Rules - 2011
[Federal Register Volume 76, Number 129 (Wednesday, July 6, 2011)]
[Proposed Rules]
[Pages 39318-39341]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-16847]
DEPARTMENT OF JUSTICE
Drug Enforcement Administration
21 CFR Parts 1301 and 1309
[Docket No. DEA-346P]
RIN 1117-AB32
Controlled Substances and List I Chemical Registration and
Reregistration Fees
AGENCY: Drug Enforcement Administration (DEA), Department of Justice.
ACTION: Notice of proposed rulemaking.
SUMMARY: DEA proposes adjusting the fee schedule for DEA registration
and reregistration fees necessary to recover the costs of its Diversion
Control Program relating to the registration and control of the
manufacture, distribution, dispensing, importation and exportation of
controlled substances and List I chemicals as mandated by the
Controlled Substances Act.
DATES: Electronic comments must be submitted and written comments must
be postmarked on or before September 6, 2011. Commenters should be
aware that the electronic Federal Docket Management System will not
accept comments after midnight Eastern Time on the last day of the
comment period.
ADDRESSES: To ensure proper handling of comments, please reference
"Docket No. DEA-346" on all electronic and written correspondence.
DEA encourages all comments be submitted electronically through http://www.regulations.gov using the electronic comment form provided on that
site. An electronic copy of this document and supplemental information
to this proposed rule are also available at the http://www.regulations.gov Web site for easy reference. Paper comments that
duplicate the electronic submission are not necessary as all comments
submitted to http://www.regulations.gov will be posted for public
review and are part of the official docket record. Should you, however,
wish to submit written comments via regular or express mail, they
should be sent to the Drug Enforcement Administration, Attention: DEA
Federal Register Representative/ODL, 8701 Morrissette Drive,
Springfield, VA 22152.
FOR FURTHER INFORMATION CONTACT:
Imelda L. Paredes, Office of Diversion
Control, Drug Enforcement Administration, 8701 Morrissette Drive,
Springfield, Virginia 22152; Telephone (202) 307-7165.
SUPPLEMENTARY INFORMATION:
Posting of Public Comments: Please note that all comments received
are considered part of the public record and made available for public
inspection online at http://www.regulations.gov and in the DEA's public
docket. Such information includes personal identifying information
(such as your name, address, etc.) voluntarily submitted by the
commenter.
If you want to submit personal identifying information (such as
your name, address, etc.) as part of your comment, but do not want it
to be posted online or made available in the public docket, you must
include the phrase "PERSONAL IDENTIFYING INFORMATION" in the first
paragraph of your comment. You must also place all the personal
identifying information you do not want posted online or made available
in the public docket in the first paragraph of your comment and
identify what information you want redacted.
If you want to submit confidential business information as part of
your comment, but do not want it to be posted online or made available
in the public docket, you must include the phrase "CONFIDENTIAL
BUSINESS INFORMATION" in the first paragraph of your comment. You must
also prominently identify confidential business information to be
redacted within the comment. If a comment has so much confidential
business information that it cannot be effectively redacted, all or
part of that comment may not be posted online or made available in the
public docket.
Personal identifying information and confidential business
information identified and located as set forth above will be redacted,
and the comment, in redacted form, will be posted online and placed in
the DEA's public docket file. Please note that the Freedom of
Information Act applies to all comments received. If you wish to
inspect the agency's public docket file in person by appointment,
please see the "For Further Information" paragraph.
Background
Legal Authority
The Drug Enforcement Administration (DEA) is a component of the
Department of Justice and is the primary agency responsible for
coordinating the drug law enforcement activities of the United States.
DEA also assists in the implementation of the President's National Drug
Control Strategy. DEA's mission is to enforce U.S. controlled
substances laws and regulations and bring to the criminal and civil
justice system those organizations and individuals involved in the
growing, manufacturing or distribution of controlled substances and
listed chemicals appearing in or destined for illicit traffic in the
U.S., including organizations that use drug trafficking proceeds to
finance terrorism. The diversion control program (DCP) is a strategic
component of the DEA's law enforcement mission. The DCP carries out the
mandates of the Controlled Substances and Chemical Diversion and
Trafficking Acts. It is primarily the DCP within DEA that implements
and enforces Titles II and III of the Comprehensive Drug Abuse
Prevention and Control Act of 1970, often referred to as the Controlled
Substances Act (CSA) and the Controlled Substances Import and Export
Act (CSIEA) (21 U.S.C. 801-971), as amended (hereinafter, "CSA").\1\
DEA drafts and publishes the implementing regulations for these
statutes in Title 21 of the Code of Federal Regulations (CFR), Parts
1300 to 1321. The CSA together with these regulations are designed to
prevent, detect, and eliminate the diversion of controlled substances
and listed chemicals into the illicit market while ensuring a
sufficient supply of controlled substances and listed chemicals for
legitimate medical, scientific, research, and industrial purposes.
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\1\ The Attorney General's delegation of authority to DEA may be
found at 28 CFR 0.100.
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Pursuant to the CSA, controlled substances are classified in one of
five schedules based upon their potential for abuse, their currently
accepted medical use, and the degree of dependence the substance may
cause. 21 U.S.C. 812. Likewise, under the CSA, listed chemicals are
separately classified based on their importance to the manufacture of
controlled substances (List I chemicals) or their use in manufacturing
controlled substances (List II chemicals). 21 U.S.C. 802(33)-(35). The
CSA mandates that DEA register persons or entities who manufacture,
distribute, dispense, import, export, or conduct research or chemical
analysis with controlled substances and listed chemicals. These
registrants are permitted to handle controlled substances and listed
chemicals as authorized by their registration and are required to
comply with the applicable requirements associated with their
registration. 21 U.S.C. 822. The identification and registration of all
individuals and entities authorized to handle controlled substances and
listed chemicals establishes a closed system over which DEA is charged
to inspect, investigate, and enforce applicable federal law.
[[Page 39319]]
Under the CSA, DEA is authorized to charge reasonable fees relating
to the registration and control of the manufacture, distribution,
dispensing, import, and export of controlled substances and listed
chemicals. 21 U.S.C. 821 and 958(f). DEA must set fees at a level that
ensures the recovery of the full costs of operating the various aspects
of its DCP. 21 U.S.C. 886a. Each year, DEA is required by statute to
transfer the first $15 million of fee revenues into the general fund of
the Treasury and the remainder of the fee revenues is deposited into a
separate fund of the Treasury called the Diversion Control Fee Account
(DCFA). 21 U.S.C. 886a(1). On at least a quarterly basis, the Secretary
of the Treasury is required to reimburse DEA an amount from the DCFA
"in accordance with estimates made in the budget request of the
Attorney General for those fiscal years" for the operation of the
DCP.\2\ 21 U.S.C. 886a(1)(B) and (D). The first $15 million of fee
revenues that are transferred to the Treasury do not support any DCP
activities.
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\2\ The diversion control program (DCP) consists of the
controlled substance and chemical diversion control activities of
DEA. These activities are related to the registration and control of
the manufacture, distribution, dispensing, importation, and
exportation of controlled substances and listed chemicals (21 U.S.C.
886a(2)).
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History of Fees
In 1970, Congress consolidated more than 50 laws related to the
control of legitimate channels of narcotics and dangerous drugs into
one statute--the CSA. The statute was "designed to improve the
administration and regulation of the manufacturing, distribution, and
dispensing of controlled substances by providing for a 'closed' system
of drug distribution for legitimate handlers of such drugs" with
criminal penalties for transactions outside the legitimate chain.\3\
With enactment of the CSA, the Bureau of Narcotics and Dangerous Drugs
(BNDD) was also granted authority to charge reasonable fees relating to
the registration and control of the manufacture, distribution,
dispensing, export, and import of controlled substances.\4\ To this
end, BNDD established a three-tiered fee structure for companies and
individuals wishing to participate in the U.S. controlled substance
industry.\5\ Before the enactment of the CSA, the U.S. House of
Representatives held hearings to discuss the proposed Controlled
Substances Act. In these hearings, there was a discussion about whether
the Attorney General should be allowed to charge reasonable fees
relating to both registration and control (including enforcement costs)
or just registration.\6\ In the end, Congress enacted the CSA and
allowed the Attorney General to charge reasonable fees relating to both
registration and control.\7\
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\3\ H.R. Rep. No. 91-1444 (1970), reprinted in 1970 U.S.C.C.A.N.
4566, 4571-4572.
\4\ DEA's authority to charge reasonable fees was later expanded
to include manufacturers, distributors, importers and exporters of
List I chemicals. The Domestic Chemical Diversion Control Act of
1993, Pub. L. 103-200, 107 Stat. 2333.
\5\ 36 FR 4928, March 13, 1971, 36 FR 7776, April 24, 1971.
\6\ Drug Abuse Control Amendments of 1970: Hearing on H.R. 1170
and H.R. 13743 Before Subcomm. on Public Health and Welfare of the
H. Comm. on Interstate and Foreign Commerce, 91st Cong. 145-148,
359-365, and 412-414 (Feb. 3 & 20, 1970) and Controlled Dangerous
Substances, Narcotics and Drug Control Laws: Hearings Before H.
Comm. on Ways and Means, 91st Cong. 211-214 and 468-474 (July 20 &
21, 1970).
\7\ The term "control" as defined in 21 U.S.C. 802(5)
specifically applies to Part B of Title II of the CSA only (21
U.S.C. 811-814). In general, "diversion control" is a broad term
encompassing activities related to preventing and detecting the
diversion of controlled substances and listed chemicals from
legitimate commerce into the illicit market. In 1992, Congress
established the Diversion Control Fee Account (DCFA) and required
that the fees charged by DEA under its diversion control program be
set at a level that ensures the recovery of the full costs of
operating the various aspects of that program (Pub. L. 102-395, 106
Stat. 1843). In 2004, Congress amended the CSA and defined
"diversion control program" and "controlled substance and
chemical diversion control activities" (Pub. L. 108-447, 118 Stat.
2921, codified in 21 U.S.C. 886a). The "diversion control program"
means the controlled substance and chemical diversion control
activities of the Drug Enforcement Administration. 21 U.S.C.
886a(2)(A).
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In 1973, the BNDD was abolished and all BNDD functions were
transferred to DEA, including the authority to charge registrants
reasonable fees.\8\ In 1982, a General Accounting Office (GAO) report
\9\ advised that the 1971 fee schedule did not adequately recover the
costs for the DCP administered by DEA. An increase in fees was proposed
and finalized in the Federal Register in 1983.\10\ All fees collected
from 1971 through 1992 were deposited into the general fund of the
United States Treasury.
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\8\ Reorganization Plan No. 2 of 1973, 38 FR 18380 (July 2,
1973).
\9\ GAO/GGD-83-2, October 29, 1982.
\10\ 48 FR 14640, April 5, 1983; 48 FR 56043, December 19, 1983.
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In the 1993 appropriations for DEA, Congress determined that the
DCP would be fully funded by fees and no longer by appropriations.\11\
Congress established the DCFA as a separate account of the Treasury to
"ensure the recovery of the full costs of operating the various
aspects of [the Diversion Control Program]" by those participating in
the closed system established by the CSA. 21 U.S.C. 886a(1)(C).
Congress specified the general operation of the DCFA. Each fiscal year,
the first $15 million of deposited fees are retained in the general
fund of the Treasury and are not available for use by the DCP. The
amounts in excess of $15 million are deposited into the DCFA for the
operation of DEA's diversion control program. The funds in the DCFA
remain available until expended and are paid by the Secretary of the
Treasury to reimburse DEA for expenses incurred in the operation of the
DCP in accordance with estimates made in the budget request of the
Attorney General. 21 U.S.C. 886a(1). Thus, specific statutory
authorizations set the parameters of the DCFA, but not the details of
the application of those standards to the activities of DEA.
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\11\ Departments of Commerce, Justice, and State, the Judiciary
and Related Agencies Appropriations Act of 1993, Public Law 102-395,
codified in relevant part at 21 U.S.C. 886a.
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Shortly after the 1993 Appropriations Act, DEA published a proposed
rule proposing to increase the existing fee schedule to comply with
Congress' direction to set fees at a level that ensures the recovery of
the full costs of operating the DCP.\12\ After a comment period, a
final rule was published on March 22, 1993, implementing changes to the
fee structure and excluding chemical control costs from the calculation
of fees.\13\ Several members of the registrant population impacted by
the fee increase challenged the new fee, first in federal district
court, where it was upheld, and subsequently on appeal to the U.S.
Court of Appeals where it was remanded without being vacated for
inadequate information supporting the selected fees.\14\
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\12\ 57 FR 60148-01, December 18, 1992.
\13\ 58 FR 15272-01, March 22, 1993.
\14\ American Medical Association v. Reno, 857 F.Supp. 80
(D.D.C. 1994); American Medical Association v. Reno, 57 F.3d 1129
(D.C. Cir. 1995).
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In December of 1993, the Domestic Chemical Diversion Control Act of
1993 was passed by Congress to amend the CSA to require that
manufacturers, distributors, importers, and exporters of List I
chemicals obtain a registration from DEA. Coincident with the new
registration requirements, DEA was also authorized to charge
"reasonable fees relating * * * to the registration and control of
regulated persons and regulated transactions." \15\ (Congress modified
this language in 2004, as it currently reads at 21 U.S.C. 821, to make
it uniform with other provisions
[[Page 39320]]
of the CSA.\16\) This amendment to the CSA was made after publication
of DEA's March 22, 1993 final rule and the commencement of the legal
challenges. List I chemical registration and reregistration fees were
not addressed in the DCFA until the fee calculation initiated with a
proposed rule published November 2005.\17\
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\15\ The Domestic Chemical Diversion Control Act of 1993, Public
Law 103-200, 107 Stat. 2333.
\16\ It authorizes "reasonable fees relating to the
registration and control of the manufacture, distribution, and
dispensing of controlled substances and to listed chemicals." 21
U.S.C. 821.
\17\ 70 FR 69474, November 16, 2005. See also 108 H. Rpt. 576,
July 1, 2004.
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The fee was finalized in 1996 with a request for further
comment.\18\ DEA instituted studies and internal reorganizations to
enable DEA to better identify DCP activities and costs. Additional
information on the components and activities of the fee-funded DCP and
what was deemed to be part of that program as well as DEA's response to
comments received was published in 2002 for additional public
comment.\19\ After that publication, a review of DEA's DCP by the
Office of the Inspector General, Department of Justice (OIG) concluded
DEA was not adequately supporting the DCP program.\20\
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\18\ 61 FR 68624, December 30, 1996.
\19\ 67 FR 51988, August 9, 2002.
