[Federal Register: March 15, 2005 (Volume 70, Number 49)]
[Notices]
[Page 12732-12734]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15mr05-129]
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DEPARTMENT OF JUSTICE
Drug Enforcement Administration
Tysa Management, d/b/a Osmani Lucky Wholesale; Denial of
Application
On July 23, 2004, the Deputy Assistant Administrator, Office of
Diversion Control, Drug Enforcement Administration (DEA), issued an
Order to Show Cause to Mr. Ty Osmani, President, Tysa Management,
d.b.a. Osmani Lucky Wholesale (hereinafter referred to as ``OLW'')
proposing to deny its application executed on October 15, 2003, for DEA
Certificate of Registration as a distributor of list I chemicals. The
Order to Show Cause alleged that granting the application of OLW would
be inconsistent with the public interest as that term is used in 21
U.S.C. 823(h).
According to the DEA investigative file, the Order to Show Cause
was sent by certified mail to OLW at its proposed registered location
in Denison, Texas and was received on August 2, 2004. According to the
investigative file, DEA received a letter from Tysa Osmani (Mr. Osmani)
dated August 20, 2004, waiving the applicant's right to a hearing and
requesting that the firm be issued a registration to distribute
ephedrine.
Accordingly, the Deputy Administrator finds that OLW has waived its
hearing right. See, Aqui Enterprises, 67 Fed. Reg. 12567 (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(b) and (d). 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). As noted in previous DEA final
orders, Pseudoephedrine and ephedrine are list I chemicals commonly
used to illegally manufacture methamphetamine, a Schedule II controlled
substance . Methamphetamine is an extremely potent central nervous
system stimulant and its illicit manufacture and abuse are ongoing
public health concerns in the United States. See e.g., Direct
Wholesale, 67 FR 11, 654 (2004); Yemen Wholesale Tobacco and Candy
Supply, Inc., 67 FR 9,997 (2002); Denver Wholesale, 67 FR 99,986
(2002).
On April 6, 2004, the State of Oklahoma enacted House Bill 2176.
Among its provisions, the newly enacted legislation has designated
pseudoephedrine tables as a Schedule V controlled substance under
Oklahoma law. This provision further mandates that pseudoephedrine
tablets sold only from licensed pharmacies and requires customers
seeking to purchase this product to present photo identifications and
sign for their purchases. As a result, it is presently prohibited under
Oklahoma law for persons to sell pseudoephedrine tables from
convenience stores or other non-pharmacy locations.
The Deputy Administrator's review of the investigative file reveals
that on October 15, 2003, Mr. Osmani submitted an application for DEA
Registration on behalf of OLW. OLW sought DEA registration as a
distributor of the list I chemicals ephedrine and pseudoephedrine. OLW
is a Limited Liability Corporation which became incorporated in Texas
on October 23, 2003, and Mr. Osmani and his wife are the company's only
employees.
On November 13, 2003, DEA diversion investigators conducted an on-
site preregistration inspection at OLW's proposed registered location
in Denison, Texas. The location requested by OLW as a DEA-registered
premise was a former gas station establishment. DEA's investigation
revealed that in addition to its proposed registered location, Mr.
Osmani owns the following Denison-area convenience stores. Lucky Liquor
& Discount Tobacco; Lucky Stop 2; and, Lucky Stop 4.
Mr. Osmani is also the owner of two Lucky Stop convenience stores
located in Cartwright and Durant, Oklahoma. DEA's investigation
revealed that as of January 2004, Cartwirght, Oklahoma had an estimated
population of 13,549. Each of Mr. Osmani's stores sell typical
convenience store items including tobacco products, candy, automobile
maintenance products and T-shirts.
Mr. Owmani informed DEA investigators that he would operate as a
wholesale distributor to his five convenience stores, which he
identified as his only customers. He further discussed plans to
distribute certain listed chemical products, including Mini-Thin
ephedrine tablets in six-count packets and 60-count bottles, as well as
Max Brand pseudoephedrine products, also in six-count packets and 60-
count bottles. Mr. Osmani estimated that these products would make up
five to fifteen percent of OLW's total sales. Mr. Osmani further
informed DEA investigators that OLW did not own any deliver trucks and
employees from the two Oklahoma convenience stores would drive to OLW's
Denison location to pick up list I chemical products for delivery to
the Oklahoma business establishment.
According to the investigative file, as of July 1, 2003,
distributors of pseudoephedrine products conducting business in
Oklahoma were required to obtain a registration with the Director of
the Oklahoma Bureau of Narcotics and Dangerous Drugs Control (the
Bureau). 63 O.S. 2001, Section 2-302. DEA's investigation has revealed
that as of January 7, 2004, neither Mr. Osmani nor OLW were registered
with the Bureau to handle pseudoephedrine.
