[Federal Register Volume 88, Number 168 (Thursday, August 31, 2023)]
[Rules and Regulations]
[Pages 60117-60144]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-18885]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF JUSTICE
Drug Enforcement Administration
21 CFR Parts 1303 and 1315
[Docket No. DEA-455]
RIN 1117-AB49
Management of Quotas for Controlled Substances and List I
Chemicals
AGENCY: Drug Enforcement Administration, Department of Justice.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Drug Enforcement Administration (DEA) is publishing this
final rule to manage the quotas for controlled substances and the list
I chemicals, ephedrine, pseudoephedrine, and phenylpropanolamine, held
by DEA-registered manufacturers. This final rule will define the types
of quotas, update the method to abandon quota, clarify the current
language to ensure that both manufacturers and distributors are
required to obtain certification of a buyer's quota, reduce overall
inventories, formalize the existing practice of use-specific
subcategories for individual manufacturing and procurement quotas, and
modify existing deadlines to fix/issue quotas. This final rule will
also amend certain regulations to implement updates to the Controlled
Substances Act made by the Substance Use-Disorder Prevention that
Promotes Opioid Recovery Treatment for Patients and Communities Act.
DATES: This final rule is effective November 29, 2023.
FOR FURTHER INFORMATION CONTACT: Scott A. Brinks, Regulatory Drafting &
Policy Support Section (DPW), Diversion Control Division, Drug
Enforcement Administration; Mailing Address: 8701 Morrissette Drive,
Springfield, Virginia 22152; Telephone: (571) 362-3261.
SUPPLEMENTARY INFORMATION:
Legal Authority
The Controlled Substances Act (CSA) authorizes the Administrator of
the Drug Enforcement Administration (DEA) (by delegation from the
Attorney General) to promulgate rules and regulations that he deems
necessary and appropriate for the efficient execution of his functions
under subchapter I (Control and Enforcement) and subchapter II (Import
and Export). 21 U.S.C. 871(b) and 958(f). Subchapter I includes
provisions which require the Administrator to establish the aggregate
production quota for each basic class of controlled substance listed in
schedules I and II and the assessment of annual needs for the
ephedrine, pseudoephedrine, and phenylpropanolamine to be manufactured
in the United States each calendar year to provide for the estimated
medical, scientific, research, and industrial needs of the United
States, lawful export requirements, and the establishment and
maintenance of reserve stocks. 21 U.S.C. 826. The Administrator shall
take the following quota actions for a basic class of controlled
substance listed in schedules I and II and ephedrine, pseudoephedrine,
and phenylpropanolamine pursuant to stipulated conditions: limit or
reduce individual production quotas for each registered
manufacturer,\1\ and fix individual manufacturing quotas for
registrants.\2\
---------------------------------------------------------------------------
\1\ 21 U.S.C. 826(b).
\2\ 21 U.S.C. 826(d).
---------------------------------------------------------------------------
On October 24, 2018, Congress revised the CSA through the Substance
Use-Disorder Prevention that Promotes Opioid Recovery Treatment for
Patients and Communities (SUPPORT) Act. These revisions will be noted
and included in these proposed regulations, where applicable. Through
this Act, the Administrator, by way of delegation from the Attorney
General, may now set quota in terms of the pharmaceutical dosage-form.
[[Page 60118]]
I. Executive Summary
A. Notice of Proposed Rulemaking
DEA published a notice of proposed rulemaking (NPRM) in the Federal
Register on October 23, 2019, which provided an opportunity for
comments to be submitted. 84 FR 56712. The comment period closed on
December 23, 2019. DEA invited comments from the public on all of the
topics covered in the NPRM; however, DEA cannot change the
implementation of amendments from the SUPPORT Act.
B. Summary of the Purposes and Provisions of the Rule
1. Types of Quota
In the NPRM, DEA proposed the addition of new sections to introduce
and define the types of quotas and proposed an update to the procedure
for abandoning quota. The types of quotas are as follows:
Aggregate production quota (APQ) (for controlled
substances);
Assessment of Annual Needs (AAN) (for list I chemicals);
\3\
---------------------------------------------------------------------------
\3\ For the purposes of this document only, ``list I chemicals''
refers to ephedrine, pseudoephedrine, and phenylpropanolamine for
legitimate medical, scientific, research, and industrial needs. The
phrase ``list I chemical(s)'' will be used going forward.
---------------------------------------------------------------------------
Individual Manufacturing Quota (for controlled substances
and list I chemicals);
Procurement Quota (for controlled substances and list I
chemicals); and
Import Quota (for list I chemicals).
Through this final rule, DEA will add these new sections to the
regulations that will define the types of quotas for controlled
substances in schedules I and II and the list I chemicals ephedrine,
pseudoephedrine, and phenylpropanolamine. Also, DEA will change the
regulations to stay up to date with modern technology by formalizing
the current practice of filing to abandon quota with the United Nations
(UN) Reporting and Quota Section in the online Quota Management System.
2. Conforming Changes From the Substance Use-Disorder Prevention That
Promotes Opioid Recovery Treatment for Patients and Communities Act
In the NPRM, DEA introduced the SUPPORT Act \4\ and informed the
public of the new legislation as it applies to DEA. With this final
rule, DEA is updating the current regulations to comply with this new
law. The SUPPORT Act now gives the Administrator, by way of delegation
from the Attorney General, the authority to establish the APQ,
individual manufacturing quotas, and procurement quotas in terms of
pharmaceutical dosage-form prepared from or containing a controlled
substance. The SUPPORT Act also changed the deadline for DEA to fix the
individual manufacturing quota for schedules I and II controlled
substances. The SUPPORT Act defines the phrase ``covered controlled
substance'' and mandates that the amount of diversion of a covered
controlled substance be estimated when establishing any quota. When
estimating diversion, DEA must consult with the Department of Health
and Human Services (HHS) on rates of overdose deaths, rates of abuse,
and the impacts on overall public health related to the covered
controlled substances. DEA may also take into consideration other
sources of information deemed reliable. The SUPPORT Act requires that
``appropriate quota reductions'' be made after estimating diversion.
The Act does not require quota increases.
---------------------------------------------------------------------------
\4\ The SUPPORT for Patients and Communities Act, Public Law
115-271.
---------------------------------------------------------------------------
3. Procurement Quota Certification
DEA proposed to change the regulations to require certification of
procurement quota in the NPRM. This final rule changes the regulations
to provide that both manufacturers and distributors selling to a
manufacturer will be required to obtain certification of the buyer's
quota when an order is placed. This is implemented by changing the
words ``importer,'' ``manufacturer,'' and ``bulk manufacturer'' to
``registrant.''
4. Inventory Allowances
In the NPRM, DEA proposed reductions to the acceptable inventory
allowance, the amount of inventory at which quota would be suspended,
and when DEA would grant a request for additional quota. DEA also
proposed the establishment of inventory allowances for procurement
quota for controlled substances. Due to comments and concerns received
from the NPRM, DEA will be implementing different provisions in this
final rule. Instead of the proposed amendments, DEA will:
Decrease the inventory allowance issued by DEA for
individual manufacturing quotas from 50 percent to 40 percent;
Establish an inventory allowance issued by DEA for all
procurement quotas, except liquid injectable products, at 35 percent,
instead of the proposed 30 percent;
Establish an inventory allowance issued by DEA for liquid
injectable dosage-form procurement quotas at 50 percent, instead of the
proposed 30 percent;
Suspend individual manufacturing quota issued by DEA if a
registrant's inventory exceeds 55 percent (reduced from 65 percent) of
the registrant's estimated net disposal;
Suspend procurement quota issued by DEA, except that for
liquid injectable dosage-forms, if a registrant's inventory exceeds 50
percent of the registrant's estimated net disposal;
Suspend liquid injectable dosage-form procurement quota
issued by DEA if a registrant's inventory exceeds 65 percent of the
registrant's estimated net disposal;
Review request to determine if request for additional
individual manufacturing quota by registrant should be granted when
inventory is less than 30 percent (reduced from 40 percent) of the
registrant's estimated net disposal;
Review request to determine if request for additional
procurement quota, except for liquid injectable dosage-forms, by
registrant should be granted when inventory is less than 25 percent of
the registrant's estimated net disposal;
and
Review for request to determine if request for additional
procurement quota for liquid injectable dosage-forms by registrant
should be granted when inventory is less than 40 percent of the
registrant's estimated net disposal.
5. Subcategories for Quotas
DEA proposed the addition of use-specific subcategories for
individual manufacturing and procurement quotas to formalize the
current, on-going practice of the use of these subcategories by
registrants. The use-specific subcategories are:
Quota for Commercial Sales;
Quota for Transfer;
Quota for Product Development;
Quota for Replacement; and
Quota for Packaging/Repackaging and Labeling/Relabeling.
6. New Deadlines To Establish Quotas
In the NPRM, DEA proposed changes to the deadlines for fixing or
establishing the different types of quotas to allow more time for
processing and communicating with applicants and to make the
regulations consistent with the SUPPORT Act. This final rule will
implement the following new deadlines:
Deadline to establish the APQ and the AAN: change to
September 1;
Deadline to issue individual procurement, import, and
manufacturing quotas: change to December 1; and
Deadline to adjust individual manufacturing quota: change
to July 1.
[[Page 60119]]
II. Discussion of Comments
DEA received 258 comments. Many comments addressed multiple topics
of the NPRM. Commenters also addressed the changes made to the CSA by
the SUPPORT Act, which Congress put into effect.
A. Defining Types of Quota and Filing To Abandon Quota
Issue: DEA received nine comments regarding the definitions and
types of quotas and three comments regarding the updates for the
process of abandoning quota. Comments received from several
organizations stated that they support DEA's changes to its regulations
introducing and defining the types of quota. One company justified its
support stating that DEA's change serves to educate and inform those
not familiar with the quota process.
While one pharmaceutical company had no objections to the
definitions of the types of quotas, they stated that DEA should
consider creating a distinct sixth type of quota: procurement quota
utilized to import concentrate of poppy straw (CPS) or raw opium that
should remain independent of any inventory restraints. This company
further suggested that the 30 percent inventory range would be too
restrictive and would risk supply disruption from one year to the next
as it believes a higher inventory range is necessary both to create a
buffer in the first quarter of a new year and to avoid disruption in
the event of delivery delays involving United States Customs and Border
Protection.
Many commenters also fully supported the formalization of the quota
abandonments with the UN Reporting and Quota Section in the online
Quota Management System. One commenter explained its support by stating
that these changes will allow for automation of the abandonment/
surrender process. One pharmaceutical company recommended DEA take
advantage of the opportunity provided by modifying the quota
regulations to include the same provision in the section for
procurement quota. This same company believes this will better reflect
current practice as both manufacturing and procurement quota utilize
the same mechanism for surrendering unnecessary quota.
DEA Response: DEA is committed to taking into consideration any
changes in market dynamics that may require allocation of individual
manufacturer's quotas or revisions to the APQ. DEA is also committed to
ensuring that quotas are set in a way as to grant manufacturers the
ability to provide controlled substances to meet the demands of the
legitimate medical, scientific, and export needs of the United States.
It has been DEA's long-standing intent to improve the process of
setting the annual quota while ensuring an adequate supply of
controlled substances is available for legitimate needs.
A sixth category of procurement quota for the acquisition of CPS or
raw opium imported in compliance with DEA regulations for the purpose
of removing restraints on inventory allowances whose aims are to ensure
availability is unnecessary. First, there are a very small number of
entities (<10) registered in the United States to procure narcotic raw
materials (NRMs) for processing into schedule II controlled substances
and these companies have a long history of obtaining the NRM necessary
to meeting the estimated needs of the United States.
In addition, there are inventory allowances built into multiple
quotas that DEA grants to those who produce active pharmaceutical
ingredients (APIs) derived from NRM. Prior to implementing this rule,
DEA granted a 50 percent inventory allowance to registered bulk
manufacturers that procure NRM for the API they produce each year,
pursuant to a DEA issued manufacturing quota. That total quantity
(i.e., 150 percent of estimated net disposals minus any existing
inventory on hand) is then utilized to calculate the amount of
procurement quota that the bulk manufacturer requires to make the API
for which a manufacturing quota was granted. In those instances, DEA
assesses the amount of NRM necessary to produce the above-mentioned API
and then calculates an inventory allowance on the amount of NRM
required. Both inventory allowances ensure that there are adequate
amounts in the drug supply to meet legitimate needs. Finally, while
appropriate safeguards are currently in place, the potential for
diversion still exists for NRM from excessive stockpiling of NRM due to
changes in legitimate need of the end products which may reduce the
need to manufacture.
In addition, DEA appreciates the comments received in support of
the process to formalize quota abandonments. Formalizing the procedure
to abandon quota is simply a codification of existing DEA practice.
While this formalization will have no economic costs or benefits, DEA
believes there are benefits to accurately codifying existing practices.
As such, this final rule will enhance efficiency and improve the
process to abandon the right to manufacture all or any part of both
individual manufacturing and procurement quotas.
B. Conforming Changes From the SUPPORT for Communities and Patients Act
DEA received nine comments about the changes imposed by the SUPPORT
Act. As stated in the NPRM, these updates to DEA's regulations are
being implemented to comply with the amendments made to the CSA by the
SUPPORT Act. While DEA does not have the authority to change what has
been established by Congress, DEA will still discuss the comments
below.