\20\ "Review of the Drug Enforcement Administration's Control
of the Diversion of Controlled Pharmaceuticals," I-2002-010,
October 2002, http://www.usdoj.gov/oig/reports/DEA/e0210/index.htm.
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In February 2003, DEA published a proposed rule to raise
registration and reregistration fees in an effort to comply with the
statutory requirement to charge fees at a level that ensures the
recovery of the full costs of operating the various aspects of the
DCP.\21\ Shortly thereafter, DEA created an organization within
headquarters known as the Validation Unit. This Unit reviews and
ensures that every DCFA expenditure over $500 is in support of
diversion control-related activities. The Validation Unit is
independent of the Office of Diversion Control and reports directly to
the DEA Deputy Administrator. If an expense only partially supports the
DCP, such as a field office's rent or utility cost, the Validation Unit
determines the portion of the expense that should be funded by the
DCFA. A new fee was finalized by publication of a final rule on October
10, 2003.\22\
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\21\ 68 FR 7728, February 18, 2003.
\22\ 68 FR 58587, October 10, 2003. DEA published a correction
to this final rule where the internal DEA computer system, Firebird,
was identified as being solely funded through appropriations. The
Firebird system costs are properly apportioned as a DCP cost as well
as a non-DCP appropriations expense. 69 FR 34568, June 22, 2004.
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In 2004, Congress provided additional guidance in the relevant 2005
Appropriations Act.\23\ Specifically, the CSA was amended to define the
DCP as "the controlled substance and chemical diversion control
activities of the Drug Enforcement Administration." 21 U.S.C.
886a(2)(A). Furthermore, "controlled substance and chemical diversion
control activities" means "those activities related to the
registration and control of the manufacture, distribution, dispensing,
importation, and exportation of controlled substances and listed
chemicals." 21 U.S.C. 886a(2)(B). Congress further provided that
reimbursements from the DCFA "shall be made without distinguishing
between expenses related to controlled substance activities and
expenses related to chemical activities" (21 U.S.C. 886a(1)(B)) and
amended the language of 21 U.S.C. 821 and 958(f) to be consistent with
the definition of the DCP articulated in 21 U.S.C. 886a(2). As a
result, all registration and reregistration fees for controlled
substances and chemicals are deposited into the DCFA and reimbursements
by the Secretary of the Treasury are made without distinction.
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\23\ Public Law 108-447, Departments of Commerce, Justice and
State, the Judiciary and Related Agencies Appropriations Act of
2005, signed into law on December 8, 2004.
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In 2005, based upon the internal organizational changes and the
2005 Appropriations Act, DEA proposed an adjusted fee schedule to
appropriately reflect all costs associated with the DCP.\24\ In July
2006, the OIG reported on its Follow-up Review of DEA's Efforts to
Control the Diversion of Controlled Pharmaceuticals and recommended
that DEA apply more resources to diversion control.\25\ The OIG also
recommended that DEA provide more Special Agent support to the DCP and
increase training for those individuals who support the program. The
OIG also noted that the diversion of controlled substance
pharmaceuticals had dramatically increased over recent years and that
the increase coincided with the use of emerging technologies such as
the Internet. Twelve comments were received and analyzed in response to
DEA's proposed fee rule and DEA published the final rule on August 29,
2006.\26\
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\24\ 70 FR 69474, November 16, 2005.
\25\ "Follow-Up Review of the Drug Enforcement Administration's
Efforts to Control the Diversion of Controlled Pharmaceuticals," I-
2006-004, July 2006, http://www.usdoj.gov/oig/reports/DEA/e0604/final.pdf.
\26\ 71 FR 51105, August 29, 2006.
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The OIG completed a Review of DEA's Use of the Diversion Control
Fee Account in 2008 and did not find any misused DCFA funds for non-
diversion control activities between FY 2004 and FY 2007. To the
contrary, the OIG found that DEA did not fully fund all diversion
control costs with the DCFA as required by law.\27\ It has been
approximately five years since the last fee adjustment. It should be
noted, however, that collections associated with the last fee
adjustment did not begin until FY 2007.
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\27\ "Review of the Drug Enforcement Administration's Use of
the Diversion Control Fee Account," I-2008-002, February 2008,
http://www.usdoj.gov/oig/reports/DEA/e0802/final.pdf.
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Diversion Control Program (DCP)--Scope
The scope of the DCP has evolved since its inception. In late 1971,
the BNDD's Compliance Program was created to provide a specialized work
force that could focus exclusively on controlled substance diversion
and take full advantage of the controls and penalties established by
the CSA. The program was placed under the BNDD's Office of Enforcement
and staffed by compliance investigators, later called diversion
investigators. In 1973, the BNDD was abolished and all BNDD functions
were transferred to DEA.\28\
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\28\ Reorganization Plan No. 2 of 1973, 38 FR 18380 (July 2,
1973).
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From 1971 to 1983, DEA's legal authority with regard to diversion
and abuse of drugs remained relatively unchanged. The CSA originally
provided DEA with substantially more authority to regulate controlled
substance manufacturers and distributors than retail dispensers such as
medical professionals and retail pharmacies. Congress, acknowledging
that registration is the cornerstone of the closed system of
distribution, required DEA to find that manufacturer and distributor
registrations are consistent with a specifically defined public
interest and with U.S. international obligations as a prerequisite to
granting such registrations.\29\ In contrast, practitioners were
entitled to a registration if they were authorized to handle controlled
substances by the state in which they practiced. Furthermore, a
practitioner's registration could be revoked only on the following
three bases: conviction of a drug-related felony; revocation of a state
license; or submission of a materially falsified application. There was
also great disparity in the recordkeeping and security requirements
applicable to the two groups, with manufacturers and distributors
subject to the tighter
[[Page 39321]]
controls. This disparity in regulatory authority generated more
regulatory oversight and, hence, compliance, at the manufacturer and
distributor level than at the retail level. The limitations on DEA's
statutory authority severely restricted its ability to regulate
practitioners.
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\29\ 21 U.S.C. 823(a)-(e).
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By 1977, all 197 DEA compliance investigators (now diversion
investigators) were fully occupied monitoring approximately 3,300
controlled substance manufacturers, distributors, importers, exporters,
and narcotic treatment programs, where large stocks of controlled
substances and the potential for large-scale diversion were
present.\30\ At that time, 98 percent of DEA registrants were in the
dispensing category, i.e., physicians, dentists, veterinarians, retail
pharmacies, hospitals, and teaching institutions.\31\ In 1978, the
Comptroller General issued a report to Congress that examined DEA's
efforts to prevent diversion of controlled substances at the retail
level, i.e., by doctors and pharmacists.\32\ The report explored the
barriers to DEA's efforts to control retail diversion: inadequate
statutory authority, weak regulatory requirements, and inadequate
resources. One of the Comptroller General's recommendations to Congress
was that Congress change DEA's role by authorizing DEA to exercise
direct regulatory authority over retail level practitioners. This would
have been a deviation from DEA's traditional enforcement role and would
require significant legislative changes and manpower increases.
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\30\ GAO/GGD-78-22, March 10, 1978 at 3, 18.
\31\ GAO/GGD-78-22 at 3.
\32\ GAO/GGD-78-22.
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Shortly thereafter, many amendments to the CSA between 1984 and
1990 strengthened and expanded DEA's statutory authority. The Dangerous
Drug Diversion Control Act of 1984 \33\ provided DEA with new authority
to deny or revoke a practitioner's DEA registration on the basis of
specifically defined public interest grounds \34\ and also provided DEA
with emergency scheduling authority.\35\ The Anti-Drug Abuse Act of
1986 established penalties for the manufacture and distribution of
"designer drugs." \36\ The Anti-Drug Abuse Act of 1988 for the first
time required recordkeeping and reporting by chemical distributors,
importers, and exporters, and established penalties for illegal
activities related to precursor and essential chemicals.\37\ The
Anabolic Steroids Control Act of 1990 brought steroids under the
regulatory oversight and control of the DEA by placing certain anabolic
steroids in schedule III of the CSA.\38\ This Act required certain
steroid manufacturers and distributors to register with DEA and brought
anabolic steroids under the recordkeeping, reporting, security,
prescribing, import, and export controls of the CSA.
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\33\ Part B--Diversion Control Amendments, Public Law 98-473, 98
Stat. 2070 (Oct. 12,1984).
\34\ 21 U.S.C. 823(f), 824(a)(4).
\35\ 21 U.S.C. 811(h) (The amendment provided for one-year
emergency scheduling of a drug, the abuse of which constituted an
"imminent hazard to the public safety." The drug would remain in
schedule I for up to one year, during which the normal scheduling
procedures would proceed).
\36\ Subtitle E--Controlled Substances Analogue Enforcement Act,
Public Law 99-570, 100 Stat. 3207 (Oct. 27, 1986).
\37\ Title VI, Subtitle A--Chemical Diversion and Chemical
Trafficking Act of 1988, Public Law 100-690, 102 Stat. 4181 (Nov.
18, 1988).
\38\ Public Law 101-647, 104 Stat. 4851 (Nov. 29, 1990).
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As discussed above, the Domestic Chemical Diversion Control Act of
1993 amended the CSA to require manufacturers, distributors, importers,
and exporters of List I chemicals obtain a registration from the DEA,
thus greatly expanding the authority and activities of the DCP.
On October 17, 2000, Congress passed the Drug Addiction Treatment
Act, permitting qualified physicians to treat narcotic dependence with
certain schedule III through V narcotic controlled substances.\39\ The
Act waived the requirement for certain qualified physicians to obtain a
separate DEA registration as a Narcotic Treatment Program. However,
upon application, the DCP must issue such qualifying physicians an
identification number for inclusion with the physician's DEA
Certificate of Registration.\40\ As a result, when a qualifying
physician submits notice of his waiver pursuant to the Act, the DCP
issues the physician a new DEA Certificate of Registration with the
appropriate identification number.
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\39\ Public Law 106-310, 114 Stat. 1222 (Oct. 17, 2000).
\40\ 21 U.S.C. 823(g)(2)(D)(ii).
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Renamed from the Office of Compliance and Regulatory Affairs and
then the Diversion Control Program, today, the DEA Office of Diversion
Control administers the DCP.\41\ As such, it is responsible for
ensuring the availability of controlled substances and listed chemicals
for legitimate uses in the United States while exercising controls to
prevent the diversion of these substances and chemicals for illegal
uses. The Office of Diversion Control maintains an overall geographic
picture of the drug and chemical diversion and abuse problems to
identify new trends or patterns in diversion and abuse. This enables
the Office of Diversion Control to appropriately direct resources.
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\41\ 28 CFR Part 0, Appendix to Subpart R.
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The DCP is executed by maintaining the closed system of
distribution, regulating and controlling nearly 1.4 million DEA
registrants,\42\ and investigating activity related to the diversion of
controlled substances and listed chemicals. The DCP's regulatory
function is accomplished through routine regulatory inspections, by
providing information and assistance to registrants, and by controlling
and monitoring the manufacture, distribution, dispensing, import, and
export of controlled substances and listed chemicals. The DCP's
enforcement function is accomplished by identifying and investigating
those persons or entities responsible for diverting controlled
substances and listed chemicals from legitimate commerce. Violators are
subject to administrative sanction, and civil and criminal prosecution.
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\42\ This represents the total registrant population.
Approximately seven percent of the total registrant population
consists of fee exempt registrants who are not included in the fee
calculations presented herein. The registrant population grew at a
rate of approximately 2.6 percent per year from 2007 to 2010.
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To ensure accountability within the closed system of distribution,
the DCP administers, maintains, controls, and oversees the DEA
registration system.\43\ This entails processing, reviewing, and, if
necessary, investigating all applications for registration and
reregistration, collecting fees, and, when appropriate, proposing to
take administrative action on registrations or applications for
registration, such as restriction, revocation, suspension, or denial of
an application. Maintaining the DEA registration system requires
coordination with state regulatory agencies and other federal agencies
such as the Center for Substance Abuse Treatment.\44\
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\43\ See 21 U.S.C. 822-25, 827-29, 831, 952-54, 956-58, 971.
\44\ See 21 U.S.C. 823(g).
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In addition, the DCP exercises statutory authority to determine the
appropriate procedures necessary to the ordering and distribution of
schedule I and II controlled substances.\45\ This enables the DCP to
monitor the flow of certain controlled substances from their point of
manufacture through commercial distribution. It also monitors
registrant compliance with
[[Page 39322]]
electronic reporting systems such as the Automation of Reports and
Consolidated Orders System (ARCOS), and manages the cataloging of
controlled substances based on the National Drug Code (NDC) system, the
Drug/Ingredient file, Trade Name file, DEA Generic Name file and U.N.
Code/Name file. Other oversight activities include maintaining the
Controlled Substance Ordering System (CSOS), monitoring CSOS activities
through the initial certification process, and periodic auditing of
registrant systems. CSOS provides registrants with an electronic
platform that reduces costs to registrants while ensuring a more
efficient and effective ordering process.
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\45\ 21 U.S.C. 828.
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One of the primary functions of the DCP is to ensure that
registrants are in compliance with the safeguards inherent in the CSA.
This proactive approach is designed to identify and prevent the large
scale diversion of controlled substances and listed chemicals into the
illicit market.
Registrant compliance is determined primarily through the conduct
of pre-registration, scheduled, and complaint investigations. DCP
regulatory activities have an inherent deterrent function, and they are
designed to ensure that those businesses and individuals registered
with DEA to handle controlled substances or listed chemicals have
sufficient measures in place to prevent the diversion of these
substances. These investigations also help registrants understand and
comply with the CSA \46\ and identify those registrants who violate the
CSA and implementing regulations. Preregistration investigations reduce
the possibility of registering unauthorized subjects, ensure that the
means to prevent diversion are in place, and determine whether
registration is consistent with the public interest.
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\46\ See 21 U.S.C. 827 (records and reports of registrants).
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Manufacturers, distributors, reverse distributors, importers,
exporters, and narcotic treatment programs pose the greatest potential
for large-scale diversion. Accordingly, scheduled investigations of
these non-practitioner registrants are a major priority of the DCP.
These investigations serve as a deterrent to diversion through the
continuous evaluation of registrants' recordkeeping procedures,
security, and overall adherence to the CSA. Emphasis during these
investigations is given to verifying inventory, records and
recordkeeping procedures, a review of customers and their ordering
patterns, and security protocols.
The DCP is constantly evaluating diversion trends, patterns,
routes, and techniques in order to appropriately focus its regulatory,
civil and criminal enforcement activities. This is accomplished in many
ways, including collecting and analyzing targeting and analysis data,
conducting diversion threat assessments, working with state and local
medical and pharmacy boards and state and local law enforcement
agencies, and developing intelligence.
