[Federal Register Volume 69, Number 228 (Monday, November 29, 2004)]
[Notices]
[Pages 69407-69409]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-26311]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration


Prachi Enterprises, Inc.; Denial of Registration

    On July 23, 2004, the Deputy Assistant Administrator, Office of 
Diversion Control, Drug Enforcement Administration (DEA), issued an 
Order to Show Cause to Prachi Enterprises, Inc. (Prachi) proposing to 
deny its September 9, 2003, application for DEA

[[Page 69408]]

Certificate of Registration as a distributor of list I chemicals. The 
Order to Show Cause alleged that granting Prachi's application would be 
inconsistent with the public interest, as that term is used in 21 
U.S.C. 823(h) and 824(a). The order also notified Prachi that should no 
request for a hearing be filed within 30 days, its hearing right would 
be deemed waived.
    According to the DEA investigative file, the Order to Show Cause 
was sent by certified mail to Prachi at its proposed registered 
location at 1516 Kalamazoo Drive, Suite 5A, Griffin, Georgia 30224. It 
was received on August 2, 2004, and DEA has not received a request for 
a hearing or any other reply from Prachi or anyone purporting to 
represent the company in this matter.
    Therefore, the Deputy Administrator of DEA, finding that (1) Thirty 
days have passed since delivery of the Order to Show Cause, and (2) no 
request for a hearing having been received, concluded that Prachi has 
waived its hearing right. See Aqui Enterprises, 67 FR 12576 (2002). 
After considering relevant material from the investigative file, the 
Deputy Administrator now enters her final order without a hearing 
pursuant to 21 CFR 1309.53 (c) and (d) and 1316.67. The Deputy 
Administrator finds as follows.
    List I chemicals are those that may be used in the manufacture of a 
controlled substance in violation of the Controlled Substances Act. 21 
U.S.C. 802(34); 21 CFR 1310.02(a). Pseudoephedrine and ephedrine are 
list I chemicals commonly used to illegally manufacture 
methamphetamine, a Schedule II controlled substance. As noted in 
previous DEA final orders, methamphetamine is an extremely potent 
central nervous system stimulant, and its abuse is a persistent and 
growing problem in the United States. See e.g., Direct Wholesale, 69 FR 
11654 (2004); Branex, Inc., 69 FR 8682 (2004); Yemen Wholesale Tobacco 
and Candy Supply, Inc., 67 FR 9997 (2002); Denver Wholesale, 67 FR 
99986 (2002).
    The Deputy Administrator's review of the investigative file reveals 
that on or about September 9, 2003, an application was submitted by an 
officer of Prachi, Mr. Ashish Patel, seeking registration to distribute 
ephedrine, pseudoephedrine and phenylpropanolamine list I chemical 
products. Subsequently Mr. Patel notified DEA the company did not 
intend to sell any products containing phenylpropanolamine.
    In connection with the pending application, an on-site pre-
registration investigation was conducted. Mr. Patel advised 
investigators that Prachi was a wholesale distributor of over-the-
counter items to convenience stores, liquor stores, gas stations and 
grocery stores. He proposed to sell Mini-Thins and Max-Brand 
pseudoephedrine and Two-Way products, but was unable to articulate any 
other intended products containing listed chemicals the company might 
sell. He also failed to provide DEA with a requested list of intended 
products. He furthermore failed to provide DEA with a list of intended 
customers for the list I chemical products, although he had 350 
customers purportedly awaiting his registration. DEA was unable to 
conduct customer verifications without that information.
    DEA is aware that small illicit laboratories operate with listed 
chemical products often procured, legally or illegally, from non-
traditional retailers of over-the-counter drug products, such as gas 
stations and small retail markets. Some retailers acquire product from 
multiple distributors to mask their acquisition of large amounts of 
listed chemicals. In addition, some individuals utilize sham 
corporations or fraudulent records to establish a commercial identity 
in order to acquire listed chemicals.
    The illegal production of methamphetamine continues unabated within 
the Southwest region. The adjacent State of Tennessee leads the region 
in the number of clandestine laboratories seized, accounting for 
approximately 50 percent of the clandestine laboratories seized during 
the second quarter of 2002. When compared with the third quarter of 
2001, the increase in clandestine laboratory seizures is notable.
    According to records for the DEA Atlanta region, 360 clandestine 
laboratories were seized during the third quarter of 2002. Of these, 
207 were located in Tennessee, 103 in Georgia, 35 in South Carolina and 
15 in North Carolina. In Georgia, there has been a consistent increase 
in the number of illicit laboratories and enforcement teams continue to 
note a trend toward smaller capacity laboratories. This is likely due 
to the ease of concealment associated with smaller laboratories, which 
continue to dominate seizures and cleanup responses.
    The adjacent State of Florida has a substantial methamphetamine 
abuse problem in Northeast and Central Florida, and DEA is aware of a 
past history of trafficking in precursors in these areas. Distributors 
or retailers serving in the illicit methamphetamine trade observe no 
borders. In fact, where precursor laws are stringent, out-of-state 
distributors often make direct shipments to retailers without observing 
state requirements.
    DEA knows by experience that there exists a ``gray market'' in 
which certain high strength, high quantity pseudoephedrine; and 
ephedrine products are distributed only to convenience stores and gas 
stations, from where they have a high incidence of diversion. These 
grey market products are not sold in large discount stores, retail 
pharmacies or grocery stores, where sales of therapeutic over-the-
counter drugs predominate. Mini-Thins and Max Brand products are prime 
products in this gray market industry and are rarely found in any 
retail store serving the traditional therapeutic market.
    DEA also knows from industry data, market studies and statistical 
analysis that over 90% of over-the-counter drug remedies are sold in 
drug stores, supermarket chains and ``big box'' discount retailers. 
Less than one percent of cough and cold remedies are sold in gas 
stations or convenience stores. Studies have indicated that most 
convenience stores could not be expected to sell more than $20.00 to 
$40.00 worth of products containing pseudoephedrine per month. The 
expected sales of ephedrine products are known to be even smaller. 
Convenience stores handling gray market products often order more 
product than what is required for the legitimate market and obtain 
chemical products from multiple distributors.
    Pursuant to 21 U.S.C. 823(h), the Deputy Administrator may deny an 
application for a Certificate of Registration if she determines that 
granting the registration would be inconsistent with the public 
interest. Section 823(h) requires that the following factors be 
considered in determining the public interest:
    (1) Maintenance of effective controls against diversion of listed 
chemicals into other than legitimate channels;
    (2) Compliance with applicable Federal, State and local law;
    (3) Any prior conviction record under Federal or State laws 
relating to controlled substances or to chemicals controlled under 
Federal or State law;
    (4) any past experience of the applicant in the manufacture and 
distribution of chemicals; and
    (5) Such other factors as are relevant to and consistent with the 
public health and safety.
    As with the public interest analysis for practitioners and 
pharmacies pursuant to subsection (f) of section 823, these factors are 
to be considered in the disjunctive; the Deputy Administrator may rely 
on any one or a combination

