Retail Inventory Services Settle for Employee Thefts from Pharmacies

When you have followed Drug Enforcement Administration (“DEA”)/Department of Justice (“DOJ”) civil settlements for as long as we have, you cannot help but think that you’ve seen it all.  Then something novel comes along.  Unlike virtually all DEA/DOJ civil settlements that we are aware of, the government recently announced a settlement not with a DEA registrant but with non-registered retail inventory service providers.  While no registrant is a party to the settlement, as the U.S. Attorney’s press release observes, it is a stark reminder that registrants are “ultimately responsible for supervising all personnel on the premises and preventing the diversion of controlled substances.”  The U.S. Attorney’s Office press release is here.  Company Pays $158,760 to Resolve Claims Related to Controlled Substance Thefts From Pharmacies During Inventory, U.S. Attorney’s Office, Northern District of New York (Sept. 29, 2022), at https://www.justice.gov/usao-ndny/pr/company-pays-158760-resolve-claims-related-controlled-substance-thefts-pharmacies.

Affiliated companies RGIS LLC (“RGIS”) and Retail Services WIS Corporation (“WIS”) provide inventory services to retail stores, including pharmacies, throughout the U.S.  The press release notes that the companies’ policies touted that “only handpicked, high-caliber, well-respected employees are assigned to pharmacy inventory teams[,]” those employees “are required to undergo a drug test and criminal background check” and the companies “maintain a ‘zero tolerance’ policy for theft.”  Id.  Yet even with those safeguards in place, RGIS and WIS employees were able to steal controlled substances from pharmacies they inventoried.  Id.  One RGIS employee stole Vicodin, a schedule II substance, while inventorying a pharmacy in Schenectady, New York, in July 2017.  That employee was terminated, rehired and “implicated in stealing narcotics” from three other New York pharmacies in 2020.  Id.  Not only was that employee caught diverting a schedule II opioid, they were given further opportunities to steal from pharmacies.  RGIS employees “were also implicated in stealing narcotics” from pharmacies in Kentucky, North Carolina and Louisiana and WIS employees “were implicated” in thefts from three Texas pharmacies.  Id.

RGIS and WIS agreed to pay $158,760 to resolve allegations “that they caused violations of the Controlled Substances Act.”  Id.  At first glance, $158,760 would appear to be some random sum the parties appear to have arrived at, but the maximum penalty assessed for each recordkeeping violation pursuant to 21 U.S.C. § 842(c)(1)(B)(i) between December 2021 and May 2022 was $15,876.  It would seem that the government and RGIS/WIS reached agreement that the employees were responsible for ten separate alleged thefts, or violations.  The settlement also requires the companies to enhance their background checks of employees who inventory pharmacies and to make the results available to their pharmacy-clients.  Id.

While neither the U.S. Attorney’s Office for the Northern District of New York nor DEA have announced related settlements with any affected pharmacies, it behooves all registrants to seriously consider whether to allow outside entities to inventory or conduct other activities requiring access to their controlled substances.  Pharmacies and every registrant must provide effective controls and procedures to guard against the theft and diversion of controlled substances.  21 C.F.R. § 1301.71.  The regulations prohibit registrants from employing anyone with access to controlled substances who has been convicted of a controlled substance-related felony or who has had a DEA application denied, a DEA registration revoked, or has surrendered a DEA registration “for cause” without a waiver to employ that person.  21 C.F.R. §§ 1301.76(a), 1307.03.  Should registrants engage an outside entity who will have access to their controlled substances, they must ensure to the extent possible that the entity has conducted adequate employee background checks of everyone entering the facility.  Once on-site, registrants should never leave any non-employee with access to controlled substances unaccompanied.

As the press release warns, registrants are ultimately responsible for the security of their controlled substances.