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Wedgewood Villiage Pharmacy, Inc. v. Ashcroft

December 15, 2003

WEDGEWOOD VILLAGE PHARMACY, INC., D/B/A WEDGEWOOD PHARMACY, A NEW JERSEY CORPORATION, PLAINTIFF,
v.
JOHN ASHCROFT, IN HIS OFFICIAL CAPACITY AS ATTORNEY GENERAL, UNITED STATES DEPARTMENT OF JUSTICE, AND KAREN TANDY, IN HER OFFICIAL CAPACITY AS THE ADMINISTRATOR OF THE UNITED STATES DRUG ENFORCEMENT ADMINISTRATION, DEFENDANTS.



The opinion of the court was delivered by: Jerome B. Simandle United States District Judge

OPINION UPON MOTION FOR PRELIMINARY INJUNCTION

This matter comes before the Court upon Plaintiff's motion for a preliminary injunction, pursuant to Fed. R. Civ. P. 65, enjoining Defendants from preventing Wedgewood Village Pharmacy, Inc. from receiving, storing, preparing and dispensing controlled substances and listed chemicals at its new pharmacy until final resolution of a pending Order to Show Cause. The principal issue here is whether the Drug Enforcement Administration, in the exercise of its authority and discretion, may refuse to immediately approve a modification in registration and instead reserve decision on a registrant's application for modification and join that determination with matters to be decided in an already pending administrative Order to Show Cause proceeding. For reasons discussed herein, Plaintiff's motion is denied.

I. BACKGROUND

Wedgewood Village Pharmacy, Inc. ("Wedgewood") is a New Jersey licensed pharmacy. In response to substantial growth in the demand for its services, Wedgewood decided earlier this year that it would relocate its operation to a larger, state-of-the-art pharmacy at 405 Heron Drive, Swedesboro, New Jersey, and signed a ten-year lease on these premises in January 2003. Wedgewood's lease on its former premises in Sewell, New Jersey expired at the end of June 2003, after which time, Wedgewood remained there as tenant on a month to month basis, with the agreement that it would vacate by November 1, 2003. In preparation for the move, on October 21, 2003, Wedgewood called Drug Enforcement Administration ("DEA") Agent Donna Walker to discuss the proper procedure for filing its change of address with the DEA. Agent Walker informed the Wedgewood employee who placed the call, Scott Elwood, that Wedgewood was required to file a change of address form, obtainable from the DEA website.

Wedgewood proceeded on the belief that mere notification to the New Jersey Pharmacy Board and the DEA of a change of address is sufficient to trigger a state inspection of the new pharmacy location which, in turn, triggers reissuance of its state pharmacy license and Wedgewood's DEA registration modified to the new location.

On or about October 21, 2003, Wedgewood notified the DEA by facsimile, First Class Mail, and United Parcel Service that Wedgewood was moving to its new facility on October 31, 2003. On October 30, 2003, Wedgewood received a letter from the DEA dated October 27, 2003 informing it that Wedgewood's address change constituted a modification of Wedgewood's registration; moving or transporting to, or storing controlled substances at the new location was prohibited; and Wedgewood's request for an address change would be "considered" at a recently issued Order to Show Cause hearing. A. Events Giving Rise to the Original Order to Show Cause

DEA Camden conducted an investigation of Wedgewood's activities in March and April 2003. The DEA was developing information that led its agents to believe that Wedgewood was an unregistered manufacturer of drugs rather than the registered pharmacy it claims to be. On April 29, 2003, the DEA Camden Resident Office placed an administrative "code 6" on the registration record of Wedgewood, which acted to prevent any automatic renewal of Wedgewood's registration. By virtue of the DEA regulation at 21 C.F.R. § 1301.36(i), this action did not prevent Wedgewood from continuing to operate under its DEA registration at its former registered premises. In Spring of 2003, Wedgewood timely applied for the renewal of its registration, however, because the registration was due to expire. The DEA did not renew Wedgewood's registration. Without a valid registration, Wedgewood would not be able to continue its business. Therefore, Wedgewood and the DEA entered into an agreement, pending the resolution of Wedgewood's license renewal, that allowed Wedgewood to continue to dispense controlled drugs.

On May 3, 2003, DEA Camden forwarded to DEA Headquarters a recommendation for the issuance of an Order to Show Cause proposing to revoke Wedgewood's registration. As Wedgewood, in DEA's view, was operating outside its retail pharmacy registration by conducting manufacturing activities without an appropriate DEA registration, the DEA Newark Acting Special Agent-in-Charge sent a letter to Wedgewood dated August 21, 2003, advising it to immediately cease and desist the identified unlawful activities.

