[Federal Register Volume 70, Number 220 (Wednesday, November 16, 2005)]
[Proposed Rules]
[Pages 69474-69486]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-22681]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration

21 CFR Parts 1301 and 1309

[Docket No. DEA-266P]
RIN 1117-AA96


Controlled Substances and List I Chemical Registration and 
Reregistration Application Fees

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

ACTION: Notice of proposed rulemaking.

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SUMMARY: DEA is proposing to adjust the fee schedule for DEA 
registration and reregistration application fees relating to the 
registration and control of the manufacture, distribution and

[[Page 69475]]

dispensing of controlled substances and listed chemicals to 
appropriately reflect all costs associated with its Diversion Control 
Program as mandated by 21 U.S.C. 822. Specifically, DEA proposes to 
revise the fee schedule for controlled substances and List I chemical 
handlers so that all manufacturers, distributors, importers, exporters, 
and dispensers of controlled substances and of List I chemicals pay an 
annual fee, by registrant category, irrespective of whether they handle 
controlled substances or List I chemicals. This action responds to 
recent amendments to the Diversion Control Fee Account provisions in 
the Controlled Substances Act (CSA) and will bring DEA's fee 
collections into line with the new requirements.

DATES: Written comments must be postmarked, and electronic comments 
must be sent, on or before January 17, 2006.

ADDRESSES: To ensure proper handling of comments, please reference 
``Docket No. DEA-266'' on all written and electronic correspondence. 
Written comments sent via regular mail should be sent to the Deputy 
Administrator, Drug Enforcement Administration, Washington, DC 20537, 
Attention: DEA Federal Register Representative/ODL. Written comments 
sent via express mail should be sent to DEA Headquarters, Attention: 
DEA Federal Register Representative/ODL, 2401 Jefferson-Davis Highway, 
Alexandria, VA 22301. Comments may be sent directly to DEA 
electronically by sending an electronic message to 
<a href="/cdn-cgi/l/email-protection#315554501f555847544342585e5f1f415e5d585248714442555e5b1f565e47"><span class="__cf_email__" data-cfemail="b2d6d7d39cd6dbc4d7c0c1dbdddc9cc2dddedbd1cbf2c7c1d6ddd89cd5ddc4">[email protected]</span></a>. Comments may also be sent 
electronically through http://www.regulations.gov using the electronic 
comment form provided on that site. An electronic copy of this document 
is also available at the http://www.regulations.gov Web site. DEA will 
accept attachments to electronic comments in Microsoft Word, 
WordPerfect, Adobe PDF, or Excel file formats only. DEA will not accept 
any file format other than those specifically listed above.

FOR FURTHER INFORMATION CONTACT: Patricia M. Good, Chief, Liaison and 
Policy Section, Office of Diversion Control, Drug Enforcement 
Administration, Washington, DC 20537; Telephone (202) 307-7297.

SUPPLEMENTARY INFORMATION:

I. Introduction and Background

    The Controlled Substances Act (CSA) requires that all 
manufacturers, distributors, dispensers, importers and exporters of 
controlled substances and List I chemicals obtain an annual 
registration with DEA (21 U.S.C. 822 and 958(f)). In addition, the CSA, 
as codified in 21 U.S.C. 821, authorizes the Attorney General, who in 
turn redelegates this authority to the Administrator of DEA, to 
``promulgate rules and regulations and to charge reasonable fees 
relating to the registration and control of the manufacture, 
distribution, and dispensing of controlled substances and listed 
chemicals'' (21 U.S.C. 821 as amended by Pub. L. 108-447).
    In October 1992, Congress passed the Departments of Commerce, 
Justice and State, the Judiciary and Related Agencies Appropriations 
Act of 1993 which changed the source of funding for DEA's Diversion 
Control Program (DCP) from being part of DEA's Congressional 
appropriation to full funding by registration and reregistration fees 
through the establishment of the Diversion Control Fee Account (DCFA). 
The Appropriations Act of 1993 required 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.'' The legislation did 
not, however, provide clarification on what constituted the ``Diversion 
Control Program,'' thus leaving open the issue as to what fee-setting 
criteria should be used to determine which costs could be reimbursed 
from the DCFA.
    In response to the Appropriations Act of 1993, DEA published a 
Notice of Proposed Rulemaking (NPRM) in December 1992 to adjust the 
registration and reregistration fees for controlled substance 
registrants (57 FR 60148, December 18, 1992). In the absence of 
guidelines from Congress regarding the specific criteria to be followed 
in identifying costs and setting the fees, DEA relied on the plain 
language of the Appropriations Act of 1993 and proposed fees necessary 
to cover the costs of the activities that were identified within the 
budget decision unit known as the ``Diversion Control Program.''
    At the time that the Appropriations Act of 1993 was passed, 21 
U.S.C. 821 did not extend to chemical control activities; accordingly, 
there were no registration or fee requirements for handlers of List I 
chemicals. DEA therefore excluded chemical control costs from its Final 
Rule implementing the requirements of the Appropriations Act of 1993 
(58 FR 15272, March 22, 1993). Congress amended 21 U.S.C. 821 on 
December 17, 1993 to require reasonable fees relating to ``the 
registration and control of regulated persons and of regulated 
transactions'' (Domestic Chemical Diversion Control Act of 1993, 3(a), 
Pub. L. 103-200, 107 Stat. 2333); however, despite this amendment, DEA 
has continued to endeavor to maintain separate funding for its 
controlled substances diversion control and its chemical diversion 
control activities.
    Following publication of DEA's Final Rule, the American Medical 
Association (AMA) and others filed a lawsuit objecting to the increase 
in registration and reregistration fees on the grounds that DEA had 
failed to provide adequate information as to what activities were 
covered by the fees and how they were justified. Upon appeal, the 
United States Court of Appeals for the District of Columbia Circuit 
remanded, without vacating, the rule to the DEA, requiring the agency 
to provide an opportunity for meaningful notice and comment on the fee-
funded components of the DCP. In doing so, the court confirmed the 
boundaries of the DCP that DEA can fund by registration fees, finding 
that the current statutory scheme (21 U.S.C. 821 and 958) required DEA 
to set reasonable registration fees to recover the full costs of the 
DCP. (AMA v. Reno, 57 F.3d 1129, 1135 (D.C. Cir. 1995)).
    Thus, in the absence of a simple, objective measure by which DCP 
costs could be identified and the appropriate fees calculated, both DEA 
and the courts have looked to 21 U.S.C. 821 and 958 to define the 
guidelines for determining what costs should be included in the 
calculation of the fees and from whom the fees might be collected.
    On November 20, 2004, Congress passed the Departments of Commerce, 
Justice, and State, the Judiciary, and Related Agencies Appropriations 
Act of 2005 which provided clarification as to the activities 
constituting the DCP (Pub. L. 108-447). This Act was included in the 
Consolidated Appropriations Act of 2005, which was signed into law by 
the President on December 8, 2004 (Pub. L. 108-447). The Act amends 21 
U.S.C. 886a to define the Diversion Control Program as ``the controlled 
substance and chemical diversion control activities of the Drug 
Enforcement Administration,'' which are further defined as the 
``activities related to the registration and control of the 
manufacture, distribution and dispensing, importation and exportation 
of controlled substances and listed chemicals.'' It also amends the 
section to provide that reimbursements from the DCFA ``* * * shall be 
made without distinguishing between expenses related to controlled 
substances activities and expenses related to chemical activities.''

