Rules - 2012
[Federal Register Volume 77, Number 51 (Thursday, March 15, 2012)]
[Rules and Regulations]
[Pages 15234-15250]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-6253]
DEPARTMENT OF JUSTICE
Drug Enforcement Administration
21 CFR Parts 1301 and 1309
[Docket No. DEA-346]
RIN 1117-AB32
Controlled Substances and List I Chemical Registration and
Reregistration Fees
AGENCY: Drug Enforcement Administration (DEA), Department of Justice.
ACTION: Final rule.
SUMMARY: This rule adjusts the fee schedule for DEA registration and
reregistration fees necessary to recover the costs of the Diversion
Control Program relating to the registration and control of the
manufacture, distribution, dispensing, importation, and exportation of
controlled substances and List I chemicals as mandated by the
Controlled Substances Act.
DATES: Effective: April 16, 2012.
FOR FURTHER INFORMATION CONTACT: Alan G. Santos, Associate Deputy
Assistant Administrator, Office of Diversion Control, Drug Enforcement
Administration, Mailing address: 8701 Morrissette Drive, Springfield,
Virginia 22152; Telephone: (202) 307-7165.
SUPPLEMENTARY INFORMATION:
Background
Legal Authority
The Drug Enforcement Administration (DEA) is a component of the
Department of Justice and is the primary agency responsible for
coordinating the drug law enforcement activities of the United States.
DEA also assists in the implementation of the President's National Drug
Control Strategy. DEA's mission is to enforce U.S. controlled
substances laws and regulations and bring to the criminal and civil
justice system those organizations and individuals involved in the
growing, manufacturing, or distribution of controlled substances and
listed chemicals appearing in or destined for illicit traffic in the
U.S., including organizations that use drug trafficking proceeds to
finance terrorism. The diversion control program (DCP) is a strategic
component of the DEA's law enforcement mission. The DCP implements and
enforces Titles II and III of the Comprehensive Drug Abuse Prevention
and Control Act of 1970 and the Controlled Substances Import and Export
Act (CSIEA) (21 U.S.C. 801-971), as amended (hereinafter, "CSA").\1\
DEA publishes the implementing regulations for these statutes in Title
21 of the Code of Federal Regulations (CFR), Parts 1300 to 1321. The
CSA, together with these regulations, is designed to help prevent,
detect, and eliminate the diversion of controlled substances and listed
chemicals into the illicit market while ensuring a sufficient supply of
controlled substances and listed chemicals for legitimate medical,
scientific, research, and industrial purposes.
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\1\ The Attorney General's delegation of authority to DEA may be
found at 28 CFR 0.100.
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Pursuant to the CSA, each controlled substance is classified in one
of five schedules based upon its potential for abuse, currently
accepted medical use, and the degree of dependence it may cause if
abused. 21 U.S.C. 812. Likewise, under the CSA, listed chemicals are
separately classified based on their use and importance to the
manufacture of controlled substances (List I or List II chemicals). 21
U.S.C. 802(33)-(35). The CSA mandates that DEA register persons and
entities who manufacture, distribute, import, or export controlled
substances or List I chemicals, and those persons and entities who
dispense or conduct research or chemical analysis with controlled
substances. These registrants are permitted to handle controlled
substances and List I chemicals as authorized by their registration and
are required to comply with the applicable requirements associated with
their registration. 21 U.S.C. 822, 958. The identification and
registration of all individuals and entities authorized to handle
controlled substances and List I chemicals establishes a closed system
of distribution that DEA is charged to maintain.
Under the CSA, DEA is authorized to charge reasonable fees relating
to the registration and control of the manufacture, distribution,
dispensing, import, and export of controlled substances and listed
chemicals. 21 U.S.C. 821 and 958(f). DEA must set fees at a level that
ensures the recovery of the full costs of operating the various aspects
of its DCP. 21 U.S.C. 886a. Each year, DEA is required by statute to
transfer the first $15 million of fee revenues into the general fund of
the Treasury, and the remainder of the fee revenues is deposited into a
separate fund of the Treasury called the Diversion Control Fee Account
(DCFA). 21 U.S.C. 886a(1). On at least a quarterly basis, the Secretary
of the Treasury is required to reimburse DEA an amount from the DCFA
"in accordance with estimates made in the budget request of the
Attorney General for those fiscal years" for the operation of the
DCP.\2\ 21 U.S.C. 886a(1)(B) and (D). A Notice of Proposed Rulemaking
(NPRM) proposing an adjusted fee schedule for DEA registration and
reregistration was published on July 6, 2011, at 76 FR 39318, with a 60
day comment period. The comment period closed on September 6, 2011.
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\2\ The diversion control program (DCP) consists of the
controlled substance and chemical diversion control activities of
DEA. These activities are related to the registration and control of
the manufacture, distribution, dispensing, importation, and
exportation of controlled substances and listed chemicals (21 U.S.C.
886a(2)).
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History of Fees
In 1970, Congress consolidated more than 50 laws related to the
control of narcotics and dangerous drugs into one statute--the CSA. The
statute was "designed to improve the administration and regulation of
the manufacturing, distribution, and dispensing of controlled
substances by providing for a 'closed' system of drug distribution for
legitimate handlers of such drugs," with criminal penalties for
transactions outside the legitimate chain.\3\ With the enactment of the
CSA, the Bureau of Narcotics and Dangerous Drugs (BNDD) was granted the
authority to charge reasonable fees relating to both registration and
control \4\ of persons and entities engaged in the manufacture,
distribution, dispensing, export, and import of controlled
substances.\5\ To this end, BNDD established a three-
[[Page 15235]]
tiered fee structure for companies and individuals wishing to
participate in the U.S. controlled substance industry.\6\
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\3\ H.R. Rep. No. 91-1444 (1970), reprinted in 1970 U.S.C.C.A.N.
4566, 4571-4572.
\4\ The term "control" as defined in 21 U.S.C. 802(5)
specifically applies to Part B of Title II of the CSA only (21
U.S.C. 811-814). In general, "diversion control" is a broad term
encompassing activities related to preventing and detecting the
diversion of controlled substances and listed chemicals from
legitimate commerce into the illicit market. In 1992, Congress
established the Diversion Control Fee Account and required that the
fees charged by DEA under its diversion control program be set at a
level that ensures the recovery of the full costs of operating the
various aspects of that program (Pub. L. 102-395, 106 Stat. 1843).
In 2004, Congress amended the CSA and defined "diversion control
program" and "controlled substance and chemical diversion control
activities" (Pub. L. 108-447, 118 Stat. 2921, codified in 21 U.S.C.
886a). The "diversion control program" means the controlled
substance and chemical diversion control activities of the Drug
Enforcement Administration. 21 U.S.C. 886a(2)(A). The term
"controlled substance and chemical diversion control activities"
means those activities related to the registration and control of
the manufacture, distribution, dispensing, importation, and
exportation of controlled substances and listed chemicals. 21 U.S.C.
886a(2)(B).
\5\ DEA's authority to charge reasonable fees was later expanded
to include manufacturers, distributors, importers, and exporters of
List I chemicals. The Domestic Chemical Diversion Control Act of
1993, Public Law 103-200, 107 Stat. 2333.
\6\ 36 FR 4928 (March 13, 1971); 36 FR 7776 (April 24, 1971).
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In 1973, BNDD was abolished, and all of its functions were
transferred to the newly-created DEA, including the authority to charge
registrants reasonable fees.\7\ In 1982, the General Accounting Office
(GAO) \8\ advised that the 1971 fee schedule did not adequately recover
the costs for the DCP administered by DEA. An increase in fees was
proposed and finalized in 1983.\9\ All fees collected through 1992 were
deposited into the general fund of the United States Treasury.
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\7\ Reorganization Plan No. 2 of 1973, 38 FR 18380 (July 2,
1973).
\8\ GAO/GGD-83-2, October 29, 1982.
\9\ 48 FR 14640 (April 5, 1983); 48 FR 56043 (December 19,
1983).
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In 1993, Congress determined that the DCP would be fully funded by
fees rather than by appropriations,\10\ and established the DCFA as a
separate account of the Treasury to "[ensure] the recovery of the full
costs of operating the various aspects of [the diversion control
program]" from fees charged by DEA. 21 U.S.C. 886a(1)(C). Congress
also specified the general operation of the DCFA. Each fiscal year, the
first $15 million of collected fees are transferred to the general fund
of the Treasury and are not directly available for use by the DCP. Fees
collected in excess of $15 million are used to reimburse DEA for
expenses incurred in the operation of the DCP, in accordance with
estimates made in the budget request of the Attorney General. 21 U.S.C.
886a(1).
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\10\ Departments of Commerce, Justice, and State, the Judiciary
and Related Agencies Appropriations Act of 1993, Public Law 102-395,
codified in relevant part at 21 U.S.C. 886a.
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Shortly after enactment of the 1993 Appropriations Act, DEA
published a NPRM proposing to increase the existing fee schedule to
comply with Congress's direction to set fees at a level that ensures
the recovery of the full costs of operating the DCP.\11\ After a
comment period, a final rule was published on March 22, 1993,
implementing changes to the fee structure and excluding chemical
control costs from the calculation of fees.\12\ Several registrants
impacted by the fee increase challenged it, first in federal district
court, where it was upheld, and subsequently on appeal, where it was
remanded for additional information to support the fees.\13\
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\11\ 57 FR 60148 (December 18, 1992).
\12\ 58 FR 15272 (March 22, 1993).
\13\ American Medical Association v. Reno, 857 F. Supp. 80
(D.D.C. 1994), aff'd, 57 F.3d 1129 (DC Cir. 1995).
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Upon remand, the March 1993 final fee rule was reopened for further
comment in 1996.\14\ DEA undertook studies and internal reorganizations
to enable it to better identify DCP activities and costs, and, in 2002,
DEA published for additional public comment more information on the
components and activities of the fee-funded DCP.\15\ After that
publication, the Office of the Inspector General, Department of Justice
(OIG) concluded its review of the DCP, and determined that DEA was not
adequately supporting the DCP.\16\
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\14\ 61 FR 68624 (December 30, 1996).
\15\ 67 FR 51988 (August 9, 2002).
\16\ "Review of the Drug Enforcement Administration's Control
of the Diversion of Controlled Pharmaceuticals," I-2002-010,
September 2002, www.usdoj.gov/oig/reports/DEA/e0210/index.htm.
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In February 2003, DEA published a proposed rule to raise
registration and reregistration fees so as to comply with the statutory
requirement to charge fees at a level ensuring the recovery of the full
costs of operating the various aspects of the DCP.\17\ Shortly
thereafter, DEA created the Validation Unit to ensure that DCFA-funded
expenditures support registration and diversion control-related
activities. The Validation Unit reports to the DEA Deputy Administrator
and independently reviews specified expenditures attributable to the
DCFA. If an expense only partially supports the DCP, such as a field
office's rent or utility cost, the Validation Unit determines the
amount that may be properly apportioned to the DCFA. On October 10,
2003, a new fee was finalized by publication of a final rule.\18\
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\17\ 68 FR 7728 (February 18, 2003).
