alprazolam is a 
Schedule IV controlled substance pursuant to 21 C.F.R. Sec.  
1308.14(c)(1).
---------------------------------------------------------------------------

    In response to a question on cross-examination, Ms. Tippie 
testified that it was her understanding that as a licensed pharmacy 
technician-in-training, she bore a legal responsibility similar to a 
pharmacist to dispense only prescriptions written for a legitimate 
medical purpose. Tr. 236.\45\ Ms. Tippie testified that she ``called 
Dr. Vandervoot's office at the beginning to make sure that the 
prescriptions were a legitimate prescription.'' Id. Ms. Tippie said 
PIC Grape was present for this call because she was challenging a 
prescription written for Xanax and hydrocodone. Tr. 237. Ms. Tippie 
testified that she went through a similar process with prescriptions 
for Dr. Okechku, since his prescriptions were also for large amounts 
of controlled substances. Id.
---------------------------------------------------------------------------

    \45\ But see 22 Tex. Admin. Code Sec.  291.32(d) (2012). This 
Texas Administrative Code section on ``Personnel'' indicates that 
``[p]harmacy technicians and pharmacy technician trainees may 
perform only nonjudgmental technical duties associated with the 
preparation and distribution of prescription drugs.'' Id. Sec.  
291.32(d)(2)(C) (emphasis added). They ``may not perform any of the 
duties listed'' under the duties of a pharmacist, which most notably 
includes ``interpreting prescription drug orders.'' Id. Sec.  
291.32(d)(2)(A), (c)(2)(B). Thus, Texas law insulates pharmacy 
technicians in training from the sort of judgment calls Ms. Tippie 
referenced in her testimony, which would have required her to 
determine whether a prescription had been written for a legitimate 
medical purpose.
---------------------------------------------------------------------------

    Ms. Tippie also testified that she witnessed the dilution of 
promethazine with codeine at the Respondent pharmacy. Id.; Gov't Ex. 
5.\46\ Ms. Tippie testified that she observed Mr. Sanders and/or his 
father funneling pure promethazine into a promethazine with codeine 
mixture, and that this took place in Sanders' office or in the back 
room of the pharmacy. Gov't Ex. 5; Tr. 226. Ms. Tippie testified 
that when she asked the pair why the syrup was being diluted, 
``[t]hey said that it was cost effective because the promethazine 
with codeine was so expensive for a pint bottle.'' Tr. 227.
---------------------------------------------------------------------------

    \46\ The handwritten statement by Heather Tippie, dated May 23, 
2012, was later received into the record as Government Exhibit 5. 
Tr. 301. In it, she stated that Mr. Sanders and Mr. Sanders, Sr. 
``has [sic] mixed promethazine w/codine [sic] with regular 
promethazine many times.'' Gov't Ex. 5, at 1. She said that Sanders 
and Sanders, Sr. mixed ``one (1) ounce of promethazine with no 
codine [sic] . . . with seven (7) ounces of promethazine with codine 
[sic].'' Id. Tippie's statement also asserts that she had been 
working at the Respondent pharmacy since February, and she ``quickly 
learned that there is a relationship between [Sanders and Sanders, 
Sr.] and the staff at [D]r[. C]apastrano[`s] office.'' Id. Tippie 
also testified that the controlled substance prescriptions from each 
of these three practitioners fell into its own definable pattern. 
Id. at 1-2. If the patients came from ``Dr Vanderoots office they 
usually wrote for (120) one hundred and twenty of the pain meds and 
sixty (60) of the two (2) milligram Xanax. If the script came from 
Capistranos office (80) eighty Soma eighty (80) or ninety (90) pain 
meds and thirty (30) Xanax.'' Id. at 1. If the patient came from 
``Okechuku, the prescription is usually wrote [sic] for one hundred 
and fourty [sic] (140) or one hundred and fifty (150) pain pills and 
30 (thirty) flexerel.'' Id. at 2. Although the Government introduced 
this evidence, it presented no argument relative to the significance 
to be attached to these numbers.
---------------------------------------------------------------------------

    According to Ms. Tippie, the dilutions she observed occurred 
before the First DEA Visit on May 8, 2012, but not after that date. 
Tr. 226. Ms. Tippie testified that things changed because Mr. 
Sanders ``seemed a little bit worried, nervous about it.'' Tr. 226. 
Interestingly, although Mr. Sanders appeared concerned, his father, 
Sanders, Sr., according to Ms. Tippie, ``acted like it was no big 
deal. He said that they're just trying to scare us, that they don't 
have anything against us.'' Tr. 227.
    Ms. Tippie testified that on the Friday following the First DEA 
Visit, after working for Top RX for three months, she quit. Tr. 228, 
237. Ms. Tippie recalled telling PIC Grape before she left, ``what 
they're doing is wrong, and you know it as well as I do.'' Id. Ms. 
Tippie testified that PIC Grape answered ``best of luck, and you 
know, you got to do what you got to do.'' Id. Ms. Tippie then 
informed Mr. Sanders that she was leaving because ``ethically'' she 
could not stay at the pharmacy. Id. Ms. Tippie testified that Mr. 
Sanders asked her why she was quitting and why she felt she could no 
longer work at his pharmacy. Id. Ms. Tippie also testified that she 
talked with Mr. Sanders, Sr. that day as well. Tr. 229. Before Ms. 
Tippie left the pharmacy that day, Mr. Sanders (who had listened to 
her explain her reasons for leaving) paid her in cash for the hours 
she had worked. Id. On cross examination, Ms. Tippie stated that on 
the day she left the Respondent's employ, she was neither 
disgruntled, nor complaining, and had not been fired. Tr. 237. Ms. 
Tippie unequivocally declared that she had not been fired from the 
pharmacy, and denied ever receiving any documentation to the 
contrary. Tr. 228-29.
    Ms. Tippie met with a DEA investigator on May 23, 2012. Id. Ms. 
Tippie admitted that initially she was concerned about having a 
disciplinary action initiated against her license, but explained 
that she is no longer concerned since she now understands that she 
``didn't do anything wrong'' and that she ``was working under the 
supervision of a pharmacist as a tech[nician]-in-training.'' Tr. 
238. Ms. Tippie testified that she has never been promised anything 
in exchange for her cooperation with the Texas Pharmacy Board. Id. 
Ms. Tippie no longer works as a pharmacy technician-in-training and 
instead, is employed as a live-in caregiver. Tr. 233.
    The testimony presented by Pharmacy Technician-in-Training, 
Heather Tippie, was not without some causes for caution. Even by her 
own account, Ms. Tippie was well aware of ongoing activity that made 
her sufficiently alarmed that she raised her concerns with her PIC 
and her employer. Yet she continued to perform her part in the 
dance. She knew Mike was a drug dealer because he told her so, and 
had actual knowledge that the dangerous drugs she was doling out to 
drug-dealer-runners were never destined to reach the patients named 
in the scrips and the labels on the bottles. It is not unreasonable 
to extrapolate that had the Respondent not been visited by the 
authorities on the First DEA Visit, that Ms. Tippie would, even now, 
be blithely shelling out copious amounts of dangerous narcotics into 
the hands of those who brazenly sold them for profit. Ms. Tippie 
cannot fairly be described as an innocent bystander who fled to the 
authorities at the first sign of impropriety. The credible evidence 
of record supports the proposition that she cooperated with DEA 
because she felt she got caught. That said, the record contains 
scant bases for her to embellish her testimony. Although 
Investigator White testified that the Texas Pharmacy Board 
investigation concerning the Respondent pharmacy is still an open 
matter,\47\ he also acknowledged that there is currently no case 
currently pending against Ms. Tippie.\48\ Furthermore, the Texas 
Code that circumscribes the duties and responsibilities of a 
pharmacy technician-in-training virtually insulates her from 
judgment calls related to the dispensing of prescriptions. 22 Tex. 
Admin. Code Sec.  291.32(d). Ms. Tippie's testimony that she has 
been offered no

[[Page 26077]]

consideration for her cooperation \49\ stands unchallenged and 
unrefuted. When pressed on the issue, Tippie stated that while she 
was initially fearful of the status of her state license, she is no 
longer concerned ``[b]ecause I know that I didn't do anything wrong. 
I was working under the supervision of a pharmacist as a 
tech[nician]-in-training.'' Tr. 238. Ms. Tippie is not a DEA 
registrant, and in view of the State of Texas law regarding her 
responsibilities and obligations as a pharmacy technician-in-
training, her potential exposure to discipline at the hands of the 
Texas Board, at least on this record, appears minimal to 
nonexistent.\50\ Based on her subjective understanding of her 
potential disciplinary exposure, which is consistent with the state 
of the law, it would be difficult to conjure up a persuasive motive 
for her to fabricate testimony against the Respondent, its owner, 
and its PIC. Accordingly, notwithstanding its shortcomings, Ms. 
Tippie's hearing testimony was sufficiently detailed, consistent, 
and plausible to be deemed credible in this recommended decision.
---------------------------------------------------------------------------

    \47\ The representation in the Respondent's post-hearing brief 
that ``[Investigator] White confirmed . . . that there was no 
pending or planned disciplinary action against the Respondent by the 
[Texas Pharmacy Board]'' is not accurate. Resp't Brief at 8. 
Investigator White stated that the ``case is still open . . . '' Tr. 
191.
    \48\ Tr. 191.
    \49\ Tr. 238.
    \50\ The multiple representations in the Respondent's post-
hearing brief that Investigator White ``confirmed that a 
disciplinary action was pending against Heather Tippie's Pharmacy 
Tech license [sic]'' is simply contrary to the evidence of record. 
Resp't Brief at 9-10.
---------------------------------------------------------------------------

The Respondent's Evidence

    In support of its case on the merits, the Respondent presented 
the testimony of PIC Grape and Mr. Sanders. PIC Grape testified that 
he earned his Bachelor of Science degree in pharmacy from the Texas 
Southern School of Pharmacy, located in Houston, Texas, in 1963. Tr. 
242-43. He testified that he has been registered as a licensed 
pharmacist since 1963. Tr. 243. Although he was either unwilling or 
unable to provide much detail on the early phases of his pharmacist 
career,\51\ PIC Grape testified that he was the owner of a 
``medicine shop'' in Fort Worth, Texas from 1992 to 2000, and that 
he retired from a Walgreens pharmacy after ten years of employment 
there. Tr. 254. Grape testified that following his retirement in 
2010, he has filled in ``as needed'' as a pharmacist at Sam 
Healthcare Pharmacy in Arlington for two years. Tr. 252.
---------------------------------------------------------------------------

    \51\ Tr. 253-54.
---------------------------------------------------------------------------

    Grape admitted that during his career he had sustained a single 
disciplinary action against his license to practice pharmacy in 
2008. Tr. 244-45. The action arose when he simultaneously dispensed 
medications that, if taken together, would have caused an ``adverse 
reaction.'' Id. Grape testified ``[i]t was prescription that had 
anti-gout with an anti-fungus medication.'' Tr. 245. According to 
PIC Grape, the patient never ingested the medications and the Texas 
Pharmacy Board resolved the action by assessing a $1,000.00 fine 
against his license. Id. PIC Grape testified that his state pharmacy 
license is presently active and unrestricted, and that he has never 
been arrested, charged, or convicted of any crime. Tr. 245-46.
    When Respondent's counsel expanded questioning of the direct 
testimony to topics of continuing education and regulations, PIC 
Grape became increasingly difficult to understand. Although, at the 
outset of his testimony, Grape indicated that he is difficult to 
understand due to a diagnosis of sleep apnea,\52\ his demeanor 
presented less as sleepy than it did as profoundly confused, and his 
testimony was punctuated with long pauses. While some testimony was 
elicited from the witness regarding some continuing education 
classes he participated in, this was done with the highest degree of 
leading questions. Tr. 246, 249-50. Other than answering in the 
affirmative when asked if he took courses that were named in various 
documents he did not prepare and which were never offered into 
evidence, PIC Grape gave no indication that he possessed the 
capacity to explain any content from any of the classes he was asked 
about. Tr. 246-47, 249-50. The most Grape could contribute through 
his testimony was a simple ``yes'' in response to a series of 
leading questions, which included ``[i]s this a certification that 
you took a class called ``Update on Federal Controlled Substances,'' 
``[d]id you take that class,'' ``[d]id you complete it,'' ``did you 
get credit for it,'' ``[i]s this a certificate that shows that 
you've complied and got credit for that?'' Tr. 250. However, as this 
line of questioning progressed, PIC Grape agreed with the 
suggestions of the Respondent's counsel that he participated in 
courses entitled ``Pharmacist's Special Knowledge,'' ``Update on 
Federal Controlled Substances,'' and ``Prescription Errors and Their 
Legal Consequences.'' Tr. 249-50.
---------------------------------------------------------------------------

    \52\ Tr. 240.
---------------------------------------------------------------------------

    Notwithstanding the length of his experience as a pharmacist, 
the force of PIC Grape's testimony was significantly undermined when 
he struggled to testify about the requirements for issuing a valid 
prescription. PIC Grape seemed abjectly unable to focus. The 
following colloquy between PIC Grape and the Respondent's counsel is 
illustrative:
    Q As being a pharmacist licensed by the state of Texas, are you 
familiar with what's required in order to have a valid prescription?
    A Yes.
    Q What is that?
    A You file the written prescription in one blank--I mean one 
folder, and your control in another folder, and at that time the 
class two folder you file that one in that, so you had three 
different folders to file the prescription.

