[Federal Register Volume 82, Number 213 (Monday, November 6, 2017)]
[Notices]
[Pages 51433-51439]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-24093]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration


ChipRX, L.L.C., d/b/a City Center Pharmacy; Decision and Order

    On August 19, 2016, the former Acting Administrator issued an Order 
to Show Cause and Immediate Suspension of Registration to ChipRX, 
L.L.C., d/b/a City Center Pharmacy (hereinafter, Registrant), of 
Hamlin, West Virginia. The Show Cause Order proposed the revocation of 
Registrant's DEA Certificate of Registration and the denial of any 
pending application to renew or modify its registration, on the ground 
that its ``continued registration is inconsistent with the public 
interest.'' Show Cause Order, at 1 (citing 21 U.S.C. 824(a)(4) and 
823(f)).
    As to the Agency's jurisdiction, the Show Cause Order alleged that 
Registrant is registered as a pharmacy with authority to dispense 
schedule II-V controlled substances under Registration No. FC3015915, 
at the registered address of 8119 Court Avenue, Hamlin, West Virginia. 
Id. at 1. The Order alleged that this registration was due to expire on 
August 31, 2017. Id.
    As to the substantive grounds for the proceeding, the Show Cause 
Order alleged that Registrant is owned by George ``Chip'' Chapman and 
Summer Chapman, and that George Chapman is Registrant's Pharmacist-in-
Charge (PIC). Id. The Show Cause Order alleged that on June 30, 2016, 
DEA executed an Administrative Inspection Warrant (AIW) at Registrant 
based on ``tips that PIC Chapman was frequently impaired and was 
unlawfully removing controlled substances from the pharmacy.'' Id. at 
2. The Order then alleged that during the inspection, DEA personnel 
interviewed PIC Chapman and other pharmacy employees. Id.
    With respect to the interview of PIC Chapman, the Show Cause Order 
alleged that he made various material false statements to the 
Investigators. Id. These included minimizing the quantity of oxycodone 
and hydrocodone that had been lost ``in the last year,'' stating that 
he had failed to reported all but one of the instances in which these 
drugs were ``lost'' because they were ```not significant' losses,'' by 
denying that he knew ``anything further about the nature of the 
pharmacy's losses'' while ``claim[ing] that he was not abusing 
prescriptions drugs,'' and stating ``that many of his per diem or fill-
in pharmacists were previous drug abusers.'' Id.
    The Show Cause Order then alleged that in a subsequent interview 
conducted on July 22, 2016, Chapman ``admitted that during the past 
year, he diverted oxycodone or hydrocodone pills equivalent to `200-300 
mg every day,' a total of approximately 25,000 pills.'' Id. at 3. The 
Order also alleged that ``Chapman admitted that he routinely falsified 
inventory records'' and that he ``shredded invoice and supplier 
records, including DEA 222 forms and electronic Controlled Substances 
Ordering System (`CSOS') records.'' Id. The Order further alleged that 
``Chapman admitted that he had relapsed,'' and told ``DEA 
[I]nvestigators that he `couldn't wait' for'' the expiration of the 
Memorandum of Agreement (MOA) which he had previously entered into with 
the Agency ``so he could begin diverting . . . drugs to feed his 
addiction.'' Id. The Order then alleged that Chapman admitted to

[[Page 51434]]

