JM Pharmacy Group, Inc., d/b/a Farmacia Nueva and Best Pharma Corp; Decision and Order, 28667-28689 [2015-12043]

Agencies

• Drug Enforcement Administration
• Department of Justice

[Federal Register Volume 80, Number 96 (Tuesday, May 19, 2015)]
[Notices]
[Pages 28667-28689]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-12043]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration

[Docket No. 13-35]


JM Pharmacy Group, Inc., d/b/a Farmacia Nueva and Best Pharma 
Corp; Decision and Order

    On October 24, 2013, Chief Administrative Law Judge John J. 
Mulrooney, II (hereinafter, ALJ), issued the attached Recommended 
Decision. Neither the Government nor the Respondents filed exceptions 
to the Recommended Decision.\1\
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    \1\ All citations to the Recommended Decision are to the slip 
opinion as issued by the ALJ.
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    Having reviewed the entire record, I have decided to adopt the 
ALJ's findings of fact including his credibility determinations except 
as discussed below.\2\ I also adopt the ALJ's

[[Page 28668]]

conclusions of law that: (1) Respondents' principal (Mr. Moro Perez) 
materially falsified each pharmacy's application by failing to disclose 
that he had previously surrendered for cause each pharmacy's DEA 
registration, and (2) that Respondents failed to demonstrate that they 
can be entrusted with a new registration.\3\ However, for reasons 
explained below, I do not adopt the ALJ's conclusions that Respondents 
and their pharmacists violated their corresponding responsibility when 
they dispensed controlled substance prescriptions issued by a physician 
whose registration had expired.
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    \2\ In the Recommended Decision, the ALJ observed that his 
factual findings ``are entitled to significant deference.'' R.D. at 
34 (citing Universal Camera Corp. v. NLRB, 340 U.S. 474, 496 
(1951)). To make clear, the Agency is the ultimate factfinder and 
considers an ALJ's factual findings ``along with the consistency and 
inherent probability of testimony. The significance of [the ALJ's] 
report, of course, depends largely on the importance of credibility 
in the particular case.'' Universal Camera, 340 U.S. at 496. See 
also Reckitt & Colman, Ltd., v. Administrator, 788 F.2d 22, 26-27 
(D.C. Cir. 1986).
    For reasons I have previously explained, see Top Rx Pharmacy, 78 
FR 26069, 26069 n.1 (2013), I do not adopt the parenthetical 
following the ALJ's citation to Paul Weir Battershell, 76 FR 44359, 
44368 n.27 (2011). See R.D. at 36.
    In his discussion of factor two (``the applicant's experience in 
. . . dispensing controlled substances''), the ALJ explained that 
this factor manifests Congress's ``acknowledgment that the 
qualitative manner and the quantitative volume in which an applicant 
has engaged in the dispensing of controlled substances may be [a] 
significant factor'' in determining ``whether an applicant should be 
(or continue to be) entrusted with a DEA'' registration. R.D. at 37 
(emphasis added).
    It is certainly true that evidence as to the volume of 
dispensings (whether by a prescriber or a pharmacy) has been 
admitted in these proceedings, by both the Government to show the 
extent of practitioner's unlawful activities, and by practitioners 
to show the extent of their lawful activities. That being said, 
neither the text of factor two, nor the legislative history of the 
1984 amendments which gave the Agency authority to consider the 
public interest in determining whether to grant an application or 
revoke (or suspend) an existing registration, compel the conclusion 
that Congress considered ``the quantitative volume'' of an 
applicant's or registrant's dispensings to be a significant factor 
in the public interest analysis.
    The word ``experience'' has multiple meanings. Among those most 
relevant in assessing its meaning as used in the context of factor 
two are: (1) The ``direct observation of or participation in events 
as a basis for knowledge,'' (2) ``the fact or state of having been 
affected by or gained knowledge through direct observation or 
participation,'' (3) ``practical knowledge, skill, or practice 
derived from direct observation of or participation in events or in 
a particular activity,'' and (4) ``the length of such 
participation.'' See Merriam-Webster's Collegiate Dictionary 409 
(10th ed. 1998); see also The Random House Dictionary of the English 
Language 681 (2d ed. 1987) (defining experience to include ``the 
process or fact of personally observing encountering, or undergoing 
something,'' ``the observing, encountering, or undergoing of things 
generally as they occur in the course of time,'' ``knowledge or 
practical wisdom gained from what one has observed, encountered, or 
undergone'').
    None of these meanings compels the conclusion that Congress 
acknowledged that ``the quantitative volume'' of a practitioner's 
dispensing activity may be a significant consideration under this 
factor, and certainly none suggest that the Agency is required to 
count up the number of times an applicant or registrant has 
dispensed controlled substances in making factual findings under 
this factor as suggested by another ALJ. See Clair L. Pettinger, 78 
FR 61592, 61597 (2013) (rejecting reasoning in ALJ's recommended 
decision that factor two ``requires evidence of both the qualitative 
and quantitative volume of the Respondent's experience'' and that 
``[w]here evidence of the Respondent's experience . . . is silent 
with respect to the quantitative volume of the Respondent's 
experience, and requires speculation to support an adverse finding 
under Factor Two, this Factor should not be used to determine 
whether the Respondent's continued registration is inconsistent with 
public interest.'').
    Prior to the 1984 amendment of section 823(f), the Agency's 
authority to deny an application or revoke a registration was 
limited to cases in which a practitioner: (1) Had materially 
falsified an application, (2) had been convicted of a State or 
Federal felony offense related to controlled substances, or (3) had 
his State license or registration suspended, revoked, or denied. See 
S. Rep. No. 98-225, at 266 (1983), as reprinted in 1984 U.S.C.C.A.N. 
3182, 3448. Finding that the ``[i]mproper diversion of controlled 
substances'' was ``one of the most serious aspects of the drug abuse 
problem,'' and yet ``effective Federal action against practitioners 
ha[d] been severely inhibited by the [then] limited authority to 
deny or revoke practitioner registrations,'' id., Congress concluded 
that ``the overly limited bases in current law for denial or 
revocation of a practitioner's registration do not operate in the 
public interest.'' Id.
    The Senate Report thus explained that ``the bill would amend 21 
U.S.C. 824(f) [sic] to expand the authority of the Attorney General 
to deny a practitioner's registration application.'' Id. The Report 
further explained that ``in those cases in which registration is 
clearly contrary to the public interest, the amendment would allow a 
swift and sure response to the danger posed to the public health and 
safety by the registration of the practitioner in question.'' Id. at 
267, as reprinted in 1984 U.S.C.C.A.N. at 3449. Accordingly, section 
823(f) was amended to provide the Agency with authority to deny an 
application based upon a finding that the issuance of a registration 
``would be inconsistent with the public interest,'' upon 
consideration of the five public interest factors, including the 
experience factor. Id. See also 21 U.S.C. 824(a)(4). Nowhere in the 
Report's discussion of the amendments to sections 823 and 824 is 
there any support for the notion that Congress deemed the 
quantitative volume of a practitioner's dispensings to be a 
significant consideration in making findings under the experience 
factor.
    As in past cases, the parties may continue to introduce evidence 
as to the extent of both a practitioner's lawful or unlawful 
dispensing activities. However, under Agency precedent, proof of a 
single act of intentional or knowing diversion remains sufficient to 
satisfy the Government's prima facie burden and to impose on a 
respondent, the obligation to produce evidence to show that it can 
be entrusted with a registration. See Jayam Krishna-Iyer, 74 FR 459, 
463 (2009); see also MacKay v. DEA, 664 F.3d 808, 819 (10th Cir. 
2011) (``Although Dr. MacKay may have engaged in the legitimate 
practice of pain medicine for many of his patients, the conduct 
found by the Deputy Administrator with respect to K.D. and M.R. is 
sufficient to support her determination that his continued 
registration is inconsistent with the public interest.''). I 
therefore do not adopt the ALJ's statement that Congress 
acknowledged ``the quantitative volume'' of a practitioner's 
dispensings to be a ``significant factor'' in assessing a 
practitioner's experience.
    \3\ I also adopt the ALJ's legal conclusion that the Government 
did not sustain the record keeping allegation.
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The Material Falsification Allegations

    As explained in the ALJ's decision, Mr. Moro Perez asserted that he 
did not materially falsify the applications because he did not believe 
that the surrenders were for cause.\4\ With respect to this allegation, 
the evidence showed that on November 30, 2011, the Government executed 
a search warrant at the two pharmacies and that Mr. Moro Perez, who had 
been arrested at his residence, was taken to Best Pharmacy, where he 
was presented with a voluntary surrender form (DEA From 104), and that 
while the form was in English, its purpose and contents were explained 
to Mr. Moro Perez by a Special Agent who spoke Spanish. Tr. 175-77.
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    \4\ Question 2 on the DEA Application asked: ``Has the applicant 
ever surrendered (for cause) or had a federal controlled substance 
registration revoked, suspended, restricted or denied, or is any 
such action pending?'' On each application, Mr. Moro Perez answered 
no. GX 1 & 8.
    Question 4 asked, in relevant part: ``If the applicant is a 
corporation (other than a corporation whose stock is owned and 
traded by the public), association, partnership, or pharmacy, has 
any officer, partner, stockholder or proprietor . . . ever 
surrendered or had a federal control substance registration revoked, 
suspended, restricted, or denied . . . .? GX 1, at 1.
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    The evidence further showed that the DI (through the Special Agent 
who translated for him) explained to Mr. Moro Perez that the form 
``dealt with the regulatory matter'' and ``his DEA registration 
number,'' and that it was ``separate from any criminal allegations that 
may be levied.'' Id. at 177. The DI also told Mr. Moro Perez that 
``[i]f he chose not to sign the form, then we would move for an order 
to show cause proceeding.'' Id. Mr. Moro Perez did not dispute this 
testimony.
    The evidence further showed that the DEA Form 104, which was used 
by the DI to memorialize the surrender, contains two boxes which can be 
checked with an accompanying statement. The first of these states, in 
relevant part: ``In view of my alleged failure to comply with the 
Federal requirements pertaining to controlled substances, and as an 
indication of my good faith in desiring to remedy any incorrect or 
unlawful practices on my part[.]'' GX 14, at 1. According to the DI, 
this box had been checked prior to the form's presentation to Mr. Moro 
Perez. Tr. 176. Mr. Moro Perez signed the form. Id.; see also GX 14, at 
1.
    Thereafter, Mr. Moro Perez was criminally charged with several 
violations of the Controlled Substances Act including possession with 
intent to distribute, see 21 U.S.C. 841(a)(1), and conspiracy to 
possess with intent to distribute. See id. Sec.  860. However, on March 
23, 2012, the charges, on motion of the Government, were dismissed with 
prejudice. RX 3.
    The ALJ took official notice that Respondents were previously the 
subject of an Order to Show Cause Proceeding, and that either one or 
both Respondents in this matter requested a hearing on the allegations, 
which was deemed filed with the Office of Administrative Law Judges on 
December 6, 2011, and assigned Docket No. 12-16. See R.D. at 10. The 
ALJ also took official notice that the aforesaid proceeding was 
terminated on June 29, 2012. Id.
    The evidence further showed that Respondent Farmacia Nueva did not 
complete a DEA Form 104. Tr. 72-74. However, the Government submitted 
various emails, which were exchanged between Farmacia Nueva's counsel 
in proceeding No. 12-16 (and who also represented Respondents in this 
proceeding) and a DEA attorney, whom the ALJ found, upon taking 
official notice of the Agency's records, served as the Agency's counsel 
of record in that proceeding.\5\ GX 14, at 2-3; R.D. at 10.
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    \5\ While the ALJ provided Respondent with the opportunity to 
refute the various facts of which he took official notice, 
Respondent did not do so. See R.D. at 9 n.29.
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    The emails include a June 27, 2012 email, which was sent at 8:52 
a.m., by DEA's counsel to Respondent's counsel stating: ``Wondering if 
you've discussed the surrender issue with your client yet. Please let 
me know if you have any other questions, thanks.'' GX 14, at 2. Later 
that day (after exchanging emails as to when they could discuss the 
matter), Respondent's counsel wrote to DEA counsel: ``Ok, anyway, I 
discussed the case with my client. I think he will surrender it 
voluntarily. Let me know where to find a form, or send it to me if you 
have one.'' Id.
    DEA counsel then replied: ``We can do it without the form if you'd 
like, just send me an email stating your client agrees to surrender his 
registration. I'll then file a joint motion to dismiss the 
proceeding.'' Id.
    The next day, Respondent's counsel emailed the following to DEA 
counsel: ``My client, Farmacia Nueva, has decided to voluntarily 
surrender its DEA registration at issue in the case Docket No. 12-16. 
Please prepare a joint motion to dismiss the pending case. Thank you.'' 
Id.
    In his testimony, Mr. Moro Perez denied that he had knowingly or 
intentionally falsified both applications. He testified that he did not 
believe that the surrenders of either pharmacy's registration were for 
cause, maintaining that upon the dismissal of the criminal case against 
him, he believed ``that there was no cause against'' him. Tr. 211. 
Throughout his testimony he repeatedly adhered to this position. 
However, as the ALJ explained, at the time he surrendered the Best 
Pharma registration, the criminal case would not be dismissed for 
another four months.\6\
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    \6\ The record does not establish the date on which the criminal 
case against Mr. Moro Perez was filed.
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    Moreover, in signing the voluntary surrender form, Mr. Moro Perez 
clearly acknowledged that he was doing so ``[i]n view of my alleged 
failure to

[[Page 28669]]

comply with the Federal requirements pertaining to controlled 
substances'' and that he was consenting to the termination and 
revocation of the Best Pharma ``registration without an order to show 
cause, a hearing, or any other proceedings.'' GX 14, at 1. Also, as the 
ALJ found, Mr. Moro Perez was specifically told by the Diversion 
Investigator that the voluntary surrender form involved his pharmacy's 
registration and was separate from any criminal allegations that could 
be levied against him. And most significantly, the Diversion 
Investigator then told Mr. Moro Perez that if he did not sign the 
voluntary surrender form, he would seek an Order to Show Cause.
    Mr. Moro Perez thus knew that the DI was pursuing the voluntary 
surrender based on the latter's belief that Best Pharma was engaged in 
unlawful practices. And finally, in addition to the DI's testimony 
(which the ALJ found credible) that he repeatedly explained to Mr. Moro 
Perez that the voluntary surrender form addressed a regulatory matter 
and was separate from any criminal charges that might be filed, it is 
noted that the CSA explicitly provides that ``[p]roceedings to deny, 
revoke, or suspend . . . shall be independent of, and not in lieu of, 
criminal prosecutions . . . under this subchapter or any other law of 
the United States.'' 21 U.S.C. 824(c).
    As the ALJ recognized, DEA regulations do not define the meaning of 
the term ``for cause'' as used on the various application for 
registration forms. Moreover, the application does not define the term. 
Nonetheless, persons of ordinary intelligence cannot dispute that a 
surrender which occurs in response to allegations of misconduct raised 
by the Agency's Special Agents and Diversion Investigators is ``for 
cause,'' especially when those Agents and Investigators further advise 
the registrant's principal that if he/she declines to surrender a 
registration, the Agency will nonetheless initiate proceedings to 
revoke it.\7\
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    \7\ In its post-hearing brief, Respondents note that on the 
application, the phrase ``for cause'' is in parentheses. Resp. Br. 
22-23. Respondents then argue that ``[i]t must be in parenthesis 
[sic] for some reason [and] [t]he idea cannot be and should not be 
that any time an applicant who had surrendered his registration for 
some reason answers `no' to this question, that applicant is 
automatically falsifying facts.'' Id. at 23.
    That is certainly true, as a pharmacy registrant may have 
surrendered its registration previously because it went out of 
business but has since reopened, just as a physician registrant may 
have done so because he/she ceased professional practice but has 
since resumed practicing medicine. The argument ultimately takes 
Respondents nowhere because Mr. Moro Perez surrendered Best 
Pharmacy's registration after he was accused of having violated the 
CSA and was told that if he did not surrender the registration, the 
Agency would pursue a proceeding to revoke its registration; as for 
Farmacia Nueva's registration, the Agency was continuing to pursue a 
Show Cause Proceeding to revoke its registration when Mr. Moro Perez 
agreed to surrender its registration.
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    Beyond this, as the ALJ recognized, if the dismissal of the 
criminal proceeding transformed the earlier surrender of Best Pharma's 
registration into a surrender which was no longer ``for cause,'' given 
that the same allegations were raised with respect to both pharmacies, 
there would have been no reason for the Agency to continue its pursuit 
of the Show Cause Proceeding against the registration Mr. Moro Perez 
held for Farmacia Nueva. Yet the Agency did pursue the Show Cause 
Proceeding against Farmacia Nueva's registration until its principal 
agreed to surrender its registration some three months after the 
dismissal of the criminal case against Mr. Moro Perez. In his 
testimony, Mr. Moro Perez offered no explanation as to why, if the 
dismissal of the criminal case against him rendered the surrender of 
Best Pharma's registration not ``for cause,'' he subsequently agreed to 
surrender Farmacia Nueva's registration.\8\
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    \8\ Respondent makes no claim that Mr. Moro Perez was unaware 
that its attorney had surrendered Farmacia Nueva's registration. 
Even if it had, `` `a principal is chargeable with the knowledge of, 
or notice to, his agent that is received by the agent in the due 
course of his employment and is related to the matters within his 
authority.' '' McMillan v. LTV Steel, Inc., 555 F.3d 218, 230 (6th 
Cir. 2009) (quoting Aetna Cas. & Sur. Co. v. Leahey Constr. Co., 219 
F.3d 519, 541 (6th Cir. 2000)).
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    In his testimony, Mr. Moro Perez also denied that he knowingly or 
intentionally falsified the applications because he completed them, 
``knowing and recognizing that you, the DEA office, are aware of, [and] 
had knowledge and everything about me,'' Tr. 218, including his arrest. 
However, whether Investigators at the local DEA office were aware of 
Mr. Moro Perez is irrelevant in assessing his scienter; having answered 
the liability question ``no,'' the only issues that are relevant are 
whether he knew that he had surrendered his registrations and had done 
so ``for cause.'' Because Mr. Moro Perez clearly knew that he: (1) Had 
surrendered his registrations, (2) had done so in response to 
allegations that his pharmacies had committed violations of the CSA, 
and (3) did so to avoid proceedings to revoke the registrations, he 
also clearly knew that he had surrendered ``for cause.''
    I thus agree with the ALJ's conclusion that Mr. Moro Perez 
knowingly and materially falsified \9\ the applications he submitted 
for both Best Pharma and Farmacia Nueva. Id. These findings provide 
reason alone to support the denial of his applications, especially when 
coupled with the ALJ's findings that Mr. Moro Perez's testimony as to 
why he falsified the applications ``is simply not credible.'' R.D. at 
67.
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    \9\ Respondents do not contend that the falsifications were 
immaterial.
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The Corresponding Responsibility Allegations

    The ALJ also found that Respondents' pharmacists violated their 
corresponding responsibility under 21 CFR 1306.04, when, over the 
course of some thirty-four months, they filled numerous controlled 
substance prescriptions which were written by a physician who no longer 
possessed a valid DEA registration. While I adopt the ALJ's finding 
that Respondents dispensed the prescriptions at issue when the 
physician no longer possessed a DEA registration, I reject his legal 
conclusion that Respondents violated 21 CFR 1306.04(a) because the 
Government failed to prove that the pharmacists acted with the 
requisite scienter. However, based on Respondents' admissions, I find 
that they committed acts inconsistent with the public interest when 
they failed to verify that the physician remained registered at any 
time for some thirty-four months.
    With respect to this allegation, the evidence showed that a 
physician named Dr. Hector J. Aguilar-Amieva (hereinafter, Dr. Aguilar) 
had allowed his registration to expire and that his registration had 
been retired by the Agency since January 31, 2009.\10\ The evidence 
further shows that between January 30, 2009 and November 30, 2011 (when 
the search warrants were executed at Respondents), Farmacia Nueva 
filled 143 controlled substance prescriptions which were purportedly 
issued by Dr. Aguilar (and which used his DEA registration) and that 
Best Pharmacy filled thirty-two controlled substance prescriptions. GXs 
5 & 10.
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    \10\ According to the DI, Dr. Aguilar's registration expired 
after he was convicted of a federal criminal offense; the record 
does not, however, establish the offense of which he was convicted 
nor the date of his conviction. Moreover, while there was evidence 
that Dr. Aguilar's office was only a three to four minute walk from 
Farmacia Nueva, Tr. 250, and that it was the closest pharmacy to his 
office, the Government provided no evidence that Respondents' 
pharmacists were aware of any enforcement actions that were brought 
against Dr. Aguilar.
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    Under 21 CFR 1306.03, a controlled substance prescription ``may be 
issued only by an individual practitioner who is: (1) [a]uthorized to 
prescribe controlled substances by the jurisdiction in which he is 
licensed to practice his profession and (2) [e]ither registered or

