GAO Report Criticizes DEA Diversion Control Performance Measures But Fails to Address Several Issues of Concern

By John A. Gilbert, Jr., Karla L. Palmer & Larry K. Houck –

The Government Accountability Office (“GAO”) recently issued a report analyzing the Drug Enforcement Administration’s (“DEA’s”) efforts to combat the diversion of legal controlled substances and listed chemicals.  As the title suggests, “DEA has Enhanced Efforts to Combat Diversion, But Could Better Assess and Report Program Results,” the report is critical of DEA’s ability to measure and report its anti-diversion efforts.  The report also concludes that DEA has adequate internal controls to ensure the quality of its criminal and regulatory investigations.

However, the GAO report fails to address a number of concerns and growing tensions about DEA’s industry guidance or lack thereof, its timeliness in responding to various issues raised by the regulated industry, and DEA’s consistency in its enforcement efforts.   

The GAO conducted the performance audit of DEA from May 2010 through August 2011.  The report responds to two questions:  (1) How DEA manages its investigation efforts to address the growing and evolving nature of prescription drug diversion; and (2) how DEA helps ensure that policies and procedures are followed for investigations, and to what extent DEA determines the results of its efforts on the diversion problem.

With respect to the first matter considered (DEA’s management of its investigation efforts), GAO reports favorably on DEA’s increased criminal and regulatory investigative efforts.  GAO reviewed DEA policies and procedures, and interviewed DEA personnel and state board of pharmacy and medicine officials at five of DEA’s twenty-one field divisions (selected on case volume and geographic diversity).  GAO also interviewed members of ten DEA Tactical Diversion Squads (“TDSs”).  Lastly, GAO interviewed officials of associations representing pharmacies and distributors, as well as certain pharmacies and distributors “to obtain regulated industry’s perspective on how DEA carries out its regulatory responsibilities and interacts with industry.”

GAO notes at the outset of the report that DEA has significantly expanded its resources  to respond to the increased rate of diversion and increased registrant population.  In particular, DEA increased the number of TDSs from five to forty.  TDSs are collaborative teams of DEA diversion investigators and special agents, and state and local law enforcement personnel, whose mission is to “detect, investigate, and refer for prosecution violators of federal and state statutes pertaining to diversion.”  DEA has significantly expanded its investigative efforts through use of the TDSs: DEA increased the number of criminal diversion investigations by 21 percent (from 1,571 in FY 2009 to 1,904 in FY 2010).  DEA plans to add sixteen TDSs over the next two years.  DEA officials told GAO that use of the TDSs has freed up DEA resources previously used to conduct criminal and regulatory investigations, resulting in the number of regulatory investigations more than tripling from 1,173 in FY 2009 to 3,731 in FY 2010.  DEA also stated that it focuses its regulatory investigation efforts on the wholesale registrants, where DEA mostly conducts unannounced investigations.  DEA believes these registrants are the “sources of supply to criminal schemes such as rogue pharmacies and pill mills.”  

The GAO report asserts that, “[i]n addition to conducting regulatory investigations, DEA has also actively engaged registrants and their industry associations to help the registrants understand current trends in diversion and the regulatory obligations they must demonstrate they have fulfilled during regulatory investigations.”  The report states, as an example of such active engagement, that DEA provides information to regulated industry on DEA’s website as well as through conferences, policy letters and correspondence.  Interestingly, the DEA Office of Diversion Control headquarters organizational and contact page on the Internet “has been temporarily removed until further notice” for many months.  The DEA also cancelled an industry conference that was scheduled to occur this fall. 

In contrast to the responsiveness that GAO noted in the report, we remain concerned about DEA’s responsiveness to the concerns and issues raised by the regulated industry.  For example, for a number of years, the regulated industry has been frustrated by the unreasonable amount of time it takes for DEA to process and issue annual manufacturing and procurement quotas.  The lack of clarity and transparency in this process continues to cause severe financial and resource allocation problems for the regulated industry.  That said, the report discusses the targeted outreach efforts that DEA conducted beginning in 2005 to inform wholesale distributors of their regulatory responsibilities to identify, monitor and report suspicious orders of controlled substances, and to assist registrants in the preparation of a DEA investigation.  Nevertheless, we believe that the regulated industry remains quite concerned that DEA’s outreach efforts still fail to provide meaningful clarification to unduly vague regulations addressing a registrant’s suspicious order monitoring, customer due diligence, or reporting suspicious orders, among other issues. 

