[Federal Register Volume 72, Number 247 (Thursday, December 27, 2007)]
[Notices]
[Pages 73361-73367]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 07-6218]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration

[Docket No. DEA-306E]


Established Assessment of Annual Needs for the List I Chemicals 
Ephedrine, Pseudoephedrine, and Phenylpropanolamine for 2008

AGENCY: Drug Enforcement Administration (DEA), Justice.

ACTION: Notice of Assessment of Annual Needs for 2008.

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SUMMARY: This notice establishes the initial year 2008 Assessment of 
Annual Needs for certain List I chemicals in accordance with the Combat 
Methamphetamine Epidemic Act of 2005 (CMEA), enacted on March 9, 2006.

EFFECTIVE DATE: December 27, 2007.

FOR FURTHER INFORMATION CONTACT: Christine A. Sannerud, PhD, Chief, 
Drug & Chemical Evaluation Section, Drug Enforcement Administration, 
Washington, DC 20537, Telephone: (202) 307-7183.

SUPPLEMENTARY INFORMATION: 

Background and Legal Authority

    Section 713 of the Combat Methamphetamine Epidemic Act of 2005 
(CMEA) (Title VII of Pub. L. 109-177) amended section 306 of the 
Controlled Substances Act (CSA) (21 U.S.C. 826) requiring that the 
Attorney General establish quotas to provide for the annual needs for 
ephedrine, pseudoephedrine, and phenylpropanolamine. Section 715 of the 
CMEA amended 21 U.S.C. 952 by adding ephedrine, pseudoephedrine and 
phenylpropanolamine to the existing language concerning importation of 
controlled substances.
    The 2008 Assessment of Annual Needs represents those quantities of 
ephedrine, pseudoephedrine, and phenylpropanolamine which may be 
manufactured domestically and/or imported into the United States in 
2008 to provide adequate supplies of each chemical for: The estimated 
medical, scientific, research, and industrial needs of the United 
States; lawful export requirements; and the establishment and 
maintenance of reserve stocks.
    The responsibility for establishing the assessment has been 
delegated to the Administrator of the DEA by 28 CFR 0.100. The 
Administrator, in turn, has redelegated this function to the Deputy 
Administrator, pursuant to 28 CFR 0.104.
    On September 20, 2007, a notice entitled, ``Assessment of Annual 
Needs for the List I Chemicals Ephedrine, Pseudoephedrine, and 
Phenylpropanolamine for 2008: Proposed'' was published in the Federal 
Register (72 FR 53911). This notice proposed the initial 2008 
Assessment of Annual Needs for ephedrine (for sale), ephedrine (for 
conversion), pseudoephedrine (for sale), phenylpropanolamine (for sale) 
and phenylpropanolamine (for conversion). All interested persons were 
invited to comment on or object to the proposed assessments on or 
before October 11, 2007.

Comments Received

    DEA did not receive any comments or objections from the more than 
1,050 DEA-registered manufacturers and importers directly impacted by 
this notice. However, DEA did receive one comment from a law firm 
representing a DEA-registered distributor of nonprescription (over-the-
counter (OTC)) products containing ephedrine, pseudoephedrine, or 
phenylpropanolamine. When sold at retail, these products are referred 
to as scheduled listed chemical products.\1\ This same commenter 
commented to DEA's proposed 2007 Assessment of Annual Needs which was 
published in the Federal Register on October 19, 2006 (71 FR 61801). 
The comment submitted to this notice is virtually identical to that 
previously considered by DEA in that the comment included the same 
reports. However, DEA notes that the current comment includes one new 
report and one new letter. The new report was prepared by an economist 
who was retained by the DEA-registered distributor being represented by 
the law firm. The letter was prepared by the statistician whose report 
was submitted as part of this commenter's comments to the 2007 proposed 
assessment.
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    \1\ Title 21 U.S.C. 802(45) defines a scheduled listed chemical 
product as ``a product that contains ephedrine, pseudoephedrine, or 
phenylpropanolamine; and * * * may be marketed or distributed 
lawfully in the United States under the Federal Food, Drug, and 
Cosmetic Act as a nonprescription drug.''
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    The commenter's comments related to DEA's proposed assessments for 
ephedrine (for sale) and pseudoephedrine (for sale). These assessments 
are discussed below within

[[Page 73362]]

the context of the comment received. As DEA did not receive any 
comments on its proposed Assessment of Annual Needs for ephedrine (for 
conversion), phenylpropanolamine (for conversion), and 
phenylpropanolamine (for sale), DEA is finalizing these values as 
proposed.

Comments Regarding DEA's Proposed Assessments for Ephedrine (For Sale) 
and Pseudoephedrine (For Sale)

    The commenter indicated its belief that the proposed ephedrine 
assessment was insufficient to meet market demands for ephedrine-
containing OTC products. The commenter also questioned the sufficiency 
of the assessment for pseudoephedrine. The commenter included in its 
comment a report from a statistician, a report from an economist, and a 
report from a physician to assess the impact of the proposed quota on 
medical, industrial, scientific and other legitimate demand for the two 
chemicals. The commenter's comments, and DEA's responses, are discussed 
below.

