Jones Total Health Care Pharmacy, LLC v. Drug Enforcement Admin.

Citation881 F.3d 823
Decision Date29 January 2018
Docket NumberNo. 16-17346,16-17346
CourtUnited States Courts of Appeals. United States Court of Appeals (11th Circuit)

Daniel Stuart Weinger, Law Offices of Robin Bresky, Boca Raton, FL, for Petitioners.

Anita Jane Gay, Jason Hadges, Dana E. Hill, U.S. Department of Justice, Criminal Division, Washington, DC, Daniel S. Newman, Broad & Cassel, Miami, FL, for Respondent.

Before MARTIN, ROSENBAUM, and ANDERSON, Circuit Judges.


Before this Court is a petition for review of a final order of the United States Drug Enforcement Administration ("DEA") revoking Jones Total Health Care Pharmacy, LLC’s ("Jones Pharmacy") certificate of registration under the Controlled Substances Act ("CSA") to dispense controlled substances and denying SND Healthcare, LLC’s ("SND Healthcare") application for a certificate of registration to dispense controlled substances. The DEA Acting Administrator revoked Jones Pharmacy’s registration after determining that it unlawfully dispensed controlled substances and that Cherese Jones, the pharmacy’s owner and operator, failed to accept full responsibility for the misconduct. Because Jones also owned and operated SND Healthcare, the Acting Administrator denied SND Healthcare’s pending application for the same reasons. Jones Pharmacy and SND Healthcare ("Petitioners") then filed this petition for review, arguing that the DEA’s decision is arbitrary and capricious. We disagree, so we deny the petition for review.


Jones Pharmacy is a community pharmacy started by Jones in Fort Lauderdale.

Jones graduated from Texas A & M University with a Doctor of Pharmacy degree in 2000 and worked in clinical and retail pharmacy positions before opening Jones Pharmacy in February 2010.

Jones Pharmacy was registered with the DEA to dispense substances controlled by the CSA, 21 U.S.C. § 801, et seq. In 2013, Jones sought to open SND Healthcare and submitted an application for registration to dispense controlled substances through that entity.

The CSA creates "a closed regulatory system making it unlawful to manufacture, distribute, dispense, or possess any controlled substance except in a manner authorized by the CSA." See Gonzales v. Raich , 545 U.S. 1, 13, 125 S.Ct. 2195, 162 L.Ed.2d 1 (2005). Pharmacies that dispense prescription medications that are controlled substances are required to obtain proper registration from the Attorney General. See 21 U.S.C. §§ 822(a), 823(f) ; Gonzales v. Oregon , 546 U.S. 243, 250–51, 126 S.Ct. 904, 163 L.Ed.2d 748 (2006). Under the CSA, the responsibility for the proper prescribing and dispensing of controlled substances, which must be for "a legitimate medical purpose," is on the prescribing practitioner, "but a corresponding responsibility rests with the pharmacist who fills the prescription." 21 C.F.R. § 1306.04(a). Thus, pharmacists have a "corresponding responsibility" to refuse to fill prescriptions that are not issued for a legitimate medical purpose. See id.

The Attorney General has the authority to deny, revoke, or suspend registrations. See 21 U.S.C. §§ 823(f), 824(a). The Attorney General has delegated this authority to the DEA. See United States v. Lippner , 676 F.2d 456, 460 (11th Cir. 1982) (holding that the functions vested in the Attorney General by the Comprehensive Drug Abuse Prevention Act were properly delegated to the DEA). When an existing registration is proposed for revocation, the DEA must serve an "order to show cause" on the registrant and give the registrant an opportunity for a hearing before an Administrative Law Judge ("ALJ") in order to contest the proposed action. See 21 U.S.C. § 824(c).

On October 6, 2014, the DEA issued an order to show cause proposing to revoke Jones Pharmacy’s existing registration and to deny SND Healthcare’s application for registration. In the order, the DEA alleged that, from February 2010 to July 2012, Jones Pharmacy "repeatedly failed to ensure that it filled only prescriptions issued for legitimate medical purposes within the usual course of professional practice." Jones Pharmacy, according to the order, repeatedly ignored "obvious and unresolvable red flags of diversion." The order also alleged record-keeping violations. According to the order, Jones Pharmacy’s practices warranted denial of SND Healthcare’s application because Jones was the owner and operator of both entities and they were one integrated enterprise.

Petitioners requested a hearing, which was held before an ALJ in March 2015. At the hearing, the ALJ heard testimony from several persons, including Domingo Gonzales (a DEA diversion investigator), Mary Crane (a Pharmacy Inspector for the Florida Department of Health), Dr. Tracy Gordon (the government’s expert), Donna Horn (Jones Pharmacy’s expert), and Jones.

