[Federal Register Volume 76, Number 129 (Wednesday, July 6, 2011)]
[Proposed Rules]
[Pages 39318-39341]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-16847]



[[Page 39318]]

=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF JUSTICE

Drug Enforcement Administration

21 CFR Parts 1301 and 1309

[Docket No. DEA-346P]
RIN 1117-AB32


Controlled Substances and List I Chemical Registration and 
Reregistration Fees

AGENCY: Drug Enforcement Administration (DEA), Department of Justice.

ACTION: Notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: DEA proposes adjusting the fee schedule for DEA registration 
and reregistration fees necessary to recover the costs of its Diversion 
Control Program relating to the registration and control of the 
manufacture, distribution, dispensing, importation and exportation of 
controlled substances and List I chemicals as mandated by the 
Controlled Substances Act.

DATES: Electronic comments must be submitted and written comments must 
be postmarked on or before September 6, 2011. Commenters should be 
aware that the electronic Federal Docket Management System will not 
accept comments after midnight Eastern Time on the last day of the 
comment period.

ADDRESSES: To ensure proper handling of comments, please reference 
``Docket No. DEA-346'' on all electronic and written correspondence. 
DEA encourages all comments be submitted electronically through http://www.regulations.gov using the electronic comment form provided on that 
site. An electronic copy of this document and supplemental information 
to this proposed rule are also available at the http://www.regulations.gov Web site for easy reference. Paper comments that 
duplicate the electronic submission are not necessary as all comments 
submitted to http://www.regulations.gov will be posted for public 
review and are part of the official docket record. Should you, however, 
wish to submit written comments via regular or express mail, they 
should be sent to the Drug Enforcement Administration, Attention: DEA 
Federal Register Representative/ODL, 8701 Morrissette Drive, 
Springfield, VA 22152.

FOR FURTHER INFORMATION CONTACT: Imelda L. Paredes, Office of Diversion 
Control, Drug Enforcement Administration, 8701 Morrissette Drive, 
Springfield, Virginia 22152; Telephone (202) 307-7165.

SUPPLEMENTARY INFORMATION:
    Posting of Public Comments: Please note that all comments received 
are considered part of the public record and made available for public 
inspection online at http://www.regulations.gov and in the DEA's public 
docket. Such information includes personal identifying information 
(such as your name, address, etc.) voluntarily submitted by the 
commenter.
    If you want to submit personal identifying information (such as 
your name, address, etc.) as part of your comment, but do not want it 
to be posted online or made available in the public docket, you must 
include the phrase ``PERSONAL IDENTIFYING INFORMATION'' in the first 
paragraph of your comment. You must also place all the personal 
identifying information you do not want posted online or made available 
in the public docket in the first paragraph of your comment and 
identify what information you want redacted.
    If you want to submit confidential business information as part of 
your comment, but do not want it to be posted online or made available 
in the public docket, you must include the phrase ``CONFIDENTIAL 
BUSINESS INFORMATION'' in the first paragraph of your comment. You must 
also prominently identify confidential business information to be 
redacted within the comment. If a comment has so much confidential 
business information that it cannot be effectively redacted, all or 
part of that comment may not be posted online or made available in the 
public docket.
    Personal identifying information and confidential business 
information identified and located as set forth above will be redacted, 
and the comment, in redacted form, will be posted online and placed in 
the DEA's public docket file. Please note that the Freedom of 
Information Act applies to all comments received. If you wish to 
inspect the agency's public docket file in person by appointment, 
please see the ``For Further Information'' paragraph.

Background

Legal Authority

    The Drug Enforcement Administration (DEA) is a component of the 
Department of Justice and is the primary agency responsible for 
coordinating the drug law enforcement activities of the United States. 
DEA also assists in the implementation of the President's National Drug 
Control Strategy. DEA's mission is to enforce U.S. controlled 
substances laws and regulations and bring to the criminal and civil 
justice system those organizations and individuals involved in the 
growing, manufacturing or distribution of controlled substances and 
listed chemicals appearing in or destined for illicit traffic in the 
U.S., including organizations that use drug trafficking proceeds to 
finance terrorism. The diversion control program (DCP) is a strategic 
component of the DEA's law enforcement mission. The DCP carries out the 
mandates of the Controlled Substances and Chemical Diversion and 
Trafficking Acts. It is primarily the DCP within DEA that implements 
and enforces Titles II and III of the Comprehensive Drug Abuse 
Prevention and Control Act of 1970, often referred to as the Controlled 
Substances Act (CSA) and the Controlled Substances Import and Export 
Act (CSIEA) (21 U.S.C. 801-971), as amended (hereinafter, ``CSA'').\1\ 
DEA drafts and publishes the implementing regulations for these 
statutes in Title 21 of the Code of Federal Regulations (CFR), Parts 
1300 to 1321. The CSA together with these regulations are designed to 
prevent, detect, and eliminate the diversion of controlled substances 
and listed chemicals into the illicit market while ensuring a 
sufficient supply of controlled substances and listed chemicals for 
legitimate medical, scientific, research, and industrial purposes.
---------------------------------------------------------------------------

    \1\ The Attorney General's delegation of authority to DEA may be 
found at 28 CFR 0.100.
---------------------------------------------------------------------------

    Pursuant to the CSA, controlled substances are classified in one of 
five schedules based upon their potential for abuse, their currently 
accepted medical use, and the degree of dependence the substance may 
cause. 21 U.S.C. 812. Likewise, under the CSA, listed chemicals are 
separately classified based on their importance to the manufacture of 
controlled substances (List I chemicals) or their use in manufacturing 
controlled substances (List II chemicals). 21 U.S.C. 802(33)-(35). The 
CSA mandates that DEA register persons or entities who manufacture, 
distribute, dispense, import, export, or conduct research or chemical 
analysis with controlled substances and listed chemicals. These 
registrants are permitted to handle controlled substances and listed 
chemicals as authorized by their registration and are required to 
comply with the applicable requirements associated with their 
registration. 21 U.S.C. 822. The identification and registration of all 
individuals and entities authorized to handle controlled substances and 
listed chemicals establishes a closed system over which DEA is charged 
to inspect, investigate, and enforce applicable federal law.

[[Page 39319]]

    Under the CSA, DEA is authorized to charge reasonable fees relating 
to the registration and control of the manufacture, distribution, 
dispensing, import, and export of controlled substances and listed 
chemicals. 21 U.S.C. 821 and 958(f). DEA must set fees at a level that 
ensures the recovery of the full costs of operating the various aspects 
of its DCP. 21 U.S.C. 886a. Each year, DEA is required by statute to 
transfer the first $15 million of fee revenues into the general fund of 
the Treasury and the remainder of the fee revenues is deposited into a 
separate fund of the Treasury called the Diversion Control Fee Account 
(DCFA). 21 U.S.C. 886a(1). On at least a quarterly basis, the Secretary 
of the Treasury is required to reimburse DEA an amount from the DCFA 
``in accordance with estimates made in the budget request of the 
Attorney General for those fiscal years'' for the operation of the 
DCP.\2\ 21 U.S.C. 886a(1)(B) and (D). The first $15 million of fee 
revenues that are transferred to the Treasury do not support any DCP 
activities.
---------------------------------------------------------------------------

    \2\ The diversion control program (DCP) consists of the 
controlled substance and chemical diversion control activities of 
DEA. These activities are related to the registration and control of 
the manufacture, distribution, dispensing, importation, and 
exportation of controlled substances and listed chemicals (21 U.S.C. 
886a(2)).
---------------------------------------------------------------------------

History of Fees

    In 1970, Congress consolidated more than 50 laws related to the 
control of legitimate channels of narcotics and dangerous drugs into 
one statute--the CSA. The statute was ``designed to improve the 
administration and regulation of the manufacturing, distribution, and 
dispensing of controlled substances by providing for a `closed' system 
of drug distribution for legitimate handlers of such drugs'' with 
criminal penalties for transactions outside the legitimate chain.\3\ 
With enactment of the CSA, the Bureau of Narcotics and Dangerous Drugs 
(BNDD) was also granted authority to charge reasonable fees relating to 
the registration and control of the manufacture, distribution, 
dispensing, export, and import of controlled substances.\4\ To this 
end, BNDD established a three-tiered fee structure for companies and 
individuals wishing to participate in the U.S. controlled substance 
industry.\5\ Before the enactment of the CSA, the U.S. House of 
Representatives held hearings to discuss the proposed Controlled 
Substances Act. In these hearings, there was a discussion about whether 
the Attorney General should be allowed to charge reasonable fees 
relating to both registration and control (including enforcement costs) 
or just registration.\6\ In the end, Congress enacted the CSA and 
allowed the Attorney General to charge reasonable fees relating to both 
registration and control.\7\
---------------------------------------------------------------------------

    \3\ H.R. Rep. No. 91-1444 (1970), reprinted in 1970 U.S.C.C.A.N. 
4566, 4571-4572.
    \4\ DEA's authority to charge reasonable fees was later expanded 
to include manufacturers, distributors, importers and exporters of 
List I chemicals. The Domestic Chemical Diversion Control Act of 
1993, Pub. L. 103-200, 107 Stat. 2333.
    \5\ 36 FR 4928, March 13, 1971, 36 FR 7776, April 24, 1971.
    \6\ Drug Abuse Control Amendments of 1970: Hearing on H.R. 1170 
and H.R. 13743 Before Subcomm. on Public Health and Welfare of the 
H. Comm. on Interstate and Foreign Commerce, 91st Cong. 145-148, 
359-365, and 412-414 (Feb. 3 & 20, 1970) and Controlled Dangerous 
Substances, Narcotics and Drug Control Laws: Hearings Before H. 
Comm. on Ways and Means, 91st Cong. 211-214 and 468-474 (July 20 & 
21, 1970).
    \7\ The term ``control'' as defined in 21 U.S.C. 802(5) 
specifically applies to Part B of Title II of the CSA only (21 
U.S.C. 811-814). In general, ``diversion control'' is a broad term 
encompassing activities related to preventing and detecting the 
diversion of controlled substances and listed chemicals from 
legitimate commerce into the illicit market. In 1992, Congress 
established the Diversion Control Fee Account (DCFA) and required 
that the fees charged by DEA under its diversion control program be 
set at a level that ensures the recovery of the full costs of 
operating the various aspects of that program (Pub. L. 102-395, 106 
Stat. 1843). In 2004, Congress amended the CSA and defined 
``diversion control program'' and ``controlled substance and 
chemical diversion control activities'' (Pub. L. 108-447, 118 Stat. 
2921, codified in 21 U.S.C. 886a). The ``diversion control program'' 
means the controlled substance and chemical diversion control 
activities of the Drug Enforcement Administration. 21 U.S.C. 
886a(2)(A).
---------------------------------------------------------------------------

    In 1973, the BNDD was abolished and all BNDD functions were 
transferred to DEA, including the authority to charge registrants 
reasonable fees.\8\ In 1982, a General Accounting Office (GAO) report 
\9\ advised that the 1971 fee schedule did not adequately recover the 
costs for the DCP administered by DEA. An increase in fees was proposed 
and finalized in the Federal Register in 1983.\10\ All fees collected 
from 1971 through 1992 were deposited into the general fund of the 
United States Treasury.
---------------------------------------------------------------------------

    \8\ Reorganization Plan No. 2 of 1973, 38 FR 18380 (July 2, 
1973).
    \9\ GAO/GGD-83-2, October 29, 1982.
    \10\ 48 FR 14640, April 5, 1983; 48 FR 56043, December 19, 1983.
---------------------------------------------------------------------------

    In the 1993 appropriations for DEA, Congress determined that the 
DCP would be fully funded by fees and no longer by appropriations.\11\ 
Congress established the DCFA as a separate account of the Treasury to 
``ensure the recovery of the full costs of operating the various 
aspects of [the Diversion Control Program]'' by those participating in 
the closed system established by the CSA. 21 U.S.C. 886a(1)(C). 
Congress specified the general operation of the DCFA. Each fiscal year, 
the first $15 million of deposited fees are retained in the general 
fund of the Treasury and are not available for use by the DCP. The 
amounts in excess of $15 million are deposited into the DCFA for the 
operation of DEA's diversion control program. The funds in the DCFA 
remain available until expended and are paid by the Secretary of the 
Treasury to reimburse DEA for expenses incurred in the operation of the 
DCP in accordance with estimates made in the budget request of the 
Attorney General. 21 U.S.C. 886a(1). Thus, specific statutory 
authorizations set the parameters of the DCFA, but not the details of 
the application of those standards to the activities of DEA.
---------------------------------------------------------------------------

    \11\ Departments of Commerce, Justice, and State, the Judiciary 
and Related Agencies Appropriations Act of 1993, Public Law 102-395, 
codified in relevant part at 21 U.S.C. 886a.
---------------------------------------------------------------------------

    Shortly after the 1993 Appropriations Act, DEA published a proposed 
rule proposing to increase the existing fee schedule to comply with 
Congress' direction to set fees at a level that ensures the recovery of 
the full costs of operating the DCP.\12\ After a comment period, a 
final rule was published on March 22, 1993, implementing changes to the 
fee structure and excluding chemical control costs from the calculation 
of fees.\13\ Several members of the registrant population impacted by 
the fee increase challenged the new fee, first in federal district 
court, where it was upheld, and subsequently on appeal to the U.S. 
Court of Appeals where it was remanded without being vacated for 
inadequate information supporting the selected fees.\14\
---------------------------------------------------------------------------

    \12\ 57 FR 60148-01, December 18, 1992.
    \13\ 58 FR 15272-01, March 22, 1993.
    \14\ American Medical Association v. Reno, 857 F.Supp. 80 
(D.D.C. 1994); American Medical Association v. Reno, 57 F.3d 1129 
(D.C. Cir. 1995).
---------------------------------------------------------------------------

    In December of 1993, the Domestic Chemical Diversion Control Act of 
1993 was passed by Congress to amend the CSA to require that 
manufacturers, distributors, importers, and exporters of List I 
chemicals obtain a registration from DEA. Coincident with the new 
registration requirements, DEA was also authorized to charge 
``reasonable fees relating * * * to the registration and control of 
regulated persons and regulated transactions.'' \15\ (Congress modified 
this language in 2004, as it currently reads at 21 U.S.C. 821, to make 
it uniform with other provisions

[[Page 39320]]

of the CSA.\16\) This amendment to the CSA was made after publication 
of DEA's March 22, 1993 final rule and the commencement of the legal 
challenges. List I chemical registration and reregistration fees were 
not addressed in the DCFA until the fee calculation initiated with a 
proposed rule published November 2005.\17\
---------------------------------------------------------------------------

    \15\ The Domestic Chemical Diversion Control Act of 1993, Public 
Law 103-200, 107 Stat. 2333.
    \16\ It authorizes ``reasonable fees relating to the 
registration and control of the manufacture, distribution, and 
dispensing of controlled substances and to listed chemicals.'' 21 
U.S.C. 821.
    \17\ 70 FR 69474, November 16, 2005. See also 108 H. Rpt. 576, 
July 1, 2004.
---------------------------------------------------------------------------

    The fee was finalized in 1996 with a request for further 
comment.\18\ DEA instituted studies and internal reorganizations to 
enable DEA to better identify DCP activities and costs. Additional 
information on the components and activities of the fee-funded DCP and 
what was deemed to be part of that program as well as DEA's response to 
comments received was published in 2002 for additional public 
comment.\19\ After that publication, a review of DEA's DCP by the 
Office of the Inspector General, Department of Justice (OIG) concluded 
DEA was not adequately supporting the DCP program.\20\
---------------------------------------------------------------------------

    \18\ 61 FR 68624, December 30, 1996.
    \19\ 67 FR 51988, August 9, 2002.
    \20\ ``Review of the Drug Enforcement Administration's Control 
of the Diversion of Controlled Pharmaceuticals,'' I-2002-010, 
October 2002, http://www.usdoj.gov/oig/reports/DEA/e0210/index.htm.
---------------------------------------------------------------------------

    In February 2003, DEA published a proposed rule to raise 
registration and reregistration fees in an effort to comply with the 
statutory requirement to charge fees at a level that ensures the 
recovery of the full costs of operating the various aspects of the 
DCP.\21\ Shortly thereafter, DEA created an organization within 
headquarters known as the Validation Unit. This Unit reviews and 
ensures that every DCFA expenditure over $500 is in support of 
diversion control-related activities. The Validation Unit is 
independent of the Office of Diversion Control and reports directly to 
the DEA Deputy Administrator. If an expense only partially supports the 
DCP, such as a field office's rent or utility cost, the Validation Unit 
determines the portion of the expense that should be funded by the 
DCFA. A new fee was finalized by publication of a final rule on October 
10, 2003.\22\
---------------------------------------------------------------------------

