[Federal Register: August 19, 2004 (Volume 69, Number 160)]
[Notices]
[Page 51480-51481]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19au04-74]
[[Page 51480]]
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DEPARTMENT OF JUSTICE
Drug Enforcement Administration
John E. McCrae d/b/a J & H Wholesale; Denial of Application
On December 8, 2003, the Deputy Assistant Administrator, Office of
Diversion Control, Drug Enforcement Administration (DEA), issued an
Order to Show Cause to John E. McCrae d/b/a J & H (J & H) prosing to
deny its application executed on April 29, 2003, for DEA Certificate of
Registration as a distributor of list I chemicals. The Order to Show
Cause alleged that granting the application of J & H would be
inconsistent with the public interest as that term is used in 21 U.S.C.
823(h) and 824(a). The Order to Show Cause also notified J & H that
should no request for a hearing be filed within 30 days, its hearing
right would be deemed waived.
According to the DEA investigative file, the Order to Show Cause
was sent by certified mail to J & H at its address of record in
Middleburg, Florida and was received on behalf of the firm on December
16, 2003. Nevertheless, DEA has not received a request for hearing or
any other reply from J & H, or anyone purporting to represent the
company in this matter.
Therefore, the Deputy Administrator of DEA, finding that (1) thirty
days having passed since the delivery of the Order to Show Cause to the
applicant's address of record, and (2) not request for hearing having
been received, concludes that J & H has waived its hearing right. See
Aqui Enterprises, 67 FR 12576 (2002). After considering relevant
material from the investigative file in this matter, the Deputy
Administrator now enters her final order without a hearing pursuant to
21 CFR 1309.53(c) and (d) and 1316.67 (2003). The Deputy Administrator
finds as follows:
List I chemicals are those that may be used in the manufacture of a
controlled substance in violation of the Controlled Substances Act. 21
U.S.C. 802(34); 21 CFR 1310.02(a). Psedoephedrine and ephedrine are
list I chemicals commonly used to illegally manufacture
methamphetamine, a Schedule II controlled substance.
Phenylpropanolamine, also a list I chemical, is presently a
legitimately manufactured and distributed product used to provide
relief of symptoms resulting from irritation of the sinus, nasal and
upper respiratory tract tissues, and is also used for weight control.
Phenylpropanolamine is also a precursor chemical used in the illicit
manufacture of methamphetamine and amphetamine. Methamphetamine is an
extremely potent central nervous system stimulant, and its abuse is an
ongoing public health concern in the United States.
The Deputy Administrator's review of the investigative file reveals
that by application dated April 29, 2003, J & H sought DEA registration
as a distributor of the list I chemicals ephedrine, pseudoephedrine,
and phenylpropanolamine. The application was submitted on behalf of J &
H by its owner, John E. McCrae (Mr. McRae). There is no evidence in the
investigative file that J & H has sought to modify its pending
application in any respect.
According to the investigative file, on July 11, 2003, a DEA
diversion investigator contacted Mr. McRae regarding J & H's pending
application. It is not clear from the investigative file whether the
July 11 contact was made in person or over the telephone. The diversion
investigator advised Mr. McRae that DEA would need to review a list of
his company's potential customers, products, and suppliers of list I
chemicals. Mr. McRae was informed that list I chemicals are regulated
by DEA because they have been used in the illicit manufacture of
methamphetamine and other controlled substances.
Mr. McRae at one point inquired with DEA investigators about the
timing of any approval of his company's pending registration
application. He stated that he had been approached by customers seeking
to purchase list I chemical products from him, and further added that
he could ``double [his] sales tomorrow'' if his application was
approved. DEA learned that Mr. McRae has no prior experience handling
over-the-counter medications, including list I chemical products.
On August 6, 2003, two DEA diversion investigators conducted an on-
site pre-registration inspection at J & H's proposed registered
location. The location requested by J & H as a proposed DEA registered
address was Mr. McRae's home residence. DEA's inspection revealed that
Mr. McRae sells approximately 150 novelty and general merchandise items
to customers located in various Florida cities, including Jacksonville
and Gainsville. Mr. McRae estimated that the sale of list I chemical
products would constitute approximately ten percent or less of his
company's total sales.
Mr. McRae then provided to DEA personnel a list of customers to
whom listed chemical products would be sold. The customer list was
comprised primarily of convenience and beverage stores, as well as gas
stations. Mr. McRae stated that he began selling novelty items to
convenience stores on a full time basis in March 2003. When asked about
the manner in which he identified his customers, Mr. McRae explained
that he makes site visits to his customers' stores and knows them from
prior transactions. He further stated that on most occasions, he deals
with the owner of a particular establishment and only accepts cash
payment, which usually comes directly from the customers' cash
register. Only occasionally has Mr. McRae accepted a business check in
payment for a sale and he never accepts personal checks.
As noted above, J & H is located at Mr. McRae's residential home.
With respect to security of the premises, DEA investigators found that
the home had a residential alarm system. DEA's inspection further
revealed that the only security devices were contact switches on the
home's front and patio doors and there was no motion detector on the
premises because of the family canine.
With respect to storage of listed chemical products, DEA personnel
were informed that these products would be stored in a plastic tote bin
maintained in the garage of the residence. When DEA investigators
arrived at the residence, they noted that an exterior garage door was
open and a young male friend of Mr. McRae's son entered the home
through the interior garage door. Family members and the visitor were
later seen using the garage's interior door to depart the home.
