Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County No. BS099848, Dzintra I. Janavs, Judge.
Law Offices of Ronald Richards and Associates and Ronald Richards for Plaintiffs and Appellants.
Edmund G. Brown, Jr., California Attorney General, Alfredo Terrazas, Senior Assistant Attorney General, Karen B. Chappelle, Lead Supervising Deputy Attorney General, Gloria Barrios, Supervising Deputy Attorney General, and Gregory J. Salute, Deputy Attorney General, for Defendant and Respondent.
MALLANO, Acting P. J.
The California State Board of Pharmacy (Board) inspected the inventory of drugs at a pharmacy as part of an investigation into whether certain drugs were being “counterfeited or diverted.” The inspector discovered that a substantial amount of a particular drug, worth more than $1.4 million, was missing from the inventory. When asked about it, the pharmacist explained that he had taken the drug to his home for safekeeping while he upgraded the pharmacy’s security system to include a motion detector.
The Board initially fined the pharmacist and the pharmacy $5,000 each, contending that the transfer of the drug to the pharmacist’s home violated the Pharmacy Law (Bus. & Prof. Code, § 4000 et seq.; all further section references are to the Business and Professions Code unless otherwise indicated.) Eventually, after an administrative appeal, the Board reduced each fine to $1,000.
The pharmacist and the pharmacy (plaintiffs) filed a petition for a writ of administrative mandate in the trial court, contending they had not violated the Pharmacy Law and, even if they had, the $1,000 fines were excessive. The trial court denied the petition.
We conclude that the Board correctly determined that plaintiffs violated the Pharmacy Law by transferring the drug to the pharmacist’s home and that the Board did not abuse its discretion in imposing the reduced fines.
I
BACKGROUND
Robert Shiepe has been a licensed pharmacist in California since 1986. He does business under the fictitious name Bob’s Pharmacy. Both are plaintiffs. The pharmacy is located in Los Angeles near the intersection of Venice and La Cienega Boulevards. The area is “kind of tough, ” and there are some local gangs. In the last 20 years, Bob’s Pharmacy has been vandalized three times. The last break-in involved an entry through the ceiling.
One of the pharmacy’s staple medications is Serostim, which is used in the treatment of wasting syndrome associated with AIDS (acquired immune deficiency syndrome). In 2003, Shiepe heard there was going to be a shortage of Serostim, so he purchased “as much as [he] could, as fast as [he] could.” The drug is shipped in powder form and must be stored at a temperature between 59 and 86 degrees Fahrenheit. Bob’s Pharmacy ended up with a stock of Serostim worth over $1.4 million. Shiepe himself takes Serostim. It is available only by prescription.
In California, a pharmacist is legally required to provide an adequate security system at the pharmacy to protect prescription drugs from theft or diversion. (§ 4113, subd. (b); Cal. Code Regs., tit. 16, § 1714, subds. (a), (c); id., tit. 17, § 10377.4, subds. (a)–(c).) Shiepe decided that, in light of the past break-ins, Bob’s Pharmacy did not have an adequate alarm system. More specifically, he wanted to add a motion detector to protect the Serostim. Until the alarm system could be upgraded, he moved most of the Serostim to a secure “panic room” at his home in Marina del Rey. The room featured high security and a controlled environment (light and temperature).
In August 2003, the Board was investigating the possible counterfeiting and diversion of drugs other than Serostim. Robert Venegas, a Board inspector for 10 years, was assigned to look into inquiries regarding two wholesalers. The wholesalers, in turn, had invoices to Bob’s Pharmacy.
On August 14, 2003, Venegas went to Bob’s Pharmacy. There, he noticed a large amount of Serostim on the shelves. Because of counterfeiting and diversion problems with Serostim, Venegas asked to see Shiepe’s records for that drug. Venegas examined invoices coming in and prescriptions going out. He returned to the pharmacy on August 21, 2003, to review the “utilization report” for Serostim. Part of the report was missing, so Shiepe faxed it to Venegas later that day. Based on the information he had, Venegas did a “fast evaluation” and determined that the pharmacy was about 700 boxes short of the drug. The exact amount was 736 boxes (each containing 7 vials), plus 2 additional vials — around a three-year supply (ignoring expiration dates).
