[Federal Register Volume 88, Number 168 (Thursday, August 31, 2023)]
[Rules and Regulations]
[Pages 60117-60144]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-18885]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration

21 CFR Parts 1303 and 1315

[Docket No. DEA-455]
RIN 1117-AB49


Management of Quotas for Controlled Substances and List I 
Chemicals

AGENCY: Drug Enforcement Administration, Department of Justice.

ACTION: Final rule.

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SUMMARY: The Drug Enforcement Administration (DEA) is publishing this 
final rule to manage the quotas for controlled substances and the list 
I chemicals, ephedrine, pseudoephedrine, and phenylpropanolamine, held 
by DEA-registered manufacturers. This final rule will define the types 
of quotas, update the method to abandon quota, clarify the current 
language to ensure that both manufacturers and distributors are 
required to obtain certification of a buyer's quota, reduce overall 
inventories, formalize the existing practice of use-specific 
subcategories for individual manufacturing and procurement quotas, and 
modify existing deadlines to fix/issue quotas. This final rule will 
also amend certain regulations to implement updates to the Controlled 
Substances Act made by the Substance Use-Disorder Prevention that 
Promotes Opioid Recovery Treatment for Patients and Communities Act.

DATES:  This final rule is effective November 29, 2023.

FOR FURTHER INFORMATION CONTACT: Scott A. Brinks, Regulatory Drafting & 
Policy Support Section (DPW), Diversion Control Division, Drug 
Enforcement Administration; Mailing Address: 8701 Morrissette Drive, 
Springfield, Virginia 22152; Telephone: (571) 362-3261.

SUPPLEMENTARY INFORMATION:

Legal Authority

    The Controlled Substances Act (CSA) authorizes the Administrator of 
the Drug Enforcement Administration (DEA) (by delegation from the 
Attorney General) to promulgate rules and regulations that he deems 
necessary and appropriate for the efficient execution of his functions 
under subchapter I (Control and Enforcement) and subchapter II (Import 
and Export). 21 U.S.C. 871(b) and 958(f). Subchapter I includes 
provisions which require the Administrator to establish the aggregate 
production quota for each basic class of controlled substance listed in 
schedules I and II and the assessment of annual needs for the 
ephedrine, pseudoephedrine, and phenylpropanolamine to be manufactured 
in the United States each calendar year to provide for the estimated 
medical, scientific, research, and industrial needs of the United 
States, lawful export requirements, and the establishment and 
maintenance of reserve stocks. 21 U.S.C. 826. The Administrator shall 
take the following quota actions for a basic class of controlled 
substance listed in schedules I and II and ephedrine, pseudoephedrine, 
and phenylpropanolamine pursuant to stipulated conditions: limit or 
reduce individual production quotas for each registered 
manufacturer,\1\ and fix individual manufacturing quotas for 
registrants.\2\
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    \1\ 21 U.S.C. 826(b).
    \2\ 21 U.S.C. 826(d).
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    On October 24, 2018, Congress revised the CSA through the Substance 
Use-Disorder Prevention that Promotes Opioid Recovery Treatment for 
Patients and Communities (SUPPORT) Act. These revisions will be noted 
and included in these proposed regulations, where applicable. Through 
this Act, the Administrator, by way of delegation from the Attorney 
General, may now set quota in terms of the pharmaceutical dosage-form.

[[Page 60118]]

I. Executive Summary

A. Notice of Proposed Rulemaking

    DEA published a notice of proposed rulemaking (NPRM) in the Federal 
Register on October 23, 2019, which provided an opportunity for 
comments to be submitted. 84 FR 56712. The comment period closed on 
December 23, 2019. DEA invited comments from the public on all of the 
topics covered in the NPRM; however, DEA cannot change the 
implementation of amendments from the SUPPORT Act.

B. Summary of the Purposes and Provisions of the Rule

1. Types of Quota
    In the NPRM, DEA proposed the addition of new sections to introduce 
and define the types of quotas and proposed an update to the procedure 
for abandoning quota. The types of quotas are as follows:
    <bullet> Aggregate production quota (APQ) (for controlled 
substances);
    <bullet> Assessment of Annual Needs (AAN) (for list I chemicals); 
\3\
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    \3\ For the purposes of this document only, ``list I chemicals'' 
refers to ephedrine, pseudoephedrine, and phenylpropanolamine for 
legitimate medical, scientific, research, and industrial needs. The 
phrase ``list I chemical(s)'' will be used going forward.
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    <bullet> Individual Manufacturing Quota (for controlled substances 
and list I chemicals);
    <bullet> Procurement Quota (for controlled substances and list I 
chemicals); and
    <bullet> Import Quota (for list I chemicals).
    Through this final rule, DEA will add these new sections to the 
regulations that will define the types of quotas for controlled 
substances in schedules I and II and the list I chemicals ephedrine, 
pseudoephedrine, and phenylpropanolamine. Also, DEA will change the 
regulations to stay up to date with modern technology by formalizing 
the current practice of filing to abandon quota with the United Nations 
(UN) Reporting and Quota Section in the online Quota Management System.
2. Conforming Changes From the Substance Use-Disorder Prevention That 
Promotes Opioid Recovery Treatment for Patients and Communities Act
    In the NPRM, DEA introduced the SUPPORT Act \4\ and informed the 
public of the new legislation as it applies to DEA. With this final 
rule, DEA is updating the current regulations to comply with this new 
law. The SUPPORT Act now gives the Administrator, by way of delegation 
from the Attorney General, the authority to establish the APQ, 
individual manufacturing quotas, and procurement quotas in terms of 
pharmaceutical dosage-form prepared from or containing a controlled 
substance. The SUPPORT Act also changed the deadline for DEA to fix the 
individual manufacturing quota for schedules I and II controlled 
substances. The SUPPORT Act defines the phrase ``covered controlled 
substance'' and mandates that the amount of diversion of a covered 
controlled substance be estimated when establishing any quota. When 
estimating diversion, DEA must consult with the Department of Health 
and Human Services (HHS) on rates of overdose deaths, rates of abuse, 
and the impacts on overall public health related to the covered 
controlled substances. DEA may also take into consideration other 
sources of information deemed reliable. The SUPPORT Act requires that 
``appropriate quota reductions'' be made after estimating diversion. 
The Act does not require quota increases.
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    \4\ The SUPPORT for Patients and Communities Act, Public Law 
115-271.
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3. Procurement Quota Certification
    DEA proposed to change the regulations to require certification of 
procurement quota in the NPRM. This final rule changes the regulations 
to provide that both manufacturers and distributors selling to a 
manufacturer will be required to obtain certification of the buyer's 
quota when an order is placed. This is implemented by changing the 
words ``importer,'' ``manufacturer,'' and ``bulk manufacturer'' to 
``registrant.''
4. Inventory Allowances
    In the NPRM, DEA proposed reductions to the acceptable inventory 
allowance, the amount of inventory at which quota would be suspended, 
and when DEA would grant a request for additional quota. DEA also 
proposed the establishment of inventory allowances for procurement 
quota for controlled substances. Due to comments and concerns received 
from the NPRM, DEA will be implementing different provisions in this 
final rule. Instead of the proposed amendments, DEA will:
    <bullet> Decrease the inventory allowance issued by DEA for 
individual manufacturing quotas from 50 percent to 40 percent;
    <bullet> Establish an inventory allowance issued by DEA for all 
procurement quotas, except liquid injectable products, at 35 percent, 
instead of the proposed 30 percent;
    <bullet> Establish an inventory allowance issued by DEA for liquid 
injectable dosage-form procurement quotas at 50 percent, instead of the 
proposed 30 percent;
    <bullet> Suspend individual manufacturing quota issued by DEA if a 
registrant's inventory exceeds 55 percent (reduced from 65 percent) of 
the registrant's estimated net disposal;
    <bullet> Suspend procurement quota issued by DEA, except that for 
liquid injectable dosage-forms, if a registrant's inventory exceeds 50 
percent of the registrant's estimated net disposal;
    <bullet> Suspend liquid injectable dosage-form procurement quota 
issued by DEA if a registrant's inventory exceeds 65 percent of the 
registrant's estimated net disposal;
    <bullet> Review request to determine if request for additional 
individual manufacturing quota by registrant should be granted when 
inventory is less than 30 percent (reduced from 40 percent) of the 
registrant's estimated net disposal;
    <bullet> Review request to determine if request for additional 
procurement quota, except for liquid injectable dosage-forms, by 
registrant should be granted when inventory is less than 25 percent of 
the registrant's estimated net disposal;
    and
    <bullet> Review for request to determine if request for additional 
procurement quota for liquid injectable dosage-forms by registrant 
should be granted when inventory is less than 40 percent of the 
registrant's estimated net disposal.
5. Subcategories for Quotas
    DEA proposed the addition of use-specific subcategories for 
individual manufacturing and procurement quotas to formalize the 
current, on-going practice of the use of these subcategories by 
registrants. The use-specific subcategories are:
    <bullet> Quota for Commercial Sales;
    <bullet> Quota for Transfer;
    <bullet> Quota for Product Development;
    <bullet> Quota for Replacement; and
    <bullet> Quota for Packaging/Repackaging and Labeling/Relabeling.
6. New Deadlines To Establish Quotas
    In the NPRM, DEA proposed changes to the deadlines for fixing or 
establishing the different types of quotas to allow more time for 
processing and communicating with applicants and to make the 
regulations consistent with the SUPPORT Act. This final rule will 
implement the following new deadlines:
    <bullet> Deadline to establish the APQ and the AAN: change to 
September 1;
    <bullet> Deadline to issue individual procurement, import, and 
manufacturing quotas: change to December 1; and
    <bullet> Deadline to adjust individual manufacturing quota: change 
to July 1.

[[Page 60119]]

II. Discussion of Comments

    DEA received 258 comments. Many comments addressed multiple topics 
of the NPRM. Commenters also addressed the changes made to the CSA by 
the SUPPORT Act, which Congress put into effect.

A. Defining Types of Quota and Filing To Abandon Quota

    Issue: DEA received nine comments regarding the definitions and 
types of quotas and three comments regarding the updates for the 
process of abandoning quota. Comments received from several 
organizations stated that they support DEA's changes to its regulations 
introducing and defining the types of quota. One company justified its 
support stating that DEA's change serves to educate and inform those 
not familiar with the quota process.
    While one pharmaceutical company had no objections to the 
definitions of the types of quotas, they stated that DEA should 
consider creating a distinct sixth type of quota: procurement quota 
utilized to import concentrate of poppy straw (CPS) or raw opium that 
should remain independent of any inventory restraints. This company 
further suggested that the 30 percent inventory range would be too 
restrictive and would risk supply disruption from one year to the next 
as it believes a higher inventory range is necessary both to create a 
buffer in the first quarter of a new year and to avoid disruption in 
the event of delivery delays involving United States Customs and Border 
Protection.
    Many commenters also fully supported the formalization of the quota 
abandonments with the UN Reporting and Quota Section in the online 
Quota Management System. One commenter explained its support by stating 
that these changes will allow for automation of the abandonment/
surrender process. One pharmaceutical company recommended DEA take 
advantage of the opportunity provided by modifying the quota 
regulations to include the same provision in the section for 
procurement quota. This same company believes this will better reflect 
current practice as both manufacturing and procurement quota utilize 
the same mechanism for surrendering unnecessary quota.
    DEA Response: DEA is committed to taking into consideration any 
changes in market dynamics that may require allocation of individual 
manufacturer's quotas or revisions to the APQ. DEA is also committed to 
ensuring that quotas are set in a way as to grant manufacturers the 
ability to provide controlled substances to meet the demands of the 
legitimate medical, scientific, and export needs of the United States. 
It has been DEA's long-standing intent to improve the process of 
setting the annual quota while ensuring an adequate supply of 
controlled substances is available for legitimate needs.
    A sixth category of procurement quota for the acquisition of CPS or 
raw opium imported in compliance with DEA regulations for the purpose 
of removing restraints on inventory allowances whose aims are to ensure 
availability is unnecessary. First, there are a very small number of 
entities (<10) registered in the United States to procure narcotic raw 
materials (NRMs) for processing into schedule II controlled substances 
and these companies have a long history of obtaining the NRM necessary 
to meeting the estimated needs of the United States.
    In addition, there are inventory allowances built into multiple 
quotas that DEA grants to those who produce active pharmaceutical 
ingredients (APIs) derived from NRM. Prior to implementing this rule, 
DEA granted a 50 percent inventory allowance to registered bulk 
manufacturers that procure NRM for the API they produce each year, 
pursuant to a DEA issued manufacturing quota. That total quantity 
(i.e., 150 percent of estimated net disposals minus any existing 
inventory on hand) is then utilized to calculate the amount of 
procurement quota that the bulk manufacturer requires to make the API 
for which a manufacturing quota was granted. In those instances, DEA 
assesses the amount of NRM necessary to produce the above-mentioned API 
and then calculates an inventory allowance on the amount of NRM 
required. Both inventory allowances ensure that there are adequate 
amounts in the drug supply to meet legitimate needs. Finally, while 
appropriate safeguards are currently in place, the potential for 
diversion still exists for NRM from excessive stockpiling of NRM due to 
changes in legitimate need of the end products which may reduce the 
need to manufacture.
    In addition, DEA appreciates the comments received in support of 
the process to formalize quota abandonments. Formalizing the procedure 
to abandon quota is simply a codification of existing DEA practice. 
While this formalization will have no economic costs or benefits, DEA 
believes there are benefits to accurately codifying existing practices. 
As such, this final rule will enhance efficiency and improve the 
process to abandon the right to manufacture all or any part of both 
individual manufacturing and procurement quotas.

B. Conforming Changes From the SUPPORT for Communities and Patients Act

    DEA received nine comments about the changes imposed by the SUPPORT 
Act. As stated in the NPRM, these updates to DEA's regulations are 
being implemented to comply with the amendments made to the CSA by the 
SUPPORT Act. While DEA does not have the authority to change what has 
been established by Congress, DEA will still discuss the comments 
below.
The Establishment of Quotas in Terms of Pharmaceutical Dosage-Forms
    Issue: By way of the SUPPORT Act, DEA's regulations were changed to 
allow quotas to be established in terms of pharmaceutical dosage-forms. 
In the NPRM, DEA explained that the discretionary authority granted to 
DEA to establish APQ, procurement, and individual manufacturing quotas 
in terms of pharmaceutical dosage-forms would not be used at this 
moment. The comments received addressed DEA's decision to delay the use 
of this discretionary authority, with some disagreeing with DEA's 
decision not to use the authority at this moment. Some suggested that 
DEA note the distinction between manufacturing injectables (which are 
given to in-patients) versus oral solid dosage-forms. These commenters 
opined that setting the quotas in terms of pharmaceutical dosage-forms 
will help address nationwide shortages of injectables.
    DEA Response: In the matter of DEA's decision not to use the 
discretionary authority at this present time, DEA emphasizes that the 
SUPPORT Act states that DEA (by delegation from the Attorney General) 
may establish the quotas in terms of pharmaceutical dosage-forms 
prepared from or containing the controlled substance when it is 
determined that these such establishments will assist in avoiding the 
overproduction, shortages, or diversion of a controlled substance. This 
is not an express requirement to grant quotas in that manner, however 
it does grant the authority to do so. If DEA were to exercise its 
discretionary authority, it would be implemented at the procurement 
quota level, which would have a more direct impact on the availability 
of specific dosage-forms for legitimate medical need. During the 
analysis and review process for individual procurement quotas, DEA 
examines in detail the supporting documentation provided by dosage-form 
manufacturers to distinguish the type of

[[Page 60120]]

product to be manufactured. This includes the type of formulation 
(solid, oral liquid, or liquid injectable) and dosage strengths, which 
become part of the factors considered in estimating an appropriate 
procurement quota accordingly.
    Currently, all liquid injectable products receive 50 percent 
inventory allowance. DEA will continue issuing the inventory allowance 
for these dosage-forms at the same percentage because there are 
significantly fewer dosage-form manufacturers of injectable products. 
DEA is aware that quality or production problems related to sterility 
issues for injectable products have led to higher likelihood of recalls 
of such products. DEA believes that these products, when administered 
in controlled clinical and hospital settings, decrease the likelihood 
of diversion due to higher levels of oversight. Furthermore, the 
ongoing Coronavirus Disease of 2019 (COVID-19) public health emergency 
declared by the Secretary of Health and Human Services (HHS) on January 
31, 2020, effective January 27, 2020, has made it necessary for DEA to 
consider both the potential for diversion, as well as the anticipated 
increase in demand for injectable products used to treat patients 
suffering from COVID-19. Due to COVID-19, DEA had to issue an 
adjustment to the established APQ for 2020 \5\ for selected controlled 
substances involved in manufacturing injectable drug products for 
COVID-19 treatment. The adjustment of APQ allowed DEA to adjust the 
individual procurement quotas and related inventory allowances for 
injectable products. While DEA declines to establish APQ in terms of 
pharmaceutical dosage-forms at this time, DEA has decided to implement 
a separate inventory allowance for liquid injectable dosage-forms. This 
will be discussed later in the document.
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    \5\ DEA published Established Aggregate Production Quotas for 
Schedule I and II Controlled Substances and Assessment of Annual 
Needs for the List I Chemicals Ephedrine, Pseudoephedrine, and 
Phenylpropanolamine for 2020 in the Federal Register, 84 FR 66014, 
on December 2, 2019. In response to COVID-19, DEA published 
Adjustments to Aggregate Production Quotas for Certain Schedule II 
Controlled Substances and Assessment of Annual Needs for the List I 
Chemicals Ephedrine and Pseudoephedrine for 2020, in Response to the 
Coronavirus Disease 2019 Public Health Emergency in the Federal 
Register, 85 FR on April 10, 2020, to address any potential 
shortages that may occur during the public health emergency.
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Deadline To Fix Individual Manufacturing Quotas
    Issue: DEA also received a comment from an individual regarding the 
date change for fixing the individual manufacturing quota. The 
commenter asked, ``how and why did DEA have Congress change the date to 
December?''
    DEA Response: The SUPPORT Act revised the CSA by issuing a 
mandatory change to the date by which DEA must fix individual 
manufacturing quotas to ``on or before December 1.'' Because Congress 
issued this change, DEA must follow this law and implement the new date 
into DEA's regulations.
Estimation of Diversion
    Issue: DEA received comments that were in support of DEA providing 
explanations for the increase in quotas but there was concern with the 
reliability of the data available for abuse (manufactured products vs. 
illicit substances). Commenters suggested DEA consider a broader range 
of data when calculating diversion by considering sources that are 
already available, pushing for even better data sources for future 
years, and adopting a uniform method of accounting for diversion. They 
stated that DEA should exhaust other means of curtailing illegitimate 
sales, abuse, and diversion before looking to quota as a prevention 
tool. Companies suggested that DEA differentiate among specific dosage-
forms and target the dosage-forms that are subject to abuse to 
encourage the use of dosage-forms that are less prone to diversion. 
They stated that there needs to be an objective evaluation considering 
the exclusion of injectable dosage-forms from quota reductions. 
Commenters also suggested that DEA account for over-prescribing as a 
part of the diversion analysis by considering data and best practices 
of healthcare providers and by collecting information from the 
Prescription Drug Takeback Programs and similar sources. Further, they 
suggested that DEA use the medical professionals' ``best practices'' to 
help account for overprescribing at the physician level and incorporate 
data collection into the Prescription Drug Takeback Program to account 
for overprescribing at the patient level.
    DEA Response: The Food and Drug Administration (FDA) is responsible 
for approving drug products and can require a manufacturer to submit a 
Risk Evaluation and Mitigation Strategy (commonly referred to by the 
industry as a REMS), which is a risk management plan that uses tools 
beyond the prescribing information to ensure that the benefits of 
certain drugs outweigh their risks. Certain REMS may include strategies 
to prevent, monitor, and manage specific risks resulting from 
inappropriate diversion and abuse of products. The information provided 
from a REMS informs DEA of potential abuse liability issues that may 
lead to diversion. If a manufacturer believes that its product is 
potentially being diverted or abused within the supply chain based on 
customer orders received that raise suspicion, it is responsible for 
notifying DEA by sending a report to the agency through DEA's 
Suspicious Orders Reporting System (SORS). See 21 U.S.C. 802(57), 21 
CFR 1301.74(b). Once notified, DEA will alert the field office 
regarding the situation. The diverted amount will then become a factor 
when processing the quota for the current year and an adjustment to the 
amount of quota granted will be made indicating the diverted amount. 
DEA also acquires data from HHS, Centers for Disease Control and 
Prevention (CDC), Centers for Medicare & Medicaid Services (CMS), and 
the States to determine reliable rates of overdose deaths, abuse, and 
overall public health impact as a factor of diversion to make 
appropriate quota reductions for each of the covered controlled 
substances. DEA conducts diversion analysis for the five covered 
controlled substances and the remaining drugs not considered a 
``covered controlled substance'' by the SUPPORT Act.