Pursuant to 21 U.S.C. 823(h), the Deputy Administrator may deny an
application for Certificate of Registration if she determines that
granting the registration would be inconsistent with the public
interest as determined under that section. Section 823(h) requires the
following factors be considered in determining the public interest:
(1) Maintenance of effective controls against diversion of listed
chemicals into other than legitimate channels;
(2) Compliance with applicable Federal, State, and local law;
(3) Any prior conviction record under Federal or State laws
relating to controlled substances or to chemicals controlled under
Federal or State law;
(4) Any past experience in the manufacture and distribution of
chemicals; and
(5) Such other factors as are relevant to and consistent with the
public health and safety.
As with the public interest analysis for practitioners and
pharmacies pursuant to subsection (f) of section 823, these factors are
to be considered in the disjunctive; the Deputy Administrator may rely
on any one or combination of
[[Page 51481]]
factors. and may give each factor the weight she deems appropriate in
determining whether a registration should be revoked or an application
for registration denied. See e.g., Energy Outlet, 64 FR 14269 (1999).
See also Henry J. Schwartz, Jr., M.D., 54 FR 16422 (1989).
The Deputy Administrator finds factors one, four and five relevant
to J & H's pending registration application.
With regard to factor one, maintenance of effective controls
against diversion of listed chemicals into other than legitimate
channels, the DEA pre-registration inspection documented inadequate
security at the proposed registered location of J & H. Mr. McRae
proposes to store listed chemical products in the garage of his
residential location. However, DEA investigators documented a
residential alarm system in which the only security devices are contact
switches on the front and patio doors of the residence. Additionally,
the garage where listed chemicals are to be stored has an exterior
overhead door which appears to be easily accessed, and the interior
garage door appears to be a common passage way into and out of the
residential home for Mr. McRae's family members and their friends.
With regard to factor two, compliance with applicable Federal,
State, and local law, there is no evidence before the Deputy
Administrator that J & H has failed to comply in any respect with such
laws.
With respect to factor four, the applicant's past experience in the
distribution of chemicals, the Deputy Administrator finds this factor
relevant to Mr. McRae's lack of experience in handling of list I
chemical products. In prior DEA decisions to deny pending applications
for DEA registration. See, Matthew D. Graham, 67 FR 10229 (2002);
Xtreme Enterprises, Inc., 67 FR 76195 (2002). Therefore, this factor
similarly weighs against the granting of J & H's pending application.
With respect to factor five, other factors relevant to and
consistent with the public safety, the Deputy Administrator finds this
factor relevant to J & H's proposal to distribute listed chemical
products from a residential location to customers comprised primarily
of convenience stores and gas stations. While there are no specific
prohibitions under the Controlled Substance Act regarding the sale of
listed chemical products to these entities, DEA has nevertheless found
that gas stations and convenience stores constitute sources for the
diversion of listed chemical products. See, e.g., Sinbad Distributing,
67 FR 10232, 10233 (2002); K.V.M. Enterprises, 67 FR 70968 (2002)
(denial of application based in part upon information developed by DEA
that the applicant proposed to sell listed chemicals to gas stations,
and the fact that these establishments in turn have sold listed
chemical products to individuals engaged in the illicit manufacture of
methamphetamine); Xtreme Enterprise, Inc., supra.
In the instant matter, the Deputy Administrator finds curious the
product specific inquiries of J & H's customers with respect to the
applicant's sale of list I chemical products. The Deputy Administrator
is also intrigued by Mr. McRae's reliance on the marketing of these
products to ``double'' his overall sales totals when his own
projections regarding these products were approximately ten percent or
less of total sales.
The high priority placed upon the proposed sale of listed chemical
products by J & H to convenience stores and gas stations, in
conjunction with the specific requests by these entities to obtain
listed chemical products for sale appears to defy current data
regarding the marketing and sale of these products. DEA has previously
accepted expert analysis of sales data regarding listed chemical
products where it was found that establishments such as convenience
stores and gas stations ``have a very small or no likelihood of selling
[listed chemical] products over the counter to consumers seeking
remedies for nasal congestion from allergies, colds or other
conditions.'' See, Branex, Incorporated, 69 FR 8682, 8690-92 (2004).
Consistent with the ruling in Branex, the Deputy Administrator
concludes here that the scale of J & H's proposed sale of list I
chemical products to its customers appears not in keeping with the
normal chain of distribution for goods of this kind.
As noted above, there is no evidence in the investigative file that
J & H ever sought to modify its pending application with respect to the
listed chemical products it seeks to distribute. Among the listed
chemical products the firm seeks to distribute is phenylpropanolamine.
In keeping with prior DEA rulings, the Deputy Administrator also finds
factor five relevant to J & H's request to distribute
phenylpropanolamine, and the apparent lack of safety associated with
the use of that product. DEA has previously determined that an
applicant's request to distribute phenylpropanolamine constitutes a
ground under factor five for denial of an application for registration.
Shani Distributors, 68 FR 62324 (2003). Based on the foregoing, and the
lack of evidence by the applicant to the contrary, the Deputy
Administrator concludes that granting the pending application of J & H
would be inconsistent with the public interest.
Accordingly, the Deputy Administrator of the Drug Enforcement
Administration, pursuant to the authority vested in her by 21 U.S.C.
823 and 28 CFR 0.100(b) and 0.104, hereby orders that the pending
application for DEA Certificate of Registration, previously submitted
by John E. McRae d/b/a J & H Wholesale be, and it hereby is, denied.
This order is effective September 20, 2004.
Dated: July 27, 2004.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. 04-18971 Filed 8-18-04; 8:45 am]
BILLING CODE 4410-09-M