Document Headings

                    Document headings vary by document type but may contain                    the following:                  
                -                       the agency or agencies that issued and signed a document                    
                -                       the number of the CFR title and the number of each part                      the document amends, proposes to amend, or is directly                      related to                    
                -                       the agency docket number / agency internal file number                    
                -                       the RIN which identifies each regulatory action listed in                      the Unified Agenda of Federal Regulatory and Deregulatory                      Actions                    

                    See the                                          Document Drafting Handbook                                        for more details.                  

###### Department of Health and Human Services

###### Food and Drug Administration

          - [Docket No. FDA-2019-N-3794]

# AGENCY:

Food and Drug Administration, HHS.

# ACTION:

Notice.

# SUMMARY:

The Food and Drug Administration (FDA or Agency) is issuing an order permanently debarring Jerrod Nichols Smith from providing services in any capacity to a person that has an approved or pending drug product application. FDA bases this order on a finding that Mr. Smith was convicted of multiple felony counts under Federal law for conduct that relates to the regulation of a drug product under the Federal, Food, Drug, and Cosmetic Act (the FD&C Act). Mr. Smith was given notice of the proposed permanent debarment and was given an opportunity to request a hearing to show why he should not be debarred. As of September 27, 2020 (30 days after receipt of the notice), Mr. Smith had not responded. Mr. Smith's failure to respond and request a hearing constitutes a waiver of his right to a hearing concerning this action.

# DATES:

This order is effective January 4, 2021.

# ADDRESSES:

                        Submit applications for termination of debarment to the Dockets Management Staff, Food and Drug Administration, 5630 Fishers Lane, Rm. 1061, Rockville, MD 20852, 240-402-7500, or at                         *https://www.regulations.gov.*

# FOR FURTHER INFORMATION CONTACT:

                        Jaime Espinosa, Division of Enforcement (ELEM-4029), Office of Strategic Planning and Operational Policy, Office of Regulatory Affairs, Food and Drug Administration, 12420 Parklawn Dr., Rockville, MD 20857, 240-402-8743, or at                         *debarments@fda.hhs.gov.*

# SUPPLEMENTARY INFORMATION:

## I. Background

                    Section 306(a)(2)(B) of the FD&C Act (21 U.S.C. 335a(a)(2)(B)) requires debarment of an individual from providing services in any capacity to a person that has an approved or pending drug product application if FDA finds that the individual has been convicted of a felony under Federal law for conduct relating to the regulation of any drug product under the FD&C Act. On July 16, 2018, Mr. Smith was convicted as defined in section 306(                    *l*)(1)(A) of the FD&C Act when judgment was entered against him in the U.S. District Court for the Middle District of Tennessee, Nashville Division, after a jury trial, to one count of conspiracy to commit mail fraud in violation of 18 U.S.C. 371, 15 counts of mail fraud in violation of 18 U.S.C. 1341, and one count of obstruction of justice in violation of 18 U.S.C. 1001.                

The factual basis for these convictions is as follows: Mr. Smith was one of the owners and operators of Cumberland Distribution, Inc. (“Cumberland”), formerly known as Midwest Pharmacy, which was a wholesale drug distribution company incorporated in Nevada and Tennessee. Mr. Smith was engaged in the business of wholesale distribution of prescription drugs, as defined by 21 U.S.C. 353(e)(3)(B), to pharmacy customers throughout the United States. From December 2006 through August 2009, Mr. Smith, along with others, purchased millions of dollars of prescription drugs, through Cumberland. The vast majority of the prescription drugs purchased by Cumberland and received at the company's warehouse facilities were sold to Cumberland, directly and indirectly, by individuals and entities whom Mr. Smith knew were not licensed by any State to engage in the wholesale distribution of prescription drugs and were not otherwise authorized to distribute prescription drugs pursuant to 21 U.S.C. 353. These unauthorized sellers obtained their prescription drugs from various networks of street level drug diverters. Mr. Smith directed employees to take steps to conceal the true origins of the diverted prescription drugs shipped to the company's warehouse facilities before shipping them to pharmacy customers around the country. Such steps included, but were not limited to, falsification of documents concerning the chain of custody or pedigree of a drug. These falsified pedigree documents, which Mr. Smith provided to his pharmacy customers or maintained at Cumberland, inaccurately represented that the diverted products had been obtained from licensed wholesale distributors. Mr. Smith also used shell companies to receive and relabel diverted prescription drugs before sending them to Cumberland's warehouse facilities to create the false appearance that his company was purchasing prescription drugs from licensed wholesale distributors.

