[Federal Register Volume 68, Number 133 (Friday, July 11, 2003)]
[Rules and Regulations]
[Pages 41222-41230]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-17578]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration

21 CFR Parts 1300, 1301, 1304, 1305, and 1307

[Docket No. DEA-108I]
RIN 1117-AA19


Definition and Registration of Reverse Distributors

AGENCY: Drug Enforcement Administration (DEA), Justice.

ACTION: Interim final rule with request for comment.

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SUMMARY: DEA is amending its regulations to define the term ``reverse 
distributor'' and to establish a new category of registration for 
persons handling controlled substances. The amendments establish the 
regulatory standards under which reverse distributors may handle 
unwanted, unusable, or outdated controlled substances acquired from 
another DEA registrant. These standards ensure the proper documentation 
and recordkeeping necessary to prevent diversion of such controlled 
substances to illegal purposes. Since this amendment mostly codifies 
DEA's existing practices, it will have no significant impact on 
existing reverse distributors.

DATES: Effective Date: August 11, 2003.
    Comment Date: Written comments must be postmarked on or before 
September 9, 2003.

ADDRESSES: Comments should be submitted to the Deputy Assistant 
Administrator, Office of Diversion Control, Drug Enforcement 
Administration, Washington, DC 20537, Attention: DEA Federal Register 
Representative/CCR.

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

SUPPLEMENTARY INFORMATION:

Overview of and Benefits of This Interim Final Rule

    As is more fully discussed in this preamble, this interim final 
rule mostly codifies existing practices that reverse distributors 
follow under memoranda of understanding (MOUs) with the Drug 
Enforcement Administration. This approach is consistent with the 
comments received (also discussed more fully later in this preamble) 
that stated that reverse distributors would be significantly and 
adversely impacted if, as was proposed, they were classified as 
manufacturers. In recognizing this activity as a separate registration 
category of distributors, DEA believes the entire controlled substances 
industry will benefit. Existing reverse distributors operating under 
MOUs will become fully recognized registrants under DEA rules. 
Thousands of other registrants who need to dispose of unneeded or 
outdated inventories will be able to turn to a fully registered group 
of distributors. Furthermore, by essentially codifying existing 
practices these benefits will be achieved with minimal need for change 
or for disruption to the affected industry.

Background

    The overall goal of the Controlled Substances Act (CSA) and of 
DEA's regulations in Title 21, Code of Federal Regulations (CFR), parts 
1300-1316 is to provide a closed distribution system so that a 
controlled substance is at all times under the legal control of a 
person registered, or specifically exempted from registration, by the 
Drug Enforcement Administration until it reaches the ultimate user or 
is destroyed. DEA achieves this goal by registering manufacturers, 
distributors, and dispensers of controlled substances. Thus, any 
movement of controlled substances between these registered persons is 
covered by DEA regulations,

[[Page 41223]]

