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Established Assessment of Annual Needs for the List I
Chemicals Ephedrine, Pseudoephedrine, and Phenylpropanolamine
for 2008
FR Doc 07-6218 [Federal Register: December 27, 2007 (Volume 72, Number 247)]
[Notices] [Page 73361-73367] From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27de07-81]
DEPARTMENT OF JUSTICE
Drug Enforcement Administration
[Docket No. DEA-306E]
Established Assessment of Annual Needs for the List I Chemicals Ephedrine,
Pseudoephedrine, and Phenylpropanolamine for 2008
AGENCY: Drug Enforcement Administration (DEA), Justice.
ACTION: Notice of Assessment of Annual Needs for 2008.
SUMMARY: This notice establishes the initial year 2008 Assessment of
Annual Needs for certain List I chemicals in accordance with the Combat
Methamphetamine Epidemic Act of 2005 (CMEA), enacted on March 9, 2006.
EFFECTIVE DATE: December 27, 2007.
FOR FURTHER INFORMATION CONTACT: Christine A. Sannerud, PhD, Chief,
Drug & Chemical Evaluation Section, Drug Enforcement Administration,
Washington, DC 20537, Telephone: (202) 307-7183.
SUPPLEMENTARY INFORMATION:
Background and Legal Authority
Section 713 of the Combat Methamphetamine Epidemic Act of 2005 (CMEA) (Title
VII of Pub. L. 109-177) amended section 306 of the Controlled Substances Act
(CSA) (21 U.S.C. 826)
requiring that the Attorney General establish quotas to provide for the annual
needs for ephedrine, pseudoephedrine, and phenylpropanolamine. Section 715 of
the CMEA amended 21
U.S.C. 952 by adding ephedrine, pseudoephedrine and phenylpropanolamine to
the existing language concerning importation of controlled substances.
The 2008 Assessment of Annual Needs represents those quantities of ephedrine,
pseudoephedrine, and phenylpropanolamine which may be manufactured domestically
and/or imported into the United States in 2008 to provide adequate supplies of
each chemical for: The estimated medical, scientific, research, and industrial
needs of the United States; lawful export requirements; and the establishment
and maintenance of reserve stocks.
The responsibility for establishing the assessment has been delegated to the
Administrator of the DEA by 28 CFR 0.100. The Administrator, in turn, has
redelegated this function to the Deputy Administrator, pursuant to 28 CFR 0.104.
On September 20, 2007, a notice entitled, "Assessment of Annual Needs for the
List I Chemicals Ephedrine, Pseudoephedrine, and Phenylpropanolamine for 2008:
Proposed'' was published in the Federal Register (72 FR 53911). This notice
proposed the initial 2008 Assessment of Annual Needs for ephedrine (for sale),
ephedrine (for conversion), pseudoephedrine (for sale), phenylpropanolamine (for
sale) and phenylpropanolamine (for conversion). All interested persons were
invited to comment on or object to the proposed assessments on or before October
11, 2007.
Comments Received
DEA did not receive any comments or objections from the more than 1,050 DEA-registered
manufacturers and importers directly impacted by this notice. However, DEA did
receive one comment from a law firm representing a DEA-registered distributor of
nonprescription (over-the- counter (OTC)) products containing ephedrine,
pseudoephedrine, or phenylpropanolamine. When sold at retail, these products are
referred to as scheduled listed chemical products.\1\ This same commenter
commented to DEA's proposed 2007 Assessment of Annual Needs which was published
in the Federal Register on October 19, 2006 (71 FR 61801). The comment submitted
to this notice is virtually identical to that previously considered by DEA in
that the comment included the same reports. However, DEA notes that the current
comment includes one new report and one new letter. The new report was prepared
by an economist who was retained by the DEA-registered distributor being
represented by the law firm. The letter was prepared by the statistician whose
report was submitted as part of this commenter's comments to the 2007 proposed
assessment.
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\1\ Title
21 U.S.C. 802(45) defines a scheduled listed chemical product as "a
product that contains ephedrine, pseudoephedrine, or phenylpropanolamine; and
* * * may be marketed or distributed lawfully in the United States under the
Federal Food, Drug, and Cosmetic Act as a nonprescription drug.''
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The commenter's comments related to DEA's proposed assessments for ephedrine
(for sale) and pseudoephedrine (for sale). These assessments are discussed below
within
[[Page 73362]]
the context of the comment received. As DEA did not receive any comments on
its proposed Assessment of Annual Needs for ephedrine (for conversion),
phenylpropanolamine (for conversion), and phenylpropanolamine (for sale), DEA is
finalizing these values as proposed.
Comments Regarding DEA's Proposed Assessments for Ephedrine (For Sale) and
Pseudoephedrine (For Sale)
The commenter indicated its belief that the proposed ephedrine assessment was
insufficient to meet market demands for ephedrine- containing OTC products. The
commenter also questioned the sufficiency of the assessment for pseudoephedrine.
