APPENDIX 

U.S. Department of Justice
Drug Enforcement Administration

Office of the Administrator

Springfield, VA 22152

September 13, 2012

IN THE MATTER OF
Walgreen Co.
15998 Walgreens Drive
Jupiter, Florida 33478

ORDER TO SHOW CAUSE AND
IMMEDIATE SUSPENSION OF REGISTRATION
PURSUANT to Sections 303 and 304 ofthe Controlled Substances Act, Title 21,
United States Code, Sections 823 and 824,
NOTICE is hereby given to inform Walgreen Corporation ("Walgreens" or
"Respondent") of the immediate suspension of Drug Enforcement Administration
("DEA'') Certificate of Registration RW0277752, pursuant to 21 U.S.C. § 824(d),
because such registration constitutes an imminent danger to the public health and safety.
Notice is also given to afford Walgreens an opportunity to show cause before DEA in
Arlington, Virginia, or a location designated by the Administrative Law Judge, on
November 13, 2012 (ifWalgreens requests such a hearing), as to why DEA should not
revoke Walgreens's DEA Certificate of Registration RW0277752, pursuant to 21 U.S.C.
§ 824(a)(4), deny any pending applications for renewal or modification of such
registration, and deny any applications for additional registration, pursuant to 21 U.S.C.
§ 823(b) & (e), because Walgreens' continued registration is inconsistent with the public
interest, as that term is defined in 21 U.S.C. § 823(b) & (e). The basis for this Order to
Show Cause and Immediate Suspension of Registration is set forth in the following
nonexhaustive summary of facts and law (see 21 C.F.R. §§ 1301.36(e) and 1301.37(c),
which DEA construes in pari materia in this context.)
1. Walgreens' Jupiter Florida Distribution Center is registered with DEA as a distributor
in Schedules II-V pursuant to DEA Certificate of Registration RW0277752 at
15998 Walgreens Drive, Jupiter, Florida 33478. DEA Certificate of Registration
RW0277752 expires by its terms on May 31,2013. The Jupiter Distribution Center is
one of 12 Distribution Centers owned and operated by the Walgreen Corporation,

 headquartered in Deerfield, Illinois. Walgreens also operates more than 7800
Walgreens retail pharmacies in the United States.
2. Since at least 2009, the State of Florida has been the epicenter of a notorious, welldocumented epidemic of prescription drug abuse. In July 2011, the Florida Surgeon
General declared a Public Health Emergency based on the prescription pill epidemic
which results in an average of seven overdose deaths per day in Florida. The drugs
most commonly associated with this epidemic are typically prescribed at
unscrupulous pain clinics by physicians acting outside the usual course of
professional practice and include Schedule II pain relievers, such as oxycodone;
Schedule IV benzodiazepines such as alprazolam, and Schedule IV muscle relaxers,
such as carisoprodol. Frequently, these drugs are prescribed in large amounts and in
combination with each other as "cocktails" popular with drug seeking individuals.
See East Main Street Pharmacy, 75 Fed. Reg, 66149, 66153, (2010); Paul H
Volkman, 73 FR 30630, 30633-34, 30639 (2008), pet. for rev. denied, Volkman v.
DEA, 567 F.3d 1215 (6th Cir. 2009).
3. Oxycodone is a dangerously addictive Schedule II controlled substance which is
known to be highly abused and diverted in the State of Florida. According to the
2010 Florida Medical Examiner's Commission Drug Report, the drug that caused the
most deaths in the state of Florida for 2010 was oxycodone (1,516 deaths), followed
by benzodiazepines (1,304 deaths of which 981 were caused by alprazolam.)
4. Since 2009, Walgreens' Jupiter, Florida Distribution Center has been the single
largest distributor of oxycodone products in Florida. At about the same time as the
abuse of prescription drugs became an epidemic in Florida, Walgreens' Florida retail
pharmacies, supplied by Respondent, commanded an increasingly large percentage of
the state's growing oxycodone business. In 2010, only 3 Walgreens retail pharmacies
were in the top 100 purchasers of oxycodone within Florida. In 2011, 38 Walgreens
pharmacies made the top 100 and 6 were in the top 10. Through May 2012, 44
Walgreens pharmacies are in the top 100 oxycodone purchasers, all of them supplied
by Respondent.
5. According to DEA records, in 2011, Walgreens operated 7,862 retail pharmacies in
the United States. Sixteen of the top 25 largest Walgreens retail oxycodone
purchasers, including the top 6 purchasers, were in Florida and supplied by
Respondent. The following table shows these 6 stores and their yearly oxycodone
purchases for 2009 through 2011:

2

 Store #Location

Oxycodone Purchases by Dosage Unit
2009
2010
2011

1. 03629 Hudson, FL

388,100

913,900

2,211,700

2. 03099 Ft. Myers, FL

95,800

496,100

2,165,900

3. 06997 Oviedo, FL

80,900

223,500

1,684,900

4. 03836 Port Richey, FL

344,000

849,000

1,406,000

5. 04391 Ft. Pierce, FL

250,000

881,400

1,329,600

6. 04 727 Ft. Pierce, FL

153,500

507,100

1,192,000

6. An ongoing DEA investigation of Respondent's distribution practices and policies,
combined with both a general examination of dispensing at Walgreens Florida
pharmacies as well as a detailed investigation of the dispensing practices at the six
pharmacies identified above, demonstrates that Respondent has failed to maintain
effective controls against the diversion of controlled substances into other than
legitimate medical, scientific, and industrial channels, in violation of21 U.S.C. §§
823(b )(1) and (e)(1 ). Respondent failed to conduct adequate due diligence of its retail
stores, including but not limited to, the six stores identified above, and continued to
distribute large amounts of controlled substances to pharmacies that it knew or should
have known were dispensing those controlled substances pursuant to prescriptions
written for other than a legitimate medical purpose by practitioners acting outside the
usual course oftheir professional practice. See Southwood Pharm., Inc., 72 Fed. Reg.
36,487 (2007) (revocation based in part on the respondent's recurring distributions of
extraordinary quantities of controlled substances to entities that likely diverted the
controlled substances by filling unlawful prescriptions, as well as the respondent's
failure to conduct due diligence sufficient to protect against the diversion of the
controlled substances it distributed).
7. DEA's investigation of Respondent also revealed that Walgreens failed to detect and
report suspicious orders by its pharmacy customers, in violation of21 C.F.R.
§1301.74(b). 21 C.F.R. § 1301.74(b) (distributors are required to "design and operate
a system to disclose to the registrant suspicious orders of controlled substances ...
suspicious orders include orders of unusual size, orders deviating substantially from a
normal pattern, and orders ofunusual frequency."); see also Southwood Pharm., Inc.,
72 Fed. Reg. at 36,502 (finding that the respondent repeatedly violated federal
regulations by failing to report suspicious orders). Walgreens knew or should have
known about their obligations to report suspicious orders, as such obligations were
spelled out in detail in three letters from DEA's Deputy Assistant Administrator,
Office of Diversion Control, sent to every registered manufacturer and distributor,
including Respondent, on September 27, 2006, February 7, 2007, and December 27,
2007. The purpose and proper implementation of suspicious order reporting
programs was further discussed in the industry's own trade association, the

3

 Healthcare Distribution Management Association (HDMA), in "Industry Compliance
Guidelines: Reporting Suspicious Orders and Preventing Diversion of Controlled
Substances" published in 2008. 1
8. Notwithstanding the ample guidance available, Walgreens has failed to maintain an
adequate suspicious order reporting system and as a result, has ignored readily
identifiable orders and ordering patterns that, based on the information available
throughout the Walgreens Corporation, should have been obvious signs of diversion
occurring at Respondent's customer pharmacies. See 21 C.F.R. § 1301.74(b); see
also Southwood Pharm., Inc., 72 Fed. Reg. 36,487 (2007).
9. Respondent's practice with regard to suspicious order reporting was to send to the
local DEA field office a monthly report labeled "Suspicious Control Drug Orders."
Two reports were provided, one for suspicious orders of Schedule II drugs, another
for suspicious orders of drugs in Schedules III through V. These reports were
transmitted on Respondent's behalf from Walgreens Corporate headquarters in
Deerfield, Illinois. Respondent's suspicious order report for December 2011 appears
to include suspicious orders placed by its customers for the past 6 months. The report
for just suspicious orders of Schedule II drugs is 1712 pages and includes reports on
approximately 836 pharmacies in more than a dozen states and Puerto Rico. The
reports are based on a formula that assigns an average monthly order for a particular
drug, which is then multiplied by a "DEA factor" (which is always 3, regardless of
the drug or the average order amount), resulting in a "Trigger" amount, above which
orders for the month are reported as suspicious, along with a listing of all orders
placed for the particular drug by the reported pharmacy for the month in which the
"Trigger" amount was exceeded. This report from the Jupiter Distribution Center
covers pharmacies in multiple states and Puerto Rico, yet the average order and
trigger amount is the same for a particular drug regardless of the pharmacy's location,
the population it serves, or the number of other pharmacies in the area.
10. As made clear in 21 CFR §l301.74(b), Southwood, and the December 27, 2007letter
to distributors from the Deputy Assistant Administrator for the Office of Diversion
Control, suspicious orders are to be reported as discovered, not in a collection of
monthly completed transactions. Moreover, commensurate with the obligation to
identify and report suspicious orders as they are discovered is the obligation to
conduct meaningful due diligence in an investigation of the customer and the
particular order to resolve the suspicion and verify that the order is actually being
used to fulfill legitimate medical needs. This analysis must take place before the
order is shipped. No order identified as suspicious should be fulfilled until an
assessment of the order's legitimacy is concluded. As such, Respondent's reports,
consisting of nothing more than an aggregate of completed transactions, did not
comply with the requirement to report suspicious orders as discovered, despite the
title Respondent attached to these reports.

1

See http://www.healthcaredistribution.org/gov affairs/pdf controlled/20081113 icg.pdf.