[[Page 28670]]

exempted from registration [under] this chapter.'' Thus, Dr. Aguilar's 
prescriptions were unlawful.\11\
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    \11\ Respondents do not claim that Dr. Aguilar was exempt from 
registration, and under the CSA, had they claimed as much, they (and 
not the Government) would have had the burden of proof on the issue. 
See 21 U.S.C. 885(a) (1).
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    Mr. Moro Perez testified that there were ``many times'' when 
Respondents' pharmacists refused to fill Dr. Aguilar's controlled 
substances prescriptions because ``we knew that that patient didn't 
require the use of the medication.'' Tr. 252; see also id. at 254. When 
questioned by the ALJ as to whether he thought it was suspicious that 
many of Dr. Aguilar's patients were presenting controlled substance 
prescriptions that he (and his pharmacists) would not fill, Mr. Moro 
Perez testified that ``we have been very careful with the dispensing'' 
and ``the amount of medications that were dispensed, the percentage 
[was] very low.'' Id. at 253. Mr. Moro Perez then testified that he 
never called Dr. Aguilar, and when asked why, claimed that he and his 
pharmacists reviewed the patient's history and used their professional 
judgment to evaluate whether a particular prescription was legitimate. 
Id.
    When questioned further as to why he did not call Dr. Aguilar, Mr. 
Moro Perez testified: ``Because I understood, I was aware that the 
doctor's license were [sic] up-to-date.'' \12\ Id. at 254. Mr. Moro-
Perez and his pharmacists never attempted to verify whether Dr. Aguilar 
held a registration, id. at 193-94, even though, according to the DI, 
they could have done so simply by calling the local DEA office.\13\ Id. 
at 20.
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    \12\ The ALJ was not impressed by this testimony, finding it to 
be ``the obvious fruit of intentional equivocation.'' R.D. at 20. 
That being said, the ALJ's finding does not establish that Moro-
Perez knew that Dr. Aguilar was no longer registered (as opposed to 
simply being unaware of the status of Aguilar's license) when his 
pharmacies filled the prescriptions and the ALJ made no such 
finding. Moreover, it is not even clear on the record whether Moro-
Perez was testifying regarding Dr. Aguilar's DEA registration rather 
than his state license.
    \13\ The evidence also showed that since 2008, DEA has provided 
a Web page, at which a DEA registrant can verify the registration 
status of another person or entity. Tr. 22. However, other than 
vague testimony suggesting that during an inspection an investigator 
would tell a registrant that the Web site is available, id. at 90, 
no evidence was put forward that this information was conveyed to 
Respondents. Nor did the Government provide any evidence as to what 
efforts have been made to notify the community of registrants as to 
the Web page's availability.
    It is noted that in publishing its Interim Final Rule on 
Electronic Prescriptions for Controlled Substances, the Agency 
explained that ``[i]f a pharmacy has doubts about a particular DEA 
registration, it can now check the registration through DEA's 
Registration Validation Tool'' which is available at the Agency's 
Web site. See 75 FR 16236, 16266 (2010).
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    Instead, Mr. Moro-Perez testified that he and his pharmacists 
relied on the patients' insurance carriers (to which they submitted 
claims for payment of medications) to determine whether a physician had 
valid licenses and registrations by seeing if the claim was paid. Id. 
at 200-1. Mr. Moro-Perez conceded that the insurance companies 
continued to pay claims for prescriptions issued by Dr. Aguilar until 
the date on which the search warrant was executed, which was nearly 
three years after the latter's registration had been retired. Id. at 
202. However, no evidence was adduced as to whether any claim for 
payment was rejected by a patient's insurer, and there was obviously no 
evidence as to whether in the event an insurer rejected a claim, it 
would disclose the reason it did so.\14\
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    \14\ Nor was any evidence put forward as to how many of the 
Aguilar prescriptions were actually paid for with cash.
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    As the ALJ recognized, under DEA's longstanding regulation, a 
pharmacist has a corresponding responsibility to fill only those 
prescriptions which are ``issued for a legitimate medical purpose by 
[a] practitioner acting in the usual course of his professional 
practice.'' 21 CFR 1306.04(a). Continuing, the regulation states that 
``the person knowingly filling such a purported prescription, as well 
as the person issuing it, [is] subject to the penalties provided for 
violations of the provisions of law relating to controlled 
substances.'' Id.\15\ (emphasis added).
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    \15\ As the Supreme Court has explained, ``the prescription 
requirement . . . ensures patients use controlled substances under 
the supervision of a doctor so as to prevent addiction and 
recreational abuse. As a corollary, [it] also bars doctors from 
peddling to patients who crave the drugs for those prohibited 
uses.'' Gonzales v. Oregon, 546 U.S. 243, 274 (2006) (citing United 
States v. Moore, 423 U.S. 122, 135 (1975)).
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    DEA has long interpreted this provision 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.'' Medic-Aid Pharmacy, 55 FR 30043, 30044 
(1990) (emphasis added); see also Frank's Corner Pharmacy, 60 FR 17574, 
17576 (1995); Ralph J. Bertolino, 55 FR 4729, 4730 (1990); United 
States v. Seelig, 622 F.2d 207, 213 (6th Cir. 1980). Thus, proof of 
actual knowledge is not necessary to establish that a pharmacist has 
violated his/her corresponding responsibility to dispense only lawful 
prescriptions.
    However, in finding violations of the corresponding responsibility 
where actual knowledge has not been proved, the Agency has explained 
that ``[w]hen prescriptions are clearly not issued for legitimate 
medical purposes, a pharmacist may not intentionally close his eyes and 
thereby avoid positive knowledge of the real purpose of the 
prescription,'' and thereafter fill the prescription ``with impunity.'' 
Bertolino, 55 FR at 4730 (citing United States v. Kershmann, 555 F.2d 
198 (8th Cir. 1977); United States v. Hayes, 595 F.2d 258 (5th Cir. 
1979)); accord Liberty Discount Drugs, Inc., 54 FR 30116, 30117 (1989). 
See also Medic-Aid Pharmacy, 55 FR at 30044 (``The administrative law 
judge concluded that it is not necessary to find that [the pharmacist] 
in fact knew that many prescriptions presented to him were not written 
for a legitimate medical purpose, for there is no question that a 
conscientious pharmacist would have been suspicious of these 
prescriptions and would have refused to fill them.''). Thus, both 
Bertolino and Medic Aid Pharmacy applied the standard of deliberate 
ignorance or willful blindness in assessing whether a pharmacist acted 
with the requisite scienter. See Seelig, 622 F.2d at 213 (``the element 
of knowledge may be inferred from proof that appellants deliberately 
closed their eyes to what would otherwise be obvious to them''); 
Kershmann, 555 F.3d at 200 (``the element of knowledge may be shown by 
deliberate ignorance'').
    In addition to the obligation imposed by 21 CFR 1306.04(a), ``[a] 
prescription for a controlled substance may only be filled by a 
pharmacist, acting in the usual course of his professional practice. . 
. .'' 21 CFR 1306.06 (emphasis added). Thus, the Agency has also 
repeatedly held that ``a pharmacist must exercise professional judgment 
[and common sense] when filling a prescription.'' Bertolino, 55 FR at 
4730; see also Medicine Shoppe-Jonesborough, 73 FR 363, 381, pet. for 
rev. denied, Medicine Shoppe-Jonesborough v. DEA, 300 Fed. App'x 409, 
412 (6th Cir. 2008); Trinity Health Care Corp., 72 FR 30849, 30854 
(2007); 21 CFR 1306.06. Accordingly, the Agency has held that ``when a 
customer presents a suspicious prescription, at a minimum, a pharmacist 
has a duty to verify the prescription with the prescriber.'' Medicine 
Shoppe-Jonesborough, 73 FR 364, 381; see also Medicine Shoppe, 300 Fed. 
App'x at 412.
    Moreover, even if a prescriber tells a pharmacist that a 
prescription has been issued for a legitimate medical purpose, a 
pharmacist cannot ignore other evidence that the prescription has not 
been issued for a legitimate medical purpose or that the prescriber 
acted outside of the usual course of his or her

[[Page 28671]]

professional practice and dispense the prescription. As one court of 
appeals has explained:

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

United States v. Hayes, 595 F.2d 258, 260 (5th Cir. 1979). See also 
Medicine Shoppe, 300 Fed. App'x at 412 (quoting Bertolino, 55 FR at 
4730) (`` `When [pharmacists'] suspicions are aroused as reasonable 
professionals,' they must at least verify the prescription's propriety, 
and if not satisfied by the answer they must `refuse to dispense.' ''); 
Holiday CVS, L.L.C., d/b/a CVS/Pharmacy Nos. 219 & 5195, 77 FR 62316, 
62341 (2012); East Main Street Pharmacy, 75 FR 66149, 66163-64 (2010).
    Under an Agency regulation, every controlled substance prescription 
must contain ``the name, address and registration number of the 
practitioner'' who issued it. 21 CFR 1306.05(a). However, the Agency's 
regulation does not require that a practitioner provide the expiration 
date of his registration on a prescription. See id.
    Moreover, no Agency regulation requires that a pharmacist ascertain 
that each prescription presented to him/her has been issued by a 
practitioner who possesses a valid DEA registration. Indeed, the Agency 
recognized this much in 2010, when it promulgated its Interim Final 
Rule on Electronic Prescriptions for Controlled Substances. See 75 FR 
16236, 16266 (2010). Therein, the Agency noted that it had proposed 
requiring pharmacies ``to confirm that the [prescriber's] DEA 
registration . . . was valid at the time'' the prescription was signed. 
Id. However, several commenters objected ``that pharmacies are not 
required to check DEA registrations for paper prescriptions unless they 
suspect something is wrong with a prescription.'' Id.
    In its response (which appears to be missing pertinent text), the 
Agency stated that it ``agrees with those commenters that expressed the 
view that, when filling a paper prescription, it is not necessary for a 
pharmacist who receives an electronic prescription for a controlled 
substance to check the CSA database in every instance to confirm that 
the prescribing practitioner is properly registered with DEA.'' Id. The 
Agency thus removed the requirement from the Interim Final Rule, but 
``made clear that a pharmacist continues to have a corresponding 
responsibility 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.'' Id.
    As this pronouncement makes clear, a pharmacist is not obligated to 
verify whether every prescription he fills has been issued by a 
practitioner who holds a valid DEA registration. Of course, if a 
pharmacist has actual knowledge that a prescriber does not hold a valid 
registration, or acts with willful blindness to this fact, a pharmacist 
violates the Controlled Substances Act if he proceeds to dispense that 
prescription. 21 U.S.C. 843(a)(2). Thus, in United Prescription 
Services, I held that a pharmacy violated its corresponding 
responsibility by dispensing prescriptions issued by a physician, whose 
registration had expired, where the pharmacy had on file a copy of the 
physician's registration and thus, its pharmacists clearly knew, or 
were willfully blind to the fact, that the physician was issuing 
prescriptions on an expired registration and that the prescriptions 
were therefore illegal.\16\ 72 FR at 50408.
---------------------------------------------------------------------------

    \16\ In United Prescription Services, this particular 
physician's registration had expired on February 28, 2003, and yet 
the pharmacy was still dispensing prescriptions written by him in 
September and October 2004. See 72 FR at 50408.
---------------------------------------------------------------------------

    More recently, in Holiday CVS, L.L.C., 77 FR 62316 (2012), two 
pharmacies continued to fill prescriptions written by two physicians 
whose registrations had expired. Moreover, the registration of one of 
the physicians had been revoked following a proceeding under 21 U.S.C. 
824(a)(4) and the Agency's Decision and Order had been published in the 
Federal Register (as well as on the DEA Office of Diversion Control's 
public Web site) approximately one month before the Order became 
effective. Id. Yet both pharmacies continued to dispense prescriptions 
issued by this physician, including some which were issued more than 
five months after the Order became effective. Id. Finally, the evidence 
also showed that the pharmacies used a company wide information 
management system which obtained updated registration data from a third 
party aggregator (which obtained it from DEA) on a weekly basis and 
that a prescribing physician's registration status was displayed to the 
pharmacist when entering the prescription into the pharmacy's 
dispensing software. Id. Thus, the pharmacists at each store had 
knowledge that the physicians' registrations had expired at the time 
they filled most of the prescriptions.\17\ Id. Here again, liability 
was imposed on the pharmacies consistent with the corresponding 
responsibility imposed on their pharmacists.\18\
---------------------------------------------------------------------------

    \17\ I also noted that as participants in a highly regulated 
industry, the pharmacies were required to keep abreast of regulatory 
developments which affect their industry and that with respect to 
the physician whose registration was revoked, publication of the 
Decision and Order in the Federal Register ``provided [the 
pharmacies] with reason to know'' that upon the effective date, the 
physician ``would no longer be authorized to issue controlled 
substance prescriptions.'' 77 FR at 62317 (citations omitted).
    \18\ In the Show Cause Order, the Government cited Medicine 
Shoppe--Jonesborough, 73 FR 364 (2008), as authority for the 
violation. In Medicine Shoppe--Jonesborough, a pharmacy was found to 
have filled over 124 controlled substances prescriptions which were 
written by a veterinarian who no longer possessed either a state 
license or a DEA registration. Id. at 381. However, I did not decide 
whether the pharmacy violated its corresponding responsibility 
because it dispensed the prescriptions when the veterinarian lacked 
either state authority or a DEA registration. Id. Rather, I found 
that even if the pharmacy's pharmacist-in-charge was unaware that 
the veterinarian no longer possessed a DEA registration and state 
license, it violated its corresponding responsibility based on the 
expert testimony that the pharmacy had ignored various circumstances 
that provided knowledge to its pharmacists that the prescriptions 
were not issued for legitimate medical purposes (including that the 
prescriptions were presented on a daily basis by the veterinarian's 
brother and were for drugs, which according to the expert, would be 
toxic for certain animals). Id.
    However, in a footnote, I explained that ``[a] pharmacy has a 
duty to periodically check to see that a practitioner retains the 
authority to practice medicine and dispense a controlled 
substance.'' Id. at n.45. Because of the evidence that the pharmacy 
had violated 21 CFR 1306.04(a), I deemed it unnecessary to decide 
whether the pharmacy had violated this duty. However, I noted my 
agreement with the ALJ's reasoning that failing ``to do so could 
threaten public health and safety because there is usually a good 
reason for why a practitioner has lost his or her state license and 
DEA registration.'' Id.
---------------------------------------------------------------------------

    As the ALJ found, the Government put forward no evidence that Mr. 
Moro-Perez or any of his pharmacists had actual knowledge that Dr. 
Aguilar's registration was no longer valid at any point during the 
thirty-four month period in which they filled his prescriptions. R.D. 
51 n.86. The ALJ nonetheless concluded that the requisite knowledge 
could be imputed to Respondents because their pharmacists entirely 
failed to investigate whether Dr. Aguilar held a valid registration and 
thus were willfully blind to the fact that Aguilar was no longer 
registered and could not write a controlled substance prescription. 
R.D. at 53 (citing United

[[Page 28672]]

States v. Katz, 445 F.3d 1023, 1031 (8th Cir. 2006)).\19\
---------------------------------------------------------------------------

    \19\ See also United States v. Lawson, 682 F.2d 480, 482 (4th 
Cir. 1982); United States v. Seelig, 622 F.2d 207, 213 (6th Cir. 
1980); United States v. Kershmann, 555 F.2d 198, 200-01 (8th Cir. 
1977).
---------------------------------------------------------------------------

    Recently, however, the Supreme Court made clear that ``a willfully 
blind defendant is one who takes deliberate actions to avoid confirming 
a high probability of wrongdoing and who can almost be said to have 
actually known the critical facts.'' Global-Tech Appliances, Inc., v. 
SEB S.A., 131 S.Ct. 2060, 2070-71 (2011) (emphasis added) (citing and 
quoting G. Williams, Criminal Law Sec.  57, p.159 (2d ed. 1961) (``A 
court can properly find willful blindness only where it can almost be 
said that the defendant actually knew.'')); see also id. at 2069 
(quoting with approval American Law Institute, Model Penal Code Sec.  
202(7) (Proposed Official Draft 1962) (``defining `knowledge of the 
existence of a particular fact' to include a situation in which `a 
person is aware of a high probability of [the fact's] existence, unless 
he actually believed that it does not exist''')).
    In Global-Tech, the Supreme Court further explained that even proof 
that a defendant was reckless in that he knew ``of a substantial and 
unjustified risk of wrongdoing'' does not establish willful blindness. 
Id. at 2071. Rather, to establish willful blindness, proof is required 
that: ``(1) the defendant must subjectively believe that there is high 
probability that a fact exists and (2) the defendant must take 
deliberate actions to avoid learning of that fact.'' Id. at 2070 
(emphasis added).
    Here, the Government offered no evidence to establish that Mr. 
Moro-Perez, or any other of Respondents' pharmacists, subjectively 
believed that there was a high probability that Dr. Aguilar was issuing 
prescriptions on an expired registration. Moreover, notwithstanding 
that Respondents put forward no evidence that it was objectively 
reasonable to determine if Dr. Aguilar possessed a valid registration 
by relying on whether the patients' insurance companies paid for their 
prescriptions, there is no evidence that a claim for payment of any of 
Dr. Aguilar's prescriptions was ever rejected by a patient's insurer. 
Indeed, notwithstanding the ALJ's finding (with which I agree) that 
this was an ``irresponsible practice'' and ``illogical manner'' of 
determining a physician's registration status, he made no finding that 
Moro-Perez (or any other pharmacist) ``subjectively believe[d] that 
there was a high probability'' that Dr. Aguilar was writing on an 
expired registration.
    To be sure, in his testimony, Mr. Moro-Perez admitted that his 
pharmacists had rejected controlled substance prescriptions issued by 
Dr. Aguilar ``many times,'' because based on the patients' histories, 
they did not consider the prescriptions to be legitimate for the 
respective patients. This admission might well have established willful 
blindness with respect to whether the Aguilar prescriptions which 
Respondents filled lacked a legitimate medical purpose--had the 
Government challenged the dispensing of any of the post-January 31, 
2009 prescriptions on this basis. But it did not. Most importantly, it 
does not establish that Moro-Perez or any of his pharmacists 
subjectively believed that there was a high probability that Aguilar no 
longer had a registration.\20\
---------------------------------------------------------------------------

    \20\ Although both the Government and ALJ made much of Moro-
Perez's admission, ``many'' is an indefinite term and the record 
does not clarify just how many prescriptions were rejected by 
Respondents, and as of what date their pharmacists were aware of 
this.
---------------------------------------------------------------------------

    As for whether Respondents' pharmacists violated their obligation 
to act within the usual course of professional practice, see 21 CFR 
1306.06, because their suspicions as to Dr. Aguilar's lack of 
registration should have been aroused as reasonable pharmacists and 
they failed to investigate, the evidence is simply insufficient to 
establish a violation. Notably, the Government does not cite to any 
statute, Board regulation, or decision of either the Board or the 
courts which requires a pharmacist to verify the status of a DEA 
registration (or medical license) upon being presented with a 
prescription which he/she suspects lacks a legitimate medical 
purpose.\21\ Nor, notwithstanding the abundance of agency case law 
applying the reasonable pharmacist standard, did the Government call an 
expert to testify that the standards of professional pharmacy practice 
require that a pharmacist who is confronted with prescriptions from a 
particular physician which he/she suspects lack a legitimate medical 
purpose, must also determine whether the physician possesses a valid 
DEA registration.\22\
---------------------------------------------------------------------------

    \21\ The ALJ also reasoned that ``[t]he absence of Dr. Aguilar's 
[registration] is the most glaring of red flags that could and 
should have been recognized by the Respondent upon the exercise of 
even the most minimal due diligence. Conclusively resolving such a 
fundamental red flag was a mandatory condition precedent to the 
legal dispensing of a control substance. . . .'' R.D. at 52.
     The term ``red flag'' is not defined in either the CSA or DEA 
regulations. However, in the context of a pharmacy, a red flag is 
simply a circumstance arising during the presentation of a 
prescription, which creates a reasonable suspicion that the 
prescription is not valid and which imposes on a pharmacist the 
obligation to conduct further inquiry into whether the prescription 
is valid or to not fill it all. See Holiday CVS, 77 FR at 62332.
     Here, there was no evidence that Respondents' pharmacists ever 
received any information that Dr. Aguilar was no longer registered 
such as through a tip, the grapevine, or having seen media coverage 
of Aguilar's putative arrest or trial. Moreover, while a red flag 
includes additional facts developed during the investigation of 
other red flags, here, the red flag was the illegality of the 
prescriptions Respondents declined to fill. Because there is no 
regulation which required Respondents to the check the registration 
status of Dr. Aguilar, nor any testimony that the accepted standards 
of professional practice required that they do so, I do not adopt 
the ALJ's discussion that Dr. Aguilar's lack of a registration was 
``the most glaring of red flags'' which should have been discovered.
    \22\ As found above, in the Interim Rule on Electronic 
Prescribing, the Agency noted that several commenters had objected 
to the proposal that the DEA registration must be verified for all 
electronic prescriptions, noting ``that pharmacies are not required 
to check DEA registrations for paper prescriptions unless they 
suspect something is wrong with a prescription.'' 75 FR at 16266. 
While this may reflect the accepted standards of professional 
pharmacy practice, the Interim Rule did not explain who the 
commenters were and whether they speak for the profession as a 
whole. Moreover, absent proof of either: (1) That a dispensing was 
simply a drug deal, or (2) that the pharmacy violated an explicit 
duty set forth in a statute, regulation, or case law, the standards 
of professional practice must generally be established on the record 
in any case. Accordingly, I place no weight on the statement 
suggesting that a pharmacist is required to check a prescriber's 
registration if he/she suspects there is something wrong with a 
prescription.
---------------------------------------------------------------------------

    In its post-hearing brief, the Government argues for the first time 
that Respondents' pharmacists also violated their corresponding 
responsibility because the prescriptions they filled also lacked a 
legitimate medical purpose. As the Government argues, ``Mr. Moro-
Perez's most egregious conduct involves filling prescriptions for Dr. 
Aguilar-Amieva despite the fact that he had previously flagged prior 
prescriptions as being illegitimate.'' Gov. Post-Hrng. Br. at 22. The 
Government then argues that ``Respondent[s] deliberately ignored their 
own internal warnings when they continued to fill other prescriptions 
for Dr. Aguilar-Amieva,'' that ``Moro-Perez failed to conduct any 
investigation to resolve this flag,'' and that ``[a]ny reasonable and 
prudent pharmacist would not have continued to fill prescriptions 
without further investigation.'' Id. at 23.
    Even ignoring that raising this theory for the first time in its 
post-hearing brief is too late to provide fair notice (given that the 
testimony did not occur until Moro-Perez was cross-examined by his own 
counsel), the Government did not put on any evidence to show that any 
of the Aguilar prescriptions filled by

[[Page 28673]]

Respondents also lacked a legitimate medical purpose.\23\ Indeed, there 
is no evidence to refute Moro-Perez's testimony (which the ALJ 
apparently found credible) that he and his pharmacists declined to fill 
many prescriptions and thus complied, (at least with respect to those 
prescriptions), with their corresponding responsibility.
---------------------------------------------------------------------------

    \23\ Notably, in this portion of its brief, the Government makes 
no reference to the status of Dr. Aguilar's registration. See Gov. 
Post-Hrng. Br. 22-23.
    While the Government obtained the prescriptions during its 
investigation, it did not raise this theory in the Show Cause Order, 
which, with regard to Respondents' dispensings, rested entirely on 
the allegations that they dispensed ``prescriptions for controlled 
substances issued by a medical doctor who did not possess a valid 
DEA registration.'' ALJ Ex. 1, at 2. Moreover, in neither of its 
pre-hearing statements, did the Government provide notice that it 
was challenging the dispensings of the Aguilar prescriptions on the 
ground that they were issued for other than a legitimate medical 
purpose. See ALJ Exs. 4 & 8.
---------------------------------------------------------------------------

    As for its contention that no reasonable and prudent pharmacist 
would have filled the prescriptions, here again, there is no evidence 
as to what a reasonable and prudent pharmacist would have done when 
confronted with this information. Nor is there any expert testimony as 
to at what point (i.e., after how many prescriptions), this information 
would have prompted further investigation.\24\
---------------------------------------------------------------------------

