[Federal Register Volume 73, Number 61 (Friday, March 28, 2008)]
[Notices]
[Pages 16715-16717]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-6377]
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DEPARTMENT OF JUSTICE
Drug Enforcement Administration
Hi-Tech Pharmaceutcals, Inc.; Denial of Applications
On August 16, 2007, the Deputy Assistant Administrator, Office of
Diversion Control, Drug Enforcement Administration, issued an Order to
Show Cause to Hi-Tech Pharmaceuticals, Inc. (Respondent), of Norcross,
Georgia. The Show Cause Order proposed the denial of Respondent's
pending applications for DEA Certificates of Registration to import and
manufacture ephedrine, a list I chemical, on the ground that its
``registrations would be inconsistent with the public interest.'' Show
Cause Order at 1 (citing 21 U.S.C. 824(a)(4) & 958(c)).
The Show Cause Order specifically alleged that both Respondent's
owner, Mr. Jared Wheat, and its Vice-President, Mr. Stephen D. Smith,
had previously been convicted of controlled-substance felony offenses.
Id. The Show Cause Order next alleged that on February 23, 2006, agents
of the U.S. Customs Service and the Food Drug Administration (FDA)
executed a search warrant at Respondent and seized various products
containing ephedrine alkaloids that the company was manufacturing and
distributing, as well as the raw materials used to manufacture these
products. Id. at 2.
The Show Cause Order further alleged that Respondent operated
several websites which represented that they offered controlled
substances for sale from Canada and that the ``drugs were made using
good manufacturing practices in Canada,'' when, in fact, ``Hi-Tech
manufactured many of these drugs, including various Schedule III and IV
controlled substances, in the country of Belize and unlawfully imported
them into the United States without a DEA registration'' in violation
of 21 U.S.C. 957(a) and 21 CFR 1301.11. Id. at 2. Relatedly, the Show
Cause Order alleged that on September 7, 2006, a federal grand jury
indicted
[[Page 16716]]
Respondent, Mr. Wheat, Mr. Smith, and ten other individuals associated
with the company, charging them with, inter alia, ``the unlawful
distribution of controlled substances and conspiracy to import
controlled substances into the United States.'' Id.
On August 20, 2007, the Show Cause Order was served on Respondent
by certified mail, return receipt requested. Thereafter, Respondent's
counsel submitted a letter in which it waived its right to a hearing,
but in which it also responded to several of the Show Cause Order's
allegations. Ltr. of Joseph P. Schilleci, Jr., to Hearing Clerk, 1
(Sept. 14, 2007). The factual assertions and arguments presented in
this letter will be considered pursuant to 21 CFR 1301.43(c).
I therefore conclude that Respondent has waived its right to a
hearing. I therefore enter this Final Order without a hearing based on
relevant material contained in the investigative file as well as
Respondent's letter and make the following findings. See 21 CFR
1301.43(e).
Findings
On July 25, 2005, Respondent, a Georgia corporation, applied for
two DEA registrations: one to import ephedrine and one to manufacture
it. Ephedrine is a list I chemical, which is frequently diverted into
the illicit manufacture of methamphetamine, a schedule II controlled
substance. See 21 U.S.C. 802(34); see also 21 CFR 1308.12(d).
Respondent's applications were submitted by Mr. Jared R. Wheat. On both
applications, Respondent stated that ``Jared R. Wheat, [its] President
and sole shareholder * * * was convicted on October 2, 1991[,] in the
United States District Court, Northern District of Alabama * * * for
conspiracy to distribute MDMA. He was sentenced to the custody of the
Bureau of Prisons for thirty-six months (36) months [and] three years
supervised release.'' \1\
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\1\ The investigative file also indicates that in September
1992, Mr. Smith was convicted in the Georgia Superior Court of
purchasing or possession of a controlled substance. As the letter
from Respondent's counsel indicated, Mr. Smith ``is a Vice-President
of [Respondent but] does not own any shares in'' the company.
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During the course of DEA's pre-registration investigation, agency
investigators received information that several other federal agencies
including the FDA and Federal Trade Commission were also investigating
Respondent. Moreover, during an on-site inspection, Mr. Wheat told DEA
investigators that he was currently importing ephedra or Ma Huang
Extract. He also provided DEA investigators with a ``Certificate of
Analysis'' which indicated that Respondent had imported from Sinochem
Jiangsu Import & Export Corporation of Nanjaing, China, one thousand
kilograms of Ma Huang Extract containing 8.2% total ephedrine
alkaloids.\2\ The Certificate stated that ``[t]his product is
concentrated from natural sources and does not contain either synthetic
or fermentation source. All alkaloids are results from extraction and
concentration of crude plant material.'' The Certificate also noted
that ``water'' was used as the ``extract solvent.''