which ensure that all controlled substances are accounted for from 
their creation until their consumption or destruction.
    When a controlled substance has become outdated or otherwise 
unusable, the registered person who possesses the substance must 
dispose of it. However, over the past decade, environmental concerns 
and regulatory changes have caused drug manufacturers and government 
agencies (including DEA and State authorities) to become increasingly 
reluctant to be involved in the disposal process. Thus, many disposal 
options are no longer available.
    Nonetheless, disposal of controlled substances can occur in several 
ways:
    1. The distributor or dispenser can return the controlled 
substances to the pharmaceutical manufacturers who, as a service to 
their customers, accept returns of outdated/damaged controlled 
substances. Distributors, dispensers, and manufacturers are all 
registered with DEA.
    2. The distributor, dispenser, or manufacturer can itself dispose 
of the controlled substances under the procedures outlined in 21 CFR 
1307.21. Under 21 CFR 1307.21, any person may request permission to 
dispose of controlled substances without the benefit of a DEA or State 
witness. In many cases, blanket permission for disposal of controlled 
substances is granted to registrants who have an ongoing need to 
dispose of unwanted controlled substances. The disposal must be 
authorized by DEA in writing, and DEA may require that a set schedule 
be established. Other registrants are granted disposal authority on a 
case-by-case basis. DEA normally requires that the registrant provide 
two designated responsible individuals to accompany the drugs to the 
disposal site and witness the destruction. This achieves DEA's goal of 
assuring the controlled substances are rendered nonrecoverable. 
Disposal under the authority of 21 CFR 1307.21 maintains the closed 
distribution system because the controlled substances remain under the 
legal control of a registered person at all times.
    3. The distributor, dispenser, or manufacturer can distribute the 
controlled substances to a reverse distributor to take control of the 
controlled substances for the purpose of returning them to the 
manufacturer or, if necessary, disposing of them.
    For many years, DEA opposed granting DEA registrations to firms 
solely or primarily engaged in the disposal (whether the transportation 
portion, actual disposal, or both) of controlled substances because 
they were not considered an essential link in the closed distribution 
system that the Controlled Substances Act established to control the 
flow of drugs from the manufacturer to the ultimate user. In recent 
years, however, increasingly stringent requirements imposed by the U.S. 
Environmental Protection Agency (EPA) resulted in fewer and fewer 
approved disposal facilities. As a result, a new type of business has 
developed that collects controlled substances from registrants and 
either returns them to the manufacturer or arranges for their disposal. 
The businesses performing this middleman service refer to themselves as 
``reverse distributors'' or ``returns processors.''
    This interim final rule deals only with the distribution of 
controlled substances to reverse distributors. The first two 
categories--direct returns of controlled substances by distributors or 
dispensers to manufacturers, and disposals by the distributor, 
manufacturer or dispenser--are already covered by the existing rules. 
Only the third category, i.e., persons who distribute controlled 
substances to reverse distributors, is not expressly covered by the 
current regulations, although DEA has regulated reverse distributors 
for many years, first, as distributors generally, and second, as 
reverse distributors specifically under the terms of Memoranda of 
Understanding (MOUs), through which they are granted DEA registrations. 
This rule will eliminate the need for MOUs. However, since this 
amendment essentially codifies current DEA policies and practices, it 
does not impose any significant additional burden on reverse 
distributors.
    On August 23, 1995, DEA issued a Notice of Proposed Rulemaking 
(NPRM) (60 FR 43732) that proposed regulatory standards governing 
disposers of controlled substances. DEA proposed to accomplish this by 
amending its regulations to define the term ``Disposer'' to account for 
this middleman function in the regulations and establish a new category 
of manufacturer registration under which persons performing this 
function would be registered. DEA also proposed amending the 
regulations to exempt disposers from the quota requirements; to 
identify the records and reports required of disposers; and to 
establish order form procedures for disposers. Finally, DEA proposed 
amendments to a number of gender-specific sections to make them gender 
neutral.
    DEA originally based its decision to define the persons performing 
the reverse distribution function as disposers on the definition of 
``manufacturer.'' In 21 CFR 1300.01(b)(27), DEA defines manufacture in 
part as ``the producing, preparation, propagation, compounding, or 
processing of a drug or other substance . . . .'' The section further 
defines a manufacturer as ``a person who manufactures a drug or other 
substance . . .'' In the proposed rule, DEA stated that by its nature, 
a disposer processes a drug or other substance. Therefore, DEA proposed 
to place disposers within the definition of manufacturer, under a new 
disposer subcategory. Commenters to the proposed rule objected to being 
categorized as disposers and manufacturers for the reasons explained 
below under ``Comments.'' Therefore, in this interim final rule, DEA is 
establishing a definition for ``reverse distributor'' and is 
establishing a new category of registration as reverse distributors.
    DEA is using an interim final rule because it will give interested 
persons an additional opportunity for comment even though the substance 
of this interim final rule is consistent with the purpose of the August 
1995 NPRM, the comments submitted in response to that NPRM, and with 
current DEA and industry practice.
    Currently DEA registers persons performing reverse distributor 
functions as distributors. Since reverse distributors are not 
specifically identified in the current regulations, DEA enters into a 
Memorandum of Understanding (MOU) with the person performing the 
reverse distribution function. The Memorandum of Understanding (MOU) 
specifies conditions which the reverse distributor must follow in 
addition to the regulations that apply to distributors. These 
registrations must be renewed annually and operations under them are 
limited to products in schedules listed on the registration. DEA has 
not experienced any difficulties in treating reverse distributors as 
distributors for purposes of registration and other requirements. Any 
reverse distributor that was registered under the terms of a MOU will 
be reregistered as a reverse distributor under the terms of this 
interim final rule in the next renewal cycle and will be specifically 
identified in DEA's records as a reverse distributor. Persons currently 
conducting reverse distribution operations must notify DEA by no later 
than the time of renewal of their registration so that they may be 
properly identified as reverse distributors in DEA's records.
    The requirements for a reverse distributor in this interim final 
rule are similar to those currently imposed on

[[Page 41224]]

all registrants at the distributor level. They include, but are not 
necessarily limited to:
    [sbull] Security: All applicants must install, at the registered 
premises, physical security controls that meet the existing standards 
of 21 CFR 1301.71 and 1301.72.
    [sbull] Recordkeeping: In accordance with 21 CFR part 1304, 
periodic inventories and records of all controlled substances received, 
destroyed, or returned to the original, registered manufacturers must 
be maintained for two years. The registrant must adequately describe 
the receipt and accountability methods and records to be employed to 
ensure the establishment of effective controls against diversion.
    [sbull] Order Forms must be completed for all Schedule I and II 
items received and transferred.
    [sbull] Reports are required under the Automation of Reports and 
Consolidated Orders System (ARCOS), as specified in 21 CFR 1304.33.

In addition to DEA requirements, reverse distribution applicants must 
obtain the appropriate State and Federal approvals for controlled 
substances and disposal activities.
    After publication of the August 1995 NPRM, DEA completed a 
rulemaking project in 1997 (62 FR 13938, March 24, 1997) that 
reorganized and clarified the regulations that would have been affected 
by that NPRM. The 1997 rulemaking also addressed the gender-specific 
and other editorial changes that were contained in the 1995 NPRM. 
Therefore, proposed changes to 21 CFR 1301.26 (now 21 CFR 1301.24), 
Exemption of law enforcement officers; 21 CFR 1301.32 (now 21 CFR 
1301.13), Application forms; contents; signature; and 21 CFR 1304.34 
(now 21 CFR 1304.33(a)), Reports generally, are not included in this 
interim final rule. For the proposed changes that relate to reverse 
distributors, this interim final rule amends the appropriate CFR 
sections as changed in 1997. Throughout the preamble, citations to both 
previous section number and current section number are provided, where 
relevant.

Public Comments on the NPRM

    Eight comments were received regarding the proposed rule. 
Commenters included reverse distributors and disposers currently 
operating under Memoranda of Understanding (i.e., facilities such as 
incinerators that destroy controlled substances) and some of their 
representative organizations. While some commenters supported the 
intent of the rule, all commenters were against some or all aspects of 
the rule. The following discussion summarizes the issues raised by 
commenters and DEA's response to these issues.