Tr. 255. PIC Grape, a pharmacist with decades of experience in the 
field, in an ultimately fruitless effort to clarify his answer on 
the subject, then offered the following:

    Oh, issuing a valid prescription? I apologize. A valid 
prescription would have the patient name, address, the name of the 
medication with a strength. You have the--whether a tablet or 
capsule, the quantity, and if it was a regular prescription--will, 
in a controlled prescription you have the DE number, the doctor's DE 
number with some type of--you can qualify some relation with the 
doctor to this patient, you know. That's what I did.

Id. Suffice it to say, that in all of this, there was no reference 
made to any requirement set forth in federal or state regulations. 
See 21 C.F.R. Sec.  1306.04.

    Since PIC Grape's unintelligible answer did contain the words 
``doctor,'' ``relation,'' and ``patient,'' he was invited to clarify 
that part of his response. This effort was similarly unrewarding. In 
response to this entreaty, PIC Grape testified ``[t]he patient or 
the--I mean the doctor know[s] his patient, and then he prescribe[s] 
medication according to his diagnosis or what he want[s] to give it 
for, that particular ailment.'' Tr. 255-56. To add additional 
discomfiture to an already disquieting dynamic, when asked to repeat 
his answer, PIC Grape responded as follows:

    The doctor relation with the patient is--he will prescribe 
medication that dictate[s] what he want[s] to give to the patient 
because the relationship is not just the patient, and either element 
he's think he will prescribe the medication for.

Tr. 256. Grape then added:

    Well, the patient and the doctor--the doctor is familiar with 
his patient. I'm trying to think of a term they use. But the two, 
the doctor know[s] his patient, and the patient know[s] the doctor, 
but the doctor know[s] the patient because he is prescribing 
medication for him.

Tr. 257. These statements indicate no understanding of any of the 
elements of what a pharmacist might be looking for in evaluating 
whether a particular controlled substance prescription reflects a 
valid physician-patient relationship, apart from a generalized 
feeling that PIC Grape appears generally to be in favor of such a 
relationship.

    In response to a direct question from the Respondent's counsel, 
Grape agreed that he has declined to fill a prescription in the past 
when he was ``unsure about--I was uneasy about the client or 
especially if I can't get in touch with the doctor to verify the 
prescription.'' Id. Grape explained his recollection of the 
prescription he turned down this way:

    It's something about the signature, mainly the signature, and 
the patient, the way I feel about the patient, whether I feel 
something is illegal or something, the reason why they have the 
prescription.

Id.

    Grape further testified in barely audible phrases that he would 
contact a doctor before making a decision about whether a 
prescription is valid, saying he would check ``if that's what he 
[the doctor] want[s], or did he write the prescription, or thing of 
that nature [sic].'' Tr. 258. When asked whether he would confirm 
that the patient is actually a patient of the doctor, Grape said 
incoherently:

    It depend[s]. I talked with them about it, but mainly if you 
think it's the wrong prescription, maybe you go to the phone and 
check the patient who knew, get out of the store place, you know, 
going to give you a chance. But if you have no chance, and you can't 
get in touch with the doctor, I just tell the patients I need to 
contact the doctor so I can verify the--I'll say, I'll give any 
answer

[[Page 26078]]

like I want to check something with the doctor before I can fill it.

Id.

    When asked ``how [he] might identify evidence of diversion,'' a 
truly bedrock competence inquiry at this level, and presumably a 
topic that would have been covered in at least one of the recent 
continuing education courses supposedly completed, he offered the 
following:

    Sometime[s] you can tell by the way the prescription is written, 
if it's written a certain way, the direction is written a certain 
way. And that way I normally pick them up. Then I'll sit with the 
patient, you know, observe the patient. And then that's the way I 
know to check it, the prescription, especially if it's out of, say 
the metro area while I'm working in Fort Worth, if out of town or 
something like that, or another state, that way I would recognize 
it.

Tr. 258-59.

    Since the witness was generally unable to clearly articulate the 
key elements of specific federal or state regulations that apply to 
pharmacies or pharmacists, the Respondent's counsel attempted to 
demonstrate that Grape at least knew where to look up the 
information that he was unable produce from memory. Tr. 259. 
However, even this attempted line of questioning proved futile. When 
asked by Respondent's counsel where he could find rules and 
regulations concerning the practice of pharmacy, Grape responded, 
``the Texas law book.'' Id. This ended the witness's direct 
testimony and the Government declined the opportunity to cross-
examine him. Tr. 259-60. PIC Grape concluded his testimony by 
saying, ``Okay. And I apologize for not understanding.'' Tr. 261.
    PIC Grape's testimony, to the extent it was not undermined by 
excessive leading on the part of the Respondent's counsel, was 
largely incoherent. To the extent that PIC Grape did understand the 
rudimentary questions he was asked, he was unable or unwilling to 
convey answers in a way that provided any level of confidence in his 
competence as a pharmacist. While there is no way from the record to 
discern the extent to which Grape's communication issues were 
genuine or contrived, it is worthy of note that none of the 
witnesses who testified about prior conversations with PIC Grape, 
indicated that communication with him was as problematic as it was 
when he took the stand. See, e.g., Tr. 18, 24, 36, 60 (Investigator 
Pinkerton), 70, 72, 86, 100 (DI Newkirk), 128-29, 131, 135, 155, 
159-60, 162-63, 166, 197 (Investigator White), 219, 228, (Ms. 
Tippie), 271-72, 282-83, 288-89, (Mr. Sanders). After PIC Grape's 
testimony, Sanders noted a respiratory ailment that required 
hospitalization about a month prior to the hearing,\53\ described 
Grape as ``a little nervous'' and offered the modest observation 
that ``sometimes his speech is kind of hard to understand.'' Tr. 
264. Irrespective of the origins of deficits in communication and 
understanding, it is undisputed that this witness was unable to 
articulate virtually anything helpful about the scrutiny he applies 
to executing his duties as a pharmacist on behalf of a DEA 
registrant. Either PIC Grape was feigning impairment, a behavior 
which would eviscerate his credibility, or he was genuinely bereft 
of any ability to relate his obligations as a pharmacist. In either 
event, his testimony did little, if anything to advance the 
Respondent's position, and if anything, was supportive of the 
revocation sought by the Government.
---------------------------------------------------------------------------

    \53\ Tr. 287.
---------------------------------------------------------------------------

    The Respondent also presented the testimony of its owner, Mr. 
Sanders. Mr. Sanders testified that he is not a pharmacist, but 
rather a licensed insurance broker with a bachelor's degree in 
finance and marketing and a master's degree in finance from the 
University of North Texas. Tr. 262. After his graduation in 2003, he 
worked as a mortgage broker at AmeriQuest Mortgage and a senior 
account executive at Century Payments. Id. Sanders emphasized on 
several occasions throughout his testimony that he has never been 
trained in the practice of pharmacy and that he is not a licensed 
pharmacist. Tr. 263, 268, 270, 273. When asked about his ``role as 
the owner of the [Respondent] pharmacy,'' Mr. Sanders explained ``I 
do the marketing, trying to find--you know, get business in, hiring 
and firing'' and that he had no ``intent to manage'' the ``day-to-
day operations.'' Tr. 265. In response to a question, Mr. Sanders 
testified that his ``business plan,'' was to hire experienced staff 
to run the business, such as PIC Grape. Tr. 265-66.
    Mr. Sanders testified that the Respondent pharmacy was issued a 
DEA COR on February 2, 2012. Tr. 267.\54\ According to Sanders, when 
the pharmacy first opened it had no controlled substances on hand. 
Tr. 267-68. Mr. Sanders's recollections regarding the status of the 
initial inventory issue is at some variance with the accounts of all 
the investigators who testified. As discussed, supra, Investigator 
Pinkerton testified that he asked Mr. Sanders and PIC Grape about an 
initial inventory and was told by the two men that they were unaware 
of the need to create such a document. Tr. 23-34. Investigator White 
recalled asking Mr. Sanders about an initial inventory during the 
First DEA Visit and being told by Mr. Sanders that one had never 
been generated. Tr. 134-35. DI Newkirk testified that, although he 
explained the requirement of preparing an initial inventory to 
Sanders and PIC Grape during DEA Visit 1, during DEA Visit 2, 
Sanders conceded that he had not yet prepared one. Tr. 92. Mr. 
Sanders, however, testified that an initial inventory had indeed 
been prepared, that the number on board had been recorded as zero, 
and that the document had been stored in the pharmacy's safe. Tr. 
268, 271-72, 293-94. When asked ``Did you tell either Mr. White or 
Mr. Pinkerton or Mr. Newkirk that you had [the initial inventory] in 
the safe?'' Mr. Sanders replied:

    \54\ Sanders initially said that he obtained the DEA COR on the 
same day that the pharmacy opened for business, which he indicated 
was February 6, 2012, but corrected to February 2, 2012, when 
prompted by the Respondent's counsel. Tr. 267.
---------------------------------------------------------------------------

    More or less . . . I wasn't exactly, you know, sure about [the] 
beginning inventory. I wasn't a licensed pharmacist. I know one was 
done, but in regards to the day-to-day operations, where all the--
everything was held, I wasn't 100 percent aware.

Tr. 268. When asked why a document reflecting an initial inventory 
was not provided to inspectors, Mr. Sanders attributed the misstep 
to ``organizational issues'' and Ms. Tippie, explaining that 
``anything regarding to [sic] inventories and invoices Heather 
Tippie mostly took care of that.'' Tr. 270. Sanders also testified 
that the investigators asked him questions, but he could not help 
them since he is ``not a pharmacist'' and only ``do[es] the 
marketing.'' Id. Mr. Sanders also allowed that he ``might have 
actually misunderstood, the investigator, where they are wanting 
[sic] to see some documentation of controls when we first opened, 
when we had indeed one.'' Tr. 272. Mr. Sanders explained that to the 
extent that Ms. Tippie was not responsible, the fault lied with PIC 
Grape:

    In regards to like the beginning inventory and what is required, 
see, I wasn't exactly sure. Learning the fact that it was done after 
the fact--like I said, I didn't do it. I'm not the licensed 
pharmacist--that it was actually done. But initially, I wasn't--like 
I said, I was--I didn't do the beginning inventory, so I wasn't 100 
percent aware of all of the logistical paperwork where it all--
that's why I hired [Grape] as well as Heather Tippie, where they can 
maintain that.

