Management of Quotas for Controlled Substances and List I Chemicals
| Citation | 84 FR 56712 |
| Record Number | 2019-21989 |
| Published date | 23 October 2019 |
| Court | Drug Enforcement Administration |
Federal Register, Volume 84 Issue 205 (Wednesday, October 23, 2019)
[Federal Register Volume 84, Number 205 (Wednesday, October 23, 2019)]
[Proposed Rules]
[Pages 56712-56731]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-21989]
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DEPARTMENT OF JUSTICE
Drug Enforcement Administration
21 CFR Parts 1303 and 1315
[Docket No. DEA-455]
RIN 1117-AB49
Management of Quotas for Controlled Substances and List I
Chemicals
AGENCY: Drug Enforcement Administration, Department of Justice.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Drug Enforcement Administration (DEA) proposes to revise
existing regulations that manage the quotas for controlled substances
and the list I chemicals, ephedrine, pseudoephedrine, and
phenylpropanolamine, held by DEA-registered manufacturers. This rule is
being proposed to: Define the types of quotas, update the method to
abandon quota, clarify the current language to ensure that both
manufacturers and distributors are required to obtain certification of
a buyer's quota, reduce overall inventories, formalize the existing
practice of use-specific subcategories for individual manufacturing and
procurement quotas, and modify existing deadlines to fix/issue quotas.
The DEA is also amending certain regulations to implement updates to
the Controlled Substances Act made by the Substance Use-Disorder
Prevention that Promotes Opioid Recovery Treatment for Patients and
Communities Act. The DEA emphasizes that all of these revisions and
amendments would apply to both bulk and dosage-form manufacturers, as
well as importers of the list I chemicals ephedrine, pseudoephedrine,
and phenylpropanolamine. The changes are necessary to reduce the
potential for diversion, and would align regulations with current
manufacturing business practices.
DATES: Written comments must be postmarked, and electronic comments
must be sent, on or before December 23, 2019.
All comments concerning collection of information under the
Paperwork Reduction Act must be submitted to the Office of Management
and Budget (OMB) on or before December 23, 2019.
ADDRESSES: To ensure proper handling of comments, please reference
``RIN-1117-AB49/Docket No. DEA-455'' on all correspondence, including
any attachments.
Electronic comments: The Drug Enforcement Administration
encourages that all comments be submitted electronically through the
Federal eRulemaking Portal which provides the ability to type short
comments directly into the comment field on the web page or to attach a
file for lengthier comments. Please go to http://www.regulations.gov
and follow the online instructions at that site for submitting
comments. Upon completion of your submission you will receive a Comment
Tracking Number for your comment. Please be aware that submitted
comments are not instantaneously available for public view on
Regulations.gov. If you have received a Comment Tracking Number, your
comment has been successfully submitted and there is no need to
resubmit the same comment.
Paper comments: Paper comments that duplicate the
electronic submission are not necessary and are discouraged. Should
you, however, wish to mail a paper comment in lieu of an electronic
comment, it should be sent via regular or express mail to: Drug
Enforcement Administration, Attention: DEA Federal Register
Representative/DPW, 8701 Morrissette Drive, Springfield, Virginia
22152.
All comments concerning collections of information under the
Paperwork Reduction Act must be submitted to the Office of Information
and Regulatory Affairs, OMB, Attention: Desk Officer for DOJ,
Washington, DC 20503. Please state that your comment refers to RIN
1117-AB49/Docket No. DEA-455.
FOR FURTHER INFORMATION CONTACT: Scott A. Brinks, Regulatory Drafting &
Policy Section, Diversion Control Division, Drug Enforcement
Administration; Mailing Address: 8701 Morrissette Drive, Springfield,
Virginia 22152; Telephone: (202) 598-6812.
SUPPLEMENTARY INFORMATION:
Posting of Public Comments
Please note that all comments received are considered part of the
public record. They will, unless reasonable cause is given, be made
available by DEA for public inspection online at http://www.regulations.gov and in DEA's public docket. Such information
includes personal identifying information (such as your name, address,
etc.) voluntarily submitted by the commenter.
If you want to submit personal identifying information (such as
your name, address, etc.) as part of your comment, but do not want it
to be posted online or made available in the public docket, you must
include the phrase ``PERSONAL IDENTIFYING INFORMATION'' in the first
paragraph of your comment. You must also place
[[Page 56713]]
all the personal identifying information you do not want posted online
or made available in the public docket in the first paragraph of your
comment and identify what information you want redacted.
If you want to submit confidential business information as part of
your comment, but do not want it to be posted online or made available
in the public docket, you must include the phrase ``CONFIDENTIAL
BUSINESS INFORMATION'' in the first paragraph of your comment. You must
also prominently identify confidential business information to be
redacted within the comment. If a comment has so much confidential
business information that it cannot be effectively redacted, all or
part of that comment may not be posted online or made available in the
public docket.
Personal identifying information and confidential business
information identified and located as set forth above will be redacted
and the comment, in redacted form, will be posted online and placed in
the DEA's public docket file. Please note that the Freedom of
Information Act applies to all comments received. If you wish to
inspect the agency's public docket file in person by appointment,
please see the FOR FURTHER INFORMATION CONTACT paragraph.
I. Executive Summary
A. Summary of the Purposes and Provisions of Rule
1. Types of Quota
Through this Notice of Proposed Rulemaking (NPRM), the DEA is
proposing to add new sections to the regulations that would introduce
and define the types of quotas for controlled substances in schedules I
and II and the list I chemicals \1\ ephedrine, pseudoephedrine, and
phenylpropanolamine. The types of quotas are as follows:
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\1\ For the purposes of this document only, ``list I chemicals''
refers to ephedrine, pseudoephedrine, and phenylpropanolamine for
legitimate medical, scientific, research, and industrial needs. The
phrase ``list I chemical(s)'' will be used going forward.
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Aggregate production quota (APQ) (for controlled
substances);
Assessment of Annual Needs (AAN) (for listed chemicals);
Individual Manufacturing Quota (for controlled substances
and listed chemicals);
Procurement Quota (for controlled substances and listed
chemicals); and
Import Quota (for listed chemicals).
Also, the DEA is proposing a change in the regulations to stay up
to date with modern technology. The proposed change would involve
formalizing the current practice of filing to abandon quota with the
United Nations (UN) Reporting and Quota Section in the online Quota
Management System.
2. Conforming Changes From the Substance Use-Disorder Prevention That
Promotes Opioid Recovery Treatment for Patients and Communities Act
In accordance with the Substance Use-Disorder Prevention that
Promotes Opioid Recovery Treatment for Patients and Communities Act
(hereinafter ``the SUPPORT Act''),\2\ the DEA is performing an update
to the current regulations to comply with the new law. The SUPPORT Act
now gives the Administrator, by way of delegation from the Attorney
General, the authority to establish APQs, individual manufacturing
quotas, and procurement quotas in terms of pharmaceutical dosage-form
prepared from or containing a controlled substance. This Act also
changed the deadline by which the DEA is to fix the individual
manufacturing quota for schedules I and II controlled substances. The
SUPPORT Act defines the phrase ``covered controlled substance'' and
mandates that the amount of diversion of a covered controlled substance
be estimated when establishing any quota. When estimating diversion,
the DEA must consult with the Department of Health and Human Services
(HHS) on rates of overdose deaths and abuse and overall public health
impact related to the covered controlled substances and may take into
consideration other sources of information the DEA deems reliable. The
SUPPORT Act requires that ``appropriate quota reductions'' be made
after estimating diversion. The Act does not require quota increases.
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\2\ The SUPPORT for Patients and Communities Act, Public Law
115-271.
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3. Procurement Quota Certification
The DEA is proposing to change the regulations to provide that both
manufacturers and distributors selling to a manufacturer would be
required to obtain certification of the buyer's quota when an order is
placed. This change would be implemented by changing the words
``importer,'' ``manufacturer,'' and ``bulk manufacturer'' to
``registrant.''
4. Reduction of Inventory Allowances
The DEA proposes to revise the regulations to reduce the allowable
individual inventory held by both bulk and dosage-form manufacturers of
controlled substances in schedules I and II and list I chemicals, which
would decrease the risk of diversion while ensuring the needs of the
United States are met. The proposed amendments are:
Decrease the inventory allowance issued by the DEA for
individual manufacturing quotas to 30 percent;
Decrease the inventory allowance issued by the DEA for
procurement quotas to 30 percent;
Suspend quota issued by the DEA if a registrant's
inventory exceeds 45 percent of the registrant's estimated net
disposal; and
Grant request of additional quota by registrant if
inventory is less than 20 percent of the registrant's estimated net
disposal.
5. Subcategories for Quotas
The DEA is proposing the addition of use-specific subcategories for
individual manufacturing and procurement quotas to formalize the
current, on-going practice of the use of these subcategories by
registrants. The use-specific subcategories are:
Quota for Commercial Sales;
Quota for Transfer;
Quota for Product Development;
Quota for Replacement; and
Quota for Packaging/Repackaging and Labeling/Relabeling.
6. New Deadlines To Establish Quotas
With this NPRM, the DEA proposes to change the deadlines for fixing
or establishing the different types of quotas to allow more time for
processing and communicating with applicants and to make the
regulations consistent with the SUPPORT Act. The proposed changes are
as follows:
Deadline to establish the APQ and the AAN: Change to
September 1.
Deadline to issue procurement quota, import quota, and
individual manufacturing quota: Change to December 1.
Deadline to adjust individual manufacturing quota: Change
to July 1.
B. Legal Authority
The Controlled Substances Act (CSA) authorizes the Administrator of
the DEA (by delegation from the Attorney General) to promulgate rules
and regulations that he deems necessary and appropriate for the
efficient execution of his functions under subchapter I (Control and
Enforcement) and subchapter II (Import and Export) of the Act, 21
U.S.C. 871(b) and 958(f). Subchapter I includes provisions which
require the Administrator to establish the APQ for each basic class of
controlled substance listed in schedules I and II and the AAN for the
list I chemicals to be manufactured in the United States each calendar
year to provide for the estimated medical,
[[Page 56714]]
scientific, research, and industrial needs of the United States, lawful
export requirements, and the establishment and maintenance of reserve
stocks. 21 U.S.C. 826. The Administrator shall take the following quota
actions for a basic class of controlled substance or list I chemical
pursuant to stipulated conditions: Limit or reduce individual
production quotas for each registered manufacturer,\3\ and fix
individual manufacturing quotas for registrants.\4\
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\3\ 21 U.S.C. 826(b).
\4\ 21 U.S.C. 826(d).
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On October 24, 2018, Congress made revisions to the CSA through the
SUPPORT Act. These revisions will be noted and included in these
proposed regulations, where applicable. Through this Act, the
Administrator, by way of delegation from the Attorney General, may now
set quota in terms of the pharmaceutical dosage-form.
C. Summary of the Benefits and Costs of the Proposed Rule
There are six key provisions in this proposed rule, five of which
are anticipated to have benefits and costs. As explained below, some of
these provisions are mandated by Congress under recent legislation, and
some others are being proposed pursuant to the DEA's general rulemaking
authority under the CSA. The anticipated effect of each provision is
summarized in this section. The following discussion is only a summary;
for a complete analysis of the benefits and costs of each provision,
see the Regulatory Analysis section.
1. Defining Types of Quota and Filing To Abandon Quota
These provisions of the proposed rule will codify two existing DEA
practices. It will formally define the different types of quota issued
by the DEA for schedules I and II controlled substances and list I
chemicals. It will also formalize the current reporting practice for a
registrant to abandon quota in the DEA's online Quota Management
System. The formal definition of quota types will have no practical
impact on registrants, and formalizing the procedure to abandon quota
is simply a codification of existing DEA practice. While these proposed
provisions will have no economic costs or benefits, the DEA believes
there are benefits to accurately codifying existing practices. These
proposed provisions are expected to enhance clarity, certainty, and
efficiency.
2. Conforming Revisions Related to the SUPPORT Act
The SUPPORT Act gives the DEA discretionary authority to establish
quotas in terms of pharmaceutical dosage-form. The DEA's current
practice is to establish quotas necessary for the manufacture of
finished dosage-forms in terms of kilograms, and manufacturers then
determine how to allocate those kilograms to different Food and Drug
Administration (FDA) approved dosage-forms. While the SUPPORT Act gives
the DEA the authority to establish quotas in terms of pharmaceutical
dosage-form, the DEA will continue to use its current process of
establishing quota in terms of kilograms, for the time being. While it
is impossible to know all the circumstances in which this authority
would be used, it is the DEA's current intention that any
implementation of dosage-form quotas will be rare occurrences in
response to specific events, and will coexist alongside kilogram
quotas. The DEA recognizes that dosage-form manufacturers are in the
best position to understand the demand for their products, in dosage-
form. However, if the DEA were to reallocate a manufacturer's quota to
prevent diversion or alleviate shortages based on specific dosage-form,
or to prevent an overproduction, the DEA would make this adjustment for
a manufacturer that is producing those specific FDA-approved dosage-
forms, and who therefore is able to shift production with minimal
disruption or delay. Therefore, this provision of the proposed rule
will have minimal impact.
The SUPPORT Act also requires the DEA to estimate the amount of
diversion when establishing quota for a ``covered controlled
substance'' (fentanyl, oxycodone, hydrocodone, oxymorphone, or
hydromorphone) using all reliable information, including information
from HHS. This requirement will expand upon the DEA's current practice,
as it has considered the amount of diversion when establishing quotas
for covered controlled substances when data has been made available.