4

 11. A review of the documents Respondent provided as evidence of its "due diligence"
on the above listed six pharmacies, demonstrates that Respondent failed to conduct
any meaningful investigation or analysis to ensure that the massive amounts of
commonly abused, highly addictive controlled substances being ordered by these
pharmacies were not being diverted into other than legitimate channels. In response
to DEA requests, Respondent has been unable to provide any files related to any
effort to adequately verify the legitimacy of any particular order it shipped to its
customer stores.
12. Respondent's employee with overall responsibility for Schedule II drug operations
(the "CII Function Manager"), raised questions within the corporation about what she
correctly identified as unusually large orders for Schedule II narcotics placed
regularly by several customer pharmacies. Based on the evidence available to DEA,
none of these orders were reported to DEA as suspicious and all appear to have been
shipped, without any further due diligence to verify their legitimacy. For example:
a. In January 2011, Jupiter's CII Function Manager expressed concern about the
enormous volume of30 mg oxycodone being ordered by three stores, Walgreens
#'s 7298, 3836, and 5018, concluding in an email to the "Manager, Rx Inventory
Drug Stores" at Walgreens' Corporate Headquarters in Deerfield, Illinois, that she
felt the stores needed "to justify the large quantity." With regard to store# 3836
in Port Richey, Florida, she noted that Respondent had shipped this store 3271
bottles of 100 count 30 mg oxycodone (i.e., 3 27, 100 dosage units) in the 40 day
period from 12/1110 to 1110/11, causing her to question "how they can even house
this many bottle[s]." She then inquired of the same corporate manager: "How do
we go about checking the validity ofthese orders?"
b. Despite having raised these concerns from the distributor to a supervisor at
corporate headquarters, none of these orders were reported as suspicious and there
appears to have been no other inquiry conducted into the circumstances of the
enormous amount of narcotics being shipped to store# 3836 in Port Richey, a
town of less than 3000 people in a county with a population of only
approximately 475,000. Despite the fact that a distribution center manager had
raised questions about this store's ordering volume to a corporate manager in
January 2011, the very next month, Respondent filled and shipped orders totaling
another 285,800 dosage units of 30 milligram oxycodone to the same pharmacy.
Again, there is no evidence of any due diligence conducted by Respondent or
anyone else within the corporation to verify the legitimacy of these orders in order
to fulfill their obligation to maintain effective controls against diversion.
13. According to documents received from Walgreens Corporate Headquarters, on
April2, 2012, Wa1greens revised its suspicious order policy, but made the policy
retroactively effective to January 1, 2012. The policy states, in pertinent part, that
"Effective calendar year 2012, the Controlled Substance Order Monitoring and
Prevention System prevents suspicious control drugs from being shipped to the stores.
In calendar year 2012, because of the program mentioned, suspicious control drug
reports are no longer generated as their shipment is prevented by the system."
5

 14. This policy ignores the fact that the reporting requirement of21 CFR § 1301.74(b)
applies to orders, not shipments. A suspicious order placed by a customer pharmacy
is made no less suspicious by application of a system designed to reduce or eliminate
such orders prior to shipping. Construing the regulation this way defeats the essential
purpose of the suspicious order requirement, which, as I stated in Southwood, is "to
provide investigators in the field with information regarding potential illegal activity
in an expeditious manner." 72 FRat 36501.
15. Respondent's local DEA field office within the Miami Field Division has not
received a suspicious order report for any orders placed in 2012, despite the fact that
Respondent has received and shipped multiple orders this year that, using the criteria
Walgreens employed in 20 II, would have exceeded the trigger amount previously
used to report these sales.
16. The available evidence suggests that Respondent's abdication of its responsibilities as
an individual registrant was at least facilitated by a push from Walgreens Corporate
headquarters to increase oxycodone sales at its Florida retail pharmacies, all of which
received their Schedule II controlled substances from Respondent. I also note that
during the relevant time herein, Walgreens had in effect compensation programs for
pharmacy employees in which bonuses were based on the number of prescriptions
filled at the pharmacy. This bonus program, combined with a concerted, corporate
directed effort to increase oxycodone sales, served as an incentive for pharmacists
and pharmacy technicians to ignore the "red flags" of diversion presented by these
prescriptions, many of which, in the proper exercise of the pharmacist's
corresponding responsibility under 21 CFR §I306.04(a), should have resulted in a
refusal to fill.
a. In July 2010, Walgreens' corporate headquarters conducted an analysis of
oxycodone dispensing for the prior month at its Florida retail pharmacies and
produced an II page spreadsheet, ranking all Florida stores by the number of
oxycodone prescriptions dispensed in June. The spreadsheet was sent to
Walgreens' market pharmacy supervisors in Florida on July 29, 2010, with the
admonition that they "look at stores on the bottom end .... We need to make sure
we aren't turning legitimate scripts away. Please reinforce." A corporate market
director of pharmacy operations did reinforce this message to Florida market
pharmacy supervisors, highlighting that their "busiest store in Florida" was filling
almost 18 oxycodone prescriptions per day, yet "We also have stores doing about
1 a day. Are we turning away good customers?"
b. At roughly the same time as Walgreens' supervisors were urging its Florida
pharmacies to increase their oxycodone sales, Florida enacted new laws to combat
the prescription drug abuse problem, particularly the devastating effects of
oxycodone and other abused drugs dispensed directly from rogue pain clinics,
commonly known as "pill mills." These new laws went into effect on October I,
2010 and severely restricted the ability of pain clinics and physicians to dispense
controlled substances directly from the clinics. The purpose of these legislative
changes was to stem the overwhelming tide of controlled substances being

6

 diverted from pill mills and into illicit channels for sale and recreational abuse.
As a result, Florida pharmacies and the distributors who served them knew or
should have known that starting in late 2010, there would be a significant increase
in requests to dispense pursuant to prescriptions issued by physicians associated
with the pain clinics.
c. Walgreens store# 06997 in Oviedo, Florida, was ranked 444th on the abovereferenced Walgreens' ranking of oxycodone sales generated at its Florida retail
pharmacies, filling on average only 4 oxycodone prescriptions per day in June
2010. DEA tracks pharmacy activity not by prescriptions but by dosage units of a
particular drug purchased by the pharmacy for retail sales. In 2010, the national
average for oxycodone sales to retail pharmacies was 70,395 dosage units per
year, or about 5,866 dosage units per month. This store's oxycodone sales began
to increase drastically, as shown by the fact that in June 2010, Walgreens store
#06997 purchased just 6,600 dosage units of oxycodone products. One year later,
in June 2011, this same pharmacy purchased 169,700 dosage units of oxycodone.
d. Oviedo is a town of about 34,000 people and is home to two Walgreens retail
pharmacies. Beginning in late 2010, these two pharmacies became the site of
multiple arrests by the local police for drug offenses. The local Chief of Police
began writing letters to the pharmacies after each arrest stemming from
prescriptions they filled. These letters informed the pharmacy of the
circumstances of the arrest and that the dispensed drugs were not being used for
treatment. They further provided the pharmacy with the name and date of birth
not only of the person whose prescription they filled, but also of others associated
with the illegal distribution of the dispensed drugs. These letters then concluded
with a request for the pharmacy's help in "dealing with the prescription
medication epidemic" by soliciting a commitment to stop further incidents.
e. The Oviedo Police Chiefs concerns reached the highest levels of Walgreens'
Loss Prevention Operations, with the Director of Divisional Loss Prevention
noting in an email on January 28, 2011 that "{e]vidently the Chief of Police is
concerned that we are filling too many C2 prescriptions .... From what I've been
told, he is referencing 100 plus incidents/arrests in his jurisdiction." Walgreens'
response was to "take a look at this market . .. and see if we have an increase in
dispensing."
f.

The Oviedo Police Chief convened a meeting with Walgreens Loss Prevention
officials on February 10, 2011, in an effort to further bring awareness of the
problems he was seeing at their stores and to brief them on the number of arrests
at each location. On March 15, 2011, he sent identical letters to both the
Chairman and CEO of Walgreens, asking them for their support and assistance in
combating the prescription drug epidemic, informing them that Oviedo "has seen
the parking lots ofyour stores become a bastion of illegal drug sales and drug
use" where once the prescriptions are filled, "the drugs are sold, distributed as
payment, crushed and snorted, liquefied and injected, or multiple pills swallowed
while in the parking lot o.fyour pharmacies."
7

 g. Despite being informed at the highest levels of ongoing diversion and drugrelated criminal activity directly stemming from dispensing at these pharmacies,
and bearing in mind that the average U.S. retail pharmacy in 2011 purchased only
73,000 dosage units of all formulations of oxycodonefor the entire year, the
Walgreens corporation, through Respondent, responded to this information about
one of its stores by shipping the following quantities of 30 milligram formulation
oxycodone to Oviedo store 06997:
(i) February 2011

75,300 dosage units

(ii) March 2011

72,900 dosage units

(iii) April 20 11

101,700 dosage units

(iv) May 2011

133,900 dosage units

(v) June 2011

115,200 dosage units

(vi) July 2011

145,300 dosage units

h. Perhaps even more significant than the enormous amount of oxycodone
Respondent shipped to this store despite the information provided by the Chief of
Police to its pharmacists and most senior leaders, is the fact that the dispensing
records for both Oviedo Walgreens pharmacies show that on multiple occasions,
they each dispensed additional prescriptions of commonly diverted narcotics to
the same individuals who they knew had been previously arrested for drug
offenses at their pharmacies. I find this to be a staggering disregard of
Walgreens' obligations under the Controlled Substances Act.
17. While the detailed information provided by the Chief of Police put Respondent and
its parent company on notice of actual diversion occurring at the two Oviedo
pharmacies, Respondent had ample other indications that its pharmacies were direct
and significant contributors to the epidemic of prescription drug abuse and diversion
in Florida, yet it largely ignored these indicators, at all levels of the corporate
structure. An inexhaustive description of some of these indicators are the following:
a. On September 27, 2010, a pharmacist working at Walgreens # 04 727 in Ft. Pierce
reported to law enforcement that he mistakenly provided an extra 120 dosage
units of 15 milligram oxycodone to a customer. When the pharmacist tried to call
the customer to request he return the mistakenly dispensed oxycodone, he was
told by the customer's girlfriend that the customer was an addict who sells his
pills and views the extra oxycodone as a "pot of gold" which he would not return.
Despite this incident, Walgreens # 04727 filled several additional oxycodone
prescriptions issued to this customer in December 2010 and January 2011.

8

 b. On November 4, 2010, a Walgreens # 04727 pharmacist reported to police that
she dispensed a prescription for 60 dosage units of oxycodone 15mg to a twentyfour year old male who she then witnessed transfer the drugs to a female in the
store. The female entered the pharmacy restroom, leaving behind evidence
indicating she had smoked the oxycodone. Despite this incident, Walgreens
# 04727 continued to fill the same customer's oxycodone and alprazolam
prescriptions on several occasions in November and December 2010 and January
2011.
c. On December 21, 2010, a pharmacist employed by Walgreens Pharmacy# 3629
in Hudson, Florida reported to the Pasco County (Florida) Sheriff's Office that an
individual had attempted to fill a prescription for 270 dosage units of thirty
milligram oxycodone, but ran from the pharmacy after learning the pharmacy had
contacted law enforcement, suspecting the prescription was a forgery. Despite
this incident, the same pharmacy that reported this customer to the Sheriff's
Office in December continued to fill the same customer's oxycodone
prescriptions in February, March, April, May and October of2011.
18. On or about March 2011, corporate officials at Walgreens headquarters in Illinois
initiated a Florida pharmacy store review initially entitled "Focus on Profit" and later
changed to "Focus on Compliance." The purpose of this review was to address the
"significant increase in the number of [Schedule II controlled substance] prescriptions
we are filling in [Florida]" after the October 2010 change in Florida law regarding
pain clinics. The initial pilot survey asked the following questions, amongst others:
"Do pain management clinic patients come all at once or in a steady stream?" and
"Do you see an increase in pain management prescriptions on the day the warehouse
order is received?" On May 17, 2011, in an email with the subject heading "Florida
Focus on Profit," a Walgreen Co. corporate attorney reviewed the survey and
regarding these two questions, stated "If these are legitimate indicators of
inappropriate prescriptions perhaps we should consider not documenting our own
potential noncompliance." The surveys that ultimately were used in the Focus on
Compliance initiative did not contain those questions. By omitting these questions in
order to avoid gathering information pertinent to whether or not pain clinic patients
were engaged in diversion, the Walgreens Corporation and Respondent as a corporate
subsidiary, ignored its statutory and regulatory obligation to maintain effective
controls against the diversion of controlled substances into other than legitimate
medical, scientific, and industrial channels. See 21 U.S.C. § 823(b) and (e).
19. Apparently as part of this "Focus On Compliance," Walgreens sought to develop and
implement "Oxycodone Action Plans" within its districts in Florida in an attempt to
reduce the volume of oxycodone dispensing on behalf of pain clinics. For store
# 3629 in Hudson, the plan devised by District Pharmacy and Loss Prevention
supervisors in a memo dated August 23, 2011 included "contacting the Jupiter
warehouse and designating order limits for Oxycodone. " The plan, effective
immediately, was to "limit" the Hudson store to orders of no more than 100 bottles of
100 count 30 milligram oxycodone. Notwithstanding the memo and the plan to limit
store #3629's purchases to no more than 100 bottles, Respondent subsequently
9