abusing cocaine for the past two years. Id.\1\
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    \1\ The Show Cause Order also alleged that during the June 30, 
2016 interview, Chapman admitted that he regularly used marijuana. 
Show Cause Order, at 3.
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    The Show Cause Order also alleged that from January 12, 2015 \2\ to 
the ``present,'' Registrant's owner had committed numerous violations 
of the Controlled Substances Act. First, the Order alleged that Chapman 
``unlawfully removed pills from the [p]harmacy.'' Id. (citing 21 U.S.C. 
829(a) & (b), 841(a)(1), and 844(a)). Second, the Order alleged that 
Chapman ``us[ed] the [p]harmacy to fuel his own drug addiction,'' in 
that he ordered controlled substances other than in ``the conduct of 
lawful business or professional practice.'' Id. (citing 21 U.S.C. 
828(e)). Third, the Order alleged that Registrant ``failed to report 
losses as required'' by DEA regulations. Id. (citing 21 CFR 
1301.76(b)). Fourth, the Order alleged that Registrant ``has failed to 
maintain effective controls against diversion and theft.'' Id. (citing 
21 CFR 1307.71).\3\ Fifth, the Order alleged that Registrant ``has 
failed to maintain accurate inventory controls'' in that ``Chapman 
routinely manipulated computer inventory records.'' Id. at 4 (citing 21 
U.S.C. 827(a) & (b); 842(a)(5)). Sixth, the Order alleged that 
Registrant ``has routinely destroyed controlled substance ordering 
records'' and that ``Chapman regularly shredded invoices . . . from its 
suppliers to conceal the extent of his diversion.'' Id. (citing 21 CFR 
1305.17 and 1305.27). Seventh, the Order alleged that on June 30, 2016, 
Registrant ``provided a [c]losing [i]nventory certifying that it was 
complete and accurate,'' but that ``[b]ased on . . . Chapman's 
admissions, this report was not complete or accurate.'' Id. (citing 21 
U.S.C. 824(a)(4)(A), 21 CFR 1304.03, 1304.04, 1304.11, and 1304.21).
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    \2\ The Government alleged that the MOA expired on January 12, 
2015. Show Cause Order, at 3.
    \3\ The correct citation is to 21 CFR 1301.71(a).
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    In addition to the above, the Show Cause Order alleged that Chapman 
``repeatedly deleted [p]harmacy video surveillance footage of his 
unlawful removal of controlled substances from the [p]harmacy,'' that 
``Chapman frequently exhibits signs of impairment or intoxication while 
at work,'' and that ``[w]hile impaired, [he] has incorrectly filled 
prescriptions.'' Id. The Order also alleged that ``[d]uring the course 
of the last year, [p]harmacy personnel have repeatedly identified 
significant losses in routine pill counts,'' including a loss of 100 
oxycodone pills ``in the week preceding [the] June 30, 2016'' 
inspection. Id. The Order further alleged that ``[t]hese losses 
occurred on a regular basis'' and involved ``oxycodone, hydrocodone, 
oxymorphone, and ADHD pills,'' and that ``[t]hese losses were 
consistently reported to . . . Chapman.'' Id.
    Next, the Show Cause Order alleged that ``[d]espite knowing . . . 
that DEA was actively investigating'' his pharmacy, Chapman diverted 
oxycodone and other drugs ``on least [five] occasions between June 30, 
2016 and August 5, 2016.'' Id. at 5. Specifically, the Order alleged 
that ``[b]etween July 15 and July 18, 2016, Chapman took 64 oxycodone 
pills,'' that ``[o]n July 21, 2016, Chapman removed oxycodone pills 
from a locked cabinet and placed an unknown number of loose pills in 
his pocket,'' that ``[o]n July 23, 2016, Chapman entered the [p]harmacy 
outside of store hours and took a 100 count bottle of oxycodone 
pills,'' and that ``[o]n August 3, 2016, Chapman again took oxycodone 
pills from the [p]harmacy['s] stock.'' Id. The Order also alleged that 
``[a]t least two of these incidents are recorded on video obtained by 
DEA.'' Id.
    The Show Cause Order further alleged that ``Chapman was 
hospitalized for complications related to overdose on at least three 
recent occasions, including . . . on approximately April 6, 2016, June 
17, 2016, and July 18, 2016.'' Id. The Order alleged that on or about 
these dates, Chapman ``tested positive'' for controlled substances 
which included oxycodone at each test (as well as cocaine on July 18, 
2016), even though records from the West Virginia Prescription 
Monitoring Program ``indicate that [he] did not receive any 
prescription for oxycodone or cocaine during the last year.'' Id.
    Finally, the Show Cause Order alleged that ``[o]ther [p]harmacy 
personnel have seen . . . Chapman using marijuana via [a] vaporizer 
while working at'' Registrant. Id. After again alleging that Chapman 
admitted to ``abus[ing] cocaine during the course of the last two 
years,'' the Order alleged that ``Chapman's possession of illicit 
controlled substances violates 21 U.S.C. 844(a).'' Id.
    Based on his ``preliminary finding that controlled substances were 
diverted from [Registrant] on numerous occasions in connection with 
serious misconduct involving concealment, falsification of inventory 
records, circumvention of security controls, and misuse of [its] 
[r]egistration to order controlled substances for purposes other than 
the conduct of lawful business or professional practice,'' the former 
Acting Administrator concluded that Registrant's registration ``is 
inconsistent with the public interest.'' Id. at 6. The former Acting 
Administrator also made the ``preliminary finding'' that Registrant's 
``continued registration during the pendency of these proceedings would 
constitute an imminent danger to the public health and safety because 
of the substantial likelihood . . . that death, serious bodily harm or 
abuse of controlled substances will occur in the absence of this 
suspension.'' Id. The former Acting Administrator thus concluded that 
Registrant's continued registration during the pendency of the 
proceeding ``constitutes an imminent danger to the public health and 
safety'' and suspended its registration ``effective immediately.'' Id. 
(citing 21 U.S.C. 824(d)). The former Acting Administrator's Order also 
authorized the seizure or placement under seal of Registrant's 
controlled substances. Id.
    The Show Cause Order notified Registrant of its right to request a 
hearing on the allegations or to submit a written statement while 
waiving its right to a hearing, the procedures for electing either 
option, and the consequence of failing to elect either option. Id. 
(citing 21 CFR 1301.43). On the same day it was issued, a DEA Diversion 
Investigator personally served the Order to Show Cause and Immediate 
Suspension of Registration on Registrant's pharmacy manager at which 
time the Investigators took custody of Registrant's controlled 
substances and Certificate of Registration. GX 3, at 2 ] 7.
    According to the Government, since the date of service of the 
Order, Registrant has neither requested a hearing nor submitted a 
written statement while waiving its right to a hearing. Request for 
Final Agency Action, at 1-2. Based on the Government's representation, 
I find that more than 30 days have now passed and Registrant has 
neither requested a hearing nor submitted a written statement while 
waiving its right to a hearing. I therefore find that Registrant has 
waived its right to a hearing or to submit a written statement and 
issue this Decision and Order based on reliable and probative evidence 
submitted by the Government. See 21 CFR 1301.43(e). I make the 
following findings.

Findings of Fact

    Registrant is a limited liability company organized under the laws 
of West Virginia; it owns and operates City Center Pharmacy, a retail 
pharmacy located at 8119 Court Avenue, Hamlin, West Virginia. GX1; GX 
3, at 1.