The DCP conducts criminal enforcement activities primarily through
Tactical Diversion Squads (TDSs). TDSs are comprised of many DEA
specialties, including DEA Special Agents and Diversion Investigators,
and state and local counterparts such as state law enforcement and
regulatory personnel. These groups combine varied resources and
expertise in order to investigate, disrupt, and dismantle those
individuals or organizations involved in diversion schemes (e.g.,
doctor shoppers, prescription forgers, and prevalent retail-level
violators).
In fulfillment of its function to control the import and export of
controlled substances and listed chemicals, the DCP issues import and
export registrations and permits, and monitors declared imports,
exports, and transshipments of these substances. The DCP must ensure
that all imports and exports of controlled substances and listed
chemicals meet the requirements of the CSA. As such, the DCP maintains
and monitors many electronic reporting systems, such as the Chemical
Handlers Enforcement Management System (CHEMS), which provides
information on entities manufacturing, distributing, and exporting and
importing regulated chemicals, and encapsulating and tableting
machines.\47\
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\47\ See 21 U.S.C. 830, 957-58.
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The DCP's authority over controlled substances and listed chemicals
requires its support of domestic and foreign investigations of these
substances. As such, the DCP serves as the Competent National Authority
(CNA) for the United States vis-[agrave]-vis precursor chemicals and
international treaties. The DCP works with the international community
to identify and seize international shipments of precursor and
essential chemicals destined for clandestine laboratories for use in
manufacturing controlled substances. The DCP also works on a bilateral
basis to urge international partners to take effective action, in
cooperation with chemical companies, to prevent the diversion of
precursor chemicals from legitimate trade. In addition to its other
oversight and regulatory responsibilities in this area,\48\ the DCP
reviews and approves importation requests for List I chemicals and
reviews chemical registrant submissions.
---------------------------------------------------------------------------
\48\ 21 U.S.C. 830; 21 CFR Parts 1310, 1313, 1314.
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Not only does the DCP exercise authority and control over the
registrant population, the DCP exercises authority over the
classification of substances.\49\ This is accomplished by evaluating
drugs and chemicals to determine whether these substances are being
abused or potentially involved in illicit traffic, and to evaluate
whether any substances should be scheduled as a controlled substance.
This requires the collection and analysis of data from various sources
across the United States. These evaluations are used by DEA as a basis
for developing appropriate drug control policies, determining the
status of controlled, excluded, or exempted drugs and drug products,
and supporting United States initiatives in international forums.
---------------------------------------------------------------------------
\49\ 21 U.S.C. 811-814.
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Another crucial function of the DCP is the annual establishment of
quotas for all schedule I and II controlled substances and the List I
chemicals pseudoephedrine, ephedrine, and phenylpropanolimine.\50\
Along with this responsibility, the DCP also provides scientific
support for policy guidance and training, expert witness testimony and
conference presentations. The DCP fulfills U.S. treaty obligations
pertaining to the CSA, including the preparation of periodic reports
for submission to the United Nations as mandated by U.S. international
drug control treaty obligations on the manufacture and distribution of
narcotic and psychotropic substances as well as determining the
anticipated future needs for narcotic and psychotropic substances.
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\50\ 21 U.S.C. 826.
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In the execution of its regulatory functions, the DCP reviews
proposed legislation pertinent to the availability of controlled
substances and listed chemicals for legitimate uses in the United
States and controls to prevent the diversion of these substances and
chemicals. The DCP constantly reviews its own regulations and develops
and implements regulations designed to enhance DEA's diversion control
efforts and to implement newly enacted legislation.
All DCP regulatory activities require education and outreach to
ensure appreciation of and compliance with the CSA and applicable
policies and regulations. Providing such guidance is also necessary to
reduce the likelihood of diversion from legitimate commerce
[[Page 39323]]
to illegitimate purposes. One aspect of the DCP's outreach efforts is
establishing and maintaining liaison and working relationships with
other federal agencies, as well as foreign, state and local
governments, and the regulated community. Other efforts include
developing and maintaining manuals and other publications; organizing
and conducting national conferences on current issues, policies, and
initiatives; and providing guidance to the general public.
Changes in the Controlled Substances Act Since the Last Fee Rule in
2006
Since implementation of the last fee rule in 2006, Congress has
made several changes to the CSA that impact how the DCP operates to
control controlled substances and listed chemicals and register those
individuals who wish to handle these substances. Additionally, the
nature of the diversion control problem has increased in size and
complexity. These statutory changes, in addition to the changing scope
of diversion, required the DCP to implement program and organizational
changes. These changes impact DEA beyond its DCP and thus are not
necessarily funded through the DCFA.
Methamphetamine Abuse
Congress has enacted a series of legislative initiatives to combat
the rise in methamphetamine abuse. Methamphetamine is a highly
addictive drug with potent central nervous system stimulant properties.
Control as a schedule II substance and the removal of methamphetamine
injectable formulations from the United States market, combined with a
better appreciation for its high abuse potential, led to a drastic
reduction in the abuse of this drug in 1971. However, a resurgence of
methamphetamine abuse occurred in the 1980s and it is currently
considered a major drug of abuse. The widespread availability of
methamphetamine today is largely fueled by illicit production in large
and small clandestine laboratories throughout the United States and
illegal production and importation from Mexico.
Methamphetamine is abused for its stimulant and euphoric effects.
High-dose chronic abuse has been associated with irritability, tremors,
convulsions, anxiety, paranoia, and neurotoxic effects that cause
damage to neurons and blood vessels. Aggressive and violent behavior by
users, often directed at spouses and children, pose a significant risk
to those individuals in contact with methamphetamine addicts. Death has
resulted from extreme anorexia, hyperthermia, convulsions, and
cardiovascular collapse (including stroke and heart attacks).
The methods used to manufacture methamphetamine are directly
impacted by the availability of precursor chemicals and ease of
synthesis. Currently, methamphetamine is primarily produced
domestically by utilizing diverted pseudoephedrine combination products
that are sold at retail and, to a lesser extent, ephedrine products.
The manufacture of this drug poses a significant threat to the public
health and safety due to the toxic waste and the risk of fire and
explosion associated with the clandestine laboratories that manufacture
the drug, and the fact that many individuals, including children, are
at risk of exposure to toxic chemicals and waste generated during the
manufacturing process.
A Rand Corporation study reported that the 2005 cost to the U.S.
for overall methamphetamine-related activities including crime and
criminal justice costs, health care costs, endangered children put in
foster care, the loss of productivity, drug treatment, and injuries and
death at methamphetamine laboratories was estimated at $23.4
billion.\51\ Similarly, the Vanderbilt University Medical Center in
Tennessee reported spending $325 million between July 2009 and June
2010 for uncompensated medical care at its Burn Center.\52\ One-third
of its patients were burned from exploding methamphetamine
laboratories.\53\
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\51\ Nancy Nicosia et al., "The Economic Cost of
Methamphetamine Use in the United States, 2005," RAND Corporation,
2009.
\52\ John Brannon, "Meth-related Burns a Growing Part of
Uncompensated Care at Vanderbilt," Messenger, August 12, 2010,
http://www.nwtntoday.com/news.php?viewstory=44736.
\53\ Id.
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In 2010, there were in excess of 10,000 clandestine laboratory
incidents in the United States related to the manufacture of
methamphetamine.\54\ Coinciding with the upward trend in
methamphetamine laboratory seizures is an alarming upward trend in
methamphetamine abusers. According to the 2009 National Survey on Drug
Use and Health, between 2008 and 2009 there was a 60 percent increase
in the number of past month users of methamphetamine.\55\ This comes
after a significant reduction of past month users between 2006 and
2008, a period when the U.S. was experiencing decreases in the number
of methamphetamine laboratory seizures.
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\54\ The El Paso Intelligence Center (EPIC) has not validated
this data as of the date of this Notice of Proposed Rulemaking,
however, all indications are that there were approximately 12,000
such clandestine laboratory incidents in 2010.
\55\ Substance Abuse and Mental Health Services Administration
(SAMHSA), "Results from the 2009 National Survey on Drug Use and
Health: Volume I, Summary of National Findings," Office of Applied
Studies, 2010 (NSDUH Series H-38A, HHS Publication No. SMA 10-4856),
http://www.oas.samhsa.gov/nsduh/2k9NSDUH/2k9Results.pdf.
---------------------------------------------------------------------------
The Combat Methamphetamine Epidemic Act of 2005 (CMEA) was enacted
on March 9, 2006. 21 U.S.C. 971. It requires retailers of non-
prescription products containing pseudoephedrine, ephedrine and
phenylpropanolamine to place these products behind the counter or in a
locked cabinet. Consumers must show identification and sign a logbook
for each purchase. An interim final rule was published to implement
section 716 of the Act and require additional reporting for import,
export, and international transactions involving all List I and List II
chemicals.\56\ On October 14, 2008, Congress enacted the
Methamphetamine Production Prevention Act of 2008, which amended the
CSA to require the sellers of methamphetamine precursor chemicals to
record information about sales and purchasers in electronic logbooks or
bound paper books. 21 U.S.C. 830(e)(1)(A)(iv)-(vi). Further, on October
12, 2010, the Combat Methamphetamine Enhancement Act of 2010 (MEA) was
enacted, establishing new requirements for mail-order distributors of
scheduled listed chemical products (Pub. L. 111-268).
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\56\ 72 FR 17401, April 9, 2007. Implementation was delayed an
additional 30 days until June 8, 2007, to allow industry more time
to fully comply with the new provisions. 72 FR 28601, May 22, 2007.
---------------------------------------------------------------------------
Internet Diversion
On October 15, 2008, Congress amended the CSA with enactment of the
Ryan Haight Online Pharmacy Consumer Protection Act of 2008. DEA
amended its regulations accordingly by interim final rule to prevent
the illegal distribution and dispensing of controlled substances by
means of the Internet.\57\
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\57\ 74 FR 15596, April 6, 2009.
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Disposal of Controlled Substances
Lastly, on October 12, 2010, Congress amended the CSA with the
enactment of the Secure and Responsible Drug Disposal Act of 2010 (Pub.
L. 111-273). Pursuant to this amendment, DEA must promulgate new
regulations that allow ultimate users and long-term care facilities to
dispose of controlled substances through a variety of methods of
collection and disposal. DEA is in the process of drafting these
regulations.
[[Page 39324]]
Increased Need for Diversion Control
Coincident with the above statutory changes, the increased misuse
of controlled substances and listed chemicals highlights the urgency of
and need for diversion control. The National Survey on Drug Use and
Health (NSDUH) (formerly the National Household Survey on Drug Abuse)
is an annual survey of the civilian, non-institutionalized, population
of the United States aged 12 or older. The survey is conducted by the
Department of Health and Human Services Office of Applied Studies,
Substance Abuse and Mental Health Services Administration. Findings
from the 2009 NSDUH \58\ estimate that 7.0 million persons used
prescription-type psychotherapeutic drugs--pain relievers, anti-anxiety
medications, stimulants, and sedatives--non-medically in the previous
month. This represents 2.8 percent of the population aged 12 or older.
These estimates were 13 percent higher than those from the 2008 Survey.
From 2002 to 2009, there was an increase in the rate of current non-
medical use of prescription-type drugs (from 5.5 to 6.3 percent) among
young adults aged 18 to 25, driven primarily by an increase in pain
reliever misuse. In 2009, an estimated 3.1 million persons aged 12 or
older used an illicit drug for the first time within the past twelve
months. Of those, an estimated 28.7 percent initiated with
psychotherapeutics, including 17.1 percent with pain relievers, 8.6
percent with tranquilizers, 2.0 percent with stimulants, and 1.0
percent with sedatives.
---------------------------------------------------------------------------
\58\ SAMHSA, "Results from the 2009 National Survey on Drug Use
and Health: Volume I, Summary of National Findings," Office of
Applied Studies, 2010 (NSDUH Series H-38A, HHS Publication No. SMA
10-4856), http://www.oas.samhsa.gov/nsduh/2k9NSDUH/2k9Results.pdf.
---------------------------------------------------------------------------
Abuse of prescription controlled substances among teenagers is
second only to abuse of illegal marijuana. The 2010 "Monitoring the
Future" survey of teenagers found that 8 percent of high school
seniors reported non-medical use of Vicodin, and 5.1 percent reported
non-medical use of OxyContin, both scheduled controlled substances
(painkillers).\59\ This reported abuse is consistent with reports by
high-school students of increased non-medical use of painkillers in the
past five years.\60\ As reported by The Partnership at Drugfree.org
(formerly the Partnership for a Drug-Free America) from its 2009
survey, more than 50 percent of teenagers (grades 9-12) believe that
prescription drugs are easier to obtain than illegal drugs. There is a
concern that young people may perceive prescription and/or over-the-
counter drugs as "safer" than illegal drugs because of their
intended, legitimate medical use.\61\
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\59\ Lloyd D. Johnson, PhD, et al, "Monitoring the Future
National Results on Adolescent Drug Use: Overview of Key Findings,
2010," Institute for Social Research, The University of Michigan,
2011.
\60\ Lloyd D. Johnston, PhD, et al, "Monitoring the Future
National Results on Adolescent Drug Use: Overview of Key Findings,
2009," National Institute of Drug Abuse, 2010 (NIH Publication No.
10-7583).
\61\ Partnership for a Drug-Free America and MetLife Foundation,
"2009 Parents and Teens Attitude Tracking Report," March 2, 2010.
---------------------------------------------------------------------------
The consequences of prescription drug abuse are seen in the data
collected by the Substance Abuse and Mental Health Services
Administration (SAMHSA) on emergency room visits. According to their
latest data, "Drug Abuse Warning Network (DAWN), 2009: National
Estimates of Drug-Related Emergency Department Visits," SAMHSA
estimates that of the 4.6 million emergency department visits in 2009
associated with drug use, about 1.2 million visits involved the non-
medical use of pharmaceuticals.\62\ Emergency department visits
involving non-medical use of pharmaceuticals (misuse or abuse) almost
doubled between 2004 and 2009 from 627,291 in 2004 to 1,244,679 visits
in 2009 (98.4 percent increase).\63\ About half of the 2009 emergency
department visits related to abuse or misuse of pharmaceuticals
involved painkillers and more than one-third involved drugs to treat
insomnia and anxiety.\64\
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\62\ SAMHSA, Highlights of the 2009 Drug Abuse Warning Network
(DAWN) Findings on Drug-Related Emergency Department Visits, Center
for Behavioral Health Statistics and Quality, The DAWN Report,
December 28, 2010.
\63\ Id. at 4.
\64\ Id. at 3.