    \21\ 68 FR 7728, February 18, 2003.
    \22\ 68 FR 58587, October 10, 2003. DEA published a correction 
to this final rule where the internal DEA computer system, Firebird, 
was identified as being solely funded through appropriations. The 
Firebird system costs are properly apportioned as a DCP cost as well 
as a non-DCP appropriations expense. 69 FR 34568, June 22, 2004.
---------------------------------------------------------------------------

    In 2004, Congress provided additional guidance in the relevant 2005 
Appropriations Act.\23\ Specifically, the CSA was amended to define the 
DCP as ``the controlled substance and chemical diversion control 
activities of the Drug Enforcement Administration.'' 21 U.S.C. 
886a(2)(A). Furthermore, ``controlled substance and chemical diversion 
control activities'' means ``those activities related to the 
registration and control of the manufacture, distribution, dispensing, 
importation, and exportation of controlled substances and listed 
chemicals.'' 21 U.S.C. 886a(2)(B). Congress further provided that 
reimbursements from the DCFA ``shall be made without distinguishing 
between expenses related to controlled substance activities and 
expenses related to chemical activities'' (21 U.S.C. 886a(1)(B)) and 
amended the language of 21 U.S.C. 821 and 958(f) to be consistent with 
the definition of the DCP articulated in 21 U.S.C. 886a(2). As a 
result, all registration and reregistration fees for controlled 
substances and chemicals are deposited into the DCFA and reimbursements 
by the Secretary of the Treasury are made without distinction.
---------------------------------------------------------------------------

    \23\ Public Law 108-447, Departments of Commerce, Justice and 
State, the Judiciary and Related Agencies Appropriations Act of 
2005, signed into law on December 8, 2004.
---------------------------------------------------------------------------

    In 2005, based upon the internal organizational changes and the 
2005 Appropriations Act, DEA proposed an adjusted fee schedule to 
appropriately reflect all costs associated with the DCP.\24\ In July 
2006, the OIG reported on its Follow-up Review of DEA's Efforts to 
Control the Diversion of Controlled Pharmaceuticals and recommended 
that DEA apply more resources to diversion control.\25\ The OIG also 
recommended that DEA provide more Special Agent support to the DCP and 
increase training for those individuals who support the program. The 
OIG also noted that the diversion of controlled substance 
pharmaceuticals had dramatically increased over recent years and that 
the increase coincided with the use of emerging technologies such as 
the Internet. Twelve comments were received and analyzed in response to 
DEA's proposed fee rule and DEA published the final rule on August 29, 
2006.\26\
---------------------------------------------------------------------------

    \24\ 70 FR 69474, November 16, 2005.
    \25\ ``Follow-Up Review of the Drug Enforcement Administration's 
Efforts to Control the Diversion of Controlled Pharmaceuticals,'' I-
2006-004, July 2006, http://www.usdoj.gov/oig/reports/DEA/e0604/final.pdf.
    \26\ 71 FR 51105, August 29, 2006.
---------------------------------------------------------------------------

    The OIG completed a Review of DEA's Use of the Diversion Control 
Fee Account in 2008 and did not find any misused DCFA funds for non-
diversion control activities between FY 2004 and FY 2007. To the 
contrary, the OIG found that DEA did not fully fund all diversion 
control costs with the DCFA as required by law.\27\ It has been 
approximately five years since the last fee adjustment. It should be 
noted, however, that collections associated with the last fee 
adjustment did not begin until FY 2007.
---------------------------------------------------------------------------

    \27\ ``Review of the Drug Enforcement Administration's Use of 
the Diversion Control Fee Account,'' I-2008-002, February 2008, 
http://www.usdoj.gov/oig/reports/DEA/e0802/final.pdf.
---------------------------------------------------------------------------

Diversion Control Program (DCP)--Scope

    The scope of the DCP has evolved since its inception. In late 1971, 
the BNDD's Compliance Program was created to provide a specialized work 
force that could focus exclusively on controlled substance diversion 
and take full advantage of the controls and penalties established by 
the CSA. The program was placed under the BNDD's Office of Enforcement 
and staffed by compliance investigators, later called diversion 
investigators. In 1973, the BNDD was abolished and all BNDD functions 
were transferred to DEA.\28\
---------------------------------------------------------------------------

    \28\ Reorganization Plan No. 2 of 1973, 38 FR 18380 (July 2, 
1973).
---------------------------------------------------------------------------

    From 1971 to 1983, DEA's legal authority with regard to diversion 
and abuse of drugs remained relatively unchanged. The CSA originally 
provided DEA with substantially more authority to regulate controlled 
substance manufacturers and distributors than retail dispensers such as 
medical professionals and retail pharmacies. Congress, acknowledging 
that registration is the cornerstone of the closed system of 
distribution, required DEA to find that manufacturer and distributor 
registrations are consistent with a specifically defined public 
interest and with U.S. international obligations as a prerequisite to 
granting such registrations.\29\ In contrast, practitioners were 
entitled to a registration if they were authorized to handle controlled 
substances by the state in which they practiced. Furthermore, a 
practitioner's registration could be revoked only on the following 
three bases: conviction of a drug-related felony; revocation of a state 
license; or submission of a materially falsified application. There was 
also great disparity in the recordkeeping and security requirements 
applicable to the two groups, with manufacturers and distributors 
subject to the tighter

[[Page 39321]]

controls. This disparity in regulatory authority generated more 
regulatory oversight and, hence, compliance, at the manufacturer and 
distributor level than at the retail level. The limitations on DEA's 
statutory authority severely restricted its ability to regulate 
practitioners.
---------------------------------------------------------------------------

    \29\ 21 U.S.C. 823(a)-(e).
---------------------------------------------------------------------------

    By 1977, all 197 DEA compliance investigators (now diversion 
investigators) were fully occupied monitoring approximately 3,300 
controlled substance manufacturers, distributors, importers, exporters, 
and narcotic treatment programs, where large stocks of controlled 
substances and the potential for large-scale diversion were 
present.\30\ At that time, 98 percent of DEA registrants were in the 
dispensing category, i.e., physicians, dentists, veterinarians, retail 
pharmacies, hospitals, and teaching institutions.\31\ In 1978, the 
Comptroller General issued a report to Congress that examined DEA's 
efforts to prevent diversion of controlled substances at the retail 
level, i.e., by doctors and pharmacists.\32\ The report explored the 
barriers to DEA's efforts to control retail diversion: inadequate 
statutory authority, weak regulatory requirements, and inadequate 
resources. One of the Comptroller General's recommendations to Congress 
was that Congress change DEA's role by authorizing DEA to exercise 
direct regulatory authority over retail level practitioners. This would 
have been a deviation from DEA's traditional enforcement role and would 
require significant legislative changes and manpower increases.
---------------------------------------------------------------------------

    \30\ GAO/GGD-78-22, March 10, 1978 at 3, 18.
    \31\ GAO/GGD-78-22 at 3.
    \32\ GAO/GGD-78-22.
---------------------------------------------------------------------------

    Shortly thereafter, many amendments to the CSA between 1984 and 
1990 strengthened and expanded DEA's statutory authority. The Dangerous 
Drug Diversion Control Act of 1984 \33\ provided DEA with new authority 
to deny or revoke a practitioner's DEA registration on the basis of 
specifically defined public interest grounds \34\ and also provided DEA 
with emergency scheduling authority.\35\ The Anti-Drug Abuse Act of 
1986 established penalties for the manufacture and distribution of 
``designer drugs.'' \36\ The Anti-Drug Abuse Act of 1988 for the first 
time required recordkeeping and reporting by chemical distributors, 
importers, and exporters, and established penalties for illegal 
activities related to precursor and essential chemicals.\37\ The 
Anabolic Steroids Control Act of 1990 brought steroids under the 
regulatory oversight and control of the DEA by placing certain anabolic 
steroids in schedule III of the CSA.\38\ This Act required certain 
steroid manufacturers and distributors to register with DEA and brought 
anabolic steroids under the recordkeeping, reporting, security, 
prescribing, import, and export controls of the CSA.
---------------------------------------------------------------------------

    \33\ Part B--Diversion Control Amendments, Public Law 98-473, 98 
Stat. 2070 (Oct. 12,1984).
    \34\ 21 U.S.C. 823(f), 824(a)(4).
    \35\ 21 U.S.C. 811(h) (The amendment provided for one-year 
emergency scheduling of a drug, the abuse of which constituted an 
``imminent hazard to the public safety.'' The drug would remain in 
schedule I for up to one year, during which the normal scheduling 
procedures would proceed).
    \36\ Subtitle E--Controlled Substances Analogue Enforcement Act, 
Public Law 99-570, 100 Stat. 3207 (Oct. 27, 1986).
    \37\ Title VI, Subtitle A--Chemical Diversion and Chemical 
Trafficking Act of 1988, Public Law 100-690, 102 Stat. 4181 (Nov. 
18, 1988).
    \38\ Public Law 101-647, 104 Stat. 4851 (Nov. 29, 1990).
---------------------------------------------------------------------------

    As discussed above, the Domestic Chemical Diversion Control Act of 
1993 amended the CSA to require manufacturers, distributors, importers, 
and exporters of List I chemicals obtain a registration from the DEA, 
thus greatly expanding the authority and activities of the DCP.
    On October 17, 2000, Congress passed the Drug Addiction Treatment 
Act, permitting qualified physicians to treat narcotic dependence with 
certain schedule III through V narcotic controlled substances.\39\ The 
Act waived the requirement for certain qualified physicians to obtain a 
separate DEA registration as a Narcotic Treatment Program. However, 
upon application, the DCP must issue such qualifying physicians an 
identification number for inclusion with the physician's DEA 
Certificate of Registration.\40\ As a result, when a qualifying 
physician submits notice of his waiver pursuant to the Act, the DCP 
issues the physician a new DEA Certificate of Registration with the 
appropriate identification number.
---------------------------------------------------------------------------

    \39\ Public Law 106-310, 114 Stat. 1222 (Oct. 17, 2000).
    \40\ 21 U.S.C. 823(g)(2)(D)(ii).
---------------------------------------------------------------------------

    Renamed from the Office of Compliance and Regulatory Affairs and 
then the Diversion Control Program, today, the DEA Office of Diversion 
Control administers the DCP.\41\ As such, it is responsible for 
ensuring the availability of controlled substances and listed chemicals 
for legitimate uses in the United States while exercising controls to 
prevent the diversion of these substances and chemicals for illegal 
uses. The Office of Diversion Control maintains an overall geographic 
picture of the drug and chemical diversion and abuse problems to 
identify new trends or patterns in diversion and abuse. This enables 
the Office of Diversion Control to appropriately direct resources.
---------------------------------------------------------------------------

    \41\ 28 CFR Part 0, Appendix to Subpart R.
---------------------------------------------------------------------------

    The DCP is executed by maintaining the closed system of 
distribution, regulating and controlling nearly 1.4 million DEA 
registrants,\42\ and investigating activity related to the diversion of 
controlled substances and listed chemicals. The DCP's regulatory 
function is accomplished through routine regulatory inspections, by 
providing information and assistance to registrants, and by controlling 
and monitoring the manufacture, distribution, dispensing, import, and 
export of controlled substances and listed chemicals. The DCP's 
enforcement function is accomplished by identifying and investigating 
those persons or entities responsible for diverting controlled 
substances and listed chemicals from legitimate commerce. Violators are 
subject to administrative sanction, and civil and criminal prosecution.
---------------------------------------------------------------------------

    \42\ This represents the total registrant population. 
Approximately seven percent of the total registrant population 
consists of fee exempt registrants who are not included in the fee 
calculations presented herein. The registrant population grew at a 
rate of approximately 2.6 percent per year from 2007 to 2010.
---------------------------------------------------------------------------

    To ensure accountability within the closed system of distribution, 
the DCP administers, maintains, controls, and oversees the DEA 
registration system.\43\ This entails processing, reviewing, and, if 
necessary, investigating all applications for registration and 
reregistration, collecting fees, and, when appropriate, proposing to 
take administrative action on registrations or applications for 
registration, such as restriction, revocation, suspension, or denial of 
an application. Maintaining the DEA registration system requires 
coordination with state regulatory agencies and other federal agencies 
such as the Center for Substance Abuse Treatment.\44\
---------------------------------------------------------------------------

    \43\ See 21 U.S.C. 822-25, 827-29, 831, 952-54, 956-58, 971.
    \44\ See 21 U.S.C. 823(g).
---------------------------------------------------------------------------

    In addition, the DCP exercises statutory authority to determine the 
appropriate procedures necessary to the ordering and distribution of 
schedule I and II controlled substances.\45\ This enables the DCP to 
monitor the flow of certain controlled substances from their point of 
manufacture through commercial distribution. It also monitors 
registrant compliance with

[[Page 39322]]

electronic reporting systems such as the Automation of Reports and 
Consolidated Orders System (ARCOS), and manages the cataloging of 
controlled substances based on the National Drug Code (NDC) system, the 
Drug/Ingredient file, Trade Name file, DEA Generic Name file and U.N. 
Code/Name file. Other oversight activities include maintaining the 
Controlled Substance Ordering System (CSOS), monitoring CSOS activities 
through the initial certification process, and periodic auditing of 
registrant systems. CSOS provides registrants with an electronic 
platform that reduces costs to registrants while ensuring a more 
efficient and effective ordering process.
---------------------------------------------------------------------------

    \45\ 21 U.S.C. 828.
---------------------------------------------------------------------------

    One of the primary functions of the DCP is to ensure that 
registrants are in compliance with the safeguards inherent in the CSA. 
This proactive approach is designed to identify and prevent the large 
scale diversion of controlled substances and listed chemicals into the 
illicit market.
    Registrant compliance is determined primarily through the conduct 
of pre-registration, scheduled, and complaint investigations. DCP 
regulatory activities have an inherent deterrent function, and they are 
designed to ensure that those businesses and individuals registered 
with DEA to handle controlled substances or listed chemicals have 
sufficient measures in place to prevent the diversion of these 
substances. These investigations also help registrants understand and 
comply with the CSA \46\ and identify those registrants who violate the 
CSA and implementing regulations. Preregistration investigations reduce 
the possibility of registering unauthorized subjects, ensure that the 
means to prevent diversion are in place, and determine whether 
registration is consistent with the public interest.
---------------------------------------------------------------------------

    \46\ See 21 U.S.C. 827 (records and reports of registrants).
---------------------------------------------------------------------------

    Manufacturers, distributors, reverse distributors, importers, 
exporters, and narcotic treatment programs pose the greatest potential 
for large-scale diversion. Accordingly, scheduled investigations of 
these non-practitioner registrants are a major priority of the DCP. 
These investigations serve as a deterrent to diversion through the 
continuous evaluation of registrants' recordkeeping procedures, 
security, and overall adherence to the CSA. Emphasis during these 
investigations is given to verifying inventory, records and 
recordkeeping procedures, a review of customers and their ordering 
patterns, and security protocols.
    The DCP is constantly evaluating diversion trends, patterns, 
routes, and techniques in order to appropriately focus its regulatory, 
civil and criminal enforcement activities. This is accomplished in many 
ways, including collecting and analyzing targeting and analysis data, 
conducting diversion threat assessments, working with state and local 
medical and pharmacy boards and state and local law enforcement 
agencies, and developing intelligence.
    The DCP conducts criminal enforcement activities primarily through 
Tactical Diversion Squads (TDSs). TDSs are comprised of many DEA 
specialties, including DEA Special Agents and Diversion Investigators, 
and state and local counterparts such as state law enforcement and 
regulatory personnel. These groups combine varied resources and 
expertise in order to investigate, disrupt, and dismantle those 
individuals or organizations involved in diversion schemes (e.g., 
doctor shoppers, prescription forgers, and prevalent retail-level 
violators).
    In fulfillment of its function to control the import and export of 
controlled substances and listed chemicals, the DCP issues import and 
export registrations and permits, and monitors declared imports, 
exports, and transshipments of these substances. The DCP must ensure 
that all imports and exports of controlled substances and listed 
chemicals meet the requirements of the CSA. As such, the DCP maintains 
and monitors many electronic reporting systems, such as the Chemical 
Handlers Enforcement Management System (CHEMS), which provides 
information on entities manufacturing, distributing, and exporting and 
importing regulated chemicals, and encapsulating and tableting 
machines.\47\
---------------------------------------------------------------------------