[[Page 51435]]

According to the records of the West Virginia Secretary of State, 
George Chapman and his wife Summer Chapman are member-officers of the 
company. GX 3, Appendix 2, at 2. George Chapman is the Pharmacist-in-
Charge (PIC). GX 3, at 2; see also id. at Appendix 3.
    Registrant previously held DEA Certificate of Registration No. 
FC3015915, pursuant to which it was authorized to dispense controlled 
substances in schedules II through V as a retail pharmacy at the above 
address. GX 1. This registration expired on August 31, 2017. Id. 
According to the registration records of the Agency (of which I take 
official notice, see 5 U.S.C. 556(e)), Registrant did not file a 
renewal application. However, according to the declaration of the 
Diversion Investigator, upon service of the Immediate Suspension Order, 
the Government took custody of Registrant's controlled substances. GX 
3, at 1.
    In 2009, Chapman, who was then employed at a hospital pharmacy, was 
convicted of a misdemeanor offense of embezzling controlled substances 
from his employer and placed on probation.\4\ GX 3, Appendix 1, at 1-2. 
Chapman, who pled guilty to the charge, was placed on probation for a 
period of one year. Id. at 1. Thereafter, Chapman applied for a retail 
pharmacy registration in schedules II through V, and was allowed to 
enter into an MOA, which became effective on January 12, 2012, and 
remained in effect for a period of three years, after which 
Registrant's Registration became unrestricted. GX 3, Appendix 3, at 1-
4.
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    \4\ According to the MOA, in the spring of 2009, Chapman injured 
his back and was prescribed oxycodone and hydrocodone. GX 3, 
Appendix 3, at 1-2. As his pain increased, Chapman began using more 
drugs than were prescribed and stole several hundred tablets from 
his employer. Id. at 1. Chapman, however, reported his drug problem 
to his employer and entered into a recovery contract with the West 
Virginia Pharmacy Recover Network (PRN), which required that he 
attend Narcotics Anonymous/Alcoholics anonymous meetings, provide 
random drug screens, and see an addiction psychiatrist. Id. at 2. At 
the time he entered into the MOA, he had successfully completed the 
PRN's requirements and was ``under contract for an additional three 
year period.'' Id.
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The Investigation of Registrant

    In June 2016, a DEA Diversion Investigator (DI) assigned to the 
Charleston, West Virginia Resident Office received ``multiple tips'' 
that George Chapman ``often appeared impaired at work.'' GX 3, at 2. 
The DI initiated an investigation and determined that Chapman had 
previously pled guilty in state court ``to embezzling and abusing 
approximately 800 hydrocodone and oxycodone pills from approximately 
June through October 2009.'' Id. He also determined that Chapman had, 
as a condition of obtaining a registration for the pharmacy, entered 
into an MOA with the Agency. Id.
    The DI obtained an Administrative Inspection Warrant (AIW), and on 
June 30, 2016, he, accompanied by other Investigators, executed the AIW 
at Registrant. Id. According to the DI, ``[t]he [p]harmacy's inventory 
records were found to be so incomplete and unreliable that no formal 
audit using the . . . records could be completed.'' Id. The DI further 
stated that during the inspection, Chapman ``admitted that [the] 
electronic inventory records had been repeatedly manipulated'' and the 
``records were otherwise so disorganized that conducting a reliable on-
site audit was impossible.'' Id.
    The DI further stated that during the inspection, ``several 
[p]harmacy [employees] uniformly reported to [him] that . . . Chapman 
regularly came to work impaired'' and ``[s]everal employees also 
reported that pills were regularly missing from the [p]harmacy during 
the last year.'' Id.
    One pharmacy employee told the DI that on occasions when a ``per 
diem [p]harmacist'' was working at Registrant, Chapman came to the 
pharmacy, ``asked to use'' the employee's computer, after which he 
``open[ed] the locked cabinet'' in which the oxycodone was kept and 
[took] a 100 count wholesale bottle of oxycodone 15 mg'' out of the 
cabinet, then ``went to his office'' and subsequently ``left the 
pharmacy.'' Id. at 3. The employee told the DI that she subsequently 
opened the cabinet to confirm that the bottle was missing; she also 
``attempted to review the surveillance video'' only to find that ``it 
had been deleted.'' Id. The employee also told the DI that she checked 
the computer inventory records and found that 100 pills of oxycodone 15 
mg had been removed from the count of drugs ``on hand.'' Id.
    The same employee told the DI ``that the [p]harmacy regularly 
experiences inventory losses'' and had been experiencing them ``for 
more than a year.'' Id. The employee told the DI that on the very day 
that the AIW was executed, her comparison of the computer inventory and 
the actual count of drugs on hand found that 107 dosage units of 
hydrocodone 10 mg were missing. Id. The employee also told the DI that 
in the weeks prior to the AIW, one bottle of oxycodone 20 mg and one 
bottle of oxycodone 15 mg went missing. Id.
    The employee further told the DI that Chapman was impaired at work 
on an almost daily basis and that he would ``spend the majority of his 
day asleep in his office.'' Id. She also told the DI of an instance in 
which Chapman ``had incorrectly filled a prescription'' which she 
corrected and that ``she saw Chapman using a vaporizer at work to smoke 
marijuana regularly.'' Id.
    According to the DI, following the AIW, the same employee 
``reported to [him] multiple other instances where . . . Chapman had 
stolen oxycodone'' from Registrant; the employee stated that these 
incidents occurred on July 18 and 23, as well as August 3, 2016. Id. 
The employee also took a photograph showing Chapman ``passed out at his 
desk on July 18, a day when he was . . . taken to the hospital'' 
because he overdosed. Id. at 3-4. According to the employee, on that 
day, ``64 oxycodone pills were missing compared with a physical pill 
count conducted on July 15, 2017.'' Id. at 4. The DI subsequently 
subpoenaed the photo; the Government submitted the photo as part of the 
evidentiary record. Id. at 3; see also Appendix 4.
    During the AIW, the DI also interviewed Chapman. GX 3, at 3. During 
the interview, Chapman stated that the ``[p]harmacy had destroyed 
approximately 70 Percocet pills sometime in the past and that . . . he 
had adjusted the `inventory book' so that the records would reflect the 
physical inventory.'' Id. Chapman admitted, however, that he did not 
report ``this shortage'' to DEA. Id. He also maintained he had 
``attempted to report a loss of 100 pills to DEA but did not attempt to 
report other losses either to DEA or local law enforcement because he 
considered them `not significant.' '' Id. Chapman further represented 
``that 10-15 oxycodone or hydrocodone pills would be missing from the 
[p]harmacy . . . perhaps 15-20 times in the prior year'' and that 
``there was a total loss of perhaps 300 oxycodone and hydrocodone 
pills.'' Id. at 3-4. Chapman stated that ``on those occasions when he 
found a pill shortage in the physical inventory as compared with the 
computer records, he adjusted the computer inventory to reflect the 
losses.'' Id. However, ``Chapman admitted that he did not report a loss 
for any of these losses.'' Id. at 4.
    During the interview, ``Chapman denied that he was abusing 
prescriptions drugs'' and stated ``that his fill-in pharmacists were 
previous drug abusers he had hired from a West Virginia Pharmacy Board 
facilitated drug rehabilitation program.'' Id. Chapman also ``denied 
knowing