C. Procurement Quota Certification

    Issue: DEA received three comments from industry expressing concern 
about DEA's change to the regulations to ensure that both manufacturers 
and distributors selling to a manufacturer are required to obtain 
certification of a buyer's quota for the request of schedule I and II 
controlled substances, as well as list I chemicals when the buyer is a 
manufacturer.
    One pharmaceutical company felt that the proposed changes seemed 
too broad. This company did not question the requirement to provide a 
certificate of quota when purchasing from a distributor or a 
manufacturer. However, the company stated that the specific wording of 
the proposed regulation may be overly broad. According to the company, 
as worded, the proposed regulation would require a certificate for 
orders from any registrant. The company believed this wording could be 
construed to apply to reference standards from analytical sites or 
complaint samples and certificates should not be required when 
manufacturers order from pharmacists, health care practitioners, or 
analytical laboratories.
    DEA Response: By requiring that any manufacturing registrant 
provide a certification of quota before receiving any quantity of a 
schedule I or II controlled substance or list I chemical,

[[Page 60121]]

DEA is better able to maintain the closed distribution system and 
provide a more accurate calculation of the APQ for the United States 
per 21 CFR 1303.12(f). While DEA is not averse to manufacturers 
fulfilling legitimate medical needs, DEA is required to ensure that 
enough quota is granted to meet legitimate medical, scientific, and 
research needs, while preventing diversion. To prevent diversion and to 
maintain a closed distribution system for schedule I and II controlled 
substances and list I chemicals, DEA requires any registrant to whom a 
procurement quota has been issued to follow the laws and regulations of 
the CSA and Code of Federal Regulations (CFR). One method of doing this 
is to require all registrants sending material to a manufacturer to 
verify proof of quota through certification, which ensures that 
purchases do not exceed the procurement quota set by DEA.

D. Inventory Allowances

    There were 23 in-scope comments that discussed the proposed 
reductions of inventory allowances. Many of the comments discussed each 
reduction separately. Furthermore, many of the comments from companies 
asked DEA to clarify which registrants the various reductions would be 
applicable to, due to the current placement of the regulations in the 
CFR. In general, commenters objected because of the economic impact to 
their business and the inability to ensure adequate supply. Commenters 
contend that DEA should not use a one-size fits all method for 
inventory and limiting additional quota because it will create a 
constant state of backorder and market shortage. A commenter proposed a 
grace period of at least one year before making the reductions 
effective.
Reduction and Establishment of New Inventory Allowances for Individual 
Manufacturing Quotas and Procurement Quotas From 50 Percent to 30 
Percent
    Issue: Commenters objected to the reduction/establishment of 
inventory allowance stating that the lower amount of inventory 
allowance combined with the new date for individual manufacturing and 
procurement quotas may cause a shortage. A commenter stated that DEA's 
data on theft and loss at the manufacturing level show that the 
security of the products exceeds the security at the retail level. 
Commenters asked DEA to name studies showing that increased inventory 
at manufacturing facilities correlates to an increase in diversion or 
abuse. Further, many commenters allege that the proposed changes will 
create incentives that may increase opportunities for diversion and 
conveyed that DEA should assess whether reducing quotas would create 
shortages and jeopardize patient care. Commenters also emphasized that 
DEA needs to evaluate carefully the legitimate supply chain's full 
throughput time to bring medicines to market, so that patient care is 
not jeopardized.
    Many commenters conveyed that the proposed 30 percent inventory 
allowance for procurement quota is overly restrictive and such a 
reduction would cause inefficiencies and shortages. Furthermore, it was 
commonly said that the reduction would hinder the ability to provide 
consistent care to patients, and it may result in potential shortages 
in hospitals and clinics and severely impact those patients managing an 
opioid dependence. They mentioned that there was already a shortage in 
acute care facilities.
    Commenters suggested that DEA should give further consideration to 
the potential for supply disruptions that would result from decreasing 
the inventory allowance for API bulk manufacturers from 50 percent to 
30 percent. It risks imposing significant costs and inefficiencies on 
the production of authorized bulk drug substances without corresponding 
benefits.
    Commenters also stated that DEA's claim that the reductions will 
not increase the likelihood of shortages because there has been an 
increase in the number of manufacturers is too broad. Manufacturers of 
approved drug products can only use the approved suppliers that they 
named in their FDA-approved applications. Typically, manufacturers of 
approved drug products only have one or two suppliers that they can 
use. Commenters also said that DEA misstated data when claiming that 
the proposed reduction should not affect manufacturers. Three 
manufacturers supply over 90 percent of the API for codeine, 
hydrocodone, oxycodone, and morphine; therefore, there are fewer API 
producers in 2019 than 2007. API from one of the three primary 
manufacturers is not interchangeable across dosage-form manufacturers 
without FDA approval. In respect to procurement quotas, commenters 
alleged that the reduction to 30 percent would leave no margin for 
recovery. They also stated that the reduction to 30 percent will result 
in unnecessary restraints on API manufacturers.
    Multiple commenters want DEA to keep the existing allowances of 50 
percent for bulk manufacturers and state DEA should consider possible 
alternatives to reduce the additional cost burdens and risks of 
shortages and diversion. Commenters frequently claimed that DEA did not 
provide data to support its claim that the reduction for individual 
manufacturing quota inventory allowances would reduce the potential for 
diversion, especially because commenters believe that the material is 
not desirable at the bulk manufacturing level. They also mentioned that 
the reductions will substantially increase the cost of bulk 
manufacturing, will increase the risk of shortages of API supplies, and 
may increase the risk of diversion. In respect to bulk and dosage-form 
manufacturers, commenters assert the reduction could be harmful to 
patients and will potentially lead to market shortages of injectable 
medicines needed for critical medical care. Commenters also alleged 
that constricting inventories at pharmaceutical manufacturers or in 
institutional settings will have little impact on curbing diversion. 
Many commenters conveyed the want for DEA to publicly provide data that 
validates and supports the need for any reductions in inventory 
allowances.
    Commenters asked for clarification on whether the 30 percent 
inventory allowance would be applicable to dosage-form manufacturers, 
due to its placement in the CFR. They suggested that if DEA applies the 
inventory allowance to dosage-form manufacturers, then it only be 
reduced for domestic consumption and not for exports. They also 
suggested that dosage-form manufacturers be allowed to calculate their 
allowance using the estimate of the current year's sales and bulk 
manufacturers calculate their allowance using the average of the 
preceding calendar year and the current calendar year. Several 
commenters mentioned that year-end inventory is not indicative of how 
much inventory they require throughout the year because a 
manufacturer's inventories are lowest at year-end as they have sold 
down their stock and await the granting of quota for the next calendar 
year. Commenters opined that the reduction of inventory from 50 to 30 
percent is counter intuitive because more quota is needed due to the 
additional waste that would be caused from the increased number of 
manufacturing campaigns that would be required. Furthermore, they 
alleged that DEA will experience an increase in the amount of quota 
requests due to this reduction.
    A few commenters worried that the reductions may not have a 
significant effect on a provider's decision to prescribe. They 
explained that if DEA

[[Page 60122]]

limits production but providers continue to prescribe at the same rate, 
the issue will not have been addressed. Instead, costs may rise as 
supply decreases due to the reduction in production. One organization 
recommended that DEA pay greater attention to evidence-based research 
on appropriate prescribing and provide greater education for physicians 
and patients based on this research.
    DEA Response: DEA has been working to prevent and to decrease 
diversion for years. DEA uses Composite Risk Management \6\ to assess 
the risk of diversion at all levels of the supply chain. While 
diversion at the manufacturing level may be low, DEA emphasizes that 
there is still the potential for diversion to occur at that level. When 
setting quotas for the year, DEA assesses whether they would cause a 
shortage or jeopardize patient care. Also, DEA uses several sources of 
data to evaluate legitimate supply chains, such as Automated Reports 
and Consolidated Ordering System (ARCOS), IQVIA, and manufacturers' own 
data. The quotas granted are a composite of estimated requirements for 
legitimate medical, scientific, and export needs, manufacturing yields, 
and inventory allowance to begin to meet the next year's legitimate 
needs while reducing the risk of diversion.
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    \6\ For purposes of this document, Composite Risk Management is 
a decision making process used to mitigate risk associated with all 
hazardous equipment or impact to the mission.
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    While there may not be published studies showing that an increase 
in inventory at manufacturing facilities correlates to an increase in 
diversion or abuse, a fundamental principle governing policy 
discussions and DEA rulemaking, especially during the height of an 
opioid epidemic, is that DEA must strike a balance between ensuring an 
adequate and uninterrupted supply of controlled substances while 
preventing an oversupply which increases the risk of diversion. DEA 
does have internal information that it takes into consideration when 
granting individual quotas at that time. Review of internal actions of 
enforcement measures taken over the years have shown thefts at the 
manufacturing level and the public health impact in the surrounding 
communities as a result of those thefts. There have been occurrences of 
thefts of bulk API and thefts of finished dosage-forms from 
manufacturers' production facilities, and these products were sold into 
the community. Overproduction of API and finished dosage-forms can lead 
to high inventories and questionable high pressure marketing practices. 
DEA notes that manufacturers cannot sell more than their granted quotas 
plus previous year inventories but that high inventories could allow 
small thefts to go unnoticed from production facilities.
    DEA understands the worries of commenters regarding the reduction 
of inventory allowances possibly jeopardizing patient care; however, 
DEA wants to stress that the management of patient care is not 
controlled by way of quotas. While DEA is aware of the opioid crisis, 
the issuance of quotas and accompanying inventory allowances are not 
directly involved with the management and care of patients. The 
issuance of quotas does not regulate the physician's practice of 
medicine. Therefore, inventory allowance reductions would not hinder a 
physician's ability to provide consistent care to patients, as voiced 
by commenters. DEA does not regulate a provider's prescription methods 
so long as there is a legitimate medical need. While the inventory 
allowance reductions apply to what manufacturers hold in inventory to 
begin dispositions for the next calendar year, they can utilize the 
inventory in the event that there is a shortage or there is an issue in 
the supply chain during manufacturing to prevent disruption to the 
legitimate supply chain. DEA does not control the way a company 
conducts business, as business decisions on production and supply chain 
management are done on the company level. DEA notes that it is HHS' 
area of responsibility to provide Evidence Based Medicine as guidance 
to providers and the public.
    While there are a few commenters who have shared the concern that 
DEA's reduction of inventory will not have much of an effect on 
overprescribing, DEA believes that this is one of many factors being 
implemented at the federal level that will have an impact on decreasing 
overdoses due to prescription medications. DEA also notes that there 
has been a decline in the prescribing of schedule II opioid 
prescriptions since 2016 as many of those other factors have been 
implemented at Federal and state levels. As shown by IQVIA and 
demonstrated by a review of CMS' data, prescribing rates for opioids 
have decreased 44 percent since 2016 without a significant increase in 
price.\7\
---------------------------------------------------------------------------

    \7\ The Centers for Medicare & Medicaid Services, https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Information-on-Prescription-Drugs/Medicaid.html, 
accessed 6/15/2020.
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    While commenters opined that DEA is being too broad in stating that 
the increase in manufacturers will offset the chances of a shortage, 
DEA did not generalize or understate the concept of there being enough 
dosage-form manufacturers so as not to increase the chances of 
shortages. Most dosage-form companies may have one main API supplier to 
ensure a continuous supply of product to meet patient need and mitigate 
the impact of potential shortage of the product. However, many dosage-
form manufacturers have named a second supplier in FDA-approved 
applications and can request API from either supplier to meet 
legitimate patient need. While a secondary supplier is not required for 
New Drug Application or Abbreviated New Drug Application approval, DEA 
has noted that most requests for product development quota include a 
second supplier of API. DEA reviewed FDA's Approved Drug Products with 
Therapeutic Equivalence Evaluations (hereinafter ``Orange Book'') to 
determine the number of approved products and then matched those 
products to DEA registered manufacturers. In the event that there is an 
increase in a company's risk of shortage of supplies, the applicant may 
file for additional quota at any time during the calendar year. During 
that time, the application, along with its supporting documents, will 
be reviewed and if needed, an adjustment to the quota will be granted. 
Currently, DEA has already been applying the reduced inventory 
allowance of 30 percent to fentanyl, hydrocodone, hydromorphone, 
oxycodone, and oxymorphone.
    DEA has decided to reduce the individual manufacturing inventory 
allowance for all controlled substances and list I chemicals to 40 
percent and the procurement inventory allowance for controlled 
substances and list I chemicals to 35 percent, with the exception of 
liquid injectable dosage-forms. For liquid injectable dosage-forms, the 
procurement quota inventory allowance will be set at 50 percent. The 
inventory allowance requires that manufacturers maintain their 
inventory allowance based on estimated net disposals for the calendar 
year. It is based on what the manufacturer estimates their disposal to 
be and not the actual disposal at a specific point in time. DEA 
requires year-end reporting that demonstrates the manufacturer ended 
the year with the correct inventory allowance percentage. The inventory 
allowance does not affect the amount of a net-disposition quota granted 
to a manufacturer. DEA grants the quota necessary to be able to 
continue to meet legitimate patient needs based on the historical and

[[Page 60123]]

estimated future data including changes in market share and FDA 
guidance. DEA grants an inventory allowance to the manufacturer to 
begin disposition for the next year; however, this may also be used to 
meet the unanticipated market changes in the current year. API and/or 
finished dosage-forms in reserve are usually held for unanticipated 
market changes, manufacturing issues, and to begin the next year. As 
such, DEA's lowering of the inventory allowance as written in the 
regulations should not affect a manufacturer's sales. While diversion 
may not occur with high frequency at the manufacturing level, it occurs 
and can impact public health in the surrounding community. Since 2004, 
DEA has sought to address risk of diversion at the apex of the 
distribution system (i.e., manufacturing level). Granting higher 
inventory based on sales provides more incentive to push more material 
further downstream as no entities want to maintain higher levels of 
stocks than what they deem necessary due to storage and monetary 
constraints, the fact is that profit is only generated through sales of 
the product and not production. DEA previously demonstrated that bulk 
manufacturers were only holding 39 percent inventory. It is for these 
reasons, and the fact that historically manufacturers have not held 50 
percent inventory levels, that a lower inventory at the manufacturer 
level should be implemented. Also, the lower inventory allowances can 
potentially reduce diversion throughout the supply chain.
    DEA notes that bulk manufacturers have not always utilized all of 
their granted quota to manufacture API and have consistently held less 
than 50 percent inventory. The year-end sales and inventory provides 
information on how a registrant is doing in the market and provides a 
starting point when assessing requests for revisions to current quotas. 
If a bulk manufacturer's sales to customers are more robust than 
anticipated, inventories will be low and DEA will grant a quota 
adjustment to ensure that the customers can receive material up to 
their individually granted procurement quota. If inventories are high, 
it indicates that the company has not sold as much API to their 
customers as they forecasted, and therefore the higher inventory 
allowance is unnecessary.
    Over the last decade, DEA has implemented a 30 percent inventory 
allowance for opioid related procurement quotas. This inventory level 
has not caused issues due to quota being set at the legitimate patient 
level. DEA notes that over the last four years, after reviewing the 
applicants' year-end reports and other data reporting sites, dosage-
form manufacturers have reported higher than average inventories of 
opioids as prescriptions for opioids have declined significantly due to 
the implementation of CDC guidelines and DEA enforcement activities. 
The data show that manufacturers only acquired 72.7 percent of 
fentanyl, 73.9 percent of hydrocodone, 56.7 percent of hydromorphone, 
79.3 percent of oxycodone, and 73 percent of oxymorphone from the 
quotas granted to them by DEA. As prescription rates have fallen, the 
data show that the material has not sold, but has been moved to their 
inventory, thereby significantly increasing inventory levels above that 
which are medically necessary on an annual basis. DEA has found that 
over the past years, inventory levels have averaged 72 percent for 
fentanyl, 36.9 percent for hydrocodone, 57 percent for hydromorphone, 
36.3 percent for oxycodone, and 61.0 percent for oxymorphone, while 
companies have met legitimate medical needs. The inventory levels for 
fentanyl, hydromorphone, and oxymorphone include product development 
efforts as manufacturers seek FDA approval of abuse-deterrent 
formulations. DEA has considered the comments from manufacturers and 
will set the inventory allowance for procurement quotas at 35 percent 
for all dosage-forms, except liquid injectable dosage-forms. Liquid 
injectable dosage-forms will receive a 50 percent inventory allowance 
for procurement quotas.
    To determine the amount for the procurement quota inventory 
allowance, DEA has reviewed the Orange Book and internal quota 
applications. These reviews led DEA to determine that, generally, there 
are more dosage-form manufacturers than bulk manufacturers, and as 
such, an individual dosage-form manufacturer does not need as great of 
an inventory as a bulk manufacturer. Therefore, the procurement quota 
inventory allowance should be lower than the manufacturing quota 
inventory allowance. DEA has considered new data from FDA on new 
approved drug applications and internal quota applications that showed 
that manufacturers are producing or seeking to produce more extended-
release and/or abuse-deterrent dosage-form products that require 
additional manufacturing time compared to immediate-release drug 
products. Therefore, DEA has determined that a procurement quota 
inventory allowance of 35 percent provides the necessary manufacturing 
lead time to prevent shortages or gaps in the supply chain. DEA 
believes this increase in inventory allowance from the proposed amount 
will provide the necessary time for all manufacturers to complete their 
manufacturing activities and place their products in the supply chain 
for legitimate need.
    However, DEA will not be reducing the inventory allowance for 
procurement quotas of the liquid injectable dosage-forms. After further 
review of comments, DEA acknowledges that for injectable products, 
there are significant manufacturing issues when manufacturers fail to 
comply with FDA's Current Good Manufacturing Practice (cGMP) 
regulations. Additionally, DEA has realized that the lower number of 
manufacturers, coupled with the higher likelihood of recalls due to 
cGMP violations, requires the higher inventory allowance for dosage-
form manufacturers of injectable products. In light of COVID-19, DEA 
also acknowledges that declining to reduce inventory allowances for 
these liquid injectable dosage-forms ensures that manufacturers are 
able to address and endure potential circumstances of nationwide 
shortages. The liquid injectable dosage-form procurement quotas will be 
set at 50 percent.
    DEA read the comments regarding the limited number of bulk 
manufacturers supplying the market. DEA and international drug control 
treaty obligations control the number of bulk manufacturers who supply 
the dosage-form manufacturers. While the number of bulk manufacturers 
may fluctuate, over the past 10 years there have been 10 bulk 
manufacturers that have supplied the opioid market, with three of them 
supplying the majority of the requirements. DEA analyzed the data and 
determined that the bulk manufacturers did not utilize the entire quota 
granted to them each year. On average, the companies manufactured only 
85.2 percent of the fentanyl, 61.7 percent of the hydrocodone, 79.1 
percent of the hydromorphone, 78.3 percent of the oxycodone, and 69 
percent of the oxymorphone quota granted by DEA. These bulk 
manufacturers have maintained an average inventory of 39 percent and 
have continually met the legitimate medical need before and during the 
opioid crisis. DEA has noted that dosage-form manufacturers are now 
validating a second API supplier as a precautionary measure. As dosage-
form manufacturers continue to seek FDA approval for new drug products 
containing controlled substances, DEA continues to grant product 
development quotas to allow for qualification of two suppliers and 
grants quota to bulk