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\2\ During the inspection, Mr. Wheat provided the DIs with a
product list and invoice which showed that it was manufacturing and
distributing several products which contained ephedrine alkaloids.
Each of the products had an ephedrine alkaloid content of less than
five percent.
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On February 23, 2006, investigators from FDA and U.S. Customs
executed a search warrant at Respondent's building. The FDA
investigators seized various products. Simultaneously, the United
States Attorney filed a complaint for forfeiture against various
products which the FDA had seized on the ground that they were
adulterated. These products were labeled as ``Lipodrene,'' ``Stimerex-
ES,'' and ``Betradene,'' and each of the products indicated that they
contained 25 mg. of ephedrine alkaloids in each tablet. Subsequently,
the U.S. District Court for Northern District of Georgia rejected
Respondent's contentions and granted the Government's motion for
summary judgment on its complaint for forfeiture. Hi-Tech
Pharmaceuticals, Inc. v. Crawford, 505 F.Supp.2d 1341 (N.D. Ga.
2007).\3\
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\3\ Regarding the seizure of ephedrine alkaloid products from
Respondent, its counsel admitted that ``on August 15, 2007, the
United States District Court for the Northern District of Georgia
entered judgment in favor of the FDA.'' Ltr. of Joseph P. Schilleci,
Jr., to Hearing Clerk, at 1 (Sept. 14, 2007). Respondent's counsel
further stated that it was appealing the district court's decision.
Id.
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On September 7, 2006, a federal grand jury returned a forty-five
count indictment against Respondent, Jared Wheat, Stephen D. Smith, and
nine other individuals. The indictment alleged, inter alia, that the
defendants had conspired to manufacture in Belize and intentionally
import, or attempt to import, into the United States, schedule III
controlled substances (the steroids oxandrolone, oxymetholone,
stanazolol) and schedule IV controlled substances (alprazolam,
diazepam, lorazepam, phentermine, and zolpidem), in violation of 21
U.S.C. 952(a)(2), 960(a)(1), 960(b)(4), and 963. United States v.
Wheat, et al., No. 1:06CR382 (N.D. Ga.) (Indictment at 14-16, 23-24).
The indictment also alleged that Respondent, Mr. Wheat, Mr. Smith, and
others, knowingly and intentionally imported phentermine, Xanax
(alprazolam), and Ambien (zolpidem) on various dates between February
and May 2004. Indictment at 30-31.
Regarding the indictment, Respondent's counsel stated that it ``is
confident that the facts will show that it has been and is
appropriately conducting its business within the bounds of the law.''
Letter of Respondent's Counsel, at 1. Respondent's counsel further
contended that the indictment's allegations ``are incorrect and do not
portray an accurate description of [it], either in the past or
present,'' and ``that there is no basis for the Government's indictment
of Hi-Tech.'' Id.
The investigative file establishes, however, that several of the
defendants named in the indictment have entered guilty pleas to various
counts. As part of his plea agreement, B.W. admitted that he conspired
with Wheat, Smith, and Respondent, ``to knowingly and intentionally
import and attempt to import into the United States from Belize [the]
Schedule IV controlled substances * * * [a]lprazolam, [d]iazepam,
[l]orazapam, [p]hentermine, and [z]olpidem * * * all in violation of
federal law.'' B.W. Guilty Plea and Plea Agreement at 1-2. B.W. further
admitted that he ``had knowledge of attempts to import Schedule IV
controlled substances and [that he] assisted in the manufacture of
[these substances] on two (2) occasions.'' Id. at 2.
Defendant D.W. admitted that he conspired with Wheat and Smith ``to
knowingly and intentionally import and attempt to import into the
United States from Belize anabolic steroids, Schedule III controlled
substances, and to knowingly and intentionally import and attempt to
import into the United States from Belize [the] Schedule IV controlled
substances * * * [a]lprazolam, [d]iazepam, [l]orazepam, [p]hentermine
and [z]olpidem * * * all in violation of federal law.'' D.W. Guilty
Plea and Plea Agreement at 1. Finally, Defendant D.J. admitted in his
plea agreement that he had knowledge that Wheat, Smith, Respondent, and
others, ``did knowingly and intentionally * * * conspire * * * with
each other and others to knowingly and intentionally import and attempt
to import into the United States from Belize [the] Schedule IV
controlled substances * * * [a]lprazolam, [d]iazepam, [l]orazepam,
[p]hentermine and [z]olpidem * * * in violation of'' federal law. D.J.
Guilty Plea and Plea Agreement at 1-2.
