United States District Court, E.D. Kentucky, Central Division, Lexington
MEMORANDUM OPINION & ORDER
M. Hood, Senior U.S. District Judge
matter is before the Court upon Defendant Appalachian
Regional Hospital, Inc.'s (“ARH”) Motion to
Dismiss for Failure to State a Claim [DE 6]. ARH has also
filed an alternative Motion to Strike Complaint and for
Partial Summary Judgment [DE 5]. The United States having
filed its Response to both Motions [DE 14], and ARH having
submitted its Reply [DE 16, 17], this matter is now ripe for
the Court's review. For the reasons stated herein,
ARH's Motions are DENIED IN FULL.
Factual and Procedural Background
a healthcare system that operates medical centers, hospitals,
and clinics throughout Eastern Kentucky. [DE 1, p. 2, ¶
7]. It also oversees several pharmacies affiliated with these
facilities, including Harlan ARH Hospital Pharmacy, Hazard
ARH Regional Medical Center Clinic Pharmacy, Hazard ARH
Regional Medical Center Hospital Pharmacy, and Middlesboro
ARH Pharmacy. [Id. at p. 2, ¶ 8].
all pharmacies, these entities were required to register with
the Drug Enforcement Administration (“DEA”) and
follow the Controlled Substances Act's
(“CSA”) comprehensive regulatory scheme, which
“tracks and traces controlled substances from
manufacture to delivery to ensure that they are not illegally
diverted for improper uses.” [Id. at p. 3,
¶ 10]. This regulatory system permits pharmacies to
dispense controlled substances to a patient, so long as that
patient holds a prescription issued by a practitioner acting
in his normal course of business for a legitimate medical
purpose. [Id. at p. 4, ¶ 14]. Pharmacies may
also distribute controlled substances to a practitioner upon
request. [Id.]. In either case, pharmacies
must maintain detailed records of the
transactions. [Id. at p. 8, ¶ 39-40].
However, the precise recordkeeping requirements vary,
depending on whether a transaction qualifies as a
dispensation or a distribution. [Id.].
2010, a pharmacist at Harlan ARH Hospital Pharmacy notified
the Director of Pharmacy, Angela Creech, that he had concerns
about Phentermine prescriptions written by Dr. Donald F.
Ramsey. [Id. at p. 10, ¶ 56-57].
Phentermine, a Schedule IV controlled substance, is a
stimulant intended to assist obese patients with weight loss
when combined with diet and exercise. [Id. at p. 9,
¶ 44-49]. The pharmacist noted that Dr. Ramsey was a
physician in Harlan ARH Hospital's Emergency Room, and
thus, did not have occasion to prescribe Phentermine in the
normal course of his business. [Id. at p. 11, ¶
58]. Many of these prescriptions were written for nurses and
staff members who were not obese. [Id. at p. 11,
¶ 60-61]. They were also written for twice the standard
dosage of Phentermine. [Id. at p. 11, ¶ 59].
the same time, an employee informed Risk Manager Phyllis
Wilson that a nurse had admitted to receiving and filling
Phentermine prescriptions written by Dr. Ramsey.
[Id. at p. 12-13, ¶ 70-71]. According to this
source, the nurse had also indicated that she kept half of
the pills and gave the other half to Dr. Ramsey.
[Id.]. Wilson obtained a report from the pharmacy,
listing all recently filled Phentermine prescriptions, which
supported these allegations. [Id. at p. 13, ¶
72]. She then approached Hospital Administrator Dan Stone
about the situation.[Id. at p. 13, ¶ 73].
these reports, Harlan ARH Hospital administrators never
discussed the issue with Dr. Ramsey or instructed its
pharmacists not to fill Phentermine prescriptions written by
him. [Id. at 12, ¶ 67-68]. As a result, from
January 17, 2012 to March 10, 2014, Harlan ARH Hospital
Pharmacy filled 83 Phentermine prescriptions written by Dr.
Ramsey to nurses, staff members, and their
families. [Id. at p. 14, ¶ 81].
in 2014, the Kentucky Board of Medical Licensure
(“KBML”) received an anonymous complaint about
Dr. Ramsey's prescribing practices. [Id. at p.
17, ¶ 86]. During the ensuing investigation, eight
employees, including five nurses, a licensed professional
nurse, and a nursing services clerk, conceded that they
obtained and filled Phentermine prescriptions written by Dr.
