[Federal Register: May 2, 2005 (Volume 70, Number 83)]
[Rules and Regulations]
[Page 22591-22595]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02my05-4]
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DEPARTMENT OF JUSTICE
Drug Enforcement Administration
21 CFR Parts 1300, 1301, 1304, 1305, and 1307
[Docket No. DEA-108F]
RIN 1117-AA19
Definition and Registration of Reverse Distributors
AGENCY: Drug Enforcement Administration (DEA), Justice.
ACTION: Final rule.
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SUMMARY: DEA is finalizing, without change, the interim rule with
Request for Comment published in the Federal Register July 11, 2003 at
68 FR 41222. The interim final rule amended Title 21, Code of Federal
Regulations, parts 1300, 1301, 1304, 1305 and 1307 to define the term
``reverse distributor'' and establish a new category of registration
for persons handling controlled substances. The amendments established
the regulatory standards under which reverse distributors may handle
unwanted, unusable, or outdated controlled substances acquired from
another DEA registrant. These standards ensure the proper documentation
and recordkeeping necessary to prevent diversion of such controlled
substances to illegal purposes. This final rule makes these changes
permanent.
DATES: Effective Date: May 2, 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:
Overview of and Benefits of the Interim Final Rule
On July 11, 2003 (68 FR 41222), the Drug Enforcement Administration
(DEA) published an interim final rule to define the term ``reverse
distributor'' and to establish a new category of registration for
persons handling controlled substances. The interim final rule mostly
codified existing practices that reverse distributors follow under
memoranda of understanding (MOUs) with DEA. This approach is consistent
with the comments received on the Notice of Proposed Rulemaking (NPRM)
(60 FR 43732, August 23, 1995) that stated that reverse distributors
would be significantly and adversely impacted if, as was proposed, they
were classified as manufacturers. In recognizing this activity as a
separate registration category of distributors, DEA believes the entire
controlled substances industry will benefit. Reverse distributors
previously operating under MOUs are becoming fully recognized
registrants under DEA rules. Thousands of other registrants who need to
dispose of unneeded or outdated inventories are now able to turn to a
fully registered group of distributors. Furthermore, by essentially
codifying existing practices these benefits are being achieved with
minimal need for change or for disruption to the affected industry.
Because of the length of time since the NPRM was published and the
evolving nature of this industry, DEA used an interim final rule to
give an additional opportunity for comment. DEA has considered the
comments received on the appropriateness and the practical application
of these rules to current industry practice. The comments are discussed
below.
Background
The overall goal of the Controlled Substances Act (CSA) and of
DEA's regulations in Title 21, Code of Federal Regulations (CFR), Parts
1300-1316 is to provide a closed distribution system so that a
controlled substance is at all times under the legal control of a
person registered, or specifically exempted from registration, by the
Drug Enforcement Administration until it reaches the ultimate user or
is destroyed. DEA achieves this goal by registering manufacturers,
distributors, importers, exporters, and dispensers of controlled
substances as well as analytical laboratories and researchers. Thus,
any movement of controlled substances between these registered persons
is covered by DEA regulations, which ensure that all controlled
substances are accounted for from their creation until their dispensing
or destruction.
When a controlled substance has become outdated or otherwise
unusable, the registrant who possesses the substance must dispose of
it. However, over the past decade, environmental concerns and
regulatory changes have caused drug manufacturers and government
agencies (including DEA and State authorities) to become increasingly
reluctant to be involved in the disposal process. Thus, some disposal
options are no longer available.
Nonetheless, disposal of controlled substances can occur in several
ways:
1. The distributor or dispenser can return the controlled substance
to the pharmaceutical manufacturer who, as a service to its customers,
accepts returns of outdated/damaged controlled substances.
Distributors, dispensers, and manufacturers are all registered with
DEA.
2. The distributor, dispenser, or manufacturer can itself dispose
of the controlled substances under the procedures outlined in 21 CFR
1307.21.
Under 21 CFR 1307.21, any person may request permission to dispose
of controlled substances without the benefit of a DEA or State witness.
