HaCKeRz KrOnIcKLeZ 3/HaCKeRz_KrOnIcKLeZ.iso/drugs/60.fr.32099

Text File | 1996-05-06 | 25KB | 467 lines

<ARTICLE>
Date="06/20/95"
Citation="60 FR 32099"
Group="legal"
Type="RULE"
Department="DEPARTMENT OF JUSTICE"
Agency="DRUG ENFORCEMENT ADMINISTRATION (DEA), JUSTICE"
Subject="Registration of Manufacturers and Importers of Controlled Substances"
<HEADER>
DEPARTMENT OF JUSTICE

Drug Enforcement Administration

21 CFR Part 1301

[DEA No. 113F]

Registration of Manufacturers and Importers of Controlled Substances

AGENCY: Drug Enforcement Administration (DEA), Justice.

ACTION: Final rule.
</HEADER>
DEPARTMENT OF JUSTICE

Drug Enforcement Administration

21 CFR Part 1301

[DEA No. 113F]

Registration of Manufacturers and Importers of Controlled Substances

AGENCY: Drug Enforcement Administration (DEA), Justice.

ACTION: Final rule.
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SUMMARY: This final is issued by the Drug Enforcement Administration
to eliminate the requirement of an administrative hearing on
objections, raised by third-party manufacturers, to the registration
of certain bulk manufacturers of controlled substances. This
action amends the current regulation and removes the third-party
manufacturer hearing provision when requested by another applicant
or registrant. Other applicants and registrants may still submit
written comments and objections for consideration by DEA and
may participate in hearings on bulk manufacturer applications
requested by the applicant. This final rule amends the regulation
concerning withdrawal of applications to be consistent with
this action.

EFFECTIVE DATE: July 20, 1995.

FOR FURTHER INFORMATION CONTACT:

Julie C. Gallagher, Associate Chief Counsel, Diversion/Regulatory
Section, Office of Chief Counsel, Drug Enforcement Administration,
Washington, DC 20537, telephone [phone].

SUPPLEMENTARY INFORMATION: On October 7, 1993, DEA published
a notice of proposed rulemaking (NPRM) in the Federal Register
(58 FR 52246) to amend its regulations to eliminate the third-
party manufacturer hearing requirement for objections to the
registration of certain bulk manufacturers and importers of
controlled substances. The DEA proposed to amend two sections
of its regulations, specifically 21 CFR 1301.43(a) and 1311.42(a),
wherein DEA is required to hold an administrative hearing on
an application for registration to manufacture or import a bulk
Schedule I or II controlled substance when requested to do so
by any current bulk manufacturer of the substance(s) or by any
other applicant for a similar registration. The NPRM proposed
to modify section 1301.43(a) and provide for a hearing only
when DEA ``determines that a hearing is necessary to receive
factual evidence and/or expert testimony with respect to issues
raised by the application or objections thereto.''