Therefore, considering additional reliable information gathered from
outside the agency to estimate the amount of diversion will result in
minimal additional cost. Also included in these SUPPORT Act updates are
extending the DEA's deadline to fix individual manufacturing quotas for
schedules I and II controlled substances from October to December,
which will also have minimal impact on registrants or the DEA.
3. Procurement Quota Certification
This provision requires that manufacturers purchasing their active
pharmaceutical ingredients (API) from distributors, as well as other
manufacturers, first certify in writing that quantities ordered do not
exceed the requesting manufacturer's quota for the year. Current
regulations stipulate that only entities registered as ``importer,''
``manufacturer,'' or ``bulk manufacturer'' must certify quota before a
purchase.\5\ This provision is expected to result in more
accountability for affected distributors and manufacturers and bring
them into compliance with the CSA and regulations as intended.
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\5\ 21 CFR 1303.12(f) and 1315.32(h).
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This new requirement that manufacturers produce and submit
certification of quota to be reviewed by the distributor will impose
costs on both manufacturers and distributors. The DEA estimates the
cost of this provision to be $35,241 per year ($23,494 of which is
incurred by manufacturers while the remaining $11,747 is incurred by
distributors).
4. Reduction of Inventory Allowances
This provision has one key benefit: It is expected to reduce the
potential for the diversion of schedules I and II controlled substances
and list I chemicals by lowering the inventory allowance from one year
to the next year from 50% to 30%. Practically speaking, this equates to
a reduction from half of a year's sales supply allowed to be held as
inventory to nearly four months. Since regulations governing inventory
allowances were first implemented, the number of firms manufacturing
controlled substances and list I chemicals has grown. For example, the
DEA records show that the number of registered manufacturers grew by
17.3 percent from 330 to 387 during the period of 2008 to 2018. Because
of this expansion of suppliers, the lower inventory allowance
authorized per firm is not expected to increase the likelihood of drug
shortages. Generally, there are now more manufacturers that can
increase production to meet demand if one or more manufacturers were to
have production issues.
Regarding costs, the DEA believes a reduction of inventory
allowance to 30%, with flexibility to produce up to 45% at any given
point in a year, would have minimal impact on registrants while
continuing to provide adequate inventory for registrants to respond to
fluctuations in demand in pharmaceutical markets. Over a ten year
period from 2008 to 2017, as reported to
[[Page 56715]]
the U.N., year-end inventories for manufacturers averaged 39%, well
within the 30% to 45% range allowed by this rule. For this reason DEA
believes this provision will have a minimal impact on registrants.
See the Regulatory Analysis section for a complete discussion of
the impact of this provision.
5. Subcategories for Quotas
The benefit of the formalization of subcategories is in the
alignment of regulatory language with current DEA practice, which
removes any ambiguity that may be perceived by regulated entities.
Because these subcategories are already in use, through voluntary and
cooperative efforts between registrants and DEA, the DEA believes this
provision will have no economic impact on registrants or the DEA.
6. New Deadlines To Establish Quota
By updating the deadlines for establishing and publishing the APQ,
AAN, procurement, import, individual manufacturing, and adjusted
individual manufacturing quotas, registrants are expected to benefit
from having the regulations accurately reflect realistic deadlines.
This will allow registrants to plan their production year appropriately
and remove any uncertainty related to these publication dates. The DEA
estimates there would be no cost associated with this provision.
II. Background
A. Types of Quota
1. APQ and AAN
Section 306 of the CSA \6\ requires the Attorney General to
establish APQ and AAN each year for each basic class of controlled
substance listed in schedules I and II and the list I chemicals,
respectively.\7\ The APQ and AAN represent the total quantity of each
basic class of controlled substance listed in schedules I and II and
list I chemicals necessary to be manufactured during the calendar year
to provide for the estimated medical, scientific, research, and
industrial needs of the United States, for lawful export requirements,
and for the establishment and maintenance of reserve stocks. The APQs
are issued as individual manufacturing and procurement quotas to DEA-
registered manufacturers. The AANs are issued as individual
manufacturing, procurement and import quotas. The quota system is meant
to ensure an adequate and uninterrupted supply of schedules I and II
controlled substances and list I chemicals for legitimate medical and
scientific needs, while preventing the production of excess quantities,
which present an increased risk of diversion.
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\6\ 21 U.S.C. 826.
\7\ The responsibility for the establishment of the APQs and
individual manufacturing and procurement quotas for DEA-registered
manufacturers of schedules I and II controlled substances and list I
chemicals has been delegated to the Administrator of DEA, 28 CFR
0.100.
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DEA-registered manufacturers apply for individual manufacturing,
import, or procurement quotas based on their manufacturing activities
and projected needs. Manufacturing activities authorized under a
manufacturer registration include dosage-form manufacturing (both
commercial and product development), manufacturing of other substances,
as well as packaging, labeling, repackaging, or relabeling efforts.
Projected needs may include product development for new suppliers or
new process requirements, increased commercial sales, estimated
improved market share based on new customers, purchase orders in hand,
or the launch of new FDA-approved drug products. Registrants can
include any other factor they want DEA to consider when evaluating
their applications for quota.
2. Individual Manufacturing Quota
An individual manufacturing quota represents the maximum quantity
of a schedule I or II controlled substance or list I chemical a
manufacturer is authorized to manufacture in a calendar year.\8\ The
sum total of all individual manufacturing quotas issued to bulk
manufacturers for a particular basic class of controlled substance in
schedule I or II or list I chemical must be equal to or lower than the
established APQ for that basic class or AAN for that chemical as
determined in accordance with 21 CFR 1303.11 and 1315.11. A bulk
manufacturer may request an increase in any of the quotas for a
schedule I or II controlled substance or list I chemical at any time
during the calendar year for which it applies.\9\ Procurement and
import quotas inform the amount of individual manufacturing quotas.
Only DEA-registered bulk manufacturers may apply for, and subsequently
be issued, individual manufacturing quotas and/or procurement quotas.
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\8\ 21 CFR 1303.21 and 1315.21.
\9\ 21 CFR 1303.12(d), 1303.25(a), 1315.25(a), 1315.32(g), and
1315.36(b).
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Any manufacturer assigned an individual manufacturing quota for a
schedule I or II controlled substance or list I chemical may at any
time abandon their right to manufacture all or any part of such quota
pursuant to 21 CFR 1303.27 and 1315.27. Currently, to abandon all or
part of an individual manufacturing quota for a schedule I or II
controlled substance, a manufacturer files a written notice with the
Drug & Chemical Evaluation Section. To abandon any part of an
individual manufacturing quota for a list I chemical, a manufacturer
would file a written notice with the UN Reporting & Quota Section of
DEA.
3. Procurement Quota
A DEA-registered manufacturer who procures a schedule I or II
controlled substance or list I chemical for the purpose of conducting
non-bulk manufacturing activities such as dosage-form manufacturing,
product development, packaging, labeling, repackaging or relabeling, or
transfer, must apply \10\ for and receive a procurement quota. A
procurement quota represents the maximum quantity of a schedule I or II
controlled substance or list I chemical a registrant is authorized to
acquire in a calendar year for the purpose of manufacturing controlled
substances into dosage-forms or to acquire to convert into another
schedule I or II controlled substance (with corresponding individual
manufacturing quota for that new drug code) and also for packaging,
repackaging, labeling, and relabeling.\11\ Finished dosage-form
manufacturers and packagers may apply for procurement quota only.
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\10\ 21 CFR 1303.12 and 1315.32(a).
\11\ 21 CFR 1303.12 and 1315.32.
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Under the current regulations, when a person with a procurement
quota orders a quantity of a basic class of a schedule I or II
controlled substance or a list I chemical, they have to certify that
the quantity ordered does not exceed their unused and available
procurement quota for that current calendar year. This certification is
required only if purchasing from a manufacturer. Because of the wording
of the regulations, many registrants do not have to certify their
purchases. Outsourcing facilities are an example of this. An
``outsourcing facility'' is defined as a facility at one geographic
location or address that is engaged in compounding sterile drugs,
either with or without prescriptions for identified individual
patients, that elects to register with the FDA and complies with the
statutory requirements in section 503B of the Federal Food, Drug, and
Cosmetic Act.\12\ Because outsourcing facilities compounding controlled
substances meet the CSA
[[Page 56716]]
definition of ``manufacturer,'' \13\ the DEA has registered these newly
designated facilities as manufacturers. Currently, outsourcing
facilities registered with DEA as manufacturers are not required to
follow the procurement quota regulations, because they buy their API
from distributors rather than another manufacturer. DEA has discussed
the issue with manufacturers. Several manufacturers have stated that 21
CFR 1303.12(f) does not apply to them because they are not purchasing
material from another manufacturer. This proposed rule would make these
changes.
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\12\ 21 U.S.C. 353b(d)(4).
\13\ 21 U.S.C. 802(15).
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4. Import Quota
DEA-registered importers that import list I chemicals must apply
for and receive an import quota. 21 CFR 1315.34(a). An import quota
represents the maximum amount of a list I chemical an importer may
bring into the United States during the calendar year. Importers of
list I chemicals may apply for import quota only.
B. Conforming Changes From the SUPPORT Act
While the Administrator of DEA, as delegated by the Attorney
General, has always been required \14\ annually to establish APQs and
individual manufacturing quotas by the CSA and procurement quotas by
DEA's regulations,\15\ there was no authorization given or a
requirement to establish APQs, individual manufacturing quotas or
procurement quotas in terms of pharmaceutical dosage-forms prior to the
SUPPORT Act. Before the signing of the SUPPORT Act, the CSA \16\ stated
that quotas for controlled substances should only be established in
terms of quantities and not in terms of individual pharmaceutical
dosage-forms. The DEA had no authority to issue the APQ based on
separate forms of drugs. The DEA could not demand that quota be used
for a specific dosage-form. Also, prior to the SUPPORT Act, the
individual manufacturing quota had to be fixed on or before October 1.
Furthermore, the CSA did not expressly require the estimation of
diversion for any controlled substance.
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\14\ 21 U.S.C. 826.
\15\ 21 CFR 1303.12(a).
\16\ 21 U.S.C. 826(a).
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C. Reduction of Inventory Allowances
The DEA's mandate by the CSA is to provide for the estimated
medical, scientific, research, and industrial needs of the United
States, for lawful export requirements, and for the establishment and
maintenance of reserve stocks, while preventing the diversion of
controlled substances and list I chemicals. The current regulations
\17\ contribute to increased inventories at multiple manufacturing
processes/steps which can lead to an increased risk of diversion.
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\17\ 21 CFR 1303.24 and 1315.24.
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The 2017 National Survey on Drug Use and Health from the Substance
Abuse and Mental Health Services Administration (SAMHSA) reported that
about 6.6% (18 million) of people ages 12 or older misused prescription
psychotherapeutic drugs (pain relievers, tranquilizers, stimulants and
sedatives) in the past year and 4.1% (11 million) misused pain
relievers (i.e., hydrocodone, oxycodone, and morphine).\18\
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\18\ SAMHSA, Center for Behavioral Health Statistics and
Quality, 2017 National Survey on Drug Use and Health, available at
https://www.samhsa.gov/data/sites/default/files/cbhsq-reports/NSDUHDetailedTabs2017/NSDUHDetailedTabs2017.pdf.
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According to the 2014 National Drug Threat Assessment Summary from
the DEA, between 2009 and 2013 there was a 222% increase in the total
U.S. drug seizures for oxycodone, hydrocodone and hydromorphone.\19\
According to the Healthcare Cost and Utilization Project from the
Agency for Healthcare Research and Quality (AHRQ) between the year 2008
and 2015, the rate of opioid-related Emergency Department visits
increased by 120.7% (i.e., from 94.6 per 100,000 population in 2008 to
208.8 per 100,000 population in 2015).\20\ Data from the SAMHSA
Treatment Episode Data Set revealed that between 2005 and 2015, there
was a 75% increase (from 71,499 to 124,943) in the number of hospital
admissions (ages 12 and older) due to or caused by primary non-heroin
opiates/synthetics.\21\
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\19\ National Drug Threat Assessment 2014, (p. 45) available at
https://www.dea.gov/resource-center/dir-ndta-unclass.pdf.
\20\ Agency for Healthcare Research and Quality (2017), Opioid-
Related Inpatient Stays and Emergency Department Visits by State,
2008-2015. http://www.hcup-us.ahrq.gov/faststats/landing.jsp.
\21\ Department of Health and Human Services (Feb 2017).
Treatment Episode Data Set (TEDS) 2005-2015 State Admissions to
Substance Abuse Treatment Services.
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The purpose of the inventory allowance is to provide for efficiency
and flexibility in managing the sale and distribution of schedule I and
II controlled substances and list I chemicals so that the manufacturer
can meet the actual or reasonably estimated demand for the schedule I
and II controlled substances and list I chemicals. Under the current
inventory allowance issued with the quota is intended to: 1. Provide
saleable material for approximately four months of sales (net disposal)
into the next calendar year while the manufacturer begins new
production in the next calendar year; 2. Manage an unexpected uptick in
sales during the calendar year; and 3. Address incidents limiting
manufacturing or supply such as natural disasters or labor strikes.
Manufacturers are encouraged to apply for adjustments to their quota at
any time during the calendar year with appropriate documented
supporting justification.\22\
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\22\ 21 CFR 1303.25.
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The mission of the DEA is to prevent diversion of controlled
substances and list I chemicals while still providing sufficient
availability for the legitimate medical, scientific, research, and
industrial needs of the United States. The DEA is committed to ensuring
the availability of controlled substances in schedules I and II and
list I chemicals to manufacturers to meet the legitimate medical,
scientific, research, and industrial needs of the United States.
