[Federal Register: November 29, 2004 (Volume 69, Number 228)]
[Notices]
[Page 69409-69411]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29no04-109]
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DEPARTMENT OF JUSTICE
Drug Enforcement Administration
Volusia Wholesale; 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 Volusia Wholesale (Volusia) proposing to deny
its December 12, 2003, application for DEA Certificate of Registration
as a distributor of list I chemicals. The Order to Show Cause alleged
that granting Volusia's application would be inconsistent with the
public interest, as that term is used in 21 U.S.C. 823(h). The order
also notified Volusia 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 Volusia at its then-proposed registered
location at 917 Daytona Avenue, Daytona Beach, Florida 32117. It was
received on August 2, 2004, and DEA has not received a request for a
hearing or any other reply from Volusia 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, concludes that Volusia 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 the
owner of Volusia, Mr. Anwar Khrino, seeking registration to distribute
ephedrine and pseudoephedrine list I chemical products. The application
initially listed the proposed registered location as Mr. Khrino's then-
residence, 1420 N. Grandview Avenue, Daytona Beach, Florida 32118. He
subsequently moved to 917 Daytona Avenue, Daytona Beach, Florida 32117,
which was to be Volusia's registered address.
In connection with the pending application, an on-site pre-
registration investigation was conducted at the Daytona Avenue proposed
premises. The location was Mr. Khrino's residence. There were no
security measures in place and his intent was to store the chemical
products overnight in a locked delivery van in the driveway.
Mr. Khrino advised investigators Volusia is a sole proprietorship
and wholesale distributor of approximately 60 to 80 sundry and novelty
items to convenience stores and gas stations. He proposed to distribute
``two packs'' of
[[Page 69410]]
six different cough and cold remedies containing pseudoephedrine.
Mr. Khrino identified two proposed suppliers of listed chemicals,
one of which DEA was aware no longer held a DEA registration to handle
listed chemicals. Mr. Khrino initially failed to provide DEA a complete
proposed customer list for listed chemical products. Later, he sent DEA
a handwritten list of 13 purported customers for listed chemicals. DEA
conducted two verifications of purported customers. At the first
convenience store, investigators were told the store was not a customer
of Volusia. Investigators also noted the store was displaying the
combination ephedrine, Mini-thins product on its counter. Investigators
were unable to locate the second purported customers, a delicatessen.
There was no such retailer at the address provided by Mr. Khrino and
the contact number for this ``customer`` turned out to be Volusia's fax
machine.
The 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 and trade across state lines. In fact, where precursor laws are
stringent, out-of-state distributors often make direct shipments to
retailers without observing state requirements.
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 too 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.
In the adjacent State of 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.
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 ``two-way'' products and
other pseudoephedrine 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.
Furthermore, 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 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 one, four and five relevant
to the pending application for registration.
As to factor one, maintenance of effective controls against
diversion of listed chemicals into other than legitimate channels, the
DEA pre-registration inspection documented inadequate security at the
proposed registered location, which is a personal residence. See, e.g.,
John E. McRae d/b/a J & H Wholesale, 69 FR 51480, 51481 (2004). Mr.
Khrino has proposed the storage of listed chemical products inside a
van that is routinely parked in the driveway of his residence. As the
Deputy Administrator has previously held, ``the prospect of listed
chemicals being stored in an unattended vehicle [is] fraught with the
dangers of diversion.'' See, William E. ``Bill'' Smith d/b/a B & B
Wholesale, 69 FR 22559, 22560 (2004). Accordingly, this factor weighs
against the granting of Volusia's pending registration application.
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. Khrino'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 registration. 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 weighs heavily against granting the application. Unlawful
methamphetamine use is a growing public health and safety concern
throughout the United States and the 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 Volusia 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
[[Page 69411]]
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. Khrino's lack of a criminal record and
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. Khrino's
failure to provide accurate 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 824 and 28 CFR 0.100(b) and 0.104, hereby orders the pending
application for DEA Certificate of Registration, previously submitted
by Volusia Wholesale, be, and it hereby is, denied. This order is
effective December 29, 2004.
Dated: November 10, 2004.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. 04-26312 Filed 11-26-04; 8:45 am]
BILLING CODE 4410-09-M