Proposed Definition and Registration Requirements

    Most commenters opposed the proposal to classify the activities 
they engage in as either disposal or manufacturing and stated that 
doing so would subject them to unnecessary and burdensome regulations.
    One commenter stated that since reverse distributors neither 
process nor package/repackage controlled substances within the meaning 
of the statutory definition of ``manufacturer,'' it is beyond DEA's 
statutory authority to regulate these companies as manufacturers. 
Another commenter stated that the primary goal of disposers is not to 
render a controlled substance unusable, but, rather, it is to sort, 
inventory and perform other activities necessary to distribute products 
back to the original manufacturer and only secondarily, arrange for the 
actual destruction of controlled substances.
    Four commenters stated that the proposed definition of disposer 
implies that a disposer is manipulating the product and, therefore, 
that waste is being accepted. This would, in turn, require disposers to 
comply with the more burdensome guidelines of the Food and Drug 
Administration (FDA) and EPA.

DEA Response

    In response to these comments, DEA has decided to establish a 
definition for reverse distributor and is establishing a new category 
of registration as reverse distributors. In this interim final rule, 
DEA is adding the definition for ``reverse distributors'' to 21 CFR 
1300.01(b). Reverse distributors are defined as ``a person who receives 
controlled substances acquired from another DEA registrant for the 
purpose of returning unwanted, unusable, or outdated controlled 
substances to the manufacturer or the manufacturer's agent, or, where 
necessary, processing such substances or arranging for processing such 
substances for disposal.'' When reverse distributors return unwanted, 
unusable, or outdated controlled substances acquired from legitimate 
medical, scientific, research or other industrial channels to a 
manufacturer or a manufacturer's agent, they must follow the same DEA 
requirements as distributors follow. When reverse distributors process 
controlled substances or arrange for processing controlled substances 
for disposal, they must follow the same procedures that distributors 
would follow in complying with 21 CFR 1307.21, ``Procedure for 
disposing of controlled substances.''

Applicability to Practitioners and Others

    One commenter stated that classifying dentists and other small 
disposers as manufacturers would be burdensome because they would now 
have to register and pay burdensome registration fees. This could 
result in dentists removing themselves from regulatory control by 
refusing to handle controlled substances, which could adversely affect 
their patients. This commenter recommended that the proposed rule 
either exempt dentists and other small disposers by quantity, or state 
that they are not members of the ``disposer'' subcategory.
    Another commenter stated that previous contacts with DEA indicated 
that the rulemaking is intended to regulate disposers that dispose of 
or offer controlled substances for disposal over which they have legal 
control. This commenter requested that DEA clarify that it should not 
be subject to the proposed rule provided that it is acting as an agent 
of DEA through a contract; or that it disposes of controlled substances 
for manufacturers provided that the manufacturer's representatives 
bring the controlled substances to a disposal facility and witness the 
destruction, thus maintaining legal responsibility for the controlled 
substances.

DEA Response

    In this interim final rule, DEA is not changing the procedures for 
disposing of controlled substances under 21 CFR 1307.21. Those 
procedures are designed to ensure that controlled substances are under 
the control of a DEA registrant until they are destroyed or rendered 
unusable. If a disposal company never takes legal control of a 
controlled substance and the actual destruction is witnessed by two 
representatives of a DEA registrant, the disposal company itself is not 
required to obtain a DEA registration. On the other hand, if a disposal 
company receives controlled substances from a DEA registrant and then 
disposes of them later, the disposal company becomes part of the chain 
of responsible parties and must therefore be registered by DEA as a 
reverse distributor.
    Under the interim final rule, DEA registrants who need to 
periodically dispose of controlled substances, such as practitioners, 
would continue to follow their current procedures for disposal of 
controlled substances.

[[Page 41225]]

Usually this involves obtaining authority and instructions from the 
local DEA field office as specified in 21 CFR 1307.21. Such registrants 
also have the option of returning controlled substances to the 
manufacturer or to a reverse distributor.

Appropriateness of Security and Other Requirements That Apply to 
Manufacturers

    Commenters recommended creating a separate category for reverse 
distributors, as a subcategory of distributors, who would be subject to 
the existing registration and other requirements for distributors. 
Commenters stated that reverse distributors should, therefore, not be 
subject to the security, inventory, recordkeeping, and reporting 
requirements of the proposed rule that apply to manufacturers.

DEA's Response

    Since DEA has decided to create a completely separate category for 
reverse distributors, persons who fall under this category will be 
required to comply with the same security, reporting, and other 
requirements that apply to distributors rather than the requirements 
that apply to manufacturers.

Proposed Security Requirements: Monitoring Systems

    DEA received one comment on the language in proposed 21 CFR 
1301.71(b)(14) which requires the applicant or registrant to document 
the adequacy of its system for monitoring the receipt, manufacture, 
distribution, and disposal of controlled substances. The commenter 
stated that all of the ``waste to energy'' facilities that it operates 
have demonstrated that the implementation of supervised monitoring of 
the receipt and disposal process, by the disposer, has proven effective 
and that it would be physically impossible for them to construct the 
vaults or other security barriers that the regulations require for 
storage at manufacturer's locations (under 21 CFR 1301.72). Instead, 
this commenter recommended that disposers be required to develop a set 
of Standard Operating Procedures, to be approved by DEA, for the 
receipt and disposal of controlled substances.

DEA Response

    With respect to the issue of physical security, it should be noted 
that the commenter does not take possession of the controlled 
substances that are to be destroyed. Instead, the commenter maintains 
incineration facilities at which DEA registrants carry out witnessed 
destruction of their controlled substances. As a result, the commenter 
is not subject to DEA's requirements and does not have to establish or 
maintain physical security as required under 21 CFR 1301.72 of the 
regulations.