In many cases, blanket permission for disposal of controlled substances
is granted to registrants who have an ongoing need to dispose of
unwanted controlled substances. DEA must authorize the disposal in
writing and may require that a set schedule be established. Other
registrants are granted disposal authority on a case-by-case basis. DEA
normally requires that the registrant provide two designated
responsible individuals to accompany the drugs to the disposal site and
witness the destruction. This achieves DEA's goal of ensuring the
controlled substances are rendered nonrecoverable. Disposal under the
authority of 21 CFR 1307.21 maintains the closed distribution system
because the controlled substances remain under the legal control of a
registrant at all times.
3. The distributor, dispenser, or manufacturer can distribute the
controlled substances to a reverse distributor to take control of the
controlled substances for the purpose of returning them to the
manufacturer or, if necessary, disposing of them.
For many years, DEA opposed granting DEA registrations to firms
solely or primarily engaged in the disposal (whether the transportation
portion, actual disposal, or both) of controlled substances because
they were not considered an essential link in the closed distribution
system that the Controlled Substances Act established to control the
flow of drugs from the manufacturer to the ultimate user. In recent
years, however, increasingly stringent requirements imposed by the U.S.
Environmental Protection Agency (EPA) resulted in fewer and fewer
approved disposal facilities. As a result, a new type of business
developed that collects controlled substances from registrants and
either returns them to the manufacturer or arranges for their disposal.
The businesses performing this middleman service refer to
[[Page 22592]]
themselves as ``reverse distributors'' or ``returns processors.''
The interim final rule dealt only with the distribution of
controlled substances to reverse distributors. The first two
categories--direct returns of controlled substances by distributors or
dispensers to manufacturers, and disposals by the distributor,
manufacturer or dispenser--are already covered by the existing rules.
Only the third category, i.e., persons who distribute controlled
substances to reverse distributors, was not expressly covered by the
regulations, although DEA regulated reverse distributors for many years
under the terms of Memoranda of Understanding (MOUs), through which
they were granted DEA registrations as distributors. The interim final
rule eliminated the need for MOUs. However, since the interim final
rule essentially codified existing DEA policies and practices, it did
not impose any significant additional burden on reverse distributors.
On August 23, 1995, DEA issued a Notice of Proposed Rulemaking
(NPRM) (60 FR 43732) that proposed regulatory standards governing
disposers of controlled substances. DEA proposed to accomplish this by
amending its regulations to define the term ``Disposer'' to account for
this middleman function in the regulations and establish a new category
of manufacturer registration under which persons performing this
function would be registered. DEA also proposed amending the
regulations to exempt disposers from the quota requirements; to
identify the records and reports required of disposers; and to
establish order form procedures for disposers. Finally, DEA proposed
amendments to a number of gender-specific sections to make them gender
neutral.
DEA originally based its decision to define the persons performing
the reverse distribution function as disposers on the definition of
``manufacturer.'' In 21 CFR 1300.01(b)(27), DEA defines manufacture in
part as ``the producing, preparation, propagation, compounding, or
processing of a drug or other substance * * *.'' The section further
defines a manufacturer as ``a person who manufactures a drug or other
substance * * *.'' In the proposed rule, DEA stated that by its nature,
a disposer processes a drug or other substance. Therefore, DEA proposed
to place disposers within the definition of manufacturer, under a new
disposer subcategory. Commenters to the proposed rule objected to being
categorized as disposers and manufacturers for the reasons explained in
the Interim Final Rule preamble. Therefore, in the interim final rule,
DEA established a definition for ``reverse distributor'' and
established a new category of registration as reverse distributors.
Even before the interim final rule was published, DEA issued
certificates of registration as distributors to persons performing the
reverse distribution function. Since reverse distributors were not
specifically identified in the regulations, DEA entered into a
Memorandum of Understanding (MOU) with the person performing the
reverse distribution function. DEA did not experience any difficulties
in treating reverse distributors as distributors for purposes of
registration and other requirements. Any reverse distributor that was
registered under the terms of a MOU must be reregistered as a reverse
distributor under the terms of the interim final rule in the next
renewal cycle and will be specifically identified in DEA's records as a
reverse distributor. Persons currently conducting reverse distribution
operations must notify DEA by no later than the time of renewal of
their registration so that they may be properly identified as reverse
distributors in DEA's records.
