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Wednesday, August 1, 2012


Your Office Manager comes into your office and tells you there are two DEA agents in the waiting area who want to inspect your office and ask you some questions. You go out to meet them, they briefly present official credentials and tell you they wish to conduct an audit or administrative inspection. You inform them that you have patient hours that day and ask them what gives them the right to come in and disrupt your practice without warning. They answer that since you have a DEA Registration they have a right to inspect and “today is your lucky day.” They then hand you a form that states if they uncover any evidence of criminality during the “administrative inspection” it can be used against you in a criminal prosecution. The form also states that you have a right to refuse the inspection. You ask about that and they tell you if you refuse the inspection they will “come right back with a warrant.” Confused, and perhaps a bit panicked, you decide this is as good a day as any to have the inspection and you let them in. During the inspection you and your staff also engage them in conversation and answer their questions regarding your administering, dispensing, prescribing and record keeping regarding controlled substances. They notice a non-formulary drug on your inventory and learn that it was ordered for the child of one of your employees. You call counsel later, more as an afterthought and seeking reassurance that all will be OK, and state to counsel that certainly this cooperation and transparency will put you in a good light? This article will explain why this was a poor choice.


This scenario is played out daily in this day of increased health care scrutiny. The DEA representatives most likely were DEA Diversion Investigators (DIs), as opposed to DEA Agents. Their stepped-up efforts are a result, and part, of DEA’s Diversion Control Program. This special mission of DEA in carrying out the program “is to prevent, detect, and investigate the diversion of controlled pharmaceuticals and listed chemicals from legitimate sources while ensuring an adequate and uninterrupted supply for legitimate medical, commercial, and scientific needs.” This is premised on the realization that a substantial increase in the number of substance abuse problems are the result of legitimate controlled substances being abused by patients or being diverted to the illicit drug market.


The DEA derives its authority to pursue its Diversion Control program from federal law. Specifically the Controlled Substances Act (CSA), 21 U.S.C. §§ 801-971, and the corresponding regulations found at 21 CFR Part 1300-1321, give DEA the authority and responsibility to monitor and regulate pharmaceutical controlled substances. These same laws and regulations also set forth the requirements of physicians and other health care providers who have authority to prescribe, dispense and/or administer controlled substances.


The controlled substances are divided into five schedules and are found at 21 C.F.R. 1308.11 through 1308.15. The different schedules and the placement of a controlled substance within a schedule is based on whether the controlled substance has a currently accepted medical use in treatment in the United States and on its potential for abuse and causing of dependence.

So is everything the DIs told the physician (provider) in the scenario above true? Yes, substantially correct. First, under the CSA and corresponding regulations, DEA has the right to conduct administrative inspections or audits. They prefer to show up unscheduled and unannounced and to obtain the provider’s consent to search. They will provide a DEA Form 82, entitled Notice of Inspection of Controlled Premises, and will ask the provider to consent by signing the form. As the form makes clear, the provider has a right to refuse to consent, has a right not to have the inspection take place without an administrative inspection warrant, and incriminating evidence that is found can be used against the provider in a criminal case. The DIs will state that if the provider refuses to consent they will be back shortly, the implication being that same day, with an administrative search warrant. This is not totally accurate; although the administrative inspection warrant will almost always be routinely granted, it is not as “immediate” as one would think. In actuality it can take days or weeks in order for the agents to obtain and return with an administrative inspection warrant.


So what should a provider do when faced with a request to consent to such an inspection? Refuse, and perhaps incur the wrath of DEA by making them work harder for an inspection that inevitably will take place? Or consent and run the risk of being unprepared for an inspection that could have adverse consequences on the provider’s registration as well us disrupt the practice during the time of the inspection? None of the above.


In this case the provider should immediately call legal counsel, who will explore with the client whether that day is the “right day” for an inspection. There are a variety of valid reasons why a provider may wish to reschedule. The timing of the inspection may be terrible; this could be a very busy day for the provider’s personal schedule, the practice may be short on personnel, or the waiting room may be packed. Also, the correct or preferable personnel for responding to such an inspection may not be present that day. The provider may want to get organized. Counsel may wish to review with the provider regulations of the State Board of Medical Examiner and DEA on prescribing controlled substances and record keeping before the inspection begins. These are some, but certainly not all, of the reasons why a provider would want to reschedule the inspection.


In addition, counsel should speak with the DIs and establish a rapport and dialogue that, while recognizing and respecting the very important role of DEA in regulating controlled substances, seeks to minimize the disruption and potential adverse impact of the inspection. Many times counsel can learn information or at least obtain an impression about the unannounced visit; whether it is truly routine or whether it was prompted by a complaint or other information that may give reason for greater concern. Based on what is learned counsel can best guide the provider whether it is best that day to consent to the inspection or to withhold consent. A middle ground may be reached where counsel and provider promise to consent to the inspection if the matter is rescheduled for a mutually convenient day.


Whether an inspection takes place by consent or by warrant, it should be the same scope. DEA is authorized by regulation to “inspect, copy, and verify the correctness of records required to be kept” under the CFRs. Basically they are looking at proper record keeping of controlled substances and whether there is any evidence of diversion. Thus, it should be limited to a review of the provider’s records to determine compliance with the laws and regulations surrounding controlled substances.