    \24\ Even were I to apply the ``reason to know'' standard of the 
common law, see Novicki v. Cook, 946 F.2d 938, 941 (D.C. Cir. 1991), 
which requires proof of something less than either actual knowledge 
or willful blindness, the Government would not prevail on its 
contention that Respondents violated 21 CFR 1306.04(a) because the 
prescriptions were issued under an expired registration. In Novicki, 
the D.C. Circuit looked to the Restatement (Second) of Agency (1958) 
and the Restatement (Second) of Torts (1965) to give meaning to the 
term. See id. (quoting Restatement (Second) of Agency Sec.  9 cmt. d 
(1958) and citing Restatement (Second) of Torts Sec.  12(1)). As the 
Restatement of Agency explains,
    A person has reason to know of a fact if he has information from 
which a person of ordinary intelligence, or of the superior 
intelligence which such person may have, would infer that the fact 
in question exists or that there is such a substantial chance of its 
existence that, if exercising reasonable care with reference to the 
matter in question, his action would be predicated upon the 
assumption of its possible existence. The inference drawn need not 
be that the fact exists; it is sufficient that the likelihood of its 
existence is so great that a person of ordinary intelligence, or of 
the superior intelligence which the person in question has, would, 
if exercising ordinary prudence under the circumstances, govern his 
conduct as if the fact existed, until he could ascertain its 
existence or non-existence. . . . A person of superior intelligence 
or training has reason to know a fact if a person with his mental 
capacity and attainments would draw such an inference from the facts 
know to him. On the other hand, ``reason to know'' imports no duty 
to ascertain facts not to be deduced as inferences from facts 
already known; one has reason to know a fact only if a reasonable 
person in his position would infer such fact from other facts 
already known to him.
    Restatement (Second) of Agency Sec.  9 cmt. d (1958); see also 
Restatement (Second) of Torts Sec.  12, cmt. a (`` `Reason to know' 
means that the actor has knowledge of facts from which a reasonable 
man of ordinary intelligence or one of the superior intelligence of 
the actor would either infer the existence of the fact in question 
or would regard its existence as so highly probable that his conduct 
would be predicated upon the assumption that the fact did exist.'').
    Because he is a licensed pharmacist (as are presumably his other 
pharmacists), Mr. Moro-Perez is a ``person of superior intelligence 
or training.'' Thus, it would be appropriate to consider whether a 
person possessing the mental capacity and attainments of Mr. Moro-
Perez and his pharmacists would, based on the knowledge that Dr. 
Aguilar was issuing prescriptions which lacked a legitimate medical 
purpose, draw the further inference that he was no longer 
registered. Here again, because the Government did not sponsor any 
expert testimony, there is no evidence as to whether, based on the 
prescriptions that he/she was rejecting, a reasonable pharmacist 
would have inferred that Aguilar was not registered or would have 
regarded the existence of this fact ``as so highly probable'' that 
he would have refused to dispense the prescriptions.
---------------------------------------------------------------------------

    In their post-hearing brief, Respondents nonetheless concede that 
by dispensing the Aguilar prescriptions they committed acts 
inconsistent with the public interest, Resp. Post-Hrng. Br. 18, because 
``it was wrong for him [Moro-Perez] and [the] pharmacies to rely on 
[an] insurance company's system to notify [them] if a doctor's license 
is expired, suspended, or revoked.'' Id. at 19. Respondents further 
concede that doing so constitutes ``such other conduct which may 
threaten public health and safety.'' Id. at 25.
    I agree. As the ALJ found (and given Respondent's concession), it 
was not objectively reasonable for Respondents' pharmacist to rely on 
whether insurance companies rejected a claim for payment of a 
prescription to determine whether a physician held a valid 
registration. And as explained above, more than a year prior to the 
conduct at issue here, I explained (albeit in a dictum) that ``[a] 
pharmacy has a duty to periodically check to see that a practitioner 
retains the authority to practice medicine and dispense a controlled 
substance.'' Medicine Shoppe-Jonesborough, 73 FR at 381 n.45. However, 
because it was not necessary to decide the case, Medicine Shoppe--
Jonesborough did not set forth the specific parameters of this duty. 
See id.
    I nonetheless conclude that Respondents breached this duty because 
their pharmacists failed to verify that Dr. Aguilar remained registered 
at any time during the thirty-four month period between the expiration 
of his registration and the execution of the search warrants. However, 
I place only nominal weight on this aspect of Respondents' misconduct. 
The Government did not prove that Respondents' misconduct was 
intentional or knowing. Moreover, while Respondents do not dispute that 
their failure to verify Dr. Aguilar's registration at any time during 
the aforesaid period constitutes conduct which may threaten the public 
health and safety, the lack of specific guidance as to what steps are 
necessary to comply with this duty diminishes its egregiousness to some 
degree. Finally, Mr. Moro-Perez's material falsification of the 
applications and failure to accept responsibility for the 
falsifications, provide reason alone to deny the applications.
    While it is indisputable that failing to verify a controlled-
substance prescriber's credentials at any time during a three year 
period is a breach of the duty set forth in Medicine Shoppe--
Jonesborough, I conclude that if the Agency intends to enforce this 
duty in other cases, it must provide the regulated community with 
guidance as to its scope. However, while such guidance can be announced 
in an adjudicatory proceeding, the process of adjudication is not well 
suited for doing so. See I Richard J. Pierce, Jr., Administrative Law 
Treatise Sec.  6.8, at 368-74 (4th ed. 2002). Accordingly, I decline to 
set forth how frequently a pharmacy must verify that a prescriber is 
registered.
    In sum, I reject the allegations that Respondents violated Federal 
law and DEA regulations when they dispensed controlled substance 
prescriptions ``issued by a medical doctor who did not possess a valid 
DEA registration.'' Show Cause Order (ALJ Ex. 1), at 2 ]] 4 & 8 (citing 
21 U.S.C. 843(a)(2); 21 CFR 1306.04).\25\ However, I find that 
Respondents breached their duty to periodically verify Dr. Aguilar's 
registration status. See Medicine Shoppe-Jonesborough, 73 FR at 381 
n.45.
---------------------------------------------------------------------------

    \25\ I also do not adopt the ALJ's discussion in the 
Recommendation section of his decision regarding the egregiousness 
of Respondents' conduct in filling the Aguilar prescriptions and the 
Agency's interest in deterring similar misconduct. Nor do I adopt 
the ALJ's discussion rejecting Respondents' arguments which were 
offered in mitigation of this violation.
---------------------------------------------------------------------------

    Most significantly, I also adopt the ALJ's findings that Mr. Moro-
Perez materially falsified the application of each Respondent by 
failing to disclose that he had previously surrendered each pharmacy's 
registration for cause, as well as the ALJ's findings that Mr. Moro-
Perez has not acknowledged his misconduct in doing so. See R.D. at 53 
(finding that Mr. Moro-Perez ``insistence that his false response to an 
application query regarding whether each pharmacy had ever surrendered 
a [registration] for cause was some sort of reasonable

[[Page 28674]]

misunderstanding is simply not credible and defeats the Respondents' 
efforts to meet the Government's case''). Accordingly, I will deny each 
Respondent's application.

Order

    Pursuant to the authority vested in me by 21 U.S.C. 823(f) and 28 
CFR 0.100(b), I order that the application of JM Pharmacy Group Inc., 
d/b/a Farmacia Nueva, for a DEA Certificate of Registration as a retail 
pharmacy, be, and it hereby is, denied. I further order that the 
application of Best Pharma Corp, for a DEA Certificate of Registration 
as a retail pharmacy, be, and it hereby is, denied. This Order is 
effective immediately.

    Dated: April 29, 2015.
Michele M. Leonhart,
 Administrator.
Anthony Yim, Esq., for the Government.
Vladimir Mihailovich, 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 June 
19, 2013, the Deputy-Assistant Administrator of the Drug Enforcement 
Administration (DEA) issued an Order to Show Cause (OSC) proposing 
to deny applications for two DEA Certificates of Registration (COR) 
submitted on behalf of two pharmacies \1\ (collectively, the 
Respondents). In its OSC and its prehearing statements, the 
Government avers that the applications should be denied because they 
were submitted with material falsifications,\2\ and because granting 
the applications would be inconsistent with the public interest as 
that term is defined under the Controlled Substances Act (CSA). 21 
U.S.C. 823(f) (2006). On July 18, 2013, the Respondents, through 
counsel, filed a timely request for hearing, which was conducted in 
Arlington, Virginia, on September 3, 2013.
---------------------------------------------------------------------------

    \1\ The two registrants were jointly captioned on a single OSC, 
and neither party petitioned for severance.
    \2\ 21 U.S.C. 824(a)(1) (2006) (providing a statutory basis for 
discretionary revocation).
---------------------------------------------------------------------------

    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 
Respondents' applications for registrations with the DEA should be 
denied on the grounds alleged by the Government.
    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,\3\ the Government alleges that the COR applications 
filed on behalf of both registrants should be denied as contrary to 
the public interest.\4\ In its subsequently filed Prehearing 
Statement,\5\ the Government supplemented its theory in support of 
denial with additional allegations that the COR applications filed 
on behalf of each Respondent contained material falsifications \6\ 
in that each application stated that the respective registrant had 
never surrendered a COR for cause, when, in fact, both had.
---------------------------------------------------------------------------

    \3\ ALJ Ex. 1.
    \4\ 21 U.S.C. 824(a)(4).
    \5\ ALJ Ex. 4.
    \6\ 21 U.S.C. 824(a)(1).
---------------------------------------------------------------------------

    In support of the denial it seeks regarding an application for a 
COR filed by JM Pharmacy Corp., d/b/a Farmacia Nueva (Farmacia Nueva 
or FN), based on the public interest, the Government avers that this 
Respondent: (1) ``filled approximately 160 prescriptions for 
controlled substances issued by a medical doctor who did not possess 
a valid DEA registration in violation of'' 21 U.S.C. 843(a)(2) and 
21 CFR 1306.04 (2013); and (2) ``failed to keep records of 
approximately twenty-seven (27) prescriptions for controlled 
substances'' from November 2009 through November 2011 in violation 
of 21 U.S.C. 827(b)(1) and 21 CFR 1304.04.\7\
---------------------------------------------------------------------------

    \7\ ALJ Ex. 1, at 2.
---------------------------------------------------------------------------

    The Government alleges that the granting of the COR application 
filed by Best Pharma Corp. (Best Pharma or BP) is inconsistent with 
the public interest in that this Respondent: (1) ``filled 
approximately thirty-two (32) prescriptions for controlled 
substances issued by a medical doctor who did not possess a valid 
DEA registration, in violation of'' 21 U.S.C. 843(a)(2) and 21 CFR 
1306.04; and (2) ``failed to keep records of approximately seven (7) 
prescriptions for controlled substances'' from November 2009 through 
November 2011 in violation of 21 U.S.C. 827(b)(1) and 21 CFR 
1304.04.\8\
---------------------------------------------------------------------------

    \8\ Id.
---------------------------------------------------------------------------

    Additionally, the Government alleges that both Farmacia Nueva 
and Best Pharma ``materially falsified'' their applications for DEA 
CORs.\9\
---------------------------------------------------------------------------

    \9\ ALJ Ex. 8, at 1.
---------------------------------------------------------------------------

The Stipulations of Fact

    The Government and the Respondents, through counsel, have 
entered into stipulations \10\ regarding the following matters:

    \10\ On August 28, 2013 (three business days prior to the 
commencement of the hearing in this matter), a telephonic status 
conference (Status Conference) was conducted with the parties, 
wherein, inter alia, the Government concurred with Best Pharma's 
position that several prescription events initially alleged by the 
Government as involving controlled substances actually described 
substances that were not controlled. The next day, the Government 
filed a document styled ``Joint Stipulations'' (Joint Stipulations) 
wherein the parties mutually agreed to the substitution of 
previously-noticed versions of Proposed Government Exhibits 7(ID) 
and 12(ID), and stipulated that six prescription events purportedly 
detailed in Proposed Government Exibit 7(ID) and one prescription 
event purportedly detailed in Proposed Government Exhibit 12(ID) do 
not refer to controlled substances. ALJ Ex. 11. Notwithstanding the 
purported exhibit substitution set forth in the Joint Stipulations, 
at the hearing, the Government (errantly) represented that it had 
withdrawn Proposed Government Exhibit 12(ID). Tr. 97-98. 
Regrettably, the record is further confounded by the fact that none 
of the seven non-controlled prescription events referenced in the 
Joint Stipulations are depicted in the substituted Government 
Exhibits 7 or 12(ID). The parties also agreed to forego objections 
to numerous proposed exhibits. ALJ Ex. 11.
---------------------------------------------------------------------------

    1) The owner of Farmacia Nueva and Best Pharma is Mr. Julio E. 
Moro-Perez (Moro-Perez).
    2) Farmacia Nueva previously held DEA COR BF9534187 as a retail 
pharmacy in Schedules II-V.
    3) Best Pharma previously held DEA COR FB1971565 as a retail 
pharmacy in Schedules II-V.
    4) Neither Farmacia Nueva nor Best Pharma currently possesses a 
DEA COR.
    5) On October 10, 2012, Moro-Perez applied on behalf of Farmacia 
Nueva for a DEA COR as a retail pharmacy in Schedules II-V at URB 
Raholisa #3, San Sebastian, Puerto Rico 00685.
    6) On October 10, 2012, Moro-Perez applied on behalf of Best 
Pharma for a DEA COR as a retail pharmacy in Schedules II-V at Carr 
111 KM 5.2 Bo. Pueblo, Ave La Moca 300, Moca, Puerto Rico 00685.
    7) A COR previously issued to Dr. Hector J. Aguilar-Amieva, M.D. 
(Dr. Aguilar) was retired by DEA on January 31, 2009.
    8) A criminal case against Moro-Perez, case no. 3:11-CR-00532-
006, was dismissed with prejudice by the United States District 
Court for the District of Puerto Rico on March 23, 2012, upon 
petition from the United States Attorney's Office for the District 
of Puerto Rico.\11\
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    \11\ The parties stipulated to this after the issuance of the 
Prehearing Ruling in this matter. The Respondents, through counsel, 
telephonically communicated their assent to this stipulation on 
August 26, 2013, the business day after the Government proposed it 
in its Supplemental Prehearing Statement. ALJ Ex. 8.
---------------------------------------------------------------------------

The Evidence

The Government's Evidence

    The Government's case-in-chief rested on the testimony of four 
witnesses: DEA Diversion Investigator (DI) Ghensy Antoine, DEA 
Digital Forensic Examiner (DFE) Amy L. Herrmann, DI George Taylor, 
and Moro-Perez, the owner/president of Farmacia Nueva and Best 
Pharma.
    DI Ghensy Antoine testified that in the course of his duties as 
a DI in the Ponce, Puerto Rico DEA field office, he was assigned as 
the lead investigator for the COR applications filed by Moro-Perez 
on behalf of the Respondents. Tr. 13-14, 76. Antoine explained that 
these COR applications were designated for investigation because the 
Respondents had a history of ``some issues with some minor 
violations.'' Tr. 15. Specifically, regarding Farmacia Nueva, 
Antoine stated that his application \12\ investigation preliminarily 
revealed that on

[[Page 28675]]

November 30, 2011, the pharmacy had been the subject of a DEA-
executed federal criminal search warrant,\13\ which resulted in an 
immediate suspension order.\14\ Tr. 14, 16. DI Antoine testified 
that he learned that, between January 30, 2009 and November 30, 
2011, Farmacia Nueva had dispensed 143 controlled substances \15\ 
based on prescription scrips issued by Dr. Aguilar,\16\ and that, 
during that period of time, Dr. Aguilar did not possess a valid COR. 
Tr. 17-18. DI Antoine stated that Dr. Aguilar's registration number 
had been retired by DEA since January 31, 2009, following an 
investigation and a federal criminal conviction, and that the status 
of his COR would have been uploaded to the DEA Diversion Web site on 
the date it was retired. Tr. 53-55. According to DI Antoine, there 
were multiple, readily-available means for Farmacia Nueva personnel 
to have ascertained that Dr. Aguilar lacked federal authorization to 
prescribe controlled substances at the time the prescriptions were 
filled. Tr. 20. Antoine related that Farmacia Nueva personnel could 
have checked Dr. Aguilar's COR status by accessing a link that is 
``clearly visible'' \17\ on the DEA Diversion Web site,\18\ by 
consulting a list of registrants updated regularly by the Department 
of Commerce, by contacting the local DEA field office directly, or 
by contracting with a private company. Tr. 20-21.
---------------------------------------------------------------------------

    \12\ Farmacia Nueva's COR application was received into the 
record. Gov't Ex. 1.
    \13\ From the outset of the Government's case as detailed in the 
OSC and its Prehearing Statement, the Government signaled its 
intention to rely upon a theory of incomplete recordkeeping at 
Farmacia Nueva, and made known that its case in this regard would be 
principally established by an evaluation of records seized during 
the course of a search warrant executed at the pharmacy on November 
30, 2011 and supplemented by an administrative request for 
information. ALJ Exs. 1, 4, at 4. Although it could hardly be a 
surprise that details surrounding the adequacy of the execution of 
the Farmacia Nueva search warrant could be an issue, instead of 
presenting testimony from anyone present when the warrant was 
executed, the Government elected to present hearsay testimony about 
the details of the operation from only DI Antoine, who was not 
present during the execution. Tr. 113-18. Over Respondents' timely 
(and ultimately correct) objection, the Government elicited details 
of conversations that occurred between DI Antoine and DIs Rosa Smith 
and Jose Rodriguez, who apparently were present at Farmacia Nueva 
when the search warrant was executed. DI Antoine was not certain 
about when the conversation(s) took place. Tr. 119-20; see also ALJ 
Ex. 24, at 7 n.1. The Government offered no indication that DIs or 
other personnel present at the search warrant execution were in any 
way unavailable and tendered no indicia of reliability that would 
merit consideration of this hearsay testimony in support of a 
substantial evidence finding. See Mireille Lalanne, M.D., 78 FR 
47750, 44752 (2013) (holding that the proponent of a hearsay 
statement in DEA administrative proceedings bears the burden to 
demonstrate sufficient reliability to warrant consideration as 
substantial evidence); see also Kevin Dennis, M.D., 78 FR 52787, 
52796 (2013) (``[H]earsay may be substantial evidence depending on 
its truthfulness, reasonableness, and credibility; hearsay 
statements are highly probative where declarants are disinterested 
witnesses, statements are essentially consistent, and counsel had 
access to the statements prior to the agency hearing.''). DEA 
applies the law in the relevant Circuit. Lalanne, 78 FR at 47751 & 
n.4. Precedent in the applicable Circuits are in accord. Echostar 
Commc'ns Corp. v. FCC, 292 F.3d 749, 753 (D.C. Cir. 2002) (holding 
that hearsay evidence at an administrative hearing may be used to 
support substantial evidence finding where it bears sufficient 
indicia of reliability and is reliable and trustworthy); Hoska v. 
U.S. Dep't of the Army, 677 F.2d 131, 138 (D.C. Cir. 1982) (holding 
that hearsay statements admitted at an administrative hearing that 
were tested for reliability and found wanting were thus insufficient 
to support a substantial evidence finding); NLRB v. Serv. Wood Heel 
Co., 124 F.2d 470, 472 (1st Cir. 1941) (finding hearsay evidence 
adduced at an administrative hearing sufficiently trustworthy to be 
considered in a substantial evidence finding where corroborated and 
consistent with attendant circumstances). Inasmuch as the Government 
did not even attempt to demonstrate any indicia of reliability 
regarding the hearsay statements from DIs Smith and Rodriguez 
received through DI Antoine, those statements cannot be properly 
considered here, and were not considered in support of substantial 
evidence.
    \14\ An indictment issued against Moro-Perez was ultimately 
dismissed with prejudice. Stip. 8; Tr. 76-77.
    \15\ Tr. 78.
    \16\ DI Antoine testified that documentary references to Dr. 
Aguilar and Dr. Hector Aquilar refer to the same individual. Tr. 19.
    \17\ Tr. 87-89.
    \18\ DI Antoine testified that he was unable to recall the name 
of the database, but was sure that it was free and available to 
registrants and accessible as a link on the DEA Diversion Web site 
and that it has been up and running continuously since 2008. Tr. 21-
22. A registrant must sign into the system to review the available 
information. Id.
---------------------------------------------------------------------------

    Antoine testified that he also learned that, in 2008, DEA had 
issued a letter admonishing Farmacia Nueva ``for failure to comply 
with federal requirements of the [CSA]'' (Letter of Admonition). Tr. 
19. The Letter of Admonition, which was received into evidence,\19\ 
presents as having been sent on April 3, 2008, from the DEA 
Caribbean Division to Moro-Perez regarding Farmacia Nueva and, on 
its face, purports to have been sent via certified mail. Gov't Ex. 
3. The Letter of Admonition informs Moro-Perez that DEA 
investigators discovered numerous record-keeping discrepancies 
during a March 2008 investigation, to wit: (1) Failure to take a 
biennial inventory; (2) failure to record on DEA Form 222 the number 
of containers received and date on which such containers were 
received; (3) failure to record the date of receipt of controlled 
substances on commercial invoices; and (4) failure to submit DEA 
Form 41. Id. Each noticed violation is accompanied by a 
corresponding statutory and/or regulatory basis. Id. Although the 
Letter of Admonition directs Farmacia Nueva to ``[p]lease advise 
this office in writing within thirty (30) days, the action taken or 
planned, to correct [the listed] violations,'' Antoine testified 
that, although DEA has no record of any further correspondence 
related to this admonition, the matter was closed without further 
action. Tr. 82-86.
---------------------------------------------------------------------------

    \19\ Tr. 34.
---------------------------------------------------------------------------

    On the issue of Farmacia Nueva's records, DI Antoine testified 
that he was furnished with data from the pharmacy's computer and 
hard copies of prescriptions seized from Farmacia Nueva at the time 
of a November 30, 2011 search warrant execution. Tr. 23-24. Although 
Antoine's testimony was by no means a model of clarity, it appears 
that when the DI compared the Dr. Aguilar-authorized controlled 
substance dispensing events in the computer data with copies of the 
seized hard-copy scrips, he was unable to match twenty-two 
dispensing events in the data with corresponding hard-copy scrips. 
Tr. 23-25, 91. Antoine added that, in the course of his 
investigation, he also sent Moro-Perez a January 30, 2013 letter 
(Administrative Request for Information), over the signature of his 
DEA supervisor, requesting ``[c]opies of [p]rescriptions issued by 
[Dr. Aguilar] within the period of January 31, 2009 to November 30, 
2011, including any information related to the dispensing of such 
prescriptions.'' Tr. 31-33; Gov't Ex. 4. Moro-Perez responded to the 
Administrative Request for Information in a letter,\20\ dated March 
4, 2013 (Response to Administrative Request for Information), which 
included copies of additional prescription scrips. Tr. 36. The 
Response to Administrative Request for Information represented that 
``all of the requested prescriptions'' were included with the 
correspondence. Gov't Ex. 4, at 3. DI Antoine presented a document 
(Government FN Aguilar Scrips) that he described as copies \21\ of 
controlled substance scrips obtained by the search warrant and later 
supplemented by Moro-Perez in the Response to Administrative Request 
for Information. Tr. 36-39; Gov't Ex. 5. Antoine testified that when 
he compared the Aguilar dispensing events recorded in the Farmacia 
Nueva computer data (FN Computer Data) to the Government FN Aguilar 
Scrips, he was unable to locate twenty-two Aguilar scrips that, 
based on the FN Computer Data, should have been there. Tr. 48. 
Antoine testified that he used a sorting function to create a 
spreadsheet from the FN Computer Data that listed every transaction 
from the scrips contained in the Government FN Aguilar Scrips 
package, or as he put it, ``exactly a mirror of what's included [in 
the Government FN Aguilar Scrips].'' Tr. 44-47; Gov't Ex. 6. Thus, 
the spreadsheet (Government FN Aguilar Scrips Spreadsheet) \22\ 
contains every dispensing event transaction depicted in the 
Government FN Aguilar Scrips \23\ document created by the seized 
scrips and supplemented by Moro-Perez pursuant to the Request for 
Information. DI Antoine testified that he used the sorting feature 
to tease out the dispensing events in the Government FN Computer 
Data that did not have a corresponding scrip in the Government FN 
Aguilar Scrips and made a spreadsheet (Government FN Aguilar No-
Scrip List).\24\

[[Page 28676]]

