```

[Federal Register Volume 77, Number 51 (Thursday, March 15, 2012)]
[Rules and Regulations]
[Pages 15234-15250]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-6253]

[[Page 15234]]

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DEPARTMENT OF JUSTICE

Drug Enforcement Administration

21 CFR Parts 1301 and 1309

[Docket No. DEA-346]
RIN 1117-AB32

Controlled Substances and List I Chemical Registration and 
Reregistration Fees

AGENCY: Drug Enforcement Administration (DEA), Department of Justice.

ACTION: Final rule.

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SUMMARY: This rule adjusts the fee schedule for DEA registration and 
reregistration fees necessary to recover the costs of the Diversion 
Control Program relating to the registration and control of the 
manufacture, distribution, dispensing, importation, and exportation of 
controlled substances and List I chemicals as mandated by the 
Controlled Substances Act.

DATES: Effective: April 16, 2012.

FOR FURTHER INFORMATION CONTACT: Alan G. Santos, Associate Deputy 
Assistant Administrator, Office of Diversion Control, Drug Enforcement 
Administration, Mailing address: 8701 Morrissette Drive, Springfield, 
Virginia 22152; Telephone: (202) 307-7165.

SUPPLEMENTARY INFORMATION: 

Background

Legal Authority

    The Drug Enforcement Administration (DEA) is a component of the 
Department of Justice and is the primary agency responsible for 
coordinating the drug law enforcement activities of the United States. 
DEA also assists in the implementation of the President's National Drug 
Control Strategy. DEA's mission is to enforce U.S. controlled 
substances laws and regulations and bring to the criminal and civil 
justice system those organizations and individuals involved in the 
growing, manufacturing, or distribution of controlled substances and 
listed chemicals appearing in or destined for illicit traffic in the 
U.S., including organizations that use drug trafficking proceeds to 
finance terrorism. The diversion control program (DCP) is a strategic 
component of the DEA's law enforcement mission. The DCP implements and 
enforces Titles II and III of the Comprehensive Drug Abuse Prevention 
and Control Act of 1970 and the Controlled Substances Import and Export 
Act (CSIEA) (21 U.S.C. 801-971), as amended (hereinafter, ``CSA'').\1\ 
DEA publishes the implementing regulations for these statutes in Title 
21 of the Code of Federal Regulations (CFR), Parts 1300 to 1321. The 
CSA, together with these regulations, is designed to help prevent, 
detect, and eliminate the diversion of controlled substances and listed 
chemicals into the illicit market while ensuring a sufficient supply of 
controlled substances and listed chemicals for legitimate medical, 
scientific, research, and industrial purposes.
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    \1\ The Attorney General's delegation of authority to DEA may be 
found at 28 CFR 0.100.
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    Pursuant to the CSA, each controlled substance is classified in one 
of five schedules based upon its potential for abuse, currently 
accepted medical use, and the degree of dependence it may cause if 
abused. 21 U.S.C. 812. Likewise, under the CSA, listed chemicals are 
separately classified based on their use and importance to the 
manufacture of controlled substances (List I or List II chemicals). 21 
U.S.C. 802(33)-(35). The CSA mandates that DEA register persons and 
entities who manufacture, distribute, import, or export controlled 
substances or List I chemicals, and those persons and entities who 
dispense or conduct research or chemical analysis with controlled 
substances. These registrants are permitted to handle controlled 
substances and List I chemicals as authorized by their registration and 
are required to comply with the applicable requirements associated with 
their registration. 21 U.S.C. 822, 958. The identification and 
registration of all individuals and entities authorized to handle 
controlled substances and List I chemicals establishes a closed system 
of distribution that DEA is charged to maintain.
    Under the CSA, DEA is authorized to charge reasonable fees relating 
to the registration and control of the manufacture, distribution, 
dispensing, import, and export of controlled substances and listed 
chemicals. 21 U.S.C. 821 and 958(f). DEA must set fees at a level that 
ensures the recovery of the full costs of operating the various aspects 
of its DCP. 21 U.S.C. 886a. Each year, DEA is required by statute to 
transfer the first $15 million of fee revenues into the general fund of 
the Treasury, and the remainder of the fee revenues is deposited into a 
separate fund of the Treasury called the Diversion Control Fee Account 
(DCFA). 21 U.S.C. 886a(1). On at least a quarterly basis, the Secretary 
of the Treasury is required to reimburse DEA an amount from the DCFA 
``in accordance with estimates made in the budget request of the 
Attorney General for those fiscal years'' for the operation of the 
DCP.\2\ 21 U.S.C. 886a(1)(B) and (D). A Notice of Proposed Rulemaking 
(NPRM) proposing an adjusted fee schedule for DEA registration and 
reregistration was published on July 6, 2011, at 76 FR 39318, with a 60 
day comment period. The comment period closed on September 6, 2011.
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    \2\ The diversion control program (DCP) consists of the 
controlled substance and chemical diversion control activities of 
DEA. These activities are related to the registration and control of 
the manufacture, distribution, dispensing, importation, and 
exportation of controlled substances and listed chemicals (21 U.S.C. 
886a(2)).
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History of Fees
    In 1970, Congress consolidated more than 50 laws related to the 
control of narcotics and dangerous drugs into one statute--the CSA. The 
statute was ``designed to improve the administration and regulation of 
the manufacturing, distribution, and dispensing of controlled 
substances by providing for a `closed' system of drug distribution for 
legitimate handlers of such drugs,'' with criminal penalties for 
transactions outside the legitimate chain.\3\ With the enactment of the 
CSA, the Bureau of Narcotics and Dangerous Drugs (BNDD) was granted the 
authority to charge reasonable fees relating to both registration and 
control \4\ of persons and entities engaged in the manufacture, 
distribution, dispensing, export, and import of controlled 
substances.\5\ To this end, BNDD established a three-

[[Page 15235]]

tiered fee structure for companies and individuals wishing to 
participate in the U.S. controlled substance industry.\6\
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    \3\ H.R. Rep. No. 91-1444 (1970), reprinted in 1970 U.S.C.C.A.N. 
4566, 4571-4572.
    \4\ The term ``control'' as defined in 21 U.S.C. 802(5) 
specifically applies to Part B of Title II of the CSA only (21 
U.S.C. 811-814). In general, ``diversion control'' is a broad term 
encompassing activities related to preventing and detecting the 
diversion of controlled substances and listed chemicals from 
legitimate commerce into the illicit market. In 1992, Congress 
established the Diversion Control Fee Account and required that the 
fees charged by DEA under its diversion control program be set at a 
level that ensures the recovery of the full costs of operating the 
various aspects of that program (Pub. L. 102-395, 106 Stat. 1843). 
In 2004, Congress amended the CSA and defined ``diversion control 
program'' and ``controlled substance and chemical diversion control 
activities'' (Pub. L. 108-447, 118 Stat. 2921, codified in 21 U.S.C. 
886a). The ``diversion control program'' means the controlled 
substance and chemical diversion control activities of the Drug 
Enforcement Administration. 21 U.S.C. 886a(2)(A). The term 
``controlled substance and chemical diversion control activities'' 
means those activities related to the registration and control of 
the manufacture, distribution, dispensing, importation, and 
exportation of controlled substances and listed chemicals. 21 U.S.C. 
886a(2)(B).
    \5\ DEA's authority to charge reasonable fees was later expanded 
to include manufacturers, distributors, importers, and exporters of 
List I chemicals. The Domestic Chemical Diversion Control Act of 
1993, Public Law 103-200, 107 Stat. 2333.
    \6\ 36 FR 4928 (March 13, 1971); 36 FR 7776 (April 24, 1971).
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    In 1973, BNDD was abolished, and all of its functions were 
transferred to the newly-created DEA, including the authority to charge 
registrants reasonable fees.\7\ In 1982, the General Accounting Office 
(GAO) \8\ advised that the 1971 fee schedule did not adequately recover 
the costs for the DCP administered by DEA. An increase in fees was 
proposed and finalized in 1983.\9\ All fees collected through 1992 were 
deposited into the general fund of the United States Treasury.
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    \7\ Reorganization Plan No. 2 of 1973, 38 FR 18380 (July 2, 
1973).
    \8\ GAO/GGD-83-2, October 29, 1982.
    \9\ 48 FR 14640 (April 5, 1983); 48 FR 56043 (December 19, 
1983).
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    In 1993, Congress determined that the DCP would be fully funded by 
fees rather than by appropriations,\10\ and established the DCFA as a 
separate account of the Treasury to ``[ensure] the recovery of the full 
costs of operating the various aspects of [the diversion control 
program]'' from fees charged by DEA. 21 U.S.C. 886a(1)(C). Congress 
also specified the general operation of the DCFA. Each fiscal year, the 
first $15 million of collected fees are transferred to the general fund 
of the Treasury and are not directly available for use by the DCP. Fees 
collected in excess of $15 million are used to reimburse DEA for 
expenses incurred in the operation of the DCP, in accordance with 
estimates made in the budget request of the Attorney General. 21 U.S.C. 
886a(1).
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    \10\ Departments of Commerce, Justice, and State, the Judiciary 
and Related Agencies Appropriations Act of 1993, Public Law 102-395, 
codified in relevant part at 21 U.S.C. 886a.
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    Shortly after enactment of the 1993 Appropriations Act, DEA 
published a NPRM proposing to increase the existing fee schedule to 
comply with Congress's direction to set fees at a level that ensures 
the recovery of the full costs of operating the DCP.\11\ After a 
comment period, a final rule was published on March 22, 1993, 
implementing changes to the fee structure and excluding chemical 
control costs from the calculation of fees.\12\ Several registrants 
impacted by the fee increase challenged it, first in federal district 
court, where it was upheld, and subsequently on appeal, where it was 
remanded for additional information to support the fees.\13\
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    \11\ 57 FR 60148 (December 18, 1992).
    \12\ 58 FR 15272 (March 22, 1993).
    \13\ American Medical Association v. Reno, 857 F. Supp. 80 
(D.D.C. 1994), aff'd, 57 F.3d 1129 (DC Cir. 1995).
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    Upon remand, the March 1993 final fee rule was reopened for further 
comment in 1996.\14\ DEA undertook studies and internal reorganizations 
to enable it to better identify DCP activities and costs, and, in 2002, 
DEA published for additional public comment more information on the 
components and activities of the fee-funded DCP.\15\ After that 
publication, the Office of the Inspector General, Department of Justice 
(OIG) concluded its review of the DCP, and determined that DEA was not 
adequately supporting the DCP.\16\
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    \14\ 61 FR 68624 (December 30, 1996).
    \15\ 67 FR 51988 (August 9, 2002).
    \16\ ``Review of the Drug Enforcement Administration's Control 
of the Diversion of Controlled Pharmaceuticals,'' I-2002-010, 
September 2002, www.usdoj.gov/oig/reports/DEA/e0210/index.htm.
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    In February 2003, DEA published a proposed rule to raise 
registration and reregistration fees so as to comply with the statutory 
requirement to charge fees at a level ensuring the recovery of the full 
costs of operating the various aspects of the DCP.\17\ Shortly 
thereafter, DEA created the Validation Unit to ensure that DCFA-funded 
expenditures support registration and diversion control-related 
activities. The Validation Unit reports to the DEA Deputy Administrator 
and independently reviews specified expenditures attributable to the 
DCFA. If an expense only partially supports the DCP, such as a field 
office's rent or utility cost, the Validation Unit determines the 
amount that may be properly apportioned to the DCFA. On October 10, 
2003, a new fee was finalized by publication of a final rule.\18\
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    \17\ 68 FR 7728 (February 18, 2003).
    \18\ 68 FR 58587 (October 10, 2003). DEA published a correction 
to this final rule where the internal DEA computer system, Firebird, 
was identified as being solely funded through appropriations. The 
Firebird system costs are properly apportioned as a DCP cost as well 
as a non-DCP appropriations expense. 69 FR 34568 (June 22, 2004).
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    Meanwhile, in December 1993, the Domestic Chemical Diversion 
Control Act of 1993 amended the CSA to require that manufacturers, 
distributors, importers, and exporters of List I chemicals obtain a 
registration from DEA. DEA was also authorized to charge ``reasonable 
fees relating * * * to the registration and control of regulated 
persons and regulated transactions.'' \19\
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    \19\ The Domestic Chemical Diversion Control Act of 1993, Public 
Law 103-200, 107 Stat. 2333.
