Applications, hearings, determinations, etc.: T Drug, Inc.,

[Federal Register: April 1, 1999 (Volume 64, Number 62)]

[Notices]

[Page 15803-15805]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr01ap99-133]

DEPARTMENT OF JUSTICE

Drug Enforcement Administration

[Docket No. 97-19]

Cadiz Thrift-T Drug, Inc., Termination of Registration

On June 3, 1997, the Deputy Assistant Administrator, Office of Diversion Control, Drug Enforcement Administration (DEA) issued an Order to Show Cause to Cadiz Thrift-T Drug, Inc. (Respondent) of Cadiz, Kentucky, notifying it of an opportunity to show cause as to why DEA should not revoke its DEA Certificate of Registration BC5009421 pursuant to 21 U.S.C. 824(a)(1), (2) and (4), and deny any applications for renewal of such registration as a retail pharmacy pursuant to 21 U.S.C. 823(f), for reason that the pharmacy ``falsified an application for registration, an owner-operator of the pharmacy was convicted of a felony related to controlled substances, and your continued registration is inconsistent with the public interest. . . .''

By letter dated June 30, 1997, Respondent fileda request for a hearing, and following prehearing procedures, a hearing was held in Nashville, Tennessee on October 29 and 30, 1997, before Administration Law Judge Gail A. Randall. At the hearing, both parties called witnesses to testify and introduced documentary evidence. After the hearing both parties filedproposed findings of fact, conclusions of law and argument. On July 31, 1998, Judge Randall issued her Opinion and Recommended Ruling, recommending that Respondent's DEA registration be revoked, but that the revocation be stayed for three years.

On August 20, 1998 both parties filedexceptions to the Opinion and Recommended Ruling of the Administrative Law Judge. In addition, on August 20, 1998, Respondent fileda Motion to Dismiss arguing that Respondent has ceased doing business

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and surrendered its DEA Certificate of Registration and as a result these proceedings are moot. The Government filedits Response to Motion to Dismiss on August 25, 1998, arguing that the record is closed and any consideration of new evidence ``ought to be rejected.'' The Government also argued that if Respondent's motion is considered it should be denied based upon a prior DEA decision. On September 10, 1998, Jude Randall transmitted the record of these proceedings to the then-Acting Deputy Administrator.

The Deputy Administrator concludes that it is proper to consider Respondent's Motion to Dismiss since it was filedbefore the record was transmitted to him and because it raises the issue of whether there is even a viable DEA registration capable of revocation in this matter. Accordingly, the Deputy Administrator has considered the record in its entirety, including Respondent's Motion to Dismiss and the Government's response thereto, and pursuant to 21 CFR 1316.67, hereby issues his final order based upon findings of fact and conclusions of law as hereinafter set forth.

Respondent was issued DEA Certificate of Registration BC5009421 on August 23, 1996. On June 30, 1997, DEA issued Respondent an Order to Show Cause proposing to revoke its DEA registration. Specifically, the Order to Show Cause alleged that:

1. On July 27, 1993, [Respondent] renewed its DEA registration, AC1370597, as a retail pharmacy at a registration location of 11 Hospital Street, Cadiz, Kentucky. The registrant held Kentucky Pharmacy permit #P01465. At that time, David C. Smith was the chief pharmacist, as well as a co-owner and corporate president.

2. On August 4, 1994, the DEA Louisville Resident Office conducted an inspection of the records of [Respondent], owned and operated by David C. Smith. The audit revealed that there were shortages and overages of Schedule II, III, and IV controlled substances. Such discrepancies indicate a failure to keep complete and accurate records in violation of 21 CFR 1304-21.

3. On or about September 15, 1994, David C. Smith admitted to an inspector of the Kentucky Board of Pharmacy that the pharmacy had dispensed or refilled prescriptions for patients without physician authorization.

4. On or about November 16, 1994, the Kentucky Board of Pharmacy entered an Agreed Order suspending the pharmacist's license of David C. Smith for three months.

