[Federal Register: November 16, 2005 (Volume 70, Number 220)]
[Proposed Rules]
[Page 69474-69486]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16no05-21]
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DEPARTMENT OF JUSTICE
Drug Enforcement Administration
21 CFR Parts 1301 and 1309
[Docket No. DEA-266P]
RIN 1117-AA96
Controlled Substances and List I Chemical Registration and
Reregistration Application Fees
AGENCY: Drug Enforcement Administration (DEA), Department of Justice.
ACTION: Notice of proposed rulemaking.
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SUMMARY: DEA is proposing to adjust the fee schedule for DEA
registration and reregistration application fees relating to the
registration and control of the manufacture, distribution and
[[Page 69475]]
dispensing of controlled substances and listed chemicals to
appropriately reflect all costs associated with its Diversion Control
Program as mandated by 21 U.S.C. 822. Specifically, DEA proposes to
revise the fee schedule for controlled substances and List I chemical
handlers so that all manufacturers, distributors, importers, exporters,
and dispensers of controlled substances and of List I chemicals pay an
annual fee, by registrant category, irrespective of whether they handle
controlled substances or List I chemicals. This action responds to
recent amendments to the Diversion Control Fee Account provisions in
the Controlled Substances Act (CSA) and will bring DEA's fee
collections into line with the new requirements.
DATES: Written comments must be postmarked, and electronic comments
must be sent, on or before January 17, 2006.
ADDRESSES: To ensure proper handling of comments, please reference
``Docket No. DEA-266'' on all written and electronic correspondence.
Written comments sent via regular mail should be sent to the Deputy
Administrator, Drug Enforcement Administration, Washington, DC 20537,
Attention: DEA Federal Register Representative/ODL. Written comments
sent via express mail should be sent to DEA Headquarters, Attention:
DEA Federal Register Representative/ODL, 2401 Jefferson-Davis Highway,
Alexandria, VA 22301. Comments may be sent directly to DEA
electronically by sending an electronic message to
dea.diversion.policy@usdoj.gov. Comments may also be sent
electronically through http://www.regulations.gov using the electronic
comment form provided on that site. An electronic copy of this document
is also available at the http: //http://www.regulations.gov Web site. DEA will
accept attachments to electronic comments in Microsoft Word,
WordPerfect, Adobe PDF, or Excel file formats only. DEA will not accept
any file format other than those specifically listed above.
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. Introduction and Background
The Controlled Substances Act (CSA) requires that all
manufacturers, distributors, dispensers, importers and exporters of
controlled substances and List I chemicals obtain an annual
registration with DEA (21 U.S.C. 822 and 958(f)). In addition, the CSA,
as codified in 21 U.S.C. 821, authorizes the Attorney General, who in
turn redelegates this authority to the Administrator of DEA, to
``promulgate rules and regulations and to charge reasonable fees
relating to the registration and control of the manufacture,
distribution, and dispensing of controlled substances and listed
chemicals'' (21 U.S.C. 821 as amended by Pub. L. 108-447).
In October 1992, Congress passed the Departments of Commerce,
Justice and State, the Judiciary and Related Agencies Appropriations
Act of 1993 which changed the source of funding for DEA's Diversion
Control Program (DCP) from being part of DEA's Congressional
appropriation to full funding by registration and reregistration fees
through the establishment of the Diversion Control Fee Account (DCFA).
The Appropriations Act of 1993 required that ``[f]ees charged by the
Drug Enforcement Administration under its diversion control program
shall be set at a level that ensures the recovery of the full costs of
operating the various aspects of that program.'' The legislation did
not, however, provide clarification on what constituted the ``Diversion
Control Program,'' thus leaving open the issue as to what fee-setting
criteria should be used to determine which costs could be reimbursed
from the DCFA.
In response to the Appropriations Act of 1993, DEA published a
Notice of Proposed Rulemaking (NPRM) in December 1992 to adjust the
registration and reregistration fees for controlled substance
registrants (57 FR 60148, December 18, 1992). In the absence of
guidelines from Congress regarding the specific criteria to be followed
in identifying costs and setting the fees, DEA relied on the plain
language of the Appropriations Act of 1993 and proposed fees necessary
to cover the costs of the activities that were identified within the
budget decision unit known as the ``Diversion Control Program.''
At the time that the Appropriations Act of 1993 was passed, 21
U.S.C. 821 did not extend to chemical control activities; accordingly,
there were no registration or fee requirements for handlers of List I
chemicals. DEA therefore excluded chemical control costs from its Final
Rule implementing the requirements of the Appropriations Act of 1993
(58 FR 15272, March 22, 1993). Congress amended 21 U.S.C. 821 on
December 17, 1993 to require reasonable fees relating to ``the
registration and control of regulated persons and of regulated
transactions'' (Domestic Chemical Diversion Control Act of 1993, 3(a),
Pub. L. 103-200, 107 Stat. 2333); however, despite this amendment, DEA
has continued to endeavor to maintain separate funding for its
controlled substances diversion control and its chemical diversion
control activities.
Following publication of DEA's Final Rule, the American Medical
Association (AMA) and others filed a lawsuit objecting to the increase
in registration and reregistration fees on the grounds that DEA had
failed to provide adequate information as to what activities were
covered by the fees and how they were justified. Upon appeal, the
United States Court of Appeals for the District of Columbia Circuit
remanded, without vacating, the rule to the DEA, requiring the agency
to provide an opportunity for meaningful notice and comment on the fee-
funded components of the DCP. In doing so, the court confirmed the
boundaries of the DCP that DEA can fund by registration fees, finding
that the current statutory scheme (21 U.S.C. 821 and 958) required DEA
to set reasonable registration fees to recover the full costs of the
DCP. (AMA v. Reno, 57 F.3d 1129, 1135 (D.C. Cir. 1995)).
Thus, in the absence of a simple, objective measure by which DCP
costs could be identified and the appropriate fees calculated, both DEA
and the courts have looked to 21 U.S.C. 821 and 958 to define the
guidelines for determining what costs should be included in the
calculation of the fees and from whom the fees might be collected.
On November 20, 2004, Congress passed the Departments of Commerce,
Justice, and State, the Judiciary, and Related Agencies Appropriations
Act of 2005 which provided clarification as to the activities
constituting the DCP (Pub. L. 108-447). This Act was included in the
Consolidated Appropriations Act of 2005, which was signed into law by
the President on December 8, 2004 (Pub. L. 108-447). The Act amends 21
U.S.C. 886a to define the Diversion Control Program as ``the controlled
substance and chemical diversion control activities of the Drug
Enforcement Administration,'' which are further defined as the
``activities related to the registration and control of the
manufacture, distribution and dispensing, importation and exportation
of controlled substances and listed chemicals.'' It also amends the
section to provide that reimbursements from the DCFA ``* * * shall be
made without distinguishing between expenses related to controlled
substances activities and expenses related to chemical activities.''
[[Page 69476]]
Finally, the Act amends 21 U.S.C. 821 and 958(f) to make the language
of those sections consistent with the definition of the DCP (Pub. L.
108-447). The net effect of the amendments is to allow DEA to deposit
all registration and reregistration fees (controlled substance and
chemical) into the Fee Account and fund all controlled substance and
chemical diversion control activities from the account without
distinguishing as to the type of activity (controlled substance or
chemical) being funded.
Independent of the passage of the Appropriations Act, DEA undertook
an internal reorganization to increase operational efficiencies and
overall effectiveness. The resulting internal reorganization removes
the focus from the single business decision unit of the DCP to a focus
on diversion control activities irrespective of the business decision
unit. That is, the diversion control activities of DEA are no longer
contained in a single business decision unit identified as the
Diversion Control Program. Thus, in identifying the activities that
constitute the DCP, DEA must now look across the whole agency at all
functions related to the registration and control of the manufacture,
distribution, dispensing, importation and exportation of controlled
substances and listed chemicals. This approach adheres both to the
definition of the DCP contained in 21 U.S.C. 821 and 958 and to the
court's requirement that there must be a nexus between the DCP
activities funded through fees and the registration and control of the
manufacture, distribution, and dispensing of controlled substances and
of regulated persons and regulated transactions (now ``listed
chemicals'').
