Controlled Substances and List I Chemical Registration and Reregistration Application Fees, 69474-69486 [05-22681]
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Federal Register / Vol. 70, No. 220 / Wednesday, November 16, 2005 / Proposed Rules
Installation of Cockpit Placard for RPM
Restriction
DEPARTMENT OF ENERGY
(f) Within 10 hours time-in-service (TIS)
after the effective date of this AD, install a
placard on the pilot’s console in front of the
pilot, that states, in 1⁄4 inch-high or higher
characters, ‘‘Continuous propeller operation
between 2,350 rpm and 2,450 rpm at 24
inches Hg and higher manifold pressure is
prohibited’’.
Federal Energy Regulatory
Commission
Propellers With Unknown Total Hours TIS,
or 10,000 or More Hours Total TIS on the
Effective Date of This AD
AGENCY:
(g) For propellers that the total TIS is
unknown, or that have 10,000 or more hours
total TIS on the effective date of this AD,
remove the propeller from service within 50
hours TIS after the effective date of this AD.
Propellers With Fewer Than 10,000 Hours
Total TIS on the Effective Date of This AD
(h) For propellers with fewer than 10,000
total hours TIS on the effective date of this
AD, do the following:
(1) Perform an inspection of the propeller
blades and repair if necessary, within 100
hours after the effective date of this AD,
using paragraphs 2.B. through 2.F. of
Accomplishment Instructions of McCauley
ASB No. ASB248, dated January 17, 2005.
(2) At the next propeller overhaul or next
major propeller disassembly, life-limit-stamp
the letter ‘‘L’’ on the propeller hub and
blades, using paragraph 3 of
Accomplishment Instructions of McCauley
Propeller Systems Alert Service Bulletin
(ASB) No. ASB248, dated January 17, 2005.
(3) Thereafter, within every 100 hours TIS
or at next annual inspection, whichever
occurs first, inspect, and repair if necessary,
the propeller blades using paragraphs 2.B.
through 2.F. of Accomplishment Instructions
of McCauley ASB No. ASB248, dated January
17, 2005.
(4) Remove the propeller from service at or
before reaching the life limit of 10,000 hours
total TIS.
Alternative Methods of Compliance
(i) The Manager, Chicago Aircraft
Certification Office, has the authority to
approve alternative methods of compliance
for this AD if requested using the procedures
found in 14 CFR 39.19.
Related Information
(j) None.
Issued in Burlington, Massachusetts, on
November 7, 2005.
Peter A. White,
Acting Manager, Engine and Propeller
Directorate, Aircraft Certification Service.
[FR Doc. 05–22712 Filed 11–15–05; 8:45 am]
BILLING CODE 4910–13–P
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18 CFR Parts 47 and 159
[Docket No. RM06–3–000]
Prohibition of Energy Market
Manipulation
Federal Energy Regulatory
Commission.
ACTION: Notice of proposed rulemaking;
correction.
SUMMARY: The Federal Energy
Regulatory Commission published in
the Federal Register of October 27,
2005, a document proposing to add a
part 47 and part 159 to Title 18 of the
CFR. Two clauses in the proposed
regulatory language for parts 47 and 159
were inadvertently incorporated into
subparagraph text, but were intended to
start a new line in the text since they are
to modify all three subparagraphs. As
such formatting is inconsistent with
Federal Register requirements, these
modifying clauses will be moved to the
beginning of the paragraph.
FOR FURTHER INFORMATION CONTACT:
Frank Karabetsos, Office of the General
Counsel, Federal Energy Regulatory
Commission, 888 First Street, NE.,
Washington, DC 20426. (202) 502–
88133.
SUPPLEMENTARY INFORMATION: The
Federal Energy Regulatory Commission
published in the Federal Register of
October 27, 2005 (70 FR 61930), a
document adding a part 47 under
subchapter B (Regulations under the
Federal Power Act) and a part 159
(Regulations under the Natural Gas Act)
to Title 18 of the CFR. The proposed
regulatory text for the two parts failed
to set out certain sentences as modifying
clauses. This document corrects that
error.
Correction
In proposed rule FR Doc. 05–21423,
beginning on page 61930 in the issue of
October 27, 2005, make the following
corrections:
§ 47.1
[Corrected]
1. On page 61933, in column 2,
correct § 47.1(a) to read as follows:
§ 47.1 Prohibition of energy market
manipulation.
