[Federal Register: December 27, 2007 (Volume 72, Number 247)]
[Notices]
[Page 73361-73367]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27de07-81]
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DEPARTMENT OF JUSTICE
Drug Enforcement Administration
[Docket No. DEA-306E]
Established Assessment of Annual Needs for the List I Chemicals
Ephedrine, Pseudoephedrine, and Phenylpropanolamine for 2008
AGENCY: Drug Enforcement Administration (DEA), Justice.
ACTION: Notice of Assessment of Annual Needs for 2008.
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SUMMARY: This notice establishes the initial year 2008 Assessment of
Annual Needs for certain List I chemicals in accordance with the Combat
Methamphetamine Epidemic Act of 2005 (CMEA), enacted on March 9, 2006.
EFFECTIVE DATE: December 27, 2007.
FOR FURTHER INFORMATION CONTACT: Christine A. Sannerud, PhD, Chief,
Drug & Chemical Evaluation Section, Drug Enforcement Administration,
Washington, DC 20537, Telephone: (202) 307-7183.
SUPPLEMENTARY INFORMATION:
Background and Legal Authority
Section 713 of the Combat Methamphetamine Epidemic Act of 2005
(CMEA) (Title VII of Pub. L. 109-177) amended section 306 of the
Controlled Substances Act (CSA) (21 U.S.C. 826) requiring that the
Attorney General establish quotas to provide for the annual needs for
ephedrine, pseudoephedrine, and phenylpropanolamine. Section 715 of the
CMEA amended 21 U.S.C. 952 by adding ephedrine, pseudoephedrine and
phenylpropanolamine to the existing language concerning importation of
controlled substances.
The 2008 Assessment of Annual Needs represents those quantities of
ephedrine, pseudoephedrine, and phenylpropanolamine which may be
manufactured domestically and/or imported into the United States in
2008 to provide adequate supplies of each chemical for: The estimated
medical, scientific, research, and industrial needs of the United
States; lawful export requirements; and the establishment and
maintenance of reserve stocks.
The responsibility for establishing the assessment has been
delegated to the Administrator of the DEA by 28 CFR 0.100. The
Administrator, in turn, has redelegated this function to the Deputy
Administrator, pursuant to 28 CFR 0.104.
On September 20, 2007, a notice entitled, ``Assessment of Annual
Needs for the List I Chemicals Ephedrine, Pseudoephedrine, and
Phenylpropanolamine for 2008: Proposed'' was published in the Federal
Register (72 FR 53911). This notice proposed the initial 2008
Assessment of Annual Needs for ephedrine (for sale), ephedrine (for
conversion), pseudoephedrine (for sale), phenylpropanolamine (for sale)
and phenylpropanolamine (for conversion). All interested persons were
invited to comment on or object to the proposed assessments on or
before October 11, 2007.
Comments Received
DEA did not receive any comments or objections from the more than
1,050 DEA-registered manufacturers and importers directly impacted by
this notice. However, DEA did receive one comment from a law firm
representing a DEA-registered distributor of nonprescription (over-the-
counter (OTC)) products containing ephedrine, pseudoephedrine, or
phenylpropanolamine. When sold at retail, these products are referred
to as scheduled listed chemical products.\1\ This same commenter
commented to DEA's proposed 2007 Assessment of Annual Needs which was
published in the Federal Register on October 19, 2006 (71 FR 61801).
The comment submitted to this notice is virtually identical to that
previously considered by DEA in that the comment included the same
reports. However, DEA notes that the current comment includes one new
report and one new letter. The new report was prepared by an economist
who was retained by the DEA-registered distributor being represented by
the law firm. The letter was prepared by the statistician whose report
was submitted as part of this commenter's comments to the 2007 proposed
assessment.
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\1\ Title 21 U.S.C. 802(45) defines a scheduled listed chemical
product as ``a product that contains ephedrine, pseudoephedrine, or
phenylpropanolamine; and * * * may be marketed or distributed
lawfully in the United States under the Federal Food, Drug, and
Cosmetic Act as a nonprescription drug.''
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The commenter's comments related to DEA's proposed assessments for
ephedrine (for sale) and pseudoephedrine (for sale). These assessments
are discussed below within
[[Page 73362]]
the context of the comment received. As DEA did not receive any
comments on its proposed Assessment of Annual Needs for ephedrine (for
conversion), phenylpropanolamine (for conversion), and
phenylpropanolamine (for sale), DEA is finalizing these values as
proposed.