The Establishment of Quotas in Terms of Pharmaceutical Dosage-Forms
Issue: By way of the SUPPORT Act, DEA's regulations were changed to
allow quotas to be established in terms of pharmaceutical dosage-forms.
In the NPRM, DEA explained that the discretionary authority granted to
DEA to establish APQ, procurement, and individual manufacturing quotas
in terms of pharmaceutical dosage-forms would not be used at this
moment. The comments received addressed DEA's decision to delay the use
of this discretionary authority, with some disagreeing with DEA's
decision not to use the authority at this moment. Some suggested that
DEA note the distinction between manufacturing injectables (which are
given to in-patients) versus oral solid dosage-forms. These commenters
opined that setting the quotas in terms of pharmaceutical dosage-forms
will help address nationwide shortages of injectables.
DEA Response: In the matter of DEA's decision not to use the
discretionary authority at this present time, DEA emphasizes that the
SUPPORT Act states that DEA (by delegation from the Attorney General)
may establish the quotas in terms of pharmaceutical dosage-forms
prepared from or containing the controlled substance when it is
determined that these such establishments will assist in avoiding the
overproduction, shortages, or diversion of a controlled substance. This
is not an express requirement to grant quotas in that manner, however
it does grant the authority to do so. If DEA were to exercise its
discretionary authority, it would be implemented at the procurement
quota level, which would have a more direct impact on the availability
of specific dosage-forms for legitimate medical need. During the
analysis and review process for individual procurement quotas, DEA
examines in detail the supporting documentation provided by dosage-form
manufacturers to distinguish the type of
[[Page 60120]]
product to be manufactured. This includes the type of formulation
(solid, oral liquid, or liquid injectable) and dosage strengths, which
become part of the factors considered in estimating an appropriate
procurement quota accordingly.
Currently, all liquid injectable products receive 50 percent
inventory allowance. DEA will continue issuing the inventory allowance
for these dosage-forms at the same percentage because there are
significantly fewer dosage-form manufacturers of injectable products.
DEA is aware that quality or production problems related to sterility
issues for injectable products have led to higher likelihood of recalls
of such products. DEA believes that these products, when administered
in controlled clinical and hospital settings, decrease the likelihood
of diversion due to higher levels of oversight. Furthermore, the
ongoing Coronavirus Disease of 2019 (COVID-19) public health emergency
declared by the Secretary of Health and Human Services (HHS) on January
31, 2020, effective January 27, 2020, has made it necessary for DEA to
consider both the potential for diversion, as well as the anticipated
increase in demand for injectable products used to treat patients
suffering from COVID-19. Due to COVID-19, DEA had to issue an
adjustment to the established APQ for 2020 \5\ for selected controlled
substances involved in manufacturing injectable drug products for
COVID-19 treatment. The adjustment of APQ allowed DEA to adjust the
individual procurement quotas and related inventory allowances for
injectable products. While DEA declines to establish APQ in terms of
pharmaceutical dosage-forms at this time, DEA has decided to implement
a separate inventory allowance for liquid injectable dosage-forms. This
will be discussed later in the document.
---------------------------------------------------------------------------
\5\ DEA published Established Aggregate Production Quotas for
Schedule I and II Controlled Substances and Assessment of Annual
Needs for the List I Chemicals Ephedrine, Pseudoephedrine, and
Phenylpropanolamine for 2020 in the Federal Register, 84 FR 66014,
on December 2, 2019. In response to COVID-19, DEA published
Adjustments to Aggregate Production Quotas for Certain Schedule II
Controlled Substances and Assessment of Annual Needs for the List I
Chemicals Ephedrine and Pseudoephedrine for 2020, in Response to the
Coronavirus Disease 2019 Public Health Emergency in the Federal
Register, 85 FR on April 10, 2020, to address any potential
shortages that may occur during the public health emergency.
---------------------------------------------------------------------------
Deadline To Fix Individual Manufacturing Quotas
Issue: DEA also received a comment from an individual regarding the
date change for fixing the individual manufacturing quota. The
commenter asked, ``how and why did DEA have Congress change the date to
December?''
DEA Response: The SUPPORT Act revised the CSA by issuing a
mandatory change to the date by which DEA must fix individual
manufacturing quotas to ``on or before December 1.'' Because Congress
issued this change, DEA must follow this law and implement the new date
into DEA's regulations.
Estimation of Diversion
Issue: DEA received comments that were in support of DEA providing
explanations for the increase in quotas but there was concern with the
reliability of the data available for abuse (manufactured products vs.
illicit substances). Commenters suggested DEA consider a broader range
of data when calculating diversion by considering sources that are
already available, pushing for even better data sources for future
years, and adopting a uniform method of accounting for diversion. They
stated that DEA should exhaust other means of curtailing illegitimate
sales, abuse, and diversion before looking to quota as a prevention
tool. Companies suggested that DEA differentiate among specific dosage-
forms and target the dosage-forms that are subject to abuse to
encourage the use of dosage-forms that are less prone to diversion.
They stated that there needs to be an objective evaluation considering
the exclusion of injectable dosage-forms from quota reductions.
Commenters also suggested that DEA account for over-prescribing as a
part of the diversion analysis by considering data and best practices
of healthcare providers and by collecting information from the
Prescription Drug Takeback Programs and similar sources. Further, they
suggested that DEA use the medical professionals' ``best practices'' to
help account for overprescribing at the physician level and incorporate
data collection into the Prescription Drug Takeback Program to account
for overprescribing at the patient level.
DEA Response: The Food and Drug Administration (FDA) is responsible
for approving drug products and can require a manufacturer to submit a
Risk Evaluation and Mitigation Strategy (commonly referred to by the
industry as a REMS), which is a risk management plan that uses tools
beyond the prescribing information to ensure that the benefits of
certain drugs outweigh their risks. Certain REMS may include strategies
to prevent, monitor, and manage specific risks resulting from
inappropriate diversion and abuse of products. The information provided
from a REMS informs DEA of potential abuse liability issues that may
lead to diversion. If a manufacturer believes that its product is
potentially being diverted or abused within the supply chain based on
customer orders received that raise suspicion, it is responsible for
notifying DEA by sending a report to the agency through DEA's
Suspicious Orders Reporting System (SORS). See 21 U.S.C. 802(57), 21
CFR 1301.74(b). Once notified, DEA will alert the field office
regarding the situation. The diverted amount will then become a factor
when processing the quota for the current year and an adjustment to the
amount of quota granted will be made indicating the diverted amount.
DEA also acquires data from HHS, Centers for Disease Control and
Prevention (CDC), Centers for Medicare & Medicaid Services (CMS), and
the States to determine reliable rates of overdose deaths, abuse, and
overall public health impact as a factor of diversion to make
appropriate quota reductions for each of the covered controlled
substances. DEA conducts diversion analysis for the five covered
controlled substances and the remaining drugs not considered a
``covered controlled substance'' by the SUPPORT Act.
C. Procurement Quota Certification
Issue: DEA received three comments from industry expressing concern
about DEA's change to the regulations to ensure that both manufacturers
and distributors selling to a manufacturer are required to obtain
certification of a buyer's quota for the request of schedule I and II
controlled substances, as well as list I chemicals when the buyer is a
manufacturer.
One pharmaceutical company felt that the proposed changes seemed
too broad. This company did not question the requirement to provide a
certificate of quota when purchasing from a distributor or a
manufacturer. However, the company stated that the specific wording of
the proposed regulation may be overly broad. According to the company,
as worded, the proposed regulation would require a certificate for
orders from any registrant. The company believed this wording could be
construed to apply to reference standards from analytical sites or
complaint samples and certificates should not be required when
manufacturers order from pharmacists, health care practitioners, or
analytical laboratories.
DEA Response: By requiring that any manufacturing registrant
provide a certification of quota before receiving any quantity of a
schedule I or II controlled substance or list I chemical,
[[Page 60121]]
DEA is better able to maintain the closed distribution system and
provide a more accurate calculation of the APQ for the United States
per 21 CFR 1303.12(f). While DEA is not averse to manufacturers
fulfilling legitimate medical needs, DEA is required to ensure that
enough quota is granted to meet legitimate medical, scientific, and
research needs, while preventing diversion. To prevent diversion and to
maintain a closed distribution system for schedule I and II controlled
substances and list I chemicals, DEA requires any registrant to whom a
procurement quota has been issued to follow the laws and regulations of
the CSA and Code of Federal Regulations (CFR). One method of doing this
is to require all registrants sending material to a manufacturer to
verify proof of quota through certification, which ensures that
purchases do not exceed the procurement quota set by DEA.
D. Inventory Allowances
There were 23 in-scope comments that discussed the proposed
reductions of inventory allowances. Many of the comments discussed each
reduction separately. Furthermore, many of the comments from companies
asked DEA to clarify which registrants the various reductions would be
applicable to, due to the current placement of the regulations in the
CFR. In general, commenters objected because of the economic impact to
their business and the inability to ensure adequate supply. Commenters
contend that DEA should not use a one-size fits all method for
inventory and limiting additional quota because it will create a
constant state of backorder and market shortage. A commenter proposed a
grace period of at least one year before making the reductions
effective.
Reduction and Establishment of New Inventory Allowances for Individual
Manufacturing Quotas and Procurement Quotas From 50 Percent to 30
Percent
Issue: Commenters objected to the reduction/establishment of
inventory allowance stating that the lower amount of inventory
allowance combined with the new date for individual manufacturing and
procurement quotas may cause a shortage. A commenter stated that DEA's
data on theft and loss at the manufacturing level show that the
security of the products exceeds the security at the retail level.
Commenters asked DEA to name studies showing that increased inventory
at manufacturing facilities correlates to an increase in diversion or
abuse. Further, many commenters allege that the proposed changes will
create incentives that may increase opportunities for diversion and
conveyed that DEA should assess whether reducing quotas would create
shortages and jeopardize patient care. Commenters also emphasized that
DEA needs to evaluate carefully the legitimate supply chain's full
throughput time to bring medicines to market, so that patient care is
not jeopardized.
Many commenters conveyed that the proposed 30 percent inventory
allowance for procurement quota is overly restrictive and such a
reduction would cause inefficiencies and shortages. Furthermore, it was
commonly said that the reduction would hinder the ability to provide
consistent care to patients, and it may result in potential shortages
in hospitals and clinics and severely impact those patients managing an
opioid dependence. They mentioned that there was already a shortage in
acute care facilities.
Commenters suggested that DEA should give further consideration to
the potential for supply disruptions that would result from decreasing
the inventory allowance for API bulk manufacturers from 50 percent to
30 percent. It risks imposing significant costs and inefficiencies on
the production of authorized bulk drug substances without corresponding
benefits.
Commenters also stated that DEA's claim that the reductions will
not increase the likelihood of shortages because there has been an
increase in the number of manufacturers is too broad. Manufacturers of
approved drug products can only use the approved suppliers that they
named in their FDA-approved applications. Typically, manufacturers of
approved drug products only have one or two suppliers that they can
use. Commenters also said that DEA misstated data when claiming that
the proposed reduction should not affect manufacturers. Three
manufacturers supply over 90 percent of the API for codeine,
hydrocodone, oxycodone, and morphine; therefore, there are fewer API
producers in 2019 than 2007. API from one of the three primary
manufacturers is not interchangeable across dosage-form manufacturers
without FDA approval. In respect to procurement quotas, commenters
alleged that the reduction to 30 percent would leave no margin for
recovery. They also stated that the reduction to 30 percent will result
in unnecessary restraints on API manufacturers.
Multiple commenters want DEA to keep the existing allowances of 50
percent for bulk manufacturers and state DEA should consider possible
alternatives to reduce the additional cost burdens and risks of
shortages and diversion. Commenters frequently claimed that DEA did not
provide data to support its claim that the reduction for individual
manufacturing quota inventory allowances would reduce the potential for
diversion, especially because commenters believe that the material is
not desirable at the bulk manufacturing level. They also mentioned that
the reductions will substantially increase the cost of bulk
manufacturing, will increase the risk of shortages of API supplies, and
may increase the risk of diversion. In respect to bulk and dosage-form
manufacturers, commenters assert the reduction could be harmful to
patients and will potentially lead to market shortages of injectable
medicines needed for critical medical care. Commenters also alleged
that constricting inventories at pharmaceutical manufacturers or in
institutional settings will have little impact on curbing diversion.
Many commenters conveyed the want for DEA to publicly provide data that
validates and supports the need for any reductions in inventory
allowances.
Commenters asked for clarification on whether the 30 percent
inventory allowance would be applicable to dosage-form manufacturers,
due to its placement in the CFR. They suggested that if DEA applies the
inventory allowance to dosage-form manufacturers, then it only be
reduced for domestic consumption and not for exports. They also
suggested that dosage-form manufacturers be allowed to calculate their
allowance using the estimate of the current year's sales and bulk
manufacturers calculate their allowance using the average of the
preceding calendar year and the current calendar year. Several
commenters mentioned that year-end inventory is not indicative of how
much inventory they require throughout the year because a
manufacturer's inventories are lowest at year-end as they have sold
down their stock and await the granting of quota for the next calendar
year. Commenters opined that the reduction of inventory from 50 to 30
percent is counter intuitive because more quota is needed due to the
additional waste that would be caused from the increased number of
manufacturing campaigns that would be required. Furthermore, they
alleged that DEA will experience an increase in the amount of quota
requests due to this reduction.
