[Federal Register: July 8, 2003 (Volume 68, Number 130)]
[Proposed Rules]
[Page 40576-40579]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08jy03-20]
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DEPARTMENT OF JUSTICE
Drug Enforcement Administration
21 CFR Part 1301
[Docket No. DEA-196P]
RIN 1117-AA73
Reports by Registrants of Theft or Significant Loss of Controlled
Substances
AGENCY: Drug Enforcement Administration (DEA), Justice.
ACTION: Notice of proposed rulemaking; guidance.
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SUMMARY: DEA is proposing the amendment of its regulations to clarify
its policy regarding reports by registrants of theft or significant
loss of controlled substances. There has been some confusion as to what
constitutes a significant loss, and when and how initial notice of a
theft or loss should be provided to DEA. This Notice of Proposed
Rulemaking proposes the clarification of DEA regulations and provides
guidance to registrants regarding the theft, significant loss and
explained loss of controlled substances.
DATES: Written comments must be postmarked on or before September 8,
2003.
ADDRESSES: Comments should be sent to the Deputy Assistant
Administrator, Office of Diversion Control, Drug Enforcement
Administration, Washington, DC 20537, Attention: DEA Federal Register
Representative/CCR.
FOR FURTHER INFORMATION CONTACT: Patricia M. Good, Chief, Liaison and
Policy Section, Office of Diversion Control, Drug Enforcement
Administration, Washington, DC 20537, Telephone (202) 307-7297.
SUPPLEMENTARY INFORMATION:
Background
DEA is publishing this Notice of Proposed Rulemaking (NPRM) to
propose the clarification of its policies and procedures regarding the
reporting by registrants of the theft or significant loss of controlled
substances.
Title 21, Code of Federal Regulations, Sec. 1301.74(c) ``Other
security controls for non-practitioners; narcotic treatment programs
and compounders for narcotic treatment programs.'' requires that: ``The
registrant shall notify the Field Division Office of the Administration
in his area of any theft or significant loss of any controlled
substances upon discovery of such theft or loss. The supplier shall be
responsible for reporting in-transit losses of controlled substances by
the common or contract carrier selected pursuant to Sec. 1301.74(e),
upon discovery of such theft or loss. The registrant shall also
complete DEA Form 106 regarding such theft or loss. Thefts must be
reported whether or not the controlled substances are subsequently
recovered and/or the responsible parties are identified and action
taken against them.''
Title 21, Code of Federal Regulations, Sec. 1301.76(b) ``Other
security controls for practitioners.'' further requires that: ``The
registrant shall notify the Field Division Office of the Administration
in his area of the theft or significant loss of any controlled
substances upon discovery of such loss or theft. The registrant shall
also complete DEA (or BND) Form 106 regarding such loss or theft.''
A number of questions have arisen regarding the meaning of certain
terms in these paragraphs. Specifically, there seems to be confusion
within the regulated industry as to the exact meaning of the phrase
``upon discovery''. Therefore, as further discussed below, DEA is
proposing the amendment of the regulations to insert the word
``immediately'' before the phrase ``upon discovery'' to clarify this
point. Further, DEA is proposing the amendment of its regulations to
list certain factors which registrants should consider when determining
whether a loss of controlled substances is significant. Finally, this
document provides guidance to registrants on the reporting of breakage,
spillage or other explained losses of controlled substances. No
regulatory amendments are being proposed regarding this guidance.
Theft or Other Unexplained Significant Loss of Controlled Substances
What Is a DEA Registrant Required To Do When a Theft or Significant
Loss Is Discovered?