Comments Regarding DEA's Proposed Assessments for Ephedrine (For Sale)
and Pseudoephedrine (For Sale)
The commenter indicated its belief that the proposed ephedrine
assessment was insufficient to meet market demands for ephedrine-
containing OTC products. The commenter also questioned the sufficiency
of the assessment for pseudoephedrine. The commenter included in its
comment a report from a statistician, a report from an economist, and a
report from a physician to assess the impact of the proposed quota on
medical, industrial, scientific and other legitimate demand for the two
chemicals. The commenter's comments, and DEA's responses, are discussed
below.
Economic Impact Analysis and Impact on Small Businesses
The commenter claimed that DEA underestimated the economic impact
of the proposed quota limits. The commenter also claimed that DEA
failed to consider the quota impact on small businesses. To support its
claims, the commenter provided a new report from an economist. The
commenter claimed that ``DEA has violated statutory requirements by
relying on inaccurate and incomplete data to produce its economic
impact.'' Based on the new report, the commenter asserted that the
economic impact of DEA's proposal ``* * * will be a reduction of
revenues of $2 billion dollars per year (from the effective ban on
ephedrine product sales) and will result in the termination of 25-50
American workers' jobs per firm.''
DEA Response: The economic information submitted by the commenter
in support of its claims is flawed. The commenter has made the
fundamental mistake of assuming that its sales are representative of
the industry as a whole, an assumption which broader industry numbers
do not support. In addition, the commenter has overstated the number of
convenience stores that are selling these products, which further
magnifies the errors in its analyses. The commenter's estimates of the
convenience store market for scheduled listed chemical products are
shown in Table 1.
Table 1.--Commenter's Estimates of Annual Value of the Ephedrine Market
------------------------------------------------------------------------
Lower bound Upper bound
------------------------------------------------------------------------
Ephedrine....................... $166 million...... $237 million.
Number of Convenience Stores 72,500 ...........
Selling the Products*.
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* Commenter did not provide an upper bound.
These numbers are at serious variance with the most comprehensive
data available on sales of nonprescription medications (OTC drugs) at
convenience and other nonconventional outlets and with estimates of the
total size of the ephedrine market; nonconventional outlets include
convenience stores, gas stations with convenience stores, gas stations
without convenience stores, liquor stores, and novelty and gift stores.
Conventional outlets include grocery stores, drug stores, discount
stores, superstores and warehouse stores, and general merchandise
stores. Internet and mail order stores are a third category. Table 2
presents data on the value of nonprescription medication sales at
various retail sectors based on the 2002 Economic Census of the Retail
Trade, Product Line, the most recent Census data. The table includes
the number of establishments in the sector, the number of those
establishments that sell nonprescription drugs, the value of
nonprescription sales in the sector, and the value of all sales in
drug, health, and beauty aids. Nonprescription drugs are a subset of
the larger category; the value of the broader category is listed
because it was used to derive an estimate of sales of nonprescription
drugs for sectors whose sales the Census did not disaggregate. The
final column lists the percentage of an establishment's sales that the
Census reported nonprescription drugs represent for those
establishments that sell the products.
Table 2.--Census Data on Product Line Sales by Sector
[Thousand $]
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Number of All drug, OTC drugs
Retail sector Number of establishments OTC drug health, and as % of all
establishments w/OTC drugs sales 2002 beauty aids sales
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Grocery.................................. 66,150 26,029 $2,670,914 $35,172,224 1.3
Convenience Store........................ 29,212 12,399 133,263 443,116 1.6
Specialty Food........................... 24,485 194 2,551 24,045 1.6
Liquor Store............................. 28,957 1,496 19,344 89,541 2
Drug and Personal Care................... 81,797 36,797 8,348,218 140,759,601 4.7
Gas Station with Convenience Store....... 93,691 * 24,597 * 248,082 824,904 ***< 0.4
Gas Station.............................. 27,755 * 685 * 7,488 70,577 ***< 0.1
Discount Store........................... 5,650 2,079 1,439,227 22,025,430 1.1
Superstore + Club........................ 2,912 2,758 2,270,530 21,066,107 1.2
Other general merchandise................ 28,546 11,840 167,951 3,357,825 1.2
Gift and novelty......................... 35,795 * 1,686 * 47,973 159,515 ***< 1
Electronic and Mail Order................ 15,910 250 565,305 29,618,519 13
Total................................ 440,860 120,810 15,920,846 253,611,404 ...........
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[[Page 73363]]
All Nonconventional **........... 215,410 40,863 456,150 1,587,653 ...........
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* OTC sales not listed separately in Census data; OTC value estimated based on percentage of OTC to all drug,
health, and beauty products sold at regular convenience stores (i.e., convenience stores that are not part of
gas stations). Number of stores estimated using ratio of regular convenience stores that carry OTC to those
that cover all drug, health, and beauty aids.
** Nonconventional outlets include convenience stores, gas stations with and without convenience stores, liquor
stores, and novelty stores.