   On June 14, 1994, DEA published a Supplemental Notice of
Proposed Rulemaking (SNPRM) in the Federal Register (59 FR 3055)
proposing to eliminate altogether the third-party manufacturer
hearing regulation, section 1301.43(a). DEA would continue to
hold hearings when requested by the applicant pursuant to an
order to show cause, section 1301.44. DEA would continue to
solicit written comments or objections from current registrants
and applicants concerning an application for registration. Current
registrants and applicants would also be granted an opportunity
to participate in any hearings conducted pursuant to section
1301.44.
   The SNPRM provided notice that DEA would not change the hearing
provision relating to registration of importers, section 1311.42(a),
because of the statutory requirements under 21 U.S.C. 958(i).
Section 958(i) states that DEA shall provide current bulk manufacturers
of controlled substances an opportunity for a hearing prior
to issuing an importer registration to another bulk manufacturer.
With an existing statute in effect, DEA is not empowered to
adopt regulations that contravene the express language of that
statute.
   Five comments were received in response to the NPRM. Three
comments were received concerning the SNPRM, although one commentor
had previously commented on the NPRM. To the extent that comments
received in response to the NPRM are relevant, they have been
considered. Of the seven independent commentors, two supported
removing the mandatory third party hearing provision while five
commentors opposed the proposed rulemaking.
   One commentor that supported the proposed rule provided an
example of its own experience as an applicant for a bulk manufacturer
registration to demonstrate how ``currently registered manufacturers
use the regulatory hearing requirement to deter others from
applying or to delay entry of their competitors in the marketplace.''
The five opposing commentors advanced numerous arguments and
proposed alternatives to the proposed rule, their primary concerns
are summarized below.
   Three commentors believed that elimination of the third-party
manufacturer hearing regulation would be contrary to Congress'
intent that DEA should limit the number of bulk manufacturers
in the United States where supply and competition are adequate.
One of these commentors noted that the United States had been
a party to several international agreements recognizing the
need to limit licensing of drug manufacturers. This commentor
then argued that the Narcotic Manufacturing Act (NMA) of 1960,
which specified limitations on the licensing of bulk manufacturers
of controlled substances, provided historical precedent for
similar limitations within the Controlled Substances Act (CSA).
Similarly, two commentors argued that the proposed rule would
run contrary to the intent of Congress to limit the number of
bulk manufacturers of controlled substances to the most qualified
applicants, and thus, limit the possible diversion of these
controlled substances. One commentor interpreted the mandate
of ``limiting'' registration under 21 U.S.C. 823(a) of the CSA
as prohibiting DEA from approving additional registrations if
there already exists uninterrupted supply and adequate competition.
   The final rule is not contrary to either the direct or implied
intent of Congress in passing the CSA. The final rule does not
alter the DEA's responsibility to apply the factors set forth
in 21 U.S.C. 823(a) to applications for bulk manufacturer registrations.
While the commentors provide persuasive arguments regarding
possible Congressional intent in the enactment of 21 U.S.C.
823(a), such arguments are irrelevant to the issue of whether
the