 shipped the following orders to store 3629:
Date

Bottles

Dosage Units

09/26111

331

33,100

10/10/11

371

37,100

11129/11

200

20,000

12/06/11

113

11,300

12/13/11

150

15,000

Respondent's inability to enforce a very simple, modest limitation on this one
pharmacy is further evidence of its failure to maintain effective controls against
diversion, even in the rare instance when it tried to do so.
20. In mid to late 2011 and continuing into 2012, Walgreens undertook to reduce the
volume of oxycodone dispensing at its high-volume pharmacies and in some cases,
did, in fact, achieve a relatively significant reduction in Schedule II dispensing at
these stores. Additionally, in late May, 2012, approximately seven weeks after
Administrative Inspection Warrants were served on six Walgreens retail pharmacies
and Respondent, Walgreens suspended dispensing of Schedule II drugs as well as
Alprazolam and Carisoprodol at these six pharmacies and two others. In my
assessment of the imminent danger posed by Respondent's continued registration, I
have considered these remedial measures, as well as Walgreens' claims that it
continues to revise its suspicious order reporting system to prevent the excesses that
occurred in 201 0 and 2011. In my judgment, and in the exercise of the discretion
afforded me by 21 U.S. C. § 824(d), the danger posed by Respondent's continued
registration is only slightly mitigated by the dispensing restrictions enacted at these
eight pharmacies.
21. To reiterate, my concerns with Respondent's distribution practices are not limited to
the six Walgreens pharmacies discussed herein. Respondent distributes to over 800
other retail pharmacies in Florida alone, many of which dispense oxycodone in
amounts far in excess ofthe U.S. and Florida averages and which also experienced
dramatic increases in their distribution of oxycodone from at least 2009 to the present.
No fewer than 43 Walgreens pharmacies in Florida purchased in excess of 500,000
dosage units of oxycodone in 2011, despite a national average of approximately
74,000 dosage units for all U.S. pharmacies and an average of approximately 110,00
dosage units for all Florida Walgreens pharmacies. Florida remains the epicenter of
this country's prescription drug abuse problem and notwithstanding the cessation of
Schedule II dispensing at eight of its retail customers, Respondent remains the top
distributor of the most dangerous prescription drugs in Florida, and still has not made
a single suspicious order report in calendar year 2012.

10

 22. Through May of this year, Respondent's customers included 44 Walgreens retail
pharmacies on the list of the 100 top oxycodone purchasing pharmacies in Florida. 2
Respondent continues to distribute large amounts of oxycodone while it appears to
continue to misunderstand or ignore its obligation to maintain effective controls
against diversion by reporting suspicious orders and conducting due diligence on its
customer stores to verify the legitimacy of their orders. Thus, the fact that Walgreens
stopped selling Schedule II controlled substances to a handful of retail pharmaciesvirtually all of which Walgreens also knew were themselves under DEA investigation
at the time Walgreens stopped distributing to these pharmacies- does little to mollify
my concerns about the danger posed by Respondent's continued operation. The
nature and significance of the problems revealed by DEA's investigation indicate that
Respondent's anti-diversion measures are inadequate generally; the problems do not
appear to be limited to the pharmacies discussed herein. Consequently, I believe that
Respondent's continued operation poses an imminent danger to public health and
safety.
23. Voluntary dispensing restrictions enacted either in anticipation of, or in reaction to
regulatory action, do not indicate to me that Respondent and its parent company have
recognized and adequately reformed the systemic shortcomings discussed herein. On
the contrary, when a company undertakes to survey its stores for regulatory
compliance, then selectively edits that survey for the explicit purpose of avoiding
evidence of its own non-compliance, as Walgreens apparently did in May 2011,
claims of effective remedial measures have less credibility. I gave significant weight
to the fact that Walgreens appears to have deliberately structured certain of its antidiversion measures to avoid learning about and/or documenting evidence consistent
with diversion. At best, I regard this as deliberate indifference on Walgreens' part as
to its obligations as a DEA registrant.
24. My confidence in Walgreens' remedial measures is lessened further by the fact that
this manipulation of the compliance survey occurred just one month after Walgreens
entered into a nationwide Memorandum of Agreement (MOA) with DEA to resolve
an Order to Show Cause issued to a San Diego Walgreens pharmacy based on
allegations of unlawful dispensing. Walgreens pledged in this MOA to enact a
compliance program at all of its retail pharmacies to detect and prevent diversion of
controlled substances and to implement and maintain policies and procedures to
ensure that prescriptions for controlled substances are only dispensed to authorized
individuals pursuant to federal and state law and regulations. Walgreens' effort to
enact such a program in Florida appears to have been, in part, intentionally skewed to
avoid actually detecting certain evidence of possible diversion. That Walgreens
would actively seek to avoid documenting evidence of possible diversion in its
"Focus on Compliance" in Florida immediately after entering this MOA, further
contributes to my preliminary finding that Respondent's continued registration during

2

By way of comparison, only two other national or regional chain pharmacies have stores on this list, one
of which has four stores in the top 100, while the other has three.

11

 the pendency of this proceeding constitutes an imminent danger to the public health
and safety.
IN view of the foregoing, and based on information before the Agency as of the
issuance of this notice, it is my preliminary finding pursuant to 21 U.S.C. §§ 823(f) and
824(a)(4), that Walgreens' continued registration is inconsistent with the public interest.
Under the summarized facts and circumstances described herein, it is also my preliminary
finding, significantly in light of the rampant and deadly problem of prescription
controlled substance abuse in Florida, that Respondent's continued registration while
these proceedings are pending constitutes an imminent danger to the public health and
safety. See 21 U.S.C. § 824(d). Accordingly, pursuantto the provisions of21 U.S.C.
§ 824(d) and 21 C.F.R. § 1301.36(e), and the authority granted me under 28 C.F.R.
§ 0.1 00, DEA Certificate of Registration RW0277752 is hereby suspended, effective
immediately. Such suspension shall remain in effect until a final determination is
3
reached in these proceedings.

PURSUANT to 21 U.S.C. § 824(f) and 21 C.F.R. § 1301.36(f), the Special
Agents and Diversion Investigators of the DEA who serve this Order to Show Cause and
Immediate Suspension of Registration are authorized to place under seal or to remove for
safekeeping all controlled substances that Walgreens possesses pursuant to the
registration which I have herein suspended. The said Agents and Investigators are also
directed to take into their possession Walgreens's DEA Certificate of Registration
RW0277752 and any unused order forms.

THE following procedures are available to you in this matter:
1. Within 30 days after the date of receipt of this Order to Show Cause and
Immediate Suspension of Registration, Walgreens may file with the DEA a
written request for a hearing in the form set forth in 21 C.F.R. § 1316.47. See 21
C.F.R. § 1301.43(a). If Walgreens fails to file such a request, the hearing shall be
cancelled in accordance with paragraph 3, below.
2. Within 30 days after the date of receipt of this Order to Show Cause and
Immediate Suspension of Registration, Walgreens may file with the DEA a
waiver of hearing together with a written statement regarding its respective
positions on the matters of fact and law involved. See 21 C.F.R. § 1301.43(c).
3. Should Walgreens decline to file a request for a hearing or, should Walgreens
request a hearing and then fail to appear at the designated hearing, Walgreens
shall be deemed to have waived the right to a hearing and the DEA may cancel
3

I have primarily addressed Schedule II controlled substances based on Walgreens' representations that
Respondent no longer distributes controlled substances other than Schedule II. This should not be
construed as an indication that DEA has concluded that Respondent's distribution practices relating to nonschedule II controlled substances conform to all applicable requirements and obligations. To the contrary,
many of the problematic distribution practices noted herein would raise imminent danger concerns with
respect to non-Schedule II controlled substances if Respondent were to continue to distribute them.

12

 such hearing, and I may enter my final order in this matter without a hearing
based upon the evidence presented to me. See 21 C.F.R. §§ 1301.43(d) and
1301.43(e).
Correspondence concerning this matter, including requests referenced in
paragraphs 1 and 2 above, should be addressed to the Hearing Clerk, Office of
Administrative Law Judges, Drug Enforcement Administration, 8701 Morrissette Drive,
Springfield, VA 22152. Matters are deemed filed upon receipt by the Hearing Clerk. See
21 C.F.R. § 1316.45. A copy of the same shall also be served on the Government counsel
listed below and be addressed to the Office of Chief Counsel, Diversion and Regulatory
Litigation, 8701 Morrissette Drive, Springfield, VA 22152.

~

Administrator
Drug Enforcement Administration

cc: Hearing Clerk, Office of Administrative Law Judges
Scott Lawson, Counsel for the Government
Jonathan Novak, Counsel for the Government

13

 REQUESTJOR HEARING

Any penon cleliriq a hearing with reprd to an Order to Shol! Cause mast,
w1ftaiD thirty (30) days from receipt of the Order to Show Cause, file a requat for a
hearlaa Ia the foDowla.g format:
(DATE)

DEA BeadqiUII'ten
Oftic:e of tbe Administrative Law Judges

HeartagCierk
8701 Morrissette~

'

Sprin&fteld, Virginia ll152
Dear Madam:
The undersigned, (Name o( peraoa), hereby requests a heui.q in the matter of
[Ideatifieatloll of tbe proceedlDgJ.
(A} [State with partlcu.ltlrity the iD.tere.st of tbe penon ill the proceedin.g.J

(B) [State 'lrith parti.calarity

of tile objeedoas or wues, If any concerning

wbich the penoa desires to be beud.J

(C)(State briefly the position of the penoa with regard to the particular
objeetiou or lsaues.]
(D) (Name (either ngiatnat, applicant, or attorney}, address (including
atreet address, dey., lfat~ ud dp eode), and telephone number
(includlug area eocle) of penon to wh.om
subsequent aotic:es or
maillnp ia this procieedfn11hould be aent.J

an

Respectfully yours,

(Sipatun of registrant, applicant
or attorney]
Note: Punuant to 21 CFR 1316.47(b), the Administrative Law Judge, upoa request
and showiag of good caue, mar grant a reaaonable exteuioa of time aUo.wing for
response to an Order to Show Cauae.

 [Page intentionally left blank]

UNITED STATES DEPARTMENT OF JUSTICE
DRUG ENFORCEMENT ADMINISTRATION

IN

THE MATTER OF

WALGREEN,

Co.