Economic Impact Analysis and Impact on Small Businesses

    The commenter claimed that DEA underestimated the economic impact 
of the proposed quota limits. The commenter also claimed that DEA 
failed to consider the quota impact on small businesses. To support its 
claims, the commenter provided a new report from an economist. The 
commenter claimed that ``DEA has violated statutory requirements by 
relying on inaccurate and incomplete data to produce its economic 
impact.'' Based on the new report, the commenter asserted that the 
economic impact of DEA's proposal ``* * * will be a reduction of 
revenues of $2 billion dollars per year (from the effective ban on 
ephedrine product sales) and will result in the termination of 25-50 
American workers' jobs per firm.''
    DEA Response: The economic information submitted by the commenter 
in support of its claims is flawed. The commenter has made the 
fundamental mistake of assuming that its sales are representative of 
the industry as a whole, an assumption which broader industry numbers 
do not support. In addition, the commenter has overstated the number of 
convenience stores that are selling these products, which further 
magnifies the errors in its analyses. The commenter's estimates of the 
convenience store market for scheduled listed chemical products are 
shown in Table 1.

 Table 1.--Commenter's Estimates of Annual Value of the Ephedrine Market
------------------------------------------------------------------------
                                      Lower bound         Upper bound
------------------------------------------------------------------------
Ephedrine.......................  $166 million......  $237 million.
Number of Convenience Stores      72,500 ...........
 Selling the Products*.
------------------------------------------------------------------------
* Commenter did not provide an upper bound.

    These numbers are at serious variance with the most comprehensive 
data available on sales of nonprescription medications (OTC drugs) at 
convenience and other nonconventional outlets and with estimates of the 
total size of the ephedrine market; nonconventional outlets include 
convenience stores, gas stations with convenience stores, gas stations 
without convenience stores, liquor stores, and novelty and gift stores. 
Conventional outlets include grocery stores, drug stores, discount 
stores, superstores and warehouse stores, and general merchandise 
stores. Internet and mail order stores are a third category. Table 2 
presents data on the value of nonprescription medication sales at 
various retail sectors based on the 2002 Economic Census of the Retail 
Trade, Product Line, the most recent Census data. The table includes 
the number of establishments in the sector, the number of those 
establishments that sell nonprescription drugs, the value of 
nonprescription sales in the sector, and the value of all sales in 
drug, health, and beauty aids. Nonprescription drugs are a subset of 
the larger category; the value of the broader category is listed 
because it was used to derive an estimate of sales of nonprescription 
drugs for sectors whose sales the Census did not disaggregate. The 
final column lists the percentage of an establishment's sales that the 
Census reported nonprescription drugs represent for those 
establishments that sell the products.

                              Table 2.--Census Data on Product Line Sales by Sector
                                                  [Thousand $]
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                                                              Number of                  All drug,    OTC drugs
              Retail sector                   Number of    establishments    OTC drug   health, and  as % of all
                                           establishments    w/OTC drugs    sales 2002  beauty aids     sales
----------------------------------------------------------------------------------------------------------------
Grocery..................................         66,150          26,029    $2,670,914  $35,172,224          1.3
Convenience Store........................         29,212          12,399       133,263      443,116          1.6
Specialty Food...........................         24,485             194         2,551       24,045          1.6
Liquor Store.............................         28,957           1,496        19,344       89,541            2
Drug and Personal Care...................         81,797          36,797     8,348,218  140,759,601          4.7
Gas Station with Convenience Store.......         93,691        * 24,597     * 248,082      824,904      ***<0.4
Gas Station..............................         27,755           * 685       * 7,488       70,577      ***<0.1
Discount Store...........................          5,650           2,079     1,439,227   22,025,430          1.1
Superstore + Club........................          2,912           2,758     2,270,530   21,066,107          1.2
Other general merchandise................         28,546          11,840       167,951    3,357,825          1.2
Gift and novelty.........................         35,795         * 1,686      * 47,973      159,515        ***<1
Electronic and Mail Order................         15,910             250       565,305   29,618,519           13
    Total................................        440,860         120,810    15,920,846  253,611,404  ...........
                                          ----------------------------------------------------------------------

[[Page 73363]]

 
        All Nonconventional **...........        215,410          40,863       456,150    1,587,653  ...........
----------------------------------------------------------------------------------------------------------------
* OTC sales not listed separately in Census data; OTC value estimated based on percentage of OTC to all drug,
  health, and beauty products sold at regular convenience stores (i.e., convenience stores that are not part of
  gas stations). Number of stores estimated using ratio of regular convenience stores that carry OTC to those
  that cover all drug, health, and beauty aids.
** Nonconventional outlets include convenience stores, gas stations with and without convenience stores, liquor
  stores, and novelty stores.
*** Percentage is the percentage that all drug, health, and beauty aid products sales represent of total sales;
  the nonprescription medications are a subset of these sales.

