[Federal Register Volume 69, Number 115 (Wednesday, June 16, 2004)]
[Notices]
[Pages 33662-33664]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-13535]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration


ALRA Laboratories, Inc. Order Denying Procurement Quota

    On July 26, 2002, the Deputy Assistant Administrator, Office of 
Diversion Control, Drug Enforcement Administration (DEA), issued an 
Order to Show Cause to ALRA Laboratories, Inc. (ALRA) of Gurnee, 
Illinois, notifying ALRA of an opportunity to show cause as to why DEA 
should not revoke ALRA's DEA Certificate of Registration, RA0205193, 
under 21 U.S.C. 823(a) and (d) and 824(a)(4) and deny any pending 
applications for renewal or modification of ALRA's manufacturing 
registration. As a basis for revocation, the Order to Show Cause 
alleged that ALRA's continued registration was inconsistent with the 
public interest, citing a long history of regulatory violations dating 
from 1987 and the 1996 criminal conviction of ALRA's President and 
Chief Executive Officer, Baldev Ray Bhutani, of seven felony counts of 
violating the Federal Food, Drug and Cosmetic Act by introducing 
adulterated pharmaceuticals into commerce. The Order to Show Cause 
further notified ALRA that should no request for a hearing be filed 
within 30 days, its hearing right would be deemed waived.
    The Order to Show Cause was sent by certified mail to ALRA's 
registered location at 3850 Clearview Court, Gurnee, Illinois 60031. 
According to its return receipt, the Order to Show Cause was received 
at the registered address by Sandra Montana on or around August 5, 
2002.
    Additionally, on September 27, 2002, pursuant to 21 U.S.C. 826(c) 
and (d), the Deputy Assistant Administrator, Office of Diversion 
Control, issued an Order to Deny Procurement Quota on the ground that 
ALRA's anticipated requirements for the then-current and following 
years did not justify its request. The Order to Deny Procurement Quota 
noted that on May 23, 2002, ALRA had submitted a procurement request 
for, inter alia, cocaine, oxycodone and methadone. The denial order 
recited ALRA's history of regulatory violations set forth in the Order 
to Show Cause, the June 30, 2002, expiration of its DEA manufacturing 
registration, Mr. Bhutani's 1996 conviction and following exhaustion of 
appeals, commencement of his 30 month prison sentence in September 
2002. The Order to Deny Procurement Quota further notified ALRA that 
should no request for a hearing be filed within 30 days, its hearing 
right would be deemed waived.
    The Order to Deny Procurement Quota was sent by certified mail on 
September 27, 2002, to ALRA's registered address in Illinois and 
according to its return receipt, was receipted for by Neelam Bhutani on 
or around October 31, 2002.
    DEA has not received a request for hearing or any other reply from 
ALRA or anyone purporting to represent it in this matter on either the 
Order to Show Cause or the Order to Deny Procurement Quota. Therefore, 
the Deputy Administrator, finding that (1) 30 days have passed since 
the receipt of the Order to Show Cause and Order Denying Procurement 
Quota, and (2) no request for a hearing having been received, concludes 
that ALRA is deemed to have waived its hearing right as to both Orders. 
See Samuel S. Jackson, D.D.S., 67 FR 65145 (2002); David W. Linder, 67 
FR 12579 (2002). After considering material from the investigative 
file, the Deputy Administrator now enters her final order without a 
hearing pursuant to 21 CFR 1303.34(e) and 1303.37.
    The Deputy Administrator's review of the investigative file reveals 
that ALRA has been registered as a manufacturer with DEA since 1995 to 
handle controlled substances in Schedules II, III, III-N, IV and V 
under DEA registration number RA0205193. That registration was last 
renewed on May

[[Page 33663]]

