Federal Register / Vol. 72, No. 127 / Tuesday, July 3, 2007 / Notices 36487 

and that his registration should be 

revoked. Id. Moreover, for the same 

reasons that led me to find that 

Respondent posed ‘‘an imminent danger 

to the public health or safety,’’ id. 

section 824(d), I conclude that the 

public interest requires that his 

registration be revoked effective 

immediately. 

Order 

Pursuant to the authority vested in me 

by 21 U.S.C. 823(f) & 824(a), as well as 

28 CFR 0.100(b) & 0.104, I hereby order 

that DEA Certificate of Registration, 

BM5526009, issued to Michael F. 

Myers, M.D., be, and it hereby is, 

revoked. I further order that any 

pending applications for renewal or 

modification of such registration be, and 

they hereby are, denied. This order is 

effective immediately. 

Dated: June 22, 2007. 

Michele M. Leonhart, 

Deputy Administrator. 

[FR Doc. E7–12771 Filed 7–2–07; 8:45 am] 

BILLING CODE 4410–09–P 

DEPARTMENT OF JUSTICE 

Drug Enforcement Administration 

[Docket No. 07–7] 

Southwood Pharmaceuticals, Inc.; 

Revocation of Registration 

On November 30, 2006, I, the Deputy 

Administrator of the Drug Enforcement 

Administration, issued an Order to 

Show Cause and Immediate Suspension 

of Registration to Southwood 

Pharmaceuticals, Inc. (Respondent), of 

Lake Forest, California. The Order 

immediately suspended Respondent’s 

DEA Certificate of Registration, 

RS0204898, based on my preliminary 

finding that its continued registration 

‘‘constitute[s] an imminent danger to the 

public health and safety because of the 

substantial likelihood that Southwood 

[would] continue to supply pharmacies 

that divert large quantities of controlled 

substances.’’ Show Cause Order at 3. 

The Order also sought the revocation of 

Respondent’s registration on the ground 

that its continued registration is 

‘‘inconsistent with the public interest.’’

Id. at 1 (citing 21 U.S.C. 823(d) & 

824(a)(4)). 

The Show Cause Order alleged that 

between November 2005 and August 

2006, Respondent’s sales to pharmacies 

of hydrocodone products ‘‘increased 

from approximately 7,000 dosage units 

per month to approximately 3,000,000 

dosage units per month,’’ and that the 

increase was ‘‘directly attributable to 

[its] supplying controlled substances to 

pharmacies that it knew or should have 

known were engaged in the widespread 

diversion of controlled substances.’’ Id. 

The Show Cause Order alleged that 

several of Respondent’s customers were 

distributing ‘‘large amounts of 

hydrocodone based on orders placed by 

customers using various Internet Web 

sites.’’ Id. 

The Show Cause Order specifically 

alleged that ‘‘from December 12, 2005, 

to August 31, 2006, [Respondent] 

distributed approximately 8,671,000 

dosage units of hydrocodone products 

to Medipharm-Rx, Inc.,’’ and did so 

‘‘under circumstances that clearly 

indicated that Medipharm was engaged 

in the diversion of controlled 

substances.’’ Id. at 1–2. The Show Cause 

Order further alleged that these 

circumstances included that ‘‘ninetynine percent of Medipharm’s business 

[with Respondent] involved the sale of 

controlled substances,’’ that Medipharm 

was owned by an individual who also 

owned a Web site ‘‘that solicit[ed] 

orders for controlled substances’’ and 

used practitioners who issued 

prescriptions outside of ‘‘the usual 

course of professional practice,’’ and 

that ‘‘Medipharm’s orders were of an 

unusual size, deviated substantially 

from a normal pattern, and were of an 

unusual frequency.’’ Id. at 2. 

Relatedly, the Show Cause Order 

alleged that Respondent had ‘‘also 

supplied controlled substances under 

similarly suspicious circumstances’’ to 

fourteen other pharmacies. Id. The 

Show Cause Order thus alleged that 

Respondent ‘‘repeatedly supplied 

excessive quantities of hydrocodone to 

pharmacies that it knew or should have 

known were diverting hydrocodone.’’

Id. Moreover, the Show Cause Order 

alleged that notwithstanding ‘‘the 

unusual size and frequency of the orders 

placed by Medipharm and others, as 

well as the fact that the orders 

substantially deviated from the normal 

pattern of orders received by’’ it, 

Respondent never reported any of the 

orders as suspicious. Id. at 2–3. 

Next, the Show Cause Order alleged 

that on July 17, 2006, the Office of 

Diversion Control’s E-Commerce 

Section held a conference call with 

Respondent’s representatives to discuss 

‘‘the distribution of controlled 

substances to Internet pharmacies.’’ Id. 

at 3. During the call, DEA officials 

allegedly presented Respondent with 

‘‘information on the characteristics of 

Internet pharmacies and the nature of 

their illegal activities.’’ Id. DEA officials 

also allegedly discussed with 

Respondent such subjects as DEA’s 2001 

Guidance Document on the use of the 

Internet to prescribe controlled 

substances, the requirement for a valid 

prescription under federal law and 

existing professional standards, DEA’s 

regulation requiring the reporting of 

suspicious orders, and the ‘‘practices 

and ordering patterns of internet 

pharmacies.’’ Id. The Show Cause Order 

further alleged that notwithstanding this 

information, in August 2006, 

Respondent proceeded to distribute 

large quantities of hydrocodone to five 

different internet pharmacies. Id. The 

Show Cause Order thus alleged that 

Respondent ‘‘has failed to maintain 

effective controls against diversion and 

that [its] continued registration * * * 

would be inconsistent with the public 

interest.’’ Id. 

On December 6, 2006, the Show 

Cause Order was served on Respondent. 

ALJ Ex. 2. Thereafter, on December 29, 

2006, Respondent, through its counsel, 

requested a hearing. ALJ Ex. 3. The 

matter was assigned to Administrative 

Law Judge (ALJ) Gail Randall, who 

conducted a hearing in Arlington, 

Virginia, from February 5 through 

February 8, 2007. At the hearing, both 

parties called witnesses and introduced 

documentary evidence. Following the 

hearing, both parties submitted briefs 

containing proposed findings of fact, 

conclusions of law, and argument. 

On March 30, 2007, the ALJ issued 

her recommended decision (ALJ). In 

that decision, the ALJ concluded that 

DEA had proved that ‘‘Respondent’s 

continued registration to handle 

hydrocodone products would be against 

the public interest.’’ ALJ at 61–62. The 

ALJ concluded, however, that 

Respondent ‘‘has kept an open dialogue 

with the DEA and has attempted to 

come into compliance with the DEA’s 

regulations.’’ Id. at 62. While 

acknowledging ‘‘the egregious quantities 

of hydrocodone products the 

Respondent irresponsibly sold to 

registered [i]nternet pharmacies during 

2005 and 2006,’’ the ALJ nonetheless 

‘‘conclude[d] that revocation of * * * 

Respondent’s entire DEA registration is 

too severe a remedy.’’ Id. 

Continuing, the ALJ explained that 

‘‘the record contains no evidence of 

* * * Respondent’s improper handling 

of any other controlled substances, 

especially in its sales of manufactured 

products to its practitioner customers.’’

Id. Noting that Respondent had hired an 

‘‘experienced officer who will be 

making the final decisions concerning 

[its] compliance measures,’’ and that 

this would provide ‘‘an increased level 

of protection of the public interest,’’ the 

ALJ recommended that Respondent’s 

authority to handle hydrocodone 

products be revoked but that it retain its 


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1By itself, hydrocodone is a schedule II 

controlled substance. 21 CFR 1308.12(b)(1). 

Respondent did not, however, distribute schedule 

II hydrocodone. Throughout this decision, the term 

hydrocodone refers to those schedule III controlled 

substances which contain hydrocodone. 

2For purposes of this decision, the term ‘‘internet 

pharmacy’’ refers to a pharmacy that fills a 

prescription that is issued by the physician without 

the physician having entered into a legitimate 

doctor-patient relationship under existing 

professional standards. Typically, a person seeking 

controlled substances goes to an internet site, fills 

out a questionnaire which requests basic medical 

information and payment/shipping information, 

and requests a specific drug; some Web sites may 

require that the patient submit a medical record, 

which is easily falsified. Thereafter, the customer’s 

information is forwarded to a physician either 

contracted to or employed by the Web site, who 

reviews the information and issues a prescription, 

either with or without the benefit of a perfunctory 

telephone consultation, but always without having 

conducted a face-to-face review of the person’s 

medical history and a physical exam. The 

prescription is then either forwarded to the 

pharmacy or downloaded electronically by the 

pharmacy; the pharmacy then fills the prescription 

and ships it to the customer. See GX 3. 

authority to handle other controlled 

substances. Id. The ALJ further 

recommended that DEA monitor 

Respondent to ensure that it comply 

with both her proposed restrictions and 

Respondent’s decision to cease 

distributing to Florida-based internet 

pharmacies. Id. 

Thereafter, the Government filed 

exceptions. In its exceptions, the 

Government contended that the record 

established that Respondent had also 

distributed excessive quantities of other 

controlled substances included 

phentermine and alprazolam. See Gov. 

Exceptions at 2–9. The Government also 

contended that the ALJ’s reliance on 

Respondent’s hiring of a new Chief 

Operating Officer (COO) was misplaced 

because the company had, in fact, sold 

increasing amounts of controlled 

substances to ‘‘rogue [i]nternet 

pharmacies’’ for several months 

thereafter. Id. at 11. The Government 

further argued that under the ‘‘day to 

day leadership’’ of its new COO, 

Respondent had continued to 

constructively distribute controlled 

substances to its physician clients after 

its registration was suspended. Id. 

According to the Government, this 

conduct ‘‘refutes the ALJ’s hypothesis 

that [the new COO] will effectively 

manage Respondent’s compliance 

program.’’ Id. 

In response, Respondent argued that 

the Government had ‘‘largely buried its 

concerns’’ regarding the distribution of 

phentermine noting that the drug was 

not mentioned in the Show Cause 

Order, the lengthy stipulation of facts, 

or in the Government’s opening 

statement. Respondent’s Resp. at 2–3. 

Respondent further argued that it has 

stipulated that it will not ‘‘ship 

phentermine to any pharmacy, should 

its registration be restored.’’ Id. at 2. 

With respect to alprazolam, Respondent 

argued that ‘‘the government wholly 

buried its concern with this substance, 

making explicit reference to it only in 

its Exceptions.’’ Id. Finally, Respondent 

argued that the ALJ’s findings regarding 

its new COO are based on credibility 

determinations and are entitled to 

deference. Id. at 4–6. 

Thereafter, on May 8, 2007, the ALJ 

forwarded the record to me for final 

agency action. Having reviewed the 

record as a whole, I hereby issue this 

decision and final order. I adopt the 

ALJ’s findings of fact and conclusions of 

law except as expressly noted herein. 

However, for reasons explained below, 

I conclude that the ALJ’s proposed 

remedy is insufficient to protect the 

public interest. While I am mindful of 

the corrective measures engaged in by 

Respondent, its sales of extraordinary 

quantities of controlled substances to 

entities which it had reason to know 

were diverting the drugs caused 

extraordinary harm to public health and 

safety. Therefore, Respondent’s 

registration will be revoked and its 

pending renewal application will be 

denied. I make the following findings. 

Findings 

Respondent Southwood 

Pharmaceuticals, Inc., is the holder of 

DEA Certificate of Registration, 

RS0204898, which authorizes it to 

manufacture controlled substances in 

schedules 3, 3N, 4, and 5. GX 1. While 

the expiration date of its registration 

was February 28, 2007, see id., 

Respondent submitted a timely renewal 

application. See Resp. Ex. 110. 

Respondent’s registration thus remains 

in effect (although in suspended status) 

pending the issuance of this order. 5 

U.S.C. 558(c). 

Respondent’s market niche was the 

repackaging of oral dose generic drug 

products into common prescription 

quantities which it then distributed. ALJ 

at 3. Until December 2005, Respondent’s 

customer base was primarily comprised 

of dispensing physicians who 

specialized in treating injured workers, 

pain management and urgent care. Id. at 

3–4. Respondent also distributed its 

products to group practices, specialty 

clinics and some traditional retail 

pharmacies. Id. Among the drugs 

distributed by Respondent were 

schedule III controlled substances 

containing hydrocodone.1 See 21 CFR 

1308.13(e). 

Respondent’s Hydrocodone Sales 

According to data submitted by 

Respondent through DEA’s ARCOS 

system, during the four-month period 

from August through November 2005, it 

sold 3,949,454 dosage units of 

hydrocodone products. ALJ at 4. Of this 

amount, Respondent’s individual 

practitioner customers purchased 

3,882,507 dosage units of the drug. Id. 

By contrast, Respondent sold 

approximately 29,940 dosage units of 

hydrocodone products to its retail 

pharmacy customers, for an average of 

7,485 dosage units per month. Id. at 5. 

On December 7, 2005, Respondent 

entered a new line of business—

supplying internet pharmacies—by 

selling hydrocodone to Medipharm-Rx, 

Inc. (Medipharm), a Florida-based 

internet pharmacy.2 Id. Over the 

ensuing months, Respondent acquired 

numerous additional internet pharmacy 

customers to whom it repeatedly sold 

large quantities of hydrocodone. 

According to the stipulated facts, from 

December 2005 through October 2006, 

Respondent supplied Medipharm with 

an average of 1,011,882 dosage units of 

hydrocodone per month. ALJ at 5. 

Respondent also supplied Medipharm 

with approximately 538,290 dosage 

units of hydrocodone during the first 

half of November 2006, at which time 

Medipharm’s registration was 

immediately suspended under 21 U.S.C. 

824(d). Id. at 5–6. 

The following table reflects 

Respondent’s monthly distributions of 

hydrocodone to Medipharm: 

Month Quantity 

December 2005 ........................ 817,010 

January 2006 ............................ 939,340 

February 2006 .......................... 1,142,250 

March 2006 ............................... 1,071,450 

April 2006 ................................. 703,550 

May 2006 .................................. 808,500 

June 2006 ................................. 1,142,000 

July 2006 .................................. 800,340 

August 2006 ............................. 1,246,560 

September 2006 ....................... 1,450,380 

October 2006 ............................ 1,009,320 

Id. at 5. According to a July 2006 report 

created by Respondent of its largest 

purchasers of controlled substances 

from December 2005 through June 2006, 

controlled substances constituted 

ninety-nine percent of its prescription 

drug sales to Medipharm. Resp. Ex. 47. 

On December 19, 2005, Respondent 

obtained another Florida-based internet 

pharmacy customer, Accumed Rx, Inc. 

(Accumed). ALJ at 7. Respondent 

supplied Accumed with approximately 

5,884,212 dosage units of hydrocodone 

as tabulated below: 


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3Effective December 15, 2006, Respondent 

instituted a policy of not supplying registrants 

whose registration remained in effect on a day-today basis for more than two months past the 

expiration date. Resp. Ex. 77. Respondent’s DEA 

registration was suspended before the policy 

became effective. 

Month Quantity 

December 2005 ........................ 273,630 

January 2006 ............................ 203,070 

February 2006 .......................... 147,180 

March 2006 ............................... 83,500 

April 2006 ................................. 169,000 

May 2006 .................................. 519,380 

June 2006 ................................. 320,470 

July 2006 .................................. 442,000 

August 2006 ............................. 1,267,770 

September 2006 ....................... 503,020 

October 2006 ............................ 393,610 

November 2006 ........................ 1,561,582 

Id. at 8. Between December 2005 and 

June 2006, controlled substances 

comprised ninety-nine percent of 

Respondent’s prescription drug sales to 

Accumed. Resp. Ex. 47. 

On December 21, 2005, Respondent 

obtained another Florida-based internet 

pharmacy customer, Avee Pharmacy, 

Inc. (Avee). ALJ at 6. Respondent’s sales 

of hydrocodone to Avee averaged 

566,259 dosage units a month and are 

tabulated below: 

Month Quantity 

December 2005 ........................ 346,140 

January 2006 ............................ 859,860 

February 2006 .......................... 0 

March 2006 ............................... 912,190 

April 2006 ................................. 76,190 

May 2006 .................................. 212,000 

June 2006 ................................. 442,800 

July 2006 .................................. 94,000 

August 2006 ............................. 506,430 

September 2006 ....................... 695,800 

October 2006 ............................ 537,900 

November 2006 ........................ 2,111,800 

Id. Respondent also supplied Avee with 

238,140 dosage units during the first 

five days of December 2006. Id. at 7. 

From December 2005 through June 

2006, controlled substances constituted 

one hundred percent of Respondent’s 

sales to Avee. Resp. Ex. 47. 