Venegas went back to Bob’s Pharmacy on September 9, 2003, and told Shiepe that the pharmacy was missing about 700 boxes of Serostim. Shiepe said the boxes were “safe in his home.” Venegas replied that it was improper to have the drug at that location, and Shiepe explained he was afraid of a burglary at the pharmacy. Venegas instructed Shiepe to retrieve the Serostim. He promptly did so, returning with nine large cases. According to Shiepe, the Serostim had been at his home “a very short period of time.”
On September 11, 2003, Venegas went to Bob’s Pharmacy, accompanied by another inspector. They confiscated 808 boxes of Serostim due to possible adulteration, leaving 54 boxes at the pharmacy that Shiepe had not removed.
On October 15, 2003, Venegas performed a full audit, finding that Bob’s Pharmacy had ordered 2, 443 boxes of Serostim and dispensed 1639 boxes. Based on the “stock on hand, ” Venegas concluded that the pharmacy was actually 48 boxes “over.”
The Board cited Shiepe and Bob’s Pharmacy for storing Serostim on unlicensed premises (§§ 4037, 4110, subd. (a)) and for storing Serostim under improper conditions, allowing it to become adulterated (§ 4342; Health & Saf. Code, §§ 111255, 111295).
On November 23, 2003, Venegas received a letter from Shiepe’s attorney, stating that Shiepe “only kept the Serostim at his home for 2 days . . . while a motion detector was being installed in the pharmacy.” The attorney claimed that the Serostim had been safely stored at Shiepe’s home, was not adulterated, and should be returned. The Board ultimately agreed that the seized drug was not adulterated and returned it to the pharmacy.
By letter dated July 28, 2004, the Board informed plaintiffs that they had violated section 4059.5, subdivision (b) (section 4059.5(b)) and were each being fined $5,000. That statute provides: “A dangerous drug . . . transferred, sold, or delivered to a person within this state shall be transferred, sold, or delivered only to an entity licensed by the board, to a manufacturer, or to an ultimate user or the ultimate user’s agent.” “Dangerous drug” means any drug that requires a prescription. (§ 4022.) The $5,000 fines were the maximum permitted. (§ 125.9, subd. (b)(3); Cal. Code Regs., tit. 16, § 1775.1, subd. (a).)
Plaintiffs filed separate administrative appeals. The appeals were consolidated and were heard by an administrative law judge (ALJ). Subsequently, in proposed decisions, the ALJ concluded that plaintiffs had violated section 4059.5(b), but the fines were excessive and should be reduced to $1,000 each. The Board adopted the ALJ’s recommendations.
On October 20, 2005, plaintiffs filed a petition for a writ of administrative mandate in the trial court (see Code Civ. Proc., § 1094.5), asserting that (1) the Serostim was not “transferred” within the meaning of section 4059.5(b) because Shiepe was an “ultimate user” of the drug; (2) Shiepe merely “transferred” the drug to himself, a licensed pharmacist, not to a third person; (3) Shiepe’s obligation as a pharmacist to provide an adequate security system justified the temporary relocation of the drug until a motion detector could be installed; and (4) even if the statute had been violated, the $1,000 fines were excessive.
After the parties filed memoranda in the trial court, the petition came on for hearing on May 23, 2006. At the end of the hearing, the trial court denied the petition. Judgment was entered accordingly. Plaintiffs appeal.
II
DISCUSSION
“Preliminarily, we note that this case does not involve revocation, suspension, or restriction of [a] license . . . . Since this case involves only a fine and not any licensing sanction, we conclude that this is not an instance where the trial court was authorized to exercise its independent judgment on the evidence. . . . Thus, as to issues of fact, the only question for us, as it was for the trial court, is whether the Board’s findings were supported by substantial evidence in the administrative record.” (Steinsmith v. Medical Board (2000) 85 Cal.App.4th 458, 464–465.) Further, “an administrative agency’s ‘interpretation of a statute it routinely enforces is entitled to great weight and will be accepted unless its application of legislative intent is clearly unauthorized or erroneous.’” (Hartwell Corp. v. Superior Court (2002) 27 Cal.4th 256, 286.)
