[Federal Register Volume 78, Number 126 (Monday, July 1, 2013)]
[Notices]
[Pages 39327-39331]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-15704]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration

[Docket No. 11-63]


Bio Diagnostic International; Denial of Application

    On June 8, 2011, the Deputy Assistant Administrator, Office of 
Diversion Control, Drug Enforcement Administration, issued an Order to 
Show Cause to Bio Diagnostic International, Inc. (hereinafter, BDI or 
Respondent), of Brea, California. The Show Cause Order proposed the 
denial of Respondent's application for a registration as a distributor 
of list I chemicals, on the ground that Respondent's registration 
``would be inconsistent with the public interest.'' Show Cause Order at 
1 (citing 21 U.S.C. 823(h) and 824(a)(4)).
    The Show Cause Order specifically alleged that on September 1, 
2009, Respondent had applied for a DEA registration as a distributor of 
iodine, a list I chemical. Id. The Order alleged that Mr. Paul Anand, 
Ph.D., was Respondent's owner and operator, and that during a pre-
registration investigation, he had failed to provide a Food and Drug 
Administration registration, that he had failed to obtain a California 
Department of Justice Bureau of Narcotic Enforcement Controlled 
Chemical Substances Permit, and that he had ``failed to accurately 
complete'' employee screening forms as requested by Agency 
Investigators. Id. at 1-2. The Order also alleged that during the 
inspection, ``investigators discovered that approximately 50 to 100 
expired bottles of Lugol's solution, a product containing . . . 
[i]odine, were left unsecured on a shelf within BDI's proposed 
controlled location without a proper registration'' and that ``BDI 
failed to record, secure, or dispose of the expired list I chemical 
products as required by law.'' Id. at 2. Finally, the Order alleged 
that ``[o]n December 8, 2010 . . . state investigators attempted to 
conduct a site inspection at BDI's business facility'' but that they 
``were not successful because BDI did not cooperate with attempts to 
conduct this inspection.'' Id.
    On June 27, Mr. Anand filed a request for a hearing on behalf of 
Respondent and the matter was placed on the docket of the Office of 
Administrative Law Judges (ALJ). Thereafter, the assigned ALJ issued an 
order for pre-hearing statements; both parties complied with the order.
    In its pre-hearing statement, the Government provided notice that 
one of its witnesses would testify that ``Respondent is required to 
have a valid California Board of Pharmacy license . . . or a California 
Bureau of Narcotic Enforcement permit . . . and . . . Respondent's 
state permit expired on June 11, 2011 and was not renewed.'' Gov. Pre-
Hearing Statement, at 6-7. The Government noticed that its witness 
would further testify that ``currently the Respondent is not authorized 
to handle list I chemicals in the State of California.'' Id. at 7.
    Based on the above, the ALJ issued a Memorandum to Parties and 
Order. Therein, the ALJ ordered the parties to address two issues: (1) 
whether the ``Respondent presently possess[es] a valid . . . state 
license, registration or other authority to handle listed chemicals, to 
include list I chemicals,

[[Page 39328]]

from the State of California or any other State, territory or U.S. 
jurisdiction in which Respondent proposes to do business?'' and (2) 
whether, under Agency precedent and applicable law, the proceeding 
could be resolved on summary disposition? Memorandum to Parties and 
Order (citing Jack's Sales, Inc., 66 FR 52939 (2001)).
    In response, the Government filed a Motion for Summary Disposition. 