*** Percentage is the percentage that all drug, health, and beauty aid products sales represent of total sales;
the nonprescription medications are a subset of these sales.
The nonconventional outlets--convenience stores, gas stations with
and without convenience stores, novelty stores, and liquor stores--make
up only about three percent of the total market for nonprescription
drugs. Using A.C. Nielsen data \2\ on the growth of the OTC market from
2002 to 2006 and the Census data on the value of the market, the annual
value of nonprescription drug sales for nonconventional outlets in 2006
is estimated to be about $532 million and the total market for all
retail sectors is about $18 billion.
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\2\ A.C. Nielsen data from Consumer Healthcare Products
Association (http://www.chpainfo.org/ChpaPortal/PressRoom/Statistics/OTCSalesbyCategory.htm
).
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Nonprescription drugs contain a wide range of medications. Data
from the Consumer Healthcare Products Association and A.C. Nielsen
indicate that cough and cold medications make up about 27 percent to 40
percent of the total OTC market, or about $4.8 billion to $7.3 billion
in 2006 (other major groups include analgesics and heartburn
medications).\3\ The cough and cold medications include a variety of
drugs, from cough syrups to antihistamines. Because there is no reason
to believe that nonconventional outlets selling nonprescription drugs
sell more or less cough or cold medications in proportion to other
nonprescription drugs than any other retail outlet, it is reasonable to
estimate that the total value of their sales for all cough and cold
drugs in 2006 was approximately $142 million to $215 million (3 percent
of the total), or somewhat less than the commenter estimated the market
for ephedrine alone to be.
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\3\ The A.C. Nielsen data were used to estimate only a ratio of
the cough and cold medication to the total OTC medication market.
The total value of the market was estimated based on the 2002 Census
data inflated to 2006 dollars. The Nielsen data do not include Wal-
Mart and may not include many convenience stores. In addition, the
Nielsen data include a number of product lines that either are not
nonprescription drugs (e.g., toothpaste) or mix nonprescription
drugs and other products (e.g., first aid ointments and bandaids).
The lower value of the range is based on inclusion of every OTC
product line listed in the Nielsen data except toothpaste and
sunscreens. The higher value excludes eye products, first aid, foot
preparations, oral care, sun products, and undefined ``others.''
Note that the higher value will overstate the value of the cough and
cold medication market because it includes some non-drug products,
such as cough drops.
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Ephedrine and pseudoephedrine constitute a subset of the cough and
cold medication market. DEA has not been able to obtain any data on
what percentage of the market they represent. In 2006, estimates of the
retail value of products containing one of the chemicals that DEA and
the Food and Drug Administration obtained from market researchers
ranged from $500 million to $1.5 billion, but the estimates involved
considerable uncertainty; the estimates were also based on the market
before many manufacturers began to market new products that substituted
phenylephrine for pseudoephedrine. Data from market research firm
Information Resources, Inc. on the top 200 over-the-counter brands
(including private label products) sold through grocery stores, drug
stores, and mass market stores in 2006 indicate that at least 65
percent of the cough and cold medications do not contain
pseudoephedrine; if private label products contain pseudoephedrine at
the same rate as brand name products, at least 78 percent of the cough
and cold medication sales do not contain pseudoephedrine.\4\ No product
in the top 200 appears to contain ephedrine; the sales value of the
200th product was about $20.4 million.
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\4\ Data available at http://www.drugtopics.com. Note that the
data probably do not cover convenience stores and other
nonconventional outlets. Even the lower estimate of the
pseudoephedrine part of the market is overstated because it includes
sales values for product lines that contain 4 to more than 20
products, only one of which contains pseudoephedrine.
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The cough and cold medication sector, as defined by A.C. Nielsen,
includes a wide variety of tablets, gel capsules, liquids, and cough
drops, many of which do not contain either ephedrine or
pseudoephedrine. Even if the entire market sector consisted of
scheduled listed chemical products, the estimates the commenter
submitted and shown in Table 1 are clearly overstated.
Data developed by IMS Health Government Solutions for the
Assessment of Annual Needs for 2007, \5\ which used a range of industry
sources, plus data from a confidential source, indicate that the
ephedrine market is at most between 2 percent and 6.6 percent the size
of the pseudoephedrine market (i.e., the value of sales of ephedrine
products represent 2 percent to 6.6 percent of the value of sales of
pseudoephedrine products). In a comment on a previous rule,\6\ the
commenter submitted estimates that implied that ephedrine sales at
convenience stores to which it distributes were about 20 percent of the
value of pseudoephedrine sales at convenience stores to which it
distributes. Table 3 shows the commenter's implied size of the
pseudoephedrine market at convenience stores.
