United States v. Ridley's Family Mkts., Inc.

UNITED STATES OF AMERICA, Plaintiff, v. RIDLEY'S FAMILY MARKETS, INC., Defendant.

Case No. 1:20-CV-173-TS-JCB

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH NORTHERN DIVISION

June 7, 2021

MEMORANDUM DECISION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS PLAINTIFF'S FIRST AMENDED COMPLAINT

District Judge Ted Stewart

In this case, the United States seeks civil penalties and injunctive relief against Defendant Ridley's Family Markets, Inc. ("Ridley's") for alleged violations of the Controlled Substances Act (the "CSA"). Now before the Court is Ridley's Motion to Dismiss Plaintiff's First Amended Complaint (the "Motion"). The Court will grant the Motion in part and deny it in part.

I. BACKGROUND

Unless otherwise noted, the following facts are alleged in the United States' Amended Complaint for Civil Penalties and Injunctive Relief (the "Complaint").¹ Ridley's owns and operates grocery stores and pharmacies in various states, including a pharmacy inside one of its grocery stores in Morgan, Utah (the "Morgan Pharmacy"). According to the United States, the Morgan Pharmacy filled 160 invalid prescriptions for 16,270 pills for two individuals who weremarried to each other. These prescriptions were for carisoprodol, hydrocodone, and oxycodone, which are all controlled substances under the CSA.

The United States alleges that these prescriptions contained several red flags suggesting they might be invalid and that Ridley's pharmacists filled the prescriptions without resolving the red flags. The red flags included cash payments, prescriptions outside the prescriber's normal scope of practice, prescriptions for high doses and long durations, family members living together with similar prescriptions, prescriptions for multiple drugs for the same purpose, "pattern prescribing," early refills, dangerous drug combinations, individuals who authorized their own or their family member's prescriptions, uncommon drug therapies, and facial errors such as misspellings and stamped or forged signatures. Allegedly, Ridley's pharmacists and employees did not fully complete Ridley's Controlled Substance Dispensing Checklist, which identifies some of these red flags. The United States also alleges the pharmacists took no steps to resolve the red flags before filling the prescriptions. The United States complains that this failure violated 21 U.S.C. § 842(a)(1) and § 829 and 21 C.F.R. § 1306.04 and § 1306.06. Thus, the United States seeks civil penalties and injunctive relief.

Ridley's brought this Motion, arguing the Court should dismiss the Complaint in its entirety under Rule 12(b)(6).² The United States submitted a memorandum in opposition on March 5, 2021,³ and Ridley's submitted a reply in support on April 5, 2021.⁴ In addition, the National Association of Chain Drug Stores (the "NACDS") submitted a brief as amicus curiae in support of Ridley's Motion on April 14, 2021,⁵ and the United States submitted a response tothat brief on April 29, 2021.⁶ The Court also heard oral argument on the Motion on June 1, 2021. Thus, the Motion is ready for resolution.

II. STANDARD OF REVIEW

Under Rule 12(b)(6), a court may dismiss a complaint when it fails to state a claim upon which relief can be granted. "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. A claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged."⁷ Legal conclusions alone are not sufficient; "they must be supported by factual allegations."⁸ However, Rule 8 does not require detailed factual allegations.⁹ When reviewing a motion to dismiss, a court must assume all the facts alleged in the complaint are true¹⁰ and view them in the light most favorable to the plaintiff.¹¹ The court must also limit its review to the four corners of the complaint and documents incorporated in the complaint by reference.¹²

III. DISCUSSION

The United States alleges Ridley's violated the CSA, specifically 21 U.S.C. § 842(a)(1) and § 829, and its implementing regulations, 21 C.F.R. § 1306.04 and § 1306.06. In 21 U.S.C. § 842(a)(1), the CSA prohibits pharmacies from distributing controlled substances in violation of21 U.S.C. § 829. In turn, § 829 permits pharmacists to dispense certain controlled substances only with a valid prescription. Regulations in 21 C.F.R. §§ 1306.01-1306.27 articulate the specific rules for issuing and filling prescriptions under § 829. Relevant to this case,

