DTCI: Neglected DEA regulatory obligations that ruin pharmacies

While the country remains desperately fixated on the national opioid crisis’ more sensationalized issues (i.e., prescription overdoses, pill-mill operations, aggressive marketing by “Big Pharma”), pharmacies must not lose sight of where their primary regulatory exposure lays hidden, which rests far from the diversion-related allegations few pharmacies actually face. Most pharmacies’ legal and financial exposure is not with the diversion of controlled substances (e.g., stealing, selling or dispensing drugs without a legitimate medical purpose); it is instead with the tedious, prosaic record-keeping requirements that often go neglected. And, even where pharmacies work tirelessly to maintain pristine records for the hot-button opioid drugs, their efforts often come at the cost of overlooking identical record-keeping obligations for non-opioid controlled substances and non-Schedule II drugs. Try as they might, pharmacies’ efforts are continually met with increasing pressure from DEA and DEA’s enforcement tools, which carry crippling civil monetary penalties.

Record-keeping obligations are extensive and require excruciating vigilance and buy-in from all pharmacy employees. The requirements demand such incredible accuracy that, if an audit of a pharmacy were to identify no violations, one would simply be left skeptical of the auditor’s proficiency — not convinced of the pharmacy’s perfection. This is due to the requirement that pharmacies must maintain two years’ worth of detailed records, documenting each and every dosage unit of any controlled substance delivered to the pharmacy, dispensed to its patients, returned to a manufacturer because of a deficiency or expiration, transferred to a neighboring pharmacy out of stock, and even stepped on and crushed accidentally by an employee. See 21 C.F.R. §§ 1304.21 & 1304.22. It is easy to see how records become deficient, and it should leave one sympathetic to pharmacies and the pressures they face on a daily basis.

Sometimes less sympathetic are federal regulators who maintain incredibly high expectations for DEA registrants, which are tested through both routine and surprise inspections. These investigations tend to reveal to pharmacies just how rampant their often unknown record-keeping violations run, which usually include a host of issues, such as: ordering controlled substances without authority through an executed power-of-attorney; missing copies of DEA 222 order forms; failure to properly document receipt of product on the face of the DEA 22 form; failure to submit copies of DEA 222 order forms to DEA; lack of biennial inventory reporting; missing inventory records; overages/shortages of inventory counts; improper wasting of controlled substances; unsecured controlled substances; lack of background checks; missing or incomplete copies of DEA 106 forms from theft or significant losses; and records for intra-company or inter-pharmacy transfers.

Violations of these requirements are costly and can result in a variety of penalties, including letters of admonition from DEA, suspension or revocation of licensure and, in some circumstances, prison. But perhaps the penalty most underappreciated by pharmacies and most often used by DEA is a hefty $15,040 fine per each individual record-keeping violation. 28 C.F.R. § 85.5. This penalty is not assessed for each type of violation, but instead for each occurrence of a violation. U.S. v. Appalachian Reg’l. Healthcare, Inc., 246 F. Supp.3d 1184, 1192 (E.D. Ky. 2017).

Imagine a situation where a pharmacy is investigated by DEA through a routine audit. The investigation discovers that, unbeknown to the pharmacy, it failed to maintain an executed power-of-attorney authorizing its employee pharmacists to order Schedule II drugs, yet its pharmacists still signed and submitted DEA 222s, placing 10 different orders for amphetamine salts (i.e., Adderall) over the last six months. Since these were unauthorized orders and defective DEA 222s, there would be 10 record-keeping violations. Continuing with this example, the audit also reveals the pharmacy had an overage of five dosage units of hydrocodone 10-325 mg when compared to its inventory records, which is a separate, distinct violation. Finally, the investigation identified a partially filled syringe of hydromorphone that had not been properly wasted, resulting in yet another violation. In a busy pharmacy (such as a pharmacy servicing a large urban hospital or servicing crowded assisted-living facilities), these are small and often ordinary violations; however, in this scenario, they amount to a staggering possible civil monetary penalty of $180,480. This potential penalty is only a fraction of penalties facing smaller independent retail pharmacies with less sophisticated and automated systems and policies in place.

Then, of course, DEA is not the only regulator of pharmacies and their records for controlled substances. State boards of pharmacy require similar obligations and are free to impose separate disciplinary sanctions for violations, which may be monetary penalties or action taken against their license. Some state boards may also have separate penalties for failing to disclose action taken by DEA based on federally assessed violations. For this reason, it is critical that pharmacies closely align their practices with state requirements, as well.

While it is nearly impossible for pharmacies to maintain records with absolute accuracy, there are simple and effective steps pharmacies can take to meaningfully reduce their financial exposure when the inevitable investigation occurs. These steps include: draft and implement detailed written policies; adopt use of perpetual inventory; conduct frequent situational trainings for staff; post copies of protocol and policies around the pharmacy; seek out third-party audits of pharmacy practices; request the pharmacy’s wholesaler to conduct an inspection; and annually review POAs, background checks and other records.

Ultimately, because most pharmacies do not have to face the more objectively pejorative allegations in the national opioid crisis, they have a perfect window of opportunity to address their real exposure: record-keeping violations.•

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• Hunter G. DeKoninck is an associate in Quarles & Brady LLP’s Indianapolis office and a member of the Defense Trial Counsel of Indiana. Edward D. Rickert is a partner in Quarles & Brady’s Chicago office. Opinions expressed are those of the authors.