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\5\ As discussed in DEA's October 19, 2006, ``Assessment of
Annual Needs for the List I Chemicals Ephedrine, Pseudoephedrine,
and Phenylpropanolamine for 2007: Proposed'' (71 FR 61801) and a
subsequent notice establishing the assessment for 2007 (72 FR 53908,
September 20, 2007), since the manufacture and importation of
ephedrine, pseudoephedrine, and phenylpropanolamine were not
previously regulated through the establishment of an assessment of
annual needs, DEA obtained assistance from a private independent
contractor, IMS Health Government Solutions, to develop the initial
estimate of the medical needs of the United States of ephedrine and
pseudoephedrine. IMS provided DEA with two reports: ``Methodology
Used in Developing Preliminary Estimates of Ephedrine and
Pseudoephedrine 2005 Legitimate Use'' (and ``2005 Ephedrine/
Pseudoephedrine Legitimate Medical Use Methodology and Final
Report'' (July 3, 2007). Both reports may be found at http://www.deadiversion.usdoj.gov/meth/index.html
.
\6\ Comment to ``Import and Production Quotas for Certain List I
Chemicals'' (72 FR 37439, July 10, 2007) [Docket No. DEA-293, RIN
1117-AB08] available at http://www.regulations.gov.
[[Page 73364]]
Table 3.--Commenter's Implied Value of the Pseudoephedrine (PSE) Sales
at Convenience Stores
------------------------------------------------------------------------
Implied PSE
market Implied PSE market
Ephedrine/PSE (ephedrine (ephedrine market =
market = $166m) $237m)
------------------------------------------------------------------------
Ephedrine = 2% of PSE Sales.. $8.3 billion... $11.85 billion.
Ephedrine = 6.60% of PSE $2.5 billion... $3.6 billion.
Sales.
Ephedrine = 20% of PSE Sales. $830 million... $1.185 billion.
------------------------------------------------------------------------
Because convenience store sales of these products represent only 3
percent of all sales, even using the lowest number the commenter
provided (ephedrine sales of $166 million representing 20 percent of
pseudoephedrine sales), the commenter's estimates produce an implied
value of the total ephedrine and pseudoephedrine nonprescription market
across all retail sectors of $33 billion, or between 4.5 and 7 times
the actual retail market for all cough and cold medications and almost
twice the size of the entire nonprescription drug retail market of $18
billion.
The commenter claimed that the ephedrine quota, which no importer
or manufacturer objected to, would lead to job losses. Even the
commenter's own overestimates indicate that job losses are highly
improbable. If all ephedrine products were removed from the market at
these outlets, which is unlikely, the daily sales loss would be very
low even at the commenter's exaggerated levels. At more realistic
market values, the daily losses would be trivial. Table 4 presents the
average value of daily sales using the commenter's estimates of the
value of ephedrine sales ($166 million to $237 million) and the number
of convenience stores selling the products based on the commenter's
estimate (72,500), Census data (41,000), and DEA data (28,000). The
table also presents the more reasonable level of daily sales based on
an estimate of the value of ephedrine sales at nonconventional outlets
($24 to $36 million). The more reasonable estimates may still be
overestimates because they are based on a series of conservative
assumptions: That nonconventional outlets sell 3 percent of
nonprescription drugs or $532 million (Census data), that cough and
cold medications represent 27 to 40 percent of those sales (Consumer
Healthcare Products Association and A.C. Nielsen data) or $142 million
to $215 million, and that ephedrine products represent 20 percent of
those sales (commenter's implied estimate assuming that only ephedrine
and pseudoephedrine products are sold in this category) or $24 million
to $36 million.
Table 4.--Estimated Daily Sales of Ephedrine-Containing Products at Convenience Stores
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Estimated total value of Daily sales of
Source of No. of outlet estimate Estimate No. ephedrine nonconventional ephedrine
of outlets outlet market products
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Commenter................................... 72,500 $166-$237 million ephedrine.... $6.27-$8.96
Census...................................... 41,000 ............................... 11.09-15.84
DEA Estimate................................ \7\ 28,000 ............................... 16.24-23.19
Commenter................................... 72,500 24-36 million ephedrine........ 0.89-1.36
Census...................................... 41,000 ............................... 1.58-2.40
DEA Estimate................................ 28,000 ............................... 2.32-3.51
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It is not reasonable to think that this level of sales loss, which
represents considerably less than the cost of a single car buying a
tank of gasoline, would affect employment as the commenter claimed.
With about 28,000 convenience stores continuing to sell these products,
there is no reason to think that all or even most such sales will be
lost. As DEA stated in its Interim Final Rule implementing the
procedures for import and production quotas for ephedrine,
pseudoephedrine, and phenylpropanolamine (72 FR 37439, July 10, 2007),
its concern is with a limited number of high dosage unit products that
are sold almost exclusively through nonconventional outlets and the
Internet, not with low dosage unit products that are sold through both
conventional and nonconventional outlets.