DOCKET

No. 13-01

ADMINISTRATIVE LAW JUDGE
JOHN J. MULROONEY, II

GOVERNMENT'S PREHEARING STATEMENT

Scott Lawson
Jonathan Novak
Attorneys
Diversion & Regulatory Litigation
Office of Chief Counsel
8701 Morrissette Drive
Springfield, VA 22152
Tel: 202.307.8038
Fax: 202.307.4946

Date: October 31,2012

 Pursuant to the October 15, 2012 Order for Prehearing Statements, as modified by the
October 18,2012 Order Granting the Respondent's Motion For a Continuance and Amending the
Order for Prehearing Statements, the United States Department of Justice, Drug Enforcement
Administration (DEA or Government), hereby submits its Prehearing Statement. 1
I. ISSUE
Whether DEA should revoke DEA Certificate of Registration RW0277752 issued to
Walgreen Co. ("Respondent"), pursuant to 21 U.S.C. §§ 824(a)(4) and 823(b) and (e) and deny
any pending applications for renewal or modification of such registration, pursuant to 21 U.S.C.
§ 823(b) and (e).
II. REQUESTED RELIEF
The Government requests revocation ofRespondent's DEA Certificate of Registration
RW0277752.
III. PROPOSED STIPULATIONS OF FACT 2
1. Respondent is registered with DEA as a distributor in Schedules II-V under DEA
Registration RW0277752 at 15998 Walgreens Drive, Jupiter, Florida 33478.
2. DEA Registration Number RW0277752 expires by its terms on May 31,2013.
IV. PROPOSED WITNESSES3
1. Joseph Rannazzisi
Deputy Assistant Administrator for Diversion Control
DEA Headquarters
8701 Morrissette Drive
1

The Government is filing separately a Motion For an Extension of Time to file this Prehearing Statement, which
was originally due on October 29,2012. The Government was unable to file by this date due to Hurricane Sandy
and the resulting closure of the federal government on October 29 and 30, 2012.
2

The Government anticipates discussing additional stipulations with Respondent.

3

At this time the Government has not noticed an expert witness. The Government requests the opportunity to
supplement its intended witnesses and testimony if it determines that such an expert is necessary in the presentation
of its case, and particularly, if Respondent intends to utilize an expert witness.

2

 Springfield, Virginia 22152
2. Susan Langston
Diversion Program Manager
DEA Miami Field Division
2100 North Commerce Parkway
Weston, Florida 33326
3. Kyle Wright
Chief, Targeting and Analysis Unit
DEA Headquarters
8701 Morrissette Drive
Springfield, Virginia 22152
4. Donna Richards
Acting Diversion Group Supervisor
DEA Miami Field Division
2100 North Commerce Parkway
Weston, Florida 33326
5. Phyllis Garrett
Diversion Investigator
DEA Miami Field Division
2100 North Commerce Parkway
Weston, Florida 33326
6. Chief Jeffrey Chudnow
Oviedo Police Department
300 Alexandria Boulevard
Oviedo, Florida 32766
7. Robert Vamo
Walgreen Co.
15998 Walgreens Drive
Jupiter, Florida 33478
8. Christine Atwell
Walgreen Co.
15998 Walgreens Drive
Jupiter, Florida 33478
9. Kathy L. Federico
Diversion Group Supervisor
Milwaukee District Office
4725 West Electric Avenue
West Milwaukee, Wisconsin 53219
3

 10. George Corripio
Pharmacist
Walgreen Co. Store# 5079
2423 Orange Ave.
Ft. Pierce, Florida
11. Edward J. Lanzetti
Walgreen Co. Market Loss Prevention Director
7003 Presidents Dr., #250
Orlando, Florida 32809
V. SUMMARY OF TESTIMONY
1. Deputy Assistant Administrator Joseph Rannazzisi

Deputy Assistant Administrator Rannazzisi will describe his background, education and
training as a DEA Deputy Assistant Administrator, a law enforcement officer, and a licensed
pharmacist. He will further testify substantially as follows:
Prescription drug abuse occurs in the United States at an alarming rate. The 2010
National Survey on Drug Use and Health reveals that approximately 7 million Americans abuse
controlled substance pharmaceuticals for non-medical purposes. Second only to marijuana,
controlled substance prescription drugs are abused by more people than cocaine, heroin,
hallucinogens and inhalants combined. Of all prescription drugs, narcotic pain relievers such as
oxycodone, hydrocodone, and oxymorphone are abused most frequently. Each year, roughly 5.1
million people abuse narcotic pain relievers in the United States.
Beginning in late 2008 and continuing to the present, there has been a significant rise in
the number of rogue pain clinics whose complicit doctors were initially permitted to dispense
millions of dosage units of oxycodone and other abused drugs directly from the clinics. Florida
is the epicenter for these illegal pain clinics. DEA, State and local law enforcement
investigations reveal that thousands of drug seekers flock to these Florida-based pain clinics to
obtain their supply of oxycodone, and other controlled substances such as alprazolam, which is

4

 in tum illegally redistributed in states along the entire east coast and Midwest.
The illicit pain clinics, the pharmacies that fill their scripts, and the wholesale distributors
who supply pharmacies without appropriate due diligence (including Respondent), have caused,
and continue to cause, millions of dosage units of oxycodone and other controlled substances to
be diverted, posing a serious threat to the public health and safety. According to the Florida
Medical Examiner's Office, they have seen a 345.9% increase in the number of overdose deaths
associated with oxycodone between 2005 and 2010. For 2010, their data showed that
approximately 4,091 persons died in Florida alone from an overdose caused by just five drugs:
methadone, oxycodone, hydrocodone, benzodiazepines, or morphine.
Furthermore, the abuse of prescription drugs is not isolated to just one drug. Abusers and
addicts routinely abuse prescription drugs in combination with one another to enhance the
effects. This activity significantly increases the risk of potential harm to the individual. This
combination is often referred to as a "cocktail" of hydrocodone or oxycodone used in
combination with alprazolam (a benzodiazepine) and carisoprodol. According to the Florida
Medical Examiner's Office, they have seen a 127% increase in the number of deaths associated
with benzodiazepines in the State of Florida between 2005 and 2010.
On July 1, 2011, the State Health Officer and Surgeon General, Dr. Frank Farmer issued
a statewide public health emergency declaration in response to the ongoing problem of
prescription drug abuse and diversion in Florida. The press release accompanying this
emergency declaration noted more oxycodone is dispensed in the state of Florida than in all
remaining states combined. It further stated that in 201 0, "98 of the top 100 doctors dispensing
Oxycodone nationally were in Florida"; and that "126 million oxycodone pills were dispensed
through the top 100 dispensing pharmacies in Florida".

5

 Following changes in Florida law aimed at curbing the problematic dispensing direct
from the pain clinics, drug abusers have found other ways to obtain oxycodone and other
"cocktail" drugs. Rather than dispensing the drugs directly to "patients," pain clinics and
complicit doctors are now forced to write prescriptions for oxycodone and other abused drugs.
Drug abusers wanting their prescriptions filled must take their prescriptions to a retail pharmacy.
The result was that law enforcement saw immediate and significant increases in the volume of
oxycodone dispensed from retail pharmacies across the state of Florida. Retail pharmacies are
generally supplied by a DEA-registered wholesale distributor. The doctors and clinics that
prescribe oxycodone inappropriately, the pharmacies that dispense their prescriptions, and the
wholesale distributors who supply them have caused, and continue to cause, millions of dosage
units of oxycodone to be diverted for unlawful use thereby creating an imminent threat to the
public health and safety.
Deputy Assistant Administrator Rannazzisi will authenticate and describe the purpose
behind three letters sent by DEA to all distributors and manufacturers, including Respondent, on
September 27, 2006, February 7, 2007, and December 27, 2007. These letters explained to
distributor registrants their obligations to maintain effective controls against diversion and report
suspicious orders as part of their duties within the closed system established by the Controlled
Substances Act (CSA). He will describe the purpose of the suspicious order requirement of21
C.F.R. §1301.74(b) and its relationship to the statutory obligation of all distributors to maintain
effective controls against diversion of controlled substances pursuant to 21 U.S.C. §§ 823(b)(l)
& 823(d)(l). Consistent with the guidance of these letters, he will describe a distributor's

obligation to devise and implement an effective system to identify suspicious orders and the
obligation to report suspicious orders to DEA as they are discovered. He will further testify that

6

 a distributor has an obligation under the statutory and regulatory scheme to determine the
legitimacy of any order it identifies as suspicious prior to fulfilling that order.
He will further testify that distributors have a statutory obligation to exercise due
diligence to avoid filling suspicious orders that might be diverted into other than legitimate
medical, scientific and industrial channels and that the exercise of this obligation requires a
distributor to confirm the legitimacy of all orders prior to filling. He will describe the general
ways in which distributors commonly perform and document this due diligence and will describe
common indicators of diversion that all distributors should be alert to at their customer
pharmacies. He will testify that these obligations apply equally to distributor registrants
regardless of whether their customers are independent or chain pharmacies and regardless of
whether the distributor and its customers are under common ownership.
Based on the evidence of its' suspicious order program provided by Respondent, he will
testify that the Walgreen Co.'s suspicious order program fails to comply with Respondent's
obligations under 21 C.F.R. §1301.74(b). He will testify that the "Suspicious Control Drug
Orders" report provided to DEA on Respondent's behalf monthly by Walgreen Co. corporate
headquarters constitutes nothing more than a monthly report of completed transactions and
therefore does not meet the regulatory requirement to report suspicious orders as discovered, as
is spelled out in his December 27, 2007 letter to Respondent. In other words, despite the title
I

attached to these compilations of completed transactions, he will testify that they are not
suspicious order reports under the regulation. Furthermore, he will testify that based on the
documents provided by Walgreen Co., Respondent appears to have conducted little to no
investigation or analysis ofthe orders it reported as suspicious prior to completing the sale of
these orders, despite the fact that on a single day, many of these orders greatly exceeded the

7

 monthly threshold established by Respondent for reporting orders of a particular controlled
substance as suspicious.
Moreover, he will testify that the monthly reports of completed "suspicious" transactions
reported by Respondent were misleading in that they did not report each order received and
shipped by Respondent, but instead aggregated the orders shipped on any given day. Further, he
will testify that the reports made by Respondent are flawed in that they include all orders for a
particular controlled substance shipped to a particular pharmacy in a given month and do not
indicate which of these orders are being reported as suspicious. He will testify that based on the
foregoing, Respondent did not make a single proper suspicious order report, despite a history of
supplying its customers, particularly but not limited to its Florida retail pharmacies, incredibly
large amounts of the most commonly abused and diverted controlled substances.
He will testify regarding the Walgreen Co.'s current suspicious order policy, applicable
to all of its distribution centers, including Respondent, which indicates that as of January 1,
2012, the company will no longer make suspicious order reports as a result of a system that
supposedly prevents shipment of any suspicious orders. He will testify that such a policy
evidences a misunderstanding of the suspicious order reporting requirement, which is triggered
by suspicious orders for controlled substances, not only when such an order is actually shipped.
He will testify that this operating statement on behalf of Respondent is further evidence of the
lack of an appropriate system under 21 C.F.R. § 1301.74(b) and is indicative of ineffective
controls against the diversion of controlled substances.
Finally, he will discuss the additional requirements imposed upon the Walgreen Co's
operation of its retail pharmacies by the Memorandum of Agreement entered into between DEA
and Walgreen Co. in April, 2011.

