FR Doc E8-6377[Federal Register: March 28, 2008 (Volume 73,
Number 61)] [Notices] [Page 16715-16717] From the Federal
Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28mr08-117]
DEPARTMENT OF JUSTICE
Drug Enforcement Administration
Hi-Tech Pharmaceutcals, Inc.; Denial of Applications
On August 16, 2007, the Deputy Assistant Administrator,
Office of Diversion Control, Drug Enforcement Administration,
issued an Order to Show Cause to Hi-Tech Pharmaceuticals, Inc.
(Respondent), of Norcross, Georgia. The Show Cause Order
proposed the denial of Respondent's pending applications for DEA
Certificates of Registration to import and manufacture
ephedrine, a list I chemical, on the ground that its "registrations
would be inconsistent with the public interest.'' Show Cause
Order at 1 (citing 21
U.S.C. 824(a)(4) & 958(c)).
The Show Cause Order specifically alleged that both
Respondent's owner, Mr. Jared Wheat, and its Vice-President, Mr.
Stephen D. Smith, had previously been convicted of
controlled-substance felony offenses. Id. The Show Cause Order
next alleged that on February 23, 2006, agents of the U.S.
Customs Service and the Food Drug Administration (FDA) executed
a search warrant at Respondent and seized various products
containing ephedrine alkaloids that the company was
manufacturing and distributing, as well as the raw materials
used to manufacture these products. Id. at 2.
The Show Cause Order further alleged that Respondent operated
several websites which represented that they offered controlled
substances for sale from Canada and that the "drugs were made
using good manufacturing practices in Canada,'' when, in fact, "Hi-Tech
manufactured many of these drugs, including various Schedule III
and IV controlled substances, in the country of Belize and
unlawfully imported them into the United States without a DEA
registration'' in violation of 21
U.S.C. 957(a) and 21
CFR 1301.11. Id. at 2. Relatedly, the Show Cause Order
alleged that on September 7, 2006, a federal grand jury indicted
[[Page 16716]]
Respondent, Mr. Wheat, Mr. Smith, and ten other individuals
associated with the company, charging them with, inter alia, "the
unlawful distribution of controlled substances and conspiracy to
import controlled substances into the United States.'' Id.
On August 20, 2007, the Show Cause Order was served on
Respondent by certified mail, return receipt requested.
Thereafter, Respondent's counsel submitted a letter in which it
waived its right to a hearing, but in which it also responded to
several of the Show Cause Order's allegations. Ltr. of Joseph P.
Schilleci, Jr., to Hearing Clerk, 1 (Sept. 14, 2007). The
factual assertions and arguments presented in this letter will
be considered pursuant to 21
CFR 1301.43(c). I therefore conclude that Respondent has
waived its right to a hearing. I therefore enter this Final
Order without a hearing based on relevant material contained in
the investigative file as well as Respondent's letter and make
the following findings. See 21
CFR 1301.43(e).
Findings
On July 25, 2005, Respondent, a Georgia corporation, applied
for two DEA registrations: one to import ephedrine and one to
manufacture it. Ephedrine is a list I chemical, which is
frequently diverted into the illicit manufacture of
methamphetamine, a schedule II controlled substance. See 21
U.S.C. 802(34); see also 21
CFR 1308.12(d). Respondent's applications were submitted by
Mr. Jared R. Wheat. On both applications, Respondent stated that
"Jared R. Wheat, [its] President and sole shareholder * * * was
convicted on October 2, 1991[,] in the United States District
Court, Northern District of Alabama * * * for conspiracy to
distribute MDMA. He was sentenced to the custody of the Bureau
of Prisons for thirty-six months (36) months [and] three years
supervised release.'' \1\
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\1\ The investigative file also indicates
that in September 1992, Mr. Smith was convicted in the Georgia
Superior Court of purchasing or possession of a controlled
substance. As the letter from Respondent's counsel indicated,
Mr. Smith "is a Vice-President of [Respondent but] does not
own any shares in'' the company.
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During the course of DEA's pre-registration investigation,
agency investigators received information that several other
federal agencies including the FDA and Federal Trade Commission
were also investigating Respondent. Moreover, during an on-site
inspection, Mr. Wheat told DEA investigators that he was
currently importing ephedra or Ma Huang Extract. He also
provided DEA investigators with a "Certificate of Analysis''
which indicated that Respondent had imported from Sinochem
Jiangsu Import & Export Corporation of Nanjaing, China, one
thousand kilograms of Ma Huang Extract containing 8.2% total
ephedrine alkaloids.\2\ The Certificate stated that "[t]his
product is concentrated from natural sources and does not
contain either synthetic or fermentation source. All alkaloids
are results from extraction and concentration of crude plant
material.'' The Certificate also noted that "water'' was used as
the "extract solvent.''