\18\ 68 FR 58587 (October 10, 2003). DEA published a correction
to this final rule where the internal DEA computer system, Firebird,
was identified as being solely funded through appropriations. The
Firebird system costs are properly apportioned as a DCP cost as well
as a non-DCP appropriations expense. 69 FR 34568 (June 22, 2004).
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Meanwhile, in December 1993, the Domestic Chemical Diversion
Control Act of 1993 amended the CSA to require that manufacturers,
distributors, importers, and exporters of List I chemicals obtain a
registration from DEA. DEA was also authorized to charge "reasonable
fees relating * * * to the registration and control of regulated
persons and regulated transactions." \19\
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\19\ The Domestic Chemical Diversion Control Act of 1993, Public
Law 103-200, 107 Stat. 2333.
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In 2004, the CSA was amended to define the DCP as "the controlled
substance and chemical diversion control activities of the Drug
Enforcement Administration." 21 U.S.C. 886a(2)(A).\20\ Furthermore,
"controlled substance and chemical diversion control activities"
means "those activities related to the registration and control of the
manufacture, distribution, dispensing, importation, and exportation of
controlled substances and listed chemicals." 21 U.S.C. 886a(2)(B).
Congress further provided that reimbursements from the DCFA "shall be
made without distinguishing between expenses related to controlled
substance activities and expenses related to chemical activities" (21
U.S.C. 886a(1)(B)) and amended the language of 21 U.S.C. 821 and 958(f)
to be consistent with the definition of the DCP articulated in 21
U.S.C. 886a(2). As a result, all fees collected in excess of $15
million are deposited into the DCFA, and reimbursements by the
Secretary of the Treasury are made without distinction between
controlled substance and List I chemical activities.
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\20\ Public Law 108-447, Departments of Commerce, Justice, and
State, the Judiciary and Related Agencies Appropriations Act of
2005, signed into law on December 8, 2004.
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In 2005, based upon internal organizational changes and the 2005
Appropriations Act, DEA proposed an adjusted fee schedule to
appropriately reflect all costs associated with the DCP.\21\ In July
2006, the OIG reported on its Follow-up Review of DEA's Efforts to
Control the Diversion of Controlled Pharmaceuticals and recommended
that DEA apply more resources to diversion control, including more
Special Agent support.\22\ The OIG also recommended that DEA increase
training for those individuals who support the DCP. The OIG also noted
that the diversion of controlled substance pharmaceuticals had
dramatically increased over recent years and that the increase
coincided with the use of emerging technologies such as the Internet.
Twelve comments were received and analyzed in response to DEA's
proposed fee rule, and DEA published the final rule on August 29,
2006.\23\ Collections associated with that fee adjustment did not begin
until FY 2007, on November 1, 2006.
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\21\ 70 FR 69474 (November 16, 2005).
\22\ "Follow-Up Review of the Drug Enforcement Administration's
Efforts to Control the Diversion of Controlled Pharmaceuticals," I-
2006-004, July 2006, www.usdoj.gov/oig/reports/DEA/e0604/final.pdf.
\23\ 71 FR 51105 (August 29, 2006).
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The OIG completed a Review of DEA's Use of the Diversion Control
Fee Account in 2008 and did not find that any DCFA funds were misused
for non-diversion control activities between FY 2004 and FY 2007. To
the contrary, the OIG found that DEA did not fully fund
[[Page 15236]]
all diversion control costs with the DCFA, as required by law.\24\
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\24\ "Review of the Drug Enforcement Administration's Use of
the Diversion Control Fee Account," I-2008-002, February 2008,
www.usdoj.gov/oig/reports/DEA/e0802/final.pdf.
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The Proposed Rule
It has been more than five years since the last fee adjustment. DEA
proposed a new fee schedule by publication of a NPRM on July 6, 2011.
76 FR 39318-41. DEA outlined the scope of the DCP, the need for a new
fee calculation, the four different methodologies or options considered
for calculating the fee, the proposed weighted-ratio methodology, and
the calculation resulting in the proposed fee increase of approximately
33 percent. The fee increase incorporates additional DCP costs
identified in the above-mentioned OIG report, as well as an expanded
diversion control program required by Congress, and it accounts for a
number of current circumstances related to the diversion of controlled
substance pharmaceuticals and listed chemicals.
Methodology for Fee Calculation
Fees must be "set at a level that ensures the recovery of the full
costs of operating the various aspects of [the DCP]." 21 U.S.C.
886a(1)(C). In addition, any methodology for calculating fees must
result in fees that are reasonable. 21 U.S.C. 821 and 958(f). As
outlined below in responses to comments, DEA must calculate and collect
fees prior to actually expending the funds in order to have funds with
which to operate the DCP. Moreover, each year DEA is required to
transfer the first $15 million of fee revenues into the general fund of
the Treasury, with the remainder deposited into a separate fund of the
Treasury called the Diversion Control Fee Account or DCFA. 21 U.S.C.
886a(1). On at least a quarterly basis, the Secretary of the Treasury
is required to reimburse DEA an amount from the DCFA "in accordance
with estimates made in the budget request of the Attorney General for
those fiscal years" for the operation of the DCP. 21 U.S.C. 886a(1)(B)
and (D).
In the NPRM, DEA outlined four alternative methodologies to
calculate the registration and reregistration fees. 76 FR 39329-32.
These were the Past-Based Option, Future-Based Option, Flat Fee Option,
and Weighted-Ratio Option. For each of the options considered, the
calculated fees are analyzed for reasonableness by examining: (1) The
absolute amount of the fee increase, (2) the change in fee as a
percentage of registrant revenue from 2007 to 2012, and (3) the
relative fee increase across registrant groups. Additionally, each
calculation methodology is re-evaluated for its overall strengths and
weaknesses in recovering the full costs of the DCP.
Based on the analysis provided in the NPRM, DEA did not adopt the
"Past-Based Option." There are two key reasons for rejecting this
methodology. First, the fee increase would be disproportionately
burdensome to a small number of registrants. Distributors' fees would
increase by over three fold, while the fees for the remaining
registrant groups would increase by 10 percent and 32 percent. DEA
believes this is unreasonable. Second, the past-based option uses FY
2007-FY 2009 investigation work hour data to set the apportionment of
cost to each registrant category. Pre-registration and scheduled
investigation costs are assigned to registrant classes and all other
costs are recovered on an equal, per-registrant basis. This method is
retrospective and assumes that future investigations will be similar to
the past. DEA cannot assume that past work hour data accurately
reflects future workload because priorities change as the threats
change. For example, in order to monitor registrant regulatory
compliance and leverage the deterrent effect of scheduled
investigations, DEA increased the frequency of all scheduled
investigations beginning in 2008. In 2011, DEA began pre-registration
investigations of all pharmacies located in the State of Florida in
order to address the rampant diversion in south Florida. And in 2010,
DEA began conducting nationwide take back events to provide a mechanism
for the public to dispose of their unwanted, unused, and expired
controlled substance pharmaceutical drugs. The past-based option is
vulnerable to short-term fluctuations in priorities which can greatly
affect fees among the different categories. As a result, DEA has
concluded that past work hour data alone is not the best basis for the
calculation of registration fees.
The second option analyzed in the NPRM is the "Future-Based
Option" which is based on projected work hours for each registrant
class using scheduled investigation work plan goals and anticipated/
planned resources. Under this option, DEA based its calculations on
projected work hour data by registrant group for FY 2012-2014. In other
words, the future-based option is based on DEA's projection of work
plan goals and the resources required for these years--specifically
examining the direct cost of anticipated scheduled investigations.
DEA rejects this methodology because it would result in an
unreasonable increase in fees for some registrants and a severe
disparity of fees among the registrant groups. The large proportional
increase in fees for two registrant categories may not pass the
reasonable standard required by statute. The vast disparity in the
increase, where fees for manufacturers increase by more than 700
percent while fees for dispensers increase by 26 percent, is
unreasonable. This method is unfair to the registrant categories
because a variety of factors other than scheduled investigations affect
cost allocations. Actual operations typically differ from scheduled
work plans due to shifting threats and other operational demands. The
future-based option is based on projected work hour data of anticipated
scheduled investigations, however, only 3.5% of the workload is
directly attributable to scheduled investigations. The remaining 96.5%
must be apportioned equally across all registrant categories.
The third option analyzed in the NPRM is called the "Flat Fee
Option." This methodology would result in equal fees across all
registrant groups regardless of the proportion of DCP costs and
resources the registrant group may require (e.g., oversight and
investigation resources). The fee calculation is straightforward: The
total amount needed to be collected over the three-year period is
divided by the total number of registration fee transactions over the
three-year period, adjusting for registrants on the three-year
registration cycle.
DEA did not select this methodology because it would result in
disparate changes in fees among registrant groups. Under this option,
fees for manufacturers and distributors would decrease by 89 percent
and 78 percent respectively, while fees for practitioners would
increase by 34 percent. Thus, setting the fees at the same level across
all registrant groups is not reasonable. DEA registrants include some
of the largest corporations in the world although the vast majority of
registrants are individual practitioners, such as physicians, physician
assistants, dentists, and nurse practitioners. To satisfy the
reasonable standard, registration fees should account for differences
in regulatory investigations and other DCP costs that vary among the
registrant categories.
The fourth methodology evaluated and ultimately selected in the
NPRM is the "Weighted-Ratio Option." This option distinguishes among
the categories to establish a reasonable fee for each category. To
determine the fee, a weighted ratio is assigned based on
[[Page 15237]]
registrant group, and the amount needed to be collected over the FY
2012-FY 2014 period to cover the costs of the DCP is divided by the
weighted number of estimated registrations.
Historically, costs vary and a fee must be set in advance. Since
the inception of registration fees, even before DEA was required to
recover the full costs of the DCP, DEA has utilized a weighted method
of fee allocation. On April 24, 1971, DEA's precursor agency, the
Bureau of Narcotics and Dangerous Drugs, published regulations
implementing the Comprehensive Drug Abuse Prevention and Control Act of
1970. Those regulations required registration/reregistration fees in
the following amounts: $50 for manufacturers; $25 for distributors; and
$5 for dispensers and persons conducting research, instructional
activities, or chemical analysis. In 1983, DEA published a NPRM which
indicated that a 1982 GAO report found that DEA's previous fees did not
adequately recover the costs incurred by the Government. The GAO
recommended that DEA set a fee schedule of $250 for manufacturers, $125
for distributors, and $25 for practitioners. DEA, however, ultimately
set the fee based on its own estimates as follows: $250 for
manufacturers; $125 for distributors, importers, and exporters; and $20
for dispensers and persons conducting research, instructional
activities, or chemical analysis. DEA indicated that these estimates
were based on "an increase in the number of practitioner registrants
since 1980 * * *." 48 FR 14640.
The first known published discussion which attempted to capture the
specific ratio of fees occurred in the Final Rule; Remanded for Further
Notice and Comment, published by DEA in 1996. That Final Rule augmented
DEA's first fee-setting rule initiated to recover the full costs of the
DCP as defined by Congress. It was published in response to a decision
by the United States Court of Appeals which required DEA to identify
the components of the DCP and provide a brief explanation of why DEA
deemed each component to be part of the program. In that Final Rule,
DEA stated that the ratio of fees implemented with the CSA in 1971 was
as follows: "A distributor's fee is 50% of the manufacturer's fee and
a dispenser's fee is 16-20% of the distributor's fee. The fee ratios
have remained consistent [since 1971] and have not been the subject of
any substantive comment or objection by the regulated industry." 61 FR
68632. A variation of this ratio has been applied in each fee structure
since the implementation of the fee system, usually as expressed above.
