Drug diversion administrative revocation and application hearings for medical and pharmacy practitioners: a primer for navigating murky, drug-infested waters.

• Author: Mulrooney, John J.
• Position: Introduction through III. Bases for Revocation or Suspension of Registration, p. 327-362

1. INTRODUCTION

   The prevalence of prescription controlled substance abuse has grown exponentially over the past decade. (1) State and federal regulatory agencies have struggled to adjust to the changing realities of a new challenge and a new dynamic between the regulators and the regulated community. State boards and federal regulators that have operated for decades on well-founded principles of mutual collegiality have been forced to revisit old methods with often mixed results. While enforcement efforts that have lurched forward in fits and starts at multiple levels of government have resulted in justifiable sanctions imposed upon law breakers, these efforts have also left many responsible professionals in the regulated community scrambling to understand new realities.

   One inexorable result of federal efforts to react reasonably to an immense growth in prescription medication dependence is an increasingly complex and nuanced practice of administrative law before the Drug Enforcement Administration (DEA or Agency). The practice has morphed into a more contested and complicated dynamic that now requires litigation and academic skills that far exceed those previously demanded. Without an established manual or research resource currently available for this practice, even seasoned administrative practitioners can find themselves overwhelmed by well-trained and seasoned agency trial counsel, experts, and regulators. Hardened litigators unprepared for the technical nuances of this sophisticated regulatory scheme can unwittingly blunder their clients into irreparable and draconian results. This is a practice that now requires both skillful litigation and thoughtful study into the statutes, regulations, and precedents from both the agency and the courts of appeal that circumscribe the exercise of powerful discretionary authority that can wreak career-ending consequences on the members of the regulated community. This Article is designed to serve as a starting point to counsel undertaking the litigation of a DEA administrative enforcement action on either side of the aisle.

   The Article is divided into multiple parts. Part II provides a general overview of the proceedings and the body of law pertinent to administrative proceedings against medical and pharmacy practitioners. Part III discusses the various bases for revocation or suspension of a DEA license, while Part IV examines the bases for denial of an application for a DEA license. Part V summarizes the process surrounding immediate suspension cases, and Part VI discusses the burdens on the parties and the DEA's exercise of discretion in sanctioning a party. Finally, Parts VII, VIII, and IX provide an examination of various pre-hearing, hearing, and post-hearing procedures, respectively.

2. OVERVIEW OF PROCEEDINGS

   Administrative revocation and application proceedings conducted under the Controlled Substances Act (CSA) before the DEA Administrative Law Judges (ALJs) are formal hearings controlled by:

   * The Administrative Procedure Act (APA) (5 U.S.C. [section] 551, et seq.); (2)

   * The Controlled Substances Act (21 U.S.C. [section] 801, et seq.); (3)

   * The CSA Implementing Regulations (21 C.F.R. [section] 1300, et seq.); (4)

   * Precedential decisions issued by the United States Courts of Appeals; (5) and

   * Final orders issued by the Drug Enforcement

   Administration and published in the Federal Register. (6) DEA utilizes a recommended decision structure, (7) and its administrative enforcement proceedings (8) are initiated by the service of an Order to Show Cause (OSC) on a DEA Certificate of Registration (COR) holder (registrant) or one seeking such a registration (applicant) and by serving a copy of the OSC on the Hearing Clerk at the DEA Office of Administrative Law Judges (OALJ). Jurisdiction to conduct a hearing vests in the DEA ALJs upon the timely filing of a request for hearing upon the OALJ Hearing Clerk. (9) Upon the filing of a timely request for hearing or petition for extension for time to respond to the OSC, (10) the DEA Chief ALJ will assign the matter to an ALJ, and a docket number will be given to the case. (11) DEA is represented in every action by Trial Attorneys from the DEA Office of the Chief Counsel, and the respondent may be represented by an attorney or an employee of the respondent. (12) The DEA ALJs are vested with authority to conduct prehearing and hearing procedures, (13) and to either issue a recommended decision to the DEA Administrator (14) or terminate proceedings upon case settlement or other appropriate good cause. (15)