    The nonconventional outlets--convenience stores, gas stations with 
and without convenience stores, novelty stores, and liquor stores--make 
up only about three percent of the total market for nonprescription 
drugs. Using A.C. Nielsen data \2\ on the growth of the OTC market from 
2002 to 2006 and the Census data on the value of the market, the annual 
value of nonprescription drug sales for nonconventional outlets in 2006 
is estimated to be about $532 million and the total market for all 
retail sectors is about $18 billion.
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    \2\ A.C. Nielsen data from Consumer Healthcare Products 
Association (http://www.chpainfo.org/ChpaPortal/PressRoom/Statistics/OTCSalesbyCategory.htm).
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    Nonprescription drugs contain a wide range of medications. Data 
from the Consumer Healthcare Products Association and A.C. Nielsen 
indicate that cough and cold medications make up about 27 percent to 40 
percent of the total OTC market, or about $4.8 billion to $7.3 billion 
in 2006 (other major groups include analgesics and heartburn 
medications).\3\ The cough and cold medications include a variety of 
drugs, from cough syrups to antihistamines. Because there is no reason 
to believe that nonconventional outlets selling nonprescription drugs 
sell more or less cough or cold medications in proportion to other 
nonprescription drugs than any other retail outlet, it is reasonable to 
estimate that the total value of their sales for all cough and cold 
drugs in 2006 was approximately $142 million to $215 million (3 percent 
of the total), or somewhat less than the commenter estimated the market 
for ephedrine alone to be.
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    \3\ The A.C. Nielsen data were used to estimate only a ratio of 
the cough and cold medication to the total OTC medication market. 
The total value of the market was estimated based on the 2002 Census 
data inflated to 2006 dollars. The Nielsen data do not include Wal-
Mart and may not include many convenience stores. In addition, the 
Nielsen data include a number of product lines that either are not 
nonprescription drugs (e.g., toothpaste) or mix nonprescription 
drugs and other products (e.g., first aid ointments and bandaids). 
The lower value of the range is based on inclusion of every OTC 
product line listed in the Nielsen data except toothpaste and 
sunscreens. The higher value excludes eye products, first aid, foot 
preparations, oral care, sun products, and undefined ``others.'' 
Note that the higher value will overstate the value of the cough and 
cold medication market because it includes some non-drug products, 
such as cough drops.
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    Ephedrine and pseudoephedrine constitute a subset of the cough and 
cold medication market. DEA has not been able to obtain any data on 
what percentage of the market they represent. In 2006, estimates of the 
retail value of products containing one of the chemicals that DEA and 
the Food and Drug Administration obtained from market researchers 
ranged from $500 million to $1.5 billion, but the estimates involved 
considerable uncertainty; the estimates were also based on the market 
before many manufacturers began to market new products that substituted 
phenylephrine for pseudoephedrine. Data from market research firm 
Information Resources, Inc. on the top 200 over-the-counter brands 
(including private label products) sold through grocery stores, drug 
stores, and mass market stores in 2006 indicate that at least 65 
percent of the cough and cold medications do not contain 
pseudoephedrine; if private label products contain pseudoephedrine at 
the same rate as brand name products, at least 78 percent of the cough 
and cold medication sales do not contain pseudoephedrine.\4\ No product 
in the top 200 appears to contain ephedrine; the sales value of the 
200th product was about $20.4 million.
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    \4\ Data available at http://www.drugtopics.com. Note that the 
data probably do not cover convenience stores and other 
nonconventional outlets. Even the lower estimate of the 
pseudoephedrine part of the market is overstated because it includes 
sales values for product lines that contain 4 to more than 20 
products, only one of which contains pseudoephedrine.
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    The cough and cold medication sector, as defined by A.C. Nielsen, 
includes a wide variety of tablets, gel capsules, liquids, and cough 
drops, many of which do not contain either ephedrine or 
pseudoephedrine. Even if the entire market sector consisted of 
scheduled listed chemical products, the estimates the commenter 
submitted and shown in Table 1 are clearly overstated.
    Data developed by IMS Health Government Solutions for the 
Assessment of Annual Needs for 2007, \5\ which used a range of industry 
sources, plus data from a confidential source, indicate that the 
ephedrine market is at most between 2 percent and 6.6 percent the size 
of the pseudoephedrine market (i.e., the value of sales of ephedrine 
products represent 2 percent to 6.6 percent of the value of sales of 
pseudoephedrine products). In a comment on a previous rule,\6\ the 
commenter submitted estimates that implied that ephedrine sales at 
convenience stores to which it distributes were about 20 percent of the 
value of pseudoephedrine sales at convenience stores to which it 
distributes. Table 3 shows the commenter's implied size of the 
pseudoephedrine market at convenience stores.
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    \5\ As discussed in DEA's October 19, 2006, ``Assessment of 
Annual Needs for the List I Chemicals Ephedrine, Pseudoephedrine, 
and Phenylpropanolamine for 2007: Proposed'' (71 FR 61801) and a 
subsequent notice establishing the assessment for 2007 (72 FR 53908, 
September 20, 2007), since the manufacture and importation of 
ephedrine, pseudoephedrine, and phenylpropanolamine were not 
previously regulated through the establishment of an assessment of 
annual needs, DEA obtained assistance from a private independent 
contractor, IMS Health Government Solutions, to develop the initial 
estimate of the medical needs of the United States of ephedrine and 
pseudoephedrine. IMS provided DEA with two reports: ``Methodology 
Used in Developing Preliminary Estimates of Ephedrine and 
Pseudoephedrine 2005 Legitimate Use'' (and ``2005 Ephedrine/
Pseudoephedrine Legitimate Medical Use Methodology and Final 
Report'' (July 3, 2007). Both reports may be found at http://www.deadiversion.usdoj.gov/meth/index.html.
    \6\ Comment to ``Import and Production Quotas for Certain List I 
Chemicals'' (72 FR 37439, July 10, 2007) [Docket No. DEA-293, RIN 
1117-AB08] available at http://www.regulations.gov.