The fee structure established by this rule is based on the same
ratios that have been utilized since the first amendment to the fee
structure, as follows: 1 for researchers, canine handlers, analytical
labs, and narcotic treatment programs, who are on a one-year
registration cycle; 3 for registrants on three-year registration cycles
such as pharmacies, hospitals/clinics, practitioners, teaching
institutions, and mid-level practitioners; 6.25 for distributors and
importers/exporters; and 12.5 for manufacturers. The ratio of 1
represents a base annual fee by which each ratio is multiplied to
determine the total fee per cycle, i.e., one year or three years.
The weighted-ratio methodology, much like the flat fee methodology,
is straightforward and easy to understand. Unlike the flat fee,
however, this method applies historic weighted ratios to differentiate
fees among registrant groups. The fees calculated using this
methodology are similar to fees calculated in the past-based option,
which allocates three years of historical pre-registration and
scheduled investigation costs to registrant groups. This method,
however, does not create a disproportionate fee increase in any
registrant group. The proposed fee published in the NPRM was calculated
using this methodology and resulted in an increase of approximately 33
percent for all registrant groups.
DEA is finalizing the fee schedule using the weighted-ratio
methodology as proposed. This approach has been used since Congress
established registrant fees and continues to be a reasonable reflection
of differing costs. The registration fees under the weighted-ratio
option result in differentiated fees among registrant groups, where
registrants with higher revenues and costs pay higher fees than
registrants with lower revenues and costs. Furthermore, the weighted-
ratio avoids the disparity that resulted from the past-based
methodology. The weighted ratios used by DEA to calculate the fees have
proven effective and reasonable over time. Additionally, the selected
calculation methodology accurately reflects the differences in
registration and other DCP activities by registrant category. For
example, these costs are greater for manufacturers. The weighted-ratio
methodology results in reasonable fees for all registrant groups at a
level sufficient to ensure the recovery of the full costs of operating
the DCP.
Discussion of Comments
DEA received 195 comments on the NPRM published on July 6, 2011, at
76 FR 39318. Of these comments, 121 were from mid-level practitioners
(e.g. nurse practitioners, nurse mid-wives, nurse anesthetists,
clinical nurse specialist, and physician assistants), 4 were from
practitioners, 9 were from associations or corporations and 61
commenters did not identify their registration category.
Comments: The majority of commenters opposed the fee increase on
principle or as coming at a bad time due to the economic climate. Some
commenters believed it was a tax on practitioners and other
registrants.
DEA Response: DEA outlined the legal authority, the history of the
fees, the need for an increase in fees, the methodology, and the
proposed fee calculation in the NPRM in an attempt to make it
transparent why there is a fee, why there is a periodic recalculation,
and how the proposed new fee schedule was calculated. Rather than a
"tax," the registration fee is a statutory requirement for those
seeking to participate in the closed system of distribution by
handling, or having access to, controlled substances or List I
chemicals. The fee funds the DCP under the Controlled Substances Act
which includes providing and maintaining services to DEA registrants.
One commenter suggested DEA postpone a fee increase until the
economy improves and several suggested imposing incremental increases
over a period of time. DEA is sensitive to the economic challenges
facing many registrants and has endeavored to set the fee as low as
possible consistent with its statutory mandates. DEA continually
strives to be fiscally responsible. The last fee increase was set in FY
2006 and was designed to encompass only FYs 2006-2008. Through various
efforts and cost-saving measures, the DCP has been able to operate
under that fee structure through FY 2011. However, DEA cannot further
postpone any increase because without an adjustment in the annual
registration fees, the DCP will be unable to continue current
operations and will be in violation of the statutory mandate that fees
charged "shall be set at a level that ensures the recovery of the full
costs of operating the various aspects of [the diversion control
program.]" 21 U.S.C. 886a(1)(C). For example, collections under the
current fee schedule would require the DCP to significantly cut
existing and planned DCP operations vital to its mission. DEA relies on
the DCP to maintain the integrity of the closed system of
[[Page 15238]]
distribution, particularly at this time of increased abuse and
diversion outlined in the proposed rule.
It is not feasible for DEA to implement an incremental increase
while ensuring the recovery of the full costs of operating the various
aspects of the DCP, as required by the CSA, and such an increase would
not be fair or equitable to registrants. Under the current fee
structure, the vast majority of registrants renew their registration
once every three years. If DEA were to implement an incremental
increase within the three-year cycle, registrants who must renew their
registration in the third year of that cycle would pay a substantially
higher amount than those registrants who must renew in the first year
of the cycle. Additionally, DEA must have reliable collection estimates
for budget formulation and execution activities throughout the three-
year collection cycle.
Comments: A number of comments suggested that the calculation
recognize that other non-federal licensure and registration fees are
also increasing.
DEA Response: DEA recognizes there may be other fee increases by
states. However, the CSA requires that DEA fees be based on the full
costs of operating the various aspects of the DCP.
Comments: Mid-level practitioners expressed the belief that any fee
increase is unfair to certain types of registrants, such as mid-level
practitioners, who make less money than other types of practitioners.
DEA Response: The fees are on a graduated scale based on the three
categories of registration established by statute. Under current
authority, DEA has not created additional fee categories or
differentiated within a fee category. As discussed, the fees are based
on DCP program costs and individual practitioners, regardless of
professional occupation, require similar DCP expenditures related to
registration and oversight. Furthermore, as outlined in the economic
analysis using estimated 2012 average income based on 2004-2009 data
provided by the Bureau of Labor Statistics, the fee as a percentage of
average income for physicians and dentists is 0.1% and it is 0.26% for
physician assistants. These percentages are essentially the same as in
2006, the year of the previous fee adjustment, where the fee as a
percentage of average income was 0.1% for physicians and dentists and
0.25% for physician assistants.
Comments: One comment suggested that the length of registration
should be extended at the same time there is an increase in the fee.
DEA Response: The statute clearly sets forth the period of
registration:
"Every person who manufactures or distributes any controlled
substance or list I chemical, or who proposes to engage in the
manufacture or distribution of any controlled substance or list I
chemical, shall obtain annually a registration issued by the
Attorney General in accordance with the rules and regulations
promulgated by him." 21 U.S.C. 822(a)(1) (emphasis added).
"Every person who dispenses, or who proposes to dispense, any
controlled substance, shall obtain from the Attorney General a
registration issued in accordance with the rules and regulations
promulgated by him. The Attorney General shall, by regulation,
determine the period of such registrations. In no event, however,
shall such registrations be issued for less than one year nor for
more than three years. 21 U.S.C. 822(a)(2) (emphasis added).
DEA currently allows for the maximum three-year registrations for
dispensers of controlled substances, except certain practitioners who
dispense narcotic drugs for narcotic treatment, who are statutorily
required to obtain annual registrations. 21 U.S.C. 823(g)(1).
Comments: Some commenters indicated that DEA should not raise
registration fees but instead decrease its spending, be more efficient
with the fees it currently collects or find another source of funds.
One commenter questioned whether increased funding would improve the
effectiveness of the DCP.
DEA Response: By statute, DEA cannot use another source of funds
for the DCP. By enacting 21 U.S.C. 886a, Congress mandated that the DCP
be fully funded through the collection of fees rather than appropriated
funds. The CSA specifically states 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." 21 U.S.C. 886a(1)(C).
It has been more than five years since the last fee adjustment. DEA
last adjusted the fee schedule in August 2006, and that fee schedule
was intended to be sufficient to cover the "full costs" of the DCP
for FY 2006 through FY 2008. The DCP has continued to operate under
this fee schedule due to cost savings through reorganization,
modernization efforts, and by delays in execution of planned programs.
As indicated by the above-referenced 2008 OIG report, additional salary
and other costs attributable to diversion control activities needed to
be incorporated into the DCP as was done in this fee calculation. In
addition, Congress has expanded the scope of the DCP through budgetary
and legislative action in order to address an increase in the diversion
of controlled substances and listed chemicals that seriously impact
public health and safety.
DEA has been and will continue to be fiscally responsible and will
remain vigilant towards identifying methods to improve efficiencies or
identifying other cost saving measures. As discussed, the DCP has been
evaluated by the OIG and it did not find that DCFA funds were misused.
As noted earlier, the OIG found that DEA did not fully fund all
diversion control costs with the DCFA as required.\25\ The DCP plans to
continue cost-saving technology improvements in doing business and to
implement such improvements for those that do business with the DCP
through its regulatory functions such as registration and reporting
systems.
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\25\ "Review of the Drug Enforcement Administration's Use of
the Diversion Control Fee Account," I-2008-002, February 2008,
www.usdoj.gov/oig/reports/DEA/e0802/final.pdf.
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The DCP exercises a variety of management controls, including
independent review of certain DCFA expenditures. This is accomplished
by the Validation Unit which was established in 2003 to review DCFA
expenditures of $500 or more to ensure that each expense is in support
of diversion-related activities. DEA continues to evaluate the
appropriate mix of management controls. The costs to the DCP associated
with additional review of expenditures must be balanced against the
risks of error. DEA may adjust the expenditure threshold level for
review and validation up to $2,500 to adjust the review process and
reduce the associated costs to the DCP. The DCP will continue to
provide managerial oversight on expenditures involving DCFA funds to
include oversight by agency managers and by the Validation Unit.
The DCP is expanding its use of Tactical Diversion Squads and is
conducting more investigations, inspections, and scheduling actions now
than ever before due to the increase in prescription drug abuse and the
corresponding efforts to divert such substances to illicit use.
Similarly, an ever expanding number of synthetic substances, such as
synthetic cannabinoids (a large family of chemically unrelated
structures functionally similar to [Delta]9-tetrahydrocannabinol (THC),
the active principle of marijuana) and synthetic cathinones (drugs of
the phenethylamine class which are structurally and pharmacologically
similar to amphetamine and other
[[Page 15239]]
related substances, and are commonly falsely marketed as bath salts or
plant food) require the DCP to dedicate resources to analyze and
respond to new and emerging threats more often now than at any time in
the past to protect the public health and safety.
The DCP also establishes and maintains various IT systems for use
by registrants. These systems result in cost savings and help both DEA
and the registrants perform day-to-day functions more efficiently.
Comments: One commenter felt DEA appropriations and not DCP funds
should be used to pursue illicit entities operating via the internet
and "pill mills" since they are the major sources of controlled
substance abuse and diversion.
DEA Response: DEA must set fees at a level that ensures the
recovery of the full costs of operating the various aspects of the DCP.
21 U.S.C. 886a(1)(C). As discussed above under the History of Fees, the
fees are for the "registration and control" of the manufacture,
distribution, and dispensing as well as importing and exporting of
controlled substances and listed chemicals. 21 U.S.C. 821 and 958(f).
