[Federal Register Volume 61, Number 251 (Monday, December 30, 1996)]
[Rules and Regulations]
[Pages 68624-68632]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-32953]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration

21 CFR PARTS 1301 and 1311

[DEA Number 140R]
RIN NUMBER 1117-AA34


Registration and Reregistration Application Fees

AGENCY: Drug Enforcement Administration (DEA), Justice.

ACTION: Final rule; remanded for further notice and comment.

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SUMMARY: On October 6, 1992, Congress passed the Departments of 
Commerce, Justice, and State, the Judiciary, and Related Agencies 
Appropriations Act of 1993, Pub. L. No. 102-395, 106 Stat. 1828 (1992) 
(codified at 21 U.S.C. 886a) (Act). In section 886a(3) of this Act, 
Congress directed that ``fees charged by the DEA under its Diversion 
Control Program (DCP) shall be set at a level that ensures the recovery 
of the full costs of operating the various aspects of the (diversion 
control) program.'' On December 18, 1992, DEA published its proposal to 
adjust the existing registration fee schedule. 57 FR 60,148. After 
notice and comment, DEA published a Final Rule on March 22, 1993, 
setting the new registration fees. 58 FR 15,272.
    Following publication of the final rule, a complaint was filed by 
the American Medical Association (AMA) and others in the United States 
District Court for the District of Columbia. On July 5, 1994, the 
district court issued its final order granting the government's motion 
for summary judgment, and thus disposed of all claims with respect to 
all parties. American Medical Association v. Reno, 857 F. Supp. 80 
(D.D.C. 1994). The AMA appealed. On June 27, 1995, the United States 
Court of Appeals for the District of Columbia Circuit issued its 
decision holding that DEA's rulemaking was inadequate and that the rule 
must be remanded, without being vacated, to the DEA for further 
proceedings in which DEA provides both an opportunity for meaningful 
notice and comment on, and an explanation of, the components of the 
diversion control program. 57 F.3d 1129 (D.C. Cir. 1995) On August 29, 
1995, the United States Court of Appeals for the District of Columbia 
Circuit remanded this action to the district court with instructions. 
On November 22, 1995, the District Court remanded the matter to DEA for 
proceedings consistent with the opinion of the United States Court of 
Appeals for the District of Columbia Circuit. This document responds to 
that requirement and provides a description of the components of the 
fee-funded diversion control program.

DATES: Comments and objections must be submitted on or before March 31, 
1997.

FOR FURTHER INFORMATION CONTACT:
Mr. G. Thomas Gitchel, Chief, Liaison and Policy Section, Office of 
Diversion Control, Drug Enforcement Administration, Washington, DC 
20537, Telephone (202) 307-7297.

SUPPLEMENTARY INFORMATION: The Departments of Commerce, Justice, and 
State, the Judiciary, and Related Agencies Appropriations Act of 1993 
(Pub. L. 102-395) required that DEA recover the costs associated with 
the DCP through fees charged by DEA under that program. Therefore, DEA 
published a notice of proposed rulemaking (NPRM) in the Federal 
Register on December 18, 1992 (57 FR 60148) proposing to amend the fees 
set forth in Title 21, Code of Federal Regulations (21 CFR), 
Secs. 1301.11 and 1311.11. On March 22, 1993, following notice and 
comment, DEA published a final rule in the Federal Register amending 
the fees.
    DEA's rulemaking was challenged in court, in part on the grounds 
that it failed to provide adequate notice or explanation of the costs 
and scope of the DCP to be funded through the fees. While the United 
States District Court upheld the rule, on appeal, the United States 
Court of Appeals, District of Columbia Circuit decided on August 29, 
1995, that the rulemaking was to be remanded, without being vacated, to 
DEA in order to identify the components of the fee-funded DCP and 
provide a brief explanation of why DEA deemed each component to be part 
of that program. Such description was to provide the opportunity for 
meaningful notice and comment regarding the established fee. AMA, et 
al. v. Janet Reno, Attorney General, et al., 57 F.3d 1129 (D.C. Cir. 
1995). In response to the decision of the court, the following 
explanation of the various components of the DCP is provided. Since the 
court did not vacate the final rule, DEA is not republishing either the 
original NPRM or final rule. Persons seeking further information 
regarding those notices should see the December 18, 1992 issue of the 
Federal Register (57 FR 60148) for the NPRM and the March 22, 1993 
issue of the Federal Register (58 FR 15272) for the final rule.

Background of The Budget Item ``Diversion Control Program''

    The Comprehensive Drug Abuse Prevention and Control Act of 1970 
(Pub. L. 91-513, commonly known as the Controlled Substances Act and 
the Controlled Substances Import and Export Act (CSA)), established the 
current Federal authority and programs to control the manufacture, 
distribution, importation, exportation and dispensing of ``controlled 
substances'' and to prevent the diversion of such substances from 
legitimate medical, scientific, research, and industrial channels into 
the illicit traffic. The CSA established a system of scheduling of 
substances, registration of legitimate handlers, production quotas, 
dispensing and distribution controls, record-keeping and reporting, 
import/export provisions, and penalties for violations of the CSA. It 
also mandated administrative and enforcement provisions, and 
cooperative efforts with state and local authorities. Additionally, as 
discussed in the later section regarding international activities, the 
United States has obligations under the United Nations Single 
Convention on Narcotic Drugs, 1961 (1961 Convention), and the 
Convention on Psychotropic Substances, 1971 (1971 Convention) (referred 
to collectively as the international treaties), to which it is a party, 
with respect to international control and cooperation to prevent the 
diversion of controlled substances. The CSA programs relating to the 
registration and control of the manufacture, distribution, and 
dispensing of controlled substances are the domestic mechanism for 
implementing these treaty provisions. Over the past 25 years, the CSA 
has

[[Page 68625]]