    \47\ See 21 U.S.C. 830, 957-58.
---------------------------------------------------------------------------

    The DCP's authority over controlled substances and listed chemicals 
requires its support of domestic and foreign investigations of these 
substances. As such, the DCP serves as the Competent National Authority 
(CNA) for the United States vis-[agrave]-vis precursor chemicals and 
international treaties. The DCP works with the international community 
to identify and seize international shipments of precursor and 
essential chemicals destined for clandestine laboratories for use in 
manufacturing controlled substances. The DCP also works on a bilateral 
basis to urge international partners to take effective action, in 
cooperation with chemical companies, to prevent the diversion of 
precursor chemicals from legitimate trade. In addition to its other 
oversight and regulatory responsibilities in this area,\48\ the DCP 
reviews and approves importation requests for List I chemicals and 
reviews chemical registrant submissions.
---------------------------------------------------------------------------

    \48\ 21 U.S.C. 830; 21 CFR Parts 1310, 1313, 1314.
---------------------------------------------------------------------------

    Not only does the DCP exercise authority and control over the 
registrant population, the DCP exercises authority over the 
classification of substances.\49\ This is accomplished by evaluating 
drugs and chemicals to determine whether these substances are being 
abused or potentially involved in illicit traffic, and to evaluate 
whether any substances should be scheduled as a controlled substance. 
This requires the collection and analysis of data from various sources 
across the United States. These evaluations are used by DEA as a basis 
for developing appropriate drug control policies, determining the 
status of controlled, excluded, or exempted drugs and drug products, 
and supporting United States initiatives in international forums.
---------------------------------------------------------------------------

    \49\ 21 U.S.C. 811-814.
---------------------------------------------------------------------------

    Another crucial function of the DCP is the annual establishment of 
quotas for all schedule I and II controlled substances and the List I 
chemicals pseudoephedrine, ephedrine, and phenylpropanolimine.\50\ 
Along with this responsibility, the DCP also provides scientific 
support for policy guidance and training, expert witness testimony and 
conference presentations. The DCP fulfills U.S. treaty obligations 
pertaining to the CSA, including the preparation of periodic reports 
for submission to the United Nations as mandated by U.S. international 
drug control treaty obligations on the manufacture and distribution of 
narcotic and psychotropic substances as well as determining the 
anticipated future needs for narcotic and psychotropic substances.
---------------------------------------------------------------------------

    \50\ 21 U.S.C. 826.
---------------------------------------------------------------------------

    In the execution of its regulatory functions, the DCP reviews 
proposed legislation pertinent to the availability of controlled 
substances and listed chemicals for legitimate uses in the United 
States and controls to prevent the diversion of these substances and 
chemicals. The DCP constantly reviews its own regulations and develops 
and implements regulations designed to enhance DEA's diversion control 
efforts and to implement newly enacted legislation.
    All DCP regulatory activities require education and outreach to 
ensure appreciation of and compliance with the CSA and applicable 
policies and regulations. Providing such guidance is also necessary to 
reduce the likelihood of diversion from legitimate commerce

[[Page 39323]]

to illegitimate purposes. One aspect of the DCP's outreach efforts is 
establishing and maintaining liaison and working relationships with 
other federal agencies, as well as foreign, state and local 
governments, and the regulated community. Other efforts include 
developing and maintaining manuals and other publications; organizing 
and conducting national conferences on current issues, policies, and 
initiatives; and providing guidance to the general public.

Changes in the Controlled Substances Act Since the Last Fee Rule in 
2006

    Since implementation of the last fee rule in 2006, Congress has 
made several changes to the CSA that impact how the DCP operates to 
control controlled substances and listed chemicals and register those 
individuals who wish to handle these substances. Additionally, the 
nature of the diversion control problem has increased in size and 
complexity. These statutory changes, in addition to the changing scope 
of diversion, required the DCP to implement program and organizational 
changes. These changes impact DEA beyond its DCP and thus are not 
necessarily funded through the DCFA.
Methamphetamine Abuse
    Congress has enacted a series of legislative initiatives to combat 
the rise in methamphetamine abuse. Methamphetamine is a highly 
addictive drug with potent central nervous system stimulant properties. 
Control as a schedule II substance and the removal of methamphetamine 
injectable formulations from the United States market, combined with a 
better appreciation for its high abuse potential, led to a drastic 
reduction in the abuse of this drug in 1971. However, a resurgence of 
methamphetamine abuse occurred in the 1980s and it is currently 
considered a major drug of abuse. The widespread availability of 
methamphetamine today is largely fueled by illicit production in large 
and small clandestine laboratories throughout the United States and 
illegal production and importation from Mexico.
    Methamphetamine is abused for its stimulant and euphoric effects. 
High-dose chronic abuse has been associated with irritability, tremors, 
convulsions, anxiety, paranoia, and neurotoxic effects that cause 
damage to neurons and blood vessels. Aggressive and violent behavior by 
users, often directed at spouses and children, pose a significant risk 
to those individuals in contact with methamphetamine addicts. Death has 
resulted from extreme anorexia, hyperthermia, convulsions, and 
cardiovascular collapse (including stroke and heart attacks).
    The methods used to manufacture methamphetamine are directly 
impacted by the availability of precursor chemicals and ease of 
synthesis. Currently, methamphetamine is primarily produced 
domestically by utilizing diverted pseudoephedrine combination products 
that are sold at retail and, to a lesser extent, ephedrine products. 
The manufacture of this drug poses a significant threat to the public 
health and safety due to the toxic waste and the risk of fire and 
explosion associated with the clandestine laboratories that manufacture 
the drug, and the fact that many individuals, including children, are 
at risk of exposure to toxic chemicals and waste generated during the 
manufacturing process.
    A Rand Corporation study reported that the 2005 cost to the U.S. 
for overall methamphetamine-related activities including crime and 
criminal justice costs, health care costs, endangered children put in 
foster care, the loss of productivity, drug treatment, and injuries and 
death at methamphetamine laboratories was estimated at $23.4 
billion.\51\ Similarly, the Vanderbilt University Medical Center in 
Tennessee reported spending $325 million between July 2009 and June 
2010 for uncompensated medical care at its Burn Center.\52\ One-third 
of its patients were burned from exploding methamphetamine 
laboratories.\53\
---------------------------------------------------------------------------

    \51\ Nancy Nicosia et al., ``The Economic Cost of 
Methamphetamine Use in the United States, 2005,'' RAND Corporation, 
2009.
    \52\ John Brannon, ``Meth-related Burns a Growing Part of 
Uncompensated Care at Vanderbilt,'' Messenger, August 12, 2010, 
http://www.nwtntoday.com/news.php?viewstory=44736.
    \53\ Id.
---------------------------------------------------------------------------

    In 2010, there were in excess of 10,000 clandestine laboratory 
incidents in the United States related to the manufacture of 
methamphetamine.\54\ Coinciding with the upward trend in 
methamphetamine laboratory seizures is an alarming upward trend in 
methamphetamine abusers. According to the 2009 National Survey on Drug 
Use and Health, between 2008 and 2009 there was a 60 percent increase 
in the number of past month users of methamphetamine.\55\ This comes 
after a significant reduction of past month users between 2006 and 
2008, a period when the U.S. was experiencing decreases in the number 
of methamphetamine laboratory seizures.
---------------------------------------------------------------------------

    \54\ The El Paso Intelligence Center (EPIC) has not validated 
this data as of the date of this Notice of Proposed Rulemaking, 
however, all indications are that there were approximately 12,000 
such clandestine laboratory incidents in 2010.
    \55\ Substance Abuse and Mental Health Services Administration 
(SAMHSA), ``Results from the 2009 National Survey on Drug Use and 
Health: Volume I, Summary of National Findings,'' Office of Applied 
Studies, 2010 (NSDUH Series H-38A, HHS Publication No. SMA 10-4856), 
http://www.oas.samhsa.gov/nsduh/2k9NSDUH/2k9Results.pdf.
---------------------------------------------------------------------------

    The Combat Methamphetamine Epidemic Act of 2005 (CMEA) was enacted 
on March 9, 2006. 21 U.S.C. 971. It requires retailers of non-
prescription products containing pseudoephedrine, ephedrine and 
phenylpropanolamine to place these products behind the counter or in a 
locked cabinet. Consumers must show identification and sign a logbook 
for each purchase. An interim final rule was published to implement 
section 716 of the Act and require additional reporting for import, 
export, and international transactions involving all List I and List II 
chemicals.\56\ On October 14, 2008, Congress enacted the 
Methamphetamine Production Prevention Act of 2008, which amended the 
CSA to require the sellers of methamphetamine precursor chemicals to 
record information about sales and purchasers in electronic logbooks or 
bound paper books. 21 U.S.C. 830(e)(1)(A)(iv)-(vi). Further, on October 
12, 2010, the Combat Methamphetamine Enhancement Act of 2010 (MEA) was 
enacted, establishing new requirements for mail-order distributors of 
scheduled listed chemical products (Pub. L. 111-268).
---------------------------------------------------------------------------

    \56\ 72 FR 17401, April 9, 2007. Implementation was delayed an 
additional 30 days until June 8, 2007, to allow industry more time 
to fully comply with the new provisions. 72 FR 28601, May 22, 2007.
---------------------------------------------------------------------------

Internet Diversion
    On October 15, 2008, Congress amended the CSA with enactment of the 
Ryan Haight Online Pharmacy Consumer Protection Act of 2008. DEA 
amended its regulations accordingly by interim final rule to prevent 
the illegal distribution and dispensing of controlled substances by 
means of the Internet.\57\
---------------------------------------------------------------------------

    \57\ 74 FR 15596, April 6, 2009.
---------------------------------------------------------------------------

Disposal of Controlled Substances
    Lastly, on October 12, 2010, Congress amended the CSA with the 
enactment of the Secure and Responsible Drug Disposal Act of 2010 (Pub. 
L. 111-273). Pursuant to this amendment, DEA must promulgate new 
regulations that allow ultimate users and long-term care facilities to 
dispose of controlled substances through a variety of methods of 
collection and disposal. DEA is in the process of drafting these 
regulations.

[[Page 39324]]

Increased Need for Diversion Control

    Coincident with the above statutory changes, the increased misuse 
of controlled substances and listed chemicals highlights the urgency of 
and need for diversion control. The National Survey on Drug Use and 
Health (NSDUH) (formerly the National Household Survey on Drug Abuse) 
is an annual survey of the civilian, non-institutionalized, population 
of the United States aged 12 or older. The survey is conducted by the 
Department of Health and Human Services Office of Applied Studies, 
Substance Abuse and Mental Health Services Administration. Findings 
from the 2009 NSDUH \58\ estimate that 7.0 million persons used 
prescription-type psychotherapeutic drugs--pain relievers, anti-anxiety 
medications, stimulants, and sedatives--non-medically in the previous 
month. This represents 2.8 percent of the population aged 12 or older. 
These estimates were 13 percent higher than those from the 2008 Survey. 
From 2002 to 2009, there was an increase in the rate of current non-
medical use of prescription-type drugs (from 5.5 to 6.3 percent) among 
young adults aged 18 to 25, driven primarily by an increase in pain 
reliever misuse. In 2009, an estimated 3.1 million persons aged 12 or 
older used an illicit drug for the first time within the past twelve 
months. Of those, an estimated 28.7 percent initiated with 
psychotherapeutics, including 17.1 percent with pain relievers, 8.6 
percent with tranquilizers, 2.0 percent with stimulants, and 1.0 
percent with sedatives.
---------------------------------------------------------------------------

    \58\ SAMHSA, ``Results from the 2009 National Survey on Drug Use 
and Health: Volume I, Summary of National Findings,'' Office of 
Applied Studies, 2010 (NSDUH Series H-38A, HHS Publication No. SMA 
10-4856), http://www.oas.samhsa.gov/nsduh/2k9NSDUH/2k9Results.pdf.
---------------------------------------------------------------------------

    Abuse of prescription controlled substances among teenagers is 
second only to abuse of illegal marijuana. The 2010 ``Monitoring the 
Future'' survey of teenagers found that 8 percent of high school 
seniors reported non-medical use of Vicodin, and 5.1 percent reported 
non-medical use of OxyContin, both scheduled controlled substances 
(painkillers).\59\ This reported abuse is consistent with reports by 
high-school students of increased non-medical use of painkillers in the 
past five years.\60\ As reported by The Partnership at Drugfree.org 
(formerly the Partnership for a Drug-Free America) from its 2009 
survey, more than 50 percent of teenagers (grades 9-12) believe that 
prescription drugs are easier to obtain than illegal drugs. There is a 
concern that young people may perceive prescription and/or over-the-
counter drugs as ``safer'' than illegal drugs because of their 
intended, legitimate medical use.\61\
---------------------------------------------------------------------------

    \59\ Lloyd D. Johnson, PhD, et al, ``Monitoring the Future 
National Results on Adolescent Drug Use: Overview of Key Findings, 
2010,'' Institute for Social Research, The University of Michigan, 
2011.
    \60\ Lloyd D. Johnston, PhD, et al, ``Monitoring the Future 
National Results on Adolescent Drug Use: Overview of Key Findings, 
2009,'' National Institute of Drug Abuse, 2010 (NIH Publication No. 
10-7583).
    \61\ Partnership for a Drug-Free America and MetLife Foundation, 
``2009 Parents and Teens Attitude Tracking Report,'' March 2, 2010.
---------------------------------------------------------------------------

    The consequences of prescription drug abuse are seen in the data 
collected by the Substance Abuse and Mental Health Services 
Administration (SAMHSA) on emergency room visits. According to their 
latest data, ``Drug Abuse Warning Network (DAWN), 2009: National 
Estimates of Drug-Related Emergency Department Visits,'' SAMHSA 
estimates that of the 4.6 million emergency department visits in 2009 
associated with drug use, about 1.2 million visits involved the non-
medical use of pharmaceuticals.\62\ Emergency department visits 
involving non-medical use of pharmaceuticals (misuse or abuse) almost 
doubled between 2004 and 2009 from 627,291 in 2004 to 1,244,679 visits 
in 2009 (98.4 percent increase).\63\ About half of the 2009 emergency 
department visits related to abuse or misuse of pharmaceuticals 
involved painkillers and more than one-third involved drugs to treat 
insomnia and anxiety.\64\
---------------------------------------------------------------------------

    \62\ SAMHSA, Highlights of the 2009 Drug Abuse Warning Network 
(DAWN) Findings on Drug-Related Emergency Department Visits, Center 
for Behavioral Health Statistics and Quality, The DAWN Report, 
December 28, 2010.
    \63\ Id. at 4.
    \64\ Id. at 3.
---------------------------------------------------------------------------

    According to the Centers for Disease Control, overdose deaths 
caused by prescription drugs is the second leading cause of accidental 
death in the United States among young people.\65\ The Florida Medical 
Examiner's Commission reported that between 2005 and 2009 the number of 
deaths in Florida associated with oxycodone rose 248.5 percent.\66\
---------------------------------------------------------------------------

    \65\ U.S. Department of Health and Human Services, Centers for 
Disease Control and Prevention, National Center for Injury 
Prevention and Control, Web-based Injury Statistics Query and 
Reporting System (WISQARS), ``20 Leading Causes of Death, United 
States, 2007, All Races, Both Sexes.''
    \66\ Florida Dep't of Law Enforcement, Medical Examiners 
Commission, ``Drugs Identified in Deceased Persons by Florida 
Medical Examiners 2005 Report,'' at 15 (May 2006) and Florida Dep't 
of Law Enforcement, Medical Examiners Commission, ``Drugs Identified 
in Deceased Persons by Florida Medical Examiners 2009 Report,'' at 
17 (June 2010).
---------------------------------------------------------------------------