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    In 2004, the CSA was amended to define the DCP as ``the controlled 
substance and chemical diversion control activities of the Drug 
Enforcement Administration.'' 21 U.S.C. 886a(2)(A).\20\ Furthermore, 
``controlled substance and chemical diversion control activities'' 
means ``those activities related to the registration and control of the 
manufacture, distribution, dispensing, importation, and exportation of 
controlled substances and listed chemicals.'' 21 U.S.C. 886a(2)(B). 
Congress further provided that reimbursements from the DCFA ``shall be 
made without distinguishing between expenses related to controlled 
substance activities and expenses related to chemical activities'' (21 
U.S.C. 886a(1)(B)) and amended the language of 21 U.S.C. 821 and 958(f) 
to be consistent with the definition of the DCP articulated in 21 
U.S.C. 886a(2). As a result, all fees collected in excess of $15 
million are deposited into the DCFA, and reimbursements by the 
Secretary of the Treasury are made without distinction between 
controlled substance and List I chemical activities.
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    \20\ Public Law 108-447, Departments of Commerce, Justice, and 
State, the Judiciary and Related Agencies Appropriations Act of 
2005, signed into law on December 8, 2004.
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    In 2005, based upon internal organizational changes and the 2005 
Appropriations Act, DEA proposed an adjusted fee schedule to 
appropriately reflect all costs associated with the DCP.\21\ In July 
2006, the OIG reported on its Follow-up Review of DEA's Efforts to 
Control the Diversion of Controlled Pharmaceuticals and recommended 
that DEA apply more resources to diversion control, including more 
Special Agent support.\22\ The OIG also recommended that DEA increase 
training for those individuals who support the DCP. The OIG also noted 
that the diversion of controlled substance pharmaceuticals had 
dramatically increased over recent years and that the increase 
coincided with the use of emerging technologies such as the Internet. 
Twelve comments were received and analyzed in response to DEA's 
proposed fee rule, and DEA published the final rule on August 29, 
2006.\23\ Collections associated with that fee adjustment did not begin 
until FY 2007, on November 1, 2006.
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    \21\ 70 FR 69474 (November 16, 2005).
    \22\ ``Follow-Up Review of the Drug Enforcement Administration's 
Efforts to Control the Diversion of Controlled Pharmaceuticals,'' I-
2006-004, July 2006, www.usdoj.gov/oig/reports/DEA/e0604/final.pdf.
    \23\ 71 FR 51105 (August 29, 2006).
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    The OIG completed a Review of DEA's Use of the Diversion Control 
Fee Account in 2008 and did not find that any DCFA funds were misused 
for non-diversion control activities between FY 2004 and FY 2007. To 
the contrary, the OIG found that DEA did not fully fund

[[Page 15236]]

all diversion control costs with the DCFA, as required by law.\24\
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    \24\ ``Review of the Drug Enforcement Administration's Use of 
the Diversion Control Fee Account,'' I-2008-002, February 2008, 
www.usdoj.gov/oig/reports/DEA/e0802/final.pdf.
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The Proposed Rule

    It has been more than five years since the last fee adjustment. DEA 
proposed a new fee schedule by publication of a NPRM on July 6, 2011. 
76 FR 39318-41. DEA outlined the scope of the DCP, the need for a new 
fee calculation, the four different methodologies or options considered 
for calculating the fee, the proposed weighted-ratio methodology, and 
the calculation resulting in the proposed fee increase of approximately 
33 percent. The fee increase incorporates additional DCP costs 
identified in the above-mentioned OIG report, as well as an expanded 
diversion control program required by Congress, and it accounts for a 
number of current circumstances related to the diversion of controlled 
substance pharmaceuticals and listed chemicals.

Methodology for Fee Calculation

    Fees must be ``set at a level that ensures the recovery of the full 
costs of operating the various aspects of [the DCP].'' 21 U.S.C. 
886a(1)(C). In addition, any methodology for calculating fees must 
result in fees that are reasonable. 21 U.S.C. 821 and 958(f). As 
outlined below in responses to comments, DEA must calculate and collect 
fees prior to actually expending the funds in order to have funds with 
which to operate the DCP. Moreover, each year DEA is required to 
transfer the first $15 million of fee revenues into the general fund of 
the Treasury, with the remainder deposited into a separate fund of the 
Treasury called the Diversion Control Fee Account or DCFA. 21 U.S.C. 
886a(1). On at least a quarterly basis, the Secretary of the Treasury 
is required to reimburse DEA an amount from the DCFA ``in accordance 
with estimates made in the budget request of the Attorney General for 
those fiscal years'' for the operation of the DCP. 21 U.S.C. 886a(1)(B) 
and (D).
    In the NPRM, DEA outlined four alternative methodologies to 
calculate the registration and reregistration fees. 76 FR 39329-32. 
These were the Past-Based Option, Future-Based Option, Flat Fee Option, 
and Weighted-Ratio Option. For each of the options considered, the 
calculated fees are analyzed for reasonableness by examining: (1) The 
absolute amount of the fee increase, (2) the change in fee as a 
percentage of registrant revenue from 2007 to 2012, and (3) the 
relative fee increase across registrant groups. Additionally, each 
calculation methodology is re-evaluated for its overall strengths and 
weaknesses in recovering the full costs of the DCP.
    Based on the analysis provided in the NPRM, DEA did not adopt the 
``Past-Based Option.'' There are two key reasons for rejecting this 
methodology. First, the fee increase would be disproportionately 
burdensome to a small number of registrants. Distributors' fees would 
increase by over three fold, while the fees for the remaining 
registrant groups would increase by 10 percent and 32 percent. DEA 
believes this is unreasonable. Second, the past-based option uses FY 
2007-FY 2009 investigation work hour data to set the apportionment of 
cost to each registrant category. Pre-registration and scheduled 
investigation costs are assigned to registrant classes and all other 
costs are recovered on an equal, per-registrant basis. This method is 
retrospective and assumes that future investigations will be similar to 
the past. DEA cannot assume that past work hour data accurately 
reflects future workload because priorities change as the threats 
change. For example, in order to monitor registrant regulatory 
compliance and leverage the deterrent effect of scheduled 
investigations, DEA increased the frequency of all scheduled 
investigations beginning in 2008. In 2011, DEA began pre-registration 
investigations of all pharmacies located in the State of Florida in 
order to address the rampant diversion in south Florida. And in 2010, 
DEA began conducting nationwide take back events to provide a mechanism 
for the public to dispose of their unwanted, unused, and expired 
controlled substance pharmaceutical drugs. The past-based option is 
vulnerable to short-term fluctuations in priorities which can greatly 
affect fees among the different categories. As a result, DEA has 
concluded that past work hour data alone is not the best basis for the 
calculation of registration fees.
    The second option analyzed in the NPRM is the ``Future-Based 
Option'' which is based on projected work hours for each registrant 
class using scheduled investigation work plan goals and anticipated/
planned resources. Under this option, DEA based its calculations on 
projected work hour data by registrant group for FY 2012-2014. In other 
words, the future-based option is based on DEA's projection of work 
plan goals and the resources required for these years--specifically 
examining the direct cost of anticipated scheduled investigations.
    DEA rejects this methodology because it would result in an 
unreasonable increase in fees for some registrants and a severe 
disparity of fees among the registrant groups. The large proportional 
increase in fees for two registrant categories may not pass the 
reasonable standard required by statute. The vast disparity in the 
increase, where fees for manufacturers increase by more than 700 
percent while fees for dispensers increase by 26 percent, is 
unreasonable. This method is unfair to the registrant categories 
because a variety of factors other than scheduled investigations affect 
cost allocations. Actual operations typically differ from scheduled 
work plans due to shifting threats and other operational demands. The 
future-based option is based on projected work hour data of anticipated 
scheduled investigations, however, only 3.5% of the workload is 
directly attributable to scheduled investigations. The remaining 96.5% 
must be apportioned equally across all registrant categories.
    The third option analyzed in the NPRM is called the ``Flat Fee 
Option.'' This methodology would result in equal fees across all 
registrant groups regardless of the proportion of DCP costs and 
resources the registrant group may require (e.g., oversight and 
investigation resources). The fee calculation is straightforward: The 
total amount needed to be collected over the three-year period is 
divided by the total number of registration fee transactions over the 
three-year period, adjusting for registrants on the three-year 
registration cycle.
    DEA did not select this methodology because it would result in 
disparate changes in fees among registrant groups. Under this option, 
fees for manufacturers and distributors would decrease by 89 percent 
and 78 percent respectively, while fees for practitioners would 
increase by 34 percent. Thus, setting the fees at the same level across 
all registrant groups is not reasonable. DEA registrants include some 
of the largest corporations in the world although the vast majority of 
registrants are individual practitioners, such as physicians, physician 
assistants, dentists, and nurse practitioners. To satisfy the 
reasonable standard, registration fees should account for differences 
in regulatory investigations and other DCP costs that vary among the 
registrant categories.
    The fourth methodology evaluated and ultimately selected in the 
NPRM is the ``Weighted-Ratio Option.'' This option distinguishes among 
the categories to establish a reasonable fee for each category. To 
determine the fee, a weighted ratio is assigned based on

[[Page 15237]]

registrant group, and the amount needed to be collected over the FY 
2012-FY 2014 period to cover the costs of the DCP is divided by the 
weighted number of estimated registrations.
    Historically, costs vary and a fee must be set in advance. Since 
the inception of registration fees, even before DEA was required to 
recover the full costs of the DCP, DEA has utilized a weighted method 
of fee allocation. On April 24, 1971, DEA's precursor agency, the 
Bureau of Narcotics and Dangerous Drugs, published regulations 
implementing the Comprehensive Drug Abuse Prevention and Control Act of 
1970. Those regulations required registration/reregistration fees in 
the following amounts: $50 for manufacturers; $25 for distributors; and 
$5 for dispensers and persons conducting research, instructional 
activities, or chemical analysis. In 1983, DEA published a NPRM which 
indicated that a 1982 GAO report found that DEA's previous fees did not 
adequately recover the costs incurred by the Government. The GAO 
recommended that DEA set a fee schedule of $250 for manufacturers, $125 
for distributors, and $25 for practitioners. DEA, however, ultimately 
set the fee based on its own estimates as follows: $250 for 
manufacturers; $125 for distributors, importers, and exporters; and $20 
for dispensers and persons conducting research, instructional 
activities, or chemical analysis. DEA indicated that these estimates 
were based on ``an increase in the number of practitioner registrants 
since 1980 * * *.'' 48 FR 14640.
    The first known published discussion which attempted to capture the 
specific ratio of fees occurred in the Final Rule; Remanded for Further 
Notice and Comment, published by DEA in 1996. That Final Rule augmented 
DEA's first fee-setting rule initiated to recover the full costs of the 
DCP as defined by Congress. It was published in response to a decision 
by the United States Court of Appeals which required DEA to identify 
the components of the DCP and provide a brief explanation of why DEA 
deemed each component to be part of the program. In that Final Rule, 
DEA stated that the ratio of fees implemented with the CSA in 1971 was 
as follows: ``A distributor's fee is 50% of the manufacturer's fee and 
a dispenser's fee is 16-20% of the distributor's fee. The fee ratios 
have remained consistent [since 1971] and have not been the subject of 
any substantive comment or objection by the regulated industry.'' 61 FR 
68632. A variation of this ratio has been applied in each fee structure 
since the implementation of the fee system, usually as expressed above.
    The fee structure established by this rule is based on the same 
ratios that have been utilized since the first amendment to the fee 
structure, as follows: 1 for researchers, canine handlers, analytical 
labs, and narcotic treatment programs, who are on a one-year 
registration cycle; 3 for registrants on three-year registration cycles 
such as pharmacies, hospitals/clinics, practitioners, teaching 
institutions, and mid-level practitioners; 6.25 for distributors and 
importers/exporters; and 12.5 for manufacturers. The ratio of 1 
represents a base annual fee by which each ratio is multiplied to 
determine the total fee per cycle, i.e., one year or three years.