been amended to include various enhancements and refinements needed to 
achieve the goals of the CSA and fulfill the U.S.'s obligations under 
international treaties in an ever changing milieu of diversion, abuse 
and illicit trafficking of drugs. These modifications include, among 
others, the Narcotic Addict Treatment Act of 1974 (Pub. L. 93-281), The 
Psychotropic Substance Act of 1978 (Pub. L. 95-633), the Diversion 
Control Amendments of 1984 (Pub. L. 98-473), the Anti-Drug Abuse Act of 
1986 (Pub. L. 99-570), and the Anabolic Steroids Control Act of 1990 
(Pub. L. 101-647).
    In executing the CSA mandates and international treaty obligations 
related to the registration and control of the manufacture, 
distribution, dispensing, importation and exportation of controlled 
substances, Congress and the DEA (and its predecessor agency the Bureau 
of Narcotics and Dangerous Drugs, BNDD) established an identified work 
force and programs generally known as the DCP. Within DEA, the 
programmatic authority and responsibility for this effort is exercised 
by the Office of Diversion Control (OD) using the Congressionally 
authorized resources identified in the budget category DCP which are 
committed to those responsibilities and programs.
    Historically, for the purposes of budget formulation and 
appropriation, only resources, along with their individual ``modular'' 
or overhead costs, devoted to diversion control efforts, were 
administratively identified as the DCP within the annual budget request 
to Congress. Other resources which support a broad range of DEA 
activities, including ``Diversion Control'', were carried for 
administrative purposes in the budget formulation and appropriation 
process under other budget categories, such as legal support. For 
example, DEA's Office of Chief Counsel, which is carried as part of the 
DEA Budget Category ``Management and Administration,'' exists primarily 
to provide legal support to the entire agency. Although that office has 
a full section devoted to ``Diversion Control'' support, such as legal 
interpretation, DEA registration revocation actions, and quota 
hearings, no resources of the Office of Chief Counsel are included in 
the ``DCP'' category of DEA's annual budget submission, since the 
overall Chief Counsel function is not primarily devoted to Diversion 
Control and is carried elsewhere in the DEA budget.
    Since 1970, the CSA has provided that the Attorney General ``is 
authorized to promulgate rules and regulations and to charge reasonable 
fees'' relating to the registration and control of the manufacture, 
distribution, dispensing, import, and export of controlled substances. 
See 21 U.S.C. 821 and 958. Prior to 1993, the fees collected solely for 
registration to handle controlled substances were deposited into the 
general fund of the United States Treasury; they did not accrue to DEA.
    In October 1992, during the annual Congressional appropriation 
process, Congress established the ``Diversion Control Fee Account.'' 
This was an amendment to the Department of Justice and Related Agencies 
Appropriations Act, and did not purport to realign or curtail any DEA 
programs, activities, or priorities; the amendment established 
legislatively the future funding mechanism for Congressionally approved 
resources related to ``the operation of the diversion control 
program.'' In setting the parameters for this funding mechanism, 
Congress identified the functions and resources within DEA which have 
historically been assigned to the administratively determined budget 
category ``DCP'', as submitted by DEA, the Department of Justice, 
Office of Management and Budget, and the President of the United 
States. Any future Congressionally approved adjustment of resources 
devoted to these components, or Congressionally approved realignment of 
appropriated resources from other DEA budget categories which are 
related to the registration and control of the manufacture, 
distribution, and dispensing of controlled substances and herein 
identified, will be encompassed in the Diversion Control Fee Account.

Diversion Control Program and Responsibilities

    The components of the DCP have their basis in the CSA and 
international treaties to which the U.S. is a party. The resources 
approved by Congress are directed toward these responsibilities. The 
components of the DCP as they relate to the specific provisions of the 
CSA and the treaties are set forth below:

Regulatory Development and Maintenance

    (21 U.S.C. 821--Rules and regulations.)
    The CSA sets the requirements with respect to the control of the 
manufacture, distribution, and dispensing of controlled substances. 
Development and refinement of the regulations set out in 21 CFR Parts 
1301-1308, 1311-1312, and 1316 are an essential part of the DCP, for 
they establish the specific procedures and guidelines that are 
necessary to implement the requirements of the CSA.
    The control of drug diversion and abuse is not static. Shifts in 
health care practices, patterns of diversion and drug abuse, drug 
treatment, industry practices, and technology present an ever-changing 
milieu of diversion and abuse. Regulatory changes are necessary to 
adjust to these shifts. The Attorney General (AG) is authorized to 
promulgate rules and regulations relating to the registration and 
control of the manufacture, distribution, and dispensing of controlled 
substances. See 21 U.S.C. 821. The AG has delegated that authority to 
DEA. See 28 CFR 0.100(b) and 0.104.
    DEA, through the DCP, is responsible for regulatory development or 
change. In order to carry out these functions DEA employs a specialist 
staff that identifies the need for regulatory change or development, 
performs the research and data collection in support of changes, 
promulgates the regulatory changes, and provides guidance to DEA 
personnel, other regulatory and law enforcement personnel, and industry 
regarding the regulatory requirements.
    Activities in support of these functions include meetings and 
national conferences with representatives of the regulated industry, 
representatives of the law enforcement community, and other interested 
parties to discuss the current regulatory program and identify areas 
that may need to be addressed. There are five different industry 
workgroups: Practitioner, Distributor, Manufacturer, Pharmacy, and Mid-
Level Practitioner. Meetings with each workgroup are scheduled on a 
regular basis. In addition, separate national conferences are held 
approximately every 24 months for the pharmaceutical manufacturers and 
distributors and for drug control personnel. In addition to the 
administrative work required to prepare for such meetings and 
conferences, including the solicitation of agenda topics from the 
attendees, DCP personnel conduct research and prepare position papers 
and briefing materials regarding the various agenda topics.
    If regulatory change is needed, DCP personnel conduct the research, 
reviews of scientific and technical literature and other Federal and 
state laws and regulations; collect data; and consult with industry, 
law enforcement/regulatory sources, or other interested parties. 
Following drafting and publication of the notice of proposed 
rulemaking, personnel review all comments and determine whether 
substantive issues have been raised that require adjustment to the 
proposed regulations. In drafting the final rule, issues raised in the 
comments are

[[Page 68626]]

addressed and, where appropriate, adjustments to the proposed 
regulations are made to accommodate any substantive issues. Following 
establishment of new regulations, DCP staff prepare and distribute 
interpretations, guidelines and informational material regarding the 
new requirements for DEA personnel, industry, and other law 
enforcement/regulatory personnel. As needed, direct consultations to 
clarify the requirements of new regulations are also held with industry 
and law enforcement/regulatory groups.
    In addition to the activities relating to regulatory changes, DCP 
personnel respond to requests from industry and law enforcement/
regulatory personnel for information and interpretation of existing 
regulatory requirements and policy; respond to congressional inquiries 
regarding issues related to controlled substances; draft legislation 
relating to controlled substances; and prepare testimony and briefings 
for congressional hearings on the diversion of controlled substances.

