vs. ) Case No. 08-5089
Respondent. )
Robert E. Meale, Administrative Law Judge of the Division of Administrative Hearings, conducted the final hearing in Miami, Florida, on December 9, 2008.
For Petitioner: Alexander Valdes, Qualified Representative 14052 Southwest 80th Street
For Respondent: Gary L. Asbell, Esquire
The issue is whether Petitioner is entitled to a permit as a prescription drug wholesale distributor.
On August 30, 2007, Respondent received an application from Petitioner for a permit as a prescription drug wholesaler. By
letter dated September 8, 2008, Respondent advised Petitioner that it intended to deny the application.
At the hearing, Petitioner called two witnesses and offered into evidence two exhibits: Petitioner Exhibits 1 and 2.
Respondent called four witnesses and offered into evidence four exhibits: Respondent Exhibits 1-4. All exhibits were admitted. The Administrative Law Judge gave both sides leave to file,
post-hearing, three exhibits: Petitioner Exhibits 1 and 2 and Respondent Exhibit 1. The parties timely filed these exhibits.
The court reporter filed the Transcript on December 22, 2008. Respondent filed its Proposed Recommended Order on January 5, 2009. Petitioner did not file a proposed recommended
order.
On August 29, 2007, Petitioner filed with Respondent an application for a permit as a prescription drug wholesaler establishment (Application). Pursuant to a change in the law effective July 1, 2008, this permit is now for a prescription drug wholesale distributor.
The Application lists Boris Rios as the sole owner of Petitioner and its president and manager. The Application lists Alexander Valdes as the next highest-ranking employee with a title of certified designated representative (CDR).
The Application requires Petitioner to list all persons who meet the following descriptions of affiliates: a) "a director, officer, trustee, partner, or committee member of a permittee or applicant or a subsidiary or service corporation of the permittee or applicant"; b) "a person who, directly or indirectly, manages, controls, or oversees the operation of a permittee or applicant, regardless of whether such person is a partner, shareholder, manager, member, officer, director, independent contractor, or employee of the permittee or applicant"; c) "a person who has filed or is required to file a personal information statement pursuant to s. 499.012(4), F.S., or is required to be identified in an application for a permit or to renew a permit pursuant to s. 499.012(3), F.S."; d) "the five largest natural shareholders who own at least 5 percent of the permittee or applicant . . ."; and e) "shareholder[s] owning 5% or more of the applicant."
In response to this item, the Application states that Mr. Rios meets the criteria set forth in paragraphs a) through e), and Mr. Valdes meets the criteria set forth in paragraph b).
Attached to the Application are Personal Information Statements for Mr. Rios and Mr. Valdes. Mr. Rios's Personal Information Statement discloses his employment, from July 2003 to July 2007, as a "sales mgr" with Worldwide Medical Supplies and Pharmaceuticals, Inc. (Worldwide). His statement includes a
resume that states he was a "sales executive" for Worldwide from July 2003 to February 2004, a "purchasing/deliver[ies] manager" for Worldwide from February 2004 to May 2005, and a "sales manager" for Worldwide from May 2005 to July 2007. As sales manager, Mr. Rios stated that he "[o]ver looked all sales transactions for all sales reps (7 man sales force). Buy establishing sales strategies and product promotions to help increase our sales and profit margins. And keeping sales force motivated and inspired by creating incentives to reach goals."
Mr. Rios's attached resume shows that he had been a sales manager for another pharmaceutical manufacturer from January 2001 to July 2003. Mr. Rios's statement also answers in the negative a question asking whether he, "or a company for which you were an owner, officer, director, or manager, has been fined or disciplined by a regulatory agency in any state (including Florida) for any offense that would constitute a violation of Chapter 499, Florida Statutes?" However, his statement answers in the affirmative a question asking whether he, "or a company for which you were an owner, officer, director, or manager, ever held a permit issued under Chapter 499, Florida Statutes, in a different name than [Petitioner's name]?"
However, on a mostly blank page entitled, Additional Information," Mr. Rios handwrote that he was employed by
Worldwide from July 2003 to July 2007 as the sales manager of seven salespersons from May 2005 to July 2007, as the purchasing manager from February 2004 to May 2005, and as a sales representative from July 2003 to February 2004.
