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Rules - 2004

FR Doc 04-722 [Federal Register: January 14, 2004 (Volume 69, Number 9)] [Rules and Regulations] [Page 2062-2066] From the Federal Register Online via GPO Access [wais.access.gpo.gov] [DOCID:fr14ja04-3]


DEPARTMENT OF JUSTICE

Drug Enforcement Administration

21 CFR Parts 1300, 1309, 1310

[Docket No. DEA-239T]

Clarification of the Exemption of Sales by Retail Distributors of Pseudoephedrine and Phenylpropanolamine Products

AGENCY: Drug Enforcement Administration (DEA), Justice.

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ACTION: Interpretive rule.


SUMMARY: By this interpretive rule, DEA is providing guidance to retail distributors for compliance with the law and DEA regulations regarding the exemption of sales of pseudoephedrine or phenylpropanolamine regulated products. Pseudoephedrine and phenylpropanolamine, which are regulated as List I chemicals, are components of many over-the-counter cold and allergy products. This rule does not change DEA's regulations and will have no impact on individual retail customers of such products who have been purchasing them from retailers which have been properly following DEA's regulations. 

DEA regulations already provide--and this rule clarifies--that an exemption from being a regulated transaction exists for sales of ordinary over-the-counter pseudoephedrine and phenylpropanolamine products ("safe harbor" products) by retail distributors. However, some sellers have failed to adequately understand that this exemption must be considered in the context of the definition of a "retail distributor." A retail distributor is one whose sales of regulated pseudoephedrine and phenylpropanolamine products are limited almost exclusively to quantities below the 9 gram threshold--whether these products are defined as "safe harbor" products or not--to individuals for legitimate medical use. Therefore, a person who sells more than an occasional amount of pseudoephedrine or phenylpropanolamine product at or above the 9 gram threshold for these products does not fit the definition of a retail distributor on which the exemption is based.

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:

Special Notice

Due to concerns regarding possible harmful side effects from the use of phenylpropanolamine, the Food and Drug Administration (FDA) initiated action in November, 2000, to remove products containing it from the market. As a result, many firms voluntarily discontinued marketing products containing phenylpropanolamine and removed them from the shelves for disposal. However, since some products containing phenylpropanolamine are still available, and since the regulations specifically address products containing phenylpropanolamine, DEA has written this interpretive rule to include drug products containing phenylpropanolamine as well as drug products containing pseudoephedrine.

Introduction

DEA is publishing this Interpretive Rule to clarify its policies and procedures regarding the exemption of sales of ordinary over-the- counter pseudoephedrine and phenylpropanolamine products ("safe harbor" products) by retail distributors from being regulated transactions and to provide guidance for compliance with the law and DEA regulations. The Controlled Substances Act (CSA), which is found in Title 21 of the United States Code (21 U.S.C.), sections 801 et seq., sets forth the law for controlled substances and listed chemicals. Implementing regulations are found in Title 21 of the Code of Federal Regulations (21 CFR). Pertinent implementing regulations pertaining to the distribution of List I chemicals are found in 21 CFR 1300.02-- definitions relating to listed chemicals; part 1309--information on the requirements for registration and security; and part 1310--requirements for recordkeeping and reports for listed chemicals. This interpretive rule does not change the regulations. Also, this rule does not have an impact on individual retail customers of regulated pseudoephedrine and phenylpropanolamine products who have been purchasing them from retailers that have been following DEA's regulations. 

Some retail distributors have failed to adequately understand this exemption. They believe that this exemption is absolute--that a retailer may, without regulation, sell as much "safe harbor" pseudoephedrine and phenylpropanolamine product to any person for any purpose as often as that person wishes to make a purchase. This is not the case. The exemption of sales of "safe harbor" products by retail distributors from being regulated transactions must be considered in the context of the definition of a retail distributor of pseudoephedrine and phenylpropanolamine products on which it is based. In the definition of a retail distributor (21 U.S.C. 802(46)(A)), all sales of these regulated products--whether the products are defined as "safe harbor" products or not--are limited almost exclusively to below-threshold amounts to individuals for legitimate personal medical use. The transaction threshold for sales of regulated pseudoephedrine or phenylpropanolamine products by retail distributors is 9 grams (in packages of not more than 3 grams) in a single transaction (21 U.S.C. 802(39)(A)(iv)(II)). Therefore, a person who sells more than an occasional amount of these products at or above the 9 gram threshold does not meet the definition of a retail distributor on which the exemption is based. The seller would need to register with DEA as a distributor of List I chemicals and comply with the recordkeeping and other regulatory requirements that are set forth for all regulated transactions.

