Management of Quotas for Controlled Substances and List I Chemicals

60117

Federal Register / Vol. 88, No. 168 / Thursday, August 31, 2023 / Rules and Regulations

1

21 U.S.C. 826(b).

2

21 U.S.C. 826(d).

OFFICE OF THE UNITED STATES

TRADE REPRESENTATIVE

15 CFR Part 2004

RIN 0350–AA13

Technical Amendment: Freedom of

Information Act Policies and

Procedures

AGENCY

: Office of the United States

Trade Representative (USTR).

ACTION

: Adoption of interim rule as

final.

SUMMARY

: This final rule adopts,

without change, an interim final rule

with a request for comments published

in the Federal Register on July 25, 2023,

that made a minor technical change to

the USTR Freedom of Information Act

(FOIA) regulation.

DATES

: Effective October 2, 2023.

FOR FURTHER INFORMATION CONTACT

:

Janice Kaye or Monique Ricker at

FOIA@ustr.eop.gov or 202–395–3150.

SUPPLEMENTARY INFORMATION

:

I. Technical Change

On July 25, 2023, USTR published an

interim final rule that made a technical

change to § 2004.6 of the USTR FOIA

regulation to align it with the statute

and Office of Information Policy

guidance about the compelling

circumstances under which an agency

must grant expedited processing. See 88

FR 47772. Although the interim final

rule was effective upon publication,

USTR provided a 30-day comment

period, which ended on August 24,

2023. USTR did not receive any

comments and is adopting the interim

final rule without any changes.

II. Regulatory Flexibility Act

USTR considered the impact of this

rule and determined that it will not

have a significant economic impact on

a substantial number of small business

entities because it applies only to

USTR’s internal operations and legal

obligations. 5 U.S.C. 605(b).

III. Paperwork Reduction Act

The final rule does not contain any

information collection requirement that

requires the approval of the Office of

Management and Budget under the

Paperwork Reduction Act (44 U.S.C.

3501 et seq.).

IV. Administrative Procedure Act

(APA)

On July 25, 2023, USTR published an

interim final rule (88 FR 47772) and

determined that there was a basis under

the Administrative Procedure Act for

issuing the interim final rule with

immediate effect. USTR provided a 30-

day comment period, which ended on

August 24, 2023. USTR did not receive

any comments and is adopting the

provisions of the interim final rule as a

final rule with no changes.

List of Subjects in 15 CFR Part 2004

Administrative practice and

procedure, Courts, Disclosure,

Exemptions, Freedom of information,

Government employees, Privacy,

Records, Subpoenas, Testimony.

PART 2004—DISCLOSURE OF

RECORDS AND INFORMATION

■Accordingly, the interim final rule

published in the Federal Register on

July 25, 2023, at 88 FR 47772, amending

15 CFR part 2004, is adopted as a final

rule without change.

Janice Kaye,

Chief FOIA Officer, Office of the United States

Trade Representative.

[FR Doc. 2023–18866 Filed 8–30–23; 8:45 am]

BILLING CODE 3290–F3–P

DEPARTMENT OF JUSTICE

Drug Enforcement Administration

21 CFR Parts 1303 and 1315

[Docket No. DEA–455]

RIN 1117–AB49

Management of Quotas for Controlled

Substances and List I Chemicals

AGENCY

: Drug Enforcement

Administration, Department of Justice.

ACTION

: Final rule.

SUMMARY

: The Drug Enforcement

Administration (DEA) is publishing this

final rule to manage the quotas for

controlled substances and the list I

chemicals, ephedrine, pseudoephedrine,

and phenylpropanolamine, held by

DEA-registered manufacturers. This

final rule will define the types of quotas,

update the method to abandon quota,

clarify the current language to ensure

that both manufacturers and distributors

are required to obtain certification of a

buyer’s quota, reduce overall

inventories, formalize the existing

practice of use-specific subcategories for

individual manufacturing and

procurement quotas, and modify

existing deadlines to fix/issue quotas.

This final rule will also amend certain

regulations to implement updates to the

Controlled Substances Act made by the

Substance Use-Disorder Prevention that

Promotes Opioid Recovery Treatment

for Patients and Communities Act.

DATES

: This final rule is effective

November 29, 2023.

FOR FURTHER INFORMATION CONTACT

:

Scott A. Brinks, Regulatory Drafting &

Policy Support Section (DPW),

Diversion Control Division, Drug

Enforcement Administration; Mailing

Address: 8701 Morrissette Drive,

Springfield, Virginia 22152; Telephone:

(571) 362–3261.

SUPPLEMENTARY INFORMATION

:

Legal Authority

The Controlled Substances Act (CSA)

authorizes the Administrator of the Drug

Enforcement Administration (DEA) (by

delegation from the Attorney General) to

promulgate rules and regulations that he

deems necessary and appropriate for the

efficient execution of his functions

under subchapter I (Control and

Enforcement) and subchapter II (Import

and Export). 21 U.S.C. 871(b) and 958(f).

Subchapter I includes provisions which

require the Administrator to establish

the aggregate production quota for each

basic class of controlled substance listed

in schedules I and II and the assessment

of annual needs for the ephedrine,

pseudoephedrine, and

phenylpropanolamine to be

manufactured in the United States each

calendar year to provide for the

estimated medical, scientific, research,

and industrial needs of the United

States, lawful export requirements, and

the establishment and maintenance of

reserve stocks. 21 U.S.C. 826. The

Administrator shall take the following

quota actions for a basic class of

controlled substance listed in schedules

I and II and ephedrine,

pseudoephedrine, and

phenylpropanolamine pursuant to

stipulated conditions: limit or reduce

individual production quotas for each

registered manufacturer,

1

and fix

individual manufacturing quotas for

registrants.

2

On October 24, 2018, Congress

revised the CSA through the Substance

Use-Disorder Prevention that Promotes

Opioid Recovery Treatment for Patients

and Communities (SUPPORT) Act.

These revisions will be noted and

included in these proposed regulations,

where applicable. Through this Act, the

Administrator, by way of delegation

from the Attorney General, may now set

quota in terms of the pharmaceutical

dosage-form.

VerDate Sep<11>2014 16:30 Aug 30, 2023 Jkt 259001 PO 00000 Frm 00013 Fmt 4700 Sfmt 4700 E:\FR\FM\31AUR1.SGM 31AUR1

ddrumheller on DSK120RN23PROD with RULES1

60118

Federal Register / Vol. 88, No. 168 / Thursday, August 31, 2023 / Rules and Regulations

3

For the purposes of this document only, ‘‘list I

chemicals’’ refers to ephedrine, pseudoephedrine,

and phenylpropanolamine for legitimate medical,

scientific, research, and industrial needs. The

phrase ‘‘list I chemical(s)’’ will be used going

forward.

4

The SUPPORT for Patients and Communities

Act, Public Law 115–271.

I. Executive Summary

A. Notice of Proposed Rulemaking

DEA published a notice of proposed

rulemaking (NPRM) in the Federal

Register on October 23, 2019, which

provided an opportunity for comments

to be submitted. 84 FR 56712. The

comment period closed on December

23, 2019. DEA invited comments from

the public on all of the topics covered

in the NPRM; however, DEA cannot

change the implementation of

amendments from the SUPPORT Act.

B. Summary of the Purposes and

Provisions of the Rule

1. Types of Quota

In the NPRM, DEA proposed the

addition of new sections to introduce

and define the types of quotas and

proposed an update to the procedure for

abandoning quota. The types of quotas

are as follows:

•Aggregate production quota (APQ)

(for controlled substances);

•Assessment of Annual Needs (AAN)

(for list I chemicals);

3

•Individual Manufacturing Quota

(for controlled substances and list I

chemicals);

•Procurement Quota (for controlled

substances and list I chemicals); and

•Import Quota (for list I chemicals).

Through this final rule, DEA will add

these new sections to the regulations

that will define the types of quotas for

controlled substances in schedules I and

II and the list I chemicals ephedrine,

pseudoephedrine, and

phenylpropanolamine. Also, DEA will

change the regulations to stay up to date

with modern technology by formalizing

the current practice of filing to abandon

quota with the United Nations (UN)

Reporting and Quota Section in the

online Quota Management System.

2. Conforming Changes From the

Substance Use-Disorder Prevention That

Promotes Opioid Recovery Treatment

for Patients and Communities Act

In the NPRM, DEA introduced the

SUPPORT Act

4

and informed the public

of the new legislation as it applies to

DEA. With this final rule, DEA is

updating the current regulations to

comply with this new law. The

SUPPORT Act now gives the

Administrator, by way of delegation

from the Attorney General, the authority

to establish the APQ, individual

manufacturing quotas, and procurement

quotas in terms of pharmaceutical

dosage-form prepared from or

containing a controlled substance. The

SUPPORT Act also changed the

deadline for DEA to fix the individual

manufacturing quota for schedules I and

II controlled substances. The SUPPORT

Act defines the phrase ‘‘covered

controlled substance’’ and mandates

that the amount of diversion of a

covered controlled substance be

estimated when establishing any quota.

When estimating diversion, DEA must

consult with the Department of Health

and Human Services (HHS) on rates of

overdose deaths, rates of abuse, and the

impacts on overall public health related

to the covered controlled substances.

DEA may also take into consideration

other sources of information deemed

reliable. The SUPPORT Act requires

that ‘‘appropriate quota reductions’’ be

made after estimating diversion. The

Act does not require quota increases.

3. Procurement Quota Certification

DEA proposed to change the

regulations to require certification of

procurement quota in the NPRM. This

final rule changes the regulations to

provide that both manufacturers and

distributors selling to a manufacturer

will be required to obtain certification of

the buyer’s quota when an order is

placed. This is implemented by

changing the words ‘‘importer,’’

‘‘manufacturer,’’ and ‘‘bulk

manufacturer’’ to ‘‘registrant.’’

4. Inventory Allowances

In the NPRM, DEA proposed

reductions to the acceptable inventory

allowance, the amount of inventory at

which quota would be suspended, and

when DEA would grant a request for

additional quota. DEA also proposed the

establishment of inventory allowances

for procurement quota for controlled

substances. Due to comments and

concerns received from the NPRM, DEA

will be implementing different

provisions in this final rule. Instead of

the proposed amendments, DEA will:

•Decrease the inventory allowance

issued by DEA for individual

manufacturing quotas from 50 percent

to 40 percent;

•Establish an inventory allowance

issued by DEA for all procurement

quotas, except liquid injectable

products, at 35 percent, instead of the

proposed 30 percent;

•Establish an inventory allowance

issued by DEA for liquid injectable

dosage-form procurement quotas at 50

percent, instead of the proposed 30

percent;

•Suspend individual manufacturing

quota issued by DEA if a registrant’s

inventory exceeds 55 percent (reduced

from 65 percent) of the registrant’s

estimated net disposal;

•Suspend procurement quota issued

by DEA, except that for liquid injectable

dosage-forms, if a registrant’s inventory

exceeds 50 percent of the registrant’s

estimated net disposal;

•Suspend liquid injectable dosage-

form procurement quota issued by DEA

if a registrant’s inventory exceeds 65

percent of the registrant’s estimated net

disposal;

•Review request to determine if

request for additional individual

manufacturing quota by registrant

should be granted when inventory is

less than 30 percent (reduced from 40

percent) of the registrant’s estimated net

disposal;

•Review request to determine if

request for additional procurement

quota, except for liquid injectable

dosage-forms, by registrant should be

granted when inventory is less than 25

percent of the registrant’s estimated net

disposal;

and

•Review for request to determine if

request for additional procurement

quota for liquid injectable dosage-forms

by registrant should be granted when

inventory is less than 40 percent of the

registrant’s estimated net disposal.

5. Subcategories for Quotas

DEA proposed the addition of use-

specific subcategories for individual

manufacturing and procurement quotas

to formalize the current, on-going

practice of the use of these subcategories

by registrants. The use-specific

subcategories are:

•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

In the NPRM, DEA proposed changes

to the deadlines for fixing or

establishing the different types of quotas

to allow more time for processing and

communicating with applicants and to

make the regulations consistent with the

SUPPORT Act. This final rule will

implement the following new deadlines:

•Deadline to establish the APQ and

the AAN: change to September 1;

•Deadline to issue individual

procurement, import, and

manufacturing quotas: change to

December 1; and

•Deadline to adjust individual

manufacturing quota: change to July 1.

VerDate Sep<11>2014 16:30 Aug 30, 2023 Jkt 259001 PO 00000 Frm 00014 Fmt 4700 Sfmt 4700 E:\FR\FM\31AUR1.SGM 31AUR1

ddrumheller on DSK120RN23PROD with RULES1

60119

Federal Register / Vol. 88, No. 168 / Thursday, August 31, 2023 / Rules and Regulations

II. Discussion of Comments

DEA received 258 comments. Many

comments addressed multiple topics of

the NPRM. Commenters also addressed

the changes made to the CSA by the

SUPPORT Act, which Congress put into

effect.

A. Defining Types of Quota and Filing

To Abandon Quota

Issue: DEA received nine comments

regarding the definitions and types of

quotas and three comments regarding

the updates for the process of

abandoning quota. Comments received

from several organizations stated that

they support DEA’s changes to its

regulations introducing and defining the

types of quota. One company justified

its support stating that DEA’s change

serves to educate and inform those not

familiar with the quota process.

While one pharmaceutical company

had no objections to the definitions of

the types of quotas, they stated that DEA

should consider creating a distinct sixth

type of quota: procurement quota

utilized to import concentrate of poppy

straw (CPS) or raw opium that should

remain independent of any inventory

restraints. This company further

suggested that the 30 percent inventory

range would be too restrictive and

would risk supply disruption from one

year to the next as it believes a higher

inventory range is necessary both to

create a buffer in the first quarter of a

new year and to avoid disruption in the

event of delivery delays involving

United States Customs and Border

Protection.

Many commenters also fully

supported the formalization of the quota

abandonments with the UN Reporting

and Quota Section in the online Quota

Management System. One commenter

explained its support by stating that

these changes will allow for automation

of the abandonment/surrender process.

One pharmaceutical company

recommended DEA take advantage of

the opportunity provided by modifying

the quota regulations to include the

same provision in the section for

procurement quota. This same company

believes this will better reflect current

practice as both manufacturing and

procurement quota utilize the same

mechanism for surrendering

unnecessary quota.

DEA Response: DEA is committed to

taking into consideration any changes in

market dynamics that may require

allocation of individual manufacturer’s

quotas or revisions to the APQ. DEA is

also committed to ensuring that quotas

are set in a way as to grant

manufacturers the ability to provide

controlled substances to meet the

demands of the legitimate medical,

scientific, and export needs of the

United States. It has been DEA’s long-

standing intent to improve the process

of setting the annual quota while

ensuring an adequate supply of

controlled substances is available for

legitimate needs.

A sixth category of procurement quota

for the acquisition of CPS or raw opium

imported in compliance with DEA

regulations for the purpose of removing

restraints on inventory allowances

whose aims are to ensure availability is

unnecessary. First, there are a very

small number of entities (<10) registered

in the United States to procure narcotic

raw materials (NRMs) for processing

into schedule II controlled substances

and these companies have a long history

of obtaining the NRM necessary to

meeting the estimated needs of the

United States.

In addition, there are inventory

allowances built into multiple quotas

that DEA grants to those who produce

active pharmaceutical ingredients (APIs)

derived from NRM. Prior to

implementing this rule, DEA granted a

50 percent inventory allowance to

registered bulk manufacturers that

procure NRM for the API they produce

each year, pursuant to a DEA issued

manufacturing quota. That total quantity

(i.e., 150 percent of estimated net

disposals minus any existing inventory

on hand) is then utilized to calculate the

amount of procurement quota that the

bulk manufacturer requires to make the

API for which a manufacturing quota

was granted. In those instances, DEA

assesses the amount of NRM necessary

to produce the above-mentioned API

and then calculates an inventory

allowance on the amount of NRM

required. Both inventory allowances

ensure that there are adequate amounts

in the drug supply to meet legitimate

needs. Finally, while appropriate

safeguards are currently in place, the

potential for diversion still exists for

NRM from excessive stockpiling of NRM

due to changes in legitimate need of the

end products which may reduce the

need to manufacture.

In addition, DEA appreciates the

comments received in support of the

process to formalize quota

abandonments. Formalizing the

procedure to abandon quota is simply a

codification of existing DEA practice.

While this formalization will have no

economic costs or benefits, DEA

believes there are benefits to accurately

codifying existing practices. As such,

this final rule will enhance efficiency

and improve the process to abandon the

right to manufacture all or any part of

both individual manufacturing and

procurement quotas.

B. Conforming Changes From the

SUPPORT for Communities and

Patients Act

DEA received nine comments about

the changes imposed by the SUPPORT

Act. As stated in the NPRM, these

updates to DEA’s regulations are being

implemented to comply with the

amendments made to the CSA by the

SUPPORT Act. While DEA does not

have the authority to change what has

been established by Congress, DEA will

still discuss the comments below.

The Establishment of Quotas in Terms

of Pharmaceutical Dosage-Forms

Issue: By way of the SUPPORT Act,

DEA’s regulations were changed to

allow quotas to be established in terms

of pharmaceutical dosage-forms. In the

NPRM, DEA explained that the

discretionary authority granted to DEA

to establish APQ, procurement, and

individual manufacturing quotas in

terms of pharmaceutical dosage-forms

would not be used at this moment. The

comments received addressed DEA’s

decision to delay the use of this

discretionary authority, with some

disagreeing with DEA’s decision not to

use the authority at this moment. Some

suggested that DEA note the distinction

between manufacturing injectables

(which are given to in-patients) versus

oral solid dosage-forms. These

commenters opined that setting the

quotas in terms of pharmaceutical

dosage-forms will help address

nationwide shortages of injectables.

DEA Response: In the matter of DEA’s

decision not to use the discretionary

authority at this present time, DEA

emphasizes that the SUPPORT Act

states that DEA (by delegation from the

Attorney General) may establish the

quotas in terms of pharmaceutical

dosage-forms prepared from or

containing the controlled substance

when it is determined that these such

establishments will assist in avoiding

the overproduction, shortages, or

diversion of a controlled substance. This

is not an express requirement to grant

quotas in that manner, however it does

grant the authority to do so. If DEA were

to exercise its discretionary authority, it

would be implemented at the

procurement quota level, which would

have a more direct impact on the

availability of specific dosage-forms for

legitimate medical need. During the

analysis and review process for

individual procurement quotas, DEA

examines in detail the supporting

documentation provided by dosage-form

manufacturers to distinguish the type of

VerDate Sep<11>2014 16:30 Aug 30, 2023 Jkt 259001 PO 00000 Frm 00015 Fmt 4700 Sfmt 4700 E:\FR\FM\31AUR1.SGM 31AUR1

ddrumheller on DSK120RN23PROD with RULES1

60120

Federal Register / Vol. 88, No. 168 / Thursday, August 31, 2023 / Rules and Regulations

5

DEA published Established Aggregate

Production Quotas for Schedule I and II Controlled

Substances and Assessment of Annual Needs for

the List I Chemicals Ephedrine, Pseudoephedrine,

and Phenylpropanolamine for 2020 in the Federal

Register, 84 FR 66014, on December 2, 2019. In

response to COVID–19, DEA published

Adjustments to Aggregate Production Quotas for

Certain Schedule II Controlled Substances and

Assessment of Annual Needs for the List I

Chemicals Ephedrine and Pseudoephedrine for

2020, in Response to the Coronavirus Disease 2019

Public Health Emergency in the Federal Register,

85 FR on April 10, 2020, to address any potential

shortages that may occur during the public health

emergency.

product to be manufactured. This

includes the type of formulation (solid,

oral liquid, or liquid injectable) and

dosage strengths, which become part of

the factors considered in estimating an

appropriate procurement quota

accordingly.

Currently, all liquid injectable

products receive 50 percent inventory

allowance. DEA will continue issuing

the inventory allowance for these

dosage-forms at the same percentage

because there are significantly fewer

dosage-form manufacturers of injectable

products. DEA is aware that quality or

production problems related to sterility

issues for injectable products have led

to higher likelihood of recalls of such

products. DEA believes that these

products, when administered in

controlled clinical and hospital settings,

decrease the likelihood of diversion due

to higher levels of oversight.