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According to the Centers for Disease Control, overdose deaths
caused by prescription drugs is the second leading cause of accidental
death in the United States among young people.\65\ The Florida Medical
Examiner's Commission reported that between 2005 and 2009 the number of
deaths in Florida associated with oxycodone rose 248.5 percent.\66\
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\65\ U.S. Department of Health and Human Services, Centers for
Disease Control and Prevention, National Center for Injury
Prevention and Control, Web-based Injury Statistics Query and
Reporting System (WISQARS), "20 Leading Causes of Death, United
States, 2007, All Races, Both Sexes."
\66\ Florida Dep't of Law Enforcement, Medical Examiners
Commission, "Drugs Identified in Deceased Persons by Florida
Medical Examiners 2005 Report," at 15 (May 2006) and Florida Dep't
of Law Enforcement, Medical Examiners Commission, "Drugs Identified
in Deceased Persons by Florida Medical Examiners 2009 Report," at
17 (June 2010).
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Operational Changes of the DCP Since 2006
As discussed above, the OIG reviewed DEA's efforts to control the
diversion of controlled pharmaceuticals and in 2006 recommended that
DEA incorporate law enforcement support and law enforcement authority
to assist the DCP in performing criminal investigations that inherently
require law enforcement authority, e.g., the authority to arrest,
execute search warrants, and conduct surveillance and undercover
activities. As discussed above, DEA expanded the use of Tactical
Diversion Squads comprised of many DEA specialized resources such as
Special Agents, Diversion Investigators and state and local law
enforcement and regulatory personnel to more effectively investigate,
disrupt, and dismantle those individuals or organizations involved in
diversion schemes. Since the last fee calculation, DEA added 161
Special Agent positions to the DCP. The majority of these positions
were allocated to the DCP Tactical Diversion Squads. By 2009, there
were 37 operational Tactical Diversion Squads across the United States
and DEA is committed to increasing this number within this fee cycle.
These squads are designed to address controlled substance diversion in
consonance with the traditional Diversion Investigator regulatory
efforts.
DEA made other organizational changes to incorporate in the DCP
those units responsible for diversion control operations. To ensure the
proper utilization of DCFA resources, DEA created a Diversion Value and
Analysis Unit in the Diversion Planning and Resources Section to
identify and prevent duplication of effort, conduct cost benefit
analyses, and develop, oversee, and review acquisitions.
In 2009, the DCP intensified its regulatory activities to help the
registrant population better comply with the CSA and to identify those
registrants who violated the CSA and implementing regulations. The
modifications included increasing investigation cycles as well as depth
of review. Scheduled investigations were increased from every five
years to every three years for controlled substance manufacturers, bulk
manufacturers, distributors, reverse distributors, importers,
exporters, bulk importers, and Narcotic Treatment Programs; scheduled
investigations for chemical manufacturers, bulk manufacturers,
distributors, importers, exporters, and bulk importers were increased
from two
[[Page 39325]]
per Diversion Investigator per year to all such registrants every three
years. Investigations of Office Based Opioid Treatment/Buprenorphine
Physicians, currently referred to as DATA-Waived Practitioners, were
increased from one such registrant per Diversion Group per year to all
such registrants per Diversion Group every five years. Researchers were
increased from only being investigated on a complaint basis to two
schedule I researchers plus two schedule II-V researchers per Diversion
Group per year. Finally, analytical laboratories, previously not
subject to scheduled investigations, were increased to include
analytical laboratories affiliated with manufacturers being
investigated every three years in tandem with the affiliated
manufacturer's scheduled investigation.
In an effort to enhance the DCP's enforcement capabilities, to
reduce costs, to streamline the regulatory compliance process for
registrants, and to keep the public informed, the DCP made several
improvements to its information technology capabilities.
Underperforming contracts were terminated and a new unit was created
within the DCP to manage all information technology projects
exclusively for the DCP. This resulted in significant cost reductions
and improved program efficiency and responsiveness to both registrants
and the public.
The new unit successfully made cost-saving improvements to the
technology infrastructure of the Controlled Substances Ordering System
(CSOS) and streamlined the application process for registrants by
implementing an online system for new applications and renewal
applications for registrations. The DCP is also enhancing the
communications system to allow interconnectivity between many different
systems. The DCP is continually working to improve the quality and
accessibility of its reporting systems, such as the Automated Reports
and Consolidated Orders System (ARCOS) and Drug Theft/Loss (DTL). These
two programs generate timely, accurate, and actionable data that
improve the DCP's enforcement and control efforts as well as providing
for a more efficient means by which registrants may submit such
reports.
DEA's Interim Final Rule on Electronic Prescriptions for Controlled
Substances (EPCS), effective June 1, 2010, will enhance diversion
control as a means to protect against fraudulent prescriptions and will
streamline the recordkeeping process for pharmacies (75 FR 16236, March
31, 2010). This rule provides practitioners with the option to
electronically sign and transmit prescriptions for controlled
substances. Likewise, with this new rule, pharmacies are permitted to
receive and archive electronic prescriptions. The DCP is working to
develop and implement EPCS.
As part of the requirements of the Combat Methamphetamine Epidemic
Act of 2005 (CMEA), regulated sellers of scheduled listed chemical
products are required to self-certify annually. Regulated sellers can
self-certify and find training manuals on the Diversion Control Program
Web site.
Need for a New Fee Calculation
DEA last adjusted the fee schedule in August 2006, however,
collections did not begin until FY 2007.\67\ This fee schedule was
intended to be sufficient to cover the "full costs" of the DCP for FY
2006 through FY 2008 or October 1, 2005 through September 30, 2008. The
DCP program has continued to operate under this fee schedule due to
cost savings through reorganization and modernization efforts and by
inadvertently excluding certain costs to the DCP. As indicated by the
above-referenced 2008 OIG report, additional salary and other costs
attributable to diversion control activities need to be incorporated
into the DCP. In addition, the mission of the DCP has been expanded by
Congress and by the need to address an explosion in the abuse of
prescription drugs that seriously impact public health and safety. The
National Drug Control Strategy is focused on all aspects of the
problem--supply, demand, and treatment.
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\67\ 71 FR 50115, August 29, 2006.
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The Office of Diversion Control at DEA is focused on the supply
side of this serious threat to the public health and safety. At the end
of FY 2008, a reorganization within DEA expanded the use of Tactical
Diversion Squads across the country to allow Diversion Investigators to
focus their expertise on regulatory oversight and the deterrent effect
of increased regulatory investigations. Tactical Diversion Squads
incorporate the criminal investigative skills and statutory authority
of Special Agents and state and local Task Force Officers to bring to
the criminal justice system those organizations and individuals who
violate the CSA by diverting controlled substances and listed chemicals
into the illicit market. Diversion Investigators are a key asset to
Tactical Diversion Squads because they lend their keen knowledge of the
closed system of distribution to the Tactical Diversion Squads.
Diversion Investigators' familiarity and detailed understanding of the
closed system of distribution require, however, that they continue to
lead the regulatory oversight of DEA registrants. DCP costs increase
with an expanded number and use of Tactical Diversion Squads.
Due to the alarming rise in prescription drug abuse, as well as an
increase in the production and use of chemicals that are harmful if
abused, the DCP has increased scheduled investigations of registrants
and drug and chemical scheduling initiatives, as well as other
modifications in its control efforts. The DCP continues to draw
technical expertise from Diversion Investigators, and the DCP has
incorporated greater numbers of Special Agents, Chemists, Information
Technology Specialists, Attorneys, Intelligence Research Specialists,
and State and Local personnel. It is essential to utilize a diverse
skilled workforce and constantly review and modify all aspects of the
DCP to successfully execute the National Drug Control Strategy and
effectively prevent, detect, and eliminate the diversion of controlled
substances and listed chemicals into the illicit market while ensuring
a sufficient supply of these substances for legitimate medical,
scientific, research, and industrial purposes.
DEA has been and will continue to be fiscally responsible and will
remain vigilant towards identifying methods to improve efficiencies or
identifying other cost saving measures. As discussed above, however, a
new fee calculation is needed. Without an adjustment in the annual
registration fees, DEA will be unable to continue current operations
and will be in violation of the statutory mandate that fees charged
"shall be set at a level that ensures the recovery of the full costs
of operating the various aspects of [the diversion control program]."
21 U.S.C. 886a(1)(C). For example, collections under the current fee
schedule will require the DCP to significantly cut existing and planned
DCP operations vital to its mission. DEA relies on the DCP to maintain
the integrity of the closed system for controlled substances and listed
chemicals, particularly at this time of dramatic increases in abuse and
diversion.
DEA must determine the proper scope of the DCP, the projected costs
for the program, a fee calculation methodology, and a new fee schedule
that recovers the costs of the DCP and sets reasonable fees for the
registration and control of manufacturers, distributors, importers,
exporters and dispensers of controlled substances and listed chemicals.
[[Page 39326]]
Fee Calculation
DEA is delegated the task of determining the details of fulfilling
the statutory requirements of ensuring the recovery of the full costs
of operating the diversion control program (DCP) as described above,
while charging registrants participating in the closed system of
distribution reasonable fees relating to the registration and control
"of the manufacture, distribution, dispensing" and "of importers and
exporters" of controlled substances and listed chemicals. For the DCP
to have funds to function, DEA must determine, in advance of actual
expenditures, a reasonable fee to be charged. As a result, historical
data and projections must be used rather than actual, current costs to
project the annual costs of the DCP. Additionally, a reasonable fee
must be calculated that will fully recover the costs of the DCP based
on the variability over time of the number of registrants in the
different categories of registration, e.g., manufacturers,
distributors, importers, exporters, reverse distributors,
practitioners, and individual researchers. Since the fees collected
must be available to fully fund the DCFA and to reimburse DEA for
expenses incurred in the operation of the DCP (21 U.S.C. 886a), there
must always be more collected than is actually spent to avoid running a
deficit and being in violation of federal fiscal law.\68\ In operating
the DCP, DEA must be prepared for changes in investigative priorities,
diversion trends, and emerging drugs or chemicals posing new threats to
the public health and safety. By definition, it is an inexact effort.
Given that fact, the agency must select a single methodology that it
consistently follows throughout any given fee cycle.
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\68\ In general, no officer or employee of the United States
Government may make or authorize an expenditure or obligation in
excess of an amount available in an appropriation or fund. 31 U.S.C.
1341.
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Current options to calculate fees are also limited by the
feasibility and practicability of tracking and allocating detailed
costs, although the agency continues to improve its capabilities on
this front. DEA has made progress through reorganization and there is
recognition throughout the agency of the need to separate DCP costs
from other agency costs. DEA is in the process of testing a system
where personnel would account for their daily hours according to
whether their time is spent on DCP or other DEA mission activities.
Part of the difficulty stems from the fact that the mission of DEA
involves investigations and actions that may involve poly-drug
organizations or that may start out as one type of investigation and
result in another, based upon the way the facts develop.
To date, tracking costs within the DCP according to registrant
categories or within a given registrant category has not been feasible
or cost-efficient. Such detailed cost attribution may or may not be
feasible in the future. However, Congress recognized that the costs of
the registration and control of controlled substances and listed
chemicals are not properly attributed on a per registrant basis when it
differentiated among the categories of registrants for purposes of
calculating a reasonable fee, e.g., manufacturers, distributors,
importers, exporters, and dispensers.\69\ Thus, the methodology used to
calculate fees needs to distinguish among these categories. The
historical fee calculation based on a weighted ratio of 12.5 for
manufacturers, 6.25 for distributors (including importers and
exporters), and 1 for dispensers was used for many years prior to and
when Congress established the DCFA and has been the method used to
date.
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\69\ 21 U.S.C. 886a(2)(B).
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As discussed in more detail below, DEA considered several
methodologies to calculate the new fee. One methodology considered was
a flat fee that takes projected DCP costs and divides it among all
registrants regardless of their business activity/registrant group. On
its face, this would not result in a "reasonable" fee for a large
portion of registrants given the disparity in economic size among
registrants and the different levels of control needed among the
registrant categories. Registrants range from multi-billion dollar
manufacturers in possession of large quantities of controlled
substances or listed chemicals to canine handlers in possession of
small amounts of controlled substances. Thus, the inspection,
investigation and oversight costs associated with a manufacturer are
much greater than for a canine handler. A flat fee methodology has been
rejected since the inception of a fee.
DEA considered another fee calculation methodology called the Past-
Based Option. This method is based on the principle that the cost of
the DCP should be shared equally among all paying registrants, except
for the cost of scheduled or regularly planned investigations and the
preregistration investigation costs to determine eligibility of
registrant applicants, as these additional costs vary by registrant
category. Rather, these historical costs should be allocated to the
registrant group receiving the scheduled and preregistration
investigations. Since the direct labor costs of scheduled and
preregistration investigations are historically around three percent of
total DCP costs, this methodology results in concerns similar to the
flat fee as the base amount is nearly as great as the flat fee amount.
DEA considered another methodology called the Future-Based Option,
which takes the same approach described in the preceding paragraph, but
the costs of scheduled investigations are derived from planned work,
not historical work hours. This methodology results in large
differences in fees among registrant groups and has been rejected by
DEA as not a "reasonable" charge.
Since the inception of the fee, the agency has selected a weighted-
ratio method to determine a reasonable fee for each category of
registrants. Under this method, registrants are assigned to a business
activity or category (e.g., researcher, practitioner, distributor,
manufacturer, etc.) based on the statutory fee categories. Then a base
fee rate is established according to the annual estimated costs of the
DCP. A projected population is calculated for each category or business
activity. That figure is then multiplied by a ratio of 1.0 for
researchers, 3.0 for practitioners (for administrative convenience the
fee is collected every three years for practitioners), 6.25 for
distributors and 12.5 for manufacturers. By utilizing these different
ratios, the agency recognizes the statutory need to charge reasonable
fees relating to the registration and control of the manufacture,
distribution, dispensing, importation and exportation of controlled
substances and listed chemicals. As historical costs support,
inspections, scheduled investigations and other control and monitoring
costs are greatest for manufacturers. This is because there is an
increased risk associated with the quantity of controlled substances
and/or chemicals located at this point in the closed system. All of the
individual business activity figures are then added together to form a
weighted sum for one projected year. This process is performed for two
more years using future projected registrant populations for those
years multiplied by the ratio. The annual figures for these three years
are then added together and divided into the total budget requirements
for that three-year period to arrive at the base rate fee to be charged
to each category of registrant.