On November 17, 2006, Respondent 

notified Avee by letter that effective 

December 15, 2006, it would not supply 

the pharmacy, whose registration had 

been continued on a day-to-day basis 

past its expiration date and not 

renewed, unless it obtained a renewal of 

its registration.3 Resp. Ex. 77. Between 

November 17 and December 5, 2006, 

however, Respondent supplied Avee 

with approximately 1,804,940 dosage 

units of hydrocodone. ALJ at 7. 

On January 4, 2006, United 

Prescription Services, Inc. (United), 

another internet pharmacy, became a 

customer of Respondent. ALJ at 14. 

Respondent sold an average of 92,988 

dosage units of hydrocodone per month 

to United as tabulated below: 

Month Quantity 

February 2006 .......................... 341,160 

March 2006 ............................... 288,000 

April 2006 ................................. 18,000 

May 2006 .................................. 18,000 

June 2006 ................................. 37,200 

July 2006 .................................. 18,000 

August 2006 ............................. 18,000 

September 2006 ....................... 0 

October 2006 ............................ 12,000 

November 2006 ........................ 179,520 

Id. 

From the date United became a 

customer through June 2006, controlled 

substances constituted one hundred 

percent of Respondent’s prescription 

drug sales to it. Resp. Ex. 47. On 

November 17, 2006, Respondent 

notified United that it would stop 

supplying the pharmacy if it did not 

obtain a renewal of its registration. Id. 

at 14. From November 21, 2006, through 

December 5, 2006, however, Respondent 

distributed to United approximately 

158,280 dosage units of hydrocodone. 

Id. 

On January 25, 2006, Respondent 

acquired two more internet pharmacy 

customers, RKR Holdings, d/b/a 

Medichem RX Pharmacy (Medichem), 

and Bi-Wise Drugs, Inc. (Bi-Wise). ALJ 

at 11, 13. Between January and 

November 2006, Respondent sold 

Medichem a monthly average of 216,638 

dosage units of hydrocodone as 

tabulated below: 

Month Quantity 

January 2006 ............................ 66,000 

February 2006 .......................... 264,000 

March 2006 ............................... 276,000 

April 2006 ................................. 168,000 

May 2006 .................................. 286,200 

June 2006 ................................. 264,000 

July 2006 .................................. 120,000 

August 2006 ............................. 216,000 

September 2006 ....................... 220,680 

October 2006 ............................ 262,140 

November 2006 ........................ 240,000 

Id. at 11–12. From the date it became a 

customer through June 2006, controlled 

substances constituted one hundred 

percent of Respondent’s prescription 

drug sales to Medichem. Resp. Ex. 47. 

From January 25 through October 

2006, Respondent’s hydrocodone sales 

to Bi-Wise averaged 117,150 dosage 

units per month. ALJ at 13. Moreover, 

from the date Bi-Wise became a 

customer through the end of June 2006, 

controlled substances constituted 

ninety-nine percent of Respondent’s 

prescription drugs sales to it. Resp. Ex. 

47. Respondent’s hydrocodone sales to 

Bi-Wise are tabulated below: 

Month Quantity 

January 2006 ............................ 70,800 

February 2006 .......................... 18,240 

March 2006 ............................... 152,750 

April 2006 ................................. 63,860 

May 2006 .................................. 112,300 

June 2006 ................................. 180,000 

July 2006 .................................. 131,750 

August 2006 ............................. 185,940 

September 2006 ....................... 111,180 

October 2006 ............................ 144,680 

ALJ at 13. 

On February 16, 2006, Respondent 

acquired another internet pharmacy 

customer, Vin-Kash, Inc., d/b/a/ 

Medicom RX. Id. at 12. Through October 

2006, Respondent supplied Medicom 

with an average of 190,281 dosage units 

of hydrocodone per month. Id. 

Respondent’s sales are tabulated below: 

Month Quantity 

February 2006 .......................... 14,000 

March 2006 ............................... 54,430 

April 2006 ................................. 157,850 

May 2006 .................................. 175,850 

June 2006 ................................. 231,100 

July 2006 .................................. 227,240 

August 2006 ............................. 117,650 

September 2006 ....................... 164,000 

October 2006 ............................ 375,690 

November 2006 ........................ 385,000 

Id. Respondent also supplied Medicom 

with approximately 82,750 dosage units 

of hydrocodone during the first five 

days of December 2006. Id. at 13. 

Moreover, from the date it became a 

customer through June 2006, controlled 

substances comprised one hundred 

percent of Respondent’s prescription 

drug sales to Medicom. Resp. Ex. 47. 

On February 20, 2006, Respondent 

obtained another internet pharmacy 

customer, Discount Mail Meds 

(Discount). ALJ at 8. From the inception 

of the relationship through November 

2006, Respondent supplied Discount 

with an average of 330,324 dosage units 

of hydrocodone per month as tabulated 

below: 

Month Quantity 

February 2006 .......................... 72,000 

March 2006 ............................... 269,500 

April 2006 ................................. 269,000 

May 2006 .................................. 364,500 

June 2006 ................................. 373,600 

July 2006 .................................. 317,780 

August 2006 ............................. 292,720 

September 2006 ....................... 340,100 

October 2006 ............................ 501,280 

November 2006 ........................ 502,760 


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4Respondent also sold 502,750 dosage units of 

hydrocodone to Woody Pharmacy Waterside, Inc., 

during April and May 2006, for an average of 

251,375 units per month. ALJ at 15–16. Respondent 

also supplied Elite Pharmacy, Inc., with 140,000 

dosage units of hydrocodone during the month of 

January 2006. Id. at 18. 

5This exhibit covers the period from August 2005 

through November 2006. Gov. Ex. 43. As found 

above, Respondent did not begin distributing to 

internet pharmacies until December 2005. 

Id. at 9. Respondent also supplied 

Discount with 43,200 dosage units of 

hydrocodone during the first five days 

of December 2006. Id. Moreover, from 

the date it became a customer through 

June 2006, controlled substances 

comprised one hundred percent of 

Respondent’s prescription drug sales to 

Discount. Resp. Ex. 47. 

On February 22, 2006, Respondent 

commenced doing business with 

Universal Rx (Universal). ALJ at 9. From 

February through October 2006, 

Respondent supplied Universal with an 

average of 308,679 dosage units of 

hydrocodone per month as tabulated 

below: 

Month Quantity 

February 2006 .......................... 60,000 

March 2006 ............................... 164,250 

April 2206 ................................. 291,000 

May 2006 .................................. 245,250 

June 2006 ................................. 384,700 

July 2006 .................................. 422,670 

August 2006 ............................. 394,070 

September 2006 ....................... 340,500 

October 2006 ............................ 453,690 

November 2006 ........................ 330,660 

Id. at 9–10. From the date it became a 

customer through June 2006, controlled 

substances comprised one hundred 

percent of Respondent’s prescription 

drug sales to Universal. Resp. Ex. 47. 

On November 17, 2006, Respondent 

notified Universal that, effective 

December 15, 2006, it would stop 

supplying the pharmacy unless it 

obtained a renewal of its registration. 

ALJ at 10. During the last two weeks of 

November 2006, Respondent shipped 

approximately 150,210 dosage units of 

hydrocodone to Universal. Id. On 

November 30, 2006, Respondent 

stopped shipments to Universal. Id 

On March 3, 2006, Respondent began 

doing business with Medcenter, Inc. 

(Medcenter), an entity owned by the 

same person who owned Medipharm. 

Id. at 10–11. From March through 

October 2006, Respondent supplied 

Medcenter with an average of 333,063 

dosage units of hydrocodone per month 

as tabulated below: 

Month Quantity 

March 2006 ............................... 340,500 

April 2006 ................................. 141,000 

May 2006 .................................. 153,000 

June 2006 ................................. 375,000 

July 2006 .................................. 102,000 

August 2006 ............................. 567,000 

September 2006 ....................... 378,000 

October 2006 ............................ 608,000 

Id. Additionally, during the first two 

weeks of November, at which point 

Medcenter’s DEA registration was 

suspended pursuant to 21 U.S.C. 824(d), 

Respondent distributed 313,680 dosages 

units of hydrocodone to it. Id. at 11. 

Moreover, from the date it became a 

customer through June 2006, controlled 

substances constituted one hundred 

percent of Respondent’s prescription 

drug sales to Medcenter. Resp. Ex. 47. 

On March 9, 2006, Respondent 

commenced doing business with CRJ 

Pharmacy, Inc. (CRJ). ALJ at 15. From 

March through October 2006, 

Respondent sold CRJ an average of 

79,803 units of hydrocodone per month 

as tabulated below: 

Month Quantity 

March 2006 ............................... 63,360 

April 2006 ................................. 76,200 

May 2006 .................................. 25,320 

June 2006 ................................. 49,240 

July 2006 .................................. 52,200 

August 2006 ............................. 75,700 

September 2006 ....................... 96,000 

October 2006 ............................ 200,400 

Id. From the date it became a customer 

through June 2006, controlled 

substances comprised ninety-eight 

percent of Respondent’s prescription 

drug sales to CRJ. Resp. Ex. 47. 

In May 2006, Respondent acquired 

another two customers, Grand Pharmacy 

(Grand), and Akshar Chemists, Inc., 

d/b/a Medicine Shoppe (Medicine 

Shoppe). ALJ at 16–17. Respondent 

supplied Grand with an average of 

144,102 dosage units of hydrocodone 

per month between May and November 

2006 as tabulated below: 

Month Quantity 

May 2006 .................................. 24,000 

June 2006 ................................. 228,720 

July 2006 .................................. 180,000 

August 2006 ............................. 180,000 

September 2006 ....................... 144,000 

October 2006 ............................ 144,000 

November 2006 ........................ 108,000 

Id. at 17. 

During the same period, Respondent 

supplied the Medicine Shoppe with an 

average of 73,365 dosage units of 

hydrocodone per month as tabulated 

below: 

Month Quantity 

May 2006 .................................. 62,100 

June 2006 ................................. 162,340 

July 2006 .................................. 164,875 

August 2006 ............................. 21,200 

September 2006 ....................... 12,000 

October 2006 ............................ 33,300 

November 2006 ........................ 57,740 

Id. During the first five days of 

December 2006, Respondent also 

supplied the Medicine Shoppe with 

approximately 17,010 dosage units of 

hydrocodone. Id. 

In July 2006, Q–R–G, Inc., d/b/a 

Duane’s Discount Group (Duane’s), 

began purchasing hydrocodone from 

Respondent. Id. at 16. From July 

through November 2006, Respondent 

supplied Duane’s with an average of 

191,808 dosage units of hydrocodone 

per month as tabulated below: 

Month Quantity 

July 2006 .................................. 188,400 

August 2006 ............................. 188,940 

September 2006 ....................... 145,500 

October 2006 ............................ 276,900 

November 2006 ........................ 159,300 

Id. During the first five days of 

December 2006, Respondent supplied 

Duane’s with an additional 74,850 

dosage units of hydrocodone.4 Id. 

From the date it began supplying 

internet pharmacies in December 2005 

through November 2006, Respondent 

sold a total of approximately 44,087,355 

dosage units of hydrocodone to these 

entities. Gov. Ex. 43. at 1.5 Respondent’s 

monthly sales of hydrocodone to these 

entities grew from approximately 1.44 

million dosage units in December 2005 

to 5.78 million dosage units in 

November 2006. Id. at 2. By contrast, 

during the even longer time frame of 

August 2005 through November 2006, 

Respondent’s sales of hydrocodone to 

its retail pharmacy customers never 

exceeded more than 16,040 dosage units 

in a month and typically never 

exceeded 10,000 dosage units in a 

month. Id. at 3. 

The Government also introduced into 

evidence a table showing the average 

purchase of hydrocodone products by 

retail pharmacies in the State of Florida 

and nationwide during the period 

October 1, 2005, through January 31, 

2006. See Gov. Ex. 45, at 8. This 

evidence established that Florida retail 

pharmacies purchased an average of 

23,850 dosage units of hydrocodone 

during the four month period; 

nationwide, retail pharmacies bought an 

average of 24,227 dosage units of the 

drug. Id. 

The record further establishes that 

many of Respondent’s Florida-based 

pharmacy customers were, in fact, 


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dispensing illegal prescriptions for 

controlled substances. More 

specifically, the record demonstrates 

that Avee (see GX 51), Medipharm (see 

GX 53 & 62), United (see GX 54), YPM 

Total Care Pharmacy (see GX 66), CRJ 

(GX 67), Bi-Wise (see Tr. 671–72); 

Universal (see id.), and Accumed (see 

id.), were dispensing large numbers of 

prescriptions which were not issued in 

the course of a legitimate doctor-patient 

relationship and thus violated Federal 

law. See 21 CFR 1306.04; see also Tr. 

628–29, 639–45, 655–57, 660–67. 

Respondent’s Due Diligence Efforts 

During the events at issue here, Mr. 

Robert Goodrich was Respondent’s 

Director of Operations and Regulatory 

Affairs. Tr. 311. According to Mr. 

Goodrich, from ‘‘a regulatory 

perspective,’’ Respondent’s due 

diligence in approving a new customer 

was limited to verifying that the 

customer had a State license and a DEA 

registration. Id. at 313–14. When asked 

by the Government whether Respondent 

had any processes in place prior to 

approving a new customer to purchase 

controlled substances, Mr. Goodrich 

testified that the primary process was to 

check the customer’s DEA registration 

and that there was ‘‘no’’ secondary 

process. Id. at 318; see also ALJ at 34 

(FOF 117). Based solely on its 

verifications of the entities’ DEA 

registrations and state licenses, 

Respondent commenced to ship large 

quantities of controlled substances to 

the various internet pharmacies. 

In early February 2006, Mr. Goodrich 

traveled to the Tampa Bay, Florida area, 

to conduct on-site visits with 

Respondent’s sales representative, Tom 

Mollick, at several of the internet 

pharmacy customers which Respondent 

had recently acquired including 

Medipharm, Accumed, Medichem, BiWise, and Avee. Tr. 319. According to 

Mr. Goodrich, the pharmacies were 

selected because ‘‘it was apparent that 

they were a different type of a customer 

than what we’d been used to dealing 

with.’’ Id. 

At Medipharm, Mr. Goodrich found 

that it was filling 700 prescriptions a 

day and noted that it was a ‘‘ClosedDoor (Mail Order) Pharmacy.’’ GX 16. In 

his report, Mr. Goodrich specifically 

noted that ‘‘[t]he mail order business 

has ties to internet pharmacy with a 

large amount of pain management and 

a growing percentage of traditional 

maintenance medications.’’ Id. 

At Accumed, Mr. Goodrich 

determined that it was filling 350 

prescriptions a day and that it also was 

a ‘‘Closed-Door (Mail Order) Pharmacy.’’

GX 17. In his report, Mr. Goodrich 

observed that Accumed has ‘‘ties to the 

internet and * * * explained [its] 

requirement to check prescriber 

credentials.’’ Id. 

At Medichem, Mr. Goodrich found 

that it was both a ‘‘Retail & Closed-Door 

(Mail-Order) Pharmacy’’ with a volume 

of 100 prescriptions per day. GX 18. Mr. 

Goodrich noted that while ‘‘Medichem 

is primarily filling prescriptions on a 

local and state level * * * there was 

evidence of prescriptions being mailed 

out-of-state as well.’’ Id. Mr. Goodrich 

further observed that Medichem does 

‘‘have some ties to the internet 

community and they appear to be in the 

process of determining their market 

niche.’’ Id. 

At Avee, Mr. Goodrich found that it 

was a ‘‘Closed-Door (Mail-Order) 

Pharmacy,’’ with a prescription volume 

of 500 per day. GX 20. Mr. Goodrich 

specifically noted that ‘‘Avee operates a 

closed pharmacy that provides mail 

order fulfillment of prescriptions from 

various sources, including internetconnected medical providers who 

provide patient assessments and 

diagnosis through unconventional 

practice models. Many of these 

prescriptions are connected to pain 

management therapies involving the 

prescription of controlled substances.’’

GX 20 (emphasis added). 

Mr. Goodrich’s report further noted 

that DEA investigators had inspected 

Avee ‘‘earlier that day.’’ Id. Moreover, 

Avee’s management discussed with him 

‘‘the concerns that DEA had with 

establishing the validity of the doctorpatient relationship that formed the 

basis of the digital diagnosis that 

resulted in a prescription for controlled 

substances being submitted to Avee for 

filling. Id. (emphasis added). Mr. 

Goodrich further noted that the position 

of Avee’s management ‘‘was that if the 

prescriber was not authorized to 

prescribe controlled substances, then 

the DEA should revoke the prescriber’s 

DEA registration.’’ Id. According to Mr. 

Goodrich’s report, DEA investigators 

had suggested to Avee’s management 

that they meet with the physicians 

‘‘from whom they receive the most 

prescriptions to better evaluate them.’’

