Federal
Register Notices > Rules
- 2006 >
Controlled Substances and List I Chemical Registration and Reregistration
Application Fees
FR Doc E6-14286 [Federal Register: August 29, 2006 (Volume 71, Number 167)]
[Rules and Regulations] [Page 51105-51115] From the Federal Register Online
via GPO Access [wais.access.gpo.gov] [DOCID:fr29au06-5]
[[Page 51105]]
DEPARTMENT OF JUSTICE
Drug Enforcement Administration
21 CFR Parts 1301 and 1309
[Docket No. DEA-266F] RIN 1117-AA96
Controlled Substances and List I Chemical Registration and Reregistration
Application Fees
AGENCY: Drug Enforcement Administration (DEA), Department of Justice.
ACTION: Final Rule.
SUMMARY: This final rule establishes the fee schedule for DEA registration
and reregistration fees relating to the registration and control of the
manufacture, distribution and dispensing of controlled substances and listed
chemicals to appropriately reflect all costs associated with its Diversion
Control Program for the conduct of activities as mandated by 21
U.S.C. 822 and 958. Specifically, this final rule revises the fee schedule for controlled
substances and List I chemical handlers so that all manufacturers,
distributors, importers, exporters, and dispensers of controlled substances
and of List I chemicals pay an annual fee, by registrant category,
irrespective of whether they handle controlled substances or List I chemicals.
In doing so, this rule implements clarifications to the Diversion Control
Program and the Diversion Control Fee Account made by Congress in the
Consolidated Appropriations Act of 2005 (Pub. L. 108-447) that amended 21
U.S.C. 886a.
EFFECTIVE DATE: This rule is effective November 1, 2006. The new fee
schedule will be in effect for all new applications postmarked on or after
November 1, 2006 and for all renewal applications postmarked on or after
November 1, 2006.
FOR FURTHER INFORMATION CONTACT: Mark W. Caverly, Chief, Liaison and Policy
Section, Office of Diversion Control, Drug Enforcement Administration,
Washington, DC 20537; Telephone (202) 307-7297.
SUPPLEMENTARY INFORMATION:
I. Background and Statutory Authority
The Drug Enforcement Administration published a Notice of Proposed
Rulemaking in the Federal Register on November 16, 2005 (70 FR 69474) to
adjust the registration and reregistration fees for controlled substances and
List I chemical handlers.
The Controlled Substances Act (CSA) requires that all manufacturers,
distributors, dispensers, importers and exporters of controlled substances and
List I chemicals obtain an annual registration with DEA (21
U.S.C. 822 and 958(f)). In addition, the CSA, as codified in
21 U.S.C. 821, authorizes the
Attorney General, who in turn redelegates this authority to the Administrator
of DEA, to "promulgate rules and regulations and to charge reasonable fees
relating to the registration and control of the manufacture, distribution, and
dispensing of controlled substances and listed chemicals'' (21 U.S.C. 821 as
amended by Pub. L. 108-447).
In October 1992, Congress passed the Departments of Commerce, Justice and
State, the Judiciary and Related Agencies Appropriations Act of 1993 which
changed the source of funding for DEA's Diversion Control Program (DCP) from
being part of DEA's Congressional appropriation to full funding by
registration and reregistration fees through the establishment of the
Diversion Control Fee Account (DCFA). The Appropriations Act of 1993 required
that "[f]ees charged by the Drug Enforcement Administration under its
diversion control program shall be set at a level that ensures the recovery of
the full costs of operating the various aspects of that program.'' The
legislation did not, however, provide clarification on what constituted the "Diversion Control Program,'' thus leaving open the issue as to what
fee-setting criteria should be used to determine which costs could be
reimbursed from the DCFA.
In response to the Appropriations Act of 1993, DEA published a Notice of
Proposed Rulemaking (NPRM) in December 1992 to adjust the registration and
reregistration fees for controlled substance registrants (57 FR 60148,
December 18, 1992). In the absence of guidelines from Congress regarding the
specific criteria to be followed in identifying costs and setting the fees,
DEA relied on the plain language of the Appropriations Act of 1993 and
proposed fees necessary to cover the costs of the activities that were
identified within the budget decision unit known as the "Diversion Control
Program.''
At the time that the Appropriations Act of 1993 was passed, 21
U.S.C. 821
did not extend to chemical control activities; accordingly, there were no
registration or fee requirements for handlers of listed chemicals. DEA
therefore excluded chemical control costs from its Final Rule implementing the
requirements of the Appropriations Act of 1993 (58 FR 15272, March 22, 1993).
Congress amended 21 U.S.C. 821 on December 17, 1993 to require reasonable fees
relating to "the registration and control of regulated persons and of
regulated transactions'' (Domestic Chemical Diversion Control Act of 1993,
3(a), Pub. L. 103-200, 107 Stat. 2333); however, despite this amendment, DEA
continued to endeavor to maintain separate funding for its controlled
substances diversion control and its chemical diversion control activities.
That is, DEA has paid for its controlled substance diversion control
activities through the Diversion Control Fee Account and registration fees and
its chemical diversion control activities through appropriated funds.
Following publication of DEA's Final Rule, the American Medical Association
(AMA) and others filed a lawsuit objecting to the increase in registration and
reregistration fees on the grounds that DEA had failed to provide adequate
information as to what activities were covered by the fees and how they were
justified. Upon appeal, the United States Court of Appeals for the District of
Columbia Circuit remanded, without vacating, the rule to DEA, requiring the
agency to provide an opportunity for meaningful notice and comment on the fee-
funded components of the DCP. In doing so, the court confirmed the boundaries
of the DCP that DEA can fund by registration fees, finding that the current
statutory scheme (21 U.S.C. 821 and 958) required DEA to set reasonable
registration fees to recover the full costs of the DCP. (AMA v. Reno, 57 F.3d
1129, 1135 (DC Cir. 1995)).