[[Page 69476]]

Finally, the Act amends 21 U.S.C. 821 and 958(f) to make the language 
of those sections consistent with the definition of the DCP (Pub. L. 
108-447). The net effect of the amendments is to allow DEA to deposit 
all registration and reregistration fees (controlled substance and 
chemical) into the Fee Account and fund all controlled substance and 
chemical diversion control activities from the account without 
distinguishing as to the type of activity (controlled substance or 
chemical) being funded.
    Independent of the passage of the Appropriations Act, DEA undertook 
an internal reorganization to increase operational efficiencies and 
overall effectiveness. The resulting internal reorganization removes 
the focus from the single business decision unit of the DCP to a focus 
on diversion control activities irrespective of the business decision 
unit. That is, the diversion control activities of DEA are no longer 
contained in a single business decision unit identified as the 
Diversion Control Program. Thus, in identifying the activities that 
constitute the DCP, DEA must now look across the whole agency at all 
functions related to the registration and control of the manufacture, 
distribution, dispensing, importation and exportation of controlled 
substances and listed chemicals. This approach adheres both to the 
definition of the DCP contained in 21 U.S.C. 821 and 958 and to the 
court's requirement that there must be a nexus between the DCP 
activities funded through fees and the registration and control of the 
manufacture, distribution, and dispensing of controlled substances and 
of regulated persons and regulated transactions (now ``listed 
chemicals'').
    In keeping with this organizational and functional change, DEA has 
re-assessed the diversion control activities to be funded by the 
Diversion Control Fee Account (DCFA). Accordingly, this Notice of 
Proposed Rulemaking identifies all of the activities that constitute 
the DCP irrespective of organizational structure within the agency and 
in compliance with 21 U.S.C. 821 and 958, and 21 U.S.C. 886a that 
require that DEA charge reasonable fees relating to the registration 
and control of the manufacture, distribution, dispensing, importation 
and exportation of controlled substances and listed chemicals and that 
DEA collect fees adequate to fully fund the controlled substances and 
chemical diversion control activities that constitute the DCP. This 
rule also proposes a revised fee structure for manufacturers, 
distributors, dispensers, importers and exporters of controlled 
substances and List I chemicals, proposing that all handlers of 
controlled substances and listed chemicals pay an annual fee, by 
registrant category to support the DCP irrespective of whether they 
handle controlled substances or List I chemicals. While the 
Appropriations Act of 2005 specifies changes to the DCP effective 
immediately, the proposed new fee schedule would not take effect until 
Fiscal Year 2006. While all DCP activities will be supported by the 
DCFA, for Fiscal Year 2005 effective February 1, 2005, the combination 
of available DCFA funds together with the anticipated fee revenues from 
existing registrants will be sufficient to cover the additional costs 
being transferred to the fee-fundable aspects of the DCP.
    Under the current fee structure, DEA would collect a total of 
approximately $161,005,104 from registrant fees to support the DCP in 
Fiscal Year 2006. The estimated Fiscal Year 2006 cost of operating the 
DCP according to the clarified definition contained in the Consolidated 
Appropriations Act of 2005 is $201,673,000 as further described below. 
To this figure, DEA is required to add $15 million to be transferred to 
the U.S. Treasury (see below for further explanation), necessitating 
that DEA collect through registrant fees a total of $216,673,000 to 
``fully fund'' the DCP in Fiscal Year 2006. Without an increase in 
registrant fees to support the DCP DEA would fall short by about 
$55,667,896 and would not have sufficient funds to operate the DCP. 
Therefore, the following rule proposes to adjust the current registrant 
fee schedule to ensure the full funding of the DCP through registrant 
fees.
    In addition, because of the statutory clarification that now 
includes all chemical diversion control activities as part of the DCP, 
DEA is modifying the fee structure for DCP registrants to include 
chemical registrants as explained below. To date, chemical registrants 
have paid fees ranging from a subsidized $116 to $595 (initial 
registration fee) that covered only the costs of registration and 
reregistration and not the actual costs of operating the chemical 
diversion control program.
    These fees are user fees in contrast to the fees paid for by 
controlled substances registrants. User fees are required under the 
Independent Offices Appropriations act (IOAA) and the guidelines set 
forth in OMB Circular A-25. User fees are paid when a special benefit 
is conferred to a particular group, individual, etc. OMB Circular A-25, 
Section 6 describes a special benefit as a government service which 
``enables the beneficiary to obtain more immediate or substantial gains 
or values (which may or may not be measurable in monetary terms) than 
those that accrue to the general public (e.g., receiving a patent, 
insurance, or guarantee provision, or a license to carry on a specific 
activity or business or various kinds of public land use).''
    The section specifies that ``[a] user charge * * * will be assessed 
against each identifiable recipient for special benefits derived from 
Federal activities beyond those received by the general public.'' The 
section further requires that the user charge be sufficient to 
``recover the full cost to the Federal Government for providing the 
special benefit.''
    Under this definition, a registration to manufacture, distribute, 
import or export List I chemicals is a special benefit; and therefore, 
the fees paid by chemical handlers are user fees subject to the IOAA. 
In contrast, because the IOAA applies ``only when there is no 
independent statutory source for the charging of a fee or where a fee 
statute fails to define fee setting criteria'' (AMA v. Reno, 857 F. 
Supp. at 84 (D.D.C. 1994)), the fees paid to date by controlled 
substances registrants are not user fees. That is, because Congress 
established the DCFA by passing the 1993 Appropriations Act with its 
collection and spending criteria established by prior law (21 U.S.C. 
821 and 958(f)), the registration fees charged by DEA pursuant to the 
1993 Appropriations Act are not user fees subject to the IOAA because 
the act constitutes an independent statutory source for charging the 
fee and it defines fee-setting criteria, i.e., to cover the full costs 
of the DCP (AMA v. Reno, 857 F. Supp. 80 (D.D.C. 1994)).
    To comply with the clarified definition of the DCP and the 
statutory requirement that the operating costs of the DCP be fully 
funded through registrant fees, DEA must fund all aspects of the DCP, 
including the chemical diversion program, through fees. Because there 
is an independent statutory source for charging fees relating to all 
activities of the DCP (controlled substances and chemical), the fees 
charged to chemical registrants are no longer considered user fees 
subject to IOAA provisions, and DEA must collect fees from both 
chemical and controlled substances registrants to support the DCP.

Diversion Control Program Responsibilities

    The mission of DEA's Diversion Control Program (DCP) is to enforce 
the provisions of the Controlled Substances Act as they pertain to 
ensuring the availability of controlled substances and

[[Page 69477]]

listed chemicals for legitimate uses in the United States while 
exercising controls to prevent the diversion of these substances and 
chemicals for illegal uses.
    DCP activities include: Program priorities and field management 
oversight; coordination of major investigations; drafting and 
promulgating of regulations relating to the enforcement of the CSA and 
other legislation; establishment of national policy on diversion; 
fulfillment of U.S. obligations under drug control treaties; advice and 
leadership on state legislation/regulation; legal control of drugs and 
chemicals not previously under Federal control; control of imports and 
exports of licit controlled substances and chemicals; and program 
resource planning and allocation, among other activities.