Proposed Security Requirements: Compliance With Other Laws

    One commenter commented on proposed 21 CFR 1301.71(b)(15), which 
would require DEA to consider the applicability of the security 
requirements contained in all Federal, State, and local laws and 
regulations governing the management of waste, as they would apply to 
applicants and registrants. The commenter stated that this requirement 
would be inappropriate because it would exceed DEA's statutory 
authority. While DEA inspectors should be concerned with compliance 
with DEA statutes and regulations during audits, the inspectors should 
not be empowered to look for violations of other Federal, State, and 
local laws governing the management of waste. Enforcement of those laws 
should be left to the other Federal agencies and individual 
jurisdictions. Therefore, the commenter requested DEA clarification on 
this issue.

DEA Response

    With respect to this comment, the items listed in 21 CFR 
1301.71(b)(1) through new (b)(15) are factors that the Administrator 
may consider in evaluating whether the security controls provided by a 
DEA registrant are adequate to guard against theft and diversion of 
controlled substances and appropriate to the registrant's business. Not 
all of the factors may be relevant for evaluation of a particular 
registrant's operation. DEA is adding a new factor regarding the 
applicability of other Federal, State, or local laws, not as an 
enforcement issue for those specific laws, but only as guidance to the 
registrant that DEA may consider how the registrant is complying with 
such laws in making an evaluation of the adequacy of the registrant's 
security system. DEA has the statutory authority under 21 U.S.C. 823 to 
consider an applicant's compliance with applicable State and local laws 
before granting a registration.

Proposed Inventory Requirements

    A commenter that provides disposal facilities at which registrants 
may conduct witnessed destructions recommended that additional language 
be added to the end of proposed 21 CFR 1304.20 (current 21 CFR 1304.11) 
to require that the information required under 21 CFR 1304.15(a), (c), 
and (d) be provided by the manufacturer or its agent when tendering the 
substances for disposal.

DEA Response

    The commenter's suggested change is not necessary because in 
witnessed destructions the registrant conducting the destruction must 
accurately document the controlled substances being destroyed on DEA 
Form 41. Further, a disposal facility of the type operated by the 
commenter does not take possession of the controlled substances being 
destroyed and, thus, is not subject to the registration, inventory, and 
recordkeeping requirements under the law.

Proposed Recordkeeping Requirements

    Several commenters made recommendations to change the language of 
proposed 21 CFR 1304.30(a) (current 21 CFR 1304.22) to make the 
specific requirements clear.
    A commenter also expressed concern about proposed paragraph (b) and 
stated that the disposer should not be expected to recount and itemize 
the individual dosage units and containers for each substance being 
delivered for disposal. This would put their employees at possible risk 
for exposure to these substances, increase opportunities for diversion, 
and significantly slow down the disposal operation. Instead, the 
commenter recommended that sufficient controls be placed on the 
manufacturer and its representatives prior to disposal so that the 
disposer can focus on rapid and effective disposal procedures.

DEA Response

    The comments primarily address problems that could have arisen if 
the reverse distribution function was included under manufacturing, as 
proposed. These concerns are mostly addressed by treating reverse 
distribution as a separate category of registration. The concerns 
expressed by disposers are, as previously discussed, not relevant as 
long as legal control of the controlled substances remains with a 
person who is registered with DEA.
    Recordkeeping requirements for reverse distributors are set forth 
in new paragraph (e) of 21 CFR 1304.22. These requirements are tailored 
to the reverse distributor role and address recordkeeping for 
controlled substances in both bulk and finished form. These 
requirements are consistent with existing practice.

[[Page 41226]]

Witness Requirement

    A commenter stated that DEA would require two responsible 
individuals to accompany the drugs to the disposal site and actually 
witness the destruction. The commenter stated that this would 
significantly increase the costs of controlled substances destruction 
for all registrants and that the rule should, therefore, require a 
regulatory flexibility analysis.

DEA Response

    The requirement to have two responsible individuals accompany the 
drugs to the disposal site is also consistent with existing practice. 
DEA Form 41, Registrants Inventory of Drugs Surrendered, must be 
completed by a registrant's representative and witnessed by a second 
representative of the registrant, to document the disposal of 
controlled substances. This form must be sent to DEA.

Proposed Reporting Requirements

    A commenter stated that ARCOS reporting becomes difficult and 
costly when a disposer receives a quantity of a controlled substance 
listed in Schedule I and II and a narcotic controlled substance listed 
in Schedule III which is contained in a compound, mixture or 
preparation which is not assigned an NDC number. The commenter stated 
that this reporting ``will become more difficult as more returns are 
accepted from Pharmacies, Home Infusion Pharmacies, Provider Pharmacies 
to Long Term Care Facilities, Hospitals, and dispensers.''
    The commenter recommended adding a new paragraph (e) to current 21 
CFR 1304.33 (formerly 21 CFR 1304.39) that would provide for the 
following exception: ``Exceptions. Any controlled substance listed in 
Schedule I and II and on each narcotic controlled substance listed in 
Schedule III which material, compounded, mixture or preparation 
containing a quantity of a substance from a registered dispenser, 
practitioner, researchers, and analytical registrants, e.g., 
prescription, IV mixture or non NDC material, may be exempted from 
filing reports under this section to ARCOS Units of the 
Administration.'' The commenter also stated that proposed paragraphs 
(b) and (c) (with regard to ARCOS reports being filed no later than the 
15th day of the month or no later than January 15th) would have a 
significant economic impact and lead to ARCOS delays. This is because 
disposers (unlike manufacturers or distributors) deal with open 
containers that need validation (by count, weight, and/or volume) 
before the containers can be placed into inventory; this can be a slow 
and tedious process. The commenter added that the economic impact and 
ARCOS delays would increase as the disposer class registration 
utilization grows.