Background

The Comprehensive Methamphetamine Control Act of 1996 (MCA) created the exemption that sales of ordinary over-the-counter pseudoephedrine and phenylpropanolamine products by retail distributors are not regulated transactions (21 U.S.C. 802(39)(A)(iv)(I)(aa), 802(45) and 802(46)). To understand the intent of Congress in creating this exemption, it is necessary to review the legislative history of the MCA. Congress proposed the MCA to curb the fast spreading abuse of methamphetamine and amphetamine across the United States. In the Findings to the MCA, Congress stated that "methamphetamine is a very dangerous and harmful drug" and that "Illegal methamphetamine manufacture and abuse presents an imminent public health threat * * *" (Pub. L. 104-237, section 2). 

To combat the illegal manufacture and the abuse of methamphetamine and amphetamine, Congress chose to restrict access to the chemical precursors of these drugs--ephedrine, pseudoephedrine and phenylpropanolamine. However, many legal over-the-counter allergy and cold products contain these precursor chemicals. Therefore, Congress balanced the need to restrict access to legal over-the-counter drug products containing precursor chemicals with the need of the public to have access to them. Senator Biden clearly stated this in the Congressional Record:

The legislation [MCA] goes after the source of the methamphetamine problem--the precursor chemicals, often found in legal, over-the- counter drug products, which are used to manufacture methamphetamine and its ugly cousin, amphetamine. While still allowing consumer access to many helpful and commonly used products containing the precursor chemicals, the bill will place significant restrictions on the bulk sale of the chemicals, both through the mail and over the counter. (142 Cong. Rec. S 10717 (September 17, 1996))

In addition to allowing consumers access to over-the-counter products

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containing the precursor chemicals, Congress also tried not to overburden retailers with recordkeeping. As Representative Riggs stated:

Thus, while imposing measures to decrease the availability of precursor chemicals, the legislation does not restrict the ability of law-abiding citizens to use common remedies for colds and allergies. Nor does the legislation subject sales of such legal products to onerous recordkeeping requirements at the retail level. (142 Cong. Rec. H 11111 (September 25, 1996))

Clarification

The MCA created an exemption or "safe harbor" for the sale by retail distributors of ordinary over-the-counter pseudoephedrine or phenylpropanolamine products. (Ephedrine and combination ephedrine products were not included in this "safe harbor.") These pseudoephedrine and phenylpropanolamine products are packaged according to specific criteria, which includes blister packs or unit dose pouches or packets for products in solid form (21 U.S.C. 802(45)). Many retail distributors have the misconception that the exemption is unqualified-- that they may, without regulation, sell as many "safe harbor" pseudoephedrine or phenylpropanolamine products as they want to anyone for any purpose so long as these products meet the "safe harbor" definition. A review of the law shows this is not the case, nor was it the intent of Congress. The intent of Congress has been established by the previous statements cited from the legislative history of the MCA. It is further demonstrated by the following statement of Senator Grassley, which clearly indicates that sales of large quantities of these products at retail stores were not to be allowed.

