[Federal Register Volume 61, Number 137 (Tuesday, July 16, 1996)]
[Notices]
[Pages 37079-37081]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-18024]


-----------------------------------------------------------------------


DEPARTMENT OF JUSTICE

Manufacturer of Controlled Substances; Notice of Registration

    By notice dated September 5, 1995, and published in the Federal 
Register on September 13, 1995, (60 FR 47591), Mallinckrodt Chemical, 
Inc., Mallinckrodt & Second Streets, St. Louis, Missouri 63147, made 
application to the Drug Enforcement Administration (DEA) to be 
registered as a bulk manufacturer of methylphenidate (1724) a basic 
class of controlled substance listed in Schedule II. Also, by Notice 
dated March 27, 1996, and published in the Federal Register on April 4, 
1996 (61 FR 15120), Mallinckrodt Chemical, Inc., Mallinckrodt & Second 
Streets, St. Louis, Missouri 63147, made application to the Drug 
Enforcement Administration (DEA) to be registered as a bulk 
manufacturer of the basic classes of controlled substances listed 
below:

------------------------------------------------------------------------
                            Drug                               Schedule 
------------------------------------------------------------------------
Tetrahydrocannabinols (7370)................................          I 
Methylphenidate (1724)......................................         II 
Cocaine (9041)..............................................         II 
Codeine (9050)..............................................         II 
Diprenorphine (9058)........................................         II 
Etorphine Hydrocholoride (9059).............................         II 
Dihydrocodeine (9120).......................................         II 
Oxycodone (9143)............................................         II 
Hydromorphone (9150)........................................         II 
Diphenoxylate (9170)........................................         II 
Hydrocodone (9193)..........................................         II 
Levorphanol (9220)..........................................         II 
Meperidine (9230)...........................................         II 
Methadone (9250)............................................         II 
Methadone-intermediate (9254)...............................         II 
Dextropropoxyphene, bulk (non-dosage forms) (9273)..........         II 
Morphine (9300).............................................         II 
Thebaine (9333).............................................         II 
Opium extracts (9610).......................................         II 
Opium fluid extract (9620)..................................         II 
Opium tincture (9630).......................................         II 
Opium powdered (9639).......................................         II 
Opium granulated (9640).....................................         II 
Levo-alphacetylmethadol (9648)..............................         II 
Oxymorphone (9652)..........................................         II 
Noroxymorphone (9668).......................................         II 
Alfentanil (9737)...........................................         II 
Sufentanil (9740)...........................................         II 
Fentanyl (9801).............................................         II 
------------------------------------------------------------------------