A. Violation of the Statute
Section 4059.5, subdivision (a), provides: “[D]angerous drugs . . . may only be ordered by an entity licensed by the board and shall be delivered to the licensed premises and signed for and received by a pharmacist. . . .” As noted, section 4059.5(b), under which plaintiffs were fined, states: “A dangerous drug . . . transferred, sold, or delivered to a person within this state shall be transferred, sold, or delivered only to an entity licensed by the board, to a manufacturer, or to an ultimate user or the ultimate user’s agent.”
“Pharmacy” is defined as a specific location, that is, “an area, place, or premises licensed by the board in which the profession of pharmacy is practiced and where prescriptions are compounded. ‘Pharmacy’ includes, but is not limited to, any area, place, or premises described in a license issued by the board wherein controlled substances, dangerous drugs, or dangerous devices are stored, possessed, prepared, manufactured, derived, compounded, or repackaged, and from which the controlled substances, dangerous drugs, or dangerous devices are furnished, sold, or dispensed at retail.” (§ 4037, subd. (a), italics added.)
Read together, these statutes contemplate that prescription drugs will be “delivered to” a pharmacy in the first instance, where a pharmacist will “sign for” and “receive” them. Thereafter, the drugs may leave the pharmacy — by sale, delivery, or transfer — only if the intended recipient is another licensed entity, a manufacturer, or a patient. (See also § 4126.5, added by Stats. 2004, ch. 857, § 23.) To “transfer” a drug is “to carry or take [it] from one person or place to another : TRANSPORT, REMOVE.” (Webster’s Third New Internat. Dict. (2002 ed.) pp. 2426–2427 [defining “transfer”]; see Bodell Construction Co. v. Trustees of Cal. State University (1998) 62 Cal.App.4th 1508, 1515 [words of statute are given ordinary meaning].)
In this case, Shiepe “transferred” the Serostim from Bob’s Pharmacy to his home, which was neither a manufacturer nor a pharmacy, and thus not a licensed “place” where drugs may be “stored” or “possessed.” Although Shiepe had a prescription for Serostim, he did not produce any evidence, or even contend, that his prescription covered the large quantity of the drug taken from the pharmacy. The term “ultimate user, ” within the meaning of the statute, reasonably refers to a sale, delivery, or transfer pursuant to a prescription. (See §§ 4059, subd. (a), 4026.) There is no evidence that Shiepe had a prescription for a three-year supply of Serostim.
Shiepe suggests that the Board is not concerned about a drug’s location as long as the drug is under the control of a pharmacist. Not so. For example, when a pharmacy is closed and no pharmacist is on duty, drugs may be delivered only “if all of the following requirements are met: [¶] (1) The drugs are placed in a secure storage facility in the same building as the pharmacy. [¶] (2) Only the pharmacist-in-charge or a pharmacist designated by the pharmacist-in-charge has access to the secure storage facility after [the] drugs . . . have been delivered. [¶] (3) The secure storage facility has a means of indicating whether it has been entered after [the] drugs . . . have been delivered. [¶] (4) The pharmacy maintains written policies and procedures for the delivery of [the] drugs . . . to a secure storage facility. [¶] (5) The agent delivering [the] drugs . . . leaves documents indicating the name and amount of each . . . drug . . . delivered in the secure storage facility.” (§ 4059.5, subd. (f), italics added.)
The Board is also concerned with strict enforcement of security measures at the pharmacy. For instance, “[p]ossession of a key to the pharmacy where . . . drugs . . . are stored shall be restricted to a pharmacist. [¶] . . . The pharmacy owner, the building owner or manager, or a family member of a pharmacist owner (but not more than one of the aforementioned) may possess a key to the pharmacy that is maintained in a tamper evident container for the purpose of 1) delivering the key to a pharmacist or 2) providing access in case of emergency. An emergency would include fire, flood or earthquake.” (Cal. Code Regs., tit. 16, § 1714, subds. (d), (e).)
Finally, Shiepe argues that, as a pharmacist, he had a duty to ensure that Bob’s Pharmacy was “equipped with an alarm system that [would] provide suitable protection against theft and diversion.” (Cal. Code Regs., tit. 17, § 10377.4, subd. (c).) He contends that his conduct protected the public by eliminating a security risk and allowing him to continue supplying patients with affordable, essential medications. (See § 4001.1 [protection of the public is the Board’s highest priority].)