[[Page 60124]]

manufacturers to support this qualification effort.
    DEA notes that the proposed regulations for procurement quota were 
added to the only regulation in the CFR for inventory allowance, which 
is located under the subheading of ``Individual Manufacturing Quotas.'' 
To lessen the chance of causing confusion to registrants, DEA has 
chosen to move the procurement quota inventory allowance regulations. 
As such, DEA will create new regulations to address the inventory 
allowance amounts for procurement quotas.
Reduction of Amount at Which Quota Would Be Suspended to 45 Percent
    Issue: Many commenters explained that the reduction of the level at 
which quota will be suspended would require manufacturers to run 
smaller campaigns. They argue that this will increase the number of 
campaigns required to produce the same amount of product in a given 
year. Commenters also noted that the proposed reduced suspension amount 
would interfere with product supply. Commenters stated that the 
reduction in the suspension threshold would increase substantially the 
cost of bulk manufacturing and would increase the risk of shortages of 
API supplies and may increase the risk of diversion. They also conveyed 
that reducing the trigger for suspending bulk API manufacturing quota 
would decrease significantly the efficiency and increase the costs of 
bulk API manufacturers.
    Commenters asked for clarification on whether the quota suspension 
will apply to dosage-form manufacturers and suggested that DEA clarify 
that it is not applicable to bulk manufacturers. They suggested that 
DEA apply the suspension threshold at year-end so that the inventory 
level is only above the trigger level briefly. Commenters conveyed that 
this would ensure that the suspension does not interrupt timely and 
efficient processing of bulk API. As an alternative option, commenters 
suggested that DEA clarify the definition of inventory so that it does 
not include material of a basic class that is not yet in finished form 
suitable or intended for sale or provide a more effective procedure for 
issuing exceptions to the quota suspension threshold.
    Commenters explained that lowering the inventory ceiling to 45 
percent would disrupt manufacturing operations and cause significant 
cost increases because this will require smaller, more frequent 
campaigns. They argue that these would generally decrease efficiency 
and potentially increase the amount of product wasted during the 
required cleaning of equipment between each additional campaign. 
Additionally, there may also be an increase in the generation of 
hazardous waste because of these additional campaigns. One commenter 
specifically stated that the reduction is too restrictive for lower 
volume APIs. Also, the reduction may potentially short the finished 
dosage-form markets by greatly impacting lead-times to get the material 
to customers, and it would force customers to wait an extra four to 
five months.
    It was suggested that DEA evaluate the data throughout the year and 
not just the year-end data. Furthermore, DEA received suggestions that 
the ceiling should be set at 55 percent instead, so that drug shortages 
do not occur. Some commenters suggested the reduction in allowances 
should only apply to dosage-form manufacturers by lowering the 
inventory allowance for those manufacturers to 40 percent and that DEA 
specify that this does not apply to bulk API manufacturers.
    DEA Response: DEA has been working to prevent and detect diversion 
for years. DEA grants the quota to companies, and they can use the 
quota for various purposes within the scope of their requested business 
activity. The companies and DEA calculate inventory allowance 
suspension is calculated based on the companies' estimated net-disposal 
for the calendar year. If the companies' dispositions are robust as 
estimated, the company will likely not meet the suspension percentage. 
If the companies' dispositions are not meeting the company's 
estimations as the calendar year progresses, the company will likely 
meet the suspension percentage and need to discontinue manufacturing 
until net disposition volume increases to the extent that the estimated 
inventory is below the inventory allowance suspension percentage. 
Companies can and do apply for quota revisions at any time during the 
calendar year. DEA grants quota to meet estimated legitimate patient 
need and provide an inventory allowance based for the next calendar 
year based on net dispositions. A company requesting quota in excess of 
their estimated market portion necessary to meet legitimate medical 
need and relevant inventory allowance, as determined by the company's 
supporting documentation, IQVIA data and FDA guidance, which are among 
the list of factors \8\ DEA considers, will not receive the requested 
quota; however, the quota granted will be sufficient to meet legitimate 
need and inventory allowance. DEA has noted instances where (1) bulk 
manufacturers have not utilized all of their granted quota to 
manufacture API and have consistently held less than 50 percent in 
inventory; and (2) dosage-form manufacturers have requested additional 
quota while not distributing finished dosage-forms from their inventory 
to the market to cause an artificial drug shortage.
---------------------------------------------------------------------------

    \8\ 21 CFR 1303.23 and 1315.23.
---------------------------------------------------------------------------

    DEA wants to clarify that this final rule will be applicable to 
both bulk manufacturers and dosage-form manufacturers. The amount at 
which quota will be suspended will differ for individual manufacturing 
quota and procurement quota. In reviewing FDA's Orange Book by 
controlled substance, it is apparent the ratio of dosage-form 
manufacturers to bulk manufacturers is heavily weighted on dosage-form 
manufacturers many of whom make generic drug products that are 
therapeutically equivalent to other drug products for treating 
patients. Therefore, the dosage-form manufacturers' quota suspension 
level will be lower.
    While DEA understands the concerns brought forth by the 
registrants, DEA will continue to grant quota based on legitimate need. 
The reduction of the suspension of quota remains based on estimated 
dispositions for the calendar year. This suspension does not interfere 
in normal campaign batches unless a company's net dispositions decrease 
markedly from the company's own estimated dispositions provided to DEA 
at the time of their quota application. A manufacturer may complete 
their campaigns for the calendar year based on estimated net 
dispositions. If dispositions are not as robust as the company 
predicted, then any unused quota will be suspended until dispositions 
are estimated to leave the company with the appropriate inventory 
levels at the end of the year. If the company is in the middle of a 
campaign batch when they realize they will exceed their estimated 
inventory allowance, the company can apply and request with good cause 
to complete the batch before suspending manufacturing activities until 
sales/dispositions bring the estimated inventory level to the correct 
percentage. See 1303.24(b). DEA does not control the way a company 
conducts business, as business decisions on production and supply chain 
management are done on the company level.
    However, as this relates to finished dosage form manufacturers, a 
company who requests quota revisions because of poor business 
decisions, such as manufacturing unnecessary dosage-forms or strength 
based on estimated legitimate need for the substance,

[[Page 60125]]

provides DEA an opportunity to grant quota based on specific FDA 
approved dosage-forms as authorized by the SUPPORT Act. For example, at 
the beginning of the COVID-19 pandemic, hospitals declared drug 
shortages of specific treatment drugs. DEA estimated that it granted 
sufficient quota to manufacturers for COVID-19 treatment drugs. DEA 
received additional detailed inventory information from the dosage-form 
manufacturers and determined that the manufacturers did not have the 
correct dosage forms and strengths available for hospitals to utilize 
immediately. Therefore, DEA granted additional quota specifically to 
meet the dosage forms and strengths hospitals required to treat COVID-
19 patients.
Reduction of Amount at Which Requests of Additional Quota Would Be 
Granted to 20 Percent
    Issue: Commenters requested clarification as to whether the 20 
percent rule will apply to dosage-form manufacturers who use 
procurement quota due to its proposed placement within the CFR and 
because historically, DEA has said it does not apply. Many commenters 
opined that waiting until 20 percent to grant additional quota is too 
low of a threshold and would lead to supply disruption if applied to 
dosage-form manufacturers. The lower amount also would not allow 
manufacturers to be ``flexible to address situations such as shortages, 
natural disasters, epidemics, medical demand, and other scenarios that 
would require an increase in production of critical medications.'' 
Commenters went on to explain that 20 percent equals 10 weeks of 
inventory but production lead times are typically greater than 10 
weeks. According to these commenters, waiting until there is less than 
10 weeks of inventory will lead to market shortages and disrupt patient 
care.
    The commenters went on to state that the time that it takes DEA to 
review quota applications is longer than six to eight weeks and 
granting more quota at the 20 percent mark would possibly mean 
depleting stock before DEA finishes reviewing. In particular, Teva 
stated that 15 of 36 (42 percent) of Teva's 2019 quota adjustment 
applications took nine weeks or longer for DEA to respond, and seven of 
36 applications (19 percent) took 13-15 weeks for response. Response 
times of 10 or more weeks are unacceptable under normal circumstances 
and will exacerbate out of stock issues with reduced inventory 
allowances. All of this attributes to the increased potential for 
shortages and delays of medicine.
    DEA Response: When establishing quota, DEA takes into account the 
current and previous year's sales and uses historical data to justify 
the need. DEA is not mandating that manufacturers need to have an 
inventory of less than 30 percent (for individual manufacturing quota) 
or 25 percent (for procurement quota) before applying for additional 
quota. A registrant may file for additional quota at any time during 
the calendar year. During that time, DEA will review the application 
and, if needed, will grant an adjustment to the quota. Registrants 
already apply for quota adjustments per their needs, and this will not 
change the current application process.
    DEA acknowledges that quota processing times can vary throughout 
the year with some outliers. A quota processing time analysis was 
conducted for quota requests processed in 2019. The analysis showed a 
quota processing time range of four to eight weeks. When initial quotas 
were not factored into the calculation, the average time to process 
quotas was approximately 37 calendar days (estimate typical provided to 
registrants is four to six weeks). However, between October and 
December, when concomitant processing of initial and revised quota 
applications occur, it took an average of 57 calendar days (estimate 
provided to registrants is six to eight weeks). Quota processing delays 
can be caused by various circumstances such as, but not limited to, 
incomplete, poorly written, and mislabeled applications; pages of 
extraneous information; and extremely busy times of the year; however, 
inventory has historically been adequate to cover these delays and 
other situations.
    Additionally, as previously stated, DEA has found that a portion of 
the procurement quota granted for some substances has not been 
utilized; therefore, formally establishing an inventory allowance five 
percent higher than that which had already been implemented should not 
cause more quota applications to be submitted or subsequent delays in 
processing. In fact, DEA showed that manufacturers have not been 
selling the material they have procured against their quota and instead 
have been adding it to their inventory to await changes in patient 
need.
    DEA's actions in response to COVID-19 prove that even with lower 
inventory levels, DEA is able to be flexible to address situations such 
as shortages, natural disasters, epidemics, medical demand, and other 
scenarios that would require an increase in production of critical 
medications, despite the concerns of commenters. During the COVID-19 
pandemic, DEA, FDA, other federal agencies, private partnerships, and 
others in the pharmaceutical industry--specifically the injectable 
dosage-form manufacturers--were in continuous dialogue regarding the 
availability of controlled substances to be used in the treatment of 
ventilator patients. Despite the injectable dosage-form manufacturers 
having almost a full year's worth of inventory, based on previous 
year's sales, plus current year quota on hand, hospitals reported 
shortages almost immediately as soon as the treatment protocols were 
determined. DEA soon determined that despite the sheer quantity of 
available inventory at the dosage-form manufacturing level, the 
specific formulations hospitals required were not available. In order 
for DEA to respond to hospitals reporting shortages of injectable 
products for treatment of ventilator patients during the COVID-19 
pandemic, DEA and the injectable manufacturers entered into continuous 
dialogue to meet hospitals' demand for injectable products. With proper 
supporting documentation, DEA was able to process their quota requests 
in less than five business days, demonstrating DEA's flexibility to 
address situations such as shortages, natural disasters, epidemics, 
medical demand, and other scenarios that would require an increase in 
production of critical medications. Also, in these dialogues, 
injectable manufacturers stated that the manufacturing times from 
acceptance of API to release of the drug product took approximately 30 
to 42 days. This manufacturing time further shows that manufacturers 
also have the flexibility to address those situations raised by the 
commenters.
    The COVID-19 pandemic demonstrated that the issue was not the 
availability of large inventories on hand, but the flexibility to grant 
and utilize quotas to produce the formulations and dosage strengths 
demanded at the time of the crisis. While the inventory allowance for 
injectable products was not at issue, discussions with FDA and 
manufacturers during COVID-19 regarding cGMP issues allowed DEA to 
realize the importance of maintaining a separate inventory allowance 
for these types of products as mentioned in comments received regarding 
injectables.

E. Subcategories for Quotas

    Issue: DEA received seven comments concerning the formalization of 
the current practice of use-specific subcategories for individual 
manufacturing and procurement quotas. One company was concerned that 
the

[[Page 60126]]

specificity may create an administrative burden on manufacturers who 
may need more product for one category versus another. This commenter 
also suggested that DEA allow registrants to transfer product between 
categories based on notice to DEA rather than requiring a formal 
reallocation of quota. Another organization emphasized that it did not 
object to the proposed addition of use-specific subcategories for 
individual manufacturing and procurement quotas and the use of 
subcategories by registrants. It recommends that DEA establish a new 
procurement quota or subcategory for CPS and opium.
    An association representing manufacturers and distributors of over-
the-counter medicines, dietary supplements, and consumer medical 
devices in the United States noted that although the subcategories for 
types of quotas seem workable, it would reduce flexibility. This 
association stated that subcategories could create inefficiencies or 
shortages in the supply chain if, for instance, a manufacturing batch 
required rework and thus required a change in which use-specific 
subcategory was used. The association further noted that introduction 
of new line extension of a medicine with a list I chemical can result 
in in-year shifts in the amount of material expected with little notice 
as development, validation or revalidation, or scale-up occur, with 
different sub-category quota impacts.
    One commenter was concerned with how DEA defines replacement quota 
and whether replacement quota will be subtracted from the APQ. This 
same commenter questioned whether DEA intends to exceed the APQ by the 
issuance of additional quota to replace quota that was previously 
granted within the same calendar year. Additionally, the commenter 
suggested that DEA explain how replacement quota is factored into the 
APQ. As such, this commenter believes that granting replacement quota 
on a case-by-case can appear to be unfair when faced with identical 
circumstances submitted by two different manufacturers.
    Another commenter requested that DEA provide clarification on 
whether DEA-registered manufacturers are materially impacted by the 
creation of new sub-categories for suppliers that will need to register 
for procurement quotas and would there be any additional impact to 
quota management and certification procedures for repackagers.
    DEA Response: DEA is committed to ensuring that quotas are set in 
such a way as to grant manufacturers the ability to provide controlled 
substances to meet the demand of the legitimate medical, scientific, 
industrial, and research needs of the United States. DEA is required to 
understand what is available for legitimate patient need versus what is 
available for product development to calculate properly the APQ and 
individual quotas. Additionally, as the number of manufacturers 
continues to increase and industry practices and specializations 
change, the ability to track methodically movements of material between 
registrants at all stages of manufacturing becomes more critical. The 
specificity of quota is important. DEA is responsible for many reports 
that require the denotation of quantities by quota type, and it 
improves the efficiency of the application and reporting process for 
DEA-registered manufacturers. If categories are combined, there would 
be no way to calculate efficiently quota that was used for commercial 
sales, product development, packaging, etc. This would drastically 
inflate the quantity of commercial sales quota, as packaging/
repackaging and labeling/relabeling quota, among other categories, 
could not be separated from commercial sales quota.
    Replacement quota is intended to replace material that does not 
meet good manufacturing practice standards slated to meet patient needs 
during the current quota year and is not a means to replace disposed 
samples, analytical samples, product development material, and expired 
inventory acquired or manufactured under previous quota years. This 
subcategory of individual manufacturing quota and procurement quota 
includes quota granted to a registrant after the registrant obtained 
material that was initially intended for commercial sale, but is unable 
to be marketed. Examples include failed batches due to a contaminant, 
material that is out of specification and can no longer be used, lots 
that reached their expiration date in the supply chain, or unusable 
material received from a bulk manufacturer. Replacement quota is 
granted on a case-by-case basis. The specifics of the registrant's 
justification and situation determines the merit of the request.
    HHS contemplates legitimate patient needs and DEA then estimates 
the APQ necessary to meet that need. While DEA may have granted an 
initial quota, changes instituted by HHS and/or market needs may 
demonstrate that the original quota is now higher than necessary to 
meet market demand. For example in November 2010, FDA asked the 
manufacturers of propoxyphene drug products to voluntarily withdraw 
their drug products due to cardiotoxicity issues. In response, DEA 
denied all quotas for 2011 to dosage-form manufacturers and bulk 
manufacturers who supplied the domestic market, and it granted 
substantially reduced quotas to allow manufacturers to meet the market 
demand of foreign countries and reference standards only. In this 
example, manufacturers providing just notice could exceed both 
agencies' estimations for legitimate need allowing for the possibility 
for misuse and abuse. To obtain quota, a manufacturer must submit a 
request to DEA for the quantity they wish to manufacture. 21 CFR 
1303.12 and 130.22. DEA in turn performs a quota analysis based on the 
information submitted and provides a determination based on legitimate 
need.
    Use-specific quota subcategories reflect the manufacturing activity 
of the applying DEA registrant and have facilitated the issuance of 
manufacturing and procurement quotas and provided a more accurate 
calculation of the APQ for the United States by preventing double 
counting of quota. They have been in place informally for well over a 
decade with no complaints from the registrants who have found the 
system beneficial in separating their product development and packaging 
efforts from their commercial manufacturing efforts when requesting 
adjustments to their quotas. Furthermore, packaging and repackaging are 
manufacturing activities as defined in the CSA and CFR and already 
require quota.

