On July 23, 2019, the Food and Drug Administration (FDA) announced the issuance of a Warning Letter to the manufacturer of certain products containing cannabidiol (CBD). Specifically, the FDA provided a laundry list of examples where Curaleaf, Inc. (Curaleaf) made unsubstantiated claims on its website and on social media “that the products treat cancer, Alzheimer’s disease, opioid withdrawal, pain and pet anxiety, among other conditions or diseases.” The FDA considers Curaleaf’s actions as the “illegal selling of unapproved products,” pursuant to the Federal Food, Drug, and Cosmetic Act.

Incidentally, Curaleaf products were being sold by a major pharmacy retailer as part of its roll-out of CBD products in 8 states and 800 stores. In response to the Warning Letter to Curaleaf, CVS immediately pulled Curaleaf products from its shelves. The Curaleaf products they carried were limited to its lotion and transdermal patches.

I encourage you to read the Curaleaf Warning Letter as well as the several Warning Letters issued by FDA regarding claims made by other companies’ CBD products. The Curaleaf letter is the most recent reminder from FDA that consumers should be wary of companies making medical claims with products containing CBD, at least until a regulatory scheme is in place involving these products.

The letter is also a reminder to retailers who are trying to cash in early on what is expected to be a multi-billion-dollar industry. The CBD market is like the Wild West right now. None of the regulations mandated by the Farm Bill have been promulgated, and the FDA does not expect to provide additional guidance on CBD products until this coming fall. Thus, the manufacturers of these products must be closely scrutinized and continuously monitored to ensure that products are safe for sale to consumers. The FDA says it best in its press release:

Unlike drugs approved by the FDA, the manufacturing process of these products has not been subject to FDA review as part of the drug approval process, and there has been no FDA evaluation of whether these products are effective for their intended use, what the proper dosage is, how they could interact with FDA-approved drugs, or whether they have dangerous side effects or other safety concerns.

We will keep you posted as this subject evolves.

As I have previously written, there is a long list of regulatory changes coming from DEA in the next few years.  Rather than publish one or more of the long overdue regulations listed on DEA’s Regulatory Agenda, on April 30, 2019, the agency will publish a Final Rule creating a “discretionary review” process allowing the Administrator to review an Administrative Law Judge’s (“ALJ’s”) denial of a request for an interlocutory appeal.  Note that this is a Final Rule, not a Notice of Proposed Rulemaking.  The agency was able to bypass the traditional notice and comment rulemaking process by categorizing this rule as a Rule of Agency, pursuant to the Administrative Procedure Act.  As such, the rule is effective immediately.

Requests for interlocutory appeals can take many forms in a DEA administrative proceeding.  Often, they are a result of a procedural or evidentiary ruling by an ALJ during the prehearing process.  DEA regulations currently give ALJs broad authority to rule on a request to seek an interlocutory appeal.  The ALJ’s decision to deny a request for an interlocutory appeal is not reviewable.  Until now.

This new rule will allow the Administrator to intervene in administrative proceedings and review an ALJ’s decision to deny a request for an interlocutory appeal.  DEA justifies the need for this change in regulations by stating it is needed for the “efficient execution of the administrative hearings.”  DEA further states that the rule attempts to preserve “the Administrator’s authority to be the final decision-maker as to important legal questions.” (emphasis added).

While that may be the desired impact, the rule may have the opposite effect.  If the Administrator issues an order regarding an interlocutory appeal as the “final decision-maker” does mean that such orders could be considered “final agency actions” that allow the parties to appeal the order to federal court?  If so, the efficient execution of proceedings will grind to a halt while the matters are resolved (for years?) on appeal.

It is difficult to understand why this rule became a priority, especially when so many important regulations remain pending with DEA and the Department of Justice.  With so few administrative matters being initiated by DEA, so few matters going through the administrative hearing process, and even fewer instances of parties seeking interlocutory appeals during proceedings, why expend resources on this rule?

One school of thought is that this is in direct response to a recent (and public) “dispute” involving an ALJ’s denial of a request for an interlocutory appeal by DEA’s counsel seeking to quash a subpoena issued by the ALJ.  The matter landed in federal court where DEA was ultimately unsuccessful in overturning the ALJ’s subpoena.  With that said, and despite being ordered to do so by a federal judge, DEA did not produce the subpoenaed documents.  Full disclosure: I was involved with that case: Miami-Luken, Inc. v. Drug Enforcement Agency Order (1:16-mc-00012-SJD-SKB)

If the Miami-Luken matter was the impetus behind the rule, it is hard not to see this rule as an attempt at whittling away at the independence of the agency’s ALJs – which does not bode well for registrants.  Yes, both sides could arguably benefit from this rule, but my experience with these proceedings leads me to believe that the government will be the primary beneficiary of the Administrator’s discretionary review.  I hope I am wrong.

As you undoubtedly should know by now, on April 22, 2019, the United States Attorney for the Southern District of New York entered into a Deferred Prosecution Agreement (the “Agreement”) with the Rochester Drug Co-operative, Inc. (“RDC”).

Specifically, the government announced that

“RDC agreed to accept responsibility for its conduct by making admissions and stipulating to the accuracy of an extensive Statement of Facts, pay a $20 million penalty, reform and enhance its Controlled Substances Act compliance program, and submit to supervision by an independent monitor.”

U.S. Attorney Geoffrey S. Berman touted this “first of its kind” action against a pharmaceutical wholesaler and the special agent in charge of DEA’s New York Division, in an interview with Martha MacCallum on Fox News, indicated that this case provides a blueprint for the government to pursue criminal enforcement actions against other pharmaceutical companies.  I certainly agree with Mr. Berman.  Whether this case is a model for similar investigations, remains to be seen.

Because of the uniqueness and importance of this matter, I urge my readers  to put down the Mueller Report (spoiler alert: the Mueller Report is 448 pages long), read the documents associated with the Agreement, and reach your own conclusions.

For me, it is frustrating that the government and media are painting all pharmaceutical companies as bad actors, based on the conduct of RDC.  Yes, there are bad actors in this space, but they are the exception, not the rule.  The vast majority of companies are trying to do the right thing and want to be part of the solution.

There is clearly a misunderstanding by the government and media of how the pharmaceutical supply chain operates (a blog for another day?).

It is also frustrating when the government mischaracterizes the law when discussing these very important matters (e.g., despite statements made in the Information, there is no legal obligation to report “bad customers” to DEA – thanks for letting me vent).

With that said, the opioid epidemic is a real problem and there is no place for bad actors in the marketplace.  The facts alleged against and agreed to by RDC, clearly show a company that was a significant part of the problem.  With all the government and media hyperbole comparing RDC and other “bad” pharmaceutical companies to the cartel, it begs the question, why did the government allow RDC to stay in business?

Does that say anything about the strength of the government’s legal theory of this case?  Perhaps that too is a blog for another day.  It will certainly be interesting to see how the case against RDC’s former CEO plays out in court and whether those legal theories are tested.

So….what can we (read: you) “learn” from the Agreement?

  • Senior management should stay out of compliance decisions. It goes without saying that the same goes for business/operations/sales management.  Let your compliance team do its job.  Management should focus on creating a culture of compliance and supporting the work of the individuals performing the difficult task of navigating through the ever-changing and sometimes contradictory obligations imposed by the CSA, DEA regulations, and the agency’s sub-regulatory guidance.  If this is a difficult pill to swallow (bad pun intended) you should get out of the controlled substance distribution business.
  • It is not a “Compliance Department” if it only contains one or two employees, with other responsibilities and no DEA compliance training or expertise. Again, if you want to play in this space, do it right or not at all (I am feeling a little preachy tonight!).
  • Controlled substances should not be the foundation of your business growth plan – I wanted to say something really snarky here but my editor would not allow it.
  • In addition to complying with your legal obligations, follow your own policies and procedures – I thought we learned that lesson from Masters?
  • Failure to conduct due diligence for existing and new customers is frowned upon by the government – I hope I am preaching to the choir with this one (fingers crossed).
  • Unfortunately, we cannot learn much about suspicious order reporting, except that failure to report any orders is a recipe for disaster. Is the government indicating in its filing that all “orders of interest” should have been reported to DEA?  This certainly goes against what a senior-level employee in the Diversion Control Division said at a recent conference (yet another potential blog post – I am going to be busy!).
  • The most important lesson learned. Be sure to follow the recommendations of consultants and outside counsel – yes, that was self-serving, but also an important take away from the facts presented in the Agreement.


*Photo by niu niu on Unsplash

As required by the “SUPPORT for Patients and Communities Act” (Public Law 115-217), DEA just announced that it has implemented a new tool to provide drug manufacturers and distributors with access to anonymized ARCOS information.

This an enhancement to DEA’s existing tool that previously provided very limited ARCOS information.  The new functionality in the tool “will allow DEA-registered manufacturers and distributors to view and download the number of distributors and the amount (anonymized data in both grams and dosage units) each distributor sold to a prospective customer in the last available six months of data.”

DEA’s expectation is that the tool will be used to assist registrants with detecting and reporting suspicious orders and to fulfill their “know your customer” obligations.  As an example, DEA indicates “if a query resulted in a large number of suppliers who have recently sold unusual quantities of opioid analgesics to a prospective purchaser, this may represent a “red flag” to the new distributor and foster a dialogue between that distributor and the pharmacy.”

On February 21, 2019, the Drug Enforcement Administration (DEA) published a Notice of Proposed Rulemaking (NPRM), New Single-Sheet Format for U.S. Official Order Form for Schedule I and II Controlled Substances (DEA Form 222).  This is the agency’s second attempt at bringing the DEA Form 222 into the 21st Century.  In 2007, the agency issued a similar NPRM, but never published a Final Rule.

The current NPRM not only changes the format of the 222, but also proposes “minor procedural changes.”  Below is a summary of some of those changes.

Format of the new form

  • Single sheet form, with enhanced security features and printed on special paper to “ensure the identity of the original.”
  • New forms will no longer be issued in “books” but will be issued in a predetermined amount depending on business activity.

Procedures for executing single sheet 222 forms

  • New forms will be processed in a manner similar to what is currently required.
  • A purchaser will fill out the form and send the original form to its supplier. The purchaser must retain a copy of the 222 form in a readily retrievable manner and is allowed to copy/scan and store the form electronically.
  • The supplier must retain a copy of the original form and does not have to submit the form to the local office or DEA HQ, if the supplier reports to ARCOS.
  • Any “registrant supplier” who is not required to submit an ARCOS report (such as a practitioner) will be required “to make and submit a copy of the original DEA Form 222 to DEA [HQ] by mail, fax, or email.”
  • Forms will no longer be sent to the local office.

DEA is also proposing a change regarding who is authorized to issue a Power of Attorney (POA) for executing 222s.  Currently, only the registrant may issue a POA.  Under the proposed rule, a POA can be executed “by the registrant, if an individual; by a partner of the registrant, if a partnership; or by an officer of the registrant, if a corporation, corporate division, association, trust or other entity…”

I applaud DEA’s efforts to modernize the DEA Form 222 and hope that similar efforts are ongoing with respect to applying for, obtaining, and renewing CSOS credentials.  Those wishing to comment on the proposed rule must do so within 60 days of publication of the NPRM.

As a side note, I believe this marks the final death blow to the dot matrix printer and carbon forms printed on interleaved carbon sheets.   It is a sad day….


*Photo by Christa Dodoo on Unsplash

After a brief hiatus, DEA Chronicles is back. As always, I will be keeping you informed on changes in the relevant laws and regulations and how these may impact your business. But, as regular readers know, we go beyond simple reporting. DEA Chronicles identifies DEA enforcement trends. We engage in policy analysis across the spectrum of issues involving controlled substances. What regulatory approaches best combine an effective strategy for combating diversion with a workable framework for the various actors in the pharmaceutical industry? What are the best practices designed to ensure compliance? What are the red flags that should alert companies to potential problems within their organizations? We explore these and all other questions regarding the enforcement of controlled substance laws and regulations.

Cote Law PLLC

So why the hiatus? The answer is simple and, for me at least, kind of exciting. After six and a half years with Quarles & Brady, I am pleased to announce that I have moved the DEA Litigation and Compliance practice to my new firm, Cote Law PLLC. I bring to my DEA practice a unique set of experience and skills. For one, I worked at DEA at a management level in the enforcement area. I know my way around the agency. I know how it operates and how it thinks. It is one thing to read a statute or a regulation. It is another to understand how the people at the agency approach the enforcement of these laws. 

My experience at DEA taught me something else. DEA has an important job to do. This is helpful to keep in mind. While I am always a strong advocate for my clients’ interests, the goal is not to battle it out with DEA (or any other governmental entity, for that matter) at every turn. I use my experience primarily to chart a course for my clients for effective compliance with all relevant laws and regulations regarding controlled substances. This is not always easy. The laws and regulations do not provide a clear road map for every possible scenario. There are “gray areas.” This is where my experience proves especially useful. I help to navigate my clients through any murky waters with a compliance strategy designed to avoid the dangers of bumping up against DEA enforcement priorities. 

My approach is practical. I do not simply regurgitate the law. Creating a compliance strategy involves much more than that. An effective strategy must provide clear guidance to company management and the employees who work with controlled substances about processes that work and remain on the right side of the law. I am always mindful that you are running a business. These are not theoretical issues. Best practices must not simply be good ideas; they must work on the ground. 

DEA Chronicles will continue to provide up-to-date law and policy news and analysis regarding all controlled substances issues. And Cote Law PLLC is here now to assist our clients with their particular needs and concerns. I look forward to working with you on both fronts. 

The Department of Justice recently published its list of proposed regulatory actions for the near and long term.  It appears that the Drug Enforcement Administration’s (DEA’s) Regulatory Drafting and Support Section is going to have a busy year.  The Unified Agenda indicates several potential regulatory changes are in store for the coming year, some of which may have significant impact on the regulated community.

A few highlights:

  • Updates to the suspicious order regulation have been delayed to at least February 2019.
  • DEA will provide guidance for Emergency Medical Services wishing to handle controlled substances.
  • After more than nine years, DEA is finally implementing regulations regarding the practice of telemedicine, as required by Congress in the Ryan Haight Act.
  • Guidance is forthcoming regarding the partial filling of prescriptions for Schedule II controlled substances as a result of related provisions in the Comprehensive Addiction and Recovery Act (CARA) of 2016.
  • It appears that additional (and significant changes) will be coming to DEA’s quota process.
  • DEA is getting rid of the carbon copy 222 form! (for those too young to understand the concept of carbon copies, click here)

Below are links to each notification and a summary taken directly from the related Abstract.

Stay tuned. We will provide updates as they become available.

Continue Reading DEA to Propose Significant Regulatory Changes in the Coming Year

In a joint statement by the U.S. Department of Justice and the Drug Enforcement Administration, the government announced continued efforts to tackle the opioid crisis by reducing the quantity of controlled substances permitted to be manufactured next year. The proposal decreases the 2019 Aggregate Production Quotas (APQ) for six of the most frequently misused opioids by an average of ten percent compared to 2018 quotas. The proposed production quotas for the six opioids will cut the 2018 quotas from 7% to 15% in 2019. The proposal seeks to advance the effort taken by President Trump’s “Safe Prescribing Plan,” which aims to “cut nationwide opioid prescription fills by one-third within three years.” The six drugs addressed by this action are oxycodone, hydrocodone, oxymorphone, hydromorphone, morphine, and fentanyl.

It appears that the percentage reduction of quota for these six drugs was not based on diversion statistics compiled by DEA and the Notice does not otherwise provide specific justification for the reduction in quota.  In the joint statement, the government indicated that the goal of the reduction is to “encourage vigilance on the part of opioid manufacturers, help DEA respond to the changing drug threat environment, and protect the American people from potential addictive drugs while ensuring that the country has enough opioids for legitimate medical, scientific, research, and industrial needs.”

This marks the third straight year that the DEA has proposed such APQ reductions for controlled substance manufacturing in the U.S., a trend that does not appear to be slowing down. In addition to the government’s stated goals, it will be interesting to see whether continued quota reductions impact the root cause of the ongoing epidemic – the over-prescribing of controlled substances.

Over a period of two weeks in June, the House passed several bills aimed at combating the ongoing opioid epidemic. Our summary of the earlier measures can be found here. Key points of these additional legislative initiatives are summarized below. We will continue to monitor and report on their progress.

R. 3192, CHIP Mental Health Parity Act
This bill required state Children’s Health Insurance Program (CHIP programs) to cover mental health benefits including substance use disorder services for pregnant women and children. It also prohibits states from imposing financial or utilization limits on mental health treatment that are lower than the limits placed on physical health treatment.

R. 3331
Specifically, this bill encourages the Center for Medicare and Medicaid Innovation to test models to provide incentive payments to behavioral health providers for adopting electronic health records technology, and using that technology to improve the quality and coordination of care.

Continue Reading House Opioid Measure Frenzy Continues

On Tuesday, the House of Representatives passed a fleet of bills aimed at combating the ongoing opioid crisis, most aimed at developing preventative measures to curb opioid addiction by funding research. The measures passed with overwhelming bipartisan support. Key points of these legislative initiatives are summarized below. Quarles & Brady will continue to monitor their progress.

Continue Reading House Passes 12 Bills Aimed at Combating Opioid Crisis