[Federal Register Volume 69, Number 37 (Wednesday, February 25, 2004)]
[Notices]
[Pages 8696-8698]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-4029]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration


Manufacturer of Controlled Substances; Notice of Registration

     By Notice dated January 27, 2003, and published in the Federal 
Register on February 6, 2003 (68 FR 6183), Houba, Inc., 16235 State 
Road 17, Culver, Indiana 46511, made application by renewal to the Drug 
Enforcement Administration (DEA) to be registered as a bulk 
manufacturer of two basic classes of Schedule II controlled substances, 
oxycodone (9143) and hydrocodone (9193).
     Two registered manufacturers of bulk controlled substances filed 
comments and objections in response to the Notice in a timely manner. 
Both objectors filed comments and objections with respect to oxycodone 
and hydrocodone. By Notice dated May 23, 2003 and published in the 
Federal Register on June 11, 2003 (68 FR 35006), the DEA acknowledge 
the receipt of the comments and objections, and its intent to 
investigate and resolve the issues raised.
     Both objectors argue that Houba, Inc. (hereafter referred to as 
Houba) cannot prove its registration as a bulk manufacturer of opiates 
is in the public interest, that Houba is in a precarious financial 
state which could have a negative impact on its ability to fulfill its 
activity as a bulk manufacturers, that Houba does not have adequate 
experience as a manufacturer, that Houba will not promote technical 
advances, that Houba's registration is not required to produce an 
adequate and uninterrupted supply of oxycodone and hydrocodone, that 
there is sufficient competition with the present bulk manufacturers, 
and that Houba's registration will add to the risk of diversion both 
domestically and internationally. Additionally, the first objector 
argues that Houba's parent company can control Houba's management and 
operations and the parent company has a history of non-compliance with 
Federal laws and regulations. Both objectors request that DEA issue an 
Order to Show Cause, pursuant to 21 CFR 1301.37(a) by one objector and 
pursuant to 21 CFR 1301.44(a) and 1301.48(a) by the other objector, as 
to why the agency should not deny Houba's application for re-
registration on the ground that Houba has not demonstrated that its 
application is in the public interest. (Title 21 CFR 1301.48 was 
deleted and currently is re-codified under 21 CFR 1301.37 in 1997.)

[[Page 8697]]