The commenter included in its comment a report from a statistician, a report
from an economist, and a report from a physician to assess the impact of the
proposed quota on medical, industrial, scientific and other legitimate demand
for the two chemicals. The commenter's comments, and DEA's responses, are
discussed below.
Economic Impact Analysis and Impact on Small Businesses
The commenter claimed that DEA underestimated the economic impact of the
proposed quota limits. The commenter also claimed that DEA failed to consider
the quota impact on small businesses. To support its claims, the commenter
provided a new report from an economist. The commenter claimed that "DEA has
violated statutory requirements by relying on inaccurate and incomplete data to
produce its economic impact.'' Based on the new report, the commenter asserted
that the economic impact of DEA's proposal "* * * will be a reduction of
revenues of $2 billion dollars per year (from the effective ban on ephedrine
product sales) and will result in the termination of 25-50 American workers'
jobs per firm.''
DEA Response: The economic information submitted by the commenter in support
of its claims is flawed. The commenter has made the fundamental mistake of
assuming that its sales are representative of the industry as a whole, an
assumption which broader industry numbers do not support. In addition, the
commenter has overstated the number of convenience stores that are selling these
products, which further magnifies the errors in its analyses. The commenter's
estimates of the convenience store market for scheduled listed chemical products
are shown in Table 1.
Table 1.--Commenter's Estimates of Annual Value of the Ephedrine Market
|
Lower bound
|
Upper bound
|
Ephedrine
|
$166 million
|
$237 million
|
Number of Convenience Stores Selling the Products* |
72,500
|
|
* Commenter did not provide an upper bound.
These numbers are at serious variance with the most comprehensive data
available on sales of nonprescription medications (OTC drugs) at convenience and
other nonconventional outlets and with estimates of the total size of the
ephedrine market; nonconventional outlets include convenience stores, gas
stations with convenience stores, gas stations without convenience stores,
liquor stores, and novelty and gift stores. Conventional outlets include grocery
stores, drug stores, discount stores, superstores and warehouse stores, and
general merchandise stores. Internet and mail order stores are a third category.
Table 2 presents data on the value of nonprescription medication sales at
various retail sectors based on the 2002 Economic Census of the Retail Trade,
Product Line, the most recent Census data. The table includes the number of
establishments in the sector, the number of those establishments that sell
nonprescription drugs, the value of nonprescription sales in the sector, and the
value of all sales in drug, health, and beauty aids. Nonprescription drugs are a
subset of the larger category; the value of the broader category is listed
because it was used to derive an estimate of sales of nonprescription drugs for
sectors whose sales the Census did not disaggregate. The final column lists the
percentage of an establishment's sales that the Census reported nonprescription
drugs represent for those establishments that sell the products.
Table 2.--Census Data on Product Line Sales by Sector [Thousand $]
Retail sector
|
Number of establishments
|
Number of establishments w/OTC drugs |
OTC drug sales 2002
|
All drug health, and beauty aids |
OTC drugs as % of all sales
|
Grocery
|
66,150
|
26,029
|
$2,670,914
|
$35,172,224 |
1.3
|
Convenience Store
|
29,212
|
12,399
|
133,263
|
443,116
|
1.6
|
Specialty Food
|
24,485
|
194
|
2,551
|
24,045
|
1.6
|
Liquor Store
|
28,957
|
1,496
|
19,344
|
89,541
|
2
|
Drug and Personal Care
|
81,797
|
36,797
|
8,348,218
|
140,759,601
|
4.7
|
Gas Station with Convenience Store
|
93,691
|
* 24,597
|
* 248,082
|
824,904
|
***< 0.4
|
Gas Station
|
27,755
|
* 685
|
* 7,488
|
70,577
|
***< 0.1
|
Discount Store
|
5,650
|
2,079
|
1,439,227
|
22,025,430
|
1.1
|
Superstore + Club
|
2,912
|
2,758
|
2,270,530
|
21,066,107
|
1.2
|
Other general merchandise
|
28,546
|
11,840
|
167,951
|
3,357,825
|
1.2
|
Gift and novelty
|
35,795
|
* 1,686
|
* 47,973
|
159,515
|
***< 1
|
Electronic and Mail Order
|
15,910
|
250
|
565,305
|
29,618,519
|
13
|
Total
|
440,860
|
120,810
|
15,920,846
|
253,611,404
|
|
All Nonconventional **
|
215,410
|
40,863
|
456,150
|
1,587,653
|
|
* OTC sales not listed separately in Census data; OTC value estimated based
on percentage of OTC to all drug, health, and beauty products sold at regular
convenience stores (i.e., convenience stores that are not part of gas stations).