Id. 

When asked by the Government what 

constitutes an ‘‘unconventional practice 

model?,’’ Mr. Goodrich testified that as 

he ‘‘understood it, that did not involve 

a patient going to the doctor’s office 

necessarily and presenting themselves 

in person.’’ Tr. 347. Mr. Goodrich 

subsequently acknowledged that he 

knew as early as February 2006, that 

‘‘[s]ome of the prescriptions [Avee] 

filled were not the result of physical 

contact between the doctor and the 

patient.’’ Id. at 348. Mr. Goodrich also 

testified that Avee had provided him 

with the names of two internet sites 

which were the source of some of the 

prescriptions it filled. Id. at 351–52. 

Notwithstanding the information he 

obtained during his visit with Avee, Mr. 

Goodrich made no follow-up inquiries 

with its management regarding whether 

they had determined if the physicians 

were writing legitimate prescriptions. 

Id. at 352–53. Indeed, Mr. Goodrich 

made no further inquiries of Avee 

regarding its business practices until the 

middle of August 2006, after a meeting 

with DEA. Id. at 353. When asked by the 

Government whether he was concerned 

by the fact that DEA had visited Avee, 

Mr. Goodrich acknowledged that he did 

not ‘‘know[] much about this 

telemedicine thing,’’ but ‘‘felt that if 

[Avee] weren’t doing what they were 

supposed to do right, DEA wouldn’t 

allow them to continue in business.’’ Id. 

at 354. Mr. Goodrich also testified that 

he was not troubled by Avee 

management’s contention that ‘‘if the 

prescriber was not authorized to 

prescribe controlled substances, then 

the DEA should revoke the prescriber’s 

DEA registration.’’ Id. 

Mr. Goodrich further acknowledged 

that at the time of his visit to Avee, he 

was not ‘‘versed’’ in the requirement 

that a prescription must be issued by a 

physician acting in the usual course of 

professional practice even though he 

asserted that he was then ‘‘aware that 

pharmacies had obligations to ensure 

that they had valid prescriptions.’’ Id. at 

355. Mr. Goodrich admitted that he had 

not gone to DEA’s website prior to 

Respondent’s engaging in business with 

internet pharmacies to determine 

whether the Agency had posted any 

guidance on the subject. Id. at 358. Mr. 

Goodrich further testified that he 

‘‘received most of’’ the information 

regarding the requirements for a valid 

prescription from DEA during a July 

2006 meeting (which will be described 

more fully below). Id. at 357. 

Mr. Goodrich also attempted to visit 

Bi-Wise, but found that it was closed. 

Tr. 321; GX 19. According to his report, 

Bi-Wise was a retail and closed-door 

pharmacy with minimal prescription 

volume. GX 19. Mr. Goodrich further 

described it as a ‘‘[v]ery small retail unit 

located in strip mall’’ and that the 

‘‘[c]ustomer is in [the] process of 

determining direction for [the] 

business.’’ Id. 

Mr. Goodrich testified that he did not 

attempt to go back to the pharmacy 

when it was open, Tr. 322, and never 

contacted anyone from Bi-Wise to 

further inquire into the nature of its 

business. Id. at 323. Furthermore, 


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6Additional DEA personnel were on the call 

including Group Supervisor (GS) Lisa Young and 

Diversion Investigator (DI) Cynthia Hooks of the 

DEA Riverside Office. GX 49. 

7The document also included the data (discussed 

earlier) regarding the average hydrocodone 

purchases over a four month period of pharmacies 

in Florida and nationwide, as well as the average 

purchases by the ‘‘Targeted Internet Pharmacies.’’

GX 45, at 8. 

8 Direct Sales Co., Inc. v. United States, 319 U.S. 

703 (1943); United States v. Moore, 423 U.S. 122 

(1975). 9EZRX, LLC, 69 FR 63178 (2004); RX Network of 

South Florida, LLC, 69 FR 62093 (2004). 10Published at 66 FR 21181 (2001). 

notwithstanding that Bi-Wise’s 

purchases of hydrocodone from 

Respondent increased from 18,240 

dosage units in February 2006 to 

152,750 dosage units in March 2006, 

Mr. Goodrich never followed up with 

anyone at Bi-Wise to determine the 

reason for the increase. Id. at 325–26. 

This was so, Mr. Goodrich testified, 

because he did not ‘‘routinely look[] at’’

the data regarding the purchases of 

Respondent’s customers. Id. at 326. 

As found above, during the ensuing 

months, Respondent took on additional 

internet pharmacies as customers and 

Respondent proceeded to sell 

extraordinary quantities of hydrocodone 

to them. Other than the five pharmacies 

visited on or about February 8, 2006, 

there is no evidence that Mr. Goodrich 

visited any of the other internet 

pharmacies which Respondent began 

supplying. 

Because of the large quantities of 

hydrocodone that Respondent was 

distributing to these entities, 

Respondent ‘‘was invited to the DEA 

Field Office in Riverside to be educated 

on the [Agency’s] view of Internet 

pharmacies.’’ ALJ at 22 (FOF 72). On 

July 17, 2006, Michael Mapes, Chief of 

the Office of Diversion Control’s 

E-Commerce Section, conducted a 

conference call with Mr. Goodrich and 

Ms. Grace Gonzales, Respondent’s 

operations manager 6 to discuss various 

issues related to the dispensing of 

controlled substances by internet 

pharmacies. GX 49. Prior to the 

conference call, Mr. Goodrich was 

provided with a document entitled 

‘‘Internet Diversion of Controlled 

Pharmaceuticals.’’ Tr. 411–12; GX 45. 

Included in the document was a table 

which showed the average sales by 

McKesson, another distributor, to seven 

internet pharmacies during the month of 

October 2005. See GX 45, at 7. Six of the 

seven pharmacies listed were 

Respondent’s customers: Avee, 

Medipharm, Accumed, United, 

Universal, and Bi-Wise. Id. The table 

included a notation that the ‘‘Average 

Sales by McKesson to Each Targeted 

Pharmacy’’ was ‘‘311,057 dosage units.’’

Id. (emphasis added). It further 

indicated that McKesson’s average sales 

of hydrocodone ‘‘to other customers’’

was ‘‘2,413 dosage units.’’ 7 Id. The 

document also included a page labeled 

‘‘The Internet Pharmacies’’ which 

included photographs of both Avee and 

Medipharm. Id. at 9. 

At the time of the conference call, Mr. 

Goodrich was provided with an 

additional package of materials which 

included a powerpoint presentation, 

two Supreme Court decisions,8 two 

agency final orders revoking the 

registrations of internet pharmacies for 

dispensing prescriptions that were not 

issued in the course of valid physicianpatient relationships,9 DEA’s April 2001 

Guidance Document on ‘‘Dispensing 

and Purchasing Controlled Substances 

over the Internet,’’ 10 and a copy of 21 

CFR 1301.74, which sets forth the 

requirements pertaining to suspicious 

orders. See Gov. Ex. 61. The materials 

also contained a document from the 

National Association of Boards of 

Pharmacy entitled ‘‘Verified Internet 

Pharmacy Practice Sites (VIPPS ) Most 

Frequently Asked Questions,’’ the 

American Medical Association’s 

‘‘Guidance for Physicians on Internet 

Prescribing,’’ the Federation of State 

Medical Boards’ ‘‘Model Guidelines for 

the Appropriate Use of the Internet in 

Medical Practice,’’ and a list of 

suggested questions for determining the 

legitimacy of internet pharmacies. See 

id. Finally, DEA provided Mr. Goodrich 

with a copy of 21 U.S.C. 823. Id. 

During the conference call, Mr. Mapes 

specifically discussed the activities of 

Medipharm, Avee, Accumed, United, 

Bi-Wise and Universal in distributing 

controlled substances ‘‘through the 

internet’’ and reviewed the various 

slides from the Power Point 

presentation. Tr. at 30–31. Mr. Mapes 

also discussed various issues that 

Respondent should consider in 

assessing the legitimacy of its customers 

including the size and frequency of a 

pharmacy’s orders, the range of 

products ordered by the pharmacy, the 

percent of controlled substances versus 

non-controlled drugs ordered, and the 

locations of/type of facility used by the 

pharmacies. Id. at 36–38. More 

specifically, Mr. Mapes advised that 

eighty percent of U.S. ‘‘pharmacies 

* * * are buying less than 5,000 

dosages of hydrocodone in a month’s 

time,’’ and that ‘‘in a typical retail 

pharmacy,’’ controlled substances might 

amount to between five and twenty 

percent of the pharmacy’s purchases’’

with the other eighty to ninety percent 

of its purchases being non-controlled 

drugs. Id. at 37. Mr. Mapes also advised 

Respondent that as a distributor it was 

required to maintain effective controls 

against diversion. Id. at 39–40. 

Mr. Mapes later discussed with Mr. 

Goodrich and Ms. Gonzales the 

requirement under Federal Law that for 

a prescription to be valid, it must be 

issued in the usual course of medical 

practice, and ‘‘that an internet 

questionnaire alone is not sufficient to 

legally prescribe controlled substances.’’

Id. at 42–43; see also 21 CFR 1306.04(a). 

Mr. Mapes also discussed the factors 

that are necessary to establish a 

bonafide doctor-patient relationship. 

These include that a patient has a 

medical complaint, that a history be 

taken of the patient, that a physical 

exam be conducted, and that there be a 

nexus between the complaint, the 

history, the exam and the drug being 

prescribed. Id. at 42–43, 45–46; GX 61, 

at 13. 

Mr. Mapes also provided Mr. 

Goodrich and Ms. Gonzales with several 

examples of illegal internet pharmacies. 

Tr. at 48–49. In one of the examples, 

which involved a Florida pharmacy, the 

pharmacy’s purchases of phentermine 

had doubled in a five month period 

from approximately 200,000 to 400,000 

units and ‘‘one hundred percent of the 

drugs purchased by [the] pharmacy 

were controlled substances.’’ GX 61, at 

10; Tr. 49. In another example, the 

pharmacy was located in an industrial 

warehouse and sold only hydrocodone 

and alprazolam (a schedule IV 

controlled substance), which it 

purchased in large quantities. Tr. 49; GX 

61, at 11. In the final example, the 

pharmacy had advised the distributor 

that they were doing business over the 

Internet. Tr. 50. The pharmacy did not, 

however, have a VIPPS certification, 

made frequent large purchases of 

hydrocodone and various 

benzodiazepines, and ninety-nine 

percent of the drugs it ordered were 

controlled substances. Id.; GX 61, at 12. 

Mr. Mapes informed Mr. Goodrich 

and Ms. Gonzales that ‘‘a pattern of 

drugs being distributed to pharmacies 

[which] are diverting controlled 

substances demonstrates a lack of 

effective controls against diversion by 

the distributor’’ and could lead to the 

revocation of the distributor’s 

registration. Tr. 51. Mr. Mapes further 

advised ‘‘that any distributor who was 

selling controlled substances that are 

being dispensed outside the course of 

professional practice must stop that 

distribution immediately.’’ Id. 

Mr. Mapes also discussed with 

Respondent’s representatives whether it 

could ship an order which it had 

reported as suspicious. Id. at 57. Mr. 


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11According to the materials, Avee was 

sanctioned because it shipped hydrocodone to a 

person in Tennessee when it did not hold a 

Tennessee license authorizing it to dispense to 

residents of that State. See Resp. Ex. 50. Avee 

entered into a stipulation with the State under 

which it was fined $2,000 and required to pay 

$719.95 as costs. See id. Avee did, however, retain 

its Florida license. 

Mapes advised that even if Respondent 

reported the order, the company still 

had to make the decision as to whether 

to ship the order. Id. at 57–58; GX 61, 

at 9. Moreover, Respondent’s personnel 

asked DEA whether it should stop 

shipping controlled substances to the 

internet pharmacies. Tr. 79, 119–20, 

342–43. DEA personnel told Mr. 

Goodrich and Ms. Gonzales that it 

cannot tell a distributor whether a 

particular order is legitimate or not, GX 

61, at 9; and that whether to ship was 

‘‘a business decision,’’ Tr. 79; but that 

Respondent ‘‘had an obligation to 

ensure that the products [it] distributed 

were used for legitimate medical 

purposes.’’ Id. 343. 

Following the meeting, Respondent 

continued to distribute large quantities 

of hydrocodone to numerous internet 

pharmacies including the six 

pharmacies that DEA officials 

specifically referred to as ‘‘targeted.’’

For instance, in August 2006, 

Respondent distributed ‘‘in excess of 1.2 

million’’ dosage units of hydrocodone to 

Accumed. Id. at 341. 

Mr. Goodrich cited several reasons to 

justify Respondent’s decision to 

continue shipping hydrocodone to 

Accumed. First, he stated that DEA ‘‘did 

not instruct us to cease shipments’’ and 

thus Respondent did not ‘‘have distinct 

direction.’’ Id. at 343–44. Second, Mr. 

Goodrich asserted that Respondent was 

conducting due diligence. Id. at 343. 

Third, Mr. Goodrich did not believe that 

Accumed was acting illegally. Id. at 345. 

In August 2006, Respondent also 

shipped large quantities of hydrocodone 

to the other internet pharmacies which 

DEA officials had referred to as 

‘‘targeted.’’ It shipped 1,246,560 dosage 

units to Medipharm, 506,340 units to 

Avee, 185,940 units to Bi-Wise, and 

399,070 units to Universal. Respondent 

also shipped large quantities to other 

entities which it had identified as 

internet pharmacies. See Resp. Ex. 52. 

Moreover, Respondent continued to 

make large shipments of hydrocodone to 

many of these pharmacies until either 

its registration was immediately 

suspended or the pharmacies’

registrations were suspended. For 

example, it shipped Medipharm 1.45 

million dosage units in September 2006 

and just over 1 million dosage units in 

October 2006; it shipped Accumed 1.56 

million dosage units in November 2006; 

it shipped Avee 2.11 million dosage 

units in November 2006; and it shipped 

Discount over 500,000 dosage units in 

both October and November 2006. 

Following the July 2006 conference 

call, Respondent did undertake 

additional measures to investigate the 

business activities of the pharmacies it 

had identified as filling prescriptions 

issued through the internet. On July 31, 

2006, Mr. Goodrich wrote the Executive 

Director of the Florida State Board of 

Pharmacy identifying nineteen 

pharmacies located in the Tampa Bay 

area which, as a result of the DEA 

conference call and ‘‘additional 

research’’ conducted by Respondent, 

had led it to ‘‘question whether or not 

these pharmacies are operating 

legitimately.’’ Resp. Ex. 49, at 1–2. 

Respondent thus requested that the 

Florida Board ‘‘provide additional 

information to enable us to qualify the 

legitimacy of these customers.’’ Id. at 2. 

By letter dated August 14, 2006, the 

Executive Director of the Florida Board 

responded. Resp. Ex. 50. In the letter, 

the Executive Director wrote that ‘‘[t]he 

Board of Pharmacy can verify for you 

that these particular pharmacies do have 

active community pharmacy licenses in 

the state of Florida. Id. The Executive 

Director further advised that ‘‘only one 

of these licenses [sic] has been 

disciplined by the Florida Board,’’ that 

pharmacy being Avee, and enclosed a 

copy of the Board’s final order 

pertaining to it.11 Id. The letter, 

however, offered no specific 

information regarding the legitimacy of 

the various pharmacies’ activities. See 

id. 

On August 15, 2006, Mr. Goodrich 

sent out a six-page questionnaire to 

seventeen of the pharmacies including 

all of the pharmacies which DEA had 

described as ‘‘targeted.’’ Resp. Ex. 51. 

The questionnaire noted that 

Respondent was conducting a ‘‘due 

diligence review of our business 

relationship’’ which had been prompted 

by four factors: (1) An ‘‘[e]xtremely high 

percentage of controlled substance 

purchases vs. non controlled substance 

purchases,’’ (2) ‘‘[e]xtremely high 

volume of controlled substance dosage 

units,’’ (3) ‘‘[i]dentification of your 

operation as an internet pharmacy,’’ and 

(4) ‘‘[i]dentification of your pharmacy 

filling prescriptions based on 

telemedicine.’’ Id. The questionnaire 

then stated that Respondent ‘‘has a 

responsibility to insure [sic] that all 

medications we distribute are used for 

legitimate medical purposes, much in 

the same way that your pharmacy has 

an obligation to ensure that every 

prescription you fill is a result of a valid 

medical examination by an authorized 

prescriber.’’ Id. 

The document asked a variety of 

questions. The first question asked the 

pharmacies to indicate the ‘‘overall 

percentage of controlled substances 

filled by [the] pharmacy,’’ and to list 

their other suppliers. Id. The second 

question was prefaced with the 

observation that ‘‘[t]he volume of 

controlled substances purchased by 

your pharmacy far exceeds the ‘average’

quantity of controlled substances 

purchased by pharmacies nationwide.’’