Thus, in the absence of a simple, objective measure by which DCP costs
could be identified and the appropriate fees calculated, both DEA and the
courts have looked to 21 U.S.C. 821 and 958 to define the guidelines for
determining what costs should be included in the calculation of the fees and
from whom the fees might be collected.
On November 20, 2004, Congress passed the Departments of Commerce, Justice,
and State, the Judiciary, and Related Agencies Appropriations Act of 2005
which provided clarification as to the activities constituting the DCP. This
Act was included in the Consolidated Appropriations Act of 2005, which was
signed into law by the President on December 8, 2004 (Pub. L. 108-447). The
Act amended 21 U.S.C. 886a to define the Diversion Control Program as "the
controlled substance and chemical diversion control activities of the Drug
Enforcement Administration,'' which are further defined as the "activities
related to the registration and control of the manufacture, distribution and
dispensing, importation and exportation of controlled substances and listed
[[Page 51106]]
chemicals.'' It also amended the section to provide that reimbursements
from the DCFA "* * * shall be made without distinguishing between expenses
related to controlled substances activities and expenses related to chemical
activities.'' Finally, the Act amended 21
U.S.C. 821 and 958(f)
to make the
language of those sections consistent with the definition of the DCP (Pub. L.
108-447). The net effect of the amendments is to allow DEA to deposit all
registration and reregistration fees (controlled substance and chemical) into
the Fee Account and fund all controlled substance and chemical diversion
control activities from the account without distinguishing as to the type of
activity (controlled substance or chemical) being funded.
While the comingling of controlled substances diversion control and
chemical diversion control fees and activities might seem initially to be
incongruous, there is, in fact, a significant amount of overlap, both in terms
of activities and registrant populations. While it is easy to distinguish
between handlers of controlled substances and the handlers of commodity
chemicals such as red phosphorous, hydriotic acid, acetic anhydride and
nitroethane, the line between handlers of controlled substances and handlers
of drug products that contain listed chemicals is blurred considerably. Not
only are the drug products that contain List I chemicals often manufactured by
controlled substances manufacturers, they are commonly distributed by
controlled substances distributors and routinely sold or dispensed by
pharmacies, hospitals, and individual practitioners. In calendar year 2004,
there were over 30 million prescriptions filled for drug products containing
the List I chemicals ephedrine, pseudoephedrine, and phenylpropanolamine,
which is still routinely used in veterinary products. There are undoubtedly
many instances in which practitioners also provided their patients with free
samples of allergy and cough and cold preparations that contain those
chemicals. Within this general environment, the use of a single, unified
account to fund the controlled substances and chemical diversion control
activities of DEA is consistent with the mandates of the law.
DEA is bound by all of the above-referenced statutory requirements in
setting fees that recover the "full cost'' of the Diversion Control Program
and its activities, as defined in the most recent lawmaking action. Therefore,
DEA has developed this rulemaking according to these legislative mandates.
II. Comments Received
Following publication of the Notice of Proposed Rulemaking on November 16,
2005, DEA received 12 comments to the notice. Three comments were received
from practitioners (one physician, one physician assistant, and one dentist);
three comments were received from manufacturers or distributors; five comments
were received from organizations representing different registrant groups; and
one comment was submitted anonymously.
Most commenters raised concern about the increase in fees, particularly for
chemical registrants. Two commenters in particular wrote that the increase in
fees will have a significant impact on chemical registrants compared to
current fee rates and proposed an alternative fee increase. One commenter
wrote that programs within DEA should be downsized or eliminated to maintain a
"neutral budget'' and keep costs lower. Three commenters expressed concern
that the fee increase is coming at a time when Congress and other entities are
re- evaluating medical reimbursements; one physician commented that he would
pay the new fee as soon as his reimbursements increased by the same
percentage. Another expressed concern that the cost of the increased fees
would discourage physicians from registering with DEA and using controlled
substances, thus affecting patient care.
Five commenters objected to the removal of the waiver of the chemical
registration requirement for controlled substances registrants that handle
drug products that are regulated as List I chemicals. The commenters wrote
that they believed removal of this waiver would damage the ability of affected
registrants to service their customer base and posed an unreasonable hardship.
Two commenters also noted that removal of the waiver could create expensive
administrative burdens for both registrants and for DEA.
Two registrants objected to the existing fee exemption for certain entities
such as some Federal agencies, certain charitable organizations, law
enforcement entities, and military personnel. Commenters noted that exempting
these organizations results in larger fees for fee-paying registrants and
requested reevaluation of this policy by DEA.
Two commenters raised the issue of performance standards tied to the
increase in fees and requested clarification on DEA's expected outcomes as a
result of the increased fees and the performance measures and metrics DEA has
established to assess these outcomes.
One commenter wrote that the required $15 million annual transfer to the
U.S. Treasury out of collected fee funds was a significant percentage of the
total fees collected, and the commenter urged DEA to request that Congress
resume its annual $15 million appropriation to offset this transfer. The
commenter wrote that it, too, would work to see this appropriation restored.
One anonymous commenter wrote that medical marijuana is "most popular in
California especially with grayhaired men and women.'' Marijuana is not a
licit controlled substance or listed chemical covered by this rulemaking and
is not affected by this final rule; accordingly, this comment is not further
addressed in this section. Another commenter, a practitioner, submitted a
request for reregistration materials through the comment response vehicle.
These materials were provided to the commenter, and this matter is not
addressed further in this rulemaking.
Three commenters requested that DEA extend implementation of the final
rule, noting that the rule comes in the middle of budget cycles for many
registrants who had not planned for increased fees as part of their budgets
and that it also comes at a time of statutory and other change for the
industry. Each of these comments is addressed below.
III. Objection to Fee Increase
Nine of the twelve comments received by DEA expressed opposition to the
increase in fees. As described above, 21
U.S.C. 821 (as amended by Pub. L.