However, the DEA must strike an appropriate balance between ensuring
the availability of drug products containing controlled substances in
schedules I and II and list I chemicals to meet these needs, and the
risk to the public health and safety. The DEA has observed an increase
in the production of many controlled substances over the years,
including those substances requiring quotas. The changes in the
industry, including the increase in the number of manufacturers, has
led to accumulations of inventory.
When the current regulations were promulgated, there were only one
or two bulk-manufacturing suppliers and finished dosage-form
manufacturers for each controlled substance. Each manufacturer needed
enough material to ensure the safe and continuous coverage of the
market place for legitimate patient needs and a significant amount of
inventory (50%) to handle potential market fluctuations in case the
other manufacturer had an emergency or other disruptive situation.
However, the number of generic dosage-form manufacturers entering the
marketplace has grown significantly, especially since the enactment of
the Drug Price Competition and Patent Term Restoration Act of 1984
(Hatch-Waxman Amendments). When the DEA considers each manufacturer's
portion of the market, the amount of inventory each manufacturer needs
to hold in reserve to ensure legitimate medical needs are met, due to
other manufacturers' potential production disruptions, is
[[Page 56717]]
much smaller than when the CSA was originally written. There are
currently so many brand and generic manufacturers for each controlled
substance with an FDA-approved drug product, that if one or two
manufacturers ceased production, the overall market would not be
affected. For instance, in 2007, the DEA registered nine bulk
manufacturers who could provide oxycodone to 88 dosage-form (non-bulk)
manufacturers. By contrast, as of 2015, the DEA registered 11 bulk
manufacturers of oxycodone who could provide bulk oxycodone to 166
dosage-form (non-bulk) manufacturers. As of March 2017, these non-bulk
manufacturers were responsible for producing FDA-approved dosage-forms
including 10 branded and 30 generic products, each of which has
multiple strengths and various immediate and extended release
formulations. These manufacturers are all competing for the U.S. market
and an increasing export market.
D. Formalization of Subcategories
Administering the quota provisions of the CSA is becoming more
complex as registrants increasingly engage in product development
efforts and subcontract various aspects of the manufacturing process to
other DEA-registered manufacturers, thus moving away from single source
production of pharmaceutical drug products. A key objective of the
quota system is to track how much of a controlled substance or list I
chemical is available so the DEA can fulfill its mandate of ensuring
that there is sufficient material to meet the estimated medical,
scientific, research, and industrial needs of the United States, for
lawful exports, and for the establishment and maintenance of reserve
stocks. The large number of manufacturing registrants that move
material from one manufacturer to another presents a growing challenge
in that multiple quotas have to be issued for the various stages of
manufacturing, while at the same time, avoiding ``double counting'' the
legitimate needs as the material moves from registrant to registrant
which would artificially increase the APQ.
E. New Deadlines To Establish Quotas
Under current regulations (established nearly 50 years ago), the
DEA is unduly burdened by unreasonable deadlines for establishing and
granting quotas. Since the establishment of the original deadlines, the
number of manufacturers has more than tripled and the number of
requests for quota has increased 560 percent, yet the deadlines have
remained the same. Because there have been no accommodations made for
the substantial increases in both manufacturers and quota requests, the
DEA is required to work within challenging parameters in order to meet
the current deadlines. Under current regulations, the DEA is required
to publish the APQ and the AAN by May 1.\23\ This deadline constitutes
an undue burden given the applications for import and procurement quota
are due April 1 \24\ and manufacturing quota are due May 1.\25\ The DEA
cannot provide a thorough and careful assessment of the quota needs and
the assessment of annual needs for the following year in 30 days or
less, particularly given the substantial increase in the number of
applications the DEA must consider at the time it proposes the APQ and
AAN.
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\23\ 21 CFR 1303.11(c) and 1315.11(c).
\24\ 21 CFR 1303.12(b), 1315.32(e), and 1315.22.
\25\ 21 CFR 1303.22.
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In 2016, the DEA issued 548 initial individual manufacturing
quotas, 1,083 initial procurement quotas, 33 import quotas, and
adjusted 250 individual manufacturing quotas. Under the current
regulations, the DEA is required to issue individual manufacturing,
procurement, and import quotas by July 1 \26\ of the calendar year
preceding the year in which the quota is to be used. The individual
manufacturing quota is to be adjusted by March 1 \27\ of the calendar
year in which the quota is to be used. The DEA needs sufficient time to
compile and consider all requests for quota in order to ensure that
each manufacturer is provided with an adequate amount of quota for
their legitimate production requests, in light of legitimate medical,
scientific, research, and industrial needs, while also ensuring that
quotas are not unwarranted, causing an increase in the risk of
diversion. It is imperative that the DEA not be forced to make a choice
between staying within the deadlines established in the regulations and
providing a thorough and accurate review of each application for quota.
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\26\ 21 CFR 1303.21(a), 1315.21, 1303.12(c), 1315.32(f) and 21
CFR 1315.34(f).
\27\ 21 CFR 1303.23(c) and 1315.23(c).
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III. Provisions of the Proposed Rule
A. Types of Quota
The DEA proposes adding sections 21 CFR 1303.03 and 1315.06 to
introduce and define the types of quotas in the current quota system.
The DEA proposes creating 21 CFR 1303.03 to define the three types of
quota for schedule I and II controlled substances: APQ, individual
manufacturing quotas, and procurement quotas. The DEA would use the
creation of 21 CFR 1315.06 to define the four types of quotas available
for list I chemicals: AAN, individual manufacturing quotas, procurement
quotas and import quotas.
As previously stated, the regulations were written many years ago
before DEA had the advanced, modern technology that we know today. As
the years have passed, DEA has turned to managing many aspects of the
quota system online. To abandon any or all parts of the individual
manufacturing quota for schedule I and II controlled substances, the
DEA is proposing that 21 CFR 1303.27 be updated to require that the
manufacturer must now submit a quota application with the UN Reporting
and Quota Section in the online Quota Management System, instead of a
written notice submitted to the Drug and Chemical Evaluation Section.
For list I chemicals, 21 CFR 1315.27 would be updated to mandate that a
manufacturer also file in the online Quota Management System, as the
regulations were previously updated \28\ to change the name of the
Section.
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\28\ 81 FR 96992, December 30, 2016.
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B. Conforming Changes From the SUPPORT for Communities and Patients Act
Pursuant to the SUPPORT Act, the Administrator of the DEA (by
delegation from the Attorney General) now has the authority to
establish APQ, individual manufacturing quotas and procurement quotas
in terms of pharmaceutical dosage-forms, if he determines it will
assist in avoiding the overproduction, shortages, or diversion of a
controlled substance. The SUPPORT Act does not require the DEA to grant
quotas in terms of dosage-form, it just grants the authority to do so,
if it will be helpful. This authorization will be added to DEA's
regulations using 21 CFR 1303.11(a), 1303.12(a) and 1303.21(a). The
SUPPORT Act also revised the CSA by changing the dates to fix the
individual manufacturing quota from ``on or before October 1'' to ``on
or before December 1.'' DEA will be revising 21 CFR 1303.21(a) and
1315.21 to keep the dates for fixing individual manufacturing quotas in
accordance with the statute.
As a result of the SUPPORT Act, the CSA has also been amended to
require the Administrator to estimate the amount of diversion of a
``covered controlled substance'' in the United States when establishing
quotas for that covered controlled substance and make appropriate
reductions. Furthermore, when estimating diversion, information deemed
reliable by the Administrator, in consultation with the Secretary of
[[Page 56718]]
HHS, about rates of overdose deaths and abuse and public health impact
must be considered. The Administrator may also consider any other
sources of information that he determines to be reliable. Moving
forward, any year where the approved APQ for a covered controlled
substance is higher than that of the previous year, the Administrator
must consult with the Secretary of HHS and explain in the final order
``why the public health benefits of increasing the quota clearly
outweigh the consequences of having an increased volume of the covered
controlled substance available for sale, and potential diversion, in
the United States.'' Congress defines a ``covered controlled
substance'' as fentanyl, oxycodone, hydrocodone, oxymorphone, or
hydromorphone.
C. Procurement Quota Certification
Regarding certification of procurement quota, this proposed rule
would clarify the current language in 21 CFR 1303.12(f) and 1315.32(h)
and ensure that both manufacturers and distributors are required to
obtain certification of a buyer's quota for the requested schedule I
and II controlled substances, as well as list I chemicals when the
buyer is a manufacturer.
In the 2000s, DEA began to notice a subset of manufacturers
reporting purchases and distributions of schedule II controlled
substances, even though they were not granted procurement quota. The
DEA determined that this subset of manufacturers was conducting
packaging/repackaging and labeling/relabeling activities. These
activities constitute manufacturing as the term is defined in the
CSA,\29\ and as such, require quota when the product falls within
schedules I or II or is a list I chemical. These manufacturers appear
to fill a niche market of providing their customers with drug products
in packaged count sizes that regular manufacturers do not market. While
DEA is not averse to manufacturers fulfilling legitimate medical needs,
DEA is required to ensure that enough quota is granted to meet
legitimate medical, scientific, and research needs, while preventing
diversion. To prevent diversion, the DEA maintains a closed
distribution system for schedule I and II controlled substances and
list I chemicals when manufacturers follow the laws and regulations of
the CSA and CFR. One method of doing this is to hold manufacturers to
the requirement of providing proof of quota through certification,
which ensures that purchases and distributions do not exceed the
procurement quota set by DEA.
---------------------------------------------------------------------------
\29\ 21 U.S.C. 802(15).
---------------------------------------------------------------------------
In order to ensure the system is closed, the DEA manages the quota
process by providing each manufacturer a letter stating the quantity of
controlled substance(s) and/or list I chemical(s) the manufacturer may
obtain during a calendar year. This letter provides legal documentation
that the manufacturer is authorized to obtain a specified quantity of
the controlled substance(s) and/or list I chemical(s). The CSA and the
DEA's implementing regulations require proof of quota when transferring
controlled substances and list I chemicals between manufacturers. When
the CSA and DEA's regulations were first drafted, neither contemplated
that distributors would be used to move controlled substances and list
I chemicals between manufacturers.
When distributors provided schedule II controlled substances to
this subset of manufacturers without verification of the manufacturers'
quota authorization, it circumvented the quota process of verifying
quota to the supplier. This prevents the DEA from performing its
oversight responsibilities and leads to unauthorized distribution of
drug products. These unauthorized distributions are only noted as
sales, which artificially inflates the estimation of legitimate medical
need, a heavily weighted factor in the setting and revising of the APQ.
By requiring that all manufacturers provide a certification of quota
before receiving any quantity of controlled substance or list I
chemical, DEA is better able to maintain the closed distribution
system.
D. Reduction of Inventory Allowances
The DEA proposes to revise 21 CFR 1303.24 and 1315.24 to reduce the
overall inventory held by DEA-registered bulk and dosage-form
manufacturers. These revisions are necessary, in light of the
increasingly complex controlled substances manufacturing business
practices, to reduce the potential for the diversion of schedule I and
II controlled substances and list I chemicals.
The DEA has noticed inventory fluctuation changes at various stages
of the manufacturing process for certain schedule II controlled
substances and changes in market conditions. The market conditions have
changed from being a vertically integrated manufacturing practice to a
horizontal manufacturing structure, which includes an increased number
of manufacturers and demand for lower cost generic drug products
containing controlled substances. This proposed rule would address the
need to reduce the overall inventory allowance for each individual
manufacturer.
The proposed revisions are as follows:
21 CFR 1303.24(a)--decreases the inventory allowance
issued by DEA for individual manufacturing quotas from 50 to 30 percent
for schedules I and II controlled substances;
21 CFR 1303.24(b)--establishes an inventory allowance
issued by DEA for procurement quotas of 30 percent for schedules I and
II controlled substances;
21 CFR 1303.24(c)--suspends quota issued by DEA if
inventory exceeds 45 percent of the registrant's estimated net disposal
for schedules I and II controlled substances;
21 CFR 1303.24(d)--grants request of additional quota by
registrant if inventory is less than 20 percent of the registrant's
estimated net disposal for schedules I and II controlled substances;
21 CFR 1315.24(a)--decreases the inventory allowance
issued by DEA for individual manufacturing quotas from 50 to 30 percent
for the list I chemicals;
21 CFR 1315.24(b)--decreases the inventory allowance
issued by DEA for procurement quotas from 50 to 30 percent for the list
I chemicals;
21 CFR 1315.24(c)--suspends quota issued by DEA if
inventory exceeds 45 percent of the registrant's estimated net disposal
for the list I chemicals; and
21 CFR 1315.24(d)--grants request of additional quota by
registrant if inventory is less than 20 percent of the registrant's
estimated net disposal for the list I chemicals.
Lowering all manufacturers to a 30 percent inventory allowance will
allow the DEA to better manage individual quotas based on fluctuations
in market shares from the entrance of the new manufacturers. The
decrease in inventory will prevent excess accumulation of drug product
or bulk API by the manufacturers who lose market share, lowering the
risk of diversion. By reducing the percentage of the inventory
allowance from 50 percent to 30 percent, the DEA will be able to
prevent the manufacture of unnecessary quantities of controlled
substances and list I chemicals, while still ensuring adequate
availability for the legitimate medical, scientific, research, and
industrial needs of the United States, thereby decreasing the overall
risk of diversion to illicit purposes.