DEA Response

    While the commenter addressed the reporting requirements in 
proposed 21 CFR 1304.39(b) and (c), the commenter's real concern 
appears to be related to inventory requirements currently in 21 CFR 
1304.11. This interim final rule will allow reverse distributors to 
follow the inventory requirements that currently apply to dispensers 
and researchers. This would mean that in the circumstances described in 
21 CFR 1304.11(e)(3)(ii), it would not be necessary to make an exact 
count or measure of the contents in all cases, i.e., if the controlled 
substance is listed in Schedule III, IV, or V, and the container holds 
fewer than 1,000 tablets or capsules, the reverse distributor could 
make an estimated count or measure.
    Notwithstanding this change, a reverse distributor is required to 
know what it has on hand from the moment it is received. It is the 
reverse distributor's responsibility to have the proper documentation 
and accountability for any controlled substances in his or her 
possession. The best way for reverse distributors to accomplish this is 
by doing the following: (1) Require customers to provide a list of the 
controlled substances to be sent in advance of the shipment; (2) 
Complete a form or invoice indicating the amount that the customer will 
be sending, keep a copy of this document, and send 2 copies to the 
customer; and (3) Require the customer to keep one copy of the document 
and put the other copy in the package with the shipment. This procedure 
would maintain a paper trail and provide the data on inventory from the 
moment the shipment is received by the reverse distributor. Reverse 
distributors who follow this procedure should not have difficulty 
preparing the ARCOS reports that are required by current 21 CFR 1304.33 
for controlled substances listed in Schedules I and II, and for 
narcotic controlled substances listed in Schedules III, IV, and V.
    With respect to the issue of non-NDC material, such as compounded 
prescription products or infusion products, DEA's ARCOS Unit has 
established a listing of generic codes that can be used to identify 
products that do not have an NDC number assigned. If a product being 
handled does not have a generic code, please contact the ARCOS Unit of 
the Administration for assistance.
    Reverse distributors are encouraged to make use of electronic 
identification and tracking systems, such as bar codes, to aid in 
meeting the inventory and reporting requirements. Also, reverse 
distributors may use electronic versions of DEA Form 41 if the 
electronic version is an exact reproduction of the form. If the 
electronic version is not identical to the paper version, it is not the 
official form, and may not be used.
    DEA invites manufacturers, reverse distributors, and other 
distributors to work with the Administration to establish standard 
operating procedures so there is a standard recordkeeping system for 
transferring, receiving, and inventorying partial containers. With a 
standardized system there would be fewer inconsistencies among the 
records of each registrant when controlled substances are transferred 
from one to another.

Proposed Order Form Requirements

    A commenter stated that in the preamble, DEA stated that ``Order 
Forms must be completed for all Schedule I and III items received and 
transferred.'' The commenter stated that this is incorrect and that the 
correct statement should be: ``Order Forms must be completed for all 
Schedule I and II items received and transferred.''

DEA Response

    DEA agrees that there was a typographical error in the preamble and 
is clarifying that order forms (DEA Form 222) required by part 1305 are 
for Schedule I and II controlled substances received and transferred.

Reverse Distributor Receipt of Controlled Substances From Non-
registrants

    Under the interim final rule, reverse distributors may only receive 
controlled substances from DEA registrants. Non-registrants, such as 
long term care facilities, do not have direct authority to handle 
controlled substances. Further, the substances in their possession are 
no longer part of the closed system of distribution and are no longer 
subject to DEA's system of corresponding accountability. In cases where 
long term care facilities must dispose of controlled substances, they 
should follow the guidelines within their State for disposing of the 
drugs and maintain appropriate documentation of the disposal. Likewise, 
a former registrant, such as a pharmacy, whose registration has expired 
or has been surrendered, would need to coordinate with the local DEA 
office to develop a procedure to

[[Page 41227]]

dispose of any controlled substances on hand.

Why Is DEA Publishing This Action as an Interim Final Rule?

    As discussed previously, the goal of the NPRM was to give codified 
status to reverse distributors. While DEA initially proposed doing this 
by registering reverse distributors in the manufacturer category, 
comments on the NPRM made it clear that this approach would adversely 
affect the existing industry (e.g. by subjecting reverse distributors 
to certain EPA and FDA regulations). By registering reverse 
distributors as distributors, DEA accomplishes its original goal in a 
manner that is consistent with the intent of the NPRM and with public 
comments on the NPRM. Also, this approach is beneficial rather than 
detrimental to the entire controlled substances industry. However, 
recognizing the time which has elapsed between publication of the NPRM 
and this action, as well as the growth and evolution of the reverse 
distributor industry during that time, DEA has determined that, rather 
than publishing final regulations on this issue, it is in the best 
interest of industry that DEA publish an interim final rule. Publishing 
an interim final rule will permit further comment from the affected 
industry, ensuring that final regulations appropriately address 
industry evolution and concerns.

