Chattem Chemicals, Inc.: Grant of Registration To Import Schedule II Substances, 9834-9839 [E6-2696]

Agencies

• Drug Enforcement Administration
• Department of Justice

[Federal Register Volume 71, Number 38 (Monday, February 27, 2006)]
[Notices]
[Pages 9834-9839]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-2696]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration


Chattem Chemicals, Inc.: Grant of Registration To Import Schedule 
II Substances

I. Background

    On February 9, 2002, Chattem Chemicals, Inc. (Chattem) applied to 
the Drug Enforcement Administration (DEA) for registration under 21 
U.S.C. 958(a) as an importer of the narcotic raw materials (NRMs) raw 
opium, concentrate of poppy straw (CPS) and thebaine, all of which are 
Schedule II controlled substances.\1\
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    \1\ Chattem later withdrew its request for registration to 
import thebaine. In December 2001, DEA granted Chattem a 
registration as a bulk manufacturer of, among other controlled 
substances, codeine, morphine, thebaine and oxycodone.
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    Pursuant to 21 CFR 1301.34(a), Mallinckrodt, Inc. (Mallinckrodt), 
Penick Corporation (Penick) and Noramco of Delaware, a Division of 
Ortho McNeil, Inc. (Noramco), requested a hearing on Chattem's 
application for registration as an importer of NRMs. The United States

[[Page 9835]]

Department of Justice, Drug Enforcement Administration (DEA or the 
Government) also participated as a party to the proceeding.
    A hearing before a DEA Administrative Law Judge (ALJ) was held in 
Arlington, Virginia, in September and October 2002, and January 2003, 
with Chattem, Penick, Noramco, Mallinckrodt and the Government (the 
Objectors) participating and represented by counsel. All parties called 
witnesses to testify and introduced documentary evidence. After the 
hearing, the parties filed proposed findings of fact, conclusions of 
law and argument, and reply briefs.
    Pursuant to 21 CFR 1301.44(c), Chattem has the burden of proof to 
show that it has met the statutory and regulatory requirements to 
import NRMs. The other parties to the proceeding have the burden of 
proving any propositions of fact or law asserted by them. See Penick 
Corporation, Inc., Grant of Registration to Import Schedule II 
Controlled Substances, 68 FR 6947, 6948 (DEA 2003).
    On January 13, 2005, the ALJ filed an Opinion and Recommended 
Ruling, Findings of Fact, Conclusions of Law and Decision (ALJ 
Opinion). The ALJ recommended that Chattem's application be granted. 
All of the parties filed exceptions to the ALJ's recommended decision. 
Chattem filed a response to the exceptions filed by Mallinckrodt and 
Noramco.
    After considering all of the evidence and post hearing submissions, 
The Deputy Administrator adopts, in part, the ALJ Opinion, makes 
independent findings, and rejects all contradictory findings and 
conclusions as unsupported by a preponderance of the evidence. The 
Deputy Administrator adopts all of the ALJ's decisions on motions filed 
during this proceeding, other than those that were overruled in the 
Deputy Administrator's Final Orders on the interlocutory appeals filed 
in this matter.\2\
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    \2\ In Chattem's Proposed Findings of Fact and Conclusions of 
Law, Chattem contended that the ALJ did not decide Noramco's motion 
to substitute Ortho McNeil as a party to these proceedings. Chattem 
opposed the motion, contending that Noramco should not be permitted 
to be a party to the proceeding, since Noramco, at the time of the 
hearing, was not a corporation, but was a division of Ortho-McNeil, 
and Noramco's DEA registration as an importer was issued to 
``Noramco, Inc., a division of Ortho McNeil, Inc.'' The Deputy 
Administrator hereby grants Noramco's motion to substitute.
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    All of the foregoing is incorporated into this Final Order as 
though set forth at length herein. The Deputy Administrator also 
incorporates by reference the Deputy Administrator's earlier decisions 
on the interlocutory appeals filed in this proceeding. Except as 
expressly noted herein, those parts of the ALJ's opinion adopted by the 
Deputy Administrator are in no manner diminished by any recitation of 
facts, issues and conclusions herein, or by any failure to mention a 
matter of fact or law.

