NABP Legal Briefs: Canadian DisConnection

February 9, 2011 2:58 PM

Originally published in the February 2011 NABP Newsletter

By Dale J. Atkinson, JD

Previous newsletter articles and presentations have addressed the unlicensed practice of pharmacy and the complex legal issues over whether boards of pharmacy have the “jurisdiction” or authority to administratively prosecute persons or entities that engage in the practice without a license or permit. At times, licensed persons and/or entities (permit holders) within a state board’s purview may engage in activities that promote or aid and abet the unlicensed practice of pharmacy. Under such a circumstance, the board may have multiple approaches to carry out the intent of the practice act to protect the public, although it may not always be easy. Consider the following.

An owner and operator of a business (Canadian Connection) which assisted individuals with prescription orders, advising and enabling its customers to order prescription medicines from low cost, out of state suppliers, in return for a commission paid by these out of state pharmacies was the subject of a multiple year legal battle with the Montana Board of Pharmacy (Board). Indeed, the predecessor business (Rx Depot, Inc) was the subject of a 2003 preliminary injunction issued by the Montana First Judicial District Court enjoining the business from continuing its operations on the grounds that its activities were violative of various provisions of the Montana Pharmacy Practice Act. (For purposes of this article, the collective pharmacist license and facility permit holder will be collectively referred to as Canadian Connection, although both licenses were at issue.)

Shortly thereafter, the United States District Court for the Northern District of Oklahoma issued a preliminary injunction against the parent company of Rx Depot which enjoined all of its affiliates from operations on a nationwide basis. Due to the breadth of the federal court injunction intended to prohibit operations in all jurisdictions, the Montana court injunction was dissolved. In spite of the injunctions, the owners of Rx Depot continued to do business under a “new” name, Canadian Connection.

In 2004, the Montana First Judicial District again issued an injunction against Canadian Connection enjoining it from engaging in the “now familiar prescription drug business.” Undeterred, Canadian Connection continued to conduct business as usual in defiance of the 2004 judicial order. As stated by the court in reference to its blatant disregard for the order, “Far from attempting to fly under the radar, [Canadian Connection] continued to promote his business arguing earnestly and openly the need for his services as a matter of public policy, and repeatedly asserting that his activities were outside the Board’s regulatory authority.”

The Board invited the proprietor of Canadian Connection to its Board meetings to discuss and seek a resolution to the matters, but all such invitations were rejected. In 2007, the Board served discovery requests on Canadian Connection and filed a motion for sanction based upon the disregard for the injunctive order. Canadian Connection, representing itself pro se, propounded numerous arguments against the motion for sanctions. In response to the discovery requests, Canadian Connection invoked the Fifth Amendment privilege against self-incrimination as a basis for refusing to comply.

After a 2009 hearing, the Montana court issued an order finding Canadian Connection in contempt of court and imposed a $4,000 civil penalty and ordered the Canadian Connection owner to immediately comply with all portions of the injunction. Canadian Connection appealed the contempt order which was denied based upon the failure to comply with specific procedural nuances.

Thereafter, both parties filed motions for summary judgment. Summary judgment motions basically argue that there are no issues of material facts in dispute and, thus, the court can determine the case as a matter of law and without the need for a trial and a determination of the facts. In its motion for summary judgment, the Board sought a permanent injunction against Canadian Connection. In Canadian Connection’s motion, the licensee sought dissolution of the preliminary injunction and a reversal of the contempt findings and civil penalty. The lower court granted the Board’s motion and denied Canadian Connection’s motion. Canadian Connection appealed the decision to the Montana Supreme Court.

On appeal, the court first addressed the standard of review. Thereafter, the court focused on whether there existed a material issue of fact in dispute which would preclude the entry of a motion for summary judgment. In its analyses, the court addressed whether the business operations of Canadian Connection violated the pharmacy practice act. In order to arrive at its conclusions, the court reviewed first whether the lower court correctly concluded that Canadian Connection’s activities fell within the applicable statutory parameters regulating the unlicensed practice of pharmacy. In so doing, the court cited the practice act and its definitions of the practice of pharmacy and unlawful practice.

Canadian Connection argued that its activities were not the practice of pharmacy, nor was it assisting the practice of pharmacy and therefore, material issues of fact existed precluding summary judgment. In response, the court noted that Canadian Connection confused issues of fact with issues of law. The court is empowered to determine issues of law and the conclusion of what constitutes the practice of pharmacy is a legal conclusion. Indeed, the facts are not in dispute, rather Canadian Connection merely disagrees with their characterizations and conclusions reached as a result. The court held that the record established in the lower court, including the testimony of the executive director of the Board, as well as the adverse inference drawn from the election by Canadian Connection of its Fifth Amendment privilege against self-incrimination provided an adequate basis for support of the lower court determinations. The court also noted the deference provided to the lower court determinations.

Specifically, the court referenced the direct testimony of the Canadian Connection witnesses regarding its business practices, including the fact that employees routinely consult with patients about prescription medications; have patients fill out medical questionnaires inquiring into such patient’s medical history, allergies, other prescriptions currently taken; regularly recommend generic substitutions for brand name drugs; discuss the possibility of splitting larger doses of medicine into smaller doses; “assist Montana consumers to purchase prescription drugs”; arrange for patient counseling by entities unlicensed in Montana; and promote Canadian Connection business as a source of prescription medication through promotional literature and advertising. Such testimony corroborated the testimony of the Board executive director.

Addressing the Fifth Amendment and Canadian Connection refusal to provide duly requested discovery documents, the court held that while the privilege was properly asserted, given the criminal penalties imposed by the practice act, Canadian Connection cannot “escape the consequences of [its] refusal to disclose the facts surrounding [its] business activities.” The court continued: “silence is often evidence of the most persuasive character” and that previous US Supreme Court decisions do not forbid adverse inferences against parties in civil proceedings when they claim the privilege. In addition and in support of its conclusion, the court noted the significant disadvantage to the requesting party to obtain discovery from parties invoking the Fifth Amendment as a basis for adverse inferences.

Finally, the court emphasized the deference afforded to the lower court determinations as a basis for its findings of fact. The court held that no mistakes were committed, no misinterpretation or misapprehension was existent, and that the Canadian Connection operates for a fee paid by a Canadian pharmacy, unlicensed in Montana, which filled the prescriptions based upon a form submitted by the Canadian Connection. Viewed in light most favorable to Canadian Connection, the Montana Supreme Court held that the facts clearly demonstrate that the company has been engaging in numerous activities defined by the statute as the practice of pharmacy. The culmination of these activities support the legal conclusion that Canadian Connection has been “assisting unlicensed pharmacies in the practice of pharmacy through virtually all phases of [its] business model, under any interpretation of ‘assist’ (which is not defined in the Act).”

The court held that the permanent injunction was necessary to “preclude the multiplicity of proceedings that have been the hallmark of this case” and that the public protection elements of the practice act substantiated affirming the holdings of the lower court regarding the injunctive relief as well as the civil penalty.

With technological advancements and the ability to provide international communications, the fact that this litigation occurred in a state bordering Canada is of secondary significance. All boards of pharmacy should be aware of the definitions of the practice of pharmacy, the aiding and abetting of the unlicensed practice of pharmacy, and the procedural nuances of litigation.

Montana Board of Pharmacy v Kennedy, 2010 WL 4229803 (MT 2010)