    The weighted-ratio methodology, much like the flat fee methodology, 
is straightforward and easy to understand. Unlike the flat fee, 
however, this method applies historic weighted ratios to differentiate 
fees among registrant groups. The fees calculated using this 
methodology are similar to fees calculated in the past-based option, 
which allocates three years of historical pre-registration and 
scheduled investigation costs to registrant groups. This method, 
however, does not create a disproportionate fee increase in any 
registrant group. The proposed fee published in the NPRM was calculated 
using this methodology and resulted in an increase of approximately 33 
percent for all registrant groups.
    DEA is finalizing the fee schedule using the weighted-ratio 
methodology as proposed. This approach has been used since Congress 
established registrant fees and continues to be a reasonable reflection 
of differing costs. The registration fees under the weighted-ratio 
option result in differentiated fees among registrant groups, where 
registrants with higher revenues and costs pay higher fees than 
registrants with lower revenues and costs. Furthermore, the weighted-
ratio avoids the disparity that resulted from the past-based 
methodology. The weighted ratios used by DEA to calculate the fees have 
proven effective and reasonable over time. Additionally, the selected 
calculation methodology accurately reflects the differences in 
registration and other DCP activities by registrant category. For 
example, these costs are greater for manufacturers. The weighted-ratio 
methodology results in reasonable fees for all registrant groups at a 
level sufficient to ensure the recovery of the full costs of operating 
the DCP.

Discussion of Comments

    DEA received 195 comments on the NPRM published on July 6, 2011, at 
76 FR 39318. Of these comments, 121 were from mid-level practitioners 
(e.g. nurse practitioners, nurse mid-wives, nurse anesthetists, 
clinical nurse specialist, and physician assistants), 4 were from 
practitioners, 9 were from associations or corporations and 61 
commenters did not identify their registration category.
    Comments: The majority of commenters opposed the fee increase on 
principle or as coming at a bad time due to the economic climate. Some 
commenters believed it was a tax on practitioners and other 
registrants.
    DEA Response: DEA outlined the legal authority, the history of the 
fees, the need for an increase in fees, the methodology, and the 
proposed fee calculation in the NPRM in an attempt to make it 
transparent why there is a fee, why there is a periodic recalculation, 
and how the proposed new fee schedule was calculated. Rather than a 
``tax,'' the registration fee is a statutory requirement for those 
seeking to participate in the closed system of distribution by 
handling, or having access to, controlled substances or List I 
chemicals. The fee funds the DCP under the Controlled Substances Act 
which includes providing and maintaining services to DEA registrants.
    One commenter suggested DEA postpone a fee increase until the 
economy improves and several suggested imposing incremental increases 
over a period of time. DEA is sensitive to the economic challenges 
facing many registrants and has endeavored to set the fee as low as 
possible consistent with its statutory mandates. DEA continually 
strives to be fiscally responsible. The last fee increase was set in FY 
2006 and was designed to encompass only FYs 2006-2008. Through various 
efforts and cost-saving measures, the DCP has been able to operate 
under that fee structure through FY 2011. However, DEA cannot further 
postpone any increase because without an adjustment in the annual 
registration fees, the DCP will be unable to continue current 
operations and will be in violation of the statutory mandate that fees 
charged ``shall be set at a level that ensures the recovery of the full 
costs of operating the various aspects of [the diversion control 
program.]'' 21 U.S.C. 886a(1)(C). For example, collections under the 
current fee schedule would require the DCP to significantly cut 
existing and planned DCP operations vital to its mission. DEA relies on 
the DCP to maintain the integrity of the closed system of

[[Page 15238]]

distribution, particularly at this time of increased abuse and 
diversion outlined in the proposed rule.
    It is not feasible for DEA to implement an incremental increase 
while ensuring the recovery of the full costs of operating the various 
aspects of the DCP, as required by the CSA, and such an increase would 
not be fair or equitable to registrants. Under the current fee 
structure, the vast majority of registrants renew their registration 
once every three years. If DEA were to implement an incremental 
increase within the three-year cycle, registrants who must renew their 
registration in the third year of that cycle would pay a substantially 
higher amount than those registrants who must renew in the first year 
of the cycle. Additionally, DEA must have reliable collection estimates 
for budget formulation and execution activities throughout the three-
year collection cycle.
    Comments: A number of comments suggested that the calculation 
recognize that other non-federal licensure and registration fees are 
also increasing.
    DEA Response: DEA recognizes there may be other fee increases by 
states. However, the CSA requires that DEA fees be based on the full 
costs of operating the various aspects of the DCP.
    Comments: Mid-level practitioners expressed the belief that any fee 
increase is unfair to certain types of registrants, such as mid-level 
practitioners, who make less money than other types of practitioners.
    DEA Response: The fees are on a graduated scale based on the three 
categories of registration established by statute. Under current 
authority, DEA has not created additional fee categories or 
differentiated within a fee category. As discussed, the fees are based 
on DCP program costs and individual practitioners, regardless of 
professional occupation, require similar DCP expenditures related to 
registration and oversight. Furthermore, as outlined in the economic 
analysis using estimated 2012 average income based on 2004-2009 data 
provided by the Bureau of Labor Statistics, the fee as a percentage of 
average income for physicians and dentists is 0.1% and it is 0.26% for 
physician assistants. These percentages are essentially the same as in 
2006, the year of the previous fee adjustment, where the fee as a 
percentage of average income was 0.1% for physicians and dentists and 
0.25% for physician assistants.
    Comments: One comment suggested that the length of registration 
should be extended at the same time there is an increase in the fee.
    DEA Response: The statute clearly sets forth the period of 
registration:

    ``Every person who manufactures or distributes any controlled 
substance or list I chemical, or who proposes to engage in the 
manufacture or distribution of any controlled substance or list I 
chemical, shall obtain annually a registration issued by the 
Attorney General in accordance with the rules and regulations 
promulgated by him.'' 21 U.S.C. 822(a)(1) (emphasis added).
    ``Every person who dispenses, or who proposes to dispense, any 
controlled substance, shall obtain from the Attorney General a 
registration issued in accordance with the rules and regulations 
promulgated by him. The Attorney General shall, by regulation, 
determine the period of such registrations. In no event, however, 
shall such registrations be issued for less than one year nor for 
more than three years. 21 U.S.C. 822(a)(2) (emphasis added).

    DEA currently allows for the maximum three-year registrations for 
dispensers of controlled substances, except certain practitioners who 
dispense narcotic drugs for narcotic treatment, who are statutorily 
required to obtain annual registrations. 21 U.S.C. 823(g)(1).
    Comments: Some commenters indicated that DEA should not raise 
registration fees but instead decrease its spending, be more efficient 
with the fees it currently collects or find another source of funds. 
One commenter questioned whether increased funding would improve the 
effectiveness of the DCP.
    DEA Response: By statute, DEA cannot use another source of funds 
for the DCP. By enacting 21 U.S.C. 886a, Congress mandated that the DCP 
be fully funded through the collection of fees rather than appropriated 
funds. The CSA specifically states that ``[f]ees charged by the Drug 
Enforcement Administration under its diversion control program shall be 
set at a level that ensures the recovery of the full costs of operating 
the various aspects of that program.'' 21 U.S.C. 886a(1)(C).
    It has been more than five years since the last fee adjustment. DEA 
last adjusted the fee schedule in August 2006, and that fee schedule 
was intended to be sufficient to cover the ``full costs'' of the DCP 
for FY 2006 through FY 2008. The DCP has continued to operate under 
this fee schedule due to cost savings through reorganization, 
modernization efforts, and by delays in execution of planned programs. 
As indicated by the above-referenced 2008 OIG report, additional salary 
and other costs attributable to diversion control activities needed to 
be incorporated into the DCP as was done in this fee calculation. In 
addition, Congress has expanded the scope of the DCP through budgetary 
and legislative action in order to address an increase in the diversion 
of controlled substances and listed chemicals that seriously impact 
public health and safety.
    DEA has been and will continue to be fiscally responsible and will 
remain vigilant towards identifying methods to improve efficiencies or 
identifying other cost saving measures. As discussed, the DCP has been 
evaluated by the OIG and it did not find that DCFA funds were misused. 
As noted earlier, the OIG found that DEA did not fully fund all 
diversion control costs with the DCFA as required.\25\ The DCP plans to 
continue cost-saving technology improvements in doing business and to 
implement such improvements for those that do business with the DCP 
through its regulatory functions such as registration and reporting 
systems.
---------------------------------------------------------------------------

    \25\ ``Review of the Drug Enforcement Administration's Use of 
the Diversion Control Fee Account,'' I-2008-002, February 2008, 
www.usdoj.gov/oig/reports/DEA/e0802/final.pdf.
---------------------------------------------------------------------------

    The DCP exercises a variety of management controls, including 
independent review of certain DCFA expenditures. This is accomplished 
by the Validation Unit which was established in 2003 to review DCFA 
expenditures of $500 or more to ensure that each expense is in support 
of diversion-related activities. DEA continues to evaluate the 
appropriate mix of management controls. The costs to the DCP associated 
with additional review of expenditures must be balanced against the 
risks of error. DEA may adjust the expenditure threshold level for 
review and validation up to $2,500 to adjust the review process and 
reduce the associated costs to the DCP. The DCP will continue to 
provide managerial oversight on expenditures involving DCFA funds to 
include oversight by agency managers and by the Validation Unit.
    The DCP is expanding its use of Tactical Diversion Squads and is 
conducting more investigations, inspections, and scheduling actions now 
than ever before due to the increase in prescription drug abuse and the 
corresponding efforts to divert such substances to illicit use. 
Similarly, an ever expanding number of synthetic substances, such as 
synthetic cannabinoids (a large family of chemically unrelated 
structures functionally similar to [Delta]9-tetrahydrocannabinol (THC), 
the active principle of marijuana) and synthetic cathinones (drugs of 
the phenethylamine class which are structurally and pharmacologically 
similar to amphetamine and other

[[Page 15239]]

related substances, and are commonly falsely marketed as bath salts or 
plant food) require the DCP to dedicate resources to analyze and 
respond to new and emerging threats more often now than at any time in 
the past to protect the public health and safety.
    The DCP also establishes and maintains various IT systems for use 
by registrants. These systems result in cost savings and help both DEA 
and the registrants perform day-to-day functions more efficiently.
    Comments: One commenter felt DEA appropriations and not DCP funds 
should be used to pursue illicit entities operating via the internet 
and ``pill mills'' since they are the major sources of controlled 
substance abuse and diversion.
    DEA Response: DEA must set fees at a level that ensures the 
recovery of the full costs of operating the various aspects of the DCP. 
21 U.S.C. 886a(1)(C). As discussed above under the History of Fees, the 
fees are for the ``registration and control'' of the manufacture, 
distribution, and dispensing as well as importing and exporting of 
controlled substances and listed chemicals. 21 U.S.C. 821 and 958(f). 
The ``control'' of controlled substances and listed chemicals includes 
enforcement costs where the DCP carries out the mandates of the 
Controlled Substances Act. In doing so, the DCP may investigate the 
diversion of controlled substances regardless of the method or source 
of diversion, including illicit operations involving the internet and 
``pill mills.''
    Comments: Several commenters requested more specificity on what the 
fee increase will support.
    DEA Response: A supplemental document titled the Proposed Fee 
Calculation, located with the NPRM on www.regulations.gov, and an 
updated version of this document titled New Registrant Fee Schedule 
Calculations, posted with this final rule, also on www.regulations.gov, 
outline specific costs of the DCP used in calculating the fee. As 
discussed in the NPRM and above, the DCP is defined as ``the controlled 
substance and chemical diversion control activities of the Drug 
Enforcement Administration.'' 21 U.S.C. 886a(2)(A). The term 
``controlled substance and chemical diversion control activities'' is 
defined as ``those activities related to the registration and control 
of the manufacture, distribution, dispensing, importation, and 
exportation of controlled substances and listed chemicals.'' 21 U.S.C. 
886a(2)(B). Additionally, detailed program costs may be found in the 
annual President's Budget, as well as supporting budget documents 
released on the Department of Justice's Web site at http://www.justice.gov/about/bpp.htm. See in particular pages 97-101 of the FY 
2012 DEA budget.
    Comments: One registrant recommended that DCP funds be better used 
to provide for adequate staffing for the DCP functions involving quota 
requests, scheduling determinations, and policy and regulatory 
interpretations in order to be more responsive to the regulated 
community.