Tr. 272-73.

    Although Mr. Sanders testified that he spoke with his 
pharmacist-father, Mr. Sanders, Sr., who served as a consultant for 
the Respondent pharmacy,\55\ about the matters raised during the 
visits and investigations, and he knew that multiple authorities 
were looking for an initial inventory, he stated that he never asked 
his father for advice on this point. Tr. 274.
---------------------------------------------------------------------------

    \55\ Tr. 90.
---------------------------------------------------------------------------

    Even setting aside issues as to whether an initial inventory of 
controlled substances that complied with DEA regulations was ever 
prepared, Mr. Sanders testified that it is his understanding that an 
initial inventory (such as the one purportedly in the Top RX safe 
and never presented to the investigators) should be prepared before 
controlled substances are brought into a pharmacy, and should 
reflect zero substances. Tr. 268-69. This (incorrect) belief about 
the nature of the initial inventory required by DEA regulations 
persisted even to near the close of the hearing. Tr. 294-96. Sanders 
explained that the reason for this supposition is founded in his 
assessment that his pharmacy is ``not like a large wholesaler like--
large pharmacy like Walgreens or these larger places where they have 
a wholesaler.'' Tr. 269. According to Sanders:

    Being a smaller wholesaler, we had to call a lot of different 
wholesalers to either--we didn't meet their criteria. A lot of them 
wanted us to do a [$]50- to $60,000 opening order. So we didn't have 
any beginning inventory, so we sent the form in. We did a beginning 
inventory of zero, and we notated that, where it took us a week to 
two weeks to start actually getting [controlled substances] in.

    Id. During his testimony, Mr. Sanders never explained where he 
``sent the form in''

[[Page 26079]]

to, why he and PIC Grape repeatedly told the investigators seeking 
the document that no initial inventory had been generated, why he 
was unable to produce the form (whatever it was) to the 
investigators, or why the initial inventory requirements under 
federal or state law were somehow dependent on the size of a 
pharmacy. Id.
    Mr. Sanders, who testified that he attended a single day of a 
two-day conference about diversion in Houston, Texas with Grape 
approximately three weeks prior to the hearing,\56\ provided some 
testimony regarding his knowledge of some controlled substance 
dispensing prerequisites. He stated that in order to dispense a 
controlled substance, there must be a ``doctor-patient 
relationship'' and a ``legitimate medical purpose.'' Tr. 275. After 
some level of prompting, he explained that ``[i]f you have any 
question [sic], you would need to call a doctor or a staff to verify 
the prescription. You also need to verify DEA, DPS. Also, we also on 
all of our issuings [sic], if we have a new doctor that sends us 
prescriptions, we do a site visit . . . .'' Tr. 275-76. When asked 
about record-keeping regulations, Sanders said a pharmacy is 
``[r]equired to keep [its] inventory separated with controls and 
non-controls for the course of two years.'' Tr. 276.
---------------------------------------------------------------------------

    \56\ Tr. 283.
---------------------------------------------------------------------------

    When asked to detail some signs of potential diversion, Mr. 
Sanders provided the following:

    If a prescription is coming from a city 2- or 300 miles away, I 
believe that's a sign of diversion. If the prescription doesn't have 
the same signature--I guess the doctor doesn't have the same 
signature, it's not consistent, or the DEA isn't matching up, or I 
don't know.

Tr. 279-80. Focusing in on signature anomalies, Sanders explained 
that ``there's been situations . . . where doctors have got their 
scrip[] pads stolen, where if it's not a consistent signature, if a 
doctor usually signed his name on a scrip[], and someone actually 
writes it in English or regular letters, that's a sign of 
diversion.'' Tr. 281. When asked to describe additional signs of 
diversion, Sanders restated the geographic considerations he 
previously explained, and added ``[i]f you feel like you know, more 
or less it's not for a legitimate purpose, that could be a sign of 
diversion.'' Id. In explaining how he would determine that a 
prescription was not for a legitimate purpose, Mr. Sanders stated:

    I don't know. I wouldn't make that decision, honestly. You know, 
if something was ever brought to my attention, I would ask [PIC 
Grape] regarding it. But I wouldn't, you know, for a legitimate 
purpose--like I know for a fact that when I looked at the 
prescriptions that I know [PIC Grape] would look at it where if it 
didn't have a PRN pain or PRN, you know, muscle spasms, if it didn't 
have a diagnosis on most of the prescriptions, he didn't feel 
comfortable filling that prescription.

Tr. 282. When invited to supplement his answer with any additional 
reasons he could think of that should result in refusing to fill a 
prescription, Mr. Sanders added:

    And the patient doesn't have a legitimate doctor-patient 
relationship, and it's not for--let me see. If you suspect--I don't 
know any other reasons.
    Id.
    Mr. Sanders disavowed any knowledge of the runners described by 
Ms. Tippie. Tr. 280, 296. Further, Sanders did not even include drug 
dealer-runners presenting multiple prescriptions among the factors 
which would justify a refusal to dispense controlled substances. Id. 
According to Sanders, Ms. Tippie is a disgruntled employee and her 
testimony about the runners she dealt with at the pharmacy was 
merely a fabrication. Tr. 296. Although Mr. Sanders testified that 
he terminated Ms. Tippie for ``[i]ncompetence [and] laziness,'' 
``talking to customers outside on a regular basis,'' and because 
``she misrepresented herself as being a licensed pharmacy 
tech[nician],'' \57\ no paperwork to corroborate any of these claims 
was received (or even offered) into evidence. When asked if such 
paperwork exists, Mr. Sanders said that there ``[p]ossibly'' was 
such paperwork ``at the pharmacy.'' Tr. 297. Mr. Sanders's 
contention that Ms. Tippie misrepresented her status as a pharmacy 
technician-in-training is belied by the credible testimony of DI 
Newkirk, who observed Ms. Tippie's pharmacy technician-in-training 
certificate on the wall of the Respondent pharmacy. Tr. 107.
---------------------------------------------------------------------------

    \57\ Tr. 266.
---------------------------------------------------------------------------

    In similar fashion, Ms. Tippie's testimony regarding the 
diluting of promethazine with codeine was met by Mr. Sanders with a 
flat, unembellished denial. Tr. 264. When asked about various 
doctors whose prescriptions were filled at Top RX, Sanders responded 
that he had heard of and filled prescriptions for Dr. Vandervoot, 
but was confident that that the Respondent pharmacy had not filled 
prescriptions for Dr. Cruz because the pharmacy did not fill 
prescriptions written by doctors with ``bad reputations.'' Tr. 280, 
281.
    Regarding the shortages and overages described by the 
investigators who testified, Sanders offered that ``[w]e were a 
fairly new pharmacy, and we had overstock of alprazolam and some 
boxes close to the back.'' Tr. 285; Gov't Ex. 3. When asked to 
explain how it happened that the pharmacy came upon more alprazolam 
``in a box in the back with overstock'' that Sanders was unaware of 
until after the First DPS Audit with Investigator Pinkerton, Sanders 
again placed the blame on the Pharmacy Technician-in-Training 
Tippie. Mr. Sanders explained that ``[m]ore of the questions that 
Pinkerton--he was doing a lot of the questions towards Heather 
Tippie and regarding, you know, getting stock, counting drugs, and 
so she must have missed that.'' Tr. 286, 290.
    Mr. Sanders also testified that the Respondent pharmacy was 
victimized by two burglaries, and that he completed and submitted 
DEA Forms 106 documenting the events. Tr. 288. According to the 
information on the forms, the Respondent pharmacy reported 
burglaries occurring on April 24 and May 2, 2012. Gov't Ex. 2. The 
burglaries were thus reported to have occurred after the two DPS 
Audits, but before the First DEA Visit. Mr. Sanders acknowledged 
that he was unsure of the amounts of controlled substances reported 
as missing in the two DEA Forms 106, and conceded that he did not 
indicate that the amounts reported were estimates.\58\ Tr. 289-90. 
Mr. Sanders explained that he and PIC Grape analyzed surveillance 
videos and the amount of drugs they felt were on board at the time 
the break-in occurred when making these estimates. Tr. 288-89. To 
explain how these amounts were distilled into the forms, Mr. Sanders 
placed the responsibility on the shoulders of PIC Grape. According 
to Mr. Sanders, Grape was his only source of advice on the matter of 
completing the DEA Forms 106. Tr. 289.
---------------------------------------------------------------------------

    \58\ As discussed, supra, the Form 106 does not contain a query 
related to whether the loss amounts are estimates, or any place to 
designate the manner in which the losses are calculated.
---------------------------------------------------------------------------

    Suffice to say that during his testimony, Mr. Sanders did not 
excel in the area of accepting responsibility for the actions of his 
pharmacy. In addition to exhibiting a consistent pattern of blaming 
his then-pharmacy technician-in-training and his PIC at the hearing, 
when asked what, if any part of the pharmacy's shortcomings are his 
responsibility, Sanders had this to say: ``I'm responsible to the 
fact [sic] where if I see some issues, I should probably take 
action, maybe get new people.'' Tr. 273 (emphasis supplied).
    On the issue of whether remedial steps have been taken to guard 
against reoccurrence of any established deficiencies, Mr. Sanders 
testified that the Respondent pharmacy has now purchased new 
inventory management software, which ``is a system where we will 
track any incoming inventory we have coming in verifying the lot 
number, NDC.'' \59\ Tr. 277. Sanders indicated that there has been a 
marked improvement ``regarding where paperwork is stored, the 
cleanliness, [and] documentation.'' Tr. 273. Sanders also expressed 
a future intention to conduct site visits on the physicians who 
write controlled substance prescriptions handled by the pharmacy. 
Tr. 299. Furthermore, Sanders testified that the Respondent pharmacy 
will be more compliant in the future because he has replaced his 
pharmacy technician-in-training with a new, superior employee. Tr. 
293. Inasmuch as Mr. Sanders has provided his testimonial assurance 
that PIC Grape ``has been a great pharmacist,'' \60\ it is difficult 
to deem his representation that the Respondent pharmacy is in the 
process of recruiting a new pharmacist in charge, as a plan of 
remedial action. Tr. 287, 298. Stated differently, if his PIC has 
been a ``great pharmacist,'' then no cognizable remedial benefit to 
past regulatory deficiencies would be accrued by replacing him.
---------------------------------------------------------------------------

    \59\ Since the DEA imposed the OSC/ISO that is the subject of 
these proceedings, the system remains in use for non-controlled 
substances. Tr. 278.
    \60\ Tr. 298.
---------------------------------------------------------------------------

    The testimony of Mr. Sanders cannot be considered entirely 
credible. It makes little sense for Sanders to at once vouch for the 
skill and ability of PIC Grape while presenting his poor advice and 
incompetence as excuses for violations of the duties

[[Page 26080]]

required by the DEA registration and simultaneously offering up the 
recruitment of a new PIC a remedial step. Likewise, Sanders' 
testimony that Ms. Tippie was terminated without offering a shred of 
documentation to corroborate that action, profoundly undermines its 
reliability, and lends support to her version--that she walked out 
of her own volition from fear of the misconduct that permeated the 
establishment. Further, it was ludicrous and incredible for Mr. 
Sanders to maintain that he had been somehow duped by Ms. Tippie 
into believing that she was a licensed pharmacy technician (not a 
pharmacy technician-in-training) when her certificate reflecting her 
status was hanging on the wall of the Respondent pharmacy on the day 
that DI Newkirk conducted the First DEA Visit. Tr. 107. Similarly, 
Sanders' statements that he was not aware that an initial inventory 
was required (because he is not a trained pharmacist), stands in 
sharp contrast with his more recent insistence that such an 
inventory (reflecting zero controlled substances) was timely 
generated and lies undisturbed in his safe. Additionally, when asked 
to furnish details about important issues, Sanders offered 
marginally responsive testimony. In short, even apart from the 
reality that Mr. Sanders, as the owner of the Respondent pharmacy, 
had the most at stake in these proceedings, his testimony was not 
sufficiently consistent, detailed, or plausible to be afforded full 
credit in this recommended decision. Accordingly to the extent that 
Mr. Sanders' testimony conflicts with other credible evidence of 
record, it will not be afforded controlling weight.