Summary

    In summary, the registration and other requirements for reverse 
distributors under this interim final rule are the same as those 
currently imposed on distributors and the same as currently imposed on 
reverse distributors under MOUs; Registration requirements under 
existing 21 CFR 1301.13; Security requirements under existing 21 CFR 
1301.71 and 1301.72; Inventory requirements under existing 21 CFR 
1304.11; Recordkeeping requirements under existing 21 CFR 1304.22; 
Reporting requirements under existing 21 CFR 1304.33 (ARCOS reports); 
Order form requirements under existing 21 CFR 1305.08 (Persons entitled 
to fill order forms). In some cases these rules have been modified to 
apply specifically to reverse distributors. In addition, DEA is 
amending 21 CFR 1307.11 and 1307.12 to clarify that registrants can 
transfer (``distribute'') controlled substances to a reverse 
distributor, even if the registrant is not registered as a distributor. 
As a result of DEA's decision to classify reverse distributors as a new 
category of registration, instead of as a manufacturer, proposed 21 CFR 
1303.12 on quotas is not applicable.
    The closed system of distribution established under the CSA for 
controlled substances relies on certain fundamental principles, 
including registration, security, and accountability (i.e., 
inventories, recordkeeping, and reporting), to achieve a system of 
controls that allows for legitimate commerce while minimizing the 
potential for diversion. The fact that reverse distributors engage in a 
unique activity within the controlled substances chain and are faced 
with certain challenges that other registrants do not normally 
encounter does not override the fundamental principals of DEA's 
controls. Reverse distributors must register, provide security, and 
maintain accurate records for all controlled substances in their 
possession. However, the regulatory structure does provide some 
flexibility and, where possible, DEA has made adjustments to address 
some of the problems the industry has encountered, including use of a 
separate category of registration and application of the inventory 
requirements for dispensers and researchers.
    Because of the length of time since the NPRM was published and the 
evolving nature of this industry, DEA is using an interim final rule to 
give an additional opportunity for comment. DEA will consider comments 
on the appropriateness and the practical application of these rules to 
current industry practice and will be flexible where possible in 
developing final rules.

Application for Registration for Reverse Distributors

    As has been previously noted in this rulemaking, persons wishing to 
conduct reverse distributor activities must register with DEA to do so. 
To apply for registration, persons must complete a DEA Form 225, 
Application for Registration. To renew a DEA registration, persons must 
complete a DEA Form 225a, Application for Registration Renewal. As DEA 
has not yet issued updated forms specifically referencing the reverse 
distributor business activity, persons wishing to register as reverse 
distributors must choose the distributor business activity on the form 
and then must attach a written statement signed by the person signing 
the registration or registration renewal application acknowledging that 
the applicant is conducting or wishes to conduct reverse distributor 
activities.

Regulatory Certifications

Regulatory Flexibility Act

    The Deputy Assistant Administrator hereby certifies that this 
interim final rulemaking has been drafted in accordance with the 
Regulatory Flexibility Act (5 U.S.C. 605(b)), and by approving it 
certifies that this regulation will not have a significant economic 
impact upon a substantial number of small entities. Therefore, no 
regulatory flexibility analysis is required.

Executive Order 12866

    The Deputy Assistant Administrator further certifies that this 
rulemaking has been drafted in accordance with the principles of 
Executive Order 12866 Section 1(b). DEA has determined that this rule 
is a significant regulatory action. Therefore, this action has been 
reviewed by the Office of Management and Budget.

Executive Order 12988

    The Deputy Assistant Administrator further certifies that this 
regulation meets the applicable standards set forth in Sections 3(a) 
and 3(b)(2) of Executive Order 12988.

Executive Order 13132

    This rulemaking does not preempt or modify any provision of State 
law; nor does it impose enforcement responsibilities on any State; nor 
does it diminish the power of any State to enforce its own laws. 
Accordingly, this rulemaking does not have federalism implications 
warranting the application of Executive Order 13132.

Unfunded Mandates Reform Act of 1995

    This rule will not result in the expenditure by State, local and 
tribal governments, in the aggregate, or by the private sector, of 
$100,000,000 or more in any one year, and will not significantly or 
uniquely affect small governments. Therefore, no actions were deemed 
necessary under the provisions of the Unfunded Mandates Reform Act of 
1995.

Small Business Regulatory Enforcement Fairness Act of 1996

    This rule is not a major rule as defined by Section 804 of the 
Small Business Regulatory Enforcement Fairness Act of 1996. This rule 
will not result in an annual effect on the economy of $100,000,000 or 
more; a major increase in costs or prices; or significant adverse 
effects on competition, employment, investment, productivity, 
innovation, or on the ability of United States-based companies to 
compete with foreign-

[[Page 41228]]

based companies in domestic and export markets.

List of Subjects

21 CFR Part 1300

    Definitions, Drug traffic control.

21 CFR Part 1301

    Administrative practice and procedure, Drug traffic control, 
Security measures.

21 CFR Part 1304

    Drug traffic control, Reporting requirements.

21 CFR Part 1305

    Drug traffic control, Reporting requirements.

21 CFR Part 1307

    Drug traffic control.


0
For the reasons set out above, 21 CFR parts 1300, 1301, 1304, 1305, and 
1307 are amended as follows:

PART 1300--DEFINITIONS

0
1. The authority citation for part 1300 continues to read as follows:

    Authority: 21 U.S.C. 802, 871(b), 951, 958(f).
0
2. Section 1300.01 is amended by redesignating paragraphs (b)(41) 
through (b)(43) as paragraphs (b)(42) through (b)(44), and adding a new 
paragraph (b)(41) to read as follows:


Sec.  1300.01  Definitions relating to controlled substances.

