[Federal Register Volume 68, Number 208 (Tuesday, October 28, 2003)]
[Notices]
[Pages 61466-61468]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-27085]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration


SPA Dynamic Wholesalers: Denial of Request for Registration to 
Handle List I Chemicals

    On May 1, 2001, Spa Dynamic Wholesalers (Respondent) applied to be 
registered with the Drug Enforcement Administration (DEA) as a 
distributor of the List I chemicals ephedrine, pseudoephedrine and 
phenylpropanolamine (PPA), Control Number K2202014201J. On April 24, 
2002, after an investigation by DEA investigators, the Deputy Assistant 
Administrator, Office of Diversion Control, issued an Order to Show 
Cause (OTSC) why DEA should not deny Respondent's application. Prior to 
the issuance of the OTSC, on March 13, 2002, Respondent's owner Ann 
Marie Tess Wrigley (Ms. Wrigley) left a voicemail message at DEA 
regarding the status of her application. The call-back number left by 
Ms. Wrigley turned out to be a number for a facsimile machine. A DEA 
investigator used the number to send a facsimile to Ms. Wrigley, asking 
her to contact the investigator at DEA. Ms. Wrigley did not respond to 
the fax, and has not contacted DEA since that time.
    The OTSC was sent by certified mail to the latest address provided 
by Ms. Wrigley to DEA. The OTSC was not claimed, indicating that 
Respondent was no longer at the latest address provided by Ms. Wrigley, 
and had left no forwarding address.Since the OTSC was issued, Ms. 
Wrigley has not contacted DEA concerning the status of her application.
    Therefore, the Acting Deputy Administrator, finding that DEA has 
made reasonable attempts to serve the OTSC on Respondent, and no 
request for a hearing has been received, concludes that Respondent is 
deemed to have waived its hearing right. The Acting Deputy 
Administrator has carefully reviewed the entire record in this matter, 
as defined above, and hereby issues this final rule and final order 
prescribed by 21 CFR 1301.43 and 21 CFR 1301.46, based upon the 
following finding of fact and conclusions.
    The Acting Deputy Administrator finds that the List I chemicals 
ephedrine and pseudoephedrine are legitimate chemicals that also may be 
used in the illicit manufacture of a controlled substance in violation 
of the Controlled Substances Act. 21 U.S.C. 802(34), 21 CFR 1310.02(a). 
Both chemicals are commonly used to illegally manufacture 
methamphetamine, a schedule II controlled substance.
    The Food and Drug Administration (FDA) has approved ephedrine for 
over-the-counter (OTC) use as a bronchodilator for the treatment of 
asthma. Ephedrine is also lawfully marketed as a nasal decongestant. 
Ephedrine is also used lawfully in hospitals in the treatment of 
hypotensive crisis and acute bronchospasm. Physicians have also used 
ephedrine to promote urinary continence. OTC ephedrine products have 
also been misused for their stimulant properties and for use as diet 
aids. FDA has not approved these products for such uses.
    Pseudoephedrine is lawfully marketed under the Federal Food Drug 
and Cosmetic Act provisions for OTC use as a decongestant. It is often 
found in combination with other active ingredients such as 
antihistamines, expectorants and/or antitussives.
    On November 6, 2000, the FDA issued a public health advisory 
warning of the dangers associated with the use of PPA, including, but 
not limited to, the risk of hemorrhagic stroke. The FDA advised that it 
was taking steps to remove PPA from all drug products and requested 
that all drug companies discontinue the sale of products containing 
this listed chemicals.
    DEA has observed nationwide that the vast majority of sales of 
ephedrine and pseudoephedrine drug products destined for end users are 
made in supermarkets, drug stores, and large discount stores. An 
extremely small amount of face-to-face purchases are made in smaller 
retail outlets. DEA has observed that many smaller or non-traditional 
stores, such as liquor stores, gas stations, and some small markets, 
purchase inordinate amounts of these products and become conduits for 
the diversion of listed chemicals into illicit drug manufacturing.
    During March 2001, DEA utilized an expert in the field of retail 
marketing and statistics to analyze national sales data for over-the-
counter non-prescription drugs. Using official Government and 
commercially available sales data, he was able to construct a model of 
the traditional market for pseudoephedrine in the retail sector. His 
study showed that over 90% of all sales of non-prescription drug 
products occurred in drug stores, grocery stores and large discount 
merchandisers. A very small percentage of such sales occurred in 
convenience stores. Additionally, this expert analyzed expected sales 
of non-prescription drugs by convenience stores and found that they 
constituted about 2% of their total