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\7\ The Combat Methamphetamine Epidemic Act of 2005 states that
it is unlawful for any person who is a regulated seller to knowingly
or recklessly sell at retail scheduled listed chemical products in
violation of the requirements of 21 U.S.C. 830(e), including the
requirement that regulated sellers self-certify to the Attorney
General regarding compliance with the provisions of the Act (21
U.S.C. 842(a)(13)). As of October 12, 2007, 18,044 convenience
stores had self-certified; DEA has identified another 10,000 that
are selling the products.
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The commenter's claim that eliminating sales of ephedrine products
at convenience stores, which neither DEA's Interim Final Rule
establishing the procedures for implementation of quotas for ephedrine,
pseudoephedrine, or phenylpropanolamine, nor this notice would do,
would harm the public is also not supported. The IMS Health Government
Solutions study that DEA used to adjust the Assessment of Annual Needs
for 2007 indicated that ephedrine sales at convenience stores had
dropped after states implemented controls on sales, but that sales at
conventional stores increased; total sales of ephedrine products
actually grew. Although this change may produce minor harm to
convenience stores, or serious harm to the commenter, as it claimed,
economically it is a transfer. Other stores and distributors have
benefited by the shift, and the economy as a whole has not been
affected. DEA notes that most stores in both categories--conventional
and nonconventional outlets--are small businesses.
The commenter asserted that DEA had failed to consider the impact
on small businesses. The only small entities directly affected by the
Assessment of Annual Needs are manufacturers and importers, none of
whom filed comments or objections to the assessment. The increased
sales of ephedrine products shown in the IMS Health Government
Solutions data indicate that these entities have not been harmed. The
indirect effects of the assessment on downstream users, such as the
commenter and its customers, are not subject to review under the
[[Page 73365]]
Regulatory Flexibility Act or Executive Order 12866. In any case, as
noted above, the data collected indicate that if some small entities
have lost sales, others have gained sales, which is in economics terms
a transfer. The total sales of ephedrine products appears to have
increased (in terms of quantity, not value), which is why DEA adjusted
the ephedrine assessment upward when establishing the assessment for
ephedrine for 2007 (72 FR 53908, September 20, 2007). If the
manufacturers and importers provide data that indicates that the
ephedrine market is continuing to grow, DEA will adjust future
assessments to meet the medical, scientific, research, industrial, and
other legitimate needs of the United States.
In conclusion, the commenter has overestimated the size of the
market for ephedrine products at convenience stores by a factor of at
least six to ten, has made exaggerated claims about the impact on jobs
when the daily sales values even using the commenter's overestimated
claims are low, and has claimed damage to the economy when the data
indicate that increased sales of the products at conventional outlets
have more than offset sales losses at nonconventional outlets. Whatever
effect the statutorily mandated restrictions have had on the commenter
or nonconventional outlets, the cough and cold medication market
continues to grow; there is no evidence to support the commenter's
claim of a cost to the United States economy.
Use of the IMS Health Government Solutions Report
The commenter refers to the IMS Health Government Solutions study
referenced above on numerous occasions throughout its comment. As
discussed in DEA's October 19, 2006, proposed 2007 Assessment of Annual
Needs Notice (71 FR 61801) and its September 20, 2007, established 2007
Assessment of Annual Needs Notice (72 FR 53908), DEA obtained
assistance from a private independent contractor, IMS Health Government
Solutions, to develop the initial estimate of the medical needs of the
United States for both ephedrine and pseudoephedrine. The results from
IMS' initial study were utilized by DEA to propose the 2007 Assessment
of Annual Needs. The commenter claimed that the IMS report
underestimated legitimate demand for ephedrine sold in OTC drugs for
respiratory ailments via convenience stores. The commenter further
claimed that the study did not adequately address sales of ephedrine-
based OTC drug products through the convenience store channel of
distribution. The commenter claimed that since DEA relied on
underestimated values of the medical need (as provided by IMS) when it
established the 2007 Assessment of Annual Needs, these same values, as
proposed for the 2008 assessment, would lead to inadequate supplies of
drug products containing ephedrine and pseudoephedrine.
DEA Response: The commenter's belief that the IMS Health Government
Solutions report underestimated the medical needs of ephedrine and
pseudoephedrine OTC drug products is flawed in the same way that its
belief regarding the economic impact of this notice is flawed, as
discussed above. The commenter's conclusion about the IMS Health
Government Solutions report is predicated on the assumption that the
commenter's sales are representative of the industry as a whole. As
explained below, this conclusion is not supported by applications that
the DEA has received for individual import, manufacturing, and
procurement quotas from DEA-registered importers and manufacturers for
2008.