A few commenters worried that the reductions may not have a
significant effect on a provider's decision to prescribe. They
explained that if DEA
[[Page 60122]]
limits production but providers continue to prescribe at the same rate,
the issue will not have been addressed. Instead, costs may rise as
supply decreases due to the reduction in production. One organization
recommended that DEA pay greater attention to evidence-based research
on appropriate prescribing and provide greater education for physicians
and patients based on this research.
DEA Response: DEA has been working to prevent and to decrease
diversion for years. DEA uses Composite Risk Management \6\ to assess
the risk of diversion at all levels of the supply chain. While
diversion at the manufacturing level may be low, DEA emphasizes that
there is still the potential for diversion to occur at that level. When
setting quotas for the year, DEA assesses whether they would cause a
shortage or jeopardize patient care. Also, DEA uses several sources of
data to evaluate legitimate supply chains, such as Automated Reports
and Consolidated Ordering System (ARCOS), IQVIA, and manufacturers' own
data. The quotas granted are a composite of estimated requirements for
legitimate medical, scientific, and export needs, manufacturing yields,
and inventory allowance to begin to meet the next year's legitimate
needs while reducing the risk of diversion.
---------------------------------------------------------------------------
\6\ For purposes of this document, Composite Risk Management is
a decision making process used to mitigate risk associated with all
hazardous equipment or impact to the mission.
---------------------------------------------------------------------------
While there may not be published studies showing that an increase
in inventory at manufacturing facilities correlates to an increase in
diversion or abuse, a fundamental principle governing policy
discussions and DEA rulemaking, especially during the height of an
opioid epidemic, is that DEA must strike a balance between ensuring an
adequate and uninterrupted supply of controlled substances while
preventing an oversupply which increases the risk of diversion. DEA
does have internal information that it takes into consideration when
granting individual quotas at that time. Review of internal actions of
enforcement measures taken over the years have shown thefts at the
manufacturing level and the public health impact in the surrounding
communities as a result of those thefts. There have been occurrences of
thefts of bulk API and thefts of finished dosage-forms from
manufacturers' production facilities, and these products were sold into
the community. Overproduction of API and finished dosage-forms can lead
to high inventories and questionable high pressure marketing practices.
DEA notes that manufacturers cannot sell more than their granted quotas
plus previous year inventories but that high inventories could allow
small thefts to go unnoticed from production facilities.
DEA understands the worries of commenters regarding the reduction
of inventory allowances possibly jeopardizing patient care; however,
DEA wants to stress that the management of patient care is not
controlled by way of quotas. While DEA is aware of the opioid crisis,
the issuance of quotas and accompanying inventory allowances are not
directly involved with the management and care of patients. The
issuance of quotas does not regulate the physician's practice of
medicine. Therefore, inventory allowance reductions would not hinder a
physician's ability to provide consistent care to patients, as voiced
by commenters. DEA does not regulate a provider's prescription methods
so long as there is a legitimate medical need. While the inventory
allowance reductions apply to what manufacturers hold in inventory to
begin dispositions for the next calendar year, they can utilize the
inventory in the event that there is a shortage or there is an issue in
the supply chain during manufacturing to prevent disruption to the
legitimate supply chain. DEA does not control the way a company
conducts business, as business decisions on production and supply chain
management are done on the company level. DEA notes that it is HHS'
area of responsibility to provide Evidence Based Medicine as guidance
to providers and the public.
While there are a few commenters who have shared the concern that
DEA's reduction of inventory will not have much of an effect on
overprescribing, DEA believes that this is one of many factors being
implemented at the federal level that will have an impact on decreasing
overdoses due to prescription medications. DEA also notes that there
has been a decline in the prescribing of schedule II opioid
prescriptions since 2016 as many of those other factors have been
implemented at Federal and state levels. As shown by IQVIA and
demonstrated by a review of CMS' data, prescribing rates for opioids
have decreased 44 percent since 2016 without a significant increase in
price.\7\
---------------------------------------------------------------------------
\7\ The Centers for Medicare & Medicaid Services, https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Information-on-Prescription-Drugs/Medicaid.html,
accessed 6/15/2020.
---------------------------------------------------------------------------
While commenters opined that DEA is being too broad in stating that
the increase in manufacturers will offset the chances of a shortage,
DEA did not generalize or understate the concept of there being enough
dosage-form manufacturers so as not to increase the chances of
shortages. Most dosage-form companies may have one main API supplier to
ensure a continuous supply of product to meet patient need and mitigate
the impact of potential shortage of the product. However, many dosage-
form manufacturers have named a second supplier in FDA-approved
applications and can request API from either supplier to meet
legitimate patient need. While a secondary supplier is not required for
New Drug Application or Abbreviated New Drug Application approval, DEA
has noted that most requests for product development quota include a
second supplier of API. DEA reviewed FDA's Approved Drug Products with
Therapeutic Equivalence Evaluations (hereinafter ``Orange Book'') to
determine the number of approved products and then matched those
products to DEA registered manufacturers. In the event that there is an
increase in a company's risk of shortage of supplies, the applicant may
file for additional quota at any time during the calendar year. During
that time, the application, along with its supporting documents, will
be reviewed and if needed, an adjustment to the quota will be granted.
Currently, DEA has already been applying the reduced inventory
allowance of 30 percent to fentanyl, hydrocodone, hydromorphone,
oxycodone, and oxymorphone.
DEA has decided to reduce the individual manufacturing inventory
allowance for all controlled substances and list I chemicals to 40
percent and the procurement inventory allowance for controlled
substances and list I chemicals to 35 percent, with the exception of
liquid injectable dosage-forms. For liquid injectable dosage-forms, the
procurement quota inventory allowance will be set at 50 percent. The
inventory allowance requires that manufacturers maintain their
inventory allowance based on estimated net disposals for the calendar
year. It is based on what the manufacturer estimates their disposal to
be and not the actual disposal at a specific point in time. DEA
requires year-end reporting that demonstrates the manufacturer ended
the year with the correct inventory allowance percentage. The inventory
allowance does not affect the amount of a net-disposition quota granted
to a manufacturer. DEA grants the quota necessary to be able to
continue to meet legitimate patient needs based on the historical and
[[Page 60123]]
estimated future data including changes in market share and FDA
guidance. DEA grants an inventory allowance to the manufacturer to
begin disposition for the next year; however, this may also be used to
meet the unanticipated market changes in the current year. API and/or
finished dosage-forms in reserve are usually held for unanticipated
market changes, manufacturing issues, and to begin the next year. As
such, DEA's lowering of the inventory allowance as written in the
regulations should not affect a manufacturer's sales. While diversion
may not occur with high frequency at the manufacturing level, it occurs
and can impact public health in the surrounding community. Since 2004,
DEA has sought to address risk of diversion at the apex of the
distribution system (i.e., manufacturing level). Granting higher
inventory based on sales provides more incentive to push more material
further downstream as no entities want to maintain higher levels of
stocks than what they deem necessary due to storage and monetary
constraints, the fact is that profit is only generated through sales of
the product and not production. DEA previously demonstrated that bulk
manufacturers were only holding 39 percent inventory. It is for these
reasons, and the fact that historically manufacturers have not held 50
percent inventory levels, that a lower inventory at the manufacturer
level should be implemented. Also, the lower inventory allowances can
potentially reduce diversion throughout the supply chain.
DEA notes that bulk manufacturers have not always utilized all of
their granted quota to manufacture API and have consistently held less
than 50 percent inventory. The year-end sales and inventory provides
information on how a registrant is doing in the market and provides a
starting point when assessing requests for revisions to current quotas.
If a bulk manufacturer's sales to customers are more robust than
anticipated, inventories will be low and DEA will grant a quota
adjustment to ensure that the customers can receive material up to
their individually granted procurement quota. If inventories are high,
it indicates that the company has not sold as much API to their
customers as they forecasted, and therefore the higher inventory
allowance is unnecessary.
Over the last decade, DEA has implemented a 30 percent inventory
allowance for opioid related procurement quotas. This inventory level
has not caused issues due to quota being set at the legitimate patient
level. DEA notes that over the last four years, after reviewing the
applicants' year-end reports and other data reporting sites, dosage-
form manufacturers have reported higher than average inventories of
opioids as prescriptions for opioids have declined significantly due to
the implementation of CDC guidelines and DEA enforcement activities.
The data show that manufacturers only acquired 72.7 percent of
fentanyl, 73.9 percent of hydrocodone, 56.7 percent of hydromorphone,
79.3 percent of oxycodone, and 73 percent of oxymorphone from the
quotas granted to them by DEA. As prescription rates have fallen, the
data show that the material has not sold, but has been moved to their
inventory, thereby significantly increasing inventory levels above that
which are medically necessary on an annual basis. DEA has found that
over the past years, inventory levels have averaged 72 percent for
fentanyl, 36.9 percent for hydrocodone, 57 percent for hydromorphone,
36.3 percent for oxycodone, and 61.0 percent for oxymorphone, while
companies have met legitimate medical needs. The inventory levels for
fentanyl, hydromorphone, and oxymorphone include product development
efforts as manufacturers seek FDA approval of abuse-deterrent
formulations. DEA has considered the comments from manufacturers and
will set the inventory allowance for procurement quotas at 35 percent
for all dosage-forms, except liquid injectable dosage-forms. Liquid
injectable dosage-forms will receive a 50 percent inventory allowance
for procurement quotas.
To determine the amount for the procurement quota inventory
allowance, DEA has reviewed the Orange Book and internal quota
applications. These reviews led DEA to determine that, generally, there
are more dosage-form manufacturers than bulk manufacturers, and as
such, an individual dosage-form manufacturer does not need as great of
an inventory as a bulk manufacturer. Therefore, the procurement quota
inventory allowance should be lower than the manufacturing quota
inventory allowance. DEA has considered new data from FDA on new
approved drug applications and internal quota applications that showed
that manufacturers are producing or seeking to produce more extended-
release and/or abuse-deterrent dosage-form products that require
additional manufacturing time compared to immediate-release drug
products. Therefore, DEA has determined that a procurement quota
inventory allowance of 35 percent provides the necessary manufacturing
lead time to prevent shortages or gaps in the supply chain. DEA
believes this increase in inventory allowance from the proposed amount
will provide the necessary time for all manufacturers to complete their
manufacturing activities and place their products in the supply chain
for legitimate need.
However, DEA will not be reducing the inventory allowance for
procurement quotas of the liquid injectable dosage-forms. After further
review of comments, DEA acknowledges that for injectable products,
there are significant manufacturing issues when manufacturers fail to
comply with FDA's Current Good Manufacturing Practice (cGMP)
regulations. Additionally, DEA has realized that the lower number of
manufacturers, coupled with the higher likelihood of recalls due to
cGMP violations, requires the higher inventory allowance for dosage-
form manufacturers of injectable products. In light of COVID-19, DEA
also acknowledges that declining to reduce inventory allowances for
these liquid injectable dosage-forms ensures that manufacturers are
able to address and endure potential circumstances of nationwide
shortages. The liquid injectable dosage-form procurement quotas will be
set at 50 percent.
DEA read the comments regarding the limited number of bulk
manufacturers supplying the market. DEA and international drug control
treaty obligations control the number of bulk manufacturers who supply
the dosage-form manufacturers. While the number of bulk manufacturers
may fluctuate, over the past 10 years there have been 10 bulk
manufacturers that have supplied the opioid market, with three of them
supplying the majority of the requirements. DEA analyzed the data and
determined that the bulk manufacturers did not utilize the entire quota
granted to them each year. On average, the companies manufactured only
85.2 percent of the fentanyl, 61.7 percent of the hydrocodone, 79.1
percent of the hydromorphone, 78.3 percent of the oxycodone, and 69
percent of the oxymorphone quota granted by DEA. These bulk
manufacturers have maintained an average inventory of 39 percent and
have continually met the legitimate medical need before and during the
opioid crisis. DEA has noted that dosage-form manufacturers are now
validating a second API supplier as a precautionary measure. As dosage-
form manufacturers continue to seek FDA approval for new drug products
containing controlled substances, DEA continues to grant product
development quotas to allow for qualification of two suppliers and
grants quota to bulk
[[Page 60124]]
manufacturers to support this qualification effort.
DEA notes that the proposed regulations for procurement quota were
added to the only regulation in the CFR for inventory allowance, which
is located under the subheading of ``Individual Manufacturing Quotas.''
To lessen the chance of causing confusion to registrants, DEA has
chosen to move the procurement quota inventory allowance regulations.
As such, DEA will create new regulations to address the inventory
allowance amounts for procurement quotas.
Reduction of Amount at Which Quota Would Be Suspended to 45 Percent
Issue: Many commenters explained that the reduction of the level at
which quota will be suspended would require manufacturers to run
smaller campaigns. They argue that this will increase the number of
campaigns required to produce the same amount of product in a given
year. Commenters also noted that the proposed reduced suspension amount
would interfere with product supply. Commenters stated that the
reduction in the suspension threshold would increase substantially the
cost of bulk manufacturing and would increase the risk of shortages of
API supplies and may increase the risk of diversion. They also conveyed
that reducing the trigger for suspending bulk API manufacturing quota
would decrease significantly the efficiency and increase the costs of
bulk API manufacturers.
Commenters asked for clarification on whether the quota suspension
will apply to dosage-form manufacturers and suggested that DEA clarify
that it is not applicable to bulk manufacturers. They suggested that
DEA apply the suspension threshold at year-end so that the inventory
level is only above the trigger level briefly. Commenters conveyed that
this would ensure that the suspension does not interrupt timely and
efficient processing of bulk API. As an alternative option, commenters
suggested that DEA clarify the definition of inventory so that it does
not include material of a basic class that is not yet in finished form
suitable or intended for sale or provide a more effective procedure for
issuing exceptions to the quota suspension threshold.