[[Page 73364]]



 Table 3.--Commenter's Implied Value of the Pseudoephedrine (PSE) Sales
                          at Convenience Stores
------------------------------------------------------------------------
                                 Implied PSE
                                    market         Implied PSE market
        Ephedrine/PSE             (ephedrine       (ephedrine market =
                               market = $166m)           $237m)
------------------------------------------------------------------------
Ephedrine = 2% of PSE Sales..  $8.3 billion...  $11.85 billion.
Ephedrine = 6.60% of PSE       $2.5 billion...  $3.6 billion.
 Sales.
Ephedrine = 20% of PSE Sales.  $830 million...  $1.185 billion.
------------------------------------------------------------------------

    Because convenience store sales of these products represent only 3 
percent of all sales, even using the lowest number the commenter 
provided (ephedrine sales of $166 million representing 20 percent of 
pseudoephedrine sales), the commenter's estimates produce an implied 
value of the total ephedrine and pseudoephedrine nonprescription market 
across all retail sectors of $33 billion, or between 4.5 and 7 times 
the actual retail market for all cough and cold medications and almost 
twice the size of the entire nonprescription drug retail market of $18 
billion.
    The commenter claimed that the ephedrine quota, which no importer 
or manufacturer objected to, would lead to job losses. Even the 
commenter's own overestimates indicate that job losses are highly 
improbable. If all ephedrine products were removed from the market at 
these outlets, which is unlikely, the daily sales loss would be very 
low even at the commenter's exaggerated levels. At more realistic 
market values, the daily losses would be trivial. Table 4 presents the 
average value of daily sales using the commenter's estimates of the 
value of ephedrine sales ($166 million to $237 million) and the number 
of convenience stores selling the products based on the commenter's 
estimate (72,500), Census data (41,000), and DEA data (28,000). The 
table also presents the more reasonable level of daily sales based on 
an estimate of the value of ephedrine sales at nonconventional outlets 
($24 to $36 million). The more reasonable estimates may still be 
overestimates because they are based on a series of conservative 
assumptions: That nonconventional outlets sell 3 percent of 
nonprescription drugs or $532 million (Census data), that cough and 
cold medications represent 27 to 40 percent of those sales (Consumer 
Healthcare Products Association and A.C. Nielsen data) or $142 million 
to $215 million, and that ephedrine products represent 20 percent of 
those sales (commenter's implied estimate assuming that only ephedrine 
and pseudoephedrine products are sold in this category) or $24 million 
to $36 million.

             Table 4.--Estimated Daily Sales of Ephedrine-Containing Products at Convenience Stores
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                                                                  Estimated total value of       Daily sales of
      Source of No. of outlet estimate         Estimate No.      ephedrine nonconventional         ephedrine
                                                of outlets             outlet market                products
----------------------------------------------------------------------------------------------------------------
Commenter...................................          72,500  $166-$237 million ephedrine....        $6.27-$8.96
Census......................................          41,000  ...............................        11.09-15.84
DEA Estimate................................      \7\ 28,000  ...............................        16.24-23.19
Commenter...................................          72,500  24-36 million ephedrine........          0.89-1.36
Census......................................          41,000  ...............................          1.58-2.40
DEA Estimate................................          28,000  ...............................          2.32-3.51
----------------------------------------------------------------------------------------------------------------

