39318 Federal Register / Vol. 76, No. 129 / Wednesday, July 6, 2011 / Proposed Rules 

1The Attorney General’s delegation of authority 

to DEA may be found at 28 CFR 0.100. 

DEPARTMENT OF JUSTICE 

Drug Enforcement Administration 

21 CFR Parts 1301 and 1309 

[Docket No. DEA–346P] 

RIN 1117–AB32 

Controlled Substances and List I 

Chemical Registration and 

Reregistration Fees 

AGENCY: Drug Enforcement 

Administration (DEA), Department of 

Justice. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: DEA proposes adjusting the 

fee schedule for DEA registration and 

reregistration fees necessary to recover 

the costs of its 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: Electronic comments must be 

submitted and written comments must 

be postmarked on or before September 

6, 2011. Commenters should be aware 

that the electronic Federal Docket 

Management System will not accept 

comments after midnight Eastern Time 

on the last day of the comment period. 

ADDRESSES: To ensure proper handling 

of comments, please reference ‘‘Docket 

No. DEA–346’’ on all electronic and 

written correspondence. DEA 

encourages all comments be submitted 

electronically through http:// 

www.regulations.gov using the 

electronic comment form provided on 

that site. An electronic copy of this 

document and supplemental 

information to this proposed rule are 

also available at the http:// 

www.regulations.gov Web site for easy 

reference. Paper comments that 

duplicate the electronic submission are 

not necessary as all comments 

submitted to http://www.regulations.gov 

will be posted for public review and are 

part of the official docket record. Should 

you, however, wish to submit written 

comments via regular or express mail, 

they should be sent to the Drug 

Enforcement Administration, Attention: 

DEA Federal Register Representative/ 

ODL, 8701 Morrissette Drive, 

Springfield, VA 22152. 

FOR FURTHER INFORMATION CONTACT: 

Imelda L. Paredes, Office of Diversion 

Control, Drug Enforcement 

Administration, 8701 Morrissette Drive, 

Springfield, Virginia 22152; Telephone 

(202) 307–7165. 

SUPPLEMENTARY INFORMATION: 

Posting of Public Comments: Please 

note that all comments received are 

considered part of the public record and 

made available for public inspection 

online at http://www.regulations.gov 

and in the DEA’s public docket. Such 

information includes personal 

identifying information (such as your 

name, address, etc.) voluntarily 

submitted by the commenter. 

If you want to submit personal 

identifying information (such as your 

name, address, etc.) as part of your 

comment, but do not want it to be 

posted online or made available in the 

public docket, you must include the 

phrase ‘‘PERSONAL IDENTIFYING 

INFORMATION’’ in the first paragraph 

of your comment. You must also place 

all the personal identifying information 

you do not want posted online or made 

available in the public docket in the first 

paragraph of your comment and identify 

what information you want redacted. 

If you want to submit confidential 

business information as part of your 

comment, but do not want it to be 

posted online or made available in the 

public docket, you must include the 

phrase ‘‘CONFIDENTIAL BUSINESS 

INFORMATION’’ in the first paragraph 

of your comment. You must also 

prominently identify confidential 

business information to be redacted 

within the comment. If a comment has 

so much confidential business 

information that it cannot be effectively 

redacted, all or part of that comment 

may not be posted online or made 

available in the public docket. 

Personal identifying information and 

confidential business information 

identified and located as set forth above 

will be redacted, and the comment, in 

redacted form, will be posted online and 

placed in the DEA’s public docket file. 

Please note that the Freedom of 

Information Act applies to all comments 

received. If you wish to inspect the 

agency’s public docket file in person by 

appointment, please see the ‘‘For 

Further Information’’ paragraph. 

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 carries out the mandates of the 

Controlled Substances and Chemical 

Diversion and Trafficking Acts. It is 

primarily the DCP within DEA that 

implements and enforces Titles II and III 

of the Comprehensive Drug Abuse 

Prevention and Control Act of 1970, 

often referred to as the Controlled 

Substances Act (CSA) and the 

Controlled Substances Import and 

Export Act (CSIEA) (21 U.S.C. 801–971), 

as amended (hereinafter, ‘‘CSA’’).1 DEA 

drafts and 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 are 

designed to 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. 

Pursuant to the CSA, controlled 

substances are classified in one of five 

schedules based upon their potential for 

abuse, their currently accepted medical 

use, and the degree of dependence the 

substance may cause. 21 U.S.C. 812. 

Likewise, under the CSA, listed 

chemicals are separately classified 

based on their importance to the 

manufacture of controlled substances 

(List I chemicals) or their use in 

manufacturing controlled substances 

(List II chemicals). 21 U.S.C. 802(33)– 

(35). The CSA mandates that DEA 

register persons or entities who 

manufacture, distribute, dispense, 

import, export, or conduct research or 

chemical analysis with controlled 

substances and listed chemicals. These 

registrants are permitted to handle 

controlled substances and listed 

chemicals as authorized by their 

registration and are required to comply 

with the applicable requirements 

associated with their registration. 21 

U.S.C. 822. The identification and 

registration of all individuals and 

entities authorized to handle controlled 

substances and listed chemicals 

establishes a closed system over which 

DEA is charged to inspect, investigate, 

and enforce applicable federal law. 


jlentini on DSK4TPTVN1PROD with PROPOSALS
Federal Register / Vol. 76, No. 129 / Wednesday, July 6, 2011 / Proposed Rules 39319 

2The 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)). 

3H.R. Rep. No. 91–1444 (1970), reprinted in 1970 

U.S.C.C.A.N. 4566, 4571–4572. 

4 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, Pub. L. 103–200, 107 Stat. 

2333. 

5 36 FR 4928, March 13, 1971, 36 FR 7776, April 

24, 1971. 

6 Drug Abuse Control Amendments of 1970: 

Hearing on H.R. 1170 and H.R. 13743 Before 

Subcomm. on Public Health and Welfare of the H. 

Comm. on Interstate and Foreign Commerce, 91st 

Cong. 145–148, 359–365, and 412–414 (Feb. 3 & 20, 

1970) and Controlled Dangerous Substances, 

Narcotics and Drug Control Laws: Hearings Before 

H. Comm. on Ways and Means, 91st Cong. 211–214 

and 468–474 (July 20 & 21, 1970). 

7The 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 (DCFA) 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). 

8Reorganization Plan No. 2 of 1973, 38 FR 18380 

(July 2, 1973). 

9 GAO/GGD–83–2, October 29, 1982. 

10 48 FR 14640, April 5, 1983; 48 FR 56043, 

December 19, 1983. 

11 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. 

12 57 FR 60148–01, December 18, 1992. 

13 58 FR 15272–01, March 22, 1993. 

14American Medical Association v. Reno, 857 

F.Supp. 80 (D.D.C. 1994); American Medical 

Association v. Reno, 57 F.3d 1129 (D.C. Cir. 1995). 

15The Domestic Chemical Diversion Control Act 

of 1993, Public Law 103–200, 107 Stat. 2333. 

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). The first $15 

million of fee revenues that are 

transferred to the Treasury do not 

support any DCP activities. 

History of Fees 

In 1970, Congress consolidated more 

than 50 laws related to the control of 

legitimate channels 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 

enactment of the CSA, the Bureau of 

Narcotics and Dangerous Drugs (BNDD) 

was also granted authority to charge 

reasonable fees relating to the 

registration and control of the 

manufacture, distribution, dispensing, 

export, and import of controlled 

substances.4 To this end, BNDD 

established a three-tiered fee structure 

for companies and individuals wishing 

to participate in the U.S. controlled 

substance industry.5 Before the 

enactment of the CSA, the U.S. House 

of Representatives held hearings to 

discuss the proposed Controlled 

Substances Act. In these hearings, there 

was a discussion about whether the 

Attorney General should be allowed to 

charge reasonable fees relating to both 

registration and control (including 

enforcement costs) or just registration.6

In the end, Congress enacted the CSA 

and allowed the Attorney General to 

charge reasonable fees relating to both 

registration and control.7

In 1973, the BNDD was abolished and 

all BNDD functions were transferred to 

DEA, including the authority to charge 

registrants reasonable fees.8 In 1982, a 

General Accounting Office (GAO) 

report 9 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 the Federal Register in 

1983.10 All fees collected from 1971 

through 1992 were deposited into the 

general fund of the United States 

Treasury. 

In the 1993 appropriations for DEA, 

Congress determined that the DCP 

would be fully funded by fees and no 

longer by appropriations.11 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]’’ by those 

participating in the closed system 

established by the CSA. 21 U.S.C. 

886a(1)(C). Congress specified the 

general operation of the DCFA. Each 

fiscal year, the first $15 million of 

deposited fees are retained in the 

general fund of the Treasury and are not 

available for use by the DCP. The 

amounts in excess of $15 million are 

deposited into the DCFA for the 

operation of DEA’s diversion control 

program. The funds in the DCFA remain 

available until expended and are paid 

by the Secretary of the Treasury 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). Thus, specific statutory 

authorizations set the parameters of the 

DCFA, but not the details of the 

application of those standards to the 

activities of DEA. 

Shortly after the 1993 Appropriations 

Act, DEA published a proposed rule 

proposing to increase the existing fee 

schedule to comply with Congress’ 

direction to set fees at a level that 

ensures the recovery of the full costs of 

operating the DCP.12 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.13 Several members 

of the registrant population impacted by 

the fee increase challenged the new fee, 

first in federal district court, where it 

was upheld, and subsequently on 

appeal to the U.S. Court of Appeals 

where it was remanded without being 

vacated for inadequate information 

supporting the selected fees.14

In December of 1993, the Domestic 

Chemical Diversion Control Act of 1993 

was passed by Congress to amend the 

CSA to require that manufacturers, 

distributors, importers, and exporters of 

List I chemicals obtain a registration 

from DEA. Coincident with the new 

registration requirements, DEA was also 

authorized to charge ‘‘reasonable fees 

relating * * * to the registration and 

control of regulated persons and 

regulated transactions.’’ 15 (Congress 

modified this language in 2004, as it 

currently reads at 21 U.S.C. 821, to 

make it uniform with other provisions 


jlentini on DSK4TPTVN1PROD with PROPOSALS
39320 Federal Register / Vol. 76, No. 129 / Wednesday, July 6, 2011 / Proposed Rules 

16 It authorizes ‘‘reasonable fees relating to the 

registration and control of the manufacture, 

distribution, and dispensing of controlled 

substances and to listed chemicals.’’ 21 U.S.C. 821. 

17 70 FR 69474, November 16, 2005. See also 108 

H. Rpt. 576, July 1, 2004. 

18 61 FR 68624, December 30, 1996. 

19 67 FR 51988, August 9, 2002. 

20 ‘‘Review of the Drug Enforcement 

Administration’s Control of the Diversion of 

Controlled Pharmaceuticals,’’ I–2002–010, October 

2002, http://www.usdoj.gov/oig/reports/DEA/e0210/ 

index.htm. 

21 68 FR 7728, February 18, 2003. 

22 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. 

23Public 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. 

24 70 FR 69474, November 16, 2005. 

25 ‘‘Follow-Up Review of the Drug Enforcement 

Administration’s Efforts to Control the Diversion of 

Controlled Pharmaceuticals,’’ I–2006–004, July 

2006, http://www.usdoj.gov/oig/reports/DEA/e0604/ 

final.pdf. 

26 71 FR 51105, August 29, 2006. 

27 ‘‘Review of the Drug Enforcement 

Administration’s Use of the Diversion Control Fee 

Account,’’ I–2008–002, February 2008, http:// 

www.usdoj.gov/oig/reports/DEA/e0802/final.pdf. 

28Reorganization Plan No. 2 of 1973, 38 FR 18380 

(July 2, 1973). 

29 21 U.S.C. 823(a)–(e). 

of the CSA.16) This amendment to the 

CSA was made after publication of 

DEA’s March 22, 1993 final rule and the 

commencement of the legal challenges. 

List I chemical registration and 

reregistration fees were not addressed in 

the DCFA until the fee calculation 

initiated with a proposed rule published 

November 2005.17

The fee was finalized in 1996 with a 

request for further comment.18 DEA 

instituted studies and internal 

reorganizations to enable DEA to better 

identify DCP activities and costs. 

Additional information on the 

components and activities of the feefunded DCP and what was deemed to be 

part of that program as well as DEA’s 

response to comments received was 

published in 2002 for additional public 

comment.19 After that publication, a 

review of DEA’s DCP by the Office of 

the Inspector General, Department of 

Justice (OIG) concluded DEA was not 

adequately supporting the DCP 

program.20

In February 2003, DEA published a 

proposed rule to raise registration and 

reregistration fees in an effort to comply 

with the statutory requirement to charge 

fees at a level that ensures the recovery 

of the full costs of operating the various 

aspects of the DCP.21 Shortly thereafter, 

DEA created an organization within 

headquarters known as the Validation 

Unit. This Unit reviews and ensures that 

every DCFA expenditure over $500 is in 

support of diversion control-related 

activities. The Validation Unit is 

independent of the Office of Diversion 

Control and reports directly to the DEA 

Deputy Administrator. If an expense 

only partially supports the DCP, such as 

a field office’s rent or utility cost, the 

Validation Unit determines the portion 

of the expense that should be funded by 

the DCFA. A new fee was finalized by 

publication of a final rule on October 

10, 2003.22

In 2004, Congress provided additional 

guidance in the relevant 2005 

Appropriations Act.23 Specifically, 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). 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 registration and 

reregistration fees for controlled 

substances and chemicals are deposited 

into the DCFA and reimbursements by 

the Secretary of the Treasury are made 

without distinction. 