Commenters explained that lowering the inventory ceiling to 45
percent would disrupt manufacturing operations and cause significant
cost increases because this will require smaller, more frequent
campaigns. They argue that these would generally decrease efficiency
and potentially increase the amount of product wasted during the
required cleaning of equipment between each additional campaign.
Additionally, there may also be an increase in the generation of
hazardous waste because of these additional campaigns. One commenter
specifically stated that the reduction is too restrictive for lower
volume APIs. Also, the reduction may potentially short the finished
dosage-form markets by greatly impacting lead-times to get the material
to customers, and it would force customers to wait an extra four to
five months.
It was suggested that DEA evaluate the data throughout the year and
not just the year-end data. Furthermore, DEA received suggestions that
the ceiling should be set at 55 percent instead, so that drug shortages
do not occur. Some commenters suggested the reduction in allowances
should only apply to dosage-form manufacturers by lowering the
inventory allowance for those manufacturers to 40 percent and that DEA
specify that this does not apply to bulk API manufacturers.
DEA Response: DEA has been working to prevent and detect diversion
for years. DEA grants the quota to companies, and they can use the
quota for various purposes within the scope of their requested business
activity. The companies and DEA calculate inventory allowance
suspension is calculated based on the companies' estimated net-disposal
for the calendar year. If the companies' dispositions are robust as
estimated, the company will likely not meet the suspension percentage.
If the companies' dispositions are not meeting the company's
estimations as the calendar year progresses, the company will likely
meet the suspension percentage and need to discontinue manufacturing
until net disposition volume increases to the extent that the estimated
inventory is below the inventory allowance suspension percentage.
Companies can and do apply for quota revisions at any time during the
calendar year. DEA grants quota to meet estimated legitimate patient
need and provide an inventory allowance based for the next calendar
year based on net dispositions. A company requesting quota in excess of
their estimated market portion necessary to meet legitimate medical
need and relevant inventory allowance, as determined by the company's
supporting documentation, IQVIA data and FDA guidance, which are among
the list of factors \8\ DEA considers, will not receive the requested
quota; however, the quota granted will be sufficient to meet legitimate
need and inventory allowance. DEA has noted instances where (1) bulk
manufacturers have not utilized all of their granted quota to
manufacture API and have consistently held less than 50 percent in
inventory; and (2) dosage-form manufacturers have requested additional
quota while not distributing finished dosage-forms from their inventory
to the market to cause an artificial drug shortage.
---------------------------------------------------------------------------
\8\ 21 CFR 1303.23 and 1315.23.
---------------------------------------------------------------------------
DEA wants to clarify that this final rule will be applicable to
both bulk manufacturers and dosage-form manufacturers. The amount at
which quota will be suspended will differ for individual manufacturing
quota and procurement quota. In reviewing FDA's Orange Book by
controlled substance, it is apparent the ratio of dosage-form
manufacturers to bulk manufacturers is heavily weighted on dosage-form
manufacturers many of whom make generic drug products that are
therapeutically equivalent to other drug products for treating
patients. Therefore, the dosage-form manufacturers' quota suspension
level will be lower.
While DEA understands the concerns brought forth by the
registrants, DEA will continue to grant quota based on legitimate need.
The reduction of the suspension of quota remains based on estimated
dispositions for the calendar year. This suspension does not interfere
in normal campaign batches unless a company's net dispositions decrease
markedly from the company's own estimated dispositions provided to DEA
at the time of their quota application. A manufacturer may complete
their campaigns for the calendar year based on estimated net
dispositions. If dispositions are not as robust as the company
predicted, then any unused quota will be suspended until dispositions
are estimated to leave the company with the appropriate inventory
levels at the end of the year. If the company is in the middle of a
campaign batch when they realize they will exceed their estimated
inventory allowance, the company can apply and request with good cause
to complete the batch before suspending manufacturing activities until
sales/dispositions bring the estimated inventory level to the correct
percentage. See 1303.24(b). DEA does not control the way a company
conducts business, as business decisions on production and supply chain
management are done on the company level.
However, as this relates to finished dosage form manufacturers, a
company who requests quota revisions because of poor business
decisions, such as manufacturing unnecessary dosage-forms or strength
based on estimated legitimate need for the substance,
[[Page 60125]]
provides DEA an opportunity to grant quota based on specific FDA
approved dosage-forms as authorized by the SUPPORT Act. For example, at
the beginning of the COVID-19 pandemic, hospitals declared drug
shortages of specific treatment drugs. DEA estimated that it granted
sufficient quota to manufacturers for COVID-19 treatment drugs. DEA
received additional detailed inventory information from the dosage-form
manufacturers and determined that the manufacturers did not have the
correct dosage forms and strengths available for hospitals to utilize
immediately. Therefore, DEA granted additional quota specifically to
meet the dosage forms and strengths hospitals required to treat COVID-
19 patients.
Reduction of Amount at Which Requests of Additional Quota Would Be
Granted to 20 Percent
Issue: Commenters requested clarification as to whether the 20
percent rule will apply to dosage-form manufacturers who use
procurement quota due to its proposed placement within the CFR and
because historically, DEA has said it does not apply. Many commenters
opined that waiting until 20 percent to grant additional quota is too
low of a threshold and would lead to supply disruption if applied to
dosage-form manufacturers. The lower amount also would not allow
manufacturers to be ``flexible to address situations such as shortages,
natural disasters, epidemics, medical demand, and other scenarios that
would require an increase in production of critical medications.''
Commenters went on to explain that 20 percent equals 10 weeks of
inventory but production lead times are typically greater than 10
weeks. According to these commenters, waiting until there is less than
10 weeks of inventory will lead to market shortages and disrupt patient
care.
The commenters went on to state that the time that it takes DEA to
review quota applications is longer than six to eight weeks and
granting more quota at the 20 percent mark would possibly mean
depleting stock before DEA finishes reviewing. In particular, Teva
stated that 15 of 36 (42 percent) of Teva's 2019 quota adjustment
applications took nine weeks or longer for DEA to respond, and seven of
36 applications (19 percent) took 13-15 weeks for response. Response
times of 10 or more weeks are unacceptable under normal circumstances
and will exacerbate out of stock issues with reduced inventory
allowances. All of this attributes to the increased potential for
shortages and delays of medicine.
DEA Response: When establishing quota, DEA takes into account the
current and previous year's sales and uses historical data to justify
the need. DEA is not mandating that manufacturers need to have an
inventory of less than 30 percent (for individual manufacturing quota)
or 25 percent (for procurement quota) before applying for additional
quota. A registrant may file for additional quota at any time during
the calendar year. During that time, DEA will review the application
and, if needed, will grant an adjustment to the quota. Registrants
already apply for quota adjustments per their needs, and this will not
change the current application process.
DEA acknowledges that quota processing times can vary throughout
the year with some outliers. A quota processing time analysis was
conducted for quota requests processed in 2019. The analysis showed a
quota processing time range of four to eight weeks. When initial quotas
were not factored into the calculation, the average time to process
quotas was approximately 37 calendar days (estimate typical provided to
registrants is four to six weeks). However, between October and
December, when concomitant processing of initial and revised quota
applications occur, it took an average of 57 calendar days (estimate
provided to registrants is six to eight weeks). Quota processing delays
can be caused by various circumstances such as, but not limited to,
incomplete, poorly written, and mislabeled applications; pages of
extraneous information; and extremely busy times of the year; however,
inventory has historically been adequate to cover these delays and
other situations.
Additionally, as previously stated, DEA has found that a portion of
the procurement quota granted for some substances has not been
utilized; therefore, formally establishing an inventory allowance five
percent higher than that which had already been implemented should not
cause more quota applications to be submitted or subsequent delays in
processing. In fact, DEA showed that manufacturers have not been
selling the material they have procured against their quota and instead
have been adding it to their inventory to await changes in patient
need.
DEA's actions in response to COVID-19 prove that even with lower
inventory levels, DEA is able to be flexible to address situations such
as shortages, natural disasters, epidemics, medical demand, and other
scenarios that would require an increase in production of critical
medications, despite the concerns of commenters. During the COVID-19
pandemic, DEA, FDA, other federal agencies, private partnerships, and
others in the pharmaceutical industry--specifically the injectable
dosage-form manufacturers--were in continuous dialogue regarding the
availability of controlled substances to be used in the treatment of
ventilator patients. Despite the injectable dosage-form manufacturers
having almost a full year's worth of inventory, based on previous
year's sales, plus current year quota on hand, hospitals reported
shortages almost immediately as soon as the treatment protocols were
determined. DEA soon determined that despite the sheer quantity of
available inventory at the dosage-form manufacturing level, the
specific formulations hospitals required were not available. In order
for DEA to respond to hospitals reporting shortages of injectable
products for treatment of ventilator patients during the COVID-19
pandemic, DEA and the injectable manufacturers entered into continuous
dialogue to meet hospitals' demand for injectable products. With proper
supporting documentation, DEA was able to process their quota requests
in less than five business days, demonstrating DEA's flexibility to
address situations such as shortages, natural disasters, epidemics,
medical demand, and other scenarios that would require an increase in
production of critical medications. Also, in these dialogues,
injectable manufacturers stated that the manufacturing times from
acceptance of API to release of the drug product took approximately 30
to 42 days. This manufacturing time further shows that manufacturers
also have the flexibility to address those situations raised by the
commenters.
The COVID-19 pandemic demonstrated that the issue was not the
availability of large inventories on hand, but the flexibility to grant
and utilize quotas to produce the formulations and dosage strengths
demanded at the time of the crisis. While the inventory allowance for
injectable products was not at issue, discussions with FDA and
manufacturers during COVID-19 regarding cGMP issues allowed DEA to
realize the importance of maintaining a separate inventory allowance
for these types of products as mentioned in comments received regarding
injectables.
E. Subcategories for Quotas
Issue: DEA received seven comments concerning the formalization of
the current practice of use-specific subcategories for individual
manufacturing and procurement quotas. One company was concerned that
the
[[Page 60126]]
specificity may create an administrative burden on manufacturers who
may need more product for one category versus another. This commenter
also suggested that DEA allow registrants to transfer product between
categories based on notice to DEA rather than requiring a formal
reallocation of quota. Another organization emphasized that it did not
object to the proposed addition of use-specific subcategories for
individual manufacturing and procurement quotas and the use of
subcategories by registrants. It recommends that DEA establish a new
procurement quota or subcategory for CPS and opium.
An association representing manufacturers and distributors of over-
the-counter medicines, dietary supplements, and consumer medical
devices in the United States noted that although the subcategories for
types of quotas seem workable, it would reduce flexibility. This
association stated that subcategories could create inefficiencies or
shortages in the supply chain if, for instance, a manufacturing batch
required rework and thus required a change in which use-specific
subcategory was used. The association further noted that introduction
of new line extension of a medicine with a list I chemical can result
in in-year shifts in the amount of material expected with little notice
as development, validation or revalidation, or scale-up occur, with
different sub-category quota impacts.
One commenter was concerned with how DEA defines replacement quota
and whether replacement quota will be subtracted from the APQ. This
same commenter questioned whether DEA intends to exceed the APQ by the
issuance of additional quota to replace quota that was previously
granted within the same calendar year. Additionally, the commenter
suggested that DEA explain how replacement quota is factored into the
APQ. As such, this commenter believes that granting replacement quota
on a case-by-case can appear to be unfair when faced with identical
circumstances submitted by two different manufacturers.
Another commenter requested that DEA provide clarification on
whether DEA-registered manufacturers are materially impacted by the
creation of new sub-categories for suppliers that will need to register
for procurement quotas and would there be any additional impact to
quota management and certification procedures for repackagers.
DEA Response: DEA is committed to ensuring that quotas are set in
such a way as to grant manufacturers the ability to provide controlled
substances to meet the demand of the legitimate medical, scientific,
industrial, and research needs of the United States. DEA is required to
understand what is available for legitimate patient need versus what is
available for product development to calculate properly the APQ and
individual quotas. Additionally, as the number of manufacturers
continues to increase and industry practices and specializations
change, the ability to track methodically movements of material between
registrants at all stages of manufacturing becomes more critical. The
specificity of quota is important. DEA is responsible for many reports
that require the denotation of quantities by quota type, and it
improves the efficiency of the application and reporting process for
DEA-registered manufacturers. If categories are combined, there would
be no way to calculate efficiently quota that was used for commercial
sales, product development, packaging, etc. This would drastically
inflate the quantity of commercial sales quota, as packaging/
repackaging and labeling/relabeling quota, among other categories,
could not be separated from commercial sales quota.
Replacement quota is intended to replace material that does not
meet good manufacturing practice standards slated to meet patient needs
during the current quota year and is not a means to replace disposed
samples, analytical samples, product development material, and expired
inventory acquired or manufactured under previous quota years. This
subcategory of individual manufacturing quota and procurement quota
includes quota granted to a registrant after the registrant obtained
material that was initially intended for commercial sale, but is unable
to be marketed. Examples include failed batches due to a contaminant,
material that is out of specification and can no longer be used, lots
that reached their expiration date in the supply chain, or unusable
material received from a bulk manufacturer. Replacement quota is
granted on a case-by-case basis. The specifics of the registrant's
justification and situation determines the merit of the request.