The Analysis

    Pursuant to 21 U.S.C. Sec.  824(a)(4) (2006), the Administrator 
\61\ is permitted to revoke a COR if persuaded that the registrant 
``has committed such acts as would render . . . registration under 
section 823 . . . inconsistent with the public interest. . . .'' The 
following factors have been provided by Congress in determining 
``the public interest'':
---------------------------------------------------------------------------

    \61\ This authority has been delegated pursuant to 28 C.F.R. 
Sec. Sec.  0.100(b) and 0.104.
---------------------------------------------------------------------------

    (1) The recommendation of the appropriate State licensing board 
or professional disciplinary authority.
    (2) The [registrant's] experience in dispensing, or conducting 
research with respect to controlled substances.
    (3) The [registrant'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.

21 U.S.C. Sec.  823(f) (2006 & Supp. III 2010).

    ``[T]hese factors are considered in the disjunctive.'' Robert A. 
Leslie, M.D., 68 Fed. Reg. 15227, 15230 (2003). Any one or a 
combination of factors may be relied upon, and when exercising 
authority as an impartial adjudicator, the Administrator may 
properly give each factor whatever weight she deems appropriate in 
determining whether a registration should be revoked. Morall v. DEA, 
412 F.3d 165, 173-74 (DC Cir. 2005); JLB, Inc., d/b/a Boyd Drugs, 53 
Fed. Reg. 43945, 43947 (1988); David E. Trawick, D.D.S., 53 Fed. 
Reg. 5326, 5327 (1988); see also Joy's Ideas, 70 Fed. Reg. 33195, 
33197 (2005); David H. Gillis, M.D., 58 Fed. Reg. 37507, 37508 
(1993); Henry J. Schwarz, Jr., M.D., 54 Fed. Reg. 16422, 16424 
(1989). Moreover, the Administrator is ``not required to make 
findings as to all of the factors . . . .'' Hoxie v. DEA, 419 F.3d 
477, 482 (6th Cir. 2005); see also Morall, 412 F.3d at 173-74. The 
Administrator is not required to discuss consideration of each 
factor in equal detail, or even every factor in any given level of 
detail. Trawick v. DEA, 861 F.2d 72, 76 (4th Cir. 1988) (the 
Administrator's obligation to explain the decision rationale may be 
satisfied even if only minimal consideration is given to the 
relevant factors and remand is required only when it is unclear 
whether the relevant factors were considered at all). The balancing 
of the public interest factors ``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 . . . .'' Jayam Krishna-Iyer, M.D., 
74 Fed. Reg. 459, 462 (2009).
    In an action to revoke a registrant's COR, the DEA has the 
burden of proving that the requirements for revocation are 
satisfied. 21 C.F.R. Sec.  1301.44(e). The Government may sustain 
its burden by showing that the Respondent has committed acts 
inconsistent with the public interest. Jeri Hassman, M.D., 75 Fed. 
Reg. 8194, 8235-36 (2010). Once DEA has made its prima facie case 
for revocation of the registrant's COR, the burden of production 
then shifts to the respondent to present sufficient mitigating 
evidence to assure the Administrator that he or she can be entrusted 
with the responsibility commensurate with such a registration. 
Steven M. Abbadessa, D.O., 74 Fed. Reg. 10077, 10078, 10081 (2009); 
Medicine Shoppe-Jonesborough, 73 Fed. Reg. 364, 387 (2008); Samuel 
S. Jackson, D.D.S., 72 Fed. Reg. 23848, 23853 (2007); Morall, 412 
F.3d at 174; Humphreys v. DEA, 96 F.3d 658, 661 (3d Cir. 1996); 
Shatz v. U.S. Dept. of Justice, 873 F.2d 1089, 1091 (8th Cir. 1989); 
Thomas E. Johnston, 45 Fed. Reg. 72311, 72312 (1980). ``[T]o rebut 
the Government's prima facie case, [the respondent] is required not 
only to accept responsibility for [the established] misconduct, but 
also to demonstrate what corrective measures [have been] undertaken 
to prevent the reoccurrence of similar acts.'' Jeri Hassman, M.D., 
75 Fed. Reg. at 8236. Normal hardships to the practitioner and even 
to the surrounding community that are attendant upon the lack of 
registration are not relevant considerations. Linda Sue Cheek, M.D., 
76 Fed. Reg. 66972, 66973 (2011); Abbadessa, 74 Fed. Reg. at 10078; 
see also Gregory D. Owens, D.D.S., 74 Fed. Reg. 36751, 36757 (2009).
    The Agency's conclusion that past performance is the best 
predictor of future performance has been sustained on review in the 
courts, Alra Labs. v. DEA, 54 F.3d 450, 452 (7th Cir. 1995), as has 
the Agency's consistent policy of strongly weighing whether a 
registrant who has committed acts inconsistent with the public 
interest has accepted responsibility and demonstrated that he or she 
will not engage in future misconduct.\62\ Mackay v. DEA, 664 F.3d 
808, 822 (10th Cir. 2011); Hoxie, 419 F.3d at 483.
---------------------------------------------------------------------------

    \62\ See, e.g., Ronald Lynch, M.D., 75 Fed. Reg. 78745, 78749 
(2010) (Respondent's attempts to minimize misconduct held to 
undermine acceptance of responsibility); George Mathew, M.D., 75 
Fed. Reg. 66138, 66140, 66145, 66148 (2010); East Main Street 
Pharmacy, 75 Fed. Reg. 66149, 66165 (2010); George C. Aycock, M.D., 
74 Fed. Reg. 17529, 17543 (2009); Abbadessa, 74 Fed. Reg. at 10078; 
Krishna-Iyer, 74 Fed. Reg. at 463; Medicine Shoppe, 73 Fed. Reg. at 
387.
---------------------------------------------------------------------------

    While the burden of proof at this administrative level is a 
preponderance-of-the-evidence standard, see Steadman v. SEC, 450 
U.S. 91, 100-01 (1981), the Administrator's factual findings will be 
sustained on review so long as they are supported by ``substantial 
evidence.'' Hoxie, 419 F.3d at 481. Thus, ``the possibility of 
drawing two inconsistent conclusions from the evidence'' does not 
limit the Administrator's ability to find facts on either side of 
the contested issues in the case. Shatz, 873 F.2d at 1092; Trawick, 
861 F.2d at 77. However, in rendering a decision, the Administrator 
must consider all ``important aspect[s] of the problem,'' such as a 
Respondent's defense or explanation that runs counter to the 
Government's evidence. Wedgewood Vill. Pharmacy v. DEA, 509 F.3d 
541, 549 (DC Cir. 2007); Humphreys, 96 F.3d at 663. The ultimate 
disposition of the case must be in accordance with the weight of the 
evidence, not simply supported by enough evidence to justify, if the 
trial were to a jury, a refusal to direct a verdict when the 
conclusion sought to be drawn from it is one of fact for the jury. 
Steadman, 450 U.S. at 99 (internal quotation marks omitted).
    Regarding the exercise of discretionary authority, the courts 
have recognized that gross deviations from past agency precedent 
must be adequately supported. Morall, 412 F.3d at 183. Mere 
unevenness in application standing alone does not, however, render a 
particular discretionary action unwarranted. Chein v. DEA, 533 F.3d 
828, 835 (DC Cir. 2008) (citing Butz v. Glover Livestock Comm. Co., 
411 U.S. 182, 188 (1973)), cert. denied, 555 U.S. 1139 (2009). It is 
well-settled that since the Administrative Law Judge has had the 
opportunity to observe the demeanor and conduct of hearing 
witnesses, the factual findings set forth in a recommended decision 
are entitled to significant deference. Universal Camera Corp. v. 
NLRB, 340 U.S. 474, 496 (1951). Thus, a recommended decision 
constitutes an important part of the record that must be considered 
in the Administrator's decision. Morall, 412 F.3d at 179. However, 
any recommendations set forth herein regarding the exercise of 
discretion are not binding on the Administrator and do not limit the 
exercise of that discretion. 5 U.S.C. Sec.  557(b) (2006); River 
Forest Pharmacy, Inc. v. DEA, 501 F.2d 1202, 1206 (7th Cir. 1974); 
Attorney General's Manual on the Administrative Procedure Act 8 
(1947).

[[Page 26081]]

Factors 1 and 3: The Recommendation of the Appropriate State Licensing 
Board or Professional Disciplinary Authority; Any Conviction Record 
Under Federal or State Laws Relating to the Manufacture, Distribution, 
or Dispensing of Controlled Substances

    Regarding Factor 1, it is undisputed that the Respondent 
pharmacy holds a valid license in the State of Texas. Stip. of Fact 
2. It is likewise undisputed that, although the Texas Pharmacy Board 
has been intimately involved in multiple visits and audits conducted 
in connection with these proceedings, there is no recommendation 
from any state licensing board in this matter. However, the fact 
that a state has not acted against a registrant's medical license is 
not dispositive in this administrative determination as to whether 
continuation of its registration is consistent with the public 
interest. Patrick W. Stodola, M.D., 74 Fed. Reg. 20727, 20730 
(2009); Jayam Krishna-Iyer, 74 Fed. Reg. at 461. It is well-
established Agency precedent that a ``state license is a necessary, 
but not a sufficient condition for registration.'' Leslie, 68 Fed. 
Reg. at 15230; John H. Kennedy, M.D., 71 Fed. Reg. 35705, 35708 
(2006). DEA bears an independent responsibility to determine whether 
a registration is in the public interest. Mortimer B. Levin, D.O., 
55 Fed. Reg. 9209, 8210 (1990). The ultimate responsibility to 
determine whether a registration is consistent with the public 
interest has been delegated exclusively to the DEA, not to entities 
within state government. Edmund Chein, M.D., 72 Fed. Reg. 6580, 6590 
(2007), aff'd, Chein v. DEA, 533 F.3d 828 (DC Cir. 2008), cert. 
denied, 555 U.S. 1139 (2009). Congress vested authority to enforce 
the CSA in the Attorney General, not state officials. Stodola, 74 
Fed. Reg. at 20375. Thus, on these facts, the absence of a 
recommendation by a state licensing board does not weigh for or 
against a determination as to whether continuation of the 
Respondent's DEA certification is consistent with the public 
interest. See Roni Dreszer, M.D., 76 Fed. Reg. 19434, 19444 (2011) 
(``[T]he fact that the record contains no evidence of a 
recommendation by a state licensing board does not weigh for or 
against a determination as to whether continuation of the 
Respondent's DEA certification is consistent with the public 
interest.'').
    Regarding the third factor (convictions relating to the 
manufacture, distribution, or dispensing of controlled substances), 
the record in this case does not contain evidence that the 
Respondent, its owner, or any pharmacist or key employee of the 
pharmacy has been convicted of (or charged with) a crime related to 
the manufacture, distribution, or dispensing of controlled 
substances. DEA administrative proceedings are non-punitive and ``a 
remedial measure, based upon the public interest and the necessity 
to protect the public from those individuals who have misused 
controlled substances or their DEA COR, and who have not presented 
sufficient mitigating evidence to assure the [Administrator] that 
they can be trusted with the responsibility carried by such a 
registration.'' Jackson, 72 Fed. Reg. at 23853; Leo R. Miller, M.D., 
53 Fed. Reg. 21931, 21932 (1988). Where evidence in a particular 
case reflects that the Respondent has acquired convictions relating 
to the manufacture, distribution, or dispensing of controlled 
substances, those convictions must be carefully examined and weighed 
in the adjudication of whether the issuance of a registration is in 
the public interest. 21 U.S.C. Sec.  823(f).
    Although the standard of proof in a criminal case is more 
stringent than the standard required at an administrative 
proceeding, and the elements of both federal and state crimes 
relating to controlled substances are not always co-extensive with 
conduct that is relevant to a determination of whether registration 
is within the public interest, evidence that a registrant has been 
convicted of crimes related to controlled substances is a factor to 
be evaluated in reaching a determination as to whether he or she 
should be entrusted with a DEA certificate. The probative value of 
an absence of any evidence of criminal prosecution is somewhat 
diminished by the myriad of considerations that are factored into a 
decision to initiate, pursue, and dispose of criminal proceedings by 
federal, state, and local prosecution authorities. See Robert L. 
Dougherty, M.D., 76 Fed. Reg. 16823, 16833 n.13 (2011); Dewey C. 
Mackay, M.D., 75 Fed. Reg. 49956, 49973 (2010) (``[W]hile a history 
of criminal convictions for offenses involving the distribution or 
dispensing of controlled substances is a highly relevant 
consideration, there are any number of reasons why a registrant may 
not have been convicted of such an offense, and thus, the absence of 
such a conviction is of considerably less consequence in the public 
interest inquiry''), aff'd, Mackay v. DEA, 664 F.3d 808 (10th Cir. 
2011); Ladapo O. Shyngle, M.D., 74 Fed. Reg. 6056, 6057 n.2 (2009). 
Therefore, the absence of criminal convictions (Factor 3), like the 
absence of a recommendation from any state licensing authorities 
(Factor 1), militates neither for nor against the revocation sought 
by the Government.