Some of the chemical companies also tried to create so-called safe harbors so large that enormous bulk purchases of meth ingredients would never have to be reported to the DEA. That means criminals could go to the corner drugstore, purchase legal products like pseudoephedrine in large quantities and make poison with no one the wiser. And then that poison is sold to our kids. (142 Cong. Rec. S 10717 (September 17, 1996))

When reference is made to the "safe harbor" exemption, it is actually referring to ordinary over-the-counter pseudoephedrine and phenylpropanolamine products, which are defined as follows [emphasis added]:

The term ordinary over-the-counter pseudoephedrine or phenylpropanolamine product means any product containing pseudoephedrine or phenylpropanolamine that is regulated * * * and * * * sold in package sizes of not more than 3.0 grams of pseudoephedrine base or 3.0 grams of phenylpropanolamine base, and that is packaged in blister packs, each blister containing not more than two dosage units, or where the use of blister packs is technically infeasible, that is packaged in unit dose packets or pouches; and * * * for liquids, sold in package sizes of not more than 3.0 grams of pseudoephedrine base or 3.0 grams of phenylpropanolamine base. (21 U.S.C. 802(45))

To fully understand the exemption of sales of ordinary over-the- counter pseudoephedrine and phenylpropanolamine products by retail distributors from a regulated transaction, it is necessary to clearly understand the definition of a regulated transaction [emphasis added]:

The term regulated transaction means--a distribution, receipt, sale, importation, or exportation of * * * a listed chemical, or if the Attorney General establishes a threshold amount for a specific listed chemical, a threshold amount, including a cumulative threshold amount for multiple transactions * * * of a listed chemical, except that such term does not include--* * *

  • [not a regulated transaction] any transaction in a listed chemical that is contained in a drug that may be marketed or distributed lawfully in the United States under the Federal Food, Drug, and Cosmetic Act * * * unless--
  • [regulated transaction] the drug contains ephedrine or its salts, optical isomers, or salts of optical isomers, pseudoephedrine or its salts, optical isomers, or salts of optical isomers, or phenylpropanolamine or its salts, optical isomers, or salts of optical isomers * * * except
  • [not a regulated transaction] that any sale of ordinary over-the-counter pseudoephedrine or phenylpropanolamine products by retail distributors shall not be a regulated transaction * * * (21 U.S.C. 802(39)(A))

It is also necessary to understand the definition of a retail distributor as it relates to pseudoephedrine or phenylpropanolamine products. A retail distributor of pseudoephedrine and phenylpropanolamine products is defined as follows [emphasis added]:

The term retail distributor means--a[n] * * * entity or person whose activities as a distributor relating to pseudoephedrine or phenylpropanolamine products are limited almost exclusively to sales for personal use, both in number of sales and volume of sales, either directly to walk-in customers or in face-to-face transactions by direct sales * * * Sale for personal use means the sale of below- threshold quantities in a single transaction to an individual for legitimate medical use. (21 U.S.C. 802(46))

This definition of the activities of a retail distributor makes no distinction between "safe harbor" and other regulated pseudoephedrine or phenylpropanolamine products. All retail sales of these products-- both safe harbor products and other regulated pseudoephedrine or phenylpropanolamine products--are limited almost exclusively to amounts below the retail threshold to an individual for legitimate medical use. 

When all of the above definitions and conditions are taken as a whole, the exemption of sales of ordinary over-the-counter pseudoephedrine or phenylpropanolamine products ("safe harbor" products) by a retail distributor from being a regulated transaction must be read as follows:

Any sale of ordinary over-the-counter pseudoephedrine or phenylpropanolamine products by [a] person whose activities as a distributor relating to pseudoephedrine or phenylpropanolamine products are limited almost exclusively to sales for personal use, both in number of sales and volume of sales, either directly to walk-in customers or in face-to-face transactions by direct sales shall not be a regulated transaction. Sale for personal use means the sale of below-threshold quantities in a single transaction to an individual for legitimate medical use.

Since sales of ordinary over-the-counter pseudoephedrine or phenylpropanolamine products by retail distributors are limited almost exclusively to below-threshold amounts to an individual for personal medical use, it is necessary to set forth the general threshold for pseudoephedrine and phenylpropanolamine products for retail distributors:

The threshold for any sale of products containing pseudoephedrine or phenylpropanolamine products by retail distributors * * * shall be 9 grams of pseudoephedrine or 9 grams of phenylpropanolamine in a single transaction and sold in packages of not more than 3 grams of pseudoephedrine base or 3 grams of phenylpropanolamine base; * * * (21 U.S.C. 802(39)(A)(iv)(II)).