DEA's Proposed 2008 Assessment of Annual Needs for Ephedrine (For Sale)
and Pseudoephedrine (For Sale)
The comment received from the commenter is virtually identical to
that submitted to the proposed 2007 Assessment of Annual Needs on
October 19, 2006 (71 FR 61801). Then, as now, the commenter asserted
that the IMS Health Government Solutions report underestimated the
legitimate demand for ephedrine sold in OTC drug products. The
commenter further asserted that DEA's Assessment of Annual Needs
significantly understated the amount of ephedrine and pseudoephedrine
required to satisfy legitimate medical, scientific, research, and
industrial purposes and lawful imports. The commenter also claimed that
the IMS Health Government Solutions study did not adequately address
sales of ephedrine-based OTC drug products through the convenience
store channel of distribution. The new information submitted by the
commenter in this area is a two-page letter prepared by the
statistician who had initially submitted a report to the commenter as
part of the commenter's comments to the 2006 proposed assessments. In
that letter, the statistician stated that the DEA's proposed medical
use estimate (which is a component of the ephedrine (for sale)
assessment, which also includes lawful export and inventory
requirements) of 11,500 kg for ephedrine ``falls far short of the 130%
to 900% range of increases that would be needed to put the earlier
proposed quota in line with actual over-the-counter sales of ephedrine
products.'' DEA notes the commenter did not provide any quantitative or
qualitative data to support its belief that the DEA's Assessment of
Annual Needs for pseudoephedrine (for sale) was too low.
DEA Response: The estimated ephedrine (for sale) requirements
submitted by the commenter are not supported by the applications
received by the DEA pursuant to 21 CFR part 1315. On July 10, 2007, DEA
published an Interim Final Rule which established procedures for
administering individual quotas to DEA-registered manufacturers and
importers of controlled substances (72 FR 37439). Although the rule
became effective immediately upon publication, DEA chose not to issue
individual import, manufacturing, and procurement quotas to DEA-
registered importers and manufacturers of these chemicals in 2007 after
finalizing the 2007 Assessment of Annual Needs. DEA concluded that such
action would negatively impact the immediate availability of these
chemicals and the products derived therefrom. Instead, DEA stated on
its web site (http://www.deadiversion.usdoj.gov/meth/q_a.htm) that it
would solicit applications for individual 2008 quotas from DEA-
registered manufacturers and importers with the intent of processing
completed applications on or before January 1, 2008.
On July 12, 2007, DEA notified all 1,054 DEA registered
manufacturers and importers of both controlled substances and List I
chemicals in writing of the publication of the Interim Final Rule and
its potential impact on companies' ability to import or manufacture the
List I chemicals ephedrine, pseudoephedrine, and phenylpropanolamine,
and products containing those chemicals after January 1, 2008. Those
that received the letter would have included companies that manufacture
ephedrine products for the convenience store market. Specifically, DEA
advised each company to submit an individual application(s) for 2008
quota; DEA advised that if no application was received, then DEA would
assess each company's importing and manufacturing requirements for 2008
to be zero and, consequently, no quota would be issued. However,
applications for quota could be submitted during the 2008 calendar
year.
In the first month and a half, prior to proposing the 2008
Assessment of Annual Needs (72 FR 53911, September
[[Page 73366]]
20, 2007), DEA received very few 2008 quota applications. Since that
time, however, DEA has received significantly more quota applications
from DEA registrants. In connection with each application, DEA has been
contacting each applicant and gathering additional information
necessary to process each of these individual quota applications by the
January 1, 2008 deadline. DEA has analyzed the statistical data
provided by these registrants and the results of this analysis (below)
are not consistent with the commenter's comments.
Analysis of Quota Applications for Ephedrine (For Sale)
Based on an analysis of the inventory, acquisition (purchases) and
disposition (sales) data provided by DEA-registered importers and
manufacturers of ephedrine products on individual quota applications
received since publication of the July 10, 2007 Interim Final Rule,
manufacturers of dosage form products containing ephedrine reported
sales totaling approximately 3,900 kg in 2007; this represents a 61
percent decrease from sales reported by these firms for 2005 and a 49
percent decrease from the sales reported for 2006, as shown on the same
quota applications. During the same period, exports of ephedrine
products from the United States, as reported on export declarations
(DEA Forms 486) received, are expected to total 245 kg in 2007, a 90
percent decrease from levels observed in 2005. These sales and export
trends, when taken along with necessary inventory allowances, may
suggest that DEA's 2008 Assessment of Annual Needs for ephedrine, as
proposed, is too high, and may require and adjustment downward in the
future.