Therein, the Government argued that Respondent is required to hold a 
California Chemical Substances Permit ``in order to purchase or sell 
Iodine in the State'' and that its ``permit expired on June 11, 2011 
and was not renewed.'' Mot. for Summ. Disp. at 2. The Government thus 
contended that because ``Respondent is currently without authority to 
handle list I chemicals in the State of California, the state in which 
[it] seeks registration with the DEA, [it] is not eligible to possess a 
DEA registration in that state.'' Id. at 3 (citing 21 U.S.C. 823(h) and 
824(a)(3)). The Government further argued that ``[t]he Controlled 
Substances Act (CSA) requires that a list I chemical manufacturer and 
distributor must be currently authorized to handle list I chemicals in 
the jurisdiction in which it seeks to maintain a DEA registration,'' 
and that because ``possessing authority under state law to handle 
listed chemicals is an essential condition for holding a DEA 
registration,'' the CSA requires the denial of Respondent's 
application. Id. at 3-4 (citing numerous cases involving 
practitioners). Finally, the Government argued that summary disposition 
was warranted even if ``there is the potential that the Respondent's 
listed chemical privileges may be reinstated, because `revocation is 
also appropriate when [a] state license has been suspended, but with 
the possibility of future reinstatement.''' Id. at 4-5 (citing Roger A. 
Rodriguez, M.D., 70 FR 33207 (2005)).
    In its pleading, Respondent did not dispute that its state permit 
had expired and provided a copy of its expired permit. However, 
Respondent further stated that it had ``already applied to renew the 
expired certificate.'' Resp. Pleading (July 14, 2011), at 2.
    On July 28, 2011, the Administrative Law Judge (ALJ) granted the 
Government's motion, holding that because Respondent does not hold 
authority under California law to handle iodine, it is not entitled to 
be registered. Recommended Ruling, Findings of Fact, Conclusions of Law 
and Decision of the ALJ (July 28, 2011) (hereinafter, ALJ I). As 
support for his ruling, the ALJ noted that ``[u]nder 21 U.S.C. 
824(a)(3), a practitioner's loss of state authority `to engage in the 
manufacturing, distribution or dispensing of controlled substances or a 
list I chemical' is grounds to revoke a practitioner's registration'' 
and that DEA ``has consistently held that a registrant or prospective 
registrant may not hold a DEA registration if the registrant is without 
appropriate authority under the laws of the state in which it does 
business.'' Id. at 5 (citing Jack's Sales Inc., 66 FR 52939 (2001) 
(holding that ``[l]oss of state authority to engage in the distribution 
of list I chemicals is grounds to revoke a distributor's 
registration'') and numerous cases involving practitioners). The ALJ 
further explained that ``[s]ummary disposition is warranted even if the 
respondent's lack of state authority is temporary, because `revocation 
is also appropriate when a state license has been suspended, but with 
the possibility of future reinstatement.''' Id. (citing Stuart A. 
Bergman, M.D., 70 FR 33193 (2005) and Rodger A. Rodriguez, M.D., 70 FR 
33206 (2005)).
    Finding it undisputed that Respondent had allowed its California 
Bureau of Narcotic Enforcement Permit for Controlled Chemical 
Substances to expire and that ``there is no genuine dispute as to any 
material fact,'' the ALJ concluded that there is ``substantial evidence 
that Respondent is presently without state authority to handle list I 
chemicals in California, the jurisdiction in which it seeks a DEA 
[registration] to distribute list I chemicals.'' Id. at 6. The ALJ thus 
granted the Government's motion and recommended that its application be 
denied. Id.
    On review of the record, I remanded the case for further 
proceedings. Order Remanding For Further Proceedings (Oct. 17, 2011). 
In the remand order, I noted that in its motion, the Government relied 
entirely on Respondent's lack of the permit issued by the California 
Department of Justice, which the Government argued Respondent must have 
to purchase or sell iodine in California under state law. Id. at 2-3 
(citing Gov. Motion, at 2-3 (citing Cal. Health & Safety Code Sec.  
11106(a)(1)(A)). Under this provision, ``[a]ny manufacturer, 
wholesaler, retailer, or any other person or entity in this state that 
sells, transfers, or otherwise furnishes [iodine] to a person or 
business entity in this state or any other state or who obtains [the 
substance] from a source outside of the state . . . shall submit an 
application to, and obtain a permit for the conduct of that business 
from[] the [California] Department of Justice.'' Cal. Health & Safety 
Code Sec.  11106(a)(1)(A). I further noted, however, that the statute 
exempts from the permit requirement ``any manufacturer, wholesaler, or 
wholesale distributor who is licensed by the California State Board of 
Pharmacy and also registered with the federal Drug Enforcement 
Administration.'' Remand Order, at 3 (quoting Cal. Health & Safety Code 
Sec.  11106(a)(1)(C)).