Thus, sales by retail distributors of all regulated pseudoephedrine and phenylpropanolamine products--both "safe harbor" products as well as other regulated products--are almost exclusively to be below the 9 gram threshold (in packages of not more than 3 grams) in a single transaction. An occasional sale at or above the 9 gram threshold is permitted for "safe harbor" products. Such an occasional sale is not a regulated transaction and does not subject the retail distributor to recordkeeping or registration as a distributor. Examples of occasional sales at or above threshold for "safe harbor" products would include a sale to a family where everyone is sick or suffering from allergies or a sale to a person who comes from a long distance away, such as in a rural area. For other

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regulated pseudoephedrine and phenylpropanolamine products, a sale at or above threshold, while permitted, is a regulated transaction necessitating recordkeeping and other regulatory requirements (21 U.S.C. 802(39)(A)(iv)(I)(aa)). 

If sales of either "safe harbor" or other regulated pseudoephedrine or phenylpropanolamine products exceed "almost exclusively below-threshold" amounts either in number of sales or volume of sales (i.e., such sales are not just rare events or sales are not in relatively small quantities), the seller does not meet the definition of a retail distributor and must register with DEA as a distributor of List I chemicals and meet all the applicable regulatory requirements (21 CFR 1309). This includes the requirements for customer identification (21 CFR 1310.07), recordkeeping and reporting (21 CFR 1310), and the security of List I chemicals (21 CFR 1309.71). 

Following is a table showing the qualifications and requirements for the exemption of sales of "ordinary over-the-counter pseudoephedrine or phenylpropanolamine" regulated products by retail distributors.

Qualifications and Requirements for the Exemption of Sales of "Ordinary Over-the-Counter Pseudoephedrine or Phenylpropanolamine Regulated Products" ("Safe Harbor Products") by Retail Distributors
Seller must first meet the definition of retail distributor relating to regulated pseudoephedrine, phenylpropanolamine, or ephedrine products listed below: 

1. Means a grocery store, general merchandise store, drug store, or other entity or person whose activities as a distributor relating to drug products containing pseudoephedrine or phenylpropanolamine are" 
2. Limited to sales almost exclusively for personal use, both in the number of sales and volume of sales [regardless of the packaging of the products]. Sale for personal use means the sale of below-threshold quantities in a single transaction to an individual for legitimate medical use. AND 
3. Sales are made either directly to walk-in customers or face-to-face by direct sales. (21 U.S.C. 802(46) & 21 CFR 1300.02(b)(29))

Requirements and conditions if retail distributor qualifies for the exemption Requirements and conditions if retail distributor does not qualify for the exemption
DEA registration as a distributor of List I chemicals is waived. (21  CFR 1309.23(e)).

As a regulated person whose  registration has been waived, a retail distributor must meet security requirements for List I  chemicals 1309.71-1309.73. (21 CFR 1309.24(k)). 

As a regulated person whose  registration has been waived, a retail distributor is subject to the to the reporting regulated transactions requirements for of listed chemicals in 21 CFR 1310.05. (21 CFR 1309.24(k)). 

No records are required for sales of regulated pseudoephedrine or phenylpropanolamine products below threshold quantities in a single  transaction regardless of packaging (not a regulated  transaction).

Records must be retained for all sales of threshold and above quantities of pseudoephedrine and  phenylpropanolamine regulated products not in blister packs (such as bottles), which are regulated transactions, as set forth in 21 1310. 

If sales of pseudoephedrine or  phenylpropanolamine regulated  products exceed "almost exclusively below-threshold"  either in number of sales or  volume of sales--regardless of the  kind of packaging, then seller must register with DEA as a distributor of List I chemicals. (See the other side of this table-- Requirements and Conditions If for Retail Distributor Does Not Qualify for the Exemption.).