The "control" of controlled substances and listed chemicals includes
enforcement costs where the DCP carries out the mandates of the
Controlled Substances Act. In doing so, the DCP may investigate the
diversion of controlled substances regardless of the method or source
of diversion, including illicit operations involving the internet and
"pill mills."
Comments: Several commenters requested more specificity on what the
fee increase will support.
DEA Response: A supplemental document titled the Proposed Fee
Calculation, located with the NPRM on www.regulations.gov, and an
updated version of this document titled New Registrant Fee Schedule
Calculations, posted with this final rule, also on www.regulations.gov,
outline specific costs of the DCP used in calculating the fee. As
discussed in the NPRM and above, the DCP is defined as "the controlled
substance and chemical diversion control activities of the Drug
Enforcement Administration." 21 U.S.C. 886a(2)(A). The term
"controlled substance and chemical diversion control activities" is
defined as "those activities related to the registration and control
of the manufacture, distribution, dispensing, importation, and
exportation of controlled substances and listed chemicals." 21 U.S.C.
886a(2)(B). Additionally, detailed program costs may be found in the
annual President's Budget, as well as supporting budget documents
released on the Department of Justice's Web site at http://www.justice.gov/about/bpp.htm. See in particular pages 97-101 of the FY
2012 DEA budget.
Comments: One registrant recommended that DCP funds be better used
to provide for adequate staffing for the DCP functions involving quota
requests, scheduling determinations, and policy and regulatory
interpretations in order to be more responsive to the regulated
community.
DEA Response: DEA continuously monitors and adjusts the number of
employees assigned to various DCP tasks, including those that respond
to inquiries from the registrant community. The DCP maintains a robust
public Web site that is continually updated with information on topics
of interest to registrants such as administrative final orders,
significant guidance documents, "questions and answers" on common
topics, registration tools and resources, and registrant reporting
requirements. The Web site is intended to alleviate the burden of
responding to multiple inquiries regarding similar or common topics,
and to communicate new policies and/or views to registrants. The DCP
regulates a registrant population of approximately 1.4 million that
continues to grow every year, and each written inquiry requires a
thorough review of the pertinent facts in order to provide a fair,
measured response. While awaiting a response from the DCP, registrants
are encouraged to review the DCP Web site for information and guidance,
and to seek assistance from their local DEA offices and state licensing
bodies. The DCP also organizes regional conferences designed to provide
information and resources to registrants. Finally, all quota requests
are scrutinized in detail and the supplemental information provided by
quota applicants is verified and cross-checked in order to ensure the
DCP is fulfilling all of its statutory obligations. The volume of quota
applications and the level of review required for an appropriate
assessment is time consuming. Accordingly, DEA is undertaking a
comprehensive review of its quota regulations pursuant to Executive
Order 13563 with the goal of updating and streamlining the quota
application process.
Comments: Several comments stated that any fee increase is unfair
to persons who do not prescribe controlled substances but are required
by an employer or an insurance company to maintain a DEA registration.
Similarly, some allege that many registrants are not reimbursed for
their payment of the registration fee by their employer or that fewer
reimbursements occur than in the past.
DEA Response: DEA issues registrations to practitioners for the
purpose of prescribing or dispensing controlled substances. DEA does
not control or otherwise have authority over requirements by outside
entities such as insurance companies or employers. Furthermore, DEA
expends resources to review applications to determine qualifications,
and it expends resources to maintain registrations once they are
issued. As such, DEA cannot consider the underlying reasons registrants
apply for a registration, other than those related to the handling of
controlled substances, nor can DEA consider whether a particular
registrant is reimbursed for the fee.
Comments: Other comments stated that any fee increase is
detrimental to persons with registrations in multiple states. Another
commenter suggested that a DEA number should be assigned to a provider
throughout their career, regardless of their practice location.
DEA Response: By statute, "[a] separate registration shall be
required at each principal place of business or professional practice
where the applicant manufactures, distributes, or dispenses controlled
substances or List I chemicals." 21 U.S.C. 822(e). Thus, some
registrants, based upon their particular circumstances and business
decisions, may have more than one registration within the same state or
in multiple states where more than one state has authorized the
registrant to conduct the above described activities. Registration is
an essential component of the closed system of distribution established
under the CSA and is predicated on compliance with all applicable state
and local laws, including state licensure in each state the registrant
practices.
Comments: A number of commenters focused on situations where one
person may be more impacted by the fee increase than another, such as
persons working in low-income areas where there is little or no
reimbursement for registration fees, persons working in rural areas,
and persons in sole practice or in small practices. Several commenters
expressed concern that fee increases will affect patient care as some
registrants may not renew or seek to register because of the cost.
DEA Response: DEA may only operate within its statutory authority,
which requires that the fees be set at a level that ensures the
recovery of the full costs of operating the DCP. DEA notes that there
are currently 1.4 million active registrants and, as such, even if
business model or size of practice could
[[Page 15240]]
be objectively measured and accounted for in individualized fee
calculations, such individual calculations would be costly. It is
likely that any cost savings would be offset by the increased need for
personnel to perform the individual fee calculations. It should also be
noted that historically, DCP costs are higher for rural areas because
of the additional travel costs from DEA office locations. Each
applicant for registration must evaluate their need to be able to
handle controlled substances or listed chemicals.
Comments: One commenter suggested that those state, federal, and
tribal organizations that are exempt from payment of the fee should be
required to pay a fee before the current fee is increased.
DEA Response: Registration fee exemptions are set forth in the
existing regulations. Generally, hospitals and other institutions
operated by an agency of the United States or of any state or any
political subdivision or agency thereof, as well as any individual
required to obtain a registration in order to carry out his or her
duties as an official of an agency of the United States or of any state
or any political subdivision or agency thereof may be exempt from
payment of a registration or reregistration fee. 21 CFR 1301.21. Such
an individual is not exempt if his/her registration is used for
appropriate private activities unrelated to the performance of his/her
official duties. Tribal governments are also exempt pursuant to the
Indian Health Care Improvement Act of 2010.\26\ DEA is committed to
carefully reviewing all applications for fee exempt status to ascertain
that such exemptions are not inappropriately granted. Approximately
96,000 individual and institutional registrants, or 7% of all
registrants, are exempt from registration fees.
---------------------------------------------------------------------------
\26\ In accordance with 25 U.S.C. 1616q, employees of a tribal
health or urban Indian organization are exempt from "payment of
licensing, registration, and any other fees imposed by a Federal
agency to the same extent that officers of the commissioned corps of
the Public Health Service and other employees of the Service are
exempt from those fees."
---------------------------------------------------------------------------
Comments: Some commenters suggested that persons who over-prescribe
or violate the law should be charged additional fees and penalties to
help make up any shortfall in collections. Likewise, it was suggested
that the end users of controlled substances be charged an additional
fee. Others suggested that DEA legalize "agriculture-based controlled
substance production" to either decrease costs or charge a fee to fund
the DCP.
DEA Response: DEA has no authority to implement these suggestions.
DEA's statutory authority is to charge reasonable registration fees set
at a level that ensures the recovery of the full costs of operating the
various aspects of the DCP. In addition, the CSA provides for
mechanisms independent of the registration fee by which to exact
financial remuneration from registrants who violate the law.
Registrants who violate the law with regard to controlled substances
may be subject to civil and criminal penalties, as well as forfeitures.
21 U.S.C. 841, 842, 843, 881.
Comments: Some commenters suggested that the fee should be based on
the rate of prescribing of controlled substances or pro-rated to the
salary of the prescriber or based on the registrant's number of
Medicaid and Medicare patients.
DEA Response: DEA does not have access to the controlled substance
prescribing rates of practitioners. In fact, many states with
prescription drug monitoring programs prohibit law enforcement entities
from using prescribing data without specific, independent legal
authority to do so, e.g., a subpoena or warrant. Even so, DEA does not
have the expertise or resources to calculate the rate of prescribing
for each registrant in order to personalize each registrant's
registration fee. Additionally, allowing individualized calculations
based on prescribing rates, income, or type of patients served would
introduce uncertainty and unpredictable fluctuations in the collection
cycle, thereby jeopardizing the statutory mandate to recover the full
costs of operating the DCP.
Comment: One association felt DEA fails to recognize the unfairness
of the "Weighted-Ratio" methodology for fee calculation because
dispensers or practitioners make no income from writing a prescription
whereas manufacturers and distributors more directly benefit from their
authorization by registration to handle controlled substances. This
commenter believed the difference in annual revenue or income for a
practitioner compared to a manufacturer or distributor was more than
the 9 times ratio for distributors and the 12 times ratio for
manufacturers.
DEA Response: It is important to emphasize that the focus of DEA's
fee calculation methodology is to account for DCP program costs among
the registrant categories and not to set fees according to a percentage
of registrant revenue from use of a DEA registration. DEA provided an
analysis of incomes to show the economic impact of the relatively minor
proportion of that income that may be expended for payment of a
registration fee. Additionally, the analysis showed that the fees as
percentages of income/revenue are essentially the same as in 2006, the
year of the last fee adjustment.
Need for New Fee Calculation
As discussed in the NPRM, DEA last adjusted the fee schedule in
August 2006. This fee schedule was calculated to cover the "full
costs" of the DCP for FY 2006 through FY 2008 or October 1, 2005
through September 30, 2008. However, collections did not begin until FY
2007.\27\ The DCP program has continued to operate under this fee
schedule due to cost savings through reorganization and modernization
efforts and by inadvertently excluding certain costs from the DCP. As
indicated by the above-referenced 2008 OIG report, additional salary
and other costs attributable to diversion control activities need to be
incorporated into the DCP. In addition, the scope of the DCP has been
expanded by Congress and by the need to address the diversion of
controlled substances and listed chemicals that seriously impact public
health and safety.
---------------------------------------------------------------------------
\27\ 71 FR 51105 (August 29, 2006).
---------------------------------------------------------------------------
The Office of Diversion Control at DEA is focused on the supply
side of this serious threat to the public health and safety. At the end
of FY 2008, a reorganization within DEA expanded the use of Tactical
Diversion Squads across the country to allow Diversion Investigators to
focus their expertise on regulatory oversight, thereby increasing the
deterrent effect of increased regulatory investigations. Tactical
Diversion Squads incorporate the criminal investigative skills and
statutory authority of Special Agents as well as state and local Task
Force Officers in an effort to stop those organizations and individuals
who violate the CSA by diverting controlled substances and listed
chemicals into the illicit market. Diversion Investigators are a key
asset as they lend their keen knowledge of the closed system of
distribution to the Tactical Diversion Squads. Diversion Investigators'
familiarity and detailed understanding of the closed system of
distribution require, however, that they continue to lead the
regulatory oversight of DEA registrants. DCP costs increase with the
need to expand the number and use of Tactical Diversion Squads.