The DEA understands that manufacturers of controlled substances and
list I chemicals need to maintain an additional inventory in case of
market fluctuations while balancing the risks of public health and
safety, but believes that a 50 percent inventory allowance is too
large. An inventory allowance of 50 percent is half of a year's sales
supply
[[Page 56719]]
(net disposal) for each manufacturer, which the DEA believes increases
the risk of potential diversion and abuse. For example, the increase in
oxycodone dosage-form manufacturers from 2007 to 2017 shows multiple
firms vying for an existing market. Their contract and purchase order
negotiations frequently require the DEA to reallocate quotas during the
same calendar year to maintain a balance between manufacturer
production and patient needs. During the calendar year, if the
inventory of a basic class held by a manufacturer exceeds 45 percent of
estimated net disposal, the quota for that class would be automatically
suspended and would remain suspended until inventory is less than 40
percent of the estimated net disposal. The current inventory allowance
of 50 percent for each individual manufacturer is too high when
compared to individual manufacturer market share necessary to support
legitimate medical, scientific, research, and industrial needs for a
specific controlled substance or list I chemical.
The DEA believes that a decrease to a 30 percent inventory
allowance is necessary because it reflects nearly four months of sales
supply (net disposal) for each manufacturer, which allows for market
fluctuations among all manufacturers of that class without disruption
to patients. Under this proposed rule, manufacturers would continue to
receive manufacturing and procurement quotas sufficient to meet their
manufacturing and inventory requirements to sustain the domestic demand
for controlled substances and list I chemicals within the United
States. DEA invites comment on whether the proposed reductions will
lead to shortages or delays in drug supply.
The complexity of current business practices is multifactorial and
includes increased specialization in the manufacturing process itself,
the development of niche markets for specifically formulated drug
products, a change from vertically integrated manufacturing practices
to a much more horizontal manufacturing structure, and the increasing
numbers of manufacturers receiving FDA approval to market generic
products. Due to this evolution of complexity in the pharmaceutical
industry and the inflexible nature of the regulations by which the DEA
must calculate inventory allowances for manufacturers of controlled
substances and list I chemicals, the current inventory allowances
provide an opportunity for the disproportionate accumulation of
controlled substance for United States needs. These proposed revisions
would rectify a situation where the DEA's ability under the statute and
regulations to strike an appropriate balance between ensuring the
availability of controlled substances and list I chemicals to patients
and reducing the risk to public health and safety is compromised. DEA
invites comment, including studies, data, or other evidence, as to
whether the reductions will result in less diversion.
E. Subcategories for Quotas
The DEA proposes formalizing the addition of use-specific
subcategories by adding 21 CFR 1303.04 and 1315.07. As a practical
matter, the DEA acknowledges that the subcategories proposed within
this rule are already in use through voluntary and cooperative efforts
of the DEA registrants.
This proposed rule would codify DEA's current utilization of
subcategories while facilitating the issuance of individual
manufacturing quotas. The formalization of subcategories also provides
benefits to the registrant, by allowing for a more detailed level of
communication with the DEA as to why a registrant requires specific
controlled substances and list I chemicals and how those substances
will be utilized.
Additionally, as the number of manufacturers continues to increase
and industry practices and specializations change, the ability to
methodically track movements of material between registrants at all
stages of manufacturing becomes more critical. The specification of
quota subcategories improves the efficiency of the application and
reporting process for DEA-registered manufacturers.
Use-specific quota subcategories reflect the manufacturing activity
of the applying DEA registrant and have facilitated the issuance of
manufacturing and procurement quotas and provided a more accurate
calculation of the APQs for the United States. These subcategories are:
(1) Quota for Commercial Sales; (2) Quota for Transfer; (3) Quota for
Product Development; (4) Quota for Replacement; and (5) Quota for
Packaging/Repackaging and Labeling/Relabeling. The specification of
subcategories for manufacturing and procurement quotas enhances the
DEA's ability to administer and manage the APQs and individual
manufacturing, importation, and procurement quotas consistent with
Congress' intent that the DEA monitor and track controlled substances
and list I chemicals as they move through a closed system of
distribution. Additionally, as the number of manufacturers continues to
increase and industry practices and specializations continue to evolve,
the DEA's ability to track movement of material between registrants at
all stages of manufacturing is critical.
By amending sections 21 CFR 1303.12(b), 1303.22, 1315.22, and
1315.32(a), the DEA proposes to revise the procedure for applying for
both manufacturing and procurement quotas. Through adding new sections
21 CFR 1303.04(d) and 1315.07(d), the DEA proposes to revise the
application process for a request of replacement quota for schedules I
and II controlled substances to include either a completed DEA Order
Form, or Form for Inventory Surrendered, (Form DEA-222 and DEA-41,
respectively) to justify a replacement quota application.
The new subcategories for quota are as follows:
1. Quota for Commercial Sale: This subcategory applies to both bulk
manufacturers and dosage-form manufacturers. This subcategory
identifies the amount of bulk API manufactured and acquired by a DEA
registrant for the dosage-form manufacture of FDA-approved controlled
substance and list I chemical drug products, the amount of API acquired
by FDA-registered 503B outsourcing facilities, as well as amounts
needed for research, scientific, and industrial purposes. Any bulk
manufacturer that produces API for sale to a manufacturer for the
purpose of finished dosage-form development receives individual
manufacturing quota for commercial sale. Any manufacturer that receives
material and conducts blending into dosage-form for sale receives
procurement quota for commercial sale. By keeping this item as a
separate category, DEA calculates how much bulk API needs to be
manufactured for a particular calendar year, which assists DEA in
setting the APQs and AANs. An appropriate inventory allowance is
established for this type of quota, as specified in 21 CFR 1303.24 and
1315.24. Manufacturing and procurement quotas for commercial sale are
not able to be used to support product development efforts.
2. Quota for Transfer: This subcategory captures material moved
from one manufacturing registrant back to the preceding registrant
through the closed distribution system during the manufacturing
process. The intent of this category is to track quota used to support
the transfer of schedules I and II controlled substances, as well as
the list I chemicals, whether it is bulk API, in-process material, or
finished dosage-
[[Page 56720]]
forms, from one DEA-registered manufacturer to another. This quota is
not to be used to assist the DEA in setting APQs and AANs because the
material was previously captured and applied against the APQ and AAN
when it was originally manufactured; therefore, the transfer of the
material cannot be counted against the APQ and AAN again. This
subcategory of procurement quota is ideal to track the return of
finished material to the manufacturer to complete the manufacturing
process and disposition after the occurrence of any of the
aforementioned manufacturing activities or return of rejected material
to the upstream manufacturer for destruction or additional processing.
3. Quota for Product Development: In recent years, the DEA has
observed a sizeable increase in requests for quota to conduct product
development and FDA validation batches. These activities obscure how
much material is commercially available to patients for legitimate
medical purposes because a registrant's individual quota currently
represents both commercial manufacturing efforts, as well as product
development and validation efforts. It is critical to accurately
capture the amount of material being utilized specifically for product
development versus commercial manufacturing. This subcategory of
individual manufacturing quota and procurement quota specifically
grants the quota for development of new drug product(s), reformulation
work, validation, and development manufacturing efforts. The product
development quota is limited only to the development efforts noted in
the application; it cannot be used or substituted for commercial
production or the development of a different product. All products
manufactured under this subcategory are non-saleable, with the
exception of validation batches post-FDA approval. This subcategory is
used to assist the DEA in setting the APQs and AANs. No inventory
allowance is provided for this type of procurement quota.
4. Quota for Replacement: Replacement quota is intended to replace
material from the current quota year and not a means to replace
disposed samples, analytical samples of product development material or
inventory acquired or manufactured under previous quota years. This
subcategory of individual manufacturing quota and procurement quota
includes quota granted to a registrant after the registrant obtained
material that was initially intended for commercial sale, but is unable
to be marketed. Examples include failed batches due to a contaminant,
material that is out of specification and can no longer be used, lots
that reached their expiration date, or unusable material from a dosage-
form manufacturer.
Replacement quota is granted on a case-by-case basis. The merit of
the request is determined by the specifics of the registrant's
justification and situation. The DEA reviews the submitted DEA Form 41
or DEA Form 222 documenting the destruction of the controlled substance
and evaluates the justification for the destruction to determine if
replacement quota is the appropriate course of action and whether or
not the destroyed material is required to meet the legitimate demand of
the market. Replacement quota is also considered in setting the APQ and
the AAN.
5. Quota for Packaging/Repackaging and Labeling/Relabeling: In
recent years, the DEA has a rise in specialty manufacturers that only
conduct packaging of controlled substances. This results in frequent
movement of materials from one facility to another facility for the
performance of packaging/repackaging and labeling/relabeling
activities. The performance of packaging/repackaging and labeling/
relabeling activities can occur within a company with multiple
manufacturing locations and thus multiple DEA registration numbers,
between a contract packager performing the activity for a manufacturer
or a third party, or a packaging/repackaging and labeling/relabeling
company who will bring the product to market. The formalization of a
subcategory for packaging quota allows the DEA to be more efficient in
accounting for these types of manufacturing activities. This
subcategory is used to assist the DEA in setting the AAN, but not the
APQ. This subcategory of quota is considered in determining the AAN
because most of the finished dosage-forms and bulk API required to meet
US legitimate need are imported rather than manufactured domestically.
The accounting is necessary to prevent circumvention of the quota
system as it applies to the list I chemicals specifically mentioned by
Congress in the Combat Methamphetamine Epidemic Act (2005).
Assigning quota to specific subcategories allows the DEA to
indicate how much of a registrant's quota may be used to receive bulk
material, in-process, or finished dosage units, as well as how much may
be used for product development, commercial production, or the
launching of new products. Additionally, registrants are prevented from
using their quota for a purpose other than that originally intended and
justified to DEA.\30\
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\30\ 21 U.S.C. 842(b).
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F. New Deadlines for the Establishment of Quotas
The DEA is proposing to revise 21 CFR 1303.11(c), and 1315.11(c) to
change the deadlines for the establishment of the APQ and the AAN. This
modification will allow a more reasonable amount of time for processing
and responding to applications for quota. The DEA also proposes to
revise 21 CFR 1303.23(c) and 1315.23(c) to modify the existing
deadlines for adjusting the individual manufacturing quotas, allowing
more time for reviewing applications for adjustment of individual
manufacturing quotas and responding to each applicant. Along with the
deadline change for individual manufacturing quotas, the DEA proposes
to revise 21 CFR 1303.12(c), 1315.32(f), and 1315.34(f), which would
change the deadlines for the establishment of procurement quotas for
both schedules I and II controlled substances and list I chemicals, as
well as the deadline for import quota of list I chemicals. The proposed
changes to the import quota and the procurement quotas are necessary to
stay in accordance with the deadline for individual manufacturing
quota, as they are all published at the same time when the DEA
establishes the APQ and AAN.
The DEA continues to collect various data to administer the United
States quota system. Moving the deadlines previously established would
allow the DEA to obtain additional relevant data from multiple Federal
and state agencies, which would enable better analysis of legitimate
demand, strengthening the DEA's ability to allocate quota to the
appropriate manufacturers of these substances. These revisions would
allow DEA sufficient time to compile and consider all requests for
quota in order to ensure that each manufacturer is provided with an
adequate amount of quota for their legitimate production needs, while
also ensuring that quotas are not unwarranted, which increases the risk
of diversion.
The proposed changes are as follows:
Establishment of the APQ and the AAN: Change from May 1 to
September 1.
Deadline to issue procurement quota: Change from July 1 to
December 1.
Deadline to issue import quota: Change from July 1 to
December 1.
[[Page 56721]]
Deadline to adjust individual manufacturing quota: Change
from March 1 to July 1.
Establishment and Publication of the APQ and AAN: The DEA is
seeking to move the publication date for the APQ and the AAN to
September 1. Allowing additional time to review applications for
import, procurement, and individual manufacturing quota would provide
the DEA enough time to assess the needs of industry within the new
established timeline for publication of the APQ and AAN, while still
maintaining the statutory deadline of December 1 \31\ for issuing
individual manufacturing quotas.
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\31\ 21 U.S.C. 826(c).
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Issuing Procurement Quotas: Under the proposed rule, this deadline
would be moved to December 1 to allow DEA an adequate amount of time to
review each application for procurement quota, identify the
corresponding bulk manufacturing quota, and then respond to each
application. In addition, as stated previously, moving the deadline
would allow the continuation of the current practice of issuing the
quota at the same time as the individual manufacturing quota.
Issuing Import Quotas: Here, the DEA proposes to move the deadline
for issuing import quotas to December 1 (three months after publication
of the AAN) to allow the DEA an adequate time to identify the
corresponding procurement quotas and then respond to each application.
Moving the deadline also allows the import quota to be issued in the
same document.
Adjusting Individual Manufacturing Quotas: The DEA proposes to move
this deadline to July 1 to allow the DEA an adequate time to review
each application for adjusting individual manufacturing quota, revise
the APQ, and respond to each application.
Regulatory Analyses
Executive Orders 12866 (Regulatory Planning and Review), 13563
(Improving Regulation and Regulatory Review), and 13771 (Reducing
Regulation and Controlling Regulatory Costs)
This rule has been developed in accordance with the principles of
Executive Orders 12866 and 13563. Executive Order 12866 directs
agencies to assess all costs and benefits of available regulatory
alternatives and when regulation is necessary, to select regulatory
approaches that maximize net benefits (including potential economic,
public health and safety, and environmental advantages, distributive
impacts, and equity). Executive Order 13563 is supplemental to and
reaffirms the principles, structures, and definitions governing
regulatory review as established in Executive Order 12866. The
Executive Order classifies a ``significant regulatory action''
requiring review by the Office of Management and Budget (OMB) as any
regulatory action that is likely to result in a rule that may: (1) Have
an annual effect on the economy of $100 million or more, or adversely
affect in a material way the economy, a sector of the economy,
productivity, competition, jobs, environment, public health or safety,
or State, local, or tribal governments or communities; (2) create a
serious inconsistency or otherwise interfere with an action taken or
planned by another agency; (3) materially alter the budgetary impact of
entitlements, grants, user fees, or loan programs or the rights and
obligations of recipients thereof; or (4) raise novel legal or policy
issues arising out of legal mandates, the President's priorities, or
the principles set forth in the Executive Order.