8

 2. Susan Langston, Diversion Program Manager ("DPM"), Miami Field Division
(MFD)
DPM Langston will testify to her background, education and training as a DEA Diversion
Investigator, Diversion Group Supervisor, and Diversion Program Manager. She will testify
substantially as follows:
Since at least 2009, the State of Florida has been the epicenter of a notorious, welldocumented epidemic of prescription drug abuse. In July 2011, the Florida Surgeon General
declared a Public Health Emergency based on the prescription pill epidemic which results in an
average of seven overdose deaths per day in Florida. The controlled substances most commonly
associated with this epidemic are typically prescribed at unscrupulous pain clinics by physicians
acting outside the usual course of professional practice and include Schedule II pain relievers,
such as oxycodone (which is highly addictive and known to be highly abused an diverted in the
State of Florida); Schedule IV benzodiazepines, such as alprazolam; and Schedule IV muscle
relaxers, such as carisoprodol. Frequently, these controlled substances are prescribed in large
amounts and in combination with each other as "cocktails" popular with drug seeking
individuals. According to the 2010 Florida Medical Examiner's Commission Drug Report, the
drug that caused the most deaths in the State of Florida for 201 0 was oxycodone (1 ,516 deaths),
followed by benzodiazepines (1,304 deaths of which 981 were caused by alprazolam). DPM
Langston will testify regarding changes to Florida law aimed at curbing this problem that
restricted the ability of practitioners to dispense controlled substances to patients and how the
epidemic of controlled substance drug abuse and diversion has now shifted to pharmacies.
DPM Langston will explain why Respondent and 6 of its retail pharmacy customers were
targeted for investigation. She will testify about statistical information compiled by DEA's

9

 ARCOS ("Automation of Reports and Consolidated Orders System") unit, identifying the largest
distributors of oxycodone and related controlled substances in Florida, as well as the largest
retail pharmacy purchasers ofthese substances in Florida from 2008 to the present. She will
introduce charts showing these pharmacies' oxycodone purchases from at least 2008 to the
present and describe why the size and frequency of these purchases should have created
suspicion within Walgreen Co. and Respondent that these pharmacies were diverting controlled
substances.
She will testify that on August 19, 2011 , DEA met with Walgreens personnel at the DEA
MFD offices in Weston, Florida to apprise them of relevant ARCOS information about
Walgreens' sales of oxycodone in Florida. Present from Walgreens were Dwayne Pinon
(corporate in-house counsel), Ed Forbes (Market Loss Prevention Director), Wesley Rohn
(Pharmacy District Supervisor), Joan Bustelo (Pharmacy District Supervisor), Anne-Marie
Aldrich (Pharmacy District Supervisor), Cesar Cedeno (Pharmacy District Supervisor), Georgia
Lehoczky (Market Pharmacy Director), Robert Espinosa (Pharmacy Supervisor), Lakeisha Axem
(Pharmacy Supervisor), Sandra Vazquez (Pharmacy Supervisor) and Susan Thompson Loss
Prevention Manager. She will testify that the Walgreens officials at this meeting were told,
amongst other things, that 20 Florida Walgreens pharmacies were in the top 300 of oxycodone
purchasers in the United States for the first half of2011 and within the State of Florida over the
same time frame, 100 of the top 300 pharmacy oxycodone purchasers were Walgreens retail
pharmacies. Moreover, Florida Walgreens pharmacies purchased more than double the average
amount of oxycodone purchased by Florida pharmacies.
DPM Langston will discuss the "Suspicious Control Drug Order" reports received by
DEA from Walgreens. She will testify that these reports were sent to DEA from Walgreens Loss

10

 Prevention officials at corporate headquarters in Illinois on behalf of the Jupiter Distribution
Center. She will discuss the contents of these reports, how frequently they were submitted, and
what DEA was able to glean from an examination of these reports. DPM Langston will testify
that the reports were not in compliance with DEA's clear edict regarding what should and should
not be contained in a suspicious order report. She will also testify that in 2012, DEA has not
received a single suspicious order report from either Walgreens Corporate Headquarters or from
the Jupiter distribution center.
DPM Langston will discuss the execution of Administrative Inspection Warrants (AIW),
on April4, 2012 at six Walgreens pharmacies and Respondent, along with the service of an
administrative subpoena for additional records from Respondent, the six pharmacies, and their
corporate headquarters. She will testify regarding the meaning of the subpoena's request for
"due diligence" files and her efforts to communicate this concept to Respondent. Further, she
will testify to the types of information traditionally found within such files maintained by
distributor registrants and the traditional steps distributors undertake to monitor their customers
and assess whether or not they are involved in diversion.
She will also introduce emails produced by Walgreens in response to the subpoena, in
which the corporation urges its Florida pharmacy supervisors to increase their oxycodone sales
and she will discuss other emails indicating that Walgreens' officials were aware of excessive
dispensing at some of these 6 pharmacies, all of whom received their Schedule II controlled
substances from Respondent. She will discuss Walgreen Co.'s dispensing guidelines for its
Florida pharmacies and the development and results of a survey entitled "Focus on Compliance",
the purpose of which was to assess the scope ofthe diversion problem at Walgreen's Florida
pharmacies.

11

 DPM Langston will testify about multiple specific suspicious orders placed by the six
related Walgreens pharmacies during 2011, which were filled despite their suspicious nature and
without Respondent conducting any due diligence to ensure these orders were not being diverted.
DPM Langston will discuss the specific order dates, the objective suspicious factors related to
the orders, such as size and quantity, as well as the subjective factors creating a situation in
which Walgreens knew or should have known that the orders were suspicious and that these
pharmacies' dispensing practices posed an unreasonable risk of diversion. DPM Langston will
discuss due diligence steps that could have and should have been taken before the distribution
center shipped the orders. She will also describe numerous "red flags" of diversion evident from
a review of the records available to Respondent from the individual pharmacies it served.

3. Office of Diversion Control, Unit Chief Kyle Wright
Mr. Wright will testify to his background, education and training as the Targeting and
Analysis Unit Chief in the Office of Diversion Control. He will further testify as follows:
Mr. Wright will testify regarding the Automation of Reports and Consolidated Orders
System ("ARCOS") data regarding Respondent's sales of controlled substances. He will testify
to the background of ARCOS, its purpose, the information ARCOS contains, and how the
information is used by DEA to identify potential diversion of controlled substances. He will
testify that he used ARCOS information to conduct an analysis of Respondent's sales of
controlled substances. Specifically, he will testify with respect to the ARCOS information for
Respondent's top six retail pharmacy customers. Wright will further authenticate charts showing
comparative levels of controlled substance purchases among Respondent's various retail chain
customers from 2008 to the present, to include the average oxycodone purchasing by all of
Respondent's customers; its Florida customers; and the six targeted Walgreens pharmacies.

12

 Wright will further testify to the importance of accurate and complete reporting to
ARCOS and will testify that a distributor who reports in a manner that consolidates multiple
orders under separate DEA Forms 222 into a single Form 222 is not making a complete and
accurate report. Wright will authenticate documents showing Respondent's ARCOS reporting
on a number of occasions and compare this reporting to the actual sales information from the
source documents.

4. Acting Group Supervisor ("A/GS") Donna Richards
A/GS Donna Richards will testify to her background, education and training as a DEA
Diversion Investigator and Group Supervisor. She will testify substantially as follows:
A/GS Richards conducted a thorough review of the materials provided by Walgreens in
response to the administrative subpoena issued by DEA. She will testify that her review of these
documents produced no actual showing of any due diligence exercised by Respondent to verify
the legitimacy of their increasingly frequent and large orders for highly abused controlled
substances. The one exception A/GS Richards will note are several emails from the Jupiter
distribution center CII Function Manager, Christine Atwell, questioning the size and frequency
of orders from particular pharmacies. Richards will testify that despite Respondent's apparent
concern about the orders it was fulfilling on behalf of these pharmacies, Respondent continued to
ship suspiciously large quantities of controlled substances to these pharmacies and did not
properly report any of the orders that Atwell questioned, or that were subsequently shipped to
these pharmacies as suspicious. Richards will testify that based on the Walgreen Co.'s response
to DEA' s request for due diligence files, Respondent filled these orders without adequately
resolving Atwell's concerns or otherwise conducting any investigation of these orders to
determine that they were not being diverted.

13

 Richards will further testify about several particular incidents occurring at Respondent's
customer pharmacies that should have increased Respondent's scrutiny ofthese customers, all of
whom were already purchasing unusually large quantities ofthe most commonly abused and
diverted controlled substances. One of these incidents occurred in December 2010, at Walgreens
store 03629 in Hudson, Florida. An individual attempted to fill a prescription for 270 thirty
milligram oxycodone tablets but abruptly left the pharmacy without the narcotics he was seeking
after apparently learning that pharmacy personnel, who had reviewed the prescription and
suspected it was a forgery, had contacted law enforcement. Despite being put on notice that this
customer was likely diverting, Walgreens 03629 continued filling prescriptions for the customer
through October 2011. All of the prescriptions were for oxycodone, hydromorphone and/or
alprazolam, were paid for in cash and issued by physicians located a significant distance from
Walgreens 03629. She will further testify that efforts by Walgreens to impose order limits on
this particular store in light of its problematic dispensing did not succeed.
Similarly, Richards will testify that on September 27, 2010, a pharmacist at Walgreens
store 04 727 in Ft. Pierce, Florida, reported to local law enforcement that he mistakenly provided
an extra 120 dosage units of oxycodone 15mg to a customer. The pharmacist stated that when he
spoke to the customer's girlfriend to request the return of the oxycodone, the girlfriend said that
the customer was an addict who sold his pills and viewed the extra prescription as a "pot of
gold." Despite this incident, Walgreens 04727 continued to fill this customer's prescriptions for
oxycodone 15mg and oxycodone 30mg on December 30, 2010 and January 26, 2011.
On November 4, 2010, a Walgreens 04727 pharmacist reported to local law enforcement
that she dispensed a prescription for 60 dosage units of oxycodone 15mg to a customer. The
pharmacist witnessed the customer hand the prescription to a female in the store. The female

14

 entered the restroom with the prescription and upon leaving the restroom, left evidence
(aluminum foil with burn marks and pill residue) indicating that she had used the oxycodone in
an illicit manner. Despite this incident, Walgreens 04727 continued to fill the customer's
oxycodone and alprazolam prescriptions on November 30, 2010, December 13,2010, December
27,2010, and January 24,2011. Additionally, on two of these occasions, the pharmacist noted
on the prescription that the customer did not have identification and/or a passport.
On October 28, 2011, the Sheriff of St. Lucie County notified Walgreens 04727 by letter
that it needed to take action to stem the tide of prescription drug diversion. St. Lucie County
Sheriff Ken Mascara requested Walgreens 04727's "help in dealing the with prescription
painkiller epidemic" in St. Lucie County and Florida by "closely scrutinizing" prescriptions for
Schedule II narcotics, written by out-of-town physicians and/or written for out-oftown
individuals. Nevertheless, Walgreens 04727 continued its practice of filling numerous
opiate/opioid prescriptions issued by out-of-town physicians through early 2012. Several of
these out-oftown physicians subsequently surrendered their registrations for cause and/or were
subject to state action for their conduct involving controlled substances prescriptions.
She will also provide additional examples of orders for controlled substances received by
Respondent that, given the information available to the Walgreen Co., including the aboverelated police incidents and the below-summarized testimony of Oviedo Police Chief Chudnow,
should have been considered suspicious. She will provide testimony that despite clear "red
flags" of diversion at some of its customer pharmacies, the distribution center shipped suspicious
orders to these pharmacies without executing any due diligence to resolve the potential for
diversion.