Due to the rise in controlled substance diversion and abuse, as
well as the recent emergence of designer drug abuse, the DCP has
increased scheduled
[[Page 15241]]
investigations of registrants and drug scheduling initiatives, as well
as other modifications in its diversion control efforts. The DCP
continues to draw technical expertise from Diversion Investigators, and
the DCP has incorporated greater numbers of Special Agents, Chemists,
Information Technology Specialists, Attorneys, Intelligence Research
Specialists, and state and local personnel. It is essential to utilize
a diverse skilled workforce and constantly review and modify all
aspects of the DCP to help successfully execute the drug trafficking
disruption goals of the National Drug Control Strategy and effectively
prevent, detect, and eliminate the diversion of controlled substances
and listed chemicals into the illicit market while ensuring a
sufficient supply of these substances for legitimate medical,
scientific, research, and industrial purposes.
DEA has been and will continue to be fiscally responsible and will
remain vigilant in identifying methods to improve efficiencies or
identifying other cost saving measures. As discussed above, however, a
new fee calculation is needed. Without an adjustment in the annual
registration fees, DEA will be unable to continue current operations
and will be in violation of the statutory mandate that fees charged
"shall be set at a level that ensures the recovery of the full costs
of operating the various aspects of [the diversion control program]."
21 U.S.C. 886a(1)(C). For example, in FY 2009, the DCP's regulatory
activities included more outreach programs to help the registrant
population better comply with the CSA. The DCP increased investigation
cycles as well as depth of review. In FY 2009, there were 1,065
scheduled investigations; in FY 2012, DEA projected performance targets
of 3,906 scheduled investigations--an increase of 2,841. Additionally,
DEA coordinates National Prescription Drug Take-Back Day initiatives,
providing an opportunity for the safe disposal of unwanted or unused
prescription drugs. DEA also projects to increase the number of
Diversion Priority Target Organizations not Linked to Consolidated
Priority Organization Targets Disrupted or Dismantled to 85
(disrupted)/90 (dismantled), an increase of 32 (disrupted)/66
(dismantled) over FY 2007's 53 (disrupted)/24 (dismantled), and is
authorized and plans to establish an additional 12 Tactical Diversion
Squads, which conduct criminal enforcement activities, across the
United States. The new fee schedule will allow DEA to sustain current,
planned, and future operations and employ additional personnel in
support of important program initiatives during Fiscal Years 2012-2014.
Fee Calculation
DEA must ensure the recovery of the full costs of operating the DCP
while charging registrants reasonable fees relating to the registration
and control of the manufacture, distribution, import, and export of
controlled substances and listed chemicals, as well as the dispensing
of controlled substances. For the DCP to have funds to function, DEA
must determine, in advance of actual expenditures, a reasonable fee to
be charged. As a result, historical data and projections must be used
to project the annual costs of the DCP. Additionally, a reasonable fee
must be calculated that will fully recover the costs of the DCP based
on the variability over time of the number of registrants in the
different categories of registration. The fees collected must be
available to fully fund the DCFA and to reimburse DEA for expenses
incurred in the operation of the DCP (21 U.S.C. 886a); therefore, there
must always be more collected than is actually spent to avoid running a
deficit in violation of federal fiscal law.\28\ In operating the DCP,
DEA must be prepared for changes in investigative priorities, diversion
trends, and emerging drugs and chemicals posing new threats to the
public health and safety.
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\28\ In general, no officer or employee of the United States
Government may make or authorize an expenditure or obligation in
excess of an amount available in an appropriation or fund. 31 U.S.C.
1341.
---------------------------------------------------------------------------
Current options to calculate fees are also limited by the ability
and practicability of tracking and allocating detailed costs, although
the agency continues to improve its capabilities on this front. Part of
the difficulty stems from the fact that the mission of DEA involves
investigations and actions that often involve poly-drug organizations
(drug trafficking organizations that traffic multiple drugs), various
types of registrants, or investigations that may start out as one type
of investigation and result in another, based upon the way the facts
develop. It is apparent that Congress recognized that the costs of the
registration and control of controlled substances and listed chemicals
are not properly attributed on a per registrant basis when Congress
differentiated among the categories of registrants for purposes of
calculating a reasonable fee, i.e., manufacturers, distributors,
importers, exporters, and dispensers. The weighted ratio of 12.5 for
manufacturers, 6.25 for distributors (including importers and
exporters), and 1 for dispensers is consistent with Congress's
differentiation between the categories of registrants.
Because of the complexity of many diversion investigations,
tracking costs within the DCP according to registrant categories or
within a given registrant category has not been possible or cost-
efficient. Such detailed cost attribution may or may not be feasible in
the future. DEA is in the process of testing a system where personnel
would account for their daily hours according to whether their time is
spent on DCP or other DEA mission activities. DEA has also made
progress through reorganization and there is recognition throughout the
agency of the need to identify and separate DCP costs from other agency
costs.
Thus, the fee is calculated by assigning registrants to a business
activity or category (e.g., researcher, practitioner, distributor,
manufacturer) based on the statutory fee categories. Then a base fee
rate is established according to the annual estimated costs of the DCP.
A projected population is calculated for each business activity or
category. That figure is then multiplied by a ratio of 1.0 for
researchers, 3.0 for practitioners (for administrative convenience the
fee is collected every three years for practitioners), 6.25 for
distributors, and 12.5 for manufacturers. By utilizing these different
ratios, the agency recognizes the statutory need to charge reasonable
fees relating to the registration and control of the manufacture,
distribution, dispensing, importation, and exportation of controlled
substances and listed chemicals. Historically, registration and other
DCP activities are greatest for manufacturers. This is because there is
great risk and grave consequences associated with the quantity and
purity of controlled substances and/or chemicals with each manufacturer
at this point in the closed system. All of the individual business
activity figures are then added together to form a weighted sum for one
projected year. This process is performed for two more years using
future projected registrant populations for those years multiplied by
the ratio. The annual figures for these three years are then added
together and divided into the total budget requirements for that three-
year period to arrive at the base rate fee to be charged to each
category of registrant.
In calculating fees to recover the full costs of operating the DCP,
DEA estimates the costs of operating the DCP
[[Page 15242]]
for the next three fiscal years.\29\ To develop the DCFA budget
estimates for Fiscal Year (FY) 2012, FY 2013 and FY 2014, DEA compiles:
(1) The actual DCFA financial data for FY 2011; (2) the FY 2012
President's Budget Request; (3) the estimated budgets for FY 2013 and
FY 2014; and (4) the required annual $15 million transfer to the United
States Treasury as mandated by the CSA (21 U.S.C. 886a). The following
paragraphs explain the annual revenue calculations and how the total
amount to be collected for the FY 2012-2014 period was calculated. In
developing this figure, DEA begins with annual projected DCP
obligations, including payroll, operational expenses and necessary
equipment. The DCP budget has increased due to inflationary adjustments
for rent and payroll and to increase staffing resources that support
the regulatory and law enforcement activities of the program. These
additional costs have not been reflected in the fees until now because
the fees were last adjusted for the time period of FY 2006-2008.
Specific details on the DCP budget are available in the annual
President's Budget Submission and supplemental budget justification
documents provided to Congress.\30\
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\29\ See "New Registrant Fee Schedule Calculations" in this
rulemaking docket found at www.regulations.gov.
\30\ See "U.S. Department of Justice, Drug Enforcement
Administration, FY 2012 Performance Budget Congressional
Submission" for details on the FY 2012 budget. The budget document
is available online at http://www.justice.gov/jmd/2012justification/pdf/fy12-dea-justification.pdf.
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Total obligations for the DCP have increased from FY 2007 to FY
2010 by approximately 49 percent. For the FY 2006-2008 period, payroll
expenses (staff compensation and benefits) composed the largest
component of DCP costs at 55.7 to 57.6 percent per year. Between the
period of FY 2006 and FY 2010, payroll constituted an average of 56.7
percent of DCP expenses. Operating expenses and capital expenditures
made up the remainder of DCP costs. Operating expenses (an average of
39.3 percent for the FY 2006-2010 period) include daily operation costs
such as investigative costs, travel, and purchases of goods and
services. Capital expenditures, including equipment and furniture
purchases, capital leases, and land/structure improvements and
purchases, averaged 4.0 percent during this same period.
For the FY 2012-2014 period covered by this rulemaking, the overall
breakdown of DCP major cost categories does not depart significantly
from previous years in terms of percentage of costs; however, totals
for each of these major cost categories do increase to reflect
additional costs in each of these categories.
In addition to the budget estimates for each of the fiscal years,
the cost components outlined below are also considered in determining
required registration fee collections.
Recoveries From Money Not Spent as Planned (Deobligation of Prior Year
Obligations)
At times, DEA enters into an obligation to purchase a product or
service that is not delivered immediately, such as in a multi-year
contract. Changes in obligations can occur for a variety of reasons,
e.g., changes in planned operations, delays in staffing, implementation
of cost savings, changes in vendor capabilities, etc. When DEA does not
expend its obligation, the "deobligated" funds are "recovered" and
the funds become available for DCP use. Based on historical trends and
for purposes of calculating the fee levels, the recovery from
deobligation of prior year obligations is estimated at $13.5 million
per year.
Transfer to Treasury
As discussed, in 1993, Congress determined that the DCP would be
fully funded by registration fees rather than by appropriations.\31\
Congress established the DCFA as a separate account of the Treasury to
"[ensure] the recovery of the full costs of operating the various
aspects of [the diversion control program]" from fees charged by DEA.
21 U.S.C. 886a(1)(C). Collected fees are deposited into the DCFA. Each
fiscal year, the first $15 million is transferred to the Treasury and
is not available for use by the DCP. Therefore, DEA needs to collect an
additional $15 million per year beyond estimated costs for transfer to
the Treasury.
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\31\ Departments of Commerce, Justice, and State, the Judiciary
and Related Agencies Appropriations Act of 1993, Public Law 102-395,
codified in relevant part at 21 U.S.C. 886a.
---------------------------------------------------------------------------
Operational Continuity Fund (OCF)
DEA maintains an operational continuity fund (OCF) based on the
need to maintain DCP operations when monthly collections and
obligations fluctuate. Historically, current obligations sometimes
exceed current collections consecutively for several months. Therefore,
an operational continuity fund is maintained in order to avoid
operational disruptions due to these fluctuations and monthly
differences in collections and obligations. Using statistical analysis
of the historical fluctuations between amounts collected and amounts
obligated, DEA has determined that seven percent of the projected
obligations is adequate to avoid operational disruptions. The amount
required to bring the operational continuity fund balance to the $15
million plus seven percent level is added to projected costs.
The FY 2012-FY 2014 OCF balance projections have been changed from
those shown in the NPRM to reflect actual FY 2011 financial data. The
FY 2012 beginning OCF balance of $41,726,554 is higher than the FY 2014
end of year target OCF balance of $40,943,670 by $782,884. The higher
beginning OCF balance allows lower required collections from
registration fees. The incremental changes in OCF balance for FY 2012,
FY 2013, and FY 2014 are -$2,047,144, $863,240, and $401,020
respectively (or a cumulative decrease of $782,884). The cumulative
decrease of $782,884 is a change from the cumulative increase of
$8,320,115 estimated in the NPRM. The two main factors that contributed
to the change from the NPRM calculation estimated in early 2011 to the
final rule calculation performed after the end of FY 2011 (September
30, 2011) are: (1) Lower than estimated actual FY 2011 spending which
led to a higher beginning FY 2012 OCF balance; and (2) lower estimated
budgets for FY 2013 and FY 2014, which lowered the target OCF balance.