Seller must register with DEA as a distributor of List I chemicals.(21 CFR 1309)

Distributor must meet security requirements for List I chemicals found in 21 CFR in 21 CFR 1309.71 -1309.73.

Distributor is subject reporting requirements for listed chemicals in 21 CFR 1310.


No records are required for sales of regulated pseudoephedrine or phenylpropanolamine products below threshold quantities in a single transaction regardless of packaging (not a regulated transaction). 

Records must be retained for all transactions of threshold or above CFR quantities regardless of type of packaging (regulated transactions). (21 CFR 1310)

For all transactions amountsat or above threshold amounts (regulated transactions), distributor must meet proof of identity requirements for customers. (21 CFR 1310.07)

Conclusion

For sales of ordinary over-the-counter pseudoephedrine or phenylpropanolamine products ("safe harbor" products) by a retail distributor to qualify for exemption from a regulated transaction, they must fall within the definition of the activities of a retail distributor (21 U.S.C. 802(46)(A)). The activities of a retail distributor relating to regulated drug products containing pseudoephedrine and phenylpropanolamine makes no distinction between "safe harbor" and other regulated pseudoephedrine and phenylpropanolamine products. All sales by a retail distributor of these products are limited almost exclusively to amounts below the retail threshold for a single transaction to an individual for legitimate personal medical use. Products must be sold to walk-in customers or must be sold in face-to-face transactions. More than occasional sales of these products by a seller at or above-threshold quantities to an individual in a single transaction or a large number of sales of these products to an individual are inconsistent with the activities defined for a retail distributor. An occasional sale of "safe harbor" pseudoephedrine or phenylpropanolamine products at or above the retail threshold is not a regulated transaction and does not require the retail distributor to keep records. More than an occasional sale that does not fit within these parameters requires the seller to obtain a DEA registration as a distributor and to meet all the requirements for a distributor, including, but not limited to, security requirements for storing List I chemicals and all the requirements for any sales that are regulated transactions.

Regulatory Certifications

Regulatory Flexibility Act

The Deputy Assistant Administrator hereby certifies that this rulemaking has been drafted in accordance with the Regulatory Flexibility Act (5 U.S.C. 605(b)), has reviewed this regulation, and by approving it certifies that this regulation will not have a significant economic impact on a substantial number of small entities. The rule provides DEA's interpretation of its law

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and regulations regarding the sale by retail distributors of ordinary over-the-counter pseudoephedrine and phenylpropanolamine products ("safe harbor" products). Compliance with the current law and regulations, as interpreted by this rulemaking, will not result in any change in economic activity for retail distributors of pseudoephedrine and phenylpropanolamine regulated products.

Executive Order 12866

The Deputy Assistant Administrator certifies that this rulemaking has been drafted in accordance with the principles of Executive Order 12866, section 1(b). The rule provides DEA's interpretation of its law and regulations regarding the sale by retail distributors of ordinary over-the-counter pseudoephedrine and phenylpropanolamine products ("safe harbor" products). DEA has determined that this is not a significant regulatory action. Therefore, this action has not been reviewed by the Office of Management and Budget.

Executive Order 12988

This rule 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; not does it impose enforcement responsibilities on any state; nor does it diminish the power of any State to enforce its own laws. Accordingly, this rule does not have federalism implications warranting the application of Executive Order 13132.

Unfunded Mandates Act

This rule will not result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100,000,000 or more in any one year, and will not significantly or uniquely affect small governments. Therefore, no actions are necessary under the Unfunded Mandates Reform Act of 1995.

Small Business Regulatory Enforcement Fairness Act of 1996

This rule is not a major rule as defined by section 804 of the Small Business Regulatory Enforcement Fairness Act of 1996. This rule will not result in an annual effect on the economy of $100,000,000 or more; a major increase in costs or prices; or significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United States-based companies to compete with foreign-based companies in domestic and export markets.

Dated: January 5, 2004. 

Laura M. Nagel, 
Deputy Assistant Administrator, Office of Diversion Control. 

[FR Doc. 04-722 Filed 1-13-04; 8:45 am]

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