Furthermore, the ongoing Coronavirus

Disease of 2019 (COVID–19) public

health emergency declared by the

Secretary of Health and Human Services

(HHS) on January 31, 2020, effective

January 27, 2020, has made it necessary

for DEA to consider both the potential

for diversion, as well as the anticipated

increase in demand for injectable

products used to treat patients suffering

from COVID–19. Due to COVID–19,

DEA had to issue an adjustment to the

established APQ for 2020

5

for selected

controlled substances involved in

manufacturing injectable drug products

for COVID–19 treatment. The

adjustment of APQ allowed DEA to

adjust the individual procurement

quotas and related inventory allowances

for injectable products. While DEA

declines to establish APQ in terms of

pharmaceutical dosage-forms at this

time, DEA has decided to implement a

separate inventory allowance for liquid

injectable dosage-forms. This will be

discussed later in the document.

Deadline To Fix Individual

Manufacturing Quotas

Issue: DEA also received a comment

from an individual regarding the date

change for fixing the individual

manufacturing quota. The commenter

asked, ‘‘how and why did DEA have

Congress change the date to December?’’

DEA Response: The SUPPORT Act

revised the CSA by issuing a mandatory

change to the date by which DEA must

fix individual manufacturing quotas to

‘‘on or before December 1.’’ Because

Congress issued this change, DEA must

follow this law and implement the new

date into DEA’s regulations.

Estimation of Diversion

Issue: DEA received comments that

were in support of DEA providing

explanations for the increase in quotas

but there was concern with the

reliability of the data available for abuse

(manufactured products vs. illicit

substances). Commenters suggested

DEA consider a broader range of data

when calculating diversion by

considering sources that are already

available, pushing for even better data

sources for future years, and adopting a

uniform method of accounting for

diversion. They stated that DEA should

exhaust other means of curtailing

illegitimate sales, abuse, and diversion

before looking to quota as a prevention

tool. Companies suggested that DEA

differentiate among specific dosage-

forms and target the dosage-forms that

are subject to abuse to encourage the use

of dosage-forms that are less prone to

diversion. They stated that there needs

to be an objective evaluation

considering the exclusion of injectable

dosage-forms from quota reductions.

Commenters also suggested that DEA

account for over-prescribing as a part of

the diversion analysis by considering

data and best practices of healthcare

providers and by collecting information

from the Prescription Drug Takeback

Programs and similar sources. Further,

they suggested that DEA use the medical

professionals’ ‘‘best practices’’ to help

account for overprescribing at the

physician level and incorporate data

collection into the Prescription Drug

Takeback Program to account for

overprescribing at the patient level.

DEA Response: The Food and Drug

Administration (FDA) is responsible for

approving drug products and can

require a manufacturer to submit a Risk

Evaluation and Mitigation Strategy

(commonly referred to by the industry

as a REMS), which is a risk management

plan that uses tools beyond the

prescribing information to ensure that

the benefits of certain drugs outweigh

their risks. Certain REMS may include

strategies to prevent, monitor, and

manage specific risks resulting from

inappropriate diversion and abuse of

products. The information provided

from a REMS informs DEA of potential

abuse liability issues that may lead to

diversion. If a manufacturer believes

that its product is potentially being

diverted or abused within the supply

chain based on customer orders

received that raise suspicion, it is

responsible for notifying DEA by

sending a report to the agency through

DEA’s Suspicious Orders Reporting

System (SORS). See 21 U.S.C. 802(57),

21 CFR 1301.74(b). Once notified, DEA

will alert the field office regarding the

situation. The diverted amount will

then become a factor when processing

the quota for the current year and an

adjustment to the amount of quota

granted will be made indicating the

diverted amount. DEA also acquires

data from HHS, Centers for Disease

Control and Prevention (CDC), Centers

for Medicare & Medicaid Services

(CMS), and the States to determine

reliable rates of overdose deaths, abuse,

and overall public health impact as a

factor of diversion to make appropriate

quota reductions for each of the covered

controlled substances. DEA conducts

diversion analysis for the five covered

controlled substances and the remaining

drugs not considered a ‘‘covered

controlled substance’’ by the SUPPORT

Act.

C. Procurement Quota Certification

Issue: DEA received three comments

from industry expressing concern about

DEA’s change to the regulations to

ensure that both manufacturers and

distributors selling to a manufacturer

are required to obtain certification of a

buyer’s quota for the request of schedule

I and II controlled substances, as well as

list I chemicals when the buyer is a

manufacturer.

One pharmaceutical company felt that

the proposed changes seemed too broad.

This company did not question the

requirement to provide a certificate of

quota when purchasing from a

distributor or a manufacturer. However,

the company stated that the specific

wording of the proposed regulation may

be overly broad. According to the

company, as worded, the proposed

regulation would require a certificate for

orders from any registrant. The

company believed this wording could

be construed to apply to reference

standards from analytical sites or

complaint samples and certificates

should not be required when

manufacturers order from pharmacists,

health care practitioners, or analytical

laboratories.

DEA Response: By requiring that any

manufacturing registrant provide a

certification of quota before receiving

any quantity of a schedule I or II

controlled substance or list I chemical,

VerDate Sep<11>2014 16:30 Aug 30, 2023 Jkt 259001 PO 00000 Frm 00016 Fmt 4700 Sfmt 4700 E:\FR\FM\31AUR1.SGM 31AUR1

ddrumheller on DSK120RN23PROD with RULES1

60121

Federal Register / Vol. 88, No. 168 / Thursday, August 31, 2023 / Rules and Regulations

DEA is better able to maintain the

closed distribution system and provide

a more accurate calculation of the APQ

for the United States per 21 CFR

1303.12(f). While DEA is not averse to

manufacturers fulfilling legitimate

medical needs, DEA is required to

ensure that enough quota is granted to

meet legitimate medical, scientific, and

research needs, while preventing

diversion. To prevent diversion and to

maintain a closed distribution system

for schedule I and II controlled

substances and list I chemicals, DEA

requires any registrant to whom a

procurement quota has been issued to

follow the laws and regulations of the

CSA and Code of Federal Regulations

(CFR). One method of doing this is to

require all registrants sending material

to a manufacturer to verify proof of

quota through certification, which

ensures that purchases do not exceed

the procurement quota set by DEA.

D. Inventory Allowances

There were 23 in-scope comments

that discussed the proposed reductions

of inventory allowances. Many of the

comments discussed each reduction

separately. Furthermore, many of the

comments from companies asked DEA

to clarify which registrants the various

reductions would be applicable to, due

to the current placement of the

regulations in the CFR. In general,

commenters objected because of the

economic impact to their business and

the inability to ensure adequate supply.

Commenters contend that DEA should

not use a one-size fits all method for

inventory and limiting additional quota

because it will create a constant state of

backorder and market shortage. A

commenter proposed a grace period of

at least one year before making the

reductions effective.

Reduction and Establishment of New

Inventory Allowances for Individual

Manufacturing Quotas and Procurement

Quotas From 50 Percent to 30 Percent

Issue: Commenters objected to the

reduction/establishment of inventory

allowance stating that the lower amount

of inventory allowance combined with

the new date for individual

manufacturing and procurement quotas

may cause a shortage. A commenter

stated that DEA’s data on theft and loss

at the manufacturing level show that the

security of the products exceeds the

security at the retail level. Commenters

asked DEA to name studies showing

that increased inventory at

manufacturing facilities correlates to an

increase in diversion or abuse. Further,

many commenters allege that the

proposed changes will create incentives

that may increase opportunities for

diversion and conveyed that DEA

should assess whether reducing quotas

would create shortages and jeopardize

patient care. Commenters also

emphasized that DEA needs to evaluate

carefully the legitimate supply chain’s

full throughput time to bring medicines

to market, so that patient care is not

jeopardized.

Many commenters conveyed that the

proposed 30 percent inventory

allowance for procurement quota is

overly restrictive and such a reduction

would cause inefficiencies and

shortages. Furthermore, it was

commonly said that the reduction

would hinder the ability to provide

consistent care to patients, and it may

result in potential shortages in hospitals

and clinics and severely impact those

patients managing an opioid

dependence. They mentioned that there

was already a shortage in acute care

facilities.

Commenters suggested that DEA

should give further consideration to the

potential for supply disruptions that

would result from decreasing the

inventory allowance for API bulk

manufacturers from 50 percent to 30

percent. It risks imposing significant

costs and inefficiencies on the

production of authorized bulk drug

substances without corresponding

benefits.

Commenters also stated that DEA’s

claim that the reductions will not

increase the likelihood of shortages

because there has been an increase in

the number of manufacturers is too

broad. Manufacturers of approved drug

products can only use the approved

suppliers that they named in their FDA-

approved applications. Typically,

manufacturers of approved drug

products only have one or two suppliers

that they can use. Commenters also said

that DEA misstated data when claiming

that the proposed reduction should not

affect manufacturers. Three

manufacturers supply over 90 percent of

the API for codeine, hydrocodone,

oxycodone, and morphine; therefore,

there are fewer API producers in 2019

than 2007. API from one of the three

primary manufacturers is not

interchangeable across dosage-form

manufacturers without FDA approval.

In respect to procurement quotas,

commenters alleged that the reduction

to 30 percent would leave no margin for

recovery. They also stated that the

reduction to 30 percent will result in

unnecessary restraints on API

manufacturers.

Multiple commenters want DEA to

keep the existing allowances of 50

percent for bulk manufacturers and state

DEA should consider possible

alternatives to reduce the additional

cost burdens and risks of shortages and

diversion. Commenters frequently

claimed that DEA did not provide data

to support its claim that the reduction

for individual manufacturing quota

inventory allowances would reduce the

potential for diversion, especially

because commenters believe that the

material is not desirable at the bulk

manufacturing level. They also

mentioned that the reductions will

substantially increase the cost of bulk

manufacturing, will increase the risk of

shortages of API supplies, and may

increase the risk of diversion. In respect

to bulk and dosage-form manufacturers,

commenters assert the reduction could

be harmful to patients and will

potentially lead to market shortages of

injectable medicines needed for critical

medical care. Commenters also alleged

that constricting inventories at

pharmaceutical manufacturers or in

institutional settings will have little

impact on curbing diversion. Many

commenters conveyed the want for DEA

to publicly provide data that validates

and supports the need for any

reductions in inventory allowances.

Commenters asked for clarification on

whether the 30 percent inventory

allowance would be applicable to

dosage-form manufacturers, due to its

placement in the CFR. They suggested

that if DEA applies the inventory

allowance to dosage-form

manufacturers, then it only be reduced

for domestic consumption and not for

exports. They also suggested that

dosage-form manufacturers be allowed

to calculate their allowance using the

estimate of the current year’s sales and

bulk manufacturers calculate their

allowance using the average of the

preceding calendar year and the current

calendar year. Several commenters

mentioned that year-end inventory is

not indicative of how much inventory

they require throughout the year

because a manufacturer’s inventories are

lowest at year-end as they have sold

down their stock and await the granting

of quota for the next calendar year.

Commenters opined that the reduction

of inventory from 50 to 30 percent is

counter intuitive because more quota is

needed due to the additional waste that

would be caused from the increased

number of manufacturing campaigns

that would be required. Furthermore,

they alleged that DEA will experience

an increase in the amount of quota

requests due to this reduction.

A few commenters worried that the

reductions may not have a significant

effect on a provider’s decision to

prescribe. They explained that if DEA

VerDate Sep<11>2014 16:30 Aug 30, 2023 Jkt 259001 PO 00000 Frm 00017 Fmt 4700 Sfmt 4700 E:\FR\FM\31AUR1.SGM 31AUR1

ddrumheller on DSK120RN23PROD with RULES1

60122

Federal Register / Vol. 88, No. 168 / Thursday, August 31, 2023 / Rules and Regulations

6

For purposes of this document, Composite Risk

Management is a decision making process used to

mitigate risk associated with all hazardous

equipment or impact to the mission.

7

The Centers for Medicare & Medicaid Services,

https://www.cms.gov/Research-Statistics-Data-and-

Systems/Statistics-Trends-and-Reports/

Information-on-Prescription-Drugs/Medicaid.html,

accessed 6/15/2020.

limits production but providers

continue to prescribe at the same rate,

the issue will not have been addressed.

Instead, costs may rise as supply

decreases due to the reduction in

production. One organization

recommended that DEA pay greater

attention to evidence-based research on

appropriate prescribing and provide

greater education for physicians and

patients based on this research.

DEA Response: DEA has been

working to prevent and to decrease

diversion for years. DEA uses Composite

Risk Management

6

to assess the risk of

diversion at all levels of the supply

chain. While diversion at the

manufacturing level may be low, DEA

emphasizes that there is still the

potential for diversion to occur at that

level. When setting quotas for the year,

DEA assesses whether they would cause

a shortage or jeopardize patient care.

Also, DEA uses several sources of data

to evaluate legitimate supply chains,

such as Automated Reports and

Consolidated Ordering System

(ARCOS), IQVIA, and manufacturers’

own data. The quotas granted are a

composite of estimated requirements for

legitimate medical, scientific, and

export needs, manufacturing yields, and

inventory allowance to begin to meet

the next year’s legitimate needs while

reducing the risk of diversion.

While there may not be published

studies showing that an increase in

inventory at manufacturing facilities

correlates to an increase in diversion or

abuse, a fundamental principle

governing policy discussions and DEA

rulemaking, especially during the height

of an opioid epidemic, is that DEA must

strike a balance between ensuring an

adequate and uninterrupted supply of

controlled substances while preventing

an oversupply which increases the risk

of diversion. DEA does have internal

information that it takes into

consideration when granting individual

quotas at that time. Review of internal

actions of enforcement measures taken

over the years have shown thefts at the

manufacturing level and the public

health impact in the surrounding

communities as a result of those thefts.

There have been occurrences of thefts of

bulk API and thefts of finished dosage-

forms from manufacturers’ production

facilities, and these products were sold

into the community. Overproduction of

API and finished dosage-forms can lead

to high inventories and questionable

high pressure marketing practices. DEA

notes that manufacturers cannot sell

more than their granted quotas plus

previous year inventories but that high

inventories could allow small thefts to

go unnoticed from production facilities.

DEA understands the worries of

commenters regarding the reduction of

inventory allowances possibly

jeopardizing patient care; however, DEA

wants to stress that the management of

patient care is not controlled by way of

quotas. While DEA is aware of the

opioid crisis, the issuance of quotas and

accompanying inventory allowances are

not directly involved with the

management and care of patients. The

issuance of quotas does not regulate the

physician’s practice of medicine.

Therefore, inventory allowance

reductions would not hinder a

physician’s ability to provide consistent

care to patients, as voiced by

commenters. DEA does not regulate a

provider’s prescription methods so long

as there is a legitimate medical need.

While the inventory allowance

reductions apply to what manufacturers

hold in inventory to begin dispositions

for the next calendar year, they can

utilize the inventory in the event that

there is a shortage or there is an issue

in the supply chain during

manufacturing to prevent disruption to

the legitimate supply chain. DEA does

not control the way a company conducts

business, as business decisions on

production and supply chain

management are done on the company

level. DEA notes that it is HHS’ area of

responsibility to provide Evidence

Based Medicine as guidance to

providers and the public.

While there are a few commenters

who have shared the concern that DEA’s

reduction of inventory will not have

much of an effect on overprescribing,

DEA believes that this is one of many

factors being implemented at the federal

level that will have an impact on

decreasing overdoses due to

prescription medications. DEA also

notes that there has been a decline in

the prescribing of schedule II opioid

prescriptions since 2016 as many of

those other factors have been

implemented at Federal and state levels.

As shown by IQVIA and demonstrated

by a review of CMS’ data, prescribing

rates for opioids have decreased 44

percent since 2016 without a significant

increase in price.

7

While commenters opined that DEA is

being too broad in stating that the

increase in manufacturers will offset the

chances of a shortage, DEA did not

generalize or understate the concept of

there being enough dosage-form

manufacturers so as not to increase the

chances of shortages. Most dosage-form

companies may have one main API

supplier to ensure a continuous supply

of product to meet patient need and

mitigate the impact of potential shortage

of the product. However, many dosage-

form manufacturers have named a

second supplier in FDA-approved

applications and can request API from

either supplier to meet legitimate

patient need. While a secondary

supplier is not required for New Drug

Application or Abbreviated New Drug

Application approval, DEA has noted

that most requests for product

development quota include a second

supplier of API. DEA reviewed FDA’s

Approved Drug Products with

Therapeutic Equivalence Evaluations

(hereinafter ‘‘Orange Book’’) to

determine the number of approved

products and then matched those

products to DEA registered

manufacturers. In the event that there is

an increase in a company’s risk of

shortage of supplies, the applicant may

file for additional quota at any time

during the calendar year. During that

time, the application, along with its

supporting documents, will be reviewed

and if needed, an adjustment to the

quota will be granted. Currently, DEA

has already been applying the reduced

inventory allowance of 30 percent to

fentanyl, hydrocodone, hydromorphone,

oxycodone, and oxymorphone.

DEA has decided to reduce the

individual manufacturing inventory

allowance for all controlled substances

and list I chemicals to 40 percent and

the procurement inventory allowance

for controlled substances and list I

chemicals to 35 percent, with the

exception of liquid injectable dosage-

forms. For liquid injectable dosage-

forms, the procurement quota inventory

allowance will be set at 50 percent. The

inventory allowance requires that

manufacturers maintain their inventory

allowance based on estimated net

disposals for the calendar year. It is

based on what the manufacturer

estimates their disposal to be and not

the actual disposal at a specific point in

time. DEA requires year-end reporting

that demonstrates the manufacturer

ended the year with the correct

inventory allowance percentage. The

inventory allowance does not affect the

amount of a net-disposition quota

granted to a manufacturer. DEA grants

the quota necessary to be able to

continue to meet legitimate patient

needs based on the historical and

VerDate Sep<11>2014 16:30 Aug 30, 2023 Jkt 259001 PO 00000 Frm 00018 Fmt 4700 Sfmt 4700 E:\FR\FM\31AUR1.SGM 31AUR1

ddrumheller on DSK120RN23PROD with RULES1

60123

Federal Register / Vol. 88, No. 168 / Thursday, August 31, 2023 / Rules and Regulations

estimated future data including changes

in market share and FDA guidance. DEA

grants an inventory allowance to the

manufacturer to begin disposition for

the next year; however, this may also be

used to meet the unanticipated market

changes in the current year. API and/or

finished dosage-forms in reserve are

usually held for unanticipated market

changes, manufacturing issues, and to

begin the next year. As such, DEA’s

lowering of the inventory allowance as

written in the regulations should not

affect a manufacturer’s sales. While

diversion may not occur with high

frequency at the manufacturing level, it

occurs and can impact public health in

the surrounding community. Since

2004, DEA has sought to address risk of

diversion at the apex of the distribution

system (i.e., manufacturing level).

Granting higher inventory based on

sales provides more incentive to push

more material further downstream as no

entities want to maintain higher levels

of stocks than what they deem necessary

due to storage and monetary constraints,

the fact is that profit is only generated

through sales of the product and not

production. DEA previously

demonstrated that bulk manufacturers

were only holding 39 percent inventory.

It is for these reasons, and the fact that

historically manufacturers have not held

50 percent inventory levels, that a lower

inventory at the manufacturer level

should be implemented. Also, the lower

inventory allowances can potentially

reduce diversion throughout the supply

chain.

DEA notes that bulk manufacturers

have not always utilized all of their

granted quota to manufacture API and

have consistently held less than 50

percent inventory. The year-end sales

and inventory provides information on

how a registrant is doing in the market

and provides a starting point when

assessing requests for revisions to

current quotas. If a bulk manufacturer’s

sales to customers are more robust than

anticipated, inventories will be low and

DEA will grant a quota adjustment to

ensure that the customers can receive

material up to their individually granted

procurement quota. If inventories are

high, it indicates that the company has

not sold as much API to their customers

as they forecasted, and therefore the

higher inventory allowance is

unnecessary.