Factors 2 and 4: The Respondent's Experience in Dispensing Controlled 
Substances, and Compliance With Applicable State, Federal, or Local 
Laws Relating to Controlled Substances

    Regarding Factor Two, in requiring an examination of a 
registrant's experience in dispensing controlled substances, 
Congress acknowledged that the qualitative manner and the 
quantitative volume in which a registrant has engaged in the 
dispensing of controlled substances may be significant factors to be 
evaluated in reaching a determination as to whether a registrant 
should be (or continue to be) entrusted with a DEA COR. In some 
cases, viewing a pharmacy registrant's actions against a backdrop of 
how it has performed activity within the scope of its certificate 
can provide a contextual lens to assist in a fair adjudication of 
whether continued registration is in the public interest. In this 
regard, however, the Agency has held that this factor can be 
outweighed by acts held to be inconsistent with the public interest. 
Jayam Krishna-Iyer, 74 Fed. Reg. at 463; see also Jeri Hassman, 
M.D., 75 Fed. Reg. 8194, 8235 (2010) (acknowledging Agency 
precedential rejection of the concept that conduct which is 
inconsistent with the public interest is rendered less so by 
comparing it with a respondent's legitimate activities which 
occurred in substantially higher numbers); Paul J. Cargine, Jr., 63 
Fed. Reg. 51592, 51560 (1998) (``[E]ven though the patients at issue 
are only a small portion of Respondent's patient population, his 
prescribing of controlled substances to these individuals raises 
serious concerns regarding [his] ability to responsibly handle 
controlled substances in the future.''). Moreover, in Cynthia M. 
Cadet, M.D., 76 Fed. Reg. 19450, 19450 n.1 (2011), the Agency 
determined that existing List I precedent \63\ holding that 
experience related to conduct within the scope of the COR sheds 
light on a practitioner's knowledge of applicable rules and 
regulations, would not be applied to cases where intentional 
diversion allegations were sustained. The Agency's approach in this 
regard has been sustained on review. Mackay, 664 F.3d at 819.
---------------------------------------------------------------------------

    \63\ See, e.g., Volusia Wholesale, 69 Fed. Reg. 69409, 69410 
(2004).
---------------------------------------------------------------------------

    On the present record, that portion of Factor Two relating to 
the Respondent's knowledge of his obligations as DEA registrant 
presents a troubling picture. Under Texas law, a non-pharmacist 
owner of a community pharmacy \64\ may receive advice from a PIC, 
but the ``responsibility for all administrative and operational 
functions of the pharmacy'' rests with him alone. 22 Tex. Admin. 
Code Sec.  291.32(b). The Respondent's owner, Mr. Sanders, holds a 
degree in finance and marketing and is licensed, not as a 
pharmacist, but as an insurance broker. Tr. 262. Mr. Sanders has 
repeatedly averred that he is not a pharmacist. Tr. 262-63, 268-71, 
273; Resp't Brief at 11. Indeed, apart from attendance for one day 
of a two-day seminar, the record has no evidence that Sanders has 
training in any aspect of drug diversion. Tr. 283. When asked by the 
Respondent's counsel to detail his understanding of diversion and 
signs of diversion, Mr. Sanders' testimony was disjointed and 
confusing. Tr. 275-76, 279-82. Yet, when compared to the testimony 
of PIC Grape, Sanders' answers were a model of clarity. See e.g., 
Tr. 258-61. To the extent these two men have the knowledge and/or 
skill set to protect the closed regulatory system against diversion, 
it is not supported at all in this record.
---------------------------------------------------------------------------

    \64\ See 22 Tex. Admin. Code Sec.  291.17(b).
---------------------------------------------------------------------------

    The manner in which controlled substances were dispensed at the 
Respondent pharmacy impacts both Factor Two (experience in 
dispensing) and Factor Four (compliance with laws related to 
controlled substances). To effectuate the dual goals of conquering 
drug abuse and controlling both legitimate and illegitimate traffic 
in controlled substances, ``Congress devised a closed regulatory 
system making it unlawful to manufacture, distribute, dispense, or 
possess any controlled substance except in a manner authorized by 
the CSA.'' Gonzales v. Raich, 545 U.S. 1, 13 (2005). Agency 
precedent has consistently held that the registration of a pharmacy 
may be revoked as the result of the unlawful activity of the

[[Page 26082]]

pharmacy's owners, majority shareholders, officers, managing 
pharmacist or other key employee. EZRX, LLC, 69 Fed. Reg. 63178, 
63181 (1988); Plaza Pharmacy, 53 Fed. Reg. 36910 (1988).
    Under the regulations, ``[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.'' 21 C.F.R. Sec.  
1306.04(a). Under this language, a pharmacist has a duty ``to fill 
only those prescriptions that conform in all respects with the 
requirements of the [CSA] and DEA regulations, including the 
requirement that the prescribing practitioner be properly 
registered.'' Electronic Prescriptions for Controlled Substances, 75 
Fed. Reg. 16236, 16266 (2010). In short, a pharmacist has a 
``corresponding responsibility under Federal law to dispense only 
lawful prescriptions.'' Liddy's Pharmacy, L.L.C., 76 Fed. Reg. 
48887, 48895 (2011).
    The corresponding responsibility to ensure the dispensing \65\ 
of valid prescriptions extends to the pharmacy itself. Medicine 
Shoppe-Jonesborough, 73 Fed. Reg. 364, 384 (2008) (finding that a 
respondent pharmacy was properly charged with violating 
corresponding responsibility); see also United Prescription 
Services, Inc., 72 Fed. Reg. 50397, 50407-08 (2007) (same); see Drug 
Enforcement Administration, Issuance of Multiple Prescriptions for 
Schedule II Controlled Substances, 72 Fed. Reg. 64921, 69424 (2007) 
(referring to a pharmacy's corresponding responsibility); see also 
Drug Enforcement Administration, Role of Authorized Agents in 
Communicating Controlled Substance Prescriptions to Pharmacies, 75 
Fed. Reg. 61613, 61617 (2010) (referring to a pharmacy's 
``corresponding responsibility regarding the dispensing of 
controlled substances.''); EZRX, LLC, 69 Fed. Reg. at 63181 (``DEA 
has issued orders to show cause and subsequently revoked the DEA 
registrations of pharmacies which failed to fulfill their 
corresponding responsibility in Internet prescribing operations.'') 
(emphasis added). Settled Agency precedent has interpreted this 
corresponding responsibility as prohibiting the filling of a 
prescription where the pharmacist or pharmacy ``knows or has reason 
to know'' that the prescription is invalid. Bob's Pharmacy & 
Diabetic Supplies, 74 Fed. Reg. 19599, 19601 (2009) (citing Medicine 
Shoppe-Jonesborough, 73 Fed. Reg. at 381 (quoting Medic-Aid 
Pharmacy, 55 Fed. Reg. 30043, 30044 (1990))); see also United 
Prescription Services, Inc., 72 Fed. Reg. 50397, 50407-08 (2007) 
(finding violation of corresponding responsibility where pharmacy 
``had ample reason to know'' that the practitioner was not acting in 
the usual course of professional practice).
---------------------------------------------------------------------------

    \65\ Under the CSA, ``[t]he term `dispense' means to deliver a 
controlled substance to an ultimate user . . . pursuant to the 
lawful order of, a practitioner . . . .'' 21 U.S.C. Sec.  802(10). 
The Respondent's registration as a retail pharmacy authorizes the 
dispensing of controlled substances to ultimate users. 21 C.F.R. 
1301.13(e).
---------------------------------------------------------------------------