[[Page 51436]]

anything further about the nature of the [p]harmacy losses of'' 
controlled substances. Id.
    During the June 30 interview, Chapman also admitted that he 
``us[ed] marijuana illegally.'' Id. at 4. He told the DI that ``he uses 
an electronic cigarette or vaporizer device as a delivery mechanism for 
his marijuana.'' Id.
    On July 19, 2016, the DI and a TFO served a search warrant on the 
Cabell-Huntington Hospital for Chapman's records. Id. at 5. The records 
show that on June 17, 2015,\5\ as well as April 6 and July 18, 2016, 
``Chapman was admitted . . . due to complications from an overdose.'' 
Id. at 5. Chapman underwent urine drug tests on each occasion, with the 
June 17, 2015 and April 6, 2016 test results showing that he was 
``positive for opiates including oxycodone'' and the July 18 test 
results showing that he ``was positive for'' both cocaine and 
oxycodone. Id. The records for both the June 17, 2015 and April 6, 2016 
admissions document that Chapman stated ``that he had taken Percocet 
prior to being admitted.'' Id. See also Appendix 6A, at 2 (April 6, 
2016 discharge summary) (``discussed his urine tox screen with him and 
he states he took \1/2\ percocet''); Appendix 6B, at 15 (June 17, 2015 
discharge summary: ``The pt. denied taking anything other than Percocet 
several days prior to admission.'')
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    \5\ While in his declaration, the DI stated that Chapman was 
admitted to the hospital on June 17, 2016, the records clearly show 
that this occurred on June 17, 2015. Appendix 6B.
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    According to the DI, he queried the West Virginia Prescription 
Monitoring Program (PMP) to determine what prescriptions Chapman had 
been issued. GX 3, at 5. The query showed that ``Chapman had filled 
prescriptions for Tramadol and one prescription for hydrocodone in 
March 2016.'' Id. The query showed no prescriptions for other drugs. 
Id.
    On July 21, 2016, the DI received another report from a pharmacy 
employee that Chapman had again taken oxycodone from the pharmacy. Id. 
at 4. The next day, the DI, along with a Task Force Officer and a 
Pharmacy Board Investigator again interviewed Chapman. Id. During the 
interview, ``Chapman admitted that he had been diverting . . . 200 to 
300 milligrams every day [of] oxycodone or hydrocodone'' for his 
``personal use'' and had done so ``for approximately [one] year.'' Id. 
Chapman admitted that he ``alter[ed] the [p]harmacy's computer and 
inventory records'' and that he ``shredd[ed] invoices from suppliers 
and destroy[ed] DEA 222 Forms and CSOS records.'' Id. He ``also 
admitted that he had been using cocaine during the past two years,'' as 
well as that ``his addiction was so strong that he couldn't wait for 
[the] MOA . . . to expire so that he could begin using his . . . 
[r]egistration to fuel his . . . addiction.'' Id.
    On July 23, 2016, the DI received another report from the employee 
that Chapman had taken drugs from the pharmacy, in particular, a 100-
count bottle of oxycodone. Id. at 4. On August 3, 2016, the DI received 
still another report from the employee that Chapman had taken narcotics 
from the pharmacy. Id. at 5.
    The DI also attempted to conduct an audit of the pharmacy. Id. 
While the DI subpoenaed the records from the pharmacy's suppliers and 
was able to determine the total amount of drugs that the pharmacy had 
obtained, according to the DI, ``the [p]harmacy's internal records were 
so unreliable as to make an accurate count impossible.'' Id. Based on 
the records he obtained from just one supplier, the DI found that 
Respondent could not account for 20,000 pills of oxycodone 30 mg and 
hydrocodone 10 mg. Id. The DI noted that Chapman had also admitted to 
diverting oxycodone 15 mg. Id.
    The DI also obtained a search warrant for the pharmacy's video 
surveillance records; these videos were submitted as part of the 
record. Id. According to the DI, these videos show ``Chapman entering 
the pharmacy and removing pills on two separate occasions,'' including 
one during which Chapman ``plac[ed] an unknown number of loose pills 
into his pocket,'' and another, during which Chapman removed a pill 
bottle from a locked storage cabinet. Id. at 5-6. In addition, the DI 
obtained photographs showing the various areas of the pharmacy and the 
location of the locked cabinet.\6\ Id. at 6. One of the videos does 
show a person opening a locked cabinet at the pharmacy counter, 
removing a plastic bottle from the cabinet, and leaving the pharmacy.
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    \6\ The DI also obtained a copy of court records showing that on 
September 8, 2016, Chapman entered into a guilty plea to a state 
court information which charged him with the felony offense of 
``Obtaining Possession of a Controlled Substance by Fraud.'' GX 3, 
at 6.
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    Finally, the DI stated that ``[i]f Chapman had been candid about 
his role in the diversion of controlled substances during the June 30 
AIW, I and my DEA colleagues would have pursued immediate criminal 
action against Chapman. We would also have been able to take additional 
steps--including seeking immediate administrative sanctions--to prevent 
additional diversion of controlled substances from the [p]harmacy.'' 
Id.