In 2005, based upon the internal 

organizational changes and the 2005 

Appropriations Act, DEA proposed an 

adjusted fee schedule to appropriately 

reflect all costs associated with the 

DCP.24 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.25 The OIG also recommended 

that DEA provide more Special Agent 

support to the DCP and increase training 

for those individuals who support the 

program. 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, 

2006.26

The OIG completed a Review of DEA’s 

Use of the Diversion Control Fee 

Account in 2008 and did not find any 

misused DCFA funds for non-diversion 

control activities between FY 2004 and 

FY 2007. To the contrary, the OIG found 

that DEA did not fully fund all 

diversion control costs with the DCFA 

as required by law.27 It has been 

approximately five years since the last 

fee adjustment. It should be noted, 

however, that collections associated 

with the last fee adjustment did not 

begin until FY 2007. 

Diversion Control Program (DCP)— 

Scope 

The scope of the DCP has evolved 

since its inception. In late 1971, the 

BNDD’s Compliance Program was 

created to provide a specialized work 

force that could focus exclusively on 

controlled substance diversion and take 

full advantage of the controls and 

penalties established by the CSA. The 

program was placed under the BNDD’s 

Office of Enforcement and staffed by 

compliance investigators, later called 

diversion investigators. In 1973, the 

BNDD was abolished and all BNDD 

functions were transferred to DEA.28

From 1971 to 1983, DEA’s legal 

authority with regard to diversion and 

abuse of drugs remained relatively 

unchanged. The CSA originally 

provided DEA with substantially more 

authority to regulate controlled 

substance manufacturers and 

distributors than retail dispensers such 

as medical professionals and retail 

pharmacies. Congress, acknowledging 

that registration is the cornerstone of the 

closed system of distribution, required 

DEA to find that manufacturer and 

distributor registrations are consistent 

with a specifically defined public 

interest and with U.S. international 

obligations as a prerequisite to granting 

such registrations.29 In contrast, 

practitioners were entitled to a 

registration if they were authorized to 

handle controlled substances by the 

state in which they practiced. 

Furthermore, a practitioner’s 

registration could be revoked only on 

the following three bases: conviction of 

a drug-related felony; revocation of a 

state license; or submission of a 

materially falsified application. There 

was also great disparity in the 

recordkeeping and security 

requirements applicable to the two 

groups, with manufacturers and 

distributors subject to the tighter 


jlentini on DSK4TPTVN1PROD with PROPOSALS
Federal Register / Vol. 76, No. 129 / Wednesday, July 6, 2011 / Proposed Rules 39321 

30 GAO/GGD–78–22, March 10, 1978 at 3, 18. 

31 GAO/GGD–78–22 at 3. 

32 GAO/GGD–78–22. 

33Part B—Diversion Control Amendments, Public 

Law 98–473, 98 Stat. 2070 (Oct. 12,1984). 

34 21 U.S.C. 823(f), 824(a)(4). 

35 21 U.S.C. 811(h) (The amendment provided for 

one-year emergency scheduling of a drug, the abuse 

of which constituted an ‘‘imminent hazard to the 

public safety.’’ The drug would remain in schedule 

I for up to one year, during which the normal 

scheduling procedures would proceed). 

36Subtitle E—Controlled Substances Analogue 

Enforcement Act, Public Law 99–570, 100 Stat. 

3207 (Oct. 27, 1986). 

37Title VI, Subtitle A—Chemical Diversion and 

Chemical Trafficking Act of 1988, Public Law 100– 

690, 102 Stat. 4181 (Nov. 18, 1988). 

38Public Law 101–647, 104 Stat. 4851 (Nov. 29, 

1990). 

39Public Law 106–310, 114 Stat. 1222 (Oct. 17, 

2000). 

40 21 U.S.C. 823(g)(2)(D)(ii). 

41 28 CFR Part 0, Appendix to Subpart R. 

42This represents the total registrant population. 

Approximately seven percent of the total registrant 

population consists of fee exempt registrants who 

are not included in the fee calculations presented 

herein. The registrant population grew at a rate of 

approximately 2.6 percent per year from 2007 to 

2010. 

43See 21 U.S.C. 822–25, 827–29, 831, 952–54, 

956–58, 971. 

44See 21 U.S.C. 823(g). 

45 21 U.S.C. 828. 

controls. This disparity in regulatory 

authority generated more regulatory 

oversight and, hence, compliance, at the 

manufacturer and distributor level than 

at the retail level. The limitations on 

DEA’s statutory authority severely 

restricted its ability to regulate 

practitioners. 

By 1977, all 197 DEA compliance 

investigators (now diversion 

investigators) were fully occupied 

monitoring approximately 3,300 

controlled substance manufacturers, 

distributors, importers, exporters, and 

narcotic treatment programs, where 

large stocks of controlled substances 

and the potential for large-scale 

diversion were present.30 At that time, 

98 percent of DEA registrants were in 

the dispensing category, i.e., physicians, 

dentists, veterinarians, retail 

pharmacies, hospitals, and teaching 

institutions.31 In 1978, the Comptroller 

General issued a report to Congress that 

examined DEA’s efforts to prevent 

diversion of controlled substances at the 

retail level, i.e., by doctors and 

pharmacists.32 The report explored the 

barriers to DEA’s efforts to control retail 

diversion: inadequate statutory 

authority, weak regulatory 

requirements, and inadequate resources. 

One of the Comptroller General’s 

recommendations to Congress was that 

Congress change DEA’s role by 

authorizing DEA to exercise direct 

regulatory authority over retail level 

practitioners. This would have been a 

deviation from DEA’s traditional 

enforcement role and would require 

significant legislative changes and 

manpower increases. 

Shortly thereafter, many amendments 

to the CSA between 1984 and 1990 

strengthened and expanded DEA’s 

statutory authority. The Dangerous Drug 

Diversion Control Act of 1984 33

provided DEA with new authority to 

deny or revoke a practitioner’s DEA 

registration on the basis of specifically 

defined public interest grounds 34 and 

also provided DEA with emergency 

scheduling authority.35 The Anti-Drug 

Abuse Act of 1986 established penalties 

for the manufacture and distribution of 

‘‘designer drugs.’’ 36 The Anti-Drug 

Abuse Act of 1988 for the first time 

required recordkeeping and reporting by 

chemical distributors, importers, and 

exporters, and established penalties for 

illegal activities related to precursor and 

essential chemicals.37 The Anabolic 

Steroids Control Act of 1990 brought 

steroids under the regulatory oversight 

and control of the DEA by placing 

certain anabolic steroids in schedule III 

of the CSA.38 This Act required certain 

steroid manufacturers and distributors 

to register with DEA and brought 

anabolic steroids under the 

recordkeeping, reporting, security, 

prescribing, import, and export controls 

of the CSA. 

As discussed above, the Domestic 

Chemical Diversion Control Act of 1993 

amended the CSA to require 

manufacturers, distributors, importers, 

and exporters of List I chemicals obtain 

a registration from the DEA, thus greatly 

expanding the authority and activities of 

the DCP. 

On October 17, 2000, Congress passed 

the Drug Addiction Treatment Act, 

permitting qualified physicians to treat 

narcotic dependence with certain 

schedule III through V narcotic 

controlled substances.39 The Act waived 

the requirement for certain qualified 

physicians to obtain a separate DEA 

registration as a Narcotic Treatment 

Program. However, upon application, 

the DCP must issue such qualifying 

physicians an identification number for 

inclusion with the physician’s DEA 

Certificate of Registration.40 As a result, 

when a qualifying physician submits 

notice of his waiver pursuant to the Act, 

the DCP issues the physician a new DEA 

Certificate of Registration with the 

appropriate identification number. 

Renamed from the Office of 

Compliance and Regulatory Affairs and 

then the Diversion Control Program, 

today, the DEA Office of Diversion 

Control administers the DCP.41 As such, 

it is responsible for ensuring the 

availability of controlled substances and 

listed chemicals for legitimate uses in 

the United States while exercising 

controls to prevent the diversion of 

these substances and chemicals for 

illegal uses. The Office of Diversion 

Control maintains an overall geographic 

picture of the drug and chemical 

diversion and abuse problems to 

identify new trends or patterns in 

diversion and abuse. This enables the 

Office of Diversion Control to 

appropriately direct resources. 

The DCP is executed by maintaining 

the closed system of distribution, 

regulating and controlling nearly 1.4 

million DEA registrants,42 and 

investigating activity related to the 

diversion of controlled substances and 

listed chemicals. The DCP’s regulatory 

function is accomplished through 

routine regulatory inspections, by 

providing information and assistance to 

registrants, and by controlling and 

monitoring the manufacture, 

distribution, dispensing, import, and 

export of controlled substances and 

listed chemicals. The DCP’s 

enforcement function is accomplished 

by identifying and investigating those 

persons or entities responsible for 

diverting controlled substances and 

listed chemicals from legitimate 

commerce. Violators are subject to 

administrative sanction, and civil and 

criminal prosecution. 

To ensure accountability within the 

closed system of distribution, the DCP 

administers, maintains, controls, and 

oversees the DEA registration system.43

This entails processing, reviewing, and, 

if necessary, investigating all 

applications for registration and 

reregistration, collecting fees, and, when 

appropriate, proposing to take 

administrative action on registrations or 

applications for registration, such as 

restriction, revocation, suspension, or 

denial of an application. Maintaining 

the DEA registration system requires 

coordination with state regulatory 

agencies and other federal agencies such 

as the Center for Substance Abuse 

Treatment.44

In addition, the DCP exercises 

statutory authority to determine the 

appropriate procedures necessary to the 

ordering and distribution of schedule I 

and II controlled substances.45 This 

enables the DCP to monitor the flow of 

certain controlled substances from their 

point of manufacture through 

commercial distribution. It also 

monitors registrant compliance with 


jlentini on DSK4TPTVN1PROD with PROPOSALS
39322 Federal Register / Vol. 76, No. 129 / Wednesday, July 6, 2011 / Proposed Rules 

46See 21 U.S.C. 827 (records and reports of 

registrants). 47See 21 U.S.C. 830, 957–58. 

48 21 U.S.C. 830; 21 CFR Parts 1310, 1313, 1314. 

49 21 U.S.C. 811–814. 

50 21 U.S.C. 826. 

electronic reporting systems such as the 

Automation of Reports and 

Consolidated Orders System (ARCOS), 

and manages the cataloging of 

controlled substances based on the 

National Drug Code (NDC) system, the 

Drug/Ingredient file, Trade Name file, 

DEA Generic Name file and U.N. Code/ 

Name file. Other oversight activities 

include maintaining the Controlled 

Substance Ordering System (CSOS), 

monitoring CSOS activities through the 

initial certification process, and 

periodic auditing of registrant systems. 

CSOS provides registrants with an 

electronic platform that reduces costs to 

registrants while ensuring a more 

efficient and effective ordering process. 

One of the primary functions of the 

DCP is to ensure that registrants are in 

compliance with the safeguards 

inherent in the CSA. This proactive 

approach is designed to identify and 

prevent the large scale diversion of 

controlled substances and listed 

chemicals into the illicit market. 

Registrant compliance is determined 

primarily through the conduct of preregistration, scheduled, and complaint 

investigations. DCP regulatory activities 

have an inherent deterrent function, and 

they are designed to ensure that those 

businesses and individuals registered 

with DEA to handle controlled 

substances or listed chemicals have 

sufficient measures in place to prevent 

the diversion of these substances. These 

investigations also help registrants 

understand and comply with the CSA 46

and identify those registrants who 

violate the CSA and implementing 

regulations. Preregistration 

investigations reduce the possibility of 

registering unauthorized subjects, 

ensure that the means to prevent 

diversion are in place, and determine 

whether registration is consistent with 

the public interest. 

Manufacturers, distributors, reverse 

distributors, importers, exporters, and 

narcotic treatment programs pose the 

greatest potential for large-scale 

diversion. Accordingly, scheduled 

investigations of these non-practitioner 

registrants are a major priority of the 

DCP. These investigations serve as a 

deterrent to diversion through the 

continuous evaluation of registrants’ 

recordkeeping procedures, security, and 

overall adherence to the CSA. Emphasis 

during these investigations is given to 

verifying inventory, records and 

recordkeeping procedures, a review of 

customers and their ordering patterns, 

and security protocols. 

The DCP is constantly evaluating 

diversion trends, patterns, routes, and 

techniques in order to appropriately 

focus its regulatory, civil and criminal 

enforcement activities. This is 

accomplished in many ways, including 

collecting and analyzing targeting and 

analysis data, conducting diversion 

threat assessments, working with state 

and local medical and pharmacy boards 

and state and local law enforcement 

agencies, and developing intelligence. 

The DCP conducts criminal 

enforcement activities primarily through 

Tactical Diversion Squads (TDSs). TDSs 

are comprised of many DEA specialties, 

including DEA Special Agents and 

Diversion Investigators, and state and 

local counterparts such as state law 

enforcement and regulatory personnel. 

These groups combine varied resources 

and expertise in order to investigate, 

disrupt, and dismantle those 

individuals or organizations involved in 

diversion schemes (e.g., doctor 

shoppers, prescription forgers, and 

prevalent retail-level violators). 

