Let’s revisit one of the most prominent DEA cases decided by a federal court this year. I am talking about Neumann’s Pharmacy case coming from the Firth Circuit. Although the case is not brand new—it was issued in February of this year, and many firms have substantially covered it—I continue to receive questions about what the decision means and how it may be used in DEA administrative actions.
It remains unclear whether this case will mark the beginning of a broader shift toward pro-pharmacy decisions nationwide, or whether its effect will be more limited.
First, a brief background. I regularly work with pharmacies during DEA audits. DEA typically takes the position that a pharmacy, through its pharmacists, violates the Controlled Substances Act (“CSA”) when it fails to resolve red flags. DEA often maintains that position even when the prescriptions appear legitimate, but the pharmacist did not document conversations with prescribers or patients addressing the red flags—such as cash payments, long travel distances, or drug combinations. It is important to note that these red flags are largely creatures of state law, which becomes significant in the discussion of Neumann’s Pharmacy below.
The Neumann’s Pharmacy decision is significant because the court held that, to prove a violation of a pharmacist’s corresponding responsibility, DEA must show subjective knowledge that the prescriptions were invalid.
In that case, DEA revoked Neumann’s Pharmacy’s registration after the pharmacy filled opioid-benzodiazepine prescriptions for three patients and did not document how it resolved alleged red flags. Two patients paid cash, and another patient received therapeutic duplication involving multiple butalbital formulations. In addition, the pharmacy owner filled a prescription for herself that had been written by her father. During the hearing, the owner, who was also the pharmacist-in-charge, testified that she resolved the red flags through conversations with patients and/or their prescribers. However, she did not document those resolutions.
The court applied a strict textual interpretation and found that DEA had effectively substituted different rules while claiming to apply existing regulations. The Fifth Circuit relied on Flores-Figueroa v. United States for its grammatical analysis of the word “knowingly.” It also looked to the Harrison Act in defining the meaning of “course of professional practice,” which the court held requires good-faith practice, not compliance with state-law standards. Finally, the court held that DEA may not rewrite regulations through interpretation while presenting that interpretation as ordinary enforcement authority.
As the court explained: “The DEA unquestionably has broad authority to deregister pharmacies and substantial discretion to shape policy within statutory bounds. But it may not say it is applying existing regulations while quietly rewriting them in practice. Because the DEA’s decision rests on interpretations the governing texts will not bear,” the court vacated DEA’s decision to revoke the pharmacy’s registration.
According to the decision, a strict interpretation of 21 C.F.R. § 1306.04(a)—the regulation underlying corresponding responsibility violations—applies only when a pharmacy fills a prescription that was invalid when issued, or written outside the prescribing physician’s usual course of professional practice. In this case, DEA did not analyze whether the prescribing physician issued the prescriptions outside the usual course of professional practice. Instead, DEA focused exclusively on whether the pharmacy dispensed the prescriptions “outside the course of professional practice” for a pharmacy. The court held that this inquiry was irrelevant under the plain text of § 1306.04(a). By finding a violation without first determining that any prescription was invalid when issued, DEA misapplied the regulation.
Within the Fifth Circuit, this decision effectively limits DEA’s reliance on a “knows or has reason to know” standard when investigating alleged violations of § 1306.04(a). The court explained that the CSA regulates medical practice only to the extent it prevents physicians from using their prescription-writing authority as a means to engage in illicit drug dealing or trafficking.
Beyond that, the court noted, “the statute manifests no intent to regulate the practice of medicine generally.” Thus, if DEA moves into evaluating the medical necessity of prescriptions, it risks exceeding its statutory authority under the CSA. The court also recognized the concern that adopting DEA’s interpretation could convert what may be negligence under state law into a federal enforcement matter.
The decision may also have implications beyond DEA matters. When agencies interpret statutes or regulations in a way that expands their authority beyond the text, regulated parties may have stronger arguments to challenge that interpretation. More importantly for pharmacies, the case draws a meaningful distinction between poor practice and unlawful conduct.
Because many red flags originate in state-law standards, this decision—if followed by other courts—could affect how DEA frames future pharmacy cases. Time will tell. For now, pharmacies should continue documenting red-flag resolutions carefully, while also watching how courts and DEA apply Neumann’s Pharmacy going forward. If you have questions about how this decision may affect your pharmacy or a pending DEA matter, please contact us for guidance.
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