[Federal Register: November 29, 2004 (Volume 69, Number 228)]
[Notices]
[Page 69407-69409]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29no04-108]
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DEPARTMENT OF JUSTICE
Drug Enforcement Administration
Prachi Enterprises, Inc.; Denial of Registration
On July 23, 2004, the Deputy Assistant Administrator, Office of
Diversion Control, Drug Enforcement Administration (DEA), issued an
Order to Show Cause to Prachi Enterprises, Inc. (Prachi) proposing to
deny its September 9, 2003, application for DEA
[[Page 69408]]
Certificate of Registration as a distributor of list I chemicals. The
Order to Show Cause alleged that granting Prachi's application would be
inconsistent with the public interest, as that term is used in 21
U.S.C. 823(h) and 824(a). The order also notified Prachi that should no
request for a hearing be filed within 30 days, its hearing right would
be deemed waived.
According to the DEA investigative file, the Order to Show Cause
was sent by certified mail to Prachi at its proposed registered
location at 1516 Kalamazoo Drive, Suite 5A, Griffin, Georgia 30224. It
was received on August 2, 2004, and DEA has not received a request for
a hearing or any other reply from Prachi or anyone purporting to
represent the company in this matter.
Therefore, the Deputy Administrator of DEA, finding that (1) Thirty
days have passed since delivery of the Order to Show Cause, and (2) no
request for a hearing having been received, concluded that Prachi has
waived its hearing right. See Aqui Enterprises, 67 FR 12576 (2002).
After considering relevant material from the investigative file, the
Deputy Administrator now enters her final order without a hearing
pursuant to 21 CFR 1309.53 (c) and (d) and 1316.67. The Deputy
Administrator finds as follows.
List I chemicals are those that may be used in the manufacture of a
controlled substance in violation of the Controlled Substances Act. 21
U.S.C. 802(34); 21 CFR 1310.02(a). Pseudoephedrine and ephedrine are
list I chemicals commonly used to illegally manufacture
methamphetamine, a Schedule II controlled substance. As noted in
previous DEA final orders, methamphetamine is an extremely potent
central nervous system stimulant, and its abuse is a persistent and
growing problem in the United States. See e.g., Direct Wholesale, 69 FR
11654 (2004); Branex, Inc., 69 FR 8682 (2004); Yemen Wholesale Tobacco
and Candy Supply, Inc., 67 FR 9997 (2002); Denver Wholesale, 67 FR
99986 (2002).
The Deputy Administrator's review of the investigative file reveals
that on or about September 9, 2003, an application was submitted by an
officer of Prachi, Mr. Ashish Patel, seeking registration to distribute
ephedrine, pseudoephedrine and phenylpropanolamine list I chemical
products. Subsequently Mr. Patel notified DEA the company did not
intend to sell any products containing phenylpropanolamine.
In connection with the pending application, an on-site pre-
registration investigation was conducted. Mr. Patel advised
investigators that Prachi was a wholesale distributor of over-the-
counter items to convenience stores, liquor stores, gas stations and
grocery stores. He proposed to sell Mini-Thins and Max-Brand
pseudoephedrine and Two-Way products, but was unable to articulate any
other intended products containing listed chemicals the company might
sell. He also failed to provide DEA with a requested list of intended
products. He furthermore failed to provide DEA with a list of intended
customers for the list I chemical products, although he had 350
customers purportedly awaiting his registration. DEA was unable to
conduct customer verifications without that information.
DEA is aware that small illicit laboratories operate with listed
chemical products often procured, legally or illegally, from non-
traditional retailers of over-the-counter drug products, such as gas
stations and small retail markets. Some retailers acquire product from
multiple distributors to mask their acquisition of large amounts of
listed chemicals. In addition, some individuals utilize sham
corporations or fraudulent records to establish a commercial identity
in order to acquire listed chemicals.
The illegal production of methamphetamine continues unabated within
the Southwest region. The adjacent State of Tennessee leads the region
in the number of clandestine laboratories seized, accounting for
approximately 50 percent of the clandestine laboratories seized during
the second quarter of 2002. When compared with the third quarter of
2001, the increase in clandestine laboratory seizures is notable.
According to records for the DEA Atlanta region, 360 clandestine
laboratories were seized during the third quarter of 2002. Of these,
207 were located in Tennessee, 103 in Georgia, 35 in South Carolina and
15 in North Carolina. In Georgia, there has been a consistent increase
in the number of illicit laboratories and enforcement teams continue to
note a trend toward smaller capacity laboratories. This is likely due
to the ease of concealment associated with smaller laboratories, which
continue to dominate seizures and cleanup responses.
The adjacent State of Florida has a substantial methamphetamine
abuse problem in Northeast and Central Florida, and DEA is aware of a
past history of trafficking in precursors in these areas. Distributors
or retailers serving in the illicit methamphetamine trade observe no
borders. In fact, where precursor laws are stringent, out-of-state
distributors often make direct shipments to retailers without observing
state requirements.