15

 5. Diversion Investigator ("DI") Phyllis Garrett
01 Phyllis Garrett will testify to her background, education and training as a DEA

Diversion Investigator. She will testify as follows:
A review of the ARCOS information reported by the Jupiter distribution center to DEA
revealed failures to report complete and accurate information to ARCOS. Specifically, DI
Garrett will point to examples where Walgreens reported a single ordered quantity of Schedule II
controlled substances, while the actual amounts were ordered over several DEA 222 forms,
amounting to several separate transactions instead of one. DI Garrett's testimony, along with
that of Kyle Wright, will be used to admit documents showing these failures to report completely
and accurately.
She will introduce evidence of particular shipments of 30mg oxycodone to the six
pharmacies named in the Order to Show Cause and will describe the characteristics of these
orders that should have triggered both a suspicious order report and additional investigation from
Respondent prior to shipping.

6. Oviedo Chief of Police Jeffrey Chudnow
Chief Chudnow will testify about his background, training and experience as a police
officer and as the Chief of Police for Oveido, Florida. Chief Chudnow will testify about the very
tangible effects that the diversion of controlled substances has had on the city of Oveido, as
evidenced by increases in, among other things, crime rates and overdoses. Chief Chudnow will
testify about his department's knowledge ofWalgreens 06997, as well as another Walgreens
within the city limits, as centers for illicit controlled substance sales and use.
The Oveido Police Department (OPD) made numerous arrests for illegal distribution of

16

 controlled substances in 2010 and 20 11 related to controlled substances dispensed at the two
Walgreens pharmacies, with many of the illicit transactions preceding these arrests occurring in
the parking lots of the stores. Chief Chudnow will testify that it was his practice following one
of these arrests to send a letter to the pharmacy which dispensed the controlled substance being
diverted, notifying them of the details and asking for the pharmacy's assistance in preventing
future diversion. Chief Chudnow sent dozens of these letters, at least five of which will be
offered into evidence because, as noted in the ISO, Walgreens Store 06997 continued to dispense
to some of these individuals even after being notified of their arrest. 4
On February 10,2011, ChiefChudnow met with Ed Lanzetti, Walgreens Market Loss
Prevention Director, and another Walgreens official. At the meeting, ChiefChudnow presented
Mr. Lanzetti with numerous statistics and facts regarding controlled substance arrests related to
Walgreens' two Oveido pharmacies. These statistics included numbers and types of drug-related
arrests, types of controlled substances seized per arrest, and statistics showing the names of
doctors whose prescriptions were related to diversion arrests. Despite being given this
information, Walgreens 06997 continued to fill prescriptions for these associated doctors
subsequent to the February meeting with Chief Chudnow.
On March 15, 2011, ChiefChudnow sent letters to Alan G. McNally, Chairman of
Walgreens Corporation and to Gregory D. Wasson, President and CEO ofWalgreens
Corporation, informing them about the numerous controlled substance arrests taking place at the
Oveido Walgreens pharmacies and the effects on the community of Oveido, and asking for their
assistance in stopping these problems. Chief Chudnow never received any response to his
request for assistance from anyone at Walgreens Corporation.
4

DEA will offer the evidence of subsequent dispensing to the subjects of Chudnow's letters through a Diversion
Investigator and will specify these individuals and supporting documents in a Supplemental Prehearing Statement,
after moving for a protective order concerning the personal information to be disclosed in these exhibits.

17

 7. Robert Varno
V arno will be asked to testify about his experience as Respondent's Distribution Center
Manager in Jupiter, Florida from June 2001 until June 2012. Varno will testify about his
responsibilities as the manager of the distribution center, including the filling of orders for all of
the Walgreens retail pharmacies serviced by the Jupiter distribution center. Varno will be asked
to explain the distribution of controlled substances to the Walgreens retail pharmacies, including
the use ofDEA Form 222 for filling orders for Schedule II controlled substances. Varno will
testify regarding his knowledge and use of shipping information reported to ARCOS, as well as
Suspicious Order Reports, his understanding of their creation and his use of these reports in
managing the distribution center. He will discuss how these reports were received and stored at
the distribution center, his utilization of these reports, and how these reports impacted shipping
operations at the distribution center. Varno will testify about his training in anti-diversion
measures by Walgreen's Headquarters and/or Loss Prevention officials, particularly those
portions ofhis training focusing on Florida's well-known epidemic of prescription drug abuse.
He will also testify about his own knowledge of the prescription drug problem in Florida and
how that awareness impacted operations at Respondent, particularly with regard to identifying
and verifying suspicious orders of commonly abused painkillers.

8. Christine Atwell
Christine Atwell will be asked to testify about her more than six years of experience as the
CII Function Manager at the Walgreens distribution center in Jupiter, Florida. Atwell will
explain the role of the CII Function Manager as part of the distribution center operations,
including her functions while serving in that role. She will explain the system for filling orders
for Schedule II controlled substances in place in 201 0 and 2011, including the filling of standard
18

 orders, the filling of "PDQ 5" orders and the filling of orders for a quantity beyond the stock on
hand at the distribution center. Atwell will discuss how the Distribution Center handled orders
placed directly by pharmacy employees in addition to the automated system. She will testify
about the process of reviewing orders for controlled substances received at the distribution
center, as well as about the guidance and training she received from Walgreen Co. on how to
evaluate special orders. Atwell is expected to testify that she had full approval authority on all
special orders placed by pharmacies. She will testify about how the automated system handled
DEA Form 222 documentation of orders filled by the distribution center, as well as any
controlled substances ordered but not filled by the distribution center.
Atwell will testify regarding her knowledge and use of information reported to ARCOS , as
well as Suspicious Order Reports, to include her understanding of their creation and her use of
these reports in managing the distribution center's CII functions. She will testify about her
training in anti-diversion measures by Walgreen's Headquarters and/or Loss Prevention officials,
particularly those portions ofthis training focusing on Florida's well-known epidemic of
prescription drug abuse. She will also testify about her own knowledge of the prescription drug
problem in Florida and how that awareness impacted operations at Respondent, particularly with
regard to identifying and verifying suspicious orders of commonly abused painkillers.
As the CIT Function Manager, Atwell will testify regarding emails she sent to Walgreens
corporate personnel, including Barbara Martin and Distribution Center Manager Rob V arno,
voicing concerns about the unusual size and frequency of orders being placed by several
pharmacies. She will testify about Walgreens response to those concerns and her awareness of
any efforts by Walgreens to address the prescription drug problem both nationally and within

5

PDQ is internal vernacular used by Walgreens for "Pretty Dam Quick," or for orders received daily at the
distribution center for fast turnaround outside the regular weekly orders.

19

 Florida.
Atwell will discuss changes to the automated filling systems implemented at the Jupiter
Distribution Center in 2012. She will also discuss her understanding ofthe suspicious order
reports produced by Walgreens, including that she has no input into the creation of these reports
and she never utilized these reports as part of her role as en Function Manager at the distribution
center. She will testify that during her tenure as the

en Function Manager at the Jupiter

distribution center, she has never stopped an order from being filled and distributed. 6

9. Group Supervisor ("GS") Kathy Federico
GS Federico will testify to her background, education and training as a DEA Group
Supervisor. She will testify as follows:
On June 14, 2012, GS Federico, of the DEA Milwaukee District Office, spoke with
Dwayne Pinon, in-house corporate counsel for Walgreen, Co., in a telephone interview. During
the interview, Pinon stated that Walgreens' prior suspicious order reporting system was based on
a formula for Pseudoephedrine reporting in the DEA Chemical Handlers Handbook. Pinon
stated that the old system automatically reported any orders for quantities above the algorithm's
threshold limit. He stated that DEA had informed Walgreens that this algorithm reporting
system was outdated and that Walgreens needed to establish their own system for reporting
suspicious orders. Pinon stated that the old reports were not suspicious orders, but were in fact
just orders that "bounced off' the old reporting system. Pinon informed Federico that Walgreens
had implemented a new system which they hoped to present to DEA at some point. The new
system set limits on a pharmacy ordering controlled substances based on their sales history, and

6

Both Ms. Atwell and Mr. Varno were interviewed by DEA in August, 2012, with counsel for Respondent present.
The Government reserves the right to present evidence of their statements through the testimony ofDI's Richards
and/or Garrett, particularly if either or both do not testify at the hearing.

20

 any order over the set limit would trigger an alert to Walgreens Loss Prevention. Loss
Prevention would then resolve the order. Pinon stated that any orders that Loss Prevention could
not resolve would be reported to DEA. However, he stated that initial implementation of this
new version of the Suspicious Order Monitoring System had produced "thousands" of allegedly
suspicious orders, and was thus still being adjusted to produce different results.

10. George Corripio
George Corripio will testify about his thirty-one (31) years of experience as a pharmacist,
and his current position as a Walgreen's Staff Pharmacist at Walgreens #5079 at 2423 Orange
Avenue, Ft. Pierce, Florida 34950. Corripio will testify about a brief period in 2011 when he
worked at Walgreens #4727, also located in Ft. Pierce, Florida. Corripio will testify as follows:
Unlike the customers at The clientele at Walgreens #4727 was "heavy CII traffic," and
that "80% ofthe clientele was oxy[codone]." In his professional opinion, the diagnoses did not
match the customers, as most of the clientele were young people and most of the diagnoses were
for back pain. He felt that most of the customers were not telling the truth. The customers were
young, they seemed to all now each other, and they often appeared to be under the influence.
Often the clientele would present "cocktail prescriptions." On one occasion, a female customer
presented a prescription for ten opiates, which is the type of prescription dispensed to a patient
suffering from tenninal illness.
Corripio will testify about his general discomfort at filling oxycodone prescriptions at
Walgreens #4727, and about how supervising pharmacist did not seem bothered by the clientele
and offered to fill prescriptions for Corripio that he felt uncomfortable filling. She suggested that
as long as the pharmacy had a diagnosis code for the prescription, they were fine to fill. When
Corripio refused to fill a prescription, the customer would often ask when the female pharmacist
21

 was coming back.
Corripio will testify that in his professional opinion, any reasonable pharmacist and
technician would know that something was not right with the situation going on at the pharmacy.
Corripio brought the situation to the attention of the local police department to seek help with the
problems. Corripio will further testify that he believed his District pharmacy supervisor knew
about the dispensing practices at Store # 4 727. 7
11. Edward J. Lanzetti
Mr.Lanzetti will testify about his employment and duties at Walgreens as a Market Loss
Prevention Director. He will be asked to describe his knowledge of the prescription drug abuse
problem in Florida and about Walgreens' efforts to combat these issues. He will be asked to
describe the Loss Prevention program as it pertains to anti-diversion measures and the methods
used by Walgreens' Loss Prevention program to detect and prevent diversion at its pharmacies.
Lanzetti will be asked about the increases in oxycodone sales at Walgreens pharmacies in 2010.
He will also be questioned about his meeting with Chief Jeffrey Chudnow of the Oviedo Police
Department, and about any actions taken in response by the Walgreen Corporation.
VI. PROPOSED DOCUMENTS

Exhibit

Description

Approx.
#Pages

1.

DEA Certificate ofRegistration RW0277752 (attached hereto)

1

2.

Sep 27, 2006 Letter from Deputy Asst. Administrator to
Respondent

4

3.

Feb 7, 2007 Letter from Deputy Asst. Administrator to
Respondent

2

7

Mr. Corripio was also interviewed by DEA in August, 2012, with counsel for Respondent present. The
Government reserves the right to present evidence his statements through the testimony ofDI ' s Richards and/or
Garrett, particularly if Corripio does not testify at the hearing.