    On review, I noted that in its motion, the Government did not 
address the potential applicability of the exemption of subparagraph C 
and it offered no evidence that Respondent lacks a license issued by 
the Board of Pharmacy, even though in its pre-hearing statement, it 
represented that a Diversion Investigator would testify that ``the 
Respondent is required to have a valid California Board of Pharmacy 
license . . . or a California Bureau of Narcotic Enforcement permit.'' 
Id. (quoting Gov. Pre-Hearing Statement, at 6).\1\ Likewise, the ALJ 
did not address the applicability of this provision and explain why 
summary disposition would be appropriate given the Government's failure 
to present any evidence that Respondent does not hold a license from 
the pharmacy board.\2\
    See ALJ I. Because under settled principles, a party moving for 
summary disposition ``must show, with materials of appropriate 
evidentiary quality, that

[[Page 39329]]

every state of facts is excluded save that which entitles [it] to 
relief,'' Sword v. Fox, 317 F. Supp. 1055, 1057 (W.D. Va. 1970) (quoted 
in in Charles Alan Wright, et al., 10B Federal Practice & Procedure 
Sec.  2727 n.1), and the non-moving party has no obligation to come 
forward with evidence disputing the motion ``if the movant fails to 
meet [its] burden of showing the absence of any genuine issue of 
material fact,'' Federal Practice & Procedure, at Sec.  2739; I 
concluded that summary disposition was inappropriate. Accordingly, I 
remanded the matter to the ALJ for further proceedings.\3\
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    \1\ I further explained that this representation of anticipated 
testimony is not evidence and thus did not support a motion for 
summary disposition. Cf. Insoftvision, LLC, v. MB Financial Bank, 
N.A., 2011 WL 4036134, *5 (N.D. Ill., Sept. 12, 2011) (``In order to 
establish a fact in support of summary judgment . . . a party must 
present competent evidence . . . . A] party's expectation of how [a 
witness] would testify at trial'' does not suffice.).
    \2\ As explained above, in his memorandum to the parties, the 
ALJ directed both parties to address the issue of whether the 
``Respondent presently possess[es] a valid, unrevoked and 
unrestricted state license, registration or other authority to 
handle listed chemicals, to include List I chemicals, from the State 
of California or any other State, territory or U.S. jurisdiction in 
which Respondent proposes to do business,'' as well as to produce 
supporting evidence. Memorandum To Parties And Order, at 1. In 
response, Respondent acknowledged that his state permit for 
controlled chemical substances had expired. Moreover, Respondent did 
not make any claim that he possessed a license issued by the 
pharmacy board.
    However, in the remand order, I held that the Government had the 
burden of proof on the issue of whether Respondent has authority 
under California law, and on summary disposition, it was required to 
show, ``with materials of appropriate evidentiary quality, that 
every state of facts is excluded save that which entitles [it] to 
relief.'' Sword v. Fox, 317 F. Supp. 1055, 1057 (W.D. Va. 1970). I 
further held that while to defeat the motion, Respondent was 
required to show a genuine dispute over the material facts, it was 
not required to do so when no evidence was put forward by the 
Government on a material fact as to which the Government had the 
burden of proof. To the extent the ALJ deemed summary disposition 
appropriate because Respondent produced no evidence that it held a 
state pharmacy license, this improperly shifted the burden of proof 
from the Government to Respondent.
    \3\ This Office served a copy of the Remand Order by First Class 
Mail on Respondent.
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    On remand, the ALJ issued a second Memorandum to Parties and Order 
(Memorandum II, Oct. 26, 2011). Therein, the ALJ directed the 
Government to address ``whether Respondent presently possesses a valid, 
unrevoked and unrestricted state license, registration or other 
authority, including a license from the California Board of Pharmacy, 
to handle listed chemicals, including list I chemicals,'' as well as 
``whether Respondent's application for a DEA Certificate of 
Registration . . . to distribute list I chemicals should be summarily 
resolved without a plenary administrative hearing.'' Memorandum II, at 
2.