Gov't Ex. 7. Thus, the Government FN Aguilar No-Scrip List reflects 
twenty-four \25\ Aguilar-authorized controlled substance dispensing 
events at Farmacia Nueva where the combined efforts of DI Antoine's 
seized records and Moro-Perez's supplemented records still did not 
yield a copy of a scrip.
---------------------------------------------------------------------------

    \20\ The Government presented a copy of the Response to the 
Administrative Request for Information in a translated format as 
well as a copy of the original Spanish-language version. Gov't Ex. 
4, at 2-3.
    \21\ DI Antoine testified that hard-copy scrips seized from 
Farmacia Nueva during the execution of the search warrant were 
photocopied. Tr. 37.
    \22\ Gov't Ex. 6.
    \23\ Gov't Ex. 5.
    \24\ Although not explained during the course of the hearing, 
the three pages that comprise the Government FN Aguilar No-Scrip 
List must be placed side-by-side and read across. Gov't Ex. 7. 
Needless to say, this format is not optimal.
    \25\ Although DI Antoine described twenty-two Aguilar dispensing 
events without corresponding scrip copies, the Government FN Aguilar 
No-Scrip List sets forth twenty-four dispensing events. Id. While no 
explanation regarding this disparity was offered at the hearing, the 
extra two entries appear to be refills of previously-filled 
prescriptions. In any event, the variance, whatever its genesis, was 
inconsequential to the resolution of the ultimate issues presented 
in this case.
---------------------------------------------------------------------------

    DI Antoine testified that he also conducted the COR application 
\26\ investigation of Best Pharma. Tr. 52. According to Antoine, 
Best Pharma was also the subject of an executed criminal search 
warrant on November 30, 2011, and prescription scrips were likewise 
seized from its pharmacy, scanned into DEA computers, and returned. 
Tr. 50, 52, 60-61; Gov't Ex. 10. As was the case at Farmacia Nueva, 
data from the Best Pharma computers was extracted by DEA, and the 
data was queried by DI Antoine to yield controlled substance 
dispensing events on scrips authorized by Dr. Aguilar from the time 
his COR was retired up to and including the date the search warrant 
was executed. Tr. 65-69; Gov't Ex. 11. Antoine testified that an 
examination of the seized documents revealed that, like Farmacia 
Nueva, Best Pharma dispensed controlled substances on prescriptions 
issued by Dr. Aguilar during a time when the doctor did not possess 
a COR. Tr. 52-53. In his testimony, DI Antoine re-affirmed the 
aforementioned methods that Best Pharma staff members had at their 
disposal to ascertain Dr. Aguilar's COR status. Tr. 55.
---------------------------------------------------------------------------

    \26\ The Best Pharma COR application was received into the 
record. Gov't Ex. 8.
---------------------------------------------------------------------------

    Antoine also indicated that when he compared the Best Pharma 
computer-stored dispensing events with the controlled substance 
prescription scrips seized in connection with the search warrant, he 
was unable to identify ``four or five'' scrips that corresponded to 
dispensing events. Tr. 96.
    Government-supplied declarations from the DEA Registration and 
Program Support Section Chief reflect that a COR was issued to 
Farmacia Nueva in 2005 and to Best Pharma in 2010. Gov't Exs. 2, 9. 
The DEA Best Pharma Declaration indicates that Best Pharma 
surrendered its COR for cause on December 14, 2011. Gov't Ex. 9. The 
Government also submitted a DEA Form 104 (Best Pharma Surrender 
Form) that indicates that Moro-Perez executed a voluntary surrender 
for cause on November 30, 2011.\27\ Gov't Ex. 14, at 1. On the Best 
Pharma Surrender Form, Moro-Perez signed below a checked box, which 
provides: ``In view of my alleged failure to comply with the Federal 
requirements pertaining to controlled substances, and as an 
indication of my good faith in desiring to remedy any incorrect or 
unlawful practices on my part . . . I hereby voluntarily surrender 
my Drug Enforcement Administration Certificate of Registration. . . 
. ''Id.
---------------------------------------------------------------------------

    \27\ Although no explanation has been tendered to explain this 
disparity, the anomaly does not impact any issue dispositive to a 
resolution of the ultimate issues in this case.
---------------------------------------------------------------------------

    The DEA Farmacia Nueva Declaration states that Farmacia Nueva 
surrendered its COR for cause on June 28, 2012. Gov't Ex. 2, at 2. 
Also offered in support of the proposition that Farmacia Nueva 
surrendered for cause in 2012 was a copy of what purports to be 
email correspondence (printed out under DI Antoine's email header) 
between the Respondents' present counsel and an individual to whom 
counsel was seeking to surrender its COR. Gov't Ex. 14, at 2-4. 
Although the Government presented no explanation or context 
regarding the email traffic or any witness testimony regarding the 
participants, the exhibit (which was received in the absence of 
objection), on its face, includes this unambiguous statement:

    My client, Farmacia Nueva, has decided to voluntarily surrender 
its DEA registration at issue in the case Docket No. 12-16. Please 
prepare a joint motion to dismiss the pending case.

Id. at 2. Official notice is taken that the same Respondents 
captioned in this matter were also the subject of DEA administrative 
proceedings under Docket Number 2012-16 (Case 2012-16), an action 
that was commenced with a request for hearing filed on December 6, 
2011, and which culminated in a termination order dated June 29, 
2012.\28\ Further notice is taken that the records of the Agency 
reflect that the recipient of the email served as the Government 
counsel of record in Case 2012-16. DEA has no record of a DEA Form 
104 executed on behalf of Farmacia Nueva, but Antoine testified that 
it is his understanding that the email surrender occurred while the 
case was in active administrative enforcement proceedings. Tr. 72-
74. In his testimony, DI Antoine explained that while it is his 
``practice [to] always get a [DEA Form] 104,'' and that he has 
procured a DEA Form 104 in all but one case where he has accepted a 
registrant's surrender for cause, it was his understanding of the 
law that the email correspondence offered by the Government in this 
case was sufficient to memorialize the event. Tr. 73-74.
---------------------------------------------------------------------------

    \28\ The Administrative Procedure Act and the DEA regulations 
authorize the identification, recognition, and inclusion of material 
facts in the administrative record by the taking of official notice. 
5 U.S.C. 556(e); 21 CFR 1316.59(e); Attorney General's Manual on the 
Administrative Procedure Act Sec.  7(d) (1947). To the extent either 
party seeks to challenge the factual predicate of the official 
notice taken in this matter, it may file an appropriate motion no 
later than fifteen days from the issuance of this recommended 
decision.
---------------------------------------------------------------------------

    DI Antoine stated that he visited Farmacia Nueva and Best Pharma 
on August 14, 2013 (twenty days prior to the commencement of the 
hearing in this matter), and spoke with Nelson Vale and Miriam 
Castro Andujar, the respective pharmacists-in-charge (PICs).\29\ Tr. 
106-11. According to Antoine, in response to his query of them on 
the subject, both PICs indicated that they were aware of no written 
procedures issued for their respective pharmacies on the subject of 
the handling of controlled substances. Tr. 107. The PICs did, 
however, relate to DI Antoine that they believed that the owner 
planned to install a computer monitor in each pharmacy to facilitate 
some measure of access to verify the COR status of prescribing 
practitioners, and that there was also a plan to check prescriber 
statuses once per month. Tr. 112. PIC Castro told Antoine that she 
had recommendations for the handling of controlled substances that 
she would like to make to the pharmacy owner. Id.
---------------------------------------------------------------------------

    \29\  See Fed. R. Evid. 801(d)(2)(E).
---------------------------------------------------------------------------

    DI Antoine's testimony was, at times, difficult to understand 
and not always clear. That said, his testimony was sufficiently 
detailed, plausible, and internally consistent to be deemed credible 
in this recommended decision.
    The Government also presented the testimony of DFE Amy Herrmann, 
a digital forensic examiner employed by DEA. DFE Herrmann has been a 
DFE at the DEA Digital Evidence Laboratory since March 2008, and 
holds degrees in Information Technology, Network Security-Computer 
Forensics, and Financial Services. Tr. 122-25; Gov't Ex. 13. DFE 
Herrmann is certified as a Global Information Assurance Forensic 
Examiner and as an Information Systems Security Professional. Gov't 
Ex. 13. In the absence of objection, DFE Herrmann was accepted as an 
expert in the field of digital forensics.\30\ Tr. 126.
---------------------------------------------------------------------------

    \30\ DFE Herrmann's CV was received into the record. Gov't Ex. 
13.
---------------------------------------------------------------------------

    DFE Herrmann stated that she was assigned to the investigations 
concerning the Respondent pharmacies that were conducted in November 
2011. Id. She explained that another DFE who works in her office, 
Ryan Gladieux,\31\ extracted the information from the Farmacia Nueva 
computer by imaging the computer to a wiped and sterile DEA hard 
drive. Tr. 128-29. Herrmann testified that the

[[Page 28677]]

technique employed by Gladieux \32\ for imaging the computer makes a 
complete copy of all data contained therein and provides an alert to 
indicate if certain files are unreadable.\33\ Tr. 139-41. DFE 
Gladieux then provided the hard drive to the DEA office in Ponce 
where it was checked in as non-drug evidence. Tr. 131. From there it 
was forwarded to the DEA laboratory in Lorton, Virginia, and checked 
into the digital evidence vault. Tr. 122-23, 131. Herrmann stated 
that she then created a virtual machine with which to run Farmacia 
Nueva's RX30 program,\34\ enabling her to access the program as if 
she were accessing it from Farmacia Nueva's own computer at the 
moment the data was extracted.\35\ Tr. 141-42. Herrmann testified 
that she generated a report of all prescriptions dispensed by the 
pharmacy from January 1, 2009 to December 31, 2011, and converted 
the report into an Excel file. Tr. 142-43. According to Herrmann, 
she ran another report of the same data, but excluded any 
prescriptions that were noted as ``on hold'' (no-holds run). Tr. 
143-44. The no-holds run generated fewer dispensing events than the 
first report, but she never attempted to run a report to isolate the 
dispensing events in the ``on hold'' status. Tr. 145-47. Some of the 
dispensing event transaction numbers in the no-holds run are 
preceded by the letter ``H.'' See Gov't Ex. 7. When Herrmann was 
queried about whether the ``H'' indicated that these events really 
were ``on hold,'' she conceded that she did not understand what the 
``H'' meant and that she did not know why some transaction numbers 
bore that designator. Tr. 152-53, 161-62. Whatever ``H'' meant, DFE 
Herrmann testified that the report she ran on the data from the 
Farmacia Nueva computer excluded any dispensing event that was in an 
``on hold'' status. Tr. 143-44, 151-52, 160-61.
---------------------------------------------------------------------------

    \31\ During the Direct Examination of DFE Herrmann, the 
Government offered into evidence a declaration from DFE Ryan 
Gladieux. Tr. 133-37; Gov't Ex. 15. In his declaration, Gladieux 
states that he made complete copies of the hard drives seized during 
the investigations of Farmacia Nueva and Best Pharma on November 30, 
2011. Gov't Ex. 15. Gladieux declares that the copies of the hard 
drives are complete and accurate. Id. In objecting to the admission 
of the declaration, the Respondents raised the (fair) point that in 
contrast to the declarant, who had actual knowledge as to how the 
evidence was extracted, DFE Herrmann, ``has testified only to the 
things she has heard from someone that that happened.'' Tr. 135-36; 
see also Tr. 149-50. In explaining its election to present a 
declaration in lieu of testimony from Gladieux, the Government 
acknowledged that Gladieux was available, but stated ``[t]he reason 
was that the [G]overnment felt that a declaration would have been 
sufficient insofar as that it was properly noticed in the prehearing 
statement and that an indicia of reliability would have been given 
during this hearing [sic].'' Tr. 135. Regarding the Government's 
proposed transcript errata correction (ALJ Ex. 20, at 2) in this 
regard, the version set forth in the official transcript is 
consistent with my recollection. Gladieux's declaration was received 
into the record over the Respondents' hearsay objection, and 
although all parties were granted leave to present his live 
testimony, none did. Tr. 136. As explained more fully, infra, the 
Respondents' objection more correctly reflected on the weight to be 
afforded the content of the exhibit than it did on the document's 
admissibility.
    \32\ Herrmann acknowledged that she had no personal knowledge of 
exactly what Gladieux did and/or how well he did it beyond reading 
reports he prepared. Tr. 149-50.
    \33\ The imaged files copy each piece of data from the original, 
and a DEA program creates something called a ``hash'' for every 
file. Tr. 128. The hash is an algorithm that uniquely fits a piece 
of data and creates a certain value. Tr. 132. If a piece of data is 
altered in any way from the original data extracted from the 
computer, the hash value will change, notifying the DEA of the 
alteration. Tr. 132, 148. Herrmann testified that she verified that 
all hash values matched when she commenced her analysis of the data 
extracted from the computer. Tr. 133. Herrmann clarified that 
although error is always a possibility, the software she utilized is 
designed to alert the examiner if the reports generated do not match 
the amount of records contained in the data. Tr. 154-56.
    \34\ RX30 appears to be a software program that enables 
pharmacies to manage and record their dispensing events. Tr. 91, 
138, 142.
    \35\ Herrmann acknowledged that the reports could have been run 
using Farmacia Nueva's computer instead of from an image of the data 
extracted from the computer. Tr. 163-65.
---------------------------------------------------------------------------

    DFE Herrmann testified that she used ``essentially the same 
steps'' \36\ employed on the Farmacia Nueva computer data to analyze 
the information extracted from Best Pharma's RX30 program. Tr. 147. 
Regarding those matters of which she did have first-hand knowledge, 
her testimony was sufficiently detailed, plausible, and internally 
consistent to be fully credited in this recommended decision.
---------------------------------------------------------------------------

    \36\ There is no indication in the record why Herrmann 
characterized the steps as ``essentially'' the same.
---------------------------------------------------------------------------

    George Taylor, a DI stationed at the DEA Des Moines Resident 
Office, was called as a witness for the Government regarding his 
role as the team leader in charge of executing the search warrant at 
Best Pharma on November 30, 2011. Tr. 168-69. DI Taylor testified 
that his team of seven to nine federal and local agents and analysts 
seized all prescription records, controlled substances, and other 
specific items listed on the warrant. Tr. 170, 172. DI Taylor stated 
that the search warrant team was assisted by a Best Pharma 
pharmacist \37\ who directed them where to find the items listed on 
the warrant. Tr. 170. Controlled substances were seized and 
inventoried on the premises, and hard copies of controlled substance 
scrips and other records were collected and transported back to the 
staging area and then to the DEA Ponce Resident Office. Tr. 170-71, 
187. Taylor testified that, with the guidance of the Best Pharma 
pharmacist (who he assessed as cooperative), it is his opinion that 
the team seized all controlled substance prescription scrips that 
were on hand at the pharmacy, including paperwork from the 
prescription counter. Tr. 186-88.
---------------------------------------------------------------------------

    \37\ DI Taylor testified that a female Best Pharma pharmacist 
assisted his team in the execution of the search warrant, but he was 
unable to recall her name. Tr. 170.
---------------------------------------------------------------------------

    DI Taylor also testified that he was with Moro-Perez at the time 
the latter signed the Best Pharma Surrender Form. Tr. 175; Gov't Ex. 
14, at 1. On November 30, 2011, DI Taylor, accompanied by DEA 
Special Agent Juan Hernandez, signed the form as a witness and 
presented it to Moro-Perez while the latter was in custody.\38\ Tr. 
175; Gov't Ex. 14, at 1. DI Taylor directed Special Agent Hernandez 
to explain, in Spanish, to Moro-Perez that the form was a voluntary 
surrender of his controlled substances privileges. Tr. 176, 184. 
Special Agent Hernandez also read the entire form to Moro-Perez in 
Spanish. Tr. 178. DI Taylor testified that Moro-Perez questioned him 
regarding the nature of the surrender and whether it was related to 
the criminal charges against him. Tr. 179. DI Taylor stated that he 
explained that the surrender specifically related to the DEA 
registration number and was separate from any criminal allegations, 
and he testified that he dealt only with the regulatory matter. DI 
Taylor explained to Moro-Perez that if he did not sign the form, the 
DEA would move for an OSC proceeding. Tr. 176-77. DI Taylor stated 
that in his conversations with Moro-Perez, he never linked the 
voluntary surrender to the ongoing criminal investigation. Tr. 177.
---------------------------------------------------------------------------

    \38\ It is clear from DI Taylor's testimony that Moro-Perez was 
in custody in the rear of a government vehicle when he signed the 
Best Pharma Surrender Form. Tr. 179-83. The Respondents have raised 
no issue related to the voluntariness of the Surrender Form 
execution, and no genuine issue in this regard is supported by the 
record evidence.
---------------------------------------------------------------------------

    Moro-Perez also testified at the hearing.\39\ He stated that he 
is the president and original owner of both Farmacia Nueva and Best 
Pharma. Tr. 192, 219, 222, 238. He stated that he has been a 
pharmacist since he completed his training at medical school in 
Puerto Rico in 1999, worked as a pharmacist at another pharmacy, and 
served as chief pharmacist at Farmacia Nueva. Tr. 194, 202, 223-24. 
He acknowledged that he had received training regarding the 
prevention of the unauthorized distribution of controlled 
substances, and that he learned in his training that the pharmacy is 
``ultimately responsible for ensuring the integrity and the veracity 
of the prescription.'' Tr. 194. He also acknowledged that, from 
February 2009 to October 2011, both Respondent pharmacies filled 
prescriptions for (the un-registered) Dr. Aguilar. Tr. 193. Farmacia 
Nueva filled approximately 143 prescriptions, and Best Pharma filled 
approximately 32 prescriptions. Id. Moro-Perez conceded that at no 
point during that time period did any of the pharmacies attempt to 
verify the COR status of any of the doctors for whom they filled 
prescriptions. Tr. 194.
---------------------------------------------------------------------------

    \39\ Although Moro-Perez was noticed as a witness by the 
Respondents, his testimony was elicited by the Government as part of 
its case-in-chief. Tr. 190-191, 268.
---------------------------------------------------------------------------

    During the course of Moro-Perez's testimony, he described the 
physical layout and operational procedures utilized at the 
Respondent pharmacies. Regarding Farmacia Nueva, Moro-Perez 
explained that the three-story establishment is manned by twenty-two 
employees and that Nelson Vale is and has been the pharmacist-in-
charge (PIC) since 2010. Tr. 224-25. According to Moro-Perez, Best 
Pharma is located in a two-story building with sixteen employees. 
Tr. 240-41. The departments in each store are divided between the 
various floors. Tr. 224, 240. Moro-Perez testified that his role as 
a pharmacist and company president requires that he ensure that 
every prescription has a regular and legal use; that all 
administrative duties are carried out; and that each prescription is 
dispatched faithfully to the patient as the doctor prescribed it. 
Tr. 226-27. He then explained the following procedure for when a 
patient enters the FN pharmacy with a prescription: The patient, 
first, turns in his prescription at the pharmacy's receiving area. 
Tr. 227. Next, a pharmacy employee verifies the prescription, the 
name on the prescription, the address of the patient, the date, the 
medication, the quantity to be dispatched, the instructions on how 
to use the medication, the doctor's signature, and, if it is a 
prescription for a controlled substance, the DEA license, the AMSSCA 
license,\40\ and the state medical registration or license as found 
on the pharmacy's RX30 program. Tr. 227-28, 230. The employee then 
verifies if the prescription and medication are bioequivalent. Tr. 
228. If the patient accepts the medication, the back of the 
prescription is stamped and signed, and then the patient signs the 
document to acknowledge acceptance of the exchange of medication. 
Id. Next, pharmacy personnel enter the patient's name, phone number, 
address, driver's license, and medical plan information into

[[Page 28678]]

the RX30 system. Tr. 228-29. The prescription is then scanned, and 
the pharmacy enters the doctor's information. Tr. 229. The pharmacy 
staff verifies that all of the prescriber's information (including 
COR and license numbers) is found in the system, and enters the 
medication, including the amount to be dispensed and the dosage 
instructions. Id. After obtaining and entering all this information, 
the pharmacy staff submits the information to the appropriate 
insurance carrier, which will determine whether it will reimburse 
based on the information submitted. Id. The pharmacy staff then 
counts out the medication, puts it in a basket, and presents it to a 
pharmacist for verification. Id. Upon successful verification, the 
prescription is placed in dispatch, and the pharmacy contacts the 
patient who signs for the prescription, collects the medication, 
receives instructions on use, and pays any applicable deductible. 
Tr. 229-30.
---------------------------------------------------------------------------

    \40\ Regrettably, neither side provided any additional details 
as to what this organization is, or what the letters stand for.
---------------------------------------------------------------------------

    Moro-Perez stated that Best Pharma uses the same process of 
dispensing prescriptions as Farmacia Nueva. Tr. 245. He testified 
that Farmacia Nueva dispenses 500 prescriptions per day, with 
controlled substances accounting for approximately 10-15% of those 
sales. Tr. 244-45. Best Pharma dispenses 200-300 prescriptions per 
day, with approximately 10-15% of those sales derived from 
controlled substances. Tr. 245.
    Moro-Perez testified that, for prescriber COR verification, his 
Respondent pharmacies have relied upon a system of entering 
information into their internal computers, submitting the 
information to medical insurance providers through pharmacy 
software, and basing the assumption of up-to-date doctor licensing 
on the receipt of insurance provider ``confirmation'' \41\ of 
payment approval. Tr. 195-96, 230-32. Moro-Perez represented that 
both pharmacies purchased the RX30 system for their computers from a 
company named Ontime Soft, Inc. Tr. 196-97, 244. Pharmacy staff 
inputted a list of prescribing doctors and the doctors' information 
into the program. Tr. 199-200. Moro-Perez then explained that, when 
a patient visits one of the pharmacies with a prescription, the 
following information is entered into the system and then 
transmitted to the insurance providers: the patient, the patient's 
information, the doctor's information, the medication, the amount of 
medication, the directions for using the medication, and the amount 
of days that the medication will be supplied. Tr. 201. Moro-Perez 
eventually admitted that the pharmacies' method of ensuring the 
validity of the prescribing doctors' DEA licenses was to check, 
prior to dispensing, that the insurance company was willing to 
reimburse based on the electronically-transmitted claim. Tr. 200-01. 
He even conceded that although this was the method they employed to 
verify the prescribers' registration status,\42\ the insurance 
companies never represented that reliance upon the benefits claim 
determination was an appropriate method to check COR status.\43\ Tr. 
202. Moro-Perez stated that he does not know why the insurance 
companies kept reimbursing based on Dr. Aguilar's controlled 
substance prescriptions when he no longer had a COR, and he even 
agreed that the Respondent pharmacies would likely never have 
stopped dispensing (unregistered) Dr. Aguilar's prescriptions if the 
DEA had not executed its search warrant on November 30, 2011. Tr. 
202-03. Moro-Perez acknowledged that the Respondents made a mistake 
and that they erred in not calling the DEA to verify Dr. Aguilar's 
COR. Tr. 201-02.
---------------------------------------------------------------------------