Mr. Valdes's Personal Information Statement discloses his employment with Worldwide from 2003 to present as a "sales mgr" and "D Rep," meaning certified designated representative. Inserted in the Application is a letter dated May 30, 2008, from Mr. Valdes to Rebecca Burnett, an employee of Respondent, stating that he was "hereby submit[ting] my resignation from Worldwide . . . effective May 30, 2008 "
Mr. Valdes's Personal Information Statement contains a long typewritten statement that says he was employed at Worldwide since 2003 in "various positions," starting as a sales person, then a sales manager, and finally a CDR, following his preparing for and passing the certification test. At about the same time, a newer Worldwide employee, Rick Nielsen, also took the CDR test, passed, and became a CDR for Worldwide, working a different shift from Mr. Valdes. Mr. Valdes stated that he often ordered Worldwide not to accept or to return a product due to product-safety issues, and he helped state inspectors in their investigations concerning these matters. However, on the Personal Information Statement itself, Mr. Valdes answered in the negative a question whether he or any company for which he
had been a manager had been fined or disciplined by a regulatory agency.
By letter dated September 8, 2008 (Denial Letter), Respondent advised Petitioner of its intent to deny the application. Among the reasons cited for denial are that Petitioner listed Mr. Valdes as its CDR. The Denial Letter states that, in Final Order Number 08-1216, Respondent found
37 violations of the Florida Drug and Cosmetic Act, Chapter 499, Florida Statutes, and revoked the permit of Worldwide Medical Supplies and Pharmaceuticals, Inc. (Worldwide), to operate as a prescription drug wholesale distributor. According to the Denial Letter, Mr. Valdes was Worldwide's CDR from August 2005 to May 2008 and sales manager from April 2003 to May 2008; he is also the son of the president and owner of Worldwide, Miriam Gonzalez. The Denial Letter states that Mr. Valdes was listed on the Application as a key employee of Worldwide and did not submit to Respondent his resignation as Worldwide's CDR until May 30, 2008.
The Denial Letter asserts that, on four occasions from July 18 to November 8, 2005, Mr. Valdes received and authenticated a pedigree that was not authenticated, so that Worldwide failed to keep the required records of prescription drug transactions. The Denial Letter states that, on six occasions between October 17 and 31, 2005, Mr. Valdes or another
Worldwide employee falsely represented under Mr. Valdes's signature that a pedigree had been presented to Worldwide and authenticated by Mr. Valdes, but Worldwide had not received the complete and accurate pedigrees and had not maintained them.
The Denial Letter states that receipt of the drugs without a complete or accurate pedigree caused the drugs to be deemed adulterated.
The Denial Letter states that, on August 16 and September 23, 2004; and September 25, October 16, and
October 27, 2006, Worldwide purchased a prescription drug from an unlicensed manufacturer or wholesaler. The letter states that this activity constituted the purchase of contraband in commerce and was detrimental to the public health.
The Denial Letter asserts that Mr. Rios was an affiliated party of Worldwide at all material times. The Denial Letter states that Mr. Rios owns Petitioner and provides financial support and assistance to Petitioner, so he is an affiliate of Petitioner.
The Denial Letter states that Respondent found that Petitioner was not entitled to licensure under Section 499.012(4)(d)9, Florida Statutes. The Denial Letter states that, pursuant to Section 499.012(10)(b), Florida Statutes, Respondent may deny an application if it finds that the
managers, officers, or directors of the applicant or an affiliate of the applicant are incompetent or untrustworthy.
Based on the facts set forth above, Respondent finds Mr. Valdes, an affiliate, incompetent or untrustworthy. The Denial Letter states that, pursuant to Section 499.012(10)(g), Florida Statutes, Respondent may deny an application if it finds that the applicant is affiliated, directly or indirectly through ownership, control or other business relations, with any person or persons whose business operations are or have been detrimental to the public health. Based on the facts set forth above, Respondent finds Mr. Valdes is an affiliate whose prior business operations are or have been detrimental to the public health
The Denial Letter states that, pursuant to Section 499.012(10)(r), Florida Statutes, Respondent may deny an application if it finds that the applicant or any affiliate has failed to comply with the requirements for manufacturing or distributing prescription drugs under Chapter 499, Florida Statutes. The Denial Letter asserts that Section 499.003(3), Florida Statutes, defines an affiliate to be a person who has filed or is required to file a personal information statement or a person who, directly or indirectly, manages, controls, or oversees the operation of a permittee or applicant, regardless whether such person is a partner, shareholder, manager, member,
officer, director, independent contractor, or employee of the permittee or applicant.