In fulfillment of its function to control 

the import and export of controlled 

substances and listed chemicals, the 

DCP issues import and export 

registrations and permits, and monitors 

declared imports, exports, and 

transshipments of these substances. The 

DCP must ensure that all imports and 

exports of controlled substances and 

listed chemicals meet the requirements 

of the CSA. As such, the DCP maintains 

and monitors many electronic reporting 

systems, such as the Chemical Handlers 

Enforcement Management System 

(CHEMS), which provides information 

on entities manufacturing, distributing, 

and exporting and importing regulated 

chemicals, and encapsulating and 

tableting machines.47

The DCP’s authority over controlled 

substances and listed chemicals requires 

its support of domestic and foreign 

investigations of these substances. As 

such, the DCP serves as the Competent 

National Authority (CNA) for the United 

States vis-a`-vis precursor chemicals and 

international treaties. The DCP works 

with the international community to 

identify and seize international 

shipments of precursor and essential 

chemicals destined for clandestine 

laboratories for use in manufacturing 

controlled substances. The DCP also 

works on a bilateral basis to urge 

international partners to take effective 

action, in cooperation with chemical 

companies, to prevent the diversion of 

precursor chemicals from legitimate 

trade. In addition to its other oversight 

and regulatory responsibilities in this 

area,48 the DCP reviews and approves 

importation requests for List I chemicals 

and reviews chemical registrant 

submissions. 

Not only does the DCP exercise 

authority and control over the registrant 

population, the DCP exercises authority 

over the classification of substances.49

This is accomplished by evaluating 

drugs and chemicals to determine 

whether these substances are being 

abused or potentially involved in illicit 

traffic, and to evaluate whether any 

substances should be scheduled as a 

controlled substance. This requires the 

collection and analysis of data from 

various sources across the United States. 

These evaluations are used by DEA as 

a basis for developing appropriate drug 

control policies, determining the status 

of controlled, excluded, or exempted 

drugs and drug products, and 

supporting United States initiatives in 

international forums. 

Another crucial function of the DCP is 

the annual establishment of quotas for 

all schedule I and II controlled 

substances and the List I chemicals 

pseudoephedrine, ephedrine, and 

phenylpropanolimine.50 Along with this 

responsibility, the DCP also provides 

scientific support for policy guidance 

and training, expert witness testimony 

and conference presentations. The DCP 

fulfills U.S. treaty obligations pertaining 

to the CSA, including the preparation of 

periodic reports for submission to the 

United Nations as mandated by U.S. 

international drug control treaty 

obligations on the manufacture and 

distribution of narcotic and 

psychotropic substances as well as 

determining the anticipated future 

needs for narcotic and psychotropic 

substances. 

In the execution of its regulatory 

functions, the DCP reviews proposed 

legislation pertinent to the availability 

of controlled substances and listed 

chemicals for legitimate uses in the 

United States and controls to prevent 

the diversion of these substances and 

chemicals. The DCP constantly reviews 

its own regulations and develops and 

implements regulations designed to 

enhance DEA’s diversion control efforts 

and to implement newly enacted 

legislation. 

All DCP regulatory activities require 

education and outreach to ensure 

appreciation of and compliance with the 

CSA and applicable policies and 

regulations. Providing such guidance is 

also necessary to reduce the likelihood 

of diversion from legitimate commerce 


jlentini on DSK4TPTVN1PROD with PROPOSALS
Federal Register / Vol. 76, No. 129 / Wednesday, July 6, 2011 / Proposed Rules 39323 

51Nancy Nicosia et al., ‘‘The Economic Cost of 

Methamphetamine Use in the United States, 2005,’’ 

RAND Corporation, 2009. 

52 John Brannon, ‘‘Meth-related Burns a Growing 

Part of Uncompensated Care at Vanderbilt,’’ 

Messenger, August 12, 2010, http:// 

www.nwtntoday.com/news.php?viewstory=44736. 

53 Id. 

54The El Paso Intelligence Center (EPIC) has not 

validated this data as of the date of this Notice of 

Proposed Rulemaking, however, all indications are 

that there were approximately 12,000 such 

clandestine laboratory incidents in 2010. 

55Substance Abuse and Mental Health Services 

Administration (SAMHSA), ‘‘Results from the 2009 

National Survey on Drug Use and Health: Volume 

I, Summary of National Findings,’’ Office of 

Applied Studies, 2010 (NSDUH Series H–38A, HHS 

Publication No. SMA 10–4856), http:// 

www.oas.samhsa.gov/nsduh/2k9NSDUH/ 

2k9Results.pdf. 

56 72 FR 17401, April 9, 2007. Implementation 

was delayed an additional 30 days until June 8, 

2007, to allow industry more time to fully comply 

with the new provisions. 72 FR 28601, May 22, 

2007. 

57 74 FR 15596, April 6, 2009. 

to illegitimate purposes. One aspect of 

the DCP’s outreach efforts is 

establishing and maintaining liaison 

and working relationships with other 

federal agencies, as well as foreign, state 

and local governments, and the 

regulated community. Other efforts 

include developing and maintaining 

manuals and other publications; 

organizing and conducting national 

conferences on current issues, policies, 

and initiatives; and providing guidance 

to the general public. 

Changes in the Controlled Substances 

Act Since the Last Fee Rule in 2006 

Since implementation of the last fee 

rule in 2006, Congress has made several 

changes to the CSA that impact how the 

DCP operates to control controlled 

substances and listed chemicals and 

register those individuals who wish to 

handle these substances. Additionally, 

the nature of the diversion control 

problem has increased in size and 

complexity. These statutory changes, in 

addition to the changing scope of 

diversion, required the DCP to 

implement program and organizational 

changes. These changes impact DEA 

beyond its DCP and thus are not 

necessarily funded through the DCFA. 

Methamphetamine Abuse 

Congress has enacted a series of 

legislative initiatives to combat the rise 

in methamphetamine abuse. 

Methamphetamine is a highly addictive 

drug with potent central nervous system 

stimulant properties. Control as a 

schedule II substance and the removal 

of methamphetamine injectable 

formulations from the United States 

market, combined with a better 

appreciation for its high abuse potential, 

led to a drastic reduction in the abuse 

of this drug in 1971. However, a 

resurgence of methamphetamine abuse 

occurred in the 1980s and it is currently 

considered a major drug of abuse. The 

widespread availability of 

methamphetamine today is largely 

fueled by illicit production in large and 

small clandestine laboratories 

throughout the United States and illegal 

production and importation from 

Mexico. 

Methamphetamine is abused for its 

stimulant and euphoric effects. Highdose chronic abuse has been associated 

with irritability, tremors, convulsions, 

anxiety, paranoia, and neurotoxic effects 

that cause damage to neurons and blood 

vessels. Aggressive and violent behavior 

by users, often directed at spouses and 

children, pose a significant risk to those 

individuals in contact with 

methamphetamine addicts. Death has 

resulted from extreme anorexia, 

hyperthermia, convulsions, and 

cardiovascular collapse (including 

stroke and heart attacks). 

The methods used to manufacture 

methamphetamine are directly impacted 

by the availability of precursor 

chemicals and ease of synthesis. 

Currently, methamphetamine is 

primarily produced domestically by 

utilizing diverted pseudoephedrine 

combination products that are sold at 

retail and, to a lesser extent, ephedrine 

products. The manufacture of this drug 

poses a significant threat to the public 

health and safety due to the toxic waste 

and the risk of fire and explosion 

associated with the clandestine 

laboratories that manufacture the drug, 

and the fact that many individuals, 

including children, are at risk of 

exposure to toxic chemicals and waste 

generated during the manufacturing 

process. 

A Rand Corporation study reported 

that the 2005 cost to the U.S. for overall 

methamphetamine-related activities 

including crime and criminal justice 

costs, health care costs, endangered 

children put in foster care, the loss of 

productivity, drug treatment, and 

injuries and death at methamphetamine 

laboratories was estimated at $23.4 

billion.51 Similarly, the Vanderbilt 

University Medical Center in Tennessee 

reported spending $325 million between 

July 2009 and June 2010 for 

uncompensated medical care at its Burn 

Center.52 One-third of its patients were 

burned from exploding 

methamphetamine laboratories.53

In 2010, there were in excess of 

10,000 clandestine laboratory incidents 

in the United States related to the 

manufacture of methamphetamine.54

Coinciding with the upward trend in 

methamphetamine laboratory seizures is 

an alarming upward trend in 

methamphetamine abusers. According 

to the 2009 National Survey on Drug 

Use and Health, between 2008 and 2009 

there was a 60 percent increase in the 

number of past month users of 

methamphetamine.55 This comes after a 

significant reduction of past month 

users between 2006 and 2008, a period 

when the U.S. was experiencing 

decreases in the number of 

methamphetamine laboratory seizures. 

The Combat Methamphetamine 

Epidemic Act of 2005 (CMEA) was 

enacted on March 9, 2006. 21 U.S.C. 

971. It requires retailers of nonprescription products containing 

pseudoephedrine, ephedrine and 

phenylpropanolamine to place these 

products behind the counter or in a 

locked cabinet. Consumers must show 

identification and sign a logbook for 

each purchase. An interim final rule 

was published to implement section 716 

of the Act and require additional 

reporting for import, export, and 

international transactions involving all 

List I and List II chemicals.56 On 

October 14, 2008, Congress enacted the 

Methamphetamine Production 

Prevention Act of 2008, which amended 

the CSA to require the sellers of 

methamphetamine precursor chemicals 

to record information about sales and 

purchasers in electronic logbooks or 

bound paper books. 21 U.S.C. 

830(e)(1)(A)(iv)–(vi). Further, on 

October 12, 2010, the Combat 

Methamphetamine Enhancement Act of 

2010 (MEA) was enacted, establishing 

new requirements for mail-order 

distributors of scheduled listed 

chemical products (Pub. L. 111–268). 

Internet Diversion 

On October 15, 2008, Congress 

amended the CSA with enactment of the 

Ryan Haight Online Pharmacy 

Consumer Protection Act of 2008. DEA 

amended its regulations accordingly by 

interim final rule to prevent the illegal 

distribution and dispensing of 

controlled substances by means of the 

Internet.57

Disposal of Controlled Substances 

Lastly, on October 12, 2010, Congress 

amended the CSA with the enactment of 

the Secure and Responsible Drug 

Disposal Act of 2010 (Pub. L. 111–273). 

Pursuant to this amendment, DEA must 

promulgate new regulations that allow 

ultimate users and long-term care 

facilities to dispose of controlled 

substances through a variety of methods 

of collection and disposal. DEA is in the 

process of drafting these regulations. 


jlentini on DSK4TPTVN1PROD with PROPOSALS
39324 Federal Register / Vol. 76, No. 129 / Wednesday, July 6, 2011 / Proposed Rules 

58SAMHSA, ‘‘Results from the 2009 National 

Survey on Drug Use and Health: Volume I, 

Summary of National Findings,’’ Office of Applied 

Studies, 2010 (NSDUH Series H–38A, HHS 

Publication No. SMA 10–4856), http:// 

www.oas.samhsa.gov/nsduh/2k9NSDUH/ 

2k9Results.pdf. 

59Lloyd D. Johnson, PhD, et al, ‘‘Monitoring the 

Future National Results on Adolescent Drug Use: 

Overview of Key Findings, 2010,’’ Institute for 

Social Research, The University of Michigan, 2011. 

60Lloyd D. Johnston, PhD, et al, ‘‘Monitoring the 

Future National Results on Adolescent Drug Use: 

Overview of Key Findings, 2009,’’ National Institute 

of Drug Abuse, 2010 (NIH Publication No. 10– 

7583). 

61Partnership for a Drug-Free America and 

MetLife Foundation, ‘‘2009 Parents and Teens 

Attitude Tracking Report,’’ March 2, 2010. 

62SAMHSA, Highlights of the 2009 Drug Abuse 

Warning Network (DAWN) Findings on DrugRelated Emergency Department Visits, Center for 

Behavioral Health Statistics and Quality, The 

DAWN Report, December 28, 2010. 

63 Id. at 4. 

64 Id. at 3. 

65U.S. Department of Health and Human 

Services, Centers for Disease Control and 

Prevention, National Center for Injury Prevention 

and Control, Web-based Injury Statistics Query and 

Reporting System (WISQARS), ‘‘20 Leading Causes 

of Death, United States, 2007, All Races, Both 

Sexes.’’ 

66Florida Dep’t of Law Enforcement, Medical 

Examiners Commission, ‘‘Drugs Identified in 

Deceased Persons by Florida Medical Examiners 

2005 Report,’’ at 15 (May 2006) and Florida Dep’t 

of Law Enforcement, Medical Examiners 

Commission, ‘‘Drugs Identified in Deceased Persons 

by Florida Medical Examiners 2009 Report,’’ at 17 

(June 2010). 

Increased Need for Diversion Control 

Coincident with the above statutory 

changes, the increased misuse of 

controlled substances and listed 

chemicals highlights the urgency of and 

need for diversion control. The National 

Survey on Drug Use and Health 

(NSDUH) (formerly the National 

Household Survey on Drug Abuse) is an 

annual survey of the civilian, noninstitutionalized, population of the 

United States aged 12 or older. The 

survey is conducted by the Department 

of Health and Human Services Office of 

Applied Studies, Substance Abuse and 

Mental Health Services Administration. 

