Neumann’s Pharmacy v. DEA: § 1306.04(a) Requires Knowledge that a Prescription Was Invalid, and “Usual Course of Professional Practice” Cannot Be Reduced to a State Standard of Care

A. Precedents Cited

1) Administrative-law framework: deference has limits

• Seven Cnty. Infrastructure Coal. v. Eagle Cnty. — Cited for the modern articulation of arbitrary-and-capricious review: the court asks whether the agency acted reasonably and reasonably explained its action. The Fifth Circuit used this as the baseline, then emphasized the case falls into a category where deference recedes: failure to follow binding regulations.
• Ellison v. Connor and Fort Stewart Schs. v. FLRA — These anchor the principle that an agency must abide by its own regulations; noncompliance is reviewable under the APA.
• Nat'l Biodiesel Bd. v. EPA (with Environmentel, LLC v. FCC), plus N.M. Farm & Livestock Bureau v. U.S. Dep't of Interior and Conservancy of Se. Fla. v. U.S. Fish & Wildlife Serv. — Not Fifth Circuit authorities, but persuasive support for the proposition that failure to follow one’s own rules is arbitrary and capricious. The opinion uses these to underscore that this is a mainstream administrative-law constraint, not an idiosyncratic one.
• Bowles v. Seminole Rock & Sand Co. and Auer v. Robbins — Mentioned to note the DEA did not invoke Seminole Rock/Auer deference. The Fifth Circuit therefore did not decide whether such deference could apply, citing waiver/forfeiture decisions (Ortiz v. McDonough, Robinson Knife Mfg. Co. v. CIR) and an analogous Supreme Court practice in HollyFrontier Cheyeene Refin., LLC v. Renewable Fuels Ass'n (declining Chevron consideration when not invoked).
• Calcutt v. FDIC and SEC v. Chenery Corp. — These supplied the Chenery constraint: courts review agency action on the grounds the agency actually invoked. This foreclosed the government’s suggestion that deregistration could be upheld based on statutory discretion independent of the flawed regulatory interpretations.

2) Mens rea and text: reading “knowingly” in § 1306.04(a)

• Flores-Figueroa v. United States — The principal textual/grammatical authority. The Fifth Circuit applied Flores-Figueroa’s ordinary-English rule: an adverb like “knowingly” modifying a transitive verb (“fills”) ordinarily applies to the whole action including its object—here, “filling” such a purported prescription (i.e., an invalid one). This case is used to reject the DEA’s “knows or has reason to know” gloss as inconsistent with the regulation’s words.
• Wooden v. United States (Kavanaugh concurrence), United States v. Bailey — Cited for the broader presumption that mens rea typically attaches to each element and that differential mens rea requires clear grounding.
• United States v. X-Citement Video, Inc. — Used to show the Supreme Court sometimes applies the mens rea presumption even where grammar is not the “most natural,” reinforcing that attaching “knowingly” to all elements is a strongly preferred reading in criminal-adjacent contexts.
• United States v. Hayes — A Fifth Circuit anchor supporting that § 1306.04(a) turns on the pharmacist’s knowledge that the practitioner issued the prescription outside professional practice. The opinion uses Hayes’s discussion of “verification” as evidence that a pharmacist can show lack of the requisite knowledge—reinforcing that knowledge of invalidity is the operative requirement.
• Global-Tech Appliances, Inc. v. SEB S.A. — Invoked to distinguish willful blindness (subjective high probability + deliberate avoidance) from the DEA’s objective “reason to know” standard. The court accepts willful blindness as a possible substitute for knowledge in some contexts, but explains it cannot justify the DEA’s negligence-like formulation.

