Pharmacy DEA Audits

Is Your Pharmacy Being Audited by the DEA? If So, Here’s What You Need to Know.

It is Tuesday morning. You just opened your pharmacy, and the first orders are coming in. Suddenly, two women enter your pharmacy, show their badges, and ask to speak with the pharmacist. They are Diversion Investigators with the U.S. Drug Enforcement Administration (DEA). Your pharmacy is being audited.

Will you pass the audit? Pharmacy compliance with all DEA regulations and the Controlled Substances Act (CSA) in place? What will happen if your inventory shows a discrepancy? What error rate is tolerable? What is the worst that can happen? Can the DEA revoke your registration? As the pharmacy’s owner, could you face personal civil, or criminal liability?

Put our highly experienced team on your side

Dr. Nick Oberheiden
Dr. Nick Oberheiden



John W. Sellers
John W. Sellers

Former Senior Trial Attorney
U.S. Department of Justice

Local Counsel

Joanne Fine DeLena
Joanne Fine DeLena

Former Assistant U.S. Attorney

Local Counsel

Joe Brown
Joe Brown

Former U.S. Attorney & Former District Attorney

Local Trial & Defense Counsel

Amanda Marshall
Amanda Marshall

Former U.S. Attorney

Local Counsel

Aaron L. Wiley
Aaron L. Wiley

Former Federal Prosecutor

Local Counsel

Roger Bach
Roger Bach

Former Special Agent (OIG)

Michael Koslow
Michael Koslow

Former Supervisory Special Agent (FBI)

Chris Quick
Chris Quick

Former Special Agent (FBI & IRS-CI)

Kevin M. Sheridan
Kevin M. Sheridan

Former Special Agent (FBI)

Ray Yuen
Ray Yuen

Former Supervisory Special Agent (FBI)

Dennis A. Wichern
Dennis A. Wichern

Former Special Agent-in-Charge (DEA)

Why is the DEA Auditing Your Pharmacy?

First and foremost, the job of DEA Diversion Investigators is to ensure that pharmacies are in strict compliance with all applicable laws and regulations. This includes, but is not limited to, the Controlled Substances Act (21 U.S.C. 801-971), the Combat Methamphetamine Epidemic Act of 2005 (CMEA), the Food, Drug, and Cosmetic Act (FDCA), and the pertinent provisions of the Code of Federal Regulations (21 C.F.R. Parts 1300 et seq.). So, during an audit of your pharmacy, the DEA’s Diversion Investigators will be closely scrutinizing all aspects of your business, from your pharmacy’s physical security to its electronic prescription compliance procedures.

However, with the nation’s opioid epidemic continuing to be a top DEA priority, the primary focus of the audit will undisputedly lie in examining your pharmacy’s prescriptions for drugs containing benzodiazepine and other commonly abused drugs such as oxycodone, hydrocodone, hydromorphone, morphine, codeine, clonazepam, alprazolam, lorazepam, diazepam, and carisoprodol. Since this is the DEA’s top compliance concern, it needs to be one of your top compliance concerns as well. However, while this is the case, it does not mean that you can afford to let your compliance efforts slide in other areas. If an audit reveals any regulatory or statutory violation, you could be at risk for substantial federal penalties.

7 Common Issues During DEA Audits

As we mentioned above, during DEA audits, pharmacy owners can expect to face questions related to all facets of their business operations. While this list is by no means exhaustive, here are some of the most-common issues we see when our attorneys and former agents represent clients in DEA pharmacy investigations:

1. Violations Related to Schedule II Controlled Substances

Schedule II controlled substances are considered high-risk drugs for diversion due to their illicit street value and propensity for abuse. During a pharmacy audit, DEA Diversion Inspectors will spend a significant of time focused on the pharmacy’s practices related to schedule II narcotics and stimulants such as morphine, hydromorphone, methadone, meperidine, oxycodone, fentanyl, amphetamine, methamphetamine, and methylphenidate.