Current Fee-Funding

    As described above, in the absence of specific guidance as to which 
activities were encompassed within the DCP and thus fee-fundable, DEA 
to date has adhered to the plain language of the Appropriations Act of 
1993 and used the budget categories that have historically been 
included in the DCP budget request of the Attorney General. As 
described in DEA's 1996 Federal Register Final Rule, for the purposes 
of budget formulation and appropriation DEA historically has identified 
only those resources (with their overhead costs) that were specifically 
devoted to diversion control efforts as part of the DCP (to include 
only its controlled substances activities) in its annual budget 
submission to Congress (61 FR 68624, December 30, 1996).
    DCP activities funded to date through the DCFA have been limited to 
those in the DCP business decision unit and constituted controlled 
substances scheduling, registration, investigation, inspection, data 
collection and analysis, training, establishing production quotas, 
cooperative efforts with state, local and other Federal agencies, 
cooperative efforts with the regulated industry, international 
activities relating to the registration and control of the manufacture, 
distribution and dispensing of controlled substances, and attendant 
management, personnel, administrative and clerical oversight for the 
DCP. Fee-fundable activities also have included travel, rent, 
utilities, supplies, equipment and services associated with the above-
listed activities and activities related to the control of licit 
controlled substances in the U.S. in which the initial source is 
foreign.
    DEA had not included the chemical control activities of the DCP 
among those funded through the DCFA for the reasons outlined 
previously. However, with the clarification in 21 U.S.C. 886a, as 
amended by Public Law 108-447, of the activities that constitute the 
DCP and that must be fully funded through registrant fees, DEA is now 
proposing to include activities related to the registration and control 
of the manufacture, distribution, importation and exportation of listed 
chemicals among those activities to be funded through the DCFA. That 
is, DEA would no longer distinguish, for the purposes of fee funding, 
between its diversion control activities relating to controlled 
substances and those relating to chemicals. These chemical diversion 
control activities include the overall control of listed chemicals, 
registration, investigation, inspection, data collection and analysis, 
cooperative efforts with the regulated industry, related management and 
administrative positions devoted to diversion control activities, other 
personnel, and administrative and clerical oversight. Activities also 
include a portion of the Office of Training (TR) that specifically 
supports the activities of the DCP. The TR develops, prepares and 
provides training, guidance and instruction for Diversion 
Investigators, Diversion Task Force Officers, regulatory agencies, 
state and local law enforcement, and DCP personnel on controlled 
substances and chemical diversion control, advance skills and technical 
knowledge, and systems applications. The total cost of the transfer of 
chemical diversion control activities to the DCFA in Fiscal Year 2005 
was $15,773,000. This figure is specified in the Appropriations Act and 
excludes $7.6 million in Congressionally-appropriated funds that have 
been provided for the chemical diversion control activities for Fiscal 
Year 2005. While the chemical program costs would be transferred to the 
DCP to comply with the clarification in 21 U.S.C. 886a and therefore 
paid for out of DCFA (fee) funds, for Fiscal Year 2005 these additional 
chemical diversion control costs to the DCP would be supported through 
available DCFA funds combined with anticipated fee collections from 
existing registrants. That is, while upon enactment the Appropriations 
Act of 2005 provides for the inclusion of chemical diversion control 
activities as part of the DCP and therefore subject to fee-funding and 
support through the DCFA, there will be no changes to registration and 
reregistration fees for Fiscal Year 2005 to accommodate the transfer of 
these activities to the DCP.
    Beginning in Fiscal Year 2006, DEA proposes to include the 
additional chemical diversion control costs in the calculation of DCFA 
registration and reregistration fees, as shown below in the proposed 
new fee schedule. The chemical diversion control costs that would be 
supported through the DCFA total $24,499,000 for Fiscal Year 2006, 
$24,874,000 for Fiscal Year 2007, and $25,223,000 for Fiscal Year 2008, 
accounting for salary growth and inflation.
    In addition to the TR costs described above, these chemical costs 
also include 188 chemical diversion control positions; 12 overseas 
diversion investigators dedicated to the DCP; and costs associated with 
the chemical transaction system (CTRANS). Historically, the DEA has 
funded diversion investigator positions overseas through appropriated 
funds, rather than the DCFA, despite the fact that these positions 
directly support the activities of the DCP. Diversion investigators in 
foreign posts conduct similar activities to domestic diversion 
investigators to prevent the diversion of legal controlled substances 
and listed chemicals to illegal uses. These individuals' activities 
include, but are not limited to, conducting background investigations 
of foreign companies involved in the importation into or exportation 
from the U.S. of controlled substances and listed chemicals; working 
with foreign governments on matters relating to the international 
controls on controlled substances and listed chemicals; advise the U.S. 
mission and DEA management regarding diversion of controlled substances 
and listed chemicals within foreign territory; training foreign law 
enforcement and regulatory counterparts to detect, investigate and 
prevent diversion of controlled substances and listed chemicals and 
working with foreign law enforcement and regulatory authorities 
regarding issues involving the illegal exportation from or illegal 
importation into the United States of controlled substances 
pharmaceuticals or listed chemicals. (It is the responsibility of the 
DCP to prevent the diversion of controlled substances and listed 
chemicals regardless of geographic source.)
    The Fiscal Year 2006 cost of the foreign diversion investigator 
positions described above is $3,107,000. Accounting for inflation and 
salary growth, the Fiscal Year 2007 cost to be fee-funded would be 
$3,181,000, and the Fiscal Year 2008 cost would be $3,222,000.

[[Page 69478]]

    DEA also is proposing to include as fee-fundable activities certain 
other internal resources that support the DEA's diversion control 
activities but that have not been considered part of the DCP in the 
past because of separate budget delineations. As was discussed more 
fully in previous rulemakings regarding the DCFA, while these elements 
support diversion control efforts, because the overall functions of the 
business decision units in which these activities are located are not 
devoted primarily to diversion control and because they have 
historically not been included as part of the DCP budget requests of 
the Attorney General, these elements have been supported by 
appropriated funds and not by the DCFA (61 FR 68624, December 30, 
1996).
    DEA identified several of these resources in its Final Rule 
published on October 10, 2003, including two sections within the Office 
of Chief Counsel that support DCP activities and a portion of the 
Office of Forensic Sciences Special Testing Laboratory that supports 
authentic sample analyses for licit drugs (68 FR 58587, October 10, 
2003). Other elements of DEA diversion control operations that support 
the DCP but have been traditionally funded through appropriated funds, 
and therefore not through the DCFA, also include diversion 
investigators assigned to overseas posts.
    Following the internal reorganization of the DEA to increase 
operational efficiencies and shift the focus from business decision 
units to activities that support the registration and control of the 
manufacture, dispensing and distribution of controlled substances and 
listed chemicals and in response to revisions to 21 U.S.C. 886a, DEA 
reviewed all activities relating to the registration and control of the 
manufacture, distribution, importation, exportation and dispensing of 
controlled substances and listed chemicals across the agency. As 
described above, with the internal reorganization, the agency's 
diversion control activities are no longer contained in an operational 
entity or office but rather the DCP now comprises all diversion control 
activities across the agency. Accordingly, the proposed, new fee 
structure includes all costs associated with the registration and 
control of the manufacture, distribution and dispensing of controlled 
substances and listed chemicals, including some diversion control costs 
previously funded through appropriated funds and not through registrant 
fees, regardless of the business decision unit in which these 
activities are located within the DEA. These costs include portions of 
the Office of Chief Counsel, the Office of Forensic Sciences Special 
Testing Laboratory, and the Special Operations Division; 12 foreign 
diversion investigator positions; additional special agent and 
intelligence analyst costs not currently supported through the DCFA; 
and ten new risk management positions to meet new mandates for the DCP. 
These components and associated costs are described below. A portion of 
DEA's internal computer system, Firebird, which already is supported 
through the DCFA, is included in the fee-fundable costs. The total cost 
of these non-chemical additions for Fiscal Year 2006 is $28,243,000.
    In the Office of Chief Counsel, two components--the Diversion and 
Regulatory Policy Section and the Diversion and Regulatory Litigation 
Section--provide diversion control support through the litigation of 
administrative actions related to DEA registrants and through legal 
support on regulatory policy matters. The Diversion and Regulatory 
Policy Section serves as the principal legal advisor on all policy 
issues related to controlled substances and chemical diversion control. 
The Diversion and Regulatory Litigation Section represents DEA in 
administrative hearings regarding the revocation or denial of DEA 
registrations to handle controlled substances or listed chemicals and 
provides legal advice related to the regulation of DEA registrants. DEA 
has identified 12 positions in these two sections (11 attorneys and one 
support position) that support the DCP. The Fiscal Year 2006 costs of 
the Chief Counsel support that would be funded through registrant fees 
totals $2,085,000, as contained in the President's Budget Request. The 
Fiscal Year 2007 costs would be $2,118,000, and the Fiscal Year 2008 
costs are anticipated to be $2,149,000 to account for inflation and 
annual salary increases.
    DEA's Office of Forensic Sciences Special Testing Laboratory 
supports authentic sample analyses for licit controlled substances. 
Fifty-one percent of the current Source Determination receipts handled 
by the Laboratory relate to licit drugs; that is, 51 percent of the 
costs of the Laboratory's eight positions directly relate to the 
control of the manufacture, distribution and dispensing of controlled 
substances as part of the DCP and therefore would be subject to fee 
funding under the proposed, revised fee structure. The Fiscal Year 2006 
Laboratory costs that would be supported through fee funds total 
$820,000. The anticipated Fiscal Year 2007 Laboratory costs to be fee-
funded would be $832,000, and the Fiscal Year 2008 costs would be 
$844,000, to account for inflation and annual salary increases.
    Based on Fiscal Year 2004 work hour analyses, DEA determined that 
there were 42 special agent work years utilized on investigations 
related to the diversion of pharmaceutical drugs. In Fiscal Year 2004, 
the DCFA funded the equivalent of 13 special agent work years on these 
investigations. DEA proposes to fully fund through the DCFA the support 
that is being provided for diversion investigations by including an 
additional 29 special agent positions. Special agents support the DCP 
by serving warrants, providing undercover support, making arrests, and 
providing other functions that diversion investigators are prohibited 
from executing but that are core elements of diversion control. The 
additional 29 positions would be added to the DCFA costs and would 
support both controlled substances and chemical diversion control 
efforts. The Fiscal Year 2006 cost for these additional special agent 
positions totals $6,530,000 (as contained in the President's Budget 
Request). Accounting for inflation and growth in salaries, the Fiscal 
Year 2007 cost would be $6,627,000, and the anticipated Fiscal Year 
2008 cost would be $6,727,000.
    In addition, for Fiscal Years 2006, 2007, and 2008 DEA proposes to 
add a total of 23 special agent positions to the budget supported by 
the DCFA. These positions include five special agents dedicated to the 
Office of Enforcement Operations to serve as Diversion Control 
Enforcement Coordinators for diversion control activities and 18 
special agents to serve as part of Diversion Investigation Groups. The 
Fiscal Year 2006 cost of these positions will be $4,704,000. The Fiscal 
Year 2007 and Fiscal Year 2008 costs are anticipated to be $4,598,000 
and $5,607,000, respectively, accounting for the phase-in of these 
positions over time and inflation and salary increases.
    DEA also proposes to fee-fund a total of 73 intelligence analyst 
positions of which 67 positions are in the field, four positions are 
located in the Special Operations Division, and two positions support 
the Office of Enforcement Operations. Intelligence analysts support the 
DCP by providing investigative and analytical support for domestic and 
international diversion control investigations, including the 
collection and evaluation of investigative intelligence information and 
the development of innovative techniques and solutions to assist the 
investigative process. Other duties of