    DEA has interpreted the ``legitimate medical purpose'' feature 
of the corresponding responsibility duty ``as prohibiting a 
pharmacist from filling a prescription for a controlled substance 
when he either knows or has reason to know that the prescription was 
not written for a legitimate medical purpose,'' and has been equally 
consistent in its admonishment that ``[w]hen prescriptions are 
clearly not issued for legitimate medical purposes, a pharmacist may 
not intentionally close his eyes and thereby avoid [actual] 
knowledge of the real purpose of the prescription.'' Sun & Lake 
Pharmacy, Inc., 76 Fed. Reg. 24523, 24530 (2011); Liddy's Pharmacy, 
L.L.C., 76 Fed. Reg. at 48895; East Main Street Pharmacy, 75 Fed. 
Reg. 66149, 66163 (2010); Lincoln Pharmacy, 75 Fed. Reg. 65667, 
65668 (2010); Bob's Pharmacy, 74 Fed. Reg. at 19601.
    The Agency does not require omniscience. Carlos Gonzalez, 76 
Fed. Reg. 63118, 63142 (2011) (citing Holloway Distrib., 72 Fed. 
Reg. 42118, 42124 (2007)). However, when the circumstances 
surrounding the presentation of a prescription would give rise to 
suspicion in a ``reasonable professional,'' there is a duty to 
``question the prescription[].'' Bertolino, 55 Fed. Reg. at 4730. 
Though initially framed as a ``reasonable professional'' standard, 
the Agency has considered the duty to discharge the corresponding 
responsibility by evaluating the circumstances in light of what 
would be considered suspicious by a ``reasonable pharmacist.'' East 
Main Street Pharmacy, 75 Fed. Reg. at 66165; see also Winn's 
Pharmacy, 56 Fed. Reg. 52559, 52561 (1991). Accordingly, a 
pharmacist or pharmacy may not dispense a prescription in the face 
of a red flag (i.e., a circumstance that does or should raise a 
reasonable suspicion as to the validity of a prescription) unless he 
or it takes steps to resolve the red flag and ensure that the 
prescription is valid. Id. Because Agency precedent limits the 
corresponding responsibility to circumstances which are known or 
should have been known, Sun & Lake Pharmacy, Inc., 76 Fed. Reg. at 
24530, it follows that, to show a violation of a corresponding 
responsibility, the Government must establish that: (1) the 
Respondent dispensed a controlled substance; (2) a red flag was or 
should have been recognized at or before the time the controlled 
substance was dispensed; and (3) the question created by the red 
flag was not resolved conclusively prior to the dispensing of the 
controlled substance. See Sun & Lake Pharmacy, 76 Fed. Reg. at 24532 
(finding that pharmacy violated corresponding responsibility where 
it took no steps to resolve red flags prior to dispensing controlled 
substances). Necessarily, the conclusiveness of the resolution will 
be judged in light of a reasonable pharmacist standard. East Main 
Street Pharmacy, 75 Fed. Reg. at 66165. The steps necessary to 
resolve the red flag conclusively will perforce be influenced by the 
nature of the circumstances giving rise to the red flag.
    When considering whether a pharmacy has violated its 
corresponding responsibility, the Agency considers whether the 
entity, not the pharmacist, can be charged with the requisite 
knowledge. See United Prescription Services, 72 Fed. Reg. 50397, 
50407 (Respondent pharmacy violated corresponding responsibility 
because ``an entity which voluntarily engages in commerce [to] other 
States is properly charged with knowledge of the laws regarding the 
practice of medicine in those States.''). See also Pharmboy Ventures 
Unlimited, Inc., 77 Fed. Reg. 33770, 33772 n.2 (2012) (``DEA has 
long held that it can look behind a pharmacy's ownership structure 
`to determine who makes decisions concerning the controlled 
substance business of a pharmacy.' ''); S&S Pharmacy, Inc., 46 Fed. 
Reg. 13051, 13052 (1981) (the corporate pharmacy acts through the 
agency of its PIC). Knowledge obtained by the pharmacists and other 
employees acting within the scope of their employment may be imputed 
to the pharmacy itself. See U.S. v. One Parcel of Land, 965 F.2d 
311, 316 (7th Cir.1992) (``Only knowledge obtained by corporate 
employees acting with the scope of their employment is imputed to 
the corporation.'').
    The Texas state standard is in substantial accord with the DEA 
regulations. The Texas Pharmacy Board has been authorized to 
regulate the practice of pharmacy within the state, including the 
regulation of issues related to conduct and competence. Tex. Occ. 
Code Sec.  551.02. Under applicable state regulations, a pharmacist 
is required to ``exercise sound professional judgment with respect 
to the accuracy and authenticity of any prescription drug order 
dispensed.'' 22 Tex. Admin. Code Sec.  291.29(a). The regulation 
echoes the federal standard, requiring that a pharmacist ``make 
every reasonable effort to ensure that any prescription drug order, 
regardless of the means of transmission, has been issued for a 
legitimate medical purpose by a practitioner in the course of 
medical practice. . . .'' Id. Sec.  291.29 (b). The regulations 
further indicate that, ``a pharmacist shall not dispense a 
prescription drug if the pharmacist knows or should have known that 
the order for such drug was issued without a valid pre-existing 
patient-practitioner relationship.'' Id. Reasons for a pharmacist 
suspecting that a prescription was written in the absence of a valid 
patient-practitioner relationship include ``the manner in which the 
prescriptions are . . . received by the pharmacy,'' ``the number of 
prescriptions authorized on a daily basis by the practitioner,'' and 
whether ``a disproportionate number of patients of the practitioner 
receive controlled substances.'' Id. Sec.  291.29 (c).
    The preponderant evidence of record establishes that, on a 
regular basis, the Respondent pharmacy filled controlled substance 
prescriptions presented by ``runners.'' The Respondent's owner and 
PIC both had actual knowledge, through their pharmacy technician-in-
training, Heather Tippie, that individuals bearing made-up names 
such as ``Uncle Bo,'' ``Jay,'' and ``Wendell,'' were providing 
bundles of fraudulent scrips with photocopies of driver's licenses 
meant to give the appearance that the patients themselves had been 
at the pharmacy, and receiving dangerous controlled substances for 
distribution and profit. These ``runners'' would ``drop off multiple 
prescriptions, 5, 10, sometimes 20 prescriptions all at the same 
time.'' Tr. 215. Tippie explained that these visits occurred ``once 
or twice a week, on the upwards of five times a week.'' Tr.

[[Page 26083]]

216. Ms. Tippie credibly testified that she repeatedly informed Mr. 
Sanders and his PIC that the Respondent pharmacy was essentially 
serving as a drug supplier to unapologetic street dealers, and that 
Sanders turned a blind eye. In fact, when directly told about the 
criminal enterprise his business was facilitating, and the 
admissions made to his own employee by one of the perpetrators, Mr. 
Sanders dismissed Ms. Tippie's concerns, stating ``what they do 
outside once they leave the pharmacy, I can't do anything about it. 
It's none of my business.'' Tr. 219. The owner and PIC at the 
Respondent pharmacy received actual knowledge that controlled 
substances were being provided to drug dealers and acted neither to 
stop it, nor to even investigate the report by its employee. At a 
minimum, to the extent that Ms. Tippie's statements to Sanders and 
Grape constituted a red flag, it should have stopped all controlled 
substance dispensing until resolved. To the more likely extent that 
Sanders and Grape knew well that the runners (one of whom offered to 
forgo collection of non-controlled substances) were drug traders, 
their conduct (and so the conduct of the Respondent pharmacy) 
amounted to intentional diversion. It would be difficult to conjure 
up a more egregious example of a registrant pharmacy violating its 
legal responsibility to ensure that the controlled substances being 
dispensed were pursuant to legitimate prescriptions. Facilitating a 
steady stream of dangerous controlled substances into the hands of 
willing drug traffickers reflects negatively on the Respondent's 
experience in dispensing controlled substances (Factor Two) and the 
Respondent's lack of compliance with applicable federal and state 
laws relating to controlled substances (Factor Four). This willing 
complicity with obvious drug dealing is sufficient, even standing 
alone, to meet the Government's burden to demonstrate acts as would 
render the Respondent's continued registration inconsistent with the 
public interest. 21 U.S.C. Sec.  824(a)(4).
    Record evidence related to the Respondent's recordkeeping also 
impacts upon Factor Four. ``Recordkeeping is one of the central 
features of the CSA's closed system of distribution. . . . A 
registrant's accurate and diligent adherence to this obligation is 
absolutely essential to protect against the diversion of controlled 
substances.'' Satinder Dang, M.D., 76 Fed. Reg. 51424, 51429 (2011) 
(internal punctuation and citations omitted). There is no question 
that the maintenance of accurate records by registrants is critical 
to DEA's ability to fulfill its obligations to regulate controlled 
substances. As previously held by the Agency, ``[r]ecordkeeping is 
one of the CSA's central features; a registrant's accurate and 
diligent adherence to this obligation is absolutely essential to 
protect against the diversion of controlled substances.'' Paul H. 
Volkman, 73 Fed. Reg. 30630, 30644 (2008), aff'd, Volkman, 567 F.3d 
at 224 (DEA Administrator's reliance on recordkeeping violations in 
denying COR application specifically upheld). Accurate and reliable 
records are an obvious bedrock safeguard that is essential to ensure 
the integrity of the closed regulatory system. A truly closed system 
requires that certain records and inventories be kept by all those 
registrants who either generate or take custody of controlled 
substances in any phase of the distribution chain until they reach 
the ultimate user. Stated differently, where a registrant is unable 
to produce the documentation required by the regulations to 
establish the integrity of his function in the closed system, the 
Agency cannot determine whether diversion has occurred. The Agency 
has held that a registrant's ``failure to maintain accurate 
records'' is in and of itself sufficient to support revocation. Id. 
That said, the Agency has also declined to revoke a registration 
where non-egregious recordkeeping errors were acknowledged by the 
pharmacy PIC and remedied promptly. Terese, Inc., d/b/a/Peach 
Orchard Drugs, 76 Fed. Reg. 46843, 46848 (2011).
    DEA regulations require a registrant pharmacy to ``take an 
inventory of all stocks of controlled substances on hand on the date 
[it] first engages in the . . . dispensing of controlled 
substances.'' 21 C.F.R. Sec.  1304.11(b). The initial inventory 
provides a vital baseline by which the controlled substances handled 
by the registrant can be accounted for. The DEA regulations require 
that this inventory take place on the day when controlled substance 
dispensing commences. Id. Texas regulations require that new 
community pharmacies ``take an inventory on the opening day of 
business'' of ``all controlled substances.'' 22 Tex. Admin. Code 
Sec.  291.12(b)(1)(A) (emphasis supplied); see also Tr. 23, 134-35; 
but see 183-84 (Investigator White mistakenly indicated that the 
initial inventory is required under Texas regulations on the first 
day a pharmacy begins dispensing). The Texas regulations further 
provide that ``[i]n the event the . . . pharmacy commences business 
with [no controlled substances] on hand, the pharmacy shall record 
this fact as the initial inventory.'' Id. at Sec.  291.12(b)(2).
    The evidence of record establishes that the Respondent did not 
conduct an initial inventory of its controlled substances on either 
the first day the pharmacy began dispensing (federal requirement) 
controlled substances or on its first day of business (state 
requirement). Investigator Pinkerton (DPS) and Investigator White 
(Texas Pharmacy Board) both testified that each sought an initial 
inventory from the Respondent and that none was provided. Tr. 23-24, 
134-35. Pinkerton credibly testified that PIC Grape told him he 
believed (incorrectly) that no such inventory was required until a 
pharmacy had been open for six months, and Mr. Sanders indicated 
that he did not have one because he did not realize that one was 
required. Tr. 24. Investigator White credibly testified that Mr. 
Sanders told him that no such inventory was prepared. Tr. 135.
    DI Newkirk likewise testified that he requested an initial 
inventory from Mr. Sanders and PIC Grape ``on multiple occasions'' 
during both the First and Second DEA Visits. Tr. 86-87, 92. Newkirk 
recounted that Sanders and Grape indicated that they did not have an 
initial inventory during the course of the First DEA Visit, and at 
the Second DEA Visit, Mr. Sanders told Newkirk that ``he had still 
not made one.'' Tr. 86, 92.
    In view of the multiple, credible accounts from multiple 
investigators from multiple agencies which consistently relate that 
Mr. Sanders and PIC Grape unwaveringly maintained that no initial 
inventory was created or available, Mr. Sanders' assertion (first 
heard during his testimony at the hearing) that he had in fact 
prepared an initial inventory and that it resided (inexplicably) in 
the Respondent's safe,\66\ is simply unpersuasive.
---------------------------------------------------------------------------

    \66\ Tr. 268, 271-72; Respt's Brief at 4-5.
---------------------------------------------------------------------------

    In addition to requiring an initial inventory, DEA regulations 
provide that ``[e]very registrant required to keep records pursuant 
to Sec.  1304.03 \67\ shall maintain on a current basis a complete 
and accurate record of each substance * * * imported, received, 
sold, delivered, exported, or otherwise disposed of by [it], except 
that no registrant shall be required to maintain a perpetual 
inventory.'' 21 C.F.R. Sec.  1304.21(a). Additionally, 21 C.F.R. 
Sec.  1304.22 requires dispensers of controlled substances to 
maintain records of: ``the number of units or volume of such 
finished form dispensed, including the name and address of the 
person to whom it was dispensed, the date of dispensing, the number 
of units or volume dispensed, and the written or typewritten name or 
initials of the individual who dispensed or administered the 
substance on behalf of the dispenser.'' Likewise, the regulations 
require that the date on which controlled substances are actually 
received serve as the receipt date for purposes of records and 
accountability. Id. Sec.  1304.21(d).
---------------------------------------------------------------------------

    \67\ Section 1304.03 provides that ``[e]each registrant shall 
maintain the records and inventories and shall file the reports 
required by this part, except as exempted by this section.'' 
Respondent does not contend that any of the Sec.  1304.03 exemptions 
apply in this case.
---------------------------------------------------------------------------

    The evidence presented at the hearing demonstrates serious 
recordkeeping deficiencies on the part of the Respondent pharmacy. 
When DPS Investigator Pinkerton first went to the Respondent 
pharmacy on March 13, 2012, the only records of the pharmacy's 
dispensing were hard copies of prescriptions written; no dispensing 
logs were provided. Tr. 25-26. Further, Investigator White testified 
that when he requested invoices from the Respondent's distributors, 
he discovered that the Respondent pharmacy was missing fifty 
invoices \68\ in violation of Texas Pharmacy Board regulations 
requiring pharmacies to keep a record of ``suppliers' invoices of 
controlled substances.'' 22 Tex. Admin. Code Sec.  291.55(d)(4). 
This regulation was further violated by the lack of annotations on 
the Respondent's invoice records, as observed by DEA DI Newkirk. Tr. 
74. Under Texas regulations, pharmacies are required to maintain
---------------------------------------------------------------------------

    \68\ Tr. 148.

suppliers' invoices of . . . controlled substances; a pharmacist 
shall verify that the controlled drugs listed on the invoices were 
actually received by clearly recording his/her initials and the 
---------------------------------------------------------------------------
actual date of receipt of the controlled substances.