    On November 2, the Government filed a new Motion for Summary 
Disposition. Therein, the Government stated that it had contacted the 
California Department of Justice Bureau of Narcotic Enforcement and 
determined that Respondent's Controlled Chemical Substances Permit had 
expired on June 11, 2011 and had not been renewed. Motion for Summary 
Disp (II), at 4. The Government further stated that it had contacted 
the California State Board of Pharmacy and determined that neither 
Respondent, nor its owner, holds a license issued by the Board. Id. As 
support for these assertions, the Government attached the affidavit of 
a Diversion Investigator.
    In its motion, the Government reiterated its position that because 
``Respondent is currently without authority to handle list I chemicals 
in the State of California, the state in which [it] seeks registration 
with the DEA, [it] is not eligible to possess a DEA registration in 
that state'' and that the CSA ``requires that a list I chemical 
manufacturer and distributor must be currently authorized to handle 
list I chemicals in the jurisdiction in which it seeks to maintain a 
DEA registration.'' Id. at 5. The Government also argued that ``because 
`possessing authority under state law to handle listed chemicals is an 
essential condition for holding a DEA registration,' the DEA has 
consistently held that `the CSA requires the revocation [denial] of a 
registration issued to a [registrant] who lacks [such authority].''' 
Id. (brackets and bracketed text in original) (citing Jack's Sales, 
Inc., and numerous practitioner cases). The Government also reiterated 
its position that summary disposition was warranted even if ``there is 
the potential that the Respondent's listed chemical privileges may be 
reinstated.'' Id. at 6 (citing, inter alia, Roger A. Rodriguez, M.D., 
70 FR 33206, 33207 (2005)).
    On November 9, the ALJ granted the Government's motion. Recommended 
Ruling, Findings of Fact, Conclusions of Law and Decision of the ALJ 
(Nov. 9, 2011) (hereinafter, ALJ II). As a preliminary matter, the ALJ 
noted that Respondent had failed to ``respond to the Government's 
November 2, 2011 motion for summary disposition, or seek an extension 
within the deadline for response,\4\ and is therefore deemed to waive 
objection.'' ALJ II at 4-5.
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    \4\ The ALJ also noted that on October 20, 2011, he issued an 
Order for Prehearing Conference which scheduled a pre-hearing 
conference for October 26, 2011 and also ordered the parties to 
contact the Office of Administrative Law Judges no later than 4 p.m. 
on October 25, 2011 to confirm their participation. The ALJ found 
that ``Respondent failed to comply with this order.'' ALJ II, at 3. 
The ALJ further noted that when his office attempted to contact 
Respondent's owner by phone, it ``was unable to reach him or any 
other representative for Respondent.'' Id.at 3-4.
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    Turning to the merits, the ALJ found that it was undisputed that 
Respondent did not renew his state Permit for Controlled Chemical 
Substances and that Respondent is not exempt from this requirement 
because it does not hold a license issued by the California State Board 
of Pharmacy. ALJ at 6. Noting that under 21 U.S.C. 824(a)(3), the loss 
of state authority to manufacture or distribute a list I chemical ``is 
grounds to revoke a practitioner's registration,'' id., the ALJ further 
explained that ``this Agency has consistently held that a registrant or 
prospective registrant may not hold a DEA registration if the 
registrant is without appropriate authority under the laws of the state 
in which it does business.'' Id. (citing Jack's Sales, 66 FR at 52939; 
also citing five cases involving practitioners). Reasoning that 
``[s]ummary disposition is warranted even if the respondent's lack of 
state authority is temporary, because `revocation is also appropriate 
when a state license had been suspended, but with the possibility of 
future reinstatement,''' id. (citing Bergman, 70 FR at 33193; 
Rodriguez, 70 FR at 33206), the ALJ granted the Government's motion and 
recommended that Respondent's application be denied.\5\ Id. at 6-7. 