22

 Exhibit

Description

Approx.
#Pages

4.

Dec 27, 2007 Letter from Deputy Asst. Administrator to
Respondent

4

5.

2011 Memorandum of Agreement between DEA and Walgreen
Co.

7

6.

Florida Declaration of Public Health Emergency

3

7.

HDMA Guidance on Suspicious Order Reporting

16

8.

Walgreen Policy: Handling Suspicious Drug Orders, Revised
2/ 15/05

1

9.

Walgreen Policy: Handling Suspicious Orders and Loss of
Controlled Drugs, Revised 2/15/05

1

10.

Walgreen: Handwritten Revisions to Suspicious Order Policies,
undated

2

11.

Walgreen Policy: Handling Suspicious Drug Orders, Revised
04/02/202 (sic)

1

12.

Walgreen Policy: Handling Suspicious Orders and Loss of
Controlled Drugs, Revised 04/02/2012

I

13.

"Controlled Substance Threshold" Project P09002, Feb. 2009

18

14.

Jupiter en Suspicious Control Drug Orders Report with cover
letter dated Dec. 30, 2011

1500+

*

15.

Jupiter en Suspicious Control Drug Orders Report with cover
letter dated Nov. 30, 2011

1500+

*

16.

Jupiter en Suspicious Control Drug Orders Report with cover
letter dated Oct. 31 , 2011

1500+

*

17.

Jupiter en Suspicious Control Drug Orders Report with cover
letter dated Sep. 30, 2011

1500+

*

18.

Jupiter en Suspicious Control Drug Orders Report with cover
letter dated July 31, 2011

1500+

*

19.

Jupiter en Suspicious Control Drug Orders Report with cover
letter dated May 5, 2011

1500+

*

20.

Chart of Top Oxycodone Dispensing Florida Pharmacies, 20082012.

5

21.

Chart of Oxycodone Sales to Selected Walgreens Pharmacies,
2006-2012

7

22.

Chart of Oxycodone Average Sales: US average, Florida average,
Walgreens Nationwide Average, Walgreens Florida Average.

2

23.

Chart of Oxycodone 30 mg Orders Shipped to Selected
Pharmacies

5

23

 Exhibit

Description

Approx.
#Pages

24.

2011 MOA between Walgreens and DEA

7

25.

Chart and Supporting Documents - Inaccurate ARCOS Reporting

10

26.

Excerpts from DEA Pharmacist Manual

5

27.

Chart: Oxycodone Sales Comparisons of Selected Walgreens
Pharmacies

4

28.

Oviedo Police Department Letters to Walgreens

10

29.

Walgreen Emails Re: Oxycodone Sales **

2

30.

Walgreens Emails re: pharmacy orders * *

15

31.

Walgreens Emails re: Ft. Pierce Pharmacies 4727 & 4391 **

8

32.

Walgreens Email about Oviedo Police Chief **

2

33.

Walgreens Emails re: Focus on Compliance**

25

34.

Walgreens Emails re: Oxycodone Action Plans**

8

35.

Walgreens Emails re: Dispensing Guidelines**

10

36.

Selected DEA Forms 222 From Respondent

25

37.

ARCOS Information Submitted by Respondent for the transactions
in Exhibit 33.

5

38.

Police Reports re: individual incidents at selected pharmacies

15

* The Government will seek to only use excerpts from these reports in order to limit the size of
each exhibit well below the number of pages contained within the original report.
**Respondent has informed the Government that it will be providing a Bates-stamped replica of
the material it originally provided in response to a subpoena without any numeration. Once
received, the Government will use these materials to specify exactly which documents are being
used and provide a more detailed exhibit list in subsequent filings.

VII. OTHER MATTERS
As this and related matters not currently before the Court are part of an ongoing
investigation, the Government requests the opportunity to supplement this Prehearing Statement
as necessary with additional witnesses and documentary evidence. There may also be a need to
supplement or revise in response to ongoing litigation brought by Respondent in both the Eastern
District of Virginia and the Court of Appeals for the District of Columbia.

24

 Pursuant to the Court's Amended Order for Prehearing Statements, the Government's
position at this time is that paragraph 20 of the OTSC/ISO is the only portion of the charging
document that is solely relevant to the Administrator's findings of an imminent danger to the
public health and safety. While other portions of the OTSC/ISO also support this finding, they
are also relevant to the issues to be determined herein, particularly at this stage of the proceeding,
where the Government is not yet aware of the particular defenses to be raised by Respondent.
VIII. POSITION REGARDING HEARING SITUS
At this time, the Government does not request a change of location for the hearing,
though this position is subject to clarification ofthe means and method of securing the
presentation of testimony by civilian witnesses located more than 500 miles from the site of the
hearing. See 21 U.S.C. § 876. This concern would be substantially alleviated should Respondent
agree to produce in person any current employee requested in this Prehearing Statement or
supplements thereto.
IX. BEST ESTIMATE AS TO TIME REQUIRED TO PRESENT CASE
The Government anticipates requiring no more than four (4) days to present its case-inchief, exclusive of cross-examination and rebuttal.

Attorneys
Diversion & Regulatory Litigation
Office of Chief Counsel
Date: October 31 , 2012
25

 CERTIFICATE OF SERVICE
I hereby certify that on the date signed below, I caused the original and two copies of the
foregoing GOVERNMENT'S PREHEARING STATEMENT, to be hand delivered and faxed to the
DEA Office of the Administrative Law Judges, and I caused a copy of the same to be sent, viaemail to counsel for Respondent at the following addresses:

Phil Perry
Allen M. Gardner
Nathan H. Seltzer
Latham & Watkins LLP
555 Eleventh Street, NW
Suite 1000
Washington, DC 20004-2232
Fax: 202.637.2201
Email: Phil.Perry@lw.com
Allen. Gardener@lw.com
Nathan.Seltzer@lw.com
DavidS. Weinstein
Clarke Silverglate P .A.
799 Brickell Plaza
Suite 900
Miami, Florida 33131
Fax: 305-377-3001
Email: DWeinstein@cspalaw.com

26

 [Page intentionally left blank]

UNITED STATES DEPARTMENT OF JUSTICE
DRUG ENFORCEMENT ADMINISTRATION

IN THE MATTER OF

DOCKET No. 13-01

WALGREEN, CO.

ADMINISTRATIVE LAW JUDGE
JOHN J. MULROONEY, II

GOVERNMENT'S SUPPLEMENTAL PREHEARING STATEMENT

Scott Lawson
Jonathan Novak
Attorneys
Diversion & Regulatory Litigation
Office of Chief Counsel
8701 Morrissette Drive
Springfield, VA 22152
Tel: 202.307.8038
Fax: 202.307.4946

Date: December 7, 2012

 Pursuant to the November 20, 2012 Prehearing Ruling, the Government hereby submits
its Supplemental Prehearing Statement.
The Government supplements the proposed testimony of its previously disclosed
witnesses as follows:

1. Deputy Assistant Administrator Joseph Rannazzisi
Both the ISO and the Government's Prehearing Statement refer to three letters issued by
Deputy Administrator Rannazzissi. The second of these two letters, dated February 7, 2007, is
identical to the first, dated September 27, 2006. The Government therefore will not be
referencing the February 7, 2007 letter in its proposed testimony and has removed this document
from its exhibit list.
Deputy Administrator Rannazzissi will further testify in response to Respondent's
contention in its Prehearing Statement that its suspicious orders program was modeled on
guidance from DEA's website. He will testify that Respondent's reliance on this website is
misplaced, as it applies to DEA's Chemical Program only and is designed to implement separate
statutes and regulations than those involving suspicious orders for controlled substances.

2. DPM Langston:
Ms. Langston will further testify to her review of the materials provided by Respondent in
response to a subpoena request for the distributor's due diligence and customer files. Utilizing
her training and experience in investigating manufacturers and distributors of controlled
substances, she will testify that she found little to no evidence that Respondent or any part of its
vertically integrated corporate structure undertook any efforts to assess the reasonableness or
legitimacy of the orders it was shipping to Walgreens stores, despite the fact that it routinely
identified these orders as suspicious. (To the extent this testimony is duplicative of that
2

 proffered for A/GS Richards, Ms. Langston's testimony on these matters will be in place of Ms.
Richards.) Correcting her proffered testimony in the government's Prehearing Statement, Ms.
Langston will testify that the last suspicious control drug orders report received by DEA on
behalf of Respondent was in February 2012, covering orders through January 2012.

3. Diversion Investigator ("DI") Phyllis Garrett:

DI Garrett (or, in the alternative, GS Richards) will additionally testify that Respondent's
Suspicious Order Reports frequently failed to fully report all orders that, pursuant to their own
criteria, should have been reported as suspicious. She will identify and describe a chart with
supporting documentation, showing examples of these failures, some of which also include
failures to report orders of Schedule II drugs to ARCOS. She will similarly identify and
describe a summary of orders shipped by Respondent in early 2012, after it adopted a policy of
no longer making suspicious order reports on the basis that it would not ship them, that exceeded
its 2011 and January 2012 criteria for reporting those orders as suspicious.
DI Garrett (or, in the alternative GS Richards) will identify Walgreens "Oxycodone Action
Plan" Memo for District 227 and compare the plan's intent to impose immediate order limits on
three stores with the actual orders shipped by Respondent subsequent to this plan.

4. George Corripio
Pharmacist George Corripio will testify that he was temporarily transferred from Fort
Pierce Walgreens 5079 to Walgreens Store# 4727, Fort Pierce, Florida, for a brief period in late
2010 (vice 2011 as stated in the Government's Prehearing Statement.)

He will testify to the

sharp contrast in clientele and dispensing practices between 4727 and 5079, despite their relative
close proximity. He will testify that much of Store #4727's oxycodone customers appeared to be
young, healthy individuals, whose appearance did not correspond with the medication they were

3

 seeking or the diagnosis codes he obtained from the offices of the clinics issuing the
prescriptions. Many times, the customers seeking the pain medications would arrive in groups
who all seemed to know each other and they often appeared to be under the influence of
something, which was suspicious to him based on his years of experience as a pharmacist. He
will testify that the pharmacy supervisor, Andrea Cohen, told him that all he had to do to in order
to fill a prescription was to get a diagnosis code from the issuing office. Because of his own
discomfort in filling these prescriptions which he readily identified as suspicious, Andrea Cohen
offered to fill them for him. He will testify that the offices whose customers presented pain
prescriptions at 4727 generally provided the same diagnosis, usually low back pain, and that he
observed that if 4727 filled one of these questionable prescriptions, they would soon see several
more customers presenting similarly questionable prescriptions. He will testify that many times
when he refused to fill these prescriptions, the customers would get angry and ask when the
female pharmacist was coming back. He will testify that the majority of these customers paid
cash and were encouraged to return to the pharmacy by Supervisor Andrea Cohen, who would
offer these customers Walgreens discount cards. He will testify that he told law enforcement
officers that the situation at 4727 with regards to the pill-seeking customers was out of control
and that he needed help.
He will testify about an incident he reported to the police after he mistakenly provided
extra oxycodone to customer Richard Hanson. Upon trying to call Hanson to tell him to return
the oxycodone, Hanson's girlfriend told him that Hanson was an addict who sells his pills. He
will be asked about whether there is anything in W algreens dispensing system to note such an
incident in order to flag a customer such as Hanson should he present prescriptions in the future
for similar substances.

