[Federal Register: May 18, 2005 (Volume 70, Number 95)]
[Notices]
[Page 28573-28574]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18my05-105]
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DEPARTMENT OF JUSTICE
Drug Enforcement Administration
A-1 Distribution Wholesale; Denial of Registration
On October 8, 2004, the Deputy Assistant Administrator, Office of
Diversion Control, Drug Enforcement Administration (DEA), issued an
Order to Show Cause to A-1 Distribution Wholesale (A-1) proposing to
deny its September 19, 2002, application for DEA Certificate of
Registration as a distributor of list I chemicals. The Order to Show
Cause alleged that granting A-1's application would be inconsistent
with the public interest, as that term is used in 21 U.S.C. 823(h). The
order also notified A-1 that should no request for a hearing be filed
within 30 days, its hearing right would be deemed waived.
According to the DEA investigative file, the Order to Show Cause
was sent by certified mail to A-1 at its proposed registered location
at 6751 Macon Road, Suite 18, Columbus, Georgia 31909. It was then
forwarded by the U.S. Postal Service to A-1's new address at 7565
Chattsworth Road, Midland, Georgia 31820-4026, where it was received on
October 18, 2004. DEA has not received a request for a hearing or any
other reply from A-1 or anyone purporting to represent the company in
this matter.
Therefore, the Deputy Administrator of DEA, finding that (1) thirty
days have passed since delivery of the Order to Show Cause, and (2) no
request for a hearing having been received, concludes that A-1 has
waived its hearing right. See Aqui Enterprises, 67 FR 12,576 (2002).
After considering relevant material from the investigative file, the
Deputy Administrator now enters her final order without a hearing
pursuant to 21 CFR 1309.53(c) and (d) and 1316.67. The Deputy
Administrator finds as follows.
List I chemicals are those that may be used in the manufacture of a
controlled substance in violation of the Controlled Substances Act. 21
U.S.C. 802(34); 21 CFR 1310.02(a). Pseudoephedrine and ephedrine are
list I chemicals commonly used to illegally manufacture
methamphetamine, a Schedule II controlled substance. As noted in
previous DEA final orders, methamphetamine is an extremely potent
central nervous system stimulant, and its abuse is a persistent and
growing problem in the United States. See e.g., Direct Wholesale, 69 FR
11,654 (2004); Branex, Inc., 69 FR 8,682 (2004); Yemen Wholesale
Tobacco and Candy Supply, Inc., 67 FR 9,997 (2002); Denver Wholesale,
67 FR 99,986 (2002).
The Deputy Administrator's review of the investigative file reveals
that on or about September 19, 2002, an application was submitted by
the owner of A-1, Mr. David Smith, seeking registration to distribute
ephedrine and pseudoephedrine list I chemical products. The application
originally included phenylpropanolamine, but that listed chemical
product was eventually deleted from the request.
In connection with the pending application, an on-site pre-
registration investigation was conducted at the proposed premises in
April 2003. Investigators were advised that A-1 was a sole
proprietorship, operated by Mr. Smith and his wife, with no other
employees. It commenced operations in June 2002 and was a wholesale
distributor of general merchandise such as health and beauty aids,
automotive products, sunglasses and other sundry items. A-1 provided a
list of products it intended to carry which included 60 tablet bottles
of Mini Two Way and Two Way brand combination ephedrine, as well as
Pseudo 60 brand pseudoephedrine. The majority of A-1's proposed
customers were gas stations, small retail markets and convenience
stores in the Columbus, Georgia area. Neither Mr. Smith nor his wife
had any prior experience with the distribution of list I chemicals.
DEA is aware that small illicit laboratories operate with listed
chemical products often procured, legally or illegally, from non-
traditional retailers of over-the-counter drug products, such as gas
stations and small retail markets. Some retailers acquire product from
multiple distributors to mask their acquisition of large amounts of
listed chemicals. In addition, some individuals utilize sham
corporations or fraudulent records to establish a commercial identity
in order to acquire listed chemicals.
The Deputy Administrator has previously found that the illegal
production of methamphetamine continues unabated within the DEA Atlanta
region. The adjacent State of Tennessee leads the region in the number
of clandestine laboratories seized, accounting for approximately 50
percent of the clandestine laboratories seized during the second
quarter of 2002. When compared with the third quarter of 2001, the
increase in clandestine laboratory seizures is notable. According to
later records for the Atlanta region, 360 clandestine laboratories were
seized during the third quarter of 2002. Of the 360 laboratories seized
during that reporting period, 207 were located in Tennessee, 103 in
Georgia, 35 in South Carolina and 15 in North Carolina. See CWK
Enterprises, Inc. (CWK), 69 FR 69,400 (2004); Prachi Enterprises, Inc.
(Prachi), 69 FR 69,407 (2004).
In the State of Georgia, there has been a consistent increase in
the number of illicit laboratories and enforcement teams continue to
note a trend toward smaller capacity laboratories. This is likely due
to the ease of concealment associated with smaller laboratories, which
continue to dominate seizures and cleanup responses. The adjacent State
of Tennessee also has a substantial methamphetamine abuse problem in
the Chattanooga and Eastern Tennessee areas and DEA is aware of a past
history of trafficking in precursors in these locations. Distributors
or retailers selling the illicit methamphetamine trade observe no
borders and trade across state lines. In fact, where precursor laws are
stringent, out-of-state distributors often make direct shipments to
retainers without observing state requirements. See CKW, supra, 69 FR
69,400; Prachi, supra, 69 FR 69,407.