Classification of Substances

    (21 U.S.C. 811, 812, and 813--Authority to Control; Authority and 
criteria for classification of Substances; Schedules of Controlled 
Substances; Treatment of analogues; 1961 Convention, Articles 2 and 3--
Substances under control; Changes in the scope of control; 1971 
Convention, Articles 2 and 3--Scope of control; Control of 
preparations)
    The authority to control substances of abuse is central to the 
effective application of the CSA and DEA's programs relating to the 
registration and control of the manufacture, distribution and 
dispensing of controlled substances. The CSA provides the criteria for 
the classification of substances into five schedules of control. The 
DCP collects, monitors, and analyzes data for recommendations to add, 
transfer between, or delete from such schedules any drug or other 
substance. These activities include the development of methodologies to 
predict and confirm the abuse potential of substances and combinations 
of substances; the application of scientific knowledge concerning the 
actual and relative potential of abuse of substances; the collection 
and appraisal of international scientific literature and information 
from DEA, and other Federal, state, local and foreign sources regarding 
the abuse, abuse and trafficking of substances; and the maintenance of 
liaison and information exchange with the Department of Health and 
Human Services (HHS) and other domestic and international agencies, 
such as the World Health Organization and the International Narcotics 
Control Board, having similar scientific, regulatory, law enforcement, 
and drug control interests.
    In addition to collecting information regarding the control of 
substances, DEA provides scientific and other information for 
international, national, and state scheduling of substances; responds 
to scheduling petitions and reviews and determines the status of 
controlled, excepted, excluded, or exempted drugs and analogues; and 
provides training, guidance, expert testimony, assistance and/or 
information on drug control and classification to law enforcement 
agencies, the scientific community, industry, the public, and other 
interested parties.
    DEA has initiated over a dozen drug reviews of both controlled and 
non-controlled substances in the recent past. Examples of controlled 
substances reviewed are fenfluramine, methylphenidate, flunitrazepam, 
quazepam, dronabinol, and marijuana (to Schedule II for medical or 
industrial use). The review of noncontrolled substances being 
considered for control include ketamine, butorphanol, gamma hydroxy 
butyrate, and carisoprodol to determine if control of the manufacture, 
distribution, and dispensing of the substances is appropriate. Each 
review requires a comprehensive study of the national and international 
scientific literature regarding the properties and use of the drugs, 
the current national and international controls over the drugs, data 
regarding annual production and consumption, and information from 
domestic and international law enforcement, regulatory, and medical 
sources regarding the diversion, trafficking, and abuse of the drugs. 
As appropriate, action may be taken, through formal rulemaking on the 
record with opportunity for hearing, to schedule, reschedule, or 
decontrol the drugs.

Identification of Controlled Substances

    (21 U.S.C. 825--Labeling and packaging; 1961 CONVENTION, ARTICLE 
30--Trade and distribution; 1971 CONVENTION, ARTICLE 10--Warnings on 
packages)
    In conjunction with the classification of substances as controlled 
under the law, the CSA and international treaties require that such 
substances contain certain identifying symbols, warnings, and seals. 
DCP personnel monitor compliance with the requirements of 21 U.S.C. 821 
as promulgated by 21 CFR 1302 pertaining to labeling and packaging 
requirements by reviewing 200 to 300 labels per year which are 
collected by DEA or are submitted to DEA by manufacturers. 
Additionally, DCP personnel provide interpretation of the requirements 
to registrants and Federal and state authorities, and review and 
enforce the requirements on an ongoing operational basis.

Registration

    (21 U.S.C. 822, 823, 824, 957, 958--Persons required to register; 
Registration Requirements; Denial, revocation, or suspension of 
registration; 1961 Convention, Article 30--Trade and distribution; 1971 
Convention, Article 8--Licenses)
    Another component of the DCP is the registration of those persons 
authorized to manufacture, distribute, dispense, import, or export 
controlled substances. The CSA requires that every person who 
manufactures, distributes, dispenses, imports, or exports a controlled 
substance shall obtain a registration, and establishes the requirements 
for such registration. The CSA also includes provisions relating to the 
denial, revocation, or suspension of registrations. The international 
treaties require that the signatories allow trade and distribution of 
controlled substances only under license.
    DEA manages and operates the registration and reregistration 
process for over 900,000 handlers of controlled substances. DCP 
personnel process an average of 300,000 renewal applications and 48,000 
new applications per year. The process includes reviewing the forms, 
processing and accounting for the fees, entering the appropriate data 
into the registration system, obtaining corrections from applicants 
when appropriate, and referring the applications to the appropriate 
office for review of the applicant's qualifications and bona fides for 
registration. Applications for the bulk manufacture or importation of 
Schedule I and II controlled substances require the preparation of 
notices of application for publication in the Federal Register. New 
applications to conduct research with Schedule I controlled substances 
and for narcotic treatment programs must be evaluated and considered in 
conjunction with the Food and Drug Administration. Further, all new 
applications for registration must be examined and evaluated with the 
appropriate state authorities to ensure that the applicant has been 
granted the appropriate state authorization.
    DCP personnel process over 150,000 requests per year from 
registrants for modification of registration (name, address, drug 
schedule changes, etc.), voluntary retirement of registration, or

[[Page 68627]]

for order forms; respond to over 10,000 telephonic inquiries per month 
from applicants and registrants regarding registration; respond to 
Freedom of Information Act and Congressional requests regarding 
registrant information; and prepare affidavits and certification 
statements regarding the registration status of DEA registrants and 
applicants for use in DEA hearings and other proceedings.
    DCP personnel also prepare and distribute registrant information to 
other DEA elements, Federal, state and local regulatory personnel, and 
registrants for the purpose of confirming registrant status; and 
initiate studies and new systems to support and enhance the 
registration program.

Records and Reports

    (21 U.S.C. 827, 828 AND 829--Records and Reports of Registrants; 
Order Forms; Prescriptions; 1961 CONVENTION, ARTICLES 19, 20, AND 30--
Estimates of drug requirements, Statistical returns furnished to the 
Board; Trade and distribution; 1971 CONVENTION, ARTICLES 11, 16 AND 9--
Records and Reports to be furnished by the parties; Prescriptions)
    The CSA and international conventions provide for the maintenance 
of a system of records and accountability for controlled substances by 
authorized handlers. Registrants are required by the CSA to maintain 
records and inventories of controlled substances manufactured, 
received, distributed, dispensed, imported, exported, or otherwise 
disposed of; make such records available for inspection and copying; 
and make certain reports to the Attorney General (DEA).
    Establishment and enforcement of the record-keeping and reporting 
provisions of the CSA and examination of the records to identify 
potential diversion constitute a substantial part of the DCP 
activities. With respect to records, program personnel conduct 
comprehensive cyclic investigations of registrants' records and 
inventories to ensure the integrity of the diversion control system. 
Investigations of registrants for failure to comply with the record-
keeping and reporting provisions of the CSA are conducted and the 
appropriate administrative, civil, or criminal action is pursued. 
Additional discussion of these investigations can be found in the 
section relating to Enforcement Activities.
    DCP personnel conduct a variety of duties utilizing various reports 
required to be submitted by registrants. As part of the closed system 
to control the manufacture, distribution and dispensing of controlled 
substances, registrants must make reports to DEA regarding the bulk or 
dosage form manufacture of all Schedule I and II controlled substances, 
all narcotic controlled substances in Schedules III-V, and certain 
psychotropic controlled substances in Schedules III and IV; and the 
repackaging and relabeling of and the distribution of all Schedule I 
and II controlled substances and all narcotic controlled substances in 
Schedule III. In addition, registrants must provide copies of order 
forms documenting the distribution of Schedule I and II controlled 
substances, excessive purchase and suspicious order reports, theft or 
loss reports, and reports of the disposal of controlled substances.
    The order forms, excessive purchase, suspicious order, and theft or 
loss of reports are reviewed by DCP personnel, both on an individual 
basis and with reference to other reports that have been filed to 
determine whether further investigation is required. Theft or loss data 
are also electronically compiled and tracked to allow for 
identification of suspicious or unusual local, regional, or national 
trends in the theft or loss of controlled substances.
    Manufacturing reports are reviewed by DCP personnel to determine if 
registrants are complying with quota requirements and to determine 
various trends and availability of substances. The information is then 
extracted and collated for domestic manufacturing reports required by 
the U.N. conventions.
    DCP personnel receive and process over 9,500 reports per year 
regarding controlled substances distributions, commonly referred to as 
``ARCOS'' reports, from approximately 1,400 registrants. The reports 
contain data regarding approximately 14,000,000 controlled substances 
transactions per year. Each report must be processed, corrected, and 
entered into the ARCOS system. From this, as mandated by the CSA, DEA 
operates a diversion targeting system for DEA and state and local 
officials. In addition, special reports regarding regional distribution 
and distributions to specific registrants are generated as needed.

