Holiday CVS, L.L.C. v. Holder, Civil Action No. 12–191 (RBW).

• Decision Date: 16 March 2012
• Docket Number: Civil Action No. 12–191 (RBW).
• Parties: HOLIDAY CVS, L.L.C., d/b/a CVS Pharmacy Nos. 219 and 5195, Plaintiffs, v. Eric H. HOLDER, Jr., et al., Defendants.
• Court: U.S. District Court — District of Columbia

839 F.Supp.2d 145

HOLIDAY CVS, L.L.C., d/b/a CVS Pharmacy Nos. 219 and 5195, Plaintiffs,

v.Eric H. HOLDER, Jr., et al., Defendants.

Civil Action No. 12–191 (RBW).

United States District Court,

District of Columbia.

March 16, 2012.

Catherine M. O'Neil, Atlanta, GA, James Philip Ellison, John A. Gilbert, Jr., Karla Lynn Palmer, Hyman, Phelps & McNamara, P.C., Washington, DC, for Plaintiffs.

Lynn Yuhee Lee, Matthew Josephson, U.S. Department of Justice, Washington, DC, for Defendants.

MEMORANDUM OPINION

REGGIE B. WALTON, District Judge.

The plaintiffs,¹ Holiday CVS, L.L.C., doing business at two of its pharmacies as CVS Pharmacy Numbers 219 and 5195, bring this action under the Administrative Procedure Act (“APA”), 5 U.S.C. §§ 551– 706 (2006), challenging two Orders to Show Cause and Immediately Suspend Registrations issued by the Drug Enforcement Administration (“DEA”) on February 2, 2012. Amended Complaint (“Am. Compl.”) ¶ 1. The case came before the Court on March 13, 2012, on (1) the Plaintiffs' Motion to Strike or, in the Alternative to Cross Examine Affiant, and (2) the Plaintiffs' Motion for a Preliminary Injunction. Both motions were opposed by the government. After carefully considering the parties' submissions and the arguments made by counsel at the first hearing on the plaintiffs' motions on March 2, 2012, and the second hearing on March 13, 2012,² the Court denied the plaintiffs' motions at the March 13, 2012 hearing. This memorandum opinion memorializes the oral rulings issued at that hearing and explains further the reasons for the Court's denial of the plaintiffs' motions.

I. Background

A. The Controlled Substances Act

The Controlled Substances Act (“CSA” or the “Act”) and its implementing regulations create restrictions on the distribution of controlled substances. See21 U.S.C. §§ 801–971 (2006); 21 C.F.R. pts. 1300–1321 (2009). The Act authorizes the DEA to establish a registration program for manufacturers, distributors, and dispensers of controlled substances designed to prevent the diversion of legally produced controlled substances into the illicit market. See21 U.S.C. §§ 821, 822. Any entity that seeks to become involved in the production or chain of distributing controlled substances must first register with the DEA. 21 U.S.C. § 822; 21 C.F.R. § 1301.11.

Under the DEA's regulations, registered pharmacies must “provide effective controls and procedures to guard against theft and diversion of controlled substances.” 21 C.F.R. § 1301.71(a). And while “[t]he responsibility for the proper prescribing and dispensing of controlled substances is upon the prescribing practitioner,” a “corresponding responsibility rests with the pharmacist who fills the prescription.” Id. § 1301.04(a). Pharmacies are therefore required to ensure that prescriptions for controlled substances are “issued for a legitimate medical purpose by an individual practitioner acting in the usual course of his professional practice.” Id.

The DEA has authority to revoke or suspend a registration it has issued for a variety of reasons, including on the grounds that a registrant “has committed such acts as would render his [or its] registration ... inconsistent with the public interest.” 21 U.S.C. § 824(a)(4). Generally, before suspending or revoking a registration, the DEA must issue an order to show cause containing its basis for the proceedings and provide an administrative hearing within 30 days. See id. § 824(c). DEA regulations direct that an “order to show cause shall ... contain a statement of the legal basis for such hearing and for the denial, revocation, or suspension of registration and a summary of the matters of fact and law asserted.” 21 C.F.R. § 1301.37(c).

In cases where the DEA has reason to believe that a registrant's continued operation would pose “an imminent danger to the public health or safety,” it can suspend that party's registration immediately, prior to an administrative hearing, by issuing an immediate suspension order (“ISO”). See21 U.S.C. § 824(d) (“The Attorney General [and the DEA Administrator by designation] may, in [her] discretion, suspend any registration simultaneously with the institution of proceedings under this section, in cases where [she] finds that there is an imminent danger to the public health or safety.”). DEA regulations direct that “an order of immediate suspension ... shall contain a statement of [the Administrator's] findings regarding the danger to public health or safety.” 21 C.F.R. § 1301.36(e). An immediate suspension order under § 824(d) remains “in effect until the conclusion of such proceedings, including judicial review thereof, unless sooner withdrawn by the Attorney General or dissolved by a court of competent jurisdiction.” 21 U.S.C. § 824(d).