[[Page 61467]]

sales. This analysis was consistent with sales data provided by the 
convenience store industry.
    DEA clandestine laboratory teams continue to note the trend in 
laboratories toward smaller capacity laboratories. This is likely due 
to the ease of concealment associated with smaller capacity 
laboratories. This is likely due to the ease of concealment associated 
with smaller laboratories and the ability to acquire listed chemical 
precursor product from smaller sources. Small capacity labs continue to 
dominate law enforcement seizures and environmental cleanups. Small 
illicit laboratories operate with listed chemical products often 
procured, legally or illegally, from non-traditional retailers of over-
the-counter drug products, such as gas stations and small retail 
markets. Some retailers acquire product from multiple distributors to 
mask their acquisition of large amounts of listed chemicals.
    DEA investigators have learned that the primarily market shares for 
sales of combination ephedrine products belong to the manufacturers of 
Primatene and Bronkaid products. The national sales of these products 
in tablet forms have been on the decline for several years, since end-
users prefer an inhalant version. In addition, DEA knows that the 
nationwide sales of combination ephedrine in the traditional market are 
much smaller than the market for other traditional cough and cold 
remedies, including products containing pseudoephedrine.
    On May 1, 2001, Ms. Wrigley submitted, on behalf of her company, an 
application for DEA registration as a distributor of the List I 
chemicals ephedrine, pseudoephedrine and PPA. Respondent's listed 
address on the application was in 7636 Village Trail, Dallas, Texas 
75240. The application was received by the Dallas Field Division.
    DEA investigators learned that in early 2001, Ms. Wrigley applied 
for a Precursor Chemical/Laboratory Apparatus Business permit with the 
Texas Department of Public Safety (DPS) under the name Dynamic 
Wholesalers, at a listed address of 840 Central Parkway East, 
120, in Plano Texas. A subsequent inspection of the physical 
location revealed that Ms. Wrigley had not physically occupied the 
premises, and the telephone number listed on the application was found 
to be fictitious.
    On December 11, 2001, Ms. Wrigley filed a second application for 
licensure to DPS under the name Spa Dynamic Wholesalers, with a 
business address of 1108 Summit Avenue 6, Plano, Texas. Ms. 
Wrigley subsequently informed DEA that she would seek registration at 
this location, and not the location provided in her May 2001 
application for DEA registration. On December 11, 2001, DEA 
investigators accompanied a DPS investigator during DPS's inspection of 
Respondent at the Summit Avenue location. When the investigators 
arrived at that location, they found it unlocked and vacant, without 
furniture or telephone service. The property manager at the location 
told the investigators that Ms. Wrigley failed to sign a contract and 
had not taken possession of the location. The property manager also 
said that on the previous day, Ms. Wrigley stated that she would not be 
occupying the Summit Avenue location for business purposes.
    On December 11, 2001, DEA investigators contacted Ms. Wrigley, 
informed her of their concerns, and requested that she withdraw her 
application. Ms. Wrigley refused to withdraw, and informed the 
investigators that her company would be ready for a pre-registrant 
inspection on December 20, 2001.
    On December 20, 2001, DEA investigators went to Respondent's 
physical location on Summit Avenue and conducted a pre-registration 
investigation of Respondent. Ms. Wrigley informed the investigators 
that Respondent intended to distribute List I chemicals to convenience 
stores in the Dallas Metropolitan area. She estimated that List I 
chemicals would comprise 30 to 45 percent of her business. Ms. Wrigley 
stated that she had no experience with sales of OTC medications or 
listed chemicals. She informed the investigators that her brother in 
Kansas owned a wholesale establishment selling similar products and was 
``making a lot of money,'' so she wanted to do the same.
    Ms. Wrigley also admitted that she had no experience in reporting 
suspicious orders. The investigators advised her of the reporting 
requirements and provided her by facsimile a copy of the threshold 
regulations. The investigators advised Ms. Wrigley of the necessity of 
identifying and verifying customers, and of DEA recordkeeping 
requirements. The investigators inspected the security measures at 
Respondent's location and found that security was adequate.
    When asked which brands of List I chemicals she intended to sell, 
Ms. Wrigley provided a list of brand names, many of which are 
manufactured by companies whose products had been found in 
methamphetamine lab dump sites. Moreover, the list of products provided 
by Ms. Wrigley contained only ephedrine and ephedrine combination 
products. The list showed that Ms. Wrigley intended to sell, among 
other things, 60 count bottles of ephedrine. This is significant in 
that this type of packaging is not normally seen in traditional retail 
establishments, and is the packaging favored by methamphetamine 
manufacturers.
    When asked about the identity of her customers, Ms. Wrigley 
provided the investigators with a list of five customers. When called 
by the investigators, three of the five customers had either never 
heard of Respondent or Ms. Wrigley, or indicated that they would not by 
buying from Respondent. One customer was waiting for Respondent to mail 
him its inventory so that he could determine whether he would become a 
customer of Respondent. One customer indicated that she would buy from 
Respondent.
    Ms. Wrigley also provided a ``cold call list'' that she had 
purchased. She said that she intended to use the list to obtain more 
customers. A review of the list by DEA investigators showed that most 
of the potential customers on the list were convenience stores.
    Based upon the above, the Acting Deputy Administrator will now 
consider the factors used by DEA to determine whether the issuance of a 
DEA Certificate of Registration is in the public interest. Under 21 
U.S.C. 823(h), the Attorney General shall register an applicant to 
distribute a List I chemical unless the Attorney General determines 
that the registration of the applicant is inconsistent with the public 
interest. (This function has been delegated to Administrator of DEA.) 
In considering the public interest, the Acting Deputy Administrator 
shall consider
    1. Maintenance by the applicant of effective controls against 
diversion of listed chemical into other than legitimate channels;
    2. Compliance by the applicant with applicable Federal, State, and 
local laws;
    3. Any prior conviction record of the applicant under Federal or 
State laws relating to controlled substances or to chemicals controlled 
under Federal or State law;
    4. Any past experience of the applicant in the manufacture and 
distribution of chemicals and
    5. Such other factors as are relevant to and consistent with the 
public health and safety.
    Consideration of the first factor weighs against Respondent. 
Security was adequate at the physical location of the business that the 
DEA investigators visited. Based upon the investigators' inability to 
contact Ms. Wrigley in