Over the last decade, DEA has

implemented a 30 percent inventory

allowance for opioid related

procurement quotas. This inventory

level has not caused issues due to quota

being set at the legitimate patient level.

DEA notes that over the last four years,

after reviewing the applicants’ year-end

reports and other data reporting sites,

dosage-form manufacturers have

reported higher than average inventories

of opioids as prescriptions for opioids

have declined significantly due to the

implementation of CDC guidelines and

DEA enforcement activities. The data

show that manufacturers only acquired

72.7 percent of fentanyl, 73.9 percent of

hydrocodone, 56.7 percent of

hydromorphone, 79.3 percent of

oxycodone, and 73 percent of

oxymorphone from the quotas granted

to them by DEA. As prescription rates

have fallen, the data show that the

material has not sold, but has been

moved to their inventory, thereby

significantly increasing inventory levels

above that which are medically

necessary on an annual basis. DEA has

found that over the past years, inventory

levels have averaged 72 percent for

fentanyl, 36.9 percent for hydrocodone,

57 percent for hydromorphone, 36.3

percent for oxycodone, and 61.0 percent

for oxymorphone, while companies

have met legitimate medical needs. The

inventory levels for fentanyl,

hydromorphone, and oxymorphone

include product development efforts as

manufacturers seek FDA approval of

abuse-deterrent formulations. DEA has

considered the comments from

manufacturers and will set the

inventory allowance for procurement

quotas at 35 percent for all dosage-

forms, except liquid injectable dosage-

forms. Liquid injectable dosage-forms

will receive a 50 percent inventory

allowance for procurement quotas.

To determine the amount for the

procurement quota inventory allowance,

DEA has reviewed the Orange Book and

internal quota applications. These

reviews led DEA to determine that,

generally, there are more dosage-form

manufacturers than bulk manufacturers,

and as such, an individual dosage-form

manufacturer does not need as great of

an inventory as a bulk manufacturer.

Therefore, the procurement quota

inventory allowance should be lower

than the manufacturing quota inventory

allowance. DEA has considered new

data from FDA on new approved drug

applications and internal quota

applications that showed that

manufacturers are producing or seeking

to produce more extended-release and/

or abuse-deterrent dosage-form products

that require additional manufacturing

time compared to immediate-release

drug products. Therefore, DEA has

determined that a procurement quota

inventory allowance of 35 percent

provides the necessary manufacturing

lead time to prevent shortages or gaps in

the supply chain. DEA believes this

increase in inventory allowance from

the proposed amount will provide the

necessary time for all manufacturers to

complete their manufacturing activities

and place their products in the supply

chain for legitimate need.

However, DEA will not be reducing

the inventory allowance for

procurement quotas of the liquid

injectable dosage-forms. After further

review of comments, DEA acknowledges

that for injectable products, there are

significant manufacturing issues when

manufacturers fail to comply with

FDA’s Current Good Manufacturing

Practice (cGMP) regulations.

Additionally, DEA has realized that the

lower number of manufacturers,

coupled with the higher likelihood of

recalls due to cGMP violations, requires

the higher inventory allowance for

dosage-form manufacturers of injectable

products. In light of COVID–19, DEA

also acknowledges that declining to

reduce inventory allowances for these

liquid injectable dosage-forms ensures

that manufacturers are able to address

and endure potential circumstances of

nationwide shortages. The liquid

injectable dosage-form procurement

quotas will be set at 50 percent.

DEA read the comments regarding the

limited number of bulk manufacturers

supplying the market. DEA and

international drug control treaty

obligations control the number of bulk

manufacturers who supply the dosage-

form manufacturers. While the number

of bulk manufacturers may fluctuate,

over the past 10 years there have been

10 bulk manufacturers that have

supplied the opioid market, with three

of them supplying the majority of the

requirements. DEA analyzed the data

and determined that the bulk

manufacturers did not utilize the entire

quota granted to them each year. On

average, the companies manufactured

only 85.2 percent of the fentanyl, 61.7

percent of the hydrocodone, 79.1

percent of the hydromorphone, 78.3

percent of the oxycodone, and 69

percent of the oxymorphone quota

granted by DEA. These bulk

manufacturers have maintained an

average inventory of 39 percent and

have continually met the legitimate

medical need before and during the

opioid crisis. DEA has noted that

dosage-form manufacturers are now

validating a second API supplier as a

precautionary measure. As dosage-form

manufacturers continue to seek FDA

approval for new drug products

containing controlled substances, DEA

continues to grant product development

quotas to allow for qualification of two

suppliers and grants quota to bulk

VerDate Sep<11>2014 16:30 Aug 30, 2023 Jkt 259001 PO 00000 Frm 00019 Fmt 4700 Sfmt 4700 E:\FR\FM\31AUR1.SGM 31AUR1

ddrumheller on DSK120RN23PROD with RULES1

60124

Federal Register / Vol. 88, No. 168 / Thursday, August 31, 2023 / Rules and Regulations

8

21 CFR 1303.23 and 1315.23.

manufacturers to support this

qualification effort.

DEA notes that the proposed

regulations for procurement quota were

added to the only regulation in the CFR

for inventory allowance, which is

located under the subheading of

‘‘Individual Manufacturing Quotas.’’ To

lessen the chance of causing confusion

to registrants, DEA has chosen to move

the procurement quota inventory

allowance regulations. As such, DEA

will create new regulations to address

the inventory allowance amounts for

procurement quotas.

Reduction of Amount at Which Quota

Would Be Suspended to 45 Percent

Issue: Many commenters explained

that the reduction of the level at which

quota will be suspended would require

manufacturers to run smaller

campaigns. They argue that this will

increase the number of campaigns

required to produce the same amount of

product in a given year. Commenters

also noted that the proposed reduced

suspension amount would interfere

with product supply. Commenters

stated that the reduction in the

suspension threshold would increase

substantially the cost of bulk

manufacturing and would increase the

risk of shortages of API supplies and

may increase the risk of diversion. They

also conveyed that reducing the trigger

for suspending bulk API manufacturing

quota would decrease significantly the

efficiency and increase the costs of bulk

API manufacturers.

Commenters asked for clarification on

whether the quota suspension will

apply to dosage-form manufacturers and

suggested that DEA clarify that it is not

applicable to bulk manufacturers. They

suggested that DEA apply the

suspension threshold at year-end so that

the inventory level is only above the

trigger level briefly. Commenters

conveyed that this would ensure that

the suspension does not interrupt timely

and efficient processing of bulk API. As

an alternative option, commenters

suggested that DEA clarify the definition

of inventory so that it does not include

material of a basic class that is not yet

in finished form suitable or intended for

sale or provide a more effective

procedure for issuing exceptions to the

quota suspension threshold.

Commenters explained that lowering

the inventory ceiling to 45 percent

would disrupt manufacturing operations

and cause significant cost increases

because this will require smaller, more

frequent campaigns. They argue that

these would generally decrease

efficiency and potentially increase the

amount of product wasted during the

required cleaning of equipment between

each additional campaign. Additionally,

there may also be an increase in the

generation of hazardous waste because

of these additional campaigns. One

commenter specifically stated that the

reduction is too restrictive for lower

volume APIs. Also, the reduction may

potentially short the finished dosage-

form markets by greatly impacting lead-

times to get the material to customers,

and it would force customers to wait an

extra four to five months.

It was suggested that DEA evaluate

the data throughout the year and not

just the year-end data. Furthermore,

DEA received suggestions that the

ceiling should be set at 55 percent

instead, so that drug shortages do not

occur. Some commenters suggested the

reduction in allowances should only

apply to dosage-form manufacturers by

lowering the inventory allowance for

those manufacturers to 40 percent and

that DEA specify that this does not

apply to bulk API manufacturers.

DEA Response: DEA has been

working to prevent and detect diversion

for years. DEA grants the quota to

companies, and they can use the quota

for various purposes within the scope of

their requested business activity. The

companies and DEA calculate inventory

allowance suspension is calculated

based on the companies’ estimated net-

disposal for the calendar year. If the

companies’ dispositions are robust as

estimated, the company will likely not

meet the suspension percentage. If the

companies’ dispositions are not meeting

the company’s estimations as the

calendar year progresses, the company

will likely meet the suspension

percentage and need to discontinue

manufacturing until net disposition

volume increases to the extent that the

estimated inventory is below the

inventory allowance suspension

percentage. Companies can and do

apply for quota revisions at any time

during the calendar year. DEA grants

quota to meet estimated legitimate

patient need and provide an inventory

allowance based for the next calendar

year based on net dispositions. A

company requesting quota in excess of

their estimated market portion

necessary to meet legitimate medical

need and relevant inventory allowance,

as determined by the company’s

supporting documentation, IQVIA data

and FDA guidance, which are among

the list of factors

8

DEA considers, will

not receive the requested quota;

however, the quota granted will be

sufficient to meet legitimate need and

inventory allowance. DEA has noted

instances where (1) bulk manufacturers

have not utilized all of their granted

quota to manufacture API and have

consistently held less than 50 percent in

inventory; and (2) dosage-form

manufacturers have requested

additional quota while not distributing

finished dosage-forms from their

inventory to the market to cause an

artificial drug shortage.

DEA wants to clarify that this final

rule will be applicable to both bulk

manufacturers and dosage-form

manufacturers. The amount at which

quota will be suspended will differ for

individual manufacturing quota and

procurement quota. In reviewing FDA’s

Orange Book by controlled substance, it

is apparent the ratio of dosage-form

manufacturers to bulk manufacturers is

heavily weighted on dosage-form

manufacturers many of whom make

generic drug products that are

therapeutically equivalent to other drug

products for treating patients. Therefore,

the dosage-form manufacturers’ quota

suspension level will be lower.

While DEA understands the concerns

brought forth by the registrants, DEA

will continue to grant quota based on

legitimate need. The reduction of the

suspension of quota remains based on

estimated dispositions for the calendar

year. This suspension does not interfere

in normal campaign batches unless a

company’s net dispositions decrease

markedly from the company’s own

estimated dispositions provided to DEA

at the time of their quota application. A

manufacturer may complete their

campaigns for the calendar year based

on estimated net dispositions. If

dispositions are not as robust as the

company predicted, then any unused

quota will be suspended until

dispositions are estimated to leave the

company with the appropriate inventory

levels at the end of the year. If the

company is in the middle of a campaign

batch when they realize they will

exceed their estimated inventory

allowance, the company can apply and

request with good cause to complete the

batch before suspending manufacturing

activities until sales/dispositions bring

the estimated inventory level to the

correct percentage. See 1303.24(b). DEA

does not control the way a company

conducts business, as business

decisions on production and supply

chain management are done on the

company level.

However, as this relates to finished

dosage form manufacturers, a company

who requests quota revisions because of

poor business decisions, such as

manufacturing unnecessary dosage-

forms or strength based on estimated

legitimate need for the substance,

VerDate Sep<11>2014 16:30 Aug 30, 2023 Jkt 259001 PO 00000 Frm 00020 Fmt 4700 Sfmt 4700 E:\FR\FM\31AUR1.SGM 31AUR1

ddrumheller on DSK120RN23PROD with RULES1

60125

Federal Register / Vol. 88, No. 168 / Thursday, August 31, 2023 / Rules and Regulations

provides DEA an opportunity to grant

quota based on specific FDA approved

dosage-forms as authorized by the

SUPPORT Act. For example, at the

beginning of the COVID–19 pandemic,

hospitals declared drug shortages of

specific treatment drugs. DEA estimated

that it granted sufficient quota to

manufacturers for COVID–19 treatment

drugs. DEA received additional detailed

inventory information from the dosage-

form manufacturers and determined that

the manufacturers did not have the

correct dosage forms and strengths

available for hospitals to utilize

immediately. Therefore, DEA granted

additional quota specifically to meet the

dosage forms and strengths hospitals

required to treat COVID–19 patients.

Reduction of Amount at Which

Requests of Additional Quota Would Be

Granted to 20 Percent

Issue: Commenters requested

clarification as to whether the 20

percent rule will apply to dosage-form

manufacturers who use procurement

quota due to its proposed placement

within the CFR and because historically,

DEA has said it does not apply. Many

commenters opined that waiting until

20 percent to grant additional quota is

too low of a threshold and would lead

to supply disruption if applied to

dosage-form manufacturers. The lower

amount also would not allow

manufacturers to be ‘‘flexible to address

situations such as shortages, natural

disasters, epidemics, medical demand,

and other scenarios that would require

an increase in production of critical

medications.’’ Commenters went on to

explain that 20 percent equals 10 weeks

of inventory but production lead times

are typically greater than 10 weeks.

According to these commenters, waiting

until there is less than 10 weeks of

inventory will lead to market shortages

and disrupt patient care.

The commenters went on to state that

the time that it takes DEA to review

quota applications is longer than six to

eight weeks and granting more quota at

the 20 percent mark would possibly

mean depleting stock before DEA

finishes reviewing. In particular, Teva

stated that 15 of 36 (42 percent) of

Teva’s 2019 quota adjustment

applications took nine weeks or longer

for DEA to respond, and seven of 36

applications (19 percent) took 13–15

weeks for response. Response times of

10 or more weeks are unacceptable

under normal circumstances and will

exacerbate out of stock issues with

reduced inventory allowances. All of

this attributes to the increased potential

for shortages and delays of medicine.

DEA Response: When establishing

quota, DEA takes into account the

current and previous year’s sales and

uses historical data to justify the need.

DEA is not mandating that

manufacturers need to have an

inventory of less than 30 percent (for

individual manufacturing quota) or 25

percent (for procurement quota) before

applying for additional quota. A

registrant may file for additional quota

at any time during the calendar year.

During that time, DEA will review the

application and, if needed, will grant an

adjustment to the quota. Registrants

already apply for quota adjustments per

their needs, and this will not change the

current application process.

DEA acknowledges that quota

processing times can vary throughout

the year with some outliers. A quota

processing time analysis was conducted

for quota requests processed in 2019.

The analysis showed a quota processing

time range of four to eight weeks. When

initial quotas were not factored into the

calculation, the average time to process

quotas was approximately 37 calendar

days (estimate typical provided to

registrants is four to six weeks).

However, between October and

December, when concomitant

processing of initial and revised quota

applications occur, it took an average of

57 calendar days (estimate provided to

registrants is six to eight weeks). Quota

processing delays can be caused by

various circumstances such as, but not

limited to, incomplete, poorly written,

and mislabeled applications; pages of

extraneous information; and extremely

busy times of the year; however,

inventory has historically been adequate

to cover these delays and other

situations.

Additionally, as previously stated,

DEA has found that a portion of the

procurement quota granted for some

substances has not been utilized;

therefore, formally establishing an

inventory allowance five percent higher

than that which had already been

implemented should not cause more

quota applications to be submitted or

subsequent delays in processing. In fact,

DEA showed that manufacturers have

not been selling the material they have

procured against their quota and instead

have been adding it to their inventory to

await changes in patient need.

DEA’s actions in response to COVID–

19 prove that even with lower inventory

levels, DEA is able to be flexible to

address situations such as shortages,

natural disasters, epidemics, medical

demand, and other scenarios that would

require an increase in production of

critical medications, despite the

concerns of commenters. During the

COVID–19 pandemic, DEA, FDA, other

federal agencies, private partnerships,

and others in the pharmaceutical

industry—specifically the injectable

dosage-form manufacturers—were in

continuous dialogue regarding the

availability of controlled substances to

be used in the treatment of ventilator

patients. Despite the injectable dosage-

form manufacturers having almost a full

year’s worth of inventory, based on

previous year’s sales, plus current year

quota on hand, hospitals reported

shortages almost immediately as soon as

the treatment protocols were

determined. DEA soon determined that

despite the sheer quantity of available

inventory at the dosage-form

manufacturing level, the specific

formulations hospitals required were

not available. In order for DEA to

respond to hospitals reporting shortages

of injectable products for treatment of

ventilator patients during the COVID–19

pandemic, DEA and the injectable

manufacturers entered into continuous

dialogue to meet hospitals’ demand for

injectable products. With proper

supporting documentation, DEA was

able to process their quota requests in

less than five business days,

demonstrating DEA’s flexibility to

address situations such as shortages,

natural disasters, epidemics, medical

demand, and other scenarios that would

require an increase in production of

critical medications. Also, in these

dialogues, injectable manufacturers

stated that the manufacturing times

from acceptance of API to release of the

drug product took approximately 30 to

42 days. This manufacturing time

further shows that manufacturers also

have the flexibility to address those

situations raised by the commenters.

The COVID–19 pandemic

demonstrated that the issue was not the

availability of large inventories on hand,

but the flexibility to grant and utilize

quotas to produce the formulations and

dosage strengths demanded at the time

of the crisis. While the inventory

allowance for injectable products was

not at issue, discussions with FDA and

manufacturers during COVID–19

regarding cGMP issues allowed DEA to

realize the importance of maintaining a

separate inventory allowance for these

types of products as mentioned in

comments received regarding

injectables.

E. Subcategories for Quotas

Issue: DEA received seven comments

concerning the formalization of the

current practice of use-specific

subcategories for individual

manufacturing and procurement quotas.

One company was concerned that the

VerDate Sep<11>2014 16:30 Aug 30, 2023 Jkt 259001 PO 00000 Frm 00021 Fmt 4700 Sfmt 4700 E:\FR\FM\31AUR1.SGM 31AUR1

ddrumheller on DSK120RN23PROD with RULES1

60126

Federal Register / Vol. 88, No. 168 / Thursday, August 31, 2023 / Rules and Regulations

specificity may create an administrative

burden on manufacturers who may need

more product for one category versus

another. This commenter also suggested

that DEA allow registrants to transfer

product between categories based on

notice to DEA rather than requiring a

formal reallocation of quota. Another

organization emphasized that it did not

object to the proposed addition of use-

specific subcategories for individual

manufacturing and procurement quotas

and the use of subcategories by

registrants. It recommends that DEA

establish a new procurement quota or

subcategory for CPS and opium.

An association representing

manufacturers and distributors of over-

the-counter medicines, dietary

supplements, and consumer medical

devices in the United States noted that

although the subcategories for types of

quotas seem workable, it would reduce

flexibility. This association stated that

subcategories could create inefficiencies

or shortages in the supply chain if, for

instance, a manufacturing batch

required rework and thus required a

change in which use-specific

subcategory was used. The association

further noted that introduction of new

line extension of a medicine with a list

I chemical can result in in-year shifts in

the amount of material expected with

little notice as development, validation

or revalidation, or scale-up occur, with

different sub-category quota impacts.

One commenter was concerned with

how DEA defines replacement quota

and whether replacement quota will be

subtracted from the APQ. This same

commenter questioned whether DEA

intends to exceed the APQ by the

issuance of additional quota to replace

quota that was previously granted

within the same calendar year.

Additionally, the commenter suggested

that DEA explain how replacement

quota is factored into the APQ. As such,

this commenter believes that granting

replacement quota on a case-by-case can

appear to be unfair when faced with

identical circumstances submitted by

two different manufacturers.

Another commenter requested that

DEA provide clarification on whether

DEA-registered manufacturers are

materially impacted by the creation of

new sub-categories for suppliers that

will need to register for procurement

quotas and would there be any

additional impact to quota management

and certification procedures for

repackagers.

DEA Response: DEA is committed to

ensuring that quotas are set in such a

way as to grant manufacturers the

ability to provide controlled substances

to meet the demand of the legitimate

medical, scientific, industrial, and

research needs of the United States.

DEA is required to understand what is

available for legitimate patient need

versus what is available for product

development to calculate properly the

APQ and individual quotas.

Additionally, as the number of

manufacturers continues to increase and

industry practices and specializations

change, the ability to track methodically

movements of material between

registrants at all stages of manufacturing

becomes more critical. The specificity of

quota is important. DEA is responsible

for many reports that require the

denotation of quantities by quota type,

and it improves the efficiency of the

application and reporting process for

DEA-registered manufacturers. If

categories are combined, there would be

no way to calculate efficiently quota

that was used for commercial sales,

product development, packaging, etc.