II. Preliminary Matters

Regulatory Context

    Because Chattem is applying for both a registration and permission 
to import, this proceeding is a combined adjudication and rulemaking. 
The rulemaking determines whether Chattem may lawfully import NRMs into 
the United States pursuant to 21 U.S.C. 952(a). Chattem has the burden 
of proof, and must establish by a preponderance of the evidence that 
such a rule can be issued. In order to do this, Chattem must show by a 
preponderance of the evidence that the NRMs that it intends to import 
are ``necessary'' to provide for medical, scientific or other 
legitimate purposes.
    The adjudication determines whether DEA should grant Chattem's 
application for registration as an importer NRMs. In accordance with 
the DEA Statement of Policy and Interpretation on Registration of 
Importers, 40 FR 43,745 (1975), the Deputy Administrator will not grant 
Chattem's application unless Chattem establishes that the requirements 
of 21 U.S.C. 958(a) and 823(a) and 21 CFR 301.34(b)(1)-(7) are met to 
show that Chattem's registration to import is in the public interest. 
DEA has the discretion to determine the weight assigned to each of the 
factors that must be considered to determine whether Chattem's 
registration to import will be granted. MD Pharmaceutical, Inc. v. DEA, 
No. 95-1267, 1996 U.S. App. LEXIS 1229 (DC Cir. 1996) (unpublished 
opinion.)

III. Final Order

    The Deputy Administrator has carefully reviewed the entire record 
in this matter, as defined above, and hereby issues this final rule and 
final order prescribed by 21 CFR 1316.67 and 21 CFR 1301.46, based upon 
the following findings and conclusions.

A. The Rulemaking

    As explained above, Chattem cannot be registered as an importer of 
NRMs unless the Deputy Administrator finds that Chattem will be allowed 
to import NRMs pursuant to 21 U.S.C. 952(a)(1). Because Chattem is the 
proponent of such a rule, it must establish by a preponderance of the 
evidence that such a rule can be issued.
    21 U.S.C. 952(a)(1) makes it unlawful to import controlled 
substances in Schedule I or II except ``such amounts of crude opium, 
poppy straw, concentrate of poppy straw, and coca leaves as the 
Attorney General finds to be necessary to provide for medical, 
scientific, or other legitimate purposes.'' Whether Chattem's 
importation of NRMs is ``necessary'' was disputed at the hearing of 
this matter. Some of the Objectors argued that they as a group are able 
to import all necessary NRMs necessary to provide for medical, 
scientific or other legitimate purposes.
    The ALJ found that it is undisputed that Chattem seeks to import 
NRMs for legitimate uses. The ALJ also noted that the actual amounts of 
NRMs necessary for those uses are established in subsequent proceedings 
by DEA. Those proceedings, which establish quotas pursuant to 21 U.S.C. 
826, and grant permits to import pursuant to 21 CFR part 1312, are not 
part of this proceeding. Moreover, there is nothing in the legislative 
history of the statute that supports any intention to limit the number 
of importers under the statute. See Johnson Matthey, Inc., Grant of 
Registration to Import Schedule II Controlled Substances, 67 FR 39041, 
39043 (DEA 2002). Accordingly, the Deputy Administrator adopts the 
ALJ's ruling on this issue, and finds that Chattem's proposed 
importation of raw opium and CPS is ``necessary to provide for medical, 
scientific, or other legitimate purposes.''

B. The Adjudication

    Longstanding Federal policy prohibits the cultivation of the opium 
poppy in the United States, and also generally prohibits the 
importation of bulk narcotic alkaloids such as morphine and codeine. 
Therefore, NRMs must be imported into the United States for purposes of 
extracting morphine and codeine for pharmaceutical use. Following the 
extraction of these alkaloids, the manufacturers convert them into 
active pharmaceutical ingredients (APIs), such as oxycodone and 
hydrocodone. These APIs are then sold to other manufacturers to produce 
either dosage formulations or other APIs. The formulated drugs are then 
sold to drug wholesalers or directly to health care entities.
    At the time of the hearing, Noramco and Mallinckrodt were the only 
companies registered with DEA as importers of NRMs. By order of May 22, 
2002, DEA granted a conditional registration to Johnson Matthey, Inc., 
to import NRMs. See Johnson Matthey,