Alternatively, the ALJ found that Respondent had waived its right to a 
hearing by failing to comply with his Order for Pre-Hearing Conference 
and/or failing respond to Government's motion. Id. at 7, n.4.
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    \5\ In a footnote, the ALJ quoted Cal. Health & Safety Code 
Sec.  11106(a)(1)(C) and suggested that Respondent was not exempt 
from the permit requirement, because to be exempt it was required to 
be both licensed by the Pharmacy Board and hold a DEA registration. 
See ALJ II, at 3 n.1. The ALJ then reasoned: ``Thus, it appears that 
even if Respondent was licensed by the . . . State Board of 
Pharmacy, [it] would nonetheless lack state authority to handle list 
I chemicals because [it] does not maintain any DEA registration.'' 
ALJ II, at 3 n.1. Under the ALJ's logic, Respondent would not be 
entitled to a DEA registration because it does not have a DEA 
registration.
     On the other hand, if Respondent did hold the requisite 
Pharmacy Board license and were the Agency to grant its application, 
it would immediately have state authority. And as explained in this 
decision, the CSA does not make possession of state authority a 
condition precedent to granting a registration for a list I chemical 
distributor.
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    Neither party filed exceptions to the ALJ's recommended decision. 
Thereafter, the ALJ re-forwarded the record to me for final agency 
action.
    Having considered the entire record, I adopt the ALJ's factual 
findings that Respondent does not possess either a California Bureau of 
Narcotic Enforcement Permit for Controlled Chemical Substances or a 
license from the California Board of Pharmacy, as well as his legal 
conclusion that Respondent does not currently possess authority under 
California law to handle list I chemicals in California. While I also 
adopt the ALJ's recommendation that Respondent's application be denied, 
for reasons explained below, I do not adopt the ALJ's reasoning that 
the Government was entitled to summary disposition on the basis that 
Respondent lacks state authority. However, I find that two alternative 
grounds exist to deny Respondent's application: (1) That Respondent has 
waived his right to a hearing to contest whether granting his 
application would be inconsistent with the public interest, and (2) 
Respondent did not apply for the correct registration and thus would 
not be in compliance with applicable laws.
    As discussed above, the Government maintains that because 
``Respondent is currently without authority to handle list I chemicals 
in . . . California, the state in which [it] seeks registration . . . 
[it] is not eligible to possess a DEA registration in that State'' and 
that the CSA ``requires that a list I chemical

[[Page 39330]]

manufacturer and distributor must be currently authorized to handle 
list I chemicals in the jurisdiction in which it seeks to maintain a 
DEA registration.'' Mot. for Summary Disp. (II) at 4. The Government 
further maintains that ``because `possessing authority under state law 
to handle listed chemicals is an essential condition for holding a DEA 
registration,' [the Agency] has consistently held that `the CSA 
requires the revocation . . . of a registration issued to a registrant 
[, and the denial of an application for registration submitted by an 
applicant,] who lacks''' state authority. Id. at 5. As noted above, in 
support of these propositions, the Government cited Jack's Sales and 
numerous cases involving practitioners. The ALJ adopted the 
Government's reasoning. ALJ II at 6.
    Contrary to both the Government's and the ALJ's understanding, the 
CSA neither makes the current possession of state authority an 
essential condition for holding a DEA registration, nor requires that 
the Agency revoke an existing registration held by, or deny an 
application submitted by, a list I chemical handler because it is not 
currently authorized by the State to handle list I chemicals. Indeed, 
Jack's Sales, the case cited for these propositions, itself 
acknowledged that the CSA ``does not specify that state licensure is a 
condition precedent to registration as a distributor of lists I 
chemicals.'' 66 FR at 52939. Moreover, while Jack's Sales did uphold 
the use of summary disposition to deny an application for a list I 
chemical distributor's registration, on the ground that the applicant 
lacked a required state license, as explained below I conclude that its 
reasoning is flawed for two reasons: (1) It relied on provisions of the 
CSA which are specifically applicable to practitioners and not to list 
I chemical distributors, and (2) its reasoning cannot be squared with 
intervening judicial precedent. See Penick Corp. v. DEA, 491 F.3d 483, 
490 (D.C. Cir. 2007).