    It is not reasonable to think that this level of sales loss, which 
represents considerably less than the cost of a single car buying a 
tank of gasoline, would affect employment as the commenter claimed. 
With about 28,000 convenience stores continuing to sell these products, 
there is no reason to think that all or even most such sales will be 
lost. As DEA stated in its Interim Final Rule implementing the 
procedures for import and production quotas for ephedrine, 
pseudoephedrine, and phenylpropanolamine (72 FR 37439, July 10, 2007), 
its concern is with a limited number of high dosage unit products that 
are sold almost exclusively through nonconventional outlets and the 
Internet, not with low dosage unit products that are sold through both 
conventional and nonconventional outlets.
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    \7\ The Combat Methamphetamine Epidemic Act of 2005 states that 
it is unlawful for any person who is a regulated seller to knowingly 
or recklessly sell at retail scheduled listed chemical products in 
violation of the requirements of 21 U.S.C. 830(e), including the 
requirement that regulated sellers self-certify to the Attorney 
General regarding compliance with the provisions of the Act (21 
U.S.C. 842(a)(13)). As of October 12, 2007, 18,044 convenience 
stores had self-certified; DEA has identified another 10,000 that 
are selling the products.
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    The commenter's claim that eliminating sales of ephedrine products 
at convenience stores, which neither DEA's Interim Final Rule 
establishing the procedures for implementation of quotas for ephedrine, 
pseudoephedrine, or phenylpropanolamine, nor this notice would do, 
would harm the public is also not supported. The IMS Health Government 
Solutions study that DEA used to adjust the Assessment of Annual Needs 
for 2007 indicated that ephedrine sales at convenience stores had 
dropped after states implemented controls on sales, but that sales at 
conventional stores increased; total sales of ephedrine products 
actually grew. Although this change may produce minor harm to 
convenience stores, or serious harm to the commenter, as it claimed, 
economically it is a transfer. Other stores and distributors have 
benefited by the shift, and the economy as a whole has not been 
affected. DEA notes that most stores in both categories--conventional 
and nonconventional outlets--are small businesses.
    The commenter asserted that DEA had failed to consider the impact 
on small businesses. The only small entities directly affected by the 
Assessment of Annual Needs are manufacturers and importers, none of 
whom filed comments or objections to the assessment. The increased 
sales of ephedrine products shown in the IMS Health Government 
Solutions data indicate that these entities have not been harmed. The 
indirect effects of the assessment on downstream users, such as the 
commenter and its customers, are not subject to review under the

[[Page 73365]]

Regulatory Flexibility Act or Executive Order 12866. In any case, as 
noted above, the data collected indicate that if some small entities 
have lost sales, others have gained sales, which is in economics terms 
a transfer. The total sales of ephedrine products appears to have 
increased (in terms of quantity, not value), which is why DEA adjusted 
the ephedrine assessment upward when establishing the assessment for 
ephedrine for 2007 (72 FR 53908, September 20, 2007). If the 
manufacturers and importers provide data that indicates that the 
ephedrine market is continuing to grow, DEA will adjust future 
assessments to meet the medical, scientific, research, industrial, and 
other legitimate needs of the United States.
    In conclusion, the commenter has overestimated the size of the 
market for ephedrine products at convenience stores by a factor of at 
least six to ten, has made exaggerated claims about the impact on jobs 
when the daily sales values even using the commenter's overestimated 
claims are low, and has claimed damage to the economy when the data 
indicate that increased sales of the products at conventional outlets 
have more than offset sales losses at nonconventional outlets. Whatever 
effect the statutorily mandated restrictions have had on the commenter 
or nonconventional outlets, the cough and cold medication market 
continues to grow; there is no evidence to support the commenter's 
claim of a cost to the United States economy.

Use of the IMS Health Government Solutions Report

    The commenter refers to the IMS Health Government Solutions study 
referenced above on numerous occasions throughout its comment. As 
discussed in DEA's October 19, 2006, proposed 2007 Assessment of Annual 
Needs Notice (71 FR 61801) and its September 20, 2007, established 2007 
Assessment of Annual Needs Notice (72 FR 53908), DEA obtained 
assistance from a private independent contractor, IMS Health Government 
Solutions, to develop the initial estimate of the medical needs of the 
United States for both ephedrine and pseudoephedrine. The results from 
IMS' initial study were utilized by DEA to propose the 2007 Assessment 
of Annual Needs. The commenter claimed that the IMS report 
underestimated legitimate demand for ephedrine sold in OTC drugs for 
respiratory ailments via convenience stores. The commenter further 
claimed that the study did not adequately address sales of ephedrine-
based OTC drug products through the convenience store channel of 
distribution. The commenter claimed that since DEA relied on 
underestimated values of the medical need (as provided by IMS) when it 
established the 2007 Assessment of Annual Needs, these same values, as 
proposed for the 2008 assessment, would lead to inadequate supplies of 
drug products containing ephedrine and pseudoephedrine.
    DEA Response: The commenter's belief that the IMS Health Government 
Solutions report underestimated the medical needs of ephedrine and 
pseudoephedrine OTC drug products is flawed in the same way that its 
belief regarding the economic impact of this notice is flawed, as 
discussed above. The commenter's conclusion about the IMS Health 
Government Solutions report is predicated on the assumption that the 
commenter's sales are representative of the industry as a whole. As 
explained below, this conclusion is not supported by applications that 
the DEA has received for individual import, manufacturing, and 
procurement quotas from DEA-registered importers and manufacturers for 
2008.