[[Page 61468]]

February 2002, it appears that Ms. Wrigley is no longer at the location 
that the DEA investigators inspected. Accordingly, DEA has no knowledge 
of Respondent's current security measures.
    With regard to the second factor, there is no evidence that Ms. 
Wrigley has failed to comply with Federal, State or local law. As for 
the third factor, there is no evidence that Ms. Wrigley has any prior 
convictions related to controlled substances or chemicals. Accordingly, 
the second and third factors weigh in Respondent's favor. Addressing 
the fourth factor, Ms. Wrigley has no experience in the manufacture or 
distribution of chemicals, which weights against Respondent.
    With regard to the fifth factor, many considerations weigh heavily 
against registering Respondent as a distributor of List I chemicals. 
The great majority of Respondent's potential customers will be convene 
stores. Convenience stores are considered part of the gray market, in 
which large amounts of listed chemicals are diverted to the illicit 
manufacture of amphetamine and methamphetamine. Ms. Wrigley admitted 
that a portion of her sales will consist of 60 count bottle of 
ephedrine, the favored packaging of illicit methamphetamine 
manufactures.
    The Acting Deputy Administrator also finds that Respondent's 
frequent changes of address weigh against Respondent in its attempt to 
obtain a DEA registration. The changes of address create the impression 
that Respondent is an unstable, ``fly by night'' concern. Ms. Wrigley's 
failure to notify DEA of changes of address indicates a serious failure 
to comprehend the responsibilities of the holder of a DEA Certificate 
of Registration. The Acting Deputy Administrator finds that Ms. 
Wrigley's lack of a criminal record and compliance with the law are far 
outweighed by her lack of experience with selling List I chemicals, 
DEA's lack of knowledge concerning Respondent's current security system 
and her frequent changes of address without notice to DEA. Moreover, 
Respondent's product mix and potential sales of combination ephedrine 
products are inconsistent with the known legitimate market and known 
end-user demand for products of this type. Therefore Respondent would 
be serving an illegitimate market for these products, and registration 
of Respondent as a distributor of List I chemicals would likely lead to 
increased diversion of List I chemicals.
    Accordingly, the Acting Deputy Administrator of the Drug 
Enforcement Administration, pursuant to the authority vested in her by 
21 U.S.C. 823 and 824 and 28 CFR 0.100 and 0.104, hereby finds that 
registration of Respondent as a distributor of List I chemicals is not 
in the public interest. The Acting Deputy Administrator hereby orders 
that the application for a DEA Certificate of Registration and any 
requests for renewal or modification submitted by Respondent Spa 
Dynamics Wholesalers be, and hereby are, denied.

    Dated: October 9, 2003.
Michele M. Leonhart,
Acting Deputy Administrator.
[FR Doc. 03-27085 Filed 10-27-03; 8:45 am]
BILLING CODE 4410-09-M