Identifying and Resolving Red Flags: DEA Continues to “Run it Up the Flagpole”

February 9, 2022By John A. Gilbert & Larry K. Houck

The Drug Enforcement Administration (“DEA”) recently issued another Final Order revoking a pharmacy registration based on the failure of the pharmacy to meet its corresponding responsibility, more specifically, the failure to identify and resolve red flags.  While the Final Order does not necessarily introduce any new red flags, it does appear that DEA is attempting to refine these requirements and impose bright line standards related to “red flags” and the need for documentation, which are not currently defined in the statute or regulations.

On December 22, 2021, new DEA Administrator Anne Milgram revoked the DEA registration of Gulf Med Pharmacy (“Gulf Med”) following issuance of an Order to Show Cause and Immediate Suspension of Registration.  Gulf Med Pharmacy; Decision and Order, 86 Fed. Reg. 72,694-72,735 (Dec. 22, 2021).  In short, DEA alleged that Gulf Med, a small, independent pharmacy in Cape Coral, Florida, “repeatedly ignored obvious red flags of abuse or diversion and filled prescriptions without exercising its corresponding responsibility to ensure that they were issued for legitimate medical purpose, in violation of federal and state law” between March 2017 and August 2019.  Id. at 72,694.  DEA investigated Gulf Med because it was one of the top ten purchasers of oxycodone, hydromorphone and hydrocodone in Florida.  Id. at 72,698.   Administrator Milgram found that Gulf Med failed to exercise its corresponding responsibility by repeatedly dispensing controlled substances pursuant to prescriptions that exhibited “obvious red flags of diversion without documenting the resolution of those red flags.”  Id. at 72,727.

This most recent case highlights again the ongoing issue of what are obvious red flags and how  a registrant must document resolution of such red flags to the satisfaction of DEA.  DEA regulations state that a pharmacist has a corresponding responsibility not to fill a prescription unless it is issued for a “legitimate medical purpose by an individual practitioner acting in the usual course of [their] professional practice.”  21 C.F.R. § 1306.04(a).  The person who knowingly fills such  prescription is subject to administrative, civil and criminal penalties.  Id.

As cited in the Gulf Med decision DEA has held that corresponding responsibility prohibits “the filling of a prescription where the pharmacist or pharmacy ‘knows or has reason to know’ that the prescription is invalid.”  Holiday CVS, L.L.C. d/b/a CVS/Pharmacy Nos. 219 and 5195; Decision and Order, 77 Fed. Reg. 62,316, 62,341 (Oct. 12, 2012) (quoting Bob’s Pharmacy & Diabetic Supplies; Revocation of Registration, 74 Fed. Reg. 19,599, 19,601 (Apr. 29, 2009)).  Agency precedent has evolved over the years to define corresponding responsibility as requiring a pharmacy to resolve “red flags” before dispensing a prescription:

[A] pharmacist or pharmacy may not dispense a prescription in the face of a red flag (i.e., a circumstance that does or should raise a reasonable suspicion as to the validity of a prescription) unless he or it takes steps to resolve the red flag and ensure that the prescription is valid.

Holiday CVS, 77 Fed. Reg. at 62,341; see Jones Total Healthcare Pharmacy, L.L.C. and SND Health Care, L.L.C.; Decision and Order, 81 Fed. Reg. 79,188, 79,218-19 (Nov. 10, 2016); East Main Street Pharmacy; Affirmance of Suspension Order, 75 Fed. Reg. 66,149, 66,150 (Oct. 27, 2010).  So, a pharmacy must not dispense a prescription unless it resolves any red flags surrounding it.

In Gulf Med, DEA emphasized that “[r]ed flags are circumstances surrounding a prescription that cause a pharmacist to take pause, including signs of diversion or the potential for patient harm.”  Gul Med at 72,703.  Administrator Milgram found that the presence of a red flag does not prohibit a pharmacist from filling a prescription, but “means that there is a potential concern with the prescription, which the pharmacist must address and resolve, and … make a record of its resolution, assuming it is resolvable.”  Id.