Id. at 2. The questionnaire then asked 

the pharmacy to ‘‘provide an 

explanation for the volume of your 

controlled substance purchases.’’ Id. 

The next set of questions began by 

noting that ‘‘[y]our pharmacy has been 

identified as an ‘internet pharmacy,’ ’’

and that ‘‘both the FDA and DEA have 

raised concerns citing the potential for 

abuse.’’ Id. at 2. The questions then 

asked the pharmacy to provide the 

‘‘percentage of prescriptions filled by 

your pharmacy [that] originate from the 

Internet,’’ to ‘‘list the website 

identifying your pharmacy,’’ to describe 

how ‘‘a patient provides prescriptions to 

your pharmacy,’’ and to indicate how 

patients pay for their prescriptions. Id. 

at 2–3. 

Later, the questionnaire observed that 

the ‘‘[u]se of the internet in a medical 

practice has raised many issues in 

regards to the issuance of a prescription, 

including, but not limited to, ensuring 

the validity of medical examinations, 

the establishment of a ‘bona fide’

doctor/patient relationship and the 

appropriateness of treatment where the 

physician is located in a different 

jurisdiction from the patient’s 

residence.’’ Id. at 4. The questionnaire 

then asked a series of questions 

regarding how the pharmacies 

performed their ‘‘due diligence on 

prescriptions issued by doctors who use 

the internet in the course of their 

medical practice.’’ Id. These included 

asking the pharmacy to ‘‘list the web 

sites identifying the physicians who 

most commonly issue prescriptions 

filled by your pharmacy,’’ whether the 

pharmacy verified the physician’s state 

license and DEA registrations, and 

whether the pharmacy verified that the 

physician was ‘‘also authorized to 

practice medicine in the state in which 

the patient is located.’’ Id. The 

questionnaire also asked whether the 

pharmacy had a protocol to ensure that 

‘‘prescriptions issued through an 

internet-assisted encounter constitute[d] 

a valid medical exam.’’ Id. 

Next, the questionnaire observed that 

‘‘a preponderance of prescription orders 

issued by a physician for the same 


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12 In a letter dated August 15, 2006, Mr. Goodrich 

transmitted a copy of the questionnaire to the DEA 

Diversion Group Supervisor and advised that he 

had requested that the pharmacies respond ‘‘by the 

end of the month.’’ Resp. Ex. 52. Mr. Goodrich 

further wrote that ‘‘[i]f we do not receive a 

response, we will cease business with that 

particular company.’’ Id. 

13Both the Medicine Shoppe and Medicom 

included logs showing that the pharmacies had 

reviewed medical records pertaining to internet 

prescriptions and a form letter the pharmacy 

represented as sending to the physicians and which 

the physicians were supposedly required to sign 

and return to the pharmacies. See, e.g., Resp. Ex. 

66. The record does not establish whether these two 

pharmacies actually sent the letter and whether the 

physicians signed it. 

14On November 2, 2006, the DEA Riverside 

Group Supervisor met with Mr. Goodrich at 

Respondent’s facility to discuss Respondent’s 

criteria and procedures for determining whether to 

ship to internet pharmacies. Tr. 102–03. During the 

meeting, Medipharm was specifically discussed. Id. 

at 104. According to the testimony of the Group 

Supervisor, Mr. Goodrich stated that ‘‘Medipharm 

* * * had a comprehensive compliance program, 

and * * * he ha[d] determined that they were 

innocent until proven guilty.’’ Id.; see also ALJ at 

29 (FOF 98). 

products in the same prescription 

quantities’’ was indicative of ‘‘potential 

prescription abuse’’ and asked the 

pharmacy to attach its ‘‘policies and 

procedures that address prescription 

abuse.’’ Id. at 5. Finally, the 

questionnaire noted that ‘‘[m]any states 

have adopted laws and regulations 

pertaining to internet prescribing’’ that 

mandate ‘‘direct contact between the 

doctor and patient and the requisite 

physical exam(s).’’ Id. The questionnaire 

thus asked the pharmacy to ‘‘list those 

states [it had] identified that allow the 

filling of prescriptions issued without a 

face-to-face encounter between the 

physician and the patient.’’ Id.12

Upon receiving the questionnaires, 

which Respondent sent by certified 

mail, the pharmacies responded in a 

variety of ways. Some, such as Bi-Wise, 

did not respond at all. See Resp. Ex. 58. 

Others, such as CRJ and YPM, failed to 

answer questions or indicated ‘‘N/A.’’

See Resp. Ex. 59 & 71. Others such as 

Accumed completed the questionnaire 

maintaining that they were not internet 

pharmacies, indicated ‘‘N/A’’ when 

asked to list the websites of the 

physicians who wrote the prescriptions 

they filled, and answered affirmatively 

that they had a protocol to ensure that 

the prescriptions were issued pursuant 

to a valid medical exam. Resp. Ex. 54. 

Likewise, Duane’s stated that zero 

percent of the prescriptions it filled 

originated on the internet, that it had 

retained counsel to implement a strict 

compliance program to ensure that the 

prescriptions it filled were valid, and 

indicated ‘‘N/A’’ where asked to list the 

websites of the physicians who were 

commonly issuing the prescriptions that 

it filled. Res. Ex. 61. 

Some of the pharmacies provided 

information which Respondent deemed 

adequate but which clearly suggested 

that the prescriptions were illegal. For 

example, Respondent deemed Grand 

Pharmacy’s response adequate. See ALJ 

at 24 (FOF 81). Yet in a letter, Grand’s 

owner/president indicated that ‘‘[a]ll 

doctors Grand deal with require a 

current physical done in a physician’s 

presence. All doctors Grand deal with 

have a physical or extended phone 

dialogue with the patient to establish 

the diagnosis and need for the 

medication.’’ Resp. Ex. 63, at 2 

(emphasis added). It is noteworthy that 

Grand’s response did not say that the 

physical was performed by the 

prescribing physician, what constituted 

a ‘‘current physical,’’ or that the doctors 

prescribing on the basis of a telephone 

call were the same doctors that had 

performed the physical exam. 

Notwithstanding the suspicious nature 

of the information, Mr. Goodrich 

deemed the answers satisfactory and did 

not inquire further, see Resp. Ex. 64; 

Respondent continued to ship large 

quantities of hydrocodone to Grand. 

The questionnaires completed by the 

Medicine Shoppe and Medicom, which 

apparently were owned by the same 

person, were of similar nature. For 

example, while the Medicine Shoppe’s 

questionnaire indicated that it was ‘‘not 

an internet pharmacy,’’ and that only 

one to two percent of the prescriptions 

it filled originated on the internet, it 

also indicated the name of a website 

used by the ‘‘physicians who most 

commonly issue prescriptions filled by 

[the] pharmacy.’’ Resp. Ex. 65, at 2–4. 

Furthermore, in answer to the question 

of whether the pharmacy verified that 

the physicians were ‘‘authorized to 

practice medicine in the state [where] 

the patient is located,’’ the Medicine 

Shoppe stated: ‘‘No. The doctor[s] 

makes the consult from [the] state in 

which they are licensed.’’ Id. at 4. 

The Medicom questionnaire indicated 

that ‘‘[w]e are not [an] internet 

pharmacy; I receive Rx from doctors 

who have spoken [to] patients, 

discussed therapy, and also reviewed 

entire medical history.’’ Resp. Ex. 66, at 

2. The questionnaire also indicated that 

it received prescriptions ‘‘via 

telemedicine,’’ and included the names 

of three websites used by physicians 

whose prescriptions the pharmacy was 

filling. Id. at 3–4. Furthermore, when 

asked whether the pharmacy verified 

that the physicians were ‘‘authorized to 

practice medicine in the state in which 

the patient is located,’’ Medicom 

likewise stated: ‘‘No. The doctor makes 

the consultation from the state they are 

licensed’’ in.13 Id. at 4. 

Mr. Goodrich deemed both the 

Medicine Shoppe and Medicom’s 

responses to be adequate. ALJ at 24–25 

(FOFs 82 & 83). Notwithstanding the 

suspicious nature of their responses, 

Respondent continued to ship large 

quantities of hydrocodone to both 

pharmacies. 

The Medipharm and Universal 

questionnaires were prepared by the 

same attorney, who had previously 

served as an Assistant State Attorney. 

See Resp. Exs. 67 & 69. Both 

questionnaires indicated that the 

pharmacies were ‘‘not an ‘internet 

pharmacy,’ ’’ and that zero percent of 

the prescriptions originated on the 

internet. Resp. Exs. 67 at 2, 69 at 2. Both 

questionnaires indicated ‘‘N/A’’ where 

asked to ‘‘list the websites identifying 

the physicians who most commonly 

issue prescriptions filled by your 

pharmacy.’’ Resp. Exs. 67 at 4, 69 at 4. 

Moreover, both questionnaires indicated 

that the pharmacies had ‘‘retained 

counsel to prepare and implement a 

strict compliance program to ensure 

compliance with the applicable rules 

and regulations for prescription practice 

in each of the states in which [the 

pharmacy] is licensed and transacts 

business.’’ Id. The questionnaires also 

indicated that the pharmacies 

‘‘routinely verif[ied]’’ that the doctors 

were ‘‘authorized to practice medicine 

in the state in which the patient is 

located.’’ Id. Finally, both pharmacies 

stated that they did ‘‘not fill 

prescriptions where the patient has not 

had a face-to-face encounter with a 

physician.’’ 14 Resp. Ex. 67, at 5; Resp. 

69, at 5. 

United’s questionnaire, which was 

submitted more than five weeks after 

Respondent’s deadline, stated that it 

was ‘‘not an internet pharmacy’’ and 

that ‘‘[r]egulations regarding physicians 

requiring a face-to-face consultation is 

an issue of compliance for the physician 

and the relevant medical board.’’ Resp. 

Ex. 70. With respect to whether United 

verified that the physicians were 

authorized to practice medicine in the 

States where their patients were located, 

the pharmacy gave the non-responsive 

answer that ‘‘We are advised by the 

prescribing physician that they are 

authorized to practice medicine for their 

patients.’’ Id. Finally, in answering the 

question as to whether United had a 

protocol to ensure that the prescriptions 

were issued pursuant to a valid medical 

exam, the pharmacy stated: ‘‘United has 

a policy, through a signed affidavit, as 

well as providing us with recent 

medical history for the patient file, that 


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15According to the stipulated facts, Mr. Mudri is 

a retired DEA Diversion Investigator. 

16The parties also stipulated that between 

January and May 2006, Respondent stopped 

accepting orders from seven other pharmacies based 

Continued 

the physician meets the standards 

noted. However, that being the case, we 

are not required [to determine] whether 

or not the physician has an internet or 

in-office encounter with his patient.’’ Id. 

United further stated that it was ‘‘not 

aware that it is a commonly accepted 

practice in the pharmacy industry, that 

the pharmacy verify the type of 

consultation a physician has with a 

patient.’’ Id. 

United also included a December 

2005 report by Mudri Associates 

regarding the pharmacy’s compliance 

with the CSA.15 The report specifically 

noted that ‘‘[a] doctor expecting to have 

his prescriptions filled by [United] can 

anticipate having to complete an 

extensive background questionnaire. 

This background consists of samples of 

writing along with a signed 

acknowledgement pertaining to a 

notification of [United’s] adherence to 

fulfilling their corresponding 

responsibilities with the physician.’’ Id. 

According to the report: 

The physician is contacted and asked 

to acknowledge that there [sic] practice 

subscribes to sound medical judgment 

criteria, such as valid patient medical 

complaints, extensive physician 

interview and consultation, in-person 

patient examination, or supervision 

and/or direction of an examination by a 

consulting medical professional, 

documented in a patient file, along with 

the appropriateness of medications 

based upon this physician/patient 

relationship. 

Id. Respondent deemed United’s 

response adequate. ALJ at 25 (FOF 84). 

Avee submitted its questionnaire 

nearly a month late. Resp. Ex. 55. Avee 

admitted that controlled substances 

comprised ninety percent of the 

prescriptions it filled and answered 

‘‘N/A’’ to the question ‘‘What percentage 

of prescriptions filled by your pharmacy 

originate on the internet.’’ Id. at 1–2. 

Avee further maintained that it was not 

an internet pharmacy but rather a ‘‘mail 

order pharmacy,’’ and that it did not 

know what percentage of the physicians 

whose prescriptions it filled used the 

internet in the course of their medical 

practice. Id. at 3–4. Where asked to 

identify the websites of the physicians 

who were ‘‘most commonly issu[ing the] 

prescriptions filled by your pharmacy,’’

Avee wrote ‘‘N/A.’’ Id. at 4. Where 

asked if it verified that the prescribing 

physician was ‘‘authorized to practice 

medicine in the state in which the 

patient is located,’’ Avee wrote: ‘‘where 

the doctor is located.’’ Id. 

Upon reviewing Avee’s questionnaire, 

Mr. Goodrich wrote back to it noting 

that he ‘‘was surprised that your 

responses to our questionnaire did not 

support the observations I made on 

site,’’ and added that he was ‘‘curious if 

your business model has changed in the 

past six months.’’ Resp. Ex. 56. Mr. 

Goodrich further noted that he was 

‘‘unable to reconcile the information 

provided on our questionnaire with the 

information observed during a visit to 

[its] facility.’’ Id. Mr. Goodrich then 

indicated that he wished to visit Avee 

again and requested that it provide ‘‘a 

current overview of [its] internal due 

diligence protocols.’’ Id. 

In an undated letter, Avee outlined its 

compliance procedures and provided 

Mr. Goodrich with a copy of a letter 

regarding prescribing practices which it 

claimed it sent to the physicians whose 

prescriptions it filled. Resp. Ex. 57. 

Avee maintained that it required that 

this letter be signed annually by the 

physician and that it also conducted site 

visits at the physician’s offices. Id. at 2. 

In its letter to the physicians, Avee 

listed the four elements of a legitimate 

doctor/patient relationship. Id. at 5. 

While the pharmacy accurately stated 

the four elements, the letter further 

added that ‘‘[t]o these, Avee would add 

an opportunity for the prescribing 

practitioner and patient, via some 

means, to confer.’’ Id. (emphasis added). 

Avee further maintained that ‘‘[i]t is not 

a requirement that the prescribing 

physician himself/herself took the 

history or performed the physical 

examination, as long as the prescribing 

practitioner had full and meaningful 

access to the medical history and 

physical examination, and an 

opportunity to confer with the patient.’’

Id. (emphasis added). 

Avee’s letter to its physicians clearly 

raised a substantial question as to the 

legality of the prescriptions it was filling 

and conflicted with information that 

DEA had previously provided 

Respondent regarding the requirements 

to establish a legitimate doctor-patient 

relationship. Indeed, it indicated that 

Avee’s practices remained the same as 

Mr. Goodrich had observed during his 

February 2006 visit when he noted that 

the pharmacy filled ‘‘prescriptions from 

various sources, including internetconnected medical providers who 

provide patient assessments and 

diagnosis through unconventional 

practice models.’’ GX. 20 (emphasis 

added). Here again, Respondent 

continued to ship large quantities of 

controlled substances to Avee and did 

so up until December 6, 2006, when the 

immediate suspension order was served. 

As a result of the surveys, Respondent 

stopped shipping controlled substances 

to Bi-Wise, CRJ and YPM. ALJ at 25 

(FOF 86). Even then, however, 

Respondent did not stop accepting 

orders from these entities until October 

20, 2006, and did not stop shipping to 

them until October 27, 2006, nearly two 

months after the completed 

questionnaires were due. Id.; see also 

Gov. Ex. 36 (memorandum dated 

December 20, 2006, from Respondent’s 

counsel to DEA attorney regarding 

discontinued pharmacy customers); 

Resp. Ex. 52 (questionnaire at p.6). 

Moreover, Respondent’s own 

evidence indicates that it never sent a 

questionnaire to Discount Mail Meds 

(a/k/a Liddy’s), see Resp. Ex. 52, at 2, 

and there is no completed questionnaire 

from it. See Resp. Exs. 51–72. 

Respondent, however, continued to sell 

large quantities of hydrocodone to 

Discount and sold it more than 500,000 

dosage units a month in both October 

and November 2006. 

Finally, there is no evidence that 

Respondent ever received a completed 

questionnaire from Medcenter and 

Medichem. See Resp. Exs. 54–72; ALJ at 

24–25 (Stipulated FOFs 77–86). 

Respondent nonetheless continued to 

supply Medcenter with large quantities 

until November 16, 2006, when the 

latter’s registration was immediately 

suspended. It also continued to supply 

Medichem with large quantities of 

hydrocodone through November 2006. 

