What Happened
A Jackson, Kentucky physician and his wife, who managed his clinic's office, agreed to pay $450,000 after the government alleged he issued controlled-substance prescriptions using pre-signed blank prescription pads while he was away from the office.
Dr. Pablo Merced owned and operated St. John Neumann's Extended Hours Clinic, where he prescribed controlled substances to patients. According to the settlement, Dr. Merced pre-signed 94 blank prescriptions for controlled substances and permitted unauthorized staff to complete and issue them to patients — including while he was out of the office or out of the country — despite the Controlled Substances Act's requirement that a valid prescription be issued by the prescriber for a legitimate medical purpose in the usual course of professional practice.
The settlement separately resolved allegations that Dr. Merced and his wife, Theresa Merced, solicited cash kickbacks from a laboratory sales representative in exchange for referring patients' lab tests to specific laboratories, generating more than $9 million in Medicare, Medicaid, and TRICARE billings for those referrals. As part of the resolution, Dr. Merced agreed to a 15-year voluntary exclusion from federal health care programs and surrendered the DEA registration he had held.
What Went Wrong
- Pre-signed blank prescriptions removed the prescriber from the decision. Once a pad of pre-signed forms exists, staff — not the physician — effectively decide who receives a controlled substance and in what quantity.
- No control stopped prescribing while the physician was unavailable. The clinic had no process to pause controlled-substance prescribing, or route it to another licensed provider, when Dr. Merced was out of the office or country.
- Referral relationships were not screened for compliance. The lab referral arrangement operated for years without a compliance check on payments tied to referral volume.
How It Could Have Been Prevented
- Prohibit pre-signed blank prescriptions for controlled substances under any circumstance; require the prescriber to sign each prescription individually and contemporaneously.
- Establish a coverage plan for controlled-substance prescribing when the primary prescriber is unavailable, rather than allowing office staff to issue prescriptions in the prescriber's name.
- Subject laboratory and referral-source financial arrangements to periodic Anti-Kickback Statute compliance review.
- Audit prescription logs against the physician's actual schedule to catch prescriptions dated during periods of confirmed absence.
Related Guidance
- 15 Red Flags of Drug Diversion — Prescribing-practice indicators, including pre-signed and delegated prescriptions.
- Regulatory Guide — Controlled Substances Act prescribing requirements for physicians.
- Hospital and Clinic Diversion Prevention Checklist — Self-assessment for prescriber-level controls.
- More Diversion Case Studies — Other physician prescribing settlements.