Findings from the 2009 NSDUH 58

estimate that 7.0 million persons used 

prescription-type psychotherapeutic 

drugs—pain relievers, anti-anxiety 

medications, stimulants, and 

sedatives—non-medically in the 

previous month. This represents 2.8 

percent of the population aged 12 or 

older. These estimates were 13 percent 

higher than those from the 2008 Survey. 

From 2002 to 2009, there was an 

increase in the rate of current nonmedical use of prescription-type drugs 

(from 5.5 to 6.3 percent) among young 

adults aged 18 to 25, driven primarily 

by an increase in pain reliever misuse. 

In 2009, an estimated 3.1 million 

persons aged 12 or older used an illicit 

drug for the first time within the past 

twelve months. Of those, an estimated 

28.7 percent initiated with 

psychotherapeutics, including 17.1 

percent with pain relievers, 8.6 percent 

with tranquilizers, 2.0 percent with 

stimulants, and 1.0 percent with 

sedatives. 

Abuse of prescription controlled 

substances among teenagers is second 

only to abuse of illegal marijuana. The 

2010 ‘‘Monitoring the Future’’ survey of 

teenagers found that 8 percent of high 

school seniors reported non-medical use 

of Vicodin, and 5.1 percent reported 

non-medical use of OxyContin, both 

scheduled controlled substances 

(painkillers).59 This reported abuse is 

consistent with reports by high-school 

students of increased non-medical use 

of painkillers in the past five years.60 As 

reported by The Partnership at 

Drugfree.org (formerly the Partnership 

for a Drug-Free America) from its 2009 

survey, more than 50 percent of 

teenagers (grades 9–12) believe that 

prescription drugs are easier to obtain 

than illegal drugs. There is a concern 

that young people may perceive 

prescription and/or over-the-counter 

drugs as ‘‘safer’’ than illegal drugs 

because of their intended, legitimate 

medical use.61

The consequences of prescription 

drug abuse are seen in the data collected 

by the Substance Abuse and Mental 

Health Services Administration 

(SAMHSA) on emergency room visits. 

According to their latest data, ‘‘Drug 

Abuse Warning Network (DAWN), 2009: 

National Estimates of Drug-Related 

Emergency Department Visits,’’ 

SAMHSA estimates that of the 4.6 

million emergency department visits in 

2009 associated with drug use, about 1.2 

million visits involved the non-medical 

use of pharmaceuticals.62 Emergency 

department visits involving nonmedical use of pharmaceuticals (misuse 

or abuse) almost doubled between 2004 

and 2009 from 627,291 in 2004 to 

1,244,679 visits in 2009 (98.4 percent 

increase).63 About half of the 2009 

emergency department visits related to 

abuse or misuse of pharmaceuticals 

involved painkillers and more than onethird involved drugs to treat insomnia 

and anxiety.64

According to the Centers for Disease 

Control, overdose deaths caused by 

prescription drugs is the second leading 

cause of accidental death in the United 

States among young people.65 The 

Florida Medical Examiner’s 

Commission reported that between 2005 

and 2009 the number of deaths in 

Florida associated with oxycodone rose 

248.5 percent.66

Operational Changes of the DCP Since 

2006 

As discussed above, the OIG reviewed 

DEA’s efforts to control the diversion of 

controlled pharmaceuticals and in 2006 

recommended that DEA incorporate law 

enforcement support and law 

enforcement authority to assist the DCP 

in performing criminal investigations 

that inherently require law enforcement 

authority, e.g., the authority to arrest, 

execute search warrants, and conduct 

surveillance and undercover activities. 

As discussed above, DEA expanded the 

use of Tactical Diversion Squads 

comprised of many DEA specialized 

resources such as Special Agents, 

Diversion Investigators and state and 

local law enforcement and regulatory 

personnel to more effectively 

investigate, disrupt, and dismantle those 

individuals or organizations involved in 

diversion schemes. Since the last fee 

calculation, DEA added 161 Special 

Agent positions to the DCP. The 

majority of these positions were 

allocated to the DCP Tactical Diversion 

Squads. By 2009, there were 37 

operational Tactical Diversion Squads 

across the United States and DEA is 

committed to increasing this number 

within this fee cycle. These squads are 

designed to address controlled 

substance diversion in consonance with 

the traditional Diversion Investigator 

regulatory efforts. 

DEA made other organizational 

changes to incorporate in the DCP those 

units responsible for diversion control 

operations. To ensure the proper 

utilization of DCFA resources, DEA 

created a Diversion Value and Analysis 

Unit in the Diversion Planning and 

Resources Section to identify and 

prevent duplication of effort, conduct 

cost benefit analyses, and develop, 

oversee, and review acquisitions. 

In 2009, the DCP intensified its 

regulatory activities to help the 

registrant population better comply with 

the CSA and to identify those registrants 

who violated the CSA and 

implementing regulations. The 

modifications included increasing 

investigation cycles as well as depth of 

review. Scheduled investigations were 

increased from every five years to every 

three years for controlled substance 

manufacturers, bulk manufacturers, 

distributors, reverse distributors, 

importers, exporters, bulk importers, 

and Narcotic Treatment Programs; 

scheduled investigations for chemical 

manufacturers, bulk manufacturers, 

distributors, importers, exporters, and 

bulk importers were increased from two 


jlentini on DSK4TPTVN1PROD with PROPOSALS
Federal Register / Vol. 76, No. 129 / Wednesday, July 6, 2011 / Proposed Rules 39325 

67 71 FR 50115, August 29, 2006. 

per Diversion Investigator per year to all 

such registrants every three years. 

Investigations of Office Based Opioid 

Treatment/Buprenorphine Physicians, 

currently referred to as DATA–Waived 

Practitioners, were increased from one 

such registrant per Diversion Group per 

year to all such registrants per Diversion 

Group every five years. Researchers 

were increased from only being 

investigated on a complaint basis to two 

schedule I researchers plus two 

schedule II–V researchers per Diversion 

Group per year. Finally, analytical 

laboratories, previously not subject to 

scheduled investigations, were 

increased to include analytical 

laboratories affiliated with 

manufacturers being investigated every 

three years in tandem with the affiliated 

manufacturer’s scheduled investigation. 

In an effort to enhance the DCP’s 

enforcement capabilities, to reduce 

costs, to streamline the regulatory 

compliance process for registrants, and 

to keep the public informed, the DCP 

made several improvements to its 

information technology capabilities. 

Underperforming contracts were 

terminated and a new unit was created 

within the DCP to manage all 

information technology projects 

exclusively for the DCP. This resulted in 

significant cost reductions and 

improved program efficiency and 

responsiveness to both registrants and 

the public. 

The new unit successfully made costsaving improvements to the technology 

infrastructure of the Controlled 

Substances Ordering System (CSOS) 

and streamlined the application process 

for registrants by implementing an 

online system for new applications and 

renewal applications for registrations. 

The DCP is also enhancing the 

communications system to allow 

interconnectivity between many 

different systems. The DCP is 

continually working to improve the 

quality and accessibility of its reporting 

systems, such as the Automated Reports 

and Consolidated Orders System 

(ARCOS) and Drug Theft/Loss (DTL). 

These two programs generate timely, 

accurate, and actionable data that 

improve the DCP’s enforcement and 

control efforts as well as providing for 

a more efficient means by which 

registrants may submit such reports. 

DEA’s Interim Final Rule on 

Electronic Prescriptions for Controlled 

Substances (EPCS), effective June 1, 

2010, will enhance diversion control as 

a means to protect against fraudulent 

prescriptions and will streamline the 

recordkeeping process for pharmacies 

(75 FR 16236, March 31, 2010). This 

rule provides practitioners with the 

option to electronically sign and 

transmit prescriptions for controlled 

substances. Likewise, with this new 

rule, pharmacies are permitted to 

receive and archive electronic 

prescriptions. The DCP is working to 

develop and implement EPCS. 

As part of the requirements of the 

Combat Methamphetamine Epidemic 

Act of 2005 (CMEA), regulated sellers of 

scheduled listed chemical products are 

required to self-certify annually. 

Regulated sellers can self-certify and 

find training manuals on the Diversion 

Control Program Web site. 

Need for a New Fee Calculation 

DEA last adjusted the fee schedule in 

August 2006, however, collections did 

not begin until FY 2007.67 This fee 

schedule was intended to be sufficient 

to cover the ‘‘full costs’’ of the DCP for 

FY 2006 through FY 2008 or October 1, 

2005 through September 30, 2008. 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 to 

the DCP. As indicated by the abovereferenced 2008 OIG report, additional 

salary and other costs attributable to 

diversion control activities need to be 

incorporated into the DCP. In addition, 

the mission of the DCP has been 

expanded by Congress and by the need 

to address an explosion in the abuse of 

prescription drugs that seriously impact 

public health and safety. The National 

Drug Control Strategy is focused on all 

aspects of the problem—supply, 

demand, and treatment. 

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 and the deterrent 

effect of increased regulatory 

investigations. Tactical Diversion 

Squads incorporate the criminal 

investigative skills and statutory 

authority of Special Agents and state 

and local Task Force Officers to bring to 

the criminal justice system 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 to Tactical Diversion 

Squads because 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 an 

expanded number and use of Tactical 

Diversion Squads. 

Due to the alarming rise in 

prescription drug abuse, as well as an 

increase in the production and use of 

chemicals that are harmful if abused, 

the DCP has increased scheduled 

investigations of registrants and drug 

and chemical scheduling initiatives, as 

well as other modifications in its 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 successfully 

execute 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 towards 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, collections under the current 

fee schedule will 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 for 

controlled substances and listed 

chemicals, particularly at this time of 

dramatic increases in abuse and 

diversion. 

DEA must determine the proper scope 

of the DCP, the projected costs for the 

program, a fee calculation methodology, 

and a new fee schedule that recovers the 

costs of the DCP and sets reasonable fees 

for the registration and control of 

manufacturers, distributors, importers, 

exporters and dispensers of controlled 

substances and listed chemicals. 


jlentini on DSK4TPTVN1PROD with PROPOSALS
39326 Federal Register / Vol. 76, No. 129 / Wednesday, July 6, 2011 / Proposed Rules 

68 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. 69 21 U.S.C. 886a(2)(B). 

Fee Calculation 

DEA is delegated the task of 

determining the details of fulfilling the 

statutory requirements of ensuring the 

recovery of the full costs of operating 

the diversion control program (DCP) as 

described above, while charging 

registrants participating in the closed 

system of distribution reasonable fees 

relating to the registration and control 

‘‘of the manufacture, distribution, 

dispensing’’ and ‘‘of importers and 

exporters’’ of controlled substances and 

listed chemicals. 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 rather than actual, current costs 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, 

e.g., manufacturers, distributors, 

importers, exporters, reverse 

distributors, practitioners, and 

individual researchers. Since 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), there must 

always be more collected than is 

actually spent to avoid running a deficit 

and being in violation of federal fiscal 

law.68 In operating the DCP, DEA must 

be prepared for changes in investigative 

priorities, diversion trends, and 

emerging drugs or chemicals posing 

new threats to the public health and 

safety. By definition, it is an inexact 

effort. Given that fact, the agency must 

select a single methodology that it 

consistently follows throughout any 

given fee cycle. 

Current options to calculate fees are 

also limited by the feasibility and 

practicability of tracking and allocating 

detailed costs, although the agency 

continues to improve its capabilities on 

this front. DEA has made progress 

through reorganization and there is 

recognition throughout the agency of the 

need to separate DCP costs from other 

agency costs. 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. Part of 

the difficulty stems from the fact that 

the mission of DEA involves 

investigations and actions that may 

involve poly-drug organizations or that 

may start out as one type of 

investigation and result in another, 

based upon the way the facts develop. 

To date, tracking costs within the DCP 

according to registrant categories or 

within a given registrant category has 

not been feasible or cost-efficient. Such 

detailed cost attribution may or may not 

be feasible in the future. However, 

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 it differentiated among the 

categories of registrants for purposes of 

calculating a reasonable fee, e.g., 

manufacturers, distributors, importers, 

exporters, and dispensers.69 Thus, the 

methodology used to calculate fees 

needs to distinguish among these 

categories. The historical fee calculation 

based on a weighted ratio of 12.5 for 

manufacturers, 6.25 for distributors 

(including importers and exporters), and 

1 for dispensers was used for many 

years prior to and when Congress 

established the DCFA and has been the 

method used to date. 

As discussed in more detail below, 

DEA considered several methodologies 

to calculate the new fee. One 

methodology considered was a flat fee 

that takes projected DCP costs and 

divides it among all registrants 

regardless of their business activity/ 

registrant group. On its face, this would 

not result in a ‘‘reasonable’’ fee for a 

large portion of registrants given the 

disparity in economic size among 

registrants and the different levels of 

control needed among the registrant 

categories. Registrants range from multibillion dollar manufacturers in 

possession of large quantities of 

controlled substances or listed 

chemicals to canine handlers in 

possession of small amounts of 

controlled substances. Thus, the 

inspection, investigation and oversight 

costs associated with a manufacturer are 

much greater than for a canine handler. 

A flat fee methodology has been rejected 

since the inception of a fee. 

DEA considered another fee 

calculation methodology called the PastBased Option. This method is based on 

the principle that the cost of the DCP 

should be shared equally among all 

paying registrants, except for the cost of 

scheduled or regularly planned 

investigations and the preregistration 

investigation costs to determine 

eligibility of registrant applicants, as 

these additional costs vary by registrant 

category. Rather, these historical costs 

should be allocated to the registrant 

group receiving the scheduled and 

preregistration investigations. Since the 

direct labor costs of scheduled and 

preregistration investigations are 

historically around three percent of total 

DCP costs, this methodology results in 

concerns similar to the flat fee as the 

base amount is nearly as great as the flat 

fee amount. 