Every DEA registrant is required to notify the DEA field office in
their area of any theft or significant loss of controlled substances
upon its discovery. DEA has always viewed ``upon discovery'' to mean
that notification should occur immediately and without delay. Every DEA
registrant (practitioner, pharmacy, hospital/clinic, manufacturer,
distributor, etc.) must comply with this requirement, and such
compliance cannot be overridden by an internal corporate policy that is
contrary to the notification requirement. For example, a DEA-registered
pharmacy must provide notice to the local DEA field office when a theft
or significant loss is discovered. This requirement is not satisfied by
the reporting of the theft or significant loss internally to
individuals in corporate management. DEA must be notified directly and
immediately of the theft or significant loss of the controlled
substances. A corporation that owns/operates multiple registered sites
and wishes to channel all notifications through a central point such as
corporate loss prevention, corporate security, or other corporate
entity may do so but must still fulfill the requirement to provide
notice to DEA immediately upon discovery by the actual registrant.
However, this immediate notification does not always occur. Therefore,
DEA is proposing the amendment of its regulations to insert the word
``immediately'' before the phrase ``upon discovery'' to clarify this
point.
The purpose of immediate notification is to provide an opportunity
for DEA, state, or local participation in the investigative process
when warranted, and to create a record that the theft or significant
loss was properly reported. It also alerts law enforcement to more
broadly based circumstances and patterns of which the individual
registrant may be unaware. This notification is considered part of a
good-faith effort on the part of the regulated industries to maintain
effective controls against the diversion of controlled substances, as
required by 21 CFR 1301.71(a). Lack of prompt notification could
prevent effective investigation and prosecution of individuals involved
in the diversion of controlled substances. Withholding or failing to
provide information is a violation of the law and regulations (21
U.S.C. 821, 21 U.S.C. 842(a)(5), 21 CFR 1301.74(c), 1301.76(b)).
How Should Notice of a Theft or Significant Loss Be Provided?
The regulations require that notice of a theft or significant loss
must be reported to DEA upon its discovery. As noted above, DEA has
always viewed ``upon discovery'' to mean that
[[Page 40577]]
notification should occur immediately and without delay. Where
circumstances of the theft or significant loss are immediately known, a
DEA Form 106, Report of Theft or Loss of Controlled Substances, should
be used to detail the circumstances of that theft or significant loss.
When details concerning the specific circumstances surrounding the
theft or loss are unknown at the time of discovery, DEA recommends
initial notice be provided by faxing a short statement to DEA advising
of the theft or significant loss. While such initial notice may
alternatively be mailed, delays occuring due to the mailing process may
hinder investigative efforts by DEA. A DEA Form 106, Report of Theft or
Loss of Controlled Substances, is not immediately necessary. The
registrant may then make efforts to determine the facts involved by
conducting inventories, internal audits, and/or investigations using
internal or law enforcement resources, as appropriate. The DEA Form 106
should be submitted once the circumstances surrounding the theft or
significant loss are clear. The DEA Form 106 must document the
circumstances of the theft or significant loss and the quantities of
controlled substances involved. DEA recognizes that some time may
elapse between the time initial notice of a theft or loss is provided
and the conclusion of the investigation. DEA suggests that if an
investigation takes more than two months to complete, registrants
provide updates regarding the investigation to DEA. The conduct of an
investigation does not obviate the need for immediate notification of
the theft or significant loss by the registrant to the local DEA field
office. If, after an investigation of the circumstances surrounding the
disappearance of the material, it is determined that no theft or
significant loss occurred, no DEA Form 106 need be filed. However, DEA
recommends the registrant advise DEA that a DEA Form 106 is not needed
or will not be filed regarding the incident.
What Other Actions Should a Registrant Take When a Theft or Significant
Loss Occurs?
The theft of controlled substances from a registrant is a criminal
act, and a source of controlled substances diversion requiring
notification of DEA. Although not specifically required by DEA law or
regulations, the registrant should also notify local law enforcement
and state regulatory agencies. Prompt notification of law enforcement
agencies will allow them to investigate the incident and prosecute
those responsible for the diversion.
Complete accountability by a registrant for all controlled
substances handled is a fundamental requirement of the closed
distribution system mandated by the Controlled Substances Act (CSA).