Discussion

Mootness

    As found above, the registration at issue in this proceeding 
expired on August 31, 2017. According to the registration records of 
the Agency, Chapman has not filed either a renewal application or a new 
application for the pharmacy. Accordingly, there is neither a 
registration to revoke nor an application to act upon.
    While ordinarily these facts would render this proceeding moot, see 
Ronald J. Riegel, 63 FR 67132, 67133 (1998), simultaneously with the 
issuance of the Show Cause Order, the former Acting Administrator 
ordered that Registrant's registration be immediately suspended. 
Pursuant to the authority granted by 21 U.S.C. 824(f), the former 
Acting Administrator authorized the seizure or placement under seal of 
the controlled substances possessed by Registrant pursuant to its 
registration. As found above, the Government seized various controlled 
substances pursuant to the Immediate Suspension Order. GX 3, at 2.
    Under section 824(f), ``[u]pon a revocation order becoming final, 
all such controlled substances'' which have been seized or placed under 
seal ``shall be forfeited to the United States'' and ``[a]ll right, 
title, and interest in such controlled substances shall vest in the 
United States upon a revocation order becoming final.'' 21 U.S.C. 
824(f). DEA has previously held that a registrant, who has been issued 
an immediate suspension order, cannot defeat the effect of this 
provision by allowing its registration to expire. See Meetinghouse 
Community Pharmacy, Inc., 74 FR 10073, 10074 n.5 (2009); RX Direct 
Pharmacy, Inc., 72 FR 54070, 54072 n.4 (2007). Thus, this proceeding 
presents the collateral consequence of who has title to the controlled 
substances that were seized. Accordingly, I hold that this case is not 
moot and proceed to the merits.

The Merits

    Under the CSA, ``[a] registration pursuant to section 823 of this 
title to manufacture, distribute, or dispense a controlled substance . 
. . 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 of this title inconsistent with the 
public interest as determined under such section.'' 21 U.S.C. 
824(a)(4). In the case of a retail

[[Page 51437]]

pharmacy, which is deemed to be a practitioner, see id. Sec.  802(21), 
Congress directed the Attorney General to consider the following 
factors in making the public interest determination:

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

Id.

    ``[T]hese factors are . . . considered in the disjunctive.'' Robert 
A. Leslie, M.D., 68 FR 15227, 15230 (2003). It is well settled that I 
``may rely on any one or a combination of factors, and may give each 
factor the weight [I] deem[ ] appropriate in determining whether'' to 
suspend or revoke an existing registration. Id.; see also MacKay v. 
DEA, 664 F.3d 808, 816 (10th Cir. 2011); Volkman v. DEA, 567 F.3d 215, 
222 (6th Cir. 2009); Hoxie v. DEA, 419 F.3d 477, 482 (6th Cir. 2005). 
Moreover, while I am required to consider each of the factors, I ``need 
not make explicit findings as to each one.'' MacKay, 664 F.3d at 816 
(quoting Volkman, 567 F.3d at 222); see also Hoxie, 419 F.3d at 482.\7\
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    \7\ In short, this is not a contest in which score is kept; the 
Agency is not required to mechanically count up the factors and 
determine how many favor the Government and how many favor the 
registrant. Rather, it is an inquiry which focuses on protecting the 
public interest; what matters is the seriousness of the registrant's 
or applicant's misconduct. Jayam Krishna-Iyer, 74 FR 459, 462 
(2009). Accordingly, as the Tenth Circuit has recognized, findings 
under a single factor can support the revocation of a registration. 
MacKay, 664 F.3d at 821.
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    Also, pursuant to section 824(d), ``[t]he Attorney General may, in 
his discretion, suspend any registration simultaneously with the 
institution of proceedings under this section, in cases where he finds 
that there is an imminent danger to the public health or safety.'' 21 
U.S.C. 824(d)(1). Congress has defined ``the phrase `imminent danger to 
the public health or safety' [to] mean[ ] that, due to the failure of 
the registrant to maintain effective controls against diversion or 
otherwise comply with the obligations of a registrant under [the CSA], 
there is a substantial likelihood of an immediate threat that death, 
serious bodily harm, or abuse of a controlled substance will occur in 
the absence of an immediate suspension of the registration.'' Id. Sec.  
(d)(2).
    Under the Agency's regulation, ``[a]t any hearing for the 
revocation or suspension of a registration, the Administration shall 
have the burden of proving that the requirements for such revocation or 
suspension pursuant to . . . 21 U.S.C. 824(a) . . . are satisfied.'' 21 
CFR 1301.44(e). In this matter, I have considered all of the factors 
and find that the Government's evidence with respect to factors four 
and five,\8\ establishes that Registrant, through its owner, has 
committed acts which render its registration ``inconsistent with the 
public interest'' and which support the suspension of its registration. 
21 U.S.C. 824(a)(4). I further find that the Government's evidence 
establishes that Registrant's misconduct satisfies the imminent danger 
standard of 21 U.S.C. 824(d), in that, Registrant's failure ``to 
maintain effective controls against diversion or otherwise comply with 
the obligations of a registrant under'' the CSA created ``a substantial 
likelihood of an immediate threat that . . . abuse of a controlled 
substance will occur in the absence of an immediate suspension of [its] 
registration.''
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    \8\ The Government submitted no evidence as to Factor One. As to 
Factor Three, the Government submitted evidence that after issuance 
of the Show Cause Order, Chapman pled guilty in state court to 
Obtaining Possession of a Controlled Substance by Fraud. While the 
evidence also includes a Post-Conviction Procedural Order but not a 
Judgment, the Government did not allege Chapman's conviction for 
this offense as grounds for the proceeding. However, even if a 
Judgment has been issued, the Government did not provide him with 
notice that it intended to rely on either Factor Three or 21 U.S.C. 
824(a)(2). Thus, I consider Chapman's guilty plea only as additional 
evidence to support the allegations (not that such evidence is 
needed).
     In its Request for Final Agency Action, the Government did not 
address the applicability of Factor Two (the Registrant's experience 
in dispensing controlled substances) to the various acts of 
misconduct that were alleged and proved. As explained in this 
Decision, the record establishes that Registrant engaged in the 
unlawful distribution of controlled substances and committed various 
recordkeeping violations. These acts of misconduct are relevant in 
assessing both Registrant's compliance with applicable laws related 
to controlled substances as well as its experience in dispensing 
controlled substances.
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Factor Four--Compliance With Applicable Laws Related to Controlled 
Substances