DEA considered another methodology 

called the Future-Based Option, which 

takes the same approach described in 

the preceding paragraph, but the costs of 

scheduled investigations are derived 

from planned work, not historical work 

hours. This methodology results in large 

differences in fees among registrant 

groups and has been rejected by DEA as 

not a ‘‘reasonable’’ charge. 

Since the inception of the fee, the 

agency has selected a weighted-ratio 

method to determine a reasonable fee 

for each category of registrants. Under 

this method, registrants are assigned to 

a business activity or category (e.g., 

researcher, practitioner, distributor, 

manufacturer, etc.) 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 category or business activity. 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. As historical costs support, 

inspections, scheduled investigations 

and other control and monitoring costs 

are greatest for manufacturers. This is 

because there is an increased risk 

associated with the quantity of 

controlled substances and/or chemicals 

located 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. 

DEA continues to review possible 

methodologies as technology continues 

to afford increased tracking and 


jlentini on DSK4TPTVN1PROD with PROPOSALS
Federal Register / Vol. 76, No. 129 / Wednesday, July 6, 2011 / Proposed Rules 39327 

70See ‘‘Proposed New Registrant Fee Schedule 

Calculations’’ in this rulemaking docket found at 

http://www.regulations.gov. 

71See this rulemaking docket found at http:// 

www.regulations.gov. 

72 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. 

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 and the 

associated oversight costs, the 12.5 ratio 

is applied to the manufacturing 

registrant group. At 50 percent of that 

ratio is the 6.25 ratio which applies to 

the ‘‘distribution’’ of controlled 

substances or the distributor registrant 

group. Likewise, ‘‘dispensing’’ has the 

largest number of registrants, but with 

relatively low oversight costs and a 

relatively small quantity of controlled 

substances or listed chemicals within 

their physical possession. The base fee 

or the 1 ratio is charged for those 

dispensing or individuals registered to 

do research or other such activities that 

use the substance and create limited 

vulnerability to the closed system, and 

thus require less control in protecting 

the closed system. The practitioner fee 

is the base fee on an annual basis but 

is collected every three years for 

administrative convenience. 

Thus, the current fees, some of which 

are paid annually and some of which 

are paid every three years, range from 

$184 for ratio 1 to $2,293 for ratio 12.5 

depending upon the particular registrant 

category. Specifically, practitioners, 

mid-level practitioners, dispensers, 

researchers, and narcotic treatment 

programs pay an annual registration fee 

of $184. For administrative convenience 

for both the collection and the payment, 

practitioners pay a combined 

registration fee of $551 every three 

years. Distributors, importers and 

exporters pay an annual fee of $1,147 

and manufacturers pay an annual fee of 

$2,293. 21 CFR 1301.13 and 1309.11. 

Projected Costs for the Diversion Control 

Program 

In calculating fees to recover the 

mandated full costs of operating the 

DCP, DEA estimates the costs of 

operating the DCP for the next three 

fiscal years.70 To develop the DCFA 

budget request estimates for FY 2012, 

FY 2013 and FY 2014, DEA compiles: 

(1) The DCFA Budget Request for Fiscal 

Year (FY) 2011, which forms a base 

spending level for the current level of 

service, (2) the estimated additional 

required funds for FY 2012, FY 2013 

and FY 2014, and (3) 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. The fees have 

not been adjusted to reflect these factors 

as they last covered 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.71

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 

purchase of evidence or payment for 

information as part of investigations, 

travel, and non-equipment purchases. 

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 percent of 

budget; however, total budgets for each 

of these major cost categories do 

increase to reflect additional costs in 

each of these categories. 

In addition to the budget 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 make a purchase of 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, i.e., 

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 $10 million 

per year. 

Payment to Treasury 

In the 1993 appropriations for DEA, 

Congress determined that the DCP 

would be fully funded by registration 

fees and no longer by appropriations.72

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]’’ by those 

participating in the closed system 

established by the CSA. 21 U.S.C. 

886a(1)(C). Fees collected are deposited 

into a separate Treasury account. 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 payment to the Treasury. 

Operational Continuity Fund (OCF) 

DEA maintains an operational 

continuity fund (OCF) based on the 

need to maintain DCP operations during 

historically low (or negative) collection 

periods (e.g., the first quarter of a new 

fiscal year when the first $15 million 

collected is transferred to Treasury). 

Monthly collections and obligations 

fluctuate throughout the year. There are 

times when obligations (spending) 

exceed collections. This can happen 

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 (spending). 

Using statistical analysis of the 

historical fluctuations between amounts 

collected and amounts obligated, DEA 

has determined that seven percent of the 

projected obligations is normally 

adequate to avoid operational 

disruptions. The amount required to 

bring the operational continuity fund 


jlentini on DSK4TPTVN1PROD with PROPOSALS
39328 Federal Register / Vol. 76, No. 129 / Wednesday, July 6, 2011 / Proposed Rules 

balance to the $15 million plus seven 

percent level is added to projected costs. 

The increase in OCF balance for FY 

2012, FY 2013, and FY 2014 are 

$6,452,395, $1,067,428, and $800,291 

respectively. 

TABLE 1—INCREASE IN OPERATIONAL CONTINUITY FUND BALANCE FY 2012–2014 

FY 2012 FY 2013 FY 2014 

Budget .......................................................................................................................................... $321,990,000 $356,582,322 $371,831,295 

Target OCF ($15M + 7%) ............................................................................................................ 39,960,763 41,028,191 41,828,482 

Beginning OCF balance .............................................................................................................. 33,508,367 39,960,763 41,028,191 

Increase in OCF balance ............................................................................................................. 6,452,395 1,067,428 800,291 

Combat Methamphetamine Act of 2005 

(CMEA) Collections 

Under CMEA, DEA collects a selfcertification 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 holding a current DEA 

registration in good standing such as a 

pharmacy to dispense controlled 

substances. DEA has observed an 

approximately 15 percent decline in 

self-certifications from FY 2008 to FY 

2010 and anticipates that the decline 

will continue through FY 2014. The 

self-certification fee is $21. CMEA selfcertification fee collection estimates for 

FY 2012, FY 2013, and FY 2014 for 

purposes of calculating the fee levels are 

$173,040, $146,853, and $124,635, 

respectively. 

TABLE 2—CMEA COLLECTIONS FY 2012–2014 

FY 2012 FY 2013 FY 2014 

Number of paying self-certifications ............................................................................................ 8,240 6,993 5,935 

Fee ............................................................................................................................................... $21 $21 $21 

CMEA collection estimate ............................................................................................................ $173,040 $146,853 $124,635 

Other Collections 

DEA also derives revenue from the 

sale/salvage of official government 

vehicles dedicated to DCP use. DEA’s 

estimate for other collections is 

$307,153 per year. This is the actual 

amount for FY 2010. 

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 $332,962,203. This 

figure includes the budget of 

$321,990,000, net of $10 million in 

recoveries, plus $15 million for transfer 

to Treasury, plus $6,452,395 for increase 

in OCF balance, net of $173,040 in 

CMEA self-certification collections, and 

net of $307,153 in other collections. 

Required registration fee collections 

for FY 2013 are $362,195,745. This 

figure includes the budget of 

$356,582,322, net of $10 million in 

recoveries, plus $15 million for transfer 

to Treasury, plus $1,067,428 for increase 

in OCF balance, net of $146,853 in 

CMEA self-certification collections, and 

net of $307,153 in other collections. 

Required registration fee collections 

for FY 2014 are $377,199,798. This 

figure includes the budget of 

$371,831,295, net of $10 million in 

recoveries, plus $15 million for transfer 

to Treasury, plus $800,291 for increase 

in OCF balance, net of $124,635 in 

CMEA self-certification collections, and 

net of $307,153 in other collections. 

TABLE 3—NEEDED FEE COLLECTIONS FY 2012–2014 

FY 2012 FY 2013 FY 2014 3-yr total 

Budget ........................................................................................................ $321,990,000 $356,582,322 $371,831,295 $1,050,403,617 

Recoveries ................................................................................................. (10,000,000) (10,000,000) (10,000,000) (30,000,000) 

Net Budget ................................................................................................. 311,990,000 346,582,322 361,831,295 1,020,403,617 

Payment to Treasury ................................................................................. 15,000,000 15,000,000 15,000,000 45,000,000 

Increase in OCF balance ........................................................................... 6,452,395 1,067,428 800,291 8,320,115 

CMEA Self-cert collections ........................................................................ (173,040) (146,853) (124,635) (444,528) 

Other collections ........................................................................................ (307,153) (307,153) (307,153) (921,458) 

Required collections from Registration Fees ............................................. 332,962,203 362,195,745 377,199,798 1,072,357,746 

Numbers are rounded. 

In total, DEA needs to collect 

$1,072,357,746 in registration fees over 

the three year period, FY 2012–FY 2014 

to fully fund the DCP. 

As in the past, DEA proposes to set 

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. 


jlentini on DSK4TPTVN1PROD with PROPOSALS
Federal Register / Vol. 76, No. 129 / Wednesday, July 6, 2011 / Proposed Rules 39329 

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 conducting their businesses 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 

(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. The Office of Diversion 

Control acknowledges the important 

role that the Validation Unit provides in 

the appropriate expenditure of the 

DCFA. DEA cannot foresee 

Congressionally-mandated changes to 

the DCP or diversion trends, 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. In 

addition, to ensure careful decisionmaking at all levels of the DCP, the 

Office of Diversion Control is 

considering several measures to ensure 

accountability for the effective 

utilization of resources. 

Proposed Methodology for New Fee 

Calculation 

In developing this proposed rule, DEA 

examined alternative methodologies to 

calculate the registration and 

registration fees. DEA analyzed 

alternative methodology approaches 

keeping in mind its statutory obligations 

under the CSA. First, pursuant to 

statute, DEA is authorized to charge 

reasonable fees relating to the 

registration and control of the 

manufacture, distribution, dispensing, 

importation, and exportation of 

controlled substances and listed 

chemicals. 21 U.S.C. 821 and 958(f). 

Second, DEA must set fees at a level that 

ensures the recovery of the full costs of 

operating the various aspects of its 

diversion control program (DCP). 21 

U.S.C. 886a. Accordingly, in examining 

each alternative methodology DEA 

considered whether the fee calculation 

(1) was reasonable and (2) could fully 

fund the costs of operating the various 

aspects of the DCP. 

Moreover, the CSA establishes a 

specific regulatory requirement that 

DEA charge fees to fully fund the DCP, 

but that the fees collected by DEA are 

to be expended through the budget 

process only. Specifically, 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 

refund 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). For that reason, DEA 

is only considering alternative 

methodologies to calculate the 

registration and reregistration fees, not 

alternative approaches to expend fees 

collected because those decisions are 

governed by the CSA and the budget 

process. 

In developing this rule, DEA 

considered four methodologies to 

calculate registration and reregistration 

fees: Past-Based Option, Future-Based 

Option, Flat Fee Option, and WeightedRatio Option. Although the increase in 

the fees may be passed down to the 

registrants’ customers, the alternatives 

are analyzed on the worst-case scenario 

where the increase in the fee is absorbed 

fully by the registrants. 

For each of the alternatives 

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 revenue from 2007 to 

2012, and (3) the relative fee increase 

across registrant groups. Additionally, 

each calculation methodology is reevaluated for its overall strengths and 

weaknesses. 

Past-Based Option 

Option 1 is called the Past-Based 

Option, and is based on historic 

investigation work hour data to set the 

apportionment of cost to each registrant 

category. In considering Option 1, DEA 

used historic investigation work hour 

data from the Fiscal Year 2007–2009. 

DEA’s records permit an accurate 

apportionment of work hours for certain 

types of diversion control activities (e.g., 

investigations) among classes of 

registrants. DEA estimates that 

approximately three to five percent of 

costs can be directly linked to preregistration and scheduled 

investigations. Although some criminal 

investigations can be attributed to 

registrant groups, DEA did not include 

the cost of criminal investigations for 

the fee calculation under the Past-Based 

Option. While DEA develops annual 

work plans for the number of scheduled 

investigations by registrant type, DEA 

does not develop such plans for 

criminal investigations. Therefore, the 

cost of criminal investigations is 

allocated equally across all registrant 

groups, regardless of business activity. 

The remaining costs associated with 

DCP activities and components benefit 

all registrants (e.g., policy, registration, 

and legal activities); however, DEA 

records cannot attribute these costs by 

registrant class. Under Option 1, preregistration and scheduled investigation 

costs are assigned to registrant classes 

and all other costs are recovered on an 

equal, per-registrant basis. 

DEA calculated the annual registrant 

fee for key registrant groups under 

Option 1 and compared this fee to the 

current fee. Although distributors and 

importers/exporters are in the same fee 

class in the current fee structure 

(Weighted-Ratio Option), in this 

analysis, distributors are separated from 

importers and exporters based on the 

available historic work hour data and 

reported work hours by type of 

registrant. 

In the past-based option, the 

calculated fees increase by a factor of 

1.16, 3.19, 1.10, and 1.32 for 

manufacturers, distributors, importers/ 

exporters, and practitioners, 

respectively. 