    \41\ The witness never made clear what information was actually 
being transmitted or confirmed in the ``confirmation.''
    \42\ Moro-Perez also said that pharmacy staff checked prescriber 
licenses in the RX30 system. Tr. 230-31. However, since the 
pharmacies' internal systems were only updated by pharmacy staff, 
who relied exclusively on payment approvals from insurance 
companies, this step added little to the aggregate safeguards in 
place.
    \43\ Actually, the record contains no evidence that would 
objectively support a decision to rely on this approach or even 
support a conclusion that this method would be an effective manner 
to garner this information.
---------------------------------------------------------------------------

    When questioned regarding the Government's list of purportedly 
missing prescriptions from Farmacia Nueva,\44\ Moro-Perez insisted 
that, when he was told that the DEA identified those scrips as 
missing, he queried the system by medication name and was able to 
locate and identify all but one of the missing scrips in the 
Farmacia Nueva Computer and found a hard copy of the single missing 
(apparently unscanned) scrip in the pharmacy.\45\ Tr. 203-05. Copies 
of the imaged Dr. Aguilar scrips he purportedly printed from the 
pharmacy computer and supplemented with the single hard-copy scrip 
were received into the record (Moro-Perez FN Aguilar Scrips). Resp't 
Exs. 1, 2. Also received into evidence was a package of imaged 
prescription scrips that Moro-Perez testified he produced by 
querying the dispensing event numbers corresponding to the Dr. 
Aguilar controlled substance scrips that DEA alleged as missing 
(Moro-Perez FN Aguilar Found Scrips).\46\ Resp't Ex. 4; Tr. 263. The 
Moro-Perez FN Aguilar Found Scrips document contains nine scrips 
that, according to Moro-Perez, he was able to create by querying the 
Farmacia Nueva RX30 system with the dispensing event numbers that 
DEA told him they were unable to match with Government FN Aguilar 
Scrips.\47\
---------------------------------------------------------------------------

    \44\ Gov't Ex. 7.
    \45\ The supplemented scrip was identified by Moro-Perez as page 
143 of Respondents Exhibit 2. According to Moro-Perez, the computer 
automatically affixes identifier information at the top of each 
prescription image it produces. Tr. 235. The scrip that Moro-Perez 
added to the package does not have the identifier heading on it. 
Resp't Ex. 2, at 143.
    \46\ The witness testified that the first five pages of the 
package contain Best Pharma scrips (identified by 5-digit dispensing 
event numbers) and the balance reflects Farmacia Nueva scrips 
(identified by 6-digit dispensing event numbers). Tr. 260-65.
    \47\ However, only two of the nine scrips (Resp't Ex. 4, at 191, 
192) contained in the Moro-Perez FN Aguilar Found Scrips document 
correspond to Aguilar Farmacia Nueva dispensing events listed by the 
Government as missing scrips in its Government FN Aguilar No-Scrip 
List. Gov't Ex. 7. This is likely the result of a pre-hearing motion 
submitted by the Respondents (ALJ Ex. 10) wherein they pointed out 
that numerous scrips noticed by the Government (apparently including 
seven of the nine FN scrips contained in the Moro-Perez FN Aguilar 
Found Scrips document (Resp't Ex. 4, at 184-90)) refer to non-
controlled substances. As a result of the Respondents' motion, the 
Government substituted the current version of Government Exhibit 7, 
which evidently omits reference to the non-controlled substances.
---------------------------------------------------------------------------

    Although, in a prehearing motion,\48\ Farmacia Nueva averred 
that multiple dispensing events set forth in the Government FN 
Aguilar No-Scrip List document were the result of typographical 
errors, an analysis of the documents does not bear this out. Both of 
the purportedly mistyped dispensing events (00735388 & 00784686) 
were actually supplied by the Respondent in the Moro-Perez FN 
Aguilar Found Scrips document.\49\
---------------------------------------------------------------------------

    \48\ ALJ Ex. 10, at 2. In their motion, the Respondents 
represented that when the typographical errors are factored into the 
equation, ``no prescription is missing.'' Id. at 3.
    \49\ Resp't Ex. 4, at 191, 192.
---------------------------------------------------------------------------

    A detailed analysis of the dispensing event exhibits from both 
sides presents a nuanced and initially confusing picture that would 
have benefitted greatly from explanation at the hearing. An 
examination of the Moro-Perez FN Aguilar Scrips \50\ and the Moro-
Perez FN Aguilar Found Scrips \51\ documents reveals that they 
contain all but two of the dispensing events depicted in the 
Government FN Aguilar No-Scrip List \52\ that was created by DI 
Antoine.\53\ This testimony was offered by Farmacia Nueva in support 
of its contention that Moro-Perez, with some level of diligence, was 
able to retrieve all of the scrips that DEA identified to him as 
missing.
---------------------------------------------------------------------------

    \50\ Resp't Ex. 1-2.
    \51\ Resp't Ex. 4.
    \52\ Gov't Ex. 7.
    \53\ The following is a list of each entry found in the 
Government FN Aguilar No-Scrip List (Gov't Ex. 7), which listed the 
prescriptions missing from Farmacia Nueva. After each listed 
prescription event number entry, a corresponding citation to where 
that prescription can be found in the Respondents' exhibits (if at 
all) is provided: #00581227: Resp't Ex. 2, at 165; #00592053: Resp't 
Ex. 2, at 167; #00594763: Resp't Ex. 2, at 168; #00603582: Resp't 
Ex. 2, at 169; #00615341: Resp't Ex. 2, at 170; #00680204: Resp't 
Ex. 2, at 143-44; #00696609: Resp't Ex. 1, at 49; #00735388: Resp't 
Exs. 1, at 52, 4, at 191; #00739096: Resp't Ex. 1, at 28; #00740774: 
Resp't Ex. 1, at 29; #00748164: Resp't Ex. 1, at 31; #00750564: 
Resp't Ex. 1, at 92; #H00751567: no record; #00760079: Resp't Ex. 1, 
at 93; #00760079: Resp't Ex. 1, at 93; #00784105: Resp't Ex. 2, at 
123; #00784686: Resp't Ex. 4, at 192; #00785359: Resp't Ex. 2, at 
124; #00785837: Resp't Ex. 2, at 125; #00785837: Resp't Ex. 2, at 
125; #00798150: Resp't Ex. 2, at 126; #00805523: no record; 
#00806899: Resp't Ex. 2, at 127; #H00784094: Resp't Ex. 4, at 190.
---------------------------------------------------------------------------

    One of the two unaccounted-for dispensing events bears a 
dispensing event number preceded by an ``H'' (H00751567). Gov't Ex. 
7. No witness who testified at the hearing explained the 
significance of an ``H'' affixed to a dispensing event number, but 
since a second ``H''-designated number (H00784094) was eventually 
paired with a scrip \54\ by Moro-Perez, it seems unlikely that the 
``H'' presents a reasonable explanation for the scrip's absence. DFE 
Herrmann testified that ``hold'' was a status setting available 
within the RX30 software structure, but she did not

[[Page 28679]]

know what it signified. Tr. 144-46. Moro-Perez likewise offered no 
explanations about the significance of an ``H'' before a dispensing 
event number, or ``hold'' status.\55\ The second missing dispensing 
event (00805523) was never matched up with a corresponding scrip.
---------------------------------------------------------------------------

    \54\ Resp't Ex. 4, at 190.
    \55\ To the extent that the Respondents' closing brief avers 
that the ``H'' described in the record refers to a dispensing event 
being in a ``hold'' status (ALJ Ex. 24, at 8, 17), that assertion is 
simply not supported in the record. This record does not contain an 
explanation of the meaning of an ``H'' before a dispensing event 
transaction number.
---------------------------------------------------------------------------

    Moro-Perez testified that DEA personnel left the Respondent 
pharmacies in considerable disarray after the simultaneous execution 
of the search warrants, and that the agents left ``a lot of 
controlled [substance] prescriptions'' in drawers at ``both 
pharmacies.'' Tr. 243-44. At the hearing, when Moro-Perez was shown 
the Government's Administrative Request for Information to Farmacia 
Nueva \56\ in which DEA requested the pharmacy to supply copies of 
all prescriptions issued by Dr. Aguilar during the period in 
question and dispensed by the pharmacy, he responded that he 
``provided [DEA] everything that the system provided and all the 
prescriptions were submitted.'' Tr. 206-08.
---------------------------------------------------------------------------

    \56\ Gov't Ex. 4.
---------------------------------------------------------------------------

    Moro-Perez explained that RX30 creates a separate number for 
each dispensing event, and that once that number is created, it 
cannot be altered or manipulated manually.\57\ Tr. 235. He offered 
his assurance that he has not nor would ever attempt to do so. Id. 
Moro-Perez indicated that Farmacia Nueva has had the same computer 
for about five years and that it has never left the pharmacy except 
for when the DEA took possession of it for about five days at the 
time the search warrant was executed. Tr. 232-33. Best Pharma's 
computers have also been in the business since it opened, and 
inasmuch as DEA extracted data from them on the date of the search 
warrant execution, these computers have never left the pharmacy. Tr. 
242.
---------------------------------------------------------------------------

    \57\ Although the relevance of this testimony was likely linked 
to dispel any notion that Moro-Perez or other pharmacy personnel 
could have manually placed an ``H'' before certain dispensing event 
numbers, the lack of any witness to explain what an ``H'' signifies 
greatly diminishes the utility of this testimony. Stated 
differently, since the record never says what the ``H'' signifies, 
it does not much matter whether anyone could have manually added it 
to the transaction numbers or anywhere else.
---------------------------------------------------------------------------

    Moro-Perez testified that Farmacia Nueva dispensed approximately 
two to three prescriptions authorized by Dr. Aguilar every two weeks 
and that there was sometimes a few months between prescriptions. Tr. 
250. He also explained that Farmacia Nueva was about a three-to-four 
minute walk from Dr. Aguilar's office.\58\ Tr. 250-51. Stunningly, 
Moro-Perez testified that personnel at Farmacia Nueva ``many times'' 
declined to fill controlled substance prescriptions authorized by 
Dr. Aguilar because they were deemed illegitimate. Tr. 252. Moro-
Perez explained that, quite often, ``many'' patients brought 
controlled substance prescriptions issued by Dr. Aguilar where the 
Farmacia Nueva pharmacists ``knew that that patient didn't require 
the use of that medication [and] we told them that we were not going 
to dispense the prescription.'' Id. Notwithstanding the close 
proximity of Dr. Aguilar's practice to Farmacia Nueva (three to four 
minutes on foot), and the frequency with which the pharmacy declined 
to dispense controlled substances he prescribed, Moro-Perez provided 
the astonishing revelation that he never contacted Dr. Aguilar about 
any of his (bad) prescriptions. Tr. 252-54. When pressed as to why 
Dr. Aguilar's routine prescribing misconduct did not arouse any 
heightened scrutiny on the part of his pharmacies, Moro-Perez 
offered that ``if you analyze the amount of medications that were 
dispensed, the percentage is very low.'' Tr. 253. In other words, 
the Respondents knew Dr. Aguilar was regularly providing illegal 
controlled substance prescriptions to Respondents' customers, but no 
one on staff checked his registration in any serious way or even 
took the minimal step of reaching out to speak with him about his 
prescribing practices because ``the percentage [was] very low.'' Id. 
Moro-Perez stated that he never contacted Dr. Aguilar because ``I 
was aware that the doctor's license was up to date.'' Tr. 253-54. In 
addition to the fact that Dr. Aguilar was not, in fact, ``up to 
date'' on his DEA registration, Moro-Perez's answer is patently 
illogical and presents as intentional equivocation.
---------------------------------------------------------------------------

    \58\ Moro-Perez testified that, of the dozen or so pharmacies in 
San Sebastian that dispensed controlled substances, Farmacia Nueva 
was the pharmacy located closest to Dr. Aguilar's office. Tr. 251.
---------------------------------------------------------------------------

    At the hearing, Moro-Perez identified a printed copy of the 
online registration application that he submitted on behalf of 
Farmacia Nueva. Tr. 210; Gov't Ex. 1; see also Stip. 5. He confirmed 
that he understood the application and Question 2 (asking whether 
the applicant had ever surrendered a COR for cause), agreed that he 
entered a ``no'' response, and explained that his reason for doing 
so was because he understood that, ``in relation to the criminal 
case, there was no cause against me.'' \59\ Tr. 211. Moro-Perez 
conceded that no one from DEA told him that his former criminal case 
(which was actually dismissed three months prior to the surrender) 
was linked in any way to the surrender,\60\ but he insisted that he 
believed that Farmacia Nueva's surrender was associated with his 
criminal case because ``all this is a consequence of the dispatch of 
the medications of Dr. Aguilar.'' Tr. 212-13. The witness persisted 
in this answer, even when pressed by the Government about how he 
could think that the nature of the Farmacia Nueva surrender could be 
affected by an event (the indictment dismissal) that preceded it. 
Tr. 212-13, 215. In response to a question asked by the Government, 
Moro-Perez responded that if Question 2 did not contain the words 
``for cause,'' he would have answered ``yes'' to the question. Tr. 
216-17, 219. Moro-Perez explained that he never wanted to lie to DEA 
because ``[t]hey are aware of the arrest that they executed.'' Tr. 
216. Later in his testimony, Moro-Perez offered this:
---------------------------------------------------------------------------

    \59\ A copy of the March 28, 2012 federal criminal indictment 
dismissal where Moro-Perez was a defendant was received into the 
record (Resp't Ex. 3) and was also the subject of testimony (Tr. 
212) and a stipulation between the parties (Stip. 8).
    \60\ Tr. 213, 218-19.

    Really in relation to this particular case I'll repeat again. I 
answered no knowing and recognizing that you, the DEA office, are 
aware of, had knowledge and everything about me. Therefore, I have 
never had intentions [sic] to lie. I'm going to say the truth, and 
---------------------------------------------------------------------------
that's the truth.

    Tr. 218-19. Moro-Perez clarified that the rationale he used for 
answering Question 2 in the negative on the Farmacia Nueva 
application was the same approach employed by him when answering the 
same question in the Best Pharma application. Tr. 222.
    Although Moro-Perez acknowledged at the hearing that Question 2 
was erroneously answered,\61\ he expressed no remorse. In like 
manner, he stood by his ability to retrieve required records from 
the Respondent pharmacies' computers and questioned the thoroughness 
of DEA's search warrant execution, see Tr. 243-44. On the other 
hand, he readily accepted that the procedure previously employed for 
ensuring that controlled-substance prescribers had valid CORs was a 
``mistake.'' Tr. 236. He offered that if the Respondent pharmacies 
are granted CORs, they would take several preventative steps to 
ensure that the doctors who wrote prescriptions for dispensing at 
the pharmacy had the requisite authority to do so.\62\ Id. Moro-
Perez represented that if the pharmacies were again registered, an 
employee would verify the registration status of prescribing 
physicians with the appropriate DEA Web site every month. Tr. 236-
37. He also represented that he is ``establishing a new system of 
computers so the pharmacy will be able to study the patient file and 
the doctor's file'' and ``demand'' documentation that the patient is 
being treated by a specialist ``mostly on the narcotic medications, 
the pain medications and any other that we understand that is being 
used for alleged medical use [sic].'' Tr. 237-38. Moro-Perez also 
offered that the current PICs of both Farmacia Nueva and Best Pharma 
have spent a significant number of years practicing in the field. 
Tr. 241-42.
---------------------------------------------------------------------------

    \61\ Tr. 216.
    \62\ Although he directed his initial comments regarding 
remedial steps to Farmacia Nueva, Moro-Perez testified that the same 
measures would be taken at Best Pharma. Tr. 245-46.
---------------------------------------------------------------------------

    The testimony of Moro-Perez cannot be deemed entirely credible. 
There were times during his testimony where he offered answers that 
were intentionally equivocal and made no sense. For example, when 
asked why no increased scrutiny or contact resulted from ``many'' 
instances where Dr. Aguilar's patients attempted to fill bad 
prescriptions at the pharmacies and were refused, Moro-Perez 
responded that no action was taken because the percentages were very 
low and because he knew Aguilar's licenses were current.\63\ These 
answers were inconsistent with his earlier recognition that the 
responsibility for accurate dispensing rests with the

[[Page 28680]]

pharmacy,\64\ bear little relation to the question, and are the 
obvious fruit of intentional equivocation. In like manner, Moro-
Perez initially testified that when claims were submitted to 
insurance carriers, the pharmacies would receive a ``confirmation'' 
that the prescribers had valid licenses. Tr. 196. Later in his 
testimony, it became apparent that the ``confirmation'' from the 
insurance providers informed the pharmacy staff only that the 
reimbursement claim would be approved. Tr. 200-01. It was the same 
sort of equivocation employed when Moro-Perez testified that 
pharmacy staff would check prescriber licenses through RX30, a 
system that depended exclusively on input from staff who depended 
exclusively on the fact that claims were being approved.\65\ When 
questioned as to why, at the hearing, he was able to produce scrips 
that were apparently not forwarded to DEA as part of his compliance 
with the Request for Information, Moro-Perez never explained why the 
new scrips were so late in coming or suggested that DEA did not have 
the complete set he forwarded, but merely continued to insist that 
he ``provided them everything that the [RX30] system provided, and 
all the prescriptions were submitted.'' Tr. 208. These answers 
presented inconsistencies, were less than complete, and were 
certainly less than candid. Similarly, when explaining his rationale 
for answering ``no'' to application Question 2, Moro-Perez adhered 
to the position that the nature of the June 2012 Farmacia Nueva 
surrender was somehow altered by the dismissal of a criminal 
indictment against him (not the pharmacies) that occurred three 
months earlier. It is inescapably illogical to insist that an event 
which occurred prior to the surrender would somehow alter its 
characterization from ``for cause'' to otherwise. Inasmuch as Moro-
Perez is an educated and experienced pharmacist, to suggest that 
this non sequitor was the result of naivet[eacute] or inexperience 
is patently unreasonable. The answer was deceitful, intentionally 
so, and he well knew it. Similarly, when explaining his position on 
the negative response entered on Question 2, Moro-Perez qualified 
his testimony by twice adding that DEA knew about his arrest. Tr. 
216, 218-19. Again, this is a non-answer, since the arrest, the 
indictment dismissal, and DEA's knowledge about those events do not 
bear any relation to the issue he was addressing, to wit, the ``no'' 
response to the question of whether the Respondents' registrations 
had been surrendered for cause. Thus, Moro-Perez tendered testimony 
that was at times implausible and inconsistent, and he substituted 
intentional equivocation for detail. His testimony, then, cannot be 
deemed fully credible in this recommended decision. That is not to 
say that all of his testimony is not worthy of belief, but in those 
places where his testimony conflicts with other record evidence, it 
must be considered with heightened vigilance.\66\
---------------------------------------------------------------------------

    \63\ Tr. 250-54.
    \64\ Tr. 194.
    \65\ Tr. 229-31.
    \66\ The Government has argued in its closing brief that Moro-
Perez ``frequently gave evidence that directly conflicted with the 
Government's evidence.'' ALJ Ex. 23, at 27. This misses the point. 
It is not that his testimony is lacking in credibility because it is 
incongruous with testimony elicited by the Government, but, rather, 
it is worthy of diminished credibility based on a dispassionate 
review of its own merits.
---------------------------------------------------------------------------

The Respondents' Evidence

    In addition to the testimony from Moro-Perez that was elicited 
on cross examination, the Respondents' presented the testimony of 
Mr. Nelson Vale. Tr. 268. Mr. Vale testified that he has worked at 
Farmacia Nueva since February 2009 and has served as the chief 
pharmacist since August 2010. Tr. 272. Vale acknowledged that he was 
employed at the pharmacy during the time period when it was 
dispensing controlled substances on Dr. Aguilar's expired COR. Tr. 
281. Before working at Farmacia Nueva, he worked as a pharmacist and 
chief pharmacist at two Walgreens pharmacies. Tr. 272-73. Vale 
testified that his role at Farmacia Nueva requires ensuring ``that 
the medication is dispensed properly'' and that the pharmacy 
maintains a correct inventory. Tr. 273. Consistent with other 
witnesses who have testified on the subject, Vale stated that the 
pharmacy uses the RX30 program, that the system automatically 
assigns dispensing event numbers to each prescription, and that the 
program cannot be manipulated to change the dispensing event numbers 
once they have been assigned. Tr. 273-74. Vale testified that a 
prescription dispensing event can be looked up on the RX30 program 
by its dispensing event number, by the type of medication, or by the 
doctor's name. Tr. 276. Further, Vale indicated that he could 
identify all prescriptions in the system that were authorized by Dr. 
Aguilar. Tr. 277. He also stated that, ``to the best of his 
knowledge,'' no one has ever tried to manipulate the numbers for 
Farmacia Nueva's RX30 program, that he has never tried to do so, and 
that he was never directed to do so. Tr. 276-77.
    Vale described the dispensing process at Farmacia Nueva. Tr. 
274. Vale's account of FN pharmacy operations was in substantial 
accord to the explanation provided by his boss, Moro-Perez. Tr. 274-
75.
    Vale also testified that he and Moro-Perez have discussed 
remedial improvements they intend to implement if Farmacia Nueva is 
granted its COR. Tr. 278. Among their plans is the future pursuit of 
a strict policy regarding dispensing controlled substances, a 
``program'' \67\ that will alert pharmacy personnel when a 
physician's license is expired in real time, and a plan to have 
staff access the DEA Web site at least once a month to ascertain 
prescriber COR status. Tr. 278-79.
---------------------------------------------------------------------------

    \67\ No further explanation was offered as to what sort of a 
``program'' is contemplated, how it would work, or how it would 
alert pharmacy staff when a prescriber's COR expires. This proposal 
was described by the witness in terms that seemed more ethereal than 
concrete.
---------------------------------------------------------------------------

    Vale conceded that these safety measures could have been 
implemented before the execution of the search warrant on November 
30, 2011. Tr. 280. He also admitted that, since November 30, 2011, 
he has not asked DEA whether they provide training against illegal 
distribution and he has not taken any training regarding anti-
diversion efforts or anti-illegal distribution efforts. Tr. 281-82. 
Vale likewise acknowledged that the planned remedial measures stem 
from enforcement actions already taken by DEA as well as a desire to 
avoid the specter of future sanctions. Tr. 282.
    Mr. Vale's testimony was sufficiently plausible, detailed, and 
internally consistent to be deemed credible in this recommended 
decision.
    Additional facts required for a disposition of this case are set 
forth below.

The Analysis

    The Government alleges two bases for denial of the Respondents' 
applications: (1) that Respondents' owner/president, Moro-Perez, 
materially falsified the Respondents' applications for CORs; and (2) 
that the granting of the Respondents' applications would be 
inconsistent with the public interest. These bases are addressed 
below, in seriatim.