This would drastically inflate the

quantity of commercial sales quota, as

packaging/repackaging and labeling/

relabeling quota, among other

categories, could not be separated from

commercial sales quota.

Replacement quota is intended to

replace material that does not meet good

manufacturing practice standards slated

to meet patient needs during the current

quota year and is not a means to replace

disposed samples, analytical samples,

product development material, and

expired inventory acquired or

manufactured under previous quota

years. This subcategory of individual

manufacturing quota and procurement

quota includes quota granted to a

registrant after the registrant obtained

material that was initially intended for

commercial sale, but is unable to be

marketed. Examples include failed

batches due to a contaminant, material

that is out of specification and can no

longer be used, lots that reached their

expiration date in the supply chain, or

unusable material received from a bulk

manufacturer. Replacement quota is

granted on a case-by-case basis. The

specifics of the registrant’s justification

and situation determines the merit of

the request.

HHS contemplates legitimate patient

needs and DEA then estimates the APQ

necessary to meet that need. While DEA

may have granted an initial quota,

changes instituted by HHS and/or

market needs may demonstrate that the

original quota is now higher than

necessary to meet market demand. For

example in November 2010, FDA asked

the manufacturers of propoxyphene

drug products to voluntarily withdraw

their drug products due to

cardiotoxicity issues. In response, DEA

denied all quotas for 2011 to dosage-

form manufacturers and bulk

manufacturers who supplied the

domestic market, and it granted

substantially reduced quotas to allow

manufacturers to meet the market

demand of foreign countries and

reference standards only. In this

example, manufacturers providing just

notice could exceed both agencies’

estimations for legitimate need allowing

for the possibility for misuse and abuse.

To obtain quota, a manufacturer must

submit a request to DEA for the quantity

they wish to manufacture. 21 CFR

1303.12 and 130.22. DEA in turn

performs a quota analysis based on the

information submitted and provides a

determination based on legitimate need.

Use-specific quota subcategories

reflect the manufacturing activity of the

applying DEA registrant and have

facilitated the issuance of

manufacturing and procurement quotas

and provided a more accurate

calculation of the APQ for the United

States by preventing double counting of

quota. They have been in place

informally for well over a decade with

no complaints from the registrants who

have found the system beneficial in

separating their product development

and packaging efforts from their

commercial manufacturing efforts when

requesting adjustments to their quotas.

Furthermore, packaging and

repackaging are manufacturing activities

as defined in the CSA and CFR and

already require quota.

F. New Deadlines for the Establishment

of Quotas

Issue: DEA received eight comments

from the public regarding the deadline

changes. Many comments were either

silent on the new deadlines or either

expressly stated that they had no

objection for the deadline changes, with

some going as far as to say they agree

and understand the need to change the

dates. Some desired clarification on

how DEA will reconcile new deadlines

for the supply chain where

inconsistences have been noted. For

instance, it was stated that extending

the deadlines would potentially bring

about supply disruptions when there are

long lead times. There is also concern

that changing the deadline to issue

quota adjustments would represent a

significant change because DEA

normally issues them any time during

the year, within six to eight weeks of a

request. Pushing the procurement quota

date to December 1 would make the

manufacturing process harder with the

reductions because DEA must issue

procurement quota before it approves an

import permit.

VerDate Sep<11>2014 16:30 Aug 30, 2023 Jkt 259001 PO 00000 Frm 00022 Fmt 4700 Sfmt 4700 E:\FR\FM\31AUR1.SGM 31AUR1

ddrumheller on DSK120RN23PROD with RULES1

60127

Federal Register / Vol. 88, No. 168 / Thursday, August 31, 2023 / Rules and Regulations

9

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

Response: DEA is changing the

deadline for issuing initial quotas to

December 1 as required in the

SUPPORT Act. This new deadline will

not affect the supply chain because the

quota issued cannot be utilized until

January 1 of the next calendar year.

Initial quota applications are due to

DEA by April 1 and May 1 of the

preceding year to be considered in the

APQ estimates which must be published

before quotas are allotted. The

December 1 deadline takes into account

the considerable amount of information

that must be collected from various

sources, analyzed, and reviewed by

multiple agencies prior to establishing

the quota. Under the current

regulations, DEA has less than two

months to accomplish this task and it

has proven unattainable as the

controlled substance manufacturing

business has grown larger and more

complex. Manufacturers will still be

able to apply for quota adjustments at

any time throughout the calendar year.

Registrants seeking an import permit

need to take into account any possible

delays when applying for them.

G. Letter From the States Attorneys

General

Types of Quota

Issue: DEA received a letter from the

Attorneys General of the States of West

Virginia, Arkansas, Florida, Kentucky,

Missouri, and Nebraska (hereinafter

‘‘letter from State Attorneys General’’)

concerning the process for setting

annual production quotas for controlled

substances.

The States applauded the significant

improvements DEA has made in

reducing opioid production quotas over

the past several years. The States stated

that DEA failed to tailor the quota-

setting process to legitimate medical

need, and urged DEA to consider

additional sources to set quotas. They

further commented that there is a lack

of transparency in setting quotas. The

States believe that DEA needs to explain

the logic behind the different

approaches to set quotas.

DEA Response: DEA is committed to

ensuring an adequate and uninterrupted

supply of controlled substances to meet

legitimate medical, scientific, and

export needs of the United States. DEA

sets aggregate production quotas in a

manner to ensure that all prescriptions

that are authorized for legitimate

medical purposes can be filled. For

purposes of setting quotas, it should be

noted that, as a result of new laws and

regulations, DEA considers a number of

factors, including, but not limited to, the

extent of any diversion of the controlled

substance in the class; relevant

information obtained from HHS

including FDA, CDC, CMS; and relevant

information obtained from the States.

9

SUPPORT Act

Issue: As previously stated, DEA

received a letter from six State

Attorneys General. West Virginia, along

with five other states, urged DEA to

expand the sources of data used to

determine the amount of diversion that

occurs. They mentioned that the

SUPPORT Act and the ‘‘Controlled

Substances Quotas’’ final rule (83 FR

32784) require the determination of the

extent of diversion, but stated that they

believe DEA takes different approaches

in fulfilling this requirement. The

commenters stated that DEA should

estimate the diversion of all controlled

substances the same way that DEA

estimates the diversion of covered

controlled substances. Furthermore,

they want DEA to explain the logic of

taking two separate approaches, as they

feel that even though the wording of the

two reforms slightly varies, DEA’s

approach should be the same.

As for the type of data DEA uses, the

States suggest that DEA use national and

state databases in the analysis.

Specifically, they recommended three

steps that DEA should take to

incorporate information that is currently

available: (1) Improve ARCOS and the

SORS to allow greater insight into

prescribing; (2) look at other national

databases that track drug abuse patterns,

poisonings, emergency room visits, and

treatment patients; and (3) consider

state databases that track drug overdoses

and hospital visits.

DEA Response: As stated above, in its

efforts to estimate the amount of

diversion, DEA acquires data from other

Federal agencies. While DEA currently

utilizes multiple internal and external

data sources, DEA remains open to

additional sources of reliable and

relevant data. Some of the sources the

States suggested that DEA use are not

reliable and precise and lack the

required granular specificity within the

data needed to estimate diversion. The

data does not examine each controlled

substance individually (i.e., as a basic

class and the quantity ingested), but

groups them together chemically,

making it difficult to determine which

basic class was involved and to what

extent its aggregate production quotas

should be lowered. For example,

patients that overdose from

hydrocodone, oxycodone, or

hydromorphone are grouped together

under opioid-related overdose. DEA is

unable to determine the basic class that

led to the overdose from this

information. Additionally, DEA cannot

determine from the data if the patient

overdosed on an illicit opioid or a

legally marketed opioid product. For

purposes of calculating the extent of

diversion for each basic class of

controlled substance, DEA would

benefit more from the drug overdose

and mortality data if it precisely

identified the controlled substance(s)

believed to be the cause of overdose or

death and if it included the quantity of

the substance ingested.

Modifications to the SORS and

ARCOS reporting requirements are

beyond the scope of this document.

DEA did request state specific data on

overdoses, death rates, and prescription

data in August 2018 for consideration in

setting the 2019 APQ. Only eight states

provided data, none of which are

represented in the comment letter;

however, the data provided was not

broken down by individual controlled

substances, which would allow DEA to

consider in determining the extent of

diversion or estimating diversion.

Over-Prescribing

Issue: As previously mentioned, DEA

received a comment that was co-signed

by six State Attorneys General,

including West Virginia. The State

Attorneys General conveyed that DEA

should account for over-prescribing

when analyzing diversion. The

commenters contend that only relying

on theft and seizure records does not

give a complete view of diversion.

Furthermore, they suggested using the

‘‘best practices’’ of medical

professionals to help account for

overprescribing at the physician level.

These commenters stated that medical

professionals are now crafting ‘‘best

practices’’ for opioid prescribing, which

the states believe can aid DEA in

determining correct quantities of what is

‘‘medically necessary’’ for opioids. The

letter also suggests that DEA expand the

National Take Back Programs to capture

more data on overprescribing rates.

DEA Response: For validly dispensed

controlled substances, DEA relies on

physicians to use their best judgment on

how much to prescribe. DEA does not

establish best practices for physicians,

nor does it control how much of a

prescription a patient ends up

consuming. DEA has previously stated

that ‘‘studies have found, with respect

to a variety of medical procedures, that

physicians prescribe more controlled

substances for post-operative pain than

the patients utilize. However, . . . DEA

has concluded that while the referenced

studies are concerning, they are

VerDate Sep<11>2014 16:30 Aug 30, 2023 Jkt 259001 PO 00000 Frm 00023 Fmt 4700 Sfmt 4700 E:\FR\FM\31AUR1.SGM 31AUR1

ddrumheller on DSK120RN23PROD with RULES1

60128

Federal Register / Vol. 88, No. 168 / Thursday, August 31, 2023 / Rules and Regulations

10

Established Aggregate Production Quotas for

Schedule I and II Controlled Substances and

Assessment of Annual Needs for the List I

Chemicals Ephedrine, Pseudoephedrine, and

Phenylpropanolamine for 2019. 85 FR 67348 at

67350. December 28, 2018.

insufficient to support a determination

as to the level of overprescribing that

occurs across the range of the medical

procedures that are performed each year

on a national basis.’’

10

More recently,

DEA has found that physicians are

already prescribing at lower rates

because of healthcare guidance.

As previously stated, there has been a

decline in schedule II opioid

prescriptions since 2014. Currently,

there is no reliable method for

quantifying the amount of prescription

medications turned in to the Take-Back

program. DEA found one study from

2015 that attempted to quantify the

drugs received at one Take-Back

location titled, ‘‘Analysis of Medications

Returned During a Medication Take-

Back Event.’’ However, DEA believes

that this study is not useful because the

methods drastically affect/limit the

quantity of each substance that could be

included in the analysis. To be included

in the study, the medication had to have

the following identifiers: drug name,

strength, amount remaining, amount

prescribed, generic or brand, and source

(local pharmacy, mail-order pharmacy,

or sample). The study also excluded

medications unavailable in the United

States, pet medications, medications in

containers without a legible label,

containers with remaining medication

amounts larger than the amount

dispensed, and medications not in tablet

or capsule formulations. The study

authors were able to demonstrate an

average overprescribing rate for all

medication types of 66 percent based on

the total number of pills dispensed

(obtained from labels) and the total

number of pills remaining in the

containers; however, substance specific

information is not available because the

medications (controlled and non-

controlled) were grouped. The study

does not mention the proportion of

medicine excluded from the study or an

estimate of diversion of particular

substances. The study assumed that

over prescribing was the cause of the

remaining number of tablets in the

bottle based on the written prescription.

It also assumed that the remainder in

the bottle was legitimate; however,

neither of these assumptions may be the

case. The bottle may have contained the

remainder of multiple prescriptions of

the same drug product dispensed over

time and brought to the drug Take-Back

event in a single container. This single

study cannot be extrapolated to the

national level for use in estimating

diversion or overprescribing.

H. Out of Scope

DEA received 194 comments are that

are being considered out of scope in

their entirety or partially. These

comments were very general and

mentioned personal medical issues,

treatments, medication costs, and drug

shortages. Included in these general out

of scope comments were assertions that

illicit drug use is the problem and that

doctors are not treating patients due to

fear of punishment from DEA.

DEA remains committed to ensuring

that there is an adequate and

uninterrupted supply of control

substances to meet the legitimate

medical, scientific, and export needs of

the United States. DEA does not tell

manufacturers how to manage their

quota within the use-specific categories.

For example, if a manufacturer holds an

FDA-approved application for several

different strengths of a dosage-form drug

product, DEA will not dictate which

strengths it should manufacture.

Furthermore, as previously stated, DEA

does not plan to set APQ in terms of

pharmaceutical dosage-form. As such,

the FDA-approved dosage-forms and

strengths that a manufacturer produces

are solely based on the manufacturers’

decision. In the event of shortages of

specific dosage-forms and/or strengths

of a dosage-form, DEA has and will

continue to implement actions based on

quota to prevent or alleviate a drug

shortage; however, DEA notes that the

injectable shortage is not a quota issue,

but instead due to manufacturers not

complying with FDA’s cGMP

requirements. In fact, DEA has granted

quota to manufacturers seeking to

comply with FDA requirements. If DEA

receives reliable information of a

manufacturer refusing to manufacture a

dosage-form or strength to alleviate a

drug product shortage, DEA will

implement its authority under the

SUPPORT Act to issue the

manufacturer’s quota in terms of dosage-

form and/or strength to ensure that

manufacturers produce certain dosage-

forms to assist in alleviating the drug

shortage.

III. Provisions Implemented in the

Final Rule

A. Types of Quota

DEA is adding sections 21 CFR

1303.03, 1303.17, 1315.06, and 1315.37,

and revising 1303.27 and 1315.27 to

introduce and define the types of quotas

in the current quota system and to

clarify and update the method to

abandon both individual manufacturing

and procurement quotas. Section 21

CFR 1303.03 will define the three types

of quota for schedule I and II controlled

substances: APQ, individual

manufacturing quotas, and procurement

quotas. Section 21 CFR 1315.06 will

define the four types of quotas available

for list I chemicals: AAN, individual

manufacturing quotas, procurement

quotas, and import quotas.

To strengthen the quota management

process, DEA has turned to managing

many aspects of the quota system

online. With this final rule, DEA will

update 21 CFR 1303.27 and 1315.27 to

require manufacturers submit a quota

application to the UN Reporting and

Quota Section in the online Quota

Management System instead of

submitting to the Drug and Chemical

Evaluation Section a written notice to

abandon any or all parts of the

individual manufacturing quotas for

schedule I and II controlled substances

and list I chemicals.

Sections 1303.17 and 1315.37 will

clarify that a manufacturer must also

abandon procurement quota for

schedule I and II controlled substances

and list I chemicals using the online

Quota Management System. Current

regulations only refer to the

abandonment of individual

manufacturing quota. To further clarify

the CFR, DEA will separate the current

subsection within the controlled

substance quota regulations entitled

‘‘Aggregate Production and Procurement

Quotas’’ and will make a separate

subsection for ‘‘Procurement Quotas.’’

In accordance with the creation of this

new subsection, DEA will move 21 CFR

1303.12 to 1303.15 and reserve 1303.12

for future use. These additions and

changes are also required due to the

procurement quota inventory

allowances that are being finalized with

this rule.

B. SUPPORT Act

As previously discussed in the NPRM,

as well as above in Section II, DEA will

be implementing in its regulations the

amendments to the CSA made by the

SUPPORT Act. These amendments

include the authority to establish APQ,

individual manufacturing quotas, and

procurement quotas in terms of

pharmaceutical dosage-forms, if it is

determined that it will assist in avoiding

the overproduction, shortages, or

diversion of a controlled substance,

which will be added to DEA’s

regulations at 21 CFR 1303.11(a),

1303.12(a) and 1303.21(a). DEA will

also be revising 21 CFR 1303.21(a) and

1315.21 to change the date to on or

before December 1 by which individual

manufacturing quotas must be fixed.

VerDate Sep<11>2014 16:30 Aug 30, 2023 Jkt 259001 PO 00000 Frm 00024 Fmt 4700 Sfmt 4700 E:\FR\FM\31AUR1.SGM 31AUR1

ddrumheller on DSK120RN23PROD with RULES1

60129

Federal Register / Vol. 88, No. 168 / Thursday, August 31, 2023 / Rules and Regulations

DEA will be adding a new regulation

regarding the requirement to estimate

the amount of diversion of the five

covered controlled substances in the

United States when establishing quotas

for these controlled substances and

make appropriate reductions will be

added to 21 CFR 1303.05. Furthermore,

this regulation will codify the

requirements of the SUPPORT Act

regarding information to be considered

when estimating diversion. The

SUPPORT Act requires consultation

with the Secretary of HHS in any year

that the approved APQ for a covered

controlled substance is higher than that

of the previous year and an explanation

from DEA in the APQ final order of why

the public health benefits of increasing

the quota clearly outweigh the

consequences of having an increased

volume of the covered controlled

substance available for sale, and

potential diversion, in the United States

21 U.S.C. 826(i)(2)(A). These

requirements will also be included in

1303.05, along with the definition of a

covered controlled substance.

C. Procurement Quota

Sections 1303.12(f) and 1315.32(h)

currently require certificates of quota

only when purchasing from a

manufacturer. Currently, DEA manages

the quota process by providing each

manufacturer a letter stating the

quantity of controlled substance(s) and/

or list I chemical(s) the manufacturer

may obtain during a calendar year. This

letter provides legal documentation that

the manufacturer is authorized to obtain

a specified quantity of the controlled

substance(s) and/or list I chemical(s).

When the CSA and DEA’s regulations

were first promulgated, neither

contemplated that distributors would be

used to move controlled substances and

list I chemicals between manufacturers.

When distributors provided schedule

II controlled substances to this subset of

manufacturers without verification of

the manufacturers’ quota authorization,

it circumvented the quota process of

verifying quota to the supplier. This

prevents DEA from performing its

oversight responsibilities and leads to

unauthorized distribution of drug

products. These unauthorized

distributions are only noted as sales,

which artificially inflates the estimation

of legitimate medical need, a heavily

weighted factor in the setting and

revising of the APQ.

This final rule revises 21 CFR

1303.12(f) and 1315.32(h) by ensuring

that both manufacturers and distributors

are required to obtain certification of a

buyer’s quota for the requested schedule

I and II controlled substances, as well as

list I chemicals when the buyer is a

manufacturer. By requiring that all

manufacturers and distributors receive a

certification of quota before providing

any quantity of controlled substance or

list I chemical to a DEA registered

manufacturer, DEA is better able to

maintain the closed distribution system.

D. Inventory Allowance

DEA is revising 21 CFR 1303.24 and

1315.24 to reduce the overall inventory

held by DEA-registered bulk and

dosage-form manufacturers. In response

to the comments received, DEA will

create a new regulation to address the

procurement quota changes. DEA had

proposed to place the changes for

procurement quotas in 21 CFR 1303.24

and 1315.24; however, it was pointed

out that the proposed placements fall

under the ‘‘Individual Manufacturing

Quota’’ subsections. As such, DEA will

create two new regulations, 21 CFR

1303.16 and 1315.31 and will place

them within the appropriate

procurement quota subsections.