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\2\ During the inspection, Mr. Wheat
provided the DIs with a product list and invoice which showed
that it was manufacturing and distributing several products
which contained ephedrine alkaloids. Each of the products had
an ephedrine alkaloid content of less than five percent.
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On February 23, 2006, investigators from FDA and U.S. Customs
executed a search warrant at Respondent's building. The FDA
investigators seized various products. Simultaneously, the
United States Attorney filed a complaint for forfeiture against
various products which the FDA had seized on the ground that
they were adulterated. These products were labeled as "Lipodrene,''
"Stimerex- ES,'' and "Betradene,'' and each of the products
indicated that they contained 25 mg. of ephedrine alkaloids in
each tablet. Subsequently, the U.S. District Court for Northern
District of Georgia rejected Respondent's contentions and
granted the Government's motion for summary judgment on its
complaint for forfeiture. Hi-Tech Pharmaceuticals, Inc. v.
Crawford, 505 F.Supp.2d 1341 (N.D. Ga. 2007).\3\
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\3\ Regarding the seizure of ephedrine
alkaloid products from Respondent, its counsel admitted that "on
August 15, 2007, the United States District Court for the
Northern District of Georgia entered judgment in favor of the
FDA.'' Ltr. of Joseph P. Schilleci, Jr., to Hearing Clerk, at
1 (Sept. 14, 2007). Respondent's counsel further stated that
it was appealing the district court's decision. Id.
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On September 7, 2006, a federal grand jury returned a
forty-five count indictment against Respondent, Jared Wheat,
Stephen D. Smith, and nine other individuals. The indictment
alleged, inter alia, that the defendants had conspired to
manufacture in Belize and intentionally import, or attempt to
import, into the United States, schedule III controlled
substances (the steroids oxandrolone, oxymetholone, stanazolol)
and schedule IV controlled substances (alprazolam, diazepam,
lorazepam, phentermine, and zolpidem), in violation of 21
U.S.C. 952(a)(2), 960(a)(1),
960(b)(4), and 963.
United States v. Wheat, et al., No. 1:06CR382 (N.D. Ga.)
(Indictment at 14-16, 23-24). The indictment also alleged that
Respondent, Mr. Wheat, Mr. Smith, and others, knowingly and
intentionally imported phentermine, Xanax (alprazolam), and
Ambien (zolpidem) on various dates between February and May
2004. Indictment at 30-31.
Regarding the indictment, Respondent's counsel stated that it
"is confident that the facts will show that it has been and is
appropriately conducting its business within the bounds of the
law.'' Letter of Respondent's Counsel, at 1. Respondent's
counsel further contended that the indictment's allegations "are
incorrect and do not portray an accurate description of [it],
either in the past or present,'' and "that there is no basis for
the Government's indictment of Hi-Tech.'' Id.
The investigative file establishes, however, that several of
the defendants named in the indictment have entered guilty pleas
to various counts. As part of his plea agreement, B.W. admitted
that he conspired with Wheat, Smith, and Respondent, "to
knowingly and intentionally import and attempt to import into
the United States from Belize [the] Schedule IV controlled
substances * * * [a]lprazolam, [d]iazepam, [l]orazapam, [p]hentermine,
and [z]olpidem * * * all in violation of federal law.'' B.W.
Guilty Plea and Plea Agreement at 1-2. B.W. further admitted
that he "had knowledge of attempts to import Schedule IV
controlled substances and [that he] assisted in the manufacture
of [these substances] on two (2) occasions.'' Id. at 2.
Defendant D.W. admitted that he conspired with Wheat and
Smith "to knowingly and intentionally import and attempt to
import into the United States from Belize anabolic steroids,
Schedule III controlled substances, and to knowingly and
intentionally import and attempt to import into the United
States from Belize [the] Schedule IV controlled substances * * *
[a]lprazolam, [d]iazepam, [l]orazepam, [p]hentermine and [z]olpidem
* * * all in violation of federal law.'' D.W. Guilty Plea and
Plea Agreement at 1. Finally, Defendant D.J. admitted in his
plea agreement that he had knowledge that Wheat, Smith,
Respondent, and others, "did knowingly and intentionally * * *
conspire * * * with each other and others to knowingly and
intentionally import and attempt to import into the United
States from Belize [the] Schedule IV controlled substances * * *
[a]lprazolam, [d]iazepam, [l]orazepam, [p]hentermine and [z]olpidem
* * * in violation of'' federal law. D.J. Guilty Plea and Plea
Agreement at 1-2.