3) Meaning of “course of professional practice” under the CSA

• Gonzales v. Raich and Gonzales v. Oregon — Raich supplies CSA background; Oregon supplies the key limiting principle: the CSA regulates medicine to prevent prescribers from using prescription authority as a vehicle for illicit dealing, and manifests no intent to regulate medicine generally. The Fifth Circuit used Oregon to show why importing state “standard of care” into “usual course” risks statutory overreach.
• Ruan v. United States (Alito concurrence) — Used for historical tracing to the Harrison Act and the “bona fide medical practice”/good-faith understanding of “in the course of professional practice,” and for the policy-structural warning that collapsing “usual course” into negligence could turn many state-law lapses into federal felonies.
• George v. McDonough — Supplies the interpretive canon that transplanted legal terms of art bring their prior meaning (“the old soil”) absent contrary indication.
• United States v. Moore — Central to the “professional role” framing: even when a physician deviates from generally accepted practices, the CSA limitation is whether the registrant acted “as a physician” rather than as a drug pusher. The Fifth Circuit extends that logic to pharmacies: the question is not mere malpractice but whether the pharmacy ceased acting as a pharmacy (i.e., acted as a conduit for illicit distribution).
• United States v. Collier — Fifth Circuit precedent describing the CSA limitation as preventing physicians from acting as pushers “under the guise of treatment,” reinforcing the bona fide/good-faith axis rather than a negligence standard.
• United States v. Feingold — Cited for collecting sister-circuit cases holding that falling below standard of care is not, by itself, enough to establish action outside professional practice (though those cases largely involve physicians; the Fifth Circuit found the logic transferable and the textual differences (“usual,” pharmacist vs. physician) insufficient to justify a wholesale meaning shift).

4) Remedy and remand principles

• Cargill v. Garland (en banc) — Establishes the Fifth Circuit’s default rule of vacatur for unlawful agency action.
• United Steel v. Mine Safety & Health Admin. — Cited for the D.C. Circuit’s approach to remand without vacatur (rare), used as a contrast and to show vacatur is not automatic in all circuits.
• Data Mktg. P'ship, LP v. U.S. DOL — Used to find forfeiture: the government did not argue remand without vacatur, so it lost that remedial position.
• I.N.S. v. Orlando Ventura — Supports remanding to the agency for first-instance discretionary decisions when the legal framework applied was wrong, rather than the court deciding the merits of deregistration under corrected standards.

B. Legal Reasoning

1) § 1306.04(a): DEA must respect both “purported prescription” and “knowingly”

The court’s textual reasoning starts with § 1306.04(a)’s internal cross-reference: the regulation imposes penalties on a person “knowingly filling such a purported prescription.” “Such a purported prescription” refers back to an order that only purports to be a prescription because it was issued not in the prescriber’s usual course of professional treatment or for legitimate research. The Fifth Circuit therefore treated invalidity-at-issuance as a prerequisite.

The DEA’s adjudication, however, focused on whether the pharmacy’s dispensing was outside the course of professional practice—without making the antecedent finding that the prescriber issued invalid prescriptions. That mismatch matters because § 1306.04(a) is built around the validity of the prescription as written; without invalidity, there is no “purported prescription” to knowingly fill.

On scienter, the Fifth Circuit rejected the DEA’s longstanding “knows or has reason to know” articulation as inconsistent with the regulation’s “knowingly” requirement. Using Flores-Figueroa’s ordinary grammar and criminal-law mens rea presumptions, the court held “knowingly” applies to the invalid nature of the prescription, not merely the physical act of dispensing. The DEA’s attempt to recast its approach as “willful blindness” failed because willful blindness is subjective and requires deliberate avoidance, whereas “reason to know” is objective.

Importantly, the court did not say the DEA lacks authority to deregister absent scienter in all circumstances; it said the DEA chose to ground part of its decision on a regulatory violation whose elements include knowledge, and under Chenery the court could not uphold the action by inventing alternative rationales the agency did not adopt.