    As found above, the evidence shows that Chapman, Registrant's PIC, 
was diverting narcotic controlled substances from the pharmacy's stock 
for his own misuse. This evidence includes: (1) The videos showing him 
unlocking the cabinet in which controlled substances were stored, 
removing a bottle of medication, and leaving the pharmacy; (2) the 
statements of a pharmacy employee to the DI as to various instances in 
which oxycodone went missing, including the July 18, 2016 incident, 
when he passed out at his desk and was hospitalized; (3) the UDS 
results for the various hospitalizations including the July 18, 2016 
positive result for oxycodone (which was also positive for cocaine); 
(4) his subsequent admission to Investigators during the July 21, 2016 
interview that he had been diverting 200 to 300 milligrams every day of 
oxycodone or hydrocodone for approximately one year; (5) the DI's 
finding that at least 20,000 dosage units of oxycodone 30 mg and 
hydrocodone 10 mg could not be accounted for; and (6) the DI's 
statement that his query of the state PMP showed that Chapman had 
filled only prescriptions for tramadol and one hydrocodone prescription 
in March 2016.
    Under the Controlled Substances Act, it is ``unlawful for any 
person knowingly or intentionally to possess a controlled substance 
unless such substance was obtained directly, or pursuant to a valid 
prescription or order, from a practitioner, while acting in the course 
of his professional practice, or except as otherwise authorized by this 
subchapter.'' 21 U.S.C. 844(a). While Chapman, as the PIC of a 
registered pharmacy, was authorized to order controlled substances for 
the pharmacy and to possess controlled substances in his capacity as 
the Registrant's PIC, he was generally authorized to do so only for the 
purpose of dispensing the controlled substances to patients ``pursuant 
to the lawful order of a practitioner,'' i.e., a prescription.\9\ See 
21 U.S.C. 822(b) (``Persons registered by the Attorney General under 
this subchapter to . . . dispense controlled substances . . . are 
authorized to possess . . . distribute, or dispense such substance . . 
. to the extent authorized by their registration and in conformity with 
the other provision of this subchapter.'') (emphasis added); id. Sec.  
823(f) (``The Attorney general shall register practitioners (including 
pharmacies, as distinguished from pharmacists) to dispense . . . .''). 
id. Sec.  802 (``The term `dispense' means to deliver a controlled

[[Page 51438]]