Number of stores estimated using ratio of regular convenience stores that carry
OTC to those that cover all drug, health, and beauty aids.
** Nonconventional outlets include convenience stores, gas stations with and
without convenience stores, liquor stores, and novelty stores.
*** Percentage is the percentage that all drug, health, and beauty aid
products sales represent of total sales; the nonprescription medications are a
subset of these sales.
The nonconventional outlets--convenience stores, gas stations with and
without convenience stores, novelty stores, and liquor stores--make up only
about three percent of the total market for nonprescription drugs. Using A.C.
Nielsen data \2\ on the growth of the OTC market from 2002 to 2006 and the
Census data on the value of the market, the annual value of nonprescription drug
sales for nonconventional outlets in 2006 is estimated to be about $532 million
and the total market for all retail sectors is about $18 billion.
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\2\ A.C. Nielsen data from Consumer Healthcare Products
Association (http://www.chpainfo.org/ChpaPortal/PressRoom/Statistics/OTCSalesbyCategory.htm
).
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Nonprescription drugs contain a wide range of medications. Data from the
Consumer Healthcare Products Association and A.C. Nielsen indicate that cough
and cold medications make up about 27 percent to 40 percent of the total OTC
market, or about $4.8 billion to $7.3 billion in 2006 (other major groups
include analgesics and heartburn medications).\3\ The cough and cold medications
include a variety of drugs, from cough syrups to antihistamines. Because there
is no reason to believe that nonconventional outlets selling nonprescription
drugs sell more or less cough or cold medications in proportion to other
nonprescription drugs than any other retail outlet, it is reasonable to estimate
that the total value of their sales for all cough and cold drugs in 2006 was
approximately $142 million to $215 million (3 percent of the total), or somewhat
less than the commenter estimated the market for ephedrine alone to be.
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\3\ The A.C. Nielsen data were used to estimate only a ratio
of the cough and cold medication to the total OTC medication market. The total
value of the market was estimated based on the 2002 Census data inflated to
2006 dollars. The Nielsen data do not include Wal- Mart and may not include
many convenience stores. In addition, the Nielsen data include a number of
product lines that either are not nonprescription drugs (e.g., toothpaste) or
mix nonprescription drugs and other products (e.g., first aid ointments and
bandaids). The lower value of the range is based on inclusion of every OTC
product line listed in the Nielsen data except toothpaste and sunscreens. The
higher value excludes eye products, first aid, foot preparations, oral care,
sun products, and undefined "others.'' Note that the higher value will
overstate the value of the cough and cold medication market because it
includes some non-drug products, such as cough drops.
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Ephedrine and pseudoephedrine constitute a subset of the cough and cold
medication market. DEA has not been able to obtain any data on what percentage
of the market they represent. In 2006, estimates of the retail value of products
containing one of the chemicals that DEA and the Food and Drug Administration
obtained from market researchers ranged from $500 million to $1.5 billion, but
the estimates involved considerable uncertainty; the estimates were also based
on the market before many manufacturers began to market new products that
substituted phenylephrine for pseudoephedrine. Data from market research firm
Information Resources, Inc. on the top 200 over-the-counter brands (including
private label products) sold through grocery stores, drug stores, and mass
market stores in 2006 indicate that at least 65 percent of the cough and cold
medications do not contain pseudoephedrine; if private label products contain
pseudoephedrine at the same rate as brand name products, at least 78 percent of
the cough and cold medication sales do not contain pseudoephedrine.\4\ No
product in the top 200 appears to contain ephedrine; the sales value of the
200th product was about $20.4 million.
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\4\ Data available at http://www.drugtopics.com. Note that
the
data probably do not cover convenience stores and other
nonconventional outlets. Even the lower estimate of the pseudoephedrine part
of the market is overstated because it includes sales values for product lines
that contain 4 to more than 20 products, only one of which contains
pseudoephedrine.
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The cough and cold medication sector, as defined by A.C. Nielsen, includes a
wide variety of tablets, gel capsules, liquids, and cough drops, many of which
do not contain either ephedrine or pseudoephedrine. Even if the entire market
sector consisted of scheduled listed chemical products, the estimates the
commenter submitted and shown in Table 1 are clearly overstated.
Data developed by IMS Health Government Solutions for the Assessment of
Annual Needs for 2007, \5\ which used a range of industry sources, plus data
from a confidential source, indicate that the ephedrine market is at most
between 2 percent and 6.6 percent the size of the pseudoephedrine market (i.e.,
the value of sales of ephedrine products represent 2 percent to 6.6 percent of
the value of sales of pseudoephedrine products). In a comment on a previous
rule,\6\ the commenter submitted estimates that implied that ephedrine sales at
convenience stores to which it distributes were about 20 percent of the value of
pseudoephedrine sales at convenience stores to which it distributes. Table 3
shows the commenter's implied size of the pseudoephedrine market at convenience
stores.