[[Page 9836]]

supra. By order of January 29, 2003, DEA granted a registration to 
Penick to import NRMs. See Penick, supra. At the time of the hearing, 
Chattem had to purchase NRMs from Mallinckrodt or Noramco in order to 
manufacture APIs. After Chattem applied to DEA to be registered to 
import NRMs, Noramco, Mallinckrodt, Penick and the Government opposed 
Chattem's application and asked for a hearing.
    At present, Mallinckrodt, Noramco, Penick, Johnson Matthey and 
Chattem are also registered with DEA as bulk manufacturers of morphine, 
codeine and oxycodone, all of which are products made from NRMs. 
Chattem is also registered with DEA as an importer of controlled 
substances other than NRMs. In 2002 DEA granted registrations to three 
additional companies for the bulk manufacture of controlled substances 
made from NRMs. See Rhodes Technologies, 67 FR 36917 (DEA 2002), Houba, 
Inc., 67 FR 40752 (DEA 2002) and Cedarburg Pharmaceuticals, L.L.C., 67 
FR 42058-02 (DEA 2002). Notably, these registrations were granted after 
the Government took the position in this proceeding that registering 
Chattem as an importer of NRMs was not in the public interest.
    Any company that wishes to import NRMs must comply with the ``80-20 
rule,'' which requires that 80 percent of the NRMs imported into the 
United States have as their original source Turkey or India. The 
remaining 20 percent must come from Yugoslavia, France, Poland, 
Hungary, or Australia. 21 CFR 1312.13(f). At the hearing, Frank 
Sapienza, then Chief of DEA's Drug and Chemical Evaluation Section in 
DEA's Office of Diversion Control, testified that the purpose of the 
rule is to limit diversion of raw materials by avoiding a proliferation 
of countries producing NRMs. He also testified that DEA estimates that 
ten to thirty percent of India's poppy crop is diverted.
    Pursuant to 21 U.S.C. 958(a) and 823(a), DEA is required to 
register Chattem as an importer of Schedule I and II substances if the 
registration is ``consistent with the public interest and with United 
States obligations under international treaties, conventions, or 
protocols in effect on May 1, 1971.'' In determining the public 
interest, DEA must consider the factors enumerated at U.S.C. 958 and 
823(a)(1)-(6) and 21 CFR 1301.34(b)(1)-(7), many of which are 
identical. Accordingly, the Deputy Administrator will first consider 
United States obligations under international treaties, then each of 
the factors delineated in 21 U.S.C. 823(a) and 21 CFR 1301.34(b)(1)-
(7), as follows.
1. Treaty Obligations
    The Objectors did not adduce sufficient evidence at the hearing 
that the importation of NRMs by Chattem would violate or be 
inconsistent with United States obligations under international 
treaties, conventions or protocols. The United States is a party to a 
number of international drug control treaties, including the United 
Nations Single Convention on Narcotic Drugs of 1961 (the Single 
Convention). Under the Single Convention, the United States is 
obligated to take all necessary measures to ensure that the 
international movement of narcotics is limited to legitimate medical 
and scientific needs.
    Mr. Sapienza testified at the hearing about DEA's obligations under 
the Single Convention and other treaties. He testified that the United 
States is the world's largest importer of NRMs, and the commentary on 
the Single Convention states that ``it may be advisable or even 
essential to keep to a minimum the number of licensees of manufacturers 
and international traders (importers as well as exporters) or of the 
state enterprises engaged in these activities.'' Commentary on the 
Single Convention on Narcotic Drugs, 1961, United Nations, New York, 
1973, p. 264. The Deputy Administrator agrees that the Single 