Table 1--Change in Operational Continuity Fund Balance FY 2012-2014
|
FY2012 |
FY2013 |
FY2014 |
Budget |
$322,000,000 |
$352,563,000 |
$364,895,000 |
Target OCF ($15M + 7%) |
39,679,410 |
40,542,650 |
40,943,670 |
Beginning OCF balance |
41,726,554 |
.............. |
.............. |
Needed Change to Achieve Target OCF |
(2,047,144 ) |
863,240 |
401,020 |
3-year cumulative change |
.............. |
.............. |
(782,884 ) |
[[Page 15243]]
Combat Methamphetamine Act of 2005 (CMEA) Collections
Under the CMEA, DEA collects a self-certification fee for regulated
sellers of scheduled listed chemical products, which is included as
part of the total collections. The fee is waived for any person in good
standing and holding a current DEA registration to dispense controlled
substances, such as a pharmacy. DEA has observed an approximately 26
percent decline in self-certifications from FY 2008 to FY 2011 and
anticipates that the decline will stabilize at approximately 5,000 per
year from FY 2012 to FY 2014. The self-certification fee is $21. CMEA
self-certification fee collection estimates for FY 2012, FY 2013, and
FY 2014 for purposes of calculating the fee levels are $105,000
annually.
Table 2--CMEA Collections FY 2012-2014
|
FY2012 |
FY2013 |
FY2014 |
Number of paying self-cert |
5,000 |
5,000 |
5,000 |
Fee |
$21 |
$21 |
$21 |
CMEA collection estimate |
$105,000 |
$105,000 |
$105,000 |
Other Collections
DEA also derives revenue from the sale/salvage of official
government vehicles dedicated to DCP use. DEA's estimate for all other
collections is $533,766 per year. This is the actual amount for FY
2011.
Estimated Total Required Collections
Based on these figures, DEA calculated the total amount required to
be collected for the FY 2012-2014 period for purposes of calculating
the fee levels as follows:
Required registration fee collections for FY 2012 are $320,814,090.
This figure includes the budget of $322,000,000, plus $15 million for
transfer to the Treasury, minus $13.5 million in recoveries, $2,047,144
for the decrease in the OCF balance, $105,000 in CMEA self-
certification collections, and $533,766 in other collections.
Required registration fee collections for FY 2013 are $354,287,474.
This figure includes the estimated budget of $352,563,000, plus $15
million for transfer to the Treasury and $863,240 for the increase in
the OCF balance, minus $13.5 million in recoveries, $105,000 in CMEA
self-certification collections, and $533,766 in other collections.
Required registration fee collections for FY 2014 are $366,157,254.
This figure includes the estimated budget of $364,895,000, plus $15
million for transfer to the Treasury and $401,020 for the increase in
the OCF balance, minus $13.5 million in recoveries, $105,000 in CMEA
self-certification collections, and $533,766 in other collections.
Table 3--Needed Fee Collections FY 2012-2014
|
FY2012 |
FY2013 |
FY2014 |
3-yr total |
Budget/Estimated Budget |
$322,000,000 |
$352,563,000 |
$364,895,000 |
$1,039,458,000 |
Recoveries |
(13,500,000 ) |
(13,500,000 ) |
(13,500,000 ) |
(40,500,000 ) |
Net Budget |
308,500,000 |
339,063,000 |
351,395,000 |
998,958,000 |
Transfer to the Treasury |
15,000,000 |
15,000,000 |
15,000,000 |
45,000,000 |
Change to Achieve Target OCF |
(2,047,144 ) |
863,240 |
401,020 |
(782,884 ) |
CMEA Self-cert collections |
(105,000 ) |
(105,000 ) |
(105,000 ) |
(315,000 ) |
Other collections |
(533,766 ) |
(533,766 ) |
(533,766 ) |
(1,601,297 ) |
Required collections from Registration Fees |
320,814,090 |
354,287,474 |
366,157,254 |
1,041,258,818 |
Numbers are rounded.
In total, DEA needs to collect $1,041,258,818 in registration fees
over the three year period, FY 2012-FY 2014, to fully fund the DCP.
As in the past, DEA is calculating the fee for each registrant
category for a three-year period (FY 2012-2014). The vast majority of
registrants are practitioners who pay a three-year registration fee.
These registrants are divided into three separate groups who pay their
three-year registration fees on alternate year cycles. Because
registration cycles may differ from year to year, the total amount
collected through fees in a given year may not exactly match the
projected amount. For purposes of calculating the new fee schedule, DEA
used a new fee collection start date of March 1, 2012, and used the
current fee schedule for calculating the first five months of FY 2012
registration fee collections.
In calculating the new fees through FY 2014 using the selected
weighted-ratio methodology, DEA has updated the data used in the
calculation set forth in the proposed rule. Instead of budget estimates
for FY 2012, 2013, and 2014, the final fee calculation uses the actual
FY 2012 budget, revised budget estimates for FY 2013 and FY 2014, and
revised estimates for recoveries from deobligations and for the
Operational Continuity Fund. These revisions are
[[Page 15244]]
outlined in the overview of the Diversion Control Fee Account below:
|
FY2012 |
FY2013 |
FY2014 |
Congressional Budget/Cost Estimates |
$322,000,000 |
$352,563,000 |
$364,895,000 |
Operational Continuity Fund (OCF) Brought Forward From Prior Year |
41,726,554 |
39,701,112 |
36,496,165 |
Collections: Registration Fees |
320,835,793 |
350,219,287 |
369,879,300 |
Collections: CMEA |
105,000 |
105,000 |
105,000 |
Treasury |
(15,000,000 ) |
(15,000,000 ) |
(15,000,000 ) |
Net Collections |
305,940,793 |
335,324,287 |
354,984,300 |
Recoveries from Deobligations |
13,500,000 |
13,500,000 |
13,500,000 |
Other Collections |
533,766 |
533,766 |
533,766 |
Subtotal Availability |
361,701,112 |
389,059,165 |
405,514,231 |
Obligations |
322,000,000 |
352,563,000 |
364,895,000 |
EOY OCF Balance |
39,701,112 |
36,496,165 |
40,619,231 |
Target OCF ($15M+7% of Budget) |
39,679,410 |
40,542,650 |
40,943,670 |
Numbers are rounded.
Note: Due to rounding of the fees to the whole dollar, the total 3-year registration fee collection estimate of
$1,040,934,380 does not equal the target collection amount of $1,041,258,818 used to calculate the fees.
Based upon careful consideration of all of the comments and
applying the above, a new fee schedule is set forth below. This new fee
schedule is slightly less than the fee schedule proposed in the NPRM on
July 6, 2011, due to the completion of FY 2011 and the availability of
actual financial data for the fiscal year as well as progression in the
budget process due to the passage of time since the NPRM was prepared.
Registrants on Three-Year Registration Cycle
Registrant class/business |
Fee |
Pharmacy |
$731 |
Hospital/Clinic |
731 |
Practitioner |
731 |
Teaching Institution |
731 |
Mid-Level Practitioner |
731 |
* Pharmacies, hospitals/clinics, practitioners, teaching institutions,
and mid-level practitioners currently pay a fee for a three-year
period. Fee of $731 is equivalent to approximately $244 annually.
Registrants on Annual Registration Cycle
Registrant class/business |
Fee |
Researcher/Canine Handler |
$244 |
Analytical Lab |
244 |
Maintenance |
244 |
Detoxification |
244 |
Maintenance and Detoxification |
244 |
Compounder/Maintenance |
244 |
Compounder/Detoxification |
244 |
Compounder/Maintenance/Detoxification |
244 |
Distributor (chemical and controlled substances) |
1,523 |
Reverse distributor |
1,523 |
Importer (chemical and controlled substances) |
1,523 |
Exporter (chemical and controlled substances) |
1,523 |
Manufacturer (chemical and controlled substances) |
3,047 |
This fee schedule replaces the current fee schedule for controlled
substance and chemical registrants in order to recover the full costs
of the DCP so that it may continue to meet the programmatic
responsibilities set forth by statute, Congress, and the President. As
discussed, without an adjustment to fees, the DCP will be unable to
continue current operations, necessitating dramatic program reductions,
and possibly weakening the closed system of distribution. Particularly
in light of increased needs for diversion control and demands upon the
DCP outlined in the NPRM, the following fees for the FY 2012-2014
period will be effective April 16, 2012.
DEA continues to review possible methodologies as technology
continues to afford increased tracking and allocation of specific
costs. However, at this time, DEA has determined that it is both
practicable and reasonable to continue to apply the weighted-ratio
methodology. Consistent with the statutory direction to charge
reasonable fees relating to the registration and control of the
manufacture of controlled substances and listed chemicals, the 12.5
ratio is applied to the manufacturing registrant group. The 6.25 ratio
applies to the "distribution" of controlled substances and listed
chemicals, or the distributor registrant group. The "dispensing"
registrant group has the largest number of registrants and each
registrant has a relatively low registration and control cost, and a
relatively smaller quantity and lower purity of controlled substances
within their physical possession. Thus, the base fee, or the 1 ratio,
is applied to the dispensing registrant group. The practitioner fee is
the base fee on an annual basis but is collected every three years for
administrative convenience.
Thus, the new fees, some of which are paid annually and some of
which are paid every three years, range from $244 for ratio 1 to $3,047
for ratio 12.5, depending upon the particular registrant category.
Specifically, the annual registration fee for practitioners, mid-level
practitioners, dispensers, researchers, and narcotic treatment programs
is $244. For administrative convenience for both the collection and the
payment, practitioners will pay a combined registration fee of $731
every three years. The annual registration fee for distributors,
importers, and exporters is $1,523, and for manufacturers the annual
fee is $3,047. 21 CFR 1301.13 and 1309.11.
DEA Efforts To Control DCP Costs
DEA continually reviews the DCP and its methods of operation to
ensure that it is fiscally responsible. The DCP works diligently to
provide the registrants with cost effective and state-of-the-art means
for complying with laws and regulations related to manufacturing,
distributing, dispensing, importing, and exporting controlled
substances and listed chemicals. Some examples of this include online
registration, the Controlled Substance Ordering System
[[Page 15245]]
(CSOS) for electronic controlled substance ordering between
registrants, and electronic reporting of thefts and significant losses
of controlled substances.
DEA takes seriously its responsibilities to manage the DCP in an
efficient and effective manner, particularly in light of the current
economy. DEA cannot foresee Congressionally-mandated changes to the
DCP, emerging trends, or how such trends may impact the DCP, but it is
committed to managing in a fiscally responsible manner. The Office of
Diversion Control is committed to reviewing the registration process to
ensure efficiency and accountability as well as reviewing current
regulations related to fee exempt registrants.
Summary of Impact of New Fee Relative to Current Fee
Affected Entities
In updating the number of registrants since the NPRM and the
proposed fee calculation, there is a slight increase, with a total of
1,407,119 controlled substances and listed chemical registrants as of
August 2011 (1,406,021 controlled substances registrants and 1,098
chemical registrants), as shown in Table 10.