The CSA requires: ``* * * every registrant under this title
manufacturing, distributing, or dispensing a controlled substance or
substances shall maintain, on a current basis, a complete and accurate
record of each such substance manufactured, received, sold, delivered,
or otherwise disposed of by him,* * *.'' (21 U.S.C. 827(a)(3)). No
registrant should disregard any unexplained shortage of controlled
substances. Registrants should treat an individual theft or significant
loss seriously and should monitor occurrences so that patterns do not
remain undetected. Record keeping must be accurate and complete so as
to serve as a reliable reporting and recording device.
DEA has become aware of instances in which registrants have used a
DEA Form 106 to document or explain minor inventory discrepancies,
thereby ``balancing the books.'' DEA wishes to stress that the DEA Form
106 should be used only to document thefts or significant losses of
controlled substances. Minor inventory discrepancies, not attributable
to theft, should not be reported to DEA or recorded on a DEA Form 106.
Rather, registrants should make appropriate notations of minor
inventory discrepancies in their records, indicating the amount of
variance between the physical count and the amount accounted for
through records. Such discrepancies need not be reported to DEA if they
are not significant or actual losses. If a registrant is unsure of the
significance of a loss after considering the factors described below,
the registrant should file the report. Any continuing pattern of loss
of seemingly insignificant quantities should always be considered
significant.
What Specific Regulations Does This Rulemaking Propose To Amend?
Specifically, this rulemaking proposes the amendment of 21 CFR
1301.74(c) and 1301.76(b) to insert the word ``immediately'' before the
phrase ``upon discovery'' to clarify the points raised in the previous
discussion. Although not specifically mentioned in the previous
discussion, such reports include the report by a supplier of in-transit
thefts or losses of controlled substances by the common or contract
carrier selected by the supplier pursuant to 21 CFR 1301.74(e).
Further, this rulemaking proposes a minor technical correction to Sec.
1301.76(b) to remove the reference to BND Form 106, as this form is no
longer used.
Significant Loss of Controlled Substances
What Constitutes a Significant Loss?
Questions have arisen as to exactly what constitutes a
``significant loss.'' There is no single objective standard which can
be established and applied to all registrants to determine whether a
loss is significant. Any unexplained loss or discrepancy should be
reviewed within the context of a registrant's business activity and
environment. What constitutes a significant loss for one registrant may
be construed as comparatively insignificant for another. For example,
the loss by a pharmacy of a 100-count bottle of controlled substance
tablets would be viewed as significant, whereas the same loss by a full
line distributor may be viewed differently, particularly if the loss is
an unexplained inventory discrepancy that may have resulted from a
picking error. A manufacturer may experience continuous losses in the
manufacturing process due to atmospheric changes, mixing procedures,
etc. Such losses may not be deemed by the registrant to be significant,
and may be recorded in batch records. Conversely, for registrants other
than manufacturers, the repeated loss of small quantities of controlled
substances over a period of time may indicate a significant aggregate
problem which must be reported to DEA, even though the individual
quantity of each occurrence is not significant.
When determining whether a loss is significant, a registrant should
consider, among others, the following factors:
(1) The actual quantity of controlled substances lost in relation
to the type of business;
(2) A pattern of such losses, and the results of efforts taken to
resolve them; and, if known,
(3) Local trends and other indicators of the diversion potential of
the missing material.
Specific questions which a registrant should ask to identify
whether a loss is significant include, but are not limited to:
(1) Has a pattern of loss been identified? Would this pattern
result in a substantial loss of controlled substances over that period
of time?
(2) Are specific controlled substances being lost, and do the
losses appear to be random?
(3) Are the specific controlled substances likely candidates for
diversion?
(4) Can losses of controlled substances be associated with access
to those
[[Page 40578]]
controlled substances by specific individuals? Can losses be attributed
to unique activities which may take place involving the controlled
substances?
Individual registrants should examine both their business
activities and the external environment in which those business
activities are conducted to determine whether unexplained losses of
controlled substances are significant. When in doubt, registrants
should err on the side of caution in alerting the appropriate law
enforcement authorities, including DEA, of thefts and losses of
controlled substances.