    To be sure, in numerous cases involving practitioners, this Agency 
has held that ``a practitioner must be currently authorized to handle 
controlled substances in the `jurisdiction in which [it] practices' in 
order to [obtain and] maintain a DEA registration.'' Roots 
Pharmaceuticals, Inc., 76 FR 51430 (2011); see also Robert Wayne 
Mosier, 75 FR 49950 (2010). However, this rule is grounded in the CSA's 
specific textual provisions which are applicable to this category of 
registrant. More specifically, Congress defined the term 
``practitioner'' to ``mean[] a physician . . . licensed, registered, or 
otherwise permitted, by the . . . jurisdiction in which he practices . 
. . to distribute, dispense, [or] administer . . . a controlled 
substance in the course of professional practice.'' 21 U.S.C. 802(21) 
(emphasis added). Likewise, Congress, in setting forth the requirements 
for obtaining a practitioner's registration, directed that ``[t]he 
Attorney General shall register practitioners . . . to dispense . . . 
controlled substances . . . if the applicant is authorized to dispense 
. . . controlled substances under the laws of the State in which he 
practices.''' 21 U.S.C. 823(f) (emphasis added). As these provisions 
make plain, a practitioner can neither obtain nor maintain a DEA 
registration unless the practitioner currently has authority under 
state law to handle controlled substances.
    Accordingly, DEA has uniformly denied the applications of 
practitioners who lack state authority. Moreover, notwithstanding that 
21 U.S.C. 824(a)(3), grants the Agency the authority to either suspend 
or revoke ``[a] registration pursuant to section 823,'' based on the 
CSA's clear requirement that a practitioner must possess state 
authority to hold a registration, DEA has uniformly revoked the 
registrations of practitioners who no longer possess state authority to 
dispense controlled substances and done so without regard to the 
underlying reason why the practitioner no longer possesses the 
requisite authority.\6\
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    \6\ As explained below, that section 824(a)(3) authorizes 
revocation where a registrant ``has had [its] State license or 
registration suspended, revoked, or denied by competent state 
authority and is no longer authorized by State law to engage in the 
manufacturing [or] distribution of . . . list I chemicals'' does not 
mean that revocation is warranted in all instances. This provision 
grants the Agency discretionary authority to impose an appropriate 
sanction; the failure to consider factors such as the egregiousness 
of the misconduct and mitigating factors in imposing the sanction 
would render the sanction arbitrary and capricious.
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    By contrast, in defining the term ``distributor,'' Congress did not 
impose a requirement that the person engaged in this activity hold 
state authority. See id. Sec.  802(11). Rather, it simply defined the 
term to ``mean[] a person who so delivers [other than by administering 
or dispensing] a controlled substance or listed chemical.'' Id. 
Likewise, Congress did not condition the registration of list I 
chemical distributors by requiring that they possess state authority. 
See id. Sec.  823(h) (``The Attorney General shall register an 
applicant to distribute a list I chemical unless the Attorney General 
determines that registration of the applicant is inconsistent with the 
public interest.''). If Congress had intended to condition the 
registration of list I chemical distributors on their possession of a 
state license, it had only to adopt language similar to that it 
employed in the provisions applicable to practitioners. See Dean v. 
United States, 556 U.S. 568, 573 (2009) (quoting Russello v. United 
States, 464 U.S. 16, 23 (1983) (``[W]here Congress includes particular 
language in one section of a statute but omits it in another section of 
the same enactment, it is generally presumed that Congress acts 
intentionally and purposely in the disparate inclusion or 
exclusion.'')).
    To be sure, in section 823(h), Congress directed that ``[i]n 
determining the public interest,'' the Agency ``shall consider,'' inter 
alia, ``compliance by the applicant with applicable Federal, State, and 
local law[.]'' Id. Thus, where state law requires that an applicant 
obtain a license to engage in list I chemical activities, DEA can 
consider an applicant's compliance (or lack thereof) with such a 
requirement in the public interest determination. However, as the D.C. 
