Jones Total Health Care Pharmacy, LLC v. Drug Enforcement Administration

Citation: 881 F.3d 823Docket: 16-17346

Court: Court of Appeals for the Eleventh Circuit; January 28, 2018; Federal Appellate Court

Original Court Document: View Document

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

A petition for review was filed by Jones Total Health Care Pharmacy, LLC, and SND Healthcare, LLC, challenging a final order from the Drug Enforcement Administration (DEA) that revoked Jones Pharmacy's certificate to dispense controlled substances and denied SND Healthcare's application for a similar certificate. The DEA's Acting Administrator found that Jones Pharmacy unlawfully dispensed controlled substances and that its owner, Cherese Jones, did not take full responsibility for these violations. The DEA’s decision was based on evidence that between February 2010 and July 2012, Jones Pharmacy failed to ensure prescriptions were issued for legitimate medical purposes and ignored significant warning signs of drug diversion, as well as committing record-keeping violations. The petitioners contended that the DEA's decision was arbitrary and capricious, but the court denied the petition for review, upholding the DEA's findings. The Controlled Substances Act (CSA) mandates that pharmacies must have proper registration and that pharmacists share responsibility for the legitimacy of the prescriptions they fill. The DEA has the authority to deny or revoke registrations, and proper procedures were followed in the revocation process, including serving an order to show cause and allowing a hearing before an Administrative Law Judge.

Jones Pharmacy's practices led to the denial of SND Healthcare's application due to their status as one integrated enterprise under the same ownership. Following a hearing in March 2015, an administrative law judge (ALJ) reviewed testimony from various experts, including law enforcement and pharmacy inspectors. The ALJ concluded that Jones Pharmacy's registration should be revoked and SND Healthcare's application denied, primarily based on the testimony of government expert Dr. Tracy Gordon, who identified multiple 'red flags' in over one hundred prescriptions filled by the pharmacy between February 2010 and July 2012. These red flags included: patients traveling long distances for prescriptions, prescriptions for potentially abused drug combinations, identical prescriptions from different individuals, inappropriate prescribing practices, cash transactions, and prescribing beyond normal medical practice.

The ALJ found that many of these red flags could not have been resolved by the pharmacists, indicating a violation of their 'corresponding responsibility.' Additional evidence, including statistical analysis, showed that Jones Pharmacy primarily dealt in controlled substances, with 99% of prescriptions being for immediate-release drugs and 89% for 'cocktail' drugs, predominantly paid for in cash—far exceeding national averages. The ALJ noted the significant price markups at Jones Pharmacy, suggesting diversion due to a customer base willing to pay excessively high prices.

The ALJ rejected arguments from Jones Pharmacy, particularly the claim of ignorance regarding red flags in prescription practices, emphasizing that the concept is well recognized in the pharmacy profession. The ALJ determined that the government had established a prima facie case for revocation and noted that Jones Pharmacy would need to demonstrate both acceptance of responsibility and implementation of remedial measures to regain trust for future registration.

Jones's testimony at the hearing led the Administrative Law Judge (ALJ) to conclude that she did not fully accept responsibility for the unlawful dispensing of controlled substances by Jones Pharmacy. The ALJ referenced prior agency rulings establishing that acceptance of responsibility is crucial for countering the government's prima facie case, thus choosing not to consider the pharmacy's remedial actions. Following the ALJ's recommendations, the Acting Administrator issued a comprehensive final order on October 31, 2016, rejecting the petitioners' arguments and affirming the ALJ's recommendations. The petitioners then sought judicial review under 21 U.S.C. 877, arguing that the Acting Administrator's decision was arbitrary and capricious, although the standard for such a claim is highly deferential, allowing for agency conclusions as long as they are rational and evidence-based. The Acting Administrator's findings are deemed conclusive if supported by substantial evidence, defined as relevant evidence that a reasonable person would find adequate to support a conclusion. The Drug Enforcement Administration (DEA) is empowered to revoke or deny registration for dispensing controlled substances if it finds such actions inconsistent with the public interest, guided by five specified factors, including the registrant's experience and compliance with laws. While the Acting Administrator must evaluate each factor, explicit findings are not mandatory, and the burden initially lies with the government to prove inconsistency with public interest, which the petitioners acknowledge was met in this case.

The agency determined that Jones Pharmacy unlawfully filled numerous controlled substance prescriptions lacking legitimate medical purposes, violating 21 C.F.R. 1306.04(a). From February 2010 to July 2012, Jones Pharmacy filled over one hundred prescriptions marked by unresolved red flags indicative of misuse. Substantial evidence suggested that the controlled substances dispensed were being diverted for improper use, leading to the agency's conclusion that revoking Jones Pharmacy's registration was in the public interest due to non-compliance with federal laws (21 U.S.C. 823(f)(4)). Petitioners challenged the DEA's conclusion as arbitrary and capricious, arguing that the agency misinterpreted Jones's testimony, overly emphasized the severity of the misconduct, and disregarded remedial measures instituted post-incident. 