F. New Deadlines for the Establishment of Quotas

    Issue: DEA received eight comments from the public regarding the 
deadline changes. Many comments were either silent on the new deadlines 
or either expressly stated that they had no objection for the deadline 
changes, with some going as far as to say they agree and understand the 
need to change the dates. Some desired clarification on how DEA will 
reconcile new deadlines for the supply chain where inconsistences have 
been noted. For instance, it was stated that extending the deadlines 
would potentially bring about supply disruptions when there are long 
lead times. There is also concern that changing the deadline to issue 
quota adjustments would represent a significant change because DEA 
normally issues them any time during the year, within six to eight 
weeks of a request. Pushing the procurement quota date to December 1 
would make the manufacturing process harder with the reductions because 
DEA must issue procurement quota before it approves an import permit.

[[Page 60127]]

    Response: DEA is changing the deadline for issuing initial quotas 
to December 1 as required in the SUPPORT Act. This new deadline will 
not affect the supply chain because the quota issued cannot be utilized 
until January 1 of the next calendar year. Initial quota applications 
are due to DEA by April 1 and May 1 of the preceding year to be 
considered in the APQ estimates which must be published before quotas 
are allotted. The December 1 deadline takes into account the 
considerable amount of information that must be collected from various 
sources, analyzed, and reviewed by multiple agencies prior to 
establishing the quota. Under the current regulations, DEA has less 
than two months to accomplish this task and it has proven unattainable 
as the controlled substance manufacturing business has grown larger and 
more complex. Manufacturers will still be able to apply for quota 
adjustments at any time throughout the calendar year. Registrants 
seeking an import permit need to take into account any possible delays 
when applying for them.

G. Letter From the States Attorneys General

Types of Quota
    Issue: DEA received a letter from the Attorneys General of the 
States of West Virginia, Arkansas, Florida, Kentucky, Missouri, and 
Nebraska (hereinafter ``letter from State Attorneys General'') 
concerning the process for setting annual production quotas for 
controlled substances.
    The States applauded the significant improvements DEA has made in 
reducing opioid production quotas over the past several years. The 
States stated that DEA failed to tailor the quota-setting process to 
legitimate medical need, and urged DEA to consider additional sources 
to set quotas. They further commented that there is a lack of 
transparency in setting quotas. The States believe that DEA needs to 
explain the logic behind the different approaches to set quotas.
    DEA Response: DEA is committed to ensuring an adequate and 
uninterrupted supply of controlled substances to meet legitimate 
medical, scientific, and export needs of the United States. DEA sets 
aggregate production quotas in a manner to ensure that all 
prescriptions that are authorized for legitimate medical purposes can 
be filled. For purposes of setting quotas, it should be noted that, as 
a result of new laws and regulations, DEA considers a number of 
factors, including, but not limited to, the extent of any diversion of 
the controlled substance in the class; relevant information obtained 
from HHS including FDA, CDC, CMS; and relevant information obtained 
from the States.\9\
---------------------------------------------------------------------------

    \9\ 21 U.S.C. 826(a); 21 CFR 1303.11.
---------------------------------------------------------------------------

SUPPORT Act
    Issue: As previously stated, DEA received a letter from six State 
Attorneys General. West Virginia, along with five other states, urged 
DEA to expand the sources of data used to determine the amount of 
diversion that occurs. They mentioned that the SUPPORT Act and the 
``Controlled Substances Quotas'' final rule (83 FR 32784) require the 
determination of the extent of diversion, but stated that they believe 
DEA takes different approaches in fulfilling this requirement. The 
commenters stated that DEA should estimate the diversion of all 
controlled substances the same way that DEA estimates the diversion of 
covered controlled substances. Furthermore, they want DEA to explain 
the logic of taking two separate approaches, as they feel that even 
though the wording of the two reforms slightly varies, DEA's approach 
should be the same.
    As for the type of data DEA uses, the States suggest that DEA use 
national and state databases in the analysis. Specifically, they 
recommended three steps that DEA should take to incorporate information 
that is currently available: (1) Improve ARCOS and the SORS to allow 
greater insight into prescribing; (2) look at other national databases 
that track drug abuse patterns, poisonings, emergency room visits, and 
treatment patients; and (3) consider state databases that track drug 
overdoses and hospital visits.
    DEA Response: As stated above, in its efforts to estimate the 
amount of diversion, DEA acquires data from other Federal agencies. 
While DEA currently utilizes multiple internal and external data 
sources, DEA remains open to additional sources of reliable and 
relevant data. Some of the sources the States suggested that DEA use 
are not reliable and precise and lack the required granular specificity 
within the data needed to estimate diversion. The data does not examine 
each controlled substance individually (i.e., as a basic class and the 
quantity ingested), but groups them together chemically, making it 
difficult to determine which basic class was involved and to what 
extent its aggregate production quotas should be lowered. For example, 
patients that overdose from hydrocodone, oxycodone, or hydromorphone 
are grouped together under opioid-related overdose. DEA is unable to 
determine the basic class that led to the overdose from this 
information. Additionally, DEA cannot determine from the data if the 
patient overdosed on an illicit opioid or a legally marketed opioid 
product. For purposes of calculating the extent of diversion for each 
basic class of controlled substance, DEA would benefit more from the 
drug overdose and mortality data if it precisely identified the 
controlled substance(s) believed to be the cause of overdose or death 
and if it included the quantity of the substance ingested.
    Modifications to the SORS and ARCOS reporting requirements are 
beyond the scope of this document. DEA did request state specific data 
on overdoses, death rates, and prescription data in August 2018 for 
consideration in setting the 2019 APQ. Only eight states provided data, 
none of which are represented in the comment letter; however, the data 
provided was not broken down by individual controlled substances, which 
would allow DEA to consider in determining the extent of diversion or 
estimating diversion.
Over-Prescribing
    Issue: As previously mentioned, DEA received a comment that was co-
signed by six State Attorneys General, including West Virginia. The 
State Attorneys General conveyed that DEA should account for over-
prescribing when analyzing diversion. The commenters contend that only 
relying on theft and seizure records does not give a complete view of 
diversion. Furthermore, they suggested using the ``best practices'' of 
medical professionals to help account for overprescribing at the 
physician level. These commenters stated that medical professionals are 
now crafting ``best practices'' for opioid prescribing, which the 
states believe can aid DEA in determining correct quantities of what is 
``medically necessary'' for opioids. The letter also suggests that DEA 
expand the National Take Back Programs to capture more data on 
overprescribing rates.
    DEA Response: For validly dispensed controlled substances, DEA 
relies on physicians to use their best judgment on how much to 
prescribe. DEA does not establish best practices for physicians, nor 
does it control how much of a prescription a patient ends up consuming. 
DEA has previously stated that ``studies have found, with respect to a 
variety of medical procedures, that physicians prescribe more 
controlled substances for post-operative pain than the patients 
utilize. However, . . . DEA has concluded that while the referenced 
studies are concerning, they are

[[Page 60128]]

insufficient to support a determination as to the level of 
overprescribing that occurs across the range of the medical procedures 
that are performed each year on a national basis.'' \10\ More recently, 
DEA has found that physicians are already prescribing at lower rates 
because of healthcare guidance.
---------------------------------------------------------------------------

    \10\ Established Aggregate Production Quotas for Schedule I and 
II Controlled Substances and Assessment of Annual Needs for the List 
I Chemicals Ephedrine, Pseudoephedrine, and Phenylpropanolamine for 
2019. 85 FR 67348 at 67350. December 28, 2018.
---------------------------------------------------------------------------

    As previously stated, there has been a decline in schedule II 
opioid prescriptions since 2014. Currently, there is no reliable method 
for quantifying the amount of prescription medications turned in to the 
Take-Back program. DEA found one study from 2015 that attempted to 
quantify the drugs received at one Take-Back location titled, 
``Analysis of Medications Returned During a Medication Take-Back 
Event.'' However, DEA believes that this study is not useful because 
the methods drastically affect/limit the quantity of each substance 
that could be included in the analysis. To be included in the study, 
the medication had to have the following identifiers: drug name, 
strength, amount remaining, amount prescribed, generic or brand, and 
source (local pharmacy, mail-order pharmacy, or sample). The study also 
excluded medications unavailable in the United States, pet medications, 
medications in containers without a legible label, containers with 
remaining medication amounts larger than the amount dispensed, and 
medications not in tablet or capsule formulations. The study authors 
were able to demonstrate an average overprescribing rate for all 
medication types of 66 percent based on the total number of pills 
dispensed (obtained from labels) and the total number of pills 
remaining in the containers; however, substance specific information is 
not available because the medications (controlled and non-controlled) 
were grouped. The study does not mention the proportion of medicine 
excluded from the study or an estimate of diversion of particular 
substances. The study assumed that over prescribing was the cause of 
the remaining number of tablets in the bottle based on the written 
prescription. It also assumed that the remainder in the bottle was 
legitimate; however, neither of these assumptions may be the case. The 
bottle may have contained the remainder of multiple prescriptions of 
the same drug product dispensed over time and brought to the drug Take-
Back event in a single container. This single study cannot be 
extrapolated to the national level for use in estimating diversion or 
overprescribing.

H. Out of Scope

    DEA received 194 comments are that are being considered out of 
scope in their entirety or partially. These comments were very general 
and mentioned personal medical issues, treatments, medication costs, 
and drug shortages. Included in these general out of scope comments 
were assertions that illicit drug use is the problem and that doctors 
are not treating patients due to fear of punishment from DEA.
    DEA remains committed to ensuring that there is an adequate and 
uninterrupted supply of control substances to meet the legitimate 
medical, scientific, and export needs of the United States. DEA does 
not tell manufacturers how to manage their quota within the use-
specific categories. For example, if a manufacturer holds an FDA-
approved application for several different strengths of a dosage-form 
drug product, DEA will not dictate which strengths it should 
manufacture. Furthermore, as previously stated, DEA does not plan to 
set APQ in terms of pharmaceutical dosage-form. As such, the FDA-
approved dosage-forms and strengths that a manufacturer produces are 
solely based on the manufacturers' decision. In the event of shortages 
of specific dosage-forms and/or strengths of a dosage-form, DEA has and 
will continue to implement actions based on quota to prevent or 
alleviate a drug shortage; however, DEA notes that the injectable 
shortage is not a quota issue, but instead due to manufacturers not 
complying with FDA's cGMP requirements. In fact, DEA has granted quota 
to manufacturers seeking to comply with FDA requirements. If DEA 
receives reliable information of a manufacturer refusing to manufacture 
a dosage-form or strength to alleviate a drug product shortage, DEA 
will implement its authority under the SUPPORT Act to issue the 
manufacturer's quota in terms of dosage-form and/or strength to ensure 
that manufacturers produce certain dosage-forms to assist in 
alleviating the drug shortage.

III. Provisions Implemented in the Final Rule

A. Types of Quota

    DEA is adding sections 21 CFR 1303.03, 1303.17, 1315.06, and 
1315.37, and revising 1303.27 and 1315.27 to introduce and define the 
types of quotas in the current quota system and to clarify and update 
the method to abandon both individual manufacturing and procurement 
quotas. Section 21 CFR 1303.03 will define the three types of quota for 
schedule I and II controlled substances: APQ, individual manufacturing 
quotas, and procurement quotas. Section 21 CFR 1315.06 will define the 
four types of quotas available for list I chemicals: AAN, individual 
manufacturing quotas, procurement quotas, and import quotas.
    To strengthen the quota management process, DEA has turned to 
managing many aspects of the quota system online. With this final rule, 
DEA will update 21 CFR 1303.27 and 1315.27 to require manufacturers 
submit a quota application to the UN Reporting and Quota Section in the 
online Quota Management System instead of submitting to the Drug and 
Chemical Evaluation Section a written notice to abandon any or all 
parts of the individual manufacturing quotas for schedule I and II 
controlled substances and list I chemicals.
    Sections 1303.17 and 1315.37 will clarify that a manufacturer must 
also abandon procurement quota for schedule I and II controlled 
substances and list I chemicals using the online Quota Management 
System. Current regulations only refer to the abandonment of individual 
manufacturing quota. To further clarify the CFR, DEA will separate the 
current subsection within the controlled substance quota regulations 
entitled ``Aggregate Production and Procurement Quotas'' and will make 
a separate subsection for ``Procurement Quotas.'' In accordance with 
the creation of this new subsection, DEA will move 21 CFR 1303.12 to 
1303.15 and reserve 1303.12 for future use. These additions and changes 
are also required due to the procurement quota inventory allowances 
that are being finalized with this rule.

B. SUPPORT Act

    As previously discussed in the NPRM, as well as above in Section 
II, DEA will be implementing in its regulations the amendments to the 
CSA made by the SUPPORT Act. These amendments include the authority to 
establish APQ, individual manufacturing quotas, and procurement quotas 
in terms of pharmaceutical dosage-forms, if it is determined that it 
will assist in avoiding the overproduction, shortages, or diversion of 
a controlled substance, which will be added to DEA's regulations at 21 
CFR 1303.11(a), 1303.12(a) and 1303.21(a). DEA will also be revising 21 
CFR 1303.21(a) and 1315.21 to change the date to on or before December 
1 by which individual manufacturing quotas must be fixed.

[[Page 60129]]

    DEA will be adding a new regulation regarding the requirement to 
estimate the amount of diversion of the five covered controlled 
substances in the United States when establishing quotas for these 
controlled substances and make appropriate reductions will be added to 
21 CFR 1303.05. Furthermore, this regulation will codify the 
requirements of the SUPPORT Act regarding information to be considered 
when estimating diversion. The SUPPORT Act requires consultation with 
the Secretary of HHS in any year that the approved APQ for a covered 
controlled substance is higher than that of the previous year and an 
explanation from DEA in the APQ final order of why the public health 
benefits of increasing the quota clearly outweigh the consequences of 
having an increased volume of the covered controlled substance 
available for sale, and potential diversion, in the United States 21 
U.S.C. 826(i)(2)(A). These requirements will also be included in 
1303.05, along with the definition of a covered controlled substance.

C. Procurement Quota

    Sections 1303.12(f) and 1315.32(h) currently require certificates 
of quota only when purchasing from a manufacturer. Currently, DEA 
manages the quota process by providing each manufacturer a letter 
stating the quantity of controlled substance(s) and/or list I 
chemical(s) the manufacturer may obtain during a calendar year. This 
letter provides legal documentation that the manufacturer is authorized 
to obtain a specified quantity of the controlled substance(s) and/or 
list I chemical(s). When the CSA and DEA's regulations were first 
promulgated, neither contemplated that distributors would be used to 
move controlled substances and list I chemicals between manufacturers.
    When distributors provided schedule II controlled substances to 
this subset of manufacturers without verification of the manufacturers' 
quota authorization, it circumvented the quota process of verifying 
quota to the supplier. This prevents DEA from performing its oversight 
responsibilities and leads to unauthorized distribution of drug 
products. These unauthorized distributions are only noted as sales, 
which artificially inflates the estimation of legitimate medical need, 
a heavily weighted factor in the setting and revising of the APQ.
    This final rule revises 21 CFR 1303.12(f) and 1315.32(h) by 
ensuring that both manufacturers and distributors are required to 
obtain certification of a buyer's quota for the requested schedule I 
and II controlled substances, as well as list I chemicals when the 
buyer is a manufacturer. By requiring that all manufacturers and 
distributors receive a certification of quota before providing any 
quantity of controlled substance or list I chemical to a DEA registered 
manufacturer, DEA is better able to maintain the closed distribution 
system.

D. Inventory Allowance

    DEA is revising 21 CFR 1303.24 and 1315.24 to reduce the overall 
inventory held by DEA-registered bulk and dosage-form manufacturers. In 
response to the comments received, DEA will create a new regulation to 
address the procurement quota changes. DEA had proposed to place the 
changes for procurement quotas in 21 CFR 1303.24 and 1315.24; however, 
it was pointed out that the proposed placements fall under the 
``Individual Manufacturing Quota'' subsections. As such, DEA will 
create two new regulations, 21 CFR 1303.16 and 1315.31 and will place 
them within the appropriate procurement quota subsections.
    DEA also acknowledges the concerns conveyed in the comments 
regarding the proposed percentages being too restrictive. In response 
to these concerns, DEA conducted further analyses on dosage-form 
manufacturer inventory data. As previously stated, the data showed that 
manufacturers only acquired 72.7 percent of fentanyl, 73.9 percent of 
hydrocodone, 56.7 percent of hydromorphone, 79.3 percent of oxycodone, 
and 73 percent of oxymorphone from the quotas granted to them by DEA. 
As prescription rates have fallen, DEA has issued lower quotas to match 
the estimated fallen rates. The data show that even with the reduced 
quotas, the material has not sold, but has been placed into inventory, 
thereby significantly increasing inventory levels above that which is 
medically necessary on an annual basis. DEA has found that over the 
past years, inventory levels have averaged 72 percent for fentanyl, 
36.9 percent for hydrocodone, 57 percent for hydromorphone, 36.3 
percent for oxycodone, and 61 percent for oxymorphone, while still 
meeting legitimate medical needs. The inventory levels for fentanyl, 
hydromorphone, and oxymorphone include product development efforts as 
manufacturers seek FDA approval of abuse-deterrent formulations. This 
data suggests that the current allowance of 30 percent was not too 
restrictive and has allowed manufacturers to acquire the quota they 
need for commercial sales. However, in light of the need for 
preparedness for any contingencies, DEA will establish the procurement 
quota inventory allowance at 35 percent.
    DEA is also taking the time to clarify what changes will apply to 
bulk form manufacturers and dosage-form manufacturers. Bulk 
manufacturers receive individual manufacturing quotas and dosage-form 
manufacturers receive procurement quota. DEA acknowledges the concerns 
of manufacturers, but for reasons stated above, a lower inventory 
allowance for individual manufacturing quota needs to be implemented. 
As such, DEA has reviewed historical data from the companies and 
determined that 50 percent (six months) of inventory allowance is no 
longer necessary given the changes in prescribing guidelines to meet 
legitimate medical need and will be reducing individual manufacturing 
quota inventory allowances to 40 percent instead. The reduction to 40 
percent allows for just under five months of inventory and takes into 
account the latest prescribing practices of the most prescribed 
substances as well as decreasing the likelihood of diversion of stocks. 
It still allows manufacturers the flexibility to accommodate market 
changes, FDA regulations, and unforeseen circumstances. As previously 
discussed for procurement quotas, there are more dosage-form 
manufacturers than bulk manufacturers; therefore, a lower inventory 
allowance for procurement quota is warranted. For procurement quotas, 
DEA will establish (for controlled substances) and will reduce (for 
list I chemicals) inventory allowances to 35 percent (instead of 30 
percent), except in the circumstances of liquid injectable dosage-
forms. Liquid injectable dosage-forms (injectable products, vials, 
solution bags, but not tablets, capsules, suppositories, patches, 
films, and oral solutions) will continue to receive a 50 percent 
inventory allowance due to DEA's acknowledgement that there are less 
dosage-form manufacturers for these liquids, as addressed above. 
Instead of suspending all quota when a registrant's inventory exceeds 
the proposed amount of 45 percent, DEA will be finalizing three 
different suspension amounts. The amount at which quota will be 
suspended for manufacturing quota is when the inventory reaches 55 
percent and will remain suspended until the amount is lower than 50 
percent. For all dosage-forms, except liquid injectable dosage-forms, 
individual procurement quota will be suspended at 50 percent and will 
be reinstated when the amount is less than 45 percent. As applied to 
liquid injectable dosage-forms,

