Document ID: FDA-2019-N-3794-0002
Agency: fda
Document Type: Notice
Title: Final Debarment Order: Jerrod Nichols Smith
Posted Date: 2021-01-04T05:00Z

[Federal Register Volume 86, Number 1 (Monday, January 4, 2021)]
[Notices]
[Pages 101-102]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-29052]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

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

Jerrod Nichols Smith: Debarment Order

AGENCY: Food and Drug Administration, HHS.

ACTION: Notice.

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

DATES: This order is effective January 4, 2021.

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

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

SUPPLEMENTARY INFORMATION: 

I. Background

    Section 306(a)(2)(B) of the FD&C Act (21 U.S.C. 335a(a)(2)(B)) 
requires debarment of an individual from providing services in any 
capacity to a person that has an approved or pending drug product 
application if FDA finds that the individual has been convicted of a 
felony under Federal law for conduct relating to the regulation of any 
drug product under the FD&C Act. On July 16, 2018, Mr. Smith was 
convicted as defined in section 306(l)(1)(A) of the FD&C Act when 
judgment was entered against him in the U.S. District Court for the 
Middle District of Tennessee, Nashville Division, after a jury trial, 
to one count of conspiracy to commit mail fraud in violation of 18 
U.S.C. 371, 15 counts of mail fraud in violation of 18 U.S.C. 1341, and 
one count of obstruction of justice in violation of 18 U.S.C. 1001.
    The factual basis for these convictions is as follows: Mr. Smith 
was one of the owners and operators of Cumberland Distribution, Inc. 
(``Cumberland''), formerly known as Midwest Pharmacy, which was a 
wholesale drug distribution company incorporated in Nevada and 
Tennessee. Mr. Smith was engaged in the business of wholesale 
distribution of prescription drugs, as defined by 21 U.S.C. 
353(e)(3)(B), to pharmacy customers throughout the United States. From 
December 2006 through August 2009, Mr. Smith, along with others, 
purchased millions of dollars of prescription drugs, through 
Cumberland. The vast majority of the prescription drugs purchased by 
Cumberland and received at the company's warehouse facilities were sold 
to Cumberland, directly and indirectly, by individuals and entities 
whom Mr. Smith knew were not licensed by any State to engage in the 
wholesale distribution of prescription drugs and were not otherwise 
authorized to distribute prescription drugs pursuant to 21 U.S.C. 353. 
These unauthorized sellers obtained their prescription drugs from 
various networks of street level drug diverters. Mr. Smith directed 
employees to take steps to conceal the true origins of the diverted 
prescription drugs shipped to the company's warehouse facilities before 
shipping them to pharmacy customers around the country. Such steps 
included, but were not limited to, falsification of documents 
concerning the chain of custody or pedigree of a drug. These falsified 
pedigree documents, which Mr. Smith provided to his pharmacy customers 
or maintained at Cumberland, inaccurately represented that the diverted 
products had been obtained from licensed wholesale distributors. Mr. 
Smith also used shell companies to receive and relabel diverted 
prescription drugs before sending them to Cumberland's warehouse 
facilities to create the false appearance that his company was 
purchasing prescription drugs from licensed wholesale distributors.
    The diverted drugs included, but were not limited to, drugs used to 
treat human immunodeficiency virus/acquired immunodeficiency syndrome, 
antipsychotic medications, antidepressants, blood pressure medications, 
and diabetes medications. Numerous pharmacies reported problems with 
drugs they purchased from Cumberland, including prescription drug 
bottles containing the wrong medicine, the wrong dosage information, 
and foreign objects inside. At trial, several witnesses testified that 
at least one bottle of prescription drugs sold by Cumberland contained 
Tic Tacs instead of medicine. Through the course of this scheme, Mr. 
Smith's company had gross proceeds of approximately $58,984,912. His 
profits were approximately $14,689,782.
    As a result of these convictions, FDA sent Mr. Smith by certified 
mail on July 16, 2020, a notice proposing to permanently debar him from 
providing services in any capacity to a person that has an approved or 
pending drug product application. The proposal was based on a finding, 
under section 306(a)(2)(B) of the FD&C Act, that Mr. Smith was 
convicted of felonies under Federal law for conduct relating to the 
regulation of a drug product under the FD&C Act. The proposal also 
offered Mr. Smith an opportunity to request a hearing, providing him 30 
days from the date of receipt of the letter in which to file the 
request, and advised him that failure to request a hearing constituted 
an election not to use the opportunity for a hearing and a waiver of 
any contentions concerning this action. Mr.

[[Page 102]]

Smith received the proposal on August 28, 2020. Mr. Smith did not 
request a hearing within the timeframe prescribed by regulation and 
has, therefore, waived his opportunity for a hearing and any 
contentions concerning his debarment (21 CFR part 12).

II. Findings and Order

    Therefore, the Assistant Commissioner, Office of Human and Animal 
Food Operations, under section 306(a)(2)(B) of the FD&C Act, under 
authority delegated to the Assistant Commissioner, finds that Mr. Smith 
has been convicted of multiple felonies under Federal law for conduct 
otherwise relating to the regulation of a drug product under the FD&C 
Act.
    As a result of the foregoing finding, Mr. Smith is permanently 
debarred from providing services in any capacity to a person with an 
approved or pending drug product application, effective (see DATES) 
(see section 306(a)(2)(B) and (c)(2)(A)(ii) of the FD&C Act). Any 
person with an approved or pending drug product application who 
knowingly employs or retains as a consultant or contractor, or 
otherwise uses the services of Mr. Smith, in any capacity during his 
debarment, will be subject to civil money penalties (section 307(a)(6) 
of the FD&C Act (21 U.S.C. 335b(a)(6))). If Mr. Smith provides services 
in any capacity to a person with an approved or pending drug product 
application during his period of debarment he will be subject to civil 
money penalties (section 307(a)(7) of the FD&C Act). In addition, FDA 
will not accept or review any abbreviated new drug applications from 
Mr. Smith during his period of debarment, other than in connection with 
an audit under section 306 of the FD&C Act (section 306(c)(1)(B) of the 
FD&C Act). Note that, for purposes of section 306 of the FD&C Act, a 
``drug product'' is defined as a drug subject to regulation under 
section 505, 512, or 802 of the FD&C Act (21 U.S.C. 355, 360b, or 382) 
or under section 351 of the Public Health Service Act (42 U.S.C. 262) 
(see section 201(dd) of the FD&C Act (21 U.S.C. 321(dd))).
    Any application by Mr. Smith for special termination of debarment 
under section 306(d)(4) of the FD&C Act should be identified with 
Docket No. FDA-2019-N-3794 and sent to the Dockets Management Staff 
(see ADDRESSES). The public availability of information in these 
submissions is governed by 21 CFR 10.20.
    Publicly available submissions will be placed in the docket and 
will be viewable at https://www.regulations.gov or at the Dockets 
Management Staff (see ADDRESSES) between 9 a.m. and 4 p.m., Monday 
through Friday, 240-402-7500.

    Dated: December 28, 2020.
Lauren K. Roth,
Acting Principal Associate Commissioner for Policy.
[FR Doc. 2020-29052 Filed 12-31-20; 8:45 am]
BILLING CODE 4164-01-P