    DEA Response: DEA continuously monitors and adjusts the number of 
employees assigned to various DCP tasks, including those that respond 
to inquiries from the registrant community. The DCP maintains a robust 
public Web site that is continually updated with information on topics 
of interest to registrants such as administrative final orders, 
significant guidance documents, ``questions and answers'' on common 
topics, registration tools and resources, and registrant reporting 
requirements. The Web site is intended to alleviate the burden of 
responding to multiple inquiries regarding similar or common topics, 
and to communicate new policies and/or views to registrants. The DCP 
regulates a registrant population of approximately 1.4 million that 
continues to grow every year, and each written inquiry requires a 
thorough review of the pertinent facts in order to provide a fair, 
measured response. While awaiting a response from the DCP, registrants 
are encouraged to review the DCP Web site for information and guidance, 
and to seek assistance from their local DEA offices and state licensing 
bodies. The DCP also organizes regional conferences designed to provide 
information and resources to registrants. Finally, all quota requests 
are scrutinized in detail and the supplemental information provided by 
quota applicants is verified and cross-checked in order to ensure the 
DCP is fulfilling all of its statutory obligations. The volume of quota 
applications and the level of review required for an appropriate 
assessment is time consuming. Accordingly, DEA is undertaking a 
comprehensive review of its quota regulations pursuant to Executive 
Order 13563 with the goal of updating and streamlining the quota 
application process.
    Comments: Several comments stated that any fee increase is unfair 
to persons who do not prescribe controlled substances but are required 
by an employer or an insurance company to maintain a DEA registration. 
Similarly, some allege that many registrants are not reimbursed for 
their payment of the registration fee by their employer or that fewer 
reimbursements occur than in the past.
    DEA Response: DEA issues registrations to practitioners for the 
purpose of prescribing or dispensing controlled substances. DEA does 
not control or otherwise have authority over requirements by outside 
entities such as insurance companies or employers. Furthermore, DEA 
expends resources to review applications to determine qualifications, 
and it expends resources to maintain registrations once they are 
issued. As such, DEA cannot consider the underlying reasons registrants 
apply for a registration, other than those related to the handling of 
controlled substances, nor can DEA consider whether a particular 
registrant is reimbursed for the fee.
    Comments: Other comments stated that any fee increase is 
detrimental to persons with registrations in multiple states. Another 
commenter suggested that a DEA number should be assigned to a provider 
throughout their career, regardless of their practice location.
    DEA Response: By statute, ``[a] separate registration shall be 
required at each principal place of business or professional practice 
where the applicant manufactures, distributes, or dispenses controlled 
substances or List I chemicals.'' 21 U.S.C. 822(e). Thus, some 
registrants, based upon their particular circumstances and business 
decisions, may have more than one registration within the same state or 
in multiple states where more than one state has authorized the 
registrant to conduct the above described activities. Registration is 
an essential component of the closed system of distribution established 
under the CSA and is predicated on compliance with all applicable state 
and local laws, including state licensure in each state the registrant 
practices.
    Comments: A number of commenters focused on situations where one 
person may be more impacted by the fee increase than another, such as 
persons working in low-income areas where there is little or no 
reimbursement for registration fees, persons working in rural areas, 
and persons in sole practice or in small practices. Several commenters 
expressed concern that fee increases will affect patient care as some 
registrants may not renew or seek to register because of the cost.
    DEA Response: DEA may only operate within its statutory authority, 
which requires that the fees be set at a level that ensures the 
recovery of the full costs of operating the DCP. DEA notes that there 
are currently 1.4 million active registrants and, as such, even if 
business model or size of practice could

[[Page 15240]]

be objectively measured and accounted for in individualized fee 
calculations, such individual calculations would be costly. It is 
likely that any cost savings would be offset by the increased need for 
personnel to perform the individual fee calculations. It should also be 
noted that historically, DCP costs are higher for rural areas because 
of the additional travel costs from DEA office locations. Each 
applicant for registration must evaluate their need to be able to 
handle controlled substances or listed chemicals.
    Comments: One commenter suggested that those state, federal, and 
tribal organizations that are exempt from payment of the fee should be 
required to pay a fee before the current fee is increased.
    DEA Response: Registration fee exemptions are set forth in the 
existing regulations. Generally, hospitals and other institutions 
operated by an agency of the United States or of any state or any 
political subdivision or agency thereof, as well as any individual 
required to obtain a registration in order to carry out his or her 
duties as an official of an agency of the United States or of any state 
or any political subdivision or agency thereof may be exempt from 
payment of a registration or reregistration fee. 21 CFR 1301.21. Such 
an individual is not exempt if his/her registration is used for 
appropriate private activities unrelated to the performance of his/her 
official duties. Tribal governments are also exempt pursuant to the 
Indian Health Care Improvement Act of 2010.\26\ DEA is committed to 
carefully reviewing all applications for fee exempt status to ascertain 
that such exemptions are not inappropriately granted. Approximately 
96,000 individual and institutional registrants, or 7% of all 
registrants, are exempt from registration fees.
---------------------------------------------------------------------------

    \26\ In accordance with 25 U.S.C. 1616q, employees of a tribal 
health or urban Indian organization are exempt from ``payment of 
licensing, registration, and any other fees imposed by a Federal 
agency to the same extent that officers of the commissioned corps of 
the Public Health Service and other employees of the Service are 
exempt from those fees.''
---------------------------------------------------------------------------

    Comments: Some commenters suggested that persons who over-prescribe 
or violate the law should be charged additional fees and penalties to 
help make up any shortfall in collections. Likewise, it was suggested 
that the end users of controlled substances be charged an additional 
fee. Others suggested that DEA legalize ``agriculture-based controlled 
substance production'' to either decrease costs or charge a fee to fund 
the DCP.
    DEA Response: DEA has no authority to implement these suggestions. 
DEA's statutory authority is to charge reasonable registration fees set 
at a level that ensures the recovery of the full costs of operating the 
various aspects of the DCP. In addition, the CSA provides for 
mechanisms independent of the registration fee by which to exact 
financial remuneration from registrants who violate the law. 
Registrants who violate the law with regard to controlled substances 
may be subject to civil and criminal penalties, as well as forfeitures. 
21 U.S.C. 841, 842, 843, 881.
    Comments: Some commenters suggested that the fee should be based on 
the rate of prescribing of controlled substances or pro-rated to the 
salary of the prescriber or based on the registrant's number of 
Medicaid and Medicare patients.
    DEA Response: DEA does not have access to the controlled substance 
prescribing rates of practitioners. In fact, many states with 
prescription drug monitoring programs prohibit law enforcement entities 
from using prescribing data without specific, independent legal 
authority to do so, e.g., a subpoena or warrant. Even so, DEA does not 
have the expertise or resources to calculate the rate of prescribing 
for each registrant in order to personalize each registrant's 
registration fee. Additionally, allowing individualized calculations 
based on prescribing rates, income, or type of patients served would 
introduce uncertainty and unpredictable fluctuations in the collection 
cycle, thereby jeopardizing the statutory mandate to recover the full 
costs of operating the DCP.
    Comment: One association felt DEA fails to recognize the unfairness 
of the ``Weighted-Ratio'' methodology for fee calculation because 
dispensers or practitioners make no income from writing a prescription 
whereas manufacturers and distributors more directly benefit from their 
authorization by registration to handle controlled substances. This 
commenter believed the difference in annual revenue or income for a 
practitioner compared to a manufacturer or distributor was more than 
the 9 times ratio for distributors and the 12 times ratio for 
manufacturers.
    DEA Response: It is important to emphasize that the focus of DEA's 
fee calculation methodology is to account for DCP program costs among 
the registrant categories and not to set fees according to a percentage 
of registrant revenue from use of a DEA registration. DEA provided an 
analysis of incomes to show the economic impact of the relatively minor 
proportion of that income that may be expended for payment of a 
registration fee. Additionally, the analysis showed that the fees as 
percentages of income/revenue are essentially the same as in 2006, the 
year of the last fee adjustment.

Need for New Fee Calculation

    As discussed in the NPRM, DEA last adjusted the fee schedule in 
August 2006. This fee schedule was calculated to cover the ``full 
costs'' of the DCP for FY 2006 through FY 2008 or October 1, 2005 
through September 30, 2008. However, collections did not begin until FY 
2007.\27\ The DCP program has continued to operate under this fee 
schedule due to cost savings through reorganization and modernization 
efforts and by inadvertently excluding certain costs from the DCP. As 
indicated by the above-referenced 2008 OIG report, additional salary 
and other costs attributable to diversion control activities need to be 
incorporated into the DCP. In addition, the scope of the DCP has been 
expanded by Congress and by the need to address the diversion of 
controlled substances and listed chemicals that seriously impact public 
health and safety.
---------------------------------------------------------------------------

    \27\ 71 FR 51105 (August 29, 2006).
---------------------------------------------------------------------------

    The Office of Diversion Control at DEA is focused on the supply 
side of this serious threat to the public health and safety. At the end 
of FY 2008, a reorganization within DEA expanded the use of Tactical 
Diversion Squads across the country to allow Diversion Investigators to 
focus their expertise on regulatory oversight, thereby increasing the 
deterrent effect of increased regulatory investigations. Tactical 
Diversion Squads incorporate the criminal investigative skills and 
statutory authority of Special Agents as well as state and local Task 
Force Officers in an effort to stop those organizations and individuals 
who violate the CSA by diverting controlled substances and listed 
chemicals into the illicit market. Diversion Investigators are a key 
asset as they lend their keen knowledge of the closed system of 
distribution to the Tactical Diversion Squads. Diversion Investigators' 
familiarity and detailed understanding of the closed system of 
distribution require, however, that they continue to lead the 
regulatory oversight of DEA registrants. DCP costs increase with the 
need to expand the number and use of Tactical Diversion Squads.
    Due to the rise in controlled substance diversion and abuse, as 
well as the recent emergence of designer drug abuse, the DCP has 
increased scheduled

[[Page 15241]]

investigations of registrants and drug scheduling initiatives, as well 
as other modifications in its diversion control efforts. The DCP 
continues to draw technical expertise from Diversion Investigators, and 
the DCP has incorporated greater numbers of Special Agents, Chemists, 
Information Technology Specialists, Attorneys, Intelligence Research 
Specialists, and state and local personnel. It is essential to utilize 
a diverse skilled workforce and constantly review and modify all 
aspects of the DCP to help successfully execute the drug trafficking 
disruption goals of the National Drug Control Strategy and effectively 
prevent, detect, and eliminate the diversion of controlled substances 
and listed chemicals into the illicit market while ensuring a 
sufficient supply of these substances for legitimate medical, 
scientific, research, and industrial purposes.
    DEA has been and will continue to be fiscally responsible and will 
remain vigilant in identifying methods to improve efficiencies or 
identifying other cost saving measures. As discussed above, however, a 
new fee calculation is needed. Without an adjustment in the annual 
registration fees, DEA will be unable to continue current operations 
and will be in violation of the statutory mandate that fees charged 
``shall be set at a level that ensures the recovery of the full costs 
of operating the various aspects of [the diversion control program].'' 
21 U.S.C. 886a(1)(C). For example, in FY 2009, the DCP's regulatory 
activities included more outreach programs to help the registrant 
population better comply with the CSA. The DCP increased investigation 
cycles as well as depth of review. In FY 2009, there were 1,065 
scheduled investigations; in FY 2012, DEA projected performance targets 
of 3,906 scheduled investigations--an increase of 2,841. Additionally, 
DEA coordinates National Prescription Drug Take-Back Day initiatives, 
providing an opportunity for the safe disposal of unwanted or unused 
prescription drugs. DEA also projects to increase the number of 
Diversion Priority Target Organizations not Linked to Consolidated 
Priority Organization Targets Disrupted or Dismantled to 85 
(disrupted)/90 (dismantled), an increase of 32 (disrupted)/66 
(dismantled) over FY 2007's 53 (disrupted)/24 (dismantled), and is 
authorized and plans to establish an additional 12 Tactical Diversion 
Squads, which conduct criminal enforcement activities, across the 
United States. The new fee schedule will allow DEA to sustain current, 
planned, and future operations and employ additional personnel in 
support of important program initiatives during Fiscal Years 2012-2014.