Ramsey. [Id. at p. 17, ¶ 87]. Dr. Ramsey
admitted to the same, indicating that he received and
ingested some of the pills so that he could stay awake while
working the night shift. [Id. at p. 18, ¶ 91].
Dr. Ramsey later entered into an agreement with the KBML,
indefinitely terminating his ability to practice medicine.
[Id. at p. 18, ¶ 93].
of a DEA audit, the United States later procured dispensing
records for Harlan ARH Hospital Pharmacy, as well as Hazard
ARH Clinic Pharmacy, Hazard ARH Hospital Pharmacy, and
Middlesboro ARH Pharmacy. [Id. at 19, ¶ 95].
These records were often incomplete and inconsistent with
each other, making it difficult to conduct an accurate audit.
[Id. at 19-21, ¶ 98-103]. The audit also
revealed that ARH pharmacies dispensed controlled substances
for “office stock” to another registrant pursuant
to a prescription and distributed Schedule II controlled
substances without using a DEA Form 222. [Id. at p.
19-21, ¶ 95-101].
United States now brings this civil enforcement action
against ARH, seeking penalties and injunctive relief in
connection with the aforementioned violations of the CSA.
[Id. at 1, ¶ 1]. Count I alleges that ARH
filled false or fraudulent prescriptions in violation of 21
U.S.C. § 842(a)(1), while Count II asserts that ARH
failed to make and maintain complete and accurate records in
violation of 21 U.S.C. § 842(a)(5). [Id. at p.
22-23, ¶ 104-113].
urges the Court to dismiss Count I with prejudice because the
relevant CSA provisions do not apply to the pharmacy itself.
Moreover, ARH insists that the pharmacy cannot be held
vicariously liable for the acts of the prescribing
practitioner or pharmacist. ARH argues that Count II should
suffer the same fate because the United States has not plead
a plausible claim of inaccurate recordkeeping. In the
alternative, ARH contends that the United States cannot
recover civil penalties on a “per occurrence”
basis, and thus, it is entitled to partial summary judgment
limiting the amount recoverable to $25, 000 for all
violations of the CSA plead in Count I and $10, 000 for all
violations alleged in Count II. Consistent with this
conclusion, ARH asks the Court to strike all mention of
“per occurrence” penalties from the Complaint.
The Court will address each of these contentions in turn.
Principles of Statutory Construction
is a ‘fundamental canon of statutory construction'
that, ‘unless otherwise defined, words will be
interpreted as taking their ordinary, contemporary, common
meaning.'” Sandifer v. U.S. Steel Corp.,
134 S.Ct. 870, 876 (2014) (quoting Perrin v. United
States, 444 U.S. 37, 42 (1979)); see also Norfolk S.
Ry. Co. v. Perez, 778 F.3d 507, 512 (6th Cir. 2015)
(“We must presume that Congress says what it means and
means what it says, and therefore must apply a statute as it
is written, giving its terms the ordinary meaning that they
carried when the statute was enacted.”).
arguments, summarized above, hinge heavily on its reading of
various federal statutes and regulations. The Court will
therefore apply the aforementioned principles of statutory
construction in evaluating ARH's Motions.
ARH's Motion to Dismiss
Standard of Review
Complaint must contain a “short and plain statement of
the claim showing that the pleader is entitled to
relief.” Fed.R.Civ.P. 8(a)(2); see also Fed.
R. Civ. P. 12(b)(6). It should also include “sufficient
factual matter, accepted as true, to ‘state a claim to
relief that is plausible on its face.'”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting
Twombly v. Bell Atl. Corp., 550 U.S. 544, 570
(2007)). “A claim has facial plausibility when the
plaintiff pleads factual content that allows the court to
draw the reasonable inference that a defendant is liable for
the misconduct alleged.” Id. “[A]
formulaic recitation of the elements of a cause of action
will not do.” Twombly, 550 U.S. at 555.
Count I-Filling False or Fraudulent
generally requires “[e]very person who manufactures or
distributes any controlled substance, ” or proposes to
engage in such activities, to obtain a registration issued by
the Attorney General. 21 U.S.C. § 822(a)(1). The same rule
applies to “[e]very person who dispenses, or proposes
to dispense, any controlled substance.” 21 U.S.C.
§ 822(a)(2). It is unlawful for registrants to
distribute or dispense Schedule II, III, IV, or V controlled
substances without a prescription. 21 U.S.C. §
829(a)-(c) (stating that such controlled ...