DEA also acknowledges the concerns

conveyed in the comments regarding the

proposed percentages being too

restrictive. In response to these

concerns, DEA conducted further

analyses on dosage-form manufacturer

inventory data. As previously stated, the

data showed that manufacturers only

acquired 72.7 percent of fentanyl, 73.9

percent of hydrocodone, 56.7 percent of

hydromorphone, 79.3 percent of

oxycodone, and 73 percent of

oxymorphone from the quotas granted

to them by DEA. As prescription rates

have fallen, DEA has issued lower

quotas to match the estimated fallen

rates. The data show that even with the

reduced quotas, the material has not

sold, but has been placed into

inventory, thereby significantly

increasing inventory levels above that

which is medically necessary on an

annual basis. DEA has found that over

the past years, inventory levels have

averaged 72 percent for fentanyl, 36.9

percent for hydrocodone, 57 percent for

hydromorphone, 36.3 percent for

oxycodone, and 61 percent for

oxymorphone, while still meeting

legitimate medical needs. The inventory

levels for fentanyl, hydromorphone, and

oxymorphone include product

development efforts as manufacturers

seek FDA approval of abuse-deterrent

formulations. This data suggests that the

current allowance of 30 percent was not

too restrictive and has allowed

manufacturers to acquire the quota they

need for commercial sales. However, in

light of the need for preparedness for

any contingencies, DEA will establish

the procurement quota inventory

allowance at 35 percent.

DEA is also taking the time to clarify

what changes will apply to bulk form

manufacturers and dosage-form

manufacturers. Bulk manufacturers

receive individual manufacturing quotas

and dosage-form manufacturers receive

procurement quota. DEA acknowledges

the concerns of manufacturers, but for

reasons stated above, a lower inventory

allowance for individual manufacturing

quota needs to be implemented. As

such, DEA has reviewed historical data

from the companies and determined

that 50 percent (six months) of

inventory allowance is no longer

necessary given the changes in

prescribing guidelines to meet

legitimate medical need and will be

reducing individual manufacturing

quota inventory allowances to 40

percent instead. The reduction to 40

percent allows for just under five

months of inventory and takes into

account the latest prescribing practices

of the most prescribed substances as

well as decreasing the likelihood of

diversion of stocks. It still allows

manufacturers the flexibility to

accommodate market changes, FDA

regulations, and unforeseen

circumstances. As previously discussed

for procurement quotas, there are more

dosage-form manufacturers than bulk

manufacturers; therefore, a lower

inventory allowance for procurement

quota is warranted. For procurement

quotas, DEA will establish (for

controlled substances) and will reduce

(for list I chemicals) inventory

allowances to 35 percent (instead of 30

percent), except in the circumstances of

liquid injectable dosage-forms. Liquid

injectable dosage-forms (injectable

products, vials, solution bags, but not

tablets, capsules, suppositories, patches,

films, and oral solutions) will continue

to receive a 50 percent inventory

allowance due to DEA’s

acknowledgement that there are less

dosage-form manufacturers for these

liquids, as addressed above. Instead of

suspending all quota when a registrant’s

inventory exceeds the proposed amount

of 45 percent, DEA will be finalizing

three different suspension amounts. The

amount at which quota will be

suspended for manufacturing quota is

when the inventory reaches 55 percent

and will remain suspended until the

amount is lower than 50 percent. For all

dosage-forms, except liquid injectable

dosage-forms, individual procurement

quota will be suspended at 50 percent

and will be reinstated when the amount

is less than 45 percent. As applied to

liquid injectable dosage-forms,

VerDate Sep<11>2014 16:30 Aug 30, 2023 Jkt 259001 PO 00000 Frm 00025 Fmt 4700 Sfmt 4700 E:\FR\FM\31AUR1.SGM 31AUR1

ddrumheller on DSK120RN23PROD with RULES1

60130

Federal Register / Vol. 88, No. 168 / Thursday, August 31, 2023 / Rules and Regulations

individual procurement quota will be

suspended at 65 percent and will

remain in suspension until the

inventory amount is lower than 60

percent. Last, instead of DEA granting

requests of additional quota if inventory

is less than the proposed 20 percent,

DEA again will be finalizing three

different amounts based on type of

quota. DEA may increase the amount of

individual manufacturing quota once

the inventory is less than 30 percent.

For individual procurement quota, the

amount of quota may be increased when

the inventory is less than 25 percent;

however, individual procurement quota

for liquid injectable dosage-forms may

be increased when the inventory is less

than 40 percent.

The final changes are as follows:

•21 CFR 1303.16(a)—establishes an

inventory allowance issued by DEA for

procurement quotas of 35 percent for all

dosage-forms of schedules I and II

controlled substances, except liquid

injectable dosage-forms, which will

receive an inventory allowance of 50

percent;

•21 CFR 1303.16(b) and (c)—

suspends procurement quota issued by

DEA if inventory exceeds 50 percent for

all dosage-forms of schedules I and II

controlled substances, except liquid

injectable dosage-forms, which will be

suspended if inventory exceeds 65

percent;

•21 CFR 1303.16(d) and (e)—may

grant request for additional procurement

quota by registrant if inventory is less

than 25 percent for all dosage-forms of

the registrant’s estimated net disposal

for schedules I and II controlled

substances, except liquid injectable

dosage-forms, which may be granted if

inventory is less than 40 percent;

•21 CFR 1303.24(a)—decreases the

inventory allowance issued by DEA for

individual manufacturing quotas from

50 to 40 percent for schedules I and II

controlled substances;

•21 CFR 1303.24(b)—suspends

individual manufacturing quota issued

by DEA if inventory exceeds 55 percent

of the registrant’s estimated net disposal

for schedules I and II controlled

substances;

•21 CFR 1303.24(c)—may grant

request for additional individual

manufacturing quota by registrant if

inventory is less than 30 percent of the

registrant’s estimated net disposal for

schedules I and II controlled substances;

•21 CFR 1315.24(a)—decreases the

inventory allowance issued by DEA for

individual manufacturing quotas from

50 to 40 percent for the list I chemicals;

•21 CFR 1315.24(b)—suspends

individual manufacturing quotas issued

by DEA if inventory exceeds 55 percent

of the registrant’s estimated net disposal

for the list I chemicals;

•21 CFR 1315.24(c)—may grant

request for additional individual

manufacturing quotas by registrant if

inventory is less than 30 percent of the

registrant’s estimated net disposal for

the list I chemicals;

•21 CFR 1315.31(a)—decreases the

inventory allowance issued by DEA for

procurement quotas from 50 to 35

percent for all dosage-forms of the list

I chemicals, except liquid injectable

dosage-forms, where an inventory

allowance of 50 percent will be created;

•21 CFR 1315.31(b) and (c)—

suspends procurement quotas issued by

DEA if inventory exceeds 50 percent for

all dosage-forms of the registrant’s

estimated net disposal for the list I

chemicals except liquid injectable

dosage-forms, which will be suspended

if inventory exceeds 65 percent; and

•21 CFR 1315.31(d) and (e)—may

grant request for additional procurement

quotas by registrant if inventory is less

than 25 percent for all dosage-forms of

the registrant’s estimated net disposal

for the list I chemicals, except liquid

injectable dosage-forms, which may be

granted if inventory is less than 40

percent.

E. Subcategories

DEA is formalizing the addition of

use-specific subcategories by adding 21

CFR 1303.04 and 1315.07. As a practical

matter, DEA acknowledges that these

subcategories are already in use through

voluntary and cooperative efforts of

DEA registrants. This final rule will

codify DEA’s current utilization of

subcategories while facilitating the

issuance of individual manufacturing

and procurement quotas.

Additionally, the specification of

subcategories for manufacturing and

procurement quotas provides benefits to

the registrant by allowing for a more

detailed level of communication with

DEA as to why a registrant requires

specific controlled substances and list I

chemicals and how the registrant will

utilize those substances.

As the number of manufacturers

continues to increase and industry

practices and specializations continue

to evolve, DEA’s ability to track

movement of material between

registrants at all stages of manufacturing

is critical.

F. Deadlines

DEA collects various data to

administer the quota system and moving

the deadlines will allow more time for

processing the numerous applications

that DEA receives and for responding to

applications for quota, as there are more

registrants now than there were when

the regulations were first promulgated.

The new deadlines will also allow DEA

more time to obtain additional relevant

data from multiple agencies. The

changes are as follows:

•Establishment of the APQ and the

AAN (21 CFR 1303.11(c) and

1315.11(c)): change from May 1 to

September 1;

•Deadline to issue procurement

quota (21 CFR 1303.12(c) and

1315.32(f)): change from July 1 to

December 1;

•Deadline to issue import quota for

list I chemicals (21 CFR 1315.34(f)):

change from July 1 to December 1; and

•Deadline to adjust individual

manufacturing quota (21 CFR 1303.23(c)

and 1315.23(c)): change from March 1 to

July 1.

Regulatory Analyses

Executive Orders 12866 (Regulatory

Planning and Review) and 13563

(Improving Regulation and Regulatory

Review)

This final rule has been developed in

accordance with the principles of

Executive Orders (E.O.) 12866 and

13563. E.O. 12866 directs agencies to

assess all costs and benefits of available

regulatory alternatives and, when

regulation is necessary, to select

regulatory approaches that maximize

net benefits (including potential

economic, public health and safety, and

environmental advantages, distributive

impacts, and equity). E.O. 13563 is

supplemental to and reaffirms the

principles, structures, and definitions

governing regulatory review established

in E.O. 12866. E.O. 12866 classifies a

‘‘significant regulatory action’’ requiring

review by the Office of Management and

Budget (OMB) as any regulatory action

that is likely to result in a rule that may:

(1) have an annual effect on the

economy of $100 million or more, or

adversely affect in a material way the

economy, a sector of the economy,

productivity, competition, jobs,

environment, public health or safety, or

State, local, or tribal governments or

communities; (2) create a serious

inconsistency or otherwise interfere

with an action taken or planned by

another agency; (3) materially alter the

budgetary impact of entitlements,

grants, user fees, or loan programs or the

rights and obligations of recipients

thereof; or (4) raise novel legal or policy

issues arising out of legal mandates, the

President’s priorities, or the principles

set forth in the Executive Order.

While this final rule is not

economically significant, it is a

significant regulatory action under E.O.

VerDate Sep<11>2014 16:30 Aug 30, 2023 Jkt 259001 PO 00000 Frm 00026 Fmt 4700 Sfmt 4700 E:\FR\FM\31AUR1.SGM 31AUR1

ddrumheller on DSK120RN23PROD with RULES1

60131

Federal Register / Vol. 88, No. 168 / Thursday, August 31, 2023 / Rules and Regulations

11

21 CFR 1303.12(f) and 1315.32(h).

12

For the purposes of this analysis, DEA used the

median hourly wage rate of $32.63 for 13–1041

Compliance Officers. Bureau of Labor Statistics,

Occupational Employment and Wages, May 2017,

https://www.bls.gov/oes/2017/may/oes131041.htm.

13

The loaded hourly rate for 13–1041

Compliance Officers is $46.99 ($32.63 × 1.44).

Bureau of Labor Statistics, Employer Costs for

Continued

12866, section 3(f) subjecting it to

review by OMB. DEA analyzed the

economic impact of each provision of

this final rule, including any changes

made from the proposed rule, and

estimated the annual cost to be $26.4

million. Certain provisions are

estimated to have benefits; however,

DEA does not have a basis to estimate

those benefits due to many unknowns.

Because of this, the benefits of this rule

are discussed qualitatively. The rule

contains clarification of regulatory

language and the codification of existing

DEA and registrant practices regarding

subcategories for quotas, certification of

procurement quota, reductions to

inventory allowances, and additional

considerations for revisions to the APQ.

The results of the analysis of each

provision are as follows:

Defining Types of Quota and Filing To

Abandon Quota

These provisions simply codify

existing DEA practices, and will result

in no economic impact on registrants or

DEA. The formal definition of quota

types will have no economic impact on

registrants or DEA, and formalizing the

procedure to abandon quota is simply a

codification of DEA’s current procedure.

While these provisions will have no

quantifiable impact, DEA believes there

is at least a minimal benefit to codifying

existing practices accurately. Because

these provisions codify existing

practice, current registrants are, in most

cases, already complying and will not

change their behavior. Errors and

misunderstandings on the part of

registrants do happen, but are

uncommon. Nevertheless, these

provisions of the final rule are expected

to enhance clarity, certainty, and

efficiency.

Conforming Revisions Related to the

SUPPORT Act

As indicated above, the SUPPORT Act

gives DEA discretionary authority to

establish quotas in terms of

pharmaceutical dosage-form. At the

present time, DEA is not deviating from

its current practice of establishing

quotas necessary for the manufacture of

finished dosage-forms in terms of

kilograms and allowing manufacturers

to determine how best to allocate those

kilograms to different FDA-approved

dosage-forms. While it is impossible to

know all the circumstances in which

this authority might be utilized in the

future, it is DEA’s current intention that

any implementation of dosage-form

quotas will be the exception rather than

the rule and will coexist alongside

kilogram quotas. DEA recognizes that

dosage-form manufacturers are in the

best position to understand the demand

for their products, in dosage-form.

Because, at the present time, DEA is

likely to use this authority sparingly,

and only adjust quotas for

manufacturers producing the dosage-

form, DEA anticipates that this

provision of the proposed rule will have

minimal impact.

The SUPPORT Act also requires DEA

to estimate the amount of diversion

when establishing quota for a covered

controlled substance using all reliable

information, including information from

HHS and other agencies. DEA has

considered information and data

regarding the amount of diversion for

covered controlled substances when

applicable during the process of

determining the APQ. This function is

a regular part of DEA’s operations,

although in the past DEA has relied on

its own internal data in the process of

determining the APQ. DEA’s view is

that considering additional reliable

information gathered from outside the

agency to estimate the amount of

diversion will result in minimal

additional time or cost.

The SUPPORT Act updates also

extend DEA’s deadline to fix individual

manufacturing quotas for schedules I

and II controlled substances from

October to December, and they formally

define the phrase ‘‘covered controlled

substance’’ to include fentanyl,

oxycodone, hydrocodone,

oxymorphone, or hydromorphone. The

deadline extension will have minimal

impact on registrants, as DEA currently

does not meet the October deadline and

has not met that deadline since before

1996. This extension will align the

regulations with reality for registrants

and DEA. Defining ‘‘covered controlled

substance’’ will not change how those

substances or the registrants that are

authorized to handle those substances

are regulated. Therefore, these

provisions will have minimal impact on

registrants or DEA.

While the benefits of the SUPPORT

Act updates were not quantified due to

many unknowns, it is possible to

discuss some of these benefits in

qualitative terms. With these

conforming revisions related to the

SUPPORT Act, DEA has the ability to

respond to adverse market conditions

with increased speed and flexibility to

minimize public harm. DEA would use

dosage-form quotas to alleviate the rare

occurrence of a drug shortage in the

market by targeting the specific dosage-

forms that are in short supply instead of

simply increasing the total amount of

kilograms of a drug to be produced,

resulting in a benefit to the public.

Another benefit is that updating the

deadlines for setting individual

manufacturing quotas so they reflect

DEA’s current practice eliminates

regulatory uncertainty for

manufacturers. Regulations that

realistically reflect current DEA and

industry practice will benefit the

planning processes of current and future

market participants.

Procurement Quota Certification

The final rule will require that all

DEA registrants supplying schedules I

and II controlled substances and list I

chemicals to DEA manufacturers obtain

certification of the manufacturer’s quota

before completing the transaction. In

practice, this certification may be any

written declaration issued by

manufacturers to distributors. This

provision prevents manufacturers from

purchasing their API or finished dosage-

forms from distributors without quota

verification as currently required when

manufacturers request API or finished

dosage-forms from other manufacturers.

Current regulations stipulate that only

entities registered as ‘‘importer,’’

‘‘manufacturer,’’ or ‘‘bulk manufacturer’’

must certify quota before a sale.

11

To estimate the cost of this provision,

DEA utilized internal data tracking the

sale of schedules I and II controlled

substances and list I chemicals from

distributors to manufacturers during the

three year period of January 1, 2015 to

December 31, 2017. DEA’s analysis

revealed that over this three year period,

distributors filled an average of 3,000

orders to manufacturers per year. Using

Bureau of Labor Statistics (BLS) wage

data for Compliance Officers,

12

the type

of registrant employee that would be

tasked with certifying quota, DEA

estimated the labor cost of quota

certification to distributors and

manufacturers. Based on its knowledge

of registrant business operations, DEA

estimates a manufacturer compliance

officer requires 10 minutes to draft a

quota certification letter after placing a

purchase request to a distributor, while

the distributor compliance officer

requires five minutes to review and

verify the manufacturer’s certification

letter. This results in a combined labor

burden of 15 minutes (0.25 hours).

Multiplying the loaded median hourly

wage rate for compliance officers

13

by

VerDate Sep<11>2014 16:30 Aug 30, 2023 Jkt 259001 PO 00000 Frm 00027 Fmt 4700 Sfmt 4700 E:\FR\FM\31AUR1.SGM 31AUR1

ddrumheller on DSK120RN23PROD with RULES1

60132

Federal Register / Vol. 88, No. 168 / Thursday, August 31, 2023 / Rules and Regulations

Employee Compensation—December 2018, https://

www.bls.gov/news.release/archives/ecec_

12142018.pdf.

0.25 and applying that to the estimated

3,000 certification letters per year yields

a combined annual labor cost of $35,241

($23,494 of which is incurred by

manufacturers while the remaining

$11,747 is incurred by distributors).

Reduction of Inventory Allowances

In response to public comments

regarding the proposed inventory

allowance reductions put forth in the

NPRM, DEA is modifying the reductions

that will become effective upon

publication of this final rule, while also

establishing new procurement quota

inventory allowances for dosage forms.

Comments received from manufacturers

stressed that the proposed changes to

the inventory allowance would increase

production costs, product waste, and

inefficiencies. Specifically,

manufacturers stated that the proposed

reductions would require smaller, more

frequent manufacturing campaigns in

order to produce the same amount of

finished product in a given year, and

that DEA’s ability to respond to requests

for quota adjustments throughout the

year is not sufficient if market demand

fluctuates. Additionally, commenters

expressed concern that reducing

inventory allowances for certain liquid

injectable dosage-forms may cause a

significant disruption in the supply of

these life-saving drugs given the

relatively limited number of

manufacturers. As a result, DEA is

adjusting the inventory allowance

reductions in this final rule to

minimize, to the extent possible, any

supply disruptions or increases in

manufacturing production costs. DEA is

also clarifying which inventory

allowances apply to individual

manufacturing quota and which apply

to procurement quota by establishing a

procurement quota inventory allowance

in 21 CFR 1303.16(a). While there may

not be published studies showing that

smaller inventories reduce diversion,

DEA must provide for the estimated

medical, scientific, research, and

industrial needs of the United States, for

lawful export requirements, and for the

establishment and maintenance of

reserve stocks, while also preventing an

oversupply which increases the risk of

diversion. DEA believes that these final

inventory allowance reductions will

help achieve its goal of reducing the risk

of diversion at the manufacturer level.

Many of the comments received from

manufacturers stated generally that the

proposed inventory allowance

reductions would increase the cost of

API production, but only one

commenter provided a detailed estimate

for how much their costs are likely to

increase in a given year. This

commenter estimates that their

incremental production costs would rise

by approximately $600,000 per year,

primarily due to the reduced inventory

allowance necessitating an additional

manufacturing campaign for their

largest volume API products, decreasing

efficiency and potentially increasing the

amount of product wasted during the

required cleaning of equipment between

each additional campaign. While DEA

recognizes this single cost estimate as

legitimate, it is unlikely that production

costs are uniform across manufacturers

and depend largely on variables unique

to each firm. However, given the

absence of detailed monetary cost

estimates from other commenters, and

the fact that the required inputs to

calculating an individual firm’s

manufacturing costs are proprietary and

unknown to DEA, using this

commenter’s estimate as the basis for

estimating the impact of this provision

of the final rule is the most reasonable

option available to DEA.

With this final rule, DEA will be

reducing individual manufacturing

quota inventory allowances to 40

percent (instead of the proposed 30

percent) and will be establishing (for

controlled substances) and reducing (for

list I chemicals) procurement quota

inventory allowances for all dosage-

forms (except liquid injectable dosage-

forms) to 35 percent. Procurement quota

inventory allowances for liquid

injectable dosage-forms are being

formally established at 50 percent,

resulting in no change from the pre-rule

baseline. The threshold at which

individual manufacturing quota will be

suspended is reached when inventories

exceed 55 percent of estimated net

disposal (instead of the proposed 45

percent) and will remain suspended

until inventory falls below 50 percent.