HHS contemplates legitimate patient needs and DEA then estimates
the APQ necessary to meet that need. While DEA may have granted an
initial quota, changes instituted by HHS and/or market needs may
demonstrate that the original quota is now higher than necessary to
meet market demand. For example in November 2010, FDA asked the
manufacturers of propoxyphene drug products to voluntarily withdraw
their drug products due to cardiotoxicity issues. In response, DEA
denied all quotas for 2011 to dosage-form manufacturers and bulk
manufacturers who supplied the domestic market, and it granted
substantially reduced quotas to allow manufacturers to meet the market
demand of foreign countries and reference standards only. In this
example, manufacturers providing just notice could exceed both
agencies' estimations for legitimate need allowing for the possibility
for misuse and abuse. To obtain quota, a manufacturer must submit a
request to DEA for the quantity they wish to manufacture. 21 CFR
1303.12 and 130.22. DEA in turn performs a quota analysis based on the
information submitted and provides a determination based on legitimate
need.
Use-specific quota subcategories reflect the manufacturing activity
of the applying DEA registrant and have facilitated the issuance of
manufacturing and procurement quotas and provided a more accurate
calculation of the APQ for the United States by preventing double
counting of quota. They have been in place informally for well over a
decade with no complaints from the registrants who have found the
system beneficial in separating their product development and packaging
efforts from their commercial manufacturing efforts when requesting
adjustments to their quotas. Furthermore, packaging and repackaging are
manufacturing activities as defined in the CSA and CFR and already
require quota.
F. New Deadlines for the Establishment of Quotas
Issue: DEA received eight comments from the public regarding the
deadline changes. Many comments were either silent on the new deadlines
or either expressly stated that they had no objection for the deadline
changes, with some going as far as to say they agree and understand the
need to change the dates. Some desired clarification on how DEA will
reconcile new deadlines for the supply chain where inconsistences have
been noted. For instance, it was stated that extending the deadlines
would potentially bring about supply disruptions when there are long
lead times. There is also concern that changing the deadline to issue
quota adjustments would represent a significant change because DEA
normally issues them any time during the year, within six to eight
weeks of a request. Pushing the procurement quota date to December 1
would make the manufacturing process harder with the reductions because
DEA must issue procurement quota before it approves an import permit.
[[Page 60127]]
Response: DEA is changing the deadline for issuing initial quotas
to December 1 as required in the SUPPORT Act. This new deadline will
not affect the supply chain because the quota issued cannot be utilized
until January 1 of the next calendar year. Initial quota applications
are due to DEA by April 1 and May 1 of the preceding year to be
considered in the APQ estimates which must be published before quotas
are allotted. The December 1 deadline takes into account the
considerable amount of information that must be collected from various
sources, analyzed, and reviewed by multiple agencies prior to
establishing the quota. Under the current regulations, DEA has less
than two months to accomplish this task and it has proven unattainable
as the controlled substance manufacturing business has grown larger and
more complex. Manufacturers will still be able to apply for quota
adjustments at any time throughout the calendar year. Registrants
seeking an import permit need to take into account any possible delays
when applying for them.
G. Letter From the States Attorneys General
Types of Quota
Issue: DEA received a letter from the Attorneys General of the
States of West Virginia, Arkansas, Florida, Kentucky, Missouri, and
Nebraska (hereinafter ``letter from State Attorneys General'')
concerning the process for setting annual production quotas for
controlled substances.
The States applauded the significant improvements DEA has made in
reducing opioid production quotas over the past several years. The
States stated that DEA failed to tailor the quota-setting process to
legitimate medical need, and urged DEA to consider additional sources
to set quotas. They further commented that there is a lack of
transparency in setting quotas. The States believe that DEA needs to
explain the logic behind the different approaches to set quotas.
DEA Response: DEA is committed to ensuring an adequate and
uninterrupted supply of controlled substances to meet legitimate
medical, scientific, and export needs of the United States. DEA sets
aggregate production quotas in a manner to ensure that all
prescriptions that are authorized for legitimate medical purposes can
be filled. For purposes of setting quotas, it should be noted that, as
a result of new laws and regulations, DEA considers a number of
factors, including, but not limited to, the extent of any diversion of
the controlled substance in the class; relevant information obtained
from HHS including FDA, CDC, CMS; and relevant information obtained
from the States.\9\
---------------------------------------------------------------------------
\9\ 21 U.S.C. 826(a); 21 CFR 1303.11.
---------------------------------------------------------------------------
SUPPORT Act
Issue: As previously stated, DEA received a letter from six State
Attorneys General. West Virginia, along with five other states, urged
DEA to expand the sources of data used to determine the amount of
diversion that occurs. They mentioned that the SUPPORT Act and the
``Controlled Substances Quotas'' final rule (83 FR 32784) require the
determination of the extent of diversion, but stated that they believe
DEA takes different approaches in fulfilling this requirement. The
commenters stated that DEA should estimate the diversion of all
controlled substances the same way that DEA estimates the diversion of
covered controlled substances. Furthermore, they want DEA to explain
the logic of taking two separate approaches, as they feel that even
though the wording of the two reforms slightly varies, DEA's approach
should be the same.
As for the type of data DEA uses, the States suggest that DEA use
national and state databases in the analysis. Specifically, they
recommended three steps that DEA should take to incorporate information
that is currently available: (1) Improve ARCOS and the SORS to allow
greater insight into prescribing; (2) look at other national databases
that track drug abuse patterns, poisonings, emergency room visits, and
treatment patients; and (3) consider state databases that track drug
overdoses and hospital visits.
DEA Response: As stated above, in its efforts to estimate the
amount of diversion, DEA acquires data from other Federal agencies.
While DEA currently utilizes multiple internal and external data
sources, DEA remains open to additional sources of reliable and
relevant data. Some of the sources the States suggested that DEA use
are not reliable and precise and lack the required granular specificity
within the data needed to estimate diversion. The data does not examine
each controlled substance individually (i.e., as a basic class and the
quantity ingested), but groups them together chemically, making it
difficult to determine which basic class was involved and to what
extent its aggregate production quotas should be lowered. For example,
patients that overdose from hydrocodone, oxycodone, or hydromorphone
are grouped together under opioid-related overdose. DEA is unable to
determine the basic class that led to the overdose from this
information. Additionally, DEA cannot determine from the data if the
patient overdosed on an illicit opioid or a legally marketed opioid
product. For purposes of calculating the extent of diversion for each
basic class of controlled substance, DEA would benefit more from the
drug overdose and mortality data if it precisely identified the
controlled substance(s) believed to be the cause of overdose or death
and if it included the quantity of the substance ingested.
Modifications to the SORS and ARCOS reporting requirements are
beyond the scope of this document. DEA did request state specific data
on overdoses, death rates, and prescription data in August 2018 for
consideration in setting the 2019 APQ. Only eight states provided data,
none of which are represented in the comment letter; however, the data
provided was not broken down by individual controlled substances, which
would allow DEA to consider in determining the extent of diversion or
estimating diversion.
Over-Prescribing
Issue: As previously mentioned, DEA received a comment that was co-
signed by six State Attorneys General, including West Virginia. The
State Attorneys General conveyed that DEA should account for over-
prescribing when analyzing diversion. The commenters contend that only
relying on theft and seizure records does not give a complete view of
diversion. Furthermore, they suggested using the ``best practices'' of
medical professionals to help account for overprescribing at the
physician level. These commenters stated that medical professionals are
now crafting ``best practices'' for opioid prescribing, which the
states believe can aid DEA in determining correct quantities of what is
``medically necessary'' for opioids. The letter also suggests that DEA
expand the National Take Back Programs to capture more data on
overprescribing rates.
DEA Response: For validly dispensed controlled substances, DEA
relies on physicians to use their best judgment on how much to
prescribe. DEA does not establish best practices for physicians, nor
does it control how much of a prescription a patient ends up consuming.
DEA has previously stated that ``studies have found, with respect to a
variety of medical procedures, that physicians prescribe more
controlled substances for post-operative pain than the patients
utilize. However, . . . DEA has concluded that while the referenced
studies are concerning, they are
[[Page 60128]]
insufficient to support a determination as to the level of
overprescribing that occurs across the range of the medical procedures
that are performed each year on a national basis.'' \10\ More recently,
DEA has found that physicians are already prescribing at lower rates
because of healthcare guidance.
---------------------------------------------------------------------------
\10\ Established Aggregate Production Quotas for Schedule I and
II Controlled Substances and Assessment of Annual Needs for the List
I Chemicals Ephedrine, Pseudoephedrine, and Phenylpropanolamine for
2019. 85 FR 67348 at 67350. December 28, 2018.
---------------------------------------------------------------------------
As previously stated, there has been a decline in schedule II
opioid prescriptions since 2014. Currently, there is no reliable method
for quantifying the amount of prescription medications turned in to the
Take-Back program. DEA found one study from 2015 that attempted to
quantify the drugs received at one Take-Back location titled,
``Analysis of Medications Returned During a Medication Take-Back
Event.'' However, DEA believes that this study is not useful because
the methods drastically affect/limit the quantity of each substance
that could be included in the analysis. To be included in the study,
the medication had to have the following identifiers: drug name,
strength, amount remaining, amount prescribed, generic or brand, and
source (local pharmacy, mail-order pharmacy, or sample). The study also
excluded medications unavailable in the United States, pet medications,
medications in containers without a legible label, containers with
remaining medication amounts larger than the amount dispensed, and
medications not in tablet or capsule formulations. The study authors
were able to demonstrate an average overprescribing rate for all
medication types of 66 percent based on the total number of pills
dispensed (obtained from labels) and the total number of pills
remaining in the containers; however, substance specific information is
not available because the medications (controlled and non-controlled)
were grouped. The study does not mention the proportion of medicine
excluded from the study or an estimate of diversion of particular
substances. The study assumed that over prescribing was the cause of
the remaining number of tablets in the bottle based on the written
prescription. It also assumed that the remainder in the bottle was
legitimate; however, neither of these assumptions may be the case. The
bottle may have contained the remainder of multiple prescriptions of
the same drug product dispensed over time and brought to the drug Take-
Back event in a single container. This single study cannot be
extrapolated to the national level for use in estimating diversion or
overprescribing.
H. Out of Scope
DEA received 194 comments are that are being considered out of
scope in their entirety or partially. These comments were very general
and mentioned personal medical issues, treatments, medication costs,
and drug shortages. Included in these general out of scope comments
were assertions that illicit drug use is the problem and that doctors
are not treating patients due to fear of punishment from DEA.
DEA remains committed to ensuring that there is an adequate and
uninterrupted supply of control substances to meet the legitimate
medical, scientific, and export needs of the United States. DEA does
not tell manufacturers how to manage their quota within the use-
specific categories. For example, if a manufacturer holds an FDA-
approved application for several different strengths of a dosage-form
drug product, DEA will not dictate which strengths it should
manufacture. Furthermore, as previously stated, DEA does not plan to
set APQ in terms of pharmaceutical dosage-form. As such, the FDA-
approved dosage-forms and strengths that a manufacturer produces are
solely based on the manufacturers' decision. In the event of shortages
of specific dosage-forms and/or strengths of a dosage-form, DEA has and
will continue to implement actions based on quota to prevent or
alleviate a drug shortage; however, DEA notes that the injectable
shortage is not a quota issue, but instead due to manufacturers not
complying with FDA's cGMP requirements. In fact, DEA has granted quota
to manufacturers seeking to comply with FDA requirements. If DEA
receives reliable information of a manufacturer refusing to manufacture
a dosage-form or strength to alleviate a drug product shortage, DEA
will implement its authority under the SUPPORT Act to issue the
manufacturer's quota in terms of dosage-form and/or strength to ensure
that manufacturers produce certain dosage-forms to assist in
alleviating the drug shortage.
III. Provisions Implemented in the Final Rule
A. Types of Quota
DEA is adding sections 21 CFR 1303.03, 1303.17, 1315.06, and
1315.37, and revising 1303.27 and 1315.27 to introduce and define the
types of quotas in the current quota system and to clarify and update
the method to abandon both individual manufacturing and procurement
quotas. Section 21 CFR 1303.03 will define the three types of quota for
schedule I and II controlled substances: APQ, individual manufacturing
quotas, and procurement quotas. Section 21 CFR 1315.06 will define the
four types of quotas available for list I chemicals: AAN, individual
manufacturing quotas, procurement quotas, and import quotas.
To strengthen the quota management process, DEA has turned to
managing many aspects of the quota system online. With this final rule,
DEA will update 21 CFR 1303.27 and 1315.27 to require manufacturers
submit a quota application to the UN Reporting and Quota Section in the
online Quota Management System instead of submitting to the Drug and
Chemical Evaluation Section a written notice to abandon any or all
parts of the individual manufacturing quotas for schedule I and II
controlled substances and list I chemicals.
Sections 1303.17 and 1315.37 will clarify that a manufacturer must
also abandon procurement quota for schedule I and II controlled
substances and list I chemicals using the online Quota Management
System. Current regulations only refer to the abandonment of individual
manufacturing quota. To further clarify the CFR, DEA will separate the
current subsection within the controlled substance quota regulations
entitled ``Aggregate Production and Procurement Quotas'' and will make
a separate subsection for ``Procurement Quotas.'' In accordance with
the creation of this new subsection, DEA will move 21 CFR 1303.12 to
1303.15 and reserve 1303.12 for future use. These additions and changes
are also required due to the procurement quota inventory allowances
that are being finalized with this rule.