Convention provides important guidance on the registration of importers 
of NRMs and manufacturers of bulk narcotics. The Deputy Administrator 
finds that the evidence did not show that it would be ``advisable'' or 
``essential'' to deny Chattem's application for registration. Moreover, 
as set forth more fully below, the Deputy Administrator finds that 
registration of Chattem would not likely cause significant increased 
diversion. Accordingly, the Deputy Administrator finds that registering 
Chattem as an importer of NRMs at this time would violate or be 
inconsistent with the Single Convention or other treaties.
2. Maintenance of effective controls against diversion of particular 
controlled substances and any controlled substance in schedule I or II 
compounded therefrom into other than legitimate, medical, scientific, 
research, or industrial channels, by limiting the importation and bulk 
manufacture of such controlled substances to a number of establishments 
which can produce an adequate and uninterrupted supply of these 
substances under adequately competitive conditions for legitimate 
medical, scientific, research, and industrial purposes
    a. Diversion
    There is no dispute in the record that Chattem maintains adequate 
security at its manufacturing plant. David Blum, Ph.D., Chattem's Vice 
President of Operations, testified extensively about Chattem's internal 
security measures. The DEA Diversion Investigator (DI) who conducted 
the investigation of Chattem's application testified favorably about 
Chattem's security. Moreover, Mr. Sapienza testified that there were no 
documented cases of diversion of NRMs imported into the United States, 
and no significant diversion at the bulk manufacturing level. The 
Deputy Administrator therefore finds Chattem has met its burden of 
proof in showing that there is no significant risk of diversion of 
imported NRMs or other controlled substances from, or in transit to, 
Chattem's facilities.
    The Government alleged that the addition of Chattem as an importer 
of NRMs could increase the diversion of the Schedule II controlled 
substances in the United States, ``downstream'' at the retail level. 
Mr. Sapienza testified that the abuse and diversion of prescription 
narcotics at the retail level, especially oxycodone, hydrocodone and 
OxyContin, a time-released brand of oxycodone, appears to be increasing 
at an alarming rate. The Government argued that registering another 
importer could lead to increase diversion at the retail level because 
of the potential of increased importation, increased manufacturing of 
bulk narcotic APIs, an increased number of products, increased 
inventories and greater availability of narcotic medication.
    The Deputy Administrator finds that the Government's evidence 
showed that the diversion of Schedule II narcotics at the retail level 
has greatly increased in recent years, and is an extremely serious 
problem. The evidence also shows that DEA continued to register bulk 
manufacturers of oxycodone; hydrocodone and other narcotics made from 
NRMs after the Government took a position against granting Chattem's 
application as an importer. The Objectors offered no explanation of 
this fact, and there is little evidence in the record that Chattem's 
registration as an importer would have any greater effect on diversion 
downstream than DEA's continued registration of bulk manufacturers. 
Moreover, 21 U.S.C. 823(a)(1) does not differentiate between importer 
and bulk manufacturer registrations in its discussion of the 
possibility of limiting such registrations in order to avoid diversion. 
Also, the Government's evidence showed that new registrations of both 
bulk manufacturers of Schedule II controlled substances and importers 
of NRMs were