Production Quotas

    (21 U.S.C. 826--Production Quotas for Controlled Substances; 1961 
CONVENTION, ARTICLE 21--Limitations on Manufacture and Importation; 
1971 CONVENTION, ARTICLE 5--Limitation of use to medical and scientific 
purposes)
    The CSA and international treaties require that DEA determine the 
total quantity of certain controlled substances that is necessary for 
medical, scientific, research, and industrial use in the U.S. and that 
the manufacture of such substances be limited accordingly through a 
system of production quotas.
    In fulfilling this mandate, the DCP collects and analyzes 
information regarding the legitimate use, trafficking and abuse of 
Schedule I and II controlled substances in the U.S. from such sources 
as manufacturing and distribution reports, treatment and prescription 
utilization data, case data, drug abuse indicators, and HHS estimates 
of medical use. Based on the information collected, more than 1200 
manufacturing and procurement quotas are established annually for 
Schedule I and II controlled substances. Aggregate production quotas 
are then determined for each basic class of controlled substance in 
Schedule I and II. Notices regarding the aggregate production quotas 
are provided to the Federal Register for publication. The DCP monitors 
the manufacture, utilization, trafficking and abuse of controlled 
substances against the quotas, processes requests for adjustments to 
specific quotas, and, where appropriate, drafts notices adjusting 
specific quotas for publication in the Federal Register. To facilitate 
the quota process, DCP staff also conduct training seminars for the 
industry. The DCP conducts domestic and international reviews of 
controlled substances utilization trends and coordinates with the UN 
control and scientific bodies regarding such trends, and prepares 
reports concerning the domestic manufacture of controlled substances.

Import and Export of Controlled Substances

    (21 U.S.C. 952, 953, 954 AND 958--Importation of controlled 
substances; Exportation of controlled substances; Transshipment and in-
transit shipment of controlled substances; 1961 CONVENTION, ARTICLE 
31--Special provisions relating to international trade; 1971 
CONVENTION, ARTICLE 12--Provisions relating to international trade)
    The CSA and the international treaties require that controlled 
substance imports and exports be subject to registration requirements; 
be allowed only when necessary to provide for the medical, scientific, 
or other legitimate needs of the United States; and be subject to a 
system of permits or declarations for each individual importation or 
exportation. Further, the U.N. International Narcotics Control Board 
(INCB), which administers the international conventions, establishes 
annual ``estimates'' of the amount of

[[Page 68628]]

Schedule I and II narcotic drugs that each country may import.
    In addressing these requirements, the DCP operates a system of 
declarations and permits for imports and exports. Under this system, 
DCP personnel receive and examine requests for permission to import or 
export controlled substances to determine if they are in compliance 
with the CSA, the international treaties, and the laws of the country 
that is involved in the transaction. DCP personnel maintain records of 
all controlled substance imports and exports, and of international 
treaty and specific foreign country provisions relating to the import 
and export of controlled substances. DCP personnel also monitor all 
Schedule I and II narcotic imports and exports to insure that they are 
consistent with the legitimate needs of the United States and the INCB 
estimates. If an import or export appears inconsistent with legitimate 
need or will exceed the estimates, DCP personnel will examine the 
circumstances of the request to import or export. DEA will subsequently 
either pursue a course of action to comply with the international 
obligations or initiate proceedings to deny the request to import or 
export.
    As required by the international conventions, DCP personnel prepare 
reports of controlled substances imports and exports for submission to 
the UN control bodies; provide support and assistance to foreign 
governments in the establishment and maintenance of import/export 
control programs; and coordinate with foreign authorities and the INCB 
in monitoring the international commerce of controlled substances.