DEA continues to review possible methodologies as technology
continues to afford increased tracking and
[[Page 39327]]
allocation of specific costs. However, at this time, DEA has determined
that it is both practicable and reasonable to continue to apply the
weighted-ratio methodology. Consistent with the statutory direction to
charge reasonable fees relating to the registration and control of the
manufacture of controlled substances and listed chemicals and the
associated oversight costs, the 12.5 ratio is applied to the
manufacturing registrant group. At 50 percent of that ratio is the 6.25
ratio which applies to the "distribution" of controlled substances or
the distributor registrant group. Likewise, "dispensing" has the
largest number of registrants, but with relatively low oversight costs
and a relatively small quantity of controlled substances or listed
chemicals within their physical possession. The base fee or the 1 ratio
is charged for those dispensing or individuals registered to do
research or other such activities that use the substance and create
limited vulnerability to the closed system, and thus require less
control in protecting the closed system. The practitioner fee is the
base fee on an annual basis but is collected every three years for
administrative convenience.
Thus, the current fees, some of which are paid annually and some of
which are paid every three years, range from $184 for ratio 1 to $2,293
for ratio 12.5 depending upon the particular registrant category.
Specifically, practitioners, mid-level practitioners, dispensers,
researchers, and narcotic treatment programs pay an annual registration
fee of $184. For administrative convenience for both the collection and
the payment, practitioners pay a combined registration fee of $551
every three years. Distributors, importers and exporters pay an annual
fee of $1,147 and manufacturers pay an annual fee of $2,293. 21 CFR
1301.13 and 1309.11.
Projected Costs for the Diversion Control Program
In calculating fees to recover the mandated full costs of operating
the DCP, DEA estimates the costs of operating the DCP for the next
three fiscal years.\70\ To develop the DCFA budget request estimates
for FY 2012, FY 2013 and FY 2014, DEA compiles: (1) The DCFA Budget
Request for Fiscal Year (FY) 2011, which forms a base spending level
for the current level of service, (2) the estimated additional required
funds for FY 2012, FY 2013 and FY 2014, and (3) the required annual $15
million transfer to the United States Treasury as mandated by the CSA
(21 U.S.C. 886a). The following paragraphs explain the annual revenue
calculations and how the total amount to be collected for the FY 2012-
2014 period was calculated. In developing this figure, DEA begins with
annual projected DCP obligations, including payroll, operational
expenses and necessary equipment. The DCP budget has increased due to
inflationary adjustments for rent and payroll and to increase staffing
resources that support the regulatory and law enforcement activities of
the program. The fees have not been adjusted to reflect these factors
as they last covered the time period of FY 2006-2008. Specific details
on the DCP budget are available in the annual President's Budget
Submission and supplemental budget justification documents provided to
Congress.\71\
---------------------------------------------------------------------------
\70\ See "Proposed New Registrant Fee Schedule Calculations"
in this rulemaking docket found at http://www.regulations.gov.
\71\ See this rulemaking docket found at http://www.regulations.gov.
---------------------------------------------------------------------------
Total obligations for the DCP have increased from FY 2007 to FY
2010 by approximately 49 percent. For the FY 2006-2008 period, payroll
expenses (staff compensation and benefits) composed the largest
component of DCP costs at 55.7 to 57.6 percent per year. Between the
period of FY 2006 and FY 2010, payroll constituted an average of 56.7
percent of DCP expenses. Operating expenses and capital expenditures
made up the remainder of DCP costs. Operating expenses (an average of
39.3 percent for the FY 2006-2010 period) include daily operation costs
such as purchase of evidence or payment for information as part of
investigations, travel, and non-equipment purchases. Capital
expenditures, including equipment and furniture purchases, capital
leases, and land/structure improvements and purchases, averaged 4.0
percent during this same period.
For the FY 2012-2014 period covered by this rulemaking, the overall
breakdown of DCP major cost categories does not depart significantly
from previous years in terms of percent of budget; however, total
budgets for each of these major cost categories do increase to reflect
additional costs in each of these categories.
In addition to the budget for each of the fiscal years, the cost
components outlined below are also considered in determining required
registration fee collections.
Recoveries From Money Not Spent as Planned (Deobligation of Prior Year
Obligations)
At times, DEA enters into an obligation to make a purchase of a
product or service that is not delivered immediately, such as in a
multi-year contract. Changes in obligations can occur for a variety of
reasons, i.e., changes in planned operations, delays in staffing,
implementation of cost savings, changes in vendor capabilities, etc.
When DEA does not expend its obligation, the "deobligated" funds are
"recovered" and the funds become available for DCP use. Based on
historical trends and for purposes of calculating the fee levels, the
recovery from deobligation of prior year obligations is estimated at
$10 million per year.
Payment to Treasury
In the 1993 appropriations for DEA, Congress determined that the
DCP would be fully funded by registration fees and no longer by
appropriations.\72\ Congress established the DCFA as a separate account
of the Treasury to "ensure the recovery of the full costs of operating
the various aspects of [the Diversion Control Program]" by those
participating in the closed system established by the CSA. 21 U.S.C.
886a(1)(C). Fees collected are deposited into a separate Treasury
account. Each fiscal year, the first $15 million is transferred to the
Treasury and is not available for use by the DCP. Therefore, DEA needs
to collect an additional $15 million per year beyond estimated costs
for payment to the Treasury.
---------------------------------------------------------------------------
\72\ Departments of Commerce, Justice, and State, the Judiciary
and Related Agencies Appropriations Act of 1993, Public Law 102-395,
codified in relevant part at 21 U.S.C. 886a.
---------------------------------------------------------------------------
Operational Continuity Fund (OCF)
DEA maintains an operational continuity fund (OCF) based on the
need to maintain DCP operations during historically low (or negative)
collection periods (e.g., the first quarter of a new fiscal year when
the first $15 million collected is transferred to Treasury). Monthly
collections and obligations fluctuate throughout the year. There are
times when obligations (spending) exceed collections. This can happen
consecutively for several months. Therefore, an operational continuity
fund is maintained in order to avoid operational disruptions due to
these fluctuations and monthly differences in collections and
obligations (spending). Using statistical analysis of the historical
fluctuations between amounts collected and amounts obligated, DEA has
determined that seven percent of the projected obligations is normally
adequate to avoid operational disruptions. The amount required to bring
the operational continuity fund
[[Page 39328]]
balance to the $15 million plus seven percent level is added to
projected costs.
The increase in OCF balance for FY 2012, FY 2013, and FY 2014 are
$6,452,395, $1,067,428, and $800,291 respectively.
Table 1--Increase in Operational Continuity Fund Balance FY 2012-2014
| |
FY 2012 |
FY 2013 |
FY 2014 |
| Budget |
$321,990,000 |
$356,582,322 |
$371,831,295 |
| Target OCF ($15M + 7%) |
39,960,763 |
41,028,191 |
41,828,482 |
| Beginning OCF balance |
33,508,367 |
39,960,763 |
41,028,191 |
| Increase in OCF balance |
6,452,395 |
1,067,428 |
800,291 |
Combat Methamphetamine Act of 2005 (CMEA) Collections
Under CMEA, DEA collects a self-certification fee for regulated
sellers of scheduled listed chemical products, which is included as
part of the total collections. The fee is waived for any person holding
a current DEA registration in good standing such as a pharmacy to
dispense controlled substances. DEA has observed an approximately 15
percent decline in self-certifications from FY 2008 to FY 2010 and
anticipates that the decline will continue through FY 2014. The self-
certification fee is $21. CMEA self-certification fee collection
estimates for FY 2012, FY 2013, and FY 2014 for purposes of calculating
the fee levels are $173,040, $146,853, and $124,635, respectively.
Table 2--CMEA Collections FY 2012-2014
| |
FY 2012 |
FY 2013 |
FY 2014 |
| Number of paying self-certifications |
8,240 |
6,993 |
5,935 |
| Fee |
$21 |
$21 |
$21 |
| CMEA collection estimate |
$173,040 |
$146,853 |
$124,635 |
Other Collections
DEA also derives revenue from the sale/salvage of official
government vehicles dedicated to DCP use. DEA's estimate for other
collections is $307,153 per year. This is the actual amount for FY
2010.
Estimated Total Required Collections
Based on these figures, DEA calculated the total amount required to
be collected for the FY 2012-2014 period for purposes of calculating
the fee levels as follows:
Required registration fee collections for FY 2012 are $332,962,203.
This figure includes the budget of $321,990,000, net of $10 million in
recoveries, plus $15 million for transfer to Treasury, plus $6,452,395
for increase in OCF balance, net of $173,040 in CMEA self-certification
collections, and net of $307,153 in other collections.
Required registration fee collections for FY 2013 are $362,195,745.
This figure includes the budget of $356,582,322, net of $10 million in
recoveries, plus $15 million for transfer to Treasury, plus $1,067,428
for increase in OCF balance, net of $146,853 in CMEA self-certification
collections, and net of $307,153 in other collections.
Required registration fee collections for FY 2014 are $377,199,798.
This figure includes the budget of $371,831,295, net of $10 million in
recoveries, plus $15 million for transfer to Treasury, plus $800,291
for increase in OCF balance, net of $124,635 in CMEA self-certification
collections, and net of $307,153 in other collections.
Table 3--Needed Fee Collections FY 2012-2014
| |
FY 2012 |
FY 2013 |
FY 2014 |
3-yr total |
| Budget |
$321,990,000 |
$356,582,322 |
$371,831,295 |
$1,050,403,617 |
| Recoveries |
(10,000,000) |
(10,000,000) |
(10,000,000) |
(30,000,000) |
| Net Budget |
311,990,000 |
346,582,322 |
361,831,295 |
1,020,403,617 |
| Payment to Treasury |
15,000,000 |
15,000,000 |
15,000,000 |
45,000,000 |
| Increase in OCF balance |
6,452,395 |
1,067,428 |
800,291 |
8,320,115 |
| CMEA Self-cert collections |
(173,040) |
(146,853) |
(124,635) |
(444,528) |
| Other collections |
(307,153) |
(307,153) |
(307,153) |
(921,458) |
| Required collections from Registration Fees |
332,962,203 |
362,195,745 |
377,199,798 |
1,072,357,746 |
Numbers are rounded.
In total, DEA needs to collect $1,072,357,746 in registration fees
over the three year period, FY 2012-FY 2014 to fully fund the DCP.
As in the past, DEA proposes to set the fee for each registrant
category for a three-year period (FY 2012-2014). The vast majority of
registrants are practitioners who pay a three-year registration fee.
These registrants are divided into three separate groups who pay their
three-year registration fees on alternate year cycles. Because
registration cycles may differ from year to year, the total amount
collected through fees in a given year may not exactly match the
projected amount.
[[Page 39329]]
DEA Efforts To Control DCP Costs
DEA continually reviews the DCP and its methods of operation to
ensure that it is fiscally responsible. The DCP works diligently to
provide the registrants with cost effective and state-of-the-art means
for conducting their businesses related to manufacturing, distributing,
dispensing, importing, and exporting controlled substances and listed
chemicals. Some examples of this include online registration, the
Controlled Substance Ordering System (CSOS) for electronic controlled
substance ordering between registrants, and electronic reporting of
thefts and significant losses of controlled substances.
DEA takes seriously its responsibilities to manage the DCP in an
efficient and effective manner, particularly in light of the current
economy. The Office of Diversion Control acknowledges the important
role that the Validation Unit provides in the appropriate expenditure
of the DCFA. DEA cannot foresee Congressionally-mandated changes to the
DCP or diversion trends, but it is committed to managing in a fiscally
responsible manner. The Office of Diversion Control is committed to
reviewing the registration process to ensure efficiency and
accountability as well as reviewing current regulations related to fee
exempt registrants. In addition, to ensure careful decision-making at
all levels of the DCP, the Office of Diversion Control is considering
several measures to ensure accountability for the effective utilization
of resources.
Proposed Methodology for New Fee Calculation
In developing this proposed rule, DEA examined alternative
methodologies to calculate the registration and registration fees. DEA
analyzed alternative methodology approaches keeping in mind its
statutory obligations under the CSA. First, pursuant to statute, DEA is
authorized to charge reasonable fees relating to the registration and
control of the manufacture, distribution, dispensing, importation, and
exportation of controlled substances and listed chemicals. 21 U.S.C.
821 and 958(f). Second, DEA must set fees at a level that ensures the
recovery of the full costs of operating the various aspects of its
diversion control program (DCP). 21 U.S.C. 886a. Accordingly, in
examining each alternative methodology DEA considered whether the fee
calculation (1) was reasonable and (2) could fully fund the costs of
operating the various aspects of the DCP.
Moreover, the CSA establishes a specific regulatory requirement
that DEA charge fees to fully fund the DCP, but that the fees collected
by DEA are to be expended through the budget process only.
Specifically, each year DEA is required by statute to transfer the
first $15 million of fee revenues into the general fund of the Treasury
and the remainder of the fee revenues is deposited into a separate fund
of the Treasury called the Diversion Control Fee Account (DCFA). 21
U.S.C. 886a(1). On at least a quarterly basis, the Secretary of the
Treasury is required to refund DEA an amount from the DCFA "in
accordance with estimates made in the budget request of the Attorney
General for those fiscal years" for the operation of the DCP. 21
U.S.C. 886a(1)(B) and (D). For that reason, DEA is only considering
alternative methodologies to calculate the registration and
reregistration fees, not alternative approaches to expend fees
collected because those decisions are governed by the CSA and the
budget process.
In developing this rule, DEA considered four methodologies to
calculate registration and reregistration fees: Past-Based Option,
Future-Based Option, Flat Fee Option, and Weighted-Ratio Option.
Although the increase in the fees may be passed down to the
registrants' customers, the alternatives are analyzed on the worst-case
scenario where the increase in the fee is absorbed fully by the
registrants.
For each of the alternatives considered, the calculated fees are
analyzed for reasonableness by examining: (1) The absolute amount of
the fee increase, (2) the change in fee as a percentage of revenue from
2007 to 2012, and (3) the relative fee increase across registrant
groups. Additionally, each calculation methodology is re-evaluated for
its overall strengths and weaknesses.
Past-Based Option
Option 1 is called the Past-Based Option, and is based on historic
investigation work hour data to set the apportionment of cost to each
registrant category. In considering Option 1, DEA used historic
investigation work hour data from the Fiscal Year 2007-2009. DEA's
records permit an accurate apportionment of work hours for certain
types of diversion control activities (e.g., investigations) among
classes of registrants. DEA estimates that approximately three to five
percent of costs can be directly linked to pre-registration and
scheduled investigations. Although some criminal investigations can be
attributed to registrant groups, DEA did not include the cost of
criminal investigations for the fee calculation under the Past-Based
Option. While DEA develops annual work plans for the number of
scheduled investigations by registrant type, DEA does not develop such
plans for criminal investigations. Therefore, the cost of criminal
investigations is allocated equally across all registrant groups,
regardless of business activity. The remaining costs associated with
DCP activities and components benefit all registrants (e.g., policy,
registration, and legal activities); however, DEA records cannot
attribute these costs by registrant class. Under Option 1, pre-
registration and scheduled investigation costs are assigned to
registrant classes and all other costs are recovered on an equal, per-
registrant basis.