Circuit has explained in discussing the public interest determination 
under section 823, the ``enumerated factors represent components of the 
public interest rather than independent requirements for registration 
and thus, the . . . Administrator may find a given registration 
consistent with the public interest even if one (or possibly more) of 
the public interest factors is not satisfied.'' Penick Corp., Inc., v. 
DEA, 491 F.3d 483, 490 (D.C. Cir. 2007) (citing Johnson Matthey, Inc., 
60 FR 26050, 26052 (1995) (``It is well established that the . . . 
Administrator is not required to make findings with respect to each of 
the . . . factors, but has discretion to give each factor the weight 
[she] deems appropriate, depending upon the facts and circumstances in 
each case.'')).
    This is not to say that DEA will grant an application for 
registration notwithstanding an applicant's failure to obtain a 
required state license. Indeed, as it does here, an applicant's failure 
to obtain a required state license will likely warrant an adverse 
finding under the compliance factor, see 21 U.S.C. 823(h)(2), and a 
finding under a single factor can support the conclusion that granting 
an application for registration would be inconsistent with the public 
interest and the consequent denial of an application. See MacKay v. 
DEA, 664 F.3d 808, 816 (10th Cir. 2011); Jayam Krishna-Iyer, 74 FR 459, 
462 (2009).
    What it is to say is that summary disposition may not be an 
appropriate mechanism for resolving such a case

[[Page 39331]]

because the applicant/registrant may have a valid explanation for why 
it is not currently licensed by the state, which would not necessarily 
support either revocation of an existing registration or the denial of 
an application. For example, the state licensing authority may have a 
large backlog in issuing its licenses, the applicant/registrant's 
application may have been lost or misplaced, there may be minor 
compliance issues which the applicant/registrant is in the process of 
correcting and which have delayed the issuance of the license but which 
would not necessarily warrant a denial or revocation (as the case may 
be) by DEA, or the applicant/registrant may have simply forgotten to 
renew its license on time. However, because other than in the case of 
practitioners, the possession of state authority is not an independent 
requirement for registration, what is clear is that an applicant/
registrant is entitled to rebut the Government's prima facie case by 
showing that its conduct is not sufficiently egregious to warrant 
denial or revocation and what remedial measures it has undertaken to 
correct the problem. Thus, upon a proper showing by a respondent, 
summary disposition would be unwarranted and the respondent would be 
entitled to put on evidence.
    In this matter, it is noted that in his July 14, 2011 filing, 
Respondent's owner claimed that it had filed for a renewal of its state 
license. However, since then, Respondent has produced no evidence that 
it has obtained a new state license. In addition, Respondent failed to 
comply with the ALJ's order for prehearing conference and failed to 
respond to the Government's renewed motion for summary disposition. As 
the First Circuit has noted in language that applies with equal force 
to administrative proceedings, ```[l]itigants must act punctually and 
not casually or indifferently if a judicial system is to function 
effectively.''' McKinnon v. Kwong Wah Restaurant, 83 F.3d 498, 504 (1st 
Cir. 1996) (quoted in Kamir Garces-Mejias, 72 FR 54931, 54933 (2007) 
(holding that registrant's failure to respond to ALJ's orders 
constituted waiver of her right to a hearing)). I therefore conclude 
that Respondent has waived its right to present evidence regarding its 
compliance with applicable laws. See Garces-Mejias, 72 FR at 54932-33; 
see also Pamela Monterosso, 73 FR 11146, 11147 (2008).
    In addition, as I noted in the remand order, Respondent applied for 
a distributor's registration, and paid the fee for this category of 
registration (and not the fee for a manufacturer's registration).\7\ 
However, it is clear from Respondent's application that it sought to 
engage in the ``Preparation 5% Solution (Lugol's Solution)'' and then 
noted that it intended to manufacture iodine in the dosage formulation 
of ``8 ml each.'' This constitutes manufacturing activity under the 
CSA. See 21 U.S.C. 802(15) (defining manufacturing to include ``the 
production, preparation . . . or processing of a drug or other 
substance, either directly or indirectly . . . and includes any 
packaging or repackaging of such substances or labeling or relabeling 
of its container'').