The Denial Letter states that Respondent finds that Mr. Valdes, while employed at Worldwide, failed to comply with the laws related to the distribution of prescription drugs while having a duty to be actively involved in and aware of the actual daily operation of the company. The Denial Letter states that Mr. Valdes had a duty to be actively involved in and aware of the actual daily operations of the company. The Denial Letter states that, while Mr. Valdes was CDR for Worldwide, the company purchased prescription drugs from an unauthorized source, in violation of Section 499.005(16), Florida Statutes; failed to maintain records of prescription drug distributions as required by Florida Administrative Code Rule 64F-12.012(6) and (10), in violation of Section 499.005(18), Florida Statutes; accepted or maintained incomplete or nonexistent pedigrees and sold drugs to unlicensed persons, thus violating the adulterated-drug provisions of Section 499.005(1), (2), and (4), Florida Statutes.
The Denial Letter states that, pursuant to Section 499.012(10)(m), Florida Statutes, Respondent may deny an application if the applicant or affiliate receives, directly or indirectly, financial support and assistance from a person who was an affiliate of a permittee whose permit was subject to
discipline or suspended or revoked. The Denial Letter states that Petitioner receives financial support and assistance from Mr. Rios, who was an affiliate of Worldwide and is an affiliate of Petitioner.
The Denial Letter states that, at all material times, Worldwide engaged in business operations that were detrimental to the public health by purchasing adulterated prescription drugs and by adulterating prescription drugs.
Worldwide filed a renewal application on May 17, 2007, for a renewal term from July 1, 2007, to June 30, 2008. The renewal application lists Ms. Gonzalez as the company's sole shareholder and manager. The only persons listed among the next four highest-ranking employees are Mr. Valdes, who is listed as the CDR and "Longistic [sic] Manager" and Mr. Rios, who is listed as "Purch/Sales Director." Each man is reported as "a person who, directly or indirectly, manages, controls, or oversees the operation of a permittee "
Sometime in 2007, Respondent commenced a disciplinary proceeding against Worldwide. In its Second Amended Administrative Complaint dated August 24, 2007, Respondent alleged that Worldwide violated Sections 499.001 through 499.081, Florida Statutes, based on documents that it had prepared during 2004-06. A formal hearing took place on February 11 and 12, 2008, and Administrative Law Judge Patricia
M. Hart entered a Recommended Order on May 1, 2008, which was adopted in its entirety by Final Order entered October 12, 2008 (FO). The Final Order finds Worldwide guilty of 37 violations of Chapter 499, Florida Statutes, imposes administrative fines of $185,000, and revokes Worldwide's permit as a Prescription Drug Wholesaler. The Final Order (FO) was never appealed.
The FO finds multiple acts and omissions attributable to Worldwide in the handling of prescription drugs shipped to it or, in some cases, purchased by it. Concerning incomplete and thus fraudulent authentications of pedigree papers, these acts and omissions ranged from February to April, June to September, and December 2004; and April to November 2005. Only seven of these violations occurred in 2004; the rest were in 2005. Concerning purchases from unlawful persons, of which there were a dozen, these acts and omissions took place in August 2004, December 2004, June 2005 (two), April 2006, September 2006 (two purchases from Kuehne & Nagel) October 2006 (four purchases from Kuehne & Nagel), and March 2007.