Table 10--Number of Registrants by Business Activity
Registrant class/business |
Controlled
substances |
Chemicals |
Pharmacy |
66,934 |
.............. |
Hospital/Clinic |
15,737 |
.............. |
Practitioner |
1,115,398 |
.............. |
Teaching Institution |
336 |
.............. |
Mid-Level Practitioner |
193,877 |
.............. |
Researcher/Canine Handler |
9,120 |
.............. |
Analytical Lab |
1,500 |
.............. |
Narcotic Treatment Program |
1,267 |
.............. |
Distributor |
828 |
550 |
Reverse Distributor |
60 |
.............. |
Importer |
209 |
182 |
Exporter |
233 |
159 |
Manufacturer |
522 |
207 |
Total |
1,406,021 |
1,098 |
Total (all registrants) |
1,407,119 |
* Data as of August 2011.
Not all registrants listed in Table 10 are subject to the fees.
Publicly owned institutions, law enforcement agencies, the Indian
Health Service, the Department of Veterans Affairs, Federal Bureau of
Prisons, and military personnel are exempt from fees.
The number of registrations exceeds the number of individual
registrants because some registrants are required to hold more than one
registration. The CSA requires a separate registration for each
location where controlled substances are handled and a separate
registration for each business activity; that is, a registration for
activities related to the handling of controlled substances and a
registration for activities related to the handling of List I
chemicals. Some registrants may conduct multiple activities under a
single registration (e.g., manufacturers may distribute substances they
have manufactured without being registered as a distributor), but firms
may hold multiple registrations for a single location. Individual
practitioners who prescribe, but do not store controlled substances,
may use a single registration at multiple locations within a state, but
need separate registrations for each state in which they prescribe
controlled substances.
Characteristics of Entities
This rule affects those manufacturers, distributors, dispensers,
importers, and exporters of controlled substances and List I chemicals
that are required to obtain and pay a registration fee with DEA
pursuant to the CSA (21 U.S.C. 822 and 958(f)). As of August 2011,
there was an increase of registrants from December 2010, with 1,407,119
controlled substances and List I chemical registrants (1,406,021
controlled substances registrants and 1,098 List I chemical
registrants), as shown above in Table 10.
Pharmacies, hospitals/clinics, practitioners, teaching
institutions, and mid-level practitioners comprise 98.9 percent of all
registrants. These registrants register every three years. Other
registrants maintain an annual registration. Registration and
reregistration costs vary by registrant category as described in more
detail in the sections below.
The fees affect a wide variety of entities. Table 11 indicates the
sectors affected by this rule and their average annual revenue/income.
Most DEA registrants are considered small entities under Small Business
Administration (SBA) standards. There are 1,309,275 registered
practitioners and mid-level practitioners as of August 2011, and almost
all practitioners are considered small (annual revenues of less than $6
million to $8.5 million, depending on specialty).
Table 11--Industrial Sectors of DEA Registrants
Sector |
NAICS code |
Average annual
revenue * |
Manufacturers: |
Petro-chemical Manufacturing (organic, inorganic) |
32511 |
$1,390,485,971 |
Medicinal and Botanical Manufacturing |
325411 |
27,601,834 |
Pharmaceutical Manufacturing |
325412 |
144,173,821 |
Adhesive Manufacturing |
325520 |
17,482,468 |
Toilet Preparation Manufacturing |
325620 |
50,322,290 |
Other Chemical Manufacturing |
325998 |
13,720,807 |
Distributors: |
Drugs and Druggist Sundries Wholesalers |
424210 |
64,793,480 |
General Line Grocery Wholesalers |
424410 |
45,518,407 |
Confectionary Merchant Wholesalers |
414450 |
17,175,982 |
Chemical Wholesalers |
424690 |
12,856,993 |
Tobacco Wholesalers |
424940 |
71,437,205 |
Miscellaneous Wholesalers |
424990 |
2,741,857 |
Pharmacies: |
Supermarkets |
445110 |
7,247,540 |
Drug Stores |
446110 |
4,829,487 |
Discount Stores |
452112 |
26,535,201 |
Warehouse Clubs and Superstores |
452910 |
76,300,280 |
Other: |
Testing Labs |
541380 |
1,907,414 |
Packaging and Labeling Services |
561910 |
2,696,904 |
Other Practitioners: |
Professional Schools |
611310 |
1,373,855 |
Ambulatory Health Care Services |
621 |
1,236,852 |
Hospitals |
622 |
108,286,641 |
*Source: 2007 Economic Census. http://www.census.gov/econ/census07.
[[Page 15246]]
Supermarkets, discount stores, warehouse clubs, and superstores
handle controlled substances through their distribution centers and
pharmacies. Drug products containing List I chemicals are primarily
distributed as over-the-counter medicines. These are distributed by
drug wholesalers who specialize in non-prescription drugs, wholesalers
who supply convenience stores, and grocery, pharmacy, and discount
stores that operate their own distribution centers.
Economic Impact Analysis of Fee
This fee is expected to have two levels of impact. Initially, the
fee adjustment will impact the registrants. Then the fee or portion of
the fee increase may be passed on to the general public. The analysis
below assumes that the impact of the fee adjustment is absorbed
entirely by the registrants. Some commenters have confirmed this
statement and have indicated some registrants may decide not to renew
their registration as a result of the higher fees.
The registration fee may be a deductible business expense for some
registrants. As a result, the increase in the fee may be dampened by
reduced tax liability as a result of the increase in registration fee
expense. For example, if a practitioner pays an additional $60 per year
in registration fees and the combined federal and state income tax is
35 percent, the net cash impact is $39, not $60. The additional $60
causes income/profit to decrease by $60, decreasing the tax liability
by $21. The net cash outlay is $39.\32\
---------------------------------------------------------------------------
\32\ This example is for illustration purposes only. Each entity
should seek competent tax advice for tax consequences of this rule.
---------------------------------------------------------------------------
DEA examined the new fees as a percentage of income for physicians,
dentists, and physician's assistants in the practitioner registrant
group and as a percentage of revenue for pharmacies, manufacturers, and
distributors. This analysis indicates the fee adjustment is expected to
have the greatest effect on small businesses in the practitioner
registrant group. The majority of practitioners work in small
businesses. Physicians, dentists, and physician's assistants reflect a
representative sub-group of the practitioner registrant group. The
effect of the fee increase is diminished by any increase in registrant
income.
The table below describes the average income for physicians,
dentists, and physician's assistants from 2004 to 2012, and reflects
the impact of the fee as a percentage of average income. This analysis
assumes that the fee is absorbed personally by each practitioner and is
not passed on to customers in such forms as higher prices for medical
services or products. The analysis also ignores the dampening effect of
registration fees as a potentially deductible business expense.
Table 12--New Fee as Percentage of Income FY 2004-2012
Year |
Average income\33\ |
Fee |
Fee as percent of average income |
Physicians |
Dentists |
Physician
assistants |
(Annual
basis) |
Physicians |
Dentists |
Physician
assistants |
2004 |
137,610 |
130,300 |
68,780 |
.............. |
.............. |
.............. |
.............. |
2005 |
138,910 |
133,680 |
71,070 |
.............. |
.............. |
.............. |
.............. |
2006 |
142,220 |
140,950 |
74,270 |
184 |
0.129 |
0.131 |
0.248 |
2007 |
155,150 |
147,010 |
77,800 |
184 |
0.119 |
0.125 |
0.237 |
2008 |
165,000 |
154,270 |
81,610 |
184 |
0.112 |
0.119 |
0.225 |
2009 |
173,860 |
156,850 |
84,830 |
184 |
0.106 |
0.117 |
0.217 |
2010 |
179,370 |
163,901 |
87,933 |
184 |
0.103 |
0.112 |
0.209 |
2011 |
187,154 |
169,632 |
91,230 |
184 |
0.098 |
0.108 |
0.202 |
2012 |
194,939 |
175,363 |
94,528 |
244 |
0.125 |
0.139 |
0.258 |
Increase from 2007 to 2012 |
26 |
19 |
22 |
33 |
6 |
11 |
9 |
Increase from 2006 to 2012 |
37 |
24 |
27 |
33 |
−3 |
7 |
4 |
---------------------------------------------------------------------------
\33\ Source: Bureau of Labor Statistics, http://www.bls.gov.
Average income data for 2004 to 2009 is provided by the Bureau of
Labor Statistics. 2010 to 2012 are estimated figures based on linear
regression, where a straight-line increase is calculated from years
2004 to 2009, then using the line to estimate average income for
2010 to 2012.
---------------------------------------------------------------------------
[[Page 15247]]
In 2007, the current fee of $184 on an annual basis represents
0.119 percent, 0.125 percent, and 0.237 percent of annual income for
physicians, dentists, and physician's assistants respectively. In 2012,
the new fee of $244 (on an annual basis) would represent approximately
0.125 percent, 0.139 percent, and 0.258 percent of annual income for
physicians, dentists, and physician's assistants respectively. While
the new fee is approximately 33 percent above the current fees
implemented at the end of 2006, average incomes for physicians,
dentists, and physician's assistants have increased 26 percent, 19
percent, and 22 percent respectively over the same period. This
estimated increase in average income dampens the effect of the fee
increase as a percentage of average income. The diminishing effect is
more apparent when comparing 2012 to 2006, the year for which the
current fee was calculated and implemented. Additionally, as the
average income grows in 2013 and 2014, the income adjusted fees are not
any higher than in recent history.
Exempt from the payment of registration fees is any hospital or
other institution that is operated by an agency of the United States,
of any state, or of any political subdivision or agency thereof.
Likewise, an individual who is required to obtain a registration in
order to carry out his/her duties as an official of a federal or state
agency is also exempt from registration fees.\34\ Fee exempt
registrants are not affected by the new fees.
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\34\ See 21 CFR 1301.21 for complete fee exemption requirements.
---------------------------------------------------------------------------
Conclusion
DEA concludes that this new fee schedule is not an economically
significant regulatory action because it does not result in a
materially adverse effect on the economy, a sector of the economy,
productivity, competition, jobs, the environment, public health or
safety, or state, local, or tribal governments or communities.\35\ The
new fee will initially affect all fee paying registrants. The fees may
eventually be passed on to the general public, diminishing the impact
of the fee adjustment on individual registrants. The impact of the fee
on registrants may also be diminished by a reduction in tax liabilities
and an increase in average income. Additionally, hospitals and
institutions operated by federal, state, or local governments, and
their employees are exempt from registration fees.\36\ Moreover, DEA
believes that this final rule will enhance the public health and
safety.
---------------------------------------------------------------------------
\35\ In accordance with 25 U.S.C. 1616q, employees of a tribal
health or urban Indian organization are exempt from "payment of
licensing, registration, and any other fees imposed by a Federal
agency to the same extent that officer of the commissioned corps of
the Public Health Service and other employees of the Service are
exempt from those fees." To the extent that any hospital or other
institution operated by or any individual practitioner associated
with an Indian Tribal Government must pay fees, the economic impact
is not substantial.
\36\ See 21 CFR 1301.21 for complete requirements for exemption
of registration fees.