In keeping with this organizational and functional change, DEA has
re-assessed the diversion control activities to be funded by the
Diversion Control Fee Account (DCFA). Accordingly, this Notice of
Proposed Rulemaking identifies all of the activities that constitute
the DCP irrespective of organizational structure within the agency and
in compliance with 21 U.S.C. 821 and 958, and 21 U.S.C. 886a that
require that DEA charge reasonable fees relating to the registration
and control of the manufacture, distribution, dispensing, importation
and exportation of controlled substances and listed chemicals and that
DEA collect fees adequate to fully fund the controlled substances and
chemical diversion control activities that constitute the DCP. This
rule also proposes a revised fee structure for manufacturers,
distributors, dispensers, importers and exporters of controlled
substances and List I chemicals, proposing that all handlers of
controlled substances and listed chemicals pay an annual fee, by
registrant category to support the DCP irrespective of whether they
handle controlled substances or List I chemicals. While the
Appropriations Act of 2005 specifies changes to the DCP effective
immediately, the proposed new fee schedule would not take effect until
Fiscal Year 2006. While all DCP activities will be supported by the
DCFA, for Fiscal Year 2005 effective February 1, 2005, the combination
of available DCFA funds together with the anticipated fee revenues from
existing registrants will be sufficient to cover the additional costs
being transferred to the fee-fundable aspects of the DCP.
Under the current fee structure, DEA would collect a total of
approximately $161,005,104 from registrant fees to support the DCP in
Fiscal Year 2006. The estimated Fiscal Year 2006 cost of operating the
DCP according to the clarified definition contained in the Consolidated
Appropriations Act of 2005 is $201,673,000 as further described below.
To this figure, DEA is required to add $15 million to be transferred to
the U.S. Treasury (see below for further explanation), necessitating
that DEA collect through registrant fees a total of $216,673,000 to
``fully fund'' the DCP in Fiscal Year 2006. Without an increase in
registrant fees to support the DCP DEA would fall short by about
$55,667,896 and would not have sufficient funds to operate the DCP.
Therefore, the following rule proposes to adjust the current registrant
fee schedule to ensure the full funding of the DCP through registrant
fees.
In addition, because of the statutory clarification that now
includes all chemical diversion control activities as part of the DCP,
DEA is modifying the fee structure for DCP registrants to include
chemical registrants as explained below. To date, chemical registrants
have paid fees ranging from a subsidized $116 to $595 (initial
registration fee) that covered only the costs of registration and
reregistration and not the actual costs of operating the chemical
diversion control program.
These fees are user fees in contrast to the fees paid for by
controlled substances registrants. User fees are required under the
Independent Offices Appropriations act (IOAA) and the guidelines set
forth in OMB Circular A-25. User fees are paid when a special benefit
is conferred to a particular group, individual, etc. OMB Circular A-25,
Section 6 describes a special benefit as a government service which
``enables the beneficiary to obtain more immediate or substantial gains
or values (which may or may not be measurable in monetary terms) than
those that accrue to the general public (e.g., receiving a patent,
insurance, or guarantee provision, or a license to carry on a specific
activity or business or various kinds of public land use).''
The section specifies that ``[a] user charge * * * will be assessed
against each identifiable recipient for special benefits derived from
Federal activities beyond those received by the general public.'' The
section further requires that the user charge be sufficient to
``recover the full cost to the Federal Government for providing the
special benefit.''
Under this definition, a registration to manufacture, distribute,
import or export List I chemicals is a special benefit; and therefore,
the fees paid by chemical handlers are user fees subject to the IOAA.
In contrast, because the IOAA applies ``only when there is no
independent statutory source for the charging of a fee or where a fee
statute fails to define fee setting criteria'' (AMA v. Reno, 857 F.
Supp. at 84 (D.D.C. 1994)), the fees paid to date by controlled
substances registrants are not user fees. That is, because Congress
established the DCFA by passing the 1993 Appropriations Act with its
collection and spending criteria established by prior law (21 U.S.C.
821 and 958(f)), the registration fees charged by DEA pursuant to the
1993 Appropriations Act are not user fees subject to the IOAA because
the act constitutes an independent statutory source for charging the
fee and it defines fee-setting criteria, i.e., to cover the full costs
of the DCP (AMA v. Reno, 857 F. Supp. 80 (D.D.C. 1994)).
To comply with the clarified definition of the DCP and the
statutory requirement that the operating costs of the DCP be fully
funded through registrant fees, DEA must fund all aspects of the DCP,
including the chemical diversion program, through fees. Because there
is an independent statutory source for charging fees relating to all
activities of the DCP (controlled substances and chemical), the fees
charged to chemical registrants are no longer considered user fees
subject to IOAA provisions, and DEA must collect fees from both
chemical and controlled substances registrants to support the DCP.
Diversion Control Program Responsibilities
The mission of DEA's Diversion Control Program (DCP) is to enforce
the provisions of the Controlled Substances Act as they pertain to
ensuring the availability of controlled substances and
[[Page 69477]]
listed chemicals for legitimate uses in the United States while
exercising controls to prevent the diversion of these substances and
chemicals for illegal uses.
DCP activities include: Program priorities and field management
oversight; coordination of major investigations; drafting and
promulgating of regulations relating to the enforcement of the CSA and
other legislation; establishment of national policy on diversion;
fulfillment of U.S. obligations under drug control treaties; advice and
leadership on state legislation/regulation; legal control of drugs and
chemicals not previously under Federal control; control of imports and
exports of licit controlled substances and chemicals; and program
resource planning and allocation, among other activities.
Current Fee-Funding
As described above, in the absence of specific guidance as to which
activities were encompassed within the DCP and thus fee-fundable, DEA
to date has adhered to the plain language of the Appropriations Act of
1993 and used the budget categories that have historically been
included in the DCP budget request of the Attorney General. As
described in DEA's 1996 Federal Register Final Rule, for the purposes
of budget formulation and appropriation DEA historically has identified
only those resources (with their overhead costs) that were specifically
devoted to diversion control efforts as part of the DCP (to include
only its controlled substances activities) in its annual budget
submission to Congress (61 FR 68624, December 30, 1996).
DCP activities funded to date through the DCFA have been limited to
those in the DCP business decision unit and constituted controlled
substances scheduling, registration, investigation, inspection, data
collection and analysis, training, establishing production quotas,
cooperative efforts with state, local and other Federal agencies,
cooperative efforts with the regulated industry, international
activities relating to the registration and control of the manufacture,
distribution and dispensing of controlled substances, and attendant
management, personnel, administrative and clerical oversight for the
DCP. Fee-fundable activities also have included travel, rent,
utilities, supplies, equipment and services associated with the above-
listed activities and activities related to the control of licit
controlled substances in the U.S. in which the initial source is
foreign.