22 Tex. Admin. Code Sec.  291.34(h)(4).

    The Respondent's violations of recordkeeping regulations are 
further

[[Page 26084]]

demonstrated by the inconsistent results of numerous audits 
conducted by state and federal investigators. Three audits conducted 
over a period of two months revealed multiple shortages and overages 
of controlled substances. Tr. 35, 41, 87, 157-59. These findings 
demonstrate that, at best, the Respondent's recordkeeping was so 
deplorably insufficient that there was no accurate means of 
ascertaining the precise quantity of controlled substances that the 
Respondent pharmacy was handling. See Bill Lloyd Drug, 64 Fed. Reg. 
1823, 1824 (1999) (``The shortages and overages revealed by the 
accountability audit show that Respondent does not keep complete and 
accurate records of its controlled substance handling as required by 
21 U.S.C. 827 and 21 CFR 1304.21.''); see also Alexander Drug 
Company, Inc., 66 Fed. Reg. 18299, 18303 (2001) (shortages or 
overages constitute violations of 21 C.F.R. Sec.  1304.21 and 21 
U.S.C. Sec.  827); Ellis Turk, M.D., 62 Fed. Reg. 19603, 19605 
(1997) (same). Where, as here, a pharmacy registrant is abjectly 
unable to account for ``extraordinary quantities'' of controlled 
substances, the Agency has held that ``it has committed acts which 
render its registration `inconsistent with the public interest' 
[within the meaning of] 21 U.S.C. Sec.  824(a)(4).'' Ideal Pharmacy 
Care, Inc. d/b/a/Esplande Pharmacy, 76 Fed. Reg. 51415, 51416 
(2011).
    As the owner of the Respondent pharmacy, Mr. Sanders is 
responsible for ``establish[ing] policies and procedures regarding 
maintenance, storage, and retrieval of records in a data processing 
system such that the system is in compliance with state and federal 
requirements.'' Id. Sec.  291.32(b)(5). His consistent insistence 
that the true fault lies with the pharmacy technician-in-training he 
hired is simply unavailing. Likewise, even acknowledging that the 
PIC has defined state-law responsibilities in the pharmacy,\69\ as 
discussed, supra, a registrant pharmacy bears the responsibility for 
the actions of its managing pharmacist or other key employees. EZRX, 
69 Fed. Reg. at 63181; Plaza Pharmacy, 53 Fed. Reg. 36910 (1988); 
see Neil Labs, Inc. v. Ashcroft, 217 F.Supp.2d 80, 87-88 (D.D.C 
2002).
---------------------------------------------------------------------------

    \69\ 22 Tex. Admin. Code Sec. Sec.  291.29(a)(2)(E), (G), 
291.32(c)(2)(E).
---------------------------------------------------------------------------

    As a result of its abysmal recordkeeping practices, the 
Respondent violated both federal and Texas laws relating to 
controlled substances to a degree that consideration of the evidence 
under Factor Four gravely and negatively impacts in favor of the COR 
revocation sought by the Government.
    DI Newkirk credibly testified that during the First DEA Visit he 
came across evidence that the Respondent pharmacy was ``transferring 
controlled substances to a pharmacy in Houston by the name of RX Max 
Pharmacy'' with inadequate documentation. Tr. 75. Specifically, 
Newkirk testified that the transfer records fell short of the 
regulatory requirements in that:

    They didn't contain the bottle size, the full name of the 
product or the amount of tablets or amount of liquid in the product 
[and] the receipts did not annotate who received the product, the 
date it was received or the correct amount received.

Id.

    The CSA provides that ``every registrant . . . dispensing a 
controlled substance or substances shall maintain, on a current 
basis, a complete and accurate record of each . . . substance . . . 
received, sold, delivered, or otherwise disposed of by [it]. . . .'' 
21 U.S.C. Sec.  827(a)(1). The DEA regulations likewise require the 
registrant to ``maintain on a current basis a complete and accurate 
record of each such substance . . . received, sold, delivered . . . 
or otherwise disposed of by [it]. . . .'' 21 C.F.R. Sec.  
1304.21(a). When recording the date of distribution or transfer, the 
regulations require the registrant to use ``the date on which the 
substances are actually . . . distributed . . . or otherwise 
transferred . . . as the date of receipt or distribution of any 
documents of transfer (e.g., invoices or packing slips).'' Id. Sec.  
1304.21(d).
    In Texas, the Administrative Code mandates pharmacies authorized 
to distribute controlled substances to other pharmacies \70\ to 
maintain records of the transfer of controlled substances contained 
in Schedules III-V.\71\ 22 Tex. Admin. Code Sec.  291.34(g)(3). 
These records must document: (1) ``the actual date of 
distribution;'' (2) ``the name, strength, and quantity of controlled 
substances distributed;'' (3) ``the name, address, and DEA 
registration number of the distributing pharmacy;'' and (4) ``the 
name, address, and DEA registration number of the pharmacy, 
practitioner, or other registrant to whom the controlled substances 
are distributed.''

Id.

    \70\ 22 Tex. Admin. Code Sec.  291.34(g).
    \71\ The Respondent's DEA COR is limited to controlled 
substances contained in Schedules III-V. Stip. Of Fact 1.
---------------------------------------------------------------------------

    In neglecting its responsibilities in correctly completing the 
required transfer documents, the Respondent was in violation of both 
federal and Texas laws relating to controlled substances and, under 
Factor Four, provides additional support to the COR revocation 
sought by the Government.
    The Government also presented testimony at the hearing regarding 
alleged violations of labeling regulations. DI Newkirk credibly 
testified that he observed unmarked bottles containing promethazine 
with codeine, hydrocodone, and alprazolam. Tr. 75-76. Photographs 
depicting unlabeled bottles of promethazine with codeine were 
received into the record. Gov't Ex. 6, at 2-4; Tr. 131. The record 
evidence clearly establishes that the investigators who entered the 
Respondent pharmacy encountered controlled substances in unlabeled 
containers. Under 21 C.F.R. Sec.  1302.03(a), ``[e]ach commercial 
container of a controlled substance . . . shall have printed on the 
label the symbol designating the schedule in which such controlled 
substance is listed.'' However, the scope of this section is defined 
by 21 U.S.C. Sec.  825,\72\ which, by its terms, applies to 
distribution. But see Paul Weir Battershell, N.P., 76 Fed. Reg. 
44359, 44367 (2011) (finding practitioner dispensing controlled 
substances to patients to be in violation of 21 C.F.R. Sec.  
1302.03(a) by storing ``controlled substances in unlabeled 
prescription bottles''). However, inasmuch as the Government has not 
sought reliance upon 21 C.F.R. Sec.  1302.03(a), and in light of the 
other violations of federal and state controlled substance 
regulations that were established on the record, there is no need to 
determine whether the discovery of controlled substances in unmarked 
containers at the Respondent pharmacy constituted a violation of DEA 
regulations.
---------------------------------------------------------------------------

    \72\ See 21 C.F.R. Sec.  1302.01 (``Requirements governing the 
labeling and packaging of controlled substances pursuant to sections 
1305 and 1008(d) of the Act (21 U.S.C. 825 and 958(d)) are set forth 
generally by those sections and specifically by the sections of this 
part.'')
---------------------------------------------------------------------------

    The regulations cited by the Government \73\ provide that:
---------------------------------------------------------------------------

    \73\ Gov't Brief at 15.

The pharmacist filling a prescription for a controlled substance 
listed in Schedule III, IV, or V shall affix to the package a label 
showing the pharmacy name and address, the serial number and date of 
initial filling, the name of the patient, the name of the 
practitioner issuing the prescription, and directions for use and 
cautionary statements, if any, contained in such prescription as 
---------------------------------------------------------------------------
required by law.

21 C.F.R. Sec.  1306.24(a) (emphasis supplied): see also 22 Tex. 
Admin. Code Sec.  291.33 (itemizes the information required on a 
label at the ``time of delivery of the drug''). However unwise the 
practice of maintaining controlled substances languishing in bottles 
unencumbered by correct labels, the plain language of the DEA 
regulation mandates specified label requirements that ripen when the 
pharmacist is ``filling a prescription.'' 21 C.F.R. Sec.  
1306.24(a). Inasmuch as there is no record evidence that any 
controlled substances were dispensed by the Respondent pharmacy 
without appropriate labels, this allegation stands as unsustainable.

    The evidence convincingly establishes that the Respondent 
pharmacy, through its owner, PIC, and its (then) directed employee, 
provided large amounts of controlled substances to runners (i.e., 
drug dealers) who supplied obviously illegitimate prescriptions. The 
poor recordkeeping and lack of knowledge regarding federal and state 
regulatory requirements predictably yielded staggering overages and 
shortages. The Respondent's owner and PIC did not know the amount of 
controlled substances on board, and had no way to ascertain how much 
should have been on board, for multiple audits and when completing 
reports of theft or loss. Even if the Respondent's dubious version 
of the facts were given some credence, it would only demonstrate 
that no one at the Respondent pharmacy knew what was going on, or 
what was required by federal and state regulations. This is hardly a 
scenario that engenders confidence. Clearly, application of Factors 
Two and Four militate powerfully and persuasively in favor of the 
COR Revocation the Government seeks.

[[Page 26085]]

Factor 5: Such Other Conduct Which May Threaten the Public Health and 
Safety

    The fifth statutory public interest factor directs consideration 
of ``[s]uch other conduct which may threaten the public health and 
safety.'' \74\ 21 U.S.C. Sec.  823(f)(5) (emphasis supplied). 
Existing Agency precedent has long held that this factor encompasses 
``conduct which creates a probable or possible threat (and not only 
an actual [threat]) to public health and safety.'' Dreszer, 76 Fed. 
Reg. at 19434 n.3; Aruta, 76 Fed. Reg. at 19420 n.3; Boshers, 76 
Fed. Reg. 19403 n.4; Dreszer, 76 Fed. Reg. at 19386-87 n.3. Agency 
precedent has generally embraced the principle that any conduct that 
is properly the subject of Factor Five must have a nexus to 
controlled substances and the underlying purposes of the CSA. 
Terese, 76 Fed. Reg. at 46848; Tony T. Bui, M.D., 75 Fed. Reg. 
49979, 49989 (2010) (prescribing practices related to a non-
controlled substance such as human growth hormone may not provide an 
independent basis for concluding that a registrant has engaged in 
conduct which may threaten public health and safety); cf., Paul Weir 
Battershell, N.P., 76 Fed. Reg. 44359, 44368 n.27 (2011) (although a 
registrant's non-compliance with the Food, Drug, and Cosmetic Act is 
not relevant under Factor Five, consideration of such conduct may 
properly be considered on the narrow issue of assessing a 
respondent's future compliance with the CSA).
---------------------------------------------------------------------------

    \74\ Inexplicably, that portion of the Government's post-hearing 
brief designated as a discussion of Factor Five deals exclusively 
with the exercise of discretion. Gov't Brief at 16-18.
---------------------------------------------------------------------------

    Similar ``catch all'' language is employed by Congress in the 
CSA related to the Agency's authorization to regulate controlled 
substance manufacturing and List I chemical distribution, but the 
language is by no means identical. 21 U.S.C. Sec. Sec.  823(d)(6), 
(h)(5). Under the language utilized by Congress in those provisions, 
the Agency may consider ``such other factors as are relevant to and 
consistent with the public health and safety.'' Id. (emphasis 
supplied). In Holloway Distributors, 72 Fed. Reg. 42118, 42126 
(2007), the Agency held this catch all language to be broader than 
the language directed at practitioners under ``other conduct which 
may threaten the public health and safety'' utilized in 21 U.S.C. 
Sec.  823(f)(5). In Holloway, the Agency stated that regarding the 
List I catch all:

    [T]he Government is not required to prove that the 
[r]espondent's conduct poses a threat to public health and safety to 
obtain an adverse finding under factor five. See T. Young, 71 [Fed. 
Reg.] at 60572 n.13. Rather, the statutory text directs the 
consideration of ``such other factors as are relevant to and 
consistent with the public health and safety.'' 21 U.S.C. Sec.  
823(h)(5). This standard thus grants the Attorney General broader 
discretion than that which applies in the case of other registrants 
such as practitioners. See id. Sec.  823(f)(5) (directing 
consideration of ``[s]uch other conduct which may threaten the 
public health and safety'').