[[Page 69479]]

intelligence analysts include researching business records, financial 
documents and person histories of diversion targets; analyzing emails, 
and related communications; researching compiling and analyzing import 
and export data to identify potential diversion targets; and 
determining associates of criminal targets and criminal organizations. 
The additional intelligence analysts in the field offices will free up 
diversion investigators who currently perform much of their own 
intelligence analysis. Freeing up diversion investigator time will 
allow them to focus more on investigative activities, including 
interviewing potential witnesses, conducting pharmacy surveys, 
conducting audits, and coordinating investigative activities with state 
and local law enforcement. Among the field positions, 34 intelligence 
analysts would be phased in during Fiscal Year 2006, and 33 
intelligence analysts would be phased in during Fiscal Year 2007. The 
total cost of the intelligence analyst positions to the DCFA in Fiscal 
Year 2006 would be $4,465,000, as indicated in the President's Budget 
Request. As the positions continue to be phased in, the Fiscal Year 
2007 fee-fundable intelligence analyst costs would be $8,761,000. The 
anticipated intelligence analysts cost in Fiscal Year 2008 would be 
$11,105,000.
    DEA also must request DCFA funding for ten risk management 
positions to support a coordinated, government-wide approach to address 
prescription drug diversion and abuse. During 2003, more than six 
million Americans abused prescription drugs. To better address this 
problem, the Appropriations Act of 2005 created, without funding, 10 
risk management positions and directed DEA to work cooperatively with 
other Federal agencies to ensure that drugs with a high risk of abuse 
are marketed appropriately (Pub. L. 108-447). The Fiscal Year 2006 cost 
of these positions to be fee-funded is $1,247,000. The Fiscal Year 2007 
cost of these additional 10 diversion control staff for this effort is 
anticipated to be $1,589,000, and the anticipated Fiscal Year 2008 cost 
for these positions to be fee-funded is $1,613,000.
    In calculating the revised fee schedule, DEA used the DCFA Budget 
Request for Fiscal Year 2006 and the expected DCFA Budget Requests for 
Fiscal Year 2007 and Fiscal Year 2008 in addition to the required 
annual $15 million transfer to the U.S. Treasury as mandated by the CSA 
(21 U.S.C. 886a). In addition to covering with fee funds all program 
elements and activities related to the registration and control of the 
manufacture, distribution and dispensing of controlled substances and 
listed chemicals, DEA must transfer the first $15 million of fee 
revenue to the General Fund of the Treasury each year (21 U.S.C. 
886a(1)). For each fiscal year between Fiscal Year 1993 through Fiscal 
Year 1998, Congress appropriated an additional $15 million to offset 
this requirement (a total infusion to the DCFA of $90 million). 
However, beginning in Fiscal Year 1999, Congress discontinued this 
additional appropriation.
    The Fiscal Year 2006 cost of the DCP is $201,673,000, including a 
base of $148,931,000 for controlled substances diversion control 
activities, $24,499,000 in chemical diversion control activities, and 
$28,243,000 for the additional non-chemical DCP support activities 
described above; that is:
    <bullet> 29 existing special agent positions to be dedicated to 
investigations of trafficking in pharmaceutical controlled substances 
(FY06 cost of $6,530,000);
    <bullet> 23 new special agent positions also to be dedicated to 
diversion control investigations (FY06 cost of $4,704,000);
    <bullet> 51% of eight Office of Forensic Sciences Special Testing 
Laboratory positions that support authentic sample analyses for licit 
controlled substances (FY06 cost of $820,000);
    <bullet> 12 Chief Counsel positions to provide diversion control 
support through the litigation of administrative actions related to DEA 
registrants and through legal support on regulatory policy matters 
(FY06 cost of $2,085,000);
    <bullet> 10 new risk management positions, mandated by the 2005 
Appropriations Act, to support a coordinated, government-wide approach 
to address prescription drug diversion and abuse (FY06 cost of 
$1,247,000)
    <bullet> 67 field intelligence analysts and 6 Headquarters 
intelligence analysts to support domestic and international diversion 
control investigations (FY06 cost of $4,465,000 for 34 of these 
analysts)
    <bullet> 1 professional/administrative position and non-personnel 
support for the Special Operations Division directly related to 
diversion control efforts (FY06 cost of $4,392,000)
    <bullet> Firebird operations costs to support communication and 
infrastructure of the diversion control program (FY06 cost of 
$4,000,000)
    With the addition of the required $15 million transfer to the U.S. 
Treasury, the total amount necessary to collect through registrant fees 
in Fiscal Year 2006 is $216,673,000.
    The anticipated costs of the DCP for Fiscal Year 2007, including 
all activities relating to the registration and control of the 
manufacture, distribution and dispensing of controlled substances and 
listed chemicals, is $213,723,000. DEA used an inflation figure of 1.5 
percent, based on the President's Economic Assumptions, to account for 
increases in costs against the Fiscal Year 2006 costs described above. 
Including the required $15 million transfer to the U.S. Treasury, the 
total amount necessary to collect through registrant fees in Fiscal 
Year 2007 is $228,723,000. The anticipated costs of the DCP for Fiscal 
Year 2008, including all activities relating to the registration and 
control of the manufacture, distribution and dispensing of controlled 
substances and listed chemicals, is $219,964,000. Including the 
required $15 million transfer to the U.S. Treasury, the total amount 
necessary to collect through registrant fees in Fiscal Year 2008 is 
$234,964,000.
    The total amount necessary to collect through fee funds for the 
Fiscal Year 2006-2008 period to fully fund the DCP as mandated by 
statute is $680,360,000. Under the current fee structure (without the 
proposed changes included in this rule), DEA would collect only 
$491,944,464 for the Fiscal Year 2006-2008 period through registrant 
fees and would therefore fall short by $188,415,536 of the necessary 
costs of operating the DCP. DEA's proposed new fee structure, 
therefore, would provide the necessary additional funds to ensure that 
the operational costs of the DCP are fully funded through registrant 
fees as mandated by statute.
    Based on the total amount necessary to collect for Fiscal Years 
2006-2008, DEA developed the specific fee levels for each registrant 
category reflected in the table below. To calculate these fees, DEA 
first estimated the number of paying registrants for this period and 
then used this figure combined with the amount required to be collected 
(with the new fees) to set the new fee rate. To calculate the number of 
paying registrants, DEA used logarithmic regression analysis to project 
the yearly registrant figures based on historical registrant data for 
the period of Fiscal Year 1994 through Fiscal Year 2004 combined with 
conservative estimates for future registration activity.
    DEA then estimated the number of registrants for each registrant 
category since different registrant categories pay different fees. 
Because there were insufficient data for some activities to perform 
regression analysis, DEA used the percentage for each category using 
data from the corresponding cycle years in the past.