The requirements for a reverse distributor in the interim final
rule are similar to those imposed on all registrants at the distributor
level. They include, but are not necessarily limited to:
Security: All applicants must install, at the registered
premises, physical security controls that meet the existing standards
of 21 CFR 1301.71 and 1301.72.
Recordkeeping: In accordance with 21 CFR part 1304,
periodic inventories and records of all controlled substances received,
destroyed, or returned to the original, registered manufacturers must
be maintained for two years. The registrant must adequately describe
the receipt and accountability methods and records to be employed to
ensure the establishment of effective controls against diversion.
Order Forms must be completed for all Schedule I and II
items prior to their transfer to the reverse distributor. Only after
the order form has been received by the reverse distributor may the
controlled substances be transferred.
Reports are required under the Automation of Reports and
Consolidated Orders System (ARCOS), as specified in 21 CFR 1304.33.
In addition to DEA requirements, reverse distribution applicants
must obtain the appropriate State and Federal approvals for controlled
substances and disposal activities.
Public Comments on the Interim Final Rule
Five comments were received regarding the interim final rule.
Commenters included reverse distributors, waste management companies,
and a distributor's association. The following discussion summarizes
the issues raised by commenters and DEA's response to these issues.
Reverse Distributor Receipt of Controlled Substances From Non-
Registrants.
Three commenters addressed the issue of whether reverse
distributors should be allowed to receive controlled substances from
non-registrants.
One commenter believed that DEA should create uniform regulations
for the management and destruction of controlled substances that a
reverse distributor receives from a non-registrant. The commenter
asserted that the procedure recommended in the preamble to the interim
final rule could lead to inconsistencies because procedures for such
transactions would be developed with various DEA offices.
Alternatively, the commenter suggested that a non-registrant and a
reverse distributor be allowed to: ``(1) create a destruction plan for
a waste controlled substance and (2) communicate that plan in writing
to the local DEA office, the non-registrant and the reverse distributor
can implement that destruction plan if no objection is received from
the DEA office within ten business days of the submittal.'' The
commenter also suggested a procedure to be followed if the DEA office
did object.
A second commenter stated that the procedure for dealing with this
issue described in the interim final rule ``is fundamentally flawed in
the protection of both the public and our environment.'' The commenter
stated that its studies have shown that a majority of long term care
facilities and nursing homes are improperly accounting for and
disposing of their controlled substances, indicating that sewage is a
primary means of disposal and that EPA has concluded that improper
disposal results in contamination. The commenter proposed an amendment
to the interim final rule that would allow exceptions for reverse
distributors. It stated that its proposal ``allows for Reverse
Distributors to account and dispose of controlled substances from non-
registrants so long as the Return
[[Page 22593]]
Distributor obtains written approval from the DEA if certain conditions
are met.'' The commenter recommended that the conditions ``would
consist of an internal system of accountability, Standard Operational
Procedures, and archiving of records for two (2) years.''
While specifically addressing the definition of ``reverse
distributor,'' the third commenter discussed the issue of a reverse
distributor receiving controlled substances from a non-registrant. The
commenter stated that the definition ``will have significant, negative
environmental concerns and increase the opportunity for controlled
substances to be diverted.''
The overall thrust of the commenter's comments and of its
recommended changes related to the problem of a reverse distributor
receiving controlled substances from a non-registrant. The commenter
requested that the reverse distributor definition be modified to allow
reverse distributors to receive controlled substances not only from
another DEA registrant, but also from any person lawfully in possession
of a controlled substance. The commenter also requested that Sec.
1307.12 be modified to allow this. According to the commenter:
The requested change will allow a reverse distributor to provide
proper disposal and documentation of controlled substances for
patient medications from legal entities such as dispensers and Long
Term Care Facilities which is currently the accepted practice by and
in many States as a standard option of destruction with the approval
of the DEA (see attached California Department of Health Services
March 5, 1999, letter to California Long Term Care Facilities {and
related patient-care entities{time} Item 3).