Fee Calculation

    DEA must ensure the recovery of the full costs of operating the DCP 
while charging registrants reasonable fees relating to the registration 
and control of the manufacture, distribution, import, and export of 
controlled substances and listed chemicals, as well as the dispensing 
of controlled substances. For the DCP to have funds to function, DEA 
must determine, in advance of actual expenditures, a reasonable fee to 
be charged. As a result, historical data and projections must be used 
to project the annual costs of the DCP. Additionally, a reasonable fee 
must be calculated that will fully recover the costs of the DCP based 
on the variability over time of the number of registrants in the 
different categories of registration. The fees collected must be 
available to fully fund the DCFA and to reimburse DEA for expenses 
incurred in the operation of the DCP (21 U.S.C. 886a); therefore, there 
must always be more collected than is actually spent to avoid running a 
deficit in violation of federal fiscal law.\28\ In operating the DCP, 
DEA must be prepared for changes in investigative priorities, diversion 
trends, and emerging drugs and chemicals posing new threats to the 
public health and safety.
---------------------------------------------------------------------------

    \28\ In general, no officer or employee of the United States 
Government may make or authorize an expenditure or obligation in 
excess of an amount available in an appropriation or fund. 31 U.S.C. 
1341.
---------------------------------------------------------------------------

    Current options to calculate fees are also limited by the ability 
and practicability of tracking and allocating detailed costs, although 
the agency continues to improve its capabilities on this front. Part of 
the difficulty stems from the fact that the mission of DEA involves 
investigations and actions that often involve poly-drug organizations 
(drug trafficking organizations that traffic multiple drugs), various 
types of registrants, or investigations that may start out as one type 
of investigation and result in another, based upon the way the facts 
develop. It is apparent that Congress recognized that the costs of the 
registration and control of controlled substances and listed chemicals 
are not properly attributed on a per registrant basis when Congress 
differentiated among the categories of registrants for purposes of 
calculating a reasonable fee, i.e., manufacturers, distributors, 
importers, exporters, and dispensers. The weighted ratio of 12.5 for 
manufacturers, 6.25 for distributors (including importers and 
exporters), and 1 for dispensers is consistent with Congress's 
differentiation between the categories of registrants.
    Because of the complexity of many diversion investigations, 
tracking costs within the DCP according to registrant categories or 
within a given registrant category has not been possible or cost-
efficient. Such detailed cost attribution may or may not be feasible in 
the future. DEA is in the process of testing a system where personnel 
would account for their daily hours according to whether their time is 
spent on DCP or other DEA mission activities. DEA has also made 
progress through reorganization and there is recognition throughout the 
agency of the need to identify and separate DCP costs from other agency 
costs.
    Thus, the fee is calculated by assigning registrants to a business 
activity or category (e.g., researcher, practitioner, distributor, 
manufacturer) based on the statutory fee categories. Then a base fee 
rate is established according to the annual estimated costs of the DCP. 
A projected population is calculated for each business activity or 
category. That figure is then multiplied by a ratio of 1.0 for 
researchers, 3.0 for practitioners (for administrative convenience the 
fee is collected every three years for practitioners), 6.25 for 
distributors, and 12.5 for manufacturers. By utilizing these different 
ratios, the agency recognizes the statutory need to charge reasonable 
fees relating to the registration and control of the manufacture, 
distribution, dispensing, importation, and exportation of controlled 
substances and listed chemicals. Historically, registration and other 
DCP activities are greatest for manufacturers. This is because there is 
great risk and grave consequences associated with the quantity and 
purity of controlled substances and/or chemicals with each manufacturer 
at this point in the closed system. All of the individual business 
activity figures are then added together to form a weighted sum for one 
projected year. This process is performed for two more years using 
future projected registrant populations for those years multiplied by 
the ratio. The annual figures for these three years are then added 
together and divided into the total budget requirements for that three-
year period to arrive at the base rate fee to be charged to each 
category of registrant.
    In calculating fees to recover the full costs of operating the DCP, 
DEA estimates the costs of operating the DCP

[[Page 15242]]

for the next three fiscal years.\29\ To develop the DCFA budget 
estimates for Fiscal Year (FY) 2012, FY 2013 and FY 2014, DEA compiles: 
(1) The actual DCFA financial data for FY 2011; (2) the FY 2012 
President's Budget Request; (3) the estimated budgets for FY 2013 and 
FY 2014; and (4) the required annual $15 million transfer to the United 
States Treasury as mandated by the CSA (21 U.S.C. 886a). The following 
paragraphs explain the annual revenue calculations and how the total 
amount to be collected for the FY 2012-2014 period was calculated. In 
developing this figure, DEA begins with annual projected DCP 
obligations, including payroll, operational expenses and necessary 
equipment. The DCP budget has increased due to inflationary adjustments 
for rent and payroll and to increase staffing resources that support 
the regulatory and law enforcement activities of the program. These 
additional costs have not been reflected in the fees until now because 
the fees were last adjusted for the time period of FY 2006-2008. 
Specific details on the DCP budget are available in the annual 
President's Budget Submission and supplemental budget justification 
documents provided to Congress.\30\
---------------------------------------------------------------------------

    \29\ See ``New Registrant Fee Schedule Calculations'' in this 
rulemaking docket found at www.regulations.gov.
    \30\ See ``U.S. Department of Justice, Drug Enforcement 
Administration, FY 2012 Performance Budget Congressional 
Submission'' for details on the FY 2012 budget. The budget document 
is available online at http://www.justice.gov/jmd/2012justification/pdf/fy12-dea-justification.pdf.
---------------------------------------------------------------------------

    Total obligations for the DCP have increased from FY 2007 to FY 
2010 by approximately 49 percent. For the FY 2006-2008 period, payroll 
expenses (staff compensation and benefits) composed the largest 
component of DCP costs at 55.7 to 57.6 percent per year. Between the 
period of FY 2006 and FY 2010, payroll constituted an average of 56.7 
percent of DCP expenses. Operating expenses and capital expenditures 
made up the remainder of DCP costs. Operating expenses (an average of 
39.3 percent for the FY 2006-2010 period) include daily operation costs 
such as investigative costs, travel, and purchases of goods and 
services. Capital expenditures, including equipment and furniture 
purchases, capital leases, and land/structure improvements and 
purchases, averaged 4.0 percent during this same period.
    For the FY 2012-2014 period covered by this rulemaking, the overall 
breakdown of DCP major cost categories does not depart significantly 
from previous years in terms of percentage of costs; however, totals 
for each of these major cost categories do increase to reflect 
additional costs in each of these categories.
    In addition to the budget estimates for each of the fiscal years, 
the cost components outlined below are also considered in determining 
required registration fee collections.

Recoveries From Money Not Spent as Planned (Deobligation of Prior Year 
Obligations)

    At times, DEA enters into an obligation to purchase a product or 
service that is not delivered immediately, such as in a multi-year 
contract. Changes in obligations can occur for a variety of reasons, 
e.g., changes in planned operations, delays in staffing, implementation 
of cost savings, changes in vendor capabilities, etc. When DEA does not 
expend its obligation, the ``deobligated'' funds are ``recovered'' and 
the funds become available for DCP use. Based on historical trends and 
for purposes of calculating the fee levels, the recovery from 
deobligation of prior year obligations is estimated at $13.5 million 
per year.

Transfer to Treasury

    As discussed, in 1993, Congress determined that the DCP would be 
fully funded by registration fees rather than by appropriations.\31\ 
Congress established the DCFA as a separate account of the Treasury to 
``[ensure] the recovery of the full costs of operating the various 
aspects of [the diversion control program]'' from fees charged by DEA. 
21 U.S.C. 886a(1)(C). Collected fees are deposited into the DCFA. Each 
fiscal year, the first $15 million is transferred to the Treasury and 
is not available for use by the DCP. Therefore, DEA needs to collect an 
additional $15 million per year beyond estimated costs for transfer to 
the Treasury.
---------------------------------------------------------------------------

    \31\ Departments of Commerce, Justice, and State, the Judiciary 
and Related Agencies Appropriations Act of 1993, Public Law 102-395, 
codified in relevant part at 21 U.S.C. 886a.
---------------------------------------------------------------------------

Operational Continuity Fund (OCF)

    DEA maintains an operational continuity fund (OCF) based on the 
need to maintain DCP operations when monthly collections and 
obligations fluctuate. Historically, current obligations sometimes 
exceed current collections consecutively for several months. Therefore, 
an operational continuity fund is maintained in order to avoid 
operational disruptions due to these fluctuations and monthly 
differences in collections and obligations. Using statistical analysis 
of the historical fluctuations between amounts collected and amounts 
obligated, DEA has determined that seven percent of the projected 
obligations is adequate to avoid operational disruptions. The amount 
required to bring the operational continuity fund balance to the $15 
million plus seven percent level is added to projected costs.
    The FY 2012-FY 2014 OCF balance projections have been changed from 
those shown in the NPRM to reflect actual FY 2011 financial data. The 
FY 2012 beginning OCF balance of $41,726,554 is higher than the FY 2014 
end of year target OCF balance of $40,943,670 by $782,884. The higher 
beginning OCF balance allows lower required collections from 
registration fees. The incremental changes in OCF balance for FY 2012, 
FY 2013, and FY 2014 are -$2,047,144, $863,240, and $401,020 
respectively (or a cumulative decrease of $782,884). The cumulative 
decrease of $782,884 is a change from the cumulative increase of 
$8,320,115 estimated in the NPRM. The two main factors that contributed 
to the change from the NPRM calculation estimated in early 2011 to the 
final rule calculation performed after the end of FY 2011 (September 
30, 2011) are: (1) Lower than estimated actual FY 2011 spending which 
led to a higher beginning FY 2012 OCF balance; and (2) lower estimated 
budgets for FY 2013 and FY 2014, which lowered the target OCF balance.

                       Table 1--Change in Operational Continuity Fund Balance FY 2012-2014
----------------------------------------------------------------------------------------------------------------
                                                                    FY2012           FY2013           FY2014
----------------------------------------------------------------------------------------------------------------
Budget.......................................................    $322,000,000     $352,563,000     $364,895,000
Target OCF ($15M + 7%).......................................      39,679,410       40,542,650       40,943,670
Beginning OCF balance........................................      41,726,554   ...............  ...............
                                                              --------------------------------------------------

[[Page 15243]]

 
Needed Change to Achieve Target OCF..........................      (2,047,144)         863,240          401,020
3-year cumulative change.....................................  ...............  ...............        (782,884)
----------------------------------------------------------------------------------------------------------------

Combat Methamphetamine Act of 2005 (CMEA) Collections

    Under the CMEA, DEA collects a self-certification fee for regulated 
sellers of scheduled listed chemical products, which is included as 
part of the total collections. The fee is waived for any person in good 
standing and holding a current DEA registration to dispense controlled 
substances, such as a pharmacy. DEA has observed an approximately 26 
percent decline in self-certifications from FY 2008 to FY 2011 and 
anticipates that the decline will stabilize at approximately 5,000 per 
year from FY 2012 to FY 2014. The self-certification fee is $21. CMEA 
self-certification fee collection estimates for FY 2012, FY 2013, and 
FY 2014 for purposes of calculating the fee levels are $105,000 
annually.

                                     Table 2--CMEA Collections FY 2012-2014
----------------------------------------------------------------------------------------------------------------
                                                                      FY2012          FY2013          FY2014
----------------------------------------------------------------------------------------------------------------
Number of paying self-cert......................................           5,000           5,000           5,000
Fee.............................................................             $21             $21             $21
CMEA collection estimate........................................        $105,000        $105,000        $105,000
----------------------------------------------------------------------------------------------------------------

Other Collections

    DEA also derives revenue from the sale/salvage of official 
government vehicles dedicated to DCP use. DEA's estimate for all other 
collections is $533,766 per year. This is the actual amount for FY 
2011.

Estimated Total Required Collections

    Based on these figures, DEA calculated the total amount required to 
be collected for the FY 2012-2014 period for purposes of calculating 
the fee levels as follows:
    Required registration fee collections for FY 2012 are $320,814,090. 
This figure includes the budget of $322,000,000, plus $15 million for 
transfer to the Treasury, minus $13.5 million in recoveries, $2,047,144 
for the decrease in the OCF balance, $105,000 in CMEA self-
certification collections, and $533,766 in other collections.
