{"id":23968,"date":"2023-05-30T14:34:53","date_gmt":"2023-05-30T14:34:53","guid":{"rendered":"https:\/\/todaysveterinarybusiness.com\/?p=23968"},"modified":"2023-07-26T20:53:53","modified_gmt":"2023-07-26T20:53:53","slug":"veterinary-acquisition-controlled-substance-guidelines","status":"publish","type":"post","link":"https:\/\/navc.sitepreview.app\/todaysveterinarybusiness.com\/veterinary-acquisition-controlled-substance-guidelines\/","title":{"rendered":"Don’t Fumble the Handoff"},"content":{"rendered":"

Let\u2019s start with a story. After 25 years of running your veterinary practice and working 80-hour weeks, you decide the time is right to sell your business. You finalize the paperwork and get on a plane to Maui for a long-overdue vacation. As you\u2019re lying on the beach, soaking up the sun and relaxing for the first time in years, your phone rings. It\u2019s the DEA registrant who took over your practice, advising that you need to get back immediately because the U.S. Drug Enforcement Administration conducted a surprise inspection and wants to talk to you.<\/p>\n

You:<\/strong> \u201cWhy do they need to talk to me? I sold my practice and am no longer involved. It\u2019s your problem now!\u201d<\/p>\n

DEA registrant:<\/strong> \u201cNot according to the DEA. The controlled substances you left here in inventory were ordered under your DEA registration and never transferred to me. So technically, they still belong to you, and you need to get back here ASAP!\u201d<\/p>\n

Within minutes, your vacation is over. You return to your former practice, where two DEA diversion investigators greet you with a series of questions, citations and fines \u2014 $15,691 per violation. There goes your time off and, worse, a portion of the seller\u2019s check.<\/p>\n

Selling Your Practice<\/h3>\n

My previous article, \u201cTransfer With Care<\/a>,\u201d discussed how to transfer controlled substances between DEA registrants in circumstances such as running out of a drug required for patient care. That is one example of when a handover is warranted. Another is when selling your practice.<\/p>\n

Mergers and acquisitions are increasingly common in the veterinary industry as more private practices sell to consolidator groups. While myriad due diligence occurs during the acquisition process, the inventory of controlled substances is often overlooked. In the same sense that the drugs cannot be shared, borrowed, traded, gifted or donated, they also cannot be inherited. The issues are the same regardless of whether the transaction involves a national corporation or local party.<\/p>\n

As a DEA registrant, you\u2019re responsible for any controlled substances ordered under your registration from the point of acquisition to the point of disposal, administration or dispensing. Selling your practice with controlled substances remaining in inventory does not qualify as disposition, administration or dispensing. A separate action, such as a transfer, needs to happen and be appropriately documented, indicating when the controlled substances left your control and how. Managing the remaining inventory is the selling registrant\u2019s responsibility, not that of the incoming buyer and registrant.<\/p>\n

Mary Mongioi, chair of the Veterinary Practice Group at the New York law firm Forchelli Deegan Terrana, works exclusively on acquisitions and sales in the veterinary industry. Her perspective is this:<\/p>\n

\u201cWhile the seller is ultimately responsible for the proper transfer of existing controlled substance inventory, buyers must make certain the transfer is accomplished properly. Any post-closing DEA inspection triggered by a seller\u2019s failure to comply with these regulations means that the DEA will be at the buyer\u2019s door, and that can lead to the DEA potentially finding post-closing deficiencies in areas such as recordkeeping, among other compliance issues.<\/p>\n

\u201cBoth the buyer and seller have an interest in controlling this risk, and counsel directing M&A proceedings must ensure that as part of the closing process, the existing controlled substance inventory is either properly transferred or disposed of at the time of closing. If that is not on counsel\u2019s radar, you can otherwise handle the acquisition perfectly and still have failed your client on a critical point.\u201d<\/p>\n

What\u2019s in Stock?<\/h3>\n

Many times when a selling DEA registrant leaves a practice, controlled substances still in the inventory remain for continued patient use. However, sellers must understand that controlled substances left behind are not automatically included in the overall sale.<\/p>\n

This fact is worthy of emphasis: Controlled substances belong to the DEA registrant who ordered them and cannot be automatically acquired as part of a business acquisition.<\/p>\n

Therefore, correctly handling the controlled substances inventory is imperative during the acquisition. For example, if you discontinue your capacity as the ordering DEA registrant as part of the transaction, you must handle any remaining controlled substances in one of three ways:<\/p>\n

    \n
  • Take them with you to a new registered location.<\/li>\n
  • Transfer them to another DEA registrant.<\/li>\n
  • Destroy them using a reverse distributor.<\/li>\n<\/ul>\n

    I\u2019ll explain each option.<\/p>\n

    TAKE THEM<\/strong><\/p>\n

    Since controlled substances belong to the DEA registrant who ordered the drugs, you can take them to your new practice if you leave.<\/p>\n

    TRANSFER THEM<\/strong><\/p>\n

    Suppose you intend to leave controlled substances ordered under your DEA registration at your former practice. In that case, you must transfer them to another DEA registrant to properly document and indicate when they left your control. (Read \u201cTransfer With Care\u201d for the steps.)<\/p>\n