72 Fed. Reg. at 42126.\75\ Thus, the Agency has recognized that, 
while the fifth factor applicable to List I chemical distributors--
21 U.S.C. Sec.  823(h)(5)--encompasses all ``factors,'' the Factor 
Five applied to practitioners--21 U.S.C. Sec.  823(f)(5)--considers 
only ``conduct.'' Because section 823(f)(5) only implicates ``such 
other conduct,'' it necessarily follows that conduct considered in 
Factors One through Four may not be considered at Factor Five.

    \75\ In Bui, the Agency clarified that ``an adverse finding 
under [Factor Five did not require a] showing that the relevant 
conduct actually constituted a threat to public safety.'' 75 Fed. 
Reg. 49888 n.12.

    The Government alleged that the Respondent ``diluted the Actavis 
brand of promethazine [codeine] syrup before dispensing, in 
violation of 21 U.S.C. Sec.  331.'' ALJ Ex. 1 at 2. 21 U.S.C. Sec.  
331(b) prohibits the ``adulteration . . . of any . . . drug . . . in 
interstate commerce.'' 21 U.S.C. Sec.  351(c) provides, in turn, 
that ``[a] drug shall be deemed to be adulterated . . . if . . . any 
substance has been . . . mixed or packed therewith so as to reduce 
its quality or strength.'' Agency precedent has considered this 
conduct under Factor Five. Dan E. Hale, D.O., 69 Fed. Reg. 69402, 
69406 (2004) (finding evidence that ``some injectable medications 
were diluted below their therapeutic dosages'' to be a relevant 
consideration under Factor Five). The admitted evidence of record 
here renders it unnecessary to decide whether diluting promethazine 
with codeine raises diversion issues properly within the purview of 
these DEA enforcement proceedings. See Judulang v. Holder, 132 S.Ct. 
476, 556 U.S. -------- (2011) (actions of a regulatory agency must 
bear a rational relationship to the purposes of the statute it is 
charged with enforcing).
    To be sure, the credible testimony of Ms. Tippie supports her 
observations that she witnessed Mr. Sanders and Mr. Sanders, Sr. 
pouring promethazine into bottles that she believed to contain 
promethazine with codeine. Tr. 171-75, 192, 226-27. Similarly 
supported is Tippie's account of her conversation with Mr. Sanders 
wherein the latter explained that such diluting ``was cost effective 
because the promethazine with codeine was so expensive for a pint 
bottle.'' Tr. 227. Likewise credible is Ms. Tippie's testimony that 
she heard complaints from numerous customers who were unhappy about 
the strength of the promethazine dispensed to the point that 
customers began insisting on tasting the medicine before paying, and 
that this phenomenon was sufficiently prevalent that Mr. Sanders 
issued a policy prohibiting the practice. Tr. 172-73, 226-27. 
Although Mr. Sanders' unembellished, one-line denial that ``[t]here 
was no dilution of promethazine with codeine,'' could arguably have 
been enhanced by the tender of some explanation of any details that 
could supply a benign explanation to Ms. Tippie's credible 
observations, no such details were presented, and her account was 
the more believable one. Tr. 264. That subsequent testing of a 
limited subset of the promethazine with codeine on board at the 
Respondent pharmacy revealed no anomalies \76\ does not detract from 
the strength of Ms. Tippie's testimony.
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    \76\ Tr. 95-96.
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    However, the present record does not have the benefit of expert 
testimony regarding the safe or appropriate strength of promethazine 
with codeine. Likewise, the anonymous, unsatisfied consumers of the 
dispensed syrup hardly can be perceived as sufficiently expert to 
supply relevant evidence. There is simply no record evidence from 
which it is possible to discern the safety implications of varying 
concentrations of codeine in promethazine, what concentrations (if 
any) were dispensed, and to the extent any promethazine with codeine 
was dispensed after dilution, what the label on the bottle(s) may 
have indicated relative to the strength of the mixture. In short, 
there is insufficient evidence of record to gauge the significance 
of Ms. Tippie's observations on the issue of whether it constituted 
a threat to public health and safety under Factor Five. 21 U.S.C. 
Sec.  823(f)(5). Accordingly, consideration of the record evidence 
under Factor Five weighs neither for nor against the revocation of 
Respondent's DEA COR sought by the Government.

Recommendation

    Based on the foregoing, the Government has established that the 
Respondent has committed acts that are inconsistent with the public 
interest.
    Because the Government has sustained its burden of showing that 
the Respondent committed acts inconsistent with the public interest, 
the burden shifts to the Respondent to show that it can be entrusted 
with a DEA registration. Agency precedent has consistently held that 
the registration of a pharmacy may be revoked as the result of the 
unlawful activity of the pharmacy's owners, majority shareholders, 
officers, managing pharmacist or other key employee. EZRX, 69 Fed. 
Reg. at 63181; Plaza Pharmacy, 53 Fed. Reg. 36910 (1988); see Neil 
Labs, Inc. v. Ashcroft, 217 F.Supp.2d 80, 87-88 (D.D.C 2002). A long 
line of consistent Agency precedent has established that ``to rebut 
the Government's prima facie case, [the Respondent is] required not 
only to accept responsibility for [the established] misconduct, but 
also to demonstrate what corrective measures [have been] undertaken 
to prevent the reoccurrence of similar acts.'' Jeri Hassman, M.D., 
75 Fed. Reg. at 8236; Hoxie v. DEA, 419 F.3d 477, 483 (6th Cir. 
2005); Ronald Lynch, M.D., 75 Fed. Reg. 78745, 78749 (Respondent's 
attempts to minimize misconduct held to undermine acceptance of 
responsibility); George Mathew, M.D., 75 Fed. Reg. 66138, 66140, 
66145, 66148 (2010); George C. Aycock, M.D., 74 Fed. Reg. 17529, 
17543 (2009); Steven M. Abbadessa, D.O., 74 Fed. Reg. 10077, 10078 
(2009); Jayam Krishna-Iyer, M.D., 74 Fed. Reg. 459, 463 (2009); 
Medicine Shoppe-Jonesborough, 73 Fed. Reg. 364, 387 (2008). The 
acceptance of responsibility is a condition precedent for the 
Respondent to prevail once the Government has established its prima 
facie case. Matthew, 75 Fed. Reg. at 66140. This feature of the 
Agency's interpretation of its statutory mandate on the

[[Page 26086]]

exercise of its discretionary function under the CSA has been 
sustained on review. Mackay, 664 F.3d at 822.
    The Respondent's owner, Mr. Sanders, has accepted no measure of 
responsibility for the established misconduct in the record. The 
preponderant evidence that the Respondent's owner and PIC had actual 
knowledge that the pharmacy was providing large amounts of dangerous 
controlled substances to drug-dealer runners presenting illegitimate 
scrips and photocopied driver's licenses on a regular basis. That 
actual knowledge, which was supplied, not by an anonymous source, 
but by an employee, was met with a dismissive rejection at the time 
it was provided and at the hearing. There is nothing in the record 
to rebut the persuasive record evidence that the conduct of the 
owner and PIC exceeded inaction and rose to the level of willing 
complicity in controlled substance diversion on a massive scale. The 
equally persuasive evidence that multiple audits demonstrated 
alarming shortages and overages, profound recordkeeping issues, and 
pervasive incompetence was met in these proceedings with an attempt 
to deflect the blame to subordinates. Based on his testimonial 
performance at the hearing, a decision to rely upon the expertise of 
PIC Grape to ensure that the Respondent pharmacy fulfilled its 
obligations as a DEA registrant (to the extent that the bona fides 
of such reliance is accepted) is patently unreasonable. Mr. Sanders' 
inconsistent positions as to whether an initial inventory ever 
existed have amplified the probative value of this recordkeeping 
shortcoming in support of the Government's case. The Respondent 
pharmacy did not have the paperwork required for inventory control 
or transfer, and its personnel were bereft of any means to discern 
how much controlled substance the enterprise should have on board 
when the audits took place and when theft/loss reports were 
prepared. The evidence here does not show a reduced level of control 
demonstrated by imperfect paperwork, but rather an absence of any 
measure of control. Indeed, the most credible aspect of Mr. Sanders' 
testimony is that he has no training or expertise in the field of 
pharmacy. Tr. 262-63; see also, Resp't Brief at 11. The continuation 
of the Respondent's COR under the circumstances is untenable.
    On the issue of remedial steps, Mr. Sanders offered a new 
computer software system and a new PIC.\77\ Regrettably, the 
software system addresses none of the pernicious issues related to 
supplying runners with controlled substances that the Respondent 
(through its owner and PIC) knew were authorized on a large scale 
through illegitimate prescriptions. Regarding the replacement of PIC 
Grape, Mr. Sanders' testimony made it clear that he does not 
acknowledge that PIC Grape was ever part of the problem. Tr. 264, 
287-88. Thus, his replacement cannot be perceived as a cognizable 
remedial step.
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    \77\ In his post-hearing brief, the Respondent states that a new 
PIC has been hired. Resp't Brief at 3. This fact is not a matter of 
record, and, based on the posture of the case wherein the Respondent 
has consistently embraced PIC Grape's qualifications and abilities, 
would be unavailing in any event.
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    To be clear, this is not a case like Terese, where recordkeeping 
violations were acknowledged and addressed with alacrity. 76 Fed. 
Reg. at 46848. There has been no acceptance of responsibility or any 
demonstration of genuine attempts at remedial action. The 
Respondent's owner, Mr. Sanders, has consistently claimed that the 
runners did not exist, that his employees should have known better, 
or (in the case of Ms. Tippie) have fabricated lies against him, and 
that any auditing issues were a natural result of the hiccups 
associated with a nascent pharmacy. In short, the posture taken by 
Mr. Sanders has made it virtually impossible for the Agency to 
continue to entrust the Respondent pharmacy with a DEA registration.
    Accordingly, in view of the fact that the Government has 
established its prima face case by a preponderance of the evidence, 
and the Respondent has declined to accept responsibility, the 
Respondent's Certificate of Registration should be REVOKED and any 
pending applications for renewal should be DENIED.

Dated: November 8, 2012

s/John J. Mulrooney, II

Chief Administrative Law Judge

[FR Doc. 2013-10550 Filed 5-2-13; 8:45 am]
BILLING CODE 4410-09-P