DEA Response: DEA addressed the issue of whether reverse
distributors can receive controlled substances from non-registrants in
the preamble to the interim final rule (68 FR 41226) and on several
other occasions. The issue arises because most long term care
facilities are not DEA registrants. In a notice document published in
2001 (66 FR 20833, April 25, 2001) and in a follow up notice of
proposed rulemaking published in 2003 (68 FR 62255, November 3, 2003),
DEA proposed to address the issue under the title, ``Preventing the
Accumulation of Surplus Controlled Substances at Long Term Care
Facilities'' (LTCFs).
DEA's position is that because LTCFs are not registrants they may
not transfer controlled substances to either the pharmacy from which
they came or to a reverse distributor, or any other registrant for
disposal. The LTCF must dispose of the excess controlled substances
directly. DEA's position is based on the fact that controlled
substances in the possession of a LTCF are no longer part of the closed
system of distribution and are no longer subject to DEA's system of
corresponding accountability. As stated in the interim final rule
preamble, ``In cases where long term care facilities must dispose of
controlled substances, they should follow the guidelines within their
State for disposing of the drugs and maintain appropriate documentation
of the disposal.''
DEA's position has not changed although, as noted, DEA has issued
an NPRM that would attempt to address the problem by allowing
registered pharmacies to operate automated dispensing systems at LTCFs;
these systems allow single dosage dispensing, reducing the amount of
drugs that become waste.
Definitions
One commenter supported the new definition as written.
A second commenter suggested adding a new definition of
``employee'' to make clear which persons are allowed to witness a
destruction event under new language in 21 CFR 1304.11(e). The
commenter believed that a definition is necessary because of what it
described as past liberal interpretation within the industry that has
led to the use of ``destruction plant personnel and other people that
are not gainfully employed by the reverse distributor registrant.''
DEA Response: DEA does not agree that a definition of ``employee''
is needed. DEA is using the word as defined in a typical dictionary
which means that persons who are not actually employed by the
registrant reverse distributor would not be eligible to perform the
witness function during the destruction.
Registration Process
While supporting the reverse distributor registration process as a
whole, one commenter expressed some concern about companies doing
business as both types of distributors without fully disclosing the
extent of their return or disposal business when partnering with
another dispensing distributor. The commenter stated that if its
interpretation is correct, namely that a company involved in both
distributing and reverse distributing will need to register
independently as a distributor and reverse distributor, that DEA should
add clarifying language to the rule.
A second commenter stated that public notice should exist, just as
it does for the importers, exporters, and manufacturers.
DEA Response: Under current regulations, any registrant is allowed
to distribute (i.e., return) a controlled substance to the distributor
or manufacturer from which the registrant originally obtained that
controlled substance without needing a separate registration as a
distributor. This type of transaction is considered to be a normal
business transaction. However, any registrant that obtains returns from
someone they did not distribute to for the purpose of returning the
controlled substances to the manufacturer or for disposal must obtain a
separate registration as a reverse distributor.
DEA intends to use the same registration process for reverse
distributors as it does for distributors because of the similarities
between distribution and reverse distribution, rather than the process
used for manufacturers, importers, and exporters. Therefore, DEA does
not agree that a public notice requirement is appropriate for reverse
distributors.
Reporting and Recordkeeping; ARCOS Reporting
One commenter recommended that the reverse distributor reporting
requirement be limited to Schedules I and II and that reverse
distributors not be required to report any controlled substance
received for destruction that is outside the DEA closed system of
distribution.
A second commenter recommended adding ``an ARCOS transaction code
that would accurately document Destruction in lieu of a Sale.'' The
commenter also noted that ``a DEA Form requires that in order for the
substance to be replaced, the manufacturer must now ask for Additional,
quota (sic) instead of Replacement Quota.'' The commenter further
suggested that recordkeeping should be augmented to require National
Drug Code (NDC) numbers, as NDC numbers are required for ARCOS and
other recordkeeping.