B. SUPPORT Act
As previously discussed in the NPRM, as well as above in Section
II, DEA will be implementing in its regulations the amendments to the
CSA made by the SUPPORT Act. These amendments include the authority to
establish APQ, individual manufacturing quotas, and procurement quotas
in terms of pharmaceutical dosage-forms, if it is determined that it
will assist in avoiding the overproduction, shortages, or diversion of
a controlled substance, which will be added to DEA's regulations at 21
CFR 1303.11(a), 1303.12(a) and 1303.21(a). DEA will also be revising 21
CFR 1303.21(a) and 1315.21 to change the date to on or before December
1 by which individual manufacturing quotas must be fixed.
[[Page 60129]]
DEA will be adding a new regulation regarding the requirement to
estimate the amount of diversion of the five covered controlled
substances in the United States when establishing quotas for these
controlled substances and make appropriate reductions will be added to
21 CFR 1303.05. Furthermore, this regulation will codify the
requirements of the SUPPORT Act regarding information to be considered
when estimating diversion. The SUPPORT Act requires consultation with
the Secretary of HHS in any year that the approved APQ for a covered
controlled substance is higher than that of the previous year and an
explanation from DEA in the APQ final order of why the public health
benefits of increasing the quota clearly outweigh the consequences of
having an increased volume of the covered controlled substance
available for sale, and potential diversion, in the United States 21
U.S.C. 826(i)(2)(A). These requirements will also be included in
1303.05, along with the definition of a covered controlled substance.
C. Procurement Quota
Sections 1303.12(f) and 1315.32(h) currently require certificates
of quota only when purchasing from a manufacturer. Currently, DEA
manages the quota process by providing each manufacturer a letter
stating the quantity of controlled substance(s) and/or list I
chemical(s) the manufacturer may obtain during a calendar year. This
letter provides legal documentation that the manufacturer is authorized
to obtain a specified quantity of the controlled substance(s) and/or
list I chemical(s). When the CSA and DEA's regulations were first
promulgated, neither contemplated that distributors would be used to
move controlled substances and list I chemicals between manufacturers.
When distributors provided schedule II controlled substances to
this subset of manufacturers without verification of the manufacturers'
quota authorization, it circumvented the quota process of verifying
quota to the supplier. This prevents DEA from performing its oversight
responsibilities and leads to unauthorized distribution of drug
products. These unauthorized distributions are only noted as sales,
which artificially inflates the estimation of legitimate medical need,
a heavily weighted factor in the setting and revising of the APQ.
This final rule revises 21 CFR 1303.12(f) and 1315.32(h) by
ensuring that both manufacturers and distributors are required to
obtain certification of a buyer's quota for the requested schedule I
and II controlled substances, as well as list I chemicals when the
buyer is a manufacturer. By requiring that all manufacturers and
distributors receive a certification of quota before providing any
quantity of controlled substance or list I chemical to a DEA registered
manufacturer, DEA is better able to maintain the closed distribution
system.
D. Inventory Allowance
DEA is revising 21 CFR 1303.24 and 1315.24 to reduce the overall
inventory held by DEA-registered bulk and dosage-form manufacturers. In
response to the comments received, DEA will create a new regulation to
address the procurement quota changes. DEA had proposed to place the
changes for procurement quotas in 21 CFR 1303.24 and 1315.24; however,
it was pointed out that the proposed placements fall under the
``Individual Manufacturing Quota'' subsections. As such, DEA will
create two new regulations, 21 CFR 1303.16 and 1315.31 and will place
them within the appropriate procurement quota subsections.
DEA also acknowledges the concerns conveyed in the comments
regarding the proposed percentages being too restrictive. In response
to these concerns, DEA conducted further analyses on dosage-form
manufacturer inventory data. As previously stated, the data showed that
manufacturers only acquired 72.7 percent of fentanyl, 73.9 percent of
hydrocodone, 56.7 percent of hydromorphone, 79.3 percent of oxycodone,
and 73 percent of oxymorphone from the quotas granted to them by DEA.
As prescription rates have fallen, DEA has issued lower quotas to match
the estimated fallen rates. The data show that even with the reduced
quotas, the material has not sold, but has been placed into inventory,
thereby significantly increasing inventory levels above that which is
medically necessary on an annual basis. DEA has found that over the
past years, inventory levels have averaged 72 percent for fentanyl,
36.9 percent for hydrocodone, 57 percent for hydromorphone, 36.3
percent for oxycodone, and 61 percent for oxymorphone, while still
meeting legitimate medical needs. The inventory levels for fentanyl,
hydromorphone, and oxymorphone include product development efforts as
manufacturers seek FDA approval of abuse-deterrent formulations. This
data suggests that the current allowance of 30 percent was not too
restrictive and has allowed manufacturers to acquire the quota they
need for commercial sales. However, in light of the need for
preparedness for any contingencies, DEA will establish the procurement
quota inventory allowance at 35 percent.
DEA is also taking the time to clarify what changes will apply to
bulk form manufacturers and dosage-form manufacturers. Bulk
manufacturers receive individual manufacturing quotas and dosage-form
manufacturers receive procurement quota. DEA acknowledges the concerns
of manufacturers, but for reasons stated above, a lower inventory
allowance for individual manufacturing quota needs to be implemented.
As such, DEA has reviewed historical data from the companies and
determined that 50 percent (six months) of inventory allowance is no
longer necessary given the changes in prescribing guidelines to meet
legitimate medical need and will be reducing individual manufacturing
quota inventory allowances to 40 percent instead. The reduction to 40
percent allows for just under five months of inventory and takes into
account the latest prescribing practices of the most prescribed
substances as well as decreasing the likelihood of diversion of stocks.
It still allows manufacturers the flexibility to accommodate market
changes, FDA regulations, and unforeseen circumstances. As previously
discussed for procurement quotas, there are more dosage-form
manufacturers than bulk manufacturers; therefore, a lower inventory
allowance for procurement quota is warranted. For procurement quotas,
DEA will establish (for controlled substances) and will reduce (for
list I chemicals) inventory allowances to 35 percent (instead of 30
percent), except in the circumstances of liquid injectable dosage-
forms. Liquid injectable dosage-forms (injectable products, vials,
solution bags, but not tablets, capsules, suppositories, patches,
films, and oral solutions) will continue to receive a 50 percent
inventory allowance due to DEA's acknowledgement that there are less
dosage-form manufacturers for these liquids, as addressed above.
Instead of suspending all quota when a registrant's inventory exceeds
the proposed amount of 45 percent, DEA will be finalizing three
different suspension amounts. The amount at which quota will be
suspended for manufacturing quota is when the inventory reaches 55
percent and will remain suspended until the amount is lower than 50
percent. For all dosage-forms, except liquid injectable dosage-forms,
individual procurement quota will be suspended at 50 percent and will
be reinstated when the amount is less than 45 percent. As applied to
liquid injectable dosage-forms,
[[Page 60130]]
individual procurement quota will be suspended at 65 percent and will
remain in suspension until the inventory amount is lower than 60
percent. Last, instead of DEA granting requests of additional quota if
inventory is less than the proposed 20 percent, DEA again will be
finalizing three different amounts based on type of quota. DEA may
increase the amount of individual manufacturing quota once the
inventory is less than 30 percent. For individual procurement quota,
the amount of quota may be increased when the inventory is less than 25
percent; however, individual procurement quota for liquid injectable
dosage-forms may be increased when the inventory is less than 40
percent.
The final changes are as follows:
21 CFR 1303.16(a)--establishes an inventory allowance
issued by DEA for procurement quotas of 35 percent for all dosage-forms
of schedules I and II controlled substances, except liquid injectable
dosage-forms, which will receive an inventory allowance of 50 percent;
21 CFR 1303.16(b) and (c)--suspends procurement quota
issued by DEA if inventory exceeds 50 percent for all dosage-forms of
schedules I and II controlled substances, except liquid injectable
dosage-forms, which will be suspended if inventory exceeds 65 percent;
21 CFR 1303.16(d) and (e)--may grant request for
additional procurement quota by registrant if inventory is less than 25
percent for all dosage-forms of the registrant's estimated net disposal
for schedules I and II controlled substances, except liquid injectable
dosage-forms, which may be granted if inventory is less than 40
percent;
21 CFR 1303.24(a)--decreases the inventory allowance
issued by DEA for individual manufacturing quotas from 50 to 40 percent
for schedules I and II controlled substances;
21 CFR 1303.24(b)--suspends individual manufacturing quota
issued by DEA if inventory exceeds 55 percent of the registrant's
estimated net disposal for schedules I and II controlled substances;
21 CFR 1303.24(c)--may grant request for additional
individual manufacturing quota by registrant if inventory is less than
30 percent of the registrant's estimated net disposal for schedules I
and II controlled substances;
21 CFR 1315.24(a)--decreases the inventory allowance
issued by DEA for individual manufacturing quotas from 50 to 40 percent
for the list I chemicals;
21 CFR 1315.24(b)--suspends individual manufacturing
quotas issued by DEA if inventory exceeds 55 percent of the
registrant's estimated net disposal for the list I chemicals;
21 CFR 1315.24(c)--may grant request for additional
individual manufacturing quotas by registrant if inventory is less than
30 percent of the registrant's estimated net disposal for the list I
chemicals;
21 CFR 1315.31(a)--decreases the inventory allowance
issued by DEA for procurement quotas from 50 to 35 percent for all
dosage-forms of the list I chemicals, except liquid injectable dosage-
forms, where an inventory allowance of 50 percent will be created;
21 CFR 1315.31(b) and (c)--suspends procurement quotas
issued by DEA if inventory exceeds 50 percent for all dosage-forms of
the registrant's estimated net disposal for the list I chemicals except
liquid injectable dosage-forms, which will be suspended if inventory
exceeds 65 percent; and
21 CFR 1315.31(d) and (e)--may grant request for
additional procurement quotas by registrant if inventory is less than
25 percent for all dosage-forms of the registrant's estimated net
disposal for the list I chemicals, except liquid injectable dosage-
forms, which may be granted if inventory is less than 40 percent.
E. Subcategories
DEA is formalizing the addition of use-specific subcategories by
adding 21 CFR 1303.04 and 1315.07. As a practical matter, DEA
acknowledges that these subcategories are already in use through
voluntary and cooperative efforts of DEA registrants. This final rule
will codify DEA's current utilization of subcategories while
facilitating the issuance of individual manufacturing and procurement
quotas.
Additionally, the specification of subcategories for manufacturing
and procurement quotas provides benefits to the registrant by allowing
for a more detailed level of communication with DEA as to why a
registrant requires specific controlled substances and list I chemicals
and how the registrant will utilize those substances.
As the number of manufacturers continues to increase and industry
practices and specializations continue to evolve, DEA's ability to
track movement of material between registrants at all stages of
manufacturing is critical.
F. Deadlines
DEA collects various data to administer the quota system and moving
the deadlines will allow more time for processing the numerous
applications that DEA receives and for responding to applications for
quota, as there are more registrants now than there were when the
regulations were first promulgated. The new deadlines will also allow
DEA more time to obtain additional relevant data from multiple
agencies. The changes are as follows:
Establishment of the APQ and the AAN (21 CFR 1303.11(c)
and 1315.11(c)): change from May 1 to September 1;
Deadline to issue procurement quota (21 CFR 1303.12(c) and
1315.32(f)): change from July 1 to December 1;
Deadline to issue import quota for list I chemicals (21
CFR 1315.34(f)): change from July 1 to December 1; and
Deadline to adjust individual manufacturing quota (21 CFR
1303.23(c) and 1315.23(c)): change from March 1 to July 1.
Regulatory Analyses
Executive Orders 12866 (Regulatory Planning and Review) and 13563
(Improving Regulation and Regulatory Review)
This final rule has been developed in accordance with the
principles of Executive Orders (E.O.) 12866 and 13563. E.O. 12866
directs agencies to assess all costs and benefits of available
regulatory alternatives and, when regulation is necessary, to select
regulatory approaches that maximize net benefits (including potential
economic, public health and safety, and environmental advantages,
distributive impacts, and equity). E.O. 13563 is supplemental to and
reaffirms the principles, structures, and definitions governing
regulatory review established in E.O. 12866. E.O. 12866 classifies a
``significant regulatory action'' requiring review by the Office of
Management and Budget (OMB) as any regulatory action that is likely to
result in a rule that may: (1) have an annual effect on the economy of
$100 million or more, or adversely affect in a material way the
economy, a sector of the economy, productivity, competition, jobs,
environment, public health or safety, or State, local, or tribal
governments or communities; (2) create a serious inconsistency or
otherwise interfere with an action taken or planned by another agency;
(3) materially alter the budgetary impact of entitlements, grants, user
fees, or loan programs or the rights and obligations of recipients
thereof; or (4) raise novel legal or policy issues arising out of legal
mandates, the President's priorities, or the principles set forth in
the Executive Order.
While this final rule is not economically significant, it is a
significant regulatory action under E.O.