(a) It shall be unlawful for any entity,
directly or indirectly, in connection
with the purchase or sale of electric
energy or the purchase or sale of
transmission services subject to the
jurisdiction of the Commission,
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(1) To use or employ any device,
scheme, or artifice to defraud,
(2) To make any untrue statement of
a material fact or to omit to state a
material fact necessary in order to make
the statements made, in the light of the
circumstances under which they were
made, not misleading, or
(3) To engage in any act, practice, or
course of business that operates or
would operate as a fraud or deceit upon
any person.
*
*
*
*
*
§ 159.1
[Corrected]
2. On page 61933, in column 3,
correct § 159.1(a) to read as follows:
§ 159.1 Prohibition of energy market
manipulation.
(a) It shall be unlawful for any entity,
directly or indirectly, in connection
with the purchase or sale of natural gas
or the purchase or sale of transportation
services subject to the jurisdiction of the
Commission,
(1) To use or employ any device,
scheme, or artifice to defraud,
(2) To make any untrue statement of
a material fact or to omit to state a
material fact necessary in order to make
the statements made, in the light of the
circumstances under which they were
made, not misleading, or
(3) To engage in any act, practice, or
course of business that operates or
would operate as a fraud or deceit upon
any person.
*
*
*
*
*
Dated: November 10, 2005.
Magalie R. Salas,
Secretary.
[FR Doc. 05–22755 Filed 11–15–05; 8:45 am]
BILLING CODE 6717–01–P
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
Drug Enforcement
Administration (DEA), Department of
Justice.
ACTION: Notice of proposed rulemaking.
AGENCY:
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
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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 JeffersonDavis 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 https://
www.regulations.gov using the
electronic comment form provided on
that site. An electronic copy of this
document is also available at the
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
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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
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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.’’
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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 reassessed 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
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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
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(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
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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.
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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
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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.
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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
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12:36 Nov 15, 2005
Jkt 208001
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 nonchemical 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-
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Frm 00012
Fmt 4702
Sfmt 4702
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
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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, governmentwide 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
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12:36 Nov 15, 2005
Jkt 208001
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 nonchemical 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
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Frm 00013
Fmt 4702
Sfmt 4702
69479
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.
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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.
Manufacturers (controlled substances) .......................................................................................
Manufacturers (chemical) ............................................................................................................
Distributors, Importers/Exporters (controlled substances), including reverse distributors ..........
Distributors, Importers/Exporters (chemical) ...............................................................................
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Frm 00014
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
annual fee
Registrant class
VerDate Aug<31>2005
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, nonretail 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.
Fmt 4702
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$2,386
2,386
1,193
1,193
E:\FR\FM\16NOP1.SGM
16NOP1
Current
annual fee
$1,625
**595
813
**595
Difference
$761
1,791
380
598
Federal Register / Vol. 70, No. 220 / Wednesday, November 16, 2005 / Proposed Rules
Proposed new
annual fee
Registrant class
Chemical Retail Distributors ........................................................................................................
Dispensers/Practitioners* .............................................................................................................
Researchers, Narcotic Treatment Programs ...............................................................................
Current
annual fee
1,193
191
191
69481
Difference
**255
130
130
938
61
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 nonretail 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
Sector
Chemical Manufacturing (organic, inorganic) ..............................................................................
Medicinal and Botanical Manufacturing .......................................................................................
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15:45 Nov 15, 2005
Jkt 208001
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Controlled
substance
Chemical
........................
X
X
X
NAICS code
Frm 00015
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325411
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Federal Register / Vol. 70, No. 220 / Wednesday, November 16, 2005 / Proposed Rules
TABLE 1.—INDUSTRIAL SECTORS OF DEA REGISTRANTS—Continued
Sector
Pharmaceutical Manufacturing ....................................................................................................
Adhesive Manufacturing ..............................................................................................................
Toilet Preparation Manufacturing ................................................................................................
Other Chemical Manufacturing ....................................................................................................
Drugs and Druggist Sundries Wholesalers .................................................................................
General Line Grocery Wholesalers .............................................................................................
Confectionary Merchant Wholesalers ..........................................................................................
Chemical Wholesalers .................................................................................................................
Tobacco Wholesalers ..................................................................................................................
Miscellaneous Wholesalers .........................................................................................................
Supermarkets ...............................................................................................................................
Drug Stores ..................................................................................................................................
Discount Stores ...........................................................................................................................
Warehouse Clubs and Superstores ............................................................................................
Testing Labs ................................................................................................................................
Packaging and Labeling Services ...............................................................................................
Colleges, Universities, Professional Schools ..............................................................................
Ambulatory Health Care Services ...............................................................................................
Hospitals ......................................................................................................................................
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
Controlled
substance
Chemical
X
........................
........................
........................
X
X
........................