     One of the objectors is apparently under the belief that if an 
order to show cause were issued to revoke Houba's renewal applications 
for the two bulk narcotic controlled substances at issue, then Houba 
would bear the burden of proof to show that granting such renewal 
applications would be in the public interest pursuant to 21 U.S.C. 
823(a). Houba would have the burden of proof if the applications were 
initial applications pursuant to 21 CFR 1301.44(a) and section 823(a). 
Since Houba already is registered to bulk manufacture oxycodone and 
hydrocodone, DEA bears the burden of proof to revoke Houba's DEA 
registrations pursuant to 21 CFR 1301.44(e) and 21 U.S.C. 824(a).
     With respect to the objectors' contentions that Houba is in a 
precarious financial state, the DEA has reviewed the information 
submitted as well as conducted independent investigation. The DEA has 
determined that while Houba's parent company has had and continues to 
have documented financial difficulty, Houba is a corporation in and of 
itself. There is insufficient evidence at this time to revoke the 
registration of a subsidiary corporation based on the financial 
standing of the parent company.
    Houba currently has a pending application to import raw opium 
(9600), poppy straw (9650) and poppy straw concentrate (9670) pursuant 
to 21 U.S.C. 958(a). Pursuant to 21 U.S.C. 958(i) and 21 CFR 
1301.34(a), three bulk manufacturers filed objections and requested a 
hearing to contest Houba's pending import application. At this time, 
this hearing is still pending. Houba, Inc., Docket No. 02-6. One of the 
issues will be Houba's current financial status and whether its alleged 
financial problems would impact on its ability to utilize its import 
registration and otherwise comply with its duties under the Controlled 
Substances Act and the Act's implementing regulations. DEA may reassess 
Houba's manufacturing registrations after the proceedings on Houba's 
import application are completed. At this point, however, there does 
not appear to be sufficient grounds to revoke Houba's bulk 
manufacturing registration.
    Moreover, if the financial conditions do make it impossible for 
Houba to utilize its bulk manufacturing registration, DEA anticipates 
that Houba would notify DEA, under 21 CFR 1301.52, that it is out of 
business either altogether or with respect to the controlled substances 
at issue. But at this point in time, DEA does not have evidence that 
Houba is renewing its registrations merely to have a ``shelf'' 
registration.
    With respect to the objectors' contentions that Houba lacks 
manufacturing experience and will not promote technical advances, Houba 
has been registered with the DEA as a bulk manufacturer since 2002. 
Houba has provided DEA with confidential information regarding its 
intent to pursue technological advancement.
    With respect to the remaining contentions submitted by both 
objectors: that there already exists an adequate and uninterrupted 
supply of oxycodone and hydrocodone, that there is sufficient 
competition with present bulk manufacturers, and that Houba's 
registration will add to the risk of diversion both domestically and 
internationally, the arguments of the objectors were considered. 
Pursuant to 21 CFR 1301.33(b), DEA is not: required to limit the number 
of manufacturers in any basic class to a number less than that 
consistent with maintenance of effective controls against diversion 
solely because a smaller number is capable of producing an adequate and 
uninterrupted supply. DEA previously registered Houba to manufacture 
these two bulk controlled substances and in so doing made the 
determination that Houba's registration would comply with section 
1301.33(b) without resulting in an excessive supply of these controlled 
substances domestically or excessive cultivation abroad.
    One of the objectors noted that DEA lowered the aggregate 
production quota for oxycodone in response to the domestic diversion of 
this Schedule II narcotic (67 FR 59313). The objector argues that DEA, 
consistent with this action, should issue an order to show cause to 
revoke Houba's registration to bulk manufacture oxycodone. DEA does 
have the discretion to limit the granting of Schedule II bulk 
manufacturers and Schedule II bulk importers under the circumstances, 
but DEA is not compelled by section 823(a)(1) or 21 U.S.C. 958(d). 
Notwithstanding the lowering of the quota, DEA does not see the need to 
commence to revoke existing registrations at this time.
    Indeed, DEA may not have the statutory authority to revoke an 
existing Schedule II bulk manufacture registration under 21 U.S.C. 
824(a)(4) solely on the basis of limiting the bulk manufacture of these 
controlled substances ``to a number of establishments which can produce 
an adequate and uninterrupted supply of these substances under 
adequately competitive conditions for legitimate medical, scientific, 
research, and industrial purposes.'' (quoting from section 823(a)(1)). 
Section 824(a)(4) permits DEA to revoke a registration when the 
registrant ``has committed such acts as would render his registration 
under section 823 of this title inconsistent with the public interest 
as determined under such section * * *'' (Emphasis supplied). ``[S]uch 
acts'' may be, however, limited to the individual acts of the 
particular registrant as set forth in 21 U.S.C. 824(a)(2)-(6). A 
registrant cannot commit ``such acts'' by lawfully manufacturing and 
distributing controlled substances under its registration. Thus, there 
is some considerable question whether DEA could seek a revocation of a 
registration for a bulk manufacturer of Schedule II controlled 
substances based solely on the micro-economic competition issue in 
section 823(a)(1). (This micro-economic issue, however, could be 
considered if DEA had other grounds to revoke a bulk manufacturing 
registration pursuant to 824(a)(4) and 823(a)(2)-(6). In any event, it 
is not necessary for DEA to reach this statutory construction issue at 
this time, since there are not sufficient grounds under Sections 
824(a)(4) and 823(2)-(6) to issue an order to show cause to revoke 
Houba's bulk manufacturing registrations.
    DEA is confident that the registration of Houba will not impede 
DEA's statutory obligation to guard against the diversion of controlled 
substances.
    With regard to the first objector's contention that Houba has a 
history of non-compliance with Federal statutes and regulations, DEA 
finds that with a single exception, the comments offered pertained to 
Houba's parent company and not to Houba itself. The remaining 
circumstance involved the Foods and Drug Administration and was not 
related to violations of the CSA. Additionally, DEA has investigated 
Houba on a regular basis to ensure that the company's continued 
registration is consistent with the public interest. These 
investigations have included inspection and testing of the company's 
physical security systems, audits of the company's records, 
verification of the company's compliance with state and local laws, and 
a review of the company's compliance with state and local laws, and a 
review of the company's background and history. The results of these 
investigations have led DEA to conclude that at this time, Houba is in 
compliance with the CSA and that its continued registration is 
consistent with the public interest.
    After reviewing all the evidence, including the comments filed, DEA 
has determined, pursuant to 21 U.S.C. 823(a), that the registration of 
Houba as

[[Page 8698]]

a bulk manufacturer of oxycodone and hydrocodone is consistent with the 
public interest at this time. Therefore, pursuant to 21 U.S.C. 823(a) 
and 28 CFR 0.100 and 0.104, the Deputy Assistant Administrator hereby 
orders that the application submitted by the above firm for 
registration as a bulk manufacturer of the basis classes of controlled 
substances listed is granted.

    Dated: February 10, 2004.
Laura M. Nagel,
Deputy Assistant Administrator, Office of Diversion Control, Drug 
Enforcement Administration.
[FR Doc. 04-4029 Filed 2-24-04; 8:45 am]
BILLING CODE 4410-09-M