DEA had not included the chemical control activities of the DCP
among those funded through the DCFA for the reasons outlined
previously. However, with the clarification in 21 U.S.C. 886a, as
amended by Public Law 108-447, of the activities that constitute the
DCP and that must be fully funded through registrant fees, DEA is now
proposing to include activities related to the registration and control
of the manufacture, distribution, importation and exportation of listed
chemicals among those activities to be funded through the DCFA. That
is, DEA would no longer distinguish, for the purposes of fee funding,
between its diversion control activities relating to controlled
substances and those relating to chemicals. These chemical diversion
control activities include the overall control of listed chemicals,
registration, investigation, inspection, data collection and analysis,
cooperative efforts with the regulated industry, related management and
administrative positions devoted to diversion control activities, other
personnel, and administrative and clerical oversight. Activities also
include a portion of the Office of Training (TR) that specifically
supports the activities of the DCP. The TR develops, prepares and
provides training, guidance and instruction for Diversion
Investigators, Diversion Task Force Officers, regulatory agencies,
state and local law enforcement, and DCP personnel on controlled
substances and chemical diversion control, advance skills and technical
knowledge, and systems applications. The total cost of the transfer of
chemical diversion control activities to the DCFA in Fiscal Year 2005
was $15,773,000. This figure is specified in the Appropriations Act and
excludes $7.6 million in Congressionally-appropriated funds that have
been provided for the chemical diversion control activities for Fiscal
Year 2005. While the chemical program costs would be transferred to the
DCP to comply with the clarification in 21 U.S.C. 886a and therefore
paid for out of DCFA (fee) funds, for Fiscal Year 2005 these additional
chemical diversion control costs to the DCP would be supported through
available DCFA funds combined with anticipated fee collections from
existing registrants. That is, while upon enactment the Appropriations
Act of 2005 provides for the inclusion of chemical diversion control
activities as part of the DCP and therefore subject to fee-funding and
support through the DCFA, there will be no changes to registration and
reregistration fees for Fiscal Year 2005 to accommodate the transfer of
these activities to the DCP.
Beginning in Fiscal Year 2006, DEA proposes to include the
additional chemical diversion control costs in the calculation of DCFA
registration and reregistration fees, as shown below in the proposed
new fee schedule. The chemical diversion control costs that would be
supported through the DCFA total $24,499,000 for Fiscal Year 2006,
$24,874,000 for Fiscal Year 2007, and $25,223,000 for Fiscal Year 2008,
accounting for salary growth and inflation.
In addition to the TR costs described above, these chemical costs
also include 188 chemical diversion control positions; 12 overseas
diversion investigators dedicated to the DCP; and costs associated with
the chemical transaction system (CTRANS). Historically, the DEA has
funded diversion investigator positions overseas through appropriated
funds, rather than the DCFA, despite the fact that these positions
directly support the activities of the DCP. Diversion investigators in
foreign posts conduct similar activities to domestic diversion
investigators to prevent the diversion of legal controlled substances
and listed chemicals to illegal uses. These individuals' activities
include, but are not limited to, conducting background investigations
of foreign companies involved in the importation into or exportation
from the U.S. of controlled substances and listed chemicals; working
with foreign governments on matters relating to the international
controls on controlled substances and listed chemicals; advise the U.S.
mission and DEA management regarding diversion of controlled substances
and listed chemicals within foreign territory; training foreign law
enforcement and regulatory counterparts to detect, investigate and
prevent diversion of controlled substances and listed chemicals and
working with foreign law enforcement and regulatory authorities
regarding issues involving the illegal exportation from or illegal
importation into the United States of controlled substances
pharmaceuticals or listed chemicals. (It is the responsibility of the
DCP to prevent the diversion of controlled substances and listed
chemicals regardless of geographic source.)
The Fiscal Year 2006 cost of the foreign diversion investigator
positions described above is $3,107,000. Accounting for inflation and
salary growth, the Fiscal Year 2007 cost to be fee-funded would be
$3,181,000, and the Fiscal Year 2008 cost would be $3,222,000.
[[Page 69478]]
DEA also is proposing to include as fee-fundable activities certain
other internal resources that support the DEA's diversion control
activities but that have not been considered part of the DCP in the
past because of separate budget delineations. As was discussed more
fully in previous rulemakings regarding the DCFA, while these elements
support diversion control efforts, because the overall functions of the
business decision units in which these activities are located are not
devoted primarily to diversion control and because they have
historically not been included as part of the DCP budget requests of
the Attorney General, these elements have been supported by
appropriated funds and not by the DCFA (61 FR 68624, December 30,
1996).
DEA identified several of these resources in its Final Rule
published on October 10, 2003, including two sections within the Office
of Chief Counsel that support DCP activities and a portion of the
Office of Forensic Sciences Special Testing Laboratory that supports
authentic sample analyses for licit drugs (68 FR 58587, October 10,
2003). Other elements of DEA diversion control operations that support
the DCP but have been traditionally funded through appropriated funds,
and therefore not through the DCFA, also include diversion
investigators assigned to overseas posts.
Following the internal reorganization of the DEA to increase
operational efficiencies and shift the focus from business decision
units to activities that support the registration and control of the
manufacture, dispensing and distribution of controlled substances and
listed chemicals and in response to revisions to 21 U.S.C. 886a, DEA
reviewed all activities relating to the registration and control of the
manufacture, distribution, importation, exportation and dispensing of
controlled substances and listed chemicals across the agency. As
described above, with the internal reorganization, the agency's
diversion control activities are no longer contained in an operational
entity or office but rather the DCP now comprises all diversion control
activities across the agency. Accordingly, the proposed, new fee
structure includes all costs associated with the registration and
control of the manufacture, distribution and dispensing of controlled
substances and listed chemicals, including some diversion control costs
previously funded through appropriated funds and not through registrant
fees, regardless of the business decision unit in which these
activities are located within the DEA. These costs include portions of
the Office of Chief Counsel, the Office of Forensic Sciences Special
Testing Laboratory, and the Special Operations Division; 12 foreign
diversion investigator positions; additional special agent and
intelligence analyst costs not currently supported through the DCFA;
and ten new risk management positions to meet new mandates for the DCP.
These components and associated costs are described below. A portion of
DEA's internal computer system, Firebird, which already is supported
through the DCFA, is included in the fee-fundable costs. The total cost
of these non-chemical additions for Fiscal Year 2006 is $28,243,000.
In the Office of Chief Counsel, two components--the Diversion and
Regulatory Policy Section and the Diversion and Regulatory Litigation
Section--provide diversion control support through the litigation of
administrative actions related to DEA registrants and through legal
support on regulatory policy matters. The Diversion and Regulatory
Policy Section serves as the principal legal advisor on all policy
issues related to controlled substances and chemical diversion control.
The Diversion and Regulatory Litigation Section represents DEA in
administrative hearings regarding the revocation or denial of DEA
registrations to handle controlled substances or listed chemicals and
provides legal advice related to the regulation of DEA registrants. DEA
has identified 12 positions in these two sections (11 attorneys and one
support position) that support the DCP. The Fiscal Year 2006 costs of
the Chief Counsel support that would be funded through registrant fees
totals $2,085,000, as contained in the President's Budget Request. The
Fiscal Year 2007 costs would be $2,118,000, and the Fiscal Year 2008
costs are anticipated to be $2,149,000 to account for inflation and
annual salary increases.
DEA's Office of Forensic Sciences Special Testing Laboratory
supports authentic sample analyses for licit controlled substances.
Fifty-one percent of the current Source Determination receipts handled
by the Laboratory relate to licit drugs; that is, 51 percent of the
costs of the Laboratory's eight positions directly relate to the
control of the manufacture, distribution and dispensing of controlled
substances as part of the DCP and therefore would be subject to fee
funding under the proposed, revised fee structure. The Fiscal Year 2006
Laboratory costs that would be supported through fee funds total
$820,000. The anticipated Fiscal Year 2007 Laboratory costs to be fee-
funded would be $832,000, and the Fiscal Year 2008 costs would be
$844,000, to account for inflation and annual salary increases.
Based on Fiscal Year 2004 work hour analyses, DEA determined that
there were 42 special agent work years utilized on investigations
related to the diversion of pharmaceutical drugs. In Fiscal Year 2004,
the DCFA funded the equivalent of 13 special agent work years on these
investigations. DEA proposes to fully fund through the DCFA the support
that is being provided for diversion investigations by including an
additional 29 special agent positions. Special agents support the DCP
by serving warrants, providing undercover support, making arrests, and
providing other functions that diversion investigators are prohibited
from executing but that are core elements of diversion control. The
additional 29 positions would be added to the DCFA costs and would
support both controlled substances and chemical diversion control
efforts. The Fiscal Year 2006 cost for these additional special agent
positions totals $6,530,000 (as contained in the President's Budget
Request). Accounting for inflation and growth in salaries, the Fiscal
Year 2007 cost would be $6,627,000, and the anticipated Fiscal Year
2008 cost would be $6,727,000.