While this proposed rule is not economically significant, it is a
significant regulatory action under Executive Order 12866, section 3(f)
subjecting it to review by OMB. The DEA analyzed the economic impact of
each provision of this proposed rule and estimated the annual cost to
be $35,241. Certain provisions are estimated to also have benefits;
however, the DEA does not have a basis to estimate those benefits due
to many unknowns. Because of this, the benefits of this proposed rule
are discussed qualitatively. The rule contains clarification of
regulatory language and the codification of existing DEA and registrant
practices regarding subcategories for quotas, certification of
procurement quota, and additional considerations for revisions to APQs.
The results of the analysis of each provision are as follows:
Defining Types of Quota and Filing To Abandon Quota
These provisions simply codify existing DEA practices, and will
result in no economic impact on registrants or the DEA. The formal
definition of quota types will have no practical impact on registrants,
and formalizing the procedure to abandon quota is simply a codification
of DEA's current procedure. While these proposed provisions will have
no economic costs or benefits, DEA believes there are benefits to
accurately codifying existing practices. These proposed provisions are
expected to enhance clarity, certainty, and efficiency.
Conforming Revisions Related to the SUPPORT Act
As indicated above, the SUPPORT Act gives the DEA discretionary
authority to establish quotas in terms of pharmaceutical dosage-form.
At the present time, the DEA is not deviating from its current practice
of establishing quotas necessary for the manufacture of finished
dosage-forms in terms of kilograms, and allowing manufacturers to
determine how to best allocate those kilograms to different FDA-
approved dosage-forms. While the SUPPORT Act gives DEA the authority to
establish quotas in terms of pharmaceutical dosage-form, the DEA will
continue to use its current process of establishing quota in terms of
kilograms, for the time being. While it is impossible to know all the
circumstances in which this authority would be used, it is the DEA's
current intention that any implementation of dosage-form quotas will be
the exception rather than the rule, and will coexist alongside kilogram
quotas. The DEA recognizes that dosage-form manufacturers are in the
best position to understand the demand for their products, in dosage-
form. Because, at the present time, the DEA is likely to use this
authority sparingly, and only adjust quotas for manufacturers producing
the dosage-form, the DEA anticipates that this provision of the
proposed rule will have minimal impact.
The SUPPORT Act also requires the DEA to estimate the amount of
diversion when establishing quota for a covered controlled substance
using all reliable information, including information from HHS and
other agencies. The DEA has considered information and data regarding
the amount of diversion for covered controlled substances when
applicable during the process of determining the APQ. This function is
a regular part of DEA's operations. Therefore, considering additional
reliable information gathered from outside the agency to estimate the
amount of diversion will result in minimal additional cost.
The SUPPORT Act updates also extend the DEA's deadline to fix
individual manufacturing quotas for schedules I and II controlled
substances from October to December, and formally define the phrase
``covered controlled substance'' to include fentanyl, oxycodone,
hydrocodone, oxymorphone, or hydromorphone. The deadline extension will
have minimal impact on registrants, as the DEA currently does not meet
the October deadline. This extension will align the regulations with
reality for registrants
[[Page 56722]]
and the DEA. Defining ``covered controlled substance'' will not change
how those substances or the registrants that are authorized to handle
those substances are regulated. Therefore, these provisions will have
minimal impact on registrants or the DEA.
While the benefits of the SUPPORT Act updates were not quantified
due to many unknowns, it is possible to discuss some of these benefits
in qualitative terms. With these conforming revisions related to the
SUPPORT Act, DEA has the ability to respond to adverse market
conditions with increased speed and flexibility in order to minimize
public harm. Dosage-form quotas would be used by the DEA to alleviate
the rare occurrence of a drug shortage in the market by targeting the
specific dosage-forms that are in short supply instead of simply
increasing the total amount of kilograms of a drug to be produced,
resulting in a benefit to the public. Another benefit is that updating
the deadlines for setting individual manufacturing quotas so they
reflect DEA's current practice removes regulatory uncertainty for
manufacturers. Regulations that realistically reflect current DEA and
industry practice will benefit the planning processes of current and
future market participants. Therefore, the DEA believes the benefits of
these conforming revisions related to the SUPPORT Act outweigh their
minimal costs.
Procurement Quota Certification
The proposed rule would require that all DEA registrants supplying
schedules I and II controlled substances and list I chemicals to DEA
manufacturers obtain certification of the manufacturer's quota before
completing the transaction. In practice, this certification may be any
written declaration issued by manufacturers to distributors. This
provision prevents manufacturers from purchasing their API or finished
dosage-forms from distributors without quota verification as currently
required when manufacturers request API or finished dosage-forms from
other manufacturers. Current regulations stipulate that only entities
registered as ``importer,'' ``manufacturer,'' or ``bulk manufacturer''
must certify \32\ quota before a sale.
---------------------------------------------------------------------------
\32\ 21 CFR 1303.12(f) and 1315.32(h).
---------------------------------------------------------------------------
In order to estimate the cost of this provision, the DEA utilized
internal data tracking the sale of schedules I and II controlled
substances and list I chemicals from distributors to manufacturers
during the three year period of January 1, 2015 to December 31, 2017.
DEA's analysis revealed that over this three year period, distributors
filled an average of 3,000 orders to manufacturers per year. Using
Bureau of Labor Statistics (BLS) wage data for Compliance Officers, the
type of registrant employee that would be tasked with certifying quota,
the DEA estimated the labor cost of quota certification to distributors
and manufacturers. Based on its knowledge of registrant business
operations, DEA estimates a manufacturer compliance officer requires 10
minutes to draft a quota certification letter after placing a purchase
request to a distributor, while the distributor compliance officer
requires five minutes to review and verify the manufacturer's
certification letter. This results in a combined labor burden of 15
minutes (0.25 hours). Multiplying the loaded median hourly wage rate
for compliance officers by 0.25 and applying that to the estimated
3,000 certification letters per year yields a total yearly labor cost
of $35,241 ($23,494 of which is incurred by manufacturers while the
remaining $11,747 is incurred by distributors).
Reduction of Inventory Allowances
The proposed rule would reduce the inventory allowance for
manufacturers of controlled substances and list I chemicals from 50
percent to 30 percent of the registrant's estimated net disposal. The
30 percent inventory allowance would be for the purposes of determining
the quota for the coming year and to allow inventory at the beginning
of a manufacturer's new quota year. Manufacturers may exceed the 30
percent inventory allowance during the year. If at any time during the
year, the inventory of a basic class held by a manufacturer exceeds 45
percent of estimated net disposal, the quota for that class is
automatically suspended and would remain suspended until inventory is
less than 40 percent of the estimated net disposal. Practically
speaking, the inventory allowance equates to a reduction from half of a
year's sales supply (50 percent) allowed to be held as inventory to
nearly four months (30 percent). Additionally, the 45 percent maximum
inventory during the year would give manufacturers the flexibility to
have inventory equal to nearly six months of sales supply in order to
account for any unplanned fluctuations in demand or timing in orders
for their product throughout the year.
DEA expects this reduction in allowance will result in minimal to
no economic impact on affected registrants as the following data show.
From 2008 to 2017, as reported to the U.N., end-of-year combined
average inventory balances for holders of both manufacturing and
procurement quotas of internationally controlled narcotics ranged from
32 percent to 46 percent, for a 10-year average of 39 percent. This
average is a result of the bulk manufacturing quotas, which by
regulation have a 50 percent inventory allowance, and procurement quota
inventories, which are not explicitly stated in the regulations, but
are held to a range of 30-50 percent based on specific risk factors,
including increased documentation of misuse and abuse discovered by
various components within HHS and the Department of Justice (DOJ). The
reduction of inventory allowance to 30 percent, with flexibility to
produce up to 45 percent at any given point in a year, is not
anticipated to impact the current operations of registrants, given that
over a 10-year period, the average year-end inventories for
manufacturers was 39 percent.
Registrants also routinely request adjustments to their quota
throughout the year due to fluctuations in market conditions. This is a
normal part of a manufacturer's business operations. The DEA quickly
responds to these requests within six to eight weeks, ensuring
legitimate business is not disrupted, and will continue to do so once
this rule is promulgated. For example, in 2017 (the last year in which
data are available), the DEA processed 1,752 initial quota applications
and 2,299 requests for adjustment to quota.
For these reasons, the DEA believes a reduction of inventory
allowance to 30 percent would have minimal impact on registrants while
continuing to provide adequate inventory for registrants to respond to
fluctuations in demand in pharmaceutical markets. However, DEA invites
public comment on its assumption that the market supply of controlled
substances and list I chemicals will not be impacted by the reduction
in inventory allowance.
Formalization of Subcategories for Manufacturing Quotas and Procurement
Quotas
This provision of the proposed rule is a codification of existing
voluntary and cooperative efforts between registrants and the DEA that
have been in place since 2001 and allows a more accurate calculation of
APQs for the United States. The establishment of subcategories of (1)
Quota for Commercial Sales; (2) Quota for Transfer; (3) Quota for
Product Development; (4) Quota for Replacement; and (5) Quota for
Packaging/Repackaging and Labeling/Relabeling are already being
utilized by
[[Page 56723]]
the DEA with full cooperation from all registrants. Therefore, this
provision simply updates 21 CFR 1303.03, 1303.04, 1315.06, and 1315.07
to reflect current DEA procedure for the establishment of quota.
Therefore, this provision of the proposed rule will have no economic
impact on registrants or the DEA.
New Deadlines for Establishing Quotas
The proposed rule would modify the deadlines for establishing and
publishing the APQ, AAN, procurement quota, and manufacturing quotas
and any adjustments to manufacturing quotas. The current publishing
deadlines for the establishment of the APQ and the AAN of May 1, and
the issuing of individual procurement, manufacturing and import quotas
of July 1 are frequently missed by the DEA due to the expansion of the
market and the increase in the number of manufacturers and importers
since that deadline was implemented almost 50 years ago. Applications
for import and procurement quota are due April 1, giving the DEA only
30 days before the May 1 deadline for publication of the APQ and AAN.
Given that the DEA has historically missed these deadlines, since it
must take adequate time to provide a thorough and careful assessment of
each application, both the DEA and industry have already become
accustomed to a delayed publishing schedule. Therefore, this provision
is expected to have minimal economic impact as it simply aligns the
regulatory deadlines with the current business practices of the DEA and
industry.
DEA invites public comment on the preceding discussion of the
potential impact of this proposed rule.
Executive Order 13771 was issued on January 30, 2017, and published
in the Federal Register on February 3, 2017. 82 FR 9339. Section 2(a)
of Executive Order 13771 requires an agency, unless prohibited by law,
to identify at least two existing regulations to be repealed when the
agency publicly proposes for notice and comment or otherwise
promulgates a new regulation. In furtherance of this requirement,
Section 2(c) of Executive Order 13771 requires that the new incremental
costs associated with new regulations, to the extent permitted by law,
be offset by the elimination of existing costs associated with at least
two prior regulations. Guidance from OMB, issued on April 5, 2017,
explains that the above requirements only apply to each new
``significant regulatory action that . . . . imposes costs.'' The same
OMB guidance also clarifies that: ``de minimis costs may qualify for an
exemption . . . [if, for example] the agency estimates the action would
have present value costs of $50,000 spread over a large number of
persons and/or entities.'' The DEA expects the costs of this proposed
rule to be de minimis. Therefore, this proposed rule is not expected to
be an Executive Order 13771 regulatory action.
Executive Order 12988, Civil Justice Reform
This rulemaking meets the applicable standards set forth in
Sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice
Reform to eliminate ambiguity, minimize litigation, establish clear
legal standards, and reduce burden.
Executive Order 13132, Federalism
This rulemaking does not preempt or modify any provision of State
law; 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.
Executive Order 13175, Consultation and Coordination With Indian Tribal
Governments
This rule does not have substantial direct effects on the States,
on the relationship between the national government and the States, or
the distribution of power and responsibilities between the Federal
Government and Indian tribes.
Regulatory Flexibility Act
In accordance with the Regulatory Flexibility Act (RFA), the DEA
evaluated the impact of this rule on small entities. The DEA's
evaluation of economic impact by size category indicates that the rule
will not, if promulgated, have a significant economic impact on a
substantial number of these small entities.
The RFA requires agencies to analyze options for regulatory relief
of small entities unless it can certify that the rule will not have a
significant impact on a substantial number of small entities. For
purposes of the RFA, small entities include small businesses, nonprofit
organizations, and small governmental jurisdictions. The DEA evaluated
the impact of this rule on small entities and discussions of its
findings are below.
As discussed in the ``Executive Orders 12866 (Regulatory Planning
and Review), 13563 (Improving Regulation and Regulatory Review), and
13771 (Reducing Regulation and Controlling Regulatory Costs)'' section
above, this proposed rule has six key components as described below.
Defining Types of Quota and Filing To Abandon Quota
This provision simply codifies existing DEA practices, and will
result in no economic impact on registrants or the DEA. The formal
definition of quota types will have no practical impact on registrants,
and formalizing the procedure to abandon quota is simply a codification
of DEA's current procedure. Therefore, this proposed provision will
have no costs.