International Activities

    The registration and control of the manufacture, distribution, and 
dispensing of controlled substances is not restricted by domestic 
borders. The CSA's system of controls was not developed, and is not 
administered, parochially; it is part of a global system comprised of 
international laws and obligations designed to establish a consistent, 
worldwide structure of control of the manufacture, distribution, and 
dispensing of controlled substances to prevent the compromise of any 
country's systems of controls by preventing the diversion of 
pharmaceutical controlled substances from one country for abuse in 
another. The international treaties mandate that each party to the 
conventions shall establish a domestic program of controls relating to 
the registration and control of the manufacture, distribution 
(including import/export), and dispensing of controlled substances. The 
treaty provisions include requirements for licensure, scheduling, 
quotas, records and reports, import/export investigation, control and 
cooperation, prescriptions, penalties, and mutual assistance. The 
international community, through the International Narcotics Control 
Board and the Commission on Narcotic Drugs, continuously monitors the 
workings of the treaties and recommends and adopts resolutions to 
maintain the safeguards against trafficking, with which the United 
States is obliged to comply. The United States participates in the 
debates and discussions to insure that its interests are considered.
    The United States' obligations under the conventions are recognized 
in the specific language of the CSA and the implementing regulations 
(see 21 USC 801, 801(a), 811(d)(1), 823(a) and 958(a), and 21 CFR 
1307.02). Further, upon the United States becoming a signatory to the 
Psychotropic Convention, Congress acknowledged that before the Senate 
could ratify the convention, the CSA would have to be amended to bring 
it into compliance with the requirements of the convention, 
acknowledging that the conventions are an integral part of the United 
States' programs regarding the registration and control of the 
manufacture, distribution, dispensing, import, and export of controlled 
substances. By implementing the CSA and ratifying the international 
treaties, Congress recognized that a strong domestic program relating 
to the registration and control of the manufacture, distribution, 
dispensing, import, and export of controlled substances is inter-
dependent on the establishment and maintenance of strong international 
controls.
    In meeting the U.S. treaty obligations, the DCP participates in 
international policy activities, including the development and 
formulation of United Nations (UN) resolutions, position papers, other 
background documents, and briefing materials relating to controlled 
substances for use by U.S. delegations to several UN bodies. DCP 
personnel also participate in a number of international conferences and 
meetings related to drug control. For example, in Fiscal Year (FY) 1995 
there were two such conferences which were organized, sponsored, and 
funded jointly by DEA and the European Union (EU): the first was held 
in Austria to improve the design and administration of, and cooperation 
regarding, controlled substance and chemical controls in the 
Commonwealth of Independent States (CIS) [the former Soviet Republics] 
which was attended by representatives from the CIS, EC and the INCB. 
The second conference was held in Istanbul regarding illicit drug 
traffic, the diversion of psychotropic substances, and chemical 
controls in the Middle East, which was attended by national authorities 
in the region, the EC, Interpol, and the INCB. The DEA share of the 
costs for these multi-topic conferences (approximately 50% of total 
conference cost) was split between the free account and appropriated 
funds in approximation to the subject matter covered. In FY 1995, DCP 
personnel also participated in the annual Commission on Narcotic Drugs 
meeting in Austria, a meeting with EC officials in Spain to discuss 
programs to control the manufacture and distribution of steroids, and 
an INCB drug training seminar for African drug control authorities 
regarding the establishment of effective national controls of the 
manufacture and distribution of controlled substances. The fee account 
expenditures for these activities totaled less than $150,000 in FY 
1995.
    In addition to those activities directly related to the 
administration of the controls under the international conventions, DCP 
personnel conduct conferences and operational initiatives with 
representatives from the appropriate foreign governments regarding 
specific controlled substances to provide and collect information 
regarding the use and abuse of the substances and, where necessary, to 
promote the strengthening of controls of the manufacture, distribution, 
dispensing, import, and export of the substances to prevent their 
diversion from international sources into the United States. Recent 
examples include meetings with officials of several European 
governments to discuss programs relating to pain management, the 
distribution and use of methylphenidate, narcotic treatment programs, 
and the medical use of marihuana, and meetings with officials in 
Colombia and Mexico regarding the manufacture and distribution of 
products containing flunitrazepam which are being illegally distributed 
and abused in the U.S.
    The DCP compiles and analyzes information on the U.S. production 
and distribution of, and estimated needs for narcotic and psychotropic 
substances, as well as trafficking data, and prepares periodic reports 
for submission to the UN.
    The above demonstrates the variety of international activities that 
fall within the purview of the Diversion Control Fee Account by virtue 
of the United States' obligations under the international conventions 
relating to the

[[Page 68629]]

registration and control of the manufacture, distribution, and 
dispensing of controlled substances. However, these activities, as 
funded through the fee account, are limited to those carried out by 
personnel assigned to domestic offices of DEA; expenses of diversion 
personnel assigned to overseas positions are funded by appropriated 
funds, not through the Diversion Control Fee Account, even though they 
may conduct activities in support of the DCP.

Enforcement Activities

    (21 U.S.C. 841, 842, 843, 853, 875, 876, 878, 879, 880, 881, 883, 
886, 960, 961, and Related Penalty and Enforcement Proceedings 
Sections--Penalties for violations of the CSA, and related enforcement 
proceedings; 1961 CONVENTION, ARTICLES 36 AND 37--Penal provisions; 
Seizure and Confiscation; 1971 CONVENTION, ARTICLE 22--Penal 
provisions)
    The DCP has responsibility for monitoring, in large part through 
investigations, all activities related to legitimately manufactured 
substances for which registration is required or excepted and where 
those controls are circumvented or disregarded. As such, it initiates 
and conducts investigations of individuals and institutions which are 
suspected of violating the CSA or which undermine public confidence in 
the safety and authenticity of controlled substances found within 
pharmaceutical and health care channels. The targets and types of 
investigations conducted by the DCP pursuant to 21 U.S.C. 821 are 
identified below.
    (1) Registrants and their agents or employees suspected of 
diverting controlled substances from legitimate channels;
    (2) Persons who engage in the smuggling, theft, robbery and/or 
trafficking of pharmaceutical controlled substances, including, where 
appropriate, identifying and immobilizing their sources of supply, 
whether domestic or foreign, through enforcement of the controls 
relating to the manufacture, distribution, import, export, and 
dispensing of controlled substances;
    (3) Persons, both registered and non-registered, who conduct 
controlled substances activities for which they do not have the 
required DOA or state authorization;
    (4) Persons who obtain pharmaceutical controlled substances from 
registrants through fraud, deceit, or circumvention of the controls on 
manufacturing, distribution, or dispensing, i.e. fraudulent use of 
another person's DEA registration number to obtain controlled 
substances, doctor shoppers, prescription forgers, etc.;
    (5) The trafficking by non-registrants in controlled substances 
which are fraudulently promoted as legitimate therapies (such as 
``herbal remedies'' sold ``under the counter'' which actually contain a 
controlled substance);
    (6) Persons who use their DEA registrations to assist in the 
diversion or misuse of controlled substances for other than medical 
purposes, such as health care fraud, self-abuse, trading controlled 
substances for non-medical purposes, etc.
    A majority of the efforts of the field elements of the DCP is 
devoted to the investigation of manufacturing, distributing, 
dispensing, importing, and exporting activities under the requirements 
of the law and regulations and to collecting evidence and preparing 
material in support of administrative, civil, and criminal proceedings 
against violators. The investigations conducted by DCP personnel fall 
into three categories.

Pre-Registrant Investigations

    The CSA requires that all individuals and institutions proposing to 
manufacture, distribute, or dispense controlled substances must obtain 
a registration from the Attorney General who is further authorized to 
inspect the establishment of a registrant or applicant for 
registration. DEA Diversion Investigators and registration personnel 
must insure that all applicants for registration and reregistration are 
authorized to conduct the activities for which they are applying within 
their jurisdiction. DEA Diversion Investigators are required to inspect 
the physical premises, interview appropriate applicant personnel, 
conduct employee background checks, and review record-keeping and 
security procedures for manufacturers, distributors, importers, 
exporters, and narcotic treatment programs to determine if the proposed 
registration is consistent with the public interest.