    Required registration fee collections for FY 2013 are $354,287,474. 
This figure includes the estimated budget of $352,563,000, plus $15 
million for transfer to the Treasury and $863,240 for the increase in 
the OCF balance, minus $13.5 million in recoveries, $105,000 in CMEA 
self-certification collections, and $533,766 in other collections.
    Required registration fee collections for FY 2014 are $366,157,254. 
This figure includes the estimated budget of $364,895,000, plus $15 
million for transfer to the Treasury and $401,020 for the increase in 
the OCF balance, minus $13.5 million in recoveries, $105,000 in CMEA 
self-certification collections, and $533,766 in other collections.

                                  Table 3--Needed Fee Collections FY 2012-2014
----------------------------------------------------------------------------------------------------------------
                                                    FY2012              FY2013        FY2014      3-yr total
----------------------------------------------------------------------------------------------------------------
Budget/Estimated Budget.....................       $322,000,000        $352,563,000   $364,8     $1,039,458,000
                                                                                      95,000
Recoveries..................................        (13,500,000)        (13,500,000)  (13,50        (40,500,000)
                                                                                      0,000)
                                             -------------------------------------------------------------------
    Net Budget..............................        308,500,000         339,063,000   351,39        998,958,000
                                                                                      5,000
Transfer to the Treasury....................         15,000,000          15,000,000   15,000         45,000,000
                                                                                      ,000
Change to Achieve Target OCF................         (2,047,144)            863,240   401,02           (782,884)
                                                                                        0
CMEA Self-cert collections..................           (105,000)           (105,000)   (105,           (315,000)
                                                                                      000)
Other collections...........................           (533,766)           (533,766)  (533,7         (1,601,297)
                                                                                      66)
                                             -------------------------------------------------------------------
Required collections from Registration Fees.        320,814,090         354,287,474   366,15      1,041,258,818
                                                                                      7,254
----------------------------------------------------------------------------------------------------------------
Numbers are rounded.

    In total, DEA needs to collect $1,041,258,818 in registration fees 
over the three year period, FY 2012-FY 2014, to fully fund the DCP.
    As in the past, DEA is calculating the fee for each registrant 
category for a three-year period (FY 2012-2014). The vast majority of 
registrants are practitioners who pay a three-year registration fee. 
These registrants are divided into three separate groups who pay their 
three-year registration fees on alternate year cycles. Because 
registration cycles may differ from year to year, the total amount 
collected through fees in a given year may not exactly match the 
projected amount. For purposes of calculating the new fee schedule, DEA 
used a new fee collection start date of March 1, 2012, and used the 
current fee schedule for calculating the first five months of FY 2012 
registration fee collections.
    In calculating the new fees through FY 2014 using the selected 
weighted-ratio methodology, DEA has updated the data used in the 
calculation set forth in the proposed rule. Instead of budget estimates 
for FY 2012, 2013, and 2014, the final fee calculation uses the actual 
FY 2012 budget, revised budget estimates for FY 2013 and FY 2014, and 
revised estimates for recoveries from deobligations and for the 
Operational Continuity Fund. These revisions are

[[Page 15244]]

outlined in the overview of the Diversion Control Fee Account below:

----------------------------------------------------------------------------------------------------------------
                                                            FY2012              FY2013              FY2014
----------------------------------------------------------------------------------------------------------------
Congressional Budget/Cost Estimates.................       $322,000,000        $352,563,000        $364,895,000
Operational Continuity Fund (OCF) Brought Forward            41,726,554          39,701,112          36,496,165
 From Prior Year....................................
Collections: Registration Fees......................        320,835,793         350,219,287         369,879,300
Collections: CMEA...................................            105,000             105,000             105,000
    Treasury........................................        (15,000,000)        (15,000,000)        (15,000,000)
                                                     -----------------------------------------------------------
    Net Collections.................................        305,940,793         335,324,287         354,984,300
Recoveries from Deobligations.......................         13,500,000          13,500,000          13,500,000
Other Collections...................................            533,766             533,766             533,766
                                                     -----------------------------------------------------------
    Subtotal Availability...........................        361,701,112         389,059,165         405,514,231
Obligations.........................................        322,000,000         352,563,000         364,895,000
                                                     -----------------------------------------------------------
EOY OCF Balance.....................................         39,701,112          36,496,165          40,619,231
                                                     ===========================================================
Target OCF ($15M+7% of Budget)......................         39,679,410          40,542,650          40,943,670
----------------------------------------------------------------------------------------------------------------
Numbers are rounded.
Note: Due to rounding of the fees to the whole dollar, the total 3-year registration fee collection estimate of
  $1,040,934,380 does not equal the target collection amount of $1,041,258,818 used to calculate the fees.

    Based upon careful consideration of all of the comments and 
applying the above, a new fee schedule is set forth below. This new fee 
schedule is slightly less than the fee schedule proposed in the NPRM on 
July 6, 2011, due to the completion of FY 2011 and the availability of 
actual financial data for the fiscal year as well as progression in the 
budget process due to the passage of time since the NPRM was prepared.

              Registrants on Three-Year Registration Cycle
------------------------------------------------------------------------
                   Registrant class/business                       Fee
------------------------------------------------------------------------
Pharmacy.......................................................     $731
Hospital/Clinic................................................      731
Practitioner...................................................      731
Teaching Institution...........................................      731
Mid-Level Practitioner.........................................      731
------------------------------------------------------------------------
* Pharmacies, hospitals/clinics, practitioners, teaching institutions,
  and mid-level practitioners currently pay a fee for a three-year
  period. Fee of $731 is equivalent to approximately $244 annually.

                Registrants on Annual Registration Cycle
------------------------------------------------------------------------
                   Registrants class/business                      Fee
------------------------------------------------------------------------
Researcher/Canine Handler......................................     $244
Analytical Lab.................................................      244
Maintenance....................................................      244
Detoxification.................................................      244
Maintenance and Detoxification.................................      244
Compounder/Maintenance.........................................      244
Compounder/Detoxification......................................      244
Compounder/Maintenance/Detoxification..........................      244
Distributor (chemical and controlled substances)...............    1,523
Reverse distributor............................................    1,523
Importer (chemical and controlled substances)..................    1,523
Exporter (chemical and controlled substances)..................    1,523
Manufacturer (chemical and controlled substances)..............    3,047
------------------------------------------------------------------------

    This fee schedule replaces the current fee schedule for controlled 
substance and chemical registrants in order to recover the full costs 
of the DCP so that it may continue to meet the programmatic 
responsibilities set forth by statute, Congress, and the President. As 
discussed, without an adjustment to fees, the DCP will be unable to 
continue current operations, necessitating dramatic program reductions, 
and possibly weakening the closed system of distribution. Particularly 
in light of increased needs for diversion control and demands upon the 
DCP outlined in the NPRM, the following fees for the FY 2012-2014 
period will be effective April 16, 2012.
    DEA continues to review possible methodologies as technology 
continues to afford increased tracking and allocation of specific 
costs. However, at this time, DEA has determined that it is both 
practicable and reasonable to continue to apply the weighted-ratio 
methodology. Consistent with the statutory direction to charge 
reasonable fees relating to the registration and control of the 
manufacture of controlled substances and listed chemicals, the 12.5 
ratio is applied to the manufacturing registrant group. The 6.25 ratio 
applies to the ``distribution'' of controlled substances and listed 
chemicals, or the distributor registrant group. The ``dispensing'' 
registrant group has the largest number of registrants and each 
registrant has a relatively low registration and control cost, and a 
relatively smaller quantity and lower purity of controlled substances 
within their physical possession. Thus, the base fee, or the 1 ratio, 
is applied to the dispensing registrant group. The practitioner fee is 
the base fee on an annual basis but is collected every three years for 
administrative convenience.
    Thus, the new fees, some of which are paid annually and some of 
which are paid every three years, range from $244 for ratio 1 to $3,047 
for ratio 12.5, depending upon the particular registrant category. 
Specifically, the annual registration fee for practitioners, mid-level 
practitioners, dispensers, researchers, and narcotic treatment programs 
is $244. For administrative convenience for both the collection and the 
payment, practitioners will pay a combined registration fee of $731 
every three years. The annual registration fee for distributors, 
importers, and exporters is $1,523, and for manufacturers the annual 
fee is $3,047. 21 CFR 1301.13 and 1309.11.

DEA Efforts To Control DCP Costs

    DEA continually reviews the DCP and its methods of operation to 
ensure that it is fiscally responsible. The DCP works diligently to 
provide the registrants with cost effective and state-of-the-art means 
for complying with laws and regulations related to manufacturing, 
distributing, dispensing, importing, and exporting controlled 
substances and listed chemicals. Some examples of this include online 
registration, the Controlled Substance Ordering System

[[Page 15245]]

(CSOS) for electronic controlled substance ordering between 
registrants, and electronic reporting of thefts and significant losses 
of controlled substances.
    DEA takes seriously its responsibilities to manage the DCP in an 
efficient and effective manner, particularly in light of the current 
economy. DEA cannot foresee Congressionally-mandated changes to the 
DCP, emerging trends, or how such trends may impact the DCP, but it is 
committed to managing in a fiscally responsible manner. The Office of 
Diversion Control is committed to reviewing the registration process to 
ensure efficiency and accountability as well as reviewing current 
regulations related to fee exempt registrants.

Summary of Impact of New Fee Relative to Current Fee

Affected Entities

    In updating the number of registrants since the NPRM and the 
proposed fee calculation, there is a slight increase, with a total of 
1,407,119 controlled substances and listed chemical registrants as of 
August 2011 (1,406,021 controlled substances registrants and 1,098 
chemical registrants), as shown in Table 10.

          Table 10--Number of Registrants by Business Activity
------------------------------------------------------------------------
                                            Controlled
        Registrant class/business           substances       Chemicals
------------------------------------------------------------------------
Pharmacy................................          66,934  ..............
Hospital/Clinic.........................          15,737  ..............
Practitioner............................       1,115,398  ..............
Teaching Institution....................             336  ..............
Mid-Level Practitioner..................         193,877  ..............
Researcher/Canine Handler...............           9,120  ..............
Analytical Lab..........................           1,500  ..............
Narcotic Treatment Program..............           1,267  ..............
Distributor.............................             828             550
Reverse Distributor.....................              60  ..............
Importer................................             209             182
Exporter................................             233             159
Manufacturer............................             522             207
                                         -------------------------------
    Total...............................       1,406,021           1,098
                                         -------------------------------
    Total (all registrants).............             1,407,119
------------------------------------------------------------------------
* Data as of August 2011.

    Not all registrants listed in Table 10 are subject to the fees. 
Publicly owned institutions, law enforcement agencies, the Indian 
Health Service, the Department of Veterans Affairs, Federal Bureau of 
Prisons, and military personnel are exempt from fees.
    The number of registrations exceeds the number of individual 
registrants because some registrants are required to hold more than one 
registration. The CSA requires a separate registration for each 
location where controlled substances are handled and a separate 
registration for each business activity; that is, a registration for 
activities related to the handling of controlled substances and a 
registration for activities related to the handling of List I 
chemicals. Some registrants may conduct multiple activities under a 
single registration (e.g., manufacturers may distribute substances they 
have manufactured without being registered as a distributor), but firms 
may hold multiple registrations for a single location. Individual 
practitioners who prescribe, but do not store controlled substances, 
may use a single registration at multiple locations within a state, but 
need separate registrations for each state in which they prescribe 
controlled substances.

Characteristics of Entities

    This rule affects those manufacturers, distributors, dispensers, 
importers, and exporters of controlled substances and List I chemicals 
that are required to obtain and pay a registration fee with DEA 
pursuant to the CSA (21 U.S.C. 822 and 958(f)). As of August 2011, 
there was an increase of registrants from December 2010, with 1,407,119 
controlled substances and List I chemical registrants (1,406,021 
controlled substances registrants and 1,098 List I chemical 
registrants), as shown above in Table 10.
    Pharmacies, hospitals/clinics, practitioners, teaching 
institutions, and mid-level practitioners comprise 98.9 percent of all 
registrants. These registrants register every three years. Other 
registrants maintain an annual registration. Registration and 
reregistration costs vary by registrant category as described in more 
detail in the sections below.