4

 Proposed Exhibits:
Pursuant to the Court's Prehearing Ruling, the Government produced the following
proposed exhibits to Respondent on November 30, 2012:

Exhibit

Description

#Pages

1.

DBA Certificate of Registration RW0277752

1

2.

September 27, 2006 Guidance Letter From DBA Deputy Assistant
Administrator Joseph T. Rannazzisi to Walgreen Co.

8

3.

December 27, 2007 Guidance Letter From DBA Deputy Assistant
Administrator Joseph T. Rannazzisi to Walgreen Co.

4

4.

April2011 Memorandum of Agreement Between Walgreen Co.
andDEA

7

5.

July 1, 2011 Florida State Department of Health Declaration of
Public Health Emergency Regarding Prescription Drug Abuse
Epidemic

5

October 17, 2008 Healthcare Distribution Management
Association Guidance with Attached Letter for DBA Chief
Counsel Wendy Goggin

17

7.

February 15, 2005 Walgreens Policy: "Handling Suspicious Drug
Orders"

2

8.

Notes on W algreens Proposed Suspicious Order Policy

2

9.

April4, 2012 Walgreens Policy: "Handling Suspicious Orders and
Loss of Controlled Drugs"

1

10.

April 4, 2012 Walgreens Policy: "Handling Suspicious Drug
Orders"

1

11.

Walgreens "Controlled Substance Threshold" Project P09002,
February 2009

18

12.

December 2011 Walgreens Jupiter Distribution Center C2
Suspicious Order Report

1626

13.

December 2011 Walgreens Jupiter Distribution Center C3-5
Suspicious Order Report

384

6.

5

 14.

Excerpt of December 2011 Walgreens Jupiter Distribution Center
C2 Suspicious Order Report

25

15.

Excerpt of August 2011 Walgreens Jupiter Distribution Center C2
Suspicious Order Report

46

16.

Excerpt of July 2011 Walgreens Jupiter Distribution Center C2
Suspicious Order Report

46

17.

Excerpt of June 2011 Walgreens Jupiter Distribution Center C2
Suspicious Order Report

46

18.

Excerpt of December 2010 Walgreens Jupiter Distribution Center
C2 Suspicious Order Report

36

19.

Excerpt of Suspicious Orders for Walgreens #3099

14

20.

Excerpt of Suspicious Orders for Walgreens #3629

64

21.

Excerpt of Suspicious Orders for Walgreens #3836

49

22.

Excerpt of Suspicious Orders for Walgreens #4391

34

23.

Excerpt of Suspicious Orders for Walgreens #4727

19

24.

Excerpt of Suspicious Orders for Walgreens #6997

15

25.

Walgreens Ft. Pierce Comparison of ARCOS Data and Chart

1

26.

Walgreens Oviedo Comparison of ARCOS Data and Chart

1

27.

Walgreens Port Richey and Hudson Comparison of ARCOS Data
and Chart

1

28.

W algreens Ft. Myers Comparison of ARCOS Data and Chart

1

29.

Top 100 Walgreens Purchasers ofOxycodone from Jupiter
Distribution Center

3

30.

Yearly Sales ofOxycodone to Select Walgreens Pharmacies from
All Sources, 209-2011

1

31.

Orders for 30mg Oxycodone (100 count bottles) in 2012
Exceeding Walgreens 2011 "Trigger Amount" for Reporting
Suspicious Transactions, with Attached DEA Forms 222

23

32.

Walgreens Ft. Pierce (#4391) ARCOS Reporting Discrepancies

28

33.

Walgreens Ft. Pierce (#4727) ARCOS Reporting Discrepancies

21

34.

Walgreens Ft. Meyers (#3099) ARCOS Reporting Discrepancies

25

35.

Walgreens Hudson (#3629) ARCOS Reporting Discrepancies

41

6

 36.

W algreens Oviedo (#6997) ARCOS Reporting Discrepancies

22

37.

Walgreens Port Richey (#3836) ARCOS Reporting Discrepancies

30

38.

Suspicious Order Report Discrepancies

39

39.

DEA Guidance "A Pharmacist's Guide to Prescription Fraud"

2

40.

September 27, 2010 Ft. Pierce Police Incident Report for Richard
Frederick Hanson

5

41.

Copies of Prescriptions Filled for Richard Frederick Hanson by
W algreens #4 727

10

42.

November 4, 2011 Ft. Pierce Police Incident Report from
W algreens #4 72 7

6

43.

Copies of Prescriptions Filled for Carlo Pastor by W algreens
#4727

18

44.

December 24, 2010 Police Incident Report Regarding James
McCune and Accompanying Prescriptions

18

45.

Dispensing Log of Prescriptions Filled by Walgreens #3629 for
James McCune

1

46.

Letters sent from Oviedo Police Department to Walgreens

16

47.

Summary of Arrests Made at Walgreens Pharmacies in Oviedo,
Florida

1

48.

Summary of Surveillance Conducted at Walgreens Oviedo
Pharmacies and Law Enforcement Results

2

49.

Oviedo Clinton and Valerie Brekke Exhibit

30

50.

Oviedo Staci Starling Exhibit

17

51.

March 19, 2012 Administrative Subpoena for Walgreens Due
Diligence Files

2

52.

Letters from Walgreens Legal Counsel to DPM Susan Langston
Outlining Walgreens' Response to DEA Due Diligence Subpoena

6

53.

Email: FW: The Two Minute Oxy-Refusal [WAG00000368]

2

54.

Email: re_ oxycodone 30 mg [WAG00000460]

2

55.

Email: Re_Please advise on Pain Manag [WAG00000462]

2

56.

Email: Standards of Practice for the Disp [WAG00000464]

2

57.

Email: Re_Handling Pain Management RX [WAG00000660]

2

7

 58.

Email: 0969_001a [WAG00000742]

22

59.

Email: 0969_001a [WAG00000742]

22

60.

Email: Fw DEA issue at 6094 with attachment
[WAG00000813]****

8

61.

Email: _ Oxycodone sales with attachment [WAG00000829]

12

62.

Email: District Notes and Focus Points [WAG00000845]

1

63.

Email: Margate FL Schedule II limitations (Svihra)
[WAG00000846]

4

64.

Email: Re: High Quantity Stores 682971 [WAG00000869]

11

65.

Email: Ft Pierce.msg 2 [WAG0000889]

13

66.

Email: Rx Numbers- Oviedo FL (Svihra) [WAG00000902]

2

67.

Email: Oviedo FL (Stahmann) [WAG00000904]

3

68.

Email: Re Fw 682971 - OXYeODONE HeL 30MG TAB
[WAG0000908]

11

Email: Fw_3099 Oxycodone Issue [WAG00000919]

2

70.

Email: Re Store #3836 [WAG00000921]

4

71.

Email: Re Fw INe000002834005 Store #3836 Wie#682971 order
qty 148 [WAG00000925]

4

Email: 1412- en Dispensing Action Plan [WAG00000929]

1

73.

Email: 3525 - en Dispensing Action Plan [WAG00000930]

1

74.

Email: Fw_Stores with many adjustments [WAG00000948]

2

75.

Email: STORE 3099- RxS Due Diligence [WAGOOOO 1042]

3

76.

Email: Re Store #06997 [WAGOOOO 1057]

2

77.

Email: Re Fw Oxycontin question [WAG00001064]

8

78.

Email: Re Fw en Order [WAGOOOO 1087]

17

79.

Email: Florida Focus on Profit (Svihra) [WAG000011 07] ****

7

80.

Email: Store 4706 [WAG00001125]

7

81.

Email: Dist #227 Oxycodone Memo August 2011
[WAG00001212]

2

69.

72.

8

 82.

Email: Store 3099 [WAG00001256]

1

83.

Email: Re_3099 [WAG00001260]

2

84.

Email: 1009_001 [WAG00001326]

40

85.

Email: REQUEST REVIEW Florida Pain Management Visits
(Merten) [WAG00001638]

1

****Government Exhibits 60 and 79 are subject to the ongoing litigation involving
Respondent's privilege claims. They are produced here as redacted by Respondent pending a
resolution of the privilege issue.

Proposed Supplemental Exhibits:
86. Email: Actions Taken in District 21 about CII Dispensing WAG0001740

2 pages

87. Email: New Florida Prescribing Law- 3 pages
88. Email: Focus on Compliance Survey- 6 pages
89. Focus on Compliance Survey Results- Excel Spreadsheet

48 pages

90. List of items produced in response to Administrative Subpoena- 13 pages

OTHER MATTERS

1. Testimony by VTC:
The Government has moved to exclude the proffered testimony of DEA employees
and/or Task Force Officers Amber Baginski, Roberta Goralczyk, William Schwartz and Roger
Kemicky, witnesses 19-22 in Respondent's Prehearing Statement. Should the Court deny the
Government's motion as to any of these witnesses, we request that they be allowed to testify by
VTC. It is the Government's intention to have Oviedo Police Chief Jeffrey Chudnow testify in

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 person, however, given his position, we request the opportunity to present his testimony by VTC
only if some currently unforeseen circumstance requires that he remain in Florida. We similarly
request the opportunity to present the testimony of George Corripio by VTC if necessary to
accommodate his employment schedule.
2. Notice of Additional Basis For Revocation:
The ISO and Prehearing Statement allege that Respondent violated federal statutes and
regulations by failing to implement a system to properly identify and investigate suspicious
orders. The failure to conduct adequate due diligence as part of a distributor's obligation to
maintain effective controls against diversion is further alleged as conduct that would render
Respondent's registration inconsistent with the public interest under 21 U.S.C. § 824(a)(4).
Florida law imposes similar requirements on wholesale distributors to conduct due diligence and
develop a program to identify suspicious orders and prevent suspicious transactions. Florida
Statutes (FS) 499.0121 (15). In particular, a wholesale distributor must assess the
reasonableness of orders in excess of 5,000 unit doses of any one controlled substance in any one
month. FS 499.0121 (15)(b). The Government hereby notifies Respondent that the same
evidence and testimony already disclosed may therefore also demonstrate that Respondent has
failed to comply with applicable State law under 21 U.S.C. §§ 823(b)(2) & § 823(e)(2).

3. Courtroom presence of Government Expert Witness:
The Government requests that its noticed expert, Prof. Paul Doering be permitted to observe
all aspects of the hearing in the event he is called in rebuttal.
4. Respondent's Witnesses:

Similar to Respondent's notice at fu 1 of its Prehearing Statement, the Government reserves
the right to call any of Respondent's Witnesses on the matters listed in their proposed testimony.

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 Resp~itted, _.

~N

JONATHAN P. NOVAK
Attorneys
Diversion & Regulatory Litigation
Office of Chief Counsel
Date: December 7, 2012

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 CERTIFICATE OF SERVICE
I hereby certify that on the date signed below, I caused the original and two copies of the
foregoing GOVERNMENT'S SUPPLEMENTAL PREHEARING STATEMENT, to be hand delivered
and faxed to the DEA Office of the Administrative Law Judges, and I caused a copy of the same
to be sent, via e-mail to counsel for Respondent at the following addresses:
Phil Perry
Allen M. Gardner
Nathan H. Seltzer
Latham & Watkins LLP
555 Eleventh Street, NW
Suite 1000
Washington, DC 20004-2232
Fax: 202.637.2201
Email: Phil.Perry@lw.com
Allen.Gardener@lw.com
Nathan. Seltzer@lw.com

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