Conforming Revisions Related to the SUPPORT Act
While the SUPPORT Act gives the DEA the authority to establish
quotas in terms of pharmaceutical dosage-form, the DEA will continue to
use its current process of establishing quota in terms of kilograms.
Therefore, this provision of the proposed rule will have no impact.
Additionally, the SUPPORT Act defines the phrase ``covered
controlled substance'' to include fentanyl, oxycodone, hydrocodone,
oxymorphone, and hydromorphone and requires the DEA to estimate the
amount of diversion when establishing quota for covered controlled
substances by consulting with the Secretary of HHS and considering
reliable information on the rates of overdose deaths and abuse and
overall public health impact in the U.S. that is determined to be
reliable. The DEA has considered the amount of diversion when
establishing quotas when data has been available, and this is a regular
part of DEA's operations. Therefore, considering additional reliable
information gathered from outside the agency to estimate the amount of
diversion will result in minimal additional cost.
The SUPPORT Act updates also extend the DEA's deadline to fix
individual manufacturing quotas for schedules I and II controlled
substances from October to December. The deadline extension will have
minimal impact on registrants, as the DEA currently does not meet the
October deadline. This extension will align the regulations with
reality for registrants. Therefore, these provisions will have minimal
impact on registrants or the DEA.
Procurement Quota Certification
The proposed rule would require that all DEA registrants supplying
schedules I and II controlled substances and list I chemicals to DEA
manufacturers to obtain certification of the manufacturer's quota
before completing the transaction. In practice, this certification must
be a written
[[Page 56724]]
declaration issued by manufacturers to distributors containing the
information as required in the regulations.\33\ This provision prevents
manufacturers from purchasing their API or finished dosage-forms from
distributors without quota verification as currently required when
manufacturers request API or finished dosage-forms from other
manufacturers. Current regulations stipulate that only entities
registered as ``importer,'' ``manufacturer,'' or ``bulk manufacturer''
must certify \34\ quota before a sale.
---------------------------------------------------------------------------
\33\ 21 CFR 1303.12(f) and 1315.32(h).
\34\ Id.
---------------------------------------------------------------------------
In order to estimate the cost of this provision, the DEA utilized
internal data tracking the sale of schedules I and II controlled
substances and list I chemicals from distributors to manufacturers
during the three year period of January 1, 2015 to December 31, 2017.
DEA's analysis revealed that over this three year period, distributors
filled an average of 3,000 orders to manufacturers per year. Using BLS
wage data for Compliance Officers, the type of registrant employee that
would be tasked with certifying quota, the DEA estimated the labor cost
of quota certification to distributors and manufacturers. Based on its
knowledge of registrant business operations, DEA estimates a
manufacturer compliance officer requires 10 minutes to draft a quota
certification letter after placing a purchase request to a distributor,
while the distributor compliance officer requires five minutes to
review and verify the manufacturer's certification letter. This results
in a combined labor burden of 15 minutes (0.25 hours). Multiplying the
loaded median hourly wage rate for compliance officers by 0.25 and
applying that to the estimated 3,000 certification letters per year
yields a total yearly labor cost of $35,241 ($23,494 of which is
incurred by manufacturers while the remaining $11,747 is incurred by
distributors).
Reduction of Inventory Allowances
The proposed rule would reduce the inventory allowance for
manufacturers of controlled substances and list I chemicals from 50
percent to 30 percent of the registrant's estimated net disposal. The
30 percent inventory allowance would be for the purposes of determining
the quota for the coming year and to allow inventory at the beginning
of a manufacturer's new quota year. Manufacturers may exceed the 30
percent inventory allowance during the year. If at any time during the
year, the inventory of a basic class held by a manufacturer exceeds 45
percent of estimated net disposal, the quota for that class is
automatically suspended and would remain suspended until inventory is
less than 40 percent of the estimated net disposal. Practically
speaking, the inventory allowance equates to a reduction from half of a
year's sales supply (50 percent) allowed to be held as inventory to
nearly four months (30 percent). Additionally, the 45 percent maximum
inventory during the year would give manufacturers the flexibility to
have inventory equal to nearly six months of sales supply in order to
account for any unplanned fluctuations in demand or timing in orders
for their product throughout the year.
DEA expects this reduction in allowance will result in minimal to
no economic impact on affected registrants as the following data show.
From 2008 to 2017, as reported to the U.N., end-of-year combined
average inventory balances for holders of both manufacturing and
procurement quotas of internationally controlled narcotics ranged from
32 percent to 46 percent, for a 10-year average of 39 percent. This
average is a result of the bulk manufacturing quotas, which by
regulation have a 50 percent inventory allowance, and procurement quota
inventories, which are not explicitly stated in the regulations, but
are held to a range of 30-50 percent based on specific risk factors,
including increased documentation of misuse and abuse discovered by
various components within HHS and DOJ. For example, the DEA currently
sets the inventory allowance for fentanyl, hydrocodone, hydromorphone,
and oxycodone procurement quotas at 30 percent for FDA-approved dosage-
forms. The reduction of inventory allowance to 30 percent, with
flexibility to produce up to 45 percent at any given point in a year,
is not anticipated to impact the current operations of registrants,
given that over a 10-year period, the very upper range of year-end
inventories for manufacturers was 46 percent.
Registrants also routinely request adjustments to their quota
throughout the year due to fluctuations in market conditions. This is a
normal part of a manufacturer's business operations. The DEA quickly
responds to these requests within six to eight weeks, ensuring
legitimate business is not disrupted, and will continue to do so once
this rule is promulgated. For example, in 2017 (the last year for which
data are available), the DEA processed 1,752 initial quota applications
and 2,299 requests for adjustment to quota.
For these reasons, the DEA believes a reduction of inventory
allowance to 30 percent would have minimal impact on registrants while
continuing to provide adequate inventory for registrants to respond to
fluctuations in demand in pharmaceutical markets. However, DEA invites
public comment on its assumption that the market supply of controlled
substances and list I chemicals will not be impacted by the reduction
in inventory allowance.
Formalization of Subcategories for Manufacturing Quotas and Procurement
Quotas
This provision of the proposed rule is a codification of existing
voluntary and cooperative efforts between registrants and the DEA that
have been in place since 2001 and allows a more accurate calculation of
APQs for the United States. The establishment of subcategories of (1)
Quota for Commercial Sales; (2) Quota for Transfer; (3) Quota for
Product Development; (4) Quota for Replacement; and (5) Quota for
Packaging/Repackaging and Labeling/Relabeling are already being
utilized by the DEA with full cooperation from all registrants,
therefore this provision simply updates 21 CFR 1303.03, 1303.04,
1315.06, and 1315.07 to reflect current DEA procedure for the
establishment of quota. Therefore, this provision of the proposed rule
will have no economic impact on registrants or the DEA.
New Deadlines for Establishing Quotas
The proposed rule would modify the deadlines for establishing and
publishing the APQ, AAN and procurement and manufacturing quotas and
any adjustments to manufacturing quotas. The current publishing
deadlines for the establishment of the APQ and the AAN of May 1, and
the issuing of individual procurement, manufacturing and import quotas
of July 1 are frequently missed by the DEA due to the expansion of the
market and the increase in the number of manufacturers and importers
since that deadline was implemented almost 50 years ago. Applications
for import and procurement quota are due April 1, giving the DEA only
30 days before the May 1 deadline for publication of the APQ and AAN.
Given that the DEA has historically missed these deadlines since it
must take adequate time to provide a thorough and careful assessment of
each application, both the DEA and industry have already become
accustomed to a delayed publishing schedule. Therefore, this provision
is expected to have minimal economic impact as it simply aligns the
regulatory deadlines with the current business practices of the DEA and
industry.
[[Page 56725]]
Summary
In summary, only the Procurement Quota Certification requirement
imposes a cost, $23,494 to all manufacturers combined and $11,747 to
all distributors combined for a grand total cost of $35,241.
Description and Estimate of the Number of Small Entities
This proposed rule has the potential to affect entities registered
with the DEA as manufacturers, distributors and importers of controlled
substances and list I chemicals. Based on a review of respective
representative North American Industry Classification System (NAICS)
codes for manufacturers,\35\ distributors and importers \36\ there are
the following number of firms: \37\
---------------------------------------------------------------------------
\35\ The DEA believes `Pharmaceutical Preparation Manufacturing'
(325412) includes 503B outsourcing facilities.
\36\ The DEA believes `Drugs and Druggists' Sundries Merchant
Wholesalers' (424210) includes both distributors and importers of
controlled substances and (human form) list I chemicals.
\37\ For the purposes of this analysis, the term ``firm'' is
synonymous with ``entities.''
935 `Pharmaceutical Preparation Manufacturing' (325412)
6,666 `Drugs and Druggists' Sundries Merchant Wholesalers'
(424210)
The U.S. Small Business Administration (SBA) considers a size
standard as the largest that a concern can be and still qualify as a
small business for Federal Government programs. For the most part, size
standards are the average annual receipts or the average employment of
a firm. The SBA Size Standards for the two industries are 1,250
employees for Pharmaceutical Preparation Manufacturing and 250
employees for Drugs and Druggists' Sundries Merchant Wholesalers.\38\
---------------------------------------------------------------------------
\38\ SBA ``Table of Small Business Size Standards Matched to
North American Industry Classification System Codes, Effective
October 1, 2017.''
---------------------------------------------------------------------------
Comparing the SBA size standards to the U.S. Census Bureau,
Statistics of U.S. Businesses (SUSB) detailed data on establishment
size by NAICS code for each affected industry, the DEA estimates the
following number of small entities (and percent of establishments that
are small entities) by industry:
866 (92.6% of total) `Pharmaceutical Preparation
Manufacturing' (325412)
6,394 (95.9% of total) `Drugs and Druggists' Sundries Merchant
Wholesalers' (424210)
The table below summarizes the calculation for the estimated number
of small entities (establishments) above.
Detailed Analysis of Percentage of Entities That Are Small Entities by Industry
--------------------------------------------------------------------------------------------------------------------------------------------------------
Firm size by average SBA size Small entities
NAICS description employees Firms Establishments standard Small entities (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
325412--Pharmaceutical Preparation Total........................ 935 1170 1,250 866 92.6
Manufacturing.
----------------------------------------------------------------------------------------------------------------
38.6% `Pharmaceutical Preparation Manufacturing' (325412)
2.8% `Drugs and Druggists' Sundries Merchant Wholesalers'
(424210)
The table below summarizes the estimated number of small entities,
number of affected small entities, and the percentage of small entities
affected.
Summary of Industry, SBA Size Standard, and Affected Small Entities
----------------------------------------------------------------------------------------------------------------
Estimated number Estimated
Small entity of small number of Percentage of
NAICS code NAICS description threshold/ SBA entities affected small small entities
size standard (establishments) entities affected
----------------------------------------------------------------------------------------------------------------
325412................... Pharmaceutical 1,250 866 334 38.6
Preparation
Manufacturing.
424210................... Drugs and 250 6,394 * 181 2.8
Druggists'
Sundries Merchant
Wholesalers.
rrrrrrrrrrrrrrrrrrrrrrrrrr
Total................ ................... .............. 7,260 515 N/A
----------------------------------------------------------------------------------------------------------------
* 159 distributors and 22 importers.
As described above, if promulgated this proposed rule is estimated
to cost $23,494 to all manufacturers combined and $11,747 to all
distributors or an average cost of $70 ($23,494/334) per affected
manufacturer and $71 ($11,747/166) per distributor. The DEA generally
uses 30 percent as a ``substantial'' number of affected small entities.
The analysis reveals that a non-substantial amount (2.8 percent) of
small distributor entities will be affected, while a substantial amount
(38.6 percent) of small manufacturing entities will be affected by this
proposed rule. The DEA generally considers impacts that are greater
than 3 percent of yearly revenue to be a ``significant economic
impact'' on an entity. The DEA compared the compliance cost of $70 and
$71 to the average annual receipts of manufacturers and distributors/
imports, respectively, for each size range.\40\ For even the smallest
of entities, the costs calculated above are much less than 3 percent of
yearly revenue and are insignificant.
---------------------------------------------------------------------------
\40\ Small Business Administration, Office of Advocacy ``Table
2--Number of firms, establishments, receipts, employment, and
payroll by firm size (in receipts) and industry, 2012.'' https://www.sba.gov/advocacy/firm-size-data, accessed 5/24/2018.
---------------------------------------------------------------------------
The table below summarizes the analysis.
Summary of Analysis
--------------------------------------------------------------------------------------------------------------------------------------------------------
Estimated
Small entity Estimated number number of Percentage of small entities Economic impact of
NAICS code NAICS description threshold/SBA of small entities affected small affected compliance
size standard (establishments) entities
--------------------------------------------------------------------------------------------------------------------------------------------------------
325412.................. Pharmaceutical 1,250 866 334 38.6% (Substantial)........... Not significant.
Preparation
Manufacturing.
424210.................. Drugs and 250 6,394 * 181 2.8% (Not Substantial)........ Not Significant.
Druggists'
Sundries Merchant
Wholesalers.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* 159 distributors and 22 importers.
[[Page 56727]]
The DEA examined the economic impact of the proposed rule for each
affected industry for various size ranges. Based on the analysis above,
and because of these facts, the DEA believes this proposed rule, if
promulgated, will not have a significant economic impact on a
substantial number of small entities.