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\5\ As discussed in DEA's October 19, 2006, "Assessment of
Annual Needs for the List I Chemicals Ephedrine, Pseudoephedrine, and
Phenylpropanolamine for 2007: Proposed'' (71 FR 61801) and a subsequent notice
establishing the assessment for 2007 (72 FR 53908, September 20, 2007), since
the manufacture and importation of ephedrine, pseudoephedrine, and
phenylpropanolamine were not previously regulated through the establishment of
an assessment of annual needs, DEA obtained assistance from a private
independent contractor, IMS Health Government Solutions, to develop the
initial estimate of the medical needs of the United States of ephedrine and
pseudoephedrine. IMS provided DEA with two reports: "Methodology Used in
Developing Preliminary Estimates of Ephedrine and Pseudoephedrine 2005
Legitimate Use'' (and "2005 Ephedrine/ Pseudoephedrine Legitimate Medical Use
Methodology and Final Report'' (July 3, 2007). Both reports may be found at
http://www.deadiversion.usdoj.gov/meth/index.html .
\6\ Comment to "Import and Production Quotas for Certain
List I Chemicals'' (72 FR 37439, July 10, 2007) [Docket No. DEA-293, RIN
1117-AB08] available at http://www.regulations.gov.
[[Page 73364]]
Table 3.--Commenter's Implied Value of the Pseudoephedrine (PSE) Sales at
Convenience Stores
Ephedrine/PSE
|
Implied PSE market (ephedrine market = $166m)
|
Implied PSE market (ephedrine market = $237m)
|
Ephedrine = 2% of PSE Sales
|
$8.3 billion
|
$11.85 billion
|
Ephedrine = 6.60% of PSE Sales
|
$2.5 billion
|
$3.6 billion
|
Ephedrine = 20% of PSE Sales
|
$830 million
|
$1.185 billion
|
Because convenience store sales of these products represent only 3 percent of
all sales, even using the lowest number the commenter provided (ephedrine sales
of $166 million representing 20 percent of pseudoephedrine sales), the
commenter's estimates produce an implied value of the total ephedrine and
pseudoephedrine nonprescription market across all retail sectors of $33 billion,
or between 4.5 and 7 times the actual retail market for all cough and cold
medications and almost twice the size of the entire nonprescription drug retail
market of $18 billion.
The commenter claimed that the ephedrine quota, which no importer or
manufacturer objected to, would lead to job losses. Even the commenter's own
overestimates indicate that job losses are highly improbable. If all ephedrine
products were removed from the market at these outlets, which is unlikely, the
daily sales loss would be very low even at the commenter's exaggerated levels.
At more realistic market values, the daily losses would be trivial. Table 4
presents the average value of daily sales using the commenter's estimates of the
value of ephedrine sales ($166 million to $237 million) and the number of
convenience stores selling the products based on the commenter's estimate
(72,500), Census data (41,000), and DEA data (28,000). The table also presents
the more reasonable level of daily sales based on an estimate of the value of
ephedrine sales at nonconventional outlets ($24 to $36 million). The more
reasonable estimates may still be overestimates because they are based on a
series of conservative assumptions: That nonconventional outlets sell 3 percent
of nonprescription drugs or $532 million (Census data), that cough and cold
medications represent 27 to 40 percent of those sales (Consumer Healthcare
Products Association and A.C. Nielsen data) or $142 million to $215 million, and
that ephedrine products represent 20 percent of those sales (commenter's implied
estimate assuming that only ephedrine and pseudoephedrine products are sold in
this category) or $24 million to $36 million.
Table 4.--Estimated Daily Sales of Ephedrine-Containing Products at
Convenience Stores
Source of No of outlet estimate
|
Estimate No of outlets
|
Estimated total value
of ephedrine nonconventional outlet market
|
Daily sales of ephedrine products
|
Commenter
|
72,500
|
$166-$237 million ephedrine
|
$6.27-$8.96
|
Census
|
41,000
|
|
11.09-15.84
|
DEA Estimate
|
\7\ 28,000
|
|
16.24-23.19
|
Commenter
|
72,500
|
24-36 million ephedrine
|
0.89-1.36
|
Census
|
41,000
|
|
1.58-2.40
|
DEA Estimate
|
28,000
|
|
2.32-3.51
|
It is not reasonable to think that this level of sales loss, which represents
considerably less than the cost of a single car buying a tank of gasoline, would
affect employment as the commenter claimed. With about 28,000 convenience stores
continuing to sell these products, there is no reason to think that all or even
most such sales will be lost. As DEA stated in its Interim Final Rule
implementing the procedures for import and production quotas for ephedrine,
pseudoephedrine, and phenylpropanolamine (72 FR 37439, July 10, 2007), its
concern is with a limited number of high dosage unit products that are sold
almost exclusively through nonconventional outlets and the Internet, not with
low dosage unit products that are sold through both conventional and
nonconventional outlets.