    The fees affect a wide variety of entities. Table 11 indicates the 
sectors affected by this rule and their average annual revenue/income. 
Most DEA registrants are considered small entities under Small Business 
Administration (SBA) standards. There are 1,309,275 registered 
practitioners and mid-level practitioners as of August 2011, and almost 
all practitioners are considered small (annual revenues of less than $6 
million to $8.5 million, depending on specialty).

             Table 11--Industrial Sectors of DEA Registrants
------------------------------------------------------------------------
                                                         Average annual
                 Sector                    NAICS code      revenue *
------------------------------------------------------------------------
Manufacturers:

[[Page 15246]]

 
    Petro-chemical Manufacturing                32511     $1,390,485,971
     (organic, inorganic)...............
    Medicinal and Botanical                    325411         27,601,834
     Manufacturing......................
    Pharmaceutical Manufacturing........       325412        144,173,821
    Adhesive Manufacturing..............       325520         17,482,468
    Toilet Preparation Manufacturing....       325620         50,322,290
    Other Chemical Manufacturing........       325998         13,720,807
Distributors:
    Drugs and Druggist Sundries                424210         64,793,480
     Wholesalers........................
    General Line Grocery Wholesalers....       424410         45,518,407
    Confectionary Merchant Wholesalers..       414450         17,175,982
    Chemical Wholesalers................       424690         12,856,993
    Tobacco Wholesalers.................       424940         71,437,205
    Miscellaneous Wholesalers...........       424990          2,741,857
Pharmacies:
    Supermarkets........................       445110          7,247,540
    Drug Stores.........................       446110          4,829,487
    Discount Stores.....................       452112         26,535,201
    Warehouse Clubs and Superstores.....       452910         76,300,280
Other:
    Testing Labs........................       541380          1,907,414
    Packaging and Labeling Services.....       561910          2,696,904
Other Practitioners:
    Professional Schools................       611310          1,373,855
    Ambulatory Health Care Services.....          621          1,236,852
    Hospitals...........................          622        108,286,641
------------------------------------------------------------------------
*Source: 2007 Economic Census. http://www.census.gov/econ/census07.

    Supermarkets, discount stores, warehouse clubs, and superstores 
handle controlled substances through their distribution centers and 
pharmacies. Drug products containing List I chemicals are primarily 
distributed as over-the-counter medicines. These are distributed by 
drug wholesalers who specialize in non-prescription drugs, wholesalers 
who supply convenience stores, and grocery, pharmacy, and discount 
stores that operate their own distribution centers.

Economic Impact Analysis of Fee

    This fee is expected to have two levels of impact. Initially, the 
fee adjustment will impact the registrants. Then the fee or portion of 
the fee increase may be passed on to the general public. The analysis 
below assumes that the impact of the fee adjustment is absorbed 
entirely by the registrants. Some commenters have confirmed this 
statement and have indicated some registrants may decide not to renew 
their registration as a result of the higher fees.
    The registration fee may be a deductible business expense for some 
registrants. As a result, the increase in the fee may be dampened by 
reduced tax liability as a result of the increase in registration fee 
expense. For example, if a practitioner pays an additional $60 per year 
in registration fees and the combined federal and state income tax is 
35 percent, the net cash impact is $39, not $60. The additional $60 
causes income/profit to decrease by $60, decreasing the tax liability 
by $21. The net cash outlay is $39.\32\
---------------------------------------------------------------------------

    \32\ This example is for illustration purposes only. Each entity 
should seek competent tax advice for tax consequences of this rule.
---------------------------------------------------------------------------

    DEA examined the new fees as a percentage of income for physicians, 
dentists, and physician's assistants in the practitioner registrant 
group and as a percentage of revenue for pharmacies, manufacturers, and 
distributors. This analysis indicates the fee adjustment is expected to 
have the greatest effect on small businesses in the practitioner 
registrant group. The majority of practitioners work in small 
businesses. Physicians, dentists, and physician's assistants reflect a 
representative sub-group of the practitioner registrant group. The 
effect of the fee increase is diminished by any increase in registrant 
income.
    The table below describes the average income for physicians, 
dentists, and physician's assistants from 2004 to 2012, and reflects 
the impact of the fee as a percentage of average income. This analysis 
assumes that the fee is absorbed personally by each practitioner and is 
not passed on to customers in such forms as higher prices for medical 
services or products. The analysis also ignores the dampening effect of 
registration fees as a potentially deductible business expense.
---------------------------------------------------------------------------

    \33\ Source: Bureau of Labor Statistics, http://www.bls.gov. 
Average income data for 2004 to 2009 is provided by the Bureau of 
Labor Statistics. 2010 to 2012 are estimated figures based on linear 
regression, where a straight-line increase is calculated from years 
2004 to 2009, then using the line to estimate average income for 
2010 to 2012.

                                                 Table 12--New Fee as Percentage of Income FY 2004-2012
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Average income \33\               Fee         Fee as percent of average income
                                                              ------------------------------------------------------------------------------------------
                             Year                                                         Physician     (Annual                               Physician
                                                                Physicians    Dentists    assistants     basis)     Physicians    Dentists    assistants
--------------------------------------------------------------------------------------------------------------------------------------------------------
2004.........................................................      137,610      130,300       68,780  ...........  ...........  ...........  ...........
2005.........................................................      138,910      133,680       71,070  ...........  ...........  ...........  ...........
2006.........................................................      142,220      140,950       74,270          184        0.129        0.131        0.248

[[Page 15247]]

 
2007.........................................................      155,150      147,010       77,800          184        0.119        0.125        0.237
2008.........................................................      165,000      154,270       81,610          184        0.112        0.119        0.225
2009.........................................................      173,860      156,850       84,830          184        0.106        0.117        0.217
2010.........................................................      179,370      163,901       87,933          184        0.103        0.112        0.209
2011.........................................................      187,154      169,632       91,230          184        0.098        0.108        0.202
2012.........................................................      194,939      175,363       94,528          244        0.125        0.139        0.258
Increase from 2007 to 2012...................................           26           19           22           33            6           11            9
Increase from 2006 to 2012...................................           37           24           27           33           -3            7            4
--------------------------------------------------------------------------------------------------------------------------------------------------------

    In 2007, the current fee of $184 on an annual basis represents 
0.119 percent, 0.125 percent, and 0.237 percent of annual income for 
physicians, dentists, and physician's assistants respectively. In 2012, 
the new fee of $244 (on an annual basis) would represent approximately 
0.125 percent, 0.139 percent, and 0.258 percent of annual income for 
physicians, dentists, and physician's assistants respectively. While 
the new fee is approximately 33 percent above the current fees 
implemented at the end of 2006, average incomes for physicians, 
dentists, and physician's assistants have increased 26 percent, 19 
percent, and 22 percent respectively over the same period. This 
estimated increase in average income dampens the effect of the fee 
increase as a percentage of average income. The diminishing effect is 
more apparent when comparing 2012 to 2006, the year for which the 
current fee was calculated and implemented. Additionally, as the 
average income grows in 2013 and 2014, the income adjusted fees are not 
any higher than in recent history.
    Exempt from the payment of registration fees is any hospital or 
other institution that is operated by an agency of the United States, 
of any state, or of any political subdivision or agency thereof. 
Likewise, an individual who is required to obtain a registration in 
order to carry out his/her duties as an official of a federal or state 
agency is also exempt from registration fees.\34\ Fee exempt 
registrants are not affected by the new fees.
---------------------------------------------------------------------------

    \34\ See 21 CFR 1301.21 for complete fee exemption requirements.
---------------------------------------------------------------------------

Conclusion
    DEA concludes that this new fee schedule is not an economically 
significant regulatory action because it does not result in a 
materially adverse effect on the economy, a sector of the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or state, local, or tribal governments or communities.\35\ The 
new fee will initially affect all fee paying registrants. The fees may 
eventually be passed on to the general public, diminishing the impact 
of the fee adjustment on individual registrants. The impact of the fee 
on registrants may also be diminished by a reduction in tax liabilities 
and an increase in average income. Additionally, hospitals and 
institutions operated by federal, state, or local governments, and 
their employees are exempt from registration fees.\36\ Moreover, DEA 
believes that this final rule will enhance the public health and 
safety.
---------------------------------------------------------------------------

    \35\ In accordance with 25 U.S.C. 1616q, employees of a tribal 
health or urban Indian organization are exempt from ``payment of 
licensing, registration, and any other fees imposed by a Federal 
agency to the same extent that officer of the commissioned corps of 
the Public Health Service and other employees of the Service are 
exempt from those fees.'' To the extent that any hospital or other 
institution operated by or any individual practitioner associated 
with an Indian Tribal Government must pay fees, the economic impact 
is not substantial.
    \36\ See 21 CFR 1301.21 for complete requirements for exemption 
of registration fees.
---------------------------------------------------------------------------

Regulatory Analyses

    This final rule is necessary to ensure the full funding of the DCP 
through registrant fees as required by 21 U.S.C. 886a. It has been five 
years since the last fee change. As discussed above, statutory and 
operational changes to the DCP cannot be fully offset by improved 
operational efficiencies and require a recalculation of registrant 
fees. This rule does not change the requirement to register to handle 
controlled substances and/or List I chemicals but rather changes the 
annual fee associated with registration and reregistration that will 
allow DEA to meet its statutory obligations. DEA recognizes that the 
fee changes affect small businesses, but does not believe the relative 
individual impact is significant. The average annual increase in 
estimated registration fee collections is less than $100 million at an 
estimated annual increase of $76,226,568.

Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3511)

    This rule will not impose additional information collection 
requirements on the public.

Regulatory Flexibility Act

    Under the Regulatory Flexibility Act of 1980 (5 U.S.C. 601-612) 
(RFA), federal agencies must evaluate the impact of rules on small 
entities and consider less burdensome alternatives. DEA has evaluated 
the impact of this final rule on small entities as summarized above and 
concluded that although the rule will affect a substantial number of 
small entities, it will not impose a significant economic impact on any 
regulated entities.
    In accordance with the Regulatory Flexibility Act (5 U.S.C. 
605(b)), the Deputy Assistant Administrator hereby certifies that this 
rulemaking has been drafted consistent with the Act and that a 
regulatory analysis on the effects or impact of this rulemaking on 
small entities has been done and summarized above.\37\ While DEA 
recognizes that this increase in fees will have a financial effect on 
registrants, the change in fees will not have a significant economic 
impact. A change in fees is necessary to fully comply with 21 U.S.C. 
886a and related statutes governing the DCP and the Diversion Control 
Fee Account by which DEA is legally mandated to collect fees to cover 
the full costs of the DCP as defined by all activities relating to the 
registration and control of the manufacture, distribution, import, 
export, and dispensing of controlled substances and listed chemicals.
---------------------------------------------------------------------------

    \37\ See ``Economic Impact Analysis of Final Rule on Controlled 
Substances and List I Chemical Registration and Reregistration Fees, 
DEA-346'' in this rulemaking docket found at www.regulations.gov.
---------------------------------------------------------------------------

    This rule is not a discretionary action but implements statutory 
direction to charge reasonable fees to recover the full

[[Page 15248]]

costs of activities constituting the DCP through registrant fees (21 
U.S.C. 821, 886a, and 958(f)). As discussed above and in the Economic 
Impact Analysis of the Final Rule found in the rulemaking docket at 
www.regulations.gov, DEA analyzed four fee calculation methodologies--
Past-Based, Future-Based, Flat Fee, and Weighted-Ratio. DEA selected 
the weighted-ratio methodology to calculate the new fee structure. This 
approach has been used since Congress established registrant fees and 
continues to be a reasonable reflection of differing costs. 
Furthermore, the weighted-ratio does not create a disparity in the 
relative increase in fees from the current to the new fees. The 
weighted-ratios used by DEA to calculate the fee have proven effective 
and reasonable over time. Additionally, the selected calculation 
methodology accurately reflects the differences in activity level, 
notably in pre-registration and scheduled investigations, by registrant 
category--for example, these costs are greatest for manufacturers. DEA 
selected this option because it is the only option that resulted in 
reasonable fees for all registrant groups.
    Under the weighted-ratio methodology, the individual effect on 
small business registrants is minimal. Practitioners represent 93 
percent of all registrants, and nearly all practitioners are employed 
by small businesses pursuant to SBA standards. Practitioners will pay a 
three-year registration fee of $731 or the equivalent of $244 per year.