Material Falsification

    The Government has alleged that the Respondents' respective 
applications for CORs should be denied because each application 
contains a material falsification,\68\ which, under the CSA, is a 
ground for a sanction against an existing COR. 21 U.S.C. 824(a)(1). 
The Agency may revoke or suspend a DEA COR upon a finding that the 
registrant has materially falsified any application filed to obtain 
it. Id. Under the theory that the law would not require issuance of 
a COR that should be revoked ab initio, a long line of Agency 
precedent has consistently held that the grounds for the revocation 
or suspension of an existing registration are also properly 
considered in adjudicating an application for a COR. The Lawsons, 
Inc., 72 FR 74334, 74335 (2007); Samuel S. Jackson, D.D.S., 72 FR 
23848, 23852 (2007); Dan E. Hale, D.O., 69 FR 69402, 69405-06 
(2004); Anthony D. Funches, 64 FR 14267, 14268 (1999); Alan R. 
Schankman, M.D., 63 FR 45260, 45260 (1998); Kuen H. Chen, M.D., 58 
FR 65401, 65402 (1993). Thus, in the same way that materially 
falsifying an application provides an independent basis for revoking 
an existing registration without proof of any other misconduct, it 
also provides an independent and adequate ground for denying an 
application for a new COR. The Lawsons, 72 FR at 74338. It is 
settled Agency precedent that ``[s]ince DEA must rely on the 
truthfulness of information supplied by applicants in registering 
them to handle controlled substances, falsification cannot be 
tolerated,'' Bobby Watts, M.D., 58 FR 46995, 46995 (1993), and that 
a ``cavalier attitude toward the importance of accurately executing 
[a registration] application suggests a lack of concern for the 
responsibilities inherent in a DEA registration.'' Chen, 58 FR at 
65402.
---------------------------------------------------------------------------

    \68\ ALJ Ex. 4, at 3-5.
---------------------------------------------------------------------------

    To serve as a basis for an adverse application determination, it 
is incumbent upon the Government to establish that an applicant has 
provided false information in his or her application, and that the 
false

[[Page 28681]]

information provided is material. 21 U.S.C. 824(a)(1). The 
Government must prove that the false information is material by 
``clear, unequivocal, and convincing'' evidence. Hoi Y. Kam, M.D., 
78 FR 62694, 62696 (2013) (quoting Kungys v. United States, 485 U.S. 
759, 772 (1988)). A material falsification requires a showing that a 
statement tendered in a COR application is one that `` `has a 
natural tendency to influence, or was capable of influencing, the 
decision of the decisionmaking body to which it was addressed.' '' 
The Lawsons, 72 FR at 74338 (citing Kungys, 485 U.S. at 770); see 
also Robles v. United States, 279 F.2d 401, 404 (9th Cir. 1960), 
cert. denied, 365 U.S. 836 (1961). Proof that any Government 
decision, including the decision regarding the registration 
application, was actually influenced is not required. The Lawsons, 
72 FR at 74339. The touchstone is whether the statement had the 
capacity to influence. See United States v. Alemany Rivera, 781 F.2d 
229, 234 (1st Cir. 1985), cert. denied, 475 U.S. 1086 (1986); Alvin 
Darby, M.D., 75 FR 26993, 26998 (2010). Since a materiality 
determination turns on an analysis of the relevant substantive law, 
Kungys, 485 U.S. at 772, the allegedly false statement must be 
analyzed in the context of the application requirements sought by 
DEA and provided by the applicant. The falsification must relate to 
a ground that could affect the decision, not merely a basis upon 
which an investigation could be initiated. Darryl J. Mohr, M.D., 77 
FR 34998, 34998 n.2 (2012); Harold Edward Smith, M.D., 76 FR 53961, 
53964 (2011); Scott C. Bickman, M.D., 76 FR 17694, 17701 (2011). The 
entire application will be examined to determine whether there was 
an intention to deceive the agency. See Jackson, 72 FR at 23852-53.
    Furthermore, the correct analysis hinges on whether the 
applicant knew or should have known that he or she submitted a false 
application. Hale, 69 FR at 69406; The Drugstore, 61 FR 5031, 5032 
(1996); Watts, 58 FR at 46995. Although even an unintentional 
falsification can serve as a basis for adverse action regarding a 
registration, lack of intent to deceive and evidence that the 
falsification was not intentional or negligent are all relevant 
considerations. Funches, 64 FR at 14268.
    The Government has alleged that each of the Respondent 
pharmacies surrendered a COR for cause and that, when Moro-Perez 
stated otherwise on their COR applications, he knew or should have 
known that his statement in this regard was untrue. In their closing 
brief, the Respondents assert that ``the Government did not submit 
any evidence to prove that Farmacia Nueva's registration was revoked 
or surrendered (for cause).'' ALJ Ex. 24, at 22. Although the record 
evidence tells a story somewhere between the parties' contentions, 
it is the Government's view that is better supported.

The DEA regulations related to COR termination provide, in pertinent 
part, that: In the case of a surrender, termination shall occur upon 
receipt by any [DEA employee] of a duly executed DEA Form 104 or any 
signed writing indicating the desire to surrender a registration.

21 CFR 1301.52(a).
    The evidence of record here clearly demonstrates that Best 
Pharma surrendered its registration through the execution of a DEA 
Form 104. Gov't Ex. 14, at 1. However, with respect to Farmacia 
Nueva, the Government has tendered neither a DEA Form 104 nor ``any 
signed writing indicating a desire to surrender a registration.'' 21 
CFR 1301.52(a) (emphasis supplied). The Government tendered an 
unsigned email exchange and brought no witness with any personal 
knowledge about the circumstances underlying the exchange or even 
one able to identify the participants. However, the existence and 
validity of the Farmacia Nueva surrender was never challenged at the 
hearing. Additionally, the identification (through official notice 
regarding Government counsel and notice of appearance of FN's 
current counsel) of the names on the face of the email traffic, 
coupled with the fact that Farmacia Nueva filed an application for a 
new COR, provide a sufficiently reliable basis upon which to 
conclude that the COR was surrendered and that Farmacia Nueva 
accepts that as fact. In any event, the language employed in the 
surrender/termination provision \69\ cited above appears more 
focused on fixing an effective date for when a surrender ripens into 
a termination than on circumscribing the exclusive means to 
surrender a COR.\70\
---------------------------------------------------------------------------

    \69\ 21 CFR 1301.52(a).
    \70\ The Agency Final Rule promulgating the modification stated 
that the language is designed to ``clarify that a voluntary 
surrender of a registration signed by a registrant using any format 
has the legal effect of immediately terminating the registrant's 
registration without any further action by DEA.'' Voluntary 
Surrender of Certificate of Registration, 76 FR 61563, 61563 (Oct. 
5, 2011). Thus, the primary focus appears to have been on providing 
clarity regarding the date upon which the surrender became 
effective, not the nature of the instruments required to make the 
surrender valid.
---------------------------------------------------------------------------

    Whether the surrenders were ``for cause'' is yet even more 
nuanced. Neither the Best Pharma Surrender Form nor Farmacia Nueva's 
email exchange contain the words ``for cause.'' Gov't Ex. 14. In 
fact, the only mention of a surrender ``for cause'' is set forth in 
two regulatory sections devoted to security matters, each of which 
provides that:

For purposes of [the two security subsections], the term ``for 
cause'' means a surrender in lieu of, or as a consequence of, any 
federal or state administrative, civil, or criminal action resulting 
from an investigation of [a current or prospective employee's] 
handling of controlled substances. . . .

21 CFR 1301.76(a), 1309.72(a). There is no ``for cause'' definition 
set forth in the regulations related to COR surrender. 21 CFR 
1301.52.
    Agency precedent has looked into the circumstances surrounding a 
surrender to determine whether it was properly characterized as 
being ``for cause'' and whether a registrant is properly charged 
with understanding that characterization. See, e.g., Shannon L. 
Gallentine, D.P.M., 76 FR 45864, 45866 (2011) (holding that the 
signing of a DEA Form 104 during a search warrant execution where 
the investigator was asking questions about prescribing practices 
and lack of documentation to justify prescriptions constituted 
circumstances sufficient to establish that COR applicant knew or 
should have known that his COR surrender, which occurred two years 
earlier, was ``for cause''); see also Robert M. Brodkin, D.P.M., 77 
FR 73678, 73679 (2012) (holding that an executed DEA Form 104 and 
subsequent federal and state disciplinary proceedings were 
circumstances sufficient to characterize a surrender as ``for 
cause''). The Best Pharma Surrender Form was executed by Moro-Perez 
while the investigators were executing a search warrant at the 
pharmacy, and they explained to him that the Form 104 ``dealt with 
the regulatory matter [and that i]f he chose not to sign the form 
then [DEA] would move for an order to show cause proceeding.'' Tr. 
177. Thus, unrefuted testimony establishes that DI Taylor, through 
an interpreter, told Moro-Perez that the surrender related only to 
the administrative proceedings, and not any criminal case. There was 
no evidence as to why Moro-Perez would not take the DI at his word 
that the surrender related only to administrative issues, not a 
criminal case. The Farmacia Nueva surrender was effected by counsel 
via email while administrative revocation proceedings were 
apparently underway before the Agency. Gov't Ex. 14, at 2-4. The 
circumstances surrounding each surrender provided sufficient notice 
to Moro-Perez that DEA was intent upon seeking revocation based on 
what its agents perceived to be serious regulatory violations. While 
the record is not optimal in this regard, there is sufficient, 
unrefuted evidence \71\ to establish that the BP and FN CORs were 
surrendered for cause and that Moro-Perez had reason to know this 
was the case.\72\
---------------------------------------------------------------------------

    \71\ In their closing brief, the Respondents argue that DI 
Antoine testified that he did not know what ``for cause'' meant. ALJ 
Ex. 24, at 13, 23. Even the record citation (Tr. 105-06) provided by 
the Respondents makes clear that Antoine testified that he did not 
know why the words ``for cause'' were in parentheses, not that he 
did not know what the phrase meant. In any event, highlighting this 
point does nothing to further the Respondents' position. If 
placement of the phrase ``for cause'' somehow renders it optional or 
diminishes its import, that would leave Question 2 as asking whether 
a COR had ever been surrendered (for any reason). A ``no'' answer 
tendered in response to a question interpreted thus would be false 
here irrespective of the Respondents' illogical association of the 
``for cause'' clause to his indictment dismissal.
    \72\ In its brief, the Government points out that Moro-Perez 
``never contacted [DI Antoine] to inquire as to what `for cause' 
meant.'' ALJ Ex. 23, at 6. To be clear, there was no burden on Moro-
Perez to contact DEA to ascertain the meaning of the language in the 
BP voluntary surrender form or the consequences of the surrender 
effected by counsel during the FN administrative proceedings. The 
language and circumstances of the voluntary surrender were 
sufficiently clear to find that the surrender here was ``for cause'' 
and that Moro-Perez knew it, whether he made inquiry or not. If the 
language and circumstances were not sufficiently clear, the absence 
of any efforts by Moro-Perez to contact DI Antoine would not advance 
the Government's case in any measure.
---------------------------------------------------------------------------

    The COR surrenders for cause that were errantly denied in 
Question 2 of the Respondents' applications were founded in 
controlled substance recordkeeping and corresponding responsibility 
violations

[[Page 28682]]

uncovered by DEA in the course of a criminal search warrant 
execution, and those violations would have supported the denial of 
the Respondents' applications. See Kam, 78 FR at 62697 & n.7 
(holding that a material falsification, to be material, must be such 
that the truthful disclosure of the facts would have supported the 
denial of the Respondent's application). One of the CORs was 
surrendered during the course of DEA administrative hearing 
procedures. As discussed more fully, infra, allegations that the 
dispensing of controlled substance prescriptions authorized by an 
unregistered physician that resulted in their surrender for cause 
provided ``actionable grounds'' sufficient to merit a COR sanction. 
Kam, 78 FR at 62697. Hence, it is beyond argument that the alleged 
falsifications, if established, ``had the capacity to influence the 
Agency's decision to grant [the] application[s]'' and, thus, were 
material. Id.
    Regarding Moro-Perez's position that he was confused about the 
whether the surrenders retained their ``for cause'' character based 
on his indictment dismissal, the timeline of events is key. Moro-
Perez testified that he has owned Farmacia Nueva and Best Pharma 
since each establishment was opened. Tr. 192, 222, 238. A COR was 
issued to Farmacia Nueva in 2005 and to Best Pharma in 2010. Gov't 
Exs. 2, 9. The Best Pharma Surrender Form was executed by Moro-Perez 
\73\ on November 30, 2011.\74\ Gov't Ex. 14, at 1. The DEA COR 
applications that are the subject of these proceedings include four 
liability questions that require the applicant to choose a ``yes'' 
or ``no'' answer. The second liability question (Liability Question 
2) contains the following language:
---------------------------------------------------------------------------

    \73\ Moro-Perez testified at the hearing with the benefit of a 
Spanish-language interpreter. Tr. 191. Uncontroverted record 
evidence establishes that the Best Pharma Surrender Form was read 
and explained to Moro-Perez in Spanish at the time it was executed. 
Tr. 175-78. At the hearing, the Respondents raised no issue 
regarding any impediment presented by language regarding Moro-
Perez's execution of the Best Pharma Surrender Form or the COR 
applications he filed on their behalf. The Farmacia Nueva COR 
surrender was effected via email by its present counsel, who 
possessed sufficient command of the Spanish language to communicate 
with Moro-Perez throughout these proceedings and to offer numerous 
challenges during the hearing to translations supplied by the 
official hearing interpreter. See, e.g., Tr. 195-96, 200, 206, 214-
15, 220, 224. Thus, this record does not support any level of 
cognizable confusion on the part of Moro-Perez borne of a language 
barrier in understanding the COR surrenders or the filed 
applications.
    \74\ The Government also provided a certification by the Chief 
of the DEA Registration and Program Support Section (Farmacia Nueva 
Certification) that the same voluntary surrender took place on 
December 14, 2011. Gov't Ex. 9, at 2. Although no explanation was 
offered for the disparity, the date variance does not impact the 
outcome of the case.

Has the applicant ever surrendered (for cause) or had a federal 
controlled substance registration revoked, suspended, restricted or 
---------------------------------------------------------------------------
denied, or is any such action pending?

Gov't Exs. 1, 8. Moro-Perez included a ``no'' response to Liability 
Question 2 on the online application he submitted for each 
Respondent. Gov't Exs. 1, 8. Notwithstanding the less-than-ideal 
sentence structure in Liability Question 2, since both CORs were 
surrendered for cause by Moro-Perez prior to the filing of the 
applications, the ``no'' response in each application is 
indisputably untrue. The principal issue remaining is whether the 
negative response entered by Moro-Perez on each application was 
objectively reasonable.
    Moro-Perez testified that, while he now acknowledges that he 
should have answered the surrender for cause questions in the 
affirmative, he misunderstood the question at the time, and there 
was never an intention on his part to deceive DEA. Tr. 216-17. 
Specifically, Moro-Perez posits that the dismissal of an indictment 
against him led him to believe that the surrenders of the two CORs 
by the Respondents were not for cause. Tr. 211-13. When viewed 
against a backdrop of the timeline of events delineated in the 
evidence of record, Moro-Perez's explanation makes no sense.
    As set forth in the table below, Moro-Perez surrendered the Best 
Pharma COR at the time of his arrest during the early morning hours 
of November 30, 2011. Tr. 72, 175, 181; Gov't Exs. 2, at 2, 14, at 
2-4. The indictment referenced by Moro-Perez was dismissed on March 
23, 2012, some four months later. Stip. 8; Resp't Ex. 3; Tr. 212. 
The Farmacia Nueva COR was surrendered for cause by counsel on June 
28, 2012, three months after the indictment dismissal and seven 
months following the Best Pharma surrender for cause. Gov't Exs. 2, 
14. The online COR applications that are the subject of these 
proceedings were submitted by Moro-Perez on October 10, 2012, eleven 
months after the for-cause surrender of Best Pharma's COR, four 
months following the Farmacia Nueva for-cause surrender, and (most 
significantly) seven months following the dismissal of the 
indictment against Moro-Perez. Gov't Exs. 1, 8; Stips. 5, 6.

------------------------------------------------------------------------
                  Date                                 Event
------------------------------------------------------------------------
November 30, 2011.......................  Best Pharma COR Surrender Form
                                           Executed by Moro-Perez.
March 23, 2012..........................  Indictment Against Moro-Perez
                                           Dismissed.
June 28, 2012...........................  Farmacia Nueva COR Surrendered
                                           by Counsel via Email.
October 10, 2012........................  Respondents' COR Applications
                                           Submitted by Moro-Perez.
------------------------------------------------------------------------

    As is apparent in the table above, the indictment dismissal, the 
single event to which Moro-Perez ascribes the confusion that spawned 
his false answers on the COR applications, occurred between the for-
cause surrenders of Best Pharma and Farmacia Nueva. The Farmacia 
Nueva surrender happened after the indictment dismissal \75\ and was 
effected through counsel. In effect, Moro-Perez testified that he 
believed that the dismissal of the criminal charges (against 
himself) somehow washed away the sins of Best Pharma, resulting in 
what had previously been a surrender for cause being transformed 
into a surrender not for cause. Then, as if this gift was not good 
enough, he also asserted that not only did the dismissal of the 
indictment (against himself) forgive the sins of one of his 
pharmacies, but somehow it preemptively pardoned another pharmacy 
that surrendered for cause after the date of dismissal by 
characterizing that surrender as ``not for cause.'' But this cannot 
be. If the dismissal of indictment really cleaned up all issues 
surrounding Moro-Perez and his pharmacies, why would there even need 
to be a subsequent surrender of Farmacia Nueva's COR? And, in light 
of the subsequent surrender of Farmacia Nueva's COR, why would it be 
reasonable to believe that the dismissal of the criminal charges 
against Moro-Perez magically deemed a subsequent surrender for cause 
as a surrender not for cause?
---------------------------------------------------------------------------

    \75\ Gov't Ex. 14, at 2.
---------------------------------------------------------------------------

    There is simply no logical manner in which a rational person 
(much less an educated, experienced registrant holder) would or 
could reason that a surrender that was ``for cause'' when effected, 
could somehow morph into one that was not ``for cause'' by an action 
(the dismissal) that preceded it. Even if it were assumed, arguendo, 
that Moro-Perez's account that he subjectively believed the 
dismissal of an indictment against him (not the Respondents) could 
somehow change the character of the surrender for cause, no 
indictment dismissal or other operative fact occurred after the 
surrender of Farmacia Nueva's COR that could alter its character. 
Thus, even if credit were afforded to Moro-Perez's account that it 
was the dismissal of the indictment against him that led him to 
believe that the surrenders of the CORs were not for cause, this 
theory of ignorance, even in its best (most na[iuml]ve) light, only 
covers the Best Pharma surrender that was signed before the 
indictment dismissal, not the Farmacia Nueva surrender, which 
occurred three months after the dismissal. Even putting aside the 
reality that, as a veteran registrant holder, Moro-Perez had the 
experience and bore the responsibility to understand the meaning of 
his answers to the applications he was filing, he failed to present 
a logical theory of subjective ignorance that corresponds with the 
facts. At the hearing, Moro-Perez acknowledged that he understood 
the question concerning the surrender for cause and his response to 
it. Tr. 210-11. The indictment dismissal occurred prior to the 
surrender for cause, and there is simply no rational view of the 
facts that could lead any reasonable person, much less an 
experienced COR holder, to believe that the surrender was suddenly 
no longer ``for cause'' due to a dismissal that came first. It is 
not insignificant that Moro-Perez (not the Respondents) was 
captioned in the indictment, and, given the timeline of events, the 
dismissal added no level of cognizable confusion here. Moro-Perez's 
assertions to the contrary are simply not credible. The ``provision 
of truthful information is absolutely essential to effectuating 
th[e] statutory purpose'' of determining whether the granting of an 
application is consistent with the public interest. Darby, 75 FR at 
26998 (quoting Peter A. Ahles, M.D., 71 FR

[[Page 28683]]

50097, 50098 (2006)); see VI Pharmacy, 69 FR 5584, 5585 (2004); 
Terrence E. Murphy, M.D., 61 FR 2841, 2846 (1996). This finding, 
standing alone, is sufficient to recommend denial of both 
applications. Cf. Gallentine, 76 FR at 45866. It is clear that the 
Respondents, through their common owner, Moro-Perez, knew or should 
have known \76\ that the answers provided to Question 2 were false, 
and that their COR applications contained material falsifications. 
The absence of any logical basis for confusion and the past 
experience of Moro-Perez as a registrant holder and pharmacist 
preponderantly support a finding that the misrepresentations were 
intentional, not negligent.\77\ The Respondents are accountable for 
the actions of Moro-Perez as their owner/president,\78\ and, even 
standing alone, the denial of the Respondents' COR applications is 
adequately supported on this record based on the material 
falsifications set forth in the filed applications.
---------------------------------------------------------------------------

    \76\ See Hale, 69 FR at 69406; The Drugstore, 61 FR 5031, 5032 
(1996); Watts, 58 FR at 46995.
    \77\ See Funches, 64 FR at 14268.
    \78\ See Top Rx Pharmacy, 78 FR 26069, 26081-82 (2013); EZRX, 
LLC, 69 FR 63178, 63181 (2004); Plaza Pharmacy, 53 FR 36910, 36911 
(1988); Syncon Pharm., Inc., 53 FR 15155, 15156 (1988); see also 
Neil Labs., Inc. v. Ashcroft, 217 F. Supp. 2d 80, 87-88 (D.D.C. 
2002).
---------------------------------------------------------------------------

Public Interest Determination: The Standard

    The Government also seeks denial of the Respondents' respective 
COR applications based on a theory that each has committed acts 
inconsistent with the public interest. Pursuant to 21 U.S.C. 823(f), 
the Administrator \79\ is permitted to deny an application for a COR 
if persuaded that an applicant ``has committed such acts as would 
render [its] registration . . . inconsistent with the public 
interest.'' \80\ The following factors have been provided by 
Congress in determining ``the public interest'':

    \79\ This authority has been delegated pursuant to 28 CFR 
0.100(b) and 0.104.
    \80\ 21 U.S.C. 824(a)(4).
---------------------------------------------------------------------------

    (1) The recommendation of the appropriate State licensing board 
or professional disciplinary authority.
    (2) The applicant's experience in dispensing, or conducting 
research with respect to controlled substances.
    (3) The applicant's conviction record under Federal or State 
laws relating to the manufacture, distribution, or dispensing of 
controlled substances.
    (4) Compliance with applicable State, Federal, or local laws 
relating to controlled substances.
    (5) Such other conduct which may threaten the public health and 
safety.