Respondent also adopted a policy 

under which it would, effective on 

December 15, 2006, cease distributing 

controlled substances to those 

pharmacies whose DEA registrations 

had not been automatically renewed but 

were continued on a day-to-day basis for 

a period of more than two months. 

Accordingly, on November 17, 2006, 

Mr. Goodrich wrote Avee, United, and 

Universal, notifying them of the policy 

and its effective date. See Resp. Exs. 77, 

78, 79. Between the date of this letter 

and December 5, 2006 (the day before 

service of the Immediate Suspension), 

Respondent supplied Avee with more 

than 1.8 million dosage units of 

hydrocodone. ALJ at 7 (FOF 21). 

Moreover, between the date of its letter 

and November 30, 2006, Respondent 

supplied Universal with 150,210 dosage 

units. ALJ at 10 (FOF 31). Finally, from 

November 21, 2006 through December 

5, 2006, Respondent supplied United 

with 158,280 dosage units of 

hydrocodone. ALJ at 14 (FOF 45).16


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on ‘‘the cessation of their’’ registrations by DEA. 

ALJ at 25 (FOF 86). 

17The parties also stipulated that every month 

since July 2002, Respondent had submitted ARCOS 

reports regarding its distributions of schedule III 

controlled substances including hydrocodone to the 

ARCOS Unit at DEA headquarters. ALJ at 18 (FOF 

58) 

18According to the document, Medipharm had 

become a customer on December 7, 2005; Accumed 

and Avee became customers on December 19, 2005, 

and December 21, 2005, respectively. See Resp. Ex. 

46. 

As a result of the surveys, in October 

2006, Respondent updated its customer 

profile questionnaire for potential 

pharmacy customers. Id. at 26 (FOF 88). 

On this questionnaire, Respondent 

required potential customers to disclose 

information related to the prescriptions 

the pharmacy was dispensing including 

whether ‘‘they [were] the result of an 

internet- or telephone-based medical 

encounter.’’ Resp. Ex. 75. Respondent 

also required the pharmacy’s 

responsible officer to attest to the 

validity of the information it provided. 

Id. 

Relatedly, in October 2006, 

Respondent revised its standard 

operating procedures (SOP) pertaining 

to the sale of controlled substances to 

pharmacy customers. ALJ 26 (FOF 88). 

The SOP adopted the requirement that 

Respondent’s pharmacy customers 

certify whether they knowingly filled 

prescriptions that arose out of an 

internet or telephone-based medical 

encounter. Resp. Ex. 76. It also directed 

that ‘‘[i]f [a] pharmacy affirms that they 

fill prescriptions of this nature, they 

will be required to provide details of the 

compliance program they have adopted 

to ensure that these prescriptions are 

legal and valid.’’ Id. The SOP further 

noted that ‘‘[c]ustomers with significant 

purchases of controlled substances, 

significant activity in mail-order 

dispensing or with significant amounts 

of telemedicine dispensing will be 

subject to on-site assessments within 

four months after being accepted as a 

customer.’’ Id. at 2. 

Respondent’s Failure to Report 

Suspicious Orders 

Under federal regulations, a registrant 

must ‘‘design and operate a system to 

disclose to the registrant suspicious 

orders of controlled substances’’; 

suspicious orders must be reported to 

the local Field Division Office upon 

discovery by the registrant. 21 CFR 

1301.74(b). Under the regulation, 

‘‘[s]uspicious orders include orders of 

unusual size, orders deviating 

substantially from a normal pattern, and 

orders of unusual frequency.’’ Id.17

While the record establishes that 

Respondent had worked with a DEA DI 

to develop a system for detecting and 

reporting suspicious orders, ALJ at 20 

(FOF 64), the system had been created 

when most of Respondent’s customer 

base was comprised of physicians. Tr. 

739. Moreover, no one from Respondent 

contacted the DI to discuss its decision 

to supply internet pharmacies and the 

criteria and procedures that should be 

used to determine whether the 

pharmacies’ orders were suspicious. Id. 

at 741. 

Under Respondent’s procedures, a 

monthly report was generated which 

identified those customers purchasing 

controlled substances and the 

percentage of controlled versus noncontrolled drugs purchased by the 

customer. Resp. Ex. 109, ¶ 25.2. If a 

customer’s monthly purchases of 

controlled substances deviated by ‘‘over 

150%’’ from the customer’s average 

monthly percentage of controlled 

substance purchases for the preceding 

six months, it was then subject to 

further review. Id. at ¶ 25.3. 

Under Respondent’s system, ‘‘[i]f no 

customers [were] deemed suspicious,’’ it 

would send DEA ‘‘a report stating ‘no 

suspicious activity’ for the period.’’ Id. 

at ¶ 25.6. Moreover, twice a year, 

Respondent sent to DEA ‘‘a list of the 

largest purchasers of controlled 

substances.’’ Id. at ¶ 25.8. The customers 

on this list were not ‘‘reported as having 

suspicious purchases.’’ Id. According to 

Mr. Goodrich’s testimony, Respondent 

did not have a procedure in place to 

monitor and detect excessive purchases 

on a monthly basis. Tr. 397–98. 

Respondent sent DEA e-mails 

reporting that it had ‘‘no suspicious 

activity to report’’ for the months of 

December 2005 (GX 9), January 2006 

(GX 10), March 2006 (GX 11), and April 

2006 (GX 12). In addition to the 

exhibits, testimony establishes that 

‘‘Respondent did not report any 

suspicious orders through the month of 

December 2006,’’ ALJ at 36 (FOF 129, 

citing Tr. 95–96), even though the 

Florida internet pharmacies were 

purchasing quantities that greatly 

exceeded the average amount of 

hydrocodone (6,000 dosage units per 

month) purchased by a traditional brickand-mortar retail pharmacy. GX 45, at 8; 

Tr. 608. 

Respondent, however, twice provided 

the DEA Riverside Field Office with a 

report listing its top purchasers of 

controlled substances. See Resp. Ex. 46, 

47, & 48. The first of these, which Mr. 

Goodrich e-mailed to the DEA Riverside 

office on February 13, 2006, covered the 

period June through December 2005. 

See Resp. Ex. 46. The report included 

Avee, Medipharm and Accumed, 

indicated the date the pharmacies had 

become customers,18 the number of 

bottles of controlled substances the 

pharmacies had ordered, and the 

percentage of prescription drugs ordered 

by the pharmacies that were controlled 

substances. See id. 

Mr. Goodrich provided the second 

report to DEA at the July 17, 2006 

conference call. ALJ at 23 (FOF 72). This 

report covered the period December 

2005 through June 2006, and included 

Medipharm, Accumed, Avee, United, 

Medichem, Bi-Wise, Medicom, 

Discount, Universal, Medcenter, CRJ, 

and Woody Pharmacy. See Resp. Ex. 47. 

The report likewise listed the date the 

pharmacies had become customers, the 

total amount of controlled substances 

ordered, and the percentage of 

prescription drugs ordered that were 

controlled substances. See id. Of the 

aforementioned pharmacies, the lowest 

percentage of controlled substances 

ordered was ninety-eight percent by 

CRJ. See id. Almost all of the above 

pharmacies had ordered only controlled 

substances. See id. Finally, the list did 

not include several of Respondent’s 

recently acquired customers including 

Grand Pharmacy and the Medicine 

Shoppe. See id. 

At the hearing, Mr. Goodrich 

acknowledged that ‘‘an unusual 

quantity could be a determining factor’’

in deciding whether an order must be 

reported as suspicious. Tr. 490. Mr. 

Goodrich further admitted that some of 

the orders received by Respondent were 

of an unusual size. Id. Moreover, Mr. 

Goodrich further testified that following 

the July 17, 2006 conference call with 

DEA, Respondent did not report any of 

the orders placed by the Florida-based 

pharmacies to be suspicious because 

‘‘[w]e considered [all of the pharmacies] 

suspicious at that point.’’ Tr. 424. 

On cross-examination, Mr. Robert 

Schwartz, who became Respondent’s 

Chief Operating Officer on September 

26, 2006, was asked a series of 

hypothetical questions based on the 

evidence in the case regarding the 

reporting of suspicious orders. Tr. 953–

57. Mr. Schwartz testified that while he 

had previously worked in senior 

management positions at major 

pharmaceutical distributors such as 

H.D. Smith and Barnes Wholesale, he 

could not recall a pharmacy ordering 

800,000 dosage units of hydrocodone in 

a month. Id. at 953. Mr. Schwartz also 

testified that an order for 2.1 million 

dosage units of the drug was ‘‘a lot of 

hydrocodone’’ and should be reported 

as suspicious because, based on his 

experience at Barnes, it was not 


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consistent with what pharmacies 

ordered. Id. at 953–54. Similarly, Mr. 

Schwartz admitted that various changes 

in a pharmacy’s ordering history (such 

as those which occurred here) would be 

suspicious and should be reported to 

DEA. Id. at 954–57. 

The ALJ further found that Mr. 

Schwartz ‘‘provided credible testimony 

concerning two possible justifications 

for the Respondent’s sharp rise in the 

sale of hydrocodone products in August 

of 2006.’’ ALJ at 38 (FOF 135 (citing Tr. 

930)). The first reason given was that 

there are ‘‘year-end inventory shortages’’

from the manufacturers and thus 

‘‘wholesalers begin ‘to buy extra product 

from manufacturers in August, building 

up our inventories for the year-end,’’

and pharmacies ‘‘buy extra inventory at 

this time.’’ Id. The second reason was 

the State of Florida’s implementation of 

its requirement, effective July 1, 2006, 

that ‘‘pedigree must be passed by each 

distributor who is not a manufacturer, 

before each distribution of a drug and 

provided to each person who receives 

the drug.’’ ALJ at 38–39 (FOF 137). 

Respondent met the pedigree 

requirements, and the developer of the 

software it used issued a press release 

announcing that Respondent was 

compliant with Florida law. See id.; 

Resp. Ex. 105. 

Respondent, however, introduced no 

evidence that it contacted any of its 

pharmacy customers that increased their 

purchases between July and August 

2006 to determine if they had done so 

for either reason. Tr. 487. As Mr. 

Goodrich testified, he did not ‘‘know 

that the pedigree program had a direct 

impact on the hydrocodone that we 

distributed to our pharmacy customers.’’

Id. at 488. In fact, only seven of the 

pharmacies increased their purchases of 

hydrocodone from July to August 2006. 

During this period, four of the 

pharmacies actually decreased their 

hydrocodone purchases from 

Respondent and the remaining three 

purchased roughly the same amount. 

Relatedly, Mr. Goodrich admitted that 

Respondent did not even ‘‘develop a 

[suspicious orders] policy that 

specifically addressed the pharmacy 

customers until September of 2006.’’

ALJ at 34 (FOF 119). 

Furthermore, the orders of the 

Florida-based internet pharmacies were 

suspicious from the beginning because 

of their large size, their frequency, and 

the fact that controlled substances 

constituted the overwhelming 

percentage (and frequently 100 percent) 

of the products being purchased. See 

ALJ at 36–37 (FOF 130–132); see also 

Resp. Exs. 46 & 47. Even if Respondent 

had contacted the seven pharmacies and 

determined that they had increased 

their orders for either of the above 

reasons, their orders were still 

suspicious and subject to reporting. And 

as Mr. Goodrich testified, following the 

July 17, 2006 conference, he considered 

all of the Florida-based pharmacies to be 

suspicious. Tr. 424. 

Respondent’s Corrective Actions and 

Post-Suspension Conduct 

The ALJ also made several findings 

regarding corrective actions instituted 

by Respondent. First, the ALJ found 

credible the testimony of Mr. Schwartz 

that on December 5, 2006, the day 

before the immediate suspension order 

was served on Respondent, he and its 

owner, Mr. John Sempre, had 

determined that it should stop 

supplying the Florida-based internet 

pharmacies. ALJ at 40 (citing Tr. 938–

39). 

Mr. Schwartz also testified that if 

Respondent regained its registration, he 

and not Mr. Goodrich, would be 

responsible for reviewing suspicious 

order reports before they were 

submitted to DEA. Tr. 1027. Moreover, 

Mr. Schwartz was to ‘‘have ultimate 

authority’’ to accept or reject any new 

customer seeking to purchase controlled 

substances. ALJ at 41 (citing Tr. 1027). 

Finally, Respondent entered into an 

agreement with SynTegra, L.L.C., to 

review its procedures for monitoring 

and reporting suspicious orders to DEA. 

Resp. Ex. 102. 

After the immediate suspension of its 

registration, Respondent continued to 

receive orders for controlled substances 

which it forwarded on to Pharmapac, a 

competitor, for filling. Tr. 184–87, GX 

63. Under the ‘‘Sold To’’ line on the 

Pharmapac invoices, typically the name 

of the individual practitioner who 

ordered the controlled substances was 

listed above Respondent’s name and 

address. See GX 63, at 281–351. 

However, on the invoices ‘‘Ship To’’

line, the invoices contained the 

individual practitioner’s name and 

address. See id. The invoices also 

included a label which stated: ‘‘Please 

send payment to: SOUTHWOOD 

PHARMACEUTICALS, INC., 60 Empire 

Drive, Lake Forest, CA 92630.’’ See id. 

On February 1, 2007, Respondent Mr. 

Schwartz wrote a letter to Respondent’s 

customers indicating that it had 

‘‘mistakenly placed a sticker on these 

invoices directing payment to 

Southwood Pharmaceuticals.’’ Resp. Ex. 

107. The letter instructed Respondent’s 

customers that the sticker be 

disregarded and that payment should be 

made directly to Pharmapac at its 

address. Id. 

The ALJ found that ‘‘Respondent 

processed an extensive number of 

orders for controlled substances in 

January of 2007,’’ and that ‘‘Respondent 

did receive payment from many of these 

customers consistent with the invoices 

dated during January of 2007.’’ ALJ at 44 

(FOF 157) (citing GX 63). During the 

hearing, however, the parties stipulated 

that ‘‘[i]t was not [Respondent’s] intent 

to retain any payment submitted to or 

through Southwood by [its] customers, 

in connection with orders forwarded to 

and filled by Pharmapac.’’ Tr. 1030. 

Moreover, the Government introduced 

no evidence establishing that 

Pharmapac is not registered with DEA to 

manufacture or distribute controlled 

substances. 

Discussion 

Section 304(a) of the Controlled 

Substances Act provides that ‘‘[a] 

registration * * * to manufacture, 

distribute, or dispense a controlled 

substance or a list I chemical may be 

suspended or revoked by the Attorney 

General upon a finding that the 

registrant * * * has committed such 

acts as would render [its] registration 

under section 823 * * * inconsistent 

with the public interest as determined 

under such section.’’ 21 U.S.C. 

824(a)(4). As relevant here, Congress 

directed that the following factors be 

considered: 

(1) Maintenance of effective controls 

against diversion of particular controlled 

substances and any controlled substance in 

schedule III, IV, or V compounded therefrom 

into other than legitimate medical, scientific, 

or industrial channels; 

(2) compliance with applicable State and 

local law; 

(3) promotion of technical advances in the 

art of manufacturing these substances and the 

development of new substances; 

(4) prior conviction record of applicant 

under Federal or State laws relating to the 

manufacture, distribution, or dispensing of 

such substances; 

(5) past experience in the manufacture, 

distribution, and dispensing of controlled 

substances, and the existence in the 

establishment of effective controls against 

diversion; and 

(6) such other factors as may be relevant to 

and consistent with the public health and 

safety. 

21 U.S.C. 823(d). These factors are 

considered in the disjunctive. I may rely 

on any one or a combination of factors 

and give each factor the weight I deem 

appropriate in determining whether to 

revoke a registration or to deny a 

pending application for renewal of a 

registration. See Green Acre Farms, Inc., 

72 FR 24607, 24608 (2007); ALRA 

Laboratories, Inc., 59 FR 50620, 50621 

(1994). Moreover, I am ‘‘not required to 


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19 It is true that Mr. Goodrich testified that he 

visited the DEA Diversion Control website in early 

2006. However, he testified that he received most 

of the information about prescriptions during the 

July 2006 conference call. Tr. 357. Neither Mr. 

Goodrich nor any other witness for Respondent 

claimed to have reviewed the DEA April 2001 

policy statement on prescribing controlled 

substances over the internet prior to it being 

provided to him by DEA officials. Moreover, 

Respondent makes no claim that following the 

February visits it consulted legal counsel to 

determine the legality of the prescribing practices 

of the Florida pharmacies. 

make findings as to all of the factors.’’

Hoxie v. DEA, 419 F.3d 477, 482 (6th 

Cir. 2005); Morall v. DEA, 412 F.3d 165, 

173–74 (D.C. Cir. 2005). 