The proposed fees as a percentage of 

revenue is very low as indicated in 

Table 4 below, 0.000 to 0.019 percent, 

0.005 to 0.134 percent, 0.000 to 0.005 

percent, and 0.125 to 0.257 percent for 

manufacturers, distributors, pharmacies, 

and practitioners, respectively. The 

impact of the incremental increase in 

the fee from current fees as a percentage 

of revenue is even lower. 

Finally, the largest increase, by a 

factor of 3.19, is incurred by 

distributors, largely as a consequence of 

their separation from exporters and 

importers, while the increases for other 

groups range from a factor of 1.10 to 

1.32. 


jlentini on DSK4TPTVN1PROD with PROPOSALS
39330 Federal Register / Vol. 76, No. 129 / Wednesday, July 6, 2011 / Proposed Rules 

73Many criminal investigations are attributable to 

the type of registrant(s) being investigated. 

However, because DEA cannot anticipate the 

volume of criminal cases initiated, either 

historically or in future years, these costs were not 

attributed directly to the registrant types affected. 

Rather, criminal investigative costs are spread 

across all registrants equally in both Option 1 and 

Option 2. 

TABLE 4—ANNUAL REGISTRANT FEES UNDER PAST-BASED OPTION

Current fee 

(annual) 

Past-based 

fee 

(annual) 

Increase 

from current 

fee 

Ratio: pastbased fee to 

current fee 

Percent of 

annual revenue 

current fee ** 

Percent of 

annual revenue 

past based 

fee *** 

Manufacturers .................................................... $2,293 $2,668 $375 1.16 0.000%–0.017% 0.000%–0.019% 

Distributors ......................................................... 1,147 3,361 2,214 2.93 0.002%–0.042% 0.005%–0.123% 

Importers/exporter .............................................. 1,147 1,258 111 1.10 * * 

Pharmacies ........................................................ 184 243 59 1.32 0.000%–0.004% 0.000%–0.005% 

Practitioners ....................................................... 184 243 59 1.32 0.119%–0.237% 0.125%–0.257% 

Source: 2007 Economic Census; Bureau of Labor Statistics. 

* No NAICS code for Importer/Exporter of controlled substances and/or List I chemicals. 

** Current Fee divided by average revenue/income in 2007, first full year of the current fee. 

*** Past-Based Fee divided by average revenue in 2007 for manufacturers, distributors and pharmacies. Past-Based Fee divided by projected 

average income in 2012 for practitioners. Only 2002 and 2007 data are available for manufacturers, distributors, and pharmacies, while practitioner income projection is based on five years of income data, 2004–2009. 

While Option 1 is based on accurate 

historical data, it does not allow for 

future needs, demands and shifting 

responsibilities of the DCP, such as 

Agency priorities, new legislation, 

control of substances, new investigative 

requirements, and other program needs. 

Conclusion 

DEA does not propose the past-based 

option for two key reasons. First, the fee 

increase is 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 from 10 percent to 32 

percent. DEA deemed this option 

unreasonable. Second, the past-based 

option is backward looking and 

implicitly assumes that the future will 

be similar to the past. DEA cannot 

assume that future workload will reflect 

past DEA work hour data. For example, 

DEA plans to conduct more scheduled 

investigations in accordance with the 

new scheduled investigation work plan. 

As a result, DEA has concluded that 

past data is not the best basis for the 

calculation of proposed fees. 

Future-Based Option 

Option 2 is called the Future-Based 

Option, and is based on projected work 

hours for each registrant class using 

scheduled investigation work plan goals 

and anticipated/planned resources. In 

considering Option 2, DEA based its 

calculations on projected work hour 

data by registrant group for FY 2012– 

2014. 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.73 Based on the data used 

to develop the projections, the futurebased option divides registrants into six 

classes and examines the projected work 

hour data within these categories. In 

contrast to Option 1 above, which is 

calculated using actual data, Option 2 is 

calculated using projected data relative 

to work plan goals and resources. This 

type of calculation results in a more 

finely tuned analysis of anticipated 

work hours. DEA calculated the 

projected annual fees under Option 2 

and compared these fees to the current 

fees. Table 5 presents these results: 

TABLE 5—ANNUAL REGISTRANT FEES UNDER FUTURE-BASED OPTION

Current fee 

(annual) 

Futurebased fee 

(annual) 

Amount of 

increase 

from current 

fee 

Ratio: 

futurebased fee to 

current fee 

Percent of 

Annual revenue 

current fee ** 

Percent of 

Annual revenue 

future-based 

fee *** 

Manufacturers 1: controlled substance manufacturers.$2.293 $17,595 $15,302 $7.67 0.000%–0.017% 0.001%–0.128% 

Manufacturers 2: List I chemical manufacturers 2,293 8,124 5,831 3.54 0.000%–0.017% 0.001%–0.059% 

Distributors 1: controlled substance distributors 

and List I chemical distributors.

1,147 6,546 5,399 5.71 0.002–0.042% 0.009%–0.239% 

Distributors 2: exporters and importers of controlled substances.1,147 4,968 3,821 4.33 * * 

Distributors 3: List I chemical exporters and importers.1,147 4,021 2,874 3.51 * * 

Pharmacies ........................................................ 184 232 48 1.26 0.000%–0.004% 0.000%–0.005% 

Practitioners ....................................................... 184 232 48 1.26 0.119%–0.237% 0.119%–0.245% 

Source: 2007 Economic Census; Bureau of Labor Statistics. 

* No NAICS code for Importer/Exporter of controlled substances and/or List I chemicals. 

** Current Fee divided by average revenue/income in 2007, first full year of the current fee. 

*** Future-Based Fee divided by average revenue in 2007 for manufacturers, distributors and pharmacies. Future-Based Fee divided by projected average income in 2012 for practitioners. Only 2002 and 2007 data is available for manufacturers, distributors, and pharmacies, while 

practitioner income projection is based on five years of income data, 2004–2009. 

In the future-based option, as shown 

in the table above, the fee increase 

ranges from a factor of 1.26 for practitioners to 7.67 for manufacturers 

of controlled substances. 


jlentini on DSK4TPTVN1PROD with PROPOSALS
Federal Register / Vol. 76, No. 129 / Wednesday, July 6, 2011 / Proposed Rules 39331 

The proposed fees as a percentage of 

revenue is very low as indicated in 

Table 5: 0.001 to 0.128 percent for 

controlled substances manufacturers, 

0.001 to 0.059 percent for manufacturers 

of List I chemical manufacturers, 0.009 

to 0.239 percent for distributors, 0.000 

to 0.005 percent for pharmacies, and 

0.119 to 0.245 percent for practitioners. 

The impact of the incremental increase 

in the fee from current fees as a 

percentage of revenue is even lower. As 

expected, registrant groups with a larger 

fee increase under this option would 

experience a larger increase as a 

percentage of revenue. 

Under this option, the increases in 

fees vary greatly across registrant 

groups. For example, controlled 

substances manufacturers incur the 

largest proportional increase by a factor 

of 7.67 or $15,302 annually, while 

practitioner fees increase by a factor of 

1.26 or $48 annually. 

Option 2 is calculated using projected 

data relative to work plan goals and 

resources. This results in a more finely 

tuned analysis of anticipated work 

hours. The disadvantage of Option 2 is 

that, because the calculation is based on 

projected work hour data, it may not be 

able to adapt to the shifting priorities 

and demands of DCP operations. 

Additionally, a change in work plan can 

cause actual cost to be much different 

for some registrant groups, causing a 

contradiction between the rationales 

used to calculate the fees and actual 

operations. 

Conclusion 

In reviewing Option 2, DEA 

concluded that for most registrant 

categories, the large proportional 

increase in fees would not pass the 

‘‘reasonable fee’’ standard required by 

statute and could represent a significant 

burden on some registrants. 

Additionally, DEA believes that the vast 

disparity in the increase, where fees for 

manufacturers increase by more than 

seven fold, while fees for registrants 

increase by 26 percent, is unreasonable. 

Although there is concern regarding a 

potential difference between the 

scheduled investigation work plan and 

actual operations, DEA recognizes that 

no plan is perfect and operations may be 

adjusted as the environment changes. 

This potential exists for all four options. 

Therefore, the potential change in work 

plan did not weigh into the DEA’s 

decision to not select Option 2. DEA’s 

decision to not select Option 2 is based 

on the unreasonable increase in fees for 

some registrants and the severe 

disparity in increase among the 

registrant groups. 

Flat Fee Option 

Option 3 is called the Flat Fee Option. 

The flat fee option would provide equal 

fees across all registrant groups 

regardless of the proportion of DCP 

costs and resources the registrant group 

may require (e.g., 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 (so that the fees for a three year 

period are three times the annual fee). 

DEA calculated the annual registrant 

fee for key registrant groups under 

Option 3 and compared this fee to the 

current fee: 

TABLE 6—ANNUAL REGISTRANT FEES UNDER FLAT-FEE OPTION

Current fee 

(annual) 

Flat fee 

(annual) 

Amount of 

increase 

from current 

fee 

Ratio: flat 

fee to 

current fee 

Percent of 

annual revenue 

current fee* 

Percent of 

annual revenue 

flat fee** 

Manufacturers .................................................... $2,293 $247 $(2,046) 0.11 0.000%–0.017% 0.000%–0.002% 

Distributors ......................................................... 1,147 247 (900) 0.22 0.002%–0.042% 0.000%–0.009% 

Practitioners ....................................................... 184 247 63 1.34 0.119%–0.237% 0.127%–0.261% 

Source: 2007 Economic Census; Bureau of Labor Statistics. 

* Current Fee divided by average revenue/income in 2007, first full year of the current fee. 

** Flat Fee divided by average revenue in 2007 for manufacturers, distributors and pharmacies. Flat Fee divided by projected average income 

in 2012 for practitioners. Only 2002 and 2007 data is available for manufacturers, distributors, and pharmacies, while practitioner income projection is based on five years of income data, 2004–2009. 

In the flat-fee option, the registration 

fees for manufacturers and distributors 

are reduced significantly, from $2,293 

for manufacturers and $1,147 for 

distributors to $247 for both. This 

reduction represents an 89 percent and 

78 percent reduction for manufacturers 

and distributors respectively. The 

registration fee for practitioners 

increases by 34 percent to $247 on an 

annual basis. 

The proposed fees as a percentage of 

revenue is very low as indicated in 

Table 6 above: 0.000 to 0.002 percent for 

manufacturers, 0.000 to 0.009 percent 

for distributors, and 0.127 to 0.261 

percent for practitioners. The impact of 

the incremental increase in the fee from 

current fees as a percentage of revenue 

is even lower. Registrant groups with a 

decrease in fee under this option would 

experience a decrease as a percentage of 

revenue. 

As with the other options, the 

calculation considered in Option 3 

results in a dramatic fee disparity 

among registrant groups. The fees for 

manufacturers and distributors 

decrease, while the fees for practitioners 

increase. 

The flat fee option has positive and 

negative aspects. The fee that DEA is 

required to charge registrants is based 

on a statutory requirement—it is not a 

user fee. A user fee calculation would 

require a calculation of the direct and 

indirect costs associated with each of 

the registrant groups and set fees to 

recover the costs associated with each of 

these groups. Since the registration fee 

is not a user fee, DEA is not required to 

calculate fees according to its costs by 

registrant groups. General historical 

costs of scheduled investigations 

support different fees among the 

categories. However, setting the same 

fees for all registrants, from multinational corporations to mid-level 

practitioners is unreasonable. 

Conclusion 

After consideration of the flat fee 

option, DEA did not select this option 

to calculate the proposed new fees. The 

fee disparity among registrant groups 

caused by this calculation alternative is 

too great. Under this option, the 

calculation would result in reduced fees 

for manufacturers and distributors by 89 

percent and 78 percent respectively, 

while practitioner fees would increase 

by 34 percent. Setting the fees at the 

same level across all registrant groups is 

not ‘‘reasonable.’’ DEA registrants 

include some of the largest corporations 


jlentini on DSK4TPTVN1PROD with PROPOSALS
39332 Federal Register / Vol. 76, No. 129 / Wednesday, July 6, 2011 / Proposed Rules 

in the world although the vast majority 

of registrants are practitioners, such as 

physicians and nurses. To satisfy the 

‘‘reasonable’’ standard, registration fees 

should be different among the categories 

to account for cost and economic 

differences among the registrant 

categories. Option 3 did not satisfy this 

requirement. 

Weighted-Ratio Option (Selected 

Methodology) 

Option 4 is called the Weighted-Ratio 

Option. In this option, fees are assigned 

to different registrant categories based 

on DEA’s general historical cost data. 

This option distinguishes among the 

categories to establish a ‘‘reasonable’’ 

fee for each category. The different fees 

are expressed in ratios: 1 for researchers, 

canine handlers, analytical labs, and 

narcotics treatment programs; 3 for 

registrants on three year registration 

cycles, pharmacies, hospitals/clinics, 

practitioners, teaching institutions, and 

mid-level practitioners; 6.25 for 

distributors and importers/exporters; 

and 12.5 for manufacturers. The 

adopted ratios are applied for 

administrative convenience since 

historically costs vary and a fee must be 

set in advance. To determine the fee, a 

weighted ratio is assigned based on 

registrant group, and the amount needed 

to be collected over the FY 2012–FY 

2014 period is divided by the weighted 

number of estimated registrations to 

determine the fees. 