DEA's Proposed 2008 Assessment of Annual Needs for Ephedrine (For Sale) 
and Pseudoephedrine (For Sale)

    The comment received from the commenter is virtually identical to 
that submitted to the proposed 2007 Assessment of Annual Needs on 
October 19, 2006 (71 FR 61801). Then, as now, the commenter asserted 
that the IMS Health Government Solutions report underestimated the 
legitimate demand for ephedrine sold in OTC drug products. The 
commenter further asserted that DEA's Assessment of Annual Needs 
significantly understated the amount of ephedrine and pseudoephedrine 
required to satisfy legitimate medical, scientific, research, and 
industrial purposes and lawful imports. The commenter also claimed that 
the IMS Health Government Solutions study did not adequately address 
sales of ephedrine-based OTC drug products through the convenience 
store channel of distribution. The new information submitted by the 
commenter in this area is a two-page letter prepared by the 
statistician who had initially submitted a report to the commenter as 
part of the commenter's comments to the 2006 proposed assessments. In 
that letter, the statistician stated that the DEA's proposed medical 
use estimate (which is a component of the ephedrine (for sale) 
assessment, which also includes lawful export and inventory 
requirements) of 11,500 kg for ephedrine ``falls far short of the 130% 
to 900% range of increases that would be needed to put the earlier 
proposed quota in line with actual over-the-counter sales of ephedrine 
products.'' DEA notes the commenter did not provide any quantitative or 
qualitative data to support its belief that the DEA's Assessment of 
Annual Needs for pseudoephedrine (for sale) was too low.
    DEA Response: The estimated ephedrine (for sale) requirements 
submitted by the commenter are not supported by the applications 
received by the DEA pursuant to 21 CFR part 1315. On July 10, 2007, DEA 
published an Interim Final Rule which established procedures for 
administering individual quotas to DEA-registered manufacturers and 
importers of controlled substances (72 FR 37439). Although the rule 
became effective immediately upon publication, DEA chose not to issue 
individual import, manufacturing, and procurement quotas to DEA-
registered importers and manufacturers of these chemicals in 2007 after 
finalizing the 2007 Assessment of Annual Needs. DEA concluded that such 
action would negatively impact the immediate availability of these 
chemicals and the products derived therefrom. Instead, DEA stated on 
its web site (http://www.deadiversion.usdoj.gov/meth/q_a.htm) that it 
would solicit applications for individual 2008 quotas from DEA-
registered manufacturers and importers with the intent of processing 
completed applications on or before January 1, 2008.
    On July 12, 2007, DEA notified all 1,054 DEA registered 
manufacturers and importers of both controlled substances and List I 
chemicals in writing of the publication of the Interim Final Rule and 
its potential impact on companies' ability to import or manufacture the 
List I chemicals ephedrine, pseudoephedrine, and phenylpropanolamine, 
and products containing those chemicals after January 1, 2008. Those 
that received the letter would have included companies that manufacture 
ephedrine products for the convenience store market. Specifically, DEA 
advised each company to submit an individual application(s) for 2008 
quota; DEA advised that if no application was received, then DEA would 
assess each company's importing and manufacturing requirements for 2008 
to be zero and, consequently, no quota would be issued. However, 
applications for quota could be submitted during the 2008 calendar 
year.
    In the first month and a half, prior to proposing the 2008 
Assessment of Annual Needs (72 FR 53911, September

[[Page 73366]]

20, 2007), DEA received very few 2008 quota applications. Since that 
time, however, DEA has received significantly more quota applications 
from DEA registrants. In connection with each application, DEA has been 
contacting each applicant and gathering additional information 
necessary to process each of these individual quota applications by the 
January 1, 2008 deadline. DEA has analyzed the statistical data 
provided by these registrants and the results of this analysis (below) 
are not consistent with the commenter's comments.

Analysis of Quota Applications for Ephedrine (For Sale)

    Based on an analysis of the inventory, acquisition (purchases) and 
disposition (sales) data provided by DEA-registered importers and 
manufacturers of ephedrine products on individual quota applications 
received since publication of the July 10, 2007 Interim Final Rule, 
manufacturers of dosage form products containing ephedrine reported 
sales totaling approximately 3,900 kg in 2007; this represents a 61 
percent decrease from sales reported by these firms for 2005 and a 49 
percent decrease from the sales reported for 2006, as shown on the same 
quota applications. During the same period, exports of ephedrine 
products from the United States, as reported on export declarations 
(DEA Forms 486) received, are expected to total 245 kg in 2007, a 90 
percent decrease from levels observed in 2005. These sales and export 
trends, when taken along with necessary inventory allowances, may 
suggest that DEA's 2008 Assessment of Annual Needs for ephedrine, as 
proposed, is too high, and may require and adjustment downward in the 
future.