However, DEA will suspend individual

procurement quota at 50 percent, and

will reinstate it when inventories fall

below 45 percent. DEA will suspend

procurement quota for liquid injectable

dosage-forms when inventories rise

above 65 percent, and will reinstate it

when inventories fall below 60 percent.

Finally, DEA may increase the amount

of individual manufacturing quota once

the inventory is less than 30 percent

(instead of the proposed 20 percent). For

individual procurement quota, the

amount of quota may be increased when

the inventory is less than 25 percent or

when inventories are less than 40

percent for liquid injectable dosage-

forms.

Because the comments received from

manufacturers focused primarily on

their estimation of the increase in time

and cost of manufacturing API products,

DEA believes it is reasonable to assume

that the costs imposed by this provision

stem primarily from the inventory

allowance reduction for individual

manufacturing quotas, and this cost is

borne by bulk manufacturers. There are

currently 44 bulk manufacturers

registered with DEA. Based on the only

detailed monetary cost estimate

received, DEA assumes that each of

these registrants will incur an average

annual cost of $600,000, equating to

$26.4 million in total annual costs as a

result of this provision of the final rule.

It is important to note that the

estimated total annual costs from

reducing inventory allowances could be

higher than actual costs. The

incremental cost increase of $600,000

presented by the commenter and being

used in this analysis as representative of

the average annual costs for each bulk

manufacturer was based on the

proposed individual manufacturing

quota inventory allowance reduction

from 50 percent to 30 percent, with

suspension of quota at 45 percent. As

stated above, based on public

comments, DEA is choosing to

implement a smaller reduction to

inventory allowances with this final

rule, settling on an individual

manufacturing quota inventory

allowance of 40 percent, with

suspension of quota occurring if

inventories rise above 55 percent.

Additionally, the commenter that

provided the monetary cost estimate is

a large manufacturer; therefore,

applying their estimated costs across all

44 bulk manufacturers, which includes

many small manufacturers, likely

overstates the total annual cost. Because

of this, it may be the case that the

average incremental costs incurred by

bulk manufacturers are less than

$600,000, especially if the revised

inventory allowances prevent the need

for some manufacturers to add

production campaigns for certain

products. However, DEA has no way of

knowing if this is indeed the case;

therefore, DEA assumes that an average

annual cost estimate of $600,000

incurred by bulk manufacturers as a

result of this provision is reasonably

accurate.

Inventory allowances are a factor in

DEA’s determination of a registrant’s

quota for the coming year and provides

inventory for sales at the beginning of a

new quota year before quota is received.

Registrants may also exceed their

VerDate Sep<11>2014 16:30 Aug 30, 2023 Jkt 259001 PO 00000 Frm 00028 Fmt 4700 Sfmt 4700 E:\FR\FM\31AUR1.SGM 31AUR1

ddrumheller on DSK120RN23PROD with RULES1

60133

Federal Register / Vol. 88, No. 168 / Thursday, August 31, 2023 / Rules and Regulations

14

Combat Methamphetamine Epidemic Act of

2005, Public Law 109–177.

inventory allowance during the year. If

at any time during the year, the

inventory of a basic class held by a

manufacturer exceeds 55 percent (or 50

percent for procurement quota of

dosage-forms) of estimated net disposal,

the quota for that class is automatically

suspended and would remain

suspended until inventory is less than

50 percent (or 45 percent for

procurement quota of dosage-forms) of

the estimated net disposal. Practically

speaking, the changes to inventory

allowances equate to a reduction from

the current half of a year’s sales supply

(50 percent) allowed to be held as

inventory to nearly five months (40

percent) for individual manufacturing

and over four months (35 percent) for

dosage-form manufacturing.

Additionally, the 55 percent maximum

inventory during the year would give

manufacturers the flexibility to have

over six months of sales supply

inventoried to account for any

unplanned fluctuations in demand or

timing in orders for their product

throughout the year. For dosage-form

manufacturers, the maximum inventory

of 50 percent provides exactly six

months of sales supply. The inventory

allowance for liquid injectable dosage-

forms remains unchanged; thus, there is

no impact on these products.

While DEA acknowledges that

reducing inventory allowances will

increase costs for bulk manufacturers,

DEA concludes that these reductions are

not likely to result in supply

disruptions. Registrants routinely

request adjustments to their quota

throughout the year due to fluctuations

in market conditions, and this is a

normal part of a manufacturer’s

business operations. DEA quickly

responds to these requests within six to

eight weeks, ensuring legitimate

business is not disrupted, and will

continue to do so once this rule is

promulgated. For example, in 2017 (the

last year in which data are available),

DEA processed 1,752 initial quota

applications and 2,299 requests for

adjustment to quota. Additionally, in

response to the ongoing COVID–19

pandemic, DEA and manufacturers of

injectable products for treatment of

ventilator patients have entered into

continuous dialogue to meet surging

hospital demand. During this time, DEA

was able to process manufacturer quota

requests in less than five business days,

demonstrating DEA’s flexibility to

address situations such as shortages,

natural disasters, epidemics, medical

demand, and other scenarios that would

require an increase in production of

critical medications. Also, in these

dialogues, injectable manufacturers

stated that the manufacturing times

from acceptance of API to release of the

drug product took approximately 30 to

42 days. The COVID–19 pandemic has

demonstrated that the flexibility to grant

and utilize quotas to produce the

formulations and dosage strengths

demanded in times of crisis is more

important than the availability of large

inventories on hand.

Formalization of Subcategories for

Manufacturing Quotas and Procurement

Quotas

This provision of the final rule is a

codification of existing voluntary and

cooperative efforts between registrants

and DEA that have been in place since

2001 and facilitates a more accurate

calculation of APQ for the United

States. The establishment of

subcategories of: (1) Quota for

Commercial Sales; (2) Quota for

Transfer; (3) Quota for Product

Development; (4) Quota for

Replacement; and (5) Quota for

Packaging/Repackaging and Labeling/

Relabeling are already being utilized by

DEA with full cooperation from all

registrants. Therefore, this provision

simply updates 21 CFR 1303.03,

1303.04, 1315.06, and 1315.07 to reflect

current DEA procedure for the

management of quota, and it will have

no economic impact on registrants or

DEA.

New Deadlines for Establishing Quotas

The final rule will modify the

deadlines for establishing and

publishing the APQ, AAN, import

quotas, procurement quotas,

manufacturing quotas, and any

adjustments to manufacturing quotas.

Due to the expansion of the market and

the increase in the number of bulk and

dosage-form manufacturers since that

deadline was implemented almost 50

years ago, DEA frequently misses the

current deadlines for the establishment

of the APQ and the AAN of May 1 and

the issuing of individual procurement,

manufacturing and import quotas of July

1. Congress mandated quotas for

importers of list I chemicals in 2007.

14

Applications for import and

procurement quota are due April 1,

giving DEA only 30 days before the May

1 deadline for publication of the APQ

and AAN. Given that DEA has

historically missed these deadlines

since it must take adequate time to

provide a thorough and careful

assessment of each application, both

DEA and industry have already become

accustomed to a delayed publishing

schedule. Therefore, this provision is

expected to have minimal economic

impact as it simply aligns the regulatory

deadlines with the current practices of

DEA and industry.

Executive Order 12988, Civil Justice

Reform

This rulemaking meets the applicable

standards set forth in Sections 3(a) and

3(b)(2) of Executive Order 12988, Civil

Justice Reform to eliminate ambiguity,

minimize litigation, establish clear legal

standards, and reduce burden.

Executive Order 13132, Federalism

This rulemaking does not preempt or

modify any provision of State law,

impose enforcement responsibilities on

any State, or diminish the power of any

State to enforce its own laws.

Accordingly, this rulemaking does not

have federalism implications warranting

the application of Executive Order

13132.

Executive Order 13175, Consultation

and Coordination With Indian Tribal

Governments

This rule does not have substantial

direct effects on the states, on the

relationship between the national

government and the states, or the

distribution of power and

responsibilities between the Federal

government and Indian tribes.

Regulatory Flexibility Act

In accordance with the Regulatory

Flexibility Act (RFA), DEA evaluated

the impact of this rule on small entities.

DEA’s evaluation of economic impact by

size category indicates that this final

rule will not have a significant

economic impact on a substantial

number of these small entities.

The RFA requires agencies to analyze

options for regulatory relief of small

entities unless it can certify that the rule

will not have a significant impact on a

substantial number of small entities. For

purposes of the RFA, small entities

include small businesses, nonprofit

organizations, and small governmental

jurisdictions. DEA evaluated the impact

of this rule on small entities and

discussions of its findings are below.

As discussed in the ‘‘Executive Orders

12866 (Regulatory Planning and

Review) and 13563 (Improving

Regulation and Regulatory Review)’’

section above, this rule has six key

components as described below.

Defining Types of Quota and Filing To

Abandon Quota

This provision codifies existing DEA

practices and will result in no economic

VerDate Sep<11>2014 16:30 Aug 30, 2023 Jkt 259001 PO 00000 Frm 00029 Fmt 4700 Sfmt 4700 E:\FR\FM\31AUR1.SGM 31AUR1

ddrumheller on DSK120RN23PROD with RULES1

60134

Federal Register / Vol. 88, No. 168 / Thursday, August 31, 2023 / Rules and Regulations

15

21 CFR 1303.12(f) and 1315.32(h).

16

Id.

impact on registrants or DEA. The

formal definition of quota types will

have no practical impact on registrants,

and formalizing the procedure to

abandon quota is simply a codification

of DEA’s current procedure. Therefore,

this provision will have no costs.

Conforming Revisions Related to the

SUPPORT Act

While the SUPPORT Act gives DEA

the authority to establish quotas in

terms of pharmaceutical dosage-form,

DEA will continue to use its current

process of establishing quota in terms of

kilograms. Therefore, this provision of

the rule will have no impact.

Additionally, the SUPPORT Act

defines the phrase ‘‘covered controlled

substance’’ to include fentanyl,

oxycodone, hydrocodone,

oxymorphone, and hydromorphone. It

requires DEA to estimate the amount of

diversion when establishing quota for

covered controlled substances by

consulting with the Secretary of HHS

and considering reliable information on

the rates of overdose deaths and abuse

and overall public health impact in the

United States that is determined to be

reliable. DEA has considered the

amount of diversion when establishing

quotas when data has been available

and is a regular part of DEA’s

operations. Therefore, considering

additional reliable information gathered

from outside the agency to estimate the

amount of diversion will result in

minimal additional cost.

The SUPPORT Act updates also

extend DEA’s deadline to fix individual

manufacturing quotas for schedules I

and II controlled substances from

October to December. The deadline

extension will have minimal impact on

registrants as DEA currently does not

meet the October deadline. This

extension will align the regulations with

reality for registrants. Therefore, these

provisions will have minimal impact on

registrants or DEA.

Procurement Quota Certification

The final rule will require that all

DEA registrants supplying schedules I

and II controlled substances and list I

chemicals to DEA manufacturers to

obtain certification of the

manufacturer’s quota before completing

the transaction. In practice, this

certification must be a written

declaration issued by manufacturers to

distributors containing the information

as required in the regulations.

15

This

provision prevents manufacturers from

purchasing their API or finished dosage-

forms from distributors without quota

verification as currently required when

manufacturers request API or finished

dosage-forms from other manufacturers.

Current regulations stipulate that only

entities registered as ‘‘importer,’’

‘‘manufacturer,’’ or ‘‘bulk manufacturer’’

must certify quota before a sale.

16

To estimate the cost of this provision,

DEA utilized internal data tracking the

sale of schedules I and II controlled

substances and list I chemicals from

distributors to manufacturers during the

three year period of January 1, 2015 to

December 31, 2017. DEA’s analysis

revealed that over this three year period,

distributors filled an average of 3,000

orders to manufacturers per year. Using

BLS wage data for Compliance Officers,

the type of registrant employee that

would be tasked with certifying quota,

DEA estimated the labor cost of quota

certification to distributors to be

$11,747 and $23,494 to manufacturers,

resulting in a combined annual labor

cost of $35,241.

Reduction of Inventory Allowances

This final rule will reduce the

inventory allowance for manufacturers

of controlled substances and list I

chemicals from 50 percent to 40 percent

of the registrant’s estimated net

disposal, and it will establish a

procurement quota inventory allowance

for dosage-forms and list I chemicals at

35 percent of the registrant’s estimated

net disposal. Procurement quota

inventory allowances for liquid

injectable dosage-forms are also being

formally established at 50 percent,

resulting in no change. Inventory

allowances are a factor in DEA’s

determination of a registrant’s quota for

the coming year and provide inventory

for sales at the beginning of a new quota

year before quota is received.

Registrants may exceed their inventory

allowance during the year. If at any time

during the year the inventory of a basic

class held by a manufacturer exceeds 55

percent (or 50 percent for procurement

quota for dosage-forms) of estimated net

disposal, the quota for that class is

automatically suspended and would

remain suspended until inventory is

less than 50 percent (45 percent for

procurement quota dosage-forms) of the

estimated net disposal. Practically

speaking, the changes to inventory

allowances equate to a reduction from

the current half of a year’s sales supply

(50 percent) allowed to be held as

inventory to nearly five months (40

percent) for individual manufacturing

and over four months (35 percent) for

dosage-form manufacturing.

Additionally, the 55 percent maximum

inventory during the year gives

manufacturers the flexibility to have

over six months of sales supply

inventoried to account for any

unplanned fluctuations in demand or

timing in orders for their product

throughout the year. For dosage-form

manufacturers, the maximum inventory

of 50 percent provides exactly six

months of sales supply. The inventory

allowance for liquid injectable dosage-

forms remains unchanged at 65 percent;

thus, there is no impact on these

products.

Because the comments received from

manufacturers on this provision of the

proposed rule focused primarily on

their estimation of the increase in time

and cost of manufacturing API products,

DEA believes it is reasonable to assume

that any costs imposed by this provision

stem primarily from the inventory

allowance reduction for individual

manufacturing quotas, and this cost is

borne by bulk manufacturers. The only

commenter to provide a detailed

monetary cost estimate for DEA to

consider stated that its incremental

production costs would rise by

approximately $600,000 per year

primarily due to the reduced inventory

allowance necessitating an additional

manufacturing campaign for their

largest volume API products. While

DEA recognizes this single cost estimate

as legitimate, it is unlikely that

production costs are uniform across

manufacturers and depend largely on

variables unique to each firm. However,

given the absence of detailed monetary

cost estimates from other commenters

and the fact that the required inputs to

calculating an individual firm’s

manufacturing costs are proprietary and

unknown to DEA, using this

commenter’s estimate as the basis for

estimating the impact of this provision

of the final rule is the most reasonable

option available to DEA.

There are currently 44 bulk

manufacturers registered with DEA.

DEA assumes that each of these

registrants will incur an average annual

cost of $600,000, equating to $26.4

million in total annual costs because of

this provision of the final rule.

While DEA acknowledges that

reducing inventory allowances will

increase costs for bulk manufacturers,

DEA concludes that these reductions are

not likely to result in supply

disruptions. Registrants also routinely

request adjustments to their quota

throughout the year due to fluctuations

in market conditions. This is a normal

part of a manufacturer’s business

operations. DEA quickly responds to

these requests within six to eight weeks,

ensuring legitimate business is not

VerDate Sep<11>2014 16:30 Aug 30, 2023 Jkt 259001 PO 00000 Frm 00030 Fmt 4700 Sfmt 4700 E:\FR\FM\31AUR1.SGM 31AUR1

ddrumheller on DSK120RN23PROD with RULES1

60135

Federal Register / Vol. 88, No. 168 / Thursday, August 31, 2023 / Rules and Regulations

17

DEA believes ‘Pharmaceutical Preparation

Manufacturing’ (325412) includes 503B outsourcing

facilities.

18

DEA believes ‘Drugs and Druggists’ Sundries

Merchant Wholesalers’ (424210) includes both

distributors and importers of controlled substances

and (human form) list I chemicals.

19

For the purposes of this analysis, the term

‘‘firm’’ is synonymous with ‘‘entities.’’

20

SBA ‘‘Table of Small Business Size Standards

Matched to North American Industry Classification

System Codes, Effective August 19, 2019.’’

disrupted, and it will continue to do so

once this rule is promulgated. For

example, in 2017 (the last year in which

data are available), DEA processed 1,752

initial quota applications and 2,299

requests for adjustment to quota.

Additionally, in response to the ongoing

COVID–19 pandemic, DEA and

manufacturers of injectable products for

treatment of ventilator patients entered

into continuous dialogue to meet

surging hospital demand. During this

time, DEA was able to process

manufacturer quota requests in less than

five business days, demonstrating DEA’s

flexibility to address situations such as

shortages, natural disasters, epidemics,

medical demand, and other scenarios

that could require an increase in

production of critical medications. Also,

in these dialogues, injectable

manufacturers stated that the

manufacturing times from acceptance of

API to release of the drug product took

approximately 30 to 42 days. The

COVID–19 pandemic has demonstrated

that the flexibility to grant and utilize

quotas to produce the formulations and

dosage strengths demanded in times of

crisis is more important than the

availability of large inventories on hand.

Formalization of Subcategories for

Manufacturing Quotas and Procurement

Quotas

This provision of the final rule is a

codification of existing voluntary and

cooperative efforts between registrants

and DEA that have been in place since

2001 and allows a more accurate

calculation of APQ for the United

States. The establishment of

subcategories of: (1) Quota for

Commercial Sales; (2) Quota for

Transfer; (3) Quota for Product

Development; (4) Quota for

Replacement; and (5) Quota for

Packaging/Repackaging and Labeling/

Relabeling are already being utilized by

DEA with full cooperation from all

registrants. Therefore, this provision

simply updates 21 CFR 1303.03,

1303.04, 1315.06, and 1315.07 to reflect

current DEA procedure for the

management of quota and will have no

economic impact on registrants or DEA.

New Deadlines for Establishing Quotas

The final rule would modify the

deadlines for establishing and

publishing the APQ, AAN, and

procurement and manufacturing quotas,

and any adjustments to manufacturing

quotas. Due to the expansion of the

market and the increase in the number

of manufacturers and importers since

that deadline was implemented almost

50 years ago, DEA frequently misses the

current publishing deadlines for the

establishment of the APQ and the AAN

of May 1 and the issuing of individual

procurement, manufacturing and import

quotas deadline of July 1. Applications

for import and procurement quota are

due April 1, giving DEA only 30 days

before the May 1 deadline for

publication of the APQ and AAN. Given

that DEA has historically missed these

deadlines since it must take adequate

time to provide a thorough and careful

assessment of each application, both

DEA and industry have already become

accustomed to a delayed publishing

schedule. Therefore, this provision is

expected to have minimal economic

impact as it simply aligns the regulatory

deadlines with the current business

practices of DEA and industry.

Summary

In summary, only the procurement

quota certification requirement and

reduction to inventory allowances

impose costs. The certification

requirement results in a $23,494 annual

cost to all manufacturers and an $11,747

annual cost to all distributors for a

combined annual cost of $35,241. The

reduction to inventory allowances

imposes an estimated annual cost of

$600,000 on each of the 44 bulk

manufacturers registered with DEA,

equating to $26.4 million in total annual

costs.

Description and Estimate of the Number

of Small Entities

This rule has the potential to affect

entities registered with DEA as

manufacturers, distributors, and

importers of controlled substances and

list I chemicals. Based on a review of

respective representative North

American Industry Classification

System (NAICS) codes for

manufacturers,

17

distributors, and

importers,

18

there are the following

number of firms:

19

•404 ‘Medicinal and Botanical

Manufacturing’ (325411)

•957 ‘Pharmaceutical Preparation

Manufacturing’ (325412)

•6,739 ‘Drugs and Druggists’ Sundries

Merchant Wholesalers’ (424210)

The U.S. Small Business

Administration (SBA) considers a size

standard as the largest that a concern

can be and still qualify as a small

business for Federal government

programs. For the most part, size

standards are the average annual

receipts or the average employment of a

firm. The SBA size standards for the

three industries are 1,000 employees for

Medicinal and Botanical Manufacturing,

1,250 employees for Pharmaceutical

Preparation Manufacturing, and 250

employees for Drugs and Druggists’

Sundries Merchant Wholesalers.