[[Page 9837]]

a potential source of increased diversion downstream, and that the 
efforts to control diversion of controlled substances made from NRMs 
``must start at the source of the bulk material (importer and 
manufacturer) and its products (dosage form manufacturers).'' There was 
also evidence adduced that importer registrants do not have a free 
hand; the Government has the ability to restrict imports of NRMs with 
respect to the number of countries and proportions allowed from each. 
The Deputy Administrator also notes that DEA has the authority to 
restrict the issuance of import permits for NRMs if it finds that such 
importation is not necessary to provide for medical, scientific, or 
other legitimate purposes. 21 CFR 1312.13.
    Also, based upon the testimony of Julie L. Tisinger, a DEA Drug 
Science Officer with DEA's Drug and Chemical Evaluation Section, it 
does not appear that registering Chattem as an additional importer 
would necessarily increase the demand or availability of Schedule II 
narcotics at the retail level. As Ms. Tisinger testified, DEA 
establishes manufacturing and procurement quotas each year for Schedule 
II controlled substances in order to avoid the overproduction of these 
substances, for the purpose of reducing the risk of diversion to 
illicit traffic. Such quotas are determined by information obtained 
from manufacturers, which includes past and present sales, anticipated 
need and existing inventories. Thus the evidence showed that the demand 
for retail products is the major factor that results in increases in 
the bulk manufacturing and importation of NRMs. It therefore appears 
unlikely that granting Chattem's application for a registration to 
import NRMs would be a significant cause of increased diversion at the 
retail level. Moreover, Chattem is already registered with DEA as a 
bulk manufacturer of products made from NRMs. Therefore Chattem's need 
for NRMs is already a factor in determining DEA quotas. Chattem's 
registration as an importer would not change that, but would simply 
permit Chattem to purchase NRMs directly from foreign suppliers rather 
than from Mallinckrodt and other companies already registered with DEA 
as importers of NRMs. Accordingly, while the Deputy Administrator 
realizes that diversion of narcotics at the retail level is an 
extremely serious problem, the Deputy Administrator finds that there is 
no solid evidence in the record that granting Chattem a registration to 
import NRMs would have the potential to increase the demand or 
availability of narcotics medications, or cause a corresponding 
increase in diversion at the retail level.
    The Government also argued that registering Chattem would make it 
more difficult for DEA to control diversion inside the United States 
because DEA conducts more inspections of importers and manufacturers 
than of physicians and pharmacies. The Deputy Administrator finds, 
however, that the evidence did not show that the addition of one more 
NRM importer would cause any significant strain on DEA resources, or 
result in increased diversion at the retail level. Chattem is already 
registered as a bulk manufacturer of controlled substances, which will 
require additional inspections, and there was no evidence that an 
inspection of a manufacturer/importer is more consuming of DEA 
resources than that of a manufacturer that does not import NRMs. Also, 
DEA's continued registration of bulk manufacturers after its opposition 
to Chattem's application shows that DEA has the capacity to handle an 
increased number of inspections of manufacturers and importers.
    The Government also argued that efforts to control diversion must 
involve the availability of controlled substances at their points of 
diversion, which includes diversion at the international level. The 
issue of whether DEA should also consider the possibility of foreign 
diversion in granting registrations to import NRMs has been discussed 
in prior cases. In Johnson Matthey, supra, the Deputy Administrator 
found that DEA was not required to consider foreign diversion in 
determining whether to grant a registration for the import of 
controlled substances. The appellate court in Noramco, supra, agreed 
with this position, basing its opinion on the legislative history of 21 
U.S.C. 823(a). Noramco of Delaware Inc. v. Drug Enforcement 
Administration, 375 F.3d 1148 (DC Cir. 2004) at 1155-56. The Government 
argued, however, that the possibility of foreign diversion should be 
considered in this matter, as the United States is a world leader in 
promoting international and domestic control of narcotics and other 
controlled substances.
    The evidence showed that the Single Convention urges all 
participants to assist in limiting the production, manufacture, 
importation, exportation, distribution and use of drugs exclusively to 
legitimate medical and other purposes. Moreover, DEA's Mission 
Statement discusses DEA's responsibility to coordinate and cooperate 
with foreign governments in programs designed to reduce the 
availability of illicit drugs subject to abuse on the United States 
market.
    The Deputy Administrator agrees that DEA has already assumed a 
major role in controlling the diversion of controlled substances around 
the world. Accordingly, the Deputy Administrator finds the failure in 
prior cases to give any consideration to international diversion was 
too narrow an interpretation of the 21 U.S.C. 823(a), which permits the 
Deputy Administrator to consider any additional matters relevant to the 
public health and safety. The Deputy Administrator therefore finds that 
DEA should consider international diversion in the granting of NRM 
import registrations. Based upon the legislative history of 21 U.S.C. 
823(a), however, as set forth in Noramco, such consideration should be 
limited to evidence of the contribution of foreign diversion to 
diversion in the United States.
    In this matter, however, the Deputy Administrator finds that the 
Objectors adduced insufficient evidence that foreign diversion was 
likely to occur if Chattem were registered as an importer of NRMs, and 
no evidence of the effect of such diversion, if it were to occur, on 
the diversion of narcotics in the United States. The Deputy 
Administrator finds that there is no question that a certain percentage 
of the opium produced in India is commonly diverted at the grower 
level. Several witnesses, including an official of the United States 
Department of State, testified at the hearing that the addition of 
another importer might cause an increase in production and an 
oversupply of opium in India, causing further diversion of Indian 
opium. There was no hard evidence, however, that the addition of one 
importer of NRMs would cause any significant increase in the amount of 
diversion of opium in India, particularly when considered in light of 
DEA's continued registrations of bulk manufacturers of APIs. The 
evidence showed that if the registration of Chattem as an importer of 
NRMs would cause increased diversion of opium in India, such diversion 
would also be caused by DEA's continued registration of bulk 
manufacturers of narcotics. While the Government argued that NRM 
importer registrations have a different effect on diversion in India 
than the registration of bulk manufacturers, the Government offered no 
solid evidence in support of this proposition, or the proposition that 
such diversion would cause increased diversion of controlled substances 
in the United States. Accordingly, while the Deputy Administrator 
agrees that the diversion