108-447) authorizes DEA to collect reasonable fees relating to the
registration and control of the manufacture, distribution and dispensing of
controlled substances and listed chemicals. In addition, the 1993 Departments
of Commerce, Justice, and State, the Judiciary, and Related Agencies
Appropriations Act that established the Diversion Control Fee Account (DCFA)
specifically mandated that fees "shall be set at a level that ensures the
recovery of the full costs of operating the various aspects of that program''
(21 U.S.C. 886a(3)). Congress, in using the mandatory term
"shall'' as
opposed to the discretionary "may,'' unambiguously required DEA to increase
its then-existing registration fees resulting in registrants fully funding DCP
expenses. DEA, therefore, lacks discretion in this matter and must fund the
DCP totally from registration fees (that is, not from fines, Congressional
appropriations or other potential sources).
[[Page 51107]]
Accordingly, while DEA recognizes the economic pressures facing
practitioners, such as declining Medicaid reimbursements and increasing
operating, equipment, and insurance costs, the current statutory scheme
requires DEA to set registration fees to recover the full costs of the DCP,
while limiting DEA to charge "reasonable'' fees relating to the registration
and control of the manufacture, distribution and dispensing of controlled
substances and listed chemicals. DEA does not have the discretion to partially
fund the DCP or to find alternative sources of funding for the program. Rather
DEA is mandated by law to fund the DCP fully through registration fees. The
registration fees outlined below are set at a level to support the full costs
of the DCP as mandated by law.
With clarification of the activities constituting the DCP in the
Appropriations Act of 2005, DEA is now required to evaluate the "full costs''
of the DCP to include all controlled substances and all listed chemical
diversion control activities; whereas, previously the only DCP costs supported
through registrant fees were controlled substances diversion control costs,
and listed chemical diversion control activities were supported through
appropriated funds. (See the Notice of Proposed Rulemaking published on
November 17, 2005, 70 FR 69474) for additional discussion on this separation
of activities.) In fact, operating the DCP as a cohesive whole, that is
without distinction in activities between controlled substances and chemical
diversion control activities, offers scale efficiencies and ultimately cost
savings and improved services for registrants.
The fees set forth in this final rule reflect calculation of the full costs
of both the controlled substances and chemical diversion control activities of
the DCP. The revised fee structure contained in this final rule includes
annual fees (or fee equivalent) ranging from $184 to $2,293. DEA recognizes
that the increase in fees may represent a budgeting challenge for registrants,
particularly registrants with multiple sites requiring separate registrations
(e.g., chain drug stores), however, because the fees do not represent a
significant financial burden on registrants, DEA has determined that the fees
contained in this final rule are reasonable. DEA expects that among all
registrants, mid-level practitioners and chemical distributors may feel the
greatest impact of the new fees (see discussion in Section XII). However, for
most registrants qualifying as small businesses the revised fee will have a
minimal impact, representing from 0.28 percent to as little as 0.01 percent of
average annual sales (or income). For registrants that are large businesses
with higher annual sales, the impact of the fee is far less.
A. Differences in Fee Increase Among Registrant Categories
Two commenters expressed concern that the fees for chemical registrants
under this final rule reflect a higher percentage increase than the change in
fees for controlled substances registrants. Commenters noted that fees for
chemical manufacturers will increase by approximately 300 percent and that
fees for chemical distributors will increase by about 100 percent compared to
the current fee structure for these chemical registrants. Commenters proposed
an alternative fee increase for these categories based on the same percentage
increase as controlled substances manufacturers and distributors.
Currently, chemical handlers pay a user fee that supports only the costs of
registration/reregistration and some administrative oversight--not the
operating costs of the DEA's chemical diversion control program. With the
transfer of DEA's chemical control program costs to the DCFA, chemical
registrants must, together with controlled substances registrants, pay a fee
to cover the full costs of the DCP. The same circumstance occurred in 1993
with the establishment of the DCFA; controlled substances registrants were
faced with a substantial increase in their fees as they transferred from a
similar user fee that supported registration costs only to a fee schedule to
cover the full costs of DEA's controlled substances diversion control
activities. With the transfer of the chemical control program costs to the
DCFA and the amendments to the law that reimbursements shall be made without
distinguishing between chemical and controlled substances activities, chemical
registrants must now be included in the DCFA population and pay the fees
necessary to sustain that account.
DEA does not have the discretion to adjust fees according to percentages,
such as was proposed by the commenters, as it is required to fully fund the
DCP through fees paid by the registrants while also maintaining reasonable
fees.
B. Program Costs
One commenter suggested that DEA downsize or eliminate programs to maintain
a neutral budget and keep fees low. DEA works diligently to achieve
administrative efficiencies in all of its programs, including the Diversion
Control Program. Through a scheduled, periodic review process, virtually all
aspects of the DCP are inspected to detect any waste, fraud or abuse. All
expenditures charged to the DCFA also are reviewed and approved by an
independent unit within DEA that reviews, approves, and audits fee-funded
expenditures.
Moreover, each of DEA's annual budget requests to Congress, which contain
all components of each DEA program, including the DCP, is available for public
review. Each budget request is examined and approved by both the Department of
Justice and the Office of Management and Budget.
DEA has undertaken several initiatives to streamline aspects of the DCP
both for DEA and for registrants. For example, DEA is developing a system to
permit the electronic transmission of controlled substances prescriptions
through electronic creation, signature and record retention, which will
significantly increase the efficiency by which prescriptions are transmitted
from prescriber to pharmacy; however, it will not reduce the review
requirements of DEA employees that monitor the prescription process for
controlled substances. DEA has developed a system that permits the electronic
transmission of controlled substances orders which provides increased
efficiencies for industry. Moreover, in 2005, DEA underwent an internal
reorganization to increase operational efficiencies and keep costs as low as
possible. This reorganization shifted the focus from business decision units
to activities that support the registration and control of the manufacture,
distribution, and dispensing of controlled substances and listed chemicals.
However, DEA is also subject to costs related to inflation and additional
costs of "doing business'' that face all organizations despite its best
efforts to keep these expenses reasonable.