[[Page 16717]]
Discussion
Section 303(h) of the Controlled Substances Act (CSA)
provides that "[t]he Attorney General shall register an
applicant to distribute a list I chemical unless the Attorney
General determines that registration of the applicant is
inconsistent with the public interest.'' 21
U.S.C. 823(h). In making this determination, Congress
directed that I consider the following factors:
(1) Maintenance by the applicant of effective controls
against diversion of listed chemicals into other than
legitimate channels;
(2) Compliance by the applicant with applicable Federal,
State, and local law;
(3) Any prior conviction record of the applicant under
Federal or State laws relating to controlled substances or to
chemicals controlled under Federal or State law;
(4) Any past experience of the applicant in the manufacture
and distribution of chemicals; and
(5) Such other factors as are relevant to and consistent
with the public health and safety.
Id.
"These factors are considered in the disjunctive.'' Joy's
Ideas, 70 FR 33195, 33197 (2005). I may rely on any one or a
combination of factors, and may give each factor the weight I
deem appropriate in determining whether an application for a
registration should be denied. See, e.g., David M. Starr, 71 FR
39367, 39368 (2006); Energy Outlet, 64 FR 14269 (1999).
Moreover, I am "not required to make findings as to all of the
factors.'' Hoxie v. DEA, 419 F.3d 477, 482 (6th Cir. 2005);
Morall v. DEA, 412 F.3d 165, 173-74 (D.C. Cir. 2005).
Having considered all of the factors, I conclude that factors
two and four establish that Respondent's registration would be "inconsistent
with the public interest.'' 21 U.S.C. 823(h). Respondent's
application will therefore be denied.
Here, the record establishes that between September 2005 and
February 2006, Respondent illegally imported into the United
States, 1,000 kilograms of Ma Huang extract, which contained
ephedrine alkaloids in a concentration of approximately eight
percent. While at the time of the importation, "harvested plant
material * * * contain[ing] ephedrine * * * that preserve[d] the
natural constituents in the ratios that are found in the plant's
natural state'' was exempt from the CSA's requirements, DEA's
regulation further provided that "[p]lant material subjected to
chemical or physical extraction, concentration, chemical
reaction, or other treatment that alters the plant's natural
constituents [was] not exempt.'' 21 CFR 1310.12(d)(1).\4\
Respondent did not have a registration to import the product,
which contains a list I chemical and was produced through an
extraction process, and thus was not exempt from the application
of the Act. See 21
U.S.C. 957(a); 21
CFR 1310.12(d)(1). Respondent's importation of Ma Huang
extract therefore violated federal law.
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\4\ On July 25, 2007, DEA published an
interim rule which removed the exemption "for unaltered
ephedra plant material.'' 72 FR 40738, 40741 (2007). This rule
became effective on August 24, 2007. Id. at 40742.
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Moreover, substantial evidence establishes that Respondent,
its owner (Mr. Wheat), and vice-president (Mr. Smith), violated
the CSA by importing schedule III and IV controlled substances
(including anabolic steroids, multiple benzodiazepines, as well
as phentermine and zolpidem) into the United States from Belize
in violation of 21
U.S.C. 952 and 957(a)(b).
While the indictment sets forth only allegations, the plea
agreements of several co-conspirators implicated Respondent, Mr.
Wheat, and Mr. Smith, in the conspiracy to knowingly import
controlled substances into the United States in violation of
federal law. The agreements thus provide substantial evidence to
support a finding that Respondent, Mr. Wheat, and Mr. Smith
violated federal law.\5\ See Richardson v. Perales, 402 U.S. 389
(1971) (upholding use of hearsay evidence in administrative
proceedings). Accordingly, I conclude that granting Respondent's
application would be "inconsistent with the public interest.'' 21
U.S.C. Sec. 823(h).
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\5\ In light of the evidence establishing
that Mr. Wheat and Mr. Smith have committed offenses in
violation of the CSA, I need not decide whether their prior
convictions are too dated to be considered.
I further note that Respondent imported
listed chemicals which it then used to manufacture and
distribute products which a federal court has held were
adulterated within the meaning of the Food, Drug, and Cosmetic
Act. See Hi-Tech Pharmaceuticals, Inc., v. Crawford, 505
F.Supp.2d at 1357. See also 21 U.S.C. 823(h)(5) (directing
consideration of "such other factors as are relevant to and
consistent with the public health and safety''). This conduct
also supports the conclusion that granting Respondent a
registration would be "inconsistent with the public
interest.'' 21 U.S.C. 823(h).
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Order
Pursuant to the authority vested in me by 21
U.S.C. 823(h), as well as 28 CFR 0.100(b) & 0.104, I
order that the application of Hi-Tech Pharmaceuticals, Inc., for
a DEA Certificate of Registration to import ephedrine, a list I
chemical, be, and it hereby is, denied. I further order that the
application of Hi-Pharmaceuticals, Inc., for a DEA Certificate
of Registration to manufacture ephedrine, a list I chemical, be,
and it hereby is, denied. This order is effective April 28,
2008.
Dated: March 17, 2008.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. E8-6377 Filed 3-27-08; 8:45 am]
BILLING CODE 4410-09-P
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unofficial version. An official version of these publications may be obtained
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