On May 2, 2018, the DEA issued an Order to Show Cause and Immediate Suspension of Registration (the “Order”) against Morris & Dickson Co., LLC (“M&D”), a drug distributor based in Louisiana with pharmacy customers in 7 states. The DEA has two main allegations against M&D:
- M&D failed to maintain effective controls against division of controlled substances into other than legitimate channels, in violation of 21 USC 823(b)(1) and 21 CFR 1301.71.
- M&D failed to identify and report suspicious orders to DEA, in violation of 21 CFR 1301.74(b).
Maintaining Effective Controls
The Order is another example of DEA using a registrant’s own policies and procedures against the registrant. The DEA largely assumes that M&D did not implement its due diligence policies because M&D did not maintain records of its investigations into suspicious orders. To the extent that DEA found information created as part of M&D’s due diligence monitoring/detection system, DEA often used the information to show that M&D knew about “red flags” with its customers that it failed to resolve. The customer information that DEA identified as a red flag is noted in Table 1.
Reporting Suspicious Orders
The DEA’s allegations about M&D’s failure to report suspicious orders fall in line with our takeaways from the D.C. Circuit Court’s decision in Masters Pharmaceutical. In the Order, DEA alleges that M&D failed to report to DEA over 32,000 unusually large orders of controlled substances. This allegation reflects the interpretation that 21 CFR § 1301.74(b) requires the registrant to provide notice to DEA of all orders that are flagged (or should have been flagged) by the registrant’s suspicious order monitoring program. The allegation also indicates that DEA views a “suspicious” order as any order that is “improbable” according to standard statistical methods. The suspicious orders that DEA described in the Order are summarizes in Table 1, below.