5. Pursuant to an Information before the United States District Court for the Western District of Kentucky, David C. Smith was charged with two counts of distributing the Schedule IV controlled substances Xanax and propoxyphene on May 20, 1993, in violation of 21 U.S.C. 841(a)(1). On or about July 19, 1996, David C. Smith entered a plea agreement with the United States Attorney, agreeing to plead guilty to both felony counts.

6. Thomas C. Smith submitted, on behalf of [Respondent], an application for a DEA registration as a retail pharmacy dated July 30, 1996. The registered location was designated as 11 Hospital Street, Cadiz, Kentucky. The applicant indicated that it held Kentucky Pharmacy permit #P01465. Thomas C. Smith is a co-owner and corporate officer, and the father of David C. Smith. The DEA subsequently issued registration number BC5009421 to [Respondent].

7. The July 30, 1996, application contained a material falsification by indicating ``no'' to a question which asked, in part, ``has any officer, partner, stockholder or proprietor . . . ever had a State professional license or controlled substance registration revoked, suspended, denied, restricted, or placed on probation.'' The corporation and its officers knew that on or about November 16, 1994, the Kentucky Board of Pharmacy entered an Agreed Order suspending the pharmacist's license of David C. Smith, President and chief pharmacist of [Respondent], for three months.

8. [Respondent's] Certificate of Registration, AC1370597, expired on August 31, 1996, and was not renewed.

9. On or about September 2, 1996, [Respondent] submitted information to the Kentucky Pharmacy Board indicating a ``change in ownership.'' As a result, Kentucky Pharmacy permit #P01465 was ``closed'' and a new Kentucky Pharmacy permit #06246 was issued to

   [Respondent] . The DEA was not notified in accordance with the requirements of 21 CFR Sec. 1307.14.

10. On November 25, 1996, David C. Smith, pursuant to the earlier plea agreement, was sentenced to two years probation by the United States District Court for the Western District of Kentucky.

11. [Respondent] has continued to employ David C. Smith as pharmacist-in-charge in violation of 21 CFR 1301.76(a).

    Following a hearing regarding the allegations raised in the Order to Show Cause, Judge Randall issued her Opinion and Recommended Ruling on July 31, 1998, recommending that Respondent's registration be revoked but that the revocation be stayed for three years upon the condition that David Smith not be allowed to work in Respondent pharmacy without a DEA waiver of 21 CFR 1301.76(a).

    Subsequently, on August 20, 1998, Respondent fileda Motion to Dismiss with attachments indicating that Respondent was sold on May 24, 1998 and its DEA Certificate of Registration was surrendered to DEA. Respondent argued that these proceedings are moot since Respondent pharmacy is no longer in business and is not using the DEA registration that is the subject of these proceedings. In its response to Respondent's motion, the Government argued that ``the issue regarding Respondent's continued registration is not rendered moot by any unilateral decision of Respondent's officers to discontinue their corporate form of business.'' The Government further argued that ``once an order to show cause has been initiated, there is continued jurisdiction over a registration consistent with DEA precedent.'' In support of its arguments, the Government cited the case of Park and King Pharmacy, 52 FR 13,136 (1987), where the then-Administrator revoked the DEA registration even though the pharmacy was sold in the midst of the proceedings.\1\ The then-Administrator found that a registration subject to ongoing administrative proceedings cannot be unilaterally terminated pursuant to 21 CFR 1301.62 \2\ by the registrant by discontinuing business. Specifically, the then- Administrator noted that ``permitting a registrant to terminate his registration unilaterally, during the eleventh hour of a proceeding to revoke that registration, would permit the registrant to avoid any of the collateral effects of revocation and could require the Administrator to grant the individual another full evidentiary hearing should he decide to re-establish his business or professional practice and apply for a new registration shortly thereafter.''

    \1\ In Park and King Pharmacy, the pharmacy's DEA registration also expired during the proceedings, however that aspect of the case will not be discussed here since it is not relevant to the issues in this proceeding.