   The administrative sanction options provided to DEA by the CSA include the authority to revoke or suspend an existing COR, (16) and to deny the application of a practitioner who seeks to obtain a COR. (17) The CSA also specifically provides that the Agency can limit a revocation or suspension to a specific controlled substance or List 1 chemical authority where a supported sanction basis exists relative to that substance. (18) Although not specifically authorized in the CSA or regulations, an established, lengthy body of Agency precedent has also endorsed the authority of the Agency to impose conditions on a registration. (19) Before imposing any of these sanctions, the Agency must serve the proposed target of a sanction with an OSC and permit the utilization of formal hearing procedures. (20)

3. BASES FOR REVOCATION OR SUSPENSION OF A REGISTRATION

   The CSA provides five bases upon which the revocation, suspension, or other sanction upon a controlled substance registration may be based. (21) All are discretionary, (22) and all encumber the government with the burden of proof. (23) The Agency may seek sanction against a registration based upon: (1) material falsification in a registration application; (2) a conviction relating to a violation of state or federal controlled substance law; (3) state action against state controlled substance authority; (4) exclusion from participation in a federal health care program; and (5) the commission of an action that would render enjoyment of the registration inconsistent with the public interest. (24)

   1. Sanction Based on Material Falsification

      The CSA authorizes DEA to sanction a registration "upon a finding that the registrant ... has materially falsified any application filed [for a controlled substance registration]." (25) The Agency has reasoned that "[s]ince DEA must rely on the truthfulness of information supplied by applicants in registering them to handle controlled substances, falsification cannot be tolerated," (26) and that a "cavalier attitude toward the importance of accurately executing [a registration] application suggests a lack of concern for the responsibilities inherent in a DEA registration." (27)

      To serve as a basis for an adverse application determination, it is incumbent upon the government to establish that an applicant has provided false information in his/her/its application, and that the false information provided is material. (28) DEA adopted the well-settled definition of material falsification that requires that such a statement be one that "has a natural tendency to influence, or was capable of influencing, the decision of the decisionmaking [sic] body to which it was addressed." (29) Proof that any government decision, including the one over the registration application, was actually influenced is not required. (30) The touchstone is whether the statement had the capacity to influence. (31) Since a materiality determination turns on an analysis of the relevant substantive law, (32) the allegedly false statement must be analyzed in the context of the application requirements sought by DEA and information provided by the applicant. The falsification must relate to a ground that could affect the decision, not merely a basis upon which an investigation could be initiated. (33) The entire application will be examined to determine whether there was an intention to deceive the agency. (34) Furthermore, the correct analysis hinges on whether the applicant knew or should have known that he or she submitted a false application. (35) Although even an unintentional falsification can serve as a basis for adverse action regarding a registration, lack of intent to deceive and evidence that the falsification was not intentional or negligent are all relevant considerations on the issue of sanction. (36)

   2. Sanction Based on "Conviction Relating To"

      The CSA also authorizes a discretionary sanction to be imposed upon a registrant convicted of a federal or state felony relating to controlled substances or precursor chemicals. (37) A conviction alone is sufficient to support a sanction. (38) A conviction obtained pursuant to a nolo contendere plea, or even one where adjudication is withheld or even subsequently dismissed, constitutes a conviction under this provision. (39) A corporate registrant's registration "may be revoked upon a finding that a natural person who is an owner, officer, key employee, or an individual who has some responsibility for the operation of the registrant's controlled substance business, has been convicted of a felony offense relating to controlled substances." (40)

   3. Sanction Based on Loss of State Controlled Substance Privileges

      A discretionary sanction is also available to the Agency where a registrant has had state controlled substance authority "suspended, revoked, or denied by competent State authority and is no longer authorized by [s]tate law to engage" in the activity permitted by his DEA registration. (41) Although there is little doubt that the language of this provision is discretionary on its face, the Agency has a long line of consistent precedent in support of the proposition that the absence of state authority in the case of a practitioner, once conclusively established, mandates revocation of DEA registration privileges. (42) The Agency has "held that revocation is warranted even where a practitioner's state authority...