[[Page 16717]]
Discussion
Section 303(h) of the Controlled Substances Act (CSA) provides that
``[t]he Attorney General shall register an applicant to distribute a
list I chemical unless the Attorney General determines that
registration of the applicant is inconsistent with the public
interest.'' 21 U.S.C. 823(h). In making this determination, Congress
directed that I consider the following factors:
(1) Maintenance by the applicant of effective controls against
diversion of listed chemicals into other than legitimate channels;
(2) Compliance by the applicant with applicable Federal, State,
and local law;
(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.
Id.
``These factors are considered in the disjunctive.'' Joy's Ideas,
70 FR 33195, 33197 (2005). I may rely on any one or a combination of
factors, and may give each factor the weight I deem appropriate in
determining whether an application for a registration should be denied.
See, e.g., David M. Starr, 71 FR 39367, 39368 (2006); Energy Outlet, 64
FR 14269 (1999). Moreover, I am ``not required to make findings as to
all of the factors.'' Hoxie v. DEA, 419 F.3d 477, 482 (6th Cir. 2005);
Morall v. DEA, 412 F.3d 165, 173-74 (D.C. Cir. 2005).
Having considered all of the factors, I conclude that factors two
and four establish that Respondent's registration would be
``inconsistent with the public interest.'' 21 U.S.C. 823(h).
Respondent's application will therefore be denied.
Here, the record establishes that between September 2005 and
February 2006, Respondent illegally imported into the United States,
1,000 kilograms of Ma Huang extract, which contained ephedrine
alkaloids in a concentration of approximately eight percent. While at
the time of the importation, ``harvested plant material * * *
contain[ing] ephedrine * * * that preserve[d] the natural constituents
in the ratios that are found in the plant's natural state'' was exempt
from the CSA's requirements, DEA's regulation further provided that
``[p]lant material subjected to chemical or physical extraction,
concentration, chemical reaction, or other treatment that alters the
plant's natural constituents [was] not exempt.'' 21 CFR
1310.12(d)(1).\4\ Respondent did not have a registration to import the
product, which contains a list I chemical and was produced through an
extraction process, and thus was not exempt from the application of the
Act. See 21 U.S.C. 957(a); 21 CFR 1310.12(d)(1). Respondent's
importation of Ma Huang extract therefore violated federal law.
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\4\ On July 25, 2007, DEA published an interim rule which
removed the exemption ``for unaltered ephedra plant material.'' 72
FR 40738, 40741 (2007). This rule became effective on August 24,
2007. Id. at 40742.
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Moreover, substantial evidence establishes that Respondent, its
owner (Mr. Wheat), and vice-president (Mr. Smith), violated the CSA by
importing schedule III and IV controlled substances (including anabolic
steroids, multiple benzodiazepines, as well as phentermine and
zolpidem) into the United States from Belize in violation of 21 U.S.C.
952 and 957(a)(b). While the indictment sets forth only allegations,
the plea agreements of several co-conspirators implicated Respondent,
Mr. Wheat, and Mr. Smith, in the conspiracy to knowingly import
controlled substances into the United States in violation of federal
law. The agreements thus provide substantial evidence to support a
finding that Respondent, Mr. Wheat, and Mr. Smith violated federal
law.\5\ See Richardson v. Perales, 402 U.S. 389 (1971) (upholding use
of hearsay evidence in administrative proceedings). Accordingly, I
conclude that granting Respondent's application would be ``inconsistent
with the public interest.'' 21 U.S.C. Sec. 823(h).
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\5\ In light of the evidence establishing that Mr. Wheat and Mr.
Smith have committed offenses in violation of the CSA, I need not
decide whether their prior convictions are too dated to be
considered.
I further note that Respondent imported listed chemicals which
it then used to manufacture and distribute products which a federal
court has held were adulterated within the meaning of the Food,
Drug, and Cosmetic Act. See Hi-Tech Pharmaceuticals, Inc., v.
Crawford, 505 F.Supp.2d at 1357. See also 21 U.S.C. 823(h)(5)
(directing consideration of ``such other factors as are relevant to
and consistent with the public health and safety''). This conduct
also supports the conclusion that granting Respondent a registration
would be ``inconsistent with the public interest.'' 21 U.S.C.
823(h).
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Order
Pursuant to the authority vested in me by 21 U.S.C. 823(h), as well
as 28 CFR 0.100(b) & 0.104, I order that the application of Hi-Tech
Pharmaceuticals, Inc., for a DEA Certificate of Registration to import
ephedrine, a list I chemical, be, and it hereby is, denied. I further
order that the application of Hi-Pharmaceuticals, Inc., for a DEA
Certificate of Registration to manufacture ephedrine, a list I
chemical, be, and it hereby is, denied. This order is effective April
28, 2008.
Dated: March 17, 2008.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. E8-6377 Filed 3-27-08; 8:45 am]
BILLING CODE 4410-09-P