TABLE 7—ANNUAL REGISTRANT FEES UNDER WEIGHTED-RATIO OPTION

[Registrants on three year registration cycle] 

Registrant class/business Current three 

year fee* 

Proposed 

three year fee* 

Difference per 

year 

Pharmacy ..................................................................................................................................... $551 $732 $60 

Hospital/Clinic .............................................................................................................................. 551 732 60 

Practitioner ................................................................................................................................... 551 732 60 

Teaching Institution ...................................................................................................................... 551 732 60 

Mid-Level Practitioner .................................................................................................................. 551 732 60 

* Pharmacies, hospitals/clinics, practitioners, teaching institutions, and mid-level practitioners currently pay a fee for a three-year period. This 

current three-year fee is $551. The proposed new fee for the three year registration period would be $732. The three year difference is $181 or 

an annual difference of $60. 

[Registrants on annual registration cycle] 

Registrant class/business Current annual 

fee 

Proposed 

annual fee Difference 

Researcher/Canine Handler ........................................................................................................ $184 $244 $60 

Analytical Lab .............................................................................................................................. 184 244 60 

Maintenance ................................................................................................................................ 184 244 60 

Detoxification ............................................................................................................................... 184 244 60 

Maintenance and Detoxification .................................................................................................. 184 244 60 

Compounder/Maintenance ........................................................................................................... 184 244 60 

Compounder/Detoxification .......................................................................................................... 184 244 60 

Compounder/Maintenance/Detoxification .................................................................................... 184 244 60 

Distributor (chemical and controlled substances) ....................................................................... 1,147 1,526 379 

Reverse distributor ....................................................................................................................... 1,147 1,526 379 

Importer (chemical and controlled substances) .......................................................................... 1,147 1,526 379 

Exporter (chemical and controlled substances) .......................................................................... 1,147 1,526 379 

Manufacturer (chemical and controlled substances) ................................................................... 2,293 3,052 759 

In the weighted-ratio option, the 

registration fees for all registrant groups 

increase by 33 percent from current fees, 

although the absolute dollar amount 

may differ. The proposed new 

registration fees range from $244 

annually (or annual equivalent) to 

$3,052. Registration fees are collected by 

location and by registered business 

activity. Most small registrants are 

expected to pay a single registration fee 

of $244 ($60 annual increase), $1,526 

($379 annual increase) or $3,052 ($759 

annual increase). Registration fees for all 

registrant groups increase by 33 percent 

and as a result, there is no disparity in 

the fee increase among registrant 

groups. 

The weighted-ratio methodology, 

much like the flat fee, is straightforward 

and easy to understand, but unlike the 

flat fee, this method applies historic 

weighted ratios to differentiate fees 

among registrant groups. Additionally, 

the fees calculated using this 

methodology are similar to fees 

calculated in the past-based option, 

which allocates historical preregistration and scheduled 

investigations costs to registrant groups. 

Finally, this method does not create a 

disproportionate fee increase in any 

registrant group. 

Conclusion 

DEA selected Option 4 to calculate 

the proposed new fee structure. 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 larger 

revenues and costs pay higher fees than 

registrants with lower revenues and 

costs. Furthermore, the weighted-ratio 

does not create a disparity in the 

relative increase in fees from the current 

to the proposed fees. The weighted 

ratios used by DEA to calculate the 

proposed fee have proven effective and 

reasonable over time. Additionally, the 

selected calculation methodology 

accurately reflects the differences in 

activity level, notably in inspections, 

scheduled investigations and other 

control and monitoring, 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. 


jlentini on DSK4TPTVN1PROD with PROPOSALS
Federal Register / Vol. 76, No. 129 / Wednesday, July 6, 2011 / Proposed Rules 39333 

Proposed New Fees 

Based on thorough analysis of the 

identified fee calculation options— 

including the anticipated economic 

impact on registrants—DEA has 

determined that the current weightedratio option represents the most 

reasonable approach to calculate 

registrant fees sufficient to fully fund 

the DCP. 

The proposed fee schedule would 

replace 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. Accordingly, DEA 

proposes the following new fees for the 

FY 2012–2014 period. 

TABLE 8—PROPOSED REGISTRATION AND REREGISTRATION FEES BY CLASS/BUSINESS

[Registrants on three year registration cycle] 

Registrant class/business Current three 

year fee* 

Proposed 

three year fee* 

Difference per 

year 

Pharmacy ..................................................................................................................................... $551 $732 $60 

Hospital/Clinic .............................................................................................................................. 551 732 60 

Practitioner ................................................................................................................................... 551 732 60 

Teaching Institution ...................................................................................................................... 551 732 60 

Mid-Level Practitioner .................................................................................................................. 551 732 60 

* Pharmacies, hospitals/clinics, practitioners, teaching institutions, and mid-level practitioners currently pay a fee for a three-year period. This 

current three-year fee is $551. The proposed new fee for the three year registration period would be $732. The three year difference is $181 or 

an annual difference of $60. 

[Registrants on annual registration cycle] 

Registrant class/business Current annual 

fee 

Proposed 

annual fee 

Annual 

difference 

Researcher/Canine Handler ........................................................................................................ $184 $244 $60 

Analytical Lab .............................................................................................................................. 184 244 60 

Maintenance ................................................................................................................................ 184 244 60 

Detoxification ............................................................................................................................... 184 244 60 

Maintenance and Detoxification .................................................................................................. 184 244 60 

Compounder/Maintenance ........................................................................................................... 184 244 60 

Compounder/Detoxification .......................................................................................................... 184 244 60 

Compounder/Maintenance/Detoxification .................................................................................... 184 244 60 

Distributor (chemical and controlled substances) ....................................................................... 1,147 1,526 379 

Reverse distributor ....................................................................................................................... 1,147 1,526 379 

Importer (chemical and controlled substances) .......................................................................... 1,147 1,526 379 

Exporter (chemical and controlled substances) .......................................................................... 1,147 1,526 379 

Manufacturer (chemical and controlled substances) ................................................................... 2,293 3,052 759 

TABLE 9—OVERVIEW OF PROPOSED DIVERSION CONTROL FEE ACCOUNT (DCFA) 

FY2011 FY2012 FY2013 FY2014 

Congressional Budget ..................................................................................... 290,304,000 321,990,000 356,582,322 371,831,295 

Operational Continuity Fund (OCF) Brought Forward From Prior Year ......... 68,089,927 33,508,367 63,225,476 50,588,959 

Collections: Registration Fees* ....................................................................... 257,254,274 356,226,916 348,491,800 366,937,230 

Collections: 

CMEA ....................................................................................................... 203,889 173,040 146,853 124,635 

Treasury .................................................................................................... (15,000,000) (15,000,000) (15,000,000) (15,000,000) 

Net Collections ......................................................................................... 242,458,163 341,399,956 333,638,653 352,061,865 

Recoveries from Deobligations ........................................................................ 12,957,124 10,000,000 10,000,000 10,000,000 

Other Collections ............................................................................................. 307,153 307,153 307,153 307,153 

Subtotal Availability .......................................................................................... 323,812,367 385,215,476 407,171,281 412,957,977 

Obligations ** .................................................................................................... 290,304,000 321,990,000 356,582,322 371,831,295 

End of Year OCF Balance ............................................................................... 33,508,367 63,225,476 50,588,959 41,126,682 

Target OCF ($15M + 7% of Budget) ............................................................... 37,539,300 39,960,763 41,028,191 41,828,482 

Numbers are rounded. 

* NOTE: Total FY 2012–2014 collections from registration fees is $1,071,655,946. This amount is different from the total required collections of 

$1,072,357,746 described in Table 3: Needed Fee Collections FY 2012–2014. Initially, the required collection of $1,072,357,746 resulted in a calculated base (ratio: 1) annual fee of $244.16. The weighted ratios were applied and rounded to the whole dollar to determine the proposed fees. 

Due to rounding of the fees to the whole dollar, the proposed fees generate $1,071,655,946 rather than $1,072,357,746. 

** For purposes of the proposed fee calculation, the Congressional Budget and Obligations are treated as the same. 


jlentini on DSK4TPTVN1PROD with PROPOSALS
39334 Federal Register / Vol. 76, No. 129 / Wednesday, July 6, 2011 / Proposed Rules 

Summary of Impact of Proposed New 

Fee Relative to Current Fee 

Affected Entities 

As of December 2010 there were a 

total of 1,378,609 controlled substances 

and chemical registrants (1,377,466 

controlled substances registrants and 

1,143 chemical registrants), as shown in 

Table 10. 

TABLE 10—NUMBER OF REGISTRANTS BY BUSINESS ACTIVITY

Registrant class/business Controlled 

substances Chemicals 

Pharmacy ......................................................................................................................................................................... 66,766 

Hospital/Clinic .................................................................................................................................................................. 15,774 

Practitioner ....................................................................................................................................................................... 1,097,454 

Teaching Institution .......................................................................................................................................................... 351 

Mid-Level Practitioner ...................................................................................................................................................... 183,538 

Researcher/Canine Handler ............................................................................................................................................ 8,997 

Analytical Lab .................................................................................................................................................................. 1,496 

Narcotic Treatment Program ........................................................................................................................................... 1,272 

Distributor ......................................................................................................................................................................... 795 584 

Reverse Distributor .......................................................................................................................................................... 56 

Importer ............................................................................................................................................................................ 203 180 

Exporter ........................................................................................................................................................................... 236 166 

Manufacturer .................................................................................................................................................................... 528 213 

Total .......................................................................................................................................................................... 1,377,466 1,143 

Total (all registrants) ......................................................................................................................................... 1,378,609 

* Data as of December 2010. 

Not all registrants listed in Table 10 

are subject to the fees. Publicly owned 

institutions, law enforcement agencies, 

Indian Health Services, 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 practice and are 

authorized to dispense controlled 

substances. Firms with multiple 

locations must have separate 

registrations for each location. 

Characteristics of Entities 

This proposed 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 December 

2010, there were 1,378,609 controlled 

substances and chemical registrants 

(1,377,466 controlled substances 

registrants and 1,143 chemical 

registrants), as shown above in Table 10. 

Pharmacies, hospitals/clinics, 

practitioners, teaching institutions, and 

mid-level practitioners make up 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 is described in more detail 

in the sections below. 

The proposed fees would affect a 

wide variety of entities. Table 11 

indicates the sectors affected by the 

proposed rule and their average annual 

revenue/income. Most DEA registrants 

are small entities under Small Business 

Administration (SBA) standards. Almost 

all practitioners, which are the largest 

category of registrants, would be 

considered small (annual revenues of 

less than $6 million to $8.5 million, 

depending on specialty), and 

practitioners and mid-level practitioners 

total 1,280,992 (as of December 2010). 

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: 


jlentini on DSK4TPTVN1PROD with PROPOSALS
Federal Register / Vol. 76, No. 129 / Wednesday, July 6, 2011 / Proposed Rules 39335 

74This example is for illustration purposes only. 

Each entity should seek competent tax advice for 

tax consequences of the proposed rule. 

75Source: Bureau of Labor Statistics, http:// 

www.bls.gov. 

TABLE 11—INDUSTRIAL SECTORS OF DEA REGISTRANTS—Continued 

Sector NAICS 

Code 

Average annual 

revenue * 

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. 

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 nonprescription drugs, wholesalers who 

supply convenience stores, and grocery, 

pharmacy, and discount stores (e.g., 

superstores) that operate their own 

distribution centers. 

Economic Impact Analysis of Proposed 

Fee 

The proposed fee, if implemented, is 

expected to have two levels of impact. 

Initially, the increase in the fee will 

impact the registrants. Then the fee 

increase or portion of the fee increase is 

expected to be eventually passed on to 

the general public. To be analytically 

conservative, the analysis below 

assumes that the impact of the fee 

increase is absorbed entirely by the 

registrants. 

DEA assumes that the registration fees 

are business expenses for all registrants. 

As a result, the increase in the fee will 

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 $39.74

DEA examined the proposed 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 increase is 

expected to have the greatest affect on 

small businesses in the practitioner 

registrant group. The majority of 

practitioners and mid-level practitioners 

work in small businesses. Physicians, 

dentists, and physician’s assistants 

reflect a representative sub-group of the 

practitioner and mid-level practitioner 

registrant groups. 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. The table below also reflects the 

impact of the proposed fee increase as 

a percentage of average income. This 

analysis assumes that the fee increase is 

absorbed personally by each 

practitioner/mid-level practitioner. The 

analysis ignores the dampening effect of 

registration fees as a business expense 

and the potential that the fee increase 

might be passed on to customers. 

TABLE 12—FEE AS PERCENTAGE OF INCOME FY 2004–2012 

Year 

Average income 75 Fee Fee as % 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% 


jlentini on DSK4TPTVN1PROD with PROPOSALS
39336 Federal Register / Vol. 76, No. 129 / Wednesday, July 6, 2011 / Proposed Rules 

76See 21 CFR 1301.21 for complete fee exemption 

requirements. 

77 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. 

78See 21 CFR 1301.21 for complete requirements 

for exemption of registration fees. 

79See ‘‘Economic Impact Analysis of Proposed 

Rule on Controlled Substances and List I Chemical 

Registration and Reregistration Fees, DEA–346’’ in 

this rulemaking docket found at http:// 

www.regulations.gov. 