DEA-registered pharmacies simply cannot afford to have material inventory error rates in this category, which also includes cocaine, amobarbital, glutethimide, and pentobarbital. Any perceived issues related to the dispensing of schedule II controlled substances will be the subject of intensive review, and the DEA (along with the U.S. Department of Justice (DOJ)) aggressively pursues pharmacy owners and pharmacists suspected of either (i) intentionally diverting schedule II drugs, (ii) turning a blind eye to possible diversion, or (iii) failing to take the necessary steps to develop an adequate compliance program.

2. Violations Related to Schedule III Controlled Substances

Schedule III controlled substances include combinations containing less than 15 milligrams of hydrocodone per dosage unit (Vicodin), drugs containing not more than 90 milligrams of codeine per dosage unit (Tylenol with codeine), buprenorphine products (Suboxone and Subutex), as well as non-narcotics like benzphetamine, phendimetrazine, ketamine, and anabolic steroids.

Since many schedule III controlled substances are also at high-risk for abuse, DEA Diversion Investigators heavily scrutinize pharmacy’s prescription and dispensing practices related to these drugs as well. For example, a pharmacy that fills an abnormally high number of prescriptions for schedule III drugs could be at risk for allegations that it either (i) is facilitating diversion in conjunction with an overprescribing physician, or (ii) has not implemented adequate controls to for these prescriptions to internally raise red flags. In these types of scenarios, it is not a defense for a pharmacy to claim that it was simply filling the prescriptions it received. Pharmacies have affirmative an affirmative obligation to investigate questionable prescription practices, and they can face severe consequences for failing to do so. This is why you may need a DEA defense lawyer!

3. Violations Related to Schedule IV Controlled Substances

Schedule IV controlled substances include the narcotic propoxyphene as well as alprazolam, clonazepam, clorazepate, diazepam, lorazepam, midazolam, temazepam, and triazolam. The DEA often considersschedule IV substances dangerous supplements to schedule II or schedule III narcotics (with combined drugs referred to as “cocktails”).

Here, too, pharmacies need to be extremely careful. Even isolated incidents can raise DEA Diversion Investigators’ eyebrows, and high error rates can lead to a presumption of intentional misconduct. If mistakes have been made, they will need to be addressed proactively, but this must be done carefully in order to avoid raising additional questions during the audit.

4. Suspicious Dispensing Patterns

In addition to independently assessing pharmacies’ compliance with regard to controlled substances on schedules II, III, and IV (and sometimes schedule V), during an audit the DEA will also analyze any suspicious dispensing patterns. For example, the Diversion Investigators may request statistics of the number of cash-paying patients, Medicaid patients, chronic pain patients, patients with frequent refills, new patients, and the like.

When it comes to dispensing medications, as we mentioned above, pharmacies’ obligations extend far beyond simply filling doctors’ prescriptions. Right now, the DEA views pharmacies as part of the problem with regard to the nation’s opioid epidemic, and it expects them to become part of the solution. As a result, even inadvertent compliance can lead to substantial fines, loss of DEA registration, and Medicaid exclusion, among other penalties. If the DEA suspects that you may be diverting prescription drugs intentionally, it won’t hesitate to go to the DOJ with the evidence prosecutors need to seek an indictmenton criminal charges.

5. Relationship with Physicians

Increasingly, we have seen instances of DEA Diversion Investigators asking pharmacy owners and physicians in charge (PICs) about pharmacies’ relationships with specific physicians. For example, in one recent audit, investigators disclosed that a certain physician who previously referred narcotic prescriptions to our client had recently been indicted for alleged violations of the Controlled Substances Act. With regard to our client, the investigators’ questions centered around to what extent the prescriptions from this physician met the test of medical necessity and, more generally, what steps our client took to validate the correctness, appropriateness, and necessity for each controlled substance prescription.