21 U.S.C. 823(f) (2006 & Supp. III 2010).
    ``[T]hese factors are considered in the disjunctive.'' Robert A. 
Leslie, M.D., 68 FR 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 
an application for a registration should be denied. Id.; David H. 
Gillis, M.D., 58 FR 37507, 37508 (1993); see Morall v. DEA, 412 F.3d 
165, 173-74 (D.C. Cir. 2005); Joy's Ideas, 70 FR 33195, 33197 
(2005); Henry J. Schwarz, Jr., M.D., 54 FR 16422, 16424 (1989). 
Moreover, the Agency is ``not required to make findings as to all of 
the factors,'' Hoxie v. DEA, 419 F.3d 477, 482 (6th Cir. 2005); 
Morall, 412 F.3d at 173, and 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) (holding that the Administrator's obligation to explain 
the decision rationale may be satisfied even if only minimal 
consideration is given to the relevant factors and that 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, 74 FR 459, 462 (2009).
    In the adjudication of an application for a DEA COR, the DEA has 
the burden of proving that the requirements for registration are not 
satisfied. 21 CFR 1301.44(d). Where the Government has sustained its 
burden and established that an applicant has committed acts 
inconsistent with the public interest, that applicant must present 
sufficient mitigating evidence to provide assurance that it can be 
entrusted with the responsibility commensurate with such a 
registration. Steven M. Abbadessa, D.O., 74 FR 10077, 10078, 10081 
(2009); Medicine Shoppe-Jonesborough, 73 FR 364, 387 (2008); 
Jackson, 72 FR at 23853. Where the Government has met this burden, 
the registrant must show an acceptance of responsibility for its 
misconduct and a demonstration that corrective measures have been 
undertaken to prevent the re-occurrence of similar acts. Jeri 
Hassman, M.D., 75 FR 8194, 8236 (2010). In determining whether and 
to what extent a sanction is appropriate, consideration must be 
given to both the egregiousness of the offense established by the 
Government's evidence and the Agency's interest in both specific and 
general deterrence. David A. Ruben, M.D., 78 FR 38363, 38364, 38385 
(2013).
    Normal hardships to the practitioner, and even the surrounding 
community, which are attendant upon the denial of a registration, 
are not a relevant consideration. Linda Sue Cheek, M.D., 76 FR 
66972, 66972-73 (2011); Gregory D. Owens, D.D.S., 74 FR 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., Inc. 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, Hoxie, 419 F.3d at 483; see 
also Ronald Lynch, M.D., 75 FR 78745, 78754 (2010) (holding that the 
Respondent's attempts to minimize misconduct undermined acceptance 
of responsibility); George Mathew, M.D., 75 FR 66138, 66140, 66145, 
66148 (2010); George C. Aycock, M.D., 74 FR 17529, 17543 (2009); 
Abbadessa, 74 FR at 10078; Krishna-Iyer, 74 FR at 463; Medicine 
Shoppe, 73 FR at 387.
    While the burden of proof at this administrative hearing is a 
preponderance-of-the-evidence standard, see Steadman v. SEC, 450 
U.S. 91, 100-02 (1981), the Agency's ultimate factual findings will 
be sustained on review to the extent they are supported by 
``substantial evidence.'' Hoxie, 419 F.3d at 481. While ```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 v. U.S. 
Dep't of Justice, 873 F.2d 1089, 1092 (8th Cir. 1989) (quoting 
Trawick, 861 F.2d at 77), all ``important aspect[s] of the 
problem,'' such as a respondent's defense or explanation that runs 
counter to the Government's evidence, must be considered, Wedgewood 
Vill. Pharmacy v. DEA, 509 F.3d 541, 549 (D.C. Cir. 2007); see 
Humphreys v. DEA, 96 F.3d 658, 663 (3d Cir. 1996). 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 (quoting Consolo v. Fed. Mar. 
Comm'n, 383 U.S. 607, 620 (1966)).
    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, but mere 
unevenness in application does not, standing alone, render a 
particular discretionary action unwarranted. Chein v. DEA, 533 F.3d 
828, 835 (D.C. Cir. 2008) (citing Butz v. Glover Livestock Comm'n 
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 this recommended 
decision are entitled to significant deference, Universal Camera 
Corp. v. NLRB, 340 U.S. 474, 496 (1951), and that this recommended 
decision constitutes an important part of the record that must be 
considered in the Agency's final decision, Morall, 412 F.3d at 179. 
However, any recommendations set forth herein regarding the exercise 
of discretion are by no means binding on the Administrator and do 
not limit the exercise of that discretion. 5 U.S.C. 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 
Sec.  8(a) (1947).

Factors 1, 3, and 5: 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; Such Other 
Conduct Which May Threaten the Public Health and Safety

    Regarding Factor 1, the record contains no evidence of a 
recommendation by any state

[[Page 28684]]

licensing board, body, or authority related to the Respondent 
pharmacies. However, the fact that a state has not acted against a 
registrant's state authority 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 FR 20727, 20730 (2009); Krishna-Iyer, 74 FR at 
461. It is well-established Agency precedent that ``state 
[authority] is a necessary, but not sufficient condition for 
registration.'' John H. Kennedy, M.D., 71 FR 35705, 35708 (2006) 
(quoting Leslie, 68 FR at 15230). DEA bears an independent 
responsibility to determine whether a registration is in the public 
interest. Mortimer B. Levin, D.O., 55 FR 8209, 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 FR 6580, 6590 (2007), aff'd, Chein v. DEA, 533 F.3d 828 
(D.C. 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 FR at 20735 n.31. 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 granting the 
Respondents' applications would be consistent with the public 
interest. See Roni Dreszer, M.D., 76 FR 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 
Respondents, their owner, or any pharmacist or key employee of 
either pharmacy has been convicted of (or charged with) a crime 
related to any of the controlled substance activities designated in 
the CSA.\81\
---------------------------------------------------------------------------

    \81\ The parties stipulated that Moro-Perez was indicted, but 
that the indictment was ultimately dismissed. Stip. 8; Resp't Ex. 3. 
The indictment itself was not offered into the record. The mere fact 
that Moro-Perez was the subject of a criminal indictment does not 
establish culpability for the acts charged by the indictment, and 
the dismissal in this matter has been considered only under the 
narrow mens rea theory upon which the Respondents offered it. See 
Paul Weir Battershell, N.P., 76 FR 44359, 44364 n.17 (2011) 
(concluding that an indictment is an instrument containing 
accusations, not proof of a respondent's actions).
---------------------------------------------------------------------------

    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. Still, 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 FR 16823, 16833 n.13 (2011); Dewey C. Mackay, M.D., 75 FR 
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 FR 6056, 6057 n.2 (2009). Therefore, on the 
present record, 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 COR denials sought 
by the Government.
    The fifth statutory public interest factor directs consideration 
of ``[s]uch other conduct which may threaten the public health and 
safety.'' 21 U.S.C. 823(f)(5) (emphasis added). 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 FR at 
19434 n.3; Michael J. Aruta, M.D., 76 FR 19420, 19420 n.3 (2011); 
Beau Boshers, M.D., 76 FR 19401, 19402 n.4 (2011); Jacobo Dreszer, 
76 FR 19386, 19386 n.3 (2011). 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, Inc., 76 FR 46843, 46848 
(2011); Tony T. Bui, M.D., 75 FR 49979, 49989 (2010) (stating that 
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 FR 44359, 44368 n.27 (2011) (noting 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).
    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. 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.'' 21 U.S.C. 823(h)(5) 
(emphasis added). In Holloway Distributing, 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. 823(f)(5). 72 FR 42118, 
42126 n.16 (2007). Regarding the List I catch-all language, the 
Administrator, in Holloway, stated:

    [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 [FR] 
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. 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'').

    Id.\82\ Thus, the Agency has recognized that, while the fifth 
factor applicable to List I chemical distributors--21 U.S.C. 
823(h)(5)--encompasses all ``factors,'' the Factor Five applied to 
practitioners--21 U.S.C. 823(f)(5)--considers only ``conduct.'' 
However, because Sec.  823(f)(5) only implicates ``such other 
conduct,'' it necessarily follows that conduct considered in Factors 
One through Four may not be considered in Factor Five.
---------------------------------------------------------------------------

    \82\ 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 FR at 
49988 n.12.
---------------------------------------------------------------------------

    The Government has not alleged any conduct against either 
Respondent in these proceedings that implicates Factor Five. Indeed, 
those portions of each party's closing briefs dedicated to Factor 
Five are exclusively (and mistakenly) devoted to a discussion of the 
burdens established under Agency precedent and the exercise of some 
of the appropriate discretionary considerations. Accordingly, 
consideration of the record evidence under Factors One, Three, and 
Five weigh neither for nor against the Governments' petition to deny 
the Respondents' COR applications.

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

    The Government's public-interest-factors case seeking COR 
application denials for both Respondents is based exclusively on 
conduct properly considered under Factors Two and Four. The 
Government alleges and relies on recordkeeping and dispensing 
activity conducted by the Respondent pharmacies' pharmacists, staff, 
and management.
    Regarding Factor Two, in requiring an examination of an 
applicant's experience in dispensing controlled substances, Congress 
manifested an acknowledgement that the qualitative manner and the 
quantitative volume in which an applicant has engaged in the 
dispensing of controlled substances may be significant factors to be 
evaluated in reaching a determination as to whether an applicant 
should be (or continue to be) entrusted with a DEA COR. In some (but 
not all) cases, viewing an applicant's actions

[[Page 28685]]

against a backdrop of how its regulated activities have been 
performed within the scope of its registration can provide a 
contextual lens to assist in a fair adjudication of whether 
registration is in the public interest. In this regard, however, the 
Agency has applied principles of reason, coupled with its own 
expertise, in the application of this factor. For example, the 
Agency has taken the reasonable position that this factor can be 
outweighed by acts held to be inconsistent with the public interest, 
and will be afforded scant weight in the face of proven allegations 
of intentional diversion. Krishna-Iyer, 74 FR at 463; see also 
Hassman, 75 FR at 8235 (acknowledging Agency precedential rejection 
of the concept that conduct inconsistent with the public interest is 
rendered less so by comparing it with a respondent's legitimate 
activities that occurred in substantially higher numbers); Paul J. 
Cargine, Jr., 63 FR 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.''). 
Similarly, in Cynthia M. Cadet, M.D., the Agency determined that 
existing List I precedent \83\ clarifying 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. 76 
FR 19450, 19450 n.3 (2011). The Agency's approach in this regard has 
been sustained on review. Mackay, 664 F.3d at 819.
---------------------------------------------------------------------------

    \83\ See, e.g., Volusia Wholesale, 69 FR 69409, 69410 (2004).
---------------------------------------------------------------------------

    Regarding 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). 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 CFR 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 FR 16236, 16266 (Mar. 
31, 2010). In short, a pharmacist has a ``corresponding 
responsibility under Federal law'' to dispense only lawful 
prescriptions. Liddy's Pharmacy, L.L.C., 76 FR 48887, 48895 (2011). 
``The corresponding responsibility to ensure the dispensing of valid 
prescriptions extends to the pharmacy itself.'' Holiday CVS, 77 FR 
62316, 62341 (2012) (citing Medicine Shoppe, 73 FR at 384; United 
Prescription Servs., Inc., 72 FR 50397, 50407-08 (2007); EZRX, LLC, 
69 FR 63178, 63181 (2004); Role of Authorized Agents in 
Communicating Controlled Substance Prescriptions to Pharmacies, 75 
FR 61613, 61617 (Oct. 16, 2010); Issuance of Multiple Prescriptions 
for Schedule II Controlled Substances, 72 FR 64921, 69424 (Nov. 19, 
2007)). 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. E. Main St. Pharmacy, 75 FR 66149, 66163 
(2010); Bob's Pharmacy & Diabetic Supplies, 74 FR 19599, 19601 
(2009) (citing Medicine Shoppe, 73 FR at 381); see also United 
Prescription Servs., 72 FR at 50407-08 (finding a violation of 
corresponding responsibility where the pharmacy ``had ample reason 
to know'' that the practitioner was not acting in the usual course 
of professional practice). The pharmacy registrant's responsibility 
under the regulations is not coextensive or identical to the duties 
imposed upon a prescriber, but is, rather, a corresponding one. 21 
CFR 1306.04(a). The Government has averred that for a period of over 
two years, the Respondents filled controlled substance prescriptions 
for Dr. Aguilar, a physician who did not possess a valid COR. These 
allegations impact both Factor 2 \84\ and Factor 4.
---------------------------------------------------------------------------

    \84\ This case contained no allegation (or evidence) of 
intentional diversion, but the Respondents offered no evidence or 
argument regarding the length and character of their experience in 
dispensing controlled substances. ALJ Ex. 24, at 24-25. Thus, it is 
unnecessary to determine whether such evidence would have been 
relevant to a disposition of the case. See Cadet, 76 FR at 19450 
n.3; Krishna-Iyer, 74 FR at 463.
---------------------------------------------------------------------------

    To show a violation of a pharmacy registrant's corresponding 
responsibility, ``the Government must establish three elements: (1) 
the registrant dispensed a controlled substance; (2) a red flag was 
or should have been recognized at or before the time the controlled 
substance was dispensed; and (3) the question created by the red 
flag was not resolved conclusively prior to the dispensing of the 
controlled substance.'' Holiday CVS, 77 FR at 62341. ``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.'' Id. (emphasis added). 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 Servs., 72 FR at 50407 
(finding that the Respondent pharmacy violated its 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'' (emphasis 
added)); see also Pharmboy Ventures Unlimited, Inc., 77 FR 33770, 
33771 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.''' 
(quoting Carriage Apothecary, 52 FR 27599, 27599 (1987))); S & S 
Pharmacy, Inc., 46 FR 13051, 13052 (1981) (holding that 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 
United States v. 7326 Highway 45 N., 965 F.2d 311, 316 (7th Cir. 
1992) (``Only knowledge obtained by corporate employees acting 
within the scope of their employment is imputed to the 
corporation.''). 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 employees. Holiday CVS, 
77 FR at 62340; EZRX, 69 FR at 63181; Plaza Pharmacy, 53 FR 36910, 
36911 (1988). Thus, it is necessary and appropriate to analyze the 
relevant conduct of each pharmacy's personnel, including Moro-Perez, 
who serves as the owner/president of each.\85\
---------------------------------------------------------------------------

    \85\ Tr. 192, 219, 222, 223, 226, 238.
---------------------------------------------------------------------------

    The DEA regulations provide that a controlled substance 
prescription may only be issued by a practitioner with state and 
federal authority to do so. 21 CFR 1306.03(a). For a controlled 
substance prescription to be effective, it must be issued by a 
practitioner. 21 CFR 1306.04(a). To be a ``practitioner'' under the 
CSA in this context, an individual must possess authority to 
prescribe controlled substances. 21 U.S.C. 802(21). Thus, a 
controlled substance prescription issued by one who lacks authority 
to prescribe is issued by a non-practitioner and is ineffective. A 
pharmacy registrant who dispenses a controlled substance based on an 
ineffective prescription, in the face of a red flag that was 
recognized or should have been recognized, has violated its 
regulatory corresponding responsibility. 21 CFR 1306.14; Holiday 
CVS, 77 FR at 62341. The question then devolves to whether Dr. 
Aguilar's lack of a COR is a red flag that should have been 
recognized. As discussed, infra, this question must be answered in 
the affirmative.
    On the present record, it is beyond argument that controlled 
substances were dispensed by the Respondent pharmacies on scrips 
issued by (unregistered) Dr. Aguilar (Element 1). The remaining 
issues concern whether this was done in the face of an unresolved 
red flag that should have been recognized \86\ before the 
prescriptions were filled (Elements 2 & 3).
---------------------------------------------------------------------------

    \86\ The Government has not alleged or proved actual knowledge 
on the part of Moro-Perez or the staff at the Respondent pharmacies 
that Dr. Aguilar lacked a valid COR at the time the dispensing 
events in issue occurred.
---------------------------------------------------------------------------

    The unrefuted evidence of record establishes that, for over two 
years, the Respondent pharmacies filled controlled substance 
prescriptions without checking COR status beyond insurance payment 
confirmation. From Antoine's testimony, it appears that, from the 
period of January 31, 2009 to November 30, 2011, Dr. Aguilar's lack 
of a DEA COR had no perceptible impact on either the enthusiasm with 
which he issued controlled substance prescriptions,

[[Page 28686]]

nor the Respondents' willingness to fill them. Tr. 17. As 
acknowledged by Moro-Perez during his testimony, during that thirty-
four month period, Farmacia Nueva and Best Pharma made no attempt 
(that was reasonably calculated for success) to ascertain whether 
Dr. Aguilar (or apparently any other physician for whom they were 
filling controlled substance prescriptions) had a valid COR. Tr. 
194. Moro-Perez testified that his pharmacy staff assumed the 
validity of all prescriber CORs if insurance carriers provided 
notification that the patients were covered and the claims related 
to the prescription would be paid. Tr. 196. He indicated that the 
pharmacies would only have had reason to know that a doctor's COR 
had expired if, regarding a particular scrip, the insurance company 
signaled its intent to decline payment. Tr. 201. At no point during 
the hearing did Moro-Perez give any basis to establish that 
insurance providers would know whether medical practitioners were 
authorized to prescribe controlled substances, much less why 
insurance companies would have a legal or contractual duty (or even 
an inclination) to pass on COR information to dispensing pharmacies. 
Moro-Perez testified that his pharmacies relied on the approvals 
they received from insurance providers, but he did not even attempt 
to describe why such a practice was rational or supported by any 
level of common sense, much less why such a practice could be a 
responsible discharge of the authority of a registrant. The only 
notification apparently provided by the insurance companies' 
notifications is that the claim would be paid--and that is 
apparently the point at which these registrants' interest in the 
subject waned.
    The responsibility for ensuring the authority of the 
practitioner writing the controlled substance prescription is 
abjectly integral to the pharmacy registrant's corresponding 
responsibility. The uncontroverted evidence of record establishes 
that, as DEA pharmacy registrants, the Respondents could have 
checked the COR status of Dr. Aguilar (and all prescribing doctors) 
by accessing a link on the DEA Diversion Web site, by consulting a 
list of current registrants that is regularly updated by the 
Department of Commerce, by contacting the local DEA office, or by 
contracting with a private company to perform due diligence in this 
regard. Tr. 20-21. The Respondents' irresponsible practice of ending 
their COR inquiry at the moment an insurance company agrees to remit 
payment speaks volumes on the subject of whether these Respondents 
should be entrusted with the responsibility of a controlled 
substance registrant. That the Respondents chose a patently 
ineffective and illogical manner to check COR statuses cannot 
absolve them of their responsibility to ensure this most basic of 
requirements. The Agency has never been, and cannot be, persuaded by 
a policy of ``see no evil, hear no evil.'' Cf. Gonzalez, 76 FR at 
63142. Even in a criminal context regarding prescriptions 
illegitimately issued, the courts have held that a factfinder ``may 
consider willful blindness as a basis for knowledge.'' United States 
v. Katz, 445 F.3d 1023, 1031 (8th Cir. 2006). The absence of Dr. 
Aguilar's COR is the most glaring of red flags that could and should 
have been recognized by the Respondents upon the exercise of even 
the most minimal due diligence. Conclusively resolving such a 
fundamental red flag was a mandatory condition precedent to the 
legal dispensing of a controlled substance, and the Respondents' 
failure to do so (on multiple occasions) was a clear breach of their 
corresponding responsibility under the regulations. 21 CFR 
1306.04(a). ``It would be difficult to imagine a duty of a pharmacy 
registrant that is more fundamental to the law and spirit of the CSA 
than the obligation to ensure that controlled substance 
prescriptions are issued only on the authority of those empowered to 
prescribe by the DEA.'' Holiday CVS, 77 FR at 62341; see also 
Liddy's Pharmacy, 76 FR at 48895. Absent confirmation of a COR, a 
prescription written by one without COR authority would authorize 
the routine distribution of dangerous narcotics on the approval of 
anyone from the uninformed to the malevolent. The DEA's Pharmacist's 
Manual specifically provides that controlled substance prescriptions 
may only be issued by a practitioner who is, inter alia, 
``[r]egistered with DEA or exempted from registration.'' DEA, 
Pharmacist's Manual Sec.  IX (2010).
    It is hardly insignificant that more than serving merely as the 
owner/president of both pharmacies, Moro-Perez has been a trained 
pharmacist since 1999. He acknowledged at the hearing that he had 
received training regarding the lawful procedures for handling 
controlled substances. Tr. 194. In addition to the readily available 
means for checking COR statuses outlined by DI Antoine, it is worthy 
of note that, with minimal effort, Aguilar's office could have been 
contacted or even (in light of its close proximity to FN) 
visited.\87\ The Respondent pharmacies knowingly pursued a course of 
deliberate ignorance, satisfying themselves in a sort of collective 
shrug that if there was ever a problem with a physician's COR, the 
insurance company would deny the claim. Tr. 201. Passively waiting 
to receive an insurance carrier claim rejection is not a responsible 
manner to discharge the duties of a registrant, and it certainly 
does not satisfy a registrant's obligation to ensure the authority 
of the issuer of the prescription. It is merely an effective manner 
to ensure payment.
---------------------------------------------------------------------------

    \87\ Tr. 250-51.
---------------------------------------------------------------------------

    The practice of relying on insurance carrier claim rejections as 
the principal means of due diligence is particularly egregious here. 
Moro-Perez testified that both pharmacies denied ``many'' of the 
controlled substance prescriptions written by Dr. Aguilar based on a 
review of the scrips submitted by his patients. Tr. 252-53. The 
pharmacies declined to fill these prescriptions based on the 
(repeated) professional judgment of the pharmacists that the scrips 
were invalid. Tr. 252. Yet, even armed with the knowledge that Dr. 
Aguilar was engaged in writing ``many'' illegitimate controlled 
substance prescriptions that could not legally be filled, Moro-Perez 
testified that his pharmacies never looked into Dr. Aguilar's 
practice or COR status in any way. Tr. 252-54. Instead, the 
Respondents blithely continued to fill Dr. Aguilar's prescriptions--
and presumably, the pharmacies continued to receive payments. Tr. 
250-52. Thus, it is clear on the present record that even though Dr. 
Aguilar had repeatedly given the professional staff working at both 
Respondent pharmacies reason to suspect his bona fides as a 
legitimate controlled substance prescriber, none of the Respondents' 
personnel was inspired to employ even the minimal effort that would 
have been required to check the status of his registration. Over and 
over again, the Respondents' pharmacists rendered their professional 
judgment that Dr. Aguilar was writing unsupported controlled 
substance prescriptions that were so sufficiently irregular that 
they were refused, yet they did not check into his authority beyond 
ensuring insurance carrier approvals for payments. It is a testament 
to the Respondents' irresponsibility (and exclusive focus on 
remuneration) that Moro-Perez acknowledged that if the DEA had not 
executed its search warrant on November 30, 2011, Farmacia Nueva 
would still be filling Dr. Aguilar's (unauthorized) controlled 
substance prescriptions. Tr. 202-03.
    The Government's evidence established that, for thirty-four 
months, Farmacia Nueva filled over 140 prescriptions for controlled 
substances written by Dr. Aguilar on his expired COR. Gov't Ex. 5. 
Similarly, the Government's evidence demonstrated that during the 
same period, Best Pharma filled 32 controlled substance 
prescriptions written by Dr. Aguilar. Gov't Ex. 10. Respondents 
clearly violated their ``fundamental'' duties under the CSA by 
failing to ensure that Dr. Aguilar's COR was valid. Holiday CVS, 77 
FR at 62341. In so doing, they breached their corresponding 
responsibilities as pharmacy registrants under Federal law to 
dispense only lawful prescriptions. Liddy's Pharmacy, 76 FR at 
48895.
    Thus, in addition to Element 1, the Government's evidence 
preponderantly established that the absence of a valid COR is a 
``red flag'' that should have been known prior to dispensing 
(Element 2), and that (inasmuch as the deficiency revolved around 
Dr. Aguilar's lack of a valid registration) it was not and could not 
have been adequately resolved prior to dispensing controlled 
substances (Element 3). Having established all three elements, there 
is no question that each Respondent violated its corresponding 
responsibility under the regulations.
    The record of both pharmacies indicates a clear disregard for 
following proper legal procedures designed to protect the public 
from the dangers of the unregulated dispensing of controlled 
substances. Furthermore, both pharmacies displayed a lack of 
motivation to follow through even the most basic of procedures, such 
as verifying a prescribing physician's COR. The Government's 
evidence that the Respondent pharmacies continued, for thirty-four 
months, to recklessly fill Dr. Aguilar's controlled substance 
prescriptions when he was unregistered and when they had actual 
knowledge that he was writing ``many'' illegitimate prescriptions 
negatively impacts