    On July 20, 1995, and January 31, 1996, Mallinckrodt Chemicals, 
Inc. (Mallinckrodt) filed applications with the Drug Enforcement 
Administration (DEA) for registration as a bulk manufacturer of 
methylphenidate. DEA published notices of these applications in the 
Federal Register on September 13, 1995, and April 4, 1996, 
respectively. One registered manufacturer of bulk methylphenidate filed 
comments in response to these notices. The commentor argues that DEA 
failed to comply with the Administrative Procedure Act (APA) and 
further alleges that Mallinckrodt's registration would be contrary to 
the public interest pursuant to 21 U.S.C. 823(a). The commentor 
requested a hearing on the 1995 application and urged DEA to deny the 
1996 application, or, at a minimum, issue an order to show cause 
proposing to deny the application.
    With respect to the first notice, published September 13, 1995, the 
commentor alleges that it is entitled to a hearing on Mallinckrodt's 
application since the regulation terminating the third party hearing 
right (21 C.F.R. 1301.43(a)) did not take effect until the end of the 
day on July 20, 1995. The commentor argues that, since Mallinckrodt's 
application was filed during the day on July 20, 1995, the commentor is 
entitled to ask for and obtain a hearing. The commentor maintains that 
if DEA were to consider the application under the new regulation, it 
would be in violation of Section 553(d) of the Administrative Procedure 
Act (APA) which dictates that there must be thirty days between 
publication of a rule and its effective date.
    DEA is not persuaded by the commentor's argument that the new 
regulation could not have become effective until the end of the day on 
July 20, 1995, i.e. after the filing of Mallinckrodt's application 
during the day of July 20, 1995. In any event, the commentor's 
contention regarding the effective date of the new regulation is, at 
this point, moot. Mallinckrodt did not manufacture any methylphenidate 
pursuant to its application published on July 20, 1995. The commentor 
thus was not prejudiced by the lack of a hearing. Convening a hearing 
regarding Mallinckrodt's July 1995 application would serve no purpose.
    Furthermore, Mallinckrodt has since filed a new application, 
published in April 1996. There is no question that Mallinckrodt's 1996 
application was filed after the effective date of the new regulation. 
As a result, the commentor enjoys no right to request or receive a 
hearing regarding Mallinckrodt's 1996 application.
    The commentor next asserts that the 60 day comment period was an 
insufficient amount of time for the commentor to gather information 
regarding Mallinckrodt' application. However, in amending the 
regulation, DEA did not intend to encourage third parties to become, in 
essence, independent investigators. DEA's intent in amending 21 C.F.R. 
1301.43(a) was to allow third parties to provide information already 
known to the third parties regarding an applicant. It is DEA's 
position, therefore, that 60 days are sufficient to permit third 
parties to share information of which they are aware regarding an 
applicant.
    The commentor argues that the notices of Mallinckrodt's 
applications failed to provide third parties, including the commentor, 
with an opportunity for meaningful, informed comment. The commentor 
concludes that DEA has violated the rulemaking provisions of Section 
553(b) of the APA. Contrary to the commentor's contention, for the 
reasons set forth below, DEA's registration of bulk manufacturers does 
not constitute a ``rulemaking'' proceeding. Nor did DEA voluntarily 
adopt notice and comment rulemaking procedures when it amended 21 
C.F.R. 1301.43(a).
    First, the commentor has ignored the definitions set forth in the 
APA and, in so doing, confuses notice and comment rulemaking with 
agency licensing proceedings. The commentor insists that DEA 
proceedings to grant or deny an application for registration as a bulk 
manufacturer are rulemakings. The APA, however, defines ``rule making'' 
to mean an ``agency process for formulating, amending, or repealing a 
rule.'' 5 U.S.C. 551(5). The APA defines a ``rule'' as:


[[Page 37080]]


    the whole or a part of an agency statement of general or 
particular applicability and future effect designed to implement, 
interpret, or prescribe law or policy or describing the 
organization, procedure, or practice requirements of an agency and 
includes the approval or prescription for the future of rates, 
wages, corporate or financial structures or reorganizations thereof, 
prices, facilities, appliances, services or allowances therefor or 
of valuations, costs, or accounting, or practices bearing on any of 
the foregoing.

5 U.S.C. 551(4).
    Review of the APA's definitions of license and licensing reveals 
that the granting or denial of a manufacturer's registration is a 
licensing action, not a rulemaking. Courts have frequently 
distinguished between agency licensing actions and rulemaking 
proceedings. See e.g., Gateway Transp. Co. v. United States, 173 F. 
Supp. 822, 828 (D.C. Wis. 1959); Underwater Exotics, Ltd. v. Secretary 
of the Interior, 1994 U.S. Dist. LEXIS 2262 (1994). Courts have 
interpreted agency action relating to licensing as not falling within 
the APA's rulemaking provisions.
    In Underwater Exotics, the United States District Court for the 
District of Columbia drew the distinction between an agency placing 
conditions on a license and an agency creating a rule. In that case, 
the plaintiff was licensed by the Fish and Wildlife Service (Service) 
to import and export certain aquatic species. When the Service imposed 
certain conditions on the plaintiff's license, plaintiff sued, arguing, 
inter alia, that the Service failed to comply with the APA's rulemaking 
requirements.
    The court looked to the APA's definitions of ``licensing'' and 
``rule'' and concluded that ``the Service's imposition of these 
conditions on a license did not violate the APA, because the Service's 
actions did not involve the creation of a rule.'' 1994 U.S. Dist. LEXIS 
2262, *26. The court further stated that:

    the Service's imposition of conditions on the plaintiff's 
import/export license clearly fall within the definitions of 
``license'' and ``licensing,'' * * * this agency action is not a 
``rule making.'' Absent specific statutory direction otherwise, a 
court should not force an agency to employ a certain procedural 
format * * *.