[[Page 69480]]

    Finally, based on the analyses conducted, DEA developed the fees 
for each registrant category consistent with its current fee structure 
and fee-paying ratios that have been in existence since the inception 
of registrant fees. During this time, DEA has evaluated other options 
to apportion registrant fees, including, for example, basing fees on 
the usage level of controlled substances or listed chemicals. However, 
in each case, DEA determined that any potential benefits to an 
alternative fee structure system would be more than offset by greater 
administrative costs and burdens which must be borne by registrants. 
For more discussion on this topic, please see DEA's 2002 Final Rule (67 
FR 51988, August 9, 2002) and its 1996 Final Rule (61 FR 68624, 
December 30, 1996).
    In developing the proposed fee schedule, DEA opted to set the fee 
level for a three-year period (FY 2006-2008) for two reasons. First, 
the vast majority of registrants are practitioners who pay a three-year 
registration fee. These registrants are divided into roughly three 
separate groups who pay their three-year registration fees on alternate 
year cycles. Accordingly, the fees below reflect the total amount 
necessary to be collected for the full three-year period (FY 2006-
2008), divided by projected registrants and accounting for projected 
registrant growth by category for each fiscal year. Because different 
categories of registrants pay different amounts, DEA weighted the 
number of registrants in each category to ensure the appropriate 
reflection in the fee schedule. Because the fees reflect the total 
amount necessary for collection over a three year period (Fiscal Years 
2006-2008) and because the type and number of registrants varies from 
year to year, the total amount of fees collected may not equal the 
requested budget level for any given year. Surplus fees collected in 
one year are used to offset fee collection shortfalls in another year. 
In no case are fees spent in excess of the levels enacted by Congress.
    In evaluating options to structure the fee schedule, DEA opted to 
remain with the current fee structure to reduce reporting burdens on 
registrants and operational costs associated with the DCP which would 
then be passed on to registrants through annual fees. One option 
suggested in the past by registrants is to structure fees based on 
total usage of controlled substances and/or listed chemicals. Such an 
option would require significant reporting by registrants and oversight 
by DEA and would greatly increase the administrative costs of operating 
the DCP.

Current Fees Paid by Registrants

    Currently, both handlers of controlled substances and of List I 
chemicals pay annual registration and reregistration fees. Under the 
current structure and prior to the passage of the Consolidated 
Appropriations Act of 2005 which clarified the activities constituting 
the DCP, fees paid by controlled substances registrants fully supported 
all costs of the DCP which to date have excluded chemical diversion 
control activities and other activities that support the DCP but have 
traditionally been funded through Congressional appropriations. In 
contrast, fees paid by chemical registrants supported only the costs 
associated with registration and reregistration and the administration 
of the chemical diversion control program--that is not the full costs 
of chemical diversion control activities.
    Currently, handlers of controlled substances pay annual 
registration and reregistration fees ranging from $130 to $1,625 
depending on the category of registrant. Practitioners, mid-level 
practitioners, dispensers, researchers, and narcotic treatment programs 
pay an annual registration or reregistration fee of $130 (practitioners 
pay a three-year registration fee of $390). Distributors, importers and 
exporters pay an annual fee of $813, and manufacturers pay an annual 
fee of $1,625. The DEA last adjusted the fee schedule for controlled 
substances handlers in October 2003 (68 FR 58587, October 10, 2003). 
DEA anticipates that even without the statutory changes prompting the 
proposed fee adjustments contained in this rule, the agency would have 
needed to adjust the fees for controlled substances registrants to 
account for inflation and normal growth in operational costs in Fiscal 
Year 2006. Approximating a 15 percent increase in fees due to inflation 
and increases in program costs would have raised the annual 
practitioner fee, for example, from $130 to $150.
    Chemical handlers pay different annual fees for initial 
registration and subsequent reregistrations and depending on the 
category of registrant. Manufacturers, non-retail distributors, 
importers and exporters of List I chemicals currently pay $595 for each 
initial annual registration and $477 for each subsequent annual 
reregistration. Retail distributors pay an annual fee of $248 plus a $7 
application processing fee for each initial registration to conduct 
business and $116 per year for each reregistration (60 FR 32447, June 
22, 1995). Since October 1997, non-retail distributors of 
pseudoephedrine, phenylpropanolamine, and combination ephedrine drug 
products have been required to pay only $116 of the initial $595 
registration fee (62 FR 53958, October 17, 1997). Fees for chemical 
registrants have not been adjusted since passage of the DCDCA in 1995, 
and DEA has not revisited the fees except with regard to the waiver of 
a portion of the fees in 1997 (62 FR 53958).
    The current chemical fees reflected only the operational costs of 
registering and reregistering List I chemical handlers and not the full 
costs of the chemical diversion control program; however, with the 
revisions to 21 U.S.C. 886a that specifically defines the DCP to 
include both controlled substances and chemical diversion control 
activities, the DEA must collect fees from both controlled substances 
and chemical registrants at a level sufficient to fully fund the 
operations of the DCP (21 U.S.C. 886a). DEA estimates that if chemical 
registrants were required to pay for the full operating costs of the 
chemical diversion control program, registration and reregistration fee 
for all categories of non-retail chemical registrants would be in 
excess of $6,400. This calculation is based on the current population 
of registered non-retail chemical handlers.

Development of the Proposed New Fee Schedule

    To recover the full costs of the DCP as required by statute and as 
outlined in the preceding sections, DEA proposes to incrementally raise 
the fees in accordance with its existing fee structure as shown in the 
following table. The table also includes the current fees paid by each 
category and the total increase in fees.

----------------------------------------------------------------------------------------------------------------
                                                                   Proposed new       Current
                        Registrant class                            annual fee      annual fee      Difference
----------------------------------------------------------------------------------------------------------------
Manufacturers (controlled substances)...........................          $2,386          $1,625            $761
Manufacturers (chemical)........................................           2,386           **595           1,791
Distributors, Importers/Exporters (controlled substances),                 1,193             813             380
 including reverse distributors.................................
Distributors, Importers/Exporters (chemical)....................           1,193           **595             598

[[Page 69481]]

 
Chemical Retail Distributors....................................           1,193           **255             938
Dispensers/Practitioners*.......................................             191             130              61
Researchers, Narcotic Treatment Programs........................             191             130             61
----------------------------------------------------------------------------------------------------------------
*Practitioners, mid-level practitioners, pharmacies, hospitals/clinics, and teaching institutions would pay a
  fee of $573 for a three-year registration period.
**Registration.