In addition to these types of questions, pharmacies can also face questions regarding their financial relationships with prescribing physicians. While there are lawful ways for pharmacists to contract with third-party physicians (i.e. under various safe harbors of the Anti-Kickback Statute), in general, any evidence of payments or other benefits being tied to the volume of prescriptions or patient referrals is going to raise questions as to the legality of the relationship.

6. The Pharmacy’s Business Model

During pharmacy audits, the DEA will often scrutinize why individuals use the audited pharmacy and why physicians refer their patients there. Any questioning in this area is also designed to assess whether the pharmacy may be complicit in the unlawful diversion of schedule II, III, or IV controlled substances. For example, if patients travel a significant distance to use the pharmacy (particularly when there are closer pharmacies nearby), or if a particular physician consistently sends a specific type of prescription to the pharmacy, this will likely be viewed as a red flag for possible drug diversion.

7. Inadequate Compliance Controls or Documentation

Finally, during a pharmacy audit, DEA Diversion Investigators will also examine the overall sufficiency of the pharmacy’s compliance program. This includes not only actual compliance but also documentation of the pharmacy’s compliance efforts (which, technically, is itself a part of compliance). Here, too, even unintentional shortcomings can lead to significant ramifications; and, if there are enough shortcomings to suggest that the pharmacy’s owners should have known better or had intentionally turned a blind eye to compliance, then the consequences can become even more severe.

When auditing pharmacies’ compliance efforts, DEA Diversion Investigators will focus their examination on seven key aspects of compliance:

  • Prescription Drug Inventory
  • Packaging and Transfer of Prescription Drugs
  • Security to Prevent Loss or Theft
  • Pharmacy Record-Keeping Practices
  • Prescription Management and Fraud Monitoring
  • Drug Ordering
  • Drug Dispensing and Diversion Prevention

However, this list, too, is not comprehensive. DEA-registered pharmacies have a host of compliance obligations, and certain types of pharmacies (i.e. compounding pharmacies and specialty pharmacies) face even greater compliance burdens. If your pharmacy is being audited, in order to avoid unnecessary consequences, you should speak with a pharmacy and compliance defense lawyer promptly.

Reputable Legal Defense and Effective Advice for Protecting Your Best Interests in DEA Inspections and DEA Audits

Finding yourself under DEA audit, DEA inspection, or investigation by the Drug Enforcement Agency is a serious and terrifying prospect for anyone. But when people think of DEA suspects, they usually imagine back-alley dealers, drug cartels, and other illicit peddlers.

The DEA’s reach expands far beyond the streets, however, and into places of professionalism and prestige — pharmacies, doctor’s offices, hospitals, and record-keeping agencies.

Like any federal law enforcement agency, the U.S. Drug Enforcement Agency is equipped with tremendous, almost limitless power, and they are intensively aggressive in exercising that power. And more often than many people realize, they use it against healthcare professionals right here in the United States.

If you or your medical practice is currently under DEA audit or inspection — or if you have reason to believe you may be under suspicion or an investigation that might soon lead to an audit — it is in your best interest to seek experienced legal counsel right away.

While many DEA audits are routine, the unsettling truth is that when federal law enforcement agents begin digging around in private practices and their files, they often find a way to raise red flags.

Those red flags can be highly technical in nature and often come as a surprise, but because the DEA is so powerful and aggressive, you must take them seriously. The consequences of an adverse outcome are severe.

Acting without legal representation, healthcare professionals and organizations often make innocent mistakes that may lead to full-fledged and altogether unnecessary investigations or allegations of misconduct. Those allegations can stain a hard-earned professional reputation for years to come, even if they never lead to criminal consequences.

Oberheiden, P.C. is an experienced team of federal law defense attorneys — including lawyers who used to work for the other side. Our former federal prosecutors bring invaluable insight and skill to the table, leveraging our experience for your benefit from Day One.

Our mission is to protect your DEA registration, professional licenses, your good name, your freedom, and your career. Let us step in and protect you from the moment a DEA audit or investigation begins. Contact our office today.

Aren’t DEA Audits Routine? Do I Need to Worry?