DEA calculated the annual registrant fee for key registrant groups
under Option 1 and compared this fee to the current fee. Although
distributors and importers/exporters are in the same fee class in the
current fee structure (Weighted-Ratio Option), in this analysis,
distributors are separated from importers and exporters based on the
available historic work hour data and reported work hours by type of
registrant.
In the past-based option, the calculated fees increase by a factor
of 1.16, 3.19, 1.10, and 1.32 for manufacturers, distributors,
importers/exporters, and practitioners, respectively.
The proposed fees as a percentage of revenue is very low as
indicated in Table 4 below, 0.000 to 0.019 percent, 0.005 to 0.134
percent, 0.000 to 0.005 percent, and 0.125 to 0.257 percent for
manufacturers, distributors, pharmacies, and practitioners,
respectively. The impact of the incremental increase in the fee from
current fees as a percentage of revenue is even lower.
Finally, the largest increase, by a factor of 3.19, is incurred by
distributors, largely as a consequence of their separation from
exporters and importers, while the increases for other groups range
from a factor of 1.10 to 1.32.
[[Page 39330]]
Table 4--Annual Registrant Fees Under Past-Based Option
| |
Current fee
(annual) |
Past-based
fee
(annual) |
Increase
from current
fee |
Ratio: past-
based
fee to
current fee |
Percent of
annual revenue
current fee ** |
Percent of
annual revenue
past based
fee *** |
| Manufacturers |
$2,293 |
$2,668 |
$375 |
1.16 |
0.000%-0.017% |
0.000%-0.019% |
| Distributors |
1,147 |
3,361 |
2,214 |
2.93 |
0.002%-0.042% |
0.005%-0.123% |
| Importers/exporter |
1,147 |
1,258 |
111 |
1.10 |
* |
* |
| Pharmacies |
184 |
243 |
59 |
1.32 |
0.000%-0.004% |
0.000%-0.005% |
| Practitioners |
184 |
243 |
59 |
1.32 |
0.119%-0.237% |
0.125%-0.257% |
Source: 2007 Economic Census; Bureau of Labor Statistics.
* No NAICS code for Importer/Exporter of controlled substances and/or List I chemicals.
** Current Fee divided by average revenue/income in 2007, first full year of the current fee.
*** Past-Based Fee divided by average revenue in 2007 for manufacturers, distributors and pharmacies. Past-Based Fee divided by projected average income
in 2012 for practitioners. Only 2002 and 2007 data are available for manufacturers, distributors, and pharmacies, while practitioner income projection
is based on five years of income data, 2004-2009.
While Option 1 is based on accurate historical data, it does not
allow for future needs, demands and shifting responsibilities of the
DCP, such as Agency priorities, new legislation, control of substances,
new investigative requirements, and other program needs.
Conclusion
DEA does not propose the past-based option for two key reasons.
First, the fee increase is disproportionately burdensome to a small
number of registrants. Distributors' fees would increase by over three
fold, while the fees for the remaining registrant groups would increase
from 10 percent to 32 percent. DEA deemed this option unreasonable.
Second, the past-based option is backward looking and implicitly
assumes that the future will be similar to the past. DEA cannot assume
that future workload will reflect past DEA work hour data. For example,
DEA plans to conduct more scheduled investigations in accordance with
the new scheduled investigation work plan. As a result, DEA has
concluded that past data is not the best basis for the calculation of
proposed fees.
Future-Based Option
Option 2 is called the Future-Based Option, and is based on
projected work hours for each registrant class using scheduled
investigation work plan goals and anticipated/planned resources. In
considering Option 2, DEA based its calculations on projected work hour
data by registrant group for FY 2012-2014. The future-based option is
based on DEA's projection of work plan goals and the resources required
for these years--specifically, examining the direct cost of anticipated
scheduled investigations.\73\ Based on the data used to develop the
projections, the future-based option divides registrants into six
classes and examines the projected work hour data within these
categories. In contrast to Option 1 above, which is calculated using
actual data, Option 2 is calculated using projected data relative to
work plan goals and resources. This type of calculation results in a
more finely tuned analysis of anticipated work hours. DEA calculated
the projected annual fees under Option 2 and compared these fees to the
current fees. Table 5 presents these results:
---------------------------------------------------------------------------
\73\ Many criminal investigations are attributable to the type
of registrant(s) being investigated. However, because DEA cannot
anticipate the volume of criminal cases initiated, either
historically or in future years, these costs were not attributed
directly to the registrant types affected. Rather, criminal
investigative costs are spread across all registrants equally in
both Option 1 and Option 2.
---------------------------------------------------------------------------
Table 5--Annual Registrant Fees Under Future-Based Option
| |
Current fee
(annual) |
Future-
based
fee
(annual) |
Amount of
increase
from current
fee |
Ratio:
future-
based
fee to
current fee |
Percent of
Annual revenue
current fee ** |
Percent of
Annual revenue
future-based
fee *** |
Manufacturers 1: controlled substance
manufacturers. |
$2.293 |
$17,595 |
$15,302 |
$7.67 |
0.000%-0.017% |
0.001%-0.128% |
| Manufacturers 2: List I chemical manufacturers |
2,293 |
8,124 |
5,831 |
3.54 |
0.000%-.017% |
0.001%-0.059% |
Distributors 1: controlled substance distributors
and List I chemical distributors. |
1,147 |
6,546 |
5,399 |
5.71 |
0.002-.042% |
0.009%-0.239% |
Distributors 2: exporters and importers of
controlled substances. |
1,147 |
4,968 |
3,821 |
4.33 |
* |
* |
Distributors 3: List I chemical exporters and
importers. |
1,147 |
4,021 |
2,874 |
3.51 |
* |
* |
| Pharmacies |
184 |
232 |
48 |
1.26 |
0.000%-0.004% |
0.000%-0.005% |
| Practitioners |
184 |
232 |
48 |
1.26 |
0.119%-0.237% |
0.119%-0.245% |
Source: 2007 Economic Census; Bureau of Labor Statistics.
* No NAICS code for Importer/Exporter of controlled substances and/or List I chemicals.
** Current Fee divided by average revenue/income in 2007, first full year of the current fee.
*** Future-Based Fee divided by average revenue in 2007 for manufacturers, distributors and pharmacies. Future-Based Fee divided by projected average
income in 2012 for practitioners. Only 2002 and 2007 data is available for manufacturers, distributors, and pharmacies, while practitioner income
projection is based on five years of income data, 2004-2009.
In the future-based option, as shown in the table above, the fee
increase ranges from a factor of 1.26 for practitioners to 7.67 for
manufacturers of controlled substances.
[[Page 39331]]
The proposed fees as a percentage of revenue is very low as
indicated in Table 5: 0.001 to 0.128 percent for controlled substances
manufacturers, 0.001 to 0.059 percent for manufacturers of List I
chemical manufacturers, 0.009 to 0.239 percent for distributors, 0.000
to 0.005 percent for pharmacies, and 0.119 to 0.245 percent for
practitioners. The impact of the incremental increase in the fee from
current fees as a percentage of revenue is even lower. As expected,
registrant groups with a larger fee increase under this option would
experience a larger increase as a percentage of revenue.
Under this option, the increases in fees vary greatly across
registrant groups. For example, controlled substances manufacturers
incur the largest proportional increase by a factor of 7.67 or $15,302
annually, while practitioner fees increase by a factor of 1.26 or $48
annually.
Option 2 is calculated using projected data relative to work plan
goals and resources. This results in a more finely tuned analysis of
anticipated work hours. The disadvantage of Option 2 is that, because
the calculation is based on projected work hour data, it may not be
able to adapt to the shifting priorities and demands of DCP operations.
Additionally, a change in work plan can cause actual cost to be much
different for some registrant groups, causing a contradiction between
the rationales used to calculate the fees and actual operations.
Conclusion
In reviewing Option 2, DEA concluded that for most registrant
categories, the large proportional increase in fees would not pass the
"reasonable fee" standard required by statute and could represent a
significant burden on some registrants. Additionally, DEA believes that
the vast disparity in the increase, where fees for manufacturers
increase by more than seven fold, while fees for registrants increase
by 26 percent, is unreasonable. Although there is concern regarding a
potential difference between the scheduled investigation work plan and
actual operations, DEA recognizes that no plan is perfect and
operations may be adjusted as the environment changes. This potential
exists for all four options. Therefore, the potential change in work
plan did not weigh into the DEA's decision to not select Option 2.
DEA's decision to not select Option 2 is based on the unreasonable
increase in fees for some registrants and the severe disparity in
increase among the registrant groups.
Flat Fee Option
Option 3 is called the Flat Fee Option. The flat fee option would
provide equal fees across all registrant groups regardless of the
proportion of DCP costs and resources the registrant group may require
(e.g., investigation resources). The fee calculation is
straightforward: the total amount needed to be collected over the three
year period is divided by the total number of registration fee
transactions over the three year period, adjusting for registrants on
the three year registration cycle (so that the fees for a three year
period are three times the annual fee).
DEA calculated the annual registrant fee for key registrant groups
under Option 3 and compared this fee to the current fee:
Table 6--Annual Registrant Fees Under Flat-Fee Option
| |
Current fee
(annual) |
Flat fee
(annual) |
Amount of
increase
from current
fee |
Ratio: flat
fee to
current fee |
Percent of
annual revenue
current fee* |
Percent of
annual revenue
flat fee** |
| Manufacturers |
$2,293 |
$247 |
$(2,046) |
0.11 |
0.000%-0.017% |
0.000%-0.002% |
| Distributors |
1,147 |
247 |
(900) |
0.22 |
0.002%-0.042% |
0.000%-0.009% |
| Practitioners |
184 |
247 |
63 |
1.34 |
0.119%-0.237% |
0.127%-0.261% |
Source: 2007 Economic Census; Bureau of Labor Statistics.
* Current Fee divided by average revenue/income in 2007, first full year of the current fee.
** Flat Fee divided by average revenue in 2007 for manufacturers, distributors and pharmacies. Flat Fee divided by projected average income in 2012 for
practitioners. Only 2002 and 2007 data is available for manufacturers, distributors, and pharmacies, while practitioner income projection is based on
five years of income data, 2004-2009.
In the flat-fee option, the registration fees for manufacturers and
distributors are reduced significantly, from $2,293 for manufacturers
and $1,147 for distributors to $247 for both. This reduction represents
an 89 percent and 78 percent reduction for manufacturers and
distributors respectively. The registration fee for practitioners
increases by 34 percent to $247 on an annual basis.
The proposed fees as a percentage of revenue is very low as
indicated in Table 6 above: 0.000 to 0.002 percent for manufacturers,
0.000 to 0.009 percent for distributors, and 0.127 to 0.261 percent for
practitioners. The impact of the incremental increase in the fee from
current fees as a percentage of revenue is even lower. Registrant
groups with a decrease in fee under this option would experience a
decrease as a percentage of revenue.
As with the other options, the calculation considered in Option 3
results in a dramatic fee disparity among registrant groups. The fees
for manufacturers and distributors decrease, while the fees for
practitioners increase.
The flat fee option has positive and negative aspects. The fee that
DEA is required to charge registrants is based on a statutory
requirement--it is not a user fee. A user fee calculation would require
a calculation of the direct and indirect costs associated with each of
the registrant groups and set fees to recover the costs associated with
each of these groups. Since the registration fee is not a user fee, DEA
is not required to calculate fees according to its costs by registrant
groups. General historical costs of scheduled investigations support
different fees among the categories. However, setting the same fees for
all registrants, from multi-national corporations to mid-level
practitioners is unreasonable.
Conclusion
After consideration of the flat fee option, DEA did not select this
option to calculate the proposed new fees. The fee disparity among
registrant groups caused by this calculation alternative is too great.
Under this option, the calculation would result in reduced fees for
manufacturers and distributors by 89 percent and 78 percent
respectively, while practitioner fees would increase by 34 percent.
Setting the fees at the same level across all registrant groups is not
"reasonable." DEA registrants include some of the largest
corporations
[[Page 39332]]
in the world although the vast majority of registrants are
practitioners, such as physicians and nurses. To satisfy the
"reasonable" standard, registration fees should be different among
the categories to account for cost and economic differences among the
registrant categories. Option 3 did not satisfy this requirement.
Weighted-Ratio Option (Selected Methodology)
Option 4 is called the Weighted-Ratio Option. In this option, fees
are assigned to different registrant categories based on DEA's general
historical cost data. This option distinguishes among the categories to
establish a "reasonable" fee for each category. The different fees
are expressed in ratios: 1 for researchers, canine handlers, analytical
labs, and narcotics treatment programs; 3 for registrants on three year
registration cycles, pharmacies, hospitals/clinics, practitioners,
teaching institutions, and mid-level practitioners; 6.25 for
distributors and importers/exporters; and 12.5 for manufacturers. The
adopted ratios are applied for administrative convenience since
historically costs vary and a fee must be set in advance. To determine
the fee, a weighted ratio is assigned based on registrant group, and
the amount needed to be collected over the FY 2012-FY 2014 period is
divided by the weighted number of estimated registrations to determine
the fees.
Table 7--Annual Registrant Fees Under Weighted-Ratio Option
[Registrants on three year registration cycle]
| Registrant class/business |
Current three
year fee* |
Proposed
three year fee* |
Difference per
year |
| Pharmacy |
$551 |
$732 |
$60 |
| Hospital/Clinic |
551 |
732 |
60 |
| Practitioner |
551 |
732 |
60 |
| Teaching Institution |
551 |
732 |
60 |
| Mid-Level Practitioner |
551 |
732 |
60 |
* Pharmacies, hospitals/clinics, practitioners, teaching institutions, and mid-level practitioners currently pay
a fee for a three-year period. This current three-year fee is $551. The proposed new fee for the three year
registration period would be $732. The three year difference is $181 or an annual difference of $60.
[Registrants on annual registration cycle]
| Registrant class/business |
Current annual
fee |
Proposed
annual fee |
Difference |
| Researcher/Canine Handler |
$184 |
$244 |
$60 |
| Analytical Lab |
184 |
244 |
60 |
| Maintenance |
184 |
244 |
60 |
| Detoxification |
184 |
244 |
60 |
| Maintenance and Detoxification |
184 |
244 |
60 |
| Compounder/Maintenance |
184 |
244 |
60 |
| Compounder/Detoxification |
184 |
244 |
60 |
| Compounder/Maintenance/Detoxification |
184 |
244 |
60 |
| Distributor (chemical and controlled substances) |
1,147 |
1,526 |
379 |
| Reverse distributor |
1,147 |
1,526 |
379 |
| Importer (chemical and controlled substances) |
1,147 |
1,526 |
379 |
| Exporter (chemical and controlled substances) |
1,147 |
1,526 |
379 |
| Manufacturer (chemical and controlled substances) |
2,293 |
3,052 |
759 |
In the weighted-ratio option, the registration fees for all
registrant groups increase by 33 percent from current fees, although
the absolute dollar amount may differ. The proposed new registration
fees range from $244 annually (or annual equivalent) to $3,052.