---- page 32100 ----

regulations should provide for a third-party manufacturer hearing.
The express language of the statute does not provide a hearing
right to bulk manufacturer registrants or applicants regarding
the registration of a bulk manufacturer, nor can such a right
be inferred. See Comprehensive Drug Abuse Prevention and Control
Act of 1970, Committee on Interstate and Foreign Commerce, H.R.
Rep. No. 91-1444 (Part 1), 91st Cong., 2d Sess. (1970) (CSA).
Moreover, even assuming that Congress intended to limit the
number of bulk manufacturer registrants, the final rule does
not purport to increase the number of such registrants. It is
also worth noting that the regulations, 21 CFR 1301.43(b), provide
that DEA is not required to limit the number of manufacturers
even if the current registrants can provide an adequate supply,
as long as DEA can maintain effective controls against diversion.
   Another commentor suggested that Congress intended that DEA
``implement such procedural safeguards when it enacted the CSA.''
This comment ignores the fact that neither 21 U.S.C. 823(a)
nor 21 U.S.C. 824 provides for a third-party manufacturer hearing.
Moreover, as one commentor noted, the procedural requirements
of the APA are not affected by the removal of the third-party
manufacturer hearing provision. Significantly, at the time of
promulgation of the CSA, Congress afforded a third-party manufacturer
hearing opportunity to current bulk manufacturers on the importer
applications of other bulk manufacturers for Schedule I and
II controlled substances. See 21 U.S.C. 958(i). Thus, a plain
reading of the statute demonstrates that Congress did not intend
to require a third-party manufacturer hearing for applications
to bulk manufacture Schedule I and II controlled substances.
   It is also not inconsistent to allow hearings on import registration
applications but deny them for bulk manufacturers, as one commentor
suggested. First, registrations to import Schedule I and II
controlled substances are arguably granted under more limited
conditions than manufacturer registrations. See 21 U.S.C. 952.
Also, it is worth noting that the statute provides for the opportunity
for a hearing where a current bulk manufacturer has applied
for an importer registration. Thus, it can be inferred that
Congress was concerned with the potential impact on domestic
competition by existing bulk manufacturers who wanted to import
controlled substances as well.
   One commentor suggested that more companies will attempt
to obtain a DEA registration because they could avoid the scrutiny
of other bulk manufacturers and that DEA would have to increase
personnel to conduct additional investigations and meet the
greater demand for registrations. This commentor argued that
it would be highly inadvisable to ``ease the entry'' of additional
bulk manufacturers and promote creation of a class of ``opportunistic''
bulk manufacturers who would seek to produce products which
are temporarily profitable, and felt no obligation to supply
for the requirements of the U.S. market. These comments presume
that removal of the third-party manufacturer hearing process
would ``ease the entry'' of additional bulk manufacturers or
that the applicant would be subject to less ``scrutiny.'' Such
is not the case. DEA will continue to apply the same factors
required by 21 U.S.C. 823(a) to evaluate applications for registrations
of bulk manufacturers. Where DEA discovers information which
warrants proceedings to deny a registration, either through
its own investigation or as provided through comments of other
manufacturers, it will issue an order to show cause seeking
to deny the application for registration.
   Two commentors found that DEA's conclusion regarding abuse
of the regulatory hearing requirement is not supported by the
record which reveals that in the last 20 years, DEA has held
as few as five evidentiary hearings on importer or bulk manufacturer
applications at the request of a current registrant. However,
one of these commentors acknowledged that it believed that objections
raised in a prior hearing involving one of its subsidiaries
``lacked substantive merit.'' More importantly, one commentor,
who supported removing the third-party manufacturer hearing
regulation, provided two examples in which it believed other
manufacturers had used the hearing process for anti-competitive
purposes and to delay entry into the marketplace. Notwithstanding
the limited number of evidentiary hearings during the past twenty
years, the final rule seeks to discourage potential future abuse
of the hearing process.
   Four commentors argued that the submission of written comments
would be insufficient because either the comment period would
be too short or because of the inability to produce witnesses
and conduct cross-examination. One of these commentors suggested
that this proposal would make it ``impossible for any currently
registered bulk manufacturer to provide meaningful information
to the Administrator'' on these applications. Two of these commentors
stated that 30 or even 60 days would be insufficient to prepare
meaningful comments on an application.
   First, regarding all subsequent manufacturer applications,
DEA will not consider a comment period less than 60 days. Second,
DEA maintains that 60 days is sufficient time for interested
parties to submit adequate comments and documentation to notify
DEA concerning potential issues that warrant DEA issuing an
order to show cause. There is no evidence that DEA would fail
to consider such evidence prior to making a final determination.
Moreover, these individuals could still participate in any hearing,
requested after the issuance of an order to show cause, thereby
providing an additional opportunity to present evidence.
   DEA does not suggest that written comments are a replacement
for direct testimony or cross-examination. However, DEA does
argue that applicants should not be subjected to the rigors
and delay accompanying an administrative hearing absent some
prior good faith belief and evidence that such procedure is
warranted. Further, this final rule will foreclose current registrants
and applicants from using the third-party manufacturer hearing
process as a forum for discovery of non-relevant information
from its competitors, such as marketing and pricing data.
   Two commentors suggested that DEA consider adopting procedures
to prevent abuse of the third-party manufacturer hearing provision
such as utilizing motions for summary judgement or requiring
written submissions prior to the hearing. The final rule, in
effect, resolves both issues because (1) DEA will only issue
an order to show cause where it has a good faith basis that
the applicant's registration should not be granted and (2) other
bulk manufacturers will be required to submit substantive written
comments within a reasonable time, after an application has
been submitted.
   Three commentors stated that the current hearing process
enables third-parties to present relevant and useful information
to DEA that might not otherwise be available because of limited
agency resources or otherwise. DEA acknowledges the critical
role that third-parties provide in identifying issues related
to the registration of bulk manufacturers. DEA does not intend
to discourage such participation. However, the final rule provides
DEA with the authority necessary to protect the interests of
applicants and current registrants alike.