C. Effect of Fee Increase on Practitioner Registration
One practitioner commenter noted concern that increases to annual
registrant fees could reduce the number of physicians registering with DEA and
using controlled substances as part of patient care. The Controlled Substances
Act requires that every person who manufactures, distributes or dispenses any
controlled substance or who proposes to engage in the manufacture,
distribution or dispensing of any controlled substance obtain an annual
[[Page 51108]]
registration (21
U.S.C. 822(a)(1) and 822(a)(2)). DEA notes that the impact
of the annual registration fee on practitioners ($184 annual equivalent) is
not significant, ranging from a high of 0.28% to a low of 0.13% based on
annual income for this registrant category (see discussion below on small
business impacts). The majority of registered practitioners (71 percent) are
physicians whose annual income averages more than $140,000 and for whom the
$184 annual fee equivalent represents approximately 0.13 percent of annual
income. Other large practitioner groups in this category include dentists (16
percent of practitioners) for whom the annual fee equivalent represents about
0.14 percent of their average annual income of $133,000 and veterinarians (5
percent of practitioners) for whom the annual fee equivalent equates to 0.25
percent of their average annual income of $76,000. The revised fee will have
greater impacts on other types of practitioners (less than 5 percent of all
registered practitioners) with lower annual incomes, including nurse
practitioners, physician assistants, optometrists, and others for whom the
annual fee equivalent has an average impact of approximately 0.16- 0.28
percent.
IV. Removal of Waiver for Chemical Registrants Holding an Existing
Controlled Substances Registration
Four commenters objected to the removal of the waiver of the registration
requirement for persons who distribute, import or export a drug product
containing a List I chemical if that person is already registered with DEA to
manufacture, distribute or dispense, import or export a controlled substance.
Commenters noted that removal of this waiver could dramatically increase the
annual registration fees for affected registrants and would damage their
ability to service their customers, would pose an "unreasonable hardship,''
and could adversely affect the List I chemical supply chain since many
affected registrants also hold a controlled substances registration. One
commenter also noted that removal of this waiver could require significant
changes to internal operations for affected registrants who would have to
maintain two DEA registrations, imposing significant paperwork, technological
and operational burdens. The commenter also suggested removal of the waiver
could result in increased operational burdens for DEA.
After careful review of these comments and consideration of the benefits
compared to the drawbacks associated with removal of this waiver, DEA has
decided to retain the current registration waiver for persons who distribute,
import, or export a product containing a List I chemical who already hold a
valid DEA registration to manufacture, distribute or dispense, import, or
export a controlled substance.
Accordingly, the proposed changes to the waiver provision are removed.
DEA will address registration issues created by passage of the Combat
Methamphetamine Epidemic Act of 2005, included in the USA PATRIOT Improvement
and Reauthorization Act of 2005 (Pub. L. 109-177) as part of the Act's
implementing regulations.
V. Registration Fee Waivers for Certain Organizations and Persons
Two commenters objected to DEA's fee exemption for certain entities and
persons. Currently, government institutions, law enforcement agencies, and
military personnel are exempt from fees. In addition, DEA waives fees for some
charitable organizations. The commenters objected to these fee waivers
suggesting that the process is inequitable and that the net result is higher
fees for fee-paying registrants than if these organizations were also required
to pay annual registration and reregistration fees. The commenters also
asserted that fee-paying registrants are paying a "hidden contribution'' or "forced donation'' to charitable organizations, without tax relief, by
partially subsidizing their fee requirements.
DEA appreciates these comments. DEA recognizes that exempting certain
entities from paying annual fees provides a benefit to some at the expense of
others and is evaluating its current practice of exempting certain
organizations and persons from annual registration fees. Any changes to this
practice will require a separate regulatory process, including notice and
comment.
VI. Performance Standards
Two commenters objected to the omission of anticipated outcomes or results
expected by DEA as a result of the increased fees. The commenters requested
detail on how DEA will track such results and correlate them to the higher
fees while recommending the development of a system of metrics, accountability
and reporting for the DCP.
The Government Performance and Results Act (GPRA) and the President's
Management Agenda (PMA), requires DEA, like all other agencies and components,
to provide a budget summary that incorporates performance information on a
quarterly basis. In response to these requirements, DEA already integrates
budget and performance in order to evaluate the effectiveness of programs
relative to long-term, measurable outcome goals.
More specifically, in response to GPRA and the PMA, the DCP's budgetary
reporting on outlays from the DCFA includes performance measures that are
consistent with DEA's Strategic Plan and that reflect the effectiveness of
programmatic activities funded by registrant fees. Among the objectives
included in DEA Strategic Plan is continued support to the registrant
population through improved technology, including E-commerce and customer
support, while maintaining cooperation, support, and assistance from the
regulated industry. These efforts, funded through registration fees, are
intended to provide benefits to the registrant population such as streamlined
processing and improved access to information. They are also intended to
reduce the paperwork burden on small businesses; reduce forged or stolen
prescriptions; improve authentication and verification of the prescribing or
ordering party and reduce processing time; increase overall security; and
improve DEA's data quality, agency efficiency and responsiveness in carrying
out its mission.
All budget submissions for the Diversion Control Program, like submissions
for all programs across DEA, are subject to multiple levels of scrutiny and
review within DEA, the Department of Justice, and the Office of Management and
Budget before being included in the President's annual Budget Request to
Congress.
VII. $15 Million Treasury Transfer
One commenter urged DEA to request that Congress resume the annual $15
million appropriation to offset the requirement that the first $15 million in
fee collections be transferred to the Treasury, so that all fee funds may be
used for DCP activities. The commenter noted that the annual $15 million
transfer represents a "significant component'' of the amounts to be collected
each year.