Analysis of Quota Applications for Pseudoephedrine (For Sale)
Based on an analysis of the inventory, acquisition, and disposition
data provided by DEA-registered importers and manufacturers of
pseudoephedrine products on individual quota applications received
since publication of the July 10, 2007 Interim Final Rule,
manufacturers of dosage form products containing pseudoephedrine
reported sales of these products totaling approximately 277.8 metric
tons (MT; 1000 kg equals 1 MT) in 2007; this represents a 38 percent
increase from sales data provided by these firms for 2005 and a 2
percent increase from sales reported in 2006, as shown on the same
quota applications. During the same period, exports of pseudoephedrine
products from the United States, as reported on export declarations
(DEA Forms 486) received, are expected to total 29,145 kg in 2007, a
67.6 percent decrease from levels observed in 2005. These sales and
export trends, when taken along with necessary inventory allowances,
may suggest that DEA's 2008 Assessment of Annual Needs for
pseudoephedrine, as proposed, is too high, and may require an
adjustment downward in the future.
Although the analysis of quota applications received by DEA would
support a decrease in the Assessment of Annual Needs for both ephedrine
(for sale) and pseudoephedrine (for sale), DEA cannot ensure that it
has applications from all those who may require an individual quota in
2008. Specifically, manufacturers and importers may have purchased
increased amounts of these List I chemicals during the 2007 calendar
year in anticipation of the establishment of individual quotas for the
2008 calendar year, thereby increasing their inventory position (i.e.
stockpiling). As a result, these same DEA registrants may have elected
to defer submission of individual quota applications until such time
that these inventory levels decrease. Additionally, it remains unclear
as to what impact, if any, phenylephrine will have on the market for
cough and cold remedies containing pseudoephedrine. Finally, the Food
and Drug Administration announced an enforcement action against
unapproved drug products containing timed-release guafenesin in
combination with other drugs, including ephedrine and pseudoephedrine
(72 FR 29517, May 29, 2007). The Notice advises firms which are
marketing unapproved products to obtain such drug approvals. As a
result of this Notice, DEA believes that it may receive requests for
quotas to support FDA validation requirements, thereby increasing the
demand for ephedrine and/or pseudoephedrine for research purposes. For
these reasons, DEA believes that the needs of the United States are
best served by establishing the values initially proposed and therefore
concludes the proposed amounts are sufficient to meet the estimated
medical, scientific, research, and industrial needs of the United
States; lawful export requirements; and the establishment and
maintenance of reserve stocks. DEA will propose a revision to, and
subsequently finalize, the Assessment of Annual Needs for 2008 during
the calendar year, thereby giving interested persons an opportunity to
provide substantive data to support or refute any proposed changes to
assessments.
Comment Period
The commenter believed that DEA's comment period of 21 days
(September 20, 2007, to October 11, 2007,) was too short, making it
impossible, the commenter claimed, for affected parties to provide
significant comment within a short window of opportunity. The commenter
requested that DEA reopen the comment period for an additional sixty
days.
DEA Response: When DEA published its July 10, 2007, Interim Final
Rule establishing procedures for administering the assessment of annual
needs and individual import, manufacturing, and procurement quotas, DEA
stated that it had ``good cause'' under the Administrative Procedure
Act to implement those regulations without engaging in traditional
notice and comment rulemaking. In support of that action, DEA
specifically stated:
Congress, in crafting CMEA, recognized that limiting of product
availability at the retail level could potentially encourage
diversion of either drug products or the List I chemicals themselves
higher in the supply chain--at the import, manufacture, and
distribution levels. To address its concern about ``what immediately
moves in behind,'' (Rep. Souder, February 28, 2006, CR p. 423)
Congress included provisions in CMEA to control the import, export,
manufacture, and distribution of the three chemicals and products
containing them. These provisions also will make it possible for the
United States to meet the recommendations of the International
Narcotics Control Board, which encouraged its member countries to
provide for pre-export notifications and an assessment of legitimate
need for these chemicals. * * *
DEA must implement the quota provisions of the CMEA on an
interim basis to ensure that product upstream from the retail level
is not diverted for illicit purposes. It would be contrary to the
public interest to allow the diversion of large amounts of
ephedrine, pseudoephedrine, and phenylpropanolamine at the wholesale
level while implementing controls at the retail level to limit sales
of these very products.