31, 2001 and expired on June 30, 2002. There is no evidence in the 
record that a renewal application has been filed by ALRA for that 
certificate.
    DEA has previously held that ``[i]f a registrant has not submitted 
a timely renewal application prior to the expiration date, then the 
registration number expires and there is nothing to revoke.'' Marlou D. 
Davis, M.D., 69 FR 1307 (2004); Ronald J. Riegel, D.V.M., 63 FR 67132 
(1998). Accordingly, while the record contains ample grounds for 
revocation of ALRA's registration under 21 U.S.C. 824(a)(4) and 823(a) 
and (d), in light of the expiration of ALRA's manufacturer registration 
prior to the issuance of the July 26, 2002, Order to Show Cause, 
revocation proceeding are moot and no further action is required in 
that regard.
    With regard to the procurement quota, the Deputy Administrator 
finds that ALRA was incorporated as an over-the-counter pharmaceutical 
manufacturer in 1982. In 1984, ALRA obtained registration as a 
manufacturer under DEA Certificate of Registration, A0216209. That 
registration became delinquent and was retired on January 31, 1990. on 
June 1, 1992, ALRA obtained DEA Certificate of Registration, RA0174273, 
as a researcher and that registration was retired on January 31, 1996.
    ALRA has a long history of regulatory violations. During on-site 
inspections of its registered location conducted in 1987, 1991 and 
1997, DEA investigators noted repeated violations of Controlled 
Substances Act recordkeeping, reporting and security requirements, 
including ALRA's failure to maintain adequate records, inadequate 
security and failure to file appropriate acquisition/distribution 
reports (ARCOS reports).
    On June 20, 1991, DEA issued an Order to Show Cause seeking to deny 
ALRA's Application for Registration, alleging it had engaged in the 
unlawful distribution of a controlled substance and unlawful 
distribution of a controlled substance by use of an expired DEA 
registration (Certificate of Registration, PA0216209), in violation of 
21 U.S.C. 841(a)(1) and 843(a)(2). After an administrative process 
lasting over four years, on October 4, 1994, the then-Deputy 
Administrator issued a final decision denying ALRA's application. On 
May 17, 1995, the U.S. Court of Appeals for the Seventh Circuit issued 
its decision upholding the final agency action denying registration. 
See 59 FR 50620 (October 4, 1994) and ALRA v. DEA, 54 F.3d 450 (7th 
Cir. 1995).
    On May 11, 1995, DEA and ALRA entered into a Memorandum of 
Agreement (MOA) and DEA approved ALRA's Application for Registration as 
a manufacturer on May 12, 1995, issuing Certificate of Registration 
RA0205193. Under the terms of the MOA, ALRA promised to surrender that 
registration within 180 days if ALRA or any of its officers were 
convicted of an offense in the then-pending matter of United States v. 
Bhutani and ALRA Labs (United States District court, Northern District 
of Illinois, Eastern division, Case No. 93 CR 585).
    In February 1996, a jury found the defendants, including Baldev Raj 
Bhutani, ALRA's president and chief executive officer, his wife, Neelam 
Bhutani and ALRA, guilty of seven felony counts of violating the 
Federal Food, Drug and Cosmetic Act. Mr. Bhutani was sentenced to a 
term of 30 months imprisonment, which was stayed, pending appeal, 
remained free on bail and continued to serve as the principal officer 
and CEO of ALRA.
    During an on-site inspection of ALRA's registered location 
conducted in September 1997, DEA investigators found, inter alia, that 
ALRA had failed to complete a biennial inventory, file ARCOS reports or 
maintain adequate security for controlled substances. In December 1997 
and January 1998, ALRA requested the addition of eight Schedule II 
controlled substances to its DEA registration and on March 18, 1998, 
applied for renewal of it DEA manufacturer registration.
    In April 1998, ALRA was issued a Letter of Admonition by DEA 
concerning the violations discovered during the September 1997 
inspection. ALRA responded that it would comply with applicable DEA 
regulations and upgrade its security systems prior to acquisition of 
any Schedule II controlled substances. On December 28, 1998, after 
several inspections, the DEA Chicago Field Division verified that 
ALRA's security mechanisms complied with regulations and closed the 
case.
    On February 9, 1999, because ALRA had failed to conform to current 
good manufacturing practices (CGMP), the U.S. Food and Drug 
Administration (FDA) seized all of ALRA's manufacturing lots of 
potassium chloride extended tablets, erythromycin ethylsuccinate and 
sulfi soxazole acetyl for oral suspension. In a consent decree filed in 
U.S. District Court, Northern District of Illinois, U.S. v. ALRA (Case 
No. 99 CV 0697), the FDA and ALRA entered into a consent agreement 
whereby ALRA agreed that the above products had been adulterated with 
ground metal and contaminated raw materials during the manufacturing 
process. In the consent decree, ALRA promised it would not begin 
manufacturing such products until it hired a consultant to assure that 
its manufacturing process met Federal requirements. ALRA has not yet 
hired such a consultant.
    On May 31, 2001, ALRA's manufacturer registration was renewed and 
in July 2001, DEA investigators conducted a scheduled, on-site 
inspection of ALRA's registered location. ALRA had not manufactured any 
controlled substances for over two years and during that inspection 
investigators noted ALRA's failure to maintain a complete biennial 
inventory in December 2000, failure to file quarterly ARCOS reports in 
a timely manner for almost three years, failure to maintain readily 
retrievable records and failure to maintain adequate security for 
controlled substances.
    Pursuant to terms of the 1995 MOA where the parties agreed that Mr. 
Bhutani was to surrender ALRA's certificate if he was convicted of any 
of the crimes alleged in his then pending criminal case, DEA requested 
the surrender of ALRA's manufacturer registration on December 31, 2001. 
However, on January 3, 2002, Mr. Bhutani responded that the MOA had 
been valid for only three years and asked for another chance. To date 
he has not surrendered ALRA's certificate of registration.
    On May 23, 2002, ALRA submitted the subject Procurement Quota 
Requests for Year 2002, for the following quantities of Schedule II 
substances:
    a. Cocaine: 128,160 grams
    b. Codeine: 61,272 grams
    c. Hydrocodone: 15,466 grams
    d. Oxycodone: 35,214 grams
    e. Morphine: 219,435 grams
    f. Hydromorphone: 8,945 grams
    g. Oxymorphone: 19,046 grams
    h. Meperidine: 36,620 grams
    i. Methadone: 82,414 grams
    j. Dextropropoxphene: 524,489 grams
    k. Thebaine: 83,750 grams
    l. Opium granulated: 105,000 grams
    However, by June 17, 2002, Mr. Bhutani's criminal judgment had been 
affirmed on appeal and all challenges to the conviction exhausted. 
United States v. Bhutani and ALRA Labs, 266 F.3d 661 (7th Cir. 2001), 
cert. denied, Bhutani v. U.S., 563 U.S. 922 (June 17, 2002). On August 
26, 2002, after his bail was revoked, Mr. Bhutani reported to the 
Federal Correctional Institute in Duluth, Minnesota to commence serving 
his 30 month sentence.
    The FDA has not permitted ALRA to engage in manufacturing 
operations since 1999 and ALRA has not handled controlled substances 
for the last three years. It currently has ceased all