---- page 32101 ----

   Finally, four commentors requested a hearing on the issue
of the third-party manufacturer hearing provision pursuant to
21 U.S.C. 875. Unlike other rulemaking conducted pursuant to
the CSA, the present rulemaking presents no requirement that
the rule be made on the record after opportunity for a hearing.
For example, 21 U.S.C. 811(a) requires the opportunity for a
hearing whenever there is a proposed rescheduling of controlled
substances. In addition, 21 U.S.C. 875 identifies general powers
available to DEA when exercising its authority under the CSA.
Thus, 21 U.S.C. 875 complements existing hearing provisions
under the CSA rather than conferring independent hearing authority.
In any event, DEA believes that the notice and comment conducted
pursuant to this rulemaking enabled interested parties to provide
meaningful comment on the final rule.
   The final rule removes the mandatory third-party manufacturer
hearing requirement while retaining the hearing provision pursuant
to an order to show cause. The proposed change as provided herein
does not violate statutory intent but instead comports with
sound principles of substantive and procedural due process.
Eliminating the hearing requirement except when requested by
the applicant after issuance of an order to show cause, supports
the statutory and regulatory mandate that an applicant for registration
as a bulk manufacturer shall have the burden of proof at ``any
hearing'' that the requirements of registration are met. See
21 CFR 1301.55. The Administrative Procedures Act (APA) which
controls these matters further provides that ``[e]xcept as otherwise
provided by statute, the proponent of a rule or order has the
burden of proof.'' See 5 U.S.C. 556(d).
   The final rule eliminates the problem of multiple hearings
which not only promotes judicial economy but also avoids the
anomalous result of DEA conducting administrative hearings which
are not dispositive of the ultimate issue of whether an applicant
should be registered. For example, because DEA must issue an
order to show cause whenever it takes action to deny an application,
21 U.S.C. 824(c), under the current regulation a second hearing
would likely be required when DEA decided to deny an application
after a hearing held pursuant to a ``third-party'' request.
Further, this second hearing would involve many of the same
issues raised in the prior proceeding. The primary objective
of the final rule is to limit abuse of the regulatory hearing
process.
   For the above-stated reasons and in the absence of express
statutory language governing the right to an evidentiary hearing
by bulk manufacturers concerning the application for registration
of bulk manufacturers of controlled substances, as well as the
absence of language in the legislative history of the CSA that
would imply Congressional intent in this regard, 21 CFR 1301.43
shall be amended.
   The Deputy Assistant Administrator hereby certifies that
the final rule will have no significant impact upon those entities
whose interests must be considered under the Regulatory Flexibility
Act, 5 U.S.C. 601, et seq. The registrants and applicants who
use, or are affected by, the hearing covered by these regulations
are typically not small entities.
   The final rule is not a significant regulatory action pursuant
to Executive Order (E.O.) 12866 and therefore, has not been
reviewed by the Office of Management and Budget. This action
has been analyzed in accordance with the principles and criteria
in E.O. 12612, and it has been determined that the proposed
rule does not have sufficient federalism implications to warrant
the preparation of a Federalism Assessment.

List of Subjects in 21 CFR Part 1301

   Administrative practice and procedure, Drug traffic control
and security measures.
   For the reasons set forth above and pursuant to the authority
vested in the Attorney General by 21 U.S.C. 821 and 871(b),
as delegated to the Administrator of the Drug Enforcement Administration,
and redelegated to the Deputy Assistant Administrator, Office
of Diversion Control by 28 CFR 0.100 and 0.104, the Deputy Assistant
Administrator, Office of Diversion Control hereby amends part
1301 of Title 21, Code of Federal Regulations to read as follows:

PART 1301-[AMENDED]

   1. The authority citation for part 1301 continues to read
as follows:

   Authority: 21 U.S.C. 821, 822, 823, 824, 871(b), 875, 877.

   2. Section 1301.37, paragraph (a) is revised to read as follows:

sec 1301.37  Amendments to and withdrawal of applications.

   (a) An application may be amended or withdrawn without permission
of the Administrator at any time before the date on which the
applicant receives an order to show cause pursuant to sec 1301.48.
An application may be amended or withdrawn with permission of
the Administrator at any time where good cause is shown by the
applicant or where the amendment or withdrawal is in the public
interest.
*     *     *     *     *
   3. Section 1301.43, paragraph (a) is revised to read as follows:

sec 1301.43  Application for bulk manufacture of Schedule I and
II substances.