In addition, for Fiscal Years 2006, 2007, and 2008 DEA proposes to
add a total of 23 special agent positions to the budget supported by
the DCFA. These positions include five special agents dedicated to the
Office of Enforcement Operations to serve as Diversion Control
Enforcement Coordinators for diversion control activities and 18
special agents to serve as part of Diversion Investigation Groups. The
Fiscal Year 2006 cost of these positions will be $4,704,000. The Fiscal
Year 2007 and Fiscal Year 2008 costs are anticipated to be $4,598,000
and $5,607,000, respectively, accounting for the phase-in of these
positions over time and inflation and salary increases.
DEA also proposes to fee-fund a total of 73 intelligence analyst
positions of which 67 positions are in the field, four positions are
located in the Special Operations Division, and two positions support
the Office of Enforcement Operations. Intelligence analysts support the
DCP by providing investigative and analytical support for domestic and
international diversion control investigations, including the
collection and evaluation of investigative intelligence information and
the development of innovative techniques and solutions to assist the
investigative process. Other duties of
[[Page 69479]]
intelligence analysts include researching business records, financial
documents and person histories of diversion targets; analyzing emails,
and related communications; researching compiling and analyzing import
and export data to identify potential diversion targets; and
determining associates of criminal targets and criminal organizations.
The additional intelligence analysts in the field offices will free up
diversion investigators who currently perform much of their own
intelligence analysis. Freeing up diversion investigator time will
allow them to focus more on investigative activities, including
interviewing potential witnesses, conducting pharmacy surveys,
conducting audits, and coordinating investigative activities with state
and local law enforcement. Among the field positions, 34 intelligence
analysts would be phased in during Fiscal Year 2006, and 33
intelligence analysts would be phased in during Fiscal Year 2007. The
total cost of the intelligence analyst positions to the DCFA in Fiscal
Year 2006 would be $4,465,000, as indicated in the President's Budget
Request. As the positions continue to be phased in, the Fiscal Year
2007 fee-fundable intelligence analyst costs would be $8,761,000. The
anticipated intelligence analysts cost in Fiscal Year 2008 would be
$11,105,000.
DEA also must request DCFA funding for ten risk management
positions to support a coordinated, government-wide approach to address
prescription drug diversion and abuse. During 2003, more than six
million Americans abused prescription drugs. To better address this
problem, the Appropriations Act of 2005 created, without funding, 10
risk management positions and directed DEA to work cooperatively with
other Federal agencies to ensure that drugs with a high risk of abuse
are marketed appropriately (Pub. L. 108-447). The Fiscal Year 2006 cost
of these positions to be fee-funded is $1,247,000. The Fiscal Year 2007
cost of these additional 10 diversion control staff for this effort is
anticipated to be $1,589,000, and the anticipated Fiscal Year 2008 cost
for these positions to be fee-funded is $1,613,000.
In calculating the revised fee schedule, DEA used the DCFA Budget
Request for Fiscal Year 2006 and the expected DCFA Budget Requests for
Fiscal Year 2007 and Fiscal Year 2008 in addition to the required
annual $15 million transfer to the U.S. Treasury as mandated by the CSA
(21 U.S.C. 886a). In addition to covering with fee funds all program
elements and activities related to the registration and control of the
manufacture, distribution and dispensing of controlled substances and
listed chemicals, DEA must transfer the first $15 million of fee
revenue to the General Fund of the Treasury each year (21 U.S.C.
886a(1)). For each fiscal year between Fiscal Year 1993 through Fiscal
Year 1998, Congress appropriated an additional $15 million to offset
this requirement (a total infusion to the DCFA of $90 million).
However, beginning in Fiscal Year 1999, Congress discontinued this
additional appropriation.
The Fiscal Year 2006 cost of the DCP is $201,673,000, including a
base of $148,931,000 for controlled substances diversion control
activities, $24,499,000 in chemical diversion control activities, and
$28,243,000 for the additional non-chemical DCP support activities
described above; that is:
29 existing special agent positions to be dedicated to
investigations of trafficking in pharmaceutical controlled substances
(FY06 cost of $6,530,000);
23 new special agent positions also to be dedicated to
diversion control investigations (FY06 cost of $4,704,000);
51% of eight Office of Forensic Sciences Special Testing
Laboratory positions that support authentic sample analyses for licit
controlled substances (FY06 cost of $820,000);
12 Chief Counsel positions to provide diversion control
support through the litigation of administrative actions related to DEA
registrants and through legal support on regulatory policy matters
(FY06 cost of $2,085,000);
10 new risk management positions, mandated by the 2005
Appropriations Act, to support a coordinated, government-wide approach
to address prescription drug diversion and abuse (FY06 cost of
$1,247,000)
67 field intelligence analysts and 6 Headquarters
intelligence analysts to support domestic and international diversion
control investigations (FY06 cost of $4,465,000 for 34 of these
analysts)
1 professional/administrative position and non-personnel
support for the Special Operations Division directly related to
diversion control efforts (FY06 cost of $4,392,000)
Firebird operations costs to support communication and
infrastructure of the diversion control program (FY06 cost of
$4,000,000)
With the addition of the required $15 million transfer to the U.S.
Treasury, the total amount necessary to collect through registrant fees
in Fiscal Year 2006 is $216,673,000.
The anticipated costs of the DCP for Fiscal Year 2007, including
all activities relating to the registration and control of the
manufacture, distribution and dispensing of controlled substances and
listed chemicals, is $213,723,000. DEA used an inflation figure of 1.5
percent, based on the President's Economic Assumptions, to account for
increases in costs against the Fiscal Year 2006 costs described above.
Including the required $15 million transfer to the U.S. Treasury, the
total amount necessary to collect through registrant fees in Fiscal
Year 2007 is $228,723,000. The anticipated costs of the DCP for Fiscal
Year 2008, including all activities relating to the registration and
control of the manufacture, distribution and dispensing of controlled
substances and listed chemicals, is $219,964,000. Including the
required $15 million transfer to the U.S. Treasury, the total amount
necessary to collect through registrant fees in Fiscal Year 2008 is
$234,964,000.
The total amount necessary to collect through fee funds for the
Fiscal Year 2006-2008 period to fully fund the DCP as mandated by
statute is $680,360,000. Under the current fee structure (without the
proposed changes included in this rule), DEA would collect only
$491,944,464 for the Fiscal Year 2006-2008 period through registrant
fees and would therefore fall short by $188,415,536 of the necessary
costs of operating the DCP. DEA's proposed new fee structure,
therefore, would provide the necessary additional funds to ensure that
the operational costs of the DCP are fully funded through registrant
fees as mandated by statute.
Based on the total amount necessary to collect for Fiscal Years
2006-2008, DEA developed the specific fee levels for each registrant
category reflected in the table below. To calculate these fees, DEA
first estimated the number of paying registrants for this period and
then used this figure combined with the amount required to be collected
(with the new fees) to set the new fee rate. To calculate the number of
paying registrants, DEA used logarithmic regression analysis to project
the yearly registrant figures based on historical registrant data for
the period of Fiscal Year 1994 through Fiscal Year 2004 combined with
conservative estimates for future registration activity.
DEA then estimated the number of registrants for each registrant
category since different registrant categories pay different fees.
Because there were insufficient data for some activities to perform
regression analysis, DEA used the percentage for each category using
data from the corresponding cycle years in the past.