DEA knows by experience that there exists a ``gray market'' in
which certain high strength, high quantity pseudoephedrine and
ephedrine products are distributed only to convenience stores and gas
stations,
[[Page 28574]]
from where they have a high incidence of diversion. These grey market
products are not sold in large discount stores, retail pharmacies or
grocery stores, where sales of therapeutic over-the-counter drugs
predominate. ``Two-way'' ephedrine and single entity pseudoephedrine
products are prime products in this gray market industry and are rarely
found in any retail store serving the traditional therapeutic market.
DEA also knows from industry data, market studies and statistical
analysis that over 90% of over-the-counter drug remedies are sold in
drug stores, supermarket chains and ``big box'' discount retailers.
Less than one percent of cough and cold remedies are sold in gas
stations or convenience stores. Studies have indicated that most
convenience stores could not be expected to sell more than $20.00 to
$40.00 worth of products containing pseudoephedrine per month. The
expected sales of ephedrine products are known to be even smaller. Most
convenience stores handling gray market products often order more
product than what is required for the legitimate market and obtain
chemical products from multiple distributors.
Pursuant to 21 U.S.C. 823(h), the Deputy Administrator may deny an
application for a Certificate of Registration if she determines that
granting the registration would be inconsistent with the public
interest. Section 823(h) requires that the following factors be
considered in determining the public interest:
(1) Maintenance of effective controls against diversion of listed
chemicals into other than legitimate channels;
(2) Compliance with applicable Federal, State and local law;
(3) Any prior conviction record under Federal or State laws
relating to controlled substances or to chemicals controlled under
Federal or State law;
(4) Any past experience of the applicant in the manufacture and
distribution of chemicals; and
(5) Such other factors as are relevant to and consistent with the
public health and safety.
As with the public interest analysis for practitioners and
pharmacies pursuant to subsection (f) of section 823, these factors are
to be considered in the disjunctive; the Deputy Administrator may rely
on any one of a combination of factors and may give each factor the
weight she deems appropriate in determining whether a registration
should be revoked or an application for registration denied. See, e.g.,
Energy Outlet, 64 FR 14,269 (1999). See also, Henry J. Schwartz, Jr.,
M.D., 54 FR 16,422 (1989).
The Deputy Administrator finds factors four and five relevant to
the pending application for registration.
With regard to factor four, the applicant's past experience in the
distribution of chemicals, the Deputy Administrator finds this factor
relevant based on Mr. and Mrs. Smith's lack of knowledge and experience
regarding the laws and regulations governing handling of list I
chemical products. In prior DEA decisions, this lack of experience in
handling list I chemical products has been a factor in denying pending
applications for registration. See, e.g., CWK, supra, 69 FR 69,400;
Prachi, supra, 69 FR 69,407; Direct Wholesale, supra, 69 FR 11,654; ANM
Wholesale, 69 FR 11,652 (2004); Xtreme Enterprises, Inc., 67 FR 76,195
(2002).
With regard to factor five, other factors relevant to and
consistent with the public safety, the Deputy Administrator finds this
factor weighs heavily against granting the application. Unlawful
methamphetamine use is a growing public health and safety concern
throughout the United States and Southeast. Ephedrine and
pseudoephedrine are precursor products needed to manufacture
methamphetamine and operators of illicit methamphetamine laboratories
regularly acquire the precursor products needed to manufacture the drug
from convenience stores and gas stations which, in prior DEA decisions,
have been identified as constituting the grey market for list I
chemical products. It is apparent that A-1 intends on being a
participant in this market.
While there are no specific prohibitions under the Controlled
Substances Act regarding the sale of listed chemical products to these
entities, DEA has nevertheless found these establishments serve as
sources for the diversion of large amounts of listed chemical products.
See, e.g., ANM Wholesale, supra, 69 FR 11,652; Xtreme Enterprises,
Inc., 67 FR 76,195; Sinbad Distributing, 67 FR 10,232 (2002); K.V.M.
Enterprises, 67 FR 70,968 (2002).
The Deputy Administrator has previously found that many
considerations weighed heavily against registering a distributor of
list I chemicals because, ``[v]irtually all of the Respondent's
customers, consisting of gas station and convenience stores, are
considered part of the grey market, in which large amounts of listed
chemicals are diverted to the illicit manufacture of amphetamine and
methamphetamine.'' Xtreme Enterprises, Inc., supra, 67 FR at 76,197. As
in Xtreme Enterprises, Inc., lack of a criminal record and intent to
comply with the law and regulations are far outweighed by A-1's lack of
experience and the company's intent to sell ephedrine and
pseudoephedrine primarily to the gray market. See also, CWK, supra, 69
FR 69,400; Prachi, supra, 69 FR 69,407.
Based on the foregoing, the Deputy Administrator concludes that
granting the pending application would be inconsistent with the public
interest.
Accordingly, the Deputy Administrator of the Drug Enforcement
Administration, pursuant to the authority vested in her by 21 U.S.C.
823 and 824 and 28 CFR 0.100(b) and 0.104, hereby orders the pending
application for DEA Certificate of Registration, previously submitted
by A-1 Distribution Wholesale, be, and it hereby is, denied. This order
is effective June 17, 2005.
Dated: May 9, 2005.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. 05-9833 Filed 5-17-05; 8:45 am]
BILLING CODE 4410-09-M