    For consideration of the impact of the fee on small businesses, DEA 
analyzed the new registration fee as a percentage of annual income for 
a representative practitioner group: physicians, dentists, and 
physician's assistants. While there are many specialists listed in the 
Bureau of Labor Statistics income data, incomes for physicians, 
dentists, and physician's assistants are representative of the 
practitioner registrant group. For practitioners, the new fee, on an 
annual basis, would be $244; the annual increase would be $60 from the 
current fee. From the calculation performed in the preceding section, 
Economic Impact Analysis of Final Rule, the impacts of the new fees, 
$60 per year increase from current fees, were found to be 0.007 
percent, 0.014 percent, and 0.022 percent (rounded to the third 
decimal) of annual income for physicians, dentists, and physician's 
assistants respectively, when normalized for income increases. In 
consideration of the calculated impact and potentially further 
mitigating factors discussed in the Economic Impact Analysis of Final 
Rule, DEA concludes that the final rule will not have a significant 
economic impact on a substantial number of small entities.

Executive Orders 13563 and 12866

    This final rule increasing registrant fees has been developed in 
accordance with the principles of Executive Orders 13563 and 12866. 
Supporting information may be found at www.regulations.gov. The 
difference between the current fee and the new fee--the fee increase--
is less than $100 million annually. Specifically, the difference in the 
fees projected to be collected under the current fee rates and in the 
fees projected to be collected under the new fee rates for the three 
years of FY 2012-FY 2014 is $228,679,704. Thus, the annual increase is 
$76,226,568. This rule has been reviewed by the Office of Management 
and Budget.
    The primary cost of this final rule is the increase in the 
registration fees paid by registrants. Benefits of the rule are an 
extension of the benefits of the DCP. The DCP is a strategic component 
of United States law and policy aimed at preventing, detecting, and 
eliminating the diversion of controlled substances and listed chemicals 
into the illicit market while ensuring a sufficient supply of 
controlled substances and listed chemicals for legitimate medical, 
scientific, research, and industrial purposes. The absence of or 
significant reduction in this program would result in enormous costs 
for the citizens and residents of the United States due to the 
diversion of controlled substances and listed chemicals into the 
illicit market as outlined in the Economic Impact Assessment found in 
the rulemaking docket.

Executive Order 12988

    This final regulation meets the applicable standards set forth in 
Sections 3(a) and 3(b)(2) of Executive Order 12988 Civil Justice Reform 
to eliminate ambiguity, minimize litigation, establish clear legal 
standards, and reduce burden.

Executive Order 13132

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

Unfunded Mandates Reform Act of 1995

    This rule does not contain a federal mandate and will not result in 
the expenditure by state, local, and tribal governments, in the 
aggregate, or by the private sector, of $136,000,000 or more (adjusted 
for inflation) in any one year, and will not significantly or uniquely 
affect small governments. DEA notes that many governmental entities 
operate DEA-registered facilities and that they are currently fee 
exempt. Moreover, the effect of this fee adjustment on individual 
entities and practitioners is minimal. The majority of the affected 
entities will pay a fee of $731 for a three year registration period 
($244 per year or an increase of $60 per year). This rule is 
promulgated in compliance with 21 U.S.C. 886a that the full costs of 
operating the DCP be collected through registrant fees.

Executive Order 13175

    This rule is required by statute, will not have tribal implications 
and will not impose substantial direct compliance costs on Indian 
tribal governments.

Congressional Review Act

    This rule is not a major rule as defined by the Congressional 
Review Act (5 U.S.C. 804). This rule will not result in an annual 
effect on the economy of $100,000,000 or more, a major increase in 
costs or prices, or have significant adverse effects on competition, 
employment, investment, productivity, innovation, or the ability of 
United States-based companies to compete with foreign based companies 
in domestic and export markets.

List of Subjects

21 CFR Part 1301

    Administrative practice and procedure, Drug traffic control, 
Security measures.

21 CFR Part 1309

    Administrative practice and procedure, Drug traffic control, 
Exports, Imports, Security measures.

    For the reasons set out above, 21 CFR parts 1301 and 1309 are 
amended as follows:

PART 1301--REGISTRATION OF MANUFACTURERS, DISTRIBUTORS AND 
DISPENSERS OF CONTROLLED SUBSTANCES

0
1. The authority citation for part 1301 continues to read as follows:

    Authority:  21 U.S.C. 821, 822, 823, 824, 831, 871(b), 875, 877, 
886a, 951, 952, 953, 956, 957, 958.

[[Page 15249]]

0
2. Amend Sec.  1301.13 by revising paragraph (e)(1) to read as follows:

Sec.  1301.13  Application for registration; time for application; 
expiration date; registration for independent activities; application 
forms, fees, contents and signature; coincident activities.

* * * * *
    (e) * * *
    (1)

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                     Registration
          Business activity            Controlled substances    DEA Application forms   Application     period         Coincident activities allowed
                                                                                         fee  ($)       (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
(i) Manufacturing...................  Schedules I-V..........  New-225 Renewal-225a..        $3,047             1  Schedules I-V: May distribute that
                                                                                                                    substance or class for which
                                                                                                                    registration was issued; may not
                                                                                                                    distribute or dispose of any
                                                                                                                    substance or class for which not
                                                                                                                    registered. Schedules II-V: Except a
                                                                                                                    person registered to dispose of any
                                                                                                                    controlled substance may conduct
                                                                                                                    chemical analysis and preclinical
                                                                                                                    research (including quality control
                                                                                                                    analysis) with substances listed in
                                                                                                                    those schedules for which
                                                                                                                    authorization as a mfg. was issued.
(ii) Distributing...................  Schedules I-V..........  New-225 Renewal-225a..         1,523             1  .....................................
(iii) Reverse distributing..........  Schedules I-V..........  New-225 Renewal-225a..         1,523             1  .....................................
(iv) Dispensing or instructing        Schedules II-V.........  New-224 Renewal-224a..           731             3  May conduct research and
 (includes Practitioner, Hospital/                                                                                  instructional activities with those
 Clinic, Retail Pharmacy, Central                                                                                   substances for which registration
 fill pharmacy, Teaching                                                                                            was granted, except that a mid-level
 Institution).                                                                                                      practitioner may conduct such
                                                                                                                    research only to the extent
                                                                                                                    expressly authorized under state
                                                                                                                    statute. A pharmacist may
                                                                                                                    manufacture an aqueous or oleaginous
                                                                                                                    solution or solid dosage form
                                                                                                                    containing a narcotic controlled
                                                                                                                    substance in Schedule II-V in a
                                                                                                                    proportion not exceeding 20% of the
                                                                                                                    complete solution, compound or
                                                                                                                    mixture. A retail pharmacy may
                                                                                                                    perform central fill pharmacy
                                                                                                                    activities.
(v) Research........................  Schedule I.............  New-225 Renewal-225a..           244             1  A researcher may manufacture or
                                                                                                                    import the basic class of substance
                                                                                                                    or substances for which registration
                                                                                                                    was issued, provided that such
                                                                                                                    manufacture or import is set forth
                                                                                                                    in the protocol required in Sec.
                                                                                                                    1301.18 and to distribute such class
                                                                                                                    to persons registered or authorized
                                                                                                                    to conduct research with such class
                                                                                                                    of substance or registered or
                                                                                                                    authorized to conduct chemical
                                                                                                                    analysis with controlled substances.
(vi) Research.......................  Schedules II-V.........  New-225 Renewal-225a..           244             1  May conduct chemical analysis with
                                                                                                                    controlled substances in those
                                                                                                                    schedules for which registration was
                                                                                                                    issued; manufacture such substances
                                                                                                                    if and to the extent that such
                                                                                                                    manufacture is set forth in a
                                                                                                                    statement filed with the application
                                                                                                                    for registration or reregistration
                                                                                                                    and provided that the manufacture is
                                                                                                                    not for the purposes of dosage form
                                                                                                                    development; import such substances
                                                                                                                    for research purposes; distribute
                                                                                                                    such substances to persons
                                                                                                                    registered or authorized to conduct
                                                                                                                    chemical analysis, instructional
                                                                                                                    activities or research with such
                                                                                                                    substances, and to persons exempted
                                                                                                                    from registration pursuant to Sec.
                                                                                                                    1301.24; and conduct instructional
                                                                                                                    activities with controlled
                                                                                                                    substances.
(vii) Narcotic Treatment Program      Narcotic Drugs in        New-363 Renewal-363a..           244             1  .....................................
 (including compounder).               Schedules II-V.
(viii) Importing....................  Schedules I-V..........  New-225 Renewal-225a..         1,523             1  May distribute that substance or
                                                                                                                    class for which registration was
                                                                                                                    issued; may not distribute any
                                                                                                                    substance or class for which not
                                                                                                                    registered.
(ix) Exporting......................  Schedules I-V..........  New-225 Renewal-225a..         1,523             1  .....................................

[[Page 15250]]

 
(x) Chemical Analysis...............  Schedules I-V..........  New-225 Renewal-225a..           244             1  May manufacture and import controlled
                                                                                                                    substances for analytical or
                                                                                                                    instructional activities; may
                                                                                                                    distribute such substances to
                                                                                                                    persons registered or authorized to
                                                                                                                    conduct chemical analysis,
                                                                                                                    instructional activities, or
                                                                                                                    research with such substances and to
                                                                                                                    persons exempted from registration
                                                                                                                    pursuant to Sec.   1301.24; may
                                                                                                                    export such substances to persons in
                                                                                                                    other countries performing chemical
                                                                                                                    analysis or enforcing laws related
                                                                                                                    to controlled substances or drugs in
                                                                                                                    those countries; and may conduct
                                                                                                                    instructional activities with
                                                                                                                    controlled substances.
--------------------------------------------------------------------------------------------------------------------------------------------------------

* * * * *

PART 1309--REGISTRATION OF MANUFACTURERS, DISTRIBUTORS, IMPORTERS, 
AND EXPORTERS OF LIST I CHEMICALS

0
3. The authority citation for part 1309 is revised to read as follows:

    Authority:  21 U.S.C. 802, 821, 822, 823, 824, 830, 871(b), 875, 
877, 886a, 952, 953, 957, 958.

0
4. Revise Sec.  1309.11 to read as follows:

Sec.  1309.11  Fee amounts.

    (a) For each application for registration or reregistration to 
manufacture the applicant shall pay an annual fee of $3,047.
    (b) For each application for registration or reregistration to 
distribute, import, or export a List I chemical, the applicant shall 
pay an annual fee of $1,523.

0
5. In Sec.  1309.21, revise paragraph (c) to read as follows:

Sec.  1309.21  Persons required to register.

* * * * *
    (c) * * *

                                                  Summary of Registration Requirements and Limitations
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                       Application    Registration
        Business  activity                  Chemicals                DEA Forms             fee       period (years)     Coincident activities allowed
--------------------------------------------------------------------------------------------------------------------------------------------------------
Manufacturing.....................  List I...................  New-510.............          $3,047               1  May distribute that chemical for
                                                                                                                      which registration was issued; may
                                                                                                                      not distribute any chemical for
                                                                                                                      which not registered.
                                    Drug products containing   Renewal-510a........           3,047
                                     ephedrine,
                                     pseudoephedrine,
                                     phenylpropanolamine.
Distributing......................  List I...................  New-510.............           1,523               1
                                    Scheduled listed chemical  Renewal-510a........           1,523
                                     products.
Importing.........................  List I...................  New-510.............           1,523               1  May distribute that chemical for
                                                                                                                      which registration was issued; may
                                                                                                                      not distribute any chemical for
                                                                                                                      which not registered.
                                    Drug Products containing   Renewal-510a........           1,523
                                     ephedrine,
                                     pseudoephedrine,
                                     phenylpropanolamine.
Exporting.........................  List I...................  New-510.............           1,523               1
                                    Scheduled listed chemical  Renewal-510a........           1,523
                                     products.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Dated: March 12, 2012.
Joseph T. Rannazzisi,
Deputy Assistant Administrator.
[FR Doc. 2012-6253 Filed 3-12-12; 11:15 am]
BILLING CODE 4410-09-P
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