[[Page 69480]]
Finally, based on the analyses conducted, DEA developed the fees
for each registrant category consistent with its current fee structure
and fee-paying ratios that have been in existence since the inception
of registrant fees. During this time, DEA has evaluated other options
to apportion registrant fees, including, for example, basing fees on
the usage level of controlled substances or listed chemicals. However,
in each case, DEA determined that any potential benefits to an
alternative fee structure system would be more than offset by greater
administrative costs and burdens which must be borne by registrants.
For more discussion on this topic, please see DEA's 2002 Final Rule (67
FR 51988, August 9, 2002) and its 1996 Final Rule (61 FR 68624,
December 30, 1996).
In developing the proposed fee schedule, DEA opted to set the fee
level for a three-year period (FY 2006-2008) for two reasons. First,
the vast majority of registrants are practitioners who pay a three-year
registration fee. These registrants are divided into roughly three
separate groups who pay their three-year registration fees on alternate
year cycles. Accordingly, the fees below reflect the total amount
necessary to be collected for the full three-year period (FY 2006-
2008), divided by projected registrants and accounting for projected
registrant growth by category for each fiscal year. Because different
categories of registrants pay different amounts, DEA weighted the
number of registrants in each category to ensure the appropriate
reflection in the fee schedule. Because the fees reflect the total
amount necessary for collection over a three year period (Fiscal Years
2006-2008) and because the type and number of registrants varies from
year to year, the total amount of fees collected may not equal the
requested budget level for any given year. Surplus fees collected in
one year are used to offset fee collection shortfalls in another year.
In no case are fees spent in excess of the levels enacted by Congress.
In evaluating options to structure the fee schedule, DEA opted to
remain with the current fee structure to reduce reporting burdens on
registrants and operational costs associated with the DCP which would
then be passed on to registrants through annual fees. One option
suggested in the past by registrants is to structure fees based on
total usage of controlled substances and/or listed chemicals. Such an
option would require significant reporting by registrants and oversight
by DEA and would greatly increase the administrative costs of operating
the DCP.
Current Fees Paid by Registrants
Currently, both handlers of controlled substances and of List I
chemicals pay annual registration and reregistration fees. Under the
current structure and prior to the passage of the Consolidated
Appropriations Act of 2005 which clarified the activities constituting
the DCP, fees paid by controlled substances registrants fully supported
all costs of the DCP which to date have excluded chemical diversion
control activities and other activities that support the DCP but have
traditionally been funded through Congressional appropriations. In
contrast, fees paid by chemical registrants supported only the costs
associated with registration and reregistration and the administration
of the chemical diversion control program--that is not the full costs
of chemical diversion control activities.
Currently, handlers of controlled substances pay annual
registration and reregistration fees ranging from $130 to $1,625
depending on the category of registrant. Practitioners, mid-level
practitioners, dispensers, researchers, and narcotic treatment programs
pay an annual registration or reregistration fee of $130 (practitioners
pay a three-year registration fee of $390). Distributors, importers and
exporters pay an annual fee of $813, and manufacturers pay an annual
fee of $1,625. The DEA last adjusted the fee schedule for controlled
substances handlers in October 2003 (68 FR 58587, October 10, 2003).
DEA anticipates that even without the statutory changes prompting the
proposed fee adjustments contained in this rule, the agency would have
needed to adjust the fees for controlled substances registrants to
account for inflation and normal growth in operational costs in Fiscal
Year 2006. Approximating a 15 percent increase in fees due to inflation
and increases in program costs would have raised the annual
practitioner fee, for example, from $130 to $150.
Chemical handlers pay different annual fees for initial
registration and subsequent reregistrations and depending on the
category of registrant. Manufacturers, non-retail distributors,
importers and exporters of List I chemicals currently pay $595 for each
initial annual registration and $477 for each subsequent annual
reregistration. Retail distributors pay an annual fee of $248 plus a $7
application processing fee for each initial registration to conduct
business and $116 per year for each reregistration (60 FR 32447, June
22, 1995). Since October 1997, non-retail distributors of
pseudoephedrine, phenylpropanolamine, and combination ephedrine drug
products have been required to pay only $116 of the initial $595
registration fee (62 FR 53958, October 17, 1997). Fees for chemical
registrants have not been adjusted since passage of the DCDCA in 1995,
and DEA has not revisited the fees except with regard to the waiver of
a portion of the fees in 1997 (62 FR 53958).
The current chemical fees reflected only the operational costs of
registering and reregistering List I chemical handlers and not the full
costs of the chemical diversion control program; however, with the
revisions to 21 U.S.C. 886a that specifically defines the DCP to
include both controlled substances and chemical diversion control
activities, the DEA must collect fees from both controlled substances
and chemical registrants at a level sufficient to fully fund the
operations of the DCP (21 U.S.C. 886a). DEA estimates that if chemical
registrants were required to pay for the full operating costs of the
chemical diversion control program, registration and reregistration fee
for all categories of non-retail chemical registrants would be in
excess of $6,400. This calculation is based on the current population
of registered non-retail chemical handlers.
Development of the Proposed New Fee Schedule
To recover the full costs of the DCP as required by statute and as
outlined in the preceding sections, DEA proposes to incrementally raise
the fees in accordance with its existing fee structure as shown in the
following table. The table also includes the current fees paid by each
category and the total increase in fees.
----------------------------------------------------------------------------------------------------------------
Proposed new Current
Registrant class annual fee annual fee Difference
----------------------------------------------------------------------------------------------------------------
Manufacturers (controlled substances)........................... $2,386 $1,625 $761
Manufacturers (chemical)........................................ 2,386 **595 1,791
Distributors, Importers/Exporters (controlled substances), 1,193 813 380
including reverse distributors.................................
Distributors, Importers/Exporters (chemical).................... 1,193 **595 598
[[Page 69481]]
Chemical Retail Distributors.................................... 1,193 **255 938
Dispensers/Practitioners*....................................... 191 130 61
Researchers, Narcotic Treatment Programs........................ 191 130 61
----------------------------------------------------------------------------------------------------------------
*Practitioners, mid-level practitioners, pharmacies, hospitals/clinics, and teaching institutions would pay a
fee of $573 for a three-year registration period.
**Registration.
Although these fees did not go into effect on October 1, 2005, the
first day of Fiscal Year 2006, DEA will publish a Final Rule in as
timely a manner as possible. Under the proposed, new fee schedule,
controlled substances registrants and chemical registrants in the same
registrant category (e.g., manufacturers) would pay the same fee
regardless of the substance or chemical being handled. Moreover, by
this Notice, DEA proposes to remove differentiation between retail and
non-retail distributors of List I chemicals; that is, both retail and
non-retail distributors would pay the same fee as described above.
The fee structure above would supplant the current fee structure
for controlled substances and for chemical registrants. To clarify
further, in establishing the new fee structure above, DEA also would be
withdrawing, by this notice, its Notice of Proposed Rulemaking issued
on December 1, 1999, which proposed changes in registration and
reregistration fees for manufacturers, distributors, importers,
exporters and retail distributors of List I chemicals (64 FR 67216,
December 1, 1999). DEA also would be rescinding, by this notice, the
1997 Notice of Fee Waiver published on October 17, 1997 (62 FR 53958).
By this notice DEA had waived a portion of the registration fee for
non-retail distributors of pseudoephedrine, phenylpropanolamine, and
combination ephedrine drug products.
DEA also is removing the registration waiver for persons who
distribute, import or export a product containing a List I chemical if
that person is registered with the DEA to manufacture, distribute or
dispense, import or export a controlled substance, since the
registration to handle List I chemicals and the registration to handle
controlled substances, while both supporting the DCP and therefore
subject to the same fees per the Appropriations Act of 2005, cover
different regulatory, legal and business requirements and also relate
to different customer bases.