[[Page 60130]]

individual procurement quota will be suspended at 65 percent and will 
remain in suspension until the inventory amount is lower than 60 
percent. Last, instead of DEA granting requests of additional quota if 
inventory is less than the proposed 20 percent, DEA again will be 
finalizing three different amounts based on type of quota. DEA may 
increase the amount of individual manufacturing quota once the 
inventory is less than 30 percent. For individual procurement quota, 
the amount of quota may be increased when the inventory is less than 25 
percent; however, individual procurement quota for liquid injectable 
dosage-forms may be increased when the inventory is less than 40 
percent.
    The final changes are as follows:
    <bullet> 21 CFR 1303.16(a)--establishes an inventory allowance 
issued by DEA for procurement quotas of 35 percent for all dosage-forms 
of schedules I and II controlled substances, except liquid injectable 
dosage-forms, which will receive an inventory allowance of 50 percent;
    <bullet> 21 CFR 1303.16(b) and (c)--suspends procurement quota 
issued by DEA if inventory exceeds 50 percent for all dosage-forms of 
schedules I and II controlled substances, except liquid injectable 
dosage-forms, which will be suspended if inventory exceeds 65 percent;
    <bullet> 21 CFR 1303.16(d) and (e)--may grant request for 
additional procurement quota by registrant if inventory is less than 25 
percent for all dosage-forms of the registrant's estimated net disposal 
for schedules I and II controlled substances, except liquid injectable 
dosage-forms, which may be granted if inventory is less than 40 
percent;
    <bullet> 21 CFR 1303.24(a)--decreases the inventory allowance 
issued by DEA for individual manufacturing quotas from 50 to 40 percent 
for schedules I and II controlled substances;
    <bullet> 21 CFR 1303.24(b)--suspends individual manufacturing quota 
issued by DEA if inventory exceeds 55 percent of the registrant's 
estimated net disposal for schedules I and II controlled substances;
    <bullet> 21 CFR 1303.24(c)--may grant request for additional 
individual manufacturing quota by registrant if inventory is less than 
30 percent of the registrant's estimated net disposal for schedules I 
and II controlled substances;
    <bullet> 21 CFR 1315.24(a)--decreases the inventory allowance 
issued by DEA for individual manufacturing quotas from 50 to 40 percent 
for the list I chemicals;
    <bullet> 21 CFR 1315.24(b)--suspends individual manufacturing 
quotas issued by DEA if inventory exceeds 55 percent of the 
registrant's estimated net disposal for the list I chemicals;
    <bullet> 21 CFR 1315.24(c)--may grant request for additional 
individual manufacturing quotas by registrant if inventory is less than 
30 percent of the registrant's estimated net disposal for the list I 
chemicals;
    <bullet> 21 CFR 1315.31(a)--decreases the inventory allowance 
issued by DEA for procurement quotas from 50 to 35 percent for all 
dosage-forms of the list I chemicals, except liquid injectable dosage-
forms, where an inventory allowance of 50 percent will be created;
    <bullet> 21 CFR 1315.31(b) and (c)--suspends procurement quotas 
issued by DEA if inventory exceeds 50 percent for all dosage-forms of 
the registrant's estimated net disposal for the list I chemicals except 
liquid injectable dosage-forms, which will be suspended if inventory 
exceeds 65 percent; and
    <bullet> 21 CFR 1315.31(d) and (e)--may grant request for 
additional procurement quotas by registrant if inventory is less than 
25 percent for all dosage-forms of the registrant's estimated net 
disposal for the list I chemicals, except liquid injectable dosage-
forms, which may be granted if inventory is less than 40 percent.

E. Subcategories

    DEA is formalizing the addition of use-specific subcategories by 
adding 21 CFR 1303.04 and 1315.07. As a practical matter, DEA 
acknowledges that these subcategories are already in use through 
voluntary and cooperative efforts of DEA registrants. This final rule 
will codify DEA's current utilization of subcategories while 
facilitating the issuance of individual manufacturing and procurement 
quotas.
    Additionally, the specification of subcategories for manufacturing 
and procurement quotas provides benefits to the registrant by allowing 
for a more detailed level of communication with DEA as to why a 
registrant requires specific controlled substances and list I chemicals 
and how the registrant will utilize those substances.
    As the number of manufacturers continues to increase and industry 
practices and specializations continue to evolve, DEA's ability to 
track movement of material between registrants at all stages of 
manufacturing is critical.

F. Deadlines

    DEA collects various data to administer the quota system and moving 
the deadlines will allow more time for processing the numerous 
applications that DEA receives and for responding to applications for 
quota, as there are more registrants now than there were when the 
regulations were first promulgated. The new deadlines will also allow 
DEA more time to obtain additional relevant data from multiple 
agencies. The changes are as follows:
    <bullet> Establishment of the APQ and the AAN (21 CFR 1303.11(c) 
and 1315.11(c)): change from May 1 to September 1;
    <bullet> Deadline to issue procurement quota (21 CFR 1303.12(c) and 
1315.32(f)): change from July 1 to December 1;
    <bullet> Deadline to issue import quota for list I chemicals (21 
CFR 1315.34(f)): change from July 1 to December 1; and
    <bullet> Deadline to adjust individual manufacturing quota (21 CFR 
1303.23(c) and 1315.23(c)): change from March 1 to July 1.

Regulatory Analyses

Executive Orders 12866 (Regulatory Planning and Review) and 13563 
(Improving Regulation and Regulatory Review)

    This final rule has been developed in accordance with the 
principles of Executive Orders (E.O.) 12866 and 13563. E.O. 12866 
directs agencies to assess all costs and benefits of available 
regulatory alternatives and, when regulation is necessary, to select 
regulatory approaches that maximize net benefits (including potential 
economic, public health and safety, and environmental advantages, 
distributive impacts, and equity). E.O. 13563 is supplemental to and 
reaffirms the principles, structures, and definitions governing 
regulatory review established in E.O. 12866. E.O. 12866 classifies a 
``significant regulatory action'' requiring review by the Office of 
Management and Budget (OMB) as any regulatory action that is likely to 
result in a rule that may: (1) have an annual effect on the economy of 
$100 million or more, or adversely affect in a material way the 
economy, a sector of the economy, productivity, competition, jobs, 
environment, public health or safety, or State, local, or tribal 
governments or communities; (2) create a serious inconsistency or 
otherwise interfere with an action taken or planned by another agency; 
(3) materially alter the budgetary impact of entitlements, grants, user 
fees, or loan programs or the rights and obligations of recipients 
thereof; or (4) raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
the Executive Order.
    While this final rule is not economically significant, it is a 
significant regulatory action under E.O.

[[Page 60131]]

12866, section 3(f) subjecting it to review by OMB. DEA analyzed the 
economic impact of each provision of this final rule, including any 
changes made from the proposed rule, and estimated the annual cost to 
be $26.4 million. Certain provisions are estimated to have benefits; 
however, DEA does not have a basis to estimate those benefits due to 
many unknowns. Because of this, the benefits of this rule are discussed 
qualitatively. The rule contains clarification of regulatory language 
and the codification of existing DEA and registrant practices regarding 
subcategories for quotas, certification of procurement quota, 
reductions to inventory allowances, and additional considerations for 
revisions to the APQ. The results of the analysis of each provision are 
as follows:
Defining Types of Quota and Filing To Abandon Quota
    These provisions simply codify existing DEA practices, and will 
result in no economic impact on registrants or DEA. The formal 
definition of quota types will have no economic impact on registrants 
or DEA, and formalizing the procedure to abandon quota is simply a 
codification of DEA's current procedure. While these provisions will 
have no quantifiable impact, DEA believes there is at least a minimal 
benefit to codifying existing practices accurately. Because these 
provisions codify existing practice, current registrants are, in most 
cases, already complying and will not change their behavior. Errors and 
misunderstandings on the part of registrants do happen, but are 
uncommon. Nevertheless, these provisions of the final rule are expected 
to enhance clarity, certainty, and efficiency.
Conforming Revisions Related to the SUPPORT Act
    As indicated above, the SUPPORT Act gives DEA discretionary 
authority to establish quotas in terms of pharmaceutical dosage-form. 
At the present time, DEA is not deviating from its current practice of 
establishing quotas necessary for the manufacture of finished dosage-
forms in terms of kilograms and allowing manufacturers to determine how 
best to allocate those kilograms to different FDA-approved dosage-
forms. While it is impossible to know all the circumstances in which 
this authority might be utilized in the future, it is DEA's current 
intention that any implementation of dosage-form quotas will be the 
exception rather than the rule and will coexist alongside kilogram 
quotas. DEA recognizes that dosage-form manufacturers are in the best 
position to understand the demand for their products, in dosage-form. 
Because, at the present time, DEA is likely to use this authority 
sparingly, and only adjust quotas for manufacturers producing the 
dosage-form, DEA anticipates that this provision of the proposed rule 
will have minimal impact.
    The SUPPORT Act also requires DEA to estimate the amount of 
diversion when establishing quota for a covered controlled substance 
using all reliable information, including information from HHS and 
other agencies. DEA has considered information and data regarding the 
amount of diversion for covered controlled substances when applicable 
during the process of determining the APQ. This function is a regular 
part of DEA's operations, although in the past DEA has relied on its 
own internal data in the process of determining the APQ. DEA's view is 
that considering additional reliable information gathered from outside 
the agency to estimate the amount of diversion will result in minimal 
additional time or cost.
    The SUPPORT Act updates also extend DEA's deadline to fix 
individual manufacturing quotas for schedules I and II controlled 
substances from October to December, and they formally define the 
phrase ``covered controlled substance'' to include fentanyl, oxycodone, 
hydrocodone, oxymorphone, or hydromorphone. The deadline extension will 
have minimal impact on registrants, as DEA currently does not meet the 
October deadline and has not met that deadline since before 1996. This 
extension will align the regulations with reality for registrants and 
DEA. Defining ``covered controlled substance'' will not change how 
those substances or the registrants that are authorized to handle those 
substances are regulated. Therefore, these provisions will have minimal 
impact on registrants or DEA.
    While the benefits of the SUPPORT Act updates were not quantified 
due to many unknowns, it is possible to discuss some of these benefits 
in qualitative terms. With these conforming revisions related to the 
SUPPORT Act, DEA has the ability to respond to adverse market 
conditions with increased speed and flexibility to minimize public 
harm. DEA would use dosage-form quotas to alleviate the rare occurrence 
of a drug shortage in the market by targeting the specific dosage-forms 
that are in short supply instead of simply increasing the total amount 
of kilograms of a drug to be produced, resulting in a benefit to the 
public. Another benefit is that updating the deadlines for setting 
individual manufacturing quotas so they reflect DEA's current practice 
eliminates regulatory uncertainty for manufacturers. Regulations that 
realistically reflect current DEA and industry practice will benefit 
the planning processes of current and future market participants.
Procurement Quota Certification
    The final rule will require that all DEA registrants supplying 
schedules I and II controlled substances and list I chemicals to DEA 
manufacturers obtain certification of the manufacturer's quota before 
completing the transaction. In practice, this certification may be any 
written declaration issued by manufacturers to distributors. This 
provision prevents manufacturers from purchasing their API or finished 
dosage-forms from distributors without quota verification as currently 
required when manufacturers request API or finished dosage-forms from 
other manufacturers. Current regulations stipulate that only entities 
registered as ``importer,'' ``manufacturer,'' or ``bulk manufacturer'' 
must certify quota before a sale.\11\
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    \11\ 21 CFR 1303.12(f) and 1315.32(h).
---------------------------------------------------------------------------

    To estimate the cost of this provision, DEA utilized internal data 
tracking the sale of schedules I and II controlled substances and list 
I chemicals from distributors to manufacturers during the three year 
period of January 1, 2015 to December 31, 2017. DEA's analysis revealed 
that over this three year period, distributors filled an average of 
3,000 orders to manufacturers per year. Using Bureau of Labor 
Statistics (BLS) wage data for Compliance Officers,\12\ the type of 
registrant employee that would be tasked with certifying quota, DEA 
estimated the labor cost of quota certification to distributors and 
manufacturers. Based on its knowledge of registrant business 
operations, DEA estimates a manufacturer compliance officer requires 10 
minutes to draft a quota certification letter after placing a purchase 
request to a distributor, while the distributor compliance officer 
requires five minutes to review and verify the manufacturer's 
certification letter. This results in a combined labor burden of 15 
minutes (0.25 hours). Multiplying the loaded median hourly wage rate 
for compliance officers \13\ by

[[Page 60132]]

0.25 and applying that to the estimated 3,000 certification letters per 
year yields a combined annual labor cost of $35,241 ($23,494 of which 
is incurred by manufacturers while the remaining $11,747 is incurred by 
distributors).
---------------------------------------------------------------------------

    \12\ For the purposes of this analysis, DEA used the median 
hourly wage rate of $32.63 for 13-1041 Compliance Officers. Bureau 
of Labor Statistics, Occupational Employment and Wages, May 2017, 
https://www.bls.gov/oes/2017/may/oes131041.htm.
    \13\ The loaded hourly rate for 13-1041 Compliance Officers is 
$46.99 ($32.63 x 1.44). Bureau of Labor Statistics, Employer Costs 
for Employee Compensation--December 2018, https://www.bls.gov/news.release/archives/ecec_12142018.pdf.
---------------------------------------------------------------------------

Reduction of Inventory Allowances
    In response to public comments regarding the proposed inventory 
allowance reductions put forth in the NPRM, DEA is modifying the 
reductions that will become effective upon publication of this final 
rule, while also establishing new procurement quota inventory 
allowances for dosage forms. Comments received from manufacturers 
stressed that the proposed changes to the inventory allowance would 
increase production costs, product waste, and inefficiencies. 
Specifically, manufacturers stated that the proposed reductions would 
require smaller, more frequent manufacturing campaigns in order to 
produce the same amount of finished product in a given year, and that 
DEA's ability to respond to requests for quota adjustments throughout 
the year is not sufficient if market demand fluctuates. Additionally, 
commenters expressed concern that reducing inventory allowances for 
certain liquid injectable dosage-forms may cause a significant 
disruption in the supply of these life-saving drugs given the 
relatively limited number of manufacturers. As a result, DEA is 
adjusting the inventory allowance reductions in this final rule to 
minimize, to the extent possible, any supply disruptions or increases 
in manufacturing production costs. DEA is also clarifying which 
inventory allowances apply to individual manufacturing quota and which 
apply to procurement quota by establishing a procurement quota 
inventory allowance in 21 CFR 1303.16(a). While there may not be 
published studies showing that smaller inventories reduce diversion, 
DEA must provide for the estimated medical, scientific, research, and 
industrial needs of the United States, for lawful export requirements, 
and for the establishment and maintenance of reserve stocks, while also 
preventing an oversupply which increases the risk of diversion. DEA 
believes that these final inventory allowance reductions will help 
achieve its goal of reducing the risk of diversion at the manufacturer 
level.
    Many of the comments received from manufacturers stated generally 
that the proposed inventory allowance reductions would increase the 
cost of API production, but only one commenter provided a detailed 
estimate for how much their costs are likely to increase in a given 
year. This commenter estimates that their incremental production costs 
would rise by approximately $600,000 per year, primarily due to the 
reduced inventory allowance necessitating an additional manufacturing 
campaign for their largest volume API products, decreasing efficiency 
and potentially increasing the amount of product wasted during the 
required cleaning of equipment between each additional campaign. While 
DEA recognizes this single cost estimate as legitimate, it is unlikely 
that production costs are uniform across manufacturers and depend 
largely on variables unique to each firm. However, given the absence of 
detailed monetary cost estimates from other commenters, and the fact 
that the required inputs to calculating an individual firm's 
manufacturing costs are proprietary and unknown to DEA, using this 
commenter's estimate as the basis for estimating the impact of this 
provision of the final rule is the most reasonable option available to 
DEA.
    With this final rule, DEA will be reducing individual manufacturing 
quota inventory allowances to 40 percent (instead of the proposed 30 
percent) and will be establishing (for controlled substances) and 
reducing (for list I chemicals) procurement quota inventory allowances 
for all dosage-forms (except liquid injectable dosage-forms) to 35 
percent. Procurement quota inventory allowances for liquid injectable 
dosage-forms are being formally established at 50 percent, resulting in 
no change from the pre-rule baseline. The threshold at which individual 
manufacturing quota will be suspended is reached when inventories 
exceed 55 percent of estimated net disposal (instead of the proposed 45 
percent) and will remain suspended until inventory falls below 50 
percent. However, DEA will suspend individual procurement quota at 50 
percent, and will reinstate it when inventories fall below 45 percent. 
DEA will suspend procurement quota for liquid injectable dosage-forms 
when inventories rise above 65 percent, and will reinstate it when 
inventories fall below 60 percent. Finally, DEA may increase the amount 
of individual manufacturing quota once the inventory is less than 30 
percent (instead of the proposed 20 percent). For individual 
procurement quota, the amount of quota may be increased when the 
inventory is less than 25 percent or when inventories are less than 40 
percent for liquid injectable dosage-forms.
    Because the comments received from manufacturers focused primarily 
on their estimation of the increase in time and cost of manufacturing 
API products, DEA believes it is reasonable to assume that the costs 
imposed by this provision stem primarily from the inventory allowance 
reduction for individual manufacturing quotas, and this cost is borne 
by bulk manufacturers. There are currently 44 bulk manufacturers 
registered with DEA. Based on the only detailed monetary cost estimate 
received, DEA assumes that each of these registrants will incur an 
average annual cost of $600,000, equating to $26.4 million in total 
annual costs as a result of this provision of the final rule.
    It is important to note that the estimated total annual costs from 
reducing inventory allowances could be higher than actual costs. The 
incremental cost increase of $600,000 presented by the commenter and 
being used in this analysis as representative of the average annual 
costs for each bulk manufacturer was based on the proposed individual 
manufacturing quota inventory allowance reduction from 50 percent to 30 
percent, with suspension of quota at 45 percent. As stated above, based 
on public comments, DEA is choosing to implement a smaller reduction to 
inventory allowances with this final rule, settling on an individual 
manufacturing quota inventory allowance of 40 percent, with suspension 
of quota occurring if inventories rise above 55 percent. Additionally, 
the commenter that provided the monetary cost estimate is a large 
manufacturer; therefore, applying their estimated costs across all 44 
bulk manufacturers, which includes many small manufacturers, likely 
overstates the total annual cost. Because of this, it may be the case 
that the average incremental costs incurred by bulk manufacturers are 
less than $600,000, especially if the revised inventory allowances 
prevent the need for some manufacturers to add production campaigns for 
certain products. However, DEA has no way of knowing if this is indeed 
the case; therefore, DEA assumes that an average annual cost estimate 
of $600,000 incurred by bulk manufacturers as a result of this 
provision is reasonably accurate.
    Inventory allowances are a factor in DEA's determination of a 
registrant's quota for the coming year and provides inventory for sales 
at the beginning of a new quota year before quota is received. 
Registrants may also exceed their