The Appropriations Act of 1993 requires that DEA transfer the first $15
million of fee revenue to the General Fund of the Treasury each year (21
U.S.C. 886a(1)). For each fiscal year from Fiscal Year 1993 through Fiscal Year 1998,
Congress appropriated an additional $15 million to offset this requirement (a
total infusion to the DCFA of $90 million). However, beginning in Fiscal Year
1999, Congress
[[Page 51109]]
discontinued this additional appropriation. Accordingly, since Fiscal Year
1999, DEA has to include the annual $15 million transfer for fee calculations;
that is, DEA must pay for all operational costs of the DCP plus the $15
million transfer out of fee funds collected from registrants.
VIII. Extension of Implementation of the Final Rule
Three commenters requested delay of implementation of the final rule to
Fiscal Year 2007 or later. Two commenters requested the delay because of the
potential effects of removal of the registration waiver for chemical handlers
holding a current controlled substance registration. Following careful review
of comments, DEA has decided to keep this waiver intact (see discussion
above).
Three commenters requested the delay because of ongoing changes in the
industry, including pending state and Federal legislation affecting
over-the-counter products containing listed chemicals (such as products
containing pseudoephedrine and ephedrine). One commenter noted that such
pending legislation could affect distributors carrying these products and
therefore DEA registrations and revenue projections. The commenters also noted
that the fee modifications are coming at a time when Congress, Federal
agencies, and private party payers are exploring methods for reducing
reimbursement for prescription drugs. Two commenters wrote that implementation
of the final rule would come in the middle of budget cycles for affected
registrants and would, therefore, impose financial challenges because of the
unanticipated additional expenses in the annual fees, particularly for chain
drug stores with many separately registered sites. DEA notes that very few
chain registrants have registrations expiring during the current calendar
year, thus limiting the potential impact of the fee increase in the current
budget cycle. With respect to pending legislation and its possible effect on
DEA registrations, DEA takes into account the potential ebb and flow of the
registrant population through the retirement of old registrations and new
applications for registration when calculating the fees. DEA cannot delay
implementation of the new fee schedule as the agency is required, by statute,
to recover the full costs of the diversion control program through
registration fees.
IX. Overview of Diversion Control Program Responsibilities
The mission of DEA's Diversion Control Program (DCP) is to enforce the
provisions of the Controlled Substances Act as they pertain to 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.
DCP activities include: Program priorities and field management oversight;
coordination of major investigations; drafting and promulgating of regulations
relating to the enforcement of the CSA and other legislation; establishment of
national policy on diversion; fulfillment of U.S. obligations under drug
control treaties; advice and leadership on state legislation/regulation; legal
control of drugs and chemicals not previously under Federal control; control
of imports and exports of licit controlled substances and chemicals; and
program resource planning and allocation, among other activities.
As was outlined in the Notice of Proposed Rulemaking, DCP activities funded
to date out of the DCFA have been limited to controlled substances diversion
control activities, including controlled substances scheduling, registration,
investigation, inspection, data collection and analysis, training,
establishing production quotas, cooperative efforts with state, local and
other Federal agencies, cooperative efforts with the regulated industry,
international activities relating to the registration and control of the
manufacture, distribution and dispensing of controlled substances, and
attendant management, personnel, administrative and clerical oversight for the
DCP. Fee-fundable activities also have included travel, rent, utilities,
supplies, equipment, and services associated with the above-listed activities
and activities related to the control of licit controlled substances in the
U.S. in which the initial source is foreign. One commenter wrote that
administrative expenses should not be paid for out of the DCFA and fee funds;
however, the courts have found that all activities and expenses that are
directly related to diversion control may be funded with registration and
reregistration fees (AMA v. Reno, 57 F.3d 1129, 1135 (DC Cir. 1995)).
Administrative and other operational costs are directly related to the ongoing
diversion control efforts of the DCP.
With the inclusion of the chemical diversion control activities in the DCFA
and registrant fees by the Appropriations Act, activities related to the
overall control of listed chemicals, registration, investigation, inspection,
data collection and analysis, cooperative efforts with the regulated industry,
related management and administrative positions devoted to diversion control
activities, other personnel, and administrative and clerical oversight have
been included in the budget calculations that are used to determined the
registration fees.
For detail on the specific DCP components to be funded through the DCFA and
their associated costs for the Fiscal Year 2006-2008 period covered by this
rulemaking, please see DEA's Notice of Proposed Rulemaking, published in the
Federal Register on November 16, 2005 (70 FR 69474).
X. Budget Changes
In calculating the registration and reregistration fees contained in this
Final Rule, DEA has included all DCP activities associated with the "registration and control of the manufacture, distribution and dispensing,
importation and exportation of controlled substances and listed chemicals''
(Pub. L. 108-447).
As discussed in detail in the Notice of Proposed Rulemaking (70 FR 69474),
beginning in Fiscal Year 2006, both controlled substance and chemical
diversion control costs must be included in the calculation of DCFA
registration and reregistration fees. Among the chemical diversion control
costs to be included among the "full costs'' of operating the DCP are a
portion of the Office of Training (TR) that specifically supports the
activities of the DCP by providing training, guidance and instruction for
Diversion Investigators, Diversion Task Force Officers, regulatory agencies,
state and local law enforcement, and DCP personnel on controlled substances
and chemical diversion control, advanced skills and technical knowledge, and
systems applications. Also included are 188 chemical diversion control
positions; 12 overseas diversion investigators dedicated to the DCP; and costs
associated with the chemical transaction system (CTRANS).
The chemical diversion control costs that will be supported through the
DCFA total $24,499,000 for Fiscal Year 2006, $24,880,000 for Fiscal Year 2007,
and $25,235,000 for Fiscal Year 2008, accounting for salary growth and
inflation.
In addition to the chemical control costs, DEA is including among
fee-fundable activities certain other internal resources that support the
DEA's diversion control activities, but that, as was discussed more fully in
previous rulemakings regarding the DCFA, had previously been supported through
appropriated funds despite their direct
[[Page 51110]]
relationship to and support of the DCP. These activities include portions
of the Office of Chief Counsel, the Office of Forensic Sciences Special
Testing Laboratory, and the Special Operations Division; and additional
special agent and intelligence analyst costs not previously supported through
the DCFA. These components and associated costs are described below. A portion
of DEA's internal computer system, Firebird, which already is supported
through the DCFA, is included in the fee-fundable cost. The total cost of
these non- chemical additions for Fiscal Year 2006 is $26,996,000; for Fiscal
Year 2007 is $31,198,000; and for Fiscal Year 2008 is $34,736,000.