Subsequently, on September 8, 2003, the DEA Deputy Assistant Administrator for the Office of Diversion Control issued an administrative Order to Show Cause to Wedgewood, proposing to revoke Wedgewood's DEA registration and to deny any pending applications for renewal of its registration pursuant to 21 U.S.C. §§ 824 and 823.The Show Cause Order contains twenty-three allegations of violations of certain Food Drug and Cosmetic Act provisions as well as some DEA record-keeping violations for controlled substances. Wedgewood filed its request for a hearing on the Order to Show Cause on October 16, 2003. An Administrative Law Judge was assigned and a briefing and disclosure schedule was set, which extends to December 8, 2003. A hearing before the ALJ is anticipated in early 2004. B. Alleged Emergent Nature of this Action

By its own arrangements with its landlord at its principal place of business in Sewell, Wedgewood had to vacate its leased principal place of business on October 31, 2003, as it was scheduled for major renovation for another tenant the week of Monday, November 3, 2003. Wedgewood had signed a lease for new enlarged premises of 30,468 sq. ft. in Swedesboro in January 2003, and it commenced paying rent at Swedesboro as the intended premises underwent substantial renovations and construction to accommodate Wedgewood's activities, and by the end of October, the Swedesboro building was ready.

Wedgewood's dispensing of compounds that contain controlled substances is alleged to be the most profitable segment of its business. It is a substantial operation with many mail-order or internet customers. Its controlled drug inventory on hand is worth approximately $100,000. On October 30, 2003, DEA's counsel informed Wedgewood's counsel that if the controlled drugs are moved into the new unapproved location, the DEA will seize them.

The administrative Show Cause hearing was originally unrelated to the move or safety or security of the new pharmacy location, since DEA was unaware of Wedgewood's plans to move until October 21, 2003. Wedgewood asserts that the administrative hearing and its resolution, including any appeal, may be a year or more away. In the interim, Wedgewood contends that it will be driven out of business and have its long-standing relationships with patients and physicians eroded.

Wedgewood filed its Complaint herein on November 5, 2003, and Wedgewood moved for a TRO and this Court heard lengthy arguments on November 7, 2003, at which time it ruled from the bench, denying Wedgewood's motion. See Tr. 11/7/03 at 77:17 to 90:17. Subsequently, the Court scheduled Plaintiff's motion for a preliminary injunction in order to give more detailed consideration to the parties' positions. Oral argument was heard on November 25 and 26, 2003 and testimony was taken from Elizabeth Willis, Diversion Investigator and the Chief, Drug Operations Section, Office of Diversion Control, Drug Enforcement Administration; Charles Lunden, a forensic Certified Public Accountant; George Malmberg, registered pharmacist and co-owner of Wedgewood; Scott Elwood, a Wedgewood employee; and Ludmilla Malmberg, registered pharmacist and co-owner of Wedgewood. *fn1

This Opinion constitutes the Court's Findings of Fact and Conclusions of Law pursuant to Rule 52(a), Federal Rules of Civil Procedure.

II. DISCUSSION

A. Statutory and Regulatory Scheme

Under the Controlled Substances Act ("CSA"), any person who distributes or dispenses controlled substances must obtain a registration from the DEA. 21 U.S.C. § 822(a). Wedgewood is currently registered with the DEA as a retail pharmacy under the CSA, in accordance with 21 U.S.C. §§ 822 and 823. As a registrant, Wedgewood is obligated to conduct its regulated business in keeping with "the extent authorized by its registration, and in conformity with the other provisions of subchapter [I of Chapter 13]." 21 U.S.C. § 822(b).

The CSA and the regulations promulgated under it are intended in part to serve as an oversight and enforcement vehicle for preventing and reducing the diversion of prescription pharmaceutical controlled substances from their intended recipients to those who will use the drugs for abusive, illicit or unauthorized purposes. In order to deter drug diversion, the Act requires registrants to prepare and maintain records which account for the receipt, storage, and distribution of controlled substances. These recordkeeping and registration requirements are part of the CSA's "closed system" which allows both the DEA and the registrant to monitor the activities of registrants and their use of controlled substances, and to aid in detecting and impeding efforts to divert and misuse controlled substances. 21 U.S.C. § 801; 21 C.F.R. Part 1301, 1304.

Under the CSA, the place of conducting the registrant's business is important, as the CSA further provides that "[a] separate registration shall be required at each principal place of business or professional practice where the applicant manufactures, distributes, or dispenses controlled substances or list I chemicals." 21 U.S.C. § 822(e). The companion regulation, 21 C.F.R. § 1301.12(a), also provides that "[a] separate registration is required for each principal place of business or professional practice at one general location where controlled substances are manufactured, distributed, imported, exported, or dispensed by a person." Id.

Pursuant to 21 C.F.R. ยง 1301.51, a simple method is provided for notifying DEA of a prospective change of address. Any registrant may apply to modify his registration in order to, among other things, change his address, by submitting a letter of request to the DEA. The regulation further provides that "[t]he request for ...


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