A prescription for a controlled substance to be effective must be issued for a legitimate medical purpose by an individual practitioner acting in the usual course of his professional practice. The responsibility for the proper prescribing and dispensing of controlled substances is upon the prescribing practitioner, but a corresponding responsibility rests with the pharmacist who fills the prescription. An order purporting to be a prescription issued not in the usual course of professional treatment or in legitimate and authorized research is not a prescription within the meaning and intent of section 309 of the Act (21 U.S.C. 829) and the person knowingly filling such a purported prescription, as well as the person issuing it, shall be subject to the penalties provided for violations of the provisions of law relating to controlled substances.¹³

And "[a] prescription for a controlled substance may only be filled by a pharmacist, acting in the usual course of his professional practice."¹⁴ Ridley's argues that the United States did not sufficiently allege Ridley's violated 21 C.F.R. § 1306.04(a) or § 1306.06.

A. 21 C.F.R. § 1306.04(a)

Ridley's contends the United States failed to state a claim under 21 C.F.R. § 1306.04(a) because (1) it failed to adequately allege knowledge and (2) pharmacists are required to fill all facially valid prescriptions.

1. Knowledge

Ridley's argues the United States failed to adequately allege knowledge because a failure to resolve red flags does not show the pharmacist knew a prescription was invalid. On the contrary, it is well settled that a knowledge requirement can be satisfied by a showing of willfulblindness or deliberate ignorance.¹⁵ "[A] willfully blind [person] is one who takes deliberate actions to avoid confirming a high probability of wrongdoing and who can almost be said to have actually known the critical facts."¹⁶ Willful blindness can be shown through circumstantial evidence such as the existence of and failure to investigate red flags.¹⁷ In addition, courts, including the Tenth Circuit, and the Drug Enforcement Administration have held that pharmacists and pharmacies violated 21 C.F.R. § 1306.04(a) and the CSA when they failed to investigate red flags connected with prescriptions.¹⁸ Here, the United States describes numerous red flags Ridley's pharmacists encountered and alleges that they failed to investigate these redflags before filling the related prescriptions.¹⁹ These facts sufficiently allege a plausible claim that Ridley's pharmacists knew of the prescriptions' invalidity through willful blindness.

Ridley's also argues the Complaint must identify a specific pharmacist who filled a prescription that he or she knew was illegitimate to satisfy the knowledge requirement. "When considering whether a pharmacy has violated its corresponding responsibility, [a court] considers whether the entity, not the pharmacist, can be charged with the requisite knowledge."²⁰ "Knowledge obtained by the pharmacists and other employees acting within the scope of their employment may be imputed to the pharmacy itself."²¹ The Complaint meets this requirement by alleging Ridley's pharmacists and employees filled red flag prescriptions without investigating the prescriptions' legitimacy.²² Certainly, the Complaint would be stronger if it identified a specific pharmacist who ignored specific red flags connected with a specific prescription. However, the liberal pleading standards do not require the United States to identify specific pharmacists or specific prescriptions to state a plausible claim.²³

Ridley's also argues that a collective knowledge theory—that is, pieces of knowledge that are evaluated cumulatively rather than on the basis of what any individual knows—is not sufficient to establish Ridley's liability. But the Complaint does not purport to rely on acollective knowledge theory. Rather, the Complaint alleges that individual Ridley's pharmacists who received, reviewed, and filled the prescriptions at issue knew about and failed to investigate the associated red flags, constituting willful blindness. This individual knowledge may be imputed to the pharmacy without invoking collective knowledge. Thus, the United States has plausibly alleged that Ridley's, through its employees, had knowledge of the illegitimacy of the prescriptions through willful blindness.

2. Facial Validity

Ridley's argues it cannot be liable because pharmacists are required to fill prescriptions that meet all of the facial requirements listed in 21 C.F.R. § 1306.05. This assertion is not supported by any statutes or regulations. Rather, 21 C.F.R. § 1306.04(a) explicitly prohibits pharmacists from filling prescriptions they know are not legitimate regardless of the prescriptions' facial validity. And even if pharmacists have to fill all facially valid prescriptions, the Complaint alleges some of the prescriptions were facially invalid. For example, the United States alleges some of the prescriptions had stamped signatures or "signatures that obviously appear forged, altered, or traced over."²⁴ At this stage, the Court must take these allegations as true, and Ridley's would certainly agree its pharmacists should not have filled facially invalid prescriptions without further investigation. Thus, this argument does not support dismissal.

For these reasons, the Court will deny...