Unfunded Mandates Reform Act of 1995
This rule will not result in the expenditure by state, local, and
tribal governments, in the aggregate, or by the private sector, of
$100,000,000 or more (adjusted for inflation) in any one year, and will
not significantly or uniquely affect small governments. Therefore, no
actions were deemed subject to the provisions of the Unfunded Mandates
Reform Act of 1995, 2 U.S.C. 1532.
Paperwork Reduction Act of 1995
Pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-
3521), this action would revise existing information collections 1117-
0006, 1117-0008, and 1117-0047, and create one new information
collection. The DEA is proposing to amend its regulations for
establishing quotas for United States companies manufacturing schedules
I and II controlled substances and ephedrine, pseudoephedrine, and
phenylpropanolamine, and for procurement quota certification and
recordkeeping requirements. The DEA has submitted these collection
requests to the Office of Management and Budget (OMB) for review and
approval.
A. Collections of Information Associated With the Proposed Rule
1. Title: Application for Individual Manufacturing Quota for a
Basic Class of Controlled Substance and for Ephedrine, Pseudoephedrine,
and Phenylpropanolamine.
OMB Control Number: 1117-0006.
DEA Form Number: DEA-189.
The DEA is proposing to formally implement the use of subcategories
to facilitate the issuance of manufacturing quotas and provide a more
accurate calculation of the aggregate production quotas for the United
States. The DEA proposes the addition of the following five
subcategories for quota: (1) Quota for Commercial Sales; (2) Quota for
Transfer; (3) Quota for Product Development; (4) Quota for Replacement;
and (5) Quota for Packaging/Repackaging and Labeling/Relabeling. All
types of quota could be requested using the same application and format
registrants are accustomed to using, in an online form. Manufacturers
of schedules I and II controlled substances and list I chemicals would
continue to receive manufacturing and procurement quotas appropriate to
their manufacturing and inventory requirements, and the DEA would
retain greater control over the amount of these controlled substances
and listed chemicals produced, thereby reducing the amount of
inventories at risk of diversion.
The DEA estimates the following number of respondents and burden
associated with reporting:
Number of respondents: 33.
Frequency of response: Annually/As-needed (26.0303
average).
Number of responses: 859.
Burden per response: 0.5 hour.
Total annual hour burden: 430.
2. Title: Application for Procurement Quota for Controlled
Substances and for Ephedrine, Pseudoephedrine, and Phenylpropanolamine.
OMB Control Number: 1117-0008.
DEA Form Number: DEA-250.
The DEA is proposing to formally implement the use of subcategories
to facilitate the issuance of procurement quotas and provide a more
accurate calculation of the aggregate production quotas for the United
States. The DEA proposes the addition of the following five
subcategories for quota: (1) Quota for Commercial Sales; (2) Quota for
Transfer; (3) Quota for Product Development; (4) Quota for Replacement;
and (5) Quota for Packaging/Repackaging and Labeling/Relabeling. All
types of quota could be requested using the same application and format
registrants are accustomed to using, in an online form. Manufacturers
of schedules I and II controlled substances and list I chemicals would
continue to receive manufacturing and procurement quotas appropriate to
their manufacturing and inventory requirements, and the DEA would
retain greater control over the amount of these controlled substances
and listed chemicals produced, thereby reducing the amount of
inventories at risk of diversion.
The DEA estimates the following number of respondents and burden
associated with reporting:
Number of respondents: 344.
Frequency of response: Annually/As-needed (8.9128
average).
Number of responses: 3,066.
Burden per response: 0.5 hour.
Total annual hour burden: 1,533.
3. Title: Application for Import Quota for Ephedrine,
Pseudoephedrine, and Phenylpropanolamine.
OMB Control Number: 1117-0047.
DEA Form Number: DEA-488.
The DEA is proposing to formally implement the use of subcategories
to facilitate the issuance of import quotas and provide a more accurate
calculation of the assessment of annual needs for the United States.
The DEA proposes the addition of the following five subcategories for
quota: (1) Quota for Commercial Sales; (2) Quota for Transfer; (3)
Quota for Product Development; (4) Quota for Replacement; and (5) Quota
for Packaging/Repackaging and Labeling/Relabeling. All types of quota
could be requested using the same application and format registrants
are accustomed to using, in an online form. Importers of list I
chemicals would continue to receive import quotas appropriate to their
manufacturing and inventory requirements, and the DEA would retain
greater control over the amount of these listed chemicals produced,
thereby reducing the amount of inventories at risk of diversion.
The DEA estimates the following number of respondents and burden
associated with reporting:.
Number of respondents: 49.
Frequency of response: Annually/As-needed (2.5714
average).
Number of responses: 126.
Burden per response: 0.5 hour.
Total annual hour burden: 63.
4. Title: Procurement Quota Certification and Recordkeeping
Requirements.
OMB Control Number: 1117-New.
DEA Form Number: N/A.
This proposed rule would require all DEA registrants supplying
schedules I and II controlled substances or list I chemicals to DEA
manufacturers to obtain certification of the manufacturer's procurement
quota before completing the transaction. This provision would prevent
manufacturers from purchasing active pharmaceutical ingredients from
distributors, rather than other manufacturers, without including a
quota certification. Current DEA regulations stipulate only that orders
to entities registered as importers, manufacturers, or bulk
manufacturers must include quota certifications.\41\ Manufacturers
procuring schedules I and II controlled substances or list I chemicals
must maintain a copy of the certification they provide with their order
for a period of two years from the date of the certification. Under the
proposed rule, this recordkeeping requirement would apply to
certifications included with orders for schedules I and II controlled
substances or list I chemicals to all registrants, including
distributors.
---------------------------------------------------------------------------
\41\ 21 CFR 1303.12(f), 1315.32(h).
---------------------------------------------------------------------------
The DEA estimates that distributors fill an average of 3,000 orders
to manufacturers per year, which under
[[Page 56728]]
this proposed rule, will require 3,000 certification letters to be
drafted and retained by manufacturers, and reviewed by distributors.
The estimated yearly cost of this activity is $35,241.The DEA will
update the below figures based on public comments received. For the
purposes of this proposed rule, the DEA estimates the following number
of respondents and burden associated with the proposed requirement that
procuring manufacturers create and retain copies of schedules I and II
controlled substance and list I chemical quota certifications for two
years:
Number of respondents: 500 (334 manufacturers and 166
distributors).
Frequency of response: 9 per year.
Number of responses: 3,000.
Burden per response: .25 (minimal).
Total annual hour burden: 750 (minimal).
B. Request for Comments Regarding the Proposed Information Collections
The DEA is soliciting comment on the following issues related to
these information collections:
The need for the information collection and its usefulness
in carrying out the proper functions of the DEA.
The accuracy of the DEA's estimate of the burden of the
proposed collection of information, including the validity of the
methodology and assumptions used.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
Written comments and suggestions from the public and affected
entities concerning the proposed collections of information are
encouraged. Please send written comments to the Office of Information
and Regulatory Affairs, OMB, Attention: Desk Officer for DOJ,
Washington, DC 20503. Please state that your comments refer to RIN
1117-AB49/Docket No. DEA-455. All comments must be submitted to OMB on
or before December 23, 2019. The final rule will respond to any OMB or
public comments on the information collection requirements contained in
this proposal.
Congressional Review Act
This proposed rule is not a major rule as defined by the
Congressional Review Act, 5 U.S.C. 804. This rule will not result in an
annual effect on the economy of $100,000,000 or more; a major increase
in costs or prices; or significant adverse effects on competition,
employment, investment, productivity, innovation, or on the ability of
United States-based companies to compete with foreign-based companies
in domestic and export markets.
List of Subjects
21 CFR Part 1303
Administrative practice and procedure, Drug traffic control.
21 CFR Part 1315
Administrative practice and procedure, Chemicals, Drug traffic
control, Imports, Reporting and recordkeeping requirements.
For the reasons set forth above, the DEA proposes to amend 21 CFR
parts 1303 and 1315 as follows:
PART 1303--QUOTAS
0
1. The authority citation for 21 CFR part 1303 continues to read as
follows:
Authority: 21 U.S.C. 821, 826, 871(b).
0
2. Add Sec. Sec. 1303.03, 1303.04, and 1303.05 immediately following
the undesignated center heading ``Aggregate Production and Procurement
Quotas'' to read as follows:
Sec. 1303.03 Types of quotas.
The three types of quotas are:
(a) Aggregate production quotas, which establish the total quantity
of each basic class of schedules I and II controlled substances that
may be produced by all manufacturers in a calendar year.
(b) Individual manufacturing quotas, which establish the maximum
quantity of each basic class of schedules I and II controlled
substances that a registered manufacturer may manufacture during a
calendar year. This type of quota is only issued to DEA-registered bulk
manufacturers.
(c) Procurement quotas, which establish the maximum quantity of
each basic class of schedules I and II controlled substances that a
registered manufacturer may procure during a calendar year for the
purpose of manufacturing into dosage-forms or other substances.
Sec. 1303.04 Subcategories of manufacturing and procurement quotas.
The five subcategories of manufacturing and procurement quotas are:
(a) Quota for Commercial Sale. This is a quota for the amount of
bulk active pharmaceutical ingredients (API) initially acquired by a
registrant for the manufacture of approved schedule I or II controlled
substance drug products by the Food and Drug Administration, and bulk
API acquired by outsourcing facilities, manufacturers, etc. This quota
category is used to capture bulk API moving from a bulk manufacturer to
other registered manufacturers for their commercial manufacturing
efforts. This type of quota may only be used to support commercial
manufacturing efforts and may not be used to support other
manufacturing efforts.
(b) Quota for Transfer. This is a quota for the amount of material
moved upstream from one registrant to another and does not include
material captured under procurement quota for commercial sale. Examples
include: 1. Bulk API being transferred back to the original registrant
after milling; 2. Transfer of in-process material or finished dosage-
forms for additional manufacturing efforts (coating, beading,
encapsulation, and so forth) back to the preceding registrant; and 3.
Return of material after the specified manufacturing activity has been
completed or return of rejected material to the upstream manufacturer
for destruction or additional processing.
(c) Quota for Product Development. This is a quota for the amount
of material needed for product development and validation of
manufacturing efforts. This quota is limited to that activity only and
only for the development efforts noted in the application; it shall not
be used or substituted for commercial production or the development of
a different product. This quota is issued with the understanding that
this material is not intended for commercial use, with the exception of
post-FDA approved validation batches. Validation batches shall be noted
specifically in an application and shall be considered product
development material that will be taken into account for net disposal
once a product is FDA-approved for commercial sale. No inventory will
be granted for these efforts, nor will replacement quota be considered
for destroyed material issued under this quota subcategory.
(d) Quota for Replacement. This is a type of individual
manufacturing quota or procurement quota that is granted to a
registrant after the registrant disposes of material that was initially
intended for commercial sale, but for some reason was unable to be
marketed. This quota is separate and shall not count against a
registrant's other issued quota. Replacement quota will be granted on a
case-by-case basis. The merits of the request will be determined by the
specifics of the registrant's justification and situation. The DEA will
review the submitted DEA Form 41 or DEA Form 222 documenting the
destruction of the controlled substance and evaluate the
[[Page 56729]]
justification for the destruction to determine if replacement quota is
warranted and whether or not the destroyed material is required to meet
the legitimate demand of the market. Replacement quota is intended to
replace material from the current quota year and not a means to replace
disposed samples, analytical samples, product development material, or
inventory acquired under previous quota years.
(e) Quota for Packaging/Repackaging and Labeling/Relabeling. This
is a quota for the amount of material moved to a registrant to undergo
packaging and labeling activities. This quota is limited to that
activity only and only for the packaging/repackaging and labeling/
relabeling noted in the application; it may not be used or substituted
for commercial production. Packaging/Repackaging and Labeling/
Relabeling quota is intended for tracking of schedules I and II
controlled substances as they undergo packaging/labeling activities;
however, packaging/repackaging and labeling/relabeling quotas shall not
be counted against the aggregate production quotas.
Sec. 1303.05 Estimation of diversion.
(a) In establishing any quota under the sections in this part for a
covered controlled substance, the Administrator shall estimate the
amount of diversion of the covered controlled substance that occurs in
the United States.
(b) In estimating diversion under the sections in this part, the
Administrator--
(1) Shall consider information the Administrator, in consultation
with the Secretary of Health and Human Services, determines reliable on
rates of overdose deaths and abuse and overall public health impact
related to the covered controlled substance in the United States; and
(2) May take into consideration whatever other sources of
information the Administrator determines reliable.
(c) After estimating the amount of diversion of a covered
controlled substance, the Administrator shall make appropriate quota
reductions, as determined by the Administrator, from the quota the
Administrator would have otherwise established had such diversion not
been considered.
(d) For purposes of this part, the term ``covered controlled
substances'' refers to fentanyl, oxycodone, hydrocodone, oxymorphone,
and hydromorphone.
0
3. Amend Sec. 1303.11 by:
0
a. Adding a sentence to the end of paragraph (a);
0
b. Removing ``May'' and adding in its place ``September'' in the first
sentence of paragraph (c); and
0
c. Adding paragraph (d).
The additions read as follows:
Sec. 1303.11 Aggregate production quotas.
(a) * * * The Administrator may establish an aggregate production
quota in terms of pharmaceutical dosage-forms prepared from or
containing the schedule I or II controlled substance, if he determines
it will assist in avoiding the overproduction, shortages, or diversion
of a controlled substance.
* * * * *
(d) For any year for which the approved aggregate production quota
for a covered controlled substance, as defined in Sec. 1303.05(d), is
higher than the approved aggregate production quota for the covered
controlled substance for the previous year, the Administrator, in
consultation with the Secretary of Health and Human Services, shall
include in the final order an explanation of why the public health
benefits of increasing the quota clearly outweigh the consequences of
having an increased volume of the covered controlled substance
available for sale, and potential diversion, in the United States.