20

Comparing the SBA size standards to

the U.S. Census Bureau, Statistics of

U.S. Businesses (SUSB) detailed data on

establishment size by NAICS code for

each affected industry, DEA estimates

the following number of small entities

(and percent of establishments that are

small entities) by industry:

•377 (93.3 percent of total)

‘Medicinal and Botanical

Manufacturing’ (325411);

•885 (92.5 percent of total)

‘Pharmaceutical Preparation

Manufacturing’ (325412); and

•6,475 (96.1 percent of total) ‘Drugs

and Druggists’ Sundries Merchant

Wholesalers’ (424210).

The table below summarizes the

calculation for the estimated number of

small entities (establishments) above.

BILLING CODE 4410–09–P

VerDate Sep<11>2014 16:30 Aug 30, 2023 Jkt 259001 PO 00000 Frm 00031 Fmt 4700 Sfmt 4700 E:\FR\FM\31AUR1.SGM 31AUR1

ddrumheller on DSK120RN23PROD with RULES1

60136

Federal Register / Vol. 88, No. 168 / Thursday, August 31, 2023 / Rules and Regulations

21

For example, the firm-to-establishment ratio for

NAICS 325412 is obtained by dividing the 957 total firms in the industry by the 1,208 total establishments in the industry, yielding a ratio of

.79.

BILLING CODE 4410–09–C

Because DEA registrants frequently

hold more than one registration for

separate locations, one entity may hold

many registrations. DEA estimates the

number of affected entities by

multiplying the number of DEA

registrations in each business activity by

its ‘‘firm-to-establishment’’ ratio to find

the total amount of entities. The firm-to-

establishment ratio is calculated by

dividing the number of firms in each

industry NAICS code by the total

number of establishments found in the

third and fourth columns of the

previous table.

21

DEA analyzed how

each provision of the proposed rule will

affect DEA registrants, including how

many entities each provision will affect,

and found that at least one provision of

this proposed rule will affect 561 DEA

registered entities. A summary of this

analysis is detailed in the table below:

VerDate Sep<11>2014 16:30 Aug 30, 2023 Jkt 259001 PO 00000 Frm 00032 Fmt 4700 Sfmt 4700 E:\FR\FM\31AUR1.SGM 31AUR1

ER31AU23.001</GPH>

ddrumheller on DSK120RN23PROD with RULES1

60137

Federal Register / Vol. 88, No. 168 / Thursday, August 31, 2023 / Rules and Regulations

After accounting for how many DEA

registered entities are affected by each

provision, DEA applied the estimated

percentage of establishments that are

small entities to each respective

business activity to estimate the number

of affected small entities. DEA estimates

that of the 561 affected entities 525 are

small entities: 161 distributors, 304

dosage-form manufacturers, 37 bulk

manufacturers, and 23 importers. In

summary, the percentages of small

entities affected are as follows:

•9.8 percent ‘Medicinal and

Botanical Manufacturing’ (325411);

•34.4 percent ‘Pharmaceutical

Preparation Manufacturing’ (325412);

and

•2.8 percent ‘Drugs and Druggists’

Sundries Merchant Wholesalers’

(424210).

The table below summarizes the

estimated number of small entities,

number of affected small entities, and

the percentage of small entities affected.

As described above, the quota

certification provision of this final rule

is estimated to cost a total of $23,494 to

manufacturers annually and a total of

$11,747 to distributors annually, or an

average cost of $70 ($23,494/334) per

affected manufacturer and $71 ($11,747/

166) per distributor. Additionally, the

reduction to inventory allowances are

estimated to impose costs of $600,000

annually on the 44 affected bulk

manufacturers that are registered with

DEA, 37 of which are small entities.

DEA generally uses 30 percent as a

‘‘substantial’’ number of affected small

entities. The analysis reveals that a non-

substantial percentage of small

distributor entities (2.8 percent) and

VerDate Sep<11>2014 16:30 Aug 30, 2023 Jkt 259001 PO 00000 Frm 00033 Fmt 4700 Sfmt 4700 E:\FR\FM\31AUR1.SGM 31AUR1

ER31AU23.002</GPH> ER31AU23.003</GPH>

ddrumheller on DSK120RN23PROD with RULES1

60138

Federal Register / Vol. 88, No. 168 / Thursday, August 31, 2023 / Rules and Regulations

22

Small Business Administration, Office of

Advocacy ‘‘Table 2—Number of firms,

establishments, receipts, employment, and payroll

by firm size (in receipts) and industry, 2012.’’

https://www.sba.gov/advocacy/firm-size-data,

accessed 5/24/2018.

small bulk manufacturer entities (9.8

percent) will be affected while a

substantial percentage of small dosage-

form manufacturing entities (34.3

percent) will be affected by this rule.

DEA generally considers impacts that

are greater than three percent of yearly

revenue to be a ‘‘significant economic

impact’’ on an entity. DEA compared

the compliance cost of $70 and $71 to

the average annual receipts of dosage-

form manufacturers and distributors/

imports, respectively, for each size

range.

22

Additionally, DEA compared

the estimated $600,000 per-entity cost

attributed to reducing inventory

allowances to the average annual

receipts of bulk manufacturers for each

size range. For even the smallest of

entities, the costs calculated above are

much less than three percent of yearly

revenue and are not significant. The

table below summarizes the analysis.

DEA examined the economic impact

of this final rule for each affected

industry for various size ranges. Based

on the analysis above, and because of

these facts, DEA believes this rule will

not have a significant economic impact

on a substantial number of small

entities.

Unfunded Mandates Reform Act of 1995

This rule will not result in the

expenditure by State, local, and tribal

governments, in the aggregate, or by the

private sector, of $100 million or more

(adjusted annually for inflation) in any

one year and will not significantly or

uniquely affect small governments.

Therefore, no actions were deemed

subject to the provisions of the

Unfunded Mandates Reform Act of

1995, 2 U.S.C. 1532.

Paperwork Reduction Act of 1995

Pursuant to the Paperwork Reduction

Act of 1995 (44 U.S.C. 3501–3521), this

action revises existing information

collections 1117–0006, 1117–0008, and

1117–0047 and creates one new

information collection. DEA is

amending its regulations for establishing

quotas for United States companies

manufacturing schedules I and II

controlled substances and ephedrine,

pseudoephedrine, and

phenylpropanolamine and for

procurement quota certification and

recordkeeping requirements. A person is

not required to respond to a collection

of information unless it displays a valid

OMB control number. DEA has

submitted these collection requests to

the OMB for review and approval.

A. Collections of Information Associated

With the Proposed Rule

1. Title: Application for Individual

Manufacturing Quota for a Basic Class

of Controlled Substance and for

Ephedrine, Pseudoephedrine, and

Phenylpropanolamine.

OMB Control Number: 1117–0006.

DEA Form Number: DEA–189.

DEA is formally implementing the use

of subcategories to facilitate the

issuance of manufacturing quotas and

provide a more accurate calculation of

the aggregate production quotas for the

United States. DEA will be adding the

following five subcategories for quota:

(1) Quota for Commercial Sales; (2)

Quota for Transfer; (3) Quota for

Product Development; (4) Quota for

Replacement; and (5) Quota for

Packaging/Repackaging and Labeling/

Relabeling. All types of quota could be

requested using the same application

and format registrants are accustomed to

using in an online form. Manufacturers

of schedules I and II controlled

substances and list I chemicals will

continue to receive manufacturing and

procurement quotas appropriate to their

manufacturing and inventory

requirements, and DEA will retain

greater control over the amount of these

controlled substances and list I

chemicals produced, thereby reducing

the amount of inventories at risk of

diversion.

DEA estimates the following number

of respondents and burden associated

with reporting:

•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.

DEA is formally implementing the use

of subcategories to facilitate the

issuance of procurement quotas and

provide a more accurate calculation of

the aggregate production quotas for the

VerDate Sep<11>2014 16:30 Aug 30, 2023 Jkt 259001 PO 00000 Frm 00034 Fmt 4700 Sfmt 4700 E:\FR\FM\31AUR1.SGM 31AUR1

ER31AU23.004</GPH>

ddrumheller on DSK120RN23PROD with RULES1

60139

Federal Register / Vol. 88, No. 168 / Thursday, August 31, 2023 / Rules and Regulations

United States. DEA is adding the

following five subcategories for quota:

(1) Quota for Commercial Sales; (2)

Quota for Transfer; (3) Quota for

Product Development; (4) Quota for

Replacement; and (5) Quota for

Packaging/Repackaging and Labeling/

Relabeling. All types of quota will be

requested using the same application

and format registrants are accustomed to

using in an online form. Manufacturers

of schedules I and II controlled

substances and list I chemicals will

continue to receive manufacturing and

procurement quotas appropriate to their

manufacturing and inventory

requirements, and DEA will retain

greater control over the amount of these

controlled substances and list I

chemicals produced, thereby reducing

the amount of inventories at risk of

diversion.

DEA estimates the following number

of respondents and burden associated

with reporting:

•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.

DEA will be formally implementing

the use of subcategories to facilitate the

issuance of import quotas and provide

a more accurate calculation of the

assessment of annual needs for the

United States. DEA is adding the

following five subcategories for quota:

(1) Quota for Commercial Sales; (2)

Quota for Transfer; (3) Quota for

Product Development; (4) Quota for

Replacement; and (5) Quota for

Packaging/Repackaging and Labeling/

Relabeling. All types of quota will be

requested using the same application

and format registrants are accustomed to

using in an online form. Importers of list

I chemicals will continue to receive

import quotas appropriate to their

manufacturing and inventory

requirements, and DEA will retain

greater control over the amount of these

list I chemicals produced, thereby

reducing the amount of inventories at

risk of diversion.

DEA estimates the following number

of respondents and burden associated

with reporting:

•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: 1117–0055.

DEA Form Number: N/A.

This final rule will require all DEA

registrants supplying schedules I and II

controlled substances or list I chemicals

to DEA manufacturers to obtain

certification of the manufacturer’s

procurement quota before completing

the transaction. This provision will

prevent manufacturers from purchasing

active pharmaceutical ingredients from

distributors, rather than other

manufacturers, without including a

quota certification. Current DEA

regulations stipulate only that orders to

entities registered as importers,

manufacturers, or bulk manufacturers

must include quota certifications.

Manufacturers procuring schedules I

and II controlled substances or list I

chemicals must maintain a copy of the

certification they provide with their

order for a period of two years from the

date of the certification. Under this final

rule, this recordkeeping requirement

will apply to certifications included

with orders for schedules I and II

controlled substances or list I chemicals

to all registrants, including distributors.

DEA estimates that distributors fill an

average of 3,000 orders to manufacturers

per year, which under this final rule,

will require 3,000 certification letters to

be drafted and retained by

manufacturers and reviewed by

distributors. The estimated yearly cost

of this activity is $35,241. For the

purposes of this final rule, DEA

estimates the following number of

respondents and burden associated with

the proposed requirement that

procuring manufacturers create and

retain copies of schedules I and II

controlled substance and list I chemical

quota certifications for two years:

•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).

If you need a copy of the information

collection instrument(s) with

instructions or additional information,

please contact the Regulatory Drafting

and Policy Support Section (DPW),

Diversion Control Division, Drug

Enforcement Administration; Mailing

Address: 8701 Morrissette Drive,

Springfield, Virginia 22152; Telephone:

(571) 362–3261.

No comments were received on any of

the information collections being

modified in connection with this final

rule. Any comments related this

collection of information may be sent in

writing to the Office of Information and

Regulatory Affairs, OMB, Attention:

Desk Officer for DOJ, Washington, DC

20503. Please state that your comment

refers to RIN 1117–AB49/Docket No.

DEA–455.

Congressional Review Act

This rule is not a major rule as

defined by the Congressional Review

Act, 5 U.S.C. 804. This rule will not

result in an annual effect on the

economy of $100 million or more; a

major increase in costs or prices; or

significant adverse effects on

competition, employment, investment,

productivity, innovation, or on the

ability of United States-based

companies to compete with foreign-

based companies in domestic and

export markets.

List of Subjects

21 CFR Part 1303

Administrative practice and

procedure, Drug traffic control.

21 CFR Part 1315

Administrative practice and

procedure, Chemicals, Drug traffic

control, Imports, Reporting and

recordkeeping requirements.

For the reasons set forth above, DEA

is amending 21 CFR parts 1303 and

1315 as follows:

PART 1303—QUOTAS

■1. The authority citation for 21 CFR

part 1303 continues to read as follows:

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

■2. Add §§ 1303.03, 1303.04, and

1303.05 to read as follows:

§ 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.

VerDate Sep<11>2014 16:30 Aug 30, 2023 Jkt 259001 PO 00000 Frm 00035 Fmt 4700 Sfmt 4700 E:\FR\FM\31AUR1.SGM 31AUR1

ddrumheller on DSK120RN23PROD with RULES1

60140

Federal Register / Vol. 88, No. 168 / Thursday, August 31, 2023 / Rules and Regulations

§ 1303.04 Subcategories of manufacturing

and procurement quotas.

The five subcategories of

manufacturing and procurement quotas

are:

(a) Quota for commercial sale. This is

a quota for the amount of bulk active

pharmaceutical ingredients (API)

initially acquired by a registrant for the

manufacture of approved schedule I or

II controlled substance drug products by

the Food and Drug Administration

(FDA), and bulk API acquired by

outsourcing facilities, manufacturers,

etc. This quota category is used to

capture bulk API moving from a bulk

manufacturer to other registered

manufacturers for their commercial

manufacturing efforts. This type of

quota may only be used to support

commercial manufacturing efforts and

may not be used to support other

manufacturing efforts.

(b) Quota for transfer. This is a quota

for the amount of material moved

upstream from one registrant to another

and does not include material captured

under procurement quota for

commercial sale. Examples include:

(1) Bulk API being transferred back to

the original registrant after milling;

(2) Transfer of in-process material or

finished dosage-forms for additional

manufacturing efforts (coating, beading,

encapsulation, and so forth) back to the

preceding registrant; and

(3) Return of material after the

specified manufacturing activity has

been completed or return of rejected

material to the upstream manufacturer

for destruction or additional processing.

(c) Quota for product development.

This is a quota for the amount of

material needed for product

development and validation of

manufacturing efforts. This quota is

limited to that activity only and only for

the development efforts noted in the

application; it shall not be used or

substituted for commercial production

or the development of a different

product. This quota is issued with the

understanding that this material is not

intended for commercial use, with the

exception of post-FDA approved

validation batches. Validation batches

shall be noted specifically in an

application and shall be considered

product development material that will

be taken into account for net disposal

once a product is FDA-approved for

commercial sale. No inventory will be

granted for these efforts, nor will

replacement quota be considered for

destroyed material issued under this

quota subcategory.

(d) Quota for replacement. This is a

type of individual manufacturing quota

or procurement quota that is granted to

a registrant after the registrant disposes

of material that was initially intended

for commercial sale, but for some reason

was unable to be marketed. This quota

is separate and shall not count against

a registrant’s other issued quota.

Replacement quota will be granted on a

case-by-case basis. The merits of the

request will be determined by the

specifics of the registrant’s justification

and situation. DEA will review the

submitted DEA Form 41 or DEA Form

222 documenting the destruction of the

controlled substance and evaluate the

justification for the destruction to

determine if replacement quota is

warranted and whether or not the

destroyed material is required to meet

the legitimate demand of the market.

Replacement quota is intended to

replace material from the current quota

year and not a means to replace

disposed samples, analytical samples,

product development material, or

inventory acquired under previous

quota years.

(e) Quota for packaging/repackaging

and labeling/relabeling. This is the

quota for the amount of material moved

to a registrant to undergo packaging and

labeling activities. This quota is limited

to that activity only and only for the

packaging/repackaging and labeling/

relabeling noted in the application; it

may not be used or substituted for

commercial production. Packaging/

repackaging and labeling/relabeling

quota is intended for tracking of

schedules I and II controlled substances

as they undergo packaging/labeling

activities; however, packaging/

repackaging and labeling/relabeling

quotas shall not be counted against the

aggregate production quotas.

§ 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.

■3. Revise the undesignated center

heading ‘‘Aggregate Production and

Procurement Quotas’’ to read as

‘‘Aggregate Production Quotas’’.

■4. Amend § 1303.11 by:

■a. Adding a sentence to the end of

paragraph (a);

■b. Removing the date ‘‘May 1’’ in the

first sentence of paragraph (c) and

adding in its place ‘‘September 1’’; and

■c. Adding paragraph (d).

The revisions to read as follows:

§ 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 § 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.

■5. Add an undesignated center

heading before § 1303.15 to read as

follows:

* * * * *

Procurement Quotas

* * * * *

§ 1303.12 [Redesignated as § 1303.15]

■6. Redesignate § 1303.12 as §1303.15

and add and reserve a new § 1303.12.

■7. Amend newly redesignated 1303.15

§ by:

■a. Adding a sentence to the end of

paragraph (a);

■b. Revising the first sentence in

paragraph (b);

■c. Removing ‘‘July’’ in paragraph (c)

introductory text and adding in its place

‘‘December’’; and

VerDate Sep<11>2014 16:30 Aug 30, 2023 Jkt 259001 PO 00000 Frm 00036 Fmt 4700 Sfmt 4700 E:\FR\FM\31AUR1.SGM 31AUR1

ddrumheller on DSK120RN23PROD with RULES1

60141

Federal Register / Vol. 88, No. 168 / Thursday, August 31, 2023 / Rules and Regulations

■d. In paragraph (f), removing the

words ‘‘manufacturer’’ and ‘‘bulk

manufacturer’’ and adding in their place

‘‘registrant’’, and removing

‘‘Manufacturers’’ and adding in its place

‘‘A registrant’’.

The revision to read as follows:

§ 1303.15 Procurement quotas.

(a) * * * The Administrator may

establish a procurement quota in terms

of pharmaceutical dosage-forms

prepared from or containing the

schedule I or II controlled substance, if

they determine it will assist in avoiding

the overproduction, shortages, or

diversion of a controlled substance.

(b) Any person who is registered to

manufacture controlled substances

listed in any schedule and who desires

to use during the next calendar year any

basic class of controlled substances

listed in schedule I or II (except raw

opium being imported by the registrant

pursuant to an import permit) for

purposes of manufacturing, shall apply

on DEA Form 250 for procurement

quota and shall state separately for each

subcategory, as defined in 21 CFR

1303.04, each quantity of such basic

class. * * *

* * * * *

■8. Add § 1303.16 to read as follows:

§ 1303.16 Inventory allowance for

procurement quotas.

(a) For the purpose of determining

procurement quotas pursuant to

§ 1303.15, each registered manufacturer

shall be allowed as part of such quota

an amount sufficient to maintain an

inventory:

(1) Except as provided in paragraph

(a)(3) of this section, for current

manufacturers, 35 percent of their

average estimated net disposal for the

current calendar year and the last

preceding calendar year; or

(2) Except as provided in paragraph

(a)(4) of this section, for new

manufacturers, 35 percent of their

reasonably estimated net disposal for

the next calendar year as determined by

the Administrator.

(3) For current liquid injectable

dosage-form manufacturers, 50 percent

of their average estimated net disposal

for the current calendar year and the last

preceding calendar year; or

(4) For new liquid injectable dosage-

form manufacturers, 50 percent of their

reasonably estimated net disposal for

the next calendar year as determined by

the Administrator.

(b) Except as provided in paragraph

(c) of this section, during each calendar

year, each registered manufacturer

receiving a procurement quota shall be

allowed to maintain an inventory of a

basic class not exceeding 50 percent of

his estimated net disposal of that class

for that year, as determined at the time

their quota for that year was

determined. At any time the inventory

of a basic class held by a manufacturer

exceeds 50 percent of their estimated

net disposal, their quota for that class is

automatically suspended and shall

remain suspended until his inventory is

less than 45 percent of their estimated

net disposal. The Administrator may,

upon application and for good cause

shown, permit a manufacturer whose

quota is, or is likely to be, suspended

pursuant to this paragraph to continue

manufacturing and to accumulate an

inventory in excess of 50 percent of

their estimated net disposal, upon such

conditions and within such limitations

as the Administrator may find necessary

or desirable.