Id.
    Since the registration of bulk manufacturers is not a ``rule,'' DEA 
is not required to follow traditional notice and comment rulemaking 
procedures when granting or denying applications for such registration. 
In fact, the D.C. Circuit clearly supported this analysis in a 1980 
decision in which the court stated that ``agency action that clearly 
falls outside the definition of `rule' is also freed from rulemaking 
procedures.'' Batterton v. Marshall, 648 F. 2d 694, 701 n. 25 (D.C. 
Cir. 1980).
    Furthermore, the commentor's contention that DEA voluntarily 
adopted notice and comment rulemaking with its amendment of 21 C.F.R. 
1301.43(a) is not supported by either the notice of proposed rulemaking 
or the final rule. In fact, while the final rule does invite written 
comments form current manufacturers and applicants, nowhere in the 
final rule does DEA state, implicitly or explicitly, that it intended 
to follow notice and comment rulemaking procedures when acting upon a 
bulk manufacturer's application. DEA simply stated in the final rule 
that it would take into account such written comments when deciding 
whether to grant a particular registration or issue an order to show 
cause proposing to deny an application.
    If DEA determines, based on information provided to it in written 
comments and its own investigation, that the registration of an 
applicant would not be in the public interest, an order to show cause 
will be issued. The decision of whether to issue an order to show cause 
is solely within DEA's discretion. If the applicant requests a hearing, 
the ensuing adjudicatory proceedings will comply with the APA. DEA's 
decision to address applications via individual adjudication, and not 
by notice and comment rulemaking, is within its discretion and in 
conformity with both the APA and the Controlled Substances Act (CSA). 
Courts have held that agencies have this discretion to determine 
whether to proceed by rulemaking or individual adjudication. See PBW 
Stock Exchange v. Securities and Exchange Commission, 485 F. 2d 718, 
731 (3d Cir. 1973) cert denied 94 S. Ct. 1992 (1974).
    Finally, the commentor's citation to Rodway v. USDA, 514 F. 2d 809 
(D.C. Cir. 1975) and Heron v. Heckler, 576 F. Supp. 218 (N.D. Cal. 
1983) is inappropriate. In those cases, as the commentor itself 
acknowledges, the agencies in question had either promulgated a 
regulation or adopted a policy statement specifically espousing the 
APA's notice and comment requirements. DEA has done neither.
    DEA's action upon a bulk manufacturer's application is not a 
rulemaking action. DEA is therefore not required to follow notice and 
comment rulemaking when considering these applications. Neither the APA 
nor the CSA requires DEA to follow notice and comment rulemaking when 
acting upon bulk manufacturer applications. While DEA invites comments 
from competitors and applicants, such invitation does not translate 
into an implicit adoption of notice and comment rulemaking.
    The commentor makes several allegations regarding its claim that 
Mallinckrodt's registration would not be consistent with the public 
interest pursuant to 21 U.S.C. 823(a). First, with respect to 21 U.S.C. 
823(a) (1), (2), and (5), the commentor alleges that Mallinckrodt lacks 
effective controls to prevent diversion, noting past instances of 
violations of the CSA and its implementing regulations relating to 
recordkeeping and security. The commentor also draws attention to 
violations of the Food Drug and Cosmetic Act. The commentor further 
notes that Mallinckrodt has been cited by both federal and state 
authorities for violations of environmental laws and regulations.
    With respect to Mallinckrodt's compliance with the CSA and its 
implementing regulations, Mallinckrodt is currently registered with DEA 
as a bulk manufacturer of other Schedule II controlled substances. It 
is true that DEA issued letters of admonition to Mallinckrodt in 1990 
and 1991. The problems identified in these letters, however, were not 
significant enough to prompt DEA to seek revocation of Mallinckrodt's 
registration. Further, Mallinckrodt acted expeditiously to correct 
those problems.
    Since the issuance of the letters of admonition, DEA has 
investigated Mallinckrodt to ensure that the company's continued 
registration is consistent with the public interest. These 
investigations have included inspection and testing of the company's 
physical security systems, audits of the company's records, 
verification of the company's compliance with state and local laws, and 
a review of the company's background and history. The results of these 
investigations have led DEA to conclude that Mallinckrodt is in 
compliance with the CSA and that its continued registration is 
consistent with the public interest.
    The commentor also notes Mallinckrodt's violation of Food and Drug 
Administration (FDA) regulations. DEA has verified that Mallinckrodt's 
registration with the FDA is current and is confident that the nature 
of the FDA violations does not warrant the initiation of proceedings to 
deny Mallinckrodt's applications.
    In addition, the commentor points out that Mallinckrodt has been 
cited by the United States Environmental Protection Agency and the 
State of North Carolina for violations of environmental regulations. In 
the absence of evidence