The broad scope of the new law [CMEA], as well as the expedited
effective dates, is a clear reflection of Congress' concerns about
the nation's growing methamphetamine epidemic and its [Congress]
desire to act quickly to prevent further illicit use of these
chemicals.'' (specifically 72 FR 37443-37444)
DEA's decision to provide a 21-day comment period was based on
Congress' mandate for DEA to act quickly to implement the requirements
of the CMEA including the establishment of an Annual Assessment of
Needs and individual import, manufacturing, and procurement quotas. The
regulations require that DEA establish the Assessment of Annual Needs
prior to the issuance of individual quotas, meaning that DEA must
establish the 2008 Assessment of Annual Needs before it can issue
individual import,
[[Page 73367]]
manufacturing, and procurement quotas. DEA is required to complete the
process of issuing individual import, manufacturing, and procurement
quotas prior to January 1, 2008, as quotas are issued for a calendar
year. DEA believes that a shorter comment period was necessary to
review and consider the comments received from the public and then
establish the 2008 Assessment of Annual Needs prior to the end of the
2007 calendar year.
DEA also believes that a 21-day comment period was sufficient given
that its proposal was neither complex nor technical. DEA notes that two
of the 2008 assessments proposed were values initially proposed on
October 19, 2006, when DEA proposed the 2007 Assessment of Annual
Needs, and the other three values were values significantly higher than
the values proposed on October 19, 2006. Additionally, DEA notes that
interested persons directly impacted by these quotas (i.e., DEA-
registered manufacturers and importers) learned of the factors DEA
would consider in the establishment of individual quotas in July when
the Interim Final Rule was published. Many of these factors are set
forth by statute; any remaining factors parallel the current system
which has existed for individual quotas for controlled substances
essentially since the inception of the Controlled Substances Act. For
these reasons, DEA believes that DEA registrants had ample time to
gather the necessary scientific and technical information that would be
required to submit substantive comments to the proposed 2008 Assessment
of Annual Needs.
Finally, DEA believes that the commenter did not proffer any
specific information beyond that which it submitted in its written
comments that would be brought to light if the DEA were to extend the
comment period.
Withdrawal of 2008 Proposed Assessment of Annual Needs
The commenter requested that the proposed 2008 Assessment of Annual
Needs be withdrawn and reproposed, presumably based on its comments.
DEA Response: After considering the commenter's comments, the DEA
has determined that the request for a withdrawal of the proposed 2008
Assessment of Annual Needs is unnecessary for the reasons discussed
above.
Conclusion
DEA has carefully considered the comment received from the lone
commenter in connection with the proposed 2008 Assessment of Annual
Needs. Based on information provided in the comment, along with
information provided by DEA-registered manufacturers and importers of
these List I chemicals on applications for individual import,
manufacturing, and procurement quotas pursuant to DEA regulations, DEA
has fully addressed the relevant issues set forth in the comment.
Therefore, under the authority vested in the Attorney General by
section 306 of the CSA (21 U.S.C. 826), and delegated to the
Administrator of the DEA by 28 CFR 0.100, and redelegated to the Deputy
Administrator pursuant to 28 CFR 0.104, the Deputy Administrator hereby
orders that the 2008 Assessment of Annual Needs for ephedrine,
pseudoephedrine, and phenylpropanolamine, expressed in kilograms of
anhydrous acid or base, be established as follows:
------------------------------------------------------------------------
Established
2008
List I Chemical assessment
of annual
needs (kg)
------------------------------------------------------------------------
Ephedrine (for sale)....................................... 11,500
Ephedrine (for conversion)................................. 128,760
Pseudoephedrine (for sale)................................. 511,100
Phenylpropanolamine (for sale)............................. 5,545
Phenylpropanolamine (for conversion)....................... 85,470
------------------------------------------------------------------------
The Office of Management and Budget has determined that notices of
quotas are not subject to centralized review under Executive Order
12866.
This action 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 action does not have any federalism implications
warranting the application of Executive Order 13132.
The Deputy Administrator hereby certifies that this action will not
have a significant economic impact upon a substantial number of small
entities whose interests must be considered under the Regulatory
Flexibility Act, 5 U.S.C. 601-612. The establishment of Assessment of
Annual Needs for ephedrine, pseudoephedrine, and phenylpropanolamine is
mandated by law. The assessments are necessary to provide for the
estimated medical, scientific, research and industrial needs of the
United States; for lawful export requirements; and the establishment
and maintenance of reserve stocks. Accordingly, the Deputy
Administrator has determined that this action does not require a
regulatory flexibility analysis.
This action meets the applicable standards set forth in sections
3(a) and 3(b)(2) of Executive Order 12988 Civil Justice Reform.
This action will not result in the expenditure by state, local, and
tribal governments, in the aggregate, or by the private sector, of
$120,000,000 or more (adjusted for inflation) 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.
This action is not a major rule as defined by section 804 of the
Small Business Regulatory Enforcement Fairness Act of 1996
(Congressional Review Act). This action 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.
Dated: December 18, 2007.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. 07-6218 Filed 12-26-07; 8:45 am]
BILLING CODE 4410-09-P