Cyclic Investigations

    In exercising the controls of the CSA, DCP personnel conduct 
periodic investigations of all controlled substance manufacturers, 
distributors, importers, exporters, and narcotic treatment programs for 
the purpose of (1) ensuring that the registrants are complying with the 
requirements of the CSA by maintaining effective controls and 
procedures to prevent the diversion of controlled substances, and (2) 
detecting criminal or civil violations by such registrants or practices 
which undermine or neglect such controls. See 21 CFR 1316.01-1316.13. 
In the course of conducting such investigations, DCP personnel perform 
a wide variety of activities. These include taking a physical inventory 
of controlled substances; interviewing the appropriate registrant 
personnel; reviewing records relating to the receipt, distribution, and 
disposal of controlled substances; verifying transactions against the 
records of other registrants; reviewing manufacturing/distribution 
records and reports to ascertain their accuracy and validity; 
inspecting and testing the adequacy of physical and procedural 
safeguards to detect and deter diversion; identifying and pursuing 
questionable or illegal distributions; and collecting samples of 
controlled substances.

Complaint Investigations

    Complaint investigations are those investigations that may result 
in an administrative, civil, or criminal complaint being filed against 
the subject for violations of the CSA or regulations. Complaint 
investigations are initiated upon information or evidence received from 
public sources, other law enforcement or regulatory personnel, or 
review of registrant records or reports, etc., that violations of the 
CSA have, or may have, occurred. DCP personnel undertake investigative 
activities to determine the type and extent of the violations, the 
identity of the violators, and the source and methods of diversion. The 
types of investigative activities performed include: audits of 
controlled substance records, examination and collection of related 
business records, prescription surveys, interviews and debriefings, 
undercover purchases of evidence, reviews of manufacturer/distribution 
records and reports, service of administrative inspection warrants and 
search warrants, and intelligence gathering and analysis.
    The conduct of complaint investigations often involves cooperation 
and coordination with other Federal, state, and local law enforcement 
and regulatory officials and occasionally international officials. In 
some instances, investigations may also involve cooperation and 
coordination with members of the legitimate drug industry. 
Investigators, in conjunction with other agencies, evaluate and pursue 
evidence of health care fraud, falsification of records, and other 
crimes that can establish key elements of proof that controlled 
substance violations have occurred.
    Upon completion of the investigation, a number of actions may be 
undertaken depending on the severity of the

[[Page 68630]]

violations. The case may be referred to the United States Attorney's 
Office or State's Attorney for civil or criminal prosecution. Violators 
may be referred for an enforcement hearing pursuant to 21 U.S.C. 883 
and 21 CFR 1316.31, at which the registrant is provided with details 
regarding alleged violations and afforded the opportunity to present 
his/her views and proposed actions to come into compliance with the 
law. The investigation may result in an administrative hearing, 
pursuant to a show cause order, to determine whether registration of 
the person should be revoked or denied.

Cooperative Efforts

    (21 U.S.C. 801, 801a, 872, and 873--Congressional findings; 
Education and research programs of Attorney General; Cooperative 
Arrangements; 1961 Convention, Preamble; 1971 Convention, Article 21--
Action against the illicit traffic)
    DEA is not alone in the efforts to combat the diversion of 
controlled substances. There are related authorities regarding the 
control of the manufacture, distribution, dispensing, import, and 
export of controlled substances in other Federal, state, and local 
regulatory and law enforcement agencies. In addition, the national and 
local organizations representing the pharmaceutical and health care 
industry actively participate in diversion control efforts. 
Internationally, there are foreign government agencies and 
international organizations, such as the United Nations International 
Narcotics Control Board and the Drug Control Program which administer 
the requirements of the international conventions; the World Health 
Organization, which is involved with international drug scheduling 
matters; and Interpol which helps coordinate international law 
enforcement activities directed against the international traffic in 
licitly produced controlled substances, committed to the establishment 
and maintenance of consistent international control of the manufacture, 
distribution, and dispensing of controlled substances. The CSA and the 
international treaties, recognizing the need for a coordinated effort 
against diversion, demand cooperative efforts between the interested 
parties.
    As noted, the DCP engages in extensive cooperative efforts with 
other officials involved in diversion control activities. DCP personnel 
meet regularly with state and local law enforcement and regulatory 
personnel to share information, identify areas of concern, and 
coordinate joint initiatives and investigations. DCP personnel also 
provide special training regarding controlled substances diversion to 
local regulatory and law enforcement personnel and hold a national 
conference regarding the control and diversion of controlled substances 
approximately every 24 months, to which regulatory and law enforcement 
administrators from each state and territory are invited. DCP personnel 
also engage in a variety of activities with UN bodies, international 
organizations, and foreign governments in meeting the U.S. 
responsibilities under the international conventions.
    In addition to its activities with other law enforcement and 
regulatory agencies, the DCP maintains an active program of liaison 
with the pharmaceutical industry. DCP activities in this area include 
scheduling biannual workgroup meetings with five different industry 
groups (manufacturers, distributors, pharmacies, practitioners, and 
mid-level practitioners) and a national industry conference held 
approximately every 24 months, which is attended by representatives 
from the national associations representing the controlled substances 
industry and by individual registrants. DCP personnel also prepare and 
conduct training sessions at universities for medical and pharmacy 
students, make presentations to industry conferences and meetings, 
participate in the development of pharmacy certification examinations; 
and draft for publication articles regarding the controlled substances 
laws and programs.
    To assist registrants in understanding and complying with the 
controlled substances laws, DCP personnel create informational manuals 
(Pharmacist's Manual, Practitioner's Manual, Mid-Level Practitioner's 
Manual, and the Security Outline to the Controlled Substances Act) 
which are distributed to registrants. Where new laws or regulations 
require, specific guides and informational circulars are prepared and 
made available to the affected parties. DCP personnel also meet 
directly with individual registrants to provide information and 
assistance regarding the controlled substances laws.

New Initiatives

    Since publication of the proposed rule in 1993, DEA has established 
two new initiatives, the National Forensic Laboratory Information 
System (NFLIS) and the Tactical Diversion Squads (TDS), which were not 
previously identified in the rulemaking. Each of these initiatives will 
enhance the DCP's ability to administer and enforce the program 
relating to the registration and control of the manufacture, 
distribution, and dispensing of controlled substances, and investigate 
and act against persons who would violate those controls, as discussed 
above. Congress has been notified of these new initiatives and has 
approved funding for them.
    The collection of accurate and validated data concerning the abuse 
of controlled substances and the scientific review of actual or 
potential drugs of abuse is a necessary function for scheduling 
controlled substances, setting quotas for manufacturing levels, and to 
provide more effective leadership in establishing drug policy under the 
CSA. The NFLIS will provide in a single system information from 
analyzed drug evidence associated with criminal activity collected from 
non-Federal forensic laboratories across the country. That information 
must currently be obtained by separate contacts with individual 
laboratories across the country. The system will also enhance the 
investigative ability of DCP personnel by allowing efficient and quick 
identification of local, regional, and national division and abuse 
trends and distribution patterns of diverted and abused controlled 
substances.
    The TDS program is a modernization of a program that was operated 
in the late 1970's and early 1980's in as many as 24 states in a form 
designed to address present diversion trends. DEA has received approval 
to fund the formation of two enforcement teams consisting of Federal, 
state, and local law enforcement personnel fully dedicated to the 
investigation and prosecution of persons involved in the diversion of 
controlled substances from legitimate manufacturing, distributing, and 
dispensing sources. The program will allow the unification of separate, 
and sometimes disparate, Federal, state, and local information, 
authorities, and enforcement programs; provide State and local law 
enforcement authorities with assistance in developing more effective 
enforcement programs against diversion; and help coordinate the various 
jurisdictional responsibilities of agencies that otherwise may hinder 
investigations and prosecutions of those involved in the diversion of 
controlled substances. Funding has also been provided to establish 
another 2 to 3 TDS's in 1997.