[[Page 37081]]

that these violations relate to the manufacture, distribution, or 
dispensing of controlled substances, DEA declines to consider them for 
purposes of determining whether Mallinckrodt's registration would be in 
the public interest.
    The commentor further alleges that there currently exists an 
adequate and uninterrupted supply of methylphenidate under adequately 
competitive conditions. Consequently, the commentor claims that 
registration of an additional manufacturer could lead to an increased 
threat of diversion. In support of its position, the commentor points 
to a background paper published by DEA in which DEA voiced concerns 
about the diversion of methylphenidate. As the commentor itself noted, 
however, DEA's paper concluded that this diversion results from illegal 
sales by health care professionals, overprescribing by physicians, and 
illegal sales by end-users. As the commentor acknowledges, there is 
little evidence of diversion occurring at the bulk manufacturer level.
    The commentor contends that, since currently registered 
manufacturers of methylphenidate produce an adequate and uninterrupted 
supply of the drug to meet the legitimate needs of the United States, 
registration of another manufacturer is not needed. The commentor 
argues that ``there is no evidence that the registration of 
Mallinckrodt * * * will have a beneficial effect upon competition.'' 
The CSA, however, does not demand that such a finding be made before 
DEA can register a bulk manufacturer. Furthermore, pursuant to 21 CFR 
1301.43(b), DEA is not:

    required to limit the number of manufacturers in any basic class 
to a number less than that consistent with maintenance of effective 
controls against diversion solely because a smaller number is 
capable of producing an adequate and uninterrupted supply.

    As is discussed above, DEA is confident that registration of 
Mallinckrodt will not impede DEA's statutory obligation to guard 
against the diversion of controlled substances.
    With respect to 21 U.S.C. 823(a)(3), the commentor questions 
whether Mallinckrodt will promote technical advances in the art of 
manufacturing methylphenidate and the development of new substances. 
Mallinckrodt has been registered with DEA since 1971. In the past 25 
years, Mallinckrodt has demonstrated its technical and manufacturing 
expertise with respect to other controlled substances. Based on this 
history, DEA is confident that Mallinckrodt will continue this practice 
if registered to manufacture methylphenidate.
    Regarding 21 U.S.C. 823(a)(4), the commentor admits that it is 
unaware of any prior convictions of Mallinckrodt. DEA has verified that 
Mallinckrodt and its principals have not been convicted under Federal 
or state laws relating to the manufacture, distribution or dispensing 
of controlled substances.
    Finally, under 21 U.S.C. 823(a)(6), the commentor again argues that 
Mallinckrodt's alleged lack of compliance with various FDA regulations 
indicates that its registration as a bulk manufacturer of 
methylphenidate would be inconsistent with the public interest. For the 
reasons set forth above, DEA does not feel that the nature of the noted 
violations warrants issuing an order to show cause to seek to deny 
Mallinckrodt's applications.
    After reviewing all the evidence, including the comments filed, DEA 
has determined, pursuant to 21 U.S.C. 823(a), that registration of 
Mallinckrodt as a bulk manufacturer of methylphenidate is consistent 
with the public interest at this time. Therefore, pursuant to 21 U.S.C. 
823 and 28 CFR 0.100 and 0.104, the Deputy Assistant Administrator 
hereby orders that the 1996 application submitted by Mallinckrodt for 
registration as a bulk manufacturer of the listed controlled 
substances, including methylphenidate, is granted. The Deputy Assistant 
Administrator declines to take action on Mallinckrodt's 1995 
application since, given that Mallinckrodt did not manufacture 
methylphenidate pursuant to its 1995 application and has since 
submitted an application for 1996, it is unnecessary to do so.

    Dated: July 10, 1996.
Gene R. Haislip,
Deputy Assistant Administrator, Office of Diversion Control, Drug 
Enforcement Administration.
[FR Doc. 96-18024 Filed 7-15-96; 8:45 am]
BILLING CODE 4410-09-M