DEA knows by experience that there exists a ``gray market'' in
which certain high strength, high quantity pseudoephedrine; and
ephedrine products are distributed only to convenience stores and gas
stations, from where they have a high incidence of diversion. These
grey market products are not sold in large discount stores, retail
pharmacies or grocery stores, where sales of therapeutic over-the-
counter drugs predominate. Mini-Thins and Max Brand products are prime
products in this gray market industry and are rarely found in any
retail store serving the traditional therapeutic market.
DEA also knows from industry data, market studies and statistical
analysis that over 90% of over-the-counter drug remedies are sold in
drug stores, supermarket chains and ``big box'' discount retailers.
Less than one percent of cough and cold remedies are sold in gas
stations or convenience stores. Studies have indicated that most
convenience stores could not be expected to sell more than $20.00 to
$40.00 worth of products containing pseudoephedrine per month. The
expected sales of ephedrine products are known to be even smaller.
Convenience stores handling gray market products often order more
product than what is required for the legitimate market and obtain
chemical products from multiple distributors.
Pursuant to 21 U.S.C. 823(h), the Deputy Administrator may deny an
application for a Certificate of Registration if she determines that
granting the registration would be inconsistent with the public
interest. Section 823(h) requires that the following factors be
considered in determining the public interest:
(1) Maintenance of effective controls against diversion of listed
chemicals into other than legitimate channels;
(2) Compliance with applicable Federal, State and local law;
(3) Any prior conviction record under Federal or State laws
relating to controlled substances or to chemicals controlled under
Federal or State law;
(4) any past experience of the applicant in the manufacture and
distribution of chemicals; and
(5) Such other factors as are relevant to and consistent with the
public health and safety.
As with the public interest analysis for practitioners and
pharmacies pursuant to subsection (f) of section 823, these factors are
to be considered in the disjunctive; the Deputy Administrator may rely
on any one or a combination
[[Page 69409]]
of factors and may give each factor the weight she deems appropriate in
determining whether a registration should be revoked or an application
for registration denied. See, e.g., Energy Outlet, 64 FR 14269 (1999).
See also, Henry J. Schwartz, Jr., M.D., 54 FR 16422 (1989).
The Deputy Administrator finds factors four and five relevant to
the pending application for registration.
With regard to factor four, the applicant's past experience in the
distribution of chemicals, the Deputy Administrator finds this factor
relevant based on Mr. Patel's lack of knowledge and experience
regarding the laws and regulations governing handling of list I
chemical products. In prior DEA decisions, this lack of experience in
handling list I chemical products has been a factor in denying pending
applications for regristration. See, e.g., Direct Wholesale, supra, 69
FR 11654; ANM Wholesale, 69 FR 11652 (2004); Xtreme Enterprises, Inc.,
67 FR 76195 (2002).
With regard to factor five, other factors relevant to and
consistent with the public safety, the Deputy Administrator finds this
factor weights heavily against granting the application. Unlawful
methamphetamine use is a growing public health and safety concern
throughout the United States and Southeast. Ephedrine and
pseudoephedrine are precursor products needed to manufacture
methamphetamine and operators of illicit methamphetamine laboratories
regularly acquire the precursor products needed to manufacture the drug
from convenience stores and gas stations which, in prior DEA decisions,
have been identified as constituting the grey market for list I
chemical products. It is apparent that Prachi intends on being a
participant in this market.
While there are no specific prohibitions under the Controlled
Substances Act regarding the sale of listed chemical products to these
entities, DEA has nevertheless found these establishments serve as
sources for the diversion of large amounts of listed chemical products.
See, e.g., ANM Wholesale, supra, 69 FR 11652; Xtreme Enterprises, Inc.,
supra, 67 FR 76195; Sinbad Distributing, 67 FR 10232 (2002); K.V.M.
Enterprises, 67 FR 70968 (2002).
The Deputy Administrator has previously found that many
considerations weighed heavily against registering a distributor of
list I chemicals because, ``[v]irtually all of the Respondent's
customers, consisting of gas station and convenience stores, are
considered part of the grey market, in which large amounts of listed
chemicals are diverted to the illicit manufacture of amphetamine and
methamphetamine.'' Xtreme Enterprises, Inc., supra, 67 FR at 76197. As
in Xtreme Enterprises, Inc., Mr. Patel's lack of a criminal record and
stated intent to comply with the law and regulations are far outweighed
by his lack of experience and the company's intent to sell ephedrine
and pseudoephedrine exclusively to the gray market.
The Deputy Administrator is further troubled by Mr. Patel's
reticence to provide requested information to DEA, indicating his
company cannot be trusted to handle the responsibilities of a
registrant.
Based on the foregoing, the Deputy Administrator concludes that
granting the pending application would be inconsistent with the public
interest.
Accordingly, the Deputy Administrator of the Drug Enforcement
Administration, pursuant to the authority vested in her by 21 U.S.C.
823 and 823 and 28 CFR 0.100(b) and 0.104, hereby orders the pending
application for DEA Certificate of Registration, previously submitted
by Prachi Enterprises, Inc., be, and it hereby is, denied. This order
is effective December 29, 2004.
Dated: November 10, 2004.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. 04-26311 Filed 11-26-04; 8:45 am]
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