Analysis of Quota Applications for Pseudoephedrine (For Sale)

    Based on an analysis of the inventory, acquisition, and disposition 
data provided by DEA-registered importers and manufacturers of 
pseudoephedrine products on individual quota applications received 
since publication of the July 10, 2007 Interim Final Rule, 
manufacturers of dosage form products containing pseudoephedrine 
reported sales of these products totaling approximately 277.8 metric 
tons (MT; 1000 kg equals 1 MT) in 2007; this represents a 38 percent 
increase from sales data provided by these firms for 2005 and a 2 
percent increase from sales reported in 2006, as shown on the same 
quota applications. During the same period, exports of pseudoephedrine 
products from the United States, as reported on export declarations 
(DEA Forms 486) received, are expected to total 29,145 kg in 2007, a 
67.6 percent decrease from levels observed in 2005. These sales and 
export trends, when taken along with necessary inventory allowances, 
may suggest that DEA's 2008 Assessment of Annual Needs for 
pseudoephedrine, as proposed, is too high, and may require an 
adjustment downward in the future.
    Although the analysis of quota applications received by DEA would 
support a decrease in the Assessment of Annual Needs for both ephedrine 
(for sale) and pseudoephedrine (for sale), DEA cannot ensure that it 
has applications from all those who may require an individual quota in 
2008. Specifically, manufacturers and importers may have purchased 
increased amounts of these List I chemicals during the 2007 calendar 
year in anticipation of the establishment of individual quotas for the 
2008 calendar year, thereby increasing their inventory position (i.e. 
stockpiling). As a result, these same DEA registrants may have elected 
to defer submission of individual quota applications until such time 
that these inventory levels decrease. Additionally, it remains unclear 
as to what impact, if any, phenylephrine will have on the market for 
cough and cold remedies containing pseudoephedrine. Finally, the Food 
and Drug Administration announced an enforcement action against 
unapproved drug products containing timed-release guafenesin in 
combination with other drugs, including ephedrine and pseudoephedrine 
(72 FR 29517, May 29, 2007). The Notice advises firms which are 
marketing unapproved products to obtain such drug approvals. As a 
result of this Notice, DEA believes that it may receive requests for 
quotas to support FDA validation requirements, thereby increasing the 
demand for ephedrine and/or pseudoephedrine for research purposes. For 
these reasons, DEA believes that the needs of the United States are 
best served by establishing the values initially proposed and therefore 
concludes the proposed amounts are sufficient to meet the estimated 
medical, scientific, research, and industrial needs of the United 
States; lawful export requirements; and the establishment and 
maintenance of reserve stocks. DEA will propose a revision to, and 
subsequently finalize, the Assessment of Annual Needs for 2008 during 
the calendar year, thereby giving interested persons an opportunity to 
provide substantive data to support or refute any proposed changes to 
assessments.

Comment Period

    The commenter believed that DEA's comment period of 21 days 
(September 20, 2007, to October 11, 2007,) was too short, making it 
impossible, the commenter claimed, for affected parties to provide 
significant comment within a short window of opportunity. The commenter 
requested that DEA reopen the comment period for an additional sixty 
days.
    DEA Response: When DEA published its July 10, 2007, Interim Final 
Rule establishing procedures for administering the assessment of annual 
needs and individual import, manufacturing, and procurement quotas, DEA 
stated that it had ``good cause'' under the Administrative Procedure 
Act to implement those regulations without engaging in traditional 
notice and comment rulemaking. In support of that action, DEA 
specifically stated:

    Congress, in crafting CMEA, recognized that limiting of product 
availability at the retail level could potentially encourage 
diversion of either drug products or the List I chemicals themselves 
higher in the supply chain--at the import, manufacture, and 
distribution levels. To address its concern about ``what immediately 
moves in behind,'' (Rep. Souder, February 28, 2006, CR p. 423) 
Congress included provisions in CMEA to control the import, export, 
manufacture, and distribution of the three chemicals and products 
containing them. These provisions also will make it possible for the 
United States to meet the recommendations of the International 
Narcotics Control Board, which encouraged its member countries to 
provide for pre-export notifications and an assessment of legitimate 
need for these chemicals. * * *
    DEA must implement the quota provisions of the CMEA on an 
interim basis to ensure that product upstream from the retail level 
is not diverted for illicit purposes. It would be contrary to the 
public interest to allow the diversion of large amounts of 
ephedrine, pseudoephedrine, and phenylpropanolamine at the wholesale 
level while implementing controls at the retail level to limit sales 
of these very products.
    The broad scope of the new law [CMEA], as well as the expedited 
effective dates, is a clear reflection of Congress' concerns about 
the nation's growing methamphetamine epidemic and its [Congress] 
desire to act quickly to prevent further illicit use of these 
chemicals.'' (specifically 72 FR 37443-37444)

    DEA's decision to provide a 21-day comment period was based on 
Congress' mandate for DEA to act quickly to implement the requirements 
of the CMEA including the establishment of an Annual Assessment of 
Needs and individual import, manufacturing, and procurement quotas. The 
regulations require that DEA establish the Assessment of Annual Needs 
prior to the issuance of individual quotas, meaning that DEA must 
establish the 2008 Assessment of Annual Needs before it can issue 
individual import,

