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“Non-Suspicious is Suspicious: DEA Moved the Goal Post Again!”

DEA Chronicles By D. Linden Barber

Just when you thought it was safe to have a robust order monitoring program to detect and report suspicious orders, DEA has moved the goal post. In previous posts (here and here), we’ve talked about DEA’s “extra-regulatory” guidance on both suspicious orders and “due diligence”. In late February-early March, the DEA held a hearing in the matter of Masters Pharmaceuticals, Inc. One of the Agency’s allegations was that the Registrant failed to report certain orders as suspicious in violation of 21 C.F.R. § 1301.74(b) , which requires registrants to report orders of unusual size, unusual frequency, or those that substantially deviate from a normal ordering pattern. Several DEA employees testified, repeating portions of what the Agency has said about suspicious order monitoring in correspondence and conference presentations (but not by notice and comment rulemaking). Then a Diversion Investigator pronounced a new and expanded interpretation of the regulation. According to the Investigator, a distributor must report previously shipped orders as suspicious if the distributor subsequently decides to cease distributions to a customer as a result of conducting what the Agency calls “due diligence” (another term not found in the Agency’s regulations). The Investigator said that prior orders placed by that customer should be reported retrospectively even if the customer had not placed any orders of unusual size, pattern, or frequency. So how far back should a distributor look in order to comply with this new interpretation? The Investigator could not provide an answer on cross examination.

Without a hint of legal authority, the DEA appears to believe that orders that are not suspicious can become suspicious when a distributor decides to cease distributions to a customer because the distributor has concerns about the customer. Of course this puts a distributor in the very awkward position of reporting an order that has already been filled as “suspicious.” DEA has said in its extra-regulatory communications that registrants should not fill suspicious orders. Perhaps the Agency will extend an exception if the order in question was filled before it became suspicious. But don’t hold your breath.

Registrants have become accustomed to DEA regulating by letters and Power Point presentations. Now they can look forward to regulation by proclamation during administrative proceedings. But the issue is much broader than order monitoring programs. Has notice and comment rulemaking become optional? Can regulatory agencies announce new requirements under the guise of “interpreting” a regulation? And can an agency do so in an administrative proceeding governed by the APA — the very act that codifies the guarantee of due process in administrative proceedings? I find this approach to regulating very suspicious even though it was previously non-suspicious and only became suspicious after…well, you’ll have to figure it out.