    Although these fees did not go into effect on October 1, 2005, the 
first day of Fiscal Year 2006, DEA will publish a Final Rule in as 
timely a manner as possible. Under the proposed, new fee schedule, 
controlled substances registrants and chemical registrants in the same 
registrant category (e.g., manufacturers) would pay the same fee 
regardless of the substance or chemical being handled. Moreover, by 
this Notice, DEA proposes to remove differentiation between retail and 
non-retail distributors of List I chemicals; that is, both retail and 
non-retail distributors would pay the same fee as described above.
    The fee structure above would supplant the current fee structure 
for controlled substances and for chemical registrants. To clarify 
further, in establishing the new fee structure above, DEA also would be 
withdrawing, by this notice, its Notice of Proposed Rulemaking issued 
on December 1, 1999, which proposed changes in registration and 
reregistration fees for manufacturers, distributors, importers, 
exporters and retail distributors of List I chemicals (64 FR 67216, 
December 1, 1999). DEA also would be rescinding, by this notice, the 
1997 Notice of Fee Waiver published on October 17, 1997 (62 FR 53958). 
By this notice DEA had waived a portion of the registration fee for 
non-retail distributors of pseudoephedrine, phenylpropanolamine, and 
combination ephedrine drug products.
    DEA also is removing the registration waiver for persons who 
distribute, import or export a product containing a List I chemical if 
that person is registered with the DEA to manufacture, distribute or 
dispense, import or export a controlled substance, since the 
registration to handle List I chemicals and the registration to handle 
controlled substances, while both supporting the DCP and therefore 
subject to the same fees per the Appropriations Act of 2005, cover 
different regulatory, legal and business requirements and also relate 
to different customer bases.
    With the changes to 21 U.S.C. 821 and 958, and 21 U.S.C. 886a 
(summarized above) that require that DEA charge reasonable fees 
relating to the registration and control of the manufacture, 
distribution, dispensing, importation and exportation of controlled 
substances and listed chemicals and that DEA collect fees adequate to 
fully fund the controlled substances and chemical diversion control 
activities that constitute the DCP, the DEA must calculate the full 
costs of the DCP based on the full operating costs of its controlled 
substances diversion activities and its chemical diversion activities. 
Accordingly, persons who handle (manufacture, dispense, distribute, 
import or export) both controlled substances and List I chemicals must 
maintain a separate registration for each business activity.

Regulatory Analysis

    The rulemaking actions contained in this notice are necessary to 
ensure the full funding of the DCP through registrant fees as required 
by 21 U.S.C. 886a(3). Recent statutory clarification as to what 
constitutes the DCP and an internal reorganization of the DCP to 
improve operational efficiencies prompted DEA to conduct a review of 
the activities and costs constituting the DCP and to recalculate the 
registrant fees accordingly. This action was necessary despite the last 
fee adjustment on October 10, 2003.
    By registering with the DEA to handle controlled substances and 
List I chemicals (as required by 21 U.S.C. 822) and paying the annual 
registration fee (or three-year registration fee for some registrants), 
registrants receive the benefit of being able to manufacture, 
distribute import, export, and/or dispense controlled substances and/or 
listed chemicals. Entities that have not registered or do not maintain 
a current registration with the DEA to handle controlled substances 
and/or List I chemicals are, in general, not permitted to handle these 
substances (certain exceptions apply as delineated in 21 U.S.C. 
822(c)).
    Registration of controlled substances and List I chemical handlers 
is a key element of the system of controls related to the manufacture 
and distribution of these substances. Congress established this system 
of controls through the Controlled Substances Act, the Chemical 
Diversion and Trafficking Act, and subsequent legislation in an effort 
to prevent, detect and eliminate the diversion of controlled 
pharmaceuticals and listed chemicals from legitimate channels to 
illegal use, while at the same time ensuring their availability for 
legitimate purposes. This system has proven effective in reducing the 
diversion of these substances from legitimate channels to the illicit 
market. Components of this system include the registration of all 
controlled substances and listed chemicals and their handlers (Handlers 
of List II chemicals exclusively are not required to register with the 
DEA), recordkeeping, security, and manufacturing quotas, all under DEA 
DCP oversight. This proposed rule does not change the requirement to 
register to handle controlled substances and/or List I chemicals but 
rather changes the annual fee associated with registration and 
reregistration.

Regulatory Flexibility Act

    The Regulatory Flexibility Act as amended (5 U.S.C. 601-612), 
requires agencies to determine whether a proposed rule will impose a 
significant economic impact on a substantial number of small entities. 
The proposed fees affect a wide variety of entities. The following 
table indicates the sectors affected by the proposed rule.

                                 Table 1.--Industrial Sectors of DEA Registrants
----------------------------------------------------------------------------------------------------------------
                                                                                   Controlled
                            Sector                                NAICS code       substance         Chemical
----------------------------------------------------------------------------------------------------------------
Chemical Manufacturing (organic, inorganic)...................            3251  ...............               X
Medicinal and Botanical Manufacturing.........................          325411               X                X

[[Page 69482]]

 
Pharmaceutical Manufacturing..................................          325412               X                X
Adhesive Manufacturing........................................          325520  ...............               X
Toilet Preparation Manufacturing..............................          325620  ...............               X
Other Chemical Manufacturing..................................          325998  ...............               X
Drugs and Druggist Sundries Wholesalers.......................          424210               X                X
General Line Grocery Wholesalers..............................          424410               X                X
Confectionary Merchant Wholesalers............................          414450  ...............               X
Chemical Wholesalers..........................................          424690  ...............               X
Tobacco Wholesalers...........................................          424940  ...............               X
Miscellaneous Wholesalers.....................................          424990  ...............               X
Supermarkets..................................................          445110               X                X
Drug Stores...................................................          446110               X                X
Discount Stores...............................................          452112               X                X
Warehouse Clubs and Superstores...............................          452910               X                X
Testing Labs..................................................          541380               X                X
Packaging and Labeling Services...............................          561910  ...............               X
Colleges, Universities, Professional Schools..................          611310               X   ...............
Ambulatory Health Care Services...............................             621               X   ...............
Hospitals.....................................................             622               X   ...............
----------------------------------------------------------------------------------------------------------------

    Controlled substances are prescription drugs; firms manufacturing 
and distributing them usually specialize in prescription 
pharmaceuticals. The supermarkets, discount stores, warehouse clubs, 
and superstores handle controlled substances through their distribution 
centers and their pharmacies. The listed chemical registrants are more 
diverse for two reasons. First, most of the listed chemicals have non-
drug uses, such as chemical intermediates, flavorings, fragrances, and 
adhesives. Second, the drug products containing List I chemicals are 
primarily over-the-counter (OTC) medicines. These are distributed by 
drug wholesalers who specialize in non-prescription drugs, wholesalers 
who supply convenience stores, and grocery, pharmacy, and discount 
stores (e.g., superstores) that operate their own distribution centers. 
Of the 460 registered manufacturers, importers, exporters, and 
distributors who hold multiple registrations, only 70 hold both a 
controlled substance and a chemical registration.
    As of December 2004 there are 1,178,361 controlled substances 
registrants and 2,998 chemical registrants, as shown in Table 2.

          Table 2.--Number of Registrants by Business Activity
------------------------------------------------------------------------
                                            Controlled
                                            substances       Chemicals
------------------------------------------------------------------------
Practitioners...........................         984,271  ..............
Midlevel Practitioners..................         103,239  ..............
Retail Pharmacy.........................          62,865               *
Hospital/Clinic.........................          15,650  ..............
Teaching Institution....................             443  ..............
Manufacturer............................             485             208
Distributor.............................             823           2,413
Researcher..............................           7,458  ..............
Analytical Laboratory...................           1,541  ..............
Importer................................             159             195
Exporter................................             253             181
Narcotic Treatment Program..............           1,174  ..............
    Total...............................       1,178,361          2,998
------------------------------------------------------------------------
*Retail distributor.