Operational Changes of the DCP Since 2006

    As discussed above, the OIG reviewed DEA's efforts to control the 
diversion of controlled pharmaceuticals and in 2006 recommended that 
DEA incorporate law enforcement support and law enforcement authority 
to assist the DCP in performing criminal investigations that inherently 
require law enforcement authority, e.g., the authority to arrest, 
execute search warrants, and conduct surveillance and undercover 
activities. As discussed above, DEA expanded the use of Tactical 
Diversion Squads comprised of many DEA specialized resources such as 
Special Agents, Diversion Investigators and state and local law 
enforcement and regulatory personnel to more effectively investigate, 
disrupt, and dismantle those individuals or organizations involved in 
diversion schemes. Since the last fee calculation, DEA added 161 
Special Agent positions to the DCP. The majority of these positions 
were allocated to the DCP Tactical Diversion Squads. By 2009, there 
were 37 operational Tactical Diversion Squads across the United States 
and DEA is committed to increasing this number within this fee cycle. 
These squads are designed to address controlled substance diversion in 
consonance with the traditional Diversion Investigator regulatory 
efforts.
    DEA made other organizational changes to incorporate in the DCP 
those units responsible for diversion control operations. To ensure the 
proper utilization of DCFA resources, DEA created a Diversion Value and 
Analysis Unit in the Diversion Planning and Resources Section to 
identify and prevent duplication of effort, conduct cost benefit 
analyses, and develop, oversee, and review acquisitions.
    In 2009, the DCP intensified its regulatory activities to help the 
registrant population better comply with the CSA and to identify those 
registrants who violated the CSA and implementing regulations. The 
modifications included increasing investigation cycles as well as depth 
of review. Scheduled investigations were increased from every five 
years to every three years for controlled substance manufacturers, bulk 
manufacturers, distributors, reverse distributors, importers, 
exporters, bulk importers, and Narcotic Treatment Programs; scheduled 
investigations for chemical manufacturers, bulk manufacturers, 
distributors, importers, exporters, and bulk importers were increased 
from two

[[Page 39325]]

per Diversion Investigator per year to all such registrants every three 
years. Investigations of Office Based Opioid Treatment/Buprenorphine 
Physicians, currently referred to as DATA-Waived Practitioners, were 
increased from one such registrant per Diversion Group per year to all 
such registrants per Diversion Group every five years. Researchers were 
increased from only being investigated on a complaint basis to two 
schedule I researchers plus two schedule II-V researchers per Diversion 
Group per year. Finally, analytical laboratories, previously not 
subject to scheduled investigations, were increased to include 
analytical laboratories affiliated with manufacturers being 
investigated every three years in tandem with the affiliated 
manufacturer's scheduled investigation.
    In an effort to enhance the DCP's enforcement capabilities, to 
reduce costs, to streamline the regulatory compliance process for 
registrants, and to keep the public informed, the DCP made several 
improvements to its information technology capabilities. 
Underperforming contracts were terminated and a new unit was created 
within the DCP to manage all information technology projects 
exclusively for the DCP. This resulted in significant cost reductions 
and improved program efficiency and responsiveness to both registrants 
and the public.
    The new unit successfully made cost-saving improvements to the 
technology infrastructure of the Controlled Substances Ordering System 
(CSOS) and streamlined the application process for registrants by 
implementing an online system for new applications and renewal 
applications for registrations. The DCP is also enhancing the 
communications system to allow interconnectivity between many different 
systems. The DCP is continually working to improve the quality and 
accessibility of its reporting systems, such as the Automated Reports 
and Consolidated Orders System (ARCOS) and Drug Theft/Loss (DTL). These 
two programs generate timely, accurate, and actionable data that 
improve the DCP's enforcement and control efforts as well as providing 
for a more efficient means by which registrants may submit such 
reports.
    DEA's Interim Final Rule on Electronic Prescriptions for Controlled 
Substances (EPCS), effective June 1, 2010, will enhance diversion 
control as a means to protect against fraudulent prescriptions and will 
streamline the recordkeeping process for pharmacies (75 FR 16236, March 
31, 2010). This rule provides practitioners with the option to 
electronically sign and transmit prescriptions for controlled 
substances. Likewise, with this new rule, pharmacies are permitted to 
receive and archive electronic prescriptions. The DCP is working to 
develop and implement EPCS.
    As part of the requirements of the Combat Methamphetamine Epidemic 
Act of 2005 (CMEA), regulated sellers of scheduled listed chemical 
products are required to self-certify annually. Regulated sellers can 
self-certify and find training manuals on the Diversion Control Program 
Web site.

Need for a New Fee Calculation

    DEA last adjusted the fee schedule in August 2006, however, 
collections did not begin until FY 2007.\67\ This fee schedule was 
intended to be sufficient to cover the ``full costs'' of the DCP for FY 
2006 through FY 2008 or October 1, 2005 through September 30, 2008. The 
DCP program has continued to operate under this fee schedule due to 
cost savings through reorganization and modernization efforts and by 
inadvertently excluding certain costs to the DCP. As indicated by the 
above-referenced 2008 OIG report, additional salary and other costs 
attributable to diversion control activities need to be incorporated 
into the DCP. In addition, the mission of the DCP has been expanded by 
Congress and by the need to address an explosion in the abuse of 
prescription drugs that seriously impact public health and safety. The 
National Drug Control Strategy is focused on all aspects of the 
problem--supply, demand, and treatment.
---------------------------------------------------------------------------

    \67\ 71 FR 50115, August 29, 2006.
---------------------------------------------------------------------------

    The Office of Diversion Control at DEA is focused on the supply 
side of this serious threat to the public health and safety. At the end 
of FY 2008, a reorganization within DEA expanded the use of Tactical 
Diversion Squads across the country to allow Diversion Investigators to 
focus their expertise on regulatory oversight and the deterrent effect 
of increased regulatory investigations. Tactical Diversion Squads 
incorporate the criminal investigative skills and statutory authority 
of Special Agents and state and local Task Force Officers to bring to 
the criminal justice system those organizations and individuals who 
violate the CSA by diverting controlled substances and listed chemicals 
into the illicit market. Diversion Investigators are a key asset to 
Tactical Diversion Squads because they lend their keen knowledge of the 
closed system of distribution to the Tactical Diversion Squads. 
Diversion Investigators' familiarity and detailed understanding of the 
closed system of distribution require, however, that they continue to 
lead the regulatory oversight of DEA registrants. DCP costs increase 
with an expanded number and use of Tactical Diversion Squads.
    Due to the alarming rise in prescription drug abuse, as well as an 
increase in the production and use of chemicals that are harmful if 
abused, the DCP has increased scheduled investigations of registrants 
and drug and chemical scheduling initiatives, as well as other 
modifications in its control efforts. The DCP continues to draw 
technical expertise from Diversion Investigators, and the DCP has 
incorporated greater numbers of Special Agents, Chemists, Information 
Technology Specialists, Attorneys, Intelligence Research Specialists, 
and State and Local personnel. It is essential to utilize a diverse 
skilled workforce and constantly review and modify all aspects of the 
DCP to successfully execute the National Drug Control Strategy and 
effectively prevent, detect, and eliminate the diversion of controlled 
substances and listed chemicals into the illicit market while ensuring 
a sufficient supply of these substances for legitimate medical, 
scientific, research, and industrial purposes.
    DEA has been and will continue to be fiscally responsible and will 
remain vigilant towards identifying methods to improve efficiencies or 
identifying other cost saving measures. As discussed above, however, a 
new fee calculation is needed. Without an adjustment in the annual 
registration fees, DEA will be unable to continue current operations 
and will be in violation of the statutory mandate that fees charged 
``shall be set at a level that ensures the recovery of the full costs 
of operating the various aspects of [the diversion control program].'' 
21 U.S.C. 886a(1)(C). For example, collections under the current fee 
schedule will require the DCP to significantly cut existing and planned 
DCP operations vital to its mission. DEA relies on the DCP to maintain 
the integrity of the closed system for controlled substances and listed 
chemicals, particularly at this time of dramatic increases in abuse and 
diversion.
    DEA must determine the proper scope of the DCP, the projected costs 
for the program, a fee calculation methodology, and a new fee schedule 
that recovers the costs of the DCP and sets reasonable fees for the 
registration and control of manufacturers, distributors, importers, 
exporters and dispensers of controlled substances and listed chemicals.

[[Page 39326]]

Fee Calculation

    DEA is delegated the task of determining the details of fulfilling 
the statutory requirements of ensuring the recovery of the full costs 
of operating the diversion control program (DCP) as described above, 
while charging registrants participating in the closed system of 
distribution reasonable fees relating to the registration and control 
``of the manufacture, distribution, dispensing'' and ``of importers and 
exporters'' of controlled substances and listed chemicals. For the DCP 
to have funds to function, DEA must determine, in advance of actual 
expenditures, a reasonable fee to be charged. As a result, historical 
data and projections must be used rather than actual, current costs to 
project the annual costs of the DCP. Additionally, a reasonable fee 
must be calculated that will fully recover the costs of the DCP based 
on the variability over time of the number of registrants in the 
different categories of registration, e.g., manufacturers, 
distributors, importers, exporters, reverse distributors, 
practitioners, and individual researchers. Since the fees collected 
must be available to fully fund the DCFA and to reimburse DEA for 
expenses incurred in the operation of the DCP (21 U.S.C. 886a), there 
must always be more collected than is actually spent to avoid running a 
deficit and being in violation of federal fiscal law.\68\ In operating 
the DCP, DEA must be prepared for changes in investigative priorities, 
diversion trends, and emerging drugs or chemicals posing new threats to 
the public health and safety. By definition, it is an inexact effort. 
Given that fact, the agency must select a single methodology that it 
consistently follows throughout any given fee cycle.
---------------------------------------------------------------------------

    \68\ In general, no officer or employee of the United States 
Government may make or authorize an expenditure or obligation in 
excess of an amount available in an appropriation or fund. 31 U.S.C. 
1341.
---------------------------------------------------------------------------

    Current options to calculate fees are also limited by the 
feasibility and practicability of tracking and allocating detailed 
costs, although the agency continues to improve its capabilities on 
this front. DEA has made progress through reorganization and there is 
recognition throughout the agency of the need to separate DCP costs 
from other agency costs. DEA is in the process of testing a system 
where personnel would account for their daily hours according to 
whether their time is spent on DCP or other DEA mission activities. 
Part of the difficulty stems from the fact that the mission of DEA 
involves investigations and actions that may involve poly-drug 
organizations or that may start out as one type of investigation and 
result in another, based upon the way the facts develop.
    To date, tracking costs within the DCP according to registrant 
categories or within a given registrant category has not been feasible 
or cost-efficient. Such detailed cost attribution may or may not be 
feasible in the future. However, Congress recognized that the costs of 
the registration and control of controlled substances and listed 
chemicals are not properly attributed on a per registrant basis when it 
differentiated among the categories of registrants for purposes of 
calculating a reasonable fee, e.g., manufacturers, distributors, 
importers, exporters, and dispensers.\69\ Thus, the methodology used to 
calculate fees needs to distinguish among these categories. The 
historical fee calculation based on a weighted ratio of 12.5 for 
manufacturers, 6.25 for distributors (including importers and 
exporters), and 1 for dispensers was used for many years prior to and 
when Congress established the DCFA and has been the method used to 
date.
---------------------------------------------------------------------------

    \69\ 21 U.S.C. 886a(2)(B).
---------------------------------------------------------------------------

    As discussed in more detail below, DEA considered several 
methodologies to calculate the new fee. One methodology considered was 
a flat fee that takes projected DCP costs and divides it among all 
registrants regardless of their business activity/registrant group. On 
its face, this would not result in a ``reasonable'' fee for a large 
portion of registrants given the disparity in economic size among 
registrants and the different levels of control needed among the 
registrant categories. Registrants range from multi-billion dollar 
manufacturers in possession of large quantities of controlled 
substances or listed chemicals to canine handlers in possession of 
small amounts of controlled substances. Thus, the inspection, 
investigation and oversight costs associated with a manufacturer are 
much greater than for a canine handler. A flat fee methodology has been 
rejected since the inception of a fee.
    DEA considered another fee calculation methodology called the Past-
Based Option. This method is based on the principle that the cost of 
the DCP should be shared equally among all paying registrants, except 
for the cost of scheduled or regularly planned investigations and the 
preregistration investigation costs to determine eligibility of 
registrant applicants, as these additional costs vary by registrant 
category. Rather, these historical costs should be allocated to the 
registrant group receiving the scheduled and preregistration 
investigations. Since the direct labor costs of scheduled and 
preregistration investigations are historically around three percent of 
total DCP costs, this methodology results in concerns similar to the 
flat fee as the base amount is nearly as great as the flat fee amount.
    DEA considered another methodology called the Future-Based Option, 
which takes the same approach described in the preceding paragraph, but 
the costs of scheduled investigations are derived from planned work, 
not historical work hours. This methodology results in large 
differences in fees among registrant groups and has been rejected by 
DEA as not a ``reasonable'' charge.
    Since the inception of the fee, the agency has selected a weighted-
ratio method to determine a reasonable fee for each category of 
registrants. Under this method, registrants are assigned to a business 
activity or category (e.g., researcher, practitioner, distributor, 
manufacturer, etc.) based on the statutory fee categories. Then a base 
fee rate is established according to the annual estimated costs of the 
DCP. A projected population is calculated for each category or business 
activity. That figure is then multiplied by a ratio of 1.0 for 
researchers, 3.0 for practitioners (for administrative convenience the 
fee is collected every three years for practitioners), 6.25 for 
distributors and 12.5 for manufacturers. By utilizing these different 
ratios, the agency recognizes the statutory need to charge reasonable 
fees relating to the registration and control of the manufacture, 
distribution, dispensing, importation and exportation of controlled 
substances and listed chemicals. As historical costs support, 
inspections, scheduled investigations and other control and monitoring 
costs are greatest for manufacturers. This is because there is an 
increased risk associated with the quantity of controlled substances 
and/or chemicals located at this point in the closed system. All of the 
individual business activity figures are then added together to form a 
weighted sum for one projected year. This process is performed for two 
more years using future projected registrant populations for those 
years multiplied by the ratio. The annual figures for these three years 
are then added together and divided into the total budget requirements 
for that three-year period to arrive at the base rate fee to be charged 
to each category of registrant.
    DEA continues to review possible methodologies as technology 
continues to afford increased tracking and

[[Page 39327]]

allocation of specific costs. However, at this time, DEA has determined 
that it is both practicable and reasonable to continue to apply the 
weighted-ratio methodology. Consistent with the statutory direction to 
charge reasonable fees relating to the registration and control of the 
manufacture of controlled substances and listed chemicals and the 
associated oversight costs, the 12.5 ratio is applied to the 
manufacturing registrant group. At 50 percent of that ratio is the 6.25 
ratio which applies to the ``distribution'' of controlled substances or 
the distributor registrant group. Likewise, ``dispensing'' has the 
largest number of registrants, but with relatively low oversight costs 
and a relatively small quantity of controlled substances or listed 
chemicals within their physical possession. The base fee or the 1 ratio 
is charged for those dispensing or individuals registered to do 
research or other such activities that use the substance and create 
limited vulnerability to the closed system, and thus require less 
control in protecting the closed system. The practitioner fee is the 
base fee on an annual basis but is collected every three years for 
administrative convenience.
    Thus, the current fees, some of which are paid annually and some of 
which are paid every three years, range from $184 for ratio 1 to $2,293 
for ratio 12.5 depending upon the particular registrant category. 
Specifically, practitioners, mid-level practitioners, dispensers, 
researchers, and narcotic treatment programs pay an annual registration 
fee of $184. For administrative convenience for both the collection and 
the payment, practitioners pay a combined registration fee of $551 
every three years. Distributors, importers and exporters pay an annual 
fee of $1,147 and manufacturers pay an annual fee of $2,293. 21 CFR 
1301.13 and 1309.11.