Assuming for the sake of discussion that a pharmacist’s duties to ward off theft and to protect the public could provide an exception to section 4059.5(b) in some circumstances, this is not such a case. Shiepe has not shown that his conduct was sufficiently necessary to further either duty. We do not see the sense of urgency. Shiepe does not cite any competent evidence as to when the last break-in took place, the length of time it would take to install the motion detector, or whether he had contacted or contracted with anyone to do the work before removing the Serostim. Shiepe increased his stock of Serostim over a period of weeks, if not months, making it easily foreseeable that the security system might need upgrading in the future.
We have previously commented on the misuse of Serostim, noting the existence of an underground market where patients sell their prescriptions to cappers, and nonpatients then buy the drug illegally in order to build muscle mass quickly. (See Paleski v. State Dept. of Health Services (2006) 144 Cal.App.4th 713, 725.) Here, the Board inspected a pharmacy as part of an investigation to prevent the misuse of Serostim. Although Shiepe knew about the inspection, he did not disclose what he had done until after the inspector had nearly completed his work and announced that more than 700 boxes of the drug were missing. At that point, the Board had legitimate concerns about adulteration and seized most of the stock.
This entire episode and the Board’s expenditure of valuable resources could have been avoided if Shiepe had obtained a temporary permit from the Board, authorizing the transfer of the Serostim to his home. (See § 4110, subd. (b) [in order to protect public, Board may issue temporary pharmacy permit lasting up to 180 days].) Shiepe does not contend that a temporary permit was unobtainable.
Plaintiffs would have this court interpret section 4059.5(b) as if a pharmacy and a pharmacist were one and the same. But subdivision (a) of the statute makes clear that the drugs are delivered to the pharmacy, where a pharmacist signs for and receives them. Once at the pharmacy, drugs can be transferred to specified recipients but a pharmacist is not among them.
Section 4059.5(b), as construed by the Board, serves to protect the public. Board inspectors must be able to check a pharmacy’s inventory to monitor the quantity and quality of drugs. Problems with theft, diversion, and adulteration demand quick and easy access to a pharmacy’s entire stock of medications. And if the Board receives a complaint about a drug, an inspector must be able to determine as soon as possible if the stock is safe for human consumption. Those important goals would be frustrated by allowing drugs to be transferred to an unlicensed location without first obtaining the Board’s permission — at least where, as here, an urgent, compelling reason is not present.
Thus, the Board correctly applied section 4059.5(b), and substantial evidence supports the Board’s determination that plaintiffs violated the statute.
B. Propriety of the Fines
The standard of review is more deferential when the courts review an administrative penalty as opposed to a finding of misconduct. “‘[T]he penalty imposed by an administrative body will not be disturbed in mandamus proceedings unless an abuse of discretion is demonstrated. . . . Neither an appellate court nor a trial court is free to substitute its discretion for that of the administrative agency concerning the degree of punishment imposed.’” (Schmitt v. City of Rialto (1985) 164 Cal.App.3d 494, 500, citations omitted.) Further, “the scope of review is the same in the appellate court as it was in the superior court, that is, the appellate court reviews the administrative determination, not that of the superior court, by the same standard as was appropriate in the superior court.” (Id. at p. 501.) We will reverse the trial court only if we find that the Board committed a “manifest abuse of discretion.” (Ibid.)
“In assessing the amount of an administrative fine, . . . the following factors shall be considered [by the Board]: [¶] (a) The gravity of the violation. [¶] (b) The good or bad faith of the cited person or entity. [¶] (c) The history of previous violations. [¶] (d) Evidence that the violation was or was not willful. [¶] (e) The extent to which the cited person or entity has cooperated with the board’s investigation. [¶] (f) The extent to which the cited person or entity has mitigated or attempted to mitigate any damage or injury caused by the violation. [¶] (g) Other matters as may be appropriate. [¶] (h) The number of violations found in the investigation.” (Cal. Code Regs., tit. 16, § 1775.2.)
In reducing each fine from $5,000 to $1,000, the ALJ set forth the foregoing factors verbatim and explained: “In the present instance the Factual Findings establish that there was one violation. The violation, although involving a large amount of Serostim, was not willful. [Plaintiffs] acted in good faith. [They] cooperated with board investigators and immediately corrected the violation. Additionally, [plaintiffs have] no record of any previous or subsequent violations. All factors considered, the ALJ concludes that a $5,000.00 fine is excessive under the circumstance; accordingly, the fine shall be reduced to a total of $2,000.00, $1,000.00 in [each] case . . . .” As stated, the Board adopted this analysis. We cannot say that the Board abused its discretion in imposing $1,000 fines as opposed to no fines at all.