0
4. Amend Sec. 1303.12 by:
0
a. Adding a sentence to the end of paragraph (a);
0
b. Revising the first sentence in paragraph (b);
0
c. Removing ``July'' and adding in its place ``December'' in the
introductory text of paragraph (c); and
0
d. Removing ``manufacturer'' and ``bulk manufacturer'' and adding in
their place ``registrant'', and removing ``Manufacturers'' and adding
in its place ``A registrant'' in paragraph (f).
The addition and revision read as follows:
Sec. 1303.12 Procurement quotas.
(a) * * * The Administrator may establish a procurement quota in
terms of pharmaceutical dosage-forms prepared from or containing the
schedule I or II controlled substance, if he determines it will assist
in avoiding the overproduction, shortages, or diversion of a controlled
substance.
(b) Any person who is registered to manufacture controlled
substances listed in any schedule and who desires to use during the
next calendar year any basic class of controlled substances listed in
schedule I or II (except raw opium being imported by the registrant
pursuant to an import permit) for purposes of manufacturing, shall
apply on DEA Form 250 for procurement quota and shall state separately
for each subcategory, as defined in 21 CFR 1303.04, each quantity of
such basic class. * * *
* * * * *
0
5. Amend Sec. 1303.21 by removing ``July'' and adding in its place
``December'' and adding a sentence after the first sentence in
paragraph (a).
The addition reads as follows:
Sec. 1303.21 Individual manufacturing quotas.
(a) * * * The Administrator may establish an individual
manufacturing quota in terms of pharmaceutical dosage-forms prepared
from or containing the schedule I or II controlled substance, if he
determines it will assist in avoiding the overproduction, shortages, or
diversion of a controlled substance. * * *
* * * * *
0
6. Amend Sec. 1303.22 by revising the first sentence of the
introductory text to read as follows:
Sec. 1303.22 Procedure for applying for individual manufacturing
quotas.
Any person who is registered to manufacture any basic class of
controlled substance listed in schedule I or II and who desires to
manufacture a quantity of such class shall apply on DEA Form 189 for a
manufacturing quota and shall state separately for each subcategory, as
defined in 21 CFR 1303.04, each quantity of such class. * * *
* * * * *
Sec. 1303.23 [Amended]
0
7. In Sec. 1303.23, remove ``March'' and add in its place ``July'' in
the first sentence of paragraph (c).
0
8. Revise Sec. 1303.24 to read as follows:
Sec. 1303.24 Inventory allowance.
(a) For the purpose of determining individual manufacturing quotas
pursuant to Sec. 1303.23, each registered manufacturer shall be
allowed as part of such quota an amount sufficient to maintain an
inventory equal to:
(1) For current manufacturers, 30 percent of his average estimated
net disposal for the current calendar year and the last preceding
calendar year; or
(2) For new manufacturers, 30 percent of his reasonably estimated
net disposal for the next calendar year as determined by the
Administrator.
(b) For the purpose of determining procurement quotas pursuant to
Sec. 1303.12, each registered manufacturer shall be allowed as part of
such quota an amount sufficient to maintain an inventory:
(1) For current manufacturers, 30 percent of his average estimated
net
[[Page 56730]]
disposal for the current calendar year and the last preceding calendar
year; or
(2) For new manufacturers, 30 percent of his reasonably estimated
net disposal for the next calendar year as determined by the
Administrator.
(c) During each calendar year, each registered manufacturer shall
be allowed to maintain an inventory of a basic class not exceeding 45
percent of his estimated net disposal of that class for that year, as
determined at the time his quota for that year was determined. At any
time the inventory of a basic class held by a manufacturer exceeds 45
percent of his estimated net disposal, his quota for that class is
automatically suspended and shall remain suspended until his inventory
is less than 40 percent of his estimated net disposal. The
Administrator may, upon application and for good cause shown, permit a
manufacturer whose quota is, or is likely to be, suspended pursuant to
this paragraph (c) to continue manufacturing and to accumulate an
inventory in excess of 45 percent of his estimated net disposal, upon
such conditions and within such limitations as the Administrator may
find necessary or desirable.
(d) If, during a calendar year, a registrant has manufactured the
entire quantity of a basic class allocated to him under an individual
manufacturing quota, and his inventory of that class is less than 20
percent of his estimated net disposal of that class for that year, the
Administrator may, upon application pursuant to Sec. 1303.25, increase
the quota of such registrant sufficiently to allow restoration of the
inventory to 30 percent of the estimated net disposal for that year.
0
9. Amend Sec. 1303.27 by revising the first sentence to read as
follows:
Sec. 1303.27 Abandonment of quota.
Any manufacturer assigned an individual manufacturing quota for any
basic class of controlled substance listed in schedule I or II pursuant
to Sec. 1303.23 may at any time abandon his right to manufacture all
or any part of such quota by filing a notice of such abandonment with
the UN Reporting and Quota Section, Diversion Control Division, Drug
Enforcement Administration in the online Quota Management System. * * *
PART 1315--IMPORTATION AND PRODUCTION QUOTAS FOR EPHEDRINE,
PSEUDOEPHEDRINE, AND PHENYLPROPANOLAMINE
0
10. The authority citation for 21 CFR part 1315 continues to read as
follows:
Authority: 21 U.S.C. 802, 821, 826, 871(b), 952.
0
11. Add Sec. 1315.06 to read as follows:
Sec. 1315.06 Assessment of annual needs; types of quotas.
The four types of quotas are:
(a) Assessment of annual needs, which establishes the total
quantity of ephedrine, pseudoephedrine, and phenylpropanolamine
necessary to be manufactured and imported by all manufacturers and
importers in a calendar year.
(b) Individual manufacturing quotas, which establish the maximum
quantity of ephedrine, pseudoephedrine, and phenylpropanolamine that a
registered manufacturer may manufacture during a calendar year. This
type of quota is only issued to DEA-registered bulk manufacturers.
(c) Procurement quotas, which establish the maximum quantity of
ephedrine, pseudoephedrine, and phenylpropanolamine that a registered
manufacturer may procure during a calendar year for the purpose of
manufacturing into dosage-forms or other substances.
(d) Import quotas, which establish the maximum quantity of
ephedrine, pseudoephedrine, and phenylpropanolamine that a registered
importer may import during the calendar year for distribution to their
DEA-registered customers.
0
12. Add Sec. 1315.07 to read as follows:
Sec. 1315.07 Subcategories of manufacturing and procurement quota.
The five subcategories are:
(a) Quota for Commercial Sale is a quota for the amount of bulk
active pharmaceutical ingredients (API) initially acquired by a
registrant for the manufacture of ephedrine, pseudoephedrine, and
phenylpropanolamine products and bulk API acquired by outsourcing
facilities, manufacturers, etc. This type of quota shall only be used
to support commercial manufacturing efforts and shall not be used to
support other manufacturing efforts.
(b) Quota for Transfer is a quota for the amount of material moved
from one registrant to another and does not include material captured
under procurement quota for commercial sale. Examples include:
(1) Bulk API being transferred back to the original registrant
after milling;
(2) Transfer of in-process material or finished dosage-forms for
additional manufacturing efforts (coating, beading, encapsulation, and
so forth) back to the preceding registrant; and
(3) Return of material after the specified manufacturing activity
has been completed.
(c) Quota for Product Development is a quota for the amount of
material needed for product development and validation manufacturing
efforts. This quota is limited to that activity only and only for the
development efforts noted in the application; it shall not be used or
substituted for commercial production or the development of a different
product. This quota is issued with the understanding that this material
is not intended for commercial use, with the exception of FDA-approved
or OTC Monograph validation batches. Validation batches shall be noted
specifically in an application and shall be considered product
development material that will be taken into account once a product is
FDA-approved for commercial sale. No inventory shall be granted for
these efforts, nor shall replacement quota be considered for destroyed
material issued under this quota subcategory.
(d) Quota for Replacement is a type of individual manufacturing
quota or procurement quota that is granted to a registrant after the
registrant disposes of material that was initially intended for
commercial sale, but for some reason was unable to be marketed. This
quota is separate and shall not count against a registrant's other
issued quota. Replacement quota will be granted on a case by case
basis. The merits of the request shall be determined by the
registrant's justification. Replacement quota is intended to replace
material from the current quota year and shall not be used to replace
disposed samples, analytical samples, product development material or
inventory acquired under previous quota years.
(e) Quota for Packaging/Repackaging and Labeling/Relabeling is
quota for the amount of material moved to a registrant to undergo
packaging and labeling activities. This quota is limited to that
activity only and only for the packaging/repackaging and labeling/
relabeling noted in the application; it shall not be used or
substituted for commercial production or the packaging of a different
product.
Sec. 1315.11 [Amended]
0
13. Amend Sec. 1315.11 by removing ``May'' and adding in its place
``September'' in the first sentence of paragraph (c).
Sec. 1315.21 [Amended]
0
14. Amend Sec. 1315.21 by removing ``July'' and adding in its place
``December'' in the first sentence.
[[Page 56731]]
0
15. Amend Sec. 1315.22 by revising the first sentence of the
introductory text to read as follows:
Sec. 1315.22 Procedure for applying for individual manufacturing
quotas.
Any person who is registered to manufacture ephedrine,
pseudoephedrine, or phenylpropanolamine and who desires to manufacture
a quantity of the chemical must apply on DEA Form 189 for a
manufacturing quota for the quantity of the chemical and shall state
separately for each subcategory, as defined in 21 CFR 1315.07, each
quantity of such chemical. * * *
* * * * *
Sec. 1315.23 [Amended]
0
16. Amend Sec. 1315.23 by removing ``March'' and adding in its place
``July'' in the first sentence of paragraph (c).
0
17. Revise Sec. 1315.24 to read as follows:
Sec. 1315.24 Inventory allowance.
(a) For the purpose of determining individual manufacturing quotas
pursuant to Sec. 1315.23, each registered manufacturer shall be
allowed as part of such quota an amount sufficient to maintain an
inventory:
(1) For current manufacturers, 30 percent of his average estimated
net disposal for the current calendar year and the last preceding
calendar year; or
(2) For new manufacturers, 30 percent of his reasonably estimated
net disposal for the next calendar year as determined by the
Administrator.
(b) For the purpose of determining procurement quotas pursuant to
Sec. 1315.32, each registered manufacturer shall be allowed as part of
such quota an amount sufficient to maintain an inventory:
(1) For current manufacturers, 30 percent of his average estimated
net disposal for the current calendar year and the last preceding
calendar year; or
(2) For new manufacturers, 30 percent of his reasonably estimated
net disposal for the next calendar year as determined by the
Administrator.
(c) During each calendar year, each registered manufacturer shall
be allowed to maintain an inventory of a chemical not exceeding 45
percent of his estimated net disposal of that chemical for that year,
as determined at the time his quota for that year was determined. At
any time the inventory of a chemical held by a manufacturer exceeds 45
percent of his estimated net disposal, his quota for that chemical is
automatically suspended and shall remain suspended until his inventory
is less than 40 percent of his estimated net disposal. The
Administrator may, upon application and for good cause shown, permit a
manufacturer whose quota is, or is likely to be, suspended pursuant to
this paragraph (c) to continue manufacturing and to accumulate an
inventory in excess of 45 percent of his estimated net disposal, upon
such conditions and within such limitations as the Administrator may
find necessary or desirable.
(d) If, during a calendar year, a registrant has manufactured the
entire quantity of a chemical allocated to him under an individual
manufacturing quota, and his inventory of that chemical is less than 20
percent of his estimated net disposal of that class for that year, the
Administrator may, upon application pursuant to Sec. 1315.25, increase
the quota of such registrant sufficiently to allow restoration of the
inventory to 30 percent of the estimated net disposal for that year.
0
18. Amend Sec. 1315.27 by revising the first sentence to read as
follows:
Sec. 1315.27 Abandonment of quota.
Any manufacturer assigned an individual manufacturing quota for a
chemical pursuant to Sec. 1315.23 may at any time abandon his right to
manufacture all or any part of such quota by filing a notice of such
abandonment with the UN Reporting and Quota Section, Diversion Control
Division, Drug Enforcement Administration in the online Quota
Management System. * * *
0
19. Amend Sec. 1315.32 by:
0
a. Revising the first sentence in paragraph (a);
0
b. Removing ``July'' and adding in its place ``December'' in the
introductory text of paragraph (f);
0
c. Removing ``manufacturer or importer'' and adding in its place
``registrant'' in paragraph (h).
The revision reads as follows:
Sec. 1315.32 Obtaining a procurement quota.
(a) Any person who is registered to manufacture ephedrine,
pseudoephedrine, or phenylpropanolamine, or whose requirement of
registration is waived pursuant to Sec. 1309.24 of this chapter, and
who desires to use during the next calendar year any ephedrine,
pseudoephedrine, or phenylpropanolamine for purposes of manufacturing
(including repackaging or relabeling), must apply on DEA Form 250 for a
procurement quota for the chemical and shall state separately for each
subcategory, as defined in 21 CFR 1315.07, each quantity of such
chemical. * * *
* * * * *
Sec. 1315.34 [Amended]
0
20. Amend Sec. 1315.34 by removing ``July'' and adding in its place
``December'' in paragraph (f).
Dated: September 28, 2019.
Uttam Dhillon,
Acting Administrator.
[FR Doc. 2019-21989 Filed 10-22-19; 8:45 am]
BILLING CODE 4410-09-P