[[Page 33664]]

pharmaceutical manufacturing operations and, without required 
notification to DEA, discontinued business within the meaning of 21 CFR 
1301.52(a).
    Even assuming arguendo, that ALRA had a current DEA registration, 
it could not manufacture the controlled substances for which it seeks a 
permanent quota unless and until the FDA found the company was in 
compliance with CGMP. Moreover, as discussed, ALRA's president, who 
submitted the procurement quota request, is currently incarcerated in 
federal prison serving a 30 month sentence. Accordingly, ALRA's 
anticipated requirements for 2002 and its estimated requirements for 
2003 do not justify approval of its requested procurement quota. See 21 
U.S.C. 826(c) and (d); 21 CFR 1302.12.
    Further, despite ample opportunities for corrective action, ALRA 
has a continuing history of regulatory violations under the Controlled 
Substances Act continuing from 1987 to the present. Under these 
circumstances, where the company has failed to conform its conduct to 
the requirements of federal law over an extensive period, where ALRA as 
well as its CEO and his wife were convicted of product adulteration 
felonies, and where the company has ceased manufacturing operations and 
allowed its DEA registration to lapse, granting a procurement quota 
under these conditions would be inimical to the public interest.
    Accordingly, the Deputy Administrator of the Drug Enforcement 
Administration, pursuant to the authority vested in her by 21 U.S.C. 
826(c) and (d), 28 CFR 0.100(b) and 0.104 and 21 CFR 1303.37, hereby 
orders that ALRA Laboratories, Inc.'s Application for Procurement Quota 
for Controlled Substances be, and it hereby is, denied. This order is 
effective July 16, 2004.

    Dated: May 17, 2004.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. 04-13535 Filed 6-15-04; 8:45 am]
BILLING CODE 4410-09-M