Projected Costs for the Diversion Control Program

    In calculating fees to recover the mandated full costs of operating 
the DCP, DEA estimates the costs of operating the DCP for the next 
three fiscal years.\70\ To develop the DCFA budget request estimates 
for FY 2012, FY 2013 and FY 2014, DEA compiles: (1) The DCFA Budget 
Request for Fiscal Year (FY) 2011, which forms a base spending level 
for the current level of service, (2) the estimated additional required 
funds for FY 2012, FY 2013 and FY 2014, and (3) the required annual $15 
million transfer to the United States Treasury as mandated by the CSA 
(21 U.S.C. 886a). The following paragraphs explain the annual revenue 
calculations and how the total amount to be collected for the FY 2012-
2014 period was calculated. In developing this figure, DEA begins with 
annual projected DCP obligations, including payroll, operational 
expenses and necessary equipment. The DCP budget has increased due to 
inflationary adjustments for rent and payroll and to increase staffing 
resources that support the regulatory and law enforcement activities of 
the program. The fees have not been adjusted to reflect these factors 
as they last covered the time period of FY 2006-2008. Specific details 
on the DCP budget are available in the annual President's Budget 
Submission and supplemental budget justification documents provided to 
Congress.\71\
---------------------------------------------------------------------------

    \70\ See ``Proposed New Registrant Fee Schedule Calculations'' 
in this rulemaking docket found at http://www.regulations.gov.
    \71\ See this rulemaking docket found at http://www.regulations.gov.
---------------------------------------------------------------------------

    Total obligations for the DCP have increased from FY 2007 to FY 
2010 by approximately 49 percent. For the FY 2006-2008 period, payroll 
expenses (staff compensation and benefits) composed the largest 
component of DCP costs at 55.7 to 57.6 percent per year. Between the 
period of FY 2006 and FY 2010, payroll constituted an average of 56.7 
percent of DCP expenses. Operating expenses and capital expenditures 
made up the remainder of DCP costs. Operating expenses (an average of 
39.3 percent for the FY 2006-2010 period) include daily operation costs 
such as purchase of evidence or payment for information as part of 
investigations, travel, and non-equipment purchases. Capital 
expenditures, including equipment and furniture purchases, capital 
leases, and land/structure improvements and purchases, averaged 4.0 
percent during this same period.
    For the FY 2012-2014 period covered by this rulemaking, the overall 
breakdown of DCP major cost categories does not depart significantly 
from previous years in terms of percent of budget; however, total 
budgets for each of these major cost categories do increase to reflect 
additional costs in each of these categories.
    In addition to the budget for each of the fiscal years, the cost 
components outlined below are also considered in determining required 
registration fee collections.
Recoveries From Money Not Spent as Planned (Deobligation of Prior Year 
Obligations)
    At times, DEA enters into an obligation to make a purchase of a 
product or service that is not delivered immediately, such as in a 
multi-year contract. Changes in obligations can occur for a variety of 
reasons, i.e., changes in planned operations, delays in staffing, 
implementation of cost savings, changes in vendor capabilities, etc. 
When DEA does not expend its obligation, the ``deobligated'' funds are 
``recovered'' and the funds become available for DCP use. Based on 
historical trends and for purposes of calculating the fee levels, the 
recovery from deobligation of prior year obligations is estimated at 
$10 million per year.
Payment to Treasury
    In the 1993 appropriations for DEA, Congress determined that the 
DCP would be fully funded by registration fees and no longer by 
appropriations.\72\ Congress established the DCFA as a separate account 
of the Treasury to ``ensure the recovery of the full costs of operating 
the various aspects of [the Diversion Control Program]'' by those 
participating in the closed system established by the CSA. 21 U.S.C. 
886a(1)(C). Fees collected are deposited into a separate Treasury 
account. Each fiscal year, the first $15 million is transferred to the 
Treasury and is not available for use by the DCP. Therefore, DEA needs 
to collect an additional $15 million per year beyond estimated costs 
for payment to the Treasury.
---------------------------------------------------------------------------

    \72\ Departments of Commerce, Justice, and State, the Judiciary 
and Related Agencies Appropriations Act of 1993, Public Law 102-395, 
codified in relevant part at 21 U.S.C. 886a.
---------------------------------------------------------------------------

Operational Continuity Fund (OCF)
    DEA maintains an operational continuity fund (OCF) based on the 
need to maintain DCP operations during historically low (or negative) 
collection periods (e.g., the first quarter of a new fiscal year when 
the first $15 million collected is transferred to Treasury). Monthly 
collections and obligations fluctuate throughout the year. There are 
times when obligations (spending) exceed collections. This can happen 
consecutively for several months. Therefore, an operational continuity 
fund is maintained in order to avoid operational disruptions due to 
these fluctuations and monthly differences in collections and 
obligations (spending). Using statistical analysis of the historical 
fluctuations between amounts collected and amounts obligated, DEA has 
determined that seven percent of the projected obligations is normally 
adequate to avoid operational disruptions. The amount required to bring 
the operational continuity fund

[[Page 39328]]

balance to the $15 million plus seven percent level is added to 
projected costs.
    The increase in OCF balance for FY 2012, FY 2013, and FY 2014 are 
$6,452,395, $1,067,428, and $800,291 respectively.

                      Table 1--Increase in Operational Continuity Fund Balance FY 2012-2014
----------------------------------------------------------------------------------------------------------------
                                                                      FY 2012         FY 2013         FY 2014
----------------------------------------------------------------------------------------------------------------
Budget..........................................................    $321,990,000    $356,582,322    $371,831,295
Target OCF ($15M + 7%)..........................................      39,960,763      41,028,191      41,828,482
Beginning OCF balance...........................................      33,508,367      39,960,763      41,028,191
                                                                 -----------------------------------------------
Increase in OCF balance.........................................       6,452,395       1,067,428         800,291
----------------------------------------------------------------------------------------------------------------

Combat Methamphetamine Act of 2005 (CMEA) Collections
    Under CMEA, DEA collects a self-certification fee for regulated 
sellers of scheduled listed chemical products, which is included as 
part of the total collections. The fee is waived for any person holding 
a current DEA registration in good standing such as a pharmacy to 
dispense controlled substances. DEA has observed an approximately 15 
percent decline in self-certifications from FY 2008 to FY 2010 and 
anticipates that the decline will continue through FY 2014. The self-
certification fee is $21. CMEA self-certification fee collection 
estimates for FY 2012, FY 2013, and FY 2014 for purposes of calculating 
the fee levels are $173,040, $146,853, and $124,635, respectively.

                                     Table 2--CMEA Collections FY 2012-2014
----------------------------------------------------------------------------------------------------------------
                                                                      FY 2012         FY 2013         FY 2014
----------------------------------------------------------------------------------------------------------------
Number of paying self-certifications............................           8,240           6,993           5,935
Fee.............................................................             $21             $21             $21
                                                                 -----------------------------------------------
CMEA collection estimate........................................        $173,040        $146,853        $124,635
----------------------------------------------------------------------------------------------------------------

Other Collections
    DEA also derives revenue from the sale/salvage of official 
government vehicles dedicated to DCP use. DEA's estimate for other 
collections is $307,153 per year. This is the actual amount for FY 
2010.
Estimated Total Required Collections
    Based on these figures, DEA calculated the total amount required to 
be collected for the FY 2012-2014 period for purposes of calculating 
the fee levels as follows:
    Required registration fee collections for FY 2012 are $332,962,203. 
This figure includes the budget of $321,990,000, net of $10 million in 
recoveries, plus $15 million for transfer to Treasury, plus $6,452,395 
for increase in OCF balance, net of $173,040 in CMEA self-certification 
collections, and net of $307,153 in other collections.
    Required registration fee collections for FY 2013 are $362,195,745. 
This figure includes the budget of $356,582,322, net of $10 million in 
recoveries, plus $15 million for transfer to Treasury, plus $1,067,428 
for increase in OCF balance, net of $146,853 in CMEA self-certification 
collections, and net of $307,153 in other collections.
    Required registration fee collections for FY 2014 are $377,199,798. 
This figure includes the budget of $371,831,295, net of $10 million in 
recoveries, plus $15 million for transfer to Treasury, plus $800,291 
for increase in OCF balance, net of $124,635 in CMEA self-certification 
collections, and net of $307,153 in other collections.

                                  Table 3--Needed Fee Collections FY 2012-2014
----------------------------------------------------------------------------------------------------------------
                                                   FY 2012         FY 2013         FY 2014         3-yr total
----------------------------------------------------------------------------------------------------------------
Budget.......................................    $321,990,000    $356,582,322    $371,831,295     $1,050,403,617
Recoveries...................................    (10,000,000)    (10,000,000)    (10,000,000)       (30,000,000)
                                              ------------------------------------------------------------------
Net Budget...................................     311,990,000     346,582,322     361,831,295      1,020,403,617
Payment to Treasury..........................      15,000,000      15,000,000      15,000,000         45,000,000
Increase in OCF balance......................       6,452,395       1,067,428         800,291          8,320,115
CMEA Self-cert collections...................       (173,040)       (146,853)       (124,635)          (444,528)
Other collections............................       (307,153)       (307,153)       (307,153)          (921,458)
                                              ------------------------------------------------------------------
Required collections from Registration Fees..     332,962,203     362,195,745     377,199,798      1,072,357,746
----------------------------------------------------------------------------------------------------------------
Numbers are rounded.

    In total, DEA needs to collect $1,072,357,746 in registration fees 
over the three year period, FY 2012-FY 2014 to fully fund the DCP.
    As in the past, DEA proposes to set the fee for each registrant 
category for a three-year period (FY 2012-2014). The vast majority of 
registrants are practitioners who pay a three-year registration fee. 
These registrants are divided into three separate groups who pay their 
three-year registration fees on alternate year cycles. Because 
registration cycles may differ from year to year, the total amount 
collected through fees in a given year may not exactly match the 
projected amount.

[[Page 39329]]

DEA Efforts To Control DCP Costs

    DEA continually reviews the DCP and its methods of operation to 
ensure that it is fiscally responsible. The DCP works diligently to 
provide the registrants with cost effective and state-of-the-art means 
for conducting their businesses related to manufacturing, distributing, 
dispensing, importing, and exporting controlled substances and listed 
chemicals. Some examples of this include online registration, the 
Controlled Substance Ordering System (CSOS) for electronic controlled 
substance ordering between registrants, and electronic reporting of 
thefts and significant losses of controlled substances.
    DEA takes seriously its responsibilities to manage the DCP in an 
efficient and effective manner, particularly in light of the current 
economy. The Office of Diversion Control acknowledges the important 
role that the Validation Unit provides in the appropriate expenditure 
of the DCFA. DEA cannot foresee Congressionally-mandated changes to the 
DCP or diversion trends, but it is committed to managing in a fiscally 
responsible manner. The Office of Diversion Control is committed to 
reviewing the registration process to ensure efficiency and 
accountability as well as reviewing current regulations related to fee 
exempt registrants. In addition, to ensure careful decision-making at 
all levels of the DCP, the Office of Diversion Control is considering 
several measures to ensure accountability for the effective utilization 
of resources.

Proposed Methodology for New Fee Calculation

    In developing this proposed rule, DEA examined alternative 
methodologies to calculate the registration and registration fees. DEA 
analyzed alternative methodology approaches keeping in mind its 
statutory obligations under the CSA. First, pursuant to statute, DEA is 
authorized to charge reasonable fees relating to the registration and 
control of the manufacture, distribution, dispensing, importation, and 
exportation of controlled substances and listed chemicals. 21 U.S.C. 
821 and 958(f). Second, DEA must set fees at a level that ensures the 
recovery of the full costs of operating the various aspects of its 
diversion control program (DCP). 21 U.S.C. 886a. Accordingly, in 
examining each alternative methodology DEA considered whether the fee 
calculation (1) was reasonable and (2) could fully fund the costs of 
operating the various aspects of the DCP.
    Moreover, the CSA establishes a specific regulatory requirement 
that DEA charge fees to fully fund the DCP, but that the fees collected 
by DEA are to be expended through the budget process only. 
Specifically, each year DEA is required by statute to transfer the 
first $15 million of fee revenues into the general fund of the Treasury 
and the remainder of the fee revenues is deposited into a separate fund 
of the Treasury called the Diversion Control Fee Account (DCFA). 21 
U.S.C. 886a(1). On at least a quarterly basis, the Secretary of the 
Treasury is required to refund DEA an amount from the DCFA ``in 
accordance with estimates made in the budget request of the Attorney 
General for those fiscal years'' for the operation of the DCP. 21 
U.S.C. 886a(1)(B) and (D). For that reason, DEA is only considering 
alternative methodologies to calculate the registration and 
reregistration fees, not alternative approaches to expend fees 
collected because those decisions are governed by the CSA and the 
budget process.
    In developing this rule, DEA considered four methodologies to 
calculate registration and reregistration fees: Past-Based Option, 
Future-Based Option, Flat Fee Option, and Weighted-Ratio Option. 
Although the increase in the fees may be passed down to the 
registrants' customers, the alternatives are analyzed on the worst-case 
scenario where the increase in the fee is absorbed fully by the 
registrants.
    For each of the alternatives considered, the calculated fees are 
analyzed for reasonableness by examining: (1) The absolute amount of 
the fee increase, (2) the change in fee as a percentage of revenue from 
2007 to 2012, and (3) the relative fee increase across registrant 
groups. Additionally, each calculation methodology is re-evaluated for 
its overall strengths and weaknesses.

Past-Based Option

    Option 1 is called the Past-Based Option, and is based on historic 
investigation work hour data to set the apportionment of cost to each 
registrant category. In considering Option 1, DEA used historic 
investigation work hour data from the Fiscal Year 2007-2009. DEA's 
records permit an accurate apportionment of work hours for certain 
types of diversion control activities (e.g., investigations) among 
classes of registrants. DEA estimates that approximately three to five 
percent of costs can be directly linked to pre-registration and 
scheduled investigations. Although some criminal investigations can be 
attributed to registrant groups, DEA did not include the cost of 
criminal investigations for the fee calculation under the Past-Based 
Option. While DEA develops annual work plans for the number of 
scheduled investigations by registrant type, DEA does not develop such 
plans for criminal investigations. Therefore, the cost of criminal 
investigations is allocated equally across all registrant groups, 
regardless of business activity. The remaining costs associated with 
DCP activities and components benefit all registrants (e.g., policy, 
registration, and legal activities); however, DEA records cannot 
attribute these costs by registrant class. Under Option 1, pre-
registration and scheduled investigation costs are assigned to 
registrant classes and all other costs are recovered on an equal, per-
registrant basis.
    DEA calculated the annual registrant fee for key registrant groups 
under Option 1 and compared this fee to the current fee. Although 
distributors and importers/exporters are in the same fee class in the 
current fee structure (Weighted-Ratio Option), in this analysis, 
distributors are separated from importers and exporters based on the 
available historic work hour data and reported work hours by type of 
registrant.
    In the past-based option, the calculated fees increase by a factor 
of 1.16, 3.19, 1.10, and 1.32 for manufacturers, distributors, 
importers/exporters, and practitioners, respectively.
    The proposed fees as a percentage of revenue is very low as 
indicated in Table 4 below, 0.000 to 0.019 percent, 0.005 to 0.134 
percent, 0.000 to 0.005 percent, and 0.125 to 0.257 percent for 
manufacturers, distributors, pharmacies, and practitioners, 
respectively. The impact of the incremental increase in the fee from 
current fees as a percentage of revenue is even lower.
    Finally, the largest increase, by a factor of 3.19, is incurred by 
distributors, largely as a consequence of their separation from 
exporters and importers, while the increases for other groups range 
from a factor of 1.10 to 1.32.

[[Page 39330]]



                                                 Table 4--Annual Registrant Fees Under Past-Based Option
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Ratio: past-
                                        Current fee   Past-based    Increase    based fee     Percent of  annual revenue     Percent of  annual revenue
                                          (annual)       fee          from      to current          current fee **               past based fee ***
                                                       (annual)   current fee      fee
--------------------------------------------------------------------------------------------------------------------------------------------------------
Manufacturers.........................       $2,293       $2,668         $375         1.16  0.000%-0.017%                  0.000%-0.019%
Distributors..........................        1,147        3,361        2,214         2.93  0.002%-0.042%                  0.005%-0.123%
Importers/exporter....................        1,147        1,258          111         1.10  *                              *
Pharmacies............................          184          243           59         1.32  0.000%-0.004%                  0.000%-0.005%
Practitioners.........................          184          243           59         1.32  0.119%-0.237%                  0.125%-0.257%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: 2007 Economic Census; Bureau of Labor Statistics.
* No NAICS code for Importer/Exporter of controlled substances and/or List I chemicals.
** Current Fee divided by average revenue/income in 2007, first full year of the current fee.
*** Past-Based Fee divided by average revenue in 2007 for manufacturers, distributors and pharmacies. Past-Based Fee divided by projected average income
  in 2012 for practitioners. Only 2002 and 2007 data are available for manufacturers, distributors, and pharmacies, while practitioner income projection
  is based on five years of income data, 2004-2009.