With the changes to 21 U.S.C. 821 and 958, and 21 U.S.C. 886a
(summarized above) that require that DEA charge reasonable fees
relating to the registration and control of the manufacture,
distribution, dispensing, importation and exportation of controlled
substances and listed chemicals and that DEA collect fees adequate to
fully fund the controlled substances and chemical diversion control
activities that constitute the DCP, the DEA must calculate the full
costs of the DCP based on the full operating costs of its controlled
substances diversion activities and its chemical diversion activities.
Accordingly, persons who handle (manufacture, dispense, distribute,
import or export) both controlled substances and List I chemicals must
maintain a separate registration for each business activity.
Regulatory Analysis
The rulemaking actions contained in this notice are necessary to
ensure the full funding of the DCP through registrant fees as required
by 21 U.S.C. 886a(3). Recent statutory clarification as to what
constitutes the DCP and an internal reorganization of the DCP to
improve operational efficiencies prompted DEA to conduct a review of
the activities and costs constituting the DCP and to recalculate the
registrant fees accordingly. This action was necessary despite the last
fee adjustment on October 10, 2003.
By registering with the DEA to handle controlled substances and
List I chemicals (as required by 21 U.S.C. 822) and paying the annual
registration fee (or three-year registration fee for some registrants),
registrants receive the benefit of being able to manufacture,
distribute import, export, and/or dispense controlled substances and/or
listed chemicals. Entities that have not registered or do not maintain
a current registration with the DEA to handle controlled substances
and/or List I chemicals are, in general, not permitted to handle these
substances (certain exceptions apply as delineated in 21 U.S.C.
822(c)).
Registration of controlled substances and List I chemical handlers
is a key element of the system of controls related to the manufacture
and distribution of these substances. Congress established this system
of controls through the Controlled Substances Act, the Chemical
Diversion and Trafficking Act, and subsequent legislation in an effort
to prevent, detect and eliminate the diversion of controlled
pharmaceuticals and listed chemicals from legitimate channels to
illegal use, while at the same time ensuring their availability for
legitimate purposes. This system has proven effective in reducing the
diversion of these substances from legitimate channels to the illicit
market. Components of this system include the registration of all
controlled substances and listed chemicals and their handlers (Handlers
of List II chemicals exclusively are not required to register with the
DEA), recordkeeping, security, and manufacturing quotas, all under DEA
DCP oversight. This proposed rule does not change the requirement to
register to handle controlled substances and/or List I chemicals but
rather changes the annual fee associated with registration and
reregistration.
Regulatory Flexibility Act
The Regulatory Flexibility Act as amended (5 U.S.C. 601-612),
requires agencies to determine whether a proposed rule will impose a
significant economic impact on a substantial number of small entities.
The proposed fees affect a wide variety of entities. The following
table indicates the sectors affected by the proposed rule.
Table 1.--Industrial Sectors of DEA Registrants
----------------------------------------------------------------------------------------------------------------
Controlled
Sector NAICS code substance Chemical
----------------------------------------------------------------------------------------------------------------
Chemical Manufacturing (organic, inorganic)................... 3251 ............... X
Medicinal and Botanical Manufacturing......................... 325411 X X
[[Page 69482]]
Pharmaceutical Manufacturing.................................. 325412 X X
Adhesive Manufacturing........................................ 325520 ............... X
Toilet Preparation Manufacturing.............................. 325620 ............... X
Other Chemical Manufacturing.................................. 325998 ............... X
Drugs and Druggist Sundries Wholesalers....................... 424210 X X
General Line Grocery Wholesalers.............................. 424410 X X
Confectionary Merchant Wholesalers............................ 414450 ............... X
Chemical Wholesalers.......................................... 424690 ............... X
Tobacco Wholesalers........................................... 424940 ............... X
Miscellaneous Wholesalers..................................... 424990 ............... X
Supermarkets.................................................. 445110 X X
Drug Stores................................................... 446110 X X
Discount Stores............................................... 452112 X X
Warehouse Clubs and Superstores............................... 452910 X X
Testing Labs.................................................. 541380 X X
Packaging and Labeling Services............................... 561910 ............... X
Colleges, Universities, Professional Schools.................. 611310 X ...............
Ambulatory Health Care Services............................... 621 X ...............
Hospitals..................................................... 622 X ...............
----------------------------------------------------------------------------------------------------------------
Controlled substances are prescription drugs; firms manufacturing
and distributing them usually specialize in prescription
pharmaceuticals. The supermarkets, discount stores, warehouse clubs,
and superstores handle controlled substances through their distribution
centers and their pharmacies. The listed chemical registrants are more
diverse for two reasons. First, most of the listed chemicals have non-
drug uses, such as chemical intermediates, flavorings, fragrances, and
adhesives. Second, the drug products containing List I chemicals are
primarily over-the-counter (OTC) medicines. These are distributed by
drug wholesalers who specialize in non-prescription drugs, wholesalers
who supply convenience stores, and grocery, pharmacy, and discount
stores (e.g., superstores) that operate their own distribution centers.
Of the 460 registered manufacturers, importers, exporters, and
distributors who hold multiple registrations, only 70 hold both a
controlled substance and a chemical registration.
As of December 2004 there are 1,178,361 controlled substances
registrants and 2,998 chemical registrants, as shown in Table 2.
Table 2.--Number of Registrants by Business Activity
------------------------------------------------------------------------
Controlled
substances Chemicals
------------------------------------------------------------------------
Practitioners........................... 984,271 ..............
Midlevel Practitioners.................. 103,239 ..............
Retail Pharmacy......................... 62,865 *
Hospital/Clinic......................... 15,650 ..............
Teaching Institution.................... 443 ..............
Manufacturer............................ 485 208
Distributor............................. 823 2,413
Researcher.............................. 7,458 ..............
Analytical Laboratory................... 1,541 ..............
Importer................................ 159 195
Exporter................................ 253 181
Narcotic Treatment Program.............. 1,174 ..............
Total............................... 1,178,361 2,998
------------------------------------------------------------------------
*Retail distributor.
Not all registrants listed in Table 2 are subject to the fees.
Publicly owned institutions, law enforcement agencies, and military
personnel are exempt from fees. In addition, DEA waives fees for
charitable organizations, some of which are registered as chemical
distributors (OTC medicines are distributed by some food banks and
exported by aid organizations).
The number of registrations overstates the number of individual
registrants. The CSA requires a separate registration for each location
where controlled substances are handled and a separate registration for
each business activity; that is a registration for activities related
to the handling of controlled substances and a registration for
activities relating to the handling of List I chemicals. Some
registrants may conduct multiple activities under a single registration
(e.g., manufacturers may distribute without being registered as a
distributor), but firms may hold multiple registrations for a single
location. Individual practitioners who prescribe, but do not store
controlled substances, may use a single registration at multiple
locations within a state, but need separate registrations for each
state in which they practice and are authorized to dispense controlled
substances. Firms with multiple locations must have separate
registrations for each location.
Small Entities. Most DEA registrants are small entities under the
Small Business Administration (SBA)
[[Page 69483]]
standards. Almost all practitioners would be considered small (annual
revenues of less than $6 million to $8.5 million, depending on
specialty). Narcotic treatment programs and many clinics would be
considered small (revenues of less than $8.5 million). According to the
American Hospital Association, there are currently 5,764 registered
hospitals; 1,360 are operated by Federal, state, or local governments
and are exempt from fees. Of the remaining hospitals, the rural
hospitals (2,166 including publicly owned hospitals) are more likely to
be small (revenues less than $29 million). About 20,000 of the
pharmacies are independent and are likely to be small (revenues less
than $6 million); some of the small chain pharmacy firms may also be
considered small. The teaching institutions and researchers are
generally associated with large institutions and are not expected to be
small. Importers and exporters are frequently manufacturers; these are
likely to be the larger companies. The remaining importers and
exporters, however, will generally be classified as wholesalers and
would probably be small under the SBA standard for wholesalers (100
employees). The manufacturing sector includes the major companies, but
many of the firms are small under SBA standards (500 to 1,000
employees). The distributors have the widest variety of sizes, from the
few large wholesalers that handle almost 90 percent of drugs to very
small wholesalers handling an array of products. In general, because of
the cost of security for controlled substances, controlled substances
manufacturers and distributors are larger than chemical manufacturers
and distributors. DEA has no basis for estimating the total number of
small entities affected, but it is clearly a substantial number.
