[Federal Register: August 12, 2005 (Volume 70, Number 155)]
[Rules and Regulations]
[Page 47094-47097]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12au05-9]
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DEPARTMENT OF JUSTICE
Drug Enforcement Administration
21 CFR Part 1301
[Docket No. DEA-196F]
RIN 1117-AA73
Reports by Registrants of Theft or Significant Loss of Controlled
Substances
AGENCY: Drug Enforcement Administration (DEA), Justice.
ACTION: Final Rule.
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SUMMARY: DEA is amending its regulations regarding reports by
registrants of theft or significant loss of controlled substances.
There had 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. In this final rule, DEA clarifies the regulations and provides
guidance to registrants regarding the theft, significant loss, and
unexplained loss of controlled substances.
DATES: This final rule is effective September 12, 2005.
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:
I. Background
DEA's Legal Authority
DEA implements the Controlled Substances Act (21 U.S.C. 801-971)
(CSA), as amended. DEA publishes the implementing regulations for this
statute in Title 21 of the Code of Federal Regulations (CFR), Part 1300
to 1399. These regulations are designed to ensure that there is a
sufficient supply of these substances for legitimate medical purposes
and deter the diversion of controlled substances to illegal purposes.
The CSA mandates that DEA establish a closed system of control for
manufacturing, distribution, and dispensing of controlled substances.
As part of these regulations, DEA requires that registrants have
systems to maintain security for controlled substances and to report
thefts or losses.
Theft and Loss Reporting Requirements
Section 1301.74(c), ``Other security controls for non-
practitioners; narcotic treatment programs and compounders for narcotic
treatment programs.'' states that ``[t]he 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.''
Section 1301.76(b), ``Other security controls for practitioners.''
requires that ``[t]he 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.''
DEA's Proposed Rule
On July 8, 2003, DEA published a notice of proposed rulemaking
(NPRM) (68 FR 40576) to address confusion that exists within the
regulated industry as to the exact meaning of the phrases ``upon
discovery'' and ``significant loss.''
DEA has always viewed ``upon discovery'' to mean that notification
should occur immediately and without delay. 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 personnel to more broadly based
circumstances or 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 Sec.
1301.71(a). Lack of prompt notification could prevent effective
investigation
[[Page 47095]]
and prosecution of individuals involved in the diversion of controlled
substances. DEA proposed to insert the word ``immediately'' before the
phrase ``upon discovery'' to clarify this point.
Regarding ``significant loss,'' there is no single objective
standard that 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. A manufacturer may experience continuous losses in the
manufacturing process due to, for example, atmospheric changes or
mixing procedures. 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 that must be reported to DEA, even
though the individual quantity of each occurrence is not significant.
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. DEA proposed to amend the regulations by
inserting a list of factors that registrants should consider when
determining whether a loss of controlled substances is significant.
II. Comments Received in Response to the NPRM Published July 8, 2003
DEA received eight comments in response to the NPRM. In general,
the comments were supportive of DEA efforts to clarify current
regulations and provide guidance regarding reporting of theft or
significant loss of controlled substances. At the same time, commenters
offered a number of suggestions that, in their view, would provide even
greater clarity and certainty to the regulations. These comments are
addressed below.
Timing of Reports
Regarding the timing of initial theft or loss reports, DEA proposed
to insert the word ``immediately'' before the phrase ``upon
discovery.'' DEA also suggested in the proposed rule preamble that
submission of the DEA Form 106 itself is not immediately necessary if
the registrant needs time to investigate the facts surrounding the
theft or significant loss, but that updates should be provided to DEA
if the investigation takes more than two months. One commenter
recommended that the regulations provide an objective standard
regarding the time frame when reports must be made (while retaining the
subjective standard for registrants to decide when a report is
necessary). Specifically, the commenter suggested that initial reports
be required within one business day and that DEA Form 106 must be filed
within 30 days.
DEA agrees with the commenter that an objective standard for
initial notification would be useful and believes the one-business-day
suggestion is consistent with its proposed addition of the word
``immediately.'' Regarding the 30-day requirement for submission of the
Form 106, however, DEA believes that may be difficult to comply with in
some cases, so prefers to retain the registrant flexibility provided by
the approach outlined in the proposed rule preamble, i.e., DEA Form 106
should be submitted once the circumstances surrounding the theft or
significant loss are clear, but updates should be provided to DEA if
the investigation takes more than two months.
Clarification on ``Discovery''
Related to this change, several commenters requested clarification
or proposed changes to what constitutes ``discovery.'' They suggested
this was more a source of confusion to the regulated community than was
the timing issue. According to these commenters, DEA should explicitly
recognize that ``discovery'' may well occur in increments, therefore,
knowing when to make a report becomes complex. One commenter suggested
that the addition of objective standards for submitting reports would
resolve much of the confusion, while another suggested adding ``and
verification'' after the phrase ``upon discovery.''
DEA does not disagree with these commenters and recognized the
incremental nature of discovery in the preamble to the proposed rule
when it suggested that an update be provided to DEA within 60 days of
initial notification, if the investigation into the theft or
significant loss is still ongoing, and that the Form 106 need not be
filed at all if the registrant ultimately determines that no theft or
significant loss occurred. DEA's overriding interest here is in
obtaining immediate notification of suspected or actual theft or
significant loss and accepts the one-business-day suggestion as a clear
standard for making that required initial notification.
Method of Initial Notification
One commenter questioned the nature of the initial notification
itself, seeking clarification on whether a telephone call would
suffice. In the preamble to the proposed rule, DEA recommended that the
initial notification be a short statement provided by fax, which would
avoid delays that might be associated with using regular U.S. mail.