    While Option 1 is based on accurate historical data, it does not 
allow for future needs, demands and shifting responsibilities of the 
DCP, such as Agency priorities, new legislation, control of substances, 
new investigative requirements, and other program needs.
Conclusion
    DEA does not propose the past-based option for two key reasons. 
First, the fee increase is disproportionately burdensome to a small 
number of registrants. Distributors' fees would increase by over three 
fold, while the fees for the remaining registrant groups would increase 
from 10 percent to 32 percent. DEA deemed this option unreasonable. 
Second, the past-based option is backward looking and implicitly 
assumes that the future will be similar to the past. DEA cannot assume 
that future workload will reflect past DEA work hour data. For example, 
DEA plans to conduct more scheduled investigations in accordance with 
the new scheduled investigation work plan. As a result, DEA has 
concluded that past data is not the best basis for the calculation of 
proposed fees.

Future-Based Option

    Option 2 is called the Future-Based Option, and is based on 
projected work hours for each registrant class using scheduled 
investigation work plan goals and anticipated/planned resources. In 
considering Option 2, DEA based its calculations on projected work hour 
data by registrant group for FY 2012-2014. The future-based option is 
based on DEA's projection of work plan goals and the resources required 
for these years--specifically, examining the direct cost of anticipated 
scheduled investigations.\73\ Based on the data used to develop the 
projections, the future-based option divides registrants into six 
classes and examines the projected work hour data within these 
categories. In contrast to Option 1 above, which is calculated using 
actual data, Option 2 is calculated using projected data relative to 
work plan goals and resources. This type of calculation results in a 
more finely tuned analysis of anticipated work hours. DEA calculated 
the projected annual fees under Option 2 and compared these fees to the 
current fees. Table 5 presents these results:
---------------------------------------------------------------------------

    \73\ Many criminal investigations are attributable to the type 
of registrant(s) being investigated. However, because DEA cannot 
anticipate the volume of criminal cases initiated, either 
historically or in future years, these costs were not attributed 
directly to the registrant types affected. Rather, criminal 
investigative costs are spread across all registrants equally in 
both Option 1 and Option 2.

                                                Table 5--Annual Registrant Fees Under Future-Based Option
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                  Ratio:
                                                       Future-     Amount of     future-
                                        Current fee   based fee     increase    based fee     Percent of Annual revenue      Percent of Annual revenue
                                          (annual)     (annual)       from      to current          current fee **              future-based fee ***
                                                                  current fee      fee
--------------------------------------------------------------------------------------------------------------------------------------------------------
Manufacturers 1: controlled substance        $2.293      $17,595      $15,302        $7.67  0.000%-0.017%                  0.001%-0.128%
 manufacturers.
Manufacturers 2: List I chemical              2,293        8,124        5,831         3.54  0.000%-0.017%                  0.001%-0.059%
 manufacturers.
Distributors 1: controlled substance          1,147        6,546        5,399         5.71  0.002-0.042%                   0.009%-0.239%
 distributors and List I chemical
 distributors.
Distributors 2: exporters and                 1,147        4,968        3,821         4.33  *                              *
 importers of controlled substances.
Distributors 3: List I chemical               1,147        4,021        2,874         3.51  *                              *
 exporters and importers.
Pharmacies............................          184          232           48         1.26  0.000%-0.004%                  0.000%-0.005%
Practitioners.........................          184          232           48         1.26  0.119%-0.237%                  0.119%-0.245%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: 2007 Economic Census; Bureau of Labor Statistics.
* No NAICS code for Importer/Exporter of controlled substances and/or List I chemicals.
** Current Fee divided by average revenue/income in 2007, first full year of the current fee.
*** Future-Based Fee divided by average revenue in 2007 for manufacturers, distributors and pharmacies. Future-Based Fee divided by projected average
  income in 2012 for practitioners. Only 2002 and 2007 data is available for manufacturers, distributors, and pharmacies, while practitioner income
  projection is based on five years of income data, 2004-2009.

    In the future-based option, as shown in the table above, the fee 
increase ranges from a factor of 1.26 for practitioners to 7.67 for 
manufacturers of controlled substances.

[[Page 39331]]

    The proposed fees as a percentage of revenue is very low as 
indicated in Table 5: 0.001 to 0.128 percent for controlled substances 
manufacturers, 0.001 to 0.059 percent for manufacturers of List I 
chemical manufacturers, 0.009 to 0.239 percent for distributors, 0.000 
to 0.005 percent for pharmacies, and 0.119 to 0.245 percent for 
practitioners. The impact of the incremental increase in the fee from 
current fees as a percentage of revenue is even lower. As expected, 
registrant groups with a larger fee increase under this option would 
experience a larger increase as a percentage of revenue.
    Under this option, the increases in fees vary greatly across 
registrant groups. For example, controlled substances manufacturers 
incur the largest proportional increase by a factor of 7.67 or $15,302 
annually, while practitioner fees increase by a factor of 1.26 or $48 
annually.
    Option 2 is calculated using projected data relative to work plan 
goals and resources. This results in a more finely tuned analysis of 
anticipated work hours. The disadvantage of Option 2 is that, because 
the calculation is based on projected work hour data, it may not be 
able to adapt to the shifting priorities and demands of DCP operations. 
Additionally, a change in work plan can cause actual cost to be much 
different for some registrant groups, causing a contradiction between 
the rationales used to calculate the fees and actual operations.
Conclusion
    In reviewing Option 2, DEA concluded that for most registrant 
categories, the large proportional increase in fees would not pass the 
``reasonable fee'' standard required by statute and could represent a 
significant burden on some registrants. Additionally, DEA believes that 
the vast disparity in the increase, where fees for manufacturers 
increase by more than seven fold, while fees for registrants increase 
by 26 percent, is unreasonable. Although there is concern regarding a 
potential difference between the scheduled investigation work plan and 
actual operations, DEA recognizes that no plan is perfect and 
operations may be adjusted as the environment changes. This potential 
exists for all four options. Therefore, the potential change in work 
plan did not weigh into the DEA's decision to not select Option 2. 
DEA's decision to not select Option 2 is based on the unreasonable 
increase in fees for some registrants and the severe disparity in 
increase among the registrant groups.

Flat Fee Option

    Option 3 is called the Flat Fee Option. The flat fee option would 
provide equal fees across all registrant groups regardless of the 
proportion of DCP costs and resources the registrant group may require 
(e.g., investigation resources). The fee calculation is 
straightforward: the total amount needed to be collected over the three 
year period is divided by the total number of registration fee 
transactions over the three year period, adjusting for registrants on 
the three year registration cycle (so that the fees for a three year 
period are three times the annual fee).
    DEA calculated the annual registrant fee for key registrant groups 
under Option 3 and compared this fee to the current fee:

                                                  Table 6--Annual Registrant Fees Under Flat-Fee Option
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Amount of
                                        Current fee    Flat fee     increase   Ratio: flat    Percent of annual revenue       Percent of annual revenue
                                          (annual)     (annual)       from        fee to             current fee*                    flat fee**
                                                                  current fee  current fee
--------------------------------------------------------------------------------------------------------------------------------------------------------
Manufacturers.........................       $2,293         $247     $(2,046)         0.11  0.000%-0.017%                  0.000%-0.002%
Distributors..........................        1,147          247        (900)         0.22  0.002%-0.042%                  0.000%-0.009%
Practitioners.........................          184          247           63         1.34  0.119%-0.237%                  0.127%-0.261%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: 2007 Economic Census; Bureau of Labor Statistics.
* Current Fee divided by average revenue/income in 2007, first full year of the current fee.
** Flat Fee divided by average revenue in 2007 for manufacturers, distributors and pharmacies. Flat Fee divided by projected average income in 2012 for
  practitioners. Only 2002 and 2007 data is available for manufacturers, distributors, and pharmacies, while practitioner income projection is based on
  five years of income data, 2004-2009.

    In the flat-fee option, the registration fees for manufacturers and 
distributors are reduced significantly, from $2,293 for manufacturers 
and $1,147 for distributors to $247 for both. This reduction represents 
an 89 percent and 78 percent reduction for manufacturers and 
distributors respectively. The registration fee for practitioners 
increases by 34 percent to $247 on an annual basis.
    The proposed fees as a percentage of revenue is very low as 
indicated in Table 6 above: 0.000 to 0.002 percent for manufacturers, 
0.000 to 0.009 percent for distributors, and 0.127 to 0.261 percent for 
practitioners. The impact of the incremental increase in the fee from 
current fees as a percentage of revenue is even lower. Registrant 
groups with a decrease in fee under this option would experience a 
decrease as a percentage of revenue.
    As with the other options, the calculation considered in Option 3 
results in a dramatic fee disparity among registrant groups. The fees 
for manufacturers and distributors decrease, while the fees for 
practitioners increase.
    The flat fee option has positive and negative aspects. The fee that 
DEA is required to charge registrants is based on a statutory 
requirement--it is not a user fee. A user fee calculation would require 
a calculation of the direct and indirect costs associated with each of 
the registrant groups and set fees to recover the costs associated with 
each of these groups. Since the registration fee is not a user fee, DEA 
is not required to calculate fees according to its costs by registrant 
groups. General historical costs of scheduled investigations support 
different fees among the categories. However, setting the same fees for 
all registrants, from multi-national corporations to mid-level 
practitioners is unreasonable.
Conclusion
    After consideration of the flat fee option, DEA did not select this 
option to calculate the proposed new fees. The fee disparity among 
registrant groups caused by this calculation alternative is too great. 
Under this option, the calculation would result in reduced fees for 
manufacturers and distributors by 89 percent and 78 percent 
respectively, while practitioner fees would increase by 34 percent. 
Setting the fees at the same level across all registrant groups is not 
``reasonable.'' DEA registrants include some of the largest 
corporations

[[Page 39332]]

in the world although the vast majority of registrants are 
practitioners, such as physicians and nurses. To satisfy the 
``reasonable'' standard, registration fees should be different among 
the categories to account for cost and economic differences among the 
registrant categories. Option 3 did not satisfy this requirement.

Weighted-Ratio Option (Selected Methodology)

    Option 4 is called the Weighted-Ratio Option. In this option, fees 
are assigned to different registrant categories based on DEA's general 
historical cost data. This option distinguishes among the categories to 
establish a ``reasonable'' fee for each category. The different fees 
are expressed in ratios: 1 for researchers, canine handlers, analytical 
labs, and narcotics treatment programs; 3 for registrants on three year 
registration cycles, pharmacies, hospitals/clinics, practitioners, 
teaching institutions, and mid-level practitioners; 6.25 for 
distributors and importers/exporters; and 12.5 for manufacturers. The 
adopted ratios are applied for administrative convenience since 
historically costs vary and a fee must be set in advance. To determine 
the fee, a weighted ratio is assigned based on registrant group, and 
the amount needed to be collected over the FY 2012-FY 2014 period is 
divided by the weighted number of estimated registrations to determine 
the fees.

                           Table 7--Annual Registrant Fees Under Weighted-Ratio Option
                                 [Registrants on three year registration cycle]
----------------------------------------------------------------------------------------------------------------
                                                                   Current three  Proposed three  Difference per
                    Registrant class/business                        year fee*       year fee*         year
----------------------------------------------------------------------------------------------------------------
Pharmacy........................................................            $551            $732             $60
Hospital/Clinic.................................................             551             732              60
Practitioner....................................................             551             732              60
Teaching Institution............................................             551             732              60
Mid-Level Practitioner..........................................             551             732              60
----------------------------------------------------------------------------------------------------------------
* Pharmacies, hospitals/clinics, practitioners, teaching institutions, and mid-level practitioners currently pay
  a fee for a three-year period. This current three-year fee is $551. The proposed new fee for the three year
  registration period would be $732. The three year difference is $181 or an annual difference of $60.


 
                                   [Registrants on annual registration cycle]
----------------------------------------------------------------------------------------------------------------
                                                                  Current annual     Proposed
                    Registrant class/business                           fee         annual fee      Difference
----------------------------------------------------------------------------------------------------------------
Researcher/Canine Handler.......................................            $184            $244             $60
Analytical Lab..................................................             184             244              60
Maintenance.....................................................             184             244              60
Detoxification..................................................             184             244              60
Maintenance and Detoxification..................................             184             244              60
Compounder/Maintenance..........................................             184             244              60
Compounder/Detoxification.......................................             184             244              60
Compounder/Maintenance/Detoxification...........................             184             244              60
Distributor (chemical and controlled substances)................           1,147           1,526             379
Reverse distributor.............................................           1,147           1,526             379
Importer (chemical and controlled substances)...................           1,147           1,526             379
Exporter (chemical and controlled substances)...................           1,147           1,526             379
Manufacturer (chemical and controlled substances)...............           2,293           3,052             759
----------------------------------------------------------------------------------------------------------------

    In the weighted-ratio option, the registration fees for all 
registrant groups increase by 33 percent from current fees, although 
the absolute dollar amount may differ. The proposed new registration 
fees range from $244 annually (or annual equivalent) to $3,052. 
Registration fees are collected by location and by registered business 
activity. Most small registrants are expected to pay a single 
registration fee of $244 ($60 annual increase), $1,526 ($379 annual 
increase) or $3,052 ($759 annual increase). Registration fees for all 
registrant groups increase by 33 percent and as a result, there is no 
disparity in the fee increase among registrant groups.
    The weighted-ratio methodology, much like the flat fee, is 
straightforward and easy to understand, but unlike the flat fee, this 
method applies historic weighted ratios to differentiate fees among 
registrant groups. Additionally, the fees calculated using this 
methodology are similar to fees calculated in the past-based option, 
which allocates historical pre-registration and scheduled 
investigations costs to registrant groups. Finally, this method does 
not create a disproportionate fee increase in any registrant group.
Conclusion
    DEA selected Option 4 to calculate the proposed new fee structure. 
This approach has been used since Congress established registrant fees 
and continues to be a reasonable reflection of differing costs. The 
registration fees under the weighted-ratio option result in 
differentiated fees among registrant groups, where registrants with 
larger revenues and costs pay higher fees than registrants with lower 
revenues and costs. Furthermore, the weighted-ratio does not create a 
disparity in the relative increase in fees from the current to the 
proposed fees. The weighted ratios used by DEA to calculate the 
proposed fee have proven effective and reasonable over time. 
Additionally, the selected calculation methodology accurately reflects 
the differences in activity level, notably in inspections, scheduled 
investigations and other control and monitoring, by registrant 
category; for example, these costs are greatest for manufacturers. DEA 
selected this option because it is the only option that resulted in 
``reasonable'' fees for all registrant groups.

[[Page 39333]]

Proposed New Fees

    Based on thorough analysis of the identified fee calculation 
options--including the anticipated economic impact on registrants--DEA 
has determined that the current weighted-ratio option represents the 
most reasonable approach to calculate registrant fees sufficient to 
fully fund the DCP.
    The proposed fee schedule would replace the current fee schedule 
for controlled substance and chemical registrants in order to recover 
the full costs of the DCP so that it may continue to meet the 
programmatic responsibilities set forth by statute, Congress, and the 
President. As discussed, without an adjustment to fees, the DCP will be 
unable to continue current operations, necessitating dramatic program 
reductions, and possibly weakening the closed system of distribution. 
Accordingly, DEA proposes the following new fees for the FY 2012-2014 
period.

                    Table 8--Proposed Registration and Reregistration Fees by Class/Business
                                 [Registrants on three year registration cycle]
----------------------------------------------------------------------------------------------------------------
                                                                   Current three  Proposed three  Difference per
                    Registrant class/business                        year fee*       year fee*         year
----------------------------------------------------------------------------------------------------------------
Pharmacy........................................................            $551            $732             $60
Hospital/Clinic.................................................             551             732              60
Practitioner....................................................             551             732              60
Teaching Institution............................................             551             732              60
Mid-Level Practitioner..........................................             551             732              60
----------------------------------------------------------------------------------------------------------------
* Pharmacies, hospitals/clinics, practitioners, teaching institutions, and mid-level practitioners currently pay
  a fee for a three-year period. This current three-year fee is $551. The proposed new fee for the three year
  registration period would be $732. The three year difference is $181 or an annual difference of $60.