[[Page 60133]]

inventory allowance during the year. If at any time during the year, 
the inventory of a basic class held by a manufacturer exceeds 55 
percent (or 50 percent for procurement quota of dosage-forms) of 
estimated net disposal, the quota for that class is automatically 
suspended and would remain suspended until inventory is less than 50 
percent (or 45 percent for procurement quota of dosage-forms) of the 
estimated net disposal. Practically speaking, the changes to inventory 
allowances equate to a reduction from the current half of a year's 
sales supply (50 percent) allowed to be held as inventory to nearly 
five months (40 percent) for individual manufacturing and over four 
months (35 percent) for dosage-form manufacturing. Additionally, the 55 
percent maximum inventory during the year would give manufacturers the 
flexibility to have over six months of sales supply inventoried to 
account for any unplanned fluctuations in demand or timing in orders 
for their product throughout the year. For dosage-form manufacturers, 
the maximum inventory of 50 percent provides exactly six months of 
sales supply. The inventory allowance for liquid injectable dosage-
forms remains unchanged; thus, there is no impact on these products.
    While DEA acknowledges that reducing inventory allowances will 
increase costs for bulk manufacturers, DEA concludes that these 
reductions are not likely to result in supply disruptions. Registrants 
routinely request adjustments to their quota throughout the year due to 
fluctuations in market conditions, and this is a normal part of a 
manufacturer's business operations. DEA quickly responds to these 
requests within six to eight weeks, ensuring legitimate business is not 
disrupted, and will continue to do so once this rule is promulgated. 
For example, in 2017 (the last year in which data are available), DEA 
processed 1,752 initial quota applications and 2,299 requests for 
adjustment to quota. Additionally, in response to the ongoing COVID-19 
pandemic, DEA and manufacturers of injectable products for treatment of 
ventilator patients have entered into continuous dialogue to meet 
surging hospital demand. During this time, DEA was able to process 
manufacturer quota requests in less than five business days, 
demonstrating DEA's flexibility to address situations such as 
shortages, natural disasters, epidemics, medical demand, and other 
scenarios that would require an increase in production of critical 
medications. Also, in these dialogues, injectable manufacturers stated 
that the manufacturing times from acceptance of API to release of the 
drug product took approximately 30 to 42 days. The COVID-19 pandemic 
has demonstrated that the flexibility to grant and utilize quotas to 
produce the formulations and dosage strengths demanded in times of 
crisis is more important than the availability of large inventories on 
hand.
Formalization of Subcategories for Manufacturing Quotas and Procurement 
Quotas
    This provision of the final rule is a codification of existing 
voluntary and cooperative efforts between registrants and DEA that have 
been in place since 2001 and facilitates a more accurate calculation of 
APQ for the United States. The establishment of subcategories of: (1) 
Quota for Commercial Sales; (2) Quota for Transfer; (3) Quota for 
Product Development; (4) Quota for Replacement; and (5) Quota for 
Packaging/Repackaging and Labeling/Relabeling are already being 
utilized by DEA with full cooperation from all registrants. Therefore, 
this provision simply updates 21 CFR 1303.03, 1303.04, 1315.06, and 
1315.07 to reflect current DEA procedure for the management of quota, 
and it will have no economic impact on registrants or DEA.
New Deadlines for Establishing Quotas
    The final rule will modify the deadlines for establishing and 
publishing the APQ, AAN, import quotas, procurement quotas, 
manufacturing quotas, and any adjustments to manufacturing quotas. Due 
to the expansion of the market and the increase in the number of bulk 
and dosage-form manufacturers since that deadline was implemented 
almost 50 years ago, DEA frequently misses the current deadlines for 
the establishment of the APQ and the AAN of May 1 and the issuing of 
individual procurement, manufacturing and import quotas of July 1. 
Congress mandated quotas for importers of list I chemicals in 2007.\14\ 
Applications for import and procurement quota are due April 1, giving 
DEA only 30 days before the May 1 deadline for publication of the APQ 
and AAN. Given that DEA has historically missed these deadlines since 
it must take adequate time to provide a thorough and careful assessment 
of each application, both DEA and industry have already become 
accustomed to a delayed publishing schedule. Therefore, this provision 
is expected to have minimal economic impact as it simply aligns the 
regulatory deadlines with the current practices of DEA and industry.
---------------------------------------------------------------------------

    \14\ Combat Methamphetamine Epidemic Act of 2005, Public Law 
109-177.
---------------------------------------------------------------------------

Executive Order 12988, Civil Justice Reform

    This rulemaking 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, Federalism

    This rulemaking does not preempt or modify any provision of State 
law, impose enforcement responsibilities on any State, or diminish the 
power of any State to enforce its own laws. Accordingly, this 
rulemaking does not have federalism implications warranting the 
application of Executive Order 13132.

Executive Order 13175, Consultation and Coordination With Indian Tribal 
Governments

    This rule does not have substantial direct effects on the states, 
on the relationship between the national government and the states, or 
the distribution of power and responsibilities between the Federal 
government and Indian tribes.

Regulatory Flexibility Act

    In accordance with the Regulatory Flexibility Act (RFA), DEA 
evaluated the impact of this rule on small entities. DEA's evaluation 
of economic impact by size category indicates that this final rule will 
not have a significant economic impact on a substantial number of these 
small entities.
    The RFA requires agencies to analyze options for regulatory relief 
of small entities unless it can certify that the rule will not have a 
significant impact on a substantial number of small entities. For 
purposes of the RFA, small entities include small businesses, nonprofit 
organizations, and small governmental jurisdictions. DEA evaluated the 
impact of this rule on small entities and discussions of its findings 
are below.
    As discussed in the ``Executive Orders 12866 (Regulatory Planning 
and Review) and 13563 (Improving Regulation and Regulatory Review)'' 
section above, this rule has six key components as described below.
Defining Types of Quota and Filing To Abandon Quota
    This provision codifies existing DEA practices and will result in 
no economic

[[Page 60134]]

impact on registrants or DEA. The formal definition of quota types will 
have no practical impact on registrants, and formalizing the procedure 
to abandon quota is simply a codification of DEA's current procedure. 
Therefore, this provision will have no costs.
Conforming Revisions Related to the SUPPORT Act
    While the SUPPORT Act gives DEA the authority to establish quotas 
in terms of pharmaceutical dosage-form, DEA will continue to use its 
current process of establishing quota in terms of kilograms. Therefore, 
this provision of the rule will have no impact.
    Additionally, the SUPPORT Act defines the phrase ``covered 
controlled substance'' to include fentanyl, oxycodone, hydrocodone, 
oxymorphone, and hydromorphone. It requires DEA to estimate the amount 
of diversion when establishing quota for covered controlled substances 
by consulting with the Secretary of HHS and considering reliable 
information on the rates of overdose deaths and abuse and overall 
public health impact in the United States that is determined to be 
reliable. DEA has considered the amount of diversion when establishing 
quotas when data has been available and is a regular part of DEA's 
operations. Therefore, considering additional reliable information 
gathered from outside the agency to estimate the amount of diversion 
will result in minimal additional cost.
    The SUPPORT Act updates also extend DEA's deadline to fix 
individual manufacturing quotas for schedules I and II controlled 
substances from October to December. The deadline extension will have 
minimal impact on registrants as DEA currently does not meet the 
October deadline. This extension will align the regulations with 
reality for registrants. Therefore, these provisions will have minimal 
impact on registrants or DEA.
Procurement Quota Certification
    The final rule will require that all DEA registrants supplying 
schedules I and II controlled substances and list I chemicals to DEA 
manufacturers to obtain certification of the manufacturer's quota 
before completing the transaction. In practice, this certification must 
be a written declaration issued by manufacturers to distributors 
containing the information as required in the regulations.\15\ This 
provision prevents manufacturers from purchasing their API or finished 
dosage-forms from distributors without quota verification as currently 
required when manufacturers request API or finished dosage-forms from 
other manufacturers. Current regulations stipulate that only entities 
registered as ``importer,'' ``manufacturer,'' or ``bulk manufacturer'' 
must certify quota before a sale.\16\
---------------------------------------------------------------------------

    \15\ 21 CFR 1303.12(f) and 1315.32(h).
    \16\ Id.
---------------------------------------------------------------------------

    To estimate the cost of this provision, DEA utilized internal data 
tracking the sale of schedules I and II controlled substances and list 
I chemicals from distributors to manufacturers during the three year 
period of January 1, 2015 to December 31, 2017. DEA's analysis revealed 
that over this three year period, distributors filled an average of 
3,000 orders to manufacturers per year. Using BLS wage data for 
Compliance Officers, the type of registrant employee that would be 
tasked with certifying quota, DEA estimated the labor cost of quota 
certification to distributors to be $11,747 and $23,494 to 
manufacturers, resulting in a combined annual labor cost of $35,241.
Reduction of Inventory Allowances
    This final rule will reduce the inventory allowance for 
manufacturers of controlled substances and list I chemicals from 50 
percent to 40 percent of the registrant's estimated net disposal, and 
it will establish a procurement quota inventory allowance for dosage-
forms and list I chemicals at 35 percent of the registrant's estimated 
net disposal. Procurement quota inventory allowances for liquid 
injectable dosage-forms are also being formally established at 50 
percent, resulting in no change. Inventory allowances are a factor in 
DEA's determination of a registrant's quota for the coming year and 
provide inventory for sales at the beginning of a new quota year before 
quota is received. Registrants may exceed their inventory allowance 
during the year. If at any time during the year the inventory of a 
basic class held by a manufacturer exceeds 55 percent (or 50 percent 
for procurement quota for dosage-forms) of estimated net disposal, the 
quota for that class is automatically suspended and would remain 
suspended until inventory is less than 50 percent (45 percent for 
procurement quota dosage-forms) of the estimated net disposal. 
Practically speaking, the changes to inventory allowances equate to a 
reduction from the current half of a year's sales supply (50 percent) 
allowed to be held as inventory to nearly five months (40 percent) for 
individual manufacturing and over four months (35 percent) for dosage-
form manufacturing. Additionally, the 55 percent maximum inventory 
during the year gives manufacturers the flexibility to have over six 
months of sales supply inventoried to account for any unplanned 
fluctuations in demand or timing in orders for their product throughout 
the year. For dosage-form manufacturers, the maximum inventory of 50 
percent provides exactly six months of sales supply. The inventory 
allowance for liquid injectable dosage-forms remains unchanged at 65 
percent; thus, there is no impact on these products.
    Because the comments received from manufacturers on this provision 
of the proposed rule focused primarily on their estimation of the 
increase in time and cost of manufacturing API products, DEA believes 
it is reasonable to assume that any costs imposed by this provision 
stem primarily from the inventory allowance reduction for individual 
manufacturing quotas, and this cost is borne by bulk manufacturers. The 
only commenter to provide a detailed monetary cost estimate for DEA to 
consider stated that its incremental production costs would rise by 
approximately $600,000 per year primarily due to the reduced inventory 
allowance necessitating an additional manufacturing campaign for their 
largest volume API products. While DEA recognizes this single cost 
estimate as legitimate, it is unlikely that production costs are 
uniform across manufacturers and depend largely on variables unique to 
each firm. However, given the absence of detailed monetary cost 
estimates from other commenters and the fact that the required inputs 
to calculating an individual firm's manufacturing costs are proprietary 
and unknown to DEA, using this commenter's estimate as the basis for 
estimating the impact of this provision of the final rule is the most 
reasonable option available to DEA.
    There are currently 44 bulk manufacturers registered with DEA. DEA 
assumes that each of these registrants will incur an average annual 
cost of $600,000, equating to $26.4 million in total annual costs 
because of this provision of the final rule.
    While DEA acknowledges that reducing inventory allowances will 
increase costs for bulk manufacturers, DEA concludes that these 
reductions are not likely to result in supply disruptions. Registrants 
also routinely request adjustments to their quota throughout the year 
due to fluctuations in market conditions. This is a normal part of a 
manufacturer's business operations. DEA quickly responds to these 
requests within six to eight weeks, ensuring legitimate business is not

[[Page 60135]]

disrupted, and it will continue to do so once this rule is promulgated. 
For example, in 2017 (the last year in which data are available), DEA 
processed 1,752 initial quota applications and 2,299 requests for 
adjustment to quota. Additionally, in response to the ongoing COVID-19 
pandemic, DEA and manufacturers of injectable products for treatment of 
ventilator patients entered into continuous dialogue to meet surging 
hospital demand. During this time, DEA was able to process manufacturer 
quota requests in less than five business days, demonstrating DEA's 
flexibility to address situations such as shortages, natural disasters, 
epidemics, medical demand, and other scenarios that could require an 
increase in production of critical medications. Also, in these 
dialogues, injectable manufacturers stated that the manufacturing times 
from acceptance of API to release of the drug product took 
approximately 30 to 42 days. The COVID-19 pandemic has demonstrated 
that the flexibility to grant and utilize quotas to produce the 
formulations and dosage strengths demanded in times of crisis is more 
important than the availability of large inventories on hand.
Formalization of Subcategories for Manufacturing Quotas and Procurement 
Quotas
    This provision of the final rule is a codification of existing 
voluntary and cooperative efforts between registrants and DEA that have 
been in place since 2001 and allows a more accurate calculation of APQ 
for the United States. The establishment of subcategories of: (1) Quota 
for Commercial Sales; (2) Quota for Transfer; (3) Quota for Product 
Development; (4) Quota for Replacement; and (5) Quota for Packaging/
Repackaging and Labeling/Relabeling are already being utilized by DEA 
with full cooperation from all registrants. Therefore, this provision 
simply updates 21 CFR 1303.03, 1303.04, 1315.06, and 1315.07 to reflect 
current DEA procedure for the management of quota and will have no 
economic impact on registrants or DEA.
New Deadlines for Establishing Quotas
    The final rule would modify the deadlines for establishing and 
publishing the APQ, AAN, and procurement and manufacturing quotas, and 
any adjustments to manufacturing quotas. Due to the expansion of the 
market and the increase in the number of manufacturers and importers 
since that deadline was implemented almost 50 years ago, DEA frequently 
misses the current publishing deadlines for the establishment of the 
APQ and the AAN of May 1 and the issuing of individual procurement, 
manufacturing and import quotas deadline of July 1. Applications for 
import and procurement quota are due April 1, giving DEA only 30 days 
before the May 1 deadline for publication of the APQ and AAN. Given 
that DEA has historically missed these deadlines since it must take 
adequate time to provide a thorough and careful assessment of each 
application, both DEA and industry have already become accustomed to a 
delayed publishing schedule. Therefore, this provision is expected to 
have minimal economic impact as it simply aligns the regulatory 
deadlines with the current business practices of DEA and industry.
Summary
    In summary, only the procurement quota certification requirement 
and reduction to inventory allowances impose costs. The certification 
requirement results in a $23,494 annual cost to all manufacturers and 
an $11,747 annual cost to all distributors for a combined annual cost 
of $35,241. The reduction to inventory allowances imposes an estimated 
annual cost of $600,000 on each of the 44 bulk manufacturers registered 
with DEA, equating to $26.4 million in total annual costs.

Description and Estimate of the Number of Small Entities

    This rule has the potential to affect entities registered with DEA 
as manufacturers, distributors, and importers of controlled substances 
and list I chemicals. Based on a review of respective representative 
North American Industry Classification System (NAICS) codes for 
manufacturers,\17\ distributors, and importers,\18\ there are the 
following number of firms: \19\
---------------------------------------------------------------------------

    \17\ DEA believes `Pharmaceutical Preparation Manufacturing' 
(325412) includes 503B outsourcing facilities.
    \18\ DEA believes `Drugs and Druggists' Sundries Merchant 
Wholesalers' (424210) includes both distributors and importers of 
controlled substances and (human form) list I chemicals.
    \19\ For the purposes of this analysis, the term ``firm'' is 
synonymous with ``entities.''

<bullet> 404 `Medicinal and Botanical Manufacturing' (325411)
<bullet> 957 `Pharmaceutical Preparation Manufacturing' (325412)
<bullet> 6,739 `Drugs and Druggists' Sundries Merchant Wholesalers' 
(424210)

    The U.S. Small Business Administration (SBA) considers a size 
standard as the largest that a concern can be and still qualify as a 
small business for Federal government programs. For the most part, size 
standards are the average annual receipts or the average employment of 
a firm. The SBA size standards for the three industries are 1,000 
employees for Medicinal and Botanical Manufacturing, 1,250 employees 
for Pharmaceutical Preparation Manufacturing, and 250 employees for 
Drugs and Druggists' Sundries Merchant Wholesalers.\20\
---------------------------------------------------------------------------

    \20\ SBA ``Table of Small Business Size Standards Matched to 
North American Industry Classification System Codes, Effective 
August 19, 2019.''
---------------------------------------------------------------------------

    Comparing the SBA size standards to the U.S. Census Bureau, 
Statistics of U.S. Businesses (SUSB) detailed data on establishment 
size by NAICS code for each affected industry, DEA estimates the 
following number of small entities (and percent of establishments that 
are small entities) by industry:
    <bullet> 377 (93.3 percent of total) `Medicinal and Botanical 
Manufacturing' (325411);
    <bullet> 885 (92.5 percent of total) `Pharmaceutical Preparation 
Manufacturing' (325412); and
    <bullet> 6,475 (96.1 percent of total) `Drugs and Druggists' 
Sundries Merchant Wholesalers' (424210).
    The table below summarizes the calculation for the estimated number 
of small entities (establishments) above.
BILLING CODE 4410-09-P

[[Page 60136]]

[GRAPHIC] [TIFF OMITTED] TR31AU23.001

BILLING CODE 4410-09-C
    Because DEA registrants frequently hold more than one registration 
for separate locations, one entity may hold many registrations. DEA 
estimates the number of affected entities by multiplying the number of 
DEA registrations in each business activity by its ``firm-to-
establishment'' ratio to find the total amount of entities. The firm-
to-establishment ratio is calculated by dividing the number of firms in 
each industry NAICS code by the total number of establishments found in 
the third and fourth columns of the previous table.\21\ DEA analyzed 
how each provision of the proposed rule will affect DEA registrants, 
including how many entities each provision will affect, and found that 
at least one provision of this proposed rule will affect 561 DEA 
registered entities. A summary of this analysis is detailed in the 
table below:
---------------------------------------------------------------------------

    \21\ For example, the firm-to-establishment ratio for NAICS 
325412 is obtained by dividing the 957 total firms in the industry 
by the 1,208 total establishments in the industry, yielding a ratio 
of .79.