What Specific Regulations Does This Rulemaking Propose To Amend?
Specifically, this rulemaking proposes the amendment of 21 CFR
1301.74(c) and 1301.76(b) to include the factors listed above as
factors which a registrant should consider when determining whether a
loss is significant and, thus, must be reported to DEA. DEA encourages
registrants to use other criteria, as well as those factors listed
above, which they have found to be useful in the evaluation of losses
of controlled substances when determining whether such losses are
significant, but is proposing the provision of these factors as the
minimum which registrants should consider.
Guidance Regarding Breakage, Spillage and Other Explained Loss of
Controlled Substances
What Is Required of a DEA Registrant When Breakage or Spillage Occurs?
DEA has encountered instances in which registrants have attempted
to report spillages or explained losses of controlled substances on a
DEA Form 106. The breakage, spillage or other witnessed controlled
substance losses do not require the immediate notification of DEA. If
controlled substance containers are broken or damaged, or controlled
substances spilled, the substances are not considered ``lost'' because
they can be accounted for. When breakage, spillage or damage of
controlled substances occurs, the affected controlled substances must
be disposed of according to DEA requirements.
If there is breakage, spillage or other damage to controlled
substances, but the controlled substances are still recoverable, then
the registrant has two options for disposing of the controlled
substances. The registrant may dispose of the controlled substances by
either (1) Contacting their local DEA field office and receiving
permission from that office to dispose of the controlled substances
pursuant to 21 CFR 1307.21, or (2) the registrant may send those
controlled substances to a firm registered with DEA to handle returns/
disposals.
If the registrant receives permission from DEA to dispose of the
controlled substances pursuant to 21 CFR 1307.21, then that registrant
must complete a DEA Form 41, Registrants Inventory of Drugs
Surrendered, explaining the circumstances of the breakage. Two
individuals who witnessed the breakage, spillage or damage must sign
the DEA Form 41, indicating what they witnessed. Registrants must
submit three copies of the DEA Form 41 to their local DEA field office
(21 CFR 1307.21(a)(1)). Registrants are also required to maintain a
copy of the DEA Form 41 in their records.
If the registrant sends the controlled substances to a DEA
registered disposer, then the registrant must complete the necessary
paperwork showing the distribution of the damaged controlled substances
to the registered disposer.
If the breakage or spillage is clearly observed but the controlled
substances are not recoverable, then the registrant must document the
circumstances of the breakage in their inventory records. Two
individuals who witnessed the breakage must sign the inventory records,
indicating what they witnessed. These records must be maintained in the
registrant's files.
Regulatory Certifications
Regulatory Flexibility Act
The Deputy Assistant Administrator hereby certifies that this
rulemaking has been drafted in accordance with the Regulatory
Flexibility Act (5 U.S.C. 605(b)), has reviewed this regulation, and by
approving it certifies that this regulation will not have a significant
economic impact on a substantial number of small entities. This
regulation seeks to clarify existing DEA regulations regarding the
reporting of thefts and losses of controlled substances. No new
recordkeeping or reporting requirements are proposed in this
rulemaking.
Executive Order 12866
The Deputy Assistant Administrator further certifies that this
rulemaking has been drafted in accordance with the principles in
Executive Order 12866 Section 1(b). DEA has determined that this is not
a significant rulemaking action. Therefore, this action has not been
reviewed by the Office of Management and Budget. This rulemaking merely
seeks to clarify existing DEA regulations, policies and procedures.
Executive Order 12988
This regulation meets the applicable standards set forth in
sections 3(a) and 3(b)(2) of Executive Order 12988 Civil Justice
Reform.
Executive Order 13132
This rulemaking does not preempt or modify any provision of state
law; nor does it impose enforcement responsibilities on any state; nor
does it diminish the power of any state to enforce its own laws.
Accordingly, this rulemaking does not have federalism implications
warranting the application of Executive Order 13132.