    Not all registrants listed in Table 2 are subject to the fees. 
Publicly owned institutions, law enforcement agencies, and military 
personnel are exempt from fees. In addition, DEA waives fees for 
charitable organizations, some of which are registered as chemical 
distributors (OTC medicines are distributed by some food banks and 
exported by aid organizations).
    The number of registrations overstates the number of individual 
registrants. 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 relating to the handling of List I chemicals. Some 
registrants may conduct multiple activities under a single registration 
(e.g., manufacturers may distribute without being registered as a 
distributor), but firms may hold multiple registrations for a single 
location. Individual practitioners who prescribe, but do not store 
controlled substances, may use a single registration at multiple 
locations within a state, but need separate registrations for each 
state in which they practice and are authorized to dispense controlled 
substances. Firms with multiple locations must have separate 
registrations for each location.
    Small Entities. Most DEA registrants are small entities under the 
Small Business Administration (SBA)

[[Page 69483]]

standards. Almost all practitioners would be considered small (annual 
revenues of less than $6 million to $8.5 million, depending on 
specialty). Narcotic treatment programs and many clinics would be 
considered small (revenues of less than $8.5 million). According to the 
American Hospital Association, there are currently 5,764 registered 
hospitals; 1,360 are operated by Federal, state, or local governments 
and are exempt from fees. Of the remaining hospitals, the rural 
hospitals (2,166 including publicly owned hospitals) are more likely to 
be small (revenues less than $29 million). About 20,000 of the 
pharmacies are independent and are likely to be small (revenues less 
than $6 million); some of the small chain pharmacy firms may also be 
considered small. The teaching institutions and researchers are 
generally associated with large institutions and are not expected to be 
small. Importers and exporters are frequently manufacturers; these are 
likely to be the larger companies. The remaining importers and 
exporters, however, will generally be classified as wholesalers and 
would probably be small under the SBA standard for wholesalers (100 
employees). The manufacturing sector includes the major companies, but 
many of the firms are small under SBA standards (500 to 1,000 
employees). The distributors have the widest variety of sizes, from the 
few large wholesalers that handle almost 90 percent of drugs to very 
small wholesalers handling an array of products. In general, because of 
the cost of security for controlled substances, controlled substances 
manufacturers and distributors are larger than chemical manufacturers 
and distributors. DEA has no basis for estimating the total number of 
small entities affected, but it is clearly a substantial number.
    Impacts. As noted above, the proposed new registration fees range 
from $191 to $2,386 annually. These fees are per location and per 
registered business activity. DEA data indicate that 63 percent of 
controlled substances manufacturers hold at least two registrations (as 
a manufacturer, importer, exporter, or distributor); the highest number 
of registrations identified for a manufacturer was 67. For chemical 
manufacturers, 66 percent hold at least two registrations, with the 
highest number being 30. The percent of multiple registrations for 
controlled substance importers is 91 percent, for exporters, 88 
percent, for distributors 55 percent; for chemical importers it is 77 
percent, exporters 95 percent, and distributors 29 percent. The chain 
pharmacies hold registrations for each of their locations. The largest 
chain holds retail pharmacy registrations for more than 5,000 locations 
as well as almost 40 registrations for its distribution centers. The 
fees paid to DEA will range from $191 for dispensing registrants 
holding a single registration to more than $900,000 for the largest 
chain pharmacy with multiple locations. Most small registrants are 
expected to pay a single registration fee of either $191, $1,193 or 
$2,386 per year (or per year equivalent).
    To assess whether the fees could impose a significant economic 
impact on a small entity, DEA considered whether the fees represent 
more than one percent of annual revenues for the registrant groups. For 
dispensers, the annual revenues would have to be below $17,900 to have 
the registration represent more than one percent of revenues. Medical 
practitioners granted authority to handle controlled substances have 
annual incomes well above that level; physician assistants, the mid-
level practitioner with the lowest average salary, have annual salaries 
of about $65,000. The average independent pharmacy has sales of almost 
$2 million according to the National Association of Chain Drug Stores. 
The smallest clinics have revenue streams higher than $17,900. 
Consequently the higher fees will not impose a significant burden on 
dispensers.
    For manufacturers, the 2002 Census data indicate that the value of 
shipments for the smallest chemical manufacturers (including drugs) 
ranged from $477,000 to $1.1 million per location (establishment). For 
this registrant group, therefore, the fee of $2,386 does not represent 
more than one percent of revenues and will not impose a significant 
burden.
    The one registrant group for which the fees could exceed one 
percent of revenues is chemical distributors. Controlled substance 
distributors are generally larger drug wholesalers in part because of 
the cost of security they need to prevent theft of controlled 
substances and other prescription drugs. According to 2004 Duns data, 
between one percent and 11 percent of the wholesale sectors handling 
listed chemicals have revenues below $100,000. DEA does not collect 
financial data on its registrants, but it is possible that some 
chemical distributor registrants have revenues below $100,000. The 
proposed increase in annual reregistration fee for chemical 
distributors (from $477 to $1,193) could impose a significant burden on 
these registrants. The proposed increase in the initial registration 
fee (from a subsidized $116 to $1,193 annually) also could be a barrier 
to entrance for these very small firms. Based on its experience, 
however, DEA considers it unlikely that any firm that lacked the 
resources to pay the initial registration fee would be granted a 
registration because it would be unlikely to have the resources to 
maintain the records and provide the security necessary to prevent 
diversion of the products. Moreover, the proposed new registration fees 
for all wholesale level activities are far less than the estimated 
annual fee of $6,400 that chemical registrants would be charged if they 
were required to independently fund the chemical portion of the 
diversion control program. Combining all diversion control activities 
into a single Diversion Control Program, as mandated by the 
Consolidated Appropriations Act of 2005, results in scale efficiencies 
and overall reduced costs to all registrants.
    The Deputy Administrator hereby certifies that this rulemaking has 
been drafted in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)) and has provided above detailed regulatory analysis on 
the effects of this rulemaking on small entities. While DEA recognizes 
that this regulation will have a financial effect on registrants with 
the increase in fees, the change in fees is necessary to fully comply 
with 21 U.S.C. 886a and related statutes governing the Diversion 
Control Program and the Diversion Control Fee Account by which DEA is 
legally mandated to collect fees to cover the full costs of the 
Diversion Control Program as defined by all activities relating to the 
registration and control of the manufacture, distribution, and 
dispensing of controlled substances and listed chemicals.

Executive Order 12866

    The Deputy Administrator certifies that this rulemaking has been 
drafted in accordance with the principles in Executive Order 12866 
1(b). DEA has determined that, because the proposed increased fees will 
result in a total increase of less than $70 million annually to be 
collected through fees (that is the difference between the amount 
collected annually under the current fee structure and the amount 
proposed to be collected under the proposed, new fee structure), this 
is not a significant regulatory action; however, it has been reviewed 
by the Office of Management and Budget. The fees to be collected 
represent only an increase of less than $70 million each year for the 
Fiscal Year 2006-2008 period (based on estimated fee collection 
figures) and are required to fully support the President's

[[Page 69484]]

budget for the DCP, as approved by Congress through the appropriations 
process. Therefore, DEA has no discretion in the establishment of the 
new fees and is required by law to collect registration and 
reregistration fees of sufficient amount to fully support the DCP.

Executive Order 12988

    This regulation meets the applicable standards set forth in 
sections 3(a) and 3(b)(2) of Executive Order 12988 Civil Justice 
Reform.

Executive Order 13132

    This rulemaking does not preempt or modify any provision of state 
law; nor does it impose enforcement responsibilities on any state; nor 
does it diminish the power of any state to enforce its own laws. 
Accordingly, this rulemaking does not have federalism implications 
warranting the application of Executive Order 13132.

Unfunded Mandates Reform Act of 1995

    This rule will not result in the expenditure by State, local, and 
tribal governments, in the aggregate of $115,000,000 or more in any one 
year, and will not significantly or uniquely affect small governments. 
The proposed increase in fees for private sector entities and 
individuals will result in a total increase of less than $70 million 
annually to be collected through fees (that is the difference between 
the amount collected annually under the current fee structure and the 
amount proposed to be collected under the proposed, new fee structure). 
Moreover, the effect on individual entities and practitioners is 
minimal. The majority of the affected entities will pay a fee of $573 
for a three year registration period (the equivalent of $191 per year) 
which equates to about 0.14 percent of annual income for most 
practitioners (the vast majority of all registrants). This rule is 
promulgated in compliance with 21 U.S.C. 886a that the full cost of 
operating the DCP be collected through registrant fees.