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\7\ The Combat Methamphetamine Epidemic Act of 2005 states
that it is unlawful for any person who is a regulated seller to knowingly or
recklessly sell at retail scheduled listed chemical products in violation of
the requirements of 21 U.S.C. 830(e), including the requirement that regulated
sellers self-certify to the Attorney General regarding compliance with the
provisions of the Act (21 U.S.C. 842(a)(13)). As of October 12, 2007, 18,044
convenience stores had self-certified; DEA has identified another 10,000 that
are selling the products.
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The commenter's claim that eliminating sales of ephedrine products at
convenience stores, which neither DEA's Interim Final Rule establishing the
procedures for implementation of quotas for ephedrine, pseudoephedrine, or
phenylpropanolamine, nor this notice would do, would harm the public is also not
supported. The IMS Health Government Solutions study that DEA used to adjust the
Assessment of Annual Needs for 2007 indicated that ephedrine sales at
convenience stores had dropped after states implemented controls on sales, but
that sales at conventional stores increased; total sales of ephedrine products
actually grew. Although this change may produce minor harm to convenience
stores, or serious harm to the commenter, as it claimed, economically it is a
transfer. Other stores and distributors have benefited by the shift, and the
economy as a whole has not been affected. DEA notes that most stores in both
categories--conventional and nonconventional outlets--are small businesses.
The commenter asserted that DEA had failed to consider the impact on small
businesses. The only small entities directly affected by the Assessment of
Annual Needs are manufacturers and importers, none of whom filed comments or
objections to the assessment. The increased sales of ephedrine products shown in
the IMS Health Government Solutions data indicate that these entities have not
been harmed. The indirect effects of the assessment on downstream users, such as
the commenter and its customers, are not subject to review under the
[[Page 73365]]
Regulatory Flexibility Act or Executive Order 12866. In any case, as noted
above, the data collected indicate that if some small entities have lost sales,
others have gained sales, which is in economics terms a transfer. The total
sales of ephedrine products appears to have increased (in terms of quantity, not
value), which is why DEA adjusted the ephedrine assessment upward when
establishing the assessment for ephedrine for 2007 (72 FR 53908, September 20,
2007). If the manufacturers and importers provide data that indicates that the
ephedrine market is continuing to grow, DEA will adjust future assessments to
meet the medical, scientific, research, industrial, and other legitimate needs
of the United States.
In conclusion, the commenter has overestimated the size of the market for
ephedrine products at convenience stores by a factor of at least six to ten, has
made exaggerated claims about the impact on jobs when the daily sales values
even using the commenter's overestimated claims are low, and has claimed damage
to the economy when the data indicate that increased sales of the products at
conventional outlets have more than offset sales losses at nonconventional
outlets. Whatever effect the statutorily mandated restrictions have had on the
commenter or nonconventional outlets, the cough and cold medication market
continues to grow; there is no evidence to support the commenter's claim of a
cost to the United States economy.
Use of the IMS Health Government Solutions Report
The commenter refers to the IMS Health Government Solutions study referenced
above on numerous occasions throughout its comment. As discussed in DEA's
October 19, 2006, proposed 2007 Assessment of Annual Needs Notice (71 FR 61801)
and its September 20, 2007, established 2007 Assessment of Annual Needs Notice
(72 FR 53908), DEA obtained assistance from a private independent contractor,
IMS Health Government Solutions, to develop the initial estimate of the medical
needs of the United States for both ephedrine and pseudoephedrine. The results
from IMS' initial study were utilized by DEA to propose the 2007 Assessment of
Annual Needs. The commenter claimed that the IMS report underestimated
legitimate demand for ephedrine sold in OTC drugs for respiratory ailments via
convenience stores. The commenter further claimed that the study did not
adequately address sales of ephedrine- based OTC drug products through the
convenience store channel of distribution. The commenter claimed that since DEA
relied on underestimated values of the medical need (as provided by IMS) when it
established the 2007 Assessment of Annual Needs, these same values, as proposed
for the 2008 assessment, would lead to inadequate supplies of drug products
containing ephedrine and pseudoephedrine.
DEA Response: The commenter's belief that the IMS Health Government
Solutions report underestimated the medical needs of ephedrine and
pseudoephedrine OTC drug products is flawed in the same way that its belief
regarding the economic impact of this notice is flawed, as discussed above. The
commenter's conclusion about the IMS Health Government Solutions report is
predicated on the assumption that the commenter's sales are representative of
the industry as a whole. As explained below, this conclusion is not supported by
applications that the DEA has received for individual import, manufacturing, and
procurement quotas from DEA-registered importers and manufacturers for 2008.