........................
........................
........................
X
X
X
X
X
........................
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
........................
........................
........................
NAICS code
chemicals have non-drug uses, such as
chemical intermediates, flavorings,
fragrances, and adhesives. Second, the
drug products containing List I
chemicals are primarily over-thecounter (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
325412
325520
325620
325998
424210
424410
414450
424690
424940
424990
445110
446110
452112
452910
541380
561910
611310
621
622
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
Practitioners .............................................................................................................................................................
Midlevel Practitioners ...............................................................................................................................................
Retail Pharmacy ......................................................................................................................................................
Hospital/Clinic ..........................................................................................................................................................
Teaching Institution ..................................................................................................................................................
Manufacturer ............................................................................................................................................................
Distributor .................................................................................................................................................................
Researcher ..............................................................................................................................................................
Analytical Laboratory ...............................................................................................................................................
Importer ....................................................................................................................................................................
Exporter ...................................................................................................................................................................
Narcotic Treatment Program ...................................................................................................................................
Total ..................................................................................................................................................................
984,271
103,239
62,865
15,650
443
485
823
7,458
1,541
159
253
1,174
1,178,361
Chemicals
........................
........................
*
........................
........................
208
2,413
........................
........................
195
181
........................
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
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12:36 Nov 15, 2005
Jkt 208001
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
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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)
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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
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12:36 Nov 15, 2005
Jkt 208001
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
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Sfmt 4702
69483
$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
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Federal Register / Vol. 70, No. 220 / Wednesday, November 16, 2005 / Proposed Rules
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 $191 per year) which
equates to about 0.14 percent of annual
income for most practitioners (the vast
majority of all registrants). This rule is
promulgated in compliance with 21
U.S.C. 886a that the full cost of
operating the DCP be collected through
registrant fees.
Small Business Regulatory Enforcement
Fairness Act of 1996
Administrative practice and
procedure, Drug traffic control, Security
measures.
PART 1301—REGISTRATION OF
MANUFACTURERS, DISTRIBUTORS
AND DISPENSERS OF CONTROLLED
SUBSTANCES
1. The authority citation for part 1301
continues to read as follows:
Authority: 21 U.S.C. 821, 822, 823, 824,
871(b), 875, 877, 951, 952, 953, 956, 957.
2. Section 1301.13 is proposed to be
amended by revising paragraph (e)(1) to
read as follows:
§ 1301.13 Application for registration; time
for application; expiration date; registration
for independent activities; application
forms, fees, contents and signature;
coincident activities.
*
New—225 .............
Renewal—225a ....
2,386
2,386
1
New—225 .............
Renewal—225a ....
New—225 .............
Renewal—225a ....
1,193
1,193
1,193
1,193
*
*
(e) * * *
(1)
Registration
period
(years)
1
DEA application
forms
(i) Manufacturing .........
Schedules I–V .......
(ii) Distributing .............
Schedules I–V .......
(iii) Reverse distributing
Schedules I–V .......
Jkt 208001
21 CFR Part 1301
Administrative practice and
procedure, Drug traffic control, Exports,
Imports, Security measures.
For the reasons set out above, 21 CFR
Parts 1301 and 1309 are proposed to be
amended as follows:
Application
fee
($)
Controlled
substances
16:00 Nov 15, 2005
List of Subjects
21 CFR Part 1309
This rule is not a major rule as
defined by § 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 $191 per year.
For the majority of these practitioners,
who compose the vast majority of
registrants and registrants qualifying as
Business activity
VerDate Aug<31>2005
small businesses, this fee represents
about 0.14 percent of their annual mean
salary. The impact on other small
business entities is described in greater
detail in the preceding regulatory
analysis.
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Fmt 4702
Sfmt 4702
*
*
Coincident activities allowed
Schedules I–V: May distribute that substance
or class for which registration was issued;
may not distribute or dispose any substance or class for which not registered.
Schedules II–V: Except a person registered
to dispose of any controlled substance may
conduct chemical analysis and preclinical
research (including quality control analysis)
with substances listed in those schedules
for which authorization as a mfg. was
issued.
1
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Federal Register / Vol. 70, No. 220 / Wednesday, November 16, 2005 / Proposed Rules
Application
fee
($)
Registration
period
(years)
New—224 .............
Renewal—224a ....
573
573
3
Schedule I .............
New—225 .............
Renewal—225a ....
191
191
1
(vi) Research ...............
Schedules II–V ......
New—225 .............
Renewal—225a 1
191
191
1
(vii) Narcotic Treatment
Program (including
compounder).
(viii) Importing ..............