---------------------------------------------------------------------------
Regulatory Analyses
This final rule is necessary to ensure the full funding of the DCP
through registrant fees as required by 21 U.S.C. 886a. It has been five
years since the last fee change. As discussed above, statutory and
operational changes to the DCP cannot be fully offset by improved
operational efficiencies and require a recalculation of registrant
fees. This rule does not change the requirement to register to handle
controlled substances and/or List I chemicals but rather changes the
annual fee associated with registration and reregistration that will
allow DEA to meet its statutory obligations. DEA recognizes that the
fee changes affect small businesses, but does not believe the relative
individual impact is significant. The average annual increase in
estimated registration fee collections is less than $100 million at an
estimated annual increase of $76,226,568.
Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3511)
This rule will not impose additional information collection
requirements on the public.
Regulatory Flexibility Act
Under the Regulatory Flexibility Act of 1980 (5 U.S.C. 601-612)
(RFA), federal agencies must evaluate the impact of rules on small
entities and consider less burdensome alternatives. DEA has evaluated
the impact of this final rule on small entities as summarized above and
concluded that although the rule will affect a substantial number of
small entities, it will not impose a significant economic impact on any
regulated entities.
In accordance with the Regulatory Flexibility Act (5 U.S.C.
605(b)), the Deputy Assistant Administrator hereby certifies that this
rulemaking has been drafted consistent with the Act and that a
regulatory analysis on the effects or impact of this rulemaking on
small entities has been done and summarized above.\37\ While DEA
recognizes that this increase in fees will have a financial effect on
registrants, the change in fees will not have a significant economic
impact. A change in fees is necessary to fully comply with 21 U.S.C.
886a and related statutes governing the DCP and the Diversion Control
Fee Account by which DEA is legally mandated to collect fees to cover
the full costs of the DCP as defined by all activities relating to the
registration and control of the manufacture, distribution, import,
export, and dispensing of controlled substances and listed chemicals.
---------------------------------------------------------------------------
\37\ See "Economic Impact Analysis of Final Rule on Controlled
Substances and List I Chemical Registration and Reregistration Fees,
DEA-346" in this rulemaking docket found at www.regulations.gov.
---------------------------------------------------------------------------
This rule is not a discretionary action but implements statutory
direction to charge reasonable fees to recover the full
[[Page 15248]]
costs of activities constituting the DCP through registrant fees (21
U.S.C. 821, 886a, and 958(f)). As discussed above and in the Economic
Impact Analysis of the Final Rule found in the rulemaking docket at
www.regulations.gov, DEA analyzed four fee calculation methodologies--
Past-Based, Future-Based, Flat Fee, and Weighted-Ratio. DEA selected
the weighted-ratio methodology to calculate the new fee structure. This
approach has been used since Congress established registrant fees and
continues to be a reasonable reflection of differing costs.
Furthermore, the weighted-ratio does not create a disparity in the
relative increase in fees from the current to the new fees. The
weighted-ratios used by DEA to calculate the fee have proven effective
and reasonable over time. Additionally, the selected calculation
methodology accurately reflects the differences in activity level,
notably in pre-registration and scheduled investigations, by registrant
category--for example, these costs are greatest for manufacturers. DEA
selected this option because it is the only option that resulted in
reasonable fees for all registrant groups.
Under the weighted-ratio methodology, the individual effect on
small business registrants is minimal. Practitioners represent 93
percent of all registrants, and nearly all practitioners are employed
by small businesses pursuant to SBA standards. Practitioners will pay a
three-year registration fee of $731 or the equivalent of $244 per year.
For consideration of the impact of the fee on small businesses, DEA
analyzed the new registration fee as a percentage of annual income for
a representative practitioner group: physicians, dentists, and
physician's assistants. While there are many specialists listed in the
Bureau of Labor Statistics income data, incomes for physicians,
dentists, and physician's assistants are representative of the
practitioner registrant group. For practitioners, the new fee, on an
annual basis, would be $244; the annual increase would be $60 from the
current fee. From the calculation performed in the preceding section,
Economic Impact Analysis of Final Rule, the impacts of the new fees,
$60 per year increase from current fees, were found to be 0.007
percent, 0.014 percent, and 0.022 percent (rounded to the third
decimal) of annual income for physicians, dentists, and physician's
assistants respectively, when normalized for income increases. In
consideration of the calculated impact and potentially further
mitigating factors discussed in the Economic Impact Analysis of Final
Rule, DEA concludes that the final rule will not have a significant
economic impact on a substantial number of small entities.
Executive Orders 13563 and 12866
This final rule increasing registrant fees has been developed in
accordance with the principles of Executive Orders 13563 and 12866.
Supporting information may be found at www.regulations.gov. The
difference between the current fee and the new fee--the fee increase--
is less than $100 million annually. Specifically, the difference in the
fees projected to be collected under the current fee rates and in the
fees projected to be collected under the new fee rates for the three
years of FY 2012-FY 2014 is $228,679,704. Thus, the annual increase is
$76,226,568. This rule has been reviewed by the Office of Management
and Budget.
The primary cost of this final rule is the increase in the
registration fees paid by registrants. Benefits of the rule are an
extension of the benefits of the DCP. The DCP is a strategic component
of United States law and policy aimed at preventing, detecting, and
eliminating the diversion of controlled substances and listed chemicals
into the illicit market while ensuring a sufficient supply of
controlled substances and listed chemicals for legitimate medical,
scientific, research, and industrial purposes. The absence of or
significant reduction in this program would result in enormous costs
for the citizens and residents of the United States due to the
diversion of controlled substances and listed chemicals into the
illicit market as outlined in the Economic Impact Assessment found in
the rulemaking docket.
Executive Order 12988
This final regulation meets the applicable standards set forth in
Sections 3(a) and 3(b)(2) of Executive Order 12988 Civil Justice Reform
to eliminate ambiguity, minimize litigation, establish clear legal
standards, and reduce burden.
Executive Order 13132
This rulemaking does not preempt or modify any provision of state
law, impose enforcement responsibilities on any state or 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 does not contain a federal mandate and will not result in
the expenditure by state, local, and tribal governments, in the
aggregate, or by the private sector, of $136,000,000 or more (adjusted
for inflation) in any one year, and will not significantly or uniquely
affect small governments. DEA notes that many governmental entities
operate DEA-registered facilities and that they are currently fee
exempt. Moreover, the effect of this fee adjustment on individual
entities and practitioners is minimal. The majority of the affected
entities will pay a fee of $731 for a three year registration period
($244 per year or an increase of $60 per year). This rule is
promulgated in compliance with 21 U.S.C. 886a that the full costs of
operating the DCP be collected through registrant fees.
Executive Order 13175
This rule is required by statute, will not have tribal implications
and will not impose substantial direct compliance costs on Indian
tribal governments.
Congressional Review Act
This rule is not a major rule as defined by the Congressional
Review Act (5 U.S.C. 804). This rule will not result in an annual
effect on the economy of $100,000,000 or more, a major increase in
costs or prices, or have significant adverse effects on competition,
employment, investment, productivity, innovation, or the ability of
United States-based companies to compete with foreign based companies
in domestic and export markets.
List of Subjects
21 CFR Part 1301
Administrative practice and procedure, Drug traffic control,
Security measures.
21 CFR Part 1309
Administrative practice and procedure, Drug traffic control,
Exports, Imports, Security measures.
For the reasons set out above, 21 CFR parts 1301 and 1309 are
amended as follows:
PART 1301--REGISTRATION OF MANUFACTURERS, DISTRIBUTORS AND
DISPENSERS OF CONTROLLED SUBSTANCES
- 1. The authority citation for part 1301 continues to read as follows:
Authority: 21 U.S.C. 821, 822, 823, 824, 831, 871(b), 875, 877,
886a, 951, 952, 953, 956, 957, 958.
[[Page 15249]]
- 2. Amend Sec. 1301.13 by revising paragraph (e)(1) to read as follows:
Sec. 1301.13 Application for registration; time for application;
expiration date; registration for independent activities; application
forms, fees, contents and signature; coincident activities.
* * * * *
(e) * * *
(1)
Business activity |
Controlled substances |
DEA Application
forms |
Application
fee
($) |
Registration
period
(years) |
Coincident activities allowed |
(i) Manufacturing |
Schedules I–V |
New–225 Renewal–225a |
$3,047 |
1 |
Schedules I–V: May distribute that substance or
class for which registration was issued; may not
distribute or dispose of 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 |
1,523 |
1 |
|
(iii) Reverse distributing |
Schedules I–V |
New–225 Renewal–225a |
1,523 |
1 |
|
(iv) Dispensing or
instructing (includes
Practitioner,
Hospital/
Clinic, Retail
Pharmacy,
Central fill
pharmacy,
Teaching Institution) |
Schedules II–V |
New–224 Renewal–224a |
731 |
3 |
May conduct research and instructional activities
with those substances for which registration 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 |
244 |
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 § 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 |
244 |
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 § 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 |
244 |
1 |
|
(viii) Importing |
Schedules I–V |
New–225 Renewal–225a |
1,523 |
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 |
1,523 |
1 |
|
(x) Chemical
Analysis |
Schedules I–V |
New–225 Renewal–225a |
244 |
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 § 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. |
* * * * *
[[Page 15250]]
PART 1309--REGISTRATION OF MANUFACTURERS, DISTRIBUTORS, IMPORTERS,
AND EXPORTERS OF LIST I CHEMICALS
- 3. The authority citation for part 1309 is revised to read as follows:
Authority: 21 U.S.C. 802, 821, 822, 823, 824, 830, 871(b), 875,
877, 886a, 952, 953, 957, 958.
Sec. 1309.11 Fee amounts.
(a) For each application for registration or reregistration to
manufacture the applicant shall pay an annual fee of $3,047.
(b) For each application for registration or reregistration to
distribute, import, or export a List I chemical, the applicant shall
pay an annual fee of $1,523.
- 5. In Sec. 1309.21, revise paragraph (c) to read as follows:
Sec. 1309.21 Persons required to register.
* * * * *
(c) * * *
Summary of Registration Requirements and Limitations
Business activity |
Chemicals |
DEA Forms |
Application fee |
Registration
period
(years) |
Coincident activities allowed |
Manufacturing |
List I
Drug products containing
ephedrine,
pseudoephedrine, phenylpropanolamine. |
New–510
Renewal–510a |
$3,047
3,047 |
1 |
May distribute that chemical for which registration
was issued; may not distribute
any chemical for which not registered. |
Distributing |
List I
Scheduled listed chemical
products. |
New–510
Renewal–510a |
1,523
1,523 |
1 |
|
Importing |
List I
Drug Products containing
ephedrine,
pseudoephedrine, phenylpropanolamine. |
New–510
Renewal–510a |
1,523
1,523 |
1 |
May distribute that chemical for which registration
was issued; may not distribute
any chemical for which not registered. |
Exporting |
List I
Scheduled listed chemical
products. |
New–510
Renewal–510a |
1,523
1,523 |
1 |
|
Dated: March 12, 2012.
Joseph T. Rannazzisi,
Deputy Assistant Administrator.
[FR Doc. 2012-6253 Filed 3-12-12; 11:15 am]
BILLING CODE 4410-09-P
NOTICE: This is an unofficial version. An official version of this publication may be obtained
directly from the Government Printing Office (GPO). |