The Government bears the burden of 

proving that Respondent’s continued 

registration would be inconsistent with 

the public interest. 21 CFR 1301.44(e). 

If, however, the Government establishes 

a prima facie case, the burden shifts to 

Respondent to show why its continued 

registration would not be inconsistent 

with the public interest. See Gregory D. 

Owens, 67 FR 50461, 50464 (2002). 

In this case, I conclude that factors 

one, five and six establish that 

Respondent’s continued registration 

would ‘‘be inconsistent with the public 

interest.’’ 21 U.S.C. 823(d). Indeed, 

Respondent ‘‘concedes that the 

Government has established a prima 

facie case * * * that [its] continued 

registration may be inconsistent with 

the public interest.’’ Resp. Proposed 

Findings of Fact and Conclusions of 

Law (hereinafter, Resp. Br.) at 31. 

Respondent maintains, however, that 

the record ‘‘encompasses sufficient 

examples of mitigation and ongoing 

remediation by’’ it to compel the 

conclusion that revoking its registration 

‘‘would be inconsistent with the public 

interest.’’ Id. For the reasons set forth 

below, I conclude otherwise and will 

order the revocation of Respondent’s 

registration and the denial of its 

pending renewal application. 

Factors One and Five—Maintenance of 

Effective Controls Against the Diversion 

of Controlled Substances Into Other 

Than Legitimate Channels and 

Respondent’s Past Experience in 

Distributing Controlled Substances 

Under DEA regulations, all 

‘‘registrants shall provide effective 

controls and procedures to guard against 

theft and diversion of controlled 

substances.’’ 21 CFR 1301.71(a). A 

registrant is further required to ‘‘design 

and operate a system to disclose to the 

registrant suspicious orders of 

controlled substances’’ and is required 

to ‘‘inform the [DEA] Field Division 

Office * * * in his area of suspicious 

orders when discovered by the 

registrant.’’ Id. 1301.74(b). As explained 

below, the record establishes that 

Respondent failed repeatedly to comply 

with both requirements. 

Respondent’s Distributions of 

Hydrocodone and Due Diligence Efforts 

Beginning in December 2005, 

Respondent distributed massive 

quantities of hydrocodone, a highly 

abused drug and schedule III controlled 

substance, to entities which, 

notwithstanding their various assertions 

to Mr. Goodrich, were nothing more 

than drug pushers operating under the 

patina of legitimate authority. 

Respondent’s due diligence measures ‘‘

which initially involved nothing more 

than verifying a pharmacy’s DEA 

registration and state license—were 

wholly deficient. 

As the record demonstrates, 

Respondent sold Medipharm in excess 

of 1.75 million units of hydrocodone in 

the months of December 2005 and 

January 2006, before Mr. Goodrich even 

visited this entity to inquire into the 

nature of its business. Likewise, during 

the months of December 2005 and 

January 2006, Respondent sold more 

than 1.55 million dosages units of 

hydrocodone to Avee and 476,000 

dosage units of the drug to Accumed 

before Mr. Goodrich even visited these 

entities. It also sold large quantities of 

hydrocodone to Medichem and Bi-Wise 

before Mr. Goodrich visited them. As 

Mr. Goodrich admitted, Respondent had 

‘‘no’’ process in place to determine the 

nature of a potential customer’s 

business before it sold to them. 

Moreover, during the February on-site 

visits with the above entities, Mr. 

Goodrich received substantial 

information which raised serious doubt 

as to the legality of their business 

practices. As the evidence demonstrates, 

Mr. Goodrich determined that 

Medipharm had a ‘‘mail order business 

[with] ties to internet pharmacy,’’ GX 

16, that Accumed had ‘‘ties to the 

internet,’’ GX 17, and that Medichem 

was mailing prescriptions out-of-state 

and had ‘‘some ties to the internet 

community.’’ GX 18. 

At Avee, Mr. Goodrich found that it 

‘‘provide[d] mail order fulfillment of 

prescriptions from various sources, 

including internet-connected medical 

providers who provide patient 

assessments and diagnosis through 

unconventional practice models,’’ with 

‘‘[m]any of these prescriptions [being] 

connected to pain management 

therapies involving the prescription of 

controlled substances.’’ GX 20 

(emphasis added). Avee’s management 

also discussed with Mr. Goodrich a visit 

earlier that day by agency investigators 

and their concern as to ‘‘the validity of 

the doctor-patient relationship that 

formed the basis of the digital diagnosis 

that resulted in a prescription for 

controlled substances being submitted 

to Avee for filling.’’ Id. (emphasis 

added). Moreover, in his testimony, Mr. 

Goodrich admitted that he knew as early 

as his visit to Avee that ‘‘[s]ome of the 

prescriptions [it] filled were not the 

result of physical contact between the 

doctor and the patient,’’ Tr. 348, and 

that Avee had also provided him with 

the names of two websites that were the 

source of the prescriptions it filled. Id. 

at 351–52. 

The evidence further establishes that 

notwithstanding that he did not ‘‘know 

[ ] much about this telemedicine thing,’’

id. at 354, Mr. Goodrich did not order 

that Respondent’s shipments to these 

pharmacies be stopped. Indeed, 

following the visits, Respondent 

shipped even larger monthly quantities 

of hydrocodone to some of the 

pharmacies. Furthermore, Mr. Goodrich 

testified that he did not assess whether 

Avee was operating illegally, claiming 

that he did not think he could ‘‘make 

that assessment.’’ Tr. 359. Indeed, 

Respondent remained disinterested in 

determining whether the Florida-based 

pharmacies were lawfully filling 

prescriptions until after the July 17, 

2006, conference call with DEA 

officials.19

Notwithstanding that Mr. Goodrich 

had reason to know that the Floridabased internet pharmacies were not 

filling lawful prescriptions, Respondent 

proceeded to supply large quantities of 

hydrocodone to an additional eleven 

internet pharmacies (most of which 

were located in the Tampa Bay area) 

including United, Medicom, Discount, 

Universal, Medcenter, CRJ, Grand, 

Medicine Shoppe, Duane’s, Woody, and 

Elite. Moreover, notwithstanding the 

large quantities that these pharmacies 

ordered, Mr. Goodrich apparently did 

not deem it necessary to conduct site 

visits to inquire into the nature of their 

businesses and whether they were 

filling lawful prescriptions. See, e.g., 

Resp. Br. at 34–35 (discussing ‘‘steps 

taken by Mr. Goodrich to ascertain that 

[Respondent’s] pharmacy customers in 

Florida were not diverting controlled 

substances,’’ and noting only Goodrich’s 

Feb. 8, 2006 site visits and the August 

2006 pharmacy questionnaires). 

Moreover, Respondent continued to 

supply the pharmacies, notwithstanding 

that they were ordering hydrocodone in 

quantities that far exceeded what its 

traditional retail pharmacy customers 

ordered, that Respondent had 

information that controlled substances 

comprised between 98 and 100 percent 


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20Respondent also continued to ship large 

quantities of hydrocodone to Universal, another 

pharmacy which was identified as ‘‘targeted.’’ In 

August, it shipped 399,070 dosage units to 

Universal; in September, 340,500 dosage units; in 

October, 453,690 dosage units; and in November, 

330,600 dosage units. 

21Likewise, the answers submitted by Duane’s 

appeared to be in order even if they were false. 

of the prescription drugs being ordered 

by these entities, and that as Mr. 

Goodrich explained, these entities 

‘‘were a different type of a customer 

than what we’d been used to dealing 

with.’’ Tr. 319. 

Respondent contends that it is 

‘‘unfair’’ to compare what Mr. Goodrich 

learned during the site visits through his 

‘‘lay inquiry’’ with what a DEA 

Diversion Investigator learned, ‘‘armed 

as she was by two decades of diversion 

investigation experience, search 

warrants, and a team of armed agents 

carrying intimidating badges.’’ Resp. Br. 

35. The record demonstrates, however, 

that even without a warrant, a badge 

and a gun, Mr. Goodrich was able to 

obtain from Avee substantial 

information indicating that its practices 

were illegal and already subject to 

DEA’s scrutiny. He was also able to 

obtain information from several other 

pharmacies which suggested that further 

inquiry was warranted as they were 

engaged in practices similar to those of 

Avee. Moreover, Respondent’s argument 

ignores that it sold to numerous 

additional internet pharmacies without 

even conducting site visits. 

Furthermore, even after DEA 

presented information to it—on the 

proverbial silver platter—that 

Respondent’s Florida-based internet 

pharmacy customers were likely 

engaged in illegal activity and even 

specifically mentioned that six of its 

customers were ‘‘targeted,’’ Respondent 

continued to distribute extraordinarily 

large quantities of hydrocodone to these 

pharmacies. 

To Medipharm, an entity described as 

a target of an investigation, in August 

2006, Respondent distributed 1.25 

million dosage units of hydrocodone. In 

September 2006, Respondent 

distributed to Medipharm 1.45 million 

dosage units of the drug, and in October 

2006, more than 1 million dosage units. 

Furthermore, Respondent distributed an 

additional 538,000 dosage units to 

Medipharm during the first half of 

November 2006, at which time 

Medipharm’s registration was 

suspended. 

To Accumed, another of the targeted 

pharmacies, in August 2006, 

Respondent sold approximately 1.268 

million dosage units of hydrocodone. 

While in September and October 2006, 

Respondent’s hydrocodone sales to 

Accumed declined to approximately 

503,000 and 394,000 dosage units 

respectively, in November 2006, 

Respondent sold 1.56 million dosage 

units to it. 

As for Avee, which was also 

identified as a target, in August 2006, 

Respondent sold 506,430 dosage units 

of hydrocodone, an amount that was 

more than five times the previous 

month’s sale. In September 2006, 

Respondent sold Avee approximately 

696,000 dosage units; in October, it sold 

Avee 537,900 dosage units; and in 

November, it sold Avee 2.11 million 

dosage units.20

It is true that following the July 17, 

2006 conference call, Respondent 

attempted to perform additional due 

diligence. More specifically, Mr. 

Goodrich requested information from 

the Florida Board of Pharmacy as to 

whether the pharmacies were operating 

legitimately. The Florida Board, 

however, only provided information as 

to the licensure status of the 

pharmacies. Resp. Ex. 50. 

On August 15, 2006, Respondent also 

sent out a questionnaire to its internet 

pharmacy customers. It is true that 

Respondent did eventually cease 

shipping controlled substances to three 

of the pharmacies (Bi-Wise, CRJ and 

YPM) because these pharmacies either 

failed to respond (Bi-Wise) or gave 

inadequate responses on their 

questionnaires (CRJ and YPM). But even 

with respect to these pharmacies, 

Respondent did not cut off its 

shipments to them until late October 

2006, nearly two months after its own 

deadline for completing the 

questionnaires, and sold them large 

quantities of hydrocodone 

notwithstanding that the pharmacies 

had failed to comply with Respondent’s 

request for additional information. 

It is also true—as Respondent 

contends—that two of the pharmacies 

(Medipharm and Universal) submitted 

questionnaires which were ‘‘prepared 

by an apparently reputable attorney,’’

Resp. Br. 35, and which indicated that 

the pharmacies had ‘‘retained counsel to 

* * * implement a strict compliance 

program to ensure compliance with the 

applicable rules and regulations for 

prescription practice in each of the 

states in which’’ the pharmacies did 

business. Resp. Ex. 67, at 4; Resp. Ex. 

69, at 4. These questionnaires further 

stated that the pharmacies ‘‘routinely 

verif[ied]’’ that the doctors were 

‘‘authorized to practice medicine in the 

state in which the patient is located.’’

Resp. Ex. 67, at 4; Resp. Ex. 69, at 4. 

These two pharmacies further 

indicated, however, that they did ‘‘not 

fill prescriptions where the patient has 

not had a face-to-face encounter with a 

physician.’’ Resp. Ex. 67, at 5, Resp. Ex. 

69, at 5 (emphasis added). Notably, the 

latter statement did not say that the 

patients had a face-to-face encounter 

with the prescribing physician. 

I need not decide whether it was 

reasonable for Respondent to continue 

shipping controlled substances to 

Medipharm and Universal in light of the 

ambiguous statements they provided 

and the massive quantities of controlled 

substances they were ordering. Even if 

it was, Respondent ignores the 

numerous instances in which it 

continued to ship to other pharmacies 

which had provided ample information 

casting serious doubt as to the validity 

of their activities.21

For example, Respondent continued 

shipping hydrocodone to Grand 

Pharmacy deeming its response to be 

adequate. Yet Grand stated that ‘‘[a]ll 

doctors Grand deal with have a physical 

or extended phone dialogue with the 

patient to establish the diagnosis and 

need for the medication.’’ Resp. Ex. 63, 

at 2 (emphasis added). While this 

answer should have stood out like a 

swollen thumb, Mr. Goodrich deemed 

Grand’s answers adequate and 

Respondent continued to ship large 

quantities of controlled substances to it. 

The Medicine Shoppe’s questionnaire 

indicated the name of a website used by 

the ‘‘physicians who most commonly 

issue prescriptions filled by [the] 

pharmacy.’’ Resp. Ex. 65, at 4. 

Moreover, the pharmacy answered the 

question of whether it verified that the 

physicians were ‘‘authorized to practice 

medicine in the state where the patient 

is located,’’ stating: ‘‘No. The doctor 

makes the consult from the state in 

which they are licensed.’’ Id. at 4. 

Medicom—which apparently was 

owned by the same person who owned 

the Medicine Shoppe—stated that it was 

not an internet pharmacy. The 

pharmacy added, however, that it 

‘‘receive[d] Rx from doctors who have 

spoken [to] patients, discussed therapy, 

and also reviewed entire medical 

history.’’ Resp. Ex. 66, at 2. Notably, 

Medicom did not maintain that the 

prescriptions were issued by the 

physicians pursuant to a face-to-face 

encounter with the patients. Moreover, 

the questionnaire indicated that the 

pharmacy received prescriptions ‘‘via 

telemedicine’’ and named three 

websites used by physicians whose 

prescriptions the pharmacy filled. Id., at 

2 & 4. Finally, when asked whether it 

verified that the physicians were 

authorized to practice medicine in the 

states where the patients were located, 


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22This is page 5 of the exhibit. 

23Respondent attempts to excuse its conduct on 

the ground that it repeatedly asked DEA officials 

whether it should stop selling to the pharmacies 

only to be told by DEA officials that they could not 

tell them whether or not to sell because that was 

a business decision. Resp. Br. 33. Several courts 

have held, however, that DEA has no authority 

under the CSA to tell a distributor whether to sell 

or not. See PDK Labs Inc., v. Ashcroft, 338 

F.Supp.2d 1, 14 (D.D.C. 2004). 

Respondent also faults the July 2006 presentation 

by agency personnel as ‘‘[s]easoned with antiquated 

case law and dense, professional material,’’ and 

asserts that it had ‘‘little pedagogic value.’’ Resp. Br. 

Medicom answered: ‘‘No. The doctor 

makes the consultation from the state 

they are licensed’’ in. Id. at 4. 

Here again, Mr. Goodrich deemed 

both the Medicine Shoppe and 

Medicom’s responses to be adequate 

despite the obvious indications that 

they were not filling lawful 

prescriptions and Respondent 

continued to ship hydrocodone to both 

pharmacies. Most significantly, in 

September 2006, it shipped 164,000 

dosage units to Medicom; in October, it 

shipped 375,690 dosage units to 

Medicom; and in November, it shipped 

385,000 dosage units to the pharmacy. 

Avee, another of the identified targets, 

sent its questionnaire in nearly a month 

late. On its questionnaire, Avee 

indicated that it was not an internet but 

rather a ‘‘mail order pharmacy.’’ Resp. 

Ex. 55, at 4. It also answered ‘‘N/A’’ to 

the questions which asked what 

percentage of the prescriptions it filled 

originated on the internet and to 

identify the websites used by the 

physicians who were commonly issuing 

the prescriptions it filled. Resp. Ex. 55, 

at 2 & 4. 

I acknowledge that Mr. Goodrich then 

undertook further inquiry to determine 

whether Avee had changed its business 

model and requested additional 

information regarding its due diligence 

protocols. Resp. Ex. 56. Avee wrote back 

including a copy of a letter it claimed 

to have sent to the physicians who 

issued the prescriptions it filled. Resp. 

Ex. 57. As found above, while that letter 

correctly stated the four elements of a 

legitimate doctor/patient relationship, it 

also stated that ‘‘[t]o these, Avee would 

add an opportunity for the prescribing 

practitioner and patient, via some 

means, to confer.’’ Id. at 2 22 (emphasis 

added). Moreover, the letter maintained 

that ‘‘[i]t is not a requirement that the 

prescribing physician himself/herself 

took the history or performed the 

physical examination, as long as the 

prescribing practitioner had full and 

meaningful access to the medical 

history and physical examination, and 

an opportunity to confer with the 

patient.’’ Id. (emphasis added). 