The commenter also expressed concern that using a reverse
distributor could have impact on a manufacturer's ability to obtain
more quota. The commenter requested that DEA clarify that there will be
no impediments in obtaining replacement or additional quotas when using
the services of a Reverse Distributor and when actual evidence of
proper destruction is provided.
DEA Response: DEA agrees that distribution by a manufacturer to a
reverse distributor for destruction could be recorded as a disposal and
not a sale. However, DEA also needs complete ARCOS records of all
transactions by reverse distributors so no change is
[[Page 22594]]
being made in the reporting requirements.
Regarding replacement quotas needed by manufacturers of controlled
substances, DEA will evaluate such needs based on the registrant's
authorized procurement quota and information submitted to DEA regarding
destruction of a manufacturer's controlled substances by a reverse
distributor. To evaluate and process requests for replacement quotas,
DEA requires the following documentation regarding destruction of
controlled substances from the registered manufacturer requesting the
replacement quota:
(1) A completed copy of the DEA Form 222 ``U.S. Official Order Form
for Schedule I and II Controlled Substances'' showing the transfer of
controlled substances from the registered manufacturer to a reverse
distributor.
(2) A copy of the completed DEA Form 41 ``Registrant's Inventory of
Drugs Surrendered'' with the corresponding destroyed by and witness by
signatures. The reverse distributor provides the DEA Form 41 to the
registered manufacturer documenting the surrender and disposal of the
controlled substances.
Replacement quota does not count against a registrant's procurement
quota; however these materials must be acquired in the same calendar
year the replacement quota is granted.
Disposal and Destruction of Controlled Substances
One commenter stated that DEA should require registrants to use a
Reverse Distributor to destroy controlled substances because
registrants who dispose of their own controlled substances have the
ability to influence their destruction records and because there is not
an arm's length relationship. The commenter asserted that ``Validation
exists at every other step in the closed-loop system DEA has
established, except for this very step.''
The commenter also believed that listed chemicals should require
the same recordkeeping and destruction requirements as controlled
substances since DEA has indicated that listed chemicals have become an
increased source of diversion into illicit markets.
Another commenter stated that DEA's use of the terms ``dispose,
disposal, disposer'' and ``destruction'' appears to be interchangeable
throughout the preamble and that this could inadvertently lead to
mishandling of controlled substances. The commenter urged DEA to
clarify that ``only those disposal methods that permanently destroy the
controlled substance are allowable forms of destruction.'' The
commenter stated that all technologies other than incineration should
require approval of DEA's Drug and Chemical Evaluation Section.
The commenter also believed that DEA should make it clear that at
no point during the loading, unloading, or destruction process should
the controlled substances be left unattended by either of the two
Registrant employees.
DEA Response: In general, the intent of the final rule is to codify
the concept of a reverse distributor with minimal change from standard
business practices of other distributors and with minimal change from
practices under the MOUs that have worked well for many years. DEA does
not have any justification for mandating delivery of controlled
substances to reverse distributors whether for return to a manufacturer
or for destruction.
Listed chemicals are subject to a totally different set of
requirements and any changes to those requirements would be outside of
the scope of this rulemaking.
With respect to the ``permanent destruction'' of controlled
substances, DEA believes that destruction under the terms of current 21
CFR 1307.21 is consistent with the goals stated by the commenters.
While DEA does not require incineration, other methods designed to
render a controlled substance unusable, while acceptable, may trigger a
more intense review by DEA or subject the disposer to the requirements
of other agencies, such as EPA.
Summary
In summary, the registration and other requirements for reverse
distributors under the interim final rule are the same as those
currently imposed on distributors and the same as previously imposed on
reverse distributors under MOUs, i.e., registration requirements under
existing 21 CFR 1301.13; security requirements under existing 21 CFR
1301.71 and 1301.72; recordkeeping requirements under existing 21 CFR
1304.22; reporting requirements under existing 21 CFR 1304.33 (ARCOS
reports); and order form requirements under existing 21 CFR 1305.08
(Persons entitled to fill order forms). In some cases these rules have
been modified to apply specifically to reverse distributors, including
inventory requirements under existing 21 CFR 1304.11. In addition, DEA
amended 21 CFR 1307.11 and 1307.12 to clarify that registrants can
transfer (``distribute'') controlled substances to a reverse
distributor, even if the registrant is not registered as a distributor.