Last, plaintiffs assert that “the fines are repetitive in that Robert Shiepe as the pharmacist and Robert Shiepe doing business as Bob’s Pharmacy are each being fined for one violation.” But a pharmacist and a pharmacy are separately licensed (see §§ 4036, 4037, subd. (a)), and a pharmacy acts through its pharmacist. Accordingly, we have previously recognized that a pharmacist’s misconduct can support administrative penalties against both the pharmacist and the pharmacy. (See Arenstein v. California State Bd. of Pharmacy (1968) 265 Cal.App.2d 179 (Arenstein), overruled on another point as stated in Barber v. Long Beach Civil Service Com. (1996) 45 Cal.App.4th 652, 658.)
In Arenstein, supra, 265 Cal.App.2d 179, the Board temporarily suspended the licenses of two pharmacists and a pharmacy because the pharmacists had violated the Pharmacy Law by refilling prescriptions without authorization from a physician. (See § 4063, former § 4229.) All three licensees challenged the suspensions. We first rejected the pharmacists’ contention that there was insufficient evidence that they had engaged in misconduct. (Arenstein, supra, 265 Cal.App.2d at pp. 184–191.)
We then addressed the pharmacy’s argument that its suspension was improper because the pharmacists, not it, had violated the law. We disagreed, explaining: “If a [pharmacy] licensee elects to operate [its] business through employees [it] must be responsible to the licensing authority for their conduct in the exercise of [its] license and [it] is responsible for the acts of [its] agents or employees done in the course of [its] business in the operation of the license. . . . One permitted to maintain and conduct a pharmacy may be disciplined by the Pharmacy Board for the unlawful acts of [one’s] employees while engaged in the conduct and operation of the pharmacy, although the permittee does not authorize the unlawful acts and did not have actual knowledge of the activities. . . .
“This would be particularly true of a corporate permittee which could act only through its officers, agents or employees. That [the pharmacy here] is guilty of the misconduct alleged is implicit in the findings of both the board and the superior court that each [pharmacist] committed his illegal act ‘while on duty as a pharmacist’ at the corporation; and the court correctly concluded that the board properly disciplined the holder of the pharmacy permit . . . upon the evidence of the illegal acts of its officers and employees . . . .” (Arenstein, supra, 265 Cal.App.2d at pp. 192–193; accord, O’Mara v. State Bd. of Pharmacy (1966) 246 Cal.App.2d 8, 9–10, 12 [upholding Board’s 15-day suspension of pharmacist’s license and 5-day suspension of his pharmacy license where both suspensions were based on pharmacist’s unlawful conduct].)
And in Banks v. Board of Pharmacy (1984) 161 Cal.App.3d 708 (Banks), Division Two of this District upheld the Board’s disciplinary action against a pharmacist and his pharmacy for failing to maintain accurate records. (Id. at pp. 712–713.) In agreeing with the Board, the court commented that “‘“[b]y virtue of the ownership of a . . . license[, an] owner has a responsibility to see to it that the license is not used in violation of the law” . . . .’” (Id. at p. 713.) Banks was later cited by our Supreme Court for the proposition that “a licensee will be held liable for the acts of its agents.” (California Assn. of Health Facilities v. Department of Health Services (1997) 16 Cal.4th 284, 296.)
Consequently, the Board had the authority to impose fines on both Shiepe and Bob’s Pharmacy. Although Shiepe chose to operate his pharmacy in noncorporate form, using only a fictitious business name, the Pharmacy Law treats a pharmacist and a pharmacy as separate licensees, both subject to administrative discipline based on the pharmacist’s conduct. Were it otherwise, a pharmacist could virtually insulate a pharmacy license from revocation, suspension, or other disciplinary action by simply operating it as a sole proprietorship. And Shiepe has not cited any authority indicating that the fines here were duplicative. (See Schoendorf v. U.D. Registry, Inc. (2002) 97 Cal.App.4th 227, 237 [party must cite pertinent authority in support of contention].)
III
DISPOSITION
The judgment is affirmed.
We concur: VOGEL, J. ROTHSCHILD, J.