[[Page 73367]]

manufacturing, and procurement quotas. DEA is required to complete the 
process of issuing individual import, manufacturing, and procurement 
quotas prior to January 1, 2008, as quotas are issued for a calendar 
year. DEA believes that a shorter comment period was necessary to 
review and consider the comments received from the public and then 
establish the 2008 Assessment of Annual Needs prior to the end of the 
2007 calendar year.
    DEA also believes that a 21-day comment period was sufficient given 
that its proposal was neither complex nor technical. DEA notes that two 
of the 2008 assessments proposed were values initially proposed on 
October 19, 2006, when DEA proposed the 2007 Assessment of Annual 
Needs, and the other three values were values significantly higher than 
the values proposed on October 19, 2006. Additionally, DEA notes that 
interested persons directly impacted by these quotas (i.e., DEA-
registered manufacturers and importers) learned of the factors DEA 
would consider in the establishment of individual quotas in July when 
the Interim Final Rule was published. Many of these factors are set 
forth by statute; any remaining factors parallel the current system 
which has existed for individual quotas for controlled substances 
essentially since the inception of the Controlled Substances Act. For 
these reasons, DEA believes that DEA registrants had ample time to 
gather the necessary scientific and technical information that would be 
required to submit substantive comments to the proposed 2008 Assessment 
of Annual Needs.
    Finally, DEA believes that the commenter did not proffer any 
specific information beyond that which it submitted in its written 
comments that would be brought to light if the DEA were to extend the 
comment period.

Withdrawal of 2008 Proposed Assessment of Annual Needs

    The commenter requested that the proposed 2008 Assessment of Annual 
Needs be withdrawn and reproposed, presumably based on its comments.
    DEA Response: After considering the commenter's comments, the DEA 
has determined that the request for a withdrawal of the proposed 2008 
Assessment of Annual Needs is unnecessary for the reasons discussed 
above.

Conclusion

    DEA has carefully considered the comment received from the lone 
commenter in connection with the proposed 2008 Assessment of Annual 
Needs. Based on information provided in the comment, along with 
information provided by DEA-registered manufacturers and importers of 
these List I chemicals on applications for individual import, 
manufacturing, and procurement quotas pursuant to DEA regulations, DEA 
has fully addressed the relevant issues set forth in the comment. 
Therefore, under the authority vested in the Attorney General by 
section 306 of the CSA (21 U.S.C. 826), and delegated to the 
Administrator of the DEA by 28 CFR 0.100, and redelegated to the Deputy 
Administrator pursuant to 28 CFR 0.104, the Deputy Administrator hereby 
orders that the 2008 Assessment of Annual Needs for ephedrine, 
pseudoephedrine, and phenylpropanolamine, expressed in kilograms of 
anhydrous acid or base, be established as follows:

------------------------------------------------------------------------
                                                             Established
                                                                 2008
                      List I Chemical                         assessment
                                                              of annual
                                                              needs (kg)
------------------------------------------------------------------------
Ephedrine (for sale).......................................       11,500
Ephedrine (for conversion).................................      128,760
Pseudoephedrine (for sale).................................      511,100
Phenylpropanolamine (for sale).............................        5,545
Phenylpropanolamine (for conversion).......................       85,470
------------------------------------------------------------------------

    The Office of Management and Budget has determined that notices of 
quotas are not subject to centralized review under Executive Order 
12866.
    This action 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 action does not have any federalism implications 
warranting the application of Executive Order 13132.
    The Deputy Administrator hereby certifies that this action will not 
have a significant economic impact upon a substantial number of small 
entities whose interests must be considered under the Regulatory 
Flexibility Act, 5 U.S.C. 601-612. The establishment of Assessment of 
Annual Needs for ephedrine, pseudoephedrine, and phenylpropanolamine is 
mandated by law. The assessments are necessary to provide for the 
estimated medical, scientific, research and industrial needs of the 
United States; for lawful export requirements; and the establishment 
and maintenance of reserve stocks. Accordingly, the Deputy 
Administrator has determined that this action does not require a 
regulatory flexibility analysis.
    This action meets the applicable standards set forth in sections 
3(a) and 3(b)(2) of Executive Order 12988 Civil Justice Reform.
    This action will not result in the expenditure by state, local, and 
tribal governments, in the aggregate, or by the private sector, of 
$120,000,000 or more (adjusted for inflation) in any one year, and will 
not significantly or uniquely affect small governments. Therefore, no 
actions were deemed necessary under the provisions of the Unfunded 
Mandates Reform Act of 1995.
    This action is not a major rule as defined by section 804 of the 
Small Business Regulatory Enforcement Fairness Act of 1996 
(Congressional Review Act). This action will not result in an annual 
effect on the economy of $100,000,000 or more; a major increase in 
costs or prices; or significant adverse effects on competition, 
employment, investment, productivity, innovation, or on the ability of 
United States-based companies to compete with foreign-based companies 
in domestic and export markets.

    Dated: December 18, 2007.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. 07-6218 Filed 12-26-07; 8:45 am]
BILLING CODE 4410-09-P