The DEA does perform routine inspections and audits as part of its normal course of operations — just like the IRS and many other federal agencies do. In fact, DEA inspections tend to occur every three years or so.

But just as with the IRS, a routine audit can lead to real problems or concerns even when no one has done anything wrong. Sometimes, all it takes is a paperwork error, a misfiling, an innocent mistake, an accidental misstatement, or any of the other kinds of human errors that lead to overblown outcomes every day.

While it’s best to proceed in a rational, clear-headed, and calm fashion, you shouldn’t approach a DEA audit casually. When mistakes are made the outcomes are potentially devastating, and could even result in criminal prosecution if there’s any suspicion of a Controlled Substances Act (CSA) violation. And as with many labyrinthine acts of federal legislation, the CSA is thorny and easier to violate than you might think.

The DEA has incredible authority and won’t hesitate to use it against you or your practice. Protect yourself. Stay ahead of DEA suspicion. Get sound legal advice that you can count on at each step along the way.

Does the DEA Need a Warrant for Inspections?

If the DEA is working with other law enforcement agencies as part of a criminal investigation that involves you or your practice, they will need a formal criminal search warrant to inspect your offices or clinic.

However, not all DEA actions are criminal proceedings so the agency doesn’t always have to act with a criminal search warrant. Even though violations of the CSA can ultimately result in criminal prosecution, the DEA does not need to get a warrant to conduct an inspection to determine CSA compliance, provided the DEA is working alone.

So the bottom line is, if they are working alone the DEA can proceed without a warrant. This fact often comes as surprise to hardworking healthcare professionals who suddenly find themselves under the spotlight.

In lieu of a warrant, the DEA will file a Form 82 (Notice of Inspection of Controlled Premises) — or, in some cases, an “administrative inspection warrant” under the DEA Diversion Control Division — and that is sufficient for initiating many DEA audits and inspections.

Do Healthcare Providers Have to Cooperate with DEA Audits and Inspections?

This depends on the nature of the investigation. If the DEA is acting alone and conducting the audit or inspection without a warrant, then the agency will need your informed written consent to proceed.

Among other things, your informed written consent stipulates that:

  • You have a constitutional right not to have the administrative inspection.
  • You have been informed of this constitutional right.
  • Any incriminating information discovered during the inspection can be used against you.
  • You have given voluntary consent to the search, audit, or inspection.

In these cases, you can decline to consent to the inspection. If you do refuse consent, the agency will have to secure either an administrative inspection warrant (which does not require probable cause and is therefore fairly easy for the DEA to get) or a formal criminal search warrant (which does require probable cause) from a federal court.

If they have either warrant in hand, the DEA can proceed without your informed consent, and refusal to cooperate could result in your arrest. (In either case, however, the search is limited to the scope specifically authorized by the warrant. Generally speaking, an administrative warrant will have a more limited scope than a criminal search warrant.)

An experienced DEA defense attorney can help you decide whether it’s a good idea to give informed consent in your situation, and can also create a sound strategy for responding either way.

Contact Oberheiden, P.C. online today.

A Glimpse at Our Track Record

  • Representation of Pharmacy in DEA InvestigationResult: No civil or criminal liability; license maintained.
  • Representation of Pharmacy in DEA InvestigationResult: No civil or criminal liability; license maintained.
  • Representation of Physician in DEA InvestigationResult: No civil or criminal liability; license maintained.
  • Representation of Physician in DEA InvestigationResult: No civil or criminal liability; license maintained.

Have You Been Notified of DEA Audits? Schedule a Free DEA Audit Consulting with Oberheiden, P.C. Today

If you are undergoing a DEA audit or inspection (or believe you may be subjected to a DEA inspection soon), we invite you to contact Oberheiden, P.C. if you need DEA audit consulting today. We offer a free consultation.

Our federal defense attorneys are available seven days a week, even on weekends, to talk about how we might be able to help with your case. Our services are available for federal law cases across the nation; Oberheiden, P.C. represents clients facing DEA investigations across the country.

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