The closed system of distribution established under the CSA for
controlled substances relies on certain fundamental principles,
including registration, security, and accountability (i.e.,
inventories, recordkeeping, and reporting), to achieve a system of
controls that allows for legitimate commerce while minimizing the
potential for diversion. The fact that reverse distributors engage in a
unique activity within the controlled substances chain and are faced
with certain challenges that other registrants do not normally
encounter does not override the fundamental principles of DEA's
controls. Reverse distributors must register, provide security, and
maintain accurate records for all controlled substances in their
possession. However, the regulatory structure does provide some
flexibility and, where possible, DEA has made adjustments to address
some of the problems the industry has encountered, including use of a
separate category of registration and application of the inventory
requirements for dispensers and researchers.
Regulatory Certifications
Administrative Procedure Act
An agency may find good cause to exempt a rule from certain
provisions of the Administrative Procedure Act (5 U.S.C. 553),
including making this rule effective upon the date of publication. DEA
finds good cause to make this rule effective upon publication, as this
Final Rule merely confirms existing regulatory requirements implemented
as part of the Interim Rule published July 11, 2003 at 68 FR 41222.
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)), and by approving it certifies that
this regulation will not have a significant economic impact upon a
substantial number of small entities. Therefore, no regulatory
flexibility analysis is required. This rule finalizes, without change,
an Interim Final Rule which mostly codified existing practices that
reverse distributors followed under memoranda of understanding (MOUs)
with DEA. DEA drafted the interim rule partly in response to concerns
by reverse distributors that they would be significantly and adversely
impacted if they were classified as manufacturers. In recognizing
reverse distributors as a separate registration category of
[[Page 22595]]
distributors, DEA believes the entire controlled substances industry
will benefit. Reverse distributors previously operating under MOUs are
becoming fully recognized registrants under DEA rules. Thousands of
other registrants who need to dispose of unneeded or outdated
inventories are now able to turn to a fully registered group of
distributors. Furthermore, by essentially codifying existing practices
these benefits are being achieved with minimal need for change or for
disruption to the affected industry.
Executive Order 12866
The Deputy Assistant Administrator further certifies that this
rulemaking has been drafted in accordance with the principles of
Executive Order 12866 Section 1(b). DEA has determined that this is a
significant regulatory action. Therefore, this action has been reviewed
by the Office of Management and Budget.
Executive Order 12988
The Deputy Assistant Administrator further certifies that this
regulation meets the applicable standards set forth in Sections 3(a)
and 3(b)(2) of Executive Order 12988.
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
$115,000,000 or more in any one year, and will not significantly or
uniquely affect small governments. Therefore, no actions were deemed
necessary under the provisions of the Unfunded Mandates Reform Act of
1995.
Small Business Regulatory Enforcement Fairness Act of 1996
This rule is not a major rule as defined by Section 804 of the
Small Business Regulatory Enforcement Fairness Act of 1996. This rule
will not result in an annual effect on the economy of $100,000,000 or
more; a major increase in costs or prices; or significant adverse
effects on competition, employment, investment, productivity,
innovation, or on the ability of United States-based companies to
compete with foreign-based companies in domestic and export markets.
The Interim Final Rule amending Parts 1300, 1301, 1304, 1305, and
1307 of Title 21, Code of Federal Regulations, which was published in
the Federal Register on July 11, 2003 at 68 FR 41222, is hereby adopted
as a Final Rule without change.
Dated: April 26, 2005.
William J. Walker,
Deputy Assistant Administrator, Office of Diversion Control.
[FR Doc. 05-8692 Filed 4-29-05; 8:45 am]
BILLING CODE 4410-09-P