---------------------------------------------------------------------------

[[Page 60137]]

[GRAPHIC] [TIFF OMITTED] TR31AU23.002

    After accounting for how many DEA registered entities are affected 
by each provision, DEA applied the estimated percentage of 
establishments that are small entities to each respective business 
activity to estimate the number of affected small entities. DEA 
estimates that of the 561 affected entities 525 are small entities: 161 
distributors, 304 dosage-form manufacturers, 37 bulk manufacturers, and 
23 importers. In summary, the percentages of small entities affected 
are as follows:
    <bullet> 9.8 percent `Medicinal and Botanical Manufacturing' 
(325411);
    <bullet> 34.4 percent `Pharmaceutical Preparation Manufacturing' 
(325412); and
    <bullet> 2.8 percent `Drugs and Druggists' Sundries Merchant 
Wholesalers' (424210).
    The table below summarizes the estimated number of small entities, 
number of affected small entities, and the percentage of small entities 
affected.
[GRAPHIC] [TIFF OMITTED] TR31AU23.003

    As described above, the quota certification provision of this final 
rule is estimated to cost a total of $23,494 to manufacturers annually 
and a total of $11,747 to distributors annually, or an average cost of 
$70 ($23,494/334) per affected manufacturer and $71 ($11,747/166) per 
distributor. Additionally, the reduction to inventory allowances are 
estimated to impose costs of $600,000 annually on the 44 affected bulk 
manufacturers that are registered with DEA, 37 of which are small 
entities. DEA generally uses 30 percent as a ``substantial'' number of 
affected small entities. The analysis reveals that a non-substantial 
percentage of small distributor entities (2.8 percent) and

[[Page 60138]]

small bulk manufacturer entities (9.8 percent) will be affected while a 
substantial percentage of small dosage-form manufacturing entities 
(34.3 percent) will be affected by this rule. DEA generally considers 
impacts that are greater than three percent of yearly revenue to be a 
``significant economic impact'' on an entity. DEA compared the 
compliance cost of $70 and $71 to the average annual receipts of 
dosage-form manufacturers and distributors/imports, respectively, for 
each size range.\22\ Additionally, DEA compared the estimated $600,000 
per-entity cost attributed to reducing inventory allowances to the 
average annual receipts of bulk manufacturers for each size range. For 
even the smallest of entities, the costs calculated above are much less 
than three percent of yearly revenue and are not significant. The table 
below summarizes the analysis.
---------------------------------------------------------------------------

    \22\ Small Business Administration, Office of Advocacy ``Table 
2--Number of firms, establishments, receipts, employment, and 
payroll by firm size (in receipts) and industry, 2012.'' https://www.sba.gov/advocacy/firm-size-data, accessed 5/24/2018.
[GRAPHIC] [TIFF OMITTED] TR31AU23.004

    DEA examined the economic impact of this final rule for each 
affected industry for various size ranges. Based on the analysis above, 
and because of these facts, DEA believes this rule will not have a 
significant economic impact on a substantial number of small entities.

Unfunded Mandates Reform Act of 1995

    This rule will not result in the expenditure by State, local, and 
tribal governments, in the aggregate, or by the private sector, of $100 
million or more (adjusted annually for inflation) in any one year and 
will not significantly or uniquely affect small governments. Therefore, 
no actions were deemed subject to the provisions of the Unfunded 
Mandates Reform Act of 1995, 2 U.S.C. 1532.

Paperwork Reduction Act of 1995

    Pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-
3521), this action revises existing information collections 1117-0006, 
1117-0008, and 1117-0047 and creates one new information collection. 
DEA is amending its regulations for establishing quotas for United 
States companies manufacturing schedules I and II controlled substances 
and ephedrine, pseudoephedrine, and phenylpropanolamine and for 
procurement quota certification and recordkeeping requirements. A 
person is not required to respond to a collection of information unless 
it displays a valid OMB control number. DEA has submitted these 
collection requests to the OMB for review and approval.

A. Collections of Information Associated With the Proposed Rule

    1. Title: Application for Individual Manufacturing Quota for a 
Basic Class of Controlled Substance and for Ephedrine, Pseudoephedrine, 
and Phenylpropanolamine.
    OMB Control Number: 1117-0006.
    DEA Form Number: DEA-189.
    DEA is formally implementing the use of subcategories to facilitate 
the issuance of manufacturing quotas and provide a more accurate 
calculation of the aggregate production quotas for the United States. 
DEA will be adding the following five subcategories for quota: (1) 
Quota for Commercial Sales; (2) Quota for Transfer; (3) Quota for 
Product Development; (4) Quota for Replacement; and (5) Quota for 
Packaging/Repackaging and Labeling/Relabeling. All types of quota could 
be requested using the same application and format registrants are 
accustomed to using in an online form. Manufacturers of schedules I and 
II controlled substances and list I chemicals will continue to receive 
manufacturing and procurement quotas appropriate to their manufacturing 
and inventory requirements, and DEA will retain greater control over 
the amount of these controlled substances and list I chemicals 
produced, thereby reducing the amount of inventories at risk of 
diversion.
    DEA estimates the following number of respondents and burden 
associated with reporting:
    <bullet> Number of respondents: 33.
    <bullet> Frequency of response: Annually/As-needed (26.0303 
average).
    <bullet> Number of responses: 859.
    <bullet> Burden per response: 0.5 hour.
    <bullet> Total annual hour burden: 430.
    2. Title: Application for Procurement Quota for Controlled 
Substances and for Ephedrine, Pseudoephedrine, and Phenylpropanolamine.
    OMB Control Number: 1117-0008.
    DEA Form Number: DEA-250.
    DEA is formally implementing the use of subcategories to facilitate 
the issuance of procurement quotas and provide a more accurate 
calculation of the aggregate production quotas for the

[[Page 60139]]

United States. DEA is adding the following five subcategories for 
quota: (1) Quota for Commercial Sales; (2) Quota for Transfer; (3) 
Quota for Product Development; (4) Quota for Replacement; and (5) Quota 
for Packaging/Repackaging and Labeling/Relabeling. All types of quota 
will be requested using the same application and format registrants are 
accustomed to using in an online form. Manufacturers of schedules I and 
II controlled substances and list I chemicals will continue to receive 
manufacturing and procurement quotas appropriate to their manufacturing 
and inventory requirements, and DEA will retain greater control over 
the amount of these controlled substances and list I chemicals 
produced, thereby reducing the amount of inventories at risk of 
diversion.
    DEA estimates the following number of respondents and burden 
associated with reporting:
    <bullet> Number of respondents: 344.
    <bullet> Frequency of response: Annually/As-needed (8.9128 
average).
    <bullet> Number of responses: 3,066.
    <bullet> Burden per response: 0.5 hour.
    <bullet> Total annual hour burden: 1,533.
    3. Title: Application for Import Quota for Ephedrine, 
Pseudoephedrine, and Phenylpropanolamine.
    OMB Control Number: 1117-0047.
    DEA Form Number: DEA-488.
    DEA will be formally implementing the use of subcategories to 
facilitate the issuance of import quotas and provide a more accurate 
calculation of the assessment of annual needs for the United States. 
DEA is adding the following five subcategories for quota: (1) Quota for 
Commercial Sales; (2) Quota for Transfer; (3) Quota for Product 
Development; (4) Quota for Replacement; and (5) Quota for Packaging/
Repackaging and Labeling/Relabeling. All types of quota will be 
requested using the same application and format registrants are 
accustomed to using in an online form. Importers of list I chemicals 
will continue to receive import quotas appropriate to their 
manufacturing and inventory requirements, and DEA will retain greater 
control over the amount of these list I chemicals produced, thereby 
reducing the amount of inventories at risk of diversion.
    DEA estimates the following number of respondents and burden 
associated with reporting:
    <bullet> Number of respondents: 49.
    <bullet> Frequency of response: Annually/As-needed (2.5714 
average).
    <bullet> Number of responses: 126.
    <bullet> Burden per response: 0.5 hour.
    <bullet> Total annual hour burden: 63.
    4. Title: Procurement Quota Certification and Recordkeeping 
Requirements.
    OMB Control Number: 1117-0055.
    DEA Form Number: N/A.
    This final rule will require all DEA registrants supplying 
schedules I and II controlled substances or list I chemicals to DEA 
manufacturers to obtain certification of the manufacturer's procurement 
quota before completing the transaction. This provision will prevent 
manufacturers from purchasing active pharmaceutical ingredients from 
distributors, rather than other manufacturers, without including a 
quota certification. Current DEA regulations stipulate only that orders 
to entities registered as importers, manufacturers, or bulk 
manufacturers must include quota certifications. Manufacturers 
procuring schedules I and II controlled substances or list I chemicals 
must maintain a copy of the certification they provide with their order 
for a period of two years from the date of the certification. Under 
this final rule, this recordkeeping requirement will apply to 
certifications included with orders for schedules I and II controlled 
substances or list I chemicals to all registrants, including 
distributors.
    DEA estimates that distributors fill an average of 3,000 orders to 
manufacturers per year, which under this final rule, will require 3,000 
certification letters to be drafted and retained by manufacturers and 
reviewed by distributors. The estimated yearly cost of this activity is 
$35,241. For the purposes of this final rule, DEA estimates the 
following number of respondents and burden associated with the proposed 
requirement that procuring manufacturers create and retain copies of 
schedules I and II controlled substance and list I chemical quota 
certifications for two years:
    <bullet> Number of respondents: 500 (334 manufacturers and 166 
distributors).
    <bullet> Frequency of response: 9 per year.
    <bullet> Number of responses: 3,000.
    <bullet> Burden per response: .25 (minimal).
    <bullet> Total annual hour burden: 750 (minimal).
    If you need a copy of the information collection instrument(s) with 
instructions or additional information, please contact the Regulatory 
Drafting and Policy Support Section (DPW), Diversion Control Division, 
Drug Enforcement Administration; Mailing Address: 8701 Morrissette 
Drive, Springfield, Virginia 22152; Telephone: (571) 362-3261.
    No comments were received on any of the information collections 
being modified in connection with this final rule. Any comments related 
this collection of information may be sent in writing to the Office of 
Information and Regulatory Affairs, OMB, Attention: Desk Officer for 
DOJ, Washington, DC 20503. Please state that your comment refers to RIN 
1117-AB49/Docket No. DEA-455.

Congressional Review Act

    This rule is not a major rule as defined by the Congressional 
Review Act, 5 U.S.C. 804. This rule will not result in an annual effect 
on the economy of $100 million or more; a major increase in costs or 
prices; or significant adverse effects on competition, employment, 
investment, productivity, innovation, or on the ability of United 
States-based companies to compete with foreign-based companies in 
domestic and export markets.

List of Subjects

21 CFR Part 1303

    Administrative practice and procedure, Drug traffic control.

21 CFR Part 1315

    Administrative practice and procedure, Chemicals, Drug traffic 
control, Imports, Reporting and recordkeeping requirements.

    For the reasons set forth above, DEA is amending 21 CFR parts 1303 
and 1315 as follows:

PART 1303--QUOTAS

0
1. The authority citation for 21 CFR part 1303 continues to read as 
follows:

    Authority:  21 U.S.C. 821, 826, 871(b).


0
2. Add Sec. Sec.  1303.03, 1303.04, and 1303.05 to read as follows:


Sec.  1303.03  Types of quotas.

    The three types of quotas are:
    (a) Aggregate production quotas, which establish the total quantity 
of each basic class of schedules I and II controlled substances that 
may be produced by all manufacturers in a calendar year.
    (b) Individual manufacturing quotas, which establish the maximum 
quantity of each basic class of schedules I and II controlled 
substances that a registered manufacturer may manufacture during a 
calendar year. This type of quota is only issued to DEA-registered bulk 
manufacturers.
    (c) Procurement quotas, which establish the maximum quantity of 
each basic class of schedules I and II controlled substances that a 
registered manufacturer may procure during a calendar year for the 
purpose of manufacturing into dosage-forms or other substances.

[[Page 60140]]

Sec.  1303.04  Subcategories of manufacturing and procurement quotas.

    The five subcategories of manufacturing and procurement quotas are:
    (a) Quota for commercial sale. This is a quota for the amount of 
bulk active pharmaceutical ingredients (API) initially acquired by a 
registrant for the manufacture of approved schedule I or II controlled 
substance drug products by the Food and Drug Administration (FDA), and 
bulk API acquired by outsourcing facilities, manufacturers, etc. This 
quota category is used to capture bulk API moving from a bulk 
manufacturer to other registered manufacturers for their commercial 
manufacturing efforts. This type of quota may only be used to support 
commercial manufacturing efforts and may not be used to support other 
manufacturing efforts.
    (b) Quota for transfer. This is a quota for the amount of material 
moved upstream from one registrant to another and does not include 
material captured under procurement quota for commercial sale. Examples 
include:
    (1) Bulk API being transferred back to the original registrant 
after milling;
    (2) Transfer of in-process material or finished dosage-forms for 
additional manufacturing efforts (coating, beading, encapsulation, and 
so forth) back to the preceding registrant; and
    (3) Return of material after the specified manufacturing activity 
has been completed or return of rejected material to the upstream 
manufacturer for destruction or additional processing.
    (c) Quota for product development. This is a quota for the amount 
of material needed for product development and validation of 
manufacturing efforts. This quota is limited to that activity only and 
only for the development efforts noted in the application; it shall not 
be used or substituted for commercial production or the development of 
a different product. This quota is issued with the understanding that 
this material is not intended for commercial use, with the exception of 
post-FDA approved validation batches. Validation batches shall be noted 
specifically in an application and shall be considered product 
development material that will be taken into account for net disposal 
once a product is FDA-approved for commercial sale. No inventory will 
be granted for these efforts, nor will replacement quota be considered 
for destroyed material issued under this quota subcategory.
    (d) Quota for replacement. This is a type of individual 
manufacturing quota or procurement quota that is granted to a 
registrant after the registrant disposes of material that was initially 
intended for commercial sale, but for some reason was unable to be 
marketed. This quota is separate and shall not count against a 
registrant's other issued quota. Replacement quota will be granted on a 
case-by-case basis. The merits of the request will be determined by the 
specifics of the registrant's justification and situation. DEA will 
review the submitted DEA Form 41 or DEA Form 222 documenting the 
destruction of the controlled substance and evaluate the justification 
for the destruction to determine if replacement quota is warranted and 
whether or not the destroyed material is required to meet the 
legitimate demand of the market. Replacement quota is intended to 
replace material from the current quota year and not a means to replace 
disposed samples, analytical samples, product development material, or 
inventory acquired under previous quota years.
    (e) Quota for packaging/repackaging and labeling/relabeling. This 
is the quota for the amount of material moved to a registrant to 
undergo packaging and labeling activities. This quota is limited to 
that activity only and only for the packaging/repackaging and labeling/
relabeling noted in the application; it may not be used or substituted 
for commercial production. Packaging/repackaging and labeling/
relabeling quota is intended for tracking of schedules I and II 
controlled substances as they undergo packaging/labeling activities; 
however, packaging/repackaging and labeling/relabeling quotas shall not 
be counted against the aggregate production quotas.


Sec.  1303.05  Estimation of Diversion.

    (a) In establishing any quota under the sections in this part for a 
covered controlled substance, the Administrator shall estimate the 
amount of diversion of the covered controlled substance that occurs in 
the United States.
    (b) In estimating diversion under the sections in this part, the 
Administrator:
    (1) Shall consider information the Administrator, in consultation 
with the Secretary of Health and Human Services, determines reliable on 
rates of overdose deaths and abuse and overall public health impact 
related to the covered controlled substance in the United States; and
    (2) May take into consideration whatever other sources of 
information the Administrator determines reliable.
    (c) After estimating the amount of diversion of a covered 
controlled substance, the Administrator shall make appropriate quota 
reductions, as determined by the Administrator, from the quota the 
Administrator would have otherwise established had such diversion not 
been considered.
    (d) For purposes of this Part, the term ``covered controlled 
substances'' refers to fentanyl, oxycodone, hydrocodone, oxymorphone, 
and hydromorphone.

0
3. Revise the undesignated center heading ``Aggregate Production and 
Procurement Quotas'' to read as ``Aggregate Production Quotas''.

0
4. Amend Sec.  1303.11 by:
0
a. Adding a sentence to the end of paragraph (a);
0
b. Removing the date ``May 1'' in the first sentence of paragraph (c) 
and adding in its place ``September 1''; and
0
c. Adding paragraph (d).
    The revisions to read as follows:


Sec.  1303.11  Aggregate production quotas.

    (a) * * * The Administrator may establish an aggregate production 
quota in terms of pharmaceutical dosage-forms prepared from or 
containing the schedule I or II controlled substance, if he determines 
it will assist in avoiding the overproduction, shortages, or diversion 
of a controlled substance.
* * * * *
    (d) For any year for which the approved aggregate production quota 
for a covered controlled substance, as defined in Sec.  1303.05(d), is 
higher than the approved aggregate production quota for the covered 
controlled substance for the previous year, the Administrator, in 
consultation with the Secretary of Health and Human Services, shall 
include in the final order an explanation of why the public health 
benefits of increasing the quota clearly outweigh the consequences of 
having an increased volume of the covered controlled substance 
available for sale, and potential diversion, in the United States.

0
5. Add an undesignated center heading before Sec.  1303.15 to read as 
follows:
* * * * *
Procurement Quotas
* * * * *


Sec.  1303.12  [Redesignated as Sec.  1303.15]

0
6. Redesignate Sec.  1303.12 as Sec.  1303.15 and add and reserve a new 
Sec.  1303.12.

0
7. Amend newly redesignated 1303.15 Sec.  by:
0
a. Adding a sentence to the end of paragraph (a);
0
b. Revising the first sentence in paragraph (b);
0
c. Removing ``July'' in paragraph (c) introductory text and adding in 
its place ``December''; and

[[Page 60141]]

0
d. In paragraph (f), removing the words ``manufacturer'' and ``bulk 
manufacturer'' and adding in their place ``registrant'', and removing 
``Manufacturers'' and adding in its place ``A registrant''.
    The revision to read as follows:


Sec.  1303.15  Procurement quotas.

    (a) * * * The Administrator may establish a procurement quota in 
terms of pharmaceutical dosage-forms prepared from or containing the 
schedule I or II controlled substance, if they determine it will assist 
in avoiding the overproduction, shortages, or diversion of a controlled 
substance.
    (b) Any person who is registered to manufacture controlled 
substances listed in any schedule and who desires to use during the 
next calendar year any basic class of controlled substances listed in 
schedule I or II (except raw opium being imported by the registrant 
pursuant to an import permit) for purposes of manufacturing, shall 
apply on DEA Form 250 for procurement quota and shall state separately 
for each subcategory, as defined in 21 CFR 1303.04, each quantity of 
such basic class. * * *
* * * * *

0
8. Add Sec.  1303.16 to read as follows:


Sec.  1303.16  Inventory allowance for procurement quotas.