 
                                   [Registrants on annual registration cycle]
----------------------------------------------------------------------------------------------------------------
                                                                  Current annual     Proposed         Annual
                    Registrant class/business                           fee         annual fee      difference
----------------------------------------------------------------------------------------------------------------
Researcher/Canine Handler.......................................            $184            $244             $60
Analytical Lab..................................................             184             244              60
Maintenance.....................................................             184             244              60
Detoxification..................................................             184             244              60
Maintenance and Detoxification..................................             184             244              60
Compounder/Maintenance..........................................             184             244              60
Compounder/Detoxification.......................................             184             244              60
Compounder/Maintenance/Detoxification...........................             184             244              60
Distributor (chemical and controlled substances)................           1,147           1,526             379
Reverse distributor.............................................           1,147           1,526             379
Importer (chemical and controlled substances)...................           1,147           1,526             379
Exporter (chemical and controlled substances)...................           1,147           1,526             379
Manufacturer (chemical and controlled substances)...............           2,293           3,052             759
----------------------------------------------------------------------------------------------------------------


                       Table 9--Overview of Proposed Diversion Control Fee Account (DCFA)
----------------------------------------------------------------------------------------------------------------
                                                      FY2011          FY2012          FY2013          FY2014
----------------------------------------------------------------------------------------------------------------
Congressional Budget............................     290,304,000     321,990,000     356,582,322     371,831,295
Operational Continuity Fund (OCF) Brought             68,089,927      33,508,367      63,225,476      50,588,959
 Forward From Prior Year........................
Collections: Registration Fees*.................     257,254,274     356,226,916     348,491,800     366,937,230
Collections:
    CMEA........................................         203,889         173,040         146,853         124,635
    Treasury....................................    (15,000,000)    (15,000,000)    (15,000,000)    (15,000,000)
                                                 ---------------------------------------------------------------
    Net Collections.............................     242,458,163     341,399,956     333,638,653     352,061,865
Recoveries from Deobligations...................      12,957,124      10,000,000      10,000,000      10,000,000
Other Collections...............................         307,153         307,153         307,153         307,153
                                                 ---------------------------------------------------------------
Subtotal Availability...........................     323,812,367     385,215,476     407,171,281     412,957,977
Obligations **..................................     290,304,000     321,990,000     356,582,322     371,831,295
                                                 ---------------------------------------------------------------
End of Year OCF Balance.........................      33,508,367      63,225,476      50,588,959      41,126,682
                                                 ===============================================================
Target OCF ($15M + 7% of Budget)................      37,539,300      39,960,763      41,028,191      41,828,482
----------------------------------------------------------------------------------------------------------------
Numbers are rounded.
* Note: Total FY 2012-2014 collections from registration fees is $1,071,655,946. This amount is different from
  the total required collections of $1,072,357,746 described in Table 3: Needed Fee Collections FY 2012-2014.
  Initially, the required collection of $1,072,357,746 resulted in a calculated base (ratio: 1) annual fee of
  $244.16. The weighted ratios were applied and rounded to the whole dollar to determine the proposed fees. Due
  to rounding of the fees to the whole dollar, the proposed fees generate $1,071,655,946 rather than
  $1,072,357,746.
** For purposes of the proposed fee calculation, the Congressional Budget and Obligations are treated as the
  same.


[[Page 39334]]

Summary of Impact of Proposed New Fee Relative to Current Fee

Affected Entities
    As of December 2010 there were a total of 1,378,609 controlled 
substances and chemical registrants (1,377,466 controlled substances 
registrants and 1,143 chemical registrants), as shown in Table 10.

          Table 10--Number of Registrants by Business Activity
------------------------------------------------------------------------
                                                 Controlled
           Registrant class/business             substances   Chemicals
------------------------------------------------------------------------
Pharmacy......................................       66,766
Hospital/Clinic...............................       15,774
Practitioner..................................    1,097,454
Teaching Institution..........................          351
Mid-Level Practitioner........................      183,538
Researcher/Canine Handler.....................        8,997
Analytical Lab................................        1,496
Narcotic Treatment Program....................        1,272
Distributor...................................          795          584
Reverse Distributor...........................           56
Importer......................................          203          180
Exporter......................................          236          166
Manufacturer..................................          528          213
                                               -------------------------
    Total.....................................    1,377,466        1,143
                                               -------------------------
        Total (all registrants)...............          1,378,609
------------------------------------------------------------------------
* Data as of December 2010.

    Not all registrants listed in Table 10 are subject to the fees. 
Publicly owned institutions, law enforcement agencies, Indian Health 
Services, the Department of Veterans Affairs, Federal Bureau of 
Prisons, and military personnel are exempt from fees.
    The number of registrations exceeds the number of individual 
registrants because some registrants are required to hold more than one 
registration. The CSA requires a separate registration for each 
location where controlled substances are handled and a separate 
registration for each business activity; that is, a registration for 
activities related to the handling of controlled substances and a 
registration for activities related to the handling of List I 
chemicals. Some registrants may conduct multiple activities under a 
single registration (e.g., manufacturers may distribute substances they 
have manufactured without being registered as a distributor), but firms 
may hold multiple registrations for a single location. Individual 
practitioners who prescribe, but do not store controlled substances, 
may use a single registration at multiple locations within a state, but 
need separate registrations for each state in which they practice and 
are authorized to dispense controlled substances. Firms with multiple 
locations must have separate registrations for each location.
Characteristics of Entities
    This proposed rule affects those manufacturers, distributors, 
dispensers, importers, and exporters of controlled substances and List 
I chemicals that are required to obtain and pay a registration fee with 
DEA pursuant to the CSA (21 U.S.C. 822 and 958(f)). As of December 
2010, there were 1,378,609 controlled substances and chemical 
registrants (1,377,466 controlled substances registrants and 1,143 
chemical registrants), as shown above in Table 10.
    Pharmacies, hospitals/clinics, practitioners, teaching 
institutions, and mid-level practitioners make up 98.9 percent of all 
registrants. These registrants register every three years. Other 
registrants maintain an annual registration. Registration and 
reregistration costs vary by registrant category as is described in 
more detail in the sections below.
    The proposed fees would affect a wide variety of entities. Table 11 
indicates the sectors affected by the proposed rule and their average 
annual revenue/income. Most DEA registrants are small entities under 
Small Business Administration (SBA) standards. Almost all 
practitioners, which are the largest category of registrants, would be 
considered small (annual revenues of less than $6 million to $8.5 
million, depending on specialty), and practitioners and mid-level 
practitioners total 1,280,992 (as of December 2010).

             Table 11--Industrial Sectors of DEA Registrants
------------------------------------------------------------------------
                                                         Average annual
                 Sector                    NAICS Code      revenue *
------------------------------------------------------------------------
Manufacturers:
Petro-chemical Manufacturing (organic,          32511     $1,390,485,971
 inorganic).............................
    Medicinal and Botanical                    325411         27,601,834
     Manufacturing......................
    Pharmaceutical Manufacturing........       325412        144,173,821
    Adhesive Manufacturing..............       325520         17,482,468
    Toilet Preparation Manufacturing....       325620         50,322,290
    Other Chemical Manufacturing........       325998         13,720,807
Distributors:

[[Page 39335]]

 
    Drugs and Druggist Sundries                424210         64,793,480
     Wholesalers........................
    General Line Grocery Wholesalers....       424410         45,518,407
    Confectionary Merchant Wholesalers..       414450         17,175,982
    Chemical Wholesalers................       424690         12,856,993
    Tobacco Wholesalers.................       424940         71,437,205
    Miscellaneous Wholesalers...........       424990          2,741,857
Pharmacies:
    Supermarkets........................       445110          7,247,540
    Drug Stores.........................       446110          4,829,487
    Discount Stores.....................       452112         26,535,201
    Warehouse Clubs and Superstores.....       452910         76,300,280
Other:
    Testing Labs........................       541380          1,907,414
    Packaging and Labeling Services.....       561910          2,696,904
Other Practitioners:
    Professional Schools................       611310          1,373,855
    Ambulatory Health Care Services.....          621          1,236,852
    Hospitals...........................          622        108,286,641
------------------------------------------------------------------------
Source: 2007 Economic Census. http://www.census.gov/econ/census07.

    Supermarkets, discount stores, warehouse clubs, and superstores 
handle controlled substances through their distribution centers and 
pharmacies. Drug products containing List I chemicals are primarily 
distributed as over-the-counter medicines. These are distributed by 
drug wholesalers who specialize in non-prescription drugs, wholesalers 
who supply convenience stores, and grocery, pharmacy, and discount 
stores (e.g., superstores) that operate their own distribution centers.
Economic Impact Analysis of Proposed Fee
    The proposed fee, if implemented, is expected to have two levels of 
impact. Initially, the increase in the fee will impact the registrants. 
Then the fee increase or portion of the fee increase is expected to be 
eventually passed on to the general public. To be analytically 
conservative, the analysis below assumes that the impact of the fee 
increase is absorbed entirely by the registrants.
    DEA assumes that the registration fees are business expenses for 
all registrants. As a result, the increase in the fee will be dampened 
by reduced tax liability, as a result of the increase in registration 
fee expense. For example, if a practitioner pays an additional $60 per 
year in registration fees and the combined federal and state income tax 
is 35 percent, the net cash impact is $39, not $60. The additional $60 
causes income/profit to decrease by $60, decreasing the tax liability 
by $21. The net cash outlay is $39.\74\
---------------------------------------------------------------------------

    \74\ This example is for illustration purposes only. Each entity 
should seek competent tax advice for tax consequences of the 
proposed rule.
---------------------------------------------------------------------------

    DEA examined the proposed fees as a percentage of income for 
physicians, dentists, and physician's assistants in the practitioner 
registrant group and as a percentage of revenue for pharmacies, 
manufacturers and distributors. This analysis indicates the fee 
increase is expected to have the greatest affect on small businesses in 
the practitioner registrant group. The majority of practitioners and 
mid-level practitioners work in small businesses. Physicians, dentists, 
and physician's assistants reflect a representative sub-group of the 
practitioner and mid-level practitioner registrant groups. The effect 
of the fee increase is diminished by any increase in registrant income.
    The table below describes the average income for physicians, 
dentists, and physician's assistants from 2004 to 2012. The table below 
also reflects the impact of the proposed fee increase as a percentage 
of average income. This analysis assumes that the fee increase is 
absorbed personally by each practitioner/mid-level practitioner. The 
analysis ignores the dampening effect of registration fees as a 
business expense and the potential that the fee increase might be 
passed on to customers.
---------------------------------------------------------------------------

    \75\ Source: Bureau of Labor Statistics, http://www.bls.gov.

                                                   Table 12--Fee as Percentage of Income FY 2004-2012
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Average income \75\               Fee            Fee as % of average income
                                                              ------------------------------------------------------------------------------------------
                             Year                                                         Physician     (Annual                               Physician
                                                                Physicians    Dentists    assistants     basis)     Physicians    Dentists    assistants
--------------------------------------------------------------------------------------------------------------------------------------------------------
2004.........................................................      137,610      130,300       68,780
2005.........................................................      138,910      133,680       71,070
2006.........................................................      142,220      140,950       74,270          184       0.129%       0.131%       0.248%
2007.........................................................      155,150      147,010       77,800          184       0.119%       0.125%       0.237%
2008.........................................................      165,000      154,270       81,610          184       0.112%       0.119%       0.225%
2009.........................................................      173,860      156,850       84,830          184       0.106%       0.117%       0.217%
2010.........................................................      179,370      163,901       87,933          184       0.103%       0.112%       0.209%
2011.........................................................      187,154      169,632       91,230          184       0.098%       0.108%       0.202%
2012.........................................................      194,939      175,363       94,528          244       0.125%       0.139%       0.258%
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 39336]]

 
Increase from 2007 to 2012...................................          26%          19%          22%          33%           6%          11%           9%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Increase from 2006 to 2012...................................          37%          24%          27%          33%          -7%           3%           4%
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Average income data for 2004 to 2009 is provided by the Bureau of Labor Statistics. 2010 to 2012 are estimated figures based on linear regression,
  where a straight-line increase is calculated from years 2004 to 2009, then using the line to estimate average income for 2010 to 2012.

    In 2007, the current fee of $184 on an annual basis represents 
0.119 percent, 0.125 percent, and 0.237 percent of annual income for 
physicians, dentists, and physician's assistants respectively. In 2012, 
the proposed fee of $244 (on an annual basis) would represent 
approximately 0.125 percent, 0.139 percent, and 0.258 percent of annual 
income for physicians, dentists, and physician's assistants 
respectively. While proposed fees are 33 percent above the current fees 
implemented at the end of 2006, average incomes for physicians, 
dentists, and physician's assistants increased 26 percent, 19 percent, 
and 22 percent respectively. This estimated increase in average income 
dampens the effect of the fee increase as a percentage of average 
income. The 33 percent fee increase as a percentage of average income 
is 6 percent for physicians, 11 percent for dentists, and 9 percent for 
physician's assistants from 2007 to 2012. The diminishing effect is 
more apparent when comparing 2012 to 2006, the year for which the 
current fee was calculated and implemented. Additionally, as the 
average income grows in 2013 and 2014, the income adjusted fees are not 
any higher than in recent history.
    Exempt from the payment of registration fees are any hospital or 
other institution that is operated by an agency of the United States, 
of any State, or any political subdivision of an agency thereof. 
Likewise, an individual who is required to obtain a registration in 
order to carry out his/her duties as an official of a federal or State 
agency is also exempt from registration fees.\76\ Fee exempt 
registrants are not affected by the proposed fees.
---------------------------------------------------------------------------

    \76\ See 21 CFR 1301.21 for complete fee exemption requirements.
---------------------------------------------------------------------------

Conclusion
    DEA concludes that this proposed rule is not a significant 
regulatory action because it does not result in a materially adverse 
effect on the economy, a sector of the economy, productivity, 
competition, jobs, the environment, public health or safety, or State, 
local, or tribal governments or communities.\77\ The proposed fee, if 
implemented, would initially affect all fee paying registrants. The 
fees may eventually be passed on to the general public, diminishing the 
impact of the proposed fee increase on individual registrants. The 
impact of the proposed fee on registrants is also diminished by a 
reduction in tax liabilities and an increase in average income. 
Additionally, hospitals and institutions operated by federal, State, or 
local governments and their employees are exempt from registration 
fees.\78\ Moreover, DEA believes that this proposed rule will enhance 
the public health and safety.
---------------------------------------------------------------------------

    \77\ In accordance with 25 U.S.C. 1616q, employees of a tribal 
health or urban Indian organization are exempt from ``payment of 
licensing, registration, and any other fees imposed by a Federal 
agency to the same extent that officer of the commissioned corps of 
the Public Health Service and other employees of the Service are 
exempt from those fees.'' To the extent that any hospital or other 
institution operated by or any individual practitioner associated 
with an Indian Tribal Government must pay fees, the economic impact 
is not substantial.
    \78\ See 21 CFR 1301.21 for complete requirements for exemption 
of registration fees.
---------------------------------------------------------------------------

Regulatory Analyses

    This proposed rule is necessary to ensure the full funding of the 
DCP through registrant fees as required by 21 U.S.C. 886a. It has been 
five years since the last fee change. As discussed above, statutory and 
operational changes to the DCP cannot be fully offset by improved 
operational efficiencies and require a recalculation of registrant 
fees. This proposed rule does not change the requirement to register to 
handle controlled substances and/or List I chemicals but rather changes 
the annual fee associated with registration and reregistration that 
will allow DEA to meet its statutory obligations. DEA recognizes that 
the proposed fee changes affect small businesses, but does not believe 
the relative individual impact is significant. The average annual 
increase in estimated registration fee collections is less than $100 
million at an estimated annual increase of $88,333,030.

Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3511)

    This proposed rule will not impose additional information 
collection requirements on the public.