2) § 1306.06: “Usual course of professional practice” is not a negligence proxy

The Administrator treated “usual course of professional practice” as synonymous with compliance with the Louisiana standard of care, effectively converting state malpractice concepts into federal CSA violations. The Fifth Circuit found that move incompatible with:

• History and term-of-art meaning: the phrase comes from the CSA and ultimately the Harrison Act, associated with bona fide practice and good faith, not with perfect adherence to state standards.
• United States v. Moore and United States v. Collier: these decisions focus on whether the registrant acted in a professional role (doctor/pharmacist) versus as a pusher—suggesting the CSA targets trafficking disguised as practice, not negligence.
• Gonzales v. Oregon: the CSA does not manifest an intent to regulate medicine (or pharmacy) generally; importing state standards of care as the federal test would expand the CSA into general professional regulation.
• Structural consequences: treating “usual course” as “standard of care” risks making routine professional negligence a federal felony—an outcome the court treated as a strong indicator the interpretation is wrong.

The court’s bottom line: a violation of a state-law standard of care, standing alone, is not enough to establish a § 1306.06 violation. That does not immunize reckless or sham dispensing; it forces the DEA to show conduct that departs from bona fide pharmacy practice in a more fundamental way than ordinary negligence.

3) Louisiana physician-prescribing rule: scope matters

The DEA treated the Louisiana rule barring physicians from prescribing controlled substances to immediate family members as relevant to the pharmacy’s conduct in dispensing a prescription written by Ms. Neumann’s father. The Fifth Circuit identified a basic scope defect:

• The rule applies to “physicians”, not pharmacies.
• The rule governs “prescrib[ing]”, not filling/dispensing.

Whether the physician violated Louisiana law might be relevant in other proceedings, but it was not, by the text, a direct violation by the pharmacy. And if the DEA used that state-law issue merely to prove state “standard of care” deviation, that still would not establish a federal “usual course” violation under the court’s § 1306.06 holding.

4) Remedy: vacatur + remand (not affirmance, not dismissal)

Applying Cargill v. Garland, the court treated vacatur as the default. It rejected remand without vacatur because the government did not press it (forfeiture under Data Mktg. P'ship, LP v. U.S. DOL). It also rejected Neumann’s request to vacate without remand, invoking I.N.S. v. Orlando Ventura: the DEA retains broad statutory discretion and should decide in the first instance whether deregistration is warranted under correct legal interpretations.

C. Impact

1) Immediate doctrinal effects on DEA pharmacy cases

• Higher burden for § 1306.04(a) findings: DEA adjudications must separately establish (i) that the prescription was invalid when issued (prescriber-side defect) and (ii) that the pharmacist knew of that invalidity (or satisfied a legally valid substitute like willful blindness, not mere “reason to know”).
• Limits on “red flags” as a substitute for elements: Red flags may be evidence relevant to knowledge or willful blindness, but they cannot replace the required findings (invalidity + knowledge of invalidity) under § 1306.04(a).
• “Usual course” cannot be collapsed into state negligence: DEA cannot treat violations of a state standard of care as per se proof of a federal CSA dispensing violation. This compels clearer separation between malpractice-style shortcomings and trafficking-like conduct.
• Stronger Chenery discipline in sanctions cases: The DEA cannot expect reviewing courts to uphold severe sanctions by pointing to broad statutory discretion after the fact if the agency’s stated reasoning depends on misread regulations.

2) Likely changes to agency adjudication practice

• More explicit prescriber-invalidity analysis: DEA may need to develop records on prescriber conduct (legitimate medical purpose/usual course) rather than focusing exclusively on pharmacy-level processes.
• Scienter-focused factfinding: Administrative decisions may need to articulate why a pharmacist actually knew a prescription was invalid (or was willfully blind), including documenting what the pharmacist saw, concluded, and deliberately avoided.
• Careful use of state law: State-law violations will matter most under CSA “compliance with applicable State ... laws” factors, but only when the state-law duty actually applies to the registrant and the conduct at issue.

3) Broader implications for federal–state boundaries

By rejecting the “standard of care equals usual course” equation, the Fifth Circuit reinforced the federalism-sensitive reading found in Gonzales v. Oregon: the CSA is not a general licensing-board statute for professional quality control. This opinion thus cabins the CSA’s role to preventing diversion/trafficking disguised as practice, leaving ordinary negligence regulation primarily to state boards and tort systems—unless Congress or valid regulations clearly say otherwise.