The biggest danger in consenting to an inspection without the benefit of the advice – and ideally the presence - of counsel during the search, is that the DIs or agents will engage the practice employees in conversation. Remember the right to inspect or audit does not equal the right to interrogate. No one is under an obligation to answer questions. Any and all communications can be used against the provider in any forum - criminal, civil, or administrative. On the other hand some communication with the agents has to take place in order for the inspection to proceed. That is why it is so important to have the “right person” in the practice - someone who can handle the “give and take” of such an event - designated to communicate with the agents during the inspection. When practicable it is also advisable to have counsel present during the inspection and have counsel communicate with the DIs. Another reason it is important to reach out to counsel is that the right to inspect does not give the DIs the right to conduct a wide ranging inspection of practice records that have nothing to do with controlled substances.


The bottom line is communication should be kept to a minimum, tailored to only what is necessary for the agents to locate the records they need to inspect. A memorandum should be drafted immediately after the inspection, capturing the substance of the communications and what transpired during the inspection, for the benefit of the practice’s attorney.


So what happens if an inspection turns up something amiss? Of course the only answer is that “it depends.” The analysis will be based on the nature and degree of non-compliance, as well as whether the provider has any history of DEA violations or licensing/disciplinary violations. If violations are egregious enough the inspection results could give rise to a full-fledged criminal investigation in which the DIs will refer the matter to DEA Special Agents, who have criminal investigatory powers, or to the relevant US Attorney’s Office (federal prosecutor). In some cases the non-compliance on its face will constitute a criminal violation.

However, when an inspection turns up deficiencies or violations, most often administrative remedies are utilized. Although not criminal in nature, administrative proceedings or resolutions of the issues could still have significant impact upon a provider’s ability to practice. Starting on the lower level of the spectrum, DEA may issue a private Letter of Admonition to the provider that acts as a warning and is a record of admonishment that will be taken into account by DEA should there be future violations.


For a case that warrants a greater administrative sanction, the DEA may issue an “order to show cause” why the provider’s registration should not be revoked or suspended. If this avenue is pursued the matter will be heard by a U.S. Administrative Law Judge. The standard that is applied is whether the provider’s continued registration “is inconsistent with the public interest.” The provider will be given administrative due process and a hearing. Of course the provider may, and should, be represented by counsel during the process. The ALJ will issue a non-binding “Recommended Opinion” that will be forwarded to the DEA Administrator, who may adopt, modify or reject the ALJ opinion in finally deciding the fate of the provider’s DEA registration. The results of these orders to show cause may be found on the DEA’s website under Diversion Control and Prescription Drugs/Cases Against Doctors.

An avenue that may be pursued with the DEA by the provider and counsel, in lieu of an order to show cause, is a Memorandum of Agreement (MOA). This is a middle ground that is not considered a sanction but at the same time addresses the concerns of the DEA. It is an agreement, for a limited time period, in which the provider agrees to take certain measures to address whatever deficiencies were found. DEA will demand in these agreements that the provider agree to future DEA administrative inspections without a warrant but “within reason and so as not to unduly disrupt the practice.” In the negotiating process between the provider’s counsel and DEA, it is important that the MOA be tailored to the record keeping or other found deficiencies, and that the terms of the MOA do not become too far ranging with little or no nexus to the underlying problem. Care must also be taken that the MOA remain a private agreement and that it not become so restrictive that it has a substantial impact on the provider’s ability to practice; this could in turn create credentialing or state licensing complications. Obviously, a violation of the MOA during the term of the MOA could result in DEA seeking to impose a greater sanction, and even after an MOA expires it can be used in the future to enhance sanctions should there be future violations.


A particularly worrisome practice that has occurred in the past is DIs or Special Agents asking providers, during an unscheduled office visit, to surrender the registration based on alleged violations of the Controlled Substances Act (CSA) and its implementing regulations. They do so by asking the physician to sign a DEA Form 104, entitled Voluntary Surrender of Controlled Substances Privileges (surrender form). Under no circumstances should the surrender form be signed without the advice of counsel.

On November 4, 2011 the DEA published a final rule amending 21 C.F.R. §§ 1301.52(a) and 1301.62(a), making it clear that a voluntary surrender of a DEA registration by a practitioner is effective immediately upon a DEA employee’s receipt of a signed DEA Form 104, or a surrender in any written format. Signing the surrender form will have immediate adverse consequences, including loss of privileges to prescribe controlled substances schedules II through V, and collateral consequences such as potential board disciplinary action, loss of medical staff privileges, and management care implications. Efforts to reacquire a registration after surrender require reapplication and legal proceedings in which DEA will oppose the reapplication in an Order to Show Cause, and the entire proceedings would likely take 18 months to two years, with no guarantee of success, while the provider possesses no DEA registration. If the DEA requests the surrender of your DEA registration, politely decline and call counsel immediately.


So what can the provider do to prepare for the likelihood of a DEA administrative inspection? First, be familiar with and make good faith efforts to be in compliance with the State and DEA regulations as they pertain to dispensing, administering and prescribing controlled substances, as well as any controlled substances record keeping requirements. Also, keep in mind that the DEA has issued a Compliance Manual for provider’s that may be found on its website. Seek qualified, expert legal advice. Have your counsel’s number available at all times. If you seek expert advice or consultation in addition to legal representation, have counsel hire the expert so the expert’s advice falls within the protection of the attorney client privilege. As eluded to previously, have a person or persons in your practice, who are experienced and knowledgeable about your practice, designated to respond in case of an inspection. Reserve the decision to consent to an inspection for yourself, the managing physician of the practice, and never make that decision without first consulting with legal counsel. Keep in mind always that professionalism and relations are factored into the equation. If engaged by the DEA, react and conduct yourself in a respectful, appropriate manner that does not denigrate the mission and purpose of DEA efforts. Antagonizing any regulatory agency does your case no good. Finally, remember always that it does not reflect adversely upon you to ask for time to consult with counsel.



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