TABLE 12—FEE AS PERCENTAGE OF INCOME FY 2004–2012—Continued 

Year 

Average income 75 Fee Fee as % of average income 

Physicians Dentists Physician 

assistants 

(Annual 

basis) Physicians Dentists Physician assistants 

Increase from 2007 to 2012 .................... 26% 19% 22% 33% 6% 11% 9% 

Increase from 2006 to 2012 .................... 37% 24% 27% 33% ¥7% 3% 4% 

* 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. 

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 proposed 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 proposed fees are 33 percent 

above the current fees implemented at 

the end of 2006, average incomes for 

physicians, dentists, and physician’s 

assistants increased 26 percent, 19 

percent, and 22 percent respectively. 

This estimated increase in average 

income dampens the effect of the fee 

increase as a percentage of average 

income. The 33 percent fee increase as 

a percentage of average income is 6 

percent for physicians, 11 percent for 

dentists, and 9 percent for physician’s 

assistants from 2007 to 2012. 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 are any hospital or 

other institution that is operated by an 

agency of the United States, of any 

State, or any political subdivision of an 

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.76 Fee 

exempt registrants are not affected by 

the proposed fees. 

Conclusion 

DEA concludes that this proposed 

rule is not a 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.77

The proposed fee, if implemented, 

would initially affect all fee paying 

registrants. The fees may eventually be 

passed on to the general public, 

diminishing the impact of the proposed 

fee increase on individual registrants. 

The impact of the proposed fee on 

registrants is also 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.78

Moreover, DEA believes that this 

proposed rule will enhance the public 

health and safety. 

Regulatory Analyses 

This proposed 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 

proposed 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 proposed 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 

$88,333,030. 

Paperwork Reduction Act of 1995 (44 

U.S.C. 3501–3511) 

This proposed 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 

proposed 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 proposed rulemaking 

has been drafted consistent with the Act 

and that a regulatory analysis on the 

effects or impact of this proposed 

rulemaking on small entities has been 

done and summarized above.79 While 

DEA recognizes that this proposed 

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 Diversion 

Control Program (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. 

This rule is not a discretionary action 

but implements statutory direction to 

charge reasonable fees to recover the full 

costs of activities constituting the DCP 


jlentini on DSK4TPTVN1PROD with PROPOSALS
Federal Register / Vol. 76, No. 129 / Wednesday, July 6, 2011 / Proposed Rules 39337 

through registrant fees (21 U.S.C. 821, 

886a, and 958(f)). As discussed above 

and in the Economic Impact Analysis of 

the Proposed Rule found in the 

rulemaking docket at http:// 

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 proposed new fee structure. 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 larger 

revenues pay higher fees than 

registrants with lower revenues. 

Furthermore, the weighted-ratio does 

not create a disparity in the relative 

increase in fees from the current to the 

proposed fees. The weighted-ratios used 

by DEA to calculate the proposed 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 and mid-level practitioners 

represent 92.9 percent of all registrants 

and nearly all practitioners and midlevel practitioners are employed by 

small businesses pursuant to SBA 

standards. Practitioners and mid-level 

practitioners would pay a three-year 

registration fee of $732 or the equivalent 

of $244 per year. 

For consideration of the impact of the 

proposed fee increase on small 

businesses, DEA analyzed the proposed 

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 and mid-level practitioner 

registrant groups. For practitioners and 

mid-level practitioners, the proposed 

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 

Proposed Rule, the impacts of the 

proposed fees, $60 per year increase 

from current fees, were found to be 

0.007 percent, 0.014 percent, and 0.022 

percent 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 Proposed Rule, DEA 

concludes that the proposed rule will 

not have a significant economic impact 

on a substantial number of small 

entities. 

Executive Orders 13563 and 12866 

This proposed rule to increase 

registrant fees has been developed in 

accordance with the principles of 

Executive Orders 13563 and 12866. 

Public comment is encouraged through 

the Internet with easy Internet access to 

supporting information found at http:// 

www. regulations.gov. The difference 

between the current fees and the 

proposed 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 

proposed new fee rates for the three 

years of FY 2012–FY 2014 is 

$264,999,092. Thus, the annual increase 

is $88,333,030. This proposed rule has 

been reviewed by the Office of 

Management and Budget. 

The primary cost of the proposed rule 

is the incremental increase in the 

combined registration fees paid by 

registrants. Benefits of the proposed 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 proposed 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; nor 

does it impose enforcement 

responsibilities on any State; nor does it 

diminish the power of any State to 

enforce its own laws. Accordingly, this 

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 $126,400,000 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 the proposed increase on 

individual entities and practitioners is 

minimal. The majority of the affected 

entities will pay a fee of $732 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 proposed rule is required by 

statute, will not have tribal implications 

and will not impose substantial direct 

compliance costs on Indian tribal 

governments. 

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 proposed to be 

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. 

2. Amend § 1301.13 by revising 

paragraph (e)(1) to read as follows: 


jlentini on DSK4TPTVN1PROD with PROPOSALS
39338 Federal Register / Vol. 76, No. 129 / Wednesday, July 6, 2011 / Proposed Rules 

§ 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.

$3,052 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.

1,526 1 

(iii) Reverse distributing ... Schedules I–V ................ New—225, Renewal— 

225a.

1,526 1 

(iv) Dispensing or instructing (includes Practitioner, Hospital/Clinic, 

Retail Pharmacy, Central fill pharmacy, 

Teaching Institution).

Schedules II–V ............... New—224, Renewal— 

224a.

732 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. 


jlentini on DSK4TPTVN1PROD with PROPOSALS
Federal Register / Vol. 76, No. 129 / Wednesday, July 6, 2011 / Proposed Rules 39339 

Business activity Controlled 

substances DEA Application forms Application fee ($) 

Registration 

period (years) 

Coincident activities 

allowed 

(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.

1,526 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.

1,526 1 


jlentini on DSK4TPTVN1PROD with PROPOSALS
39340 Federal Register / Vol. 76, No. 129 / Wednesday, July 6, 2011 / Proposed Rules 

Business activity Controlled 

substances DEA Application forms Application fee ($) 

Registration 

period (years) 

Coincident activities 

allowed 

(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. 

* * * * * 

PART 1309—REGISTRATION OF 

MANUFACTURERS, DISTRIBUTORS, 

IMPORTERS, AND EXPORTERS OF 

LIST I CHEMICALS 

3. The authority citation for Part 1309 

is corrected to read as follows: 

Authority: 21 U.S.C. 802, 821, 822, 823, 

824, 830, 871(b), 875, 877, 886a, 952, 953, 

957, 958. 

4. Revise § 1309.11 to read as follows: 

§ 1309.11 Fee amounts. 

(a) For each application for 

registration or reregistration to 

manufacture the applicant shall pay an 

annual fee of $3,052. 

(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 $1,526. 

5. In § 1309.21, paragraph (c) is 

revised to read as follows: 

§ 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 ....................... $3,052 1 May distribute that chemical for which registration was issued; may 

not distribute any 

chemical for which not 

registered. 

Renewal—510a .............. 3,052 

Distributing ....................... List I, Scheduled listed 

chemical products.

New—510 ....................... 1,526 1 

Renewal—510a .............. 1,526 

Importing .......................... List I, Drug Products containing ephedrine, 

pseudoephedrine, 

phenylpropanolamine.

New—510 ....................... 1,526 1 May distribute that chemical for which registration was issued; may 

not distribute any 

chemical for which not 

registered. 

Renewal—510a .............. 1,526 

Exporting .......................... List I, Scheduled listed 

chemical products.

New—510 ....................... 1,526 1 

Renewal—510a .............. 1,526 


jlentini on DSK4TPTVN1PROD with PROPOSALS
Federal Register / Vol. 76, No. 129 / Wednesday, July 6, 2011 / Proposed Rules 39341 

Dated: June 30, 2011. 

Joseph T. Rannazzisi, 

Deputy Assistant Administrator. 

[FR Doc. 2011–16847 Filed 7–5–11; 8:45 am] 

BILLING CODE 4410–09–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[REG–114206–11] 

RIN 1545–BK21 

Encouraging New Markets Tax Credit 

Non-Real Estate Investments; 

Correction 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Correction to advance notice of 

proposed rulemaking. 

SUMMARY: This document contains a 

correction to advance notice of 

proposed rulemaking (REG–114206–11) 

that was published in the Federal 

Register on Tuesday, June 7, 2011 (76 

FR 32880). This document invites 

comments from the public on how the 

new markets tax credit program may be 

amended to encourage non-real estate 

investments. 

FOR FURTHER INFORMATION CONTACT: Julie 

Hanlon-Bolton, (202) 622–3040 (not a 

toll-free number). 

SUPPLEMENTARY INFORMATION: 

Background 

The correction notice that is the 

subject of this document is under 

section 45D of the Internal Revenue 

Code. 

Need for Correction 

As published, the advance notice of 

proposed rulemaking (REG–114206–11) 

contains an error that may prove to be 

misleading and is in need of 

clarification. 

Correction of Publication 

Accordingly, the publication of 

advance notice of proposed rulemaking 

(REG–114206–11), which was the 

subject of FR Doc. 2011–13981, is 

corrected as follows: 

On page 32881, column 2, in the 

preamble, under the paragraph heading 

‘‘Background’’, second paragraph of the 

column, fourth line, the language 

‘‘nonprofit corporation) or partnership 

if’’ is corrected to read ‘‘nonprofit 

corporation) or partnership, if’’. 

LaNita Van Dyke, 

Chief, Publications and Regulations Branch, 

Legal Processing Division, Associate Chief 

Counsel (Procedure and Administration). 

[FR Doc. 2011–16824 Filed 7–5–11; 8:45 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[REG–118809–11] 

RIN 1545–BK27 

Modification of Treasury Regulations 

Pursuant to Section 939A of the DoddFrank Wall Street Reform and 

Consumer Protection Act 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Notice of proposed rulemaking 

by cross-reference to temporary 

regulations. 

SUMMARY: In the Rules and Regulations 

section of this issue of the Federal 

Register, the IRS is issuing final and 

temporary regulations that remove any 

reference to, or requirement of reliance 

on, credit ratings in regulations under 

the Internal Revenue Code (Code) and 

provide substitute standards of creditworthiness where appropriate. The 

Dodd-Frank Wall Street Reform and 

Consumer Protection Act requires each 

Federal agency to take such actions 

regarding its regulations. These 

regulations affect persons subject to 

various provisions of the Code. The text 

of the temporary regulations published 

in the Rules and Regulations section of 

the Federal Register also serves as the 

text of the proposed regulations. 

DATES: Written and electronic comments 

and requests for a public hearing must 

be received by August 30, 2011. 

ADDRESSES: Send submissions to: 

CC:PA:LPD:PR (REG–118809–11), Room 

5203, Internal Revenue Service, PO Box 

7604, Ben Franklin Station, Washington, 

DC 20044. Submissions may be handdelivered to: CC:PA:LPD:PR Monday 

through Friday between the hours of 8 

a.m. and 4 p.m. to: CC:PA:LPD:PR 

(REG–118809–11), Courier’s Desk, 

Internal Revenue Service, 1111 

Constitution Avenue, NW., Washington, 

DC, or sent electronically via the 

Federal eRulemaking Portal at http:// 

www.regulations.gov (IRS REG–118809– 

11). 

FOR FURTHER INFORMATION CONTACT: 

Concerning the proposed regulations, 

Arturo Estrada, (202) 622–3900; 

concerning submissions of comments 

and requests for a public hearing, 

Oluwafunmilayo Taylor, (202) 622–7180 

(not toll-free numbers). 

SUPPLEMENTARY INFORMATION: 

Background 

Section 939A(a) of the Dodd-Frank 

Wall Street Reform and Consumer 

Protection Act, Public Law 111–203 

(124 Stat. 1376 (2010)), (the ‘‘DoddFrank Act’’), requires each Federal 

agency to review its regulations that 

require the use of an assessment of 

credit-worthiness of a security or money 

market instrument, and to review any 

references or requirements in those 

regulations regarding credit ratings. 

Section 939A(b) directs each agency to 

modify any regulation identified in the 

review required under section 939A(a) 

by removing any reference to, or 

requirement of reliance on, credit 

ratings and substituting a standard of 

credit-worthiness that the agency deems 

appropriate. Numerous provisions 

under the Code are affected. 

Temporary regulations in the Rules 

and Regulations section of this issue of 

the Federal Register amend the Income 

Tax Regulations (26 CFR part 1) under 

sections 150, 171, 197, 249, 475, 860G, 

and 1001 of the Code. The temporary 

regulations also amend the 

Manufacturers and Retailers Excise Tax 

Regulations (26 CFR part 48) under 

section 4101 of the Code. The text of the 

temporary regulations also serves as the 

text of these proposed regulations. The 

preamble to the temporary regulations 

explains the temporary regulations and 

the proposed regulations. 

Special Analyses 

It has been determined that this notice 

of proposed rulemaking is not a 

significant regulatory action as defined 

in Executive Order 12866, as 

supplemented by Executive Order 

13563. Therefore, a regulatory 

assessment is not required. It has been 

determined that section 553(b) of the 

Administrative Procedure Act (5 U.S.C. 

chapter 5) does not apply to these 

regulations, and because these 

regulations do not impose a collection 

of information on small entities, the 

Regulatory Flexibility Act (5 U.S.C. 

chapter 6) does not apply. Pursuant to 

section 7805(f) of the Code, this notice 

of proposed rulemaking has been 

submitted to the Chief Counsel for 

Advocacy of the Small Business 

Administration for comment on its 

impact on small business. 


jlentini on DSK4TPTVN1PROD with PROPOSALS