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    \7\ In his letter requesting a hearing, Respondent's owner 
stated that it required a DEA registration ``to manufacture iodine 
5% solution, called Lugol Solution.'' Letter of Paul Anand, Ph.D., 
to Administrator (June 23, 2011). However, according to Respondent's 
application, it sought registration as a Chemical Distributor and 
not as a Chemical Manufacturer; consistent with this, it paid the 
fee for the former and not the latter. Respondent's Application, at 
1, 3. Moreover, in Section 3B of the application, which applies to 
``Manufacturers Only,'' Dr. Anand wrote: ``Preparation 5% Solution 
(Lugol's Solution),'' and in Section 3C, he checked the box for bulk 
iodine. Id. at 1-2.
    Under DEA's regulation, the manufacturing of list I chemicals is 
deemed to be an activity which is independent of distribution 
(although a registered manufacturer can lawfully engage in 
distribution), and thus requires a manufacturer's registration. See 
21 CFR 1309.22. Because Respondent did not apply for the required 
registration, its application should have been rejected as 
defective. See id. Sec.  1309.34(a).
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    Under the CSA, ``[p]ersons registered . . . to manufacture, 
distribute, or dispense controlled substances or list I chemicals are 
authorized to possess, manufacture, distribute, or dispense such 
substances or chemicals . . . to the extent authorized by their 
registration.'' Id. Sec.  822(b). Under DEA regulations, the 
manufacturing and distribution of list I chemicals are activities which 
``are deemed to be independent of each other'' and while the holder of 
a manufacturer's registration can engage in the distribution of a list 
I chemical, the holder of a distributor's registration cannot engage in 
manufacturing. 21 CFR 1309.21(c); id. 1309.22(b) & (d). Accordingly, 
Respondent's proposed activity would not be lawful under the 
registration it seeks.
    Based on Respondent's failure to obtain the required state permit 
or license, as well as that its proposed activity would not be lawful 
under the registration for which it applied, I find that the record 
supports a finding under factor two that granting Respondent's 
application would be ``inconsistent with the public interest.'' 21 
U.S.C. 823(h). Accordingly, Respondent's application will be denied.\8\
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    \8\ As found above, on November 2, the Government filed its 
second motion for summary disposition by mailing it to Respondent's 
owner, at its address in Brea, California; on November 9, the ALJ 
issued his recommended decision noting that ``Respondent had `until 
4:00 p.m. EDT three business days after the date of service of any 
motion to file a responsive pleading' and that `[i]n the absence of 
good cause, failure to file a written response to the moving party's 
motion after three business days will be deemed a waiver of 
objection.''' ALJ II, at 4. The ALJ apparently deemed service to 
have been effectuated with mailing. See id. (noting that ``[a]s of 
November 9, 2011, five business days after service of the 
Government's [motion], Respondent had not yet filed a response''). 
While courts frequently deem service of a pleading to have occurred 
on mailing and not upon receipt by the opposing party, see, e.g., 
F.R.C.P. r. 5(b)(2)(C), due regard must be given to the respective 
locations of the parties and the vagaries of the mail. While an ALJ 
is entitled to substantial discretion in managing his/her docket, 
the amount of time the ALJ allowed here for Respondent to file its 
responsive pleading was unduly limited and potentially a violation 
of Due Process.
    However, because following issuance of the remand order, 
Respondent has not filed any pleadings including exceptions, I deem 
any such error harmless.
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Order

    Pursuant to the authority vested in me by 21 U.S.C. 823(h) and 28 
CFR 0.100(b), I order that the application of Bio Diagnostic 
International, Inc., for a DEA Certificate of Registration as a 
distributor of list I chemicals, be, and it hereby is, denied. This 
Order is effective July 31, 2013.

    Dated: June 21, 2013.
Michele M. Leonhart,
Administrator.
[FR Doc. 2013-15704 Filed 6-28-13; 8:45 am]
BILLING CODE 4410-09-P