    (a) For the purpose of determining procurement quotas pursuant to 
Sec.  1303.15, each registered manufacturer shall be allowed as part of 
such quota an amount sufficient to maintain an inventory:
    (1) Except as provided in paragraph (a)(3) of this section, for 
current manufacturers, 35 percent of their average estimated net 
disposal for the current calendar year and the last preceding calendar 
year; or
    (2) Except as provided in paragraph (a)(4) of this section, for new 
manufacturers, 35 percent of their reasonably estimated net disposal 
for the next calendar year as determined by the Administrator.
    (3) For current liquid injectable dosage-form manufacturers, 50 
percent of their average estimated net disposal for the current 
calendar year and the last preceding calendar year; or
    (4) For new liquid injectable dosage-form manufacturers, 50 percent 
of their reasonably estimated net disposal for the next calendar year 
as determined by the Administrator.
    (b) Except as provided in paragraph (c) of this section, during 
each calendar year, each registered manufacturer receiving a 
procurement quota shall be allowed to maintain an inventory of a basic 
class not exceeding 50 percent of his estimated net disposal of that 
class for that year, as determined at the time their quota for that 
year was determined. At any time the inventory of a basic class held by 
a manufacturer exceeds 50 percent of their estimated net disposal, 
their quota for that class is automatically suspended and shall remain 
suspended until his inventory is less than 45 percent of their 
estimated net disposal. The Administrator may, upon application and for 
good cause shown, permit a manufacturer whose quota is, or is likely to 
be, suspended pursuant to this paragraph to continue manufacturing and 
to accumulate an inventory in excess of 50 percent of their estimated 
net disposal, upon such conditions and within such limitations as the 
Administrator may find necessary or desirable.
    (c) For liquid injectable dosage-forms, each registered 
manufacturer receiving a procurement quota shall be allowed to maintain 
an inventory of a basic class not exceeding 65 percent of their 
estimated net disposal of that class for that year during each calendar 
year, as determined at the time their quota for that year was 
determined. At any time the inventory of a basic class held by a 
manufacturer exceeds 65 percent of their estimated net disposal, their 
quota for that class is automatically suspended and shall remain 
suspended until their inventory is less than 60 percent of his 
estimated net disposal. The Administrator may, upon application and for 
good cause shown, permit a manufacturer whose quota is, or is likely to 
be, suspended pursuant to this paragraph to continue manufacturing and 
to accumulate an inventory in excess of 65 percent of their estimated 
net disposal, upon such conditions and within such limitations as the 
Administrator may find necessary or desirable.
    (d) Except as provided in paragraph (e) of this section, if, during 
a calendar year, a registrant has procured the entire quantity of a 
basic class allocated to him under an individual procurement quota, and 
their inventory of that class is less than 25 percent of his estimated 
net disposal of that class for that year, the Administrator may, upon 
application pursuant to Sec.  1303.15(d), increase the quota of such 
registrant sufficiently to allow restoration of the inventory to 35 
percent of the estimated net disposal for that year.
    (e) For liquid injectable dosage-forms, if, during a calendar year, 
a registrant has procured the entire quantity of a basic class 
allocated to them under an individual procurement quota, and their 
inventory of that class is less than 40 percent of their estimated net 
disposal of that class for that year, the Administrator may, upon 
application pursuant to Sec.  1303.15(d), increase the quota of such 
registrant sufficiently to allow restoration of the inventory to 50 
percent of the estimated net disposal for that year.

0
9. Add Sec.  1303.17 to read as follows:


Sec.  1303.17  Abandonment of procurement quota.

    Any manufacturer assigned a procurement quota for any basic class 
of controlled substance listed in schedule I or II pursuant to Sec.  
1303.12 may at any time abandon their right to manufacture all or any 
part of such quota by filing a notice of such abandonment with the UN 
Reporting and Quota Section, Diversion Control Division, Drug 
Enforcement Administration in the online Quota Management System. The 
Administrator may, in their discretion, allocate such amount among the 
other manufacturers in proportion to their respective quotas.

0
10. In Sec.  1303.21 amend paragraph (a) by removing the date ``July 
1'' in the first sentence and adding in its place ``December 1'' and 
adding a new second sentence to read as follows


Sec.  1303.21  Individual manufacturing quotas.

    (a) * * * The Administrator may establish an individual 
manufacturing quota in terms of pharmaceutical dosage-forms prepared 
from or containing the schedule I or II controlled substance, if they 
determine it will assist in avoiding the overproduction, shortages, or 
diversion of a controlled substance. * * *
* * * * *

0
10. Amend Sec.  1303.22 by revising the first sentence of the 
introductory text to read as follows:


Sec.  1303.22  Procedure for applying for individual manufacturing 
quotas.

    Any person who is registered to manufacture any basic class of 
controlled substance listed in schedule I or II and who desires to 
manufacture a quantity of such class shall apply on DEA Form 189 for a 
manufacturing quota and shall state separately for each subcategory, as 
defined in Sec.  1303.04, each quantity of such class. * * *
* * * * *


Sec.  1303.23  Procedure for applying for individual manufacturing 
quotas.

0
11. In Sec.  1303.23, amend paragraph (c) by removing the date ``March 
1'' in the first sentence and adding in its place ``July 1''.

[[Page 60142]]


0
12. Revise Sec.  1303.24 to read as follows:


Sec.  1303.24  Inventory allowance for individual manufacturing quotas.

    (a) For the purpose of determining individual manufacturing quotas 
pursuant to Sec.  1303.23, each registered manufacturer shall be 
allowed as part of such quota an amount sufficient to maintain an 
inventory equal to:
    (1) For current manufacturers, 40 percent of their average 
estimated net disposal for the current calendar year and the last 
preceding calendar year; or
    (2) For new manufacturers, 40 percent of their reasonably estimated 
net disposal for the next calendar year as determined by the 
Administrator.
    (b) During each calendar year, each registered manufacturer shall 
be allowed to maintain an inventory of a basic class not exceeding 55 
percent of their estimated net disposal of that class for that year, as 
determined at the time their quota for that year was determined. At any 
time the inventory of a basic class held by a manufacturer exceeds 55 
percent of their estimated net disposal, their quota for that class is 
automatically suspended and shall remain suspended until their 
inventory is less than 50 percent of their estimated net disposal. The 
Administrator may, upon application and for good cause shown, permit a 
manufacturer whose quota is, or is likely to be, suspended pursuant to 
this paragraph to continue manufacturing and to accumulate an inventory 
in excess of 55 percent of their estimated net disposal, upon such 
conditions and within such limitations as the Administrator may find 
necessary or desirable.
    (c) If, during a calendar year, a registrant has manufactured the 
entire quantity of a basic class allocated to them under an individual 
manufacturing quota, and their inventory of that class is less than 30 
percent of their estimated net disposal of that class for that year, 
the Administrator may, upon application pursuant to Sec.  1303.25, 
increase the quota of such registrant sufficiently to allow restoration 
of the inventory to 40 percent of the estimated net disposal for that 
year.

0
13. Amend Sec.  1303.27 by revising the section heading and the first 
sentence to read as follows:


Sec.  1303.27  Abandonment of quota for Individual Manufacturing Quota.

    Any manufacturer assigned an individual manufacturing quota for any 
basic class of controlled substance listed in schedule I or II pursuant 
to Sec.  1303.23 may at any time abandon their right to manufacture all 
or any part of such quota by filing a notice of such abandonment with 
the UN Reporting and Quota Section, Diversion Control Division, Drug 
Enforcement Administration in the online Quota Management System. * * *

PART 1315--IMPORTATION AND PRODUCTION QUOTAS FOR EPHEDRINE, 
PSEUDOEPHEDRINE, AND PHENYLPROPANOLAMINE

0
14. The authority citation for part 1315 continues to read as follows:

    Authority: 21 U.S.C. 802, 821, 826, 871(b), 952.


0
15. Add Sec.  1315.06 to read as follows:


Sec.  1315.06  Assessment of Annual Needs; Types of quotas.

    The four types of quotas are:
    (a) Assessment of annual needs, which establishes the total 
quantity of ephedrine, pseudoephedrine, and phenylpropanolamine 
necessary to be manufactured and imported by all manufacturers and 
importers in a calendar year.
    (b) Individual manufacturing quotas, which establish the maximum 
quantity of ephedrine, pseudoephedrine, and phenylpropanolamine that a 
registered manufacturer may manufacture during a calendar year. This 
type of quota is only issued to DEA-registered bulk manufacturers.
    (c) Procurement quotas, which establish the maximum quantity of 
ephedrine, pseudoephedrine, and phenylpropanolamine that a registered 
manufacturer may procure during a calendar year for the purpose of 
manufacturing into dosage-forms or other substances.
    (d) Import quotas, which establish the maximum quantity of 
ephedrine, pseudoephedrine, and phenylpropanolamine that a registered 
importer may import during the calendar year for distribution to their 
DEA-registered customers.

0
16. Add Sec.  1315.07 to read as follows:


Sec.  1315.07  Subcategories of manufacturing and procurement quota.

    The five subcategories are:
    (a) Quota for Commercial Sale is a quota for the amount of bulk 
active pharmaceutical ingredients (API) initially acquired by a 
registrant for the manufacture of ephedrine, pseudoephedrine, and 
phenylpropanolamine products and bulk API acquired by outsourcing 
facilities, manufacturers, etc. This type of quota shall only be used 
to support commercial manufacturing efforts and shall not be used to 
support other manufacturing efforts.
    (b) Quota for Transfer is a quota for the amount of material moved 
from one registrant to another and does not include material captured 
under procurement quota for commercial sale. Examples include: 1. Bulk 
API being transferred back to the original registrant after milling; 2. 
Transfer of in-process material or finished dosage-forms for additional 
manufacturing efforts (coating, beading, encapsulation, and so forth) 
back to the preceding registrant; and 3. Return of material after the 
specified manufacturing activity has been completed.
    (c) Quota for Product Development is a quota for the amount of 
material needed for product development and validation manufacturing 
efforts. This quota is limited to that activity only and only for the 
development efforts noted in the application; it shall not be used or 
substituted for commercial production or the development of a different 
product. This quota is issued with the understanding that this material 
is not intended for commercial use, with the exception of FDA-approved 
or OTC Monograph validation batches. Validation batches shall be noted 
specifically in an application and shall be considered product 
development material that will be taken into account once a product is 
FDA-approved for commercial sale. No inventory shall be granted for 
these efforts, nor shall replacement quota be considered for destroyed 
material issued under this quota subcategory.
    (d) Quota for Replacement is a type of individual manufacturing 
quota or procurement quota that is granted to a registrant after the 
registrant disposes of material that was initially intended for 
commercial sale, but for some reason was unable to be marketed. This 
quota is separate and shall not count against a registrant's other 
issued quota. Replacement quota will be granted on a case by case 
basis. The merits of the request shall be determined by the 
registrant's justification. Replacement quota is intended to replace 
material from the current quota year and shall not be used to replace 
disposed samples, analytical samples, product development material or 
inventory acquired under previous quota years.
    (e) Quota for Packaging/Repackaging and Labeling/Relabeling is 
quota for the amount of material moved to a registrant to undergo 
packaging and labeling activities. This quota is limited to that 
activity only and only for the packaging/repackaging and labeling/
relabeling noted in the application; it shall not be used or 
substituted for commercial

[[Page 60143]]

production or the packaging of a different product.


Sec.  1315.11  Assessment of annual needs.

0
17. In Sec.  1315.11, amend paragraph (c) by removing the date ``May 
1'' in the first sentence and adding in its place the date ``September 
1''.


Sec.  1315.21  Individual manufacturing quotas.

0
18. Amend Sec.  1315.21 by removing the date ``July 1'' in the first 
sentence and adding in its place the date ``December 1''.

0
19. Amend Sec.  1315.22 by revising the first sentence of the 
introductory text to read as follows:


Sec.  1315.22  Procedure for applying for individual manufacturing 
quotas.

    Any person who is registered to manufacture ephedrine, 
pseudoephedrine, or phenylpropanolamine and who desires to manufacture 
a quantity of the chemical must apply on DEA Form 189 for a 
manufacturing quota for the quantity of the chemical and shall state 
separately for each subcategory, as defined in Sec.  1315.07, each 
quantity of such chemical. * * *
* * * * *


Sec.  1315.23  Procedure for fixing individual manufacturing quotas.

0
20. In Sec.  1315.23, amend paragraph (c) by removing the date ``March 
1'' in the first sentence and adding in its place the date ``July 1''.

0
21. Revise Sec.  1315.24 to read as follows:


Sec.  1315.24  Inventory allowance for individual manufacturing quotas.

    (a) For the purpose of determining individual manufacturing quotas 
pursuant to Sec.  1315.23, each registered manufacturer shall be 
allowed as part of such quota an amount sufficient to maintain an 
inventory:
    (1) For current manufacturers, 40 percent of their average 
estimated net disposal for the current calendar year and the last 
preceding calendar year; or
    (2) For new manufacturers, 40 percent of their reasonably estimated 
net disposal for the next calendar year as determined by the 
Administrator.
    (b) During each calendar year, each registered manufacturer 
receiving a manufacturing quota shall be allowed to maintain an 
inventory of a chemical not exceeding 55 percent of their estimated net 
disposal of that chemical for that year, as determined at the time his 
quota for that year was determined. At any time the inventory of a 
chemical held by a manufacturer exceeds 55 percent of their estimated 
net disposal, their quota for that chemical is automatically suspended 
and shall remain suspended until their inventory is less than 50 
percent of his estimated net disposal. The Administrator may, upon 
application and for good cause shown, permit a manufacturer whose quota 
is, or is likely to be, suspended pursuant to this paragraph to 
continue manufacturing and to accumulate an inventory in excess of 55 
percent of their estimated net disposal, upon such conditions and 
within such limitations as the Administrator may find necessary or 
desirable.
    (c) If, during a calendar year, a registrant has manufactured the 
entire quantity of a chemical allocated to them under an individual 
manufacturing quota, and their inventory of that chemical is less than 
30 percent of his estimated net disposal of that class for that year, 
the Administrator may, upon application pursuant to Sec.  1315.25, 
increase the quota of such registrant sufficiently to allow restoration 
of the inventory to 40 percent of the estimated net disposal for that 
year.

0
22. Amend Sec.  1315.27 by revising the first sentence to read as 
follows:


Sec.  1315.27  Abandonment of individual manufacturing quota.

    Any manufacturer assigned an individual manufacturing quota for a 
chemical pursuant to Sec.  1315.23 may at any time abandon their right 
to manufacture all or any part of such quota by filing a notice of such 
abandonment with the UN Reporting and Quota Section, Diversion Control 
Division, Drug Enforcement Administration in the online Quota 
Management System. * * *

0
23. Add Sec.  1315.31 to read as follows:


Sec.  1315.31  Inventory allowance for procurement quotas.

    (a) For the purpose of determining procurement quotas pursuant to 
Sec.  1315.32, each registered manufacturer shall be allowed as part of 
such quota an amount sufficient to maintain an inventory:
    (1) Except as provided in paragraph (a)(3) of this section, for 
current manufacturers, 35 percent of his average estimated net disposal 
for the current calendar year and the last preceding calendar year; or
    (2) Except as provided in paragraph (a)(4) of this section, for new 
manufacturers, 35 percent of his reasonably estimated net disposal for 
the next calendar year as determined by the Administrator.
    (3) For current liquid injectable dosage-form manufacturers, 50 
percent of his average estimated net disposal for the current calendar 
year and the last preceding calendar year; or
    (4) For new liquid injectable dosage-form manufacturers, 50 percent 
of his reasonably estimated net disposal for the next calendar year as 
determined by the Administrator.
    (b) Except as provided in paragraph (c) of this section, during 
each calendar year, each registered manufacturer receiving a 
procurement quota shall be allowed to maintain an inventory of a 
chemical not exceeding 50 percent of his estimated net disposal of that 
chemical for that year, as determined at the time his quota for that 
year was determined. At any time the inventory of a chemical held by a 
manufacturer exceeds 50 percent of his estimated net disposal, his 
quota for that chemical is automatically suspended and shall remain 
suspended until his inventory is less than 45 percent of his estimated 
net disposal. The Administrator may, upon application and for good 
cause shown, permit a manufacturer whose quota is, or is likely to be, 
suspended pursuant to this paragraph to continue manufacturing and to 
accumulate an inventory in excess of 50 percent of his estimated net 
disposal, upon such conditions and within such limitations as the 
Administrator may find necessary or desirable.
    (c) For liquid-injectable dosage-forms, during each calendar year, 
each registered manufacturer receiving a procurement quota shall be 
allowed to maintain an inventory of a chemical not exceeding 65 percent 
of his estimated net disposal of that chemical for that year, as 
determined at the time his quota for that year was determined. At any 
time the inventory of a chemical held by a manufacturer exceeds 65 
percent of his estimated net disposal, his quota for that chemical is 
automatically suspended and shall remain suspended until his inventory 
is less than 60 percent of his estimated net disposal. The 
Administrator may, upon application and for good cause shown, permit a 
manufacturer whose quota is, or is likely to be, suspended pursuant to 
this paragraph to continue manufacturing and to accumulate an inventory 
in excess of 65 percent of his estimated net disposal, upon such 
conditions and within such limitations as the Administrator may find 
necessary or desirable.
    (d) If, during a calendar year, a registrant has procured the 
entire quantity of a chemical allocated to him under an individual 
procurement quota, and his inventory of that chemical is less than 25 
percent of his estimated net disposal of that class for that year, the

[[Page 60144]]

Administrator may, upon application pursuant to Sec.  1315.25, increase 
the quota of such registrant sufficiently to allow restoration of the 
inventory to 35 percent of the estimated net disposal for that year.
    (e) For liquid-injectable dosage-forms, if, during a calendar year, 
a registrant has procured the entire quantity of a chemical allocated 
to him under an individual procurement quota, and his inventory of that 
chemical is less than 40 percent of his estimated net disposal of that 
class for that year, the Administrator may, upon application pursuant 
to Sec.  1315.25, increase the quota of such registrant sufficiently to 
allow restoration of the inventory to 50 percent of the estimated net 
disposal for that year.

0
24. Amend Sec.  1315.32 by:
0
a. Revising the first sentence in paragraph (a);
0
b. Removing the date ``July 1'' in the introductory text of paragraph 
(f) and adding in its place the date ``December 1'';
0
c. Removing ``manufacturer or importer'' in paragraph (h) and adding in 
its place ``registrant''.
    The revision to read as follows:


Sec.  1315.32  Obtaining a procurement quota.

    (a) Any person who is registered to manufacture ephedrine, 
pseudoephedrine, or phenylpropanolamine, or whose requirement of 
registration is waived pursuant to Sec.  1309.24 of this chapter, and 
who desires to use during the next calendar year any ephedrine, 
pseudoephedrine, or phenylpropanolamine for purposes of manufacturing 
(including repackaging or relabeling), must apply on DEA Form 250 for a 
procurement quota for the chemical and shall state separately for each 
subcategory, as defined in 21 CFR 1315.07, each quantity of such 
chemical. * * *
* * * * *


Sec.  1315.34  Obtaining an import quota.

0
25. In Sec.  1315.34 amend paragraph (f) by removing the date ``July 
1'' and adding, in its place, the date ``December 1''.

0
26. Add Sec.  1315.37 to read as follows:


Sec.  1315.37  Abandonment of procurement quota.

    Any manufacturer assigned a procurement quota for a chemical 
pursuant to Sec.  1315.23 may at any time abandon his right to 
manufacture all or any part of such quota by filing a notice of such 
abandonment with the UN Reporting and Quota Section, Diversion Control 
Division, Drug Enforcement Administration in the online Quota 
Management System. The Administrator may, in his discretion, allocate 
the amount among the other manufacturers in proportion to their 
respective quotas.

Signing Authority

    This document of the Drug Enforcement Administration was signed on 
August 28, 2023, by Administrator Anne Milgram. That document with the 
original signature and date is maintained by DEA. For administrative 
purposes only, and in compliance with requirements of the Office of the 
Federal Register, the undersigned DEA Federal Register Liaison Officer 
has been authorized to sign and submit the document in electronic 
format for publication, as an official document of DEA. This 
administrative process in no way alters the legal effect of this 
document upon publication in the Federal Register.

Scott Brinks,
Federal Register Liaison Officer, Drug Enforcement Administration.
[FR Doc. 2023-18885 Filed 8-30-23; 8:45 am]
BILLING CODE 4410-09-P