The diverted drugs included, but were not limited to, drugs used to treat human immunodeficiency virus/acquired immunodeficiency syndrome, antipsychotic medications, antidepressants, blood pressure medications, and diabetes medications. Numerous pharmacies reported problems with drugs they purchased from Cumberland, including prescription drug bottles containing the wrong medicine, the wrong dosage information, and foreign objects inside. At trial, several witnesses testified that at least one bottle of prescription drugs sold by Cumberland contained Tic Tacs instead of medicine. Through the course of this scheme, Mr. Smith's company had gross proceeds of approximately $58,984,912. His profits were approximately $14,689,782.

                    As a result of these convictions, FDA sent Mr. Smith by certified mail on July 16, 2020, a notice proposing to permanently debar him from providing services in any capacity to a person that has an approved or pending drug product application. The proposal was based on a finding, under section 306(a)(2)(B) of the FD&C Act, that Mr. Smith was convicted of felonies under Federal law for conduct relating to the regulation of a drug product under the FD&C Act. The proposal also offered Mr. Smith an opportunity to request a hearing, providing him 30 days from the date of receipt of the letter in which to file the request, and advised him that failure to request a hearing constituted an election not to use the opportunity for a hearing and a waiver of any contentions concerning this action. Mr.                           ( print page 102)                        Smith received the proposal on August 28, 2020. Mr. Smith did not request a hearing within the timeframe prescribed by regulation and has, therefore, waived his opportunity for a hearing and any contentions concerning his debarment (21 CFR part 12).                

## II. Findings and Order

Therefore, the Assistant Commissioner, Office of Human and Animal Food Operations, under section 306(a)(2)(B) of the FD&C Act, under authority delegated to the Assistant Commissioner, finds that Mr. Smith has been convicted of multiple felonies under Federal law for conduct otherwise relating to the regulation of a drug product under the FD&C Act.

                    As a result of the foregoing finding, Mr. Smith is permanently debarred from providing services in any capacity to a person with an approved or pending drug product application, effective (see                     **DATES**                    ) (see section 306(a)(2)(B) and (c)(2)(A)(ii) of the FD&C Act). Any person with an approved or pending drug product application who knowingly employs or retains as a consultant or contractor, or otherwise uses the services of Mr. Smith, in any capacity during his debarment, will be subject to civil money penalties (section 307(a)(6) of the FD&C Act (21 U.S.C. 335b(a)(6))). If Mr. Smith provides services in any capacity to a person with an approved or pending drug product application during his period of debarment he will be subject to civil money penalties (section 307(a)(7) of the FD&C Act). In addition, FDA will not accept or review any abbreviated new drug applications from Mr. Smith during his period of debarment, other than in connection with an audit under section 306 of the FD&C Act (section 306(c)(1)(B) of the FD&C Act). Note that, for purposes of section 306 of the FD&C Act, a “drug product” is defined as a drug subject to regulation under section 505, 512, or 802 of the FD&C Act (21 U.S.C. 355, 360b, or 382) or under section 351 of the Public Health Service Act (42 U.S.C. 262) (see section 201(dd) of the FD&C Act (21 U.S.C. 321(dd))).                

                    Any application by Mr. Smith for special termination of debarment under section 306(d)(4) of the FD&C Act should be identified with Docket No. FDA-2019-N-3794 and sent to the Dockets Management Staff (see                     **ADDRESSES**                    ). The public availability of information in these submissions is governed by 21 CFR 10.20.                

                    Publicly available submissions will be placed in the docket and will be viewable at                     *https://www.regulations.gov*                     or at the Dockets Management Staff (see                     **ADDRESSES**                    ) between 9 a.m. and 4 p.m., Monday through Friday, 240-402-7500.                

Dated: December 28, 2020.

Lauren K. Roth,

Acting Principal Associate Commissioner for Policy.

[FR Doc. 2020-29052 Filed 12-31-20; 8:45 am]

BILLING CODE 4164-01-P