[[Page 60131]]
12866, section 3(f) subjecting it to review by OMB. DEA analyzed the
economic impact of each provision of this final rule, including any
changes made from the proposed rule, and estimated the annual cost to
be $26.4 million. Certain provisions are estimated to have benefits;
however, DEA does not have a basis to estimate those benefits due to
many unknowns. Because of this, the benefits of this rule are discussed
qualitatively. The rule contains clarification of regulatory language
and the codification of existing DEA and registrant practices regarding
subcategories for quotas, certification of procurement quota,
reductions to inventory allowances, and additional considerations for
revisions to the APQ. The results of the analysis of each provision are
as follows:
Defining Types of Quota and Filing To Abandon Quota
These provisions simply codify existing DEA practices, and will
result in no economic impact on registrants or DEA. The formal
definition of quota types will have no economic impact on registrants
or DEA, and formalizing the procedure to abandon quota is simply a
codification of DEA's current procedure. While these provisions will
have no quantifiable impact, DEA believes there is at least a minimal
benefit to codifying existing practices accurately. Because these
provisions codify existing practice, current registrants are, in most
cases, already complying and will not change their behavior. Errors and
misunderstandings on the part of registrants do happen, but are
uncommon. Nevertheless, these provisions of the final rule are expected
to enhance clarity, certainty, and efficiency.
Conforming Revisions Related to the SUPPORT Act
As indicated above, the SUPPORT Act gives DEA discretionary
authority to establish quotas in terms of pharmaceutical dosage-form.
At the present time, DEA is not deviating from its current practice of
establishing quotas necessary for the manufacture of finished dosage-
forms in terms of kilograms and allowing manufacturers to determine how
best to allocate those kilograms to different FDA-approved dosage-
forms. While it is impossible to know all the circumstances in which
this authority might be utilized in the future, it is DEA's current
intention that any implementation of dosage-form quotas will be the
exception rather than the rule and will coexist alongside kilogram
quotas. DEA recognizes that dosage-form manufacturers are in the best
position to understand the demand for their products, in dosage-form.
Because, at the present time, DEA is likely to use this authority
sparingly, and only adjust quotas for manufacturers producing the
dosage-form, DEA anticipates that this provision of the proposed rule
will have minimal impact.
The SUPPORT Act also requires DEA to estimate the amount of
diversion when establishing quota for a covered controlled substance
using all reliable information, including information from HHS and
other agencies. DEA has considered information and data regarding the
amount of diversion for covered controlled substances when applicable
during the process of determining the APQ. This function is a regular
part of DEA's operations, although in the past DEA has relied on its
own internal data in the process of determining the APQ. DEA's view is
that considering additional reliable information gathered from outside
the agency to estimate the amount of diversion will result in minimal
additional time or cost.
The SUPPORT Act updates also extend DEA's deadline to fix
individual manufacturing quotas for schedules I and II controlled
substances from October to December, and they formally define the
phrase ``covered controlled substance'' to include fentanyl, oxycodone,
hydrocodone, oxymorphone, or hydromorphone. The deadline extension will
have minimal impact on registrants, as DEA currently does not meet the
October deadline and has not met that deadline since before 1996. This
extension will align the regulations with reality for registrants and
DEA. Defining ``covered controlled substance'' will not change how
those substances or the registrants that are authorized to handle those
substances are regulated. Therefore, these provisions will have minimal
impact on registrants or DEA.
While the benefits of the SUPPORT Act updates were not quantified
due to many unknowns, it is possible to discuss some of these benefits
in qualitative terms. With these conforming revisions related to the
SUPPORT Act, DEA has the ability to respond to adverse market
conditions with increased speed and flexibility to minimize public
harm. DEA would use dosage-form quotas to alleviate the rare occurrence
of a drug shortage in the market by targeting the specific dosage-forms
that are in short supply instead of simply increasing the total amount
of kilograms of a drug to be produced, resulting in a benefit to the
public. Another benefit is that updating the deadlines for setting
individual manufacturing quotas so they reflect DEA's current practice
eliminates regulatory uncertainty for manufacturers. Regulations that
realistically reflect current DEA and industry practice will benefit
the planning processes of current and future market participants.
Procurement Quota Certification
The final rule will require that all DEA registrants supplying
schedules I and II controlled substances and list I chemicals to DEA
manufacturers obtain certification of the manufacturer's quota before
completing the transaction. In practice, this certification may be any
written declaration issued by manufacturers to distributors. This
provision prevents manufacturers from purchasing their API or finished
dosage-forms from distributors without quota verification as currently
required when manufacturers request API or finished dosage-forms from
other manufacturers. Current regulations stipulate that only entities
registered as ``importer,'' ``manufacturer,'' or ``bulk manufacturer''
must certify quota before a sale.\11\
---------------------------------------------------------------------------
\11\ 21 CFR 1303.12(f) and 1315.32(h).
---------------------------------------------------------------------------
To estimate the cost of this provision, DEA utilized internal data
tracking the sale of schedules I and II controlled substances and list
I chemicals from distributors to manufacturers during the three year
period of January 1, 2015 to December 31, 2017. DEA's analysis revealed
that over this three year period, distributors filled an average of
3,000 orders to manufacturers per year. Using Bureau of Labor
Statistics (BLS) wage data for Compliance Officers,\12\ the type of
registrant employee that would be tasked with certifying quota, DEA
estimated the labor cost of quota certification to distributors and
manufacturers. Based on its knowledge of registrant business
operations, DEA estimates a manufacturer compliance officer requires 10
minutes to draft a quota certification letter after placing a purchase
request to a distributor, while the distributor compliance officer
requires five minutes to review and verify the manufacturer's
certification letter. This results in a combined labor burden of 15
minutes (0.25 hours). Multiplying the loaded median hourly wage rate
for compliance officers \13\ by
[[Page 60132]]
0.25 and applying that to the estimated 3,000 certification letters per
year yields a combined annual labor cost of $35,241 ($23,494 of which
is incurred by manufacturers while the remaining $11,747 is incurred by
distributors).
---------------------------------------------------------------------------
\12\ For the purposes of this analysis, DEA used the median
hourly wage rate of $32.63 for 13-1041 Compliance Officers. Bureau
of Labor Statistics, Occupational Employment and Wages, May 2017,
https://www.bls.gov/oes/2017/may/oes131041.htm.
\13\ The loaded hourly rate for 13-1041 Compliance Officers is
$46.99 ($32.63 x 1.44). Bureau of Labor Statistics, Employer Costs
for Employee Compensation--December 2018, https://www.bls.gov/news.release/archives/ecec_12142018.pdf.
---------------------------------------------------------------------------
Reduction of Inventory Allowances
In response to public comments regarding the proposed inventory
allowance reductions put forth in the NPRM, DEA is modifying the
reductions that will become effective upon publication of this final
rule, while also establishing new procurement quota inventory
allowances for dosage forms. Comments received from manufacturers
stressed that the proposed changes to the inventory allowance would
increase production costs, product waste, and inefficiencies.
Specifically, manufacturers stated that the proposed reductions would
require smaller, more frequent manufacturing campaigns in order to
produce the same amount of finished product in a given year, and that
DEA's ability to respond to requests for quota adjustments throughout
the year is not sufficient if market demand fluctuates. Additionally,
commenters expressed concern that reducing inventory allowances for
certain liquid injectable dosage-forms may cause a significant
disruption in the supply of these life-saving drugs given the
relatively limited number of manufacturers. As a result, DEA is
adjusting the inventory allowance reductions in this final rule to
minimize, to the extent possible, any supply disruptions or increases
in manufacturing production costs. DEA is also clarifying which
inventory allowances apply to individual manufacturing quota and which
apply to procurement quota by establishing a procurement quota
inventory allowance in 21 CFR 1303.16(a). While there may not be
published studies showing that smaller inventories reduce diversion,
DEA must provide for the estimated medical, scientific, research, and
industrial needs of the United States, for lawful export requirements,
and for the establishment and maintenance of reserve stocks, while also
preventing an oversupply which increases the risk of diversion. DEA
believes that these final inventory allowance reductions will help
achieve its goal of reducing the risk of diversion at the manufacturer
level.
Many of the comments received from manufacturers stated generally
that the proposed inventory allowance reductions would increase the
cost of API production, but only one commenter provided a detailed
estimate for how much their costs are likely to increase in a given
year. This commenter estimates that their incremental production costs
would rise by approximately $600,000 per year, primarily due to the
reduced inventory allowance necessitating an additional manufacturing
campaign for their largest volume API products, decreasing efficiency
and potentially increasing the amount of product wasted during the
required cleaning of equipment between each additional campaign. While
DEA recognizes this single cost estimate as legitimate, it is unlikely
that production costs are uniform across manufacturers and depend
largely on variables unique to each firm. However, given the absence of
detailed monetary cost estimates from other commenters, and the fact
that the required inputs to calculating an individual firm's
manufacturing costs are proprietary and unknown to DEA, using this
commenter's estimate as the basis for estimating the impact of this
provision of the final rule is the most reasonable option available to
DEA.
With this final rule, DEA will be reducing individual manufacturing
quota inventory allowances to 40 percent (instead of the proposed 30
percent) and will be establishing (for controlled substances) and
reducing (for list I chemicals) procurement quota inventory allowances
for all dosage-forms (except liquid injectable dosage-forms) to 35
percent. Procurement quota inventory allowances for liquid injectable
dosage-forms are being formally established at 50 percent, resulting in
no change from the pre-rule baseline. The threshold at which individual
manufacturing quota will be suspended is reached when inventories
exceed 55 percent of estimated net disposal (instead of the proposed 45
percent) and will remain suspended until inventory falls below 50
percent. However, DEA will suspend individual procurement quota at 50
percent, and will reinstate it when inventories fall below 45 percent.
DEA will suspend procurement quota for liquid injectable dosage-forms
when inventories rise above 65 percent, and will reinstate it when
inventories fall below 60 percent. Finally, DEA may increase the amount
of individual manufacturing quota once the inventory is less than 30
percent (instead of the proposed 20 percent). For individual
procurement quota, the amount of quota may be increased when the
inventory is less than 25 percent or when inventories are less than 40
percent for liquid injectable dosage-forms.
Because the comments received from manufacturers focused primarily
on their estimation of the increase in time and cost of manufacturing
API products, DEA believes it is reasonable to assume that the costs
imposed by this provision stem primarily from the inventory allowance
reduction for individual manufacturing quotas, and this cost is borne
by bulk manufacturers. There are currently 44 bulk manufacturers
registered with DEA. Based on the only detailed monetary cost estimate
received, DEA assumes that each of these registrants will incur an
average annual cost of $600,000, equating to $26.4 million in total
annual costs as a result of this provision of the final rule.
It is important to note that the estimated total annual costs from
reducing inventory allowances could be higher than actual costs. The
incremental cost increase of $600,000 presented by the commenter and
being used in this analysis as representative of the average annual
costs for each bulk manufacturer was based on the proposed individual
manufacturing quota inventory allowance reduction from 50 percent to 30
percent, with suspension of quota at 45 percent. As stated above, based
on public comments, DEA is choosing to implement a smaller reduction to
inventory allowances with this final rule, settling on an individual
manufacturing quota inventory allowance of 40 percent, with suspension
of quota occurring if inventories rise above 55 percent. Additionally,
the commenter that provided the monetary cost estimate is a large
manufacturer; therefore, applying their estimated costs across all 44
bulk manufacturers, which includes many small manufacturers, likely
overstates the total annual cost. Because of this, it may be the case
that the average incremental costs incurred by bulk manufacturers are
less than $600,000, especially if the revised inventory allowances
prevent the need for some manufacturers to add production campaigns for
certain products. However, DEA has no way of knowing if this is indeed
the case; therefore, DEA assumes that an average annual cost estimate
of $600,000 incurred by bulk manufacturers as a result of this
provision is reasonably accurate.
Inventory allowances are a factor in DEA's determination of a
registrant's quota for the coming year and provides inventory for sales
at the beginning of a new quota year before quota is received.
Registrants may also exceed their
[[Page 60133]]
inventory allowance during the year. If at any time during the year,
the inventory of a basic class held by a manufacturer exceeds 55
percent (or 50 percent for procurement quota of dosage-forms) of
estimated net disposal, the quota for that class is automatically
suspended and would remain suspended until inventory is less than 50
percent (or 45 percent for procurement quota of dosage-forms) of the
estimated net disposal. Practically speaking, the changes to inventory
allowances equate to a reduction from the current half of a year's
sales supply (50 percent) allowed to be held as inventory to nearly
five months (40 percent) for individual manufacturing and over four
months (35 percent) for dosage-form manufacturing. Additionally, the 55
percent maximum inventory during the year would give manufacturers the
flexibility to have over six months of sales supply inventoried to
account for any unplanned fluctuations in demand or timing in orders
for their product throughout the year. For dosage-form manufacturers,
the maximum inventory of 50 percent provides exactly six months of
sales supply. The inventory allowance for liquid injectable dosage-
forms remains unchanged; thus, there is no impact on these products.
While DEA acknowledges that reducing inventory allowances will
increase costs for bulk manufacturers, DEA concludes that these
reductions are not likely to result in supply disruptions. Registrants
routinely request adjustments to their quota throughout the year due to
fluctuations in market conditions, and this is a normal part of a
manufacturer's business operations. DEA quickly responds to these
requests within six to eight weeks, ensuring legitimate business is not
disrupted, and will continue to do so once this rule is promulgated.