[[Page 9838]]

of opium in India is a serious and continuing problem, the Deputy 
Administrator finds no substantial evidence in the record that 
Chattem's registration as an importer would result in a significant 
increase in foreign diversion of NRMs, or that such diversion, if it 
were to occur, would significantly increase diversion of controlled 
substances in this country.
    The Deputy Administrator therefore finds that Chattem has met its 
burden of proof in showing that its registration as an importer of NRMs 
will not significantly interfere with the maintenance of effective 
controls against diversion. Moreover, it would be inequitable to deny 
an importer registration to Chattem while continuing to register bulk 
manufacturers of narcotics made from NRMs. The Deputy Administrator 
therefore finds that this factor favors the registration of Chattem as 
an importer of NRMs.
    b. Adequate Competition and Adequate Supply
    The ALJ Opinion included consideration of the issues of whether 
there is adequate competition in the NRM processing market, and whether 
the current importers can provide an adequate supply. She did so, 
however, only because she found that Chattem had not met its burden of 
proof in showing that diversion would not occur as a result of its 
registration. In Johnson Matthey, the Deputy Administrator found that 
in determining whether to register an importer of NRMs, DEA need not 
consider the issue of adequate competition or the adequacy of supply 
unless DEA finds that diversion cannot be effectively controlled. The 
court in Noramco agreed that this determination was a sound 
interpretation of DEA policy. Unlike Johnson Matthey, however, in 
Penick, a later case involving a challenge to an application for 
registration as an importer of NRMs, the Deputy Administrator did 
consider whether there was adequate competition in the NRM processing 
market even though the Deputy Administrator also found that the 
registration of Penick was unlikely to result in diversion of 
controlled substances. The Noramco court, however, which issued its 
opinion after the Penick Final Order, approved the application of the 
DEA policy, as applied in Johnson Matthey, of not considering the 
adequacy of competition in both the registration of bulk manufacturers 
of Schedule I and II controlled substances and registration of NRM 
importers, if the Deputy Administrator finds that there are sufficient 
controls against diversion. Noramco at 1153. The Deputy Administrator 
will therefore follow the policy applied in Johnson Matthey and 
approved by the appellate court in Noramco. Accordingly, in light of 
the Deputy Administrator's finding above concerning the lack of 
evidence of potential diversion, the Deputy Administrator will not 
consider the adequacy of competition or supply in this matter.
3. Compliance With Applicable State and Local Law
    There is no significant evidence that Chattem has failed to comply 
with applicable State and local law. The evidence showed that on two 
occasions in the past, Chattem destroyed controlled substance in 
violation of DEA policy. Chattem's actions, however, were based on the 
advice of a Diversion Investigator in a DEA field office, and none of 
the Objectors adduced evidence to the contrary. Moreover, Dr. Blum 
testified that Chattem intended to fully comply with all DEA laws and 
regulations. The evidence also showed that the Food and Drug 
Administration (FDA) issued a warning letter to Chattem in 2000 
revealing various deviations from Current Good Manufacturing Practices. 
Dr. Blum testified that the deficiencies were corrected and the matter 
resolved. Chattem also introduced into evidence FDA warning letters to 
Ortho-McNeil Pharmaceuticals, (Noramco's owner at the time of the 
hearing), and Mallinckrodt. The Deputy Administrator therefore finds 
that this factor weighs in favor of granting Chattem's application.
4. Promotion of Technical Advances in the Art of Manufacturing These 
Substances and the Development of New Substances
    Dr. Blum testified that Chattem has produced advances in the art of 
manufacturing those controlled substances that it is already registered 
to produce. Dr. Blum also testified that Chattem intends to attempt to 
develop a process to produce thebaine from PSC if registered as an 
importer. There was little evidence, however, that Chattem has achieved 
any noteworthy success in technical advances in the manufacturing of 
controlled substances, or in the development of new substances or 
patents. Accordingly, the Deputy Administrator finds that this factor 
weighs against granting Chattem's application.
5. Prior Conviction Record of Applicant Under Federal And State Laws 
Relating to the Manufacture, Distribution, or Dispensing of Such 
Substances
    It is undisputed that neither Chattem nor any of its officers, 
agents, or key employees has been convicted of any Federal or State law 
relating to the manufacture, distribution, or dispensing of controlled 
substances. The Deputy Administrator therefore concludes that this 
factor weighs in favor of granting Chattem's application.
6. Past Experience in the Manufacture of Controlled Substances and the 
Existence in the Establishment of Effective Controls Against Diversion
    The evidence in the record showed that Chattem maintains effective 
controls against diversion, as discussed above. The record also showed 
that Chattem has experience in manufacturing controlled substances 
other than narcotics produced from NRMs. Chattem has no experience, 
however, in processing NRMs. Chattem introduced credible evidence, 
however, that the processing of NRMs is not complicated, and that 
Chattem has sufficient facilities to carry out the process. Dr. Frank 
Stermitz, Centennial Professor Emeritus of chemistry at Colorado State 
University, testified that the fundamental procedures for extracting 
and isolating alkaloids from NRMs do not require sophisticated 
technology or specialized equipment. Dr. Stermitz further testified 
that Chattem has experience in handling alkaloid-like materials that 
could be directly applicable to the processing of opium alkaloids. The 
ALJ gave little weight to that part of Dr. Stermitz's testimony 
concerning Chattem's plans for large scale production of APIs. The ALJ 
did not, however, comment negatively upon Dr. Stermitz's additional 
testimony concerning the process for the extraction of alkaloids from 
NRMs. Some of the Objectors introduced evidence that processing NRMs 
was not a simple process, and that Chattem was unlikely to possess the 
necessary technology to efficiently process NRMs. Similar to the Deputy 
Administrator's finding in Johnson Matthey, however, the Deputy 
Administrator finds that the record here showed by a preponderance of 
the evidence that the extraction of alkaloids from NRMs is not a new or 
complex process. Moreover, DEA has already granted a bulk manufacturing 
registration to Chattem for the manufacture of APIs from NRMs, and at 
the time of the hearing DEA had already issued a procurement quota to 
Chattem