With respect DEA’s internal controls that help ensure the quality of investigations, GAO reports that DEA has in place internal control activities to ensure that diversion investigators and special agents are skilled enough to carry out their DEA responsibilities.  These activities include guidance and training through program policy and procedure manuals, and diversion investigation courses.  For example, the report notes, DEA provides a twelve-week basic training program and a one-week refresher program for diversion investigators.  However, our experience has been that there remains an inconsistency between DEA offices as to statutory and regulatory requirements, and we have observed a number of cases where DEA offices have provided conflicting advice on those requirements.  For example, we have been told that some DEA offices will advise registrants that List I chemical products are required to be kept in a DEA security cage.  While this may be good practice in certain cases, it is not required by either the CSA or its implementing regulations.  As another example, DEA offices have also provided inconsistent guidance on what constitutes a “significant loss” for reporting purposes pursuant to 21 C.F.R. § 1301.74(c).  Some DEA offices deem the loss of a single dosage unit to be “significant” and therefore reportable.  Other offices have chastised registrants for reporting such insignificant losses.

The report also states that DEA provides a one-week program on criminal diversion for special agents assigned to the Diversion Control Program.  Interestingly the GAO report does not question whether, based on this one week of training, special agents are actually competent to conduct investigations of DEA registrants, although it appears that special agents are increasingly involved in conducting or overseeing investigations of DEA registrants.  The report also notes that “Division management” reviews cases “being elevated for disciplinary action (civil or criminal)” but does not identify whether, by referring to “Division management,” it is referring to the current thirteen career diversion investigator Diversion Program Managers (“DPMs”) who took the twelve-week basic diversion control training course or the seven special agent DPMs who took the mere one-week training program on criminal diversion.

With respect to the second issue considered — GAO’s assessment of how DEA measures the results of its enforcement efforts — GAO sheds a decidedly negative view on DEA’s ability to measure and report on its diversion control efforts.  For example, GAO reported that, although DEA has the ability to track and report on criminal investigations, DEA does not adequately identify and report on its regulatory efforts.  Importantly, given DEA’s increased focus on regulatory and criminal investigations in response to the growing diversion problem in the United States, GAO states, “it is critical for DEA to determine and report on the extent to which these additional efforts are helping reduce diversion.”  While DEA has established five core ways to measure performance and assess outcomes, GAO found that DEA could enhance these measures to better capture and report investigative outcomes and their effect on diversion.  Better reporting would help DEA target its resources, and measure how well agency programs are achieving targeted goals.  In sum, GAO questioned how DEA targets its efforts, monitors and improves performance, or meets performance goals of decreasing diversion if DEA’s core performance matrices do not “clearly explain how they demonstrate progress towards … overall program goals of reducing diversion.” 

GAO recommends that DEA develop an “outcome measure” that directly demonstrates results of the diversion control program.  This would provide better information to DEA program managers and other decision makers including Congress.  The GAO similarly observes that, given that DEA more than tripled the number of regulatory investigations that it conducted between 2009 and 2010, it is important that DEA develop a way to assess and report on the increased number and type of regulatory investigations to determine what effect they are having on compliance and decreasing diversion.  It also notes that DEA management must track the results of its efforts.  For example, rather than individually reporting on the various types of potential sanctions (i.e., administrative recordkeeping, actual diversion, or criminal sanctions, to name a few) the agency currently tallies all administrative, civil and criminal sanctions together, making it difficult to determine whether the sanctions are a result of regulatory noncompliance issues or actual diversion.  The GAO notes that an increase in sanctions does not necessarily correlate with a decrease in diversion, or meeting other program targets, if one is not informed whether those sanctions are a result of criminal investigations or administrative investigations (which could actually indicate a rise in non-compliance among registrants).  

GAO concludes by stating that, whether DEA is making progress towards meeting its goals is unclear; DEA must track whether its efforts are having any impact on diversion so that it can determine what benefits are being realized and what, if any, adjustments need to be made to make programs more effective.  

The DEA disagrees with GAO’s findings and observations concerning the agency’s failure to measure and report on its enforcement efforts.  DEA asserts that further strengthening the current performance measures would not provide any additional benefit in assisting the agency in the allocation of resources or targeting diversion.  The DEA adds that the deterrent effect of regulatory investigations cannot be measured — it is impossible to quantify the “lack of diversion” that is occurring as a result of DEA’s efforts. 

DEA’s Office of Diversion Control has a budget of $292 million, is authorized for 1,300 full-time positions, and regulates more than 1.3 million registrants.  Registration fees fund DEA diversion control activities, and DEA published a Notice of Proposed Rulemaking in July 2011 proposing to significantly increase those fees (see our previous post here).

In conclusion, we believe the DEA should take greater steps to ensure that investigators are aware of the statutory and regulatory requirements, and thus can provide and promote accurate and meaningful guidance to the regulated industry.  While we understand there will always be an inherent tension between regulators and the regulated industry, the current tension between the DEA and the regulated industry needs to be resolved.  Both DEA and the regulated industry have the same goal in mind — ensuring that legitimate patients have access to their medicine while preventing diversion and abuse of controlled substances.