Unfunded Mandates Reform Act of 1995
This rule will not result in the expenditure by State, local, and
tribal governments, in the aggregate, or by the private sector, of
$100,000,000 or more in any one year, and will not significantly or
uniquely affect small governments. Therefore, no actions were deemed
necessary under the provisions of the Unfunded Mandates Reform Act of
1995.
Small Business Regulatory Enforcement Fairness Act of 1996
This rule is not a major rule as defined by section 804 of the
Small Business Regulatory Enforcement Fairness Act of 1996. This rule
will not result in an annual effect on the economy of $100,000,000 or
more; a major increase in costs or prices; or significant adverse
effects on competition, employment, investment, productivity,
innovation, or on the ability of United States-based companies to
compete with foreign-based companies in domestic and export markets.
List of Subjects in 21 CFR Part 1301
Administrative practice and procedure, Drug traffic control,
Security measures.
For the reasons set out above, 21 CFR part 1301 is proposed to be
amended as follows:
PART 1301--REGISTRATION OF MANUFACTURERS, DISTRIBUTORS, AND
DISPENSERS OF CONTROLLED SUBSTANCES
1. The authority citation for part 1301 continues to read as
follows:
Authority: 21 U.S.C. 821, 822, 823, 824, 871(b), 875, 877.
2. Section 1301.74 is amended by revising paragraph (c) to read as
follows:
[[Page 40579]]
Sec. 1301.74 Other security controls for non-practitioners; narcotic
treatment programs and compounders for narcotic treatment programs.
* * * * *
(c) The registrant shall notify the Field Division Office of the
Administration in his area of any theft or significant loss of any
controlled substances immediately upon discovery of such theft or loss.
The supplier shall be responsible for reporting in-transit losses of
controlled substances by the common or contract carrier selected
pursuant to Sec. 1301.74(e), immediately upon discovery of such theft
or loss. The registrant shall also complete DEA Form 106 regarding such
theft or loss. Thefts must be reported whether or not the controlled
substances are subsequently recovered and/or the responsible parties
are identified and action taken against them. When determining whether
a loss is significant, a registrant should consider, among others, the
following factors:
(1) The actual quantity of controlled substances lost in relation
to the type of business;
(2) The specific controlled substances lost;
(3) Whether the loss of the controlled substances can be associated
with access to those controlled substances by specific individuals, or
whether the loss can be attributed to unique activities which may take
place involving the controlled substances;
(4) A pattern of such losses over a specific time period, whether
the losses appear to be random, and the results of efforts taken to
resolve the losses; and, if known,
(5) Whether the specific controlled substances are likely
candidates for diversion;
(6) Local trends and other indicators of the diversion potential of
the missing material.
* * * * *
3. Section 1301.76 is amended by revising paragraph (b) to read as
follows:
Sec. 1301.76 Other security controls for practitioners.
* * * * *
(b) The registrant shall notify the Field Division Office of the
Administration in his area of the theft or significant loss of any
controlled substances immediately upon discovery of such loss or theft.
The registrant shall also complete DEA Form 106 regarding such loss or
theft. When determining whether a loss is significant, a registrant
should consider, among others, the following factors:
(1) The actual quantity of controlled substances lost in relation
to the type of business;
(2) The specific controlled substances lost;
(3) Whether the loss of the controlled substances can be associated
with access to those controlled substances by specific individuals, or
whether the loss can be attributed to unique activities which may take
place involving the controlled substances;
(4) A pattern of such losses over a specific time period, whether
the losses appear to be random, and the results of efforts taken to
resolve the losses; and, if known,
(5) Whether the specific controlled substances are likely
candidates for diversion;
(6) Local trends and other indicators of the diversion potential of
the missing material.
* * * * *
Dated: June 25, 2003.
Laura M. Nagel,
Deputy Assistant Administrator, Office of Diversion Control.
[FR Doc. 03-17127 Filed 7-7-03; 8:45 am]
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