By Ronald W. Chapman Sr., and Ronald W. Chapman II

The Drug Enforcement Administration (DEA) employs hundreds of Diversion Investigators to monitor compliance with the Controlled Substances Act (CSA).¹ Principal methods for maintaining compliance and determining noncompliance are “inspections” or “audits,” which the DEA has the authority to conduct without a criminal warrant, as established by federal law outlined in the Code of Federal Regulations (CFR).²

Recent federal decisions have set the stage for a broad expansion of the scope of administrative inspections, and their frequency is expected to surge in the near future as increased federal funds are committed to combating the prescription drug epidemic in the United States. Nonpractitioner registrants (i.e., manufacturers, distributors, importers, exporters and narcotic treatment programs) can generally expect to be inspected once every five years. Practitioners may be inspected once every three years, but it may be more often if they prescribe buprenorphine and/or have a Drug Addiction Treatment Act of 2000 waiver.

As DEA compliance is all too often left as an afterthought even when there are agents standing at the door ready to perform an inspection, this guide will examine the types of inspections and a physician’s rights in each situation.

Search Versus Inspection

The first step is to determine whether the agents are conducting an administrative inspection or executing a criminal search warrant upon your premises.

If there are agents from multiple enforcement agencies and a search warrant is presented, it is likely that you have been served with a criminal search warrant. This means the DEA believes there is probable cause that a criminal violation of the CSA or other federal statute has been committed. If this is the case, contact an attorney who specializes in the criminal defense of health care professionals immediately, and do not make a statement until you speak with counsel.

However, if two DEA agents present you with a DEA Form 82 (Notice of Inspection of Controlled Premises) or an administrative inspection warrant, you are either getting administrative inspection or an audit. The DEA can pursue these for a variety of reasons: The DEA may have seen a statistical deviation in your prescribing patterns compared with other physicians, received a tip from a pharmacy or patient regarding your prescribing practices, or be performing random inspections to ensure compliance with the CSA.

Audit Versus Administrative Inspection

Physicians can refuse an audit when it is authorized by a DEA Form 82 because “informed consent” is required by the DEA to proceed, unless the facility falls into an exception listed in the code.^3,4 Informed consent generally consists of a written statement that says:

• the person consenting to inspection is the owner, operator or agent in charge of the premises;
• the person has been informed of his or her constitutional right not to have an administrative inspection;
• anything of incriminating nature can be used against the person in a criminal prosecution;
• the person has had the ability to see the notice of inspection;
• consent is voluntary and without threats of any kind;
• and the person may withdraw consent at any time.⁴

A duplicate copy of the DEA Form 82 must be given to the person inspected.

If you choose to decline the audit, the DEA is then required to apply for an administrative inspection warrant from the U.S. Federal District Court.⁵ This warrant must describe the nature and extent of the administrative inspection, including, where necessary, a request to seize specific items and/or collect samples. Unlike a search warrant, the DEA is not required to show probable cause to believe that a violation of the CSA was committed. Administrative inspection warrants are routinely granted upon finding that the investigation will be conducted pursuant to a legitimate purpose, the inquiry may be relevant to that purpose, the information sought is not already within the DEA’s possession and the administrative steps required have been followed.⁶

Note that the DEA must only show that the person to be searched is a registrant, and the DEA wants to inspect the registrant and has not done so in a substantial period of time—generally three years.⁷ If a registrant refuses to permit or impedes the execution of an administrative inspection pursuant to a warrant, the registrant will be arrested and the search will continue.⁸ Thus, it is imperative to seek counsel when faced with an administrative inspection warrant.

There are a few exceptions to the administrative inspection warrant requirement. The DEA does not always need informed consent to search without a warrant. An administrative warrant is not required for establishments applying for initial registration, for inspection of books and records pursuant to an administrative subpoena issued by the DEA’s subpoena power, or for administrative inspections where there is an imminent danger to the public health or safety and the opportunity to apply for a warrant is lacking.⁹

Three Reasons To Refuse an Audit

So why refuse an inspection when the DEA can simply obtain a search warrant? First, the DEA generally shows up in the morning with little regard to your patient load, rounds or walk-in hours. You might refuse the inspection to avoid the disruption it would create in your office and the impact it might have on your patients and professional reputation. These inspections invariably involve asking a lot of questions of the registrant, so you will likely not be able to see patients for much of the day (depending on the scope of the search). Second, this gives you an opportunity to contact your counsel for advice while the administrative warrant is being prepared and submitted. You can also take this time to secure your counsel’s appearance during the inspection to ensure that agents do not exceed the scope of the search warrant or DEA Form 82. Finally, while waiting for the inspection to take place, an attorney skilled in DEA inspection matters can assist you in identifying and improving problematic areas of your practice so you can put your “best foot forward.”