Impacts. As noted above, the proposed new registration fees range
from $191 to $2,386 annually. These fees are per location and per
registered business activity. DEA data indicate that 63 percent of
controlled substances manufacturers hold at least two registrations (as
a manufacturer, importer, exporter, or distributor); the highest number
of registrations identified for a manufacturer was 67. For chemical
manufacturers, 66 percent hold at least two registrations, with the
highest number being 30. The percent of multiple registrations for
controlled substance importers is 91 percent, for exporters, 88
percent, for distributors 55 percent; for chemical importers it is 77
percent, exporters 95 percent, and distributors 29 percent. The chain
pharmacies hold registrations for each of their locations. The largest
chain holds retail pharmacy registrations for more than 5,000 locations
as well as almost 40 registrations for its distribution centers. The
fees paid to DEA will range from $191 for dispensing registrants
holding a single registration to more than $900,000 for the largest
chain pharmacy with multiple locations. Most small registrants are
expected to pay a single registration fee of either $191, $1,193 or
$2,386 per year (or per year equivalent).
To assess whether the fees could impose a significant economic
impact on a small entity, DEA considered whether the fees represent
more than one percent of annual revenues for the registrant groups. For
dispensers, the annual revenues would have to be below $17,900 to have
the registration represent more than one percent of revenues. Medical
practitioners granted authority to handle controlled substances have
annual incomes well above that level; physician assistants, the mid-
level practitioner with the lowest average salary, have annual salaries
of about $65,000. The average independent pharmacy has sales of almost
$2 million according to the National Association of Chain Drug Stores.
The smallest clinics have revenue streams higher than $17,900.
Consequently the higher fees will not impose a significant burden on
dispensers.
For manufacturers, the 2002 Census data indicate that the value of
shipments for the smallest chemical manufacturers (including drugs)
ranged from $477,000 to $1.1 million per location (establishment). For
this registrant group, therefore, the fee of $2,386 does not represent
more than one percent of revenues and will not impose a significant
burden.
The one registrant group for which the fees could exceed one
percent of revenues is chemical distributors. Controlled substance
distributors are generally larger drug wholesalers in part because of
the cost of security they need to prevent theft of controlled
substances and other prescription drugs. According to 2004 Duns data,
between one percent and 11 percent of the wholesale sectors handling
listed chemicals have revenues below $100,000. DEA does not collect
financial data on its registrants, but it is possible that some
chemical distributor registrants have revenues below $100,000. The
proposed increase in annual reregistration fee for chemical
distributors (from $477 to $1,193) could impose a significant burden on
these registrants. The proposed increase in the initial registration
fee (from a subsidized $116 to $1,193 annually) also could be a barrier
to entrance for these very small firms. Based on its experience,
however, DEA considers it unlikely that any firm that lacked the
resources to pay the initial registration fee would be granted a
registration because it would be unlikely to have the resources to
maintain the records and provide the security necessary to prevent
diversion of the products. Moreover, the proposed new registration fees
for all wholesale level activities are far less than the estimated
annual fee of $6,400 that chemical registrants would be charged if they
were required to independently fund the chemical portion of the
diversion control program. Combining all diversion control activities
into a single Diversion Control Program, as mandated by the
Consolidated Appropriations Act of 2005, results in scale efficiencies
and overall reduced costs to all registrants.
The Deputy Administrator hereby certifies that this rulemaking has
been drafted in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)) and has provided above detailed regulatory analysis on
the effects of this rulemaking on small entities. While DEA recognizes
that this regulation will have a financial effect on registrants with
the increase in fees, the change in fees is necessary to fully comply
with 21 U.S.C. 886a and related statutes governing the Diversion
Control Program and the Diversion Control Fee Account by which DEA is
legally mandated to collect fees to cover the full costs of the
Diversion Control Program as defined by all activities relating to the
registration and control of the manufacture, distribution, and
dispensing of controlled substances and listed chemicals.
Executive Order 12866
The Deputy Administrator certifies that this rulemaking has been
drafted in accordance with the principles in Executive Order 12866
1(b). DEA has determined that, because the proposed increased fees will
result in a total increase of less than $70 million annually to be
collected through fees (that is the difference between the amount
collected annually under the current fee structure and the amount
proposed to be collected under the proposed, new fee structure), this
is not a significant regulatory action; however, it has been reviewed
by the Office of Management and Budget. The fees to be collected
represent only an increase of less than $70 million each year for the
Fiscal Year 2006-2008 period (based on estimated fee collection
figures) and are required to fully support the President's
[[Page 69484]]
budget for the DCP, as approved by Congress through the appropriations
process. Therefore, DEA has no discretion in the establishment of the
new fees and is required by law to collect registration and
reregistration fees of sufficient amount to fully support the DCP.
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 of $115,000,000 or more in any one
year, and will not significantly or uniquely affect small governments.
The proposed increase in fees for private sector entities and
individuals will result in a total increase of less than $70 million
annually to be collected through fees (that is the difference between
the amount collected annually under the current fee structure and the
amount proposed to be collected under the proposed, new fee structure).
Moreover, the effect on individual entities and practitioners is
minimal. The majority of the affected entities will pay a fee of $573
for a three year registration period (the equivalent of $191 per year)
which equates to about 0.14 percent of annual income for most
practitioners (the vast majority of all registrants). This rule is
promulgated in compliance with 21 U.S.C. 886a that the full cost of
operating the DCP be collected through registrant fees.
Small Business Regulatory Enforcement Fairness Act of 1996
This rule is not a major rule as defined by Sec. 804 of the Small
Business Regulatory Enforcement Fairness Act of 1996. While this rule
will result in an annual effect on the economy of $100,000,000 or more,
it will not result in a major increase in costs or prices or cause
significant adverse effects on competition, employment, investment,
productivity, innovation, or on the ability of U.S.-based companies to
compete with foreign-based companies in domestic and export markets.
This rule is not a discretionary action but rather responds to
statutory clarification as to the activities constituting the DCP
which, by law, must be fully funded through registrant fees (21 U.S.C.
821 and 21 U.S.C. 886a, respectively). Moreover, the individual effect
on small business registrants is minimal. The majority of registrants
considered to be small businesses are practitioners who will pay a
three-year registration fee of $573 or the equivalent of $191 per year.
For the majority of these practitioners, who compose the vast majority
of registrants and registrants qualifying as small businesses, this fee
represents about 0.14 percent of their annual mean salary. The impact
on other small business entities is described in greater detail in the
preceding regulatory analysis.
List of Subjects
21 CFR Part 1301
Administrative practice and procedure, Drug traffic control,
Security measures.
21 CFR Part 1309
Administrative practice and procedure, Drug traffic control,
Exports, Imports, Security measures.
For the reasons set out above, 21 CFR Parts 1301 and 1309 are
proposed to be amended as follows:
PART 1301--REGISTRATION OF MANUFACTURERS, DISTRIBUTORS AND
DISPENSERS OF CONTROLLED SUBSTANCES
1. The authority citation for part 1301 continues to read as
follows:
Authority: 21 U.S.C. 821, 822, 823, 824, 871(b), 875, 877, 951,
952, 953, 956, 957.
2. Section 1301.13 is proposed to be amended by revising paragraph
(e)(1) to read as follows:
Sec. 1301.13 Application for registration; time for application;
expiration date; registration for independent activities; application
forms, fees, contents and signature; coincident activities.