In short, Avee had not changed its 

practices from the time of the February 

2006 on-site visit, when Mr. Goodrich 

noted that the pharmacy filled 

‘‘prescriptions from various sources, 

including internet-connected medical 

providers who provide patient 

assessments and diagnosis through 

unconventional practice models.’’ GX 

20 (emphasis added). Respondent 

nonetheless continued to ship large 

quantities of hydrocodone to Avee. 

Indeed, in September 2006, Respondent 

shipped 695,800 dosage units to Avee, 

in October, it shipped 537,900 dosage 

units to Avee, and in November, it 

shipped 2.11 million dosage units to the 

pharmacy. 

Accumed, another of the ‘‘targeted 

pharmacies,’’ represented in its 

questionnaire that it was ‘‘not an 

internet pharmacy,’’ and that zero 

percent of the prescriptions it filled 

originated on the internet. Resp. Ex. 54, 

at 2–3. It also indicated ‘‘N/A’’ where 

asked to list the websites used by the 

‘‘physicians who most commonly issue 

prescriptions filled by your pharmacy.’’

Id. at 4. Notwithstanding the 

inconsistency between Accumed’s 

answers and Mr. Goodrich’s finding 

during the February site visit that the 

pharmacy had ‘‘ties to the internet,’’ GX 

17, there is no evidence that Mr. 

Goodrich undertook any additional 

investigation to determine whether it 

was filling legitimate prescriptions. 

Here again, Respondent continued to 

sell extraordinary quantities of 

hydrocodone to the pharmacy. More 

specifically, in August 2006, 

Respondent sold Accumed 1.267 

million dosage units; in September, it 

sold 503,020 dosage units; in October, it 

sold 393,610 dosage units; and in 

November, it sold more than 1.56 

million dosage units. 

Finally, Respondent produced no 

evidence that it ever received responses 

from Medcenter, Discount Mail Meds 

(a/k/a Liddy’s), and Medichem. See 

Resp. Exs. 54–72; ALJ at 24–25 

(Stipulated FOF 77–86). Moreover, 

Respondent’s evidence suggests that it 

did not even send a questionnaire to 

Discount Mail Meds. See Resp. Ex. 52, 

at 2. 

Respondent nonetheless continued to 

distribute large quantities of 

hydrocodone to Medcenter until 

November 16, 2006, when the 

pharmacy’s registration was suspended. 

More specifically, Respondent sold 

Medcenter 378,000 dosage units in 

September, 608,000 dosage units in 

October, and approximately 314,000 

dosage units in the first half of 

November. 

Respondent also distributed large 

quantities of hydrocodone to Discount 

and Medichem until the immediate 

suspension of its registration on 

December 6, 2006. Between August and 

November 2006, Respondent sold 

Medichem at least 216,000 dosage units 

each month. During the same period, 

the lowest amount Respondent sold to 

Discount was 292,720 dosage units in 

August. Moreover, in October and 

November, Respondent sold to Discount 

more than 500,000 dosage units each 

month. 

Accordingly, I conclude that even 

after being advised by agency officials 

that its internet pharmacy customers 

were likely engaged in illegal activity, 

Respondent failed miserably to conduct 

adequate due diligence. 

Notwithstanding the breadth of 

information provided during the 

conference call, Respondent did not 

stop selling to any of its internet 

pharmacy customers while it 

investigated the legitimacy of their 

businesses activities. 

Moreover, even when some of the 

pharmacies provided information 

indicating that the prescriptions they 

filled were likely illegal, Respondent 

continued to distribute large quantities 

of hydrocodone to them. Indeed, the 

only instances in which Respondent 

stopped supplying a pharmacy pursuant 

its ‘‘due diligence’’ program was when 

one pharmacy (Bi-Wise) entirely failed 

to submit the questionnaire and when 

two other pharmacies (CRJ and YPM) 

answered nearly every question with a 

dash or ‘‘N/A.’’ Furthermore, 

Respondent failed to even send a 

questionnaire to one of the pharmacies 

and continued to ship to two 

pharmacies which apparently never 

submitted a completed questionnaire. 

In short, the direct and foreseeable 

consequence of the manner in which 

Respondent conducted its due diligence 

program was the likely diversion of 

millions of dosage units of 

hydrocodone. Indeed, it is especially 

appalling that notwithstanding the 

information Respondent received from 

both this agency and the pharmacies, it 

did not immediately stop distributing 

hydrocodone to any of the pharmacies. 

Moreover, in several cases, Respondent 

actually distributed even larger 

quantities of the drug to them. As one 

of the DIs testified regarding 

Respondent’s distribution of 2.1 million 

dosage units to Avee in November 2006, 

‘‘[t]his is an obscene amount of drugs.’’

Tr. 617. The term ‘‘obscene’’ also fairly 

describes Respondent’s experience in 

distributing hydrocodone to all of its 

internet pharmacy customers.23


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at 34. The Supreme Court’s decision in United 

States v. Moore, 423 U.S. 122 (1975), however, 

remains good law. As for the purportedly ‘‘dense, 

professional materials,’’ these documents were 

typically no more than a handful of pages in length 

and surely capable of being understood by a person 

of reasonable intelligence. See GX 61. Indeed, based 

on the questionnaire Mr. Goodrich prepared, it 

seems clear that he understood the requirements for 

a valid prescription and legitimate doctor/patient 

relationship even if he chose to ignore the 

information provided by many of the pharmacies. 

See Resp. Ex. 52. 

I further note, however, that the Agency had no 

obligation to conduct the July 2006 briefing. In any 

event, in April 2001, the Agency published in the 

Federal Register a guidance document explaining 

the potential illegality under existing law of the 

activities engaged in by Respondent’s internet 

pharmacy customers. See Dispensing and 

Purchasing Controlled Substances over the Internet, 

66 FR 21181 (2001). 

24Finally, Mr. Goodrich testified that the reason 

Respondent did not file the reports even after being 

told during the July 2006 conference call of the 

highly suspicious nature of the activities of the 

Florida-based pharmacies was that the pharmacies 

were already under investigation. Respondent’s 

awareness of an ongoing investigation does not, 

however, excuse its failure to report its customers’

continued suspicious orders. Indeed, such 

information might well enable the agency to 

complete its investigation. 

Respondent’s Failure to Report 

Suspicious Orders 

The record further demonstrates that 

Respondent repeatedly failed to report 

any of its sales to the Florida-based 

internet pharmacies as suspicious 

orders even though, as the ALJ 

concluded, the purchases by these 

customers ‘‘fell within the regulatory 

definition of suspicious orders.’’ ALJ at 

49. From its first distribution of 

hydrocodone products in December 

2005 through its last in December 2006, 

not once did Respondent report a 

suspicious order. 

Moreover, Respondent failed to report 

these distributions notwithstanding (1) 

that the Florida-based pharmacies were 

ordering massive quantities of 

hydrocodone, quantities which greatly 

exceeded what Respondent sold to 

traditional retail pharmacies, and (2) 

that controlled substances typically 

constituted all but a miniscule 

percentage of the prescriptions drugs 

being ordered by the Florida-based 

pharmacies. For example, between 

December 7 and December 31, 2005 (a 

three-and-a-half week period), 

Respondent distributed approximately 

817,000 dosage units of hydrocodone to 

Medipharm. This amount was 109 times 

the amount of hydrocodone that 

Respondent typically sold in a month to 

its retail pharmacy customers. 

Moreover, controlled substances 

comprised 98 percent of Medipharm’s 

purchases of prescriptions drugs from 

Respondent. 

Notwithstanding this information, 

Respondent did not deem Medipharm’s 

purchases to be suspicious. It did not 

report any of Medipharm’s subsequent 

purchases as suspicious even though the 

pharmacy never purchased less than 

703,000 dosage units of hydrocodone in 

a month and purchased more than a 

million dosage units of this drug in six 

different months. Moreover, even 

though between December 2005 and 

June 2006, controlled substances 

constituted 99% of Medipharm’s 

prescription drug purchases from it and 

was specifically identified as a targeted 

pharmacy, Respondent never reported 

the purchases as suspicious. 

As another example, between 

December 21st and 31st, 2005, Avee 

purchased approximately 346,000 

dosage units of hydrocodone from 

Respondent. Just as in the case of 

Medipharm, this amount—which 

involved only ten days of purchases—

greatly exceed Respondent’s average 

monthly sale of hydrocodone to a 

traditional pharmacy. Moreover, while 

Avee was only a customer for ten days 

during the seven-month period of June 

through December 2005, Avee 

nonetheless made Respondent’s list 

(ranking eighth) of its largest purchasers 

of controlled substances. See Resp. Ex. 

46. Moreover, controlled substances 

constituted 100 percent of Avee’s 

purchases of prescription drug products 

from Respondent. Id. 

Here again, Respondent did not report 

any of Avee’s purchases as suspicious. 

It did not do so after Mr. Goodrich 

acquired information during the 

February site visit indicating that Avee 

was engaged in the filling of illegitimate 

prescriptions. Nor did it do so even after 

the July 2006 conference call when DEA 

officials informed Respondent that it 

was a targeted pharmacy. It did not do 

so even in November 2006, when it 

distributed more than 2.1 million 

dosage units of hydrocodone to Avee. 

Moreover, as it obtained additional 

Florida based customers, who 

proceeded to order excessive quantities 

of hydrocodone, Respondent never 

reported any of these pharmacies’ orders 

as suspicious. To the contrary, on 

various occasions, it submitted e-mails 

to DEA field personnel affirmatively 

stating that it had reviewed its 

customer’s purchases of controlled 

substances and had ‘‘no suspicious 

activity to report.’’ See GX 9 (Dec. 2005); 

GX 10 (Jan. 2006); GX 11 (Mar. 2006); 

GX 12 (April 2006). 

Respondent contends that ‘‘[t]he 

[G]overnment’s focus on [its] failure to 

report orders as suspicious in early 2006 

is a red herring.’’ Resp. Br. 34. 

Respondent argues that its failure to file 

suspicious order reports was not the 

result of any intent to mislead and 

points to the fact that in February 2006, 

it submitted a report that identified 

Medipharm, Avee and Accumed as 

among its largest purchasers of 

controlled substances. Id. Respondent 

also argues that by filing reports with 

DEA’s ARCOS unit ‘‘it alerted the DEA 

to Southwood’s commerce with internet 

pharmacies.’’ Id. 

Even if Mr. Goodrich had no intent to 

mislead by submitting these negative 

reports, Respondent still violated the 

regulation by failing to report suspicious 

orders. That some of the pharmacies 

were identified on the two reports 

Respondent submitted listing its largest 

purchasers of controlled substances 

(which Respondent submitted in 

February and July 2006), does not 

excuse its failure to comply with the 

regulation. Those reports did not 

comply with the regulation for several 

reasons. 

First, they were not timely submitted. 

See 21 CFR 1301.74(b) (requiring 

reporting of ‘‘suspicious orders when 

discovered by the registrant’’). Indeed, 

many of the pharmacies had been 

purchasing extraordinary quantities of 

hydrocodone for months by the time 

Respondent submitted its July 2006 

report. Second, the reports did not list 

several of the internet customers—even 

though they had purchased large 

quantities—either because they had 

only recently become customers (as in 

the case of Grand Pharmacy and the 

Medicine Shoppe), or because the 

pharmacy had only purchased 

hydrocodone from Respondent for a 

limited time (as in the case of Elite). 

Nor does Respondent’s filing of 

ARCOS reports excuse its failure to 

report suspicious orders. The ARCOS 

reporting requirement and the 

suspicious orders reporting requirement 

serve two different purposes. While 

ARCOS provides the Agency with 

information regarding trends in the 

diversion of controlled substances, the 

reports need not be submitted until 

fifteen days after the end of the 

reporting period. In contrast, as 

explained above, a suspicious order 

must be reported ‘‘when discovered by 

the registrant.’’ 21 CFR 1301.74(b). The 

suspicious orders reporting requirement 

exists to provide investigators in the 

field with information regarding 

potential illegal activity in an 

expeditious manner. Respondent’s 

compliance with the ARCOS reporting 

requirement is thus not a substitute for 

its failure to report suspicious orders.24

Accordingly, I further conclude that 

Respondent repeatedly violated federal 


jlentini on PROD1PC65 with NOTICES
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regulations by failing to report 

suspicious orders. 21 CFR 1301.74(b). 

As explained above, the record also 

clearly establishes that Respondent’s 

experience in distributing controlled 

substances is characterized by recurring 

distributions of extraordinary quantities 

of controlled substances to entities 

which then likely diverted the drugs by 

filling prescriptions which were 

unlawful. Moreover, Respondent’s due 

diligence measures were wholly 

inadequate to protect against the 

diversion of the drugs. Respondent’s 

failure to maintain effective controls 

against diversion and its experience in 

distributing controlled substances thus 

support the conclusion that its 

continued registration would be 

‘‘inconsistent with the public interest.’’

21 U.S.C. 824(a)(4). 

Factor Six—Other Factors Relevant to 

and Consistent With Public Health and 

Safety 

Respondent ‘‘concedes that the 

Government has established a prima 

facie case * * * that [its] continued 

registration may be inconsistent with 

the public interest.’’ Resp. Br. 31. 

Respondent contends, however that 

there is sufficient evidence ‘‘of 

mitigation and ongoing remediation by 

[it] to compel a conclusion that to 

revoke its registration would be 

inconsistent with the public interest.’’

Id. (citations omitted). 

More specifically, Respondent argues 

that its ‘‘cooperation with and 

responsiveness to * * * DEA [should] 

also be considered in evaluating 

whether [its] continued registration is in 

keeping with the public interest.’’ Id. at 

37. Respondent maintains that it has 

undertaken several remedial measures 

‘‘to prevent the occurrence of further 

violations,’’ and that therefore, a 

sanction less than revocation is 

warranted. These measures include: (1) 

The development of a new SOP ‘‘to 

more rapidly detect suspicious orders’’; 

(2) placing its new COO ‘‘in charge of 

DEA compliance’’; (3) retaining a 

consultant to audit its compliance 

efforts; and (4) working with the 

consultant ‘‘to develop a means of 

interdicting suspicious orders of 

controlled substances before they are 

shipped.’’ Resp. Br. 36. 

The ALJ agreed with Respondent. 

According to the ALJ, ‘‘Respondent has 

worked with * * * DEA throughout its 

registration,’’ and had ‘‘worked closely 

with local DEA diversion investigators 

to establish systems to control against 

the diversion of controlled substances.’’

Id. at 54–55. The ALJ also noted that 

Respondent had ‘‘consistently 

submitted’’ ARCOS reports without any 

deficiencies noted. Id. at 54. 

Addressing the issue of its 

responsiveness to the Agency, the ALJ 

noted that Respondent attempted to 

obtain information from the Florida 

Board, that it sent questionnaires to the 

pharmacies and developed a new 

customer profile to evaluate new 

accounts, and that it adopted a policy 

under which it stopped filling orders 

placed by pharmacies whose 

registrations had been continued on a 

day-to-day basis but not renewed. Id. at 

59–60. 

The ALJ also explained that 

‘‘Respondent continues to demonstrate a 

willingness to bring its business 

practices into compliance with DEA 

regulations,’’ and noted that its new 

COO ‘‘has a firmer grasp [of] these 

regulatory requirements.’’ Id. at 61. 

Reasoning that Respondent had ‘‘kept 

an open dialogue with the DEA and has 

attempted to come into compliance with 

the DEA’s regulations,’’ and had not 

previously been subject to enforcement 

action, the ALJ concluded that 

revocation of its ‘‘entire * * * 

registration is too severe a remedy’’ even 

though Respondent had ‘‘irresponsibly 

sold’’ what she described as ‘‘egregious 

quantities’’ of hydrocodone to the 

Florida internet pharmacies. Id. at 62. 

I disagree with both Respondent and 

the ALJ. As for Respondent’s view, its 

‘‘circumstances’’ do not ‘‘compare 

favorably with [those of] registrants’’

whose registrations have not been 

revoked, but rather, subjected to lesser 

sanctions. See Resp. Br. 36. As for the 

ALJ’s view that Respondent had kept 

‘‘an open dialogue,’’ the record amply 

establishes that Respondent is not a 

good listener. 