In calculating the revised fee schedule, DEA used the Fiscal Year 2006
enacted Appropriation, the President's Budget Request for Fiscal Year 2007,
the expected Budget Request for Fiscal Year 2008, and the annual $15 million
transfer to the U.S. Treasury as mandated by the CSA (21 U.S.C. 886a). In
addition to fee funding all program elements and activities related to the
registration and control of the manufacture, distribution, dispensing,
importation, and exportation of controlled substances and listed chemicals,
DEA must transfer the first $15 million of fee revenue to the General Fund of
the Treasury each year as described above (21
U.S.C. 886a(1)).
The Fiscal Year 2006 cost of the DCP is $201,673,000, including a base of
$150,178,000 for controlled substances diversion control activities,
$24,499,000 in chemical diversion control activities, and $26,996,000 for the
additional non-chemical DCP support activities outlined above and described in
detail in the November 16, 2005 Notice of Proposed Rulemaking (70 FR 69474),
including 52 additional special agent positions; a portion of the Forensic
Sciences Special Testing Laboratory; a portion of the Office of Chief Counsel
that directly supports diversion control activities; 34 of the 67 field
intelligence analysts to be phased in between Fiscal Year 2006-2007 and 6
Headquarters intelligence analysts to support domestic and international
diversion control investigations (the remaining 33 field intelligence analysts
will be phased in during Fiscal Year 2007); a portion of the Special
Operations Division directly related to diversion control efforts; and
Firebird operations costs to support communication and infrastructure of the
diversion control program.
With the addition of the required $15 million transfer to the U.S.
Treasury, the total amount necessary to collect through registrant fees in
Fiscal Year 2006 is $216,673,000.
The DCP cost for Fiscal Year 2007, including all activities relating to the
registration and control of the manufacture, distribution and dispensing of
controlled substances and listed chemicals, is $212,078,000, as reflected in
the President's Budget Request to Congress. Including the required $15 million
transfer to the U.S. Treasury, the total amount necessary to collect through
registrant fees in Fiscal Year 2007 is $227,078,000. The anticipated costs of
the DCP for Fiscal Year 2008, including all activities relating to the
registration and control of the manufacture, distribution and dispensing of
controlled substances and listed chemicals, is $218,669,000. Including the
required $15 million transfer to the U.S. Treasury, the total amount necessary
to collect through registrant fees in Fiscal Year 2008 is $233,669,000.
The total amount that must be collected through fee funds for the Fiscal
Year 2006-2008 period to fully fund the DCP as mandated by statute is
$677,420,000. Without an increase in fees, DEA would fall short by
$185,475,536 in funds to support the operations of the DCP. The new fee
structure contained in this final rule, therefore, provides the necessary
additional funds to ensure that the operational costs of the DCP are fully
funded through registrant fees as mandated by statute. As explained above, DEA
is required by statute to collect the "full costs'' associated with operating
the DCP.
XI. Calculation of Fees
Based on the total amount necessary to collect for Fiscal Years 2006-2008,
DEA developed the specific fee levels for each registrant category according
to its current fee structure and the fee-paying ratios that have been in
existence since the inception of registrant fees. New fees are shown in the
table below. For discussion on DEA's analysis of alternative fee schedules and
approaches to calculating registrant fees, please see DEA's 2002 Final Rule
(67 FR 51988, August 9, 2002) and its 1996 Final Rule (61 FR 68624, December
30, 1996).
In developing the fee schedule, DEA opted to set the fee level for a
three-year period (FY 2006-2008) for two reasons. First, the vast majority of
registrants are practitioners who pay a three-year registration fee. These
registrants are divided into roughly three separate groups who pay their
three-year registration fees on alternate year cycles. Accordingly, the fees
below reflect the total amount necessary to be collected for the full
three-year period (FY 2006- 2008), divided by projected registrants and
accounting for projected registrant growth by category for each fiscal year.
Because different categories of registrants pay different amounts, DEA
weighted the number of registrants in each category to ensure the appropriate
reflection in the fee schedule. In calculating the final fee schedule
reflected below, DEA relied on the latest and current registrant population
figures, which have fluctuated since the proposed fees contained in the Notice
of Proposed Rulemaking. Because the fees reflect the total amount necessary
for collection over a three-year period (Fiscal Years 2006-2008) and because
the type and number of registrants varies from year to year, the total amount
of fees collected may not equal the requested budget level for any given year.
Surplus fees collected in one year are used to offset fee collection
shortfalls in another year. In no case are fees spent in excess of the levels
enacted by Congress.
In evaluating options to structure the fee schedule, DEA opted to remain
with the current fee structure to reduce reporting burdens on registrants and
operational costs associated with the DCP which would then be passed on to
registrants through annual fees.
To recover the full costs of the DCP as required by statute and as outlined
in the preceding sections, DEA is adjusting the fees in accordance with its
existing fee structure as shown in the following table. Under this fee
schedule, controlled substances registrants and chemical registrants in the
same registrant category (e.g., manufacturers) pay the same fee regardless of
the substance or chemical being handled. The table also includes the current
fees paid by each category.
Registrant class
|
New annual fee
|
Current annual fee
|
Manufacturers (controlled substances)
|
$2,293
|
$1,625
|
Manufacturers (chemical)
|
2,293
|
595 (registration)
|
Distributors, Importers/Exporters (controlled substances),
including reverse distributors
|
1,147
|
813
|
Distributors, Importers/Exporters (chemical)
|
1,147
|
595 (registration)
|
Chemical Retail Distributors
|
1,147
|
255 (registration)
|
Dispensers/Practitioners *
|
184
|
130
|
Researchers, Narcotic Treatment Programs
|
184
|
130
|
* Practitioners, mid-level practitioners, pharmacies,
hospitals/clinics, and teaching institutions will pay a fee of $551 for a
three-year registration period.