Budget and Appropriations

    In order to accomplish the mandates of the CSA and the 
international treaties, Congress in past years authorized and 
appropriated funds within the ``Diversion Control Decision Unit'' of 
the DEA Salaries and Expenses Appropriation. The President's annual 
budget request to Congress contained

[[Page 68631]]

proposed appropriations for the Department of Justice, including the 
DEA. DEA's budget requests are required to meet OMB policy guidelines 
for budget preparation. [OMB Circular No. A-11]
    Once Congress and the President approve the appropriation level, 
funds are made available from the appropriate source in the U.S. 
Treasury. Prior to fiscal year 1993, registration fees collected under 
the CSA were deposited into the general fund of the U.S. Treasury. 
Prior to fiscal year 1993, registration fees collected under the CSA 
were deposited into the general fund of the U.S. Treasury and scored to 
DEA's Salaries and Expenses Appropriation. [31 U.S.C. 3302; 21 U.S.C. 
821; OMB Circular No. A-25 (1959)].
    On October 6, 1992, the President signed the Departments of 
Commerce, Justice and State, the Judiciary and Related Agencies 
Appropriations Act of 1993, Pub. L. No. 102-395, 102d Cong. 2d Sess., 
106 Stat. 1828, 1835 (1992) (``Appropriations Act'') (DEA Salaries and 
Expenses Appropriation). Section 111(b) of the Appropriations Act 
established in the U.S. Treasury, for fiscal year 1993 and thereafter, 
a separate account, to be known as the Diversion Control Fee Account. 
The Appropriations Act directed that ``[n]otwithstanding [a]ny [o]ther 
[p]rovision of [l]aw * * *] fees charged by the Drug Enforcement 
Administration under its Diversion Control Program shall be set at a 
level that ensures the recovery of the full costs of operating the 
various aspects of that program''. Congress specified that the amount 
``required to be refunded'' to DEA from the Diversion Control Fee 
Account for fiscal year 1994 and thereafter ``shall be refunded in 
accordance with estimates made in the budget request of the Attorney 
General for those fiscal years''.
    For fiscal year 1993, in order to provide the opportunity to 
establish and implement a new fee structure to meet the legislative 
requirement, Congress appropriated funds, as it had in past years, for 
the DCP from the general fund of the U.S. Treasury, less $12 million. 
The $12 million was to be funded through increased CSA registration 
fees established as a result of the creation of the Diversion Control 
Fee Account in 1993. Congress further directed in the Appropriations 
Act that ``[a]ny proposed changes in the amounts designated in said 
budget requests shall only be made after notification to the Committees 
on Appropriations of the House of Representatives and the Senate 
fifteen days in advance''.
    The fiscal year 1997 resources for the DCP, as authorized by 
Congress, include 598 full-time employees charged with the 
responsibility for overseeing the activities of one of the largest 
pharmaceutical industries in the world to ensure controlled substances 
are manufactured, imported, exported, distributed, and dispensed for 
legitimate medical and scientific reasons.
    These resources includes a staff of Diversion Investigators, 
Special Agents, Administrative Law Judges, program analysts, 
pharmacologists, chemists, information systems specialists, 
registration assistants, examiners, and management and support staff 
assigned to field offices across the country and assigned to DEA 
Headquarters. Overhead and program expenses include salaries and 
employee benefits (retirement, health and life insurance); travel; rent 
and utilities; equipment and supplies, including vehicles, computers, 
communications, furniture, etc.
    In the overall Budget process, the estimated cost per full time 
employee is based on a module which includes salary and overhead items. 
Modular costs are part of the specific Congressionally approved 
positions, as they are with the positions within the rest of the DEA 
Budget. For example, when Congress authorized 588 positions for the DCP 
in 1994, included therein are the modular costs of maintaining those 
positions (such as rent, equipment, per diem and travel, background 
investigation costs, etc.)
    There are separate DEA activities which support the DCP, but are 
covered elsewhere in the DEA Salaries and Expenses Budget and are 
therefore not supported by CSA Registration Fees. Examples of this 
include: Support provided by the Attorneys in DEA's Office of Chief 
Counsel Diversion/Regulatory Section; laboratory Services support; DEA 
Automated Data Processing systems support (except ARCOS and CSA); 
Office of Training staff, DEA Management and Administrative support; 
Office of Congressional and Public Affairs; Intelligence Support and 
Diversion Investigators assigned overseas.
    Resources not initially identified in the 1993 Federal Register 
establishing the fee (57 FR 60,148 and 58 FR 15,272) which have been 
subsequently approved and funded through CSA registration fees as part 
of the above discussed DCP components include: (1) Congressional 
approval in FY 1994 for 11 Special Agents to enforce the Anabolic 
Steroid Control Act; (2) Transfer of 7 positions and associated costs 
previously provided for in the DEA Salaries and Expenses Budget for 
operation of the ARCOS and CSA data systems--these systems exist at DEA 
solely to support the DCP; (3) Authorization to establish a National 
Forensic Laboratory Information System (as discussed above); (4) 
Authorization to expand assistance and cooperation with state and local 
law enforcement with the establishment of Tactical Diversion Squads (as 
discussed above).
    While DEA's budget is formulated, reviewed, and approved on an 
annual basis, the majority of DEA registrations, from which the fees to 
fund DCP activities are derived, are issued for a three year term. 
Further, the registrant population is not evenly distributed across the 
three year registration cycle; current figures indicate approximately 
320,103 renewals will be received for October 1996 to September 1997, 
305,200 renewals for October 1997 to September 1998, and 290,698 for 
October 1998 to September 1999. Thus, attempting to calculate the fee 
on an annual basis would preclude a uniform application of the costs of 
the DCP for each year across either the entire registrant population or 
the registrants that would renew in each of the individual years. 
Either a return to a one year registration term for all registrants or 
a multi-year fee schedule would be necessary.
    Rather than establish an annual registration, which would impose an 
enormous burden on both the registrants and DEA, a fee schedule which 
averages income over three years was adopted. Use of the three year fee 
schedule allows for (1) uniform application of fees necessary to cover 
the costs of the DCP across the entire registrant population, (2) 
accommodation of such factors as inflation and an uneven number of 
registration renewals in each of the individual years, and (3) 
minimizing the administrative burden associated with frequent 
adjustment to the fee schedule. Use of a multi-year cycle does, 
however, require that estimated fee collection and funding 
authorization figures be used in calculating the fees.
    During the transition to the Diversion Fee Account (DFA) system in 
FY 93, funding was provided from the general fund in the United States 
Treasury to cover the period leading up to the implementation date of 
the DFA. Because the rule implementing the Diversion Fee Account system 
became effective two months early, a $7 million surplus resulted. 
Additional surplus funds have accrued as a result of DEA estimates of 
the costs of the program, as reflected in the Congressional Budget 
Authorization, that were greater than the actual expenses, in part due 
to