Mr. Valdes is named in connection with six of the unlawful transactions. For October 2005 (except for one transaction in November 2005, as indicated), the FO found a pedigree paper bearing a "stamp" showing receipt and authentication by Mr. Valdes of 35 6GM vials of Carimune was incomplete and thus "false," a pedigree paper bearing a "stamp"
showing receipt and authentication by Mr. Valdes of seven 10ML units of Baygam as incomplete and thus "false," a pedigree paper bearing a "stamp" showing receipt and authentication by
Mr. Valdes of 15 12GM vials of Carimune as incomplete and thus "false," a pedigree paper bearing a "stamp" showing receipt and authentication by Mr. Valdes of 100 2ML units of Baygam was incomplete and thus "false," a pedigree paper bearing a "stamp" showing receipt and authentication by Mr. Valdes of 100 units of Gammar P as incomplete and thus "false" (November 2005), and one pedigree paper bearing a "stamp" showing receipt and authentication by Mr. Valdes of one 2ML unit of Baygam SDV and three 10CP units of Tamiflu 75MG was incomplete and thus "fraudulent."
In his responses to requests for admission in this case, Mr. Valdes admits that he received and authenticated the pedigree paper, on October 10, 2005, for Carimune; the pedigree paper, on October 18, 2005, for Baygam; the pedigree paper, on July 18, 2005, for Baygam; and the pedigree paper, on
November 8, 2005, for Gammar P.
Worldwide never employed many employees, perhaps never more than 8-10. Ms. Gonzalez owned the company, but reduced her interest to 51 percent from February 2004 to December 31, 2006, during which period Mr. Nielsen owned 49 percent. However,
Mr. Nielsen terminated his employment with Worldwide on
December 31, 2006, and evidently relinquished his interest in the company at that time.
Upon initial employment, Mr. Nielsen occupied a position in which he supervised the purchasing manager,
Mr. Rios, who, even though called a manager, supervised no one. At that time, Mr. Rios was lower-ranking than Ms. Gonzalez,
Mr. Nielsen, Mr. Valdes, and possibly another employee. At some point, Mr. Nielsen was designated a CDR for Worldwide, and he remained a CDR for Worldwide until he left employment with the company. Prior to that, Mr. Gonzalez had served as the CDR for Worldwide.
Mr. Valdes also served as a CDR for Worldwide. Based on his responses to requests for admission, Mr. Valdes started as CDR for Worldwide in August 2005, so he and Mr. Nielsen were both CDRs for Worldwide at the same time. Mr. Valdes served until the end of July or early August 2006, when, dissatisfied with his employment situation, he terminated his employment. Mr. Valdes did not return until early January 2007 when his mother needed him to serve as CDR again because Mr. Nielsen had
left, and no one remaining with Worldwide could pass the test to become a CDR.
Mr. Valdes produced testimonials from various persons, such as a former drug agent supervisor of Respondent and current
investigators of Medicaid fraud, who commend him for assisting in combating fraud in the wholesale pharmaceutical industry.
However, at the hearing, Mr. Valdes never explained how he was not at fault or responsible for the violations in which the paperwork bore his stamp or other violations taking place, particularly while he was CDR. Mr. Valdes was sales manager during the 2004 violations and a CDR during all of the bad-pedigree transactions from August to December 2005, as well as one bad-purchase transaction in April 2006. He had sizable responsibilities during a timeframe that many violations were taking place at Worldwide, and, despite the three commendations and candid demeanor at the hearing, does not appear to have done a good job discharging these important duties.
As confirmed by Ms. Gonzalez, Mr. Rios was the sales manager from May 2005 to July 2007, and he had supervisory authority over a sales staff that, at most, numbered seven persons. Mr. Rios could hire and fire salespersons, but he had no contact with the prescription drugs. From February 2004 to May 2005, Mr. Rios was purchasing manager, but worked under the supervision of Mr. Nielsen and lacked any managerial duties.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the subject matter. §§ 120.569 and 120.57(1), Fla. Stat. (2008).
Petitioner bears the burden of proving entitlement to the permit. Department of Transportation v. J. W. C. Company, Inc., 396 So. 2d 778 (Fla. 1st DCA 1981).
Section 499.01(d), Florida Statutes, requires a permit before an entity operates as a "prescription drug wholesale distributor."
Section 499.012(10), Florida Statutes, provides, in relevant part:
The department may deny an application for a permit or refuse to renew a permit for a prescription drug wholesale distributor or an out-of-state prescription drug wholesale distributor if:
* * *
(b) The management, officers, or directors of the applicant or any affiliated party are found by the department to be incompetent or untrustworthy.