Registration fees are collected by location and by registered business
activity. Most small registrants are expected to pay a single
registration fee of $244 ($60 annual increase), $1,526 ($379 annual
increase) or $3,052 ($759 annual increase). Registration fees for all
registrant groups increase by 33 percent and as a result, there is no
disparity in the fee increase among registrant groups.
The weighted-ratio methodology, much like the flat fee, is
straightforward and easy to understand, but unlike the flat fee, this
method applies historic weighted ratios to differentiate fees among
registrant groups. Additionally, the fees calculated using this
methodology are similar to fees calculated in the past-based option,
which allocates historical pre-registration and scheduled
investigations costs to registrant groups. Finally, this method does
not create a disproportionate fee increase in any registrant group.
Conclusion
DEA selected Option 4 to calculate the proposed new fee structure.
This approach has been used since Congress established registrant fees
and continues to be a reasonable reflection of differing costs. The
registration fees under the weighted-ratio option result in
differentiated fees among registrant groups, where registrants with
larger revenues and costs pay higher fees than registrants with lower
revenues and costs. Furthermore, the weighted-ratio does not create a
disparity in the relative increase in fees from the current to the
proposed fees. The weighted ratios used by DEA to calculate the
proposed fee have proven effective and reasonable over time.
Additionally, the selected calculation methodology accurately reflects
the differences in activity level, notably in inspections, scheduled
investigations and other control and monitoring, by registrant
category; for example, these costs are greatest for manufacturers. DEA
selected this option because it is the only option that resulted in
"reasonable" fees for all registrant groups.
[[Page 39333]]
Proposed New Fees
Based on thorough analysis of the identified fee calculation
options--including the anticipated economic impact on registrants--DEA
has determined that the current weighted-ratio option represents the
most reasonable approach to calculate registrant fees sufficient to
fully fund the DCP.
The proposed fee schedule would replace the current fee schedule
for controlled substance and chemical registrants in order to recover
the full costs of the DCP so that it may continue to meet the
programmatic responsibilities set forth by statute, Congress, and the
President. As discussed, without an adjustment to fees, the DCP will be
unable to continue current operations, necessitating dramatic program
reductions, and possibly weakening the closed system of distribution.
Accordingly, DEA proposes the following new fees for the FY 2012-2014
period.
Table 8--Proposed Registration and Reregistration Fees by Class/Business
[Registrants on three year registration cycle]
| Registrant class/business |
Current three
year fee* |
Proposed
three year fee* |
Difference per
year |
| Pharmacy |
$551 |
$732 |
$60 |
| Hospital/Clinic |
551 |
732 |
60 |
| Practitioner |
551 |
732 |
60 |
| Teaching Institution |
551 |
732 |
60 |
| Mid-Level Practitioner |
551 |
732 |
60 |
* Pharmacies, hospitals/clinics, practitioners, teaching institutions, and mid-level practitioners currently pay
a fee for a three-year period. This current three-year fee is $551. The proposed new fee for the three year
registration period would be $732. The three year difference is $181 or an annual difference of $60.
[Registrants on annual registration cycle]
| Registrant class/business |
Current annual
fee |
Proposed
annual fee |
Annual
difference |
| Researcher/Canine Handler |
$184 |
$244 |
$60 |
| Analytical Lab |
184 |
244 |
60 |
| Maintenance |
184 |
244 |
60 |
| Detoxification |
184 |
244 |
60 |
| Maintenance and Detoxification |
184 |
244 |
60 |
| Compounder/Maintenance |
184 |
244 |
60 |
| Compounder/Detoxification |
184 |
244 |
60 |
| Compounder/Maintenance/Detoxification |
184 |
244 |
60 |
| Distributor (chemical and controlled substances) |
1,147 |
1,526 |
379 |
| Reverse distributor |
1,147 |
1,526 |
379 |
| Importer (chemical and controlled substances) |
1,147 |
1,526 |
379 |
| Exporter (chemical and controlled substances) |
1,147 |
1,526 |
379 |
| Manufacturer (chemical and controlled substances) |
2,293 |
3,052 |
759 |
Table 9--Overview of Proposed Diversion Control Fee Account (DCFA)
| |
FY2011 |
FY2012 |
FY2013 |
FY2014 |
| Congressional Budget |
290,304,000 |
321,990,000 |
356,582,322 |
371,831,295 |
| Operational Continuity Fund (OCF) Brought Forward From Prior Year |
68,089,927 |
33,508,367 |
63,225,476 |
50,588,959 |
| Collections: Registration Fees* |
257,254,274 |
356,226,916 |
348,491,800 |
366,937,230 |
Collections:
CMEA
Treasury |
203,889
(15,000,000) |
173,040
(15,000,000) |
146,853
(15,000,000) |
124,635
(15,000,000) |
| Net Collections |
242,458,163 |
341,399,956 |
333,638,653 |
352,061,865 |
| Recoveries from Deobligations |
12,957,124 |
10,000,000 |
10,000,000 |
10,000,000 |
| Other Collections |
307,153 |
307,153 |
307,153 |
307,153 |
| Subtotal Availability |
323,812,367 |
385,215,476 |
407,171,281 |
412,957,977 |
| Obligations ** |
290,304,000 |
321,990,000 |
356,582,322 |
371,831,295 |
| End of Year OCF Balance |
33,508,367 |
63,225,476 |
50,588,959 |
41,126,682 |
| Target OCF ($15M + 7% of Budget) |
37,539,300 |
39,960,763 |
41,028,191 |
41,828,482 |
Numbers are rounded.
* Note: Total FY 2012-2014 collections from registration fees is $1,071,655,946. This amount is different from
the total required collections of $1,072,357,746 described in Table 3: Needed Fee Collections FY 2012-2014.
Initially, the required collection of $1,072,357,746 resulted in a calculated base (ratio: 1) annual fee of
$244.16. The weighted ratios were applied and rounded to the whole dollar to determine the proposed fees. Due
to rounding of the fees to the whole dollar, the proposed fees generate $1,071,655,946 rather than
$1,072,357,746.
** For purposes of the proposed fee calculation, the Congressional Budget and Obligations are treated as the
same.
[[Page 39334]]
Summary of Impact of Proposed New Fee Relative to Current Fee
Affected Entities
As of December 2010 there were a total of 1,378,609 controlled
substances and chemical registrants (1,377,466 controlled substances
registrants and 1,143 chemical registrants), as shown in Table 10.
Table 10--Number of Registrants by Business Activity
| Registrant class/business |
Controlled
substances |
Chemicals |
| Pharmacy |
66,766 |
|
| Hospital/Clinic |
15,774 |
|
| Practitioner |
1,097,454 |
|
| Teaching Institution |
351 |
|
| Mid-Level Practitioner |
183,538 |
|
| Researcher/Canine Handler |
8,997 |
|
| Analytical Lab |
1,496 |
|
| Narcotic Treatment Program |
1,272 |
|
| Distributor |
795 |
584 |
| Reverse Distributor |
56 |
|
| Importer |
203 |
180 |
| Exporter |
236 |
166 |
| Manufacturer |
528 |
213 |
| Total |
1,377,466 |
1,143 |
| Total (all registrants) |
1,378,609 |
* Data as of December 2010.
Not all registrants listed in Table 10 are subject to the fees.
Publicly owned institutions, law enforcement agencies, Indian Health
Services, the Department of Veterans Affairs, Federal Bureau of
Prisons, and military personnel are exempt from fees.
The number of registrations exceeds the number of individual
registrants because some registrants are required to hold more than one
registration. 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 related to the handling of List I
chemicals. Some registrants may conduct multiple activities under a
single registration (e.g., manufacturers may distribute substances they
have manufactured 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.
Characteristics of Entities
This proposed rule affects those manufacturers, distributors,
dispensers, importers, and exporters of controlled substances and List
I chemicals that are required to obtain and pay a registration fee with
DEA pursuant to the CSA (21 U.S.C. 822 and 958(f)). As of December
2010, there were 1,378,609 controlled substances and chemical
registrants (1,377,466 controlled substances registrants and 1,143
chemical registrants), as shown above in Table 10.
Pharmacies, hospitals/clinics, practitioners, teaching
institutions, and mid-level practitioners make up 98.9 percent of all
registrants. These registrants register every three years. Other
registrants maintain an annual registration. Registration and
reregistration costs vary by registrant category as is described in
more detail in the sections below.
The proposed fees would affect a wide variety of entities. Table 11
indicates the sectors affected by the proposed rule and their average
annual revenue/income. Most DEA registrants are small entities under
Small Business Administration (SBA) standards. Almost all
practitioners, which are the largest category of registrants, would be
considered small (annual revenues of less than $6 million to $8.5
million, depending on specialty), and practitioners and mid-level
practitioners total 1,280,992 (as of December 2010).
Table 11--Industrial Sectors of DEA Registrants
| Sector |
NAICS
Code |
Average annual
revenue * |
Manufacturers:
Petro-chemical Manufacturing (organic, inorganic)
Medicinal and Botanical Manufacturing
Pharmaceutical Manufacturing
Adhesive Manufacturing
Toilet Preparation Manufacturing
Other Chemical Manufacturing |
32511
325411
325412
325520
325620
325998
|
$1,390,485,971
27,601,834
144,173,821
17,482,468
50,322,290
13,720,807
|
Distributors:
Drugs and Druggist Sundries Wholesalers
General Line Grocery Wholesalers
Confectionary Merchant Wholesalers
Chemical Wholesalers
Tobacco Wholesalers
Miscellaneous Wholesalers |
424210
424410
414450
424690
424940
424990 |
64,793,480
45,518,407
17,175,982
12,856,993
71,437,205
2,741,857 |
Pharmacies:
Supermarkets
Drug Stores
Discount Stores
Warehouse Clubs and Superstores |
445110
446110
452112
452910 |
7,247,540
4,829,487
26,535,201
76,300,280 |
Other:
Testing Labs
Packaging and Labeling Services |
541380
561910 |
1,907,414
2,696,904 |
Other Practitioners:
Professional Schools
Ambulatory Health Care Services
Hospitals |
611310
621
622 |
1,373,855
1,236,852
108,286,641 |
Source: 2007 Economic Census. http://www.census.gov/econ/census07.
[[Page 39335]]
Supermarkets, discount stores, warehouse clubs, and superstores
handle controlled substances through their distribution centers and
pharmacies. Drug products containing List I chemicals are primarily
distributed as over-the-counter 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.
Economic Impact Analysis of Proposed Fee
The proposed fee, if implemented, is expected to have two levels of
impact. Initially, the increase in the fee will impact the registrants.
Then the fee increase or portion of the fee increase is expected to be
eventually passed on to the general public. To be analytically
conservative, the analysis below assumes that the impact of the fee
increase is absorbed entirely by the registrants.
DEA assumes that the registration fees are business expenses for
all registrants. As a result, the increase in the fee will be dampened
by reduced tax liability, as a result of the increase in registration
fee expense. For example, if a practitioner pays an additional $60 per
year in registration fees and the combined federal and state income tax
is 35 percent, the net cash impact is $39, not $60. The additional $60
causes income/profit to decrease by $60, decreasing the tax liability
by $21. The net cash outlay is $39.\74\
---------------------------------------------------------------------------
\74\ This example is for illustration purposes only. Each entity
should seek competent tax advice for tax consequences of the
proposed rule.
---------------------------------------------------------------------------
DEA examined the proposed fees as a percentage of income for
physicians, dentists, and physician's assistants in the practitioner
registrant group and as a percentage of revenue for pharmacies,
manufacturers and distributors. This analysis indicates the fee
increase is expected to have the greatest affect on small businesses in
the practitioner registrant group. The majority of practitioners and
mid-level practitioners work in small businesses. Physicians, dentists,
and physician's assistants reflect a representative sub-group of the
practitioner and mid-level practitioner registrant groups. The effect
of the fee increase is diminished by any increase in registrant income.
The table below describes the average income for physicians,
dentists, and physician's assistants from 2004 to 2012. The table below
also reflects the impact of the proposed fee increase as a percentage
of average income. This analysis assumes that the fee increase is
absorbed personally by each practitioner/mid-level practitioner. The
analysis ignores the dampening effect of registration fees as a
business expense and the potential that the fee increase might be
passed on to customers.
---------------------------------------------------------------------------
\75\ Source: Bureau of Labor Statistics, http://www.bls.gov.
---------------------------------------------------------------------------
Table 12--Fee as Percentage of Income FY 2004-2012
| Year |
Average income \75\ |
Fee |
Fee as % of average income |
| Physicians |
Dentists |
Physician
assistants |
(Annual
basis) |
Physicians |
Dentists |
Physician
assistants |
| 2004 |
137,610 |
130,300 |
68,780 |
|
|
|
|
| 2005 |
138,910 |
133,680 |
71,070 |
|
|
|
|
| 2006 |
142,220 |
140,950 |
74,270 |
184 |
0.129% |
0.131% |
0.248% |
| 2007 |
155,150 |
147,010 |
77,800 |
184 |
0.119% |
0.125% |
0.237% |
| 2008 |
165,000 |
154,270 |
81,610 |
184 |
0.112% |
0.119% |
0.225% |
| 2009 |
173,860 |
156,850 |
84,830 |
184 |
0.106% |
0.117% |
0.217% |
| 2010 |
179,370 |
163,901 |
87,933 |
184 |
0.103% |
0.112% |
0.209% |
| 2011 |
187,154 |
169,632 |
91,230 |
184 |
0.098% |
0.108% |
0.202% |
| 2012 |
194,939 |
175,363 |
94,528 |
244 |
0.125% |
0.139% |
0.258% |
| Increase from 2007 to 2012 |
26% |
19% |
22% |
33% |
6% |
11% |
9% |
| Increase from 2006 to 2012 |
37% |
24% |
27% |
33% |
--7% |
3% |
4% |
* Average income data for 2004 to 2009 is provided by the Bureau of Labor Statistics. 2010 to 2012 are estimated figures based on linear regression,
where a straight-line increase is calculated from years 2004 to 2009, then using the line to estimate average income for 2010 to 2012.