DEA's Proposed 2008 Assessment of Annual Needs for Ephedrine (For Sale)
and Pseudoephedrine (For Sale)
The comment received from the commenter is virtually identical to that
submitted to the proposed 2007 Assessment of Annual Needs on October 19, 2006
(71 FR 61801). Then, as now, the commenter asserted that the IMS Health
Government Solutions report underestimated the legitimate demand for ephedrine
sold in OTC drug products. The commenter further asserted that DEA's Assessment
of Annual Needs significantly understated the amount of ephedrine and
pseudoephedrine required to satisfy legitimate medical, scientific, research,
and industrial purposes and lawful imports. The commenter also claimed that the
IMS Health Government Solutions study did not adequately address sales of
ephedrine-based OTC drug products through the convenience store channel of
distribution. The new information submitted by the commenter in this area is a
two-page letter prepared by the statistician who had initially submitted a
report to the commenter as part of the commenter's comments to the 2006 proposed
assessments. In that letter, the statistician stated that the DEA's proposed
medical use estimate (which is a component of the ephedrine (for sale)
assessment, which also includes lawful export and inventory requirements) of
11,500 kg for ephedrine "falls far short of the 130% to 900% range of increases
that would be needed to put the earlier proposed quota in line with actual
over-the-counter sales of ephedrine products.'' DEA notes the commenter did not
provide any quantitative or qualitative data to support its belief that the
DEA's Assessment of Annual Needs for pseudoephedrine (for sale) was too low.
DEA Response: The estimated ephedrine (for sale) requirements
submitted by the commenter are not supported by the applications received by the
DEA pursuant to 21 CFR part 1315. On July 10, 2007, DEA published an Interim
Final Rule which established procedures for administering individual quotas to
DEA-registered manufacturers and importers of controlled substances (72 FR
37439). Although the rule became effective immediately upon publication, DEA
chose not to issue individual import, manufacturing, and procurement quotas to
DEA- registered importers and manufacturers of these chemicals in 2007 after
finalizing the 2007 Assessment of Annual Needs. DEA concluded that such action
would negatively impact the immediate availability of these chemicals and the
products derived therefrom. Instead, DEA stated on its web site (http://www.deadiversion.usdoj.gov/meth/q_a.htm)
that it would solicit applications for individual 2008 quotas from DEA-
registered manufacturers and importers with the intent of processing completed
applications on or before January 1, 2008.
On July 12, 2007, DEA notified all 1,054 DEA registered manufacturers and
importers of both controlled substances and List I chemicals in writing of the
publication of the Interim Final Rule and its potential impact on companies'
ability to import or manufacture the List I chemicals ephedrine, pseudoephedrine,
and phenylpropanolamine, and products containing those chemicals after January
1, 2008. Those that received the letter would have included companies that
manufacture ephedrine products for the convenience store market. Specifically,
DEA advised each company to submit an individual application(s) for 2008 quota;
DEA advised that if no application was received, then DEA would assess each
company's importing and manufacturing requirements for 2008 to be zero and,
consequently, no quota would be issued. However, applications for quota could be
submitted during the 2008 calendar year.
In the first month and a half, prior to proposing the 2008 Assessment of
Annual Needs (72 FR 53911, September
[[Page 73366]]
20, 2007), DEA received very few 2008 quota applications. Since that time,
however, DEA has received significantly more quota applications from DEA
registrants. In connection with each application, DEA has been contacting each
applicant and gathering additional information necessary to process each of
these individual quota applications by the January 1, 2008 deadline. DEA has
analyzed the statistical data provided by these registrants and the results of
this analysis (below) are not consistent with the commenter's comments.
Analysis of Quota Applications for Ephedrine (For Sale)
Based on an analysis of the inventory, acquisition (purchases) and
disposition (sales) data provided by DEA-registered importers and manufacturers
of ephedrine products on individual quota applications received since
publication of the July 10, 2007 Interim Final Rule, manufacturers of dosage
form products containing ephedrine reported sales totaling approximately 3,900
kg in 2007; this represents a 61 percent decrease from sales reported by these
firms for 2005 and a 49 percent decrease from the sales reported for 2006, as
shown on the same quota applications. During the same period, exports of
ephedrine products from the United States, as reported on export declarations (DEA
Forms 486) received, are expected to total 245 kg in 2007, a 90 percent decrease
from levels observed in 2005. These sales and export trends, when taken along
with necessary inventory allowances, may suggest that DEA's 2008 Assessment of
Annual Needs for ephedrine, as proposed, is too high, and may require and
adjustment downward in the future.