Regulatory Flexibility Act

    Under the Regulatory Flexibility Act of 1980 (5 U.S.C. 601-612) 
(RFA), federal agencies must evaluate the impact of rules on small 
entities and consider less burdensome alternatives. DEA has evaluated 
the impact of this proposed rule on small entities as summarized above 
and concluded that although the rule will affect a substantial number 
of small entities, it will not impose a significant economic impact on 
any regulated entities.
    In accordance with the Regulatory Flexibility Act (5 U.S.C. 
605(b)), the Deputy Assistant Administrator hereby certifies that this 
proposed rulemaking has been drafted consistent with the Act and that a 
regulatory analysis on the effects or impact of this proposed 
rulemaking on small entities has been done and summarized above.\79\ 
While DEA recognizes that this proposed increase in fees will have a 
financial effect on registrants, the change in fees will not have a 
significant economic impact. A change in fees is necessary to fully 
comply with 21 U.S.C. 886a and related statutes governing the Diversion 
Control Program (DCP) and the Diversion Control Fee Account by which 
DEA is legally mandated to collect fees to cover the full costs of the 
DCP as defined by all activities relating to the registration and 
control of the manufacture, distribution, import, export, and 
dispensing of controlled substances and listed chemicals.
---------------------------------------------------------------------------

    \79\ See ``Economic Impact Analysis of Proposed Rule on 
Controlled Substances and List I Chemical Registration and 
Reregistration Fees, DEA-346'' in this rulemaking docket found at 
http://www.regulations.gov.
---------------------------------------------------------------------------

    This rule is not a discretionary action but implements statutory 
direction to charge reasonable fees to recover the full costs of 
activities constituting the DCP

[[Page 39337]]

through registrant fees (21 U.S.C. 821, 886a, and 958(f)). As discussed 
above and in the Economic Impact Analysis of the Proposed Rule found in 
the rulemaking docket at http://www.regulations.gov, DEA analyzed four 
fee calculation methodologies--Past-Based, Future-Based, Flat Fee, and 
Weighted-Ratio. DEA selected the weighted-ratio methodology to 
calculate the proposed new fee structure. This approach has been used 
since Congress established registrant fees and continues to be a 
reasonable reflection of differing costs. The registration fees under 
the weighted-ratio option result in differentiated fees among 
registrant groups, where registrants with larger revenues pay higher 
fees than registrants with lower revenues. Furthermore, the weighted-
ratio does not create a disparity in the relative increase in fees from 
the current to the proposed fees. The weighted-ratios used by DEA to 
calculate the proposed fee have proven effective and reasonable over 
time. Additionally, the selected calculation methodology accurately 
reflects the differences in activity level, notably in pre-registration 
and scheduled investigations, by registrant category: for example, 
these costs are greatest for manufacturers. DEA selected this option 
because it is the only option that resulted in reasonable fees for all 
registrant groups.
    Under the weighted-ratio methodology, the individual effect on 
small business registrants is minimal. Practitioners and mid-level 
practitioners represent 92.9 percent of all registrants and nearly all 
practitioners and mid-level practitioners are employed by small 
businesses pursuant to SBA standards. Practitioners and mid-level 
practitioners would pay a three-year registration fee of $732 or the 
equivalent of $244 per year.
    For consideration of the impact of the proposed fee increase on 
small businesses, DEA analyzed the proposed registration fee as a 
percentage of annual income for a representative practitioner group: 
physicians, dentists, and physician's assistants. While there are many 
specialists listed in the Bureau of Labor Statistics income data, 
incomes for physicians, dentists, and physician's assistants are 
representative of the practitioner and mid-level practitioner 
registrant groups. For practitioners and mid-level practitioners, the 
proposed new fee, on an annual basis, would be $244; the annual 
increase would be $60 from the current fee. From the calculation 
performed in the preceding section, Economic Impact Analysis of 
Proposed Rule, the impacts of the proposed fees, $60 per year increase 
from current fees, were found to be 0.007 percent, 0.014 percent, and 
0.022 percent of annual income for physicians, dentists, and 
physician's assistants respectively, when normalized for income 
increases. In consideration of the calculated impact and potentially 
further mitigating factors discussed in the Economic Impact Analysis of 
Proposed Rule, DEA concludes that the proposed rule will not have a 
significant economic impact on a substantial number of small entities.

Executive Orders 13563 and 12866

    This proposed rule to increase registrant fees has been developed 
in accordance with the principles of Executive Orders 13563 and 12866. 
Public comment is encouraged through the Internet with easy Internet 
access to supporting information found at http://www.regulations.gov. 
The difference between the current fees and the proposed new fee--the 
fee increase--is less than $100 million annually. Specifically, the 
difference in the fees projected to be collected under the current fee 
rates and in the fees projected to be collected under the proposed new 
fee rates for the three years of FY 2012-FY 2014 is $264,999,092. Thus, 
the annual increase is $88,333,030. This proposed rule has been 
reviewed by the Office of Management and Budget.
    The primary cost of the proposed rule is the incremental increase 
in the combined registration fees paid by registrants. Benefits of the 
proposed rule are an extension of the benefits of the DCP. The DCP is a 
strategic component of United States law and policy aimed at 
preventing, detecting, and eliminating the diversion of controlled 
substances and listed chemicals into the illicit market while ensuring 
a sufficient supply of controlled substances and listed chemicals for 
legitimate medical, scientific, research and industrial purposes. The 
absence of or significant reduction in this program would result in 
enormous costs for the citizens and residents of the United States due 
to the diversion of controlled substances and listed chemicals into the 
illicit market as outlined in the Economic Impact Assessment found in 
the rulemaking docket.

Executive Order 12988

    This proposed regulation meets the applicable standards set forth 
in Sections 3(a) and 3(b)(2) of Executive Order 12988 Civil Justice 
Reform to eliminate ambiguity, minimize litigation, establish clear 
legal standards and reduce burden.

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 does not contain a federal mandate and will not result in 
the expenditure by State, local, and tribal governments, in the 
aggregate, or by the private sector, of $126,400,000 or more (adjusted 
for inflation) in any one year, and will not significantly or uniquely 
affect small governments. DEA notes that many governmental entities 
operate DEA-registered facilities and that they are currently fee 
exempt. Moreover, the effect of the proposed increase on individual 
entities and practitioners is minimal. The majority of the affected 
entities will pay a fee of $732 for a three year registration period 
($244 per year or an increase of $60 per year). This rule is 
promulgated in compliance with 21 U.S.C. 886a that the full costs of 
operating the DCP be collected through registrant fees.

Executive Order 13175

    This proposed rule is required by statute, will not have tribal 
implications and will not impose substantial direct compliance costs on 
Indian tribal governments.

List of Subjects

21 CFR Part 1301

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

21 CFR Part 1309

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

    For the reasons set out above, 21 CFR Parts 1301 and 1309 are 
proposed to be amended as follows:

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

    1. The authority citation for Part 1301 continues to read as 
follows:

    Authority: 21 U.S.C. 821, 822, 823, 824, 831, 871(b), 875, 877, 
886a, 951, 952, 953, 956, 957, 958.

    2. Amend Sec.  1301.13 by revising paragraph (e)(1) to read as 
follows:

[[Page 39338]]

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

* * * * *
    (e) * * *
    (1)

----------------------------------------------------------------------------------------------------------------
                                                                                                    Coincident
      Business activity           Controlled    DEA Application    Application    Registration      activities
                                  substances         forms           fee ($)     period (years)      allowed
----------------------------------------------------------------------------------------------------------------
(i) Manufacturing............  Schedules I-V..  New-225,                 $3,052               1  Schedules I-V:
                                                 Renewal--225a.                                   May distribute
                                                                                                  that substance
                                                                                                  or class for
                                                                                                  which
                                                                                                  registration
                                                                                                  was issued;
                                                                                                  may not
                                                                                                  distribute or
                                                                                                  dispose of any
                                                                                                  substance or
                                                                                                  class for
                                                                                                  which not
                                                                                                  registered.
                                                                                                  Schedules II-
                                                                                                  V: except a
                                                                                                  person
                                                                                                  registered to
                                                                                                  dispose of any
                                                                                                  controlled
                                                                                                  substance may
                                                                                                  conduct
                                                                                                  chemical
                                                                                                  analysis and
                                                                                                  preclinical
                                                                                                  research
                                                                                                  (including
                                                                                                  quality
                                                                                                  control
                                                                                                  analysis) with
                                                                                                  substances
                                                                                                  listed in
                                                                                                  those
                                                                                                  schedules for
                                                                                                  which
                                                                                                  authorization
                                                                                                  as a mfg. was
                                                                                                  issued.
(ii) Distributing............  Schedules I-V..  New--225,                 1,526               1
                                                 Renewal--225a.
(iii) Reverse distributing...  Schedules I-V..  New--225,                 1,526               1
                                                 Renewal--225a.
(iv) Dispensing or             Schedules II-V.  New--224,                   732               3  May conduct
 instructing (includes                           Renewal--224a.                                   research and
 Practitioner, Hospital/                                                                          instructional
 Clinic, Retail Pharmacy,                                                                         activities
 Central fill pharmacy,                                                                           with those
 Teaching Institution).                                                                           substances for
                                                                                                  which
                                                                                                  registration
                                                                                                  was granted,
                                                                                                  except that a
                                                                                                  mid-level
                                                                                                  practitioner
                                                                                                  may conduct
                                                                                                  such research
                                                                                                  only to the
                                                                                                  extent
                                                                                                  expressly
                                                                                                  authorized
                                                                                                  under State
                                                                                                  statute. A
                                                                                                  pharmacist may
                                                                                                  manufacture an
                                                                                                  aqueous or
                                                                                                  oleaginous
                                                                                                  solution or
                                                                                                  solid dosage
                                                                                                  form
                                                                                                  containing a
                                                                                                  narcotic
                                                                                                  controlled
                                                                                                  substance in
                                                                                                  Schedule II-V
                                                                                                  in a
                                                                                                  proportion not
                                                                                                  exceeding 20%
                                                                                                  of the
                                                                                                  complete
                                                                                                  solution,
                                                                                                  compound or
                                                                                                  mixture. A
                                                                                                  retail
                                                                                                  pharmacy may
                                                                                                  perform
                                                                                                  central fill
                                                                                                  pharmacy
                                                                                                  activities.

[[Page 39339]]

 
(v) Research.................  Schedule I.....  New--225,                   244               1  A researcher
                                                 Renewal--225a.                                   may
                                                                                                  manufacture or
                                                                                                  import the
                                                                                                  basic class of
                                                                                                  substance or
                                                                                                  substances for
                                                                                                  which
                                                                                                  registration
                                                                                                  was issued,
                                                                                                  provided that
                                                                                                  such
                                                                                                  manufacture or
                                                                                                  import is set
                                                                                                  forth in the
                                                                                                  protocol
                                                                                                  required in
                                                                                                  Sec.   1301.18
                                                                                                  and to
                                                                                                  distribute
                                                                                                  such class to
                                                                                                  persons
                                                                                                  registered or
                                                                                                  authorized to
                                                                                                  conduct
                                                                                                  research with
                                                                                                  such class of
                                                                                                  substance or
                                                                                                  registered or
                                                                                                  authorized to
                                                                                                  conduct
                                                                                                  chemical
                                                                                                  analysis with
                                                                                                  controlled
                                                                                                  substances.
(vi) Research................  Schedules II-V.  New--225,                   244               1  May conduct
                                                 Renewal--225a.                                   chemical
                                                                                                  analysis with
                                                                                                  controlled
                                                                                                  substances in
                                                                                                  those
                                                                                                  schedules for
                                                                                                  which
                                                                                                  registration
                                                                                                  was issued;
                                                                                                  manufacture
                                                                                                  such
                                                                                                  substances if
                                                                                                  and to the
                                                                                                  extent that
                                                                                                  such
                                                                                                  manufacture is
                                                                                                  set forth in a
                                                                                                  statement
                                                                                                  filed with the
                                                                                                  application
                                                                                                  for
                                                                                                  registration
                                                                                                  or
                                                                                                  reregistration
                                                                                                  and provided
                                                                                                  that the
                                                                                                  manufacture is
                                                                                                  not for the
                                                                                                  purposes of
                                                                                                  dosage form
                                                                                                  development;
                                                                                                  import such
                                                                                                  substances for
                                                                                                  research
                                                                                                  purposes;
                                                                                                  distribute
                                                                                                  such
                                                                                                  substances to
                                                                                                  persons
                                                                                                  registered or
                                                                                                  authorized to
                                                                                                  conduct
                                                                                                  chemical
                                                                                                  analysis,
                                                                                                  instructional
                                                                                                  activities or
                                                                                                  research with
                                                                                                  such
                                                                                                  substances,
                                                                                                  and to persons
                                                                                                  exempted from
                                                                                                  registration
                                                                                                  pursuant to
                                                                                                  Sec.
                                                                                                  1301.24; and
                                                                                                  conduct
                                                                                                  instructional
                                                                                                  activities
                                                                                                  with
                                                                                                  controlled
                                                                                                  substances.
(vii) Narcotic Treatment       Narcotic Drugs   New--363,                   244               1
 Program (including             in Schedules     Renewal--363a.
 compounder).                   II-V.
(viii) Importing.............  Schedules I-V..  New--225,                 1,526               1  May distribute
                                                 Renewal--225a.                                   that substance
                                                                                                  or class for
                                                                                                  which
                                                                                                  registration
                                                                                                  was issued;
                                                                                                  may not
                                                                                                  distribute any
                                                                                                  substance or
                                                                                                  class for
                                                                                                  which not
                                                                                                  registered.
(ix) Exporting...............  Schedules I-V..  New--225,                 1,526               1
                                                 Renewal--225a.

[[Page 39340]]

 
(x) Chemical Analysis........  Schedules I-V..  New--225,                   244               1  May manufacture
                                                 Renewal--225a.                                   and import
                                                                                                  controlled
                                                                                                  substances for
                                                                                                  analytical or
                                                                                                  instructional
                                                                                                  activities;
                                                                                                  may distribute
                                                                                                  such
                                                                                                  substances to
                                                                                                  persons
                                                                                                  registered or
                                                                                                  authorized to
                                                                                                  conduct
                                                                                                  chemical
                                                                                                  analysis,
                                                                                                  instructional
                                                                                                  activities, or
                                                                                                  research with
                                                                                                  such
                                                                                                  substances and
                                                                                                  to persons
                                                                                                  exempted from
                                                                                                  registration
                                                                                                  pursuant to
                                                                                                  Sec.
                                                                                                  1301.24; may
                                                                                                  export such
                                                                                                  substances to
                                                                                                  persons in
                                                                                                  other
                                                                                                  countries
                                                                                                  performing
                                                                                                  chemical
                                                                                                  analysis or
                                                                                                  enforcing laws
                                                                                                  related to
                                                                                                  controlled
                                                                                                  substances or
                                                                                                  drugs in those
                                                                                                  countries; and
                                                                                                  may conduct
                                                                                                  instructional
                                                                                                  activities
                                                                                                  with
                                                                                                  controlled
                                                                                                  substances.
----------------------------------------------------------------------------------------------------------------

* * * * *

PART 1309--REGISTRATION OF MANUFACTURERS, DISTRIBUTORS, IMPORTERS, 
AND EXPORTERS OF LIST I CHEMICALS

    3. The authority citation for Part 1309 is corrected to read as 
follows:

    Authority:  21 U.S.C. 802, 821, 822, 823, 824, 830, 871(b), 875, 
877, 886a, 952, 953, 957, 958.

    4. Revise Sec.  1309.11 to read as follows:


Sec.  1309.11  Fee amounts.

    (a) For each application for registration or reregistration to 
manufacture the applicant shall pay an annual fee of $3,052.
    (b) For each application for registration or reregistration to 
distribute, import, or export a List I chemical, the applicant shall 
pay an annual fee of $1,526.
    5. In Sec.  1309.21, paragraph (c) is revised to read as follows:


Sec.  1309.21  Persons required to register.

* * * * *
    (c) * * *

                              Summary of Registration Requirements and Limitations
----------------------------------------------------------------------------------------------------------------
                                                                                                    Coincident
      Business activity           Chemicals        DEA Forms       Application    Registration      activities
                                                                       fee       period (years)      allowed
----------------------------------------------------------------------------------------------------------------
Manufacturing................  List I, Drug     New--510.......          $3,052               1  May distribute
                                products                                                          that chemical
                                containing                                                        for which
                                ephedrine,                                                        registration
                                pseudoephedrin                                                    was issued;
                                e,                                                                may not
                                phenylpropanol                                                    distribute any
                                amine.                                                            chemical for
                                                                                                  which not
                                                                                                  registered.
                                                Renewal--510a..           3,052
Distributing.................  List I,          New--510.......           1,526               1
                                Scheduled
                                listed
                                chemical
                                products.
                                                Renewal--510a..           1,526
Importing....................  List I, Drug     New--510.......           1,526               1  May distribute
                                Products                                                          that chemical
                                containing                                                        for which
                                ephedrine,                                                        registration
                                pseudoephedrin                                                    was issued;
                                e,                                                                may not
                                phenylpropanol                                                    distribute any
                                amine.                                                            chemical for
                                                                                                  which not
                                                                                                  registered.
                                                Renewal--510a..           1,526
Exporting....................  List I,          New--510.......           1,526               1
                                Scheduled
                                listed
                                chemical
                                products.
                                                Renewal--510a..           1,526
----------------------------------------------------------------------------------------------------------------



[[Page 39341]]

    Dated: June 30, 2011.
Joseph T. Rannazzisi,
Deputy Assistant Administrator.
[FR Doc. 2011-16847 Filed 7-5-11; 8:45 am]
BILLING CODE 4410-09-P