[[Page 39336]]
In 2007, the current fee of $184 on an annual basis represents
0.119 percent, 0.125 percent, and 0.237 percent of annual income for
physicians, dentists, and physician's assistants respectively. In 2012,
the proposed fee of $244 (on an annual basis) would represent
approximately 0.125 percent, 0.139 percent, and 0.258 percent of annual
income for physicians, dentists, and physician's assistants
respectively. While proposed fees are 33 percent above the current fees
implemented at the end of 2006, average incomes for physicians,
dentists, and physician's assistants increased 26 percent, 19 percent,
and 22 percent respectively. This estimated increase in average income
dampens the effect of the fee increase as a percentage of average
income. The 33 percent fee increase as a percentage of average income
is 6 percent for physicians, 11 percent for dentists, and 9 percent for
physician's assistants from 2007 to 2012. The diminishing effect is
more apparent when comparing 2012 to 2006, the year for which the
current fee was calculated and implemented. Additionally, as the
average income grows in 2013 and 2014, the income adjusted fees are not
any higher than in recent history.
Exempt from the payment of registration fees are any hospital or
other institution that is operated by an agency of the United States,
of any State, or any political subdivision of an agency thereof.
Likewise, an individual who is required to obtain a registration in
order to carry out his/her duties as an official of a federal or State
agency is also exempt from registration fees.\76\ Fee exempt
registrants are not affected by the proposed fees.
---------------------------------------------------------------------------
\76\ See 21 CFR 1301.21 for complete fee exemption requirements.
---------------------------------------------------------------------------
Conclusion
DEA concludes that this proposed rule is not a significant
regulatory action because it does not result in a materially adverse
effect on the economy, a sector of the economy, productivity,
competition, jobs, the environment, public health or safety, or State,
local, or tribal governments or communities.\77\ The proposed fee, if
implemented, would initially affect all fee paying registrants. The
fees may eventually be passed on to the general public, diminishing the
impact of the proposed fee increase on individual registrants. The
impact of the proposed fee on registrants is also diminished by a
reduction in tax liabilities and an increase in average income.
Additionally, hospitals and institutions operated by federal, State, or
local governments and their employees are exempt from registration
fees.\78\ Moreover, DEA believes that this proposed rule will enhance
the public health and safety.
---------------------------------------------------------------------------
\77\ In accordance with 25 U.S.C. 1616q, employees of a tribal
health or urban Indian organization are exempt from "payment of
licensing, registration, and any other fees imposed by a Federal
agency to the same extent that officer of the commissioned corps of
the Public Health Service and other employees of the Service are
exempt from those fees." To the extent that any hospital or other
institution operated by or any individual practitioner associated
with an Indian Tribal Government must pay fees, the economic impact
is not substantial.
\78\ See 21 CFR 1301.21 for complete requirements for exemption
of registration fees.
---------------------------------------------------------------------------
Regulatory Analyses
This proposed rule is necessary to ensure the full funding of the
DCP through registrant fees as required by 21 U.S.C. 886a. It has been
five years since the last fee change. As discussed above, statutory and
operational changes to the DCP cannot be fully offset by improved
operational efficiencies and require a recalculation of registrant
fees. 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 that
will allow DEA to meet its statutory obligations. DEA recognizes that
the proposed fee changes affect small businesses, but does not believe
the relative individual impact is significant. The average annual
increase in estimated registration fee collections is less than $100
million at an estimated annual increase of $88,333,030.
Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3511)
This proposed rule will not impose additional information
collection requirements on the public.
Regulatory Flexibility Act
Under the Regulatory Flexibility Act of 1980 (5 U.S.C. 601-612)
(RFA), federal agencies must evaluate the impact of rules on small
entities and consider less burdensome alternatives. DEA has evaluated
the impact of this proposed rule on small entities as summarized above
and concluded that although the rule will affect a substantial number
of small entities, it will not impose a significant economic impact on
any regulated entities.
In accordance with the Regulatory Flexibility Act (5 U.S.C.
605(b)), the Deputy Assistant Administrator hereby certifies that this
proposed rulemaking has been drafted consistent with the Act and that a
regulatory analysis on the effects or impact of this proposed
rulemaking on small entities has been done and summarized above.\79\
While DEA recognizes that this proposed increase in fees will have a
financial effect on registrants, the change in fees will not have a
significant economic impact. A change in fees is necessary to fully
comply with 21 U.S.C. 886a and related statutes governing the Diversion
Control Program (DCP) and the Diversion Control Fee Account by which
DEA is legally mandated to collect fees to cover the full costs of the
DCP as defined by all activities relating to the registration and
control of the manufacture, distribution, import, export, and
dispensing of controlled substances and listed chemicals.
---------------------------------------------------------------------------
\79\ See "Economic Impact Analysis of Proposed Rule on
Controlled Substances and List I Chemical Registration and
Reregistration Fees, DEA-346" in this rulemaking docket found at
http://www.regulations.gov.
---------------------------------------------------------------------------
This rule is not a discretionary action but implements statutory
direction to charge reasonable fees to recover the full costs of
activities constituting the DCP
[[Page 39337]]
through registrant fees (21 U.S.C. 821, 886a, and 958(f)). As discussed
above and in the Economic Impact Analysis of the Proposed Rule found in
the rulemaking docket at http://www.regulations.gov, DEA analyzed four
fee calculation methodologies--Past-Based, Future-Based, Flat Fee, and
Weighted-Ratio. DEA selected the weighted-ratio methodology to
calculate the proposed new fee structure. This approach has been used
since Congress established registrant fees and continues to be a
reasonable reflection of differing costs. The registration fees under
the weighted-ratio option result in differentiated fees among
registrant groups, where registrants with larger revenues pay higher
fees than registrants with lower revenues. Furthermore, the weighted-
ratio does not create a disparity in the relative increase in fees from
the current to the proposed fees. The weighted-ratios used by DEA to
calculate the proposed fee have proven effective and reasonable over
time. Additionally, the selected calculation methodology accurately
reflects the differences in activity level, notably in pre-registration
and scheduled investigations, by registrant category: for example,
these costs are greatest for manufacturers. DEA selected this option
because it is the only option that resulted in reasonable fees for all
registrant groups.
Under the weighted-ratio methodology, the individual effect on
small business registrants is minimal. Practitioners and mid-level
practitioners represent 92.9 percent of all registrants and nearly all
practitioners and mid-level practitioners are employed by small
businesses pursuant to SBA standards. Practitioners and mid-level
practitioners would pay a three-year registration fee of $732 or the
equivalent of $244 per year.
For consideration of the impact of the proposed fee increase on
small businesses, DEA analyzed the proposed registration fee as a
percentage of annual income for a representative practitioner group:
physicians, dentists, and physician's assistants. While there are many
specialists listed in the Bureau of Labor Statistics income data,
incomes for physicians, dentists, and physician's assistants are
representative of the practitioner and mid-level practitioner
registrant groups. For practitioners and mid-level practitioners, the
proposed new fee, on an annual basis, would be $244; the annual
increase would be $60 from the current fee. From the calculation
performed in the preceding section, Economic Impact Analysis of
Proposed Rule, the impacts of the proposed fees, $60 per year increase
from current fees, were found to be 0.007 percent, 0.014 percent, and
0.022 percent of annual income for physicians, dentists, and
physician's assistants respectively, when normalized for income
increases. In consideration of the calculated impact and potentially
further mitigating factors discussed in the Economic Impact Analysis of
Proposed Rule, DEA concludes that the proposed rule will not have a
significant economic impact on a substantial number of small entities.
Executive Orders 13563 and 12866
This proposed rule to increase registrant fees has been developed
in accordance with the principles of Executive Orders 13563 and 12866.
Public comment is encouraged through the Internet with easy Internet
access to supporting information found at http://www.regulations.gov.
The difference between the current fees and the proposed new fee--the
fee increase--is less than $100 million annually. Specifically, the
difference in the fees projected to be collected under the current fee
rates and in the fees projected to be collected under the proposed new
fee rates for the three years of FY 2012-FY 2014 is $264,999,092. Thus,
the annual increase is $88,333,030. This proposed rule has been
reviewed by the Office of Management and Budget.
The primary cost of the proposed rule is the incremental increase
in the combined registration fees paid by registrants. Benefits of the
proposed rule are an extension of the benefits of the DCP. The DCP is a
strategic component of United States law and policy aimed at
preventing, detecting, and eliminating the diversion of controlled
substances and listed chemicals into the illicit market while ensuring
a sufficient supply of controlled substances and listed chemicals for
legitimate medical, scientific, research and industrial purposes. The
absence of or significant reduction in this program would result in
enormous costs for the citizens and residents of the United States due
to the diversion of controlled substances and listed chemicals into the
illicit market as outlined in the Economic Impact Assessment found in
the rulemaking docket.
Executive Order 12988
This proposed regulation meets the applicable standards set forth
in Sections 3(a) and 3(b)(2) of Executive Order 12988 Civil Justice
Reform to eliminate ambiguity, minimize litigation, establish clear
legal standards and reduce burden.
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 does not contain a federal mandate and will not result in
the expenditure by State, local, and tribal governments, in the
aggregate, or by the private sector, of $126,400,000 or more (adjusted
for inflation) in any one year, and will not significantly or uniquely
affect small governments. DEA notes that many governmental entities
operate DEA-registered facilities and that they are currently fee
exempt. Moreover, the effect of the proposed increase on individual
entities and practitioners is minimal. The majority of the affected
entities will pay a fee of $732 for a three year registration period
($244 per year or an increase of $60 per year). This rule is
promulgated in compliance with 21 U.S.C. 886a that the full costs of
operating the DCP be collected through registrant fees.
Executive Order 13175
This proposed rule is required by statute, will not have tribal
implications and will not impose substantial direct compliance costs on
Indian tribal governments.
List of Subjects
21 CFR Part 1301
Administrative practice and procedure, Drug traffic control,
Security measures.
21 CFR Part 1309
Administrative practice and procedure, Drug traffic control,
Exports, Imports, Security measures.
For the reasons set out above, 21 CFR Parts 1301 and 1309 are
proposed to be amended as follows:
PART 1301--REGISTRATION OF MANUFACTURERS, DISTRIBUTORS AND
DISPENSERS OF CONTROLLED SUBSTANCES
1. The authority citation for Part 1301 continues to read as
follows:
Authority: 21 U.S.C. 821, 822, 823, 824, 831, 871(b), 875, 877,
886a, 951, 952, 953, 956, 957, 958.
2. Amend Sec. 1301.13 by revising paragraph (e)(1) to read as
follows:
[[Page 39338]]
Sec. 1301.13 Application for registration; time for application;
expiration date; registration for independent activities; application
forms, fees, contents and signature; coincident activities.
* * * * *
(e) * * *
(1)
| Business activity |
Controlled
substances |
DEA Application forms |
Application fee
($) |
Registration
period (years) |
Coincident activities
allowed |
| (i) Manufacturing |
Schedules I-V |
New--225,
Renewal--225a. |
$3,052 |
1 |
Schedules I-V: May distribute
that substance
or class for which registration
was issued;
may not distribute or
dispose of 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. |
| (ii) Distributing |
Schedules I-V |
New--225,
Renewal--225a. |
1,526 |
1 |
|
| (iii) Reverse distributing |
Schedules I-V |
New--225,
Renewal--225a. |
1,526 |
1 |
|
| (iv) Dispensing or instructing
(includes Practitioner,
Hospital/Clinic,
Retail Pharmacy, Central
fill pharmacy,
Teaching Institution). |
Schedules II-V |
New--224,
Renewal--224a. |
732 |
3 |
May conduct research
and instructional activities
with those substances
for which registration
was granted,
except that a mid-level
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 a proportion
not exceeding
20% of the complete
solution, compound or
mixture. A retail pharmacy
may perform
central fill pharmacy
activities. |
| (v) Research |
Schedule I |
New--225,
Renewal--225a. |
244 |
1 |
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. |
| (vi) Research |
Schedules II-V |
New--225,
Renewal--225a. |
244 |
1 |
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. |
| (vii) Narcotic Treatment Program (including compounder). |
Narcotic Drugs in Schedules II-V. |
New--363,
Renewal--363a. |
244 |
1 |
|
| (viii) Importing |
Schedules I-V |
New--225,
Renewal--225a. |
1,526 |
1 |
May distribute that substance
or class for
which registration was
issued; may not distribute
any substance
or class for which not
registered. |
| (ix) Exporting |
Schedules I-V |
New--225,
Renewal--225a. |
1,526 |
1 |
|
| (x) Chemical Analysis |
Schedules I-V |
New--225,
Renewal--225a. |
244 |
1 |
May manufacture and import
controlled substances
for analytical
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. |
* * * * *
PART 1309--REGISTRATION OF MANUFACTURERS, DISTRIBUTORS, IMPORTERS,
AND EXPORTERS OF LIST I CHEMICALS
3. The authority citation for Part 1309 is corrected to read as
follows:
Authority: 21 U.S.C. 802, 821, 822, 823, 824, 830, 871(b), 875,
877, 886a, 952, 953, 957, 958.
4. Revise Sec. 1309.11 to read as follows:
Sec. 1309.11 Fee amounts.
(a) For each application for registration or reregistration to
manufacture the applicant shall pay an annual fee of $3,052.
(b) For each application for registration or reregistration to
distribute, import, or export a List I chemical, the applicant shall
pay an annual fee of $1,526.
5. In Sec. 1309.21, paragraph (c) is revised to read as follows:
Sec. 1309.21 Persons required to register.
* * * * *
(c) * * *
Summary of Registration Requirements and Limitations
| Business activity |
Chemicals |
DEA Forms |
Application fee |
Registration
period
(years) |
Coincident activities
allowed |
| Manufacturing |
List I, Drug products containing
ephedrine,
pseudoephedrine,
phenylpropanolamine. |
New--510
Renewal--510a |
$3,052
3,052 |
1 |
May distribute that chemical
for which registration
was issued; may
not distribute any
chemical for which not
registered. |
| Distributing |
List I, Scheduled listed
chemical products. |
New--510
Renewal--510a |
1,526
1,526 |
1 |
|
| Importing |
List I, Drug Products containing
ephedrine,
pseudoephedrine,
phenylpropanolamine. |
New--510
Renewal--510a |
1,526
1,526 |
1 |
May distribute that chemical
for which registration
was issued; may
not distribute any
chemical for which not
registered. |
| Exporting |
List I, Scheduled listed
chemical products. |
New--510
Renewal--510a |
1,526
1,526 |
1 |
|
[[Page 39341]]
Dated: June 30, 2011.
Joseph T. Rannazzisi,
Deputy Assistant Administrator.
[FR Doc. 2011-16847 Filed 7-5-11; 8:45 am]
BILLING CODE 4410-09-P
NOTICE: This is an unofficial version. An official version of this publication may be obtained
directly from the Government Printing Office (GPO). |