* * *
(g) The applicant is affiliated directly or indirectly through ownership, control, or other business relations, with any person or persons whose business operations are or have been detrimental to the public health.
* * *
(m) The applicant or any affiliated party receives, directly or indirectly, financial support and assistance from a person who was an affiliated party of a permittee whose permit was subject to discipline or was suspended or revoked, other than through the ownership of stock in a publicly traded company or a mutual fund.
* * *
(r) The applicant or any affiliated party has failed to comply with the requirements for manufacturing or distributing prescription drugs under this part, similar federal laws, similar laws in other states, or the rules adopted under such laws.
Section 499.003(3), Florida Statutes, provides, in relevant part:
"Affiliated party" means:
A director, officer, trustee, partner, or committee member of a permittee or applicant or a subsidiary or service corporation of the permittee or applicant;
A person who, directly or indirectly, manages, controls, or oversees the operation of a permittee or applicant, regardless of whether such person is a partner, shareholder, manager, member, officer, director, independent contractor, or employee of the permittee or applicant;
A person who has filed or is required to file a personal information statement pursuant to s. 499.012(9) or is required to be identified in an application for a permit or to renew a permit pursuant to
s. 499.012(8); or
The five largest natural shareholders that own at least 5 percent of the permittee or applicant.
Section 499.012(8), Florida Statutes, describes who is required to file a personal information statement:
An application for a permit or to renew a permit for a prescription drug wholesale distributor or an out-of-state prescription drug wholesale distributor submitted to the department must include:
* * *
The name of the manager of the establishment that is applying for the permit or to renew the permit, the next four highest ranking employees responsible for prescription drug wholesale operations for the establishment, and the name of all affiliated parties for the establishment, together with the personal information statement and fingerprints required pursuant to subsection (9) for each of such persons.
The name of each of the applicant's designated representatives as required by subsection (16), together with the personal information statement and fingerprints required pursuant to subsection (9) for each such person.
For an applicant that is a secondary wholesale distributor, each of the following:
A personal background information statement containing the background information and fingerprints required pursuant to subsection (9) for each person named in the applicant's response to paragraphs (k) and (l) and for each affiliated party of the applicant.
* * *
Mr. Valdes and Mr. Rios do not contest that they are affiliates of Petitioner. Mr. Rios is the owner and president, and Mr. Valdes is the CDR. As such, they meet multiple elements of the definition of affiliates.
The question in this case is whether they are also affiliates of Worldwide, such that the wrongful acts and omissions of that company will be attributed to them.
For Mr. Valdes, the answer is straightforward. He was a CDR when many of the improper-pedigree transactions took
place, not just the ones involving him directly. The evidence is clear that Mr. Valdes is an affiliate.
Section 499.012(16), Florida Statutes, describes the role of a CDR. Section 499.012(16)(b)5, Florida Statutes, requires that a CDR: "[p]rovide the department with a personal information statement and fingerprints pursuant to subsection (9)." Section 499.012(16)(d), Florida Statutes, requires of a CDR that he:
Must be actively involved in and aware of the actual daily operation of the wholesale distributor.
Must be employed full time in a managerial position by the wholesale distributor.
Must be physically present at the establishment during normal business hours, except for time periods when absent due to illness, family illness or death, scheduled vacation, or other authorized absence.
May serve as a designated representative for only one wholesale distributor at any one time.
Section 499.012(16)(d), Florida Statutes, leaves no doubt that a CDR is a manager, who must be actively involved and aware of the actual daily operation and must be physically present during normal business hours. Mr. Valdes was thus an affiliate of Worldwide under Section 499.012(8)(k), Florida Statutes, at all times that he was a CDR of Worldwide. Although Respondent has discretion in its licensing decision, it is too soon to allow Mr. Valdes to resume CDR responsibilities without
first demonstrating that he has acquired a greater understanding of these responsibilities and a greater commitment to discharging them in a timely and effective fashion.
Clearly, no evidence establishes that Mr. Rios was incompetent or untrustworthy in his service to Worldwide or that he poses a public health risk. The question is closer, though, as to whether he was nonetheless an affiliate of Worldwide, at least while the violations were taking place.