For support, Respondent cites my 

decision in Joy’s Ideas, 70 FR 33195 

(2005), where I noted that the registrant 

had taken ‘‘aggressive actions to 

improve her’’ accountability systems. Id. 

at 33198. Notwithstanding that the 

registrant ‘‘may have been an 

unknowing and unintentional 

contributor’’ to the methamphetamine 

problem, I still revoked her registration 

based on evidence that large amounts of 

the products she distributed were being 

diverted. Id. at 33198–99. The case thus 

does not support Respondent for two 

reasons: (1) I revoked the registration in 

Joy’s Ideas notwithstanding the 

mitigating evidence, and (2) here, 

Respondent had reason to know that it 

was contributing to the diversion of 

hydrocodone through most, if not all, of 

the pharmacies it supplied. 

Respondent also cites Service 

Pharmacy, Inc., 61 FR 10791 (1996), 

which noted that a registrant’s 

adherence to the terms of a consent 

order it had entered into with state 

authorities supported its being allowed 

to maintain its DEA registration. 

Respondent argues by analogy that its 

‘‘cooperation with and responsiveness 

to * * * DEA [should] also be 

considered in evaluating whether [its] 

continued registration is [consistent] 

with the public interest.’’ Resp. Br. 37. 

I agree that Respondent’s level of 

cooperation and responsiveness to DEA 

should be considered in determining the 

appropriate sanction. It is true that there 

is some evidence of Respondent’s 

having been a cooperative registrant as 

to some issues involving its 

responsibilities under the CSA. In 

particular, Respondent worked with a 

diversion investigator to develop a 

suspicious orders reporting system 

(although it was developed for a 

different customer base). There was also 

no evidence of Respondent’s noncompliance with the CSA prior to its 

decision to supply internet pharmacies. 

On the other hand, even were I to 

completely ignore Respondent’s 

conduct during the period between 

December 2005, when it started 

supplying the pharmacies, and the July 

2006 conference call, the record further 

demonstrates that it did not adequately 

respond to the information DEA 

provided it in July 2006. As explained 

above, Respondent did not cut off any 

of the pharmacies until more than three 

months after being informed of the 

potential illegality of the pharmacies’

activities. Indeed, it did not even 

enforce the deadline it set in its 

questionnaire. 

Moreover, while some of the 

responses to the questionnaires were 

either false or were cleverly prepared by 

a wordsmith, in a number of other 

instances the responses contained 

information—which Respondent then 

ignored—that clearly suggested that the 

pharmacy was filling invalid 

prescriptions. Finally, Respondent 

continued to sell large quantities to 

many of the pharmacies—including 

those specifically identified as 

targeted—up until the suspension of 

either the pharmacy’s registration or its 

own registration. Contrary to 

Respondent’s view, the entire body of 

evidence regarding its cooperation and 

responsiveness does not support its 

continued registration. 

While finding that ‘‘Respondent 

continues to fail to adequately protect 

against diversion of hydrocodone 

products,’’ ALJ at 59, the ALJ 

nonetheless concluded that to revoke its 

entire registration would be ‘‘too severe 

a remedy,’’ presumably because there 

was ‘‘no evidence of [its] improper 


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Federal Register / Vol. 72, No. 127 / Tuesday, July 3, 2007 / Notices 36503 

25As for the Government’s exception, when a 

party intends to rely on evidence contained in a 

CD–ROM, it has the obligation to prepare a 

summary setting forth what the data contained 

therein show. That summary must be prepared and 

served on opposing counsel along with a copy of 

the CD–ROM in advance of the hearing. It is not the 

responsibility of the ALJ or this Office to plumb the 

depths of such an exhibit to determine what the 

data show. Moreover, such evidence should not be 

admitted into the record unless the proponent of 

the exhibit establishes an adequate foundation for 

its admission by identifying and authenticating the 

exhibit; this must be done even if opposing counsel 

do not object to its admission. 

26As Mr. Schwartz testified, ‘‘when a regulatory 

agency is on-site * * * everybody in the company 

knows about it. Word travels quickly.’’ Tr. 937. 

handling of any other controlled 

substances.’’ Id. at 62. The ALJ, 

however, offered no explanation as to 

why Respondent’s procedures were 

nonetheless sufficient to entrust it with 

authority to distribute other controlled 

substances. 

To the extent the ALJ’s 

recommendation was based on the lack 

of evidence showing that Respondent 

improperly handled other controlled 

substances, the ALJ erred. The 

Government is not required to prove 

that multiple categories of the drugs 

Respondent distributed were diverted in 

order to sustain the revocation of its 

entire registration. Rather, proof that a 

single category of a drug it distributed 

was diverted is enough to support the 

revocation of Respondent’s entire 

registration.25

The ALJ apparently was persuaded by 

the various measures undertaken by 

Respondent to bring itself into 

compliance. Among these was 

Respondent’s hiring of its new COO. 

According to the ALJ, the new COO is 

‘‘an experienced officer who will be 

making the final decisions concerning 

* * * Respondent’s compliance 

measures,’’ and this hiring ‘‘operates as 

an increased level of protection of the 

public interest and [its] compliance 

with DEA regulations in its business 

practices.’’ ALJ at 62. The ALJ also 

noted that Respondent had voluntarily 

agreed ‘‘to cease selling controlled 

substances to Internet pharmacies.’’ Id. 

at 63. Relatedly, Respondent points to 

its retaining of a consultant to audit its 

DEA compliance efforts and to develop 

a means of interdicting suspicious 

orders before they are shipped. 

As for Respondent’s hiring of its new 

COO, the record establishes that Mr. 

Schwartz commenced his duties on 

September 26, 2006. Mr. Schwartz was 

thus the COO for more than two months 

before the immediate suspension order 

was served. Yet during this period, 

Respondent continued to distribute 

extraordinary quantities of hydrocodone 

to numerous internet pharmacies. 

Moreover, with respect to some of the 

pharmacies, it actually distributed 

increasing quantities culminating with 

the 2.1 million dosage units it sold to 

Avee in November 2006. 

In his testimony, Mr. Schwartz 

claimed that he did not become aware 

of Respondent’s sales to the internet 

pharmacies and DEA’s interest in the 

matter until on or about November 2, 

2006, when DEA investigators visited 

Respondent and again met with its 

employees including Mr. Goodrich.26

Mr. Schwartz testified that it took ‘‘a 

couple of days’’ for him to be given the 

notebook which DEA investigators had 

provided to Respondent before the July 

conference call and review it, and that 

on December 5, 2007—approximately 

four weeks later—he and Mr. Sempre 

(Respondent’s owner) came to the 

decision to cease doing business with 

the Florida pharmacies. 

While the ALJ credited Mr. 

Schwartz’s testimony, I decline to give 

any weight to Respondent’s stroke-ofmidnight decision in determining the 

appropriate sanction. See, e.g., Vico 

Products Co., Inc., v. NLRB, 333 F.3d 

198, 211 (D.C. Cir. 2003). As an initial 

matter, I note that it should not have 

taken five weeks for Mr. Schwartz to 

even become aware of Respondent’s 

sales to the internet pharmacies. 

Moreover, given the information Mr. 

Schwartz claims to have reviewed and 

his extensive experience in the industry, 

it should not have taken another four 

weeks to decide to stop selling to these 

entities. 

Most importantly, the decision must 

be considered in light of the evidence 

that for nearly a year prior to it, 

Respondent distributed millions of 

dosage units of hydrocodone products 

to entities which were likely diverting 

the drugs. Moreover, Respondent 

continued to distribute hydrocodone to 

the pharmacies following at least two 

meetings in which DEA investigators 

discussed the questionable practices of 

these pharmacies. As the Seventh 

Circuit has noted, ‘‘[a]n agency 

rationally may conclude that past 

performance is the best predictor of 

future performance.’’ ALRA 

Laboratories, Inc., v. DEA, 54 F.3d 450, 

452 (7th Cir. 1995). In short, 

Respondent’s decision is too little, too 

late, to persuade me that it can be 

entrusted with a registration. 

Nor does the other evidence 

Respondent presented regarding its 

remedial efforts persuade me that a 

sanction less than revocation is 

warranted. Respondent’s distribution of 

44 million dosage units of hydrocodone 

which were likely diverted caused 

extraordinary harm to the public health 

and safety. Moreover, the record 

establishes that Respondent had reason 

to know that the hydrocodone it 

distributed was likely being diverted. 

As the record demonstrates, for nearly 

a year, Respondent repeatedly supplied 

these drug pushers with large quantities 

of hydrocodone. Respondent 

commenced supplying the pharmacies 

showing little interest in determining 

whether they were engaged in lawful 

activity. Moreover, Respondent 

continued to supply the pharmacies 

even after being advised by this Agency 

of the likely illegality of their activities. 

Finally, while Respondent eventually 

undertook some inquiries, it then 

frequently ignored the information it 

obtained from the pharmacies 

themselves, which indicated that they 

were likely filling unlawful 

prescriptions, and continued to supply 

most of them. 

Given the scope of Respondent’s 

conduct and the harm it caused, I 

decline to accept its assertions of 

reform. I therefore conclude that this 

factor also supports the conclusion that 

Respondent’s continued registration ‘‘is 

inconsistent with the public interest.’’

21 U.S.C. 823(d). Finally, for the same 

reasons which led me to order the 

immediate suspension of Respondent’s 

registration, I further hold that this 

order shall be effective immediately. See 

21 CFR 1316.67. 

* * * * * 

My determination is based on the 

reasons set forth above, and those 

reasons are sufficient by themselves to 

support the revocation of Respondent’s 

registration. There is, however, an 

additional consideration, which, while 

not necessary to decide this case, bears 

mentioning. Specifically, to allow 

Respondent to maintain its 

registration—even subject to the 

conditions as proposed by the ALJ and/ 

or Respondent—would create a perverse 

incentive. A precedent which ignores 

how irresponsibly a registrant has acted 

and allows it to maintain its registration 

based on its claim of having reformed its 

business practices, could well prompt 

other registrants to ignore their 

obligations under the Act and sell 

massive quantities of controlled 

substances to diverters. 

I acknowledge that proceedings under 

sections 303 and 304 of the CSA are 

non-punitive. See Samuel S. Jackson 72 

FR 23848, 23853 (2007); Leo R. Miller, 

53 FR 21931, 21932 (1988). Relatedly, 

DEA precedent holds that a proceeding 

under these provisions ‘ ‘‘is a remedial 

measure, based upon the public interest 

and the necessity to protect the public 


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from those individuals who have 

misused * * * their DEA Certificate of 

Registration, and who have not 

presented sufficient mitigating evidence 

to assure the Administrator that they 

can be [en]trusted with the 

responsibility carried by such a 

registration.’ ’’ Jackson, 72 FR at 23853 

(quoting Miller, 53 FR at 21932). 

Neither Jackson nor any other agency 

decision holds, however, that the 

Agency cannot consider the deterrent 

value of a sanction in deciding whether 

a registration should be revoked. 

Moreover, even when a proceeding 

serves a remedial purpose, an 

administrative agency can properly 

consider the need to deter others from 

engaging in similar acts. Cf. Butz v. 

Glover Livestock Commission Co., Inc., 

411 U.S. 182, 187 (1973). Consideration 

of the deterrent effect of a potential 

sanction is supported by the CSA’s 

purpose of protecting the public 

interest, see 21 U.S.C. 801, and the 

broad grant of authority conveyed in the 

CSA’s statutory text, which authorizes 

the revocation of a registration when a 

registrant has committed acts that 

render its ‘‘registration * * * 

inconsistent with the public interest,’’

id. 824(a)(4), and specifically directs the 

Attorney General to consider ‘‘such 

other factors as may be relevant to and 

consistent with the public health and 

safety.’’ Id. 823(d)(6). 

As noted by a recent study of the 

National Center on Addiction and 

Substance Abuse (CASA), ‘‘the abuse of 

controlled prescription drugs in 

America now eclipses abuse of all illicit 

drugs combined, except marijuana.’’ GX 

3 (Declaration of Joseph T. Rannazzisi). 

According to the CASA study, ‘‘between 

1992 and 2003, abuse of controlled 

prescription drugs grew at a rate twice 

that of marijuana abuse, five times 

greater than cocaine abuse, and 60 times 

greater than heroin abuse.’’ Id. 

Relatedly, CASA has found that the 

number of ‘‘controlled prescription 

drug-related visits to emergency rooms 

has increased three and a half times 

more than heroin-related visits and four 

times more than visits linked to cocaine 

abuse.’’ Id. Moreover, ‘‘between 1994 

and 2002, emergency department 

reports of hydrocodone * * * overdoses 

increased by 170 percent.’’ Id. 

Equally alarming are the results of the 

National Institute of Drug Abuse (NIDA) 

2004 survey of eighth, tenth and twelfth 

grade school children. According to the 

survey, ‘‘9.3 percent of twelfth graders 

reported using Vicodin, a brand name 

Schedule III controlled substance 

containing hydrocodone, without a 

prescription in the previous year.’’ Id. 

Illegitimate internet sites play an 

increasingly large and disturbing role in 

facilitating the growth of prescription 

drug abuse. Id. at 1–2.; see also William 

R. Lockridge, 71 FR 77791 (2006). 

Because these websites allow a person 

to obtain a controlled substance based 

on a prescription which is issued 

outside of a legitimate doctor/patient 

relationship and the safeguards that 

relationship provides, ‘‘[a]nyone—

including children—can easily obtain 

highly addictive controlled substances 

online.’’ GX 3, at 2. 

As stated above, these websites and 

the pharmacies that fill the 

prescriptions issued by them, are 

nothing more than drug pushers 

operating under the patina of legitimate 

authority. Cutting off the supply sources 

of these pushers is of critical importance 

in protecting the American people from 

this extraordinary threat to public 

health and safety. In accomplishing this 

objective, this Agency cannot do it all 

itself. It must rely on registrants to fulfill 

their obligation under the Act to ensure 

that they do not supply controlled 

substances to entities which act as 

pushers. And to make clear, because of 

the threat to public safety posed by the 

diversion of controlled substances 

through the internet, the deterrent value 

of a sanction is an appropriate 

consideration in proceedings brought 

under sections 303 and 304 of the CSA. 

Order 

Pursuant to the authority vested in me 

by 21 U.S.C 823(d) & 824(a), as well as 

28 CFR 0.100(b) & 0.104, I order that 

DEA Certificate of Registration, 

RS0204898, issued to Southwood 

Pharmaceuticals, Inc., be, and it hereby 

is, revoked. I further order that the 

pending application of Southwood 

Pharmaceuticals, Inc., for renewal of its 

registration be, and it hereby is, denied. 

Moreover, for the same reasons which 

led me to conclude that Respondent’s 

continued registration constituted an 

imminent danger to public health and 

safety, this order is effective 

immediately. 

Dated: June 22, 2007. 

Michele M. Leonhart, 

Deputy Administrator. 

[FR Doc. 07–3218 Filed 7–2–07; 8:45 am] 

BILLING CODE 4410–09–P 

DEPARTMENT OF LABOR 

Employment and Training 

Administration 

Special Guidelines for Processing 

H–2B Temporary Labor Certification in 

Tree Planting and Related 

Reforestation Occupations 

AGENCY: Employment & Training 

Administration, Department Of Labor. 

ACTION: Notice. 

SUMMARY: This notice updates 

procedures for State Workforce 

Agencies and ETA National Processing 

Centers to process H–2B labor 

certification applications in tree 

planting and related reforestation 

occupations. 

SUPPLEMENTARY INFORMATION: 

I. References 

Immigration and Nationality Act 

(INA) section 101(a)(15)(H)(ii)(b); 20 

Code of Federal Regulations (CFR) Parts 

652 and 655; 8 CFR 214.2(h)(6); Federal 

Register Notice, Vol. 70, No. 137, pps. 

41430–41438; Migrant and Seasonal 

Agricultural Worker Protection Act, 29 

U.S.C. 1801, et seq.; 29 CFR part 500; 

and Training and Employment 

Guidance Letter (TEGL) 21–06, 

Procedures for H–2B Temporary Labor 

Certification in Non-Agricultural 

Occupations. 

II. Background 

The H–2B nonimmigrant program 

permits employers to hire foreign 

workers to come to the United States 

(U.S.) and perform temporary nonagricultural services or labor on a onetime, seasonal, peakload, or intermittent 

basis. The H–2B visa classification 

requires the Secretary of Homeland 

Security to consult with appropriate 

agencies before admitting H–2B 

nonimmigrants. Homeland Security 

regulations require the intending 

employer first to apply for a temporary 

labor certification from the Secretary of 

Labor advising the Department of 

Homeland Security’s United States 

Citizenship and Immigration Services 

(USCIS) as to whether qualified U.S. 

workers are available and whether the 

alien’s employment will adversely affect 

the wages and working conditions of 

similarly employed U.S. workers, or a 

notice that such certification cannot be 

made, prior to filing an H–2B visa 

petition with USCIS. 

However, in December 2004, the 

Department opened two new National 

Processing Centers (NPCs), one each 

located in Atlanta and Chicago. These 

Centers have been designated to process 


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