Analysis of Quota Applications for Pseudoephedrine (For Sale)
Based on an analysis of the inventory, acquisition, and disposition data
provided by DEA-registered importers and manufacturers of pseudoephedrine
products on individual quota applications received since publication of the July
10, 2007 Interim Final Rule, manufacturers of dosage form products containing
pseudoephedrine reported sales of these products totaling approximately 277.8
metric tons (MT; 1000 kg equals 1 MT) in 2007; this represents a 38 percent
increase from sales data provided by these firms for 2005 and a 2 percent
increase from sales reported in 2006, as shown on the same quota applications.
During the same period, exports of pseudoephedrine products from the United
States, as reported on export declarations (DEA Forms 486) received, are
expected to total 29,145 kg in 2007, a 67.6 percent decrease from levels
observed in 2005. These sales and export trends, when taken along with necessary
inventory allowances, may suggest that DEA's 2008 Assessment of Annual Needs for
pseudoephedrine, as proposed, is too high, and may require an adjustment
downward in the future.
Although the analysis of quota applications received by DEA would support a
decrease in the Assessment of Annual Needs for both ephedrine (for sale) and
pseudoephedrine (for sale), DEA cannot ensure that it has applications from all
those who may require an individual quota in 2008. Specifically, manufacturers
and importers may have purchased increased amounts of these List I chemicals
during the 2007 calendar year in anticipation of the establishment of individual
quotas for the 2008 calendar year, thereby increasing their inventory position
(i.e. stockpiling). As a result, these same DEA registrants may have elected to
defer submission of individual quota applications until such time that these
inventory levels decrease. Additionally, it remains unclear as to what impact,
if any, phenylephrine will have on the market for cough and cold remedies
containing pseudoephedrine. Finally, the Food and Drug Administration announced
an enforcement action against unapproved drug products containing timed-release
guafenesin in combination with other drugs, including ephedrine and
pseudoephedrine (72 FR 29517, May 29, 2007). The Notice advises firms which are
marketing unapproved products to obtain such drug approvals. As a result of this
Notice, DEA believes that it may receive requests for quotas to support FDA
validation requirements, thereby increasing the demand for ephedrine and/or
pseudoephedrine for research purposes. For these reasons, DEA believes that the
needs of the United States are best served by establishing the values initially
proposed and therefore concludes the proposed amounts are sufficient to meet the
estimated medical, scientific, research, and industrial needs of the United
States; lawful export requirements; and the establishment and maintenance of
reserve stocks. DEA will propose a revision to, and subsequently finalize, the
Assessment of Annual Needs for 2008 during the calendar year, thereby giving
interested persons an opportunity to provide substantive data to support or
refute any proposed changes to assessments.
Comment Period
The commenter believed that DEA's comment period of 21 days (September 20,
2007, to October 11, 2007,) was too short, making it impossible, the commenter
claimed, for affected parties to provide significant comment within a short
window of opportunity. The commenter requested that DEA reopen the comment
period for an additional sixty days.
DEA Response: When DEA published its July 10, 2007, Interim Final Rule
establishing procedures for administering the assessment of annual needs and
individual import, manufacturing, and procurement quotas, DEA stated that it had
"good cause'' under the Administrative Procedure Act to implement those
regulations without engaging in traditional notice and comment rulemaking. In
support of that action, DEA specifically stated:
Congress, in crafting CMEA, recognized that limiting of product availability
at the retail level could potentially encourage diversion of either drug
products or the List I chemicals themselves higher in the supply chain--at the
import, manufacture, and distribution levels. To address its concern about "what
immediately moves in behind,'' (Rep. Souder, February 28, 2006, CR p. 423)
Congress included provisions in CMEA to control the import, export, manufacture,
and distribution of the three chemicals and products containing them. These
provisions also will make it possible for the United States to meet the
recommendations of the International Narcotics Control Board, which encouraged
its member countries to provide for pre-export notifications and an assessment
of legitimate need for these chemicals. * * *
DEA must implement the quota provisions of the CMEA on an interim basis to
ensure that product upstream from the retail level is not diverted for illicit
purposes. It would be contrary to the public interest to allow the diversion of
large amounts of ephedrine, pseudoephedrine, and phenylpropanolamine at the
wholesale level while implementing controls at the retail level to limit sales
of these very products.
The broad scope of the new law [CMEA], as well as the expedited effective
dates, is a clear reflection of Congress' concerns about the nation's growing
methamphetamine epidemic and its [Congress] desire to act quickly to prevent
further illicit use of these chemicals.'' (specifically 72 FR 37443-37444)
DEA's decision to provide a 21-day comment period was based on Congress'
mandate for DEA to act quickly to implement the requirements of the CMEA
including the establishment of an Annual Assessment of Needs and individual
import, manufacturing, and procurement quotas. The regulations require that DEA
establish the Assessment of Annual Needs prior to the issuance of individual
quotas, meaning that DEA must establish the 2008 Assessment of Annual Needs
before it can issue individual import,
[[Page 73367]]
manufacturing, and procurement quotas. DEA is required to complete the
process of issuing individual import, manufacturing, and procurement quotas
prior to January 1, 2008, as quotas are issued for a calendar year. DEA believes
that a shorter comment period was necessary to review and consider the comments
received from the public and then establish the 2008 Assessment of Annual Needs
prior to the end of the 2007 calendar year.