At this point, it is important to note that, although Petitioner has the ultimate burden of proof, Respondent has the burden of proving the reasons for denial. See, e.g., Department of Banking and Finance v. Osborne Stern and Company, 670 So. 2d 932, 934 (Fla. 1996); M.H. v. Department of Children and Family Services, 977 So. 2d 755, 762-63 (Fla. 2d DCA 2008). While Respondent has met this burden as to Mr. Valdes, it has not as to Mr. Rios, even as to the closer question about whether he is an affiliate of Worldwide.
During the violations, Mr. Rios did not have any management authority as a purchasing manager, as he had no one to manage and was directly supervised by Mr. Nielsen, a co-owner of Worldwide. While Mr. Rios was purchasing manager, only two unlawful purchases took place, so it is not like he was watching idly as Mr. Nielsen engaged in a pattern of wrongful purchases.
While Mr. Rios was sales manager, a large number of the improper-pedigree transactions took place, as did a large number of the unlawful-purchase transactions. On the one hand, Mr. Rios's name was never stamped as the person falsely authenticating a pedigree, but, on the other hand, there were few employees in the company. Although the mid-2007 renewal application of Worldwide suggests that Mr. Rios had significant managerial authority at that time, this was over one year after the last proved violation.
Respondent did not introduce the renewal application for 2005-06 or 2006-07. Nearly all of the violations took place from mid-2005 to the end of 2006 when Mr. Nielsen left the company. During this timeframe, Mr. Rios was not a person required to file a personal information statement because he was neither a CDR nor an overall manager.
Nor has Respondent proved that Mr. Rios was one of the four highest-ranking employees. It appears that he was not. When Mr. Valdes joined Worldwide, Veronica Boyette, who later may have married Mr. Nielsen, was the supervisor of the sales force. Nothing suggests that she ever lost the managerial authority that went with her seniority. And she remained with the company until after Mr. Nielsen left, as Ms. Boyette was among those who tried, and failed, to pass the CDR test before Mr. Valdes returned in early 2007. Ms. Boyette, not Mr. Rios,
was the fourth highest-ranking employee of Worldwide during the violations of 2004-06. Although Mr. Rios later became one of the four highest-ranking employees of Worldwide, it was not while Worldwide was engaged in violations of the law.
The ultimate question as to Mr. Rios is whether, during 2004-06, while the violations were taking place, Respondent has proved that he "directly or indirectly, manage[d], control[ed], or overs[aw] the operation" of Worldwide. Again, after Mr. Nielsen's departure, Mr. Rios became such a person, but the violations ended at the time of Mr. Nielsen's departure, a couple of months after he had prescription drugs shipped directly to his home.
The improper-pedigree transactions, which were the majority of the violations, nearly all took place after Mr. Rios had become a sales manager, although they bore the stamps of three employees, of whom Mr. Rios was not one. In fact,
Mr. Rios's name never appears in the FO. In the final analysis, while Mr. Rios had some supervisory authority in sales during the period of the violations, Respondent has failed to prove that he had any authority over the operation of Worldwide.
Because the violations did not involve the sales staff, the statutory definition of affiliate contained in Section 499.003(3)(b), Florida Statutes, cannot be extended to Mr. Rios.
RECOMMENDED that the Department of Health enter a final order denying the application for a permit as a prescription drug wholesale distributor until Mr. Rios substitutes a qualified CDR for Mr. Valdes--a condition that the Department of Health should allow Mr. Valdes a reasonable time to satisfy. If Mr. Rios cannot submit the name of a qualified CDR within such time, the final order should provide for the denial of the application without prejudice to refiling at a later date with a qualified CDR.
DONE AND ENTERED this 9th day of March, 2009, in Tallahassee, Leon County, Florida.
ROBERT E. MEALE
Filed with the Clerk of the Division of Administrative Hearings this 9th day of March, 2009.
Gary L. Asbell, Esquire Department of Health
Rebecca Poston, R.Ph., Executive Director Drugs, Devices, and Cosmetics Program Department of Health
R. S. Power, Agency Clerk Department of Health
Josefina M. Tamayo, General Counsel Department of Health
15 days from the date of this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the Final Order in this case.