For example, in 2017 (the last year in which data are available), DEA
processed 1,752 initial quota applications and 2,299 requests for
adjustment to quota. Additionally, in response to the ongoing COVID-19
pandemic, DEA and manufacturers of injectable products for treatment of
ventilator patients have entered into continuous dialogue to meet
surging hospital demand. During this time, DEA was able to process
manufacturer quota requests in less than five business days,
demonstrating DEA's flexibility to address situations such as
shortages, natural disasters, epidemics, medical demand, and other
scenarios that would require an increase in production of critical
medications. Also, in these dialogues, injectable manufacturers stated
that the manufacturing times from acceptance of API to release of the
drug product took approximately 30 to 42 days. The COVID-19 pandemic
has demonstrated that the flexibility to grant and utilize quotas to
produce the formulations and dosage strengths demanded in times of
crisis is more important than the availability of large inventories on
hand.
Formalization of Subcategories for Manufacturing Quotas and Procurement
Quotas
This provision of the final rule is a codification of existing
voluntary and cooperative efforts between registrants and DEA that have
been in place since 2001 and facilitates a more accurate calculation of
APQ for the United States. The establishment of subcategories of: (1)
Quota for Commercial Sales; (2) Quota for Transfer; (3) Quota for
Product Development; (4) Quota for Replacement; and (5) Quota for
Packaging/Repackaging and Labeling/Relabeling are already being
utilized by DEA with full cooperation from all registrants. Therefore,
this provision simply updates 21 CFR 1303.03, 1303.04, 1315.06, and
1315.07 to reflect current DEA procedure for the management of quota,
and it will have no economic impact on registrants or DEA.
New Deadlines for Establishing Quotas
The final rule will modify the deadlines for establishing and
publishing the APQ, AAN, import quotas, procurement quotas,
manufacturing quotas, and any adjustments to manufacturing quotas. Due
to the expansion of the market and the increase in the number of bulk
and dosage-form manufacturers since that deadline was implemented
almost 50 years ago, DEA frequently misses the current deadlines for
the establishment of the APQ and the AAN of May 1 and the issuing of
individual procurement, manufacturing and import quotas of July 1.
Congress mandated quotas for importers of list I chemicals in 2007.\14\
Applications for import and procurement quota are due April 1, giving
DEA only 30 days before the May 1 deadline for publication of the APQ
and AAN. Given that DEA has historically missed these deadlines since
it must take adequate time to provide a thorough and careful assessment
of each application, both DEA and industry have already become
accustomed to a delayed publishing schedule. Therefore, this provision
is expected to have minimal economic impact as it simply aligns the
regulatory deadlines with the current practices of DEA and industry.
---------------------------------------------------------------------------
\14\ Combat Methamphetamine Epidemic Act of 2005, Public Law
109-177.
---------------------------------------------------------------------------
Executive Order 12988, Civil Justice Reform
This rulemaking 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, Federalism
This rulemaking does not preempt or modify any provision of State
law, impose enforcement responsibilities on any State, or 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.
Executive Order 13175, Consultation and Coordination With Indian Tribal
Governments
This rule does not have substantial direct effects on the states,
on the relationship between the national government and the states, or
the distribution of power and responsibilities between the Federal
government and Indian tribes.
Regulatory Flexibility Act
In accordance with the Regulatory Flexibility Act (RFA), DEA
evaluated the impact of this rule on small entities. DEA's evaluation
of economic impact by size category indicates that this final rule will
not have a significant economic impact on a substantial number of these
small entities.
The RFA requires agencies to analyze options for regulatory relief
of small entities unless it can certify that the rule will not have a
significant impact on a substantial number of small entities. For
purposes of the RFA, small entities include small businesses, nonprofit
organizations, and small governmental jurisdictions. DEA evaluated the
impact of this rule on small entities and discussions of its findings
are below.
As discussed in the ``Executive Orders 12866 (Regulatory Planning
and Review) and 13563 (Improving Regulation and Regulatory Review)''
section above, this rule has six key components as described below.
Defining Types of Quota and Filing To Abandon Quota
This provision codifies existing DEA practices and will result in
no economic
[[Page 60134]]
impact on registrants or DEA. The formal definition of quota types will
have no practical impact on registrants, and formalizing the procedure
to abandon quota is simply a codification of DEA's current procedure.
Therefore, this provision will have no costs.
Conforming Revisions Related to the SUPPORT Act
While the SUPPORT Act gives DEA the authority to establish quotas
in terms of pharmaceutical dosage-form, DEA will continue to use its
current process of establishing quota in terms of kilograms. Therefore,
this provision of the rule will have no impact.
Additionally, the SUPPORT Act defines the phrase ``covered
controlled substance'' to include fentanyl, oxycodone, hydrocodone,
oxymorphone, and hydromorphone. It requires DEA to estimate the amount
of diversion when establishing quota for covered controlled substances
by consulting with the Secretary of HHS and considering reliable
information on the rates of overdose deaths and abuse and overall
public health impact in the United States that is determined to be
reliable. DEA has considered the amount of diversion when establishing
quotas when data has been available and is a regular part of DEA's
operations. Therefore, considering additional reliable information
gathered from outside the agency to estimate the amount of diversion
will result in minimal additional cost.
The SUPPORT Act updates also extend DEA's deadline to fix
individual manufacturing quotas for schedules I and II controlled
substances from October to December. The deadline extension will have
minimal impact on registrants as DEA currently does not meet the
October deadline. This extension will align the regulations with
reality for registrants. Therefore, these provisions will have minimal
impact on registrants or DEA.
Procurement Quota Certification
The final rule will require that all DEA registrants supplying
schedules I and II controlled substances and list I chemicals to DEA
manufacturers to obtain certification of the manufacturer's quota
before completing the transaction. In practice, this certification must
be a written declaration issued by manufacturers to distributors
containing the information as required in the regulations.\15\ This
provision prevents manufacturers from purchasing their API or finished
dosage-forms from distributors without quota verification as currently
required when manufacturers request API or finished dosage-forms from
other manufacturers. Current regulations stipulate that only entities
registered as ``importer,'' ``manufacturer,'' or ``bulk manufacturer''
must certify quota before a sale.\16\
---------------------------------------------------------------------------
\15\ 21 CFR 1303.12(f) and 1315.32(h).
\16\ Id.
---------------------------------------------------------------------------
To estimate the cost of this provision, DEA utilized internal data
tracking the sale of schedules I and II controlled substances and list
I chemicals from distributors to manufacturers during the three year
period of January 1, 2015 to December 31, 2017. DEA's analysis revealed
that over this three year period, distributors filled an average of
3,000 orders to manufacturers per year. Using BLS wage data for
Compliance Officers, the type of registrant employee that would be
tasked with certifying quota, DEA estimated the labor cost of quota
certification to distributors to be $11,747 and $23,494 to
manufacturers, resulting in a combined annual labor cost of $35,241.
Reduction of Inventory Allowances
This final rule will reduce the inventory allowance for
manufacturers of controlled substances and list I chemicals from 50
percent to 40 percent of the registrant's estimated net disposal, and
it will establish a procurement quota inventory allowance for dosage-
forms and list I chemicals at 35 percent of the registrant's estimated
net disposal. Procurement quota inventory allowances for liquid
injectable dosage-forms are also being formally established at 50
percent, resulting in no change. Inventory allowances are a factor in
DEA's determination of a registrant's quota for the coming year and
provide inventory for sales at the beginning of a new quota year before
quota is received. Registrants may exceed their inventory allowance
during the year. If at any time during the year the inventory of a
basic class held by a manufacturer exceeds 55 percent (or 50 percent
for procurement quota for dosage-forms) of estimated net disposal, the
quota for that class is automatically suspended and would remain
suspended until inventory is less than 50 percent (45 percent for
procurement quota dosage-forms) of the estimated net disposal.
Practically speaking, the changes to inventory allowances equate to a
reduction from the current half of a year's sales supply (50 percent)
allowed to be held as inventory to nearly five months (40 percent) for
individual manufacturing and over four months (35 percent) for dosage-
form manufacturing. Additionally, the 55 percent maximum inventory
during the year gives manufacturers the flexibility to have over six
months of sales supply inventoried to account for any unplanned
fluctuations in demand or timing in orders for their product throughout
the year. For dosage-form manufacturers, the maximum inventory of 50
percent provides exactly six months of sales supply. The inventory
allowance for liquid injectable dosage-forms remains unchanged at 65
percent; thus, there is no impact on these products.
Because the comments received from manufacturers on this provision
of the proposed rule focused primarily on their estimation of the
increase in time and cost of manufacturing API products, DEA believes
it is reasonable to assume that any costs imposed by this provision
stem primarily from the inventory allowance reduction for individual
manufacturing quotas, and this cost is borne by bulk manufacturers. The
only commenter to provide a detailed monetary cost estimate for DEA to
consider stated that its incremental production costs would rise by
approximately $600,000 per year primarily due to the reduced inventory
allowance necessitating an additional manufacturing campaign for their
largest volume API products. While DEA recognizes this single cost
estimate as legitimate, it is unlikely that production costs are
uniform across manufacturers and depend largely on variables unique to
each firm. However, given the absence of detailed monetary cost
estimates from other commenters and the fact that the required inputs
to calculating an individual firm's manufacturing costs are proprietary
and unknown to DEA, using this commenter's estimate as the basis for
estimating the impact of this provision of the final rule is the most
reasonable option available to DEA.
There are currently 44 bulk manufacturers registered with DEA. DEA
assumes that each of these registrants will incur an average annual
cost of $600,000, equating to $26.4 million in total annual costs
because of this provision of the final rule.
While DEA acknowledges that reducing inventory allowances will
increase costs for bulk manufacturers, DEA concludes that these
reductions are not likely to result in supply disruptions. Registrants
also routinely request adjustments to their quota throughout the year
due to fluctuations in market conditions. This is a normal part of a
manufacturer's business operations. DEA quickly responds to these
requests within six to eight weeks, ensuring legitimate business is not
[[Page 60135]]
disrupted, and it will continue to do so once this rule is promulgated.
For example, in 2017 (the last year in which data are available), DEA
processed 1,752 initial quota applications and 2,299 requests for
adjustment to quota. Additionally, in response to the ongoing COVID-19
pandemic, DEA and manufacturers of injectable products for treatment of
ventilator patients entered into continuous dialogue to meet surging
hospital demand. During this time, DEA was able to process manufacturer
quota requests in less than five business days, demonstrating DEA's
flexibility to address situations such as shortages, natural disasters,
epidemics, medical demand, and other scenarios that could require an
increase in production of critical medications. Also, in these
dialogues, injectable manufacturers stated that the manufacturing times
from acceptance of API to release of the drug product took
approximately 30 to 42 days. The COVID-19 pandemic has demonstrated
that the flexibility to grant and utilize quotas to produce the
formulations and dosage strengths demanded in times of crisis is more
important than the availability of large inventories on hand.
Formalization of Subcategories for Manufacturing Quotas and Procurement
Quotas
This provision of the final rule is a codification of existing
voluntary and cooperative efforts between registrants and DEA that have
been in place since 2001 and allows a more accurate calculation of APQ
for the United States. The establishment of subcategories of: (1) Quota
for Commercial Sales; (2) Quota for Transfer; (3) Quota for Product
Development; (4) Quota for Replacement; and (5) Quota for Packaging/
Repackaging and Labeling/Relabeling are already being utilized by DEA
with full cooperation from all registrants. Therefore, this provision
simply updates 21 CFR 1303.03, 1303.04, 1315.06, and 1315.07 to reflect
current DEA procedure for the management of quota and will have no
economic impact on registrants or DEA.
New Deadlines for Establishing Quotas
The final rule would modify the deadlines for establishing and
publishing the APQ, AAN, and procurement and manufacturing quotas, and
any adjustments to manufacturing quotas. Due to the expansion of the
market and the increase in the number of manufacturers and importers
since that deadline was implemented almost 50 years ago, DEA frequently
misses the current publishing deadlines for the establishment of the
APQ and the AAN of May 1 and the issuing of individual procurement,
manufacturing and import quotas deadline of July 1. Applications for
import and procurement quota are due April 1, giving DEA only 30 days
before the May 1 deadline for publication of the APQ and AAN. Given
that DEA has historically missed these deadlines since it must take
adequate time to provide a thorough and careful assessment of each
application, both DEA and industry have already become accustomed to a
delayed publishing schedule. Therefore, this provision is expected to
have minimal economic impact as it simply aligns the regulatory
deadlines with the current business practices of DEA and industry.
Summary
In summary, only the procurement quota certification requirement
and reduction to inventory allowances impose costs. The certification
requirement results in a $23,494 annual cost to all manufacturers and
an $11,747 annual cost to all distributors for a combined annual cost
of $35,241. The reduction to inventory allowances imposes an estimated
annual cost of $600,000 on each of the 44 bulk manufacturers registered
with DEA, equating to $26.4 million in total annual costs.
Description and Estimate of the Number of Small Entities
This rule has the potential to affect entities registered with DEA
as manufacturers, distributors, and importers of controlled substances
and list I chemicals. Based on a review of respective representative
North American Industry Classification System (NAICS) codes for
manufacturers,\17\ distributors, and importers,\18\ there are the
following number of firms: \19\
---------------------------------------------------------------------------
\17\ DEA believes `Pharmaceutical Preparation Manufacturing'
(325412) includes 503B outsourcing facilities.
\18\ DEA believes `Drugs and Druggists' Sundries Merchant
Wholesalers' (424210) includes both distributors and importers of
controlled substances and (human form) list I chemicals.
\19\ For the purposes of this analysis, the term ``firm'' is
synonymous with ``entities.''
404 `Medicinal and Botanical Manufacturing' (325411)
957 `Pharmaceutical Preparