Pills production Line

On May 11, 2016, the Drug Enforcement Administration filed its brief in Masters Pharmaceutical, Inc. v. Drug Enforcement Administration (Docket No: 15-1335), in the United States Court of Appeals for the District of Columbia. The vast majority of the Government’s brief addresses whether “substantial evidence” (the applicable standard of review) supports Acting Administrator Rosenberg’s decision to revoke Masters’ DEA registration. Curiously, the Government does not dedicate much effort to one of the seminal issues in the case: whether DEA imposed new obligations on registrants in violation of the Administrative Procedure Act.

Rather than attempt to defend the indefensible, the Government invoked a creative reading of the Masters Final Order that is starkly at odds with Administrator Rosenberg’s decision. In its brief, DEA states that Administrator Rosenberg’s decision “did not impose any new duties on distributors.” In defending this position, the Government’s brief goes on to say the following:

Most of the “new duties” that Masters and amici cite in their briefs were obligations that Masters had voluntarily imposed on itself through its own compliance program. [citation omitted] The Administrator cited Masters’ failure to perform many of these duties – such as obtaining utilization reports or asking customers for explanations of unusually large orders – because Masters sought to rely on its compliance program to justify its reporting failures. However, in highlighting Masters’ disregard for its own program’s requirements, the Administrator did not impose those same requirements on all registered distributors.

This is a logical, well-reasoned position for DEA to take except for one thing. DEA’s “new” position on appeal is a head-scratcher because it contradicts Administrator Rosenberg’s crystal clear position in the Final Order:

I conclude that a distributor is required to use the most accurate information available to it. Because the URs show the actual dispensing level of each drug, and questionnaires and surveys provide only estimates, I conclude that a distributor must use the URs in evaluating whether a customer’s dispensing ratio is suspicious.

Interestingly, DEA fails to cite to the Final Order or the official record to support its statement that the new obligations imposed on distributors, at least with respect to obtaining URs or pharmacy utilization reports, is only applicable to Masters because Masters had such a requirement in its operating procedures. The attempt by the Government to spin DEA’s Final Order in such a manner will likely be greeted with skepticism by the Court.

So what have we learned? First, the Government’s brief is further evidence that DEA’s interpretation of its regulations, especially with respect to obligations of manufacturers and distributors, continues to evolve depending on the circumstances of a given investigation. Second, guidance and clarity about DEA’s expectations of registrants remains elusive. If DEA’s current interpretation is what was stated in their brief, what guidance does that provide industry? Should registrants no longer maintain standard operating procedures for fear of DEA using them against the registrant? Should company policies and procedures be watered down and just re-state what is required by the regulations? Unfortunately, the lack of clarity and ever-evolving position of DEA do a disservice to registrants, the vast majority of which are willing to go above and beyond their regulatory requirements to help prevent the diversion of controlled substances.

 

Disclaimer: Quarles & Brady filed an amicus brief in this matter on behalf of the Generic Pharmaceutical Association