    \2\ At the time of the decision in Park and King Pharmacy the provision regarding the termination of a registration was found in 21 CFR 1301.62. That provision has since been renumbered and can now be found in 21 CFR 1301.52.

    In addition, the then-Administrator found in Park and King Pharmacy that 21 CFR 1301.37(a) \3\ ``effectively precludes an applicant's abrupt and unilateral termination of proceedings by requiring the Administrator's permission for withdrawal of an application at any time after issuance of the Order to Show Cause.'' The then-Administrator reasoned that it is the ``application'' and not the applicant that is the subject of the proceedings and found that it is similarly the ``registration,'' and not the registrant who possessed it, that becomes the subject of revocation proceedings. As a result, the then- Administrator concluded that a registration cannot be withdrawn without the Administrator's prior approval.

    \3\ This provision has since been renumbered as 21 CFR 1301.16(a).

    The Government in its response to Respondent's motion also argued that Respondent did not ``surrender'' its DEA registration but merely tendered it to

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    DEA for retirement, ``and that no action has been taken, nor is any action contemplated . . . for reason that Respondent's registration record currently has an administrative code ``O'' placed on it, which forecloses all administrative action pending the outcome of a show cause proceeding. Accordingly, DEA has not accepted this tender.''

    The Deputy Administrator agrees with the Government that the chronology of this case is similar to that of Park and King Pharmacy. Respondent was sold after the Order to Show Cause was issued. Therefore, according to the decision in Park and King Pharmacy, Respondent's registration should not be considered terminated and should be capable of revocation. However, the Deputy Administrator is troubled by the decision in Park and King Pharmacy. The Deputy Administrator can find nothing in the statute or regulations nor any other notice to the public that a registration does not terminate upon the sale of a pharmacy if an Order to Show Cause has been issued. Pursuant to 21 CFR 1301.16, permission is needed to amend or withdraw an application once an Order to Show Cause has been issued, but there is no similar provision regarding a registration. Therefore, no permission is needed to terminate a registration. In fact, 21 CFR 1301.52(a) specifically states that, ``the registration of any person shall terminate if and when such person dies, ceases legal existence, or discontinues business or professional practice.'' (emphasis added)

    The Deputy Administrator recognizes the then-Administrator's concerns in Park and King Pharmacy that to permit termination after an Order to Show Cause has been issued allows a registrant to avoid the consequences of a revocation. However, pursuant to 21 CFR 1301.52(a) a registration automatically terminates when a pharmacy ceases legal existence or discontinues business or professional practice. The Deputy Administrator can find no authority to support the prevention of a termination, and therefore finds no authority to support the then- Administrator's conclusion in Park and King Pharmacy that a registration does not terminate upon the sale of a pharmacy if an Order to Show Cause has been issued.

    In fact in AML Corporation, d/b/a G & O Pharmacy, and G & O Pharmacy, 61 Fed. Reg. 8973 (1996), decided subsequent to Park and King Pharmacy, the then-Deputy Administrator concluded that a pharmacy's registration terminated upon the sale of the pharmacy even though the sale occurred in the midst of administrative proceedings regarding the registration.\4\ The then-Deputy Administrator noted ``that pursuant to 21 CFR 1301.62, the transfer of ownership of G & O Pharmacy to AML effectively terminated all authority granted under DEA Certificate of Registration, AG2999691, previously issued to G & O Pharmacy.''

    \4\ In that case, the Government also sought to revoke the new pharmacy's DEA registration and the proceedings were consolidated.

    Accordingly, the Deputy Administrator concludes that DEA Certificate of Registration BC5009421, previously issued to Cadiz Thrif/T Drug, Inc. terminated as of May 24, 1998, when it discontinued business upon its sale to Hospital Street Pharmacy, Inc. Therefore there is no viable DEA Certificate of Registration capable of revocation as proposed in the June 3, 1997 Order to Show Cause. This order is effective immediately.

    Dated: March 15, 1999. Donnie R. Marshall, Deputy Administrator.

    [FR Doc. 99-7932Filed3-31-99; 8:45 am]

    BILLING CODE 4410-09-M