Narcotic Drugs in
Schedules II–V.
New—363 .............
Renewal—363a ....
191
191
1
Schedules I–V .......
New—225 .............
Renewal—225a ....
1,193
1,193
1
(ix) Exporting ...............
Schedules I–V .......
Schedules I–V .......
1,193
1,193
191
191
1
(x) Chemical Analysis
New—225 .............
Renewal—225a ....
New—225 .............
Renewal—225a ....
*
*
69485
Business activity
Controlled
substances
DEA application
forms
(iv) Dispensing or instructing (includes
Practitioner, Hospital/
Clinic, Retail Pharmacy, Central fill
pharmacy, Teaching
institution).
Schedules II–V ......
(v) Research ................
*
*
VerDate Aug<31>2005
*
16:00 Nov 15, 2005
Jkt 208001
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Fmt 4702
Sfmt 4702
1
Coincident activities allowed
May conduct research and instructional activities with those substances for which registration was granted, except that a midlevel 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.
A researcher may 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 § 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.
May conduct chemical 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 § 1301.24; and conduct instructional activities with controlled
substances.
May distribute that substance or class for
which registration was issued; may not distribute any substance or class for which not
registered.
May manufacture and import 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 § 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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Federal Register / Vol. 70, No. 220 / Wednesday, November 16, 2005 / Proposed Rules
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. §§ 821, 822, 823, 824,
830, 871(b), 875, 877, 886a, 958.
4. Section 1309.11 is proposed to be
revised to read as follows:
§§ 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:
§§ 1309.12
refund.
Time and method of payment;
(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:
§§ 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.
VerDate Aug<31>2005
16:00 Nov 15, 2005
Jkt 208001
(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 § 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
§ 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 § 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 §§ 1309.43 through 1309.46 and
§§ 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 §§ 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
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DEPARTMENT OF JUSTICE
28 CFR Part 16
[AAG/A Order No. 015–2005]
Privacy Act of 1974; Implementation
Department of Justice.
Proposed rule.
AGENCY:
ACTION:
SUMMARY: The Department of Justice,
Tax Division, proposes to amend 28
CFR part 16 to exempt a newly revised
Privacy Act system of records entitled
‘‘Files of Applicants For Attorney and
Non-Attorney Positions with the Tax
Division, Justice/TAX–003,’’ as
described in today’s notice section of
the Federal Register, from 5 U.S.C.
552a(c)(3), (d)(1), and (e)(1). The
exemptions will be applied only to the
extent that information in a record is
subject to exemption pursuant to 5
U.S.C. 552a(k)(2) and (k)(5). The
exemptions are necessary to protect the
confidentiality of employment records.
The Department also proposes to delete
as obsolete provisions exempting two
former Tax Division systems of records:
‘‘Freedom of Information/Privacy Act
Request Files, Justice/TAX–004;’’ and
‘‘Tax Division Special Project Files,
Justice/TAX–005.’’ The records in Tax004 are now covered by a
Departmentwide system notice,
‘‘Freedom of Information Act, Privacy
Act, and Mandatory Declassification
Review Requests and Administrative
Appeals, DOJ–004’’. The relevant
records in TAX–005 are now part of the
revised system entitled ‘‘Criminal Tax
Case Files, Special Project Files, Docket
Cards, and Associated Records, Justice/
TAX–001.’’
DATES: Submit any comments by
December 27, 2005.
ADDRESSES: Address all comments to
Mary Cahill, Management and Planning
Staff, Justice Management Division,
Department of Justice, Washington, DC
20530 (1400 National Place Building),
Facsimile Number (202) 307–1853. To
ensure proper handling, please
reference the AAG/A Order No. on your
correspondence. You may view an
electronic version of this proposed rule
at https://www.regulations.gov. You may
also comment via the Internet to the
DOJ/Justice Management Division at the
following e-mail address:
DOJPrivacyACTProposed
Regulations@usdoj.gov; or by using the
https://www.regulations.gov comment
form for this regulation. When
submitting comments electronically,
you must include the AAG/A Order No.
in the subject box.
FOR FURTHER INFORMATION CONTACT:
Mary Cahill, (202) 307–1823.
E:\FR\FM\16NOP1.SGM
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]]>Agencies
[Federal Register Volume 70, Number 220 (Wednesday, November 16, 2005)]
[Proposed Rules]
[Pages 69474-69486]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-22681]
=======================================================================
-----------------------------------------------------------------------
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.
-----------------------------------------------------------------------
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 https://www.regulations.gov using the electronic
comment form provided on that site. An electronic copy of this document
is also available at the 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 s