After the hearing, the ALJ issued her findings of fact, conclusions of law, and recommendations that the DEA Acting Administrator revoke Jones Pharmacy’s registration and deny SND Healthcare’s application for registration. The ALJ credited the testimony of Gordon, who reviewed over one-hundred prescriptions filled by Jones Pharmacy between February 2010 and July 2012 and found that they had one or more "red flags"—indicia that the prescriptions were not issued for a legitimate medical purpose—and should not have been filled. According to Gordon, these red flags included the following: (1) individuals traveling long distances to fill prescriptions; (2) prescriptions for drug "cocktails," known for their abuse potential, such as oxycodone

and Xanax ; (3) individuals who arrived together with identical or nearly identical prescriptions; (4) purported pain patients with prescriptions for immediate-release rather than long-acting narcotics; (5) cash purchases; and (6) doctors prescribing outside the scope of their usual practice. The ALJ credited Gordon’s testimony that many of these red flags could not have been resolved by the pharmacists. Accordingly, the ALJ determined that Jones Pharmacy violated its "corresponding responsibility" by filling controlled-substances prescriptions with unresolved red flags.

Crediting Gonzales’s testimony and other evidence submitted by the government, the ALJ also found additional indicators that Jones Pharmacy dispensed controlled substances unlawfully. The ALJ cited statistics showing that, from February 2010 to July 2012, Jones Pharmacy’s business was based primarily on sales of controlled substances. In addition, of the more than 3,000 controlled-substance prescriptions filled, 99% were for immediate-release drugs, 89% were for "cocktail" drugs, and 93% were paid for in cash. The ALJ noted that these statistics were "unusually high compared to national averages." For instance, according to a report from the IMS Institute of Healthcare Informatics, the national average for cash sales between 2007 and 2011 was 6%. The ALJ also found that Jones Pharmacy’s high markup on the price per pill—including 415 instances where the markup on the price per pill was over 1,000%—combined with the high rate of cash-based customers indicated diversion because "it elucidates a customer base willing to pay exorbitant prices for a drug the customer could otherwise purchase at a nearby pharmacy for much less."

The ALJ rejected Petitioners' contentions that Jones was unaware of the concept of "red flags" and that she did not know or have reason to know that the prescriptions filled by Jones Pharmacy were not written for a legitimate medical purpose. The ALJ was unpersuaded by testimony offered by Jones Pharmacy’s expert Horn, who stated that pharmacists were generally unaware of the concept of red flags during the relevant time period. Instead, the ALJ credited the contrary testimony of the government’s expert, Gordon, and concluded that "the concept of red flags has long been recognized as a reflection of the norms of the pharmacy profession," so Jones Pharmacy’s purported ignorance was not a credible defense.

Having found that the government met its burden of establishing a prima facie case that revocation of Jones Pharmacy’s registration was in the public interest, the ALJ then addressed whether Jones Pharmacy put forward sufficient evidence to show that it could be trusted with a registration going forward. The ALJ explained that a registrant must establish two things to rebut the government’s prima facie face: (1) full acceptance of responsibility and (2) remedial measures so that such violations will not happen in the future. Based on Jones’s testimony at the hearing, the ALJ determined that she had not fully accepted responsibility for Jones Pharmacy’s unlawful dispensing of controlled substances. Citing agency precedent holding that acceptance of responsibility is an independent and essential requirement for rebutting the government’s prima facie case, the ALJ declined to address Jones Pharmacy’s remedial efforts. See, e.g. , Holiday CVS, L.L.C. , 77 Fed. Reg. 62316, 62323, 2012 WL 4832770 (Oct. 12, 2012).

Petitioners filed exceptions in May 2015, which the Acting Administrator overruled in a 54-page final order issued on October 31, 2016. Addressing and rejecting many of the arguments we are faced with here, and which we address in more detail below, the Acting Administrator adopted the ALJ’s recommendations. This petition for review followed. See 21 U.S.C. § 877.


We may set aside the Acting Administrator’s final decision if it is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law." 5 U.S.C. § 706(2)(A). "The arbitrary and capricious standard is exceedingly deferential." Defs. of Wildlife v. U.S. Dep't of Navy , 733 F.3d 1106, 1115 (11th Cir. 2013) (internal quotation marks omitted). We may not substitute our judgment for that of the agency so long as its conclusions are rational and based on the evidence before it. Miccosukee Tribe of Indians of Fla. v. United States , 566 F.3d 1257, 1264 (...

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