[[Page 68632]]

hiring constraints within DEA that resulted in a diversion investigator 
vacancy rate of between 50 and 70 positions from 1993 to present; and 
DEA estimates of fee income that were less than the actual income. As a 
result, the DFA surplus was 45 million dollars as of September, 1996.
    While some surplus in the DFA is necessary to cover the variations 
in the fees collected each year and the need for some carry-over funds 
from one fiscal year to the next, the current surplus exceeds the 
amounts necessary to insure the fiscal continuity of the DCP. However, 
the surplus will delay the need for any fee increases for a number of 
years; based on out-year projections for collections and 
appropriations, the surplus will begin to be drawn down in FY 98 and 
will be exhausted by FY 2001.

Conclusion

    In sum, DEA is mandated to maintain a multi-faceted endeavor 
encompassing scientific, cooperative, regulatory, criminal, and 
international programs to prevent the diversion of controlled 
substances to illicit uses. The DCP has been authorized and has served 
for the past 25 years as an effective vehicle for carrying out these 
mandates. Creation of the Diversion Control Fee Account in 1993 altered 
the funding mechanism of the program, but not its duties, objectives, 
or priorities.
    The Acting Deputy Administrator of the Drug Enforcement 
Administration hereby certifies that this rule will not have a 
significant economic impact upon entities whose interests must be 
considered under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). 
The majority of DEA registrants are practitioners, pharmacies, and 
hospital/clinics, for whom the annual impact of the fee increase is 
$50.00 per registrant. Further, the total annual impact of the fee 
increase for the entire registrant population is less than $50 million. 
However, consistent with the principles of the Regulatory Flexibility 
Act, DEA gave consideration to alternative approaches to the fee 
schedule.
    Since 1971, the CSA has permitted the Attorney General to collect 
fees relating to the registration and control of the manufacture, 
distribution, import, export and dispensing of controlled substances 
(21 U.S.C. 821 and 958). DEA and its predecessor agency have collected 
such fees pursuant to a schedule based upon the five basic activities 
cited in the law. That fee schedule was proposed for public comment as 
part of the regulations to implement the CSA which were finalized in 
1971. The ration of fees was: A distributor's fee is 50% of the 
manufacturer's fee and a dispenser's fee is 16-20% of the distributor's 
fee. The fee ratios have remained consistent for the past 25 years and 
have not been the subject of any substantive comment or objection by 
the regulated industry.
    The Federal Register notice proposing the new fee structure (57 FR 
60148, December 18, 1992) specifically noted that this fee schedule was 
to be continued since the administrative structure to collect it was 
well established and operating efficiently. There were no practical or 
substantive alternative proposals submitted on the record regarding the 
fee structure. Individual interest groups questioned the possibility of 
alternative structures after the rule was finalized.
    In reaching the decision to propose the existing fee ratio as the 
basis for establishing the new fees, several alternatives were 
discussed by DEA, including:
    (1) Establish a fee based on volume of drugs handled by individual 
registrants. This was rejected as impractical on several grounds: (a) 
DEA has no way of determining the volume handled; (b) the volume 
changes due to a variety of market, health care, and competition 
issues, thus requiring frequent modification of individual fees; and 
(c) DEA would be unable to budget due to income fluctuations.
    (2) Establish a fee based upon DEA work hours expended per class of 
registrant. This was rejected as impractical because: (a) Work hours 
vary from year to year based upon particular drug problems, 
identification of violative firms, political or mandated priorities, 
travel restrictions, and many other factors; (b) due to the degree of 
control established over the past years, less work hours are currently 
expended at the wholesale level than at the retail level; however 
indications of diversion at the wholesale level will always receive 
priority attention. Therefore, this measure would fluctuate year to 
year, causing an administrative burden on both the registrants and DEA 
due to frequent fee modifications.
    (3) Establish a different fee for various types of practitioner 
activities (i.e., hospital, medical doctor, dentist, veterinarian, 
narcotic treatment program, teaching institution). Again , this was 
rejected as impractical because: (a) Many of the same issues in items 1 
and 2 above apply equally; (b) a new administrative system to handle 8-
10 registration categories, rather than five, would have to be created, 
with attendant costs of computer programming, staffing, form design, 
printing, inventory, etc.; and (c) an entirely new system of criteria 
would have to be developed to distinguish between categories (i.e., a 
general practice dentist may prescribe less than a general practice 
M.D., but an oral surgeon may prescribe more; a small rural hospital/
clinic my utilize less controlled substances than an M.D. specialist in 
cancer treatment).
    (4) Charge for Order Forms (DEA 222) used to order Schedule II 
drugs. This was impractical because: (a) A substantial number of 
registrants are not registered for Schedule II so an additional fee 
system would have to be used for registrants in Schedules III-V; and 
(b) order form volume is not reflective of activity, i.e., 
practitioners who prescribe rather than dispense do not use many order 
forms.
    Therefore, although various options were considered, none offered a 
feasible alternative, each would require the establishment of complex, 
labor-intensive, expensive new programs (the cost of which would be 
borne by the registrants) with complicated fee schedules that would be 
difficult to understand and administer. The existing fee structure, 
which is operating efficiently and is well understood by the registrant 
population, remained the most suitable choice.
    This document has been drafted and reviewed in accordance with 
Executive Order 12866. The Acting Deputy Administrator of the Drug 
Enforcement Administration has determined that this is not a 
significant action under the provisions of Executive Order 12866, 
section 3(f); accordingly this rule has not been reviewed by the Office 
of Management and Budget. This action involves the implementation of 
non-discretionary mandate under the Departments of Commerce, Justice, 
and State, the Judiciary, and Related Agencies Appropriations Act of 
1993 (Pub. L. 102-395), the annual impact of which is less than $100 
million.
    This action has been analyzed in accordance with the principles and 
criteria contained in E.O. 12612, and it has been determined that the 
rule has no implications which would warrant the preparation of a 
Federalism Assessment.

    Dated: December 20, 1996.
James S. Milford,
Acting Deputy Administrator, Drug Enforcement Administration.
[FR Doc. 96-32953 Filed 12-27-96; 8:45 am]
BILLING CODE 4410-09-M