During the aforementioned onsite inspection by DEA, Mr. Osmani also
informed investigators that his suppliers for listed chemicals were
Silver Star and Import Warehouse, Incorporated, both of Dallas, Texas.
However, when DEA investigators conducted verification checks with
OLW's proposed suppliers on November 17, 2003, the owner of Import
Warehouse stated that he would not be supplying listed chemicals
products to OLW; and, the owner of Silver Star informed DEA personnel
that he had planned to supply only
[[Page 12733]]
ephedrine to OLW and not pseudoephedrine.
On November 19, 2003, DEA investigators requested purchase records
from the two aforementioned establishments. The owner of Import
Warehouse provided purchase records dating from May 23, 1998 to
September 27, 2000, for sales of listed chemicals to two of Mr.
Osmani's Denison-area convenience stores (Lucky Stop 2 and
Lucky Stop 4). The records revealed that with the exception of
July and August, 1998, Mr. Osmani ordered forty-eight, 60-count bottles
of Mini 2 Way 200mg. Guaifenesin nearly every month during the above
time period. In addition, Mr. Osmani ordered four cases (144 bottles
per case) of Max Alert Pseudo (pseudoephedrine) 60-count in July 1998.
One month later, Mr. Osmani ordered an additional 192 bottles of Max
Alert Pseudo.
The owner of Silver Star also provided purchase records dating from
April 24, 2001 to August 28, 2003, for the sale of listed chemical
products to two of Mr. Osmani's Denison-area convenience stores (Lucky
Liquor & discount Tobacco and Lucky Stop 4). The records
revealed that on eleven separate occasions from November 8, 2001 to
August 28, 2003, Mr. Osmani ordered a case (144 bottles per case) of
200-count Guaifensin 12.5mg; in April 2001 and again in November 2002,
Mr. Osmani purchased 288 bottles of this product; on April 19, 2003,
Mr. Osmani purchased 72 (60-count) bottles of Max Brand 2-Way
ephedrine.
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 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.,
ANM Wholesale, 69 FR 11,652 (2004); Energy Outlet, 64 FR 14269 (1999).
See also Henry J. Schwartz, Jr., M.D., 54 FR 16,422 (1989).
The Deputy Administrator finds factors one, two, four and five
relevant to OLW's pending registration application.
With regard to factor one, maintenance of effective controls
against diversion of listed chemicals into other than legitimate
channels, the Deputy Administrator finds substantial evidence in the
investigative file that OLW, through its owner Ty Osmani, has
participated in the unlawful diversion of pseudoephedrine having
reasonable cause to believe that it would be used to manufacture
illicit methamphetamine. Mr. Osmani has purchased large quantities of
pseudoephedrine and ephedrine products and distributed these products
through his convenience stores located in Texas and Oklahoma. Prior to
2004, these areas have been known for their numerous seizures involving
clandestine methamphetamine laboratories. In most instances, the
primary sources for the diversion of these products are convenience
stores and other ``non-traditional retailers of over-the-counter drug
products.'' Al-Alousi, Inc., 70 FR 3561 (2005). See, Sinbad
Distribution, 67 FR 10232, 10233 (2002). Therefore, factor one weights
against the granting of OLW's pending application for registration.
With regard to factor two, compliance with applicable Federal,
State, and local law, DEA's pre-registrant inspection revealed that as
of July 1, 2003, distributors of pseudoephedrine products conducting
business in Oklahoma were required to register with the state Bureau of
Narcotics and Dangerous Drugs Control (the Bureau) pursuant to 63 O.S.
2001, Section 2-302. Mr. Osmani and OLW's failure to obtain state
registration to handle listed chemicals is relevant under factor two,
and also weighs against the granting of the pending application for
registration.
With regard to factor four, past experience in the manufacture and
distribution of chemicals, and factor five, such other factors relevant
to and consistent with the public safety, the Deputy Administrator
finds these factors relevant to Mr. Osmani and OLW's purchase of
quantities of listed chemical products for distribution to, and sale by
his convenience stores in Texas and Oklahoma. These listed chemical
products were for the most part, purchased by OLW on a monthly basis
and appeared to be far in excess of the expected demand for such
products. As noted in previous final orders, 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 convenience stores constitute sources for the
diversion of listed chemical products. Sinbad Distributing, supra at
10233; 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).