B. Factual and Procedural Background

Plaintiff Holiday CVS, L.C.C. is a subsidiary of CVS Caremark Corporation, which is the largest pharmacy health care provider in the United States and is ranked twenty-first in the Fortune 500 list for 2011. Gov't's Opp'n at 30. At issue in this case are two CVS retail pharmacy stores located in Sanford, Florida (“CVS 219” and “CVS 5195”; collectively, the “CVS pharmacies”). Pls.' Mem. at 6. The CVS pharmacies are registered to dispense Schedule II–V controlled substances, as classified by the CSA. Id. Neither pharmacy has previously been the subject of disciplinary action for failing to comply with the controlled substance laws. Id.

The DEA's investigation of CVS 219 and CVS 5195 evolved from the agency's investigation of the pharmacies' main distributor, Cardinal Health, Inc. (“Cardinal”).³ Gov't's Opp'n at 8. This investigation revealed that from January 1, 2008, to October 31, 2011, Cardinal's distribution facility in Lakeland, Florida, sold over 12.8 million dosage units of oxycodone (a Schedule II drug) to its top four pharmacy customers. Id. Two of these top four customers were the CVS pharmacies. Id.

The DEA executed administrative inspection warrants at the CVS pharmacies on October 18, 2011. Pls.' Mem. at 7. The warrants sought documents relating to the dispensing practices and volumes of oxycodone sold at the two pharmacies. Id. The DEA then served administrative subpoenas on the two pharmacies on October 25, 2011, seeking additional documents regarding the prescribing physicians whose patients filled prescriptions at the two pharmacies. Id. The DEA also interviewed employees at both pharmacies, as well as individuals with supervisory responsibility over the pharmacies. Id.

After the DEA commenced its investigation, the plaintiffs took a number of remedial steps in response to the agency's concerns. First, in November 2011, the CVS pharmacies suspended filling Schedule II drug prescriptions of 22 physicians for whom the DEA had requested dispensing information from CVS. Id.; Gov't's Opp'n at 23. These 22 physicians accounted for a substantial majority of the oxycodone prescriptions dispensed by the pharmacies. Pls.' Mem. at 7. Second, CVS issued revised dispensing guidelines in January 2012 for filling pain management prescriptions, which have been implemented at CVS pharmacies nationwide. Id. at 8. Third, the CVS pharmacies limited the “geographic area for prescribers and patients for which they will fill prescriptions.” Id. Fourth, they reviewed “with pharmacists the regulatory requirements relating to pharmacists' corresponding responsibility to fill prescriptions for a legitimate medical purpose.” Id. And fifth, the pharmacies retained “a third party consultant to review recordkeeping and security at both pharmacies.” Id. Since the DEA served the warrants in October 2011, dispensing volumes for oxycodone at the two CVS pharmacies have decreased by 86%. Id. at 9.

The DEA issued immediate suspension orders to the CVS pharmacies on February 2, 2012. See Pls.' Mem., Exhibits (“Exs.”) A and B (Orders to Show Cause and Immediate Suspension of Registration issued to CVS 219 and CVS 5195 (“CVS 219 ISO” and “CVS 5195 ISO”; collectively,“ISOs”)).⁴ The allegations set forth in the ISOs are outlined in detail below. Briefly stated, they allege that between 2008 and 2011, the CVS pharmacies purchased enormous quantities of oxycodone that “considerably surpassed the amount of oxycodone ordinarily purchased by a retail pharmacy.” ISOs ¶ 3. They further assert that since at least 2010, the pharmacies had dispensed controlled substances to customers “under circumstances indicating that the drugs” were illegally diverted. Id. ¶ 4. Finding that this conduct violated the CSA and that continued registration of the CVS pharmacies posed an imminent danger to the public health and safety, the DEA immediately suspended the pharmacies' registrations pursuant to 21 U.S.C. § 824(d). Id. at 2–3.

The plaintiffs filed a complaint and motion for temporary restraining order with this Court on February 6, 2012. Their complaint challenges the ISOs under the APA on the grounds that the orders (1) were issued without statutory authority (Count I), Compl. ¶¶ 43–49; (2) deprived the plaintiffs of their constitutional right to due process of law (Count II), id. ¶¶ 50–55; (3) were arbitrary and capricious (Count III), id. ¶¶ 56–60; and (4) contained inadequate findings to justify an immediate suspension (Count IV), id. ¶¶ 61–64.

After holding a hearing on the plaintiffs' motion for a temporary restraining order on February 7, 2012, and while the undersigned member of this Court was absent from the jurisdiction, Judge Amy Berman Jackson of this Court granted the plaintiffs' motion by order issued that same date. See February 7, 2012 Order, Holiday CVS, L.L.C. v. Holder, Civil Action No. 12–191(RBW) (D.D.C.). The plaintiffs then moved for a preliminary injunction on February 17, 2012, seeking to enjoin enforcement of the ISOs pending resolution of the administrative proceedings before the DEA. With its opposition to the plaintiffs' preliminary injunction motion, the government submitted declarations of...