(c) For liquid injectable dosage-forms,

each registered manufacturer receiving a

procurement quota shall be allowed to

maintain an inventory of a basic class

not exceeding 65 percent of their

estimated net disposal of that class for

that year during each calendar year, as

determined at the time their quota for

that year was determined. At any time

the inventory of a basic class held by a

manufacturer exceeds 65 percent of

their estimated net disposal, their quota

for that class is automatically suspended

and shall remain suspended until their

inventory is less than 60 percent of his

estimated net disposal. The

Administrator may, upon application

and for good cause shown, permit a

manufacturer whose quota is, or is

likely to be, suspended pursuant to this

paragraph to continue manufacturing

and to accumulate an inventory in

excess of 65 percent of their estimated

net disposal, upon such conditions and

within such limitations as the

Administrator may find necessary or

desirable.

(d) Except as provided in paragraph

(e) of this section, if, during a calendar

year, a registrant has procured the entire

quantity of a basic class allocated to him

under an individual procurement quota,

and their inventory of that class is less

than 25 percent of his estimated net

disposal of that class for that year, the

Administrator may, upon application

pursuant to § 1303.15(d), increase the

quota of such registrant sufficiently to

allow restoration of the inventory to 35

percent of the estimated net disposal for

that year.

(e) For liquid injectable dosage-forms,

if, during a calendar year, a registrant

has procured the entire quantity of a

basic class allocated to them under an

individual procurement quota, and their

inventory of that class is less than 40

percent of their estimated net disposal

of that class for that year, the

Administrator may, upon application

pursuant to § 1303.15(d), increase the

quota of such registrant sufficiently to

allow restoration of the inventory to 50

percent of the estimated net disposal for

that year.

■9. Add § 1303.17 to read as follows:

§ 1303.17 Abandonment of procurement

quota.

Any manufacturer assigned a

procurement quota for any basic class of

controlled substance listed in schedule

I or II pursuant to § 1303.12 may at any

time abandon their right to manufacture

all or any part of such quota by filing

a notice of such abandonment with the

UN Reporting and Quota Section,

Diversion Control Division, Drug

Enforcement Administration in the

online Quota Management System. The

Administrator may, in their discretion,

allocate such amount among the other

manufacturers in proportion to their

respective quotas.

■10. In § 1303.21 amend paragraph (a)

by removing the date ‘‘July 1’’ in the

first sentence and adding in its place

‘‘December 1’’ and adding a new second

sentence to read as follows

§ 1303.21 Individual manufacturing

quotas.

(a) * * * The Administrator may

establish an individual manufacturing

quota in terms of pharmaceutical

dosage-forms prepared from or

containing the schedule I or II

controlled substance, if they determine

it will assist in avoiding the

overproduction, shortages, or diversion

of a controlled substance. * * *

* * * * *

■10. Amend § 1303.22 by revising the

first sentence of the introductory text to

read as follows:

§ 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 § 1303.04,

each quantity of such class. * * *

* * * * *

§ 1303.23 Procedure for applying for

individual manufacturing quotas.

■11. In § 1303.23, amend paragraph (c)

by removing the date ‘‘March 1’’ in the

first sentence and adding in its place

‘‘July 1’’.

VerDate Sep<11>2014 16:30 Aug 30, 2023 Jkt 259001 PO 00000 Frm 00037 Fmt 4700 Sfmt 4700 E:\FR\FM\31AUR1.SGM 31AUR1

ddrumheller on DSK120RN23PROD with RULES1

60142

Federal Register / Vol. 88, No. 168 / Thursday, August 31, 2023 / Rules and Regulations

■12. Revise § 1303.24 to read as

follows:

§ 1303.24 Inventory allowance for

individual manufacturing quotas.

(a) For the purpose of determining

individual manufacturing quotas

pursuant to § 1303.23, each registered

manufacturer shall be allowed as part of

such quota an amount sufficient to

maintain an inventory equal to:

(1) For current manufacturers, 40

percent of their average estimated net

disposal for the current calendar year

and the last preceding calendar year; or

(2) For new manufacturers, 40 percent

of their reasonably estimated net

disposal for the next calendar year as

determined by the Administrator.

(b) During each calendar year, each

registered manufacturer shall be

allowed to maintain an inventory of a

basic class not exceeding 55 percent of

their estimated net disposal of that class

for that year, as determined at the time

their quota for that year was

determined. At any time the inventory

of a basic class held by a manufacturer

exceeds 55 percent of their estimated

net disposal, their quota for that class is

automatically suspended and shall

remain suspended until their inventory

is less than 50 percent of their estimated

net disposal. The Administrator may,

upon application and for good cause

shown, permit a manufacturer whose

quota is, or is likely to be, suspended

pursuant to this paragraph to continue

manufacturing and to accumulate an

inventory in excess of 55 percent of

their estimated net disposal, upon such

conditions and within such limitations

as the Administrator may find necessary

or desirable.

(c) If, during a calendar year, a

registrant has manufactured the entire

quantity of a basic class allocated to

them under an individual

manufacturing quota, and their

inventory of that class is less than 30

percent of their estimated net disposal

of that class for that year, the

Administrator may, upon application

pursuant to § 1303.25, increase the

quota of such registrant sufficiently to

allow restoration of the inventory to 40

percent of the estimated net disposal for

that year.

■13. Amend § 1303.27 by revising the

section heading and the first sentence to

read as follows:

§ 1303.27 Abandonment of quota for

Individual Manufacturing Quota.

Any manufacturer assigned an

individual manufacturing quota for any

basic class of controlled substance listed

in schedule I or II pursuant to § 1303.23

may at any time abandon their right to

manufacture all or any part of such

quota by filing a notice of such

abandonment with the UN Reporting

and Quota Section, Diversion Control

Division, Drug Enforcement

Administration in the online Quota

Management System. * * *

PART 1315—IMPORTATION AND

PRODUCTION QUOTAS FOR

EPHEDRINE, PSEUDOEPHEDRINE,

AND PHENYLPROPANOLAMINE

■14. The authority citation for part

1315 continues to read as follows:

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

952.

■15. Add § 1315.06 to read as follows:

§ 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.

■16. Add § 1315.07 to read as follows:

§ 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

VerDate Sep<11>2014 16:30 Aug 30, 2023 Jkt 259001 PO 00000 Frm 00038 Fmt 4700 Sfmt 4700 E:\FR\FM\31AUR1.SGM 31AUR1

ddrumheller on DSK120RN23PROD with RULES1

60143

Federal Register / Vol. 88, No. 168 / Thursday, August 31, 2023 / Rules and Regulations

production or the packaging of a

different product.

§ 1315.11 Assessment of annual needs.

■17. In § 1315.11, amend paragraph (c)

by removing the date ‘‘May 1’’ in the

first sentence and adding in its place the

date ‘‘September 1’’.

§ 1315.21 Individual manufacturing

quotas.

■18. Amend § 1315.21 by removing the

date ‘‘July 1’’ in the first sentence and

adding in its place the date ‘‘December

1’’.

■19. Amend § 1315.22 by revising the

first sentence of the introductory text to

read as follows:

§ 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 § 1315.07, each quantity of

such chemical. * * *

* * * * *

§ 1315.23 Procedure for fixing individual

manufacturing quotas.

■20. In § 1315.23, amend paragraph (c)

by removing the date ‘‘March 1’’ in the

first sentence and adding in its place the

date ‘‘July 1’’.

■21. Revise § 1315.24 to read as

follows:

§ 1315.24 Inventory allowance for

individual manufacturing quotas.

(a) For the purpose of determining

individual manufacturing quotas

pursuant to § 1315.23, each registered

manufacturer shall be allowed as part of

such quota an amount sufficient to

maintain an inventory:

(1) For current manufacturers, 40

percent of their average estimated net

disposal for the current calendar year

and the last preceding calendar year; or

(2) For new manufacturers, 40 percent

of their reasonably estimated net

disposal for the next calendar year as

determined by the Administrator.

(b) During each calendar year, each

registered manufacturer receiving a

manufacturing quota shall be allowed to

maintain an inventory of a chemical not

exceeding 55 percent of their estimated

net disposal of that chemical for that

year, as determined at the time his quota

for that year was determined. At any

time the inventory of a chemical held by

a manufacturer exceeds 55 percent of

their estimated net disposal, their quota

for that chemical is automatically

suspended and shall remain suspended

until their inventory is less than 50

percent of his estimated net disposal.

The Administrator may, upon

application and for good cause shown,

permit a manufacturer whose quota is,

or is likely to be, suspended pursuant to

this paragraph to continue

manufacturing and to accumulate an

inventory in excess of 55 percent of

their estimated net disposal, upon such

conditions and within such limitations

as the Administrator may find necessary

or desirable.

(c) If, during a calendar year, a

registrant has manufactured the entire

quantity of a chemical allocated to them

under an individual manufacturing

quota, and their inventory of that

chemical is less than 30 percent of his

estimated net disposal of that class for

that year, the Administrator may, upon

application pursuant to § 1315.25,

increase the quota of such registrant

sufficiently to allow restoration of the

inventory to 40 percent of the estimated

net disposal for that year.

■22. Amend § 1315.27 by revising the

first sentence to read as follows:

§ 1315.27 Abandonment of individual

manufacturing quota.

Any manufacturer assigned an

individual manufacturing quota for a

chemical pursuant to § 1315.23 may at

any time abandon their right to

manufacture all or any part of such

quota by filing a notice of such

abandonment with the UN Reporting

and Quota Section, Diversion Control

Division, Drug Enforcement

Administration in the online Quota

Management System. * * *

■23. Add § 1315.31 to read as follows:

§ 1315.31 Inventory allowance for

procurement quotas.

(a) For the purpose of determining

procurement quotas pursuant to

§ 1315.32, each registered manufacturer

shall be allowed as part of such quota

an amount sufficient to maintain an

inventory:

(1) Except as provided in paragraph

(a)(3) of this section, for current

manufacturers, 35 percent of his average

estimated net disposal for the current

calendar year and the last preceding

calendar year; or

(2) Except as provided in paragraph

(a)(4) of this section, for new

manufacturers, 35 percent of his

reasonably estimated net disposal for

the next calendar year as determined by

the Administrator.

(3) For current liquid injectable

dosage-form manufacturers, 50 percent

of his average estimated net disposal for

the current calendar year and the last

preceding calendar year; or

(4) For new liquid injectable dosage-

form manufacturers, 50 percent of his

reasonably estimated net disposal for

the next calendar year as determined by

the Administrator.

(b) Except as provided in paragraph

(c) of this section, during each calendar

year, each registered manufacturer

receiving a procurement quota shall be

allowed to maintain an inventory of a

chemical not exceeding 50 percent of

his estimated net disposal of that

chemical for that year, as determined at

the time his quota for that year was

determined. At any time the inventory

of a chemical held by a manufacturer

exceeds 50 percent of his estimated net

disposal, his quota for that chemical is

automatically suspended and shall

remain suspended until his inventory is

less than 45 percent of his estimated net

disposal. The Administrator may, upon

application and for good cause shown,

permit a manufacturer whose quota is,

or is likely to be, suspended pursuant to

this paragraph to continue

manufacturing and to accumulate an

inventory in excess of 50 percent of his

estimated net disposal, upon such

conditions and within such limitations

as the Administrator may find necessary

or desirable.

(c) For liquid-injectable dosage-forms,

during each calendar year, each

registered manufacturer receiving a

procurement quota shall be allowed to

maintain an inventory of a chemical not

exceeding 65 percent of his estimated

net disposal of that chemical for that

year, as determined at the time his quota

for that year was determined. At any

time the inventory of a chemical held by

a manufacturer exceeds 65 percent of

his estimated net disposal, his quota for

that chemical is automatically

suspended and shall remain suspended

until his inventory is less than 60

percent of his estimated net disposal.

The Administrator may, upon

application and for good cause shown,

permit a manufacturer whose quota is,

or is likely to be, suspended pursuant to

this paragraph to continue

manufacturing and to accumulate an

inventory in excess of 65 percent of his

estimated net disposal, upon such

conditions and within such limitations

as the Administrator may find necessary

or desirable.

(d) If, during a calendar year, a

registrant has procured the entire

quantity of a chemical allocated to him

under an individual procurement quota,

and his inventory of that chemical is

less than 25 percent of his estimated net

disposal of that class for that year, the

VerDate Sep<11>2014 16:30 Aug 30, 2023 Jkt 259001 PO 00000 Frm 00039 Fmt 4700 Sfmt 4700 E:\FR\FM\31AUR1.SGM 31AUR1

ddrumheller on DSK120RN23PROD with RULES1

60144

Federal Register / Vol. 88, No. 168 / Thursday, August 31, 2023 / Rules and Regulations

Administrator may, upon application

pursuant to § 1315.25, increase the

quota of such registrant sufficiently to

allow restoration of the inventory to 35

percent of the estimated net disposal for

that year.

(e) For liquid-injectable dosage-forms,

if, during a calendar year, a registrant

has procured the entire quantity of a

chemical allocated to him under an

individual procurement quota, and his

inventory of that chemical is less than

40 percent of his estimated net disposal

of that class for that year, the

Administrator may, upon application

pursuant to § 1315.25, increase the

quota of such registrant sufficiently to

allow restoration of the inventory to 50

percent of the estimated net disposal for

that year.

■24. Amend § 1315.32 by:

■a. Revising the first sentence in

paragraph (a);

■b. Removing the date ‘‘July 1’’ in the

introductory text of paragraph (f) and

adding in its place the date ‘‘December

1’’;

■c. Removing ‘‘manufacturer or

importer’’ in paragraph (h) and adding

in its place ‘‘registrant’’.

The revision to read as follows:

§ 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 § 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. * * *

* * * * *

§ 1315.34 Obtaining an import quota.

■25. In § 1315.34 amend paragraph (f)

by removing the date ‘‘July 1’’ and

adding, in its place, the date ‘‘December

1’’.

■26. Add § 1315.37 to read as follows:

§ 1315.37 Abandonment of procurement

quota.

Any manufacturer assigned a

procurement quota for a chemical

pursuant to § 1315.23 may at any time

abandon his right to manufacture all or

any part of such quota by filing a notice

of such abandonment with the UN

Reporting and Quota Section, Diversion

Control Division, Drug Enforcement

Administration in the online Quota

Management System. The Administrator

may, in his discretion, allocate the

amount among the other manufacturers

in proportion to their respective quotas.

Signing Authority

This document of the Drug

Enforcement Administration was signed

on August 28, 2023, by Administrator

Anne Milgram. That document with the

original signature and date is

maintained by DEA. For administrative

purposes only, and in compliance with

requirements of the Office of the Federal

Register, the undersigned DEA Federal

Register Liaison Officer has been

authorized to sign and submit the

document in electronic format for

publication, as an official document of

DEA. This administrative process in no

way alters the legal effect of this

document upon publication in the

Federal Register.

Scott Brinks,

Federal Register Liaison Officer, Drug

Enforcement Administration.

[FR Doc. 2023–18885 Filed 8–30–23; 8:45 am]

BILLING CODE 4410–09–P

DEPARTMENT OF DEFENSE

Office of the Secretary

32 CFR Part 310

[Docket ID: DoD–2023–OS–0076]

RIN 0790–AL68

Privacy Act of 1974; Implementation

AGENCY

: Office of the Secretary of

Defense, Department of Defense (DoD).

ACTION

: Technical amendment.

SUMMARY

: The DoD is amending this

part to correct an error in the Privacy

Act exemption rule associated with the

Privacy Act system of records DoD–

0007, ‘‘Defense Reasonable

Accommodation and Assistive

Technology Records.’’

DATES

: The rule will be effective on

August 31, 2023.

FOR FURTHER INFORMATION CONTACT

: Ms.

Rahwa Keleta, OSD.DPCLTD@mail.mil,

(703) 571–0070.

SUPPLEMENTARY INFORMATION

: The

Privacy Act permits Federal agencies to

exempt eligible records in a system of

records from certain provisions of the

Act, including the provisions providing

individuals with a right to request

access to and amendment of their own

records and accountings of disclosures

of such records. If an agency intends to

exempt a particular system of records, it

must first go through the rulemaking

process to provide public notice and an

opportunity to comment on the

exemption.

DoD is amending 32 CFR 310.13(e)(6)

to correct an error in the Privacy Act

exemption rule associated with the

Privacy Act system of records notice

DoD–0007, ‘‘Defense Reasonable

Accommodation and Assistive

Technology Records.’’ Section

310.13(e)(6) erroneously claims an

exemption for this system of records

from 5 U.S.C. 552a(c)(4), which

generally requires the agency

maintaining the system of records to

inform recipients with whom it has

shared a record if later the record was

corrected or disputed pursuant to the

requirements of the Privacy Act. DoD’s

inclusion of subsection 552a(c)(4) was

an error and DoD is removing it from the

exemption rule as well as the DoD–0007

system of records notice, which is being

modified in a notice published

concurrently in today’s issue of the

Federal Register.

Regulatory Analysis

Executive Order 12866, ‘‘Regulatory

Planning and Review’’ and Executive

Order 13563, ‘‘Improving Regulation

and Regulatory Review’’

Executive Orders 12866 and 13563

direct agencies to assess all costs and

benefits of available regulatory

alternatives and, if regulation is

necessary, to select regulatory

approaches that maximize net benefits

(including potential economic,

environmental, public health and safety

effects, distribute impacts, and equity).

Executive Order 13563 emphasizes the

importance of quantifying both costs

and benefits, of reducing costs, of

harmonizing rules, and of promoting

flexibility. It has been determined that

this rule is not a significant regulatory

action under these Executive Orders.

Congressional Review Act (5 U.S.C.

804(2))

The Congressional Review Act, 5

U.S.C. 801 et seq., generally provides

that before a rule may take effect, the

agency promulgating the rule must

submit a rule report, which includes a

copy of the rule, to each House of the

Congress and to the Comptroller General

of the United States. DoD will submit a

report containing this rule and other

required information to the U.S. Senate,

the U.S. House of Representatives, and

the Comptroller General of the United

States. A major rule may take effect no

earlier than 60 calendar days after

Congress receives the rule report or the

rule is published in the Federal

VerDate Sep<11>2014 16:30 Aug 30, 2023 Jkt 259001 PO 00000 Frm 00040 Fmt 4700 Sfmt 4700 E:\FR\FM\31AUR1.SGM 31AUR1

ddrumheller on DSK120RN23PROD with RULES1

Court	Drug Enforcement Administration,Justice Department
Citation	88 FR 60117
Published date	31 August 2023
Record Number	2023-18885
Section	Rules and Regulations

Management of Quotas for Controlled Substances and List I Chemicals

You can sign up for a trial and make the most of our service including these benefits.

Why Sign-up to vLex?

Over 100 Countries

Thousands of Data Sources

Find What You Need, Quickly

Over 2 million registered users

You can sign up for a trial and make the most of our service including these benefits.

Why Sign-up to vLex?

Over 100 Countries

Thousands of Data Sources

Find What You Need, Quickly

Over 2 million registered users

You can sign up for a trial and make the most of our service including these benefits.

Why Sign-up to vLex?

Over 100 Countries

Thousands of Data Sources

Find What You Need, Quickly

Over 2 million registered users

You can sign up for a trial and make the most of our service including these benefits.

Why Sign-up to vLex?

Over 100 Countries

Thousands of Data Sources

Find What You Need, Quickly

Over 2 million registered users

You can sign up for a trial and make the most of our service including these benefits.

Why Sign-up to vLex?

Over 100 Countries

Thousands of Data Sources

Find What You Need, Quickly

Over 2 million registered users

Why Sign-up to vLex?

Over 100 Countries

Thousands of Data Sources

Find What You Need, Quickly

Over 2 million registered users

Over 100 Countries

Thousands of Data Sources

Find What You Need, Quickly

Over 2 million registered users