The fee structure above supplants the current fee structure for controlled
substances and for chemical registrants. These fees go into effect November 1,
2006.
XI. Related Issues and Waivers
Also by this Notice, DEA is removing differentiation between retail and
non-retail distributors of List I chemicals. As of the effective date of this
final rule, both retail and non-retail distributors must pay the same fee as
described above.
DEA also is withdrawing, by this notice, its Notice of Proposed Rulemaking
issued on December 1, 1999, which proposed changes in registration and
reregistration fees for manufacturers, distributors, importers, exporters and
retail distributors of List I chemicals (64 FR 67216, December 1, 1999).
DEA also is rescinding the 1997 Notice of Fee Waiver published on October
17, 1997 (62 FR 53958) which had waived a portion of the registration fee for
non-retail distributors of pseudoephedrine, phenylpropanolamine, and
combination ephedrine drug products.
XII. Effects on Small Businesses
The new registrant fees range from $184 to $2,293 annually per location and
per registered business activity. To assess whether the fees could impose a
significant economic impact on a small entity, DEA considered whether the fees
represent more than one percent of annual revenues for the registrant groups
that qualify as small entities under the Small Business Administration (SBA)
standards. As discussed below, DEA does not anticipate that the increase in
fees will have a significant impact on a substantial number of small entities.
Most DEA registrants qualify as small entities under the SBA standards.
Almost all practitioners, who compose 85 percent of all registrants affected
by this rulemaking, would be considered small. For practitioners and
dispensers, the annual revenues would have to be below $18,400 to have the
annual registration fee or equivalent represent more than one percent of
revenues. Medical practitioners who are granted authority to handle controlled
substances have annual incomes well above that level. Eighty-six percent of
all practitioners have annual incomes in excess of $133,000 (Bureau of Labor
Statistics salary information). For these practitioners, the new annual fee
equivalent of $184 represents less than 0.14 percent of annual income.
Physician assistants, the mid-level practitioner with the lowest average
salary, have annual salaries of about $65,000 (ibid.). For this practitioner
group, which represents about 2 percent of registered practitioners, the
annual fee equivalent equates to 0.28 percent of annual income.
The higher fees also will not impose a significant burden on dispensers.
The average independent pharmacy has sales of almost $2 million according to
the National Association of Chain Drug Stores. The smallest clinics have
revenue streams higher than $18,400. Among dispensers, the greatest impact of
this regulatory fee change will be on chain pharmacies which must hold a
registration for each of their locations. The largest chain holds retail
pharmacy registrations for more than 5,000 locations as well as almost 40
registrations for its distribution centers. However, these businesses do not
qualify as small entities; moreover, for the annual fee to have a significant
economic impact, annual revenues would have to be less than $18,400.
DEA acknowledges the concerns of one commenter that fee increases going
into effect in the middle of a budget cycle represent a non- controllable and,
perhaps, unanticipated, expense for large chain drug stores and chain pharmacy
distribution centers; however, as discussed above, only a small fraction of
registered chain drug stores must renew their DEA registration in the second
half of Calendar Year 2006 and are thus affected by the budgetary implications
of the fee increase. For manufacturers, the 2002 Census data indicate that the
value of shipments for the smallest chemical manufacturers (including drugs)
ranged from $477,000 to $1.1 million per location (establishment). For this
registrant group, therefore, the fee of $2,293 does not represent more than
one percent of revenues and will not impose a significant burden.
The one registrant group for which the fees could exceed one percent of
revenues and have a significant economic impact is chemical distributors.
According to 2004 Duns data, between one percent and 11 percent of the
wholesale sectors handling listed chemicals have revenues below $100,000. DEA
does not collect financial data on its registrants, but it is possible that
some chemical distributor registrants have revenues below $100,000. The
increase in the annual reregistration fee for chemical distributors (from $477
to $1,147) may impose a significant burden on these registrants. The increase
in the initial registration fee (from a subsidized $116 for certain entities
to $1,147 annually) also could be a barrier to entrance for these very small
firms. Based on its experience, however, DEA considers it unlikely that any
firm that lacked the resources to pay the initial registration fee would be
granted a registration because it would be unlikely to have the resources
necessary to prevent diversion of the products. Moreover, the new registration
fees for all wholesale level activities are far less than the estimated annual
fee of $6,400 that chemical registrants would be charged if they were required
to independently fund the chemical portion of the diversion control program,
as previously discussed in the Notice of Proposed Rulemaking (70 FR 69474,
November 16, 2005).
In short, combining all diversion control activities into a single
Diversion Control Program, as mandated by the Consolidated Appropriations Act
of
[[Page 51112]]
2005, results in scale efficiencies and overall reduced costs to all
registrants.
XIII. Regulatory Analysis
Regulatory Flexibility Act
The Deputy Administrator hereby certifies that this rulemaking has been
drafted in accordance with the Regulatory Flexibility Act (5 U.S.C. 605(b))
and has provided above detailed regulatory analysis on the effects of this
rulemaking on small entities. The rule will not have a significant economic
impact on a substantial number of small entities as discussed in Section XII.
While DEA recognizes that this regulation will have a financial effect on
registrants, the change in fees is necessary to fully comply with 21 U.S.C.
886a and related statutes, which mandate that DEA establish the fees at a
level necessary to recover the full costs of the Diversion Control Program.