    DESTROY THEM<\/strong><\/p>\n

    If you\u2019re selling your practice and do not want to take any remaining controlled substances with you or transfer them, you should send them to a reverse distributor for destruction.<\/p>\n

    Unless you complete one of those three actions, the DEA says you still own the controlled substances. That means you\u2019re responsible for everything that happens with them and for meeting all DEA requirements associated with their management, documentation and oversight, regardless of whether you are present at or practicing at the hospital.<\/p>\n

    Don\u2019t Forget Your Suppliers<\/h3>\n

    Just as the controlled substances inventory is often overlooked during a practice acquisition, another common oversight is not notifying drug suppliers of the change. The DEA registrant who ordered on behalf of the practice is responsible. I\u2019ll explain why that step is vital.<\/p>\n

    I recently worked with a client that underwent an acquisition and change in the DEA registrant 10 months earlier. A records review discovered that of the five suppliers from which the practice ordered controlled substances, two never updated the change.<\/p>\n

    The practice responded that it had called all the suppliers about the change as the sale occurred. But unfortunately, nothing was in writing concerning the two suppliers. Further complicating matters was that the three other suppliers had not adequately updated their systems to reflect the new registrant\u2019s information. They were regularly shipping controlled substances to the practice under the old registrant.<\/p>\n

    The suppliers\u2019 failure to properly update the change created significant issues for the former and current registrants. Since every DEA registrant is responsible for ensuring that inventories and records aren\u2019t commingled with another registrant\u2019s, a regulatory nightmare ensued. As a result, significant remediation was conducted, including the review and sorting of every controlled substance document from the previous 10 months. In addition, new physical inventories were performed, and statements explaining the situation were drafted. The work continued for weeks until resolution. In short, it was a mess.<\/p>\n

    What\u2019s the lesson? Make sure your suppliers get the memo and implement the change. Unfortunately, in this case, the suppliers\u2019 failure should have been apparent on the invoices and packing slips, but nobody took the time to look.<\/p>\n

    As a best practice, call your supplier first to advise them of a change in the DEA registrant and ask about specific requirements for documenting it. Not all suppliers are the same, and different techniques might be required to change the DEA registrant of record.<\/p>\n

    After completing the necessary first steps, follow up by email to confirm that the change was made. Also, double-check the DEA registrant information on invoices and packing slips.<\/p>\n

    Finally, when assembling your M&A team, ask your attorneys (whether you\u2019re the buyer or seller) whether they are proficient in DEA and state-level controlled substances requirements. If they are not, either engage attorneys familiar with regulatory matters or have them find a co-counsel to guide them through compliance issues.<\/p>\n

    Veterinarians are hard-working, dedicated health care professionals. When you decide to sell your practice, make sure to properly close the loop on your controlled substances inventory so you can finally enjoy that long-overdue vacation without the fear of something coming back to bite you.<\/p>\n

    \n

    10 HELPFUL REMINDERS<\/span><\/h3>\n
      \n
    1. Controlled substances cannot be \u201cinherited.\u201d<\/li>\n
    2. You cannot automatically roll your DEA controlled substances inventory into a practice merger or acquisition.<\/li>\n
    3. Controlled substances belong to the DEA registrant who ordered them until the point of their disposition, administration, dispensing or transfer.<\/li>\n
    4. If you sell your practice and still have an inventory of controlled substances, take them with you, transfer them or destroy them before you leave.<\/li>\n
    5. The responsibility for managing any remaining controlled substances during the sale is on the selling DEA registrant, not the incoming buyer.<\/li>\n
    6. When calculating inventory into the cost of the sale, remember that the transfer of controlled substances requires separate paperwork. A bill of sale does not accomplish the transfer.<\/li>\n
    7. Ensure that suppliers of controlled substances are properly notified of a change in DEA registration and that they implement it.<\/li>\n
    8. Not all suppliers are the same. Different processes might be required when changing the DEA registrant of record.<\/li>\n
    9. Check controlled substances invoices to ensure the correct DEA registrant\u2019s information is listed on the order during the receiving process.<\/li>\n
    10. Make sure your acquisitions team and the legal counsel handling the deal are proficient in DEA and state-level controlled substances requirements.<\/li>\n<\/ol>\n","protected":false},"excerpt":{"rendered":"

      The original DEA registrant is legally responsible for what happens to controlled substances during a veterinary practice merger or acquisition.<\/p>\n","protected":false},"author":292,"featured_media":23969,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"iawp_total_views":0,"footnotes":""},"categories":[406],"tags":[],"class_list":["post-23968","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-june-july-2023","column-continuing-education","column-features","clinical_topics-government-regulations","clinical_topics-legal-issues"],"acf":{"hide_sidebar":false,"hide_sidebar_ad":false,"hide_all_ads":false},"yoast_head":"\nDon't Fumble the Handoff | Today's Veterinary Business<\/title>\n<meta name=\"robots\" content=\"noindex, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta 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