The agency's analysis is structured into three main points. Firstly, it affirms that substantial evidence supports the finding that Jones did not credibly accept responsibility for the misconduct. Secondly, it concludes that the agency's decision to overlook Jones Pharmacy's subsequent remedial measures was justified under the circumstances. Lastly, the chosen sanction of revocation was deemed appropriate and not arbitrary or capricious. The DEA is recognized as having the authority to assess a registrant's acceptance of responsibility when considering registration revocation, with past performance serving as a significant indicator of future compliance. The ALJ, having directly observed Jones's testimony, found her acceptance of responsibility to be uncertain.

Ms. Jones testified that she believed she was fulfilling her corresponding responsibility to fill only legitimate prescriptions between 2010 and 2012, despite dispensing over a hundred prescriptions with multiple red flags at Jones Pharmacy. She acknowledged her past actions but claimed she could have done more, yet the ALJ found that she did not fully grasp her corresponding responsibility, as evidenced by her inability to recognize the legal requirement to ensure prescriptions were for legitimate medical purposes. The ALJ concluded that her ignorance was not a valid excuse for failing to comply with legal obligations. The Acting Administrator supported this conclusion after reviewing her testimony. Petitioners argued that the assessment of Jones’s acceptance of responsibility was flawed, asserting that she acknowledged her mistakes and that the ALJ misinterpreted her testimony. They contended that her misunderstanding was influenced by prior work at other pharmacies and criticized the ALJ for using a standard of acceptance that only applied to blatant offenders. However, both the ALJ and Acting Administrator reasonably determined that Jones's confusion did not excuse her actions and emphasized that, as a DEA-registered pharmacist, she had a duty not to fill illegitimate prescriptions. Evidence showed that from February 2010 to July 2012, Jones Pharmacy filled prescriptions with red flags and primarily dealt in cash for high-priced pain medications, yet Jones continued to deny any unlawful dispensing of prescriptions despite the evidence.

Jones's testimony revealed her naïveté and acknowledgment of mistakes regarding the verification of prescriptions. However, she did not clearly admit to understanding that Jones Pharmacy violated the Controlled Substances Act (CSA). Jones maintained that the pharmacy was fulfilling its duties as she perceived them and struggled to grasp the independent responsibility of pharmacists in ensuring prescriptions are for legitimate medical purposes. Her responses during cross-examination indicated a lack of understanding regarding her legal obligations under 21 C.F.R. 1306.04(a). The record suggests an inference of knowing misconduct, despite her claims of non-intentionality. The agency's conclusion that Jones failed to recognize even unintentional misconduct supported the finding that she did not fully accept responsibility for the pharmacy's actions. Although Jones Pharmacy has implemented corrective measures, which could indicate future compliance, the DEA must ensure that the pharmacy understands its legal responsibilities to trust it with a registration to dispense controlled substances.

The DEA's decision to revoke Jones Pharmacy's registration is upheld as neither arbitrary nor capricious. The Acting Administrator justified the revocation based on the severity and duration of the misconduct, Jones's failure to acknowledge her wrongdoing, and her lack of understanding of the responsibilities under the Controlled Substances Act (CSA). This determination is supported by substantial evidence. The Acting Administrator's choice of revocation as a sanction is also deemed reasonable, as the agency's sanctions are afforded substantial deference under the Administrative Procedure Act (APA), and the Petitioners did not demonstrate that this choice was unjustified or a departure from agency policy. The cited cases by Petitioners involved registrants who accepted responsibility for their actions, contrasting with Jones's case, where she lacked such acceptance. Furthermore, Petitioners' claim of due-process violation regarding the denial of discovery of an expert report was addressed, noting that administrative discovery is governed by the agency's rules while still adhering to basic due process standards. Overall, the revocation of Jones Pharmacy's registration is affirmed, and the procedural claims are not substantiated.

Discovery is warranted when a refusal to grant it would prejudice a party's due process rights. In this case, the Acting Administrator concluded that the Petitioners were not prejudiced, as they were fully aware of the Government's case theory and evidence, and had sufficient opportunity to prepare their defense. The expert report in question was not submitted as evidence, and the Petitioners were able to cross-examine the expert regarding her testimony and opinions. The Acting Administrator deemed the claim of prejudice as speculative and found that the denial of discovery was appropriate. Furthermore, the decision to revoke Jones Pharmacy's registration to dispense controlled substances was upheld, as it was not arbitrary or capricious and was backed by substantial evidence. The Petitioners did not contest the DEA's rationale for denying SND Healthcare's registration application based on Jones Pharmacy's practices. As a result, the Petitioners' petition for review was denied.