The Limits of an Inspection

The scope of administrative inspections is by far the most contentious and hotly disputed issue regarding them. Naturally, the DEA believes it has broad authority to inspect your entire practice—and occasionally uses administrative inspections to intrude into other areas. However, even an administrative inspection warrant does not give the DEA carte blanche authority to inspect everything. The list of items allowed pursuant to an administrative warrant is contained in 21 CFR §1316.03. Most of these items are related to facilities that manufacture or dispense controlled substances. However, this statute does permit the DEA to inspect, copy or verify the correctness of records that are required to be kept under the CFRs (e.g., buprenorphine and dispensing logs). The DEA recently attempted to obtain patient records under this statute, arguing that these records are required under the code.¹⁰

In United States v. Zadeh, the DEA petitioned a U.S. District Court for an order requiring Abbas T. Zadeh, MD, to provide 35 patient records identified in an administrative subpoena, to monitor Dr. Zadeh’s prescribing habits.¹⁰ Dr. Zadeh rightly refused to provide the records because the request exceeded the DEA’s powers under 21 U.S.C. §876. The Federal District Court disagreed and ordered him to produce the patient records. The court ruled that the request was for an appropriate purpose authorized by 21 U.S.C. §876 because the DEA was engaged in an ongoing investigation for violations of the CSA. The court went on to rule that Fourth Amendment protections do not extend to patient records sought by administrative subpoena, inherently ruling that patient records are within the scope of administrative inspections authorized by 21 C.F.R. §1316.

Dr. Zadeh appealed his case to the U.S. Court of Appeals for the Fifth Circuit.¹¹ As this decision and its inevitable progeny develop, the current consensus is that patient records are within the scope of an administrative inspection or subpoena in some states to determine if a physician is prescribing outside professionally recognized therapeutic purposes and is in violation of the CSA.¹² Unless overruled by a higher court, the broad expansion of DEA powers by the Zadeh decision will inevitably embolden DEA inspectors to increase the frequency and scope of administrative inspections as a pretext to difficult-to-obtain criminal search warrants.

While patient records may currently be inspected, the right to audit does not include the right to interview witnesses, including the registrant and his or her employees. Statements made by you and your employees may be used at any administrative or criminal proceeding against you. Thus, you have no obligation to answer questions or submit your staff to interviews. It is always a good idea to seek the advice of counsel prior to making a statement.

Deviations Found During Inspection

The DEA will issue an “audit report” detailing any noncompliance upon completing an audit. If the DEA determines that the registrant was noncompliant, it will commence administrative action and/or refer the registrant to the Department of Justice (DOJ) for disciplinary action or criminal prosecution. Consequences of CSA violations depend on the severity of the conduct.

If the DEA pursues administrative action, an “order to show cause” will be issued explaining why the registrant’s DEA registration should not be revoked.¹³ It may offer the registrant a “memorandum of understanding,” which is similar to a plea agreement where the registrant agrees to pay a fine and follow additional compliance measures in exchange for deferred prosecution of administrative or criminal action. In extreme circumstances where the DEA believes they can prove that an imminent emergency or danger to the public exists, the DEA will pursue an emergency suspension order.

If the DEA pursues criminal action, it may prosecute registrants for negligent or knowing failure to comply with the CSA. Refusal or negligently failing to make, keep or furnish any record required under the CSA is punishable by a fine of up to $10,000. Intentionally or knowingly refusing or failing to keep or maintain records required under the CSA can result in imprisonment of not more than one year or a fine of up to $100,000. Additionally, the DOJ may charge a registrant with any unlawful prescribing, drug diversion or health care fraud discovered during the inspection. These offenses carry stiff criminal penalties, and registrants could face significant jail time and asset forfeitures.

Conclusion

All practitioners are charged with knowing the ever-increasing web of federal regulations related to the prescribing, manufacturing and dispensing of controlled substances. Failure to adhere to the black letter of the law will result in costly administrative or even criminal action. Successfully navigating a DEA audit requires the help of trained health care law counsel skilled in DEA registration matters at the earliest opportunity, preferably before an inspection. The counsel can conduct an internal audit to spot and address problems, and help implement an audit plan for employees to use during an audit. Finally, involving counsel at the earliest opportunity will help to prevent costly mistakes during the auditing process, and could prevent discipline, suspension or revocation of your DEA registration, or even criminal prosecution.

About the Authors

Ronald W. Chapman Sr. is the founder of Chapman Law Group, a Michigan and Florida law firm dedicated to health law for over 25 years. Ronald W. Chapman Sr. is a recognized leader in health law and has been dedicated to advising and defending health professionals nationwide in administrative, civil and criminal matters.

Ronald W. Chapman II, previously a former federal prosecutor and criminal defense attorney, has focused his practice on defending licensed health care providers in all aspects of criminal and administrative proceedings.

References

1. 21 U.S.C. §§ 801 et seq.
2. 21 CFR §1316.03
3. 21 CFR §1316.06; see 21 CFR §1316.07 for exceptions.
4. 21 CFR §1316.08
5. 21 CFR §1316.09
6. United States v. Powell, 379 U.S. 48, 57-58 (1964).
7. United States v. Prendergast, D.C.Pa. 436 F.Supp. 931, 932 (1977) and Camara v. Municipal Court, 387 U.S. 523, 538 (1967).
8. 1021 CFR 1316.12
9. 321 U.S.C. 876
10. United States v. Zadeh, 2014 U.S. Dist. LEXIS 181500, ×1 (N.D. Tex. Dec. 3, 2014).
11. At press time, the Fifth Circuit had yet to decide this appeal.
12. See 21 CFR 1301.28.
13. 21 CFR 1301.37