[[Page 69409]]

of factors and may give each factor the weight she deems appropriate in 
determining whether a registration should be revoked or an application 
for registration denied. See, e.g., Energy Outlet, 64 FR 14269 (1999). 
See also, Henry J. Schwartz, Jr., M.D., 54 FR 16422 (1989).
    The Deputy Administrator finds factors four and five relevant to 
the pending application for registration.
    With regard to factor four, the applicant's past experience in the 
distribution of chemicals, the Deputy Administrator finds this factor 
relevant based on Mr. Patel's lack of knowledge and experience 
regarding the laws and regulations governing handling of list I 
chemical products. In prior DEA decisions, this lack of experience in 
handling list I chemical products has been a factor in denying pending 
applications for regristration. See, e.g., Direct Wholesale, supra, 69 
FR 11654; ANM Wholesale, 69 FR 11652 (2004); Xtreme Enterprises, Inc., 
67 FR 76195 (2002).
    With regard to factor five, other factors relevant to and 
consistent with the public safety, the Deputy Administrator finds this 
factor weights heavily against granting the application. Unlawful 
methamphetamine use is a growing public health and safety concern 
throughout the United States and Southeast. Ephedrine and 
pseudoephedrine are precursor products needed to manufacture 
methamphetamine and operators of illicit methamphetamine laboratories 
regularly acquire the precursor products needed to manufacture the drug 
from convenience stores and gas stations which, in prior DEA decisions, 
have been identified as constituting the grey market for list I 
chemical products. It is apparent that Prachi intends on being a 
participant in this market.
    While there are no specific prohibitions under the Controlled 
Substances Act regarding the sale of listed chemical products to these 
entities, DEA has nevertheless found these establishments serve as 
sources for the diversion of large amounts of listed chemical products. 
See, e.g., ANM Wholesale, supra, 69 FR 11652; Xtreme Enterprises, Inc., 
supra, 67 FR 76195; Sinbad Distributing, 67 FR 10232 (2002); K.V.M. 
Enterprises, 67 FR 70968 (2002).
    The Deputy Administrator has previously found that many 
considerations weighed heavily against registering a distributor of 
list I chemicals because, ``[v]irtually all of the Respondent's 
customers, consisting of gas station and convenience stores, are 
considered part of the grey market, in which large amounts of listed 
chemicals are diverted to the illicit manufacture of amphetamine and 
methamphetamine.'' Xtreme Enterprises, Inc., supra, 67 FR at 76197. As 
in Xtreme Enterprises, Inc., Mr. Patel's lack of a criminal record and 
stated intent to comply with the law and regulations are far outweighed 
by his lack of experience and the company's intent to sell ephedrine 
and pseudoephedrine exclusively to the gray market.
    The Deputy Administrator is further troubled by Mr. Patel's 
reticence to provide requested information to DEA, indicating his 
company cannot be trusted to handle the responsibilities of a 
registrant.
    Based on the foregoing, the Deputy Administrator concludes that 
granting the pending application would be inconsistent with the public 
interest.
    Accordingly, the Deputy Administrator of the Drug Enforcement 
Administration, pursuant to the authority vested in her by 21 U.S.C. 
823 and 823 and 28 CFR 0.100(b) and 0.104, hereby orders the pending 
application for DEA Certificate of Registration, previously submitted 
by Prachi Enterprises, Inc., be, and it hereby is, denied. This order 
is effective December 29, 2004.

    Dated: November 10, 2004.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. 04-26311 Filed 11-26-04; 8:45 am]
BILLING CODE 4410-09-M