* * * * *
(e) * * *
(1)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Registration
Business activity Controlled substances DEA application forms Application period Coincident activities
fee ($) (years) allowed
--------------------------------------------------------------------------------------------------------------------------------------------------------
(i) Manufacturing.................. Schedules I-V................ New--225..................... 2,386 1 Schedules I-V: May
Renewal--225a................ 2,386 distribute that substance
or class for which
registration was issued;
may not distribute or
dispose any substance or
class for which not
registered.
Schedules II-V: Except a
person registered to
dispose of any controlled
substance may conduct
chemical analysis and
preclinical research
(including quality
control analysis) with
substances listed in
those schedules for which
authorization as a mfg.
was issued.
(ii) Distributing.................. Schedules I-V................ New--225..................... 1,193 1 ..........................
Renewal--225a................ 1,193
(iii) Reverse distributing......... Schedules I-V................ New--225..................... 1,193 1 ..........................
Renewal--225a................ 1,193
[[Page 69485]]
(iv) Dispensing or instructing Schedules II-V............... New--224..................... 573 3 May conduct research and
(includes Practitioner, Hospital/ Renewal--224a................ 573 instructional activities
Clinic, Retail Pharmacy, Central with those substances for
fill pharmacy, Teaching which registration was
institution). granted, except that a
mid-level practitioner
may conduct such research
only to the extent
expressly authorized
under state statute. A
pharmacist may
manufacture an aqueous or
oleaginous solution or
solid dosage form
containing a narcotic
controlled substance in
Schedule II-V in Schedule
II-V in a proportion not
exceeding 20% of the
complete solution,
compound or mixture. A
retail pharmacy may
perform central fill
pharmacy activities.
(v) Research....................... Schedule I................... New--225..................... 191 1 A researcher may
Renewal--225a................ 191 manufacture or import the
basic class of substance
or substances for which
registration was issued,
provided that such
manufacture or import is
set forth in the protocol
required in Sec.
1301.18 and to distribute
such class to persons
registered or authorized
to conduct research with
such class of substance
or registered or
authorized to conduct
chemical analysis with
controlled substances.
(vi) Research...................... Schedules II-V............... New--225..................... 191 1 May conduct chemical
Renewal--225a 1.............. 191 analysis with controlled
substances in those
schedules for which
registration was issued;
manufacture such
substances if and to the
extent that such
manufacture is set forth
in a statement filed with
the application for
registration or
reregistration and
provided that the
manufacture is not for
the purposes of dosage
form development; import
such substances for
research purposes;
distribute such
substances to persons
registered or authorized
to conduct chemical
analysis, instructional
activities or research
with such substances, and
to persons exempted from
registration pursuant to
Sec. 1301.24; and
conduct instructional
activities with
controlled substances.
(vii) Narcotic Treatment Program Narcotic Drugs in Schedules New--363..................... 191 1 ..........................
(including compounder). II-V. Renewal--363a................ 191
(viii) Importing................... Schedules I-V................ New--225..................... 1,193 1 May distribute that
Renewal--225a................ 1,193 substance or class for
which registration was
issued; may not
distribute any substance
or class for which not
registered.
(ix) Exporting..................... Schedules I-V................ New--225..................... 1,193 1 ..........................
Renewal--225a................ 1,193
(x) Chemical Analysis.............. Schedules I-V................ New--225..................... 191 1 May manufacture and import
Renewal--225a................ 191 controlled substances for
analytical activities or
instructional activities;
may distribute such
substances to persons
registered or authorized
to conduct chemical
analysis, instructional
activities, or research
with such substances and
to persons exempted from
registration pursuant to
Sec. 1301.24; may
export such substances to
persons in other
countries performing
chemical analysis or
enforcing laws related to
controlled substances or
drugs in those countries;
and may conduct
instructional activities
with controlled
substances.
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* * * * *
[[Page 69486]]
PART 1309--REGISTRATION OF MANUFACTURERS, DISTRIBUTORS, IMPORTERS,
AND EXPORTERS OF LIST I CHEMICALS [AMENDED]
3. The authority citation for Part 1309 is proposed to be amended
to read as follows:
Authority: 21 U.S.C. Sec. Sec. 821, 822, 823, 824, 830, 871(b),
875, 877, 886a, 958.
4. Section 1309.11 is proposed to be revised to read as follows:
Sec. Sec. 1309.11 Fee amounts.
(a) For each application for registration or reregistration to
manufacture for distribution the applicant shall pay an annual fee of
$2,386.
(b) For each application for registration or reregistration to
distribute (either retail distribution or non-retail distribution),
import, or export a List I chemical, the applicant shall pay an annual
fee of $1,193.
5. Section 1309.12 is proposed to be revised to read as follows:
Sec. Sec. 1309.12 Time and method of payment; refund.
(a) For each application for registration or reregistration to
manufacture for distribution, distribute (either retail distribution or
non-retail distribution), import, or export a List I chemical, the
applicant shall pay the fee when the application for registration or
reregistration is submitted for filing.
(b) Payment should be made in the form of a personal, certified, or
cashier's check or money order made payable to ``Drug Enforcement
Administration.'' Payments made in the form of stamps, foreign
currency, or third party endorsed checks will not be accepted. These
application fees are not refundable.
6. Section 1309.24 is proposed to be revised to read as follows:
Sec. Sec. 1309.24 Waiver of registration requirement for certain
activities.
(a) The requirement of registration is waived for any agent or
employee of a person who is registered to engage in any group of
independent activities, if such agent or employee is acting in the
usual course of his or her business or employment.
(b) The requirement of registration is waived for any person whose
activities with respect to List I chemicals are limited to the
distribution of red phosphorus, white phosphorus, or hypophosphorous
acid (and its salts) to: another location operated by the same firm
solely for internal end-use; or an EPA or State licensed waste
treatment or disposal firm for the purpose of waste disposal.
(c) The requirement of registration is waived for any person whose
distribution of red phosphorus or white phosphorus is limited solely to
residual quantities of chemical returned to the producer, in reusable
rail cars and intermodal tank containers which conform to International
Standards Organization specifications (with capacities greater than or
equal to 2,500 gallons in a single container).
(d) The requirement of registration is waived for any retail
distributor whose activities with respect to List I chemicals are
limited to the distribution of below-threshold quantities of a
pseudoephedrine, phenylpropanolamine, or combination ephedrine product
that is regulated pursuant to Sec. 1300.02(b)(28)(i)(D) of this
chapter, in a single transaction to an individual for legitimate
medical use, irrespective of whether the form of packaging of the
product meets the definition of ``ordinary over-the-counter
pseudoephedrine or phenylpropanolamine product'' under Sec.
1300.02(b)(31) of this chapter.
(e) The requirement of registration is waived for any manufacturer
of a List I chemical, if that chemical is produced solely for internal
consumption by the manufacturer and there is no subsequent distribution
or exportation of the List I chemical.
(f) If any person exempted under paragraph (b), (c) or (d) of this
section also engages in the distribution, importation or exportation of
a List I chemical, other than as described in such paragraph, the
person shall obtain a registration for such activities, as required by
Sec. 1309.21 of this part.
(g) The Administrator may, upon finding that continuation of the
waiver would not be in the public interest, suspend or revoke a waiver
granted under paragraph (b), (c), or (d) of this section pursuant to
the procedures set forth in Sec. Sec. 1309.43 through 1309.46 and
Sec. Sec. 1309.51 through 1309.55 of this part.
(h) Any person exempted from the registration requirement under
this section shall comply with the security requirements set forth in
Sec. Sec. 1309.71-1309.73 of this part and the recordkeeping and
reporting requirements set forth under parts 1310 and 1313 of this
chapter.
Dated: November 8, 2005.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. 05-22681 Filed 11-15-05; 8:45 am]
BILLING CODE 4410-09-P