Small Business Regulatory Enforcement Fairness Act of 1996

    This rule is not a major rule as defined by Sec.  804 of the Small 
Business Regulatory Enforcement Fairness Act of 1996. While this rule 
will result in an annual effect on the economy of $100,000,000 or more, 
it will not result in a major increase in costs or prices or cause 
significant adverse effects on competition, employment, investment, 
productivity, innovation, or on the ability of U.S.-based companies to 
compete with foreign-based companies in domestic and export markets. 
This rule is not a discretionary action but rather responds to 
statutory clarification as to the activities constituting the DCP 
which, by law, must be fully funded through registrant fees (21 U.S.C. 
821 and 21 U.S.C. 886a, respectively). Moreover, the individual effect 
on small business registrants is minimal. The majority of registrants 
considered to be small businesses are practitioners who will pay a 
three-year registration fee of $573 or the equivalent of $191 per year. 
For the majority of these practitioners, who compose the vast majority 
of registrants and registrants qualifying as small businesses, this fee 
represents about 0.14 percent of their annual mean salary. The impact 
on other small business entities is described in greater detail in the 
preceding regulatory analysis.

List of Subjects

21 CFR Part 1301

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

21 CFR Part 1309

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

    For the reasons set out above, 21 CFR Parts 1301 and 1309 are 
proposed to be amended as follows:

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

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

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

    2. Section 1301.13 is proposed to be amended 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
                                                                                                     fee  ($)      (years)              allowed
--------------------------------------------------------------------------------------------------------------------------------------------------------
(i) Manufacturing..................  Schedules I-V................  New--225.....................        2,386             1  Schedules I-V: May
                                                                    Renewal--225a................        2,386                 distribute that substance
                                                                                                                               or class for which
                                                                                                                               registration was issued;
                                                                                                                               may not distribute or
                                                                                                                               dispose 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.....................        1,193             1  ..........................
                                                                    Renewal--225a................        1,193
(iii) Reverse distributing.........  Schedules I-V................  New--225.....................        1,193             1  ..........................
                                                                    Renewal--225a................        1,193

[[Page 69485]]

 
(iv) Dispensing or instructing       Schedules II-V...............  New--224.....................          573             3  May conduct research and
 (includes Practitioner, Hospital/                                  Renewal--224a................          573                 instructional activities
 Clinic, Retail Pharmacy, Central                                                                                              with those substances for
 fill pharmacy, Teaching                                                                                                       which registration was
 institution).                                                                                                                 granted, except that a
                                                                                                                               mid-level practitioner
                                                                                                                               may conduct such research
                                                                                                                               only to the extent
                                                                                                                               expressly authorized
                                                                                                                               under state statute. A
                                                                                                                               pharmacist may
                                                                                                                               manufacture an aqueous or
                                                                                                                               oleaginous solution or
                                                                                                                               solid dosage form
                                                                                                                               containing a narcotic
                                                                                                                               controlled substance in
                                                                                                                               Schedule II-V in 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.....................          191             1  A researcher may
                                                                    Renewal--225a................          191                 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.....................          191             1  May conduct chemical
                                                                    Renewal--225a 1..............          191                 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 Schedules    New--363.....................          191             1  ..........................
 (including compounder).              II-V.                         Renewal--363a................          191
(viii) Importing...................  Schedules I-V................  New--225.....................        1,193             1  May distribute that
                                                                    Renewal--225a................        1,193                 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.....................        1,193             1  ..........................
                                                                    Renewal--225a................        1,193
(x) Chemical Analysis..............  Schedules I-V................  New--225.....................          191             1  May manufacture and import
                                                                    Renewal--225a................          191                 controlled substances for
                                                                                                                               analytical activities 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.
--------------------------------------------------------------------------------------------------------------------------------------------------------

* * * * *

[[Page 69486]]

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

    3. The authority citation for Part 1309 is proposed to be amended 
to read as follows:

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

    4. Section 1309.11 is proposed to be revised to read as follows:


Sec. Sec.  1309.11   Fee amounts.

    (a) For each application for registration or reregistration to 
manufacture for distribution the applicant shall pay an annual fee of 
$2,386.
    (b) For each application for registration or reregistration to 
distribute (either retail distribution or non-retail distribution), 
import, or export a List I chemical, the applicant shall pay an annual 
fee of $1,193.
    5. Section 1309.12 is proposed to be revised to read as follows:


Sec. Sec.  1309.12  Time and method of payment; refund.

    (a) For each application for registration or reregistration to 
manufacture for distribution, distribute (either retail distribution or 
non-retail distribution), import, or export a List I chemical, the 
applicant shall pay the fee when the application for registration or 
reregistration is submitted for filing.
    (b) Payment should be made in the form of a personal, certified, or 
cashier's check or money order made payable to ``Drug Enforcement 
Administration.'' Payments made in the form of stamps, foreign 
currency, or third party endorsed checks will not be accepted. These 
application fees are not refundable.
    6. Section 1309.24 is proposed to be revised to read as follows:


Sec. Sec.  1309.24  Waiver of registration requirement for certain 
activities.

    (a) The requirement of registration is waived for any agent or 
employee of a person who is registered to engage in any group of 
independent activities, if such agent or employee is acting in the 
usual course of his or her business or employment.
    (b) The requirement of registration is waived for any person whose 
activities with respect to List I chemicals are limited to the 
distribution of red phosphorus, white phosphorus, or hypophosphorous 
acid (and its salts) to: another location operated by the same firm 
solely for internal end-use; or an EPA or State licensed waste 
treatment or disposal firm for the purpose of waste disposal.
    (c) The requirement of registration is waived for any person whose 
distribution of red phosphorus or white phosphorus is limited solely to 
residual quantities of chemical returned to the producer, in reusable 
rail cars and intermodal tank containers which conform to International 
Standards Organization specifications (with capacities greater than or 
equal to 2,500 gallons in a single container).
    (d) The requirement of registration is waived for any retail 
distributor whose activities with respect to List I chemicals are 
limited to the distribution of below-threshold quantities of a 
pseudoephedrine, phenylpropanolamine, or combination ephedrine product 
that is regulated pursuant to Sec.  1300.02(b)(28)(i)(D) of this 
chapter, in a single transaction to an individual for legitimate 
medical use, irrespective of whether the form of packaging of the 
product meets the definition of ``ordinary over-the-counter 
pseudoephedrine or phenylpropanolamine product'' under Sec.  
1300.02(b)(31) of this chapter.
    (e) The requirement of registration is waived for any manufacturer 
of a List I chemical, if that chemical is produced solely for internal 
consumption by the manufacturer and there is no subsequent distribution 
or exportation of the List I chemical.
    (f) If any person exempted under paragraph (b), (c) or (d) of this 
section also engages in the distribution, importation or exportation of 
a List I chemical, other than as described in such paragraph, the 
person shall obtain a registration for such activities, as required by 
Sec.  1309.21 of this part.
    (g) The Administrator may, upon finding that continuation of the 
waiver would not be in the public interest, suspend or revoke a waiver 
granted under paragraph (b), (c), or (d) of this section pursuant to 
the procedures set forth in Sec. Sec.  1309.43 through 1309.46 and 
Sec. Sec.  1309.51 through 1309.55 of this part.
    (h) Any person exempted from the registration requirement under 
this section shall comply with the security requirements set forth in 
Sec. Sec.  1309.71-1309.73 of this part and the recordkeeping and 
reporting requirements set forth under parts 1310 and 1313 of this 
chapter.

    Dated: November 8, 2005.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. 05-22681 Filed 11-15-05; 8:45 am]
BILLING CODE 4410-09-P


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