Faxing is not the only option a registrant may use, but DEA does
believe that the notification should be in writing. Not only does this
eliminate any misunderstanding that could arise in an oral
communication, but it also provides the registrant with a record of
what was provided, when it was provided, and to whom it was provided.
DEA Form 106
A final area of comments on the notification process raised issues
about the purpose of Form 106 and offered suggestions that the
commenters believed would make it a more useful report. While DEA
appreciates these comments and suggestions, DEA considers them beyond
the scope of this rulemaking. DEA Form 106 is scheduled to be revised
within the next year, and DEA will consider these comments during that
process.
In reviewing the existing regulation and DEA Form 106, DEA noted
that while the form itself specified that the form should be completed
and submitted to DEA, the regulations merely required that the form be
completed and did not contain a requirement that the form be submitted.
Therefore, DEA is amending the regulations to explicitly acknowledge
the requirement, currently contained only in the DEA Form 106
instructions, that the completed DEA Form 106 be submitted to DEA.
Factors To Be Considered in Determining Whether a Loss Is Significant
In the proposed rulemaking, DEA included a change that would add a
list of factors to be considered in determining whether a loss is
``significant.'' DEA recognizes there is no single objective standard
that can be applied to all registrants--what constitutes a significant
loss for one registrant may be construed as comparatively insignificant
for another. Any unexplained loss or discrepancy must be reviewed
within the context of a registrant's business activity and
[[Page 47096]]
environment. Several commenters thought the list of factors is a
helpful addition. One commenter disagreed, stating that ``none of these
factors or questions is particularly useful in determining whether
initial notification should be provided to DEA to satisfy the
requirement of reporting'' and suggested that confusion over what
constitutes a significant loss exists not only among DEA registrants,
but also among DEA field offices, which results in differences in
interpretation and enforcement.
DEA recognizes that there has been confusion within the regulated
community regarding the application of this standard and for that very
reason proposed the list of factors to clarify for all parties what
registrants should be considering--at a minimum--when determining
whether a loss is significant. As DEA noted in the proposed rule
preamble, ``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.'' DEA encourages registrants to use additional
factors beyond what DEA suggests in the evaluation of whether a loss is
significant. DEA believes, however, that it has provided as much
direction on this matter as it reasonably can, given the case-by-case
nature of this determination.
In-Transit Loss
One commenter also suggested the insertion of the word
``significant'' before the phrase ``in-transit losses of controlled
substances'' in Sec. 1301.74(c), unless DEA intends for all in-transit
losses to be reported. DEA does, in fact, intend for all in-transit
losses to be reported, not just significant losses. Therefore, to
clarify this point, and based on the comment received, DEA is amending
the regulatory text to reflect that ``all'' in-transit losses must be
reported to DEA.
DEA Form 41
Several commenters requested additional clarification and guidance
on reporting and recordkeeping, particularly with regard to breakage
and spillage and the submission of Form 41.
In the preamble to the proposed rulemaking, DEA did provide
guidance on this topic, both to distinguish it from reporting of thefts
or significant losses of controlled substances (and the use of DEA Form
106) and to restate the disposal and documentation obligations when
breakage, spillage, or other damage to controlled substances occurs.
DEA believes this guidance is adequate and sufficiently clear and does
not wish to expand on the topic as a part of this rulemaking on theft
and significant loss. Registrants should continue to employ common
sense, good faith approaches to their reporting and recordkeeping
obligations in the case of breakage and spillage.
Reporting of Thefts and Losses to ARCOS
Finally, DEA received a request for clarification of the reporting
of thefts and losses to DEA's Automation of Reports and Consolidated
Orders System (ARCOS). DEA wishes to reiterate that thefts and losses
are reported to ARCOS. Thefts are reported using transaction codes
based on the type of theft, e.g., theft from premises, in-transit loss,
etc. Losses are reported to ARCOS simply as losses. DEA did not propose
any regulatory change regarding this reporting, nor is it making a
regulatory change at this time.
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 significant losses of controlled substances. No
new recordkeeping or reporting requirements are imposed by 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 $115
million 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.
0
For the reasons set out above, 21 CFR part 1301 is amended as follows:
PART 1301--REGISTRATION OF MANUFACTURERS, DISTRIBUTORS, AND
DISPENSERS OF CONTROLLED SUBSTANCES
0
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, 951,
952, 953, 956, 957.
0
2. Section 1301.74 is amended by revising paragraph (c) to read as
follows:
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, in writing, of any theft or significant
loss of any
[[Page 47097]]
controlled substances within one business day of discovery of the theft
or loss. The supplier is responsible for reporting all in-transit
losses of controlled substances by the common or contract carrier
selected pursuant to paragraph (e) of this section, within one business
day of discovery of such theft or loss. The registrant shall also
complete, and submit to the Field Division Office in his area, DEA Form
106 regarding the theft or loss. Thefts and significant losses must be
reported whether or not the controlled substances are subsequently
recovered 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 that may take
place involving the controlled substances;
(4) A pattern of 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 controlled substance.
* * * * *
0
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, in writing, of the theft or significant
loss of any controlled substances within one business day of discovery
of such loss or theft. The registrant shall also complete, and submit
to the Field Division Office in his area, DEA Form 106 regarding the
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 that may take
place involving the controlled substances;
(4) A pattern of 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 controlled substance.
* * * * *
William J. Walker,
Deputy Assistant Administrator, Office of Diversion Control.
[FR Doc. 05-15969 Filed 8-11-05; 8:45 am]
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