* * * * *
    (b) * * *
    (41) The term reverse distributor means a registrant who receives 
controlled substances acquired from another DEA registrant for the 
purpose of--
    (i) Returning unwanted, unusable, or outdated controlled substances 
to the manufacturer or the manufacturer's agent; or
    (ii) Where necessary, processing such substances or arranging for 
processing such substances for disposal.
* * * * *

PART 1301--REGISTRATION OF MANUFACTURERS, DISTRIBUTORS, AND 
DISPENSERS OF CONTROLLED SUBSTANCES

0
3. The authority citation for part 1301 continues to read as follows:

    Authority: 21 U.S.C. 821, 822, 823, 824, 871(b), 875, 877.


0
4. Section 1301.13 is amended by revising paragraph (c), redesignating 
paragraphs (e)(1)(iii) through (e)(1)(ix) as paragraphs (e)(1)(iv) 
through (e)(1)(x) and adding a new paragraph (e)(1)(iii) to read as 
follows:


Sec.  1301.13  Application for registration; time for application; 
expiration date; registration for independent activities; application 
forms, fees, contents and signature; coincident activities.

* * * * *
    (c) At the time a manufacturer, distributor, reverse distributor, 
researcher, analytical lab, importer, exporter or narcotic treatment 
program is first registered, that business activity shall be assigned 
to one of twelve groups, which shall correspond to the months of the 
year. The expiration date of the registrations of all registrants 
within any group will be the last date of the month designated for that 
group. In assigning any of these business activities to a group, the 
Administration may select a group the expiration date of which is less 
than one year from the date such business activity was registered. If 
the business activity is assigned to a group which has an expiration 
date less than three months from the date of which the business 
activity is registered, the registration shall not expire until one 
year from that expiration date; in all other cases, the registration 
shall expire on the expiration date following the date on which the 
business activity is registered.
* * * * *
    (e) * * *
    (1) * * *

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               New--225  Renewal--
     (iii) Reverse distributing           Schedules I-V               225a                  438  438                  1
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
                                                                      * * * * * * *
------------------------------------


0
5. Section 1301.71 is amended by revising paragraphs (b)(13) and 
(b)(14) and adding a new paragraph (b)(15) to read as follows:


Sec.  1301.71  Security requirements generally.

* * * * *
    (b) * * *
    (13) The availability of local police protection or of the 
registrant's or applicant's security personnel;
    (14) The adequacy of the registrant's or applicant's system for 
monitoring the receipt, manufacture, distribution, and disposition of 
controlled substances in its operations; and
    (15) The applicability of the security requirements contained in 
all Federal, State, and local laws and regulations governing the 
management of waste.
* * * * *

0
6. Section 1301.72 is amended by revising paragraph (b)(7) to read as 
follows:


Sec.  1301.72  Physical security controls for non-practitioners; 
narcotic treatment programs and compounders for narcotic treatment 
programs; storage areas.

* * * * *
    (b) * * *
    (7) Such other secure storage areas as may be approved by the 
Administrator after considering the factors listed in Sec.  1301.71(b);
* * * * *

PART 1304--RECORDS AND REPORTS OF REGISTRANTS

0
7. The authority citation for part 1304 continues to read as follows:

    Authority: 21 U.S.C. 821, 827, 871(b), 958(e), 965, unless 
otherwise noted.


0
8. Section 1304.11 is amended by revising paragraph (e)(2) and the 
introductory text of paragraph (e)(3) to read as follows:


Sec.  1304.11  Inventory requirements.

* * * * *
    (e) * * *
    (2) Inventories of distributors. Except for reverse distributors 
covered by paragraph (e)(3) of this section, each person registered or 
authorized to distribute controlled substances shall include in the 
inventory the same information required of manufacturers pursuant to 
paragraphs (e)(1)(iii) and (iv) of this section.
    (3) Inventories of dispensers, researchers, and reverse 
distributors. Each person registered or authorized to dispense, conduct 
research, or act as a reverse distributor with controlled substances 
shall include in the inventory the same information required of 
manufacturers pursuant to paragraphs (e)(1)(iii) and (iv) of this 
section. In determining the number of units of each finished form of a 
controlled substance in a commercial container which has been opened, 
the dispenser, researcher,

[[Page 41229]]

or reverse distributor shall do as follows:
* * * * *

0
9. Section 1304.22 is amended by revising paragraph (b) and adding new 
paragraph (e) to read as follows:


Sec.  1304.22  Records for manufacturers, distributors, dispensers, 
researchers, importers, and exporters.

* * * * *
    (b) Records for distributors. Except as provided in paragraph (e) 
of this section, each person registered or authorized to distribute 
controlled substances shall maintain records with the same information 
required of manufacturers pursuant to paragraphs (a)(2)(i), (ii), (iv), 
(v), (vii), (viii) and (ix) of this section.
* * * * *
    (e) Records for reverse distributors. Each person registered to 
distribute controlled substances as a reverse distributor shall 
maintain records with the following information for each controlled 
substance:
    (1) For each controlled substance in bulk form the following:
    (i) The name of the controlled substance.
    (ii) The total quantity of the controlled substance to the nearest 
metric unit weight consistent with unit size.
    (iii) The quantity received from other persons, including the date 
and quantity of each receipt and the name, address, and registration 
number of the other person from whom the controlled substance was 
received.
    (iv) The quantity returned to the original manufacturer of the 
controlled substance or the manufacturer's agent, including the date of 
and quantity of each distribution and the name, address and 
registration number of the manufacturer or manufacturer's agent to whom 
the controlled substance was distributed.
    (v) The quantity disposed of including the date and manner of 
disposal and the signatures of two responsible employees of the 
registrant who witnessed the disposal.
    (2) For each controlled substance in finished form the following:
    (i) The name of the substance.
    (ii) Each finished form (e.g., 10-milligram tablet or 10-milligram 
concentration per fluid ounce or milliliter) and the number of units or 
volume of finished form in each commercial container (e.g., 100-tablet 
bottle or 3-milliliter vial).
    (iii) The number of commercial containers of each such finished 
form received from other persons, including the date of and number of 
containers in each receipt and the name, address, and registration 
number of the person from whom the containers were received.
    (iv) The number of commercial containers of each such finished form 
distributed back to the original manufacturer of the substance or the 
manufacturer's agent, including the date of and number of containers in 
each distribution and the name, address, and registration number of the 
manufacturer or manufacturer's agent to whom the containers were 
distributed.
    (v) The number of units or volume of finished forms and/or 
commercial containers disposed of including the date and manner of 
disposal, the quantity of the substance in finished form disposed, and 
the signatures of two responsible employees of the registrant who 
witnessed the disposal.