In particular, the DEA and its expert witness, focused on several specific red flags that Gulf Med failed to identify or failed to identify and document the resolution.

a.  Cocktail Medications

Controlled substance combinations known to be abused or diverted when consumed together that significantly increase a patient’s risk of death or overdose are referred to as “cocktail medications.”  Gulf Med Pharmacy at 72,695.  DEA’s expert concluded that Gulf Med repeatedly dispensed high doses of opioids, (hydromorphone, oxycodone and morphine sulfate extended release) with high doses of other central nervous system depressants such as benzodiazepines (e.g., alprazolam, clonazepam, or diazepam) or muscle relaxants (e.g., carisoprodol) that are dangerous when consumed together.  Id.  This combination, the “Trinity” cocktail, “is highly dangerous and is widely known to be abused and/or diverted.”  Id.  DEA’s expert explained that combination of an opioid and benzodiazepine is dangerous because both drugs depress the patient’s central nervous system.  Id. at 72,719.  Gulf Med repeatedly filled prescriptions for Trinity cocktail medications without any indication that pharmacists addressed or resolved their risk of abuse or diversion.  Id. at 72,695.  The Administrator found that dispensing cocktail medications requires documentation of investigation and resolution, which Gulf Med pharmacists failed to do.  Id. at 72,730.

b.  Improper Dosing for Pain Management

DEA’s expert opined that proper pharmacologic dosing of pain management patients receiving both long-acting and short-acting opioids is to use larger, scheduled doses of long-acting opioids to control chronic pain with smaller, as-needed doses of short-acting opioids for breakthrough pain.  Id. at 72,695.  She explained that such dosing requires reducing the quantity of the short-acting opioid to obtain the same level of pain control.  The expert concluded that prescribing a larger daily dose of short-acting opioids than long-acting opioids does not make pharmacologic sense.  Id.  The Administrator found that Gulf Med failed to resolve this red flag.  Id. at 72,730.

c.  Long Distances Traveled

The Government alleged that Gulf Med regularly filled prescriptions for patients who traveled “an unusual distance” to obtain their prescriptions.  Id. at 72,696.  DEA’s expert opined that patients traveling long distances to obtain or fill controlled substance prescriptions can be indicative of diversion and/or abuse and therefore a red flag that must be addressed prior to dispensing.  Id.  The ALJ determined that the Government failed to prove the distances traveled to fill prescriptions, ranging between 30 to 50 miles round trip, and the Administrator found it unnecessary to weigh in on that allegation.  Id. at 72,729-30.

d.  Payment in Cash

Cash payment for controlled prescriptions rather than payment by insurance (or worker’s compensation) is another red flag.  The expert explained that insurance companies frequently reject suspicious controlled prescriptions that may be related to drug abuse or diversion, for example prescriptions for the same patient filled by multiple pharmacies.  Id. at 72,696.  Some patients choose to pay cash to avoid insurance rejections that would alert pharmacists of potential abuse or diversion.  Cash payments are especially suspicious when the patient bills insurance for other prescriptions but pays cash for controlled prescriptions.  Id.  The Administrator agreed that cash payments were a red flag and outside the usual course of professional practice for Gulf Med when it failed to resolve and document their resolution in light of the other red flags.  Id. at 72,730.

e.  Price Gouging

DEA’s expert indicated that price gouging, charging more than the market rate for controlled prescriptions, is another red flag that may indicate drug abuse or diversion.  Id. at 72,696.  She explained that legitimate patients, who can fill their prescriptions anywhere, will switch pharmacies to pay the fair market price while a “highly suspect patient can only fill prescriptions at a suspicious pharmacy and must pay whatever price that suspicious pharmacy sets.”  Id.   Inflated prices for controlled prescriptions are a red flag, especially when prices are substantially higher than the market prices charged by local pharmacies.  Filling controlled substance prescriptions at inflated cash prices also demonstrates that a pharmacy “has knowledge that it is filling prescriptions that are not legitimate, as its inflated prices reflect a ‘risk premium’ that the pharmacy charges to account for the risk it is taking by filling illegitimate prescriptions.”  Id.  DEA’s expert contacted representative local pharmacies to determine a “baseline of normalcy (i.e., legitimate pricing).”  Id.  The Government alleged that Gulf Med charged certain patients two to three times the market rate for their controlled medications.  Id. at 72,697.

Most if not all of these red flags have been discussed in prior DEA administrative decisions.   However, this decision appears to paint with an even broader brush that the mere presence of certain facts, e.g., a cash payment, a patient travelling from some undefined “long distance” or patients receiving a combination of drugs are de facto red flags that must be resolved and documented before filling the prescription.  For example, does DEA expect that a pharmacy must document and justify the filling of any cash prescription?  What about a case where a pharmacy is filling a prescription for a combination of drugs for a known hospice patient?  What documentation is required in these cases?  And if such resolution/documentation is not required in every case,  what is the standard or criteria: greater than some percentage of payments in cash or a travelling distance over 30 miles?

The extent of the red flags in Gulf Med may have certainly justified revocation, but we are concerned that DEA is establishing a standard that would require pharmacies, particularly the thousands of small independent pharmacies, to meet a standard of documentation that would be burdensome and unnecessary, or face significant penalties,  However, it seems that is the way that DEA itself is waving the “red” flag.