DEA also believes that a 21-day comment period was sufficient given that its
proposal was neither complex nor technical. DEA notes that two of the 2008
assessments proposed were values initially proposed on October 19, 2006, when
DEA proposed the 2007 Assessment of Annual Needs, and the other three values
were values significantly higher than the values proposed on October 19, 2006.
Additionally, DEA notes that interested persons directly impacted by these
quotas (i.e., DEA- registered manufacturers and importers) learned of the
factors DEA would consider in the establishment of individual quotas in July
when the Interim Final Rule was published. Many of these factors are set forth
by statute; any remaining factors parallel the current system which has existed
for individual quotas for controlled substances essentially since the inception
of the Controlled Substances Act. For these reasons, DEA believes that DEA
registrants had ample time to gather the necessary scientific and technical
information that would be required to submit substantive comments to the
proposed 2008 Assessment of Annual Needs.
Finally, DEA believes that the commenter did not proffer any specific
information beyond that which it submitted in its written comments that would be
brought to light if the DEA were to extend the comment period.
Withdrawal of 2008 Proposed Assessment of Annual Needs
The commenter requested that the proposed 2008 Assessment of Annual Needs be
withdrawn and reproposed, presumably based on its comments. DEA Response: After
considering the commenter's comments, the DEA has determined that the request
for a withdrawal of the proposed 2008 Assessment of Annual Needs is unnecessary
for the reasons discussed above.
Conclusion
DEA has carefully considered the comment received from the lone commenter in
connection with the proposed 2008 Assessment of Annual Needs. Based on
information provided in the comment, along with information provided by DEA-registered
manufacturers and importers of these List I chemicals on applications for
individual import, manufacturing, and procurement quotas pursuant to DEA
regulations, DEA has fully addressed the relevant issues set forth in the
comment. Therefore, under the authority vested in the Attorney General by
section 306 of the CSA (21
U.S.C. 826), and delegated to the Administrator of
the DEA by 28 CFR 0.100, and redelegated to the Deputy Administrator pursuant to
28 CFR 0.104, the Deputy Administrator hereby orders that the 2008 Assessment of
Annual Needs for ephedrine, pseudoephedrine, and phenylpropanolamine, expressed
in kilograms of anhydrous acid or base, be established as follows:
List I Chemical
|
Established 2008 assessment of annual needs (kg)
|
Ephedrine (for sale)
|
11,500
|
Ephedrine (for conversion)
|
128,760
|
Pseudoephedrine (for sale)
|
511,100
|
Phenylpropanolamine (for sale)
|
5,545
|
Phenylpropanolamine (for conversion)
|
85,470
|
The Office of Management and Budget has determined that notices of quotas are
not subject to centralized review under Executive Order 12866.
This action 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 action does not
have any federalism implications warranting the application of Executive Order
13132.
The Deputy Administrator hereby certifies that this action will not have a
significant economic impact upon a substantial number of small entities whose
interests must be considered under the Regulatory Flexibility Act, 5 U.S.C.
601-612. The establishment of Assessment of Annual Needs for ephedrine,
pseudoephedrine, and phenylpropanolamine is mandated by law. The assessments are
necessary to provide for the estimated medical, scientific, research and
industrial needs of the United States; for lawful export requirements; and the
establishment and maintenance of reserve stocks. Accordingly, the Deputy
Administrator has determined that this action does not require a regulatory
flexibility analysis.
This action meets the applicable standards set forth in sections 3(a) and
3(b)(2) of Executive Order 12988 Civil Justice Reform. This action will not
result in the expenditure by state, local, and tribal governments, in the
aggregate, or by the private sector, of $120,000,000 or more (adjusted for
inflation) in any one year, and will not significantly or uniquely affect small
governments. Therefore, no actions were deemed necessary under the provisions of
the Unfunded Mandates Reform Act of 1995.
This action is not a major rule as defined by section 804 of the Small
Business Regulatory Enforcement Fairness Act of 1996 (Congressional Review Act).
This action will not result in an annual effect on the economy of $100,000,000
or more; a major increase in costs or prices; or significant adverse effects on
competition, employment, investment, productivity, innovation, or on the ability
of United States-based companies to compete with foreign-based companies in
domestic and export markets.
Dated: December 18, 2007.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. 07-6218 Filed 12-26-07; 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).
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