[[Page 9839]]

for the purchase of PSC. It seems improbable that DEA would have issued 
the registration and quota if it had concerns about Chattem's 
technology for processing NRMs. The Deputy Administrator therefore 
finds that the evidence showed that Chattem possesses sufficient 
technology to process NRMs with efficiency. Accordingly, the Deputy 
Administrator concludes that this factor weighs in favor of granting 
Chattem's application.
7. Such Other Factors as May Be Relevant to and Consistent With the 
Public Health And Safety
    The Deputy Administrator agrees with the ALJ's finding that there 
are no factors that might be relevant to and consistent with the public 
health and safety other than those discussed above.

C. Exceptions

    All of the Objectors filed exceptions to the ALJ Opinion. Chattem 
responded to those exceptions. Having considered the record in its 
entirety, including the parties' exceptions and responses, the Deputy 
Administrator finds no merit in any of the exceptions, most of which 
concerned matters that were addressed at length at the hearing. The 
exceptions were extensive and are part of the record. Only one of the 
exceptions merits further discussion, and the remainder will not be 
restated herein.
    In its exceptions, Mallinckrodt argued that conditions should be 
placed upon Chattem's registration, requiring Chattem to provide DEA 
with plans for a new facility capable of processing both opium and PSC 
and providing DEA with plans and a time table for upgrading and 
expanding its controlled substances facilities and equipment to meet 
Chattem's needs. The Deputy Administrator finds no need for such 
conditions. The evidence showed that while Chattem has potential plans 
to build a larger facility if warranted by its future sales, it 
currently has sufficient facilities to process both opium and PSC.

IV. Conclusion

    Based upon the foregoing, the Deputy Administrator finds that 
Chattem has met its burden of proof to show that it is in the public 
interest, as defined by 21 U.S.C. 823(a) and 21 CFR 1301.34(b), to 
grant its application to be registered as an importer of NRMs. This 
decision is effective March 29, 2006.

    Dated: February 17, 2006.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. E6-2696 Filed 2-24-06; 8:45 am]
BILLING CODE 4410-09-P