   (a) In the case of an application for registration or reregistration
to manufacture in bulk a basic class of controlled substance
listed in Schedule I or II, the Administrator shall, upon the
filing of such application, publish in the Federal Register
a notice naming the applicant and stating that such applicant
has applied to be registered as a bulk manufacturer of a basic
class of narcotic or nonnarcotic controlled substance, which
class shall be identified. A copy of said notice shall be mailed
simultaneously to each person registered as a bulk manufacturer
of that basic class and to any other applicant therefor. Any
such person may, within 60 days from the date of publication
of the notice in the Federal Register, file with the Administrator
written comments on or objections to the issuance of the proposed
registration.
*     *     *     *     *
   4. Section 1301.44 is amended by redesignating paragraph
(b) as paragraph (c) and adding a new paragraph (b) to read
as follows:

sec 1301.44  Certificate of registration; denial of registration.
*     *     *     *     *
   (b) If a hearing is requested by an applicant for registration
or reregistration to manufacture in bulk a basic class of controlled
substance listed in Schedule I or II, notice that a hearing
has been requested shall be published in the Federal Register
and shall be mailed simultaneously to the applicant and to all
persons to whom notice of the application was mailed. Any person
entitled to file comments or objections to the issuance of the
proposed registration pursuant to sec 1301.43(a) may participate
in the hearing by filing a notice of appearance in accordance
with sec 1301.54. Such persons shall have 30 days to file a notice
of appearance after the date of publication of the notice of
a request for a hearing in the Federal Register.
   5. Section 1301.54, paragraph (a), (b), (c) and (d) are revised
to read as follows:

---- page 32102 ----


sec 1301.54  Request for hearing or appearance; waiver.

   (a) Any person entitled to a hearing pursuant to secsec 1301.42,
1301.44, or 1301.45 and desiring a hearing shall, within 30
days after the date of receipt of the order to shown cause,
file with the Administrator a written request for a hearing
in the form prescribed in sec 1316.47 of this chapter.
   (b) Any person entitled to participate in a hearing pursuant
to sec 1301.44(b) and desiring to do so shall, within 30 days
of the date of publication of notice of the request for a hearing
in the Federal Register, file with the Administrator a written
notice of intent to participate in such hearing in the form
prescribed in sec 1316.48 of this chapter. Any person filing a
request for a hearing need not also file a notice of appearance.
   (c) Any person entitled to a hearing or to participate in
a hearing pursuant to secsec 1301.42, 1301.44, or 1301.45 may, within
the period permitted for filing a request for a hearing or a
notice of appearance, file with the Administrator a waiver of
an opportunity for a hearing or to participate in a hearing,
together with a written statement regarding such person's position
on the matters of fact and law involved in such hearing. Such
statement, if admissible, shall be made a part of the record
and shall be considered in light of the lack of opportunity
for cross-examination in determining the weight to be attached
to matters of fact asserted therein.
   (d) If any person entitled to a hearing or to participate
in a hearing pursuant to secsec 1301.42, 1301.44, or 1301.45 fails
to file a request for a hearing or a notice of appearance, or
if such person so files and fails to appear at the hearing,
such person shall be deemed to have waived the opportunity for
a hearing or to participate in the hearing, unless such person
shows good cause for such failure.
*     *     *     *     *
   6. Section 1301.55, paragraph (a) is revised to read as follows:

sec 1301.55  Burden of proof.

   (a) At any hearing on an application to manufacture any controlled
substance listed in Schedule I or II, the applicant shall have
the burden of proving that the requirements for such registration
pursuant to section 303(a) of the Act (21 U.S.C. 823(a)) are
satisfied. Any other person participating in the hearing pursuant
to sec 1301.44(b) shall have the burden of proving any propositions
of fact or law asserted by such person in the hearing.
*     *     *     *     *
   Dated: June 14, 1995.

Gene R. Haislip,
Deputy Assistant Administrator, Office of Diversion Control,
Drug Enforcement Administration.

[FR Doc. 95-15058 Filed 6-19-95; 8:45 am]
BILLING CODE 4410-09-M


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The Contents entry for this article reads as follows:

Manufacturers, distributors, and dispensers of controlled substances;
    registration, etc.:
  Administrative hearing requirement, 32099
</ARTICLE>

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