[[Page 28687]]

both Factor 2 (experience in dispensing) and Factor 4 (compliance 
with federal controlled substance laws) and militates strongly in 
favor of the application denial sought by the Government.\88\
---------------------------------------------------------------------------

    \88\ In view of the lengthy (34-month) period of time during 
which the scrips of (unregistered) Dr. Aguilar were filled, it is 
not necessary to discern exactly when the duty to re-check COR 
credentials emerges. A more precise divination of that issue may 
require resolution on different facts in another case.
---------------------------------------------------------------------------

    The Government's allegations regarding missing records/poor 
recordkeeping also relate to considerations under Factor Four. It is 
beyond argument that accurate and reliable records are an obvious 
bedrock safeguard that is essential to ensure the integrity of the 
closed regulatory system designed by Congress. See Gonzales v. 
Raich, 545 U.S. at 13. ``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 FR 51424, 51429 (2011) 
(internal punctuation and citations omitted) (quoting Paul H. 
Volkman, 73 FR 30630, 30644 (2008)). There is no question that the 
maintenance of accurate records by registrants is key to DEA's 
ability to fulfill its obligations to regulate controlled 
substances. See Volkman, 73 FR at 30644, aff'd, Volkman v. U.S. DEA, 
567 F.3d 215, 224 (6th Cir. 2009) (specifically upholding the DEA 
Administrator's reliance on recordkeeping violations in denying a 
COR application). Thus, where established by reliable evidence, 
recordkeeping deficiencies may provide a reason--``which is 
sufficient by itself''--to find that the granting of a registration 
would be inconsistent with the public interest. Id. DEA has also 
held that non-compliance with recordkeeping obligations can lend 
``substantial credence'' to allegations that a registrant is engaged 
in ``massive diversion.'' Grider Drug #1 & Grider Drug #2, 77 FR 
44069, 44101 (2012). However, the Agency has also held that where 
non-egregious recordkeeping errors are acknowledged and remedied 
promptly, revocation may not always be required. Terese, 76 FR at 
46848.
    In Terese, substantial evidence established that the registrant 
had failed to conduct an initial inventory as required under 21 CFR 
1304.11(b), failed to execute a power of attorney form as required 
by 21 CFR 1305.05(a), and failed to include dates on DEA Forms 222 
as required by 21 CFR 1305.13(e). Id. In declining to revoke 
Terese's registration, the Agency, emphasizing that the registrant 
had accepted responsibility for its violations and had instituted 
corrective actions, determined that, under the circumstances, the 
three recordkeeping violations did not render its continued 
registration inconsistent with the public interest. Id. at 46848. In 
Ideal Pharmacy Care, Inc., an audit of the registrant's records 
showed a shortage of 150,000 dosage units of hydrocodone, 83,000 
dosage units of alprazolam, and 1.6 million milliliters of 
promethazine with codeine. 76 FR 51415, 51416 (2011). However, in 
contrast to Terese, the Agency found \89\ that Ideal Pharmacy's 
failure to maintain accurate records constituted an act that 
rendered its continued registration inconsistent with the public 
interest. Id. at 51416. Taken together, Ideal and Terese indicate 
that, when considering recordkeeping violations, the Agency has 
coupled consideration of the degree of severity of the non-
compliance with an analysis of whether the registrant has both 
acknowledged culpability and demonstrated credible efforts aimed at 
correction. The current state of the Agency's precedent, thus, 
provides a logical framework upon which the current evidence can be 
evaluated.
---------------------------------------------------------------------------

    \89\ The registrant in Ideal waived its right to a hearing and 
presented no evidence to the Agency on its behalf. Ideal, 76 FR at 
51415.
---------------------------------------------------------------------------

    DEA regulations provide that ``[e]very registrant required to 
keep records pursuant to Sec.  1304.03 \90\ shall maintain on a 
current basis a complete and accurate record of each substance . . . 
imported, received, sold, delivered, exported, or otherwise disposed 
of by him/her, except that no registrant shall be required to 
maintain a perpetual inventory.'' 21 CFR 1304.21(a). The regulations 
also mandate that ``every . . . record[] required to be kept under 
this part must be kept by the registrant and be available, for at 
least 2 years from the date of such . . . records, for inspection 
and copying by authorized employees of the [DEA].'' Id. Sec.  
1304.04(a). Pharmacy registrants, such as the Respondents used to 
be, are required to maintain separate records of Schedule II 
controlled substances, and to maintain records of controlled 
substances listed in Schedules III-V ``either separately from all 
other records of the pharmacy or in such form that the information 
required is readily retrievable from the ordinary business records 
of the pharmacy.'' Id. Sec.  1304.04(h). Readily retrievable is 
defined in the regulations as records kept ``in such a manner that 
they can be separated out from all other records in a reasonable 
time . . . .'' 21 CFR 1300.01(b).
---------------------------------------------------------------------------

    \90\ Section 1304.03(a) provides that ``[e]ach registrant shall 
maintain the records and inventories and shall file the reports 
required by this part, except as exempted by this section.'' 21 CFR 
1304.03(a). The record contains no contention that any of the Sec.  
1304.03 exemptions apply in this case.
---------------------------------------------------------------------------

    On this record, the Government's allegations regarding alleged 
infirmities in the Respondents' recordkeeping are simply not 
supported by the presentation it made at the hearing. It is 
uncontroverted that both pharmacies used a computer program called 
``RX30'' to manage and record prescriptions and corresponding 
dispenses. Tr. 234, 244. While DI Antoine testified that, consistent 
with the Government's allegations, there were missing records from 
the computer systems of both pharmacies,\91\ the Government only 
offered exhibits relating to the missing records at Farmacia Nueva. 
Gov't Exs. 5-7.
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    \91\ Tr. 23-25, 96.
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    Exhibits supplied by both the Government and Farmacia Nueva 
purport to constitute copies of all controlled substance 
prescription scrips filled for Dr. Aguilar's patients between 
January 31, 2009 to November 30, 2011. Gov't Ex. 5; Resp't Exs. 1, 
2. It is uncontroverted that the RX30 system employed at Farmacia 
Nueva automatically affixes an informational heading at the top of 
each copy of a scrip that has been scanned into the system. Tr. 263. 
Both the Government's version and Farmacia Nueva's version contain 
scrip copies that display the informational heading and copies that 
do not.\92\ DI Antoine testified that he assembled the Government's 
version of Dr. Aguilar's Farmacia Nueva scrips from material seized 
at the search warrant execution and from material forwarded by Moro-
Perez in response to DEA's Supplemental Information Request. Tr. 23-
25.
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    \92\ Resp't Ex. 2, at 143-44; Gov't Ex. 5, at 1-6.
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    Moro-Perez, for his part, testified that he was able to generate 
a copy of all but one of every Aguilar controlled substance 
prescription scrip through a query of the Farmacia Nueva RX30 
program. Tr. 203-04, 248; Resp't Exs. 1, 2. While it strains 
credulity that Moro-Perez would intentionally hold back material 
that could have conceivably cleared up the issue of missing scrips 
until the hearing process commenced, the Government (who bears the 
burden on this issue) presented no testimony or other evidence that 
would explain why its version should be deemed the more complete 
one. The Government presented no testimony from anyone who was 
present at the search warrant execution at Farmacia Nueva. Likewise, 
instead of calling DFE Gladieux, who extracted the digital 
information, the Government presented a terse, barebones 
declaration.\93\ Gov't Ex. 15.
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    \93\ At the hearing, Government counsel represented that 
Gladieux was local and available, but not called as a witness 
because he felt that the declaration was sufficient. Tr. 135-37.
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    On the state of the present record, there is no way to determine 
which party has presented the more persuasive set of the Aguilar 
prescription scrips maintained at Farmacia Nueva. DFE Herrmann, the 
DEA digital forensic examiner who analyzed the data pulled from FN's 
RX30 program, acknowledged the possibility of a ``margin for 
error,'' \94\ but testified that she was able to create a duplicate 
of the Farmacia Nueva computer as it existed on the day the data was 
extracted from it. Tr. 141-42. The Government initially alleged that 
Best Pharma and Farmacia Nueva did not maintain controlled substance 
scrips authorized by Dr. Aguilar, but withdrew and/or did not 
proceed on all of the Best Pharma scrips \95\ and many of the 
Farmacia Nueva scrips when the Respondents pointed out in a 
prehearing motion \96\ that the noticed scrips included non-
controlled substances. Farmacia Nueva was able to produce purported 
copies of scrips for all but two (H00751567 & 00805523) of the 
(reduced number of) Aguilar scrips that the Government alleged as 
missing.\97\ Resp't Exs.

[[Page 28688]]

1-2, 4. While admittedly true that Farmacia Nueva did little to 
explain the origin, structure, or reliability of its own scrip-
related exhibits, the Government produced no credible challenge to 
Farmacia Nueva's purported scrip copies and declined to challenge 
their admission into evidence. Tr. 249, 257, 264-65. Even though he 
was not unavailable, DFE Gladieux, the technician who imaged the 
Farmacia Nueva computer, was not called as a witness to explain the 
data extraction process or defend its integrity and completeness. It 
is also worth noting here that Moro-Perez never explained why, if 
the FN scrips in question did exist and were available from the 
outset, they were not forwarded to the Government with his Response 
to Government Administrative Request for Information,\98\ wherein he 
provided the assurance that ``all of the requested prescriptions'' 
were included--a position he re-affirmed during his testimony. Tr. 
206-08. Still, the Government presented no evidence whatsoever in 
support of its BP recordkeeping allegations, and, with respect to 
Farmacia Nueva, its evidence was confusing and wholly unpersuasive. 
It would be virtually impossible on the present record to assign one 
party's batch of copied, purported prescriptions more credibility 
than the other party's batch in any manner that could be logically 
defended on appeal. In this mutually confusing contest of admitted 
evidence, it was the Government that bore the burden to establish 
the violations of the laws it had alleged. Regarding the 
recordkeeping allegations, its burden was simply not carried.
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    \94\ Tr. 155.
    \95\ In its closing brief, the Government made no mention of the 
Best Pharma recordkeeping allegations. ALJ Ex. 24, at 25.
    \96\ ALJ Ex. 10.
    \97\ So much of the Government's evidence in this regard was 
withdrawn or readily contradicted by evidence offered by the 
Respondent that it would be difficult to assign persuasive weight to 
even the two instances where the Respondent did not produce 
corresponding scrips. Stated differently, the Government's 
evidentiary presentation in this regard was simply too shaky and 
shifting to merit sufficient confidence to sustain the allegations. 
But even if the Government's evidence was deemed sufficiently 
reliable to believe that two Aguilar scrips were not maintained in 
accordance with the regulations, Agency precedent provides support 
for the proposition that, standing alone, these two missing scrips 
would not have been a sufficient violation to merit the application 
denial the Government seeks. See Terese, 76 FR at 46848 (determining 
that three recordkeeping violations that were acknowledged and 
timely corrected were insufficient to warrant COR revocation).
    \98\ Gov't Ex. 4, at 2-3.
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    Accordingly, to the extent the Government alleged that the 
Respondents violated 21 U.S.C. 827(b)(1) and 21 CFR 1304.04 by 
failing to maintain controlled substance scrips authorized by Dr. 
Aguilar, those allegations are not sustained.
    That said, the Respondents' actions in filling Dr. Aguilar's 
controlled substance prescriptions over the course of over two and a 
half years without checking his (expired) COR status in any logical 
manner, even though pharmacy personnel had rejected ``many'' of his 
prescriptions as illegitimate, balance powerfully in favor of 
denying both COR applications under Factors Two and Four.

Recommendation

    Based on the foregoing, the Government has established that the 
Respondents have submitted COR applications that bear material 
falsifications \99\ and have committed acts that are inconsistent 
with the public interest. 21 U.S.C. 823(f). Accordingly, the 
Government has sustained its prima facie burden to establish that 
the Respondents' COR applications should be denied. Hence, under 
established Agency precedent, the burden is shifted to the 
Respondents to demonstrate that each can be entrusted with a DEA 
registration.
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    \99\ 21 U.S.C. 824(a)(1).
---------------------------------------------------------------------------

    ``[T]o rebut the Government's prima facie case, [the Respondents 
are] required not only to accept responsibility for [the 
established] misconduct, but also to demonstrate what corrective 
measures [have been] undertaken to prevent the re-occurrence of 
similar acts.'' Hassman, 75 FR at 8236; see Hoxie, 419 F.3d at 483; 
Lynch, 75 FR at 78754 (holding that a respondent's attempts to 
minimize misconduct undermined acceptance of responsibility); 
Mathew, 75 FR at 66140, 66145, 66148; Aycock, 74 FR at 17543; 
Abbadessa, 74 FR at 10078; Krishna-Iyer, 74 FR at 463; Medicine 
Shoppe, 73 FR at 387. The acceptance of responsibility is a 
condition precedent for the Respondents to prevail once the 
Government has established its prima facie case. Mathew, 75 FR at 
66148. This feature of the Agency's interpretation of its statutory 
mandate on the exercise of its discretionary function under the CSA 
has been sustained on review. Mackay, 664 F.3d at 822. In 
determining whether and to what extent a sanction, such as denial of 
an application, is appropriate, consideration must be given to both 
the egregiousness of the offenses established by the Government's 
evidence and the Agency's interest in both specific and general 
deterrence. Ruben, 78 FR at 38364, 38385.
    The issue of acceptance of responsibility presents something of 
a mixed bag for the Respondents. Moro-Perez, the owner/president of 
both Respondent pharmacies, spoke on their behalf and, through 
counsel, represented their interests. As discussed in more detail, 
supra, the pharmacies are responsible for his actions. See EZRX, 69 
FR at 63181; Plaza Pharmacy, 53 FR at 36911. Moro-Perez acknowledged 
that he and his staff substituted what was essentially affirmative 
payment notification by insurance carriers in place of their 
responsibility to ensure that prescribing physicians, such as Dr. 
Aguilar, have valid CORs. The representations rendered by Moro-Perez 
and echoed by Farmacia Nueva PIC Nelson Vale regarding their intent 
to be more careful and purchase computer screens in the future were 
too amorphous to provide evidence sufficient to engender enough 
confidence that the pharmacies should be entrusted with CORs in the 
future. The Farmacia Nueva and Best Pharma PICs told DI Antoine 
that, as recently as two weeks prior to this hearing, no written 
controlled substance handling procedures had been promulgated by 
either pharmacy.\100\ Tr. 107. Even if the tacit admissions of 
wrongdoing by Moro-Perez were embraced as sufficient acceptance of 
responsibility to carry the pharmacies' burden (a dubious 
proposition), the showing of remedial measures is too weak to carry 
the day. In like manner, the intentional decision by an experienced 
registrant to have his staff substitute insurance approvals for COR 
checks over the course of over two years is bad enough, but when 
coupled with the actual knowledge by the Respondent pharmacies that 
Dr. Aguilar had written ``many'' bad controlled substance 
prescriptions, it elevates the level of egregiousness to a point 
where it militates powerfully in favor of denial of the CORs. While 
true that the Government's failure to sustain its recordkeeping 
allegations substantially diminishes the gravity to be attached to 
the 2008 Letter of Admonition,\101\ it is still relevant that Moro-
Perez had been counseled once by the Agency to exercise an 
appropriate level of care, and that the Agency's warning did not 
inspire sufficient vigilance to check the COR status of a 
prescribing physician who was engaged in writing ``many'' bad 
controlled substance prescriptions. To grant registrations in the 
face of such conduct would be a statement to the regulated community 
of pharmacy registrants that employing a patently infirm system of 
COR checks for prescribing physicians can serve as an effective 
shield to the consequences of failure to exercise due care. Thus, 
the Agency's interests in deterrence also weigh in favor of denial 
of the requested registrations.
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    \100\ While Moro-Perez made a fleeting reference to a 
``continuing education'' that he participated in after the execution 
of the search warrant (Tr. 203), there was no evidence as to what 
the class covered or whether it was in any way related to controlled 
substance diversion issues.
    \101\ Gov't Ex. 3. Indeed, none of the deficiencies cited in the 
Letter of Admonition are the basis of any allegation in these 
proceedings.
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    In their closing brief, the Respondents argue that mitigation is 
found in: (1) what they posit as a relatively modest number of 
dispensed prescriptions issued by (unregistered) Dr. Aguilar; (2) 
``minimal'' pecuniary gain to the registrants that resulted in 
filling Dr. Aguilar's scrips; (3) their continuing representation 
that the Respondents' pharmacists actually turned down ``many'' of 
Dr. Aguilar's controlled substance prescription that were 
illegitimate; (4) the fact that forty employees working at the 
Respondent pharmacies stand to lose their jobs upon an unfavorable 
decision by the Agency on the applications; and (5) that the 
Government offered no evidence that any of the scrips in question 
were for other than a legitimate medical purpose. ALJ Ex. 24, at 20-
21, 26. None of these arguments, all but one of which are offered 
under an apparent theory that ``it could have been worse,'' are 
persuasive on the present record.
    While the Respondents characterize the number of the Dr. Aguilar 
scrips during the relevant period as modest in comparison to the 
pharmacies' other business, their numbers (even if assumed as 
accurate) do not further their cause. These dispensing events were 
executed during a time when the pharmacies had no rational system 
for checking the COR status of any of the prescribers whose scrips 
they were filling. To compare the Dr. Aguilar scrips with the scrips 
of other physicians while the pharmacy was not checking anyone's COR

[[Page 28689]]

status confounds logic. Stated differently, the level of care 
exercised on Dr. Aguilar's scrips was the same as every other 
controlled substance scrip issued during the relevant period. The 
Agency has revoked based on as few as two acts of intentional 
diversion, and it held that one such act can be sufficient. MacKay, 
75 FR at 4997; Krishna-Iyer, 74 FR at 463. While the dispensing acts 
proven on this record may not have been intentional, there were 
certainly well more than one or two.
    Similarly, that the Respondents argue (without specific figures) 
that they have made ``minimal'' pecuniary gain due to their lack of 
care helps their respective causes not at all. A reduced profit 
margin is no more persuasive evidence in the context of a registrant 
pharmacy as it would be in the case of a street dealer in illicit 
drugs. The focus is on maintaining a closed regulatory system that 
protects the public from the unlawful distribution of controlled 
substances. Gonzales, 545 U.S. at 13. A registrant's voluntary 
decision to abandon the most basic of its registrant obligations 
should not result in any profit. Further, as is true with the 
Respondents' argument regarding the relative percentage of scrips 
that can be attributed to Dr. Aguilar, in an environment where no 
serious COR checking was employed, there is no basis in reason for 
evaluating the money Moro-Perez's pharmacies made from prescriptions 
authorized by Dr. Aguilar as compared to those by other 
practitioners. Who knows which of the issuing prescribers were 
actually registered? Hence, that the ``pecuniary benefits gained'' 
from dispensing controlled substances on Dr. Aguilar's scrips ``is 
minimal'' \102\ means nothing and mitigates nothing.
---------------------------------------------------------------------------

    \102\ ALJ Ex. 24, at 21.
---------------------------------------------------------------------------

    As discussed in detail, supra, the Respondents argument that 
they turned down ``many'' of Dr. Aguilar's prescriptions they 
thought to be illegitimate actually exacerbates the pharmacies' 
positions. Turning down ``many'' prescriptions from Dr. Aguilar that 
pharmacists determined to be illegitimate should have caused 
increased circumspection about dispensing on Aguilar's scrips. 
Instead, even by their own account, the pharmacies identified Dr. 
Aguilar as a problematic prescriber, never checked his COR status, 
and kept dispensing many of the prescriptions he authorized.
    In their closing brief, the Respondents ask that, in making its 
decision on the COR applications, the Agency consider that ``[t]here 
are . . . more than 40 employees among two pharmacies whose welfare 
depend on their jobs at the pharmacies [and that in] small towns 
like San Sebastian and Moca in Puerto Rico, this means a lot.'' ALJ 
Ex. 24, at 21 (internal transcript citations omitted). Even setting 
aside for a moment Moro-Perez's testimony that controlled substances 
account for only 10-15% of the prescription medications dispensed at 
each of the Respondent pharmacies,\103\ any blame for the lost jobs 
must properly be laid at the feet of the Respondents themselves, and 
Moro-Perez in particular. It is settled Agency precedent that normal 
hardships to the practitioner, and even the surrounding community, 
which are attendant upon the denial of a registration, are not a 
relevant consideration in determining whether status as a COR 
registrant is in the public interest within the meaning of the CSA. 
Cheek, 76 FR at 66972-73; Owens, 74 FR at 36757; Abbadessa, 74 FR at 
10078.
---------------------------------------------------------------------------

    \103\ Tr. 244-45.
---------------------------------------------------------------------------

    Finally, insofar as the Respondents point to the fact that the 
Government's theory of the case and its evidence have never relied 
on the absence of a legitimate medical purpose (LMP) for any of the 
scrips in question, it is certainly true that the Agency has looked 
at the LMP issue where prescriptions were issued by a prescriber who 
lacked proper authorization. Kam, 78 FR at 62698. However, that the 
Government has advanced no LMP evidence does not mitigate the 
evidence that was received regarding the Respondents' breach in 
their respective duties of due care in ensuring that controlled 
substance prescriptions were authorized by a practitioner with a 
valid COR.
    Regarding the material false misrepresentations intentionally 
placed into the COR applications, Moro-Perez doggedly adhered to his 
illogical position that he was reasonable in representing on the COR 
applications that neither pharmacy had ever surrendered a 
registration for cause. By Moro-Perez's intractable logic, the 
dismissal of an indictment against him (not either pharmacy) that 
occurred after the for-cause surrender of Best Pharma's COR, but 
before the for-cause surrender of Farmacia Nueva's COR, rendered 
both surrenders no longer ``for cause.'' Moro-Perez is an 
experienced COR holder and an educated, veteran pharmacist. His 
insistence that his false response to an application query regarding 
whether each pharmacy had ever surrendered a COR for cause was some 
sort of reasonable misunderstanding is simply not credible and 
defeats the Respondents' efforts to meet the Government's case. The 
false misrepresentation regarding the errant denial of the 
Respondents' prior surrenders for cause are sufficiently egregious 
on their face to warrant sanction, and the denial of the 
Respondents' applications here serve the Agency's interest in 
deterring false statements on the applications that it depends upon 
in its decisionmaking.
    The Respondents have, thus, failed to rebut the Government's 
prima facie case regarding either material falsification of their 
applications or a balancing of the public interest factors. Further, 
consideration of the egregiousness of the offenses, coupled with the 
Agency's interest in both specific deterrence regarding these 
pharmacies, and general deterrence among the regulated community, 
supports the denial of both COR applications. Accordingly, the 
Respondents' respective applications for DEA Certificates of 
Registration should be DENIED.

    Dated: October 24, 2013.

s/JOHN J. MULROONEY, II,

Chief Administrative Law Judge.

[FR Doc. 2015-12043 Filed 5-18-15; 8:45 am]
 BILLING CODE 4410-09-P