DEA has found persuasive, expert testimony in the area of
statistical analysis of convenience stores and their sale of
pseudoephedrine. Branex, Inc., 69 FR 8,682 (2004); Express Wholesale,
69 FR 62086, 62088 (2004). In analyzing the expected sale of listed
chemical products in the State of Oklahoma, a consultant in marketing
information and databases offered expert testimony through the use of
the 1997 United States Economic Census of Retail Trade and tabulated
data which indicated that ``over 97% of all sales of non-prescription
drug products,'' including non-prescription cough, cold and nasal
congestion remedies, occur in drug stores and pharmacies, supermarkets,
large discount merchandisers, mail-order houses and through electronic
shopping. The markeing consultant characterized these five retail
industries as ``the traditional marketplace where such goods are
purchased by ordinary customers.'' Express Wholesale, supra.
The market consultant also analyzed national data specific to the
sale of over-the-counter, non-prescription drugs containing
pseudoephedrine by convenience stores which he characterized as a
``nontraditional market'' for the sale of listed chemical products. He
further determined ``* * * that a very small percentage of the sales of
such goods occur in convenience stores--only about 2.6% of the HABC
[Health and Beauty Care] category of merchandise or 0.05% of total in-
store (non-gasoline) sales.'' The marketing consultant concluded that
``[c]onveniece stores, therefore, definitely constitute a `non-
traditional' market for the sale of over-the-counter, non-prescription
drug pesudoephedrine products.''
[[Page 12734]]
The marketing consultant further explained that this information
support's DEA's conclusion that pseudoephedrine products distributed to
this nontraditional market greatly exceeded the normal demand for such
products at such retail outlets. He agreed that such excessive sales
could be purchases of listed chemical products that were diverted to
illicit uses. With respect to Oklahoma wholesale pseudoephedrine sales
of several distributors and over 300 of their retail customers, all of
which were convenience stores, a July 2002 analysis by the marketing
consultant led to the conclusion ``that without evidence of the
existence of immense numbers of legitimate customers, it was likely
that the massive inventories of pseudoephedrine products purchased by
these Oklahoma stores were being turned to illegal uses.'' Express
Wholesale, supra.
With respect to the instant matter, Mr. Osmani and OLW have
similarly amassed large quantities of pseudoephedrine and ephedrine
products. The frequency and quantity of listed chemicals purchased by
OLW from 1998 to 2003 defined all available and conventional marketing
data for the expected sale of these products. Given the demonstrated
lack of legitimate demand for these products when sold from convenience
stores, the Deputy Administrator is left with the conclusion that Mr.
Osmani and OLW purchased pseudoephedrine and ephedrine products for
sale to individuals involved in the illicit manufacture of
methamphetamine.
As noted above, effective April 6, 2004, Oklahoma enacted House
Bill 2176, titled the ``Oklahoma Methamphetamine Reduction Act of
2004.'' This provision includes the requirement that the sale of
pseudoephedrine tablets are now restricted to licensed pharmacies. As
in a prior DEA final order, the Deputy Administrator finds in the
instant matter that OLW's proposed distribution of listed chemicals
through its convenience stores is no longer legally viable in Oklahoma.
See, Express Wholesale, supra at 62089.
A review of early data for 2004 reveals that the newly enacted laws
have resulted in an apparent reduction in the number of seizures
involving clandestine methamphetamine labs in Oklahoma. These
developments in Oklahoma are encouraging and represent another
important step in the ongoing battle to curb methamphetamine abuse in
the United States. In keeping with this positive trend, DEA must also
act in an appropriate fashion to ensure that listed chemicals are not
diverted. The Deputy Administrator notes that while Mr. Osmani and OLW
seek DEA registration in the State of Texas, the company also seeks to
distribute listed chemicals from convenience stores located in
Oklahoma. Based solely on the population statistics of Cartwright and
Durant, Oklahoma, it would appear at first glance that the market for
over-the-counter drug products in these cities is relatively
insignificant. However, as the record before the Deputy Administrator
clearly demonstrates, the relatively small size of the Oklahoma markets
serviced by OLW is not a significant factor since Mr. Osmani appears
intent on purchasing extraordinarily large quantities of listed
chemical products without regard to market size. These purchasing
practices indicate that OLW would willingly accommodate persons
involved in the illicit methamphetamine trade. Based on the foregoing,
the Deputy Administrator concludes that granting the pending
application of OLW 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 Tysa Management, d.b.a. Osmani Lucky Wholesale be, and it hereby is,
denied. This order is effective April 14, 2005.
Dated: February 24, 2005.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. 05-5068 Filed 3-14-05; 8:45 am]
BILLING CODE 4410-09-M