0
10. Section 1304.33 is amended by revising paragraph (c) to read as 
follows:


Sec.  1304.33  Reports to ARCOS.

* * * * *
    (c) Persons reporting. For controlled substances in Schedules I, II 
or narcotic controlled substances in Schedule III, each person who is 
registered to manufacture in bulk or dosage form, or to package, 
repackage, label or relabel, and each person who is registered to 
distribute, including each person who is registered to reverse 
distribute, shall report acquisition/distribution transactions. In 
addition to reporting acquisition/distribution transactions, each 
person who is registered to manufacture controlled substances in bulk 
or dosage form shall report manufacturing transactions on controlled 
substances in Schedules I and II, each narcotic controlled substance 
listed in Schedules III, IV, and V, and on each psychotropic controlled 
substance listed in Schedules III and IV as identified in paragraph (d) 
of this section.
* * * * *

PART 1305--ORDER FORMS

0
11. The authority citation for part 1305 continues to read as follows:

    Authority: 21 U.S.C. 821, 828, 871(b), unless otherwise noted.


0
12. Section 1305.08 is amended by revising paragraph (b) to read as 
follows:


Sec.  1305.08  Persons entitled to fill order forms.

* * * * *
    (b) A person who has obtained any controlled substance in Schedule 
I or II by order form may return such substance, or portion thereof, to 
the person from whom he/she obtained the substance, to the manufacturer 
of the substance, or to a registered reverse distributor pursuant to 
the order form of the latter person;
* * * * *

PART 1307--MISCELLANEOUS

0
13. The authority citation for part 1307 continues to read as follows:

    Authority: 21 U.S.C. 821, 822(d), 871(b), unless otherwise 
noted.

0
14. Section 1307.11 is revised to read as follows:


Sec.  1307.11  Distribution by dispenser to another practitioner or 
reverse distributor.

    (a) A practitioner who is registered to dispense a controlled 
substance may distribute (without being registered to distribute) a 
quantity of such substance to--
    (1) Another practitioner for the purpose of general dispensing by 
the practitioner to patients, provided that--
    (i) The practitioner to whom the controlled substance is to be 
distributed is registered under the Act to dispense that controlled 
substance;
    (ii) The distribution is recorded by the distributing practitioner 
in accordance with Sec.  1304.22(c) of this chapter and by the 
receiving practitioner in accordance with Sec.  1304.22(c) of this 
chapter;
    (iii) If the substance is listed in Schedule I or II, an order form 
is used as required in part 1305 of this chapter; and
    (iv) The total number of dosage units of all controlled substances 
distributed by the practitioner pursuant to this section and Sec.  
1301.25 of this chapter during each calendar year in which the 
practitioner is registered to dispense does not exceed 5 percent of the 
total number of dosage units of all controlled substances distributed 
and dispensed by the practitioner during the same calendar year.
    (2) A reverse distributor who is registered to receive such 
controlled substances.
    (b) If, during any calendar year in which the practitioner is 
registered to dispense, the practitioner has reason to believe that the 
total number of dosage units of all controlled substances which will be 
distributed by him pursuant to paragraph (a)(1) of this section and 
Sec.  1301.25 of this chapter will exceed 5 percent of this total 
number of dosage units of all controlled substances distributed and 
dispensed by him during that calendar year, the practitioner shall 
obtain a registration to distribute controlled substances.

0
15. Section 1307.12 is amended by revising the title and revising 
paragraph (a) to read as follows:

[[Page 41230]]

Sec.  1307.12  Distribution to supplier or manufacturer.

    (a) Any person lawfully in possession of a controlled substance 
listed in any schedule may distribute (without being registered to 
distribute) that substance to the person from whom he/she obtained it 
or to the manufacturer of the substance, or, if designated, to the 
manufacturer's registered agent for accepting returns, provided that a 
written record is maintained which indicates the date of the 
transaction, the name, form and quantity of the substance, the name, 
address, and registration number, if any, of the person making the 
distribution, and the name, address, and registration number, if known, 
of the supplier or manufacturer. In the case of returning a controlled 
substance in Schedule I or II, an order form shall be used in the 
manner prescribed in part 1305 of this chapter and be maintained as the 
written record of the transaction. Any person not required to register 
pursuant to sections 302(c) or 1007(b)(1) of the Act (21 U.S.C. 822(c) 
or 957(b)(1)) shall be exempt from maintaining the records required by 
this section.
* * * * *

    Dated: July 3, 2003.
Laura M. Nagel,
Deputy Assistant Administrator, Office of Diversion Control.
[FR Doc. 03-17578 Filed 7-10-03; 8:45 am]
BILLING CODE 4410-09-P