Executive Order 12866
The Deputy Administrator certifies that this rulemaking has been drafted in
accordance with the principles in Executive Order 12866 Sec. 1(b). DEA has
determined that, because the increased fees will result in a total increase of
less than $70 million annually to be collected through fees (that is the
difference between the amount collected annually under the previous fee
structure and the amount to be collected under the new fee structure), this is
not a significant regulatory action; however, it was reviewed by the Office of
Management and Budget. The fees to be collected represent an increase of less
than $70 million each year for the Fiscal Year 2006-2008 period (based on
estimated fee collection figures and compared to the previous fee schedule)
and are required to fully support the President's budget for the DCP, as
approved by Congress through the appropriations process. Therefore, DEA has no
discretion in the establishment of the new fees and is required by law to
collect registration and reregistration fees of sufficient amount to fully
support the DCP.
Executive Order 12988
This regulation meets the applicable standards set forth in Sec. Sec. 3(a)
and 3(b)(2) of Executive Order 12988 Civil Justice Reform.
Executive Order 13132
This rulemaking does not preempt or modify any provision of state law; 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 will not result in the expenditure by State, local, and tribal
governments, in the aggregate of $118,000,000 or more in any one year, and
will not significantly or uniquely affect small governments. The increase in
fees for private sector entities and individuals will result in a total
increase of less than $70 million annually to be collected through fees (that
is the difference between the amount collected annually under the prior fee
structure and the amount to be collected under the new fee structure).
Moreover, the effect on individual entities and practitioners is minimal. The
majority of the affected entities will pay a fee of $551 for a three year
registration period (the equivalent of $184 per year) which equates to about
0.13 percent of annual income for most practitioners (the vast majority of all
registrants). This rule is promulgated in compliance with 21
U.S.C. 886a that
the full cost of operating the DCP be collected through registrant fees.
Small Business Regulatory Enforcement Fairness Act of 1996
This rule is not a major rule as defined by Sec. 804 of the Small Business
Regulatory Enforcement Fairness Act of 1996. While this rule will result in an
annual effect on the economy of $100,000,000 or more, in that it will result
in the collection of approximately $216-$234 million annually, the increase in
fees (that is, the difference between the amount collected annually under the
previous fee structure compared to the new fee structure) will result in a
total increase of less than $70 million annually. Moreover, it will not result
in a major increase in costs or prices or cause significant adverse effects on
competition, employment, investment, productivity, innovation, or on the
ability of U.S.-based companies to compete with foreign-based companies in
domestic and export markets. This rule is not a discretionary action but
rather responds to statutory clarification as to the activities constituting
the DCP which, by law, must be fully funded through registrant fees (21
U.S.C.
821 and 958 and
21 U.S.C. 886a, respectively). Moreover, the individual effect
on small business registrants is minimal. The majority of registrants
considered to be small businesses are practitioners who will pay a three-year
registration fee of $551 or the equivalent of $184 per year. For the majority
of these practitioners, who compose the vast majority of registrants and
registrants qualifying as small businesses, this annual fee equivalent
represents about 0.13 percent of their annual mean salary. The impact on other
small business entities is described in greater detail in the preceding
regulatory analysis.
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 amended as
follows:
PART 1301--REGISTRATION OF MANUFACTURERS, DISTRIBUTORS AND DISPENSERS OF
CONTROLLED SUBSTANCES
- 1. The authority citation for part 1301 is revised to read as follows:
Authority: 21
U.S.C. 821, 822, 823, 824, 871(b), 875, 877,
886a,
951, 952, 953, 956, 957.
- 2. Section 1301.13 is amended by revising paragraph (e)(1) to read as
follows:
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)
[[Page 51113]]
Business activity
|
Controlled substances
|
DEA application forms
|
Application fee (dollars) |
Registration period (years) |
Coincident activities allowed
|
(i) Manufacturing
|
Schedules I-V
|
New--225
Renewal--225a
|
2,293
2,293
|
1
|
Schedules I-V: May distribute that substance or class for which
registration was issued; may not distribute or dispose 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
|
1,147
1,147
|
1
|
|
(iii) Reverse distributing
|
Schedules I-V
|
New--225
Renewal--225a
|
1,147
1,147
|
1
|
|
(iv) Dispensing or instructing (includes Practitioner,
Hospital/Clinic, Retail Pharmacy, Central fill pharmacy,
Teaching for which registration Institution). |
Schedules II-V
|
New--224
Renewal--224a |
551
551 |
3
|
May conduct research and instructional activities
with those substances 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 |
184
184 |
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 Sec. 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
|
184
184
|
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 Sec. 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
|
184
184 |
1
|
|
(viii) Importing
|
Schedules I-V
|
New--225
Renewal--225a
|
1,147
1,147 |
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
|
1,147
1,147
|
1
|
|
(x) Chemical Analysis
|
Schedules I-V
|
New--225
Renewal--225a |
184
184
|
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 Sec. 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 amended to read as follows:
Authority: 21 U.S.C. 821, 822, 823, 824, 830, 871(b), 875, 877,
886a, 958.
- 4. Section 1309.11 is revised to read as follows:
Sec. 1309.11 Fee amounts.
(a) For each application for registration or reregistration to manufacture
for distribution the applicant shall pay an annual fee of $2,293.
(b) For each application for registration or reregistration to distribute
(either retail distribution or non-retail distribution), import, or export a
List I chemical, the applicant shall pay an annual fee of $1,147.
- 5. Section 1309.12 is revised to read as follows:
Sec. 1309.12 Time and method of payment; refund.
(a) For each application for registration or reregistration to manufacture
for distribution, distribute (either retail distribution or non-retail
distribution), import, or export a List I chemical, the applicant shall pay
the fee when the application for registration or reregistration is submitted
for filing.
[[Page 51115]]
(b) Payment should be made in the form of a personal, certified, or
cashier's check or money order made payable to "Drug Enforcement
Administration.'' Payments made in the form of stamps, foreign currency, or
third party endorsed checks will not be accepted. These application fees are
not refundable.
Dated: August 22, 2006.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. E6-14286 Filed 8-28-06; 8:45 am]
BILLING CODE 4410-09-P
NOTICE: This is an
unofficial version. An official version of these publications may be obtained
directly from the Government Printing Office (GPO).
|