substance to an ultimate user . . . by, or pursuant to the lawful order 
of, a practitioner''); see also 21 CFR 1300.01(a) (``Prescription means 
an order for medication which is dispensed to or for an ultimate user 
but does not include an order for medication which is dispensed for 
immediate administration to the ultimate user . . . .''). As 
Registrant's PIC, Chapman was not authorized to then distribute the 
controlled substances to himself. Moreover, because under West Virginia 
law, a limited liability company has legal personality (see West Va. 
Sec.  841(a)(1)) and Chip RX, L.L.C., held the registration, it 
unlawfully distributed controlled substances to Chapman in violation of 
21 U.S.C. 841(a)(1) (``Except as authorized by this subchapter, it 
shall be unlawful for any person knowing or intentionally . . . to 
distribute . . . a controlled substance.'').
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    \9\ Under a DEA regulation, a pharmacy is also allowed to 
distribute a small quantity of controlled substances to another 
practitioner ``without being registered to distribute,'' provided 
that ``[t]he practitioner to whom the controlled substance is to be 
distributed is registered under the Act to dispense that controlled 
substance.'' 21 CFR 1307.11(a). Those distributions cannot, however, 
exceed, on a ``calendar year'' basis, ``5 percent of the total 
number of dosage units of all controlled substances distributed and 
dispensed by the practitioner during the same calendar year.'' Id. 
Chapman's distribution of controlled substances to himself does not 
come within this exemption.
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    The evidence also shows that Registrant (and Chapman) violated the 
CSA by failing maintain ``a complete and accurate'' record of each such 
[controlled] substance . . . received, sold, delivered or otherwise 
disposed of . . . .'' 21 U.S.C. Sec.  827(a)(3). Specifically, Chapman 
admitted that he shredded invoices from suppliers. See id., see also 21 
CFR 1304.04(a) (requiring that records be kept ``for at least 2 years 
from the date of such inventory or records''); id. Sec.  1304.22(c) 
(incorporating 21 CFR 1304.22(a)(2)(i), (ii), (iv), (vii), (ix)). 
Indeed, Registrant was required to maintain records of its distribution 
to Chapman.
    Moreover, Chapman admitted that he destroyed both schedule II order 
forms and CSOS (Controlled Substance Ordering System) electronic 
records. Chapman's admission establishes that Registrant violated 21 
U.S.C. 828(c)(2), which requires that a purchaser of a schedule II 
controlled substance retain a duplicate copy of a DEA Order Form ``if 
such order is accepted'' by a supplier and ``preserve such duplicate 
for a period of two years and make it available for inspection or 
copying.'' Chapman's admission also establishes that Registrant 
violated section 828(c)(2) by failing to maintain CSOS records. See 
also 21 CFR 1305.27(a) (``A purchaser must, for each order filled, 
retain the original signed order and all linked records for that order 
for two years.'').
    Thus, the evidence with respect to Registrant's compliance with 
applicable laws related to controlled substances establishes that 
Registrant committed numerous violations of the CSA by unlawfully 
distributing controlled substances to Chapman in violation of 21 U.S.C. 
841(a)(1); it also shows that Registrant and Chapman violated the 
recordkeeping provisions of 21 U.S.C. 827(a)(3), as well as provisions 
requiring the maintenance of schedule II order forms. 21 U.S.C. 
828(a)(2). Finally, the evidence also shows that Registrant's principal 
and PIC violated 21 U.S.C. 844(a) by obtaining controlled substances 
other than by means ``pursuant to a valid prescription . . . from a 
practitioner, while acting in the course of his professional practice, 
or except as otherwise authorized by'' the CSA.

Factor Five--Such Other Conduct Which May Threaten Public Health and 
Safety

    The Agency has also long held that self-abuse of a controlled 
substance constitutes such other conduct which may threaten public 
health and safety. See Tyson D. Quy, 78 FR 47412 (2013); Tony T. Bui, 
75 FR 49979 (2010); Kenneth Wayne Green, Jr., 59 FR 51453 (1994); David 
E. Trawick, 53 FR 5,326 (1988). While Registrant is not an individual 
but rather a limited liability company, the Agency has long held that 
the misconduct of an entity's principal is properly considered in 
determining whether to revoke the entity's registration. See G & O 
Pharmacy of Paducah, 68 FR 43752, 43753 (2003). That Chapman's personal 
abuse of controlled substances, which includes his abuse of cocaine, 
narcotics, and marijuana on the job, may have threatened public health 
and safety is indisputable given the evidence that he incorrectly 
filled a prescription and pharmacy staff had to correct his error.\10\
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    \10\ Factor Five does not require that the Government prove an 
actual threat to public health or safety and thus, the Government is 
not required to identify any specific instance in which a 
practitioner's (or its employee's) self-abuse created an actual 
threat to the health and safety of its patients.
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    The Government also alleged that Chapman made several materially 
false statements to agency Investigators. As recognized by the Sixth 
Circuit,''[c]andor during DEA investigations, regardless of the 
severity of the violations alleged, is considered by the DEA to be an 
important factor when assessing whether a [practitioner's] registration 
is consistent with the public interest.'' Hoxie v. DEA, 419 F.3d 477, 
483 (6th Cir. 2005). To be actionable, the Government is required to 
show that the statement was false and material to the investigation. 
See Roy S. Schwartz, 79 FR 34360, 34363 n.6 (2014); Belinda R. Mori, 78 
FR 36582, 36589 (2013).
    As the Supreme Court has explained, a false statement is material 
if it `` `has a natural tendency to influence, or was capable of 
influencing the decision of the decisionmaking body to which it was 
addressed.' '' Kungys v. United States, 485 U.S. 755, 770 (1988) 
(quoting Weinstock v. United States, 231 F.2d 699, 701 (D.C. Cir. 
1956)). The Court has further explained that:

it has never been the test of materiality that the misrepresentation 
. . . would more likely than not have produced an erroneous 
decision, or even that it would more likely than not have triggered 
an investigation. Rather, the test is whether the misrepresentation 
. . . was predictably capable of affecting, i.e., had a natural 
tendency to affect, the official decision.

485 U.S. at 770-71. ``It makes no difference that a specific 
falsification did not exert influence so long as it had the capacity to 
do so.'' United States v. Alemany Rivera, 781 F.2d 229, 234 (1st Cir. 
1985).
    The evidence establishes that Chapman made several materially false 
statements to the Investigators. First, Chapman told the Investigators 
during the June 30, 2016 interview that ``10 to 15 oxycodone or 
hydrocodone pills would be missing from the [p]harmacy . . . perhaps 
15-20 times in the prior year'' and that Registrant had ``a total loss 
of perhaps 300 oxycodone and hydrocodone pills.'' Second, during the 
June 30, 2016 interview, Chapman ``denied that he was abusing 
prescription drugs'' and attributed the diversion to fill-in 
pharmacists he employed who were previous drug abusers and were hired 
through a State Board rehabilitation program. He also ``denied knowing 
anything further about the nature of the [p]harmacy's losses'' of 
controlled substances.
    Chapman's statements regarding the scope of the diversion of drugs 
from Registrant were false because the diversion was far more extensive 
than what he claimed during the June 30 interview, as he ultimately 
admitted during the July 22, 2016 interview, when he acknowledged 
diverting 200 to 300 milligrams per day of oxycodone or hydrocodone for 
personal use. So too, his statements during the June 30 interview in 
which he denied that he was abusing drugs, as well as that he knew 
anything further about the nature of the pharmacy's losses, were also 
false as he ultimately admitted during the July 22 interview that he 
was abusing narcotic prescription drugs and was diverting large 
quantities on a daily basis.
    I further conclude that these statements were capable of 
influencing the decisionmaking process of the Agency because Chapman 
attempted to minimize the scope of the criminal conduct that was 
occurring at

[[Page 51439]]

Registrant, both with respect to the volume of drugs being diverted and 
by denying that he was engaged in diverting and abusing the controlled 
substances. As explained above, Registrant's and Chapman's misconduct 
in diverting drugs, which the latter personally abused, was actionable 
misconduct under both Factor Four (compliance with applicable laws 
related to controlled substances) and Factor Five (other conduct which 
may threaten public health and safety). As the DI explained, had 
Chapman been candid during the June 30, 2016 interview, he and his 
colleagues ``would have pursued immediate criminal action against 
Chapman'' as well as administrative action against Registrant. Indeed, 
Chapman's subsequent admissions during the July 22, 2016 interview 
supported both criminal charges against Chapman and the Immediate 
Suspension Order.
    Accordingly, I conclude that the evidence with respect to Factor 
Five establishes that Registrant's principal was abusing controlled 
substances and that he made several materially false statements to DEA 
investigators. I also conclude that these acts constitute actionable 
misconduct which may threaten public health and safety.

Summary of Factors Four and Five and Imminent Danger

    As found above, the Government's evidence establishes that 
Registrant unlawfully distributed controlled substances to Chapman and 
failed to maintain required records. The evidence also establishes that 
Registrant's principal and pharmacist in charge unlawfully possessed 
controlled substances, destroyed records that Registrant was required 
to maintain, abused controlled substances and made materially false 
statements to DEA Investigators. I therefore find that Registrant has 
committed such acts as to render its registration inconsistent with the 
public interest. 21 U.S.C. 824(a)(4).
    For purposes of the imminent danger inquiry, these findings also 
support the conclusion that Registrant has ``fail[ed] . . . to maintain 
effective controls against diversion or otherwise comply with the 
obligations of a registrant under'' the CSA. 21 U.S.C. 824(d)(2). Also, 
the evidence that Chapman was diverting 200 to 300 milligrams of 
narcotics per day, which he then abused (along with the evidence 
showing that he was hospitalized for an overdose on multiple 
occasions), establishes that there was ``a substantial likelihood of an 
immediate threat that death, serious bodily harm, or abuse of a 
controlled substance [would] occur in the absence of the immediate 
suspension of [Registrant'] registration.'' Id. I therefor affirm the 
issuance of the Immediate Suspension Order.
    Pursuant to 21 U.S.C. 824(f), ``[u]pon a revocation order becoming 
final, all . . . controlled substances'' seized pursuant to a 
suspension order ``shall be forfeited to the United States'' and 
``[a]ll right, title, and interest in such controlled substances shall 
vest in the United States upon a revocation order becoming final.'' As 
the Agency has previously held, a registrant cannot defeat the effect 
of this provision by allowing its registration to expire.'' S & S 
Pharmacy, Inc., d/b/a Platinum Pharmacy & Compounding, 78 FR 57656, 
57659 (2013) (citing Meetinghouse Community Pharmacy, Inc., 74 FR 
10073, 10074 n.5 (2009); RX Direct Pharmacy, Inc., 72 FR 54070, 54072 
n.4 (2007)). Registrant had the right to challenge the Immediate 
Suspension Order before the Agency but chose not to. And had Registrant 
not allowed its registration to expire, I would have revoked it.
    Accordingly, I will order that the controlled substances seized 
pursuant to the Immediate Suspension Order be forfeited to the United 
States. 21 U.S.C. 824(f). I will also declare that ``[a]ll, right, 
title, and interest in'' the controlled substances that were seized 
pursuant to the Suspension Order have vested in the United States. Id.

Order

    Pursuant to the authority vested in me by 21 U.S.C. 824(a) and (d), 
as well as 28 CFR 0.100(b), I order that the Order of Immediate 
Suspension issued to Chip RX d/b/a City Center Pharmacy be, and it 
hereby is, affirmed. Pursuant to the authority vested in me by 21 
U.S.C. 824(f), I order that all controlled substances seized pursuant 
to the Order of Immediate Suspension be, and they hereby are, forfeited 
to the United States. Pursuant to the authority vested in me by 21 
U.S.C. 824(f), I also declare that all right, title, and interest in 
all controlled substances seized pursuant to the Order of Immediate 
Suspension be, and they hereby are, vested in the United States. This 
Order is applicable December 6, 2017.

    Dated: October 31, 2017.
Robert W. Patterson,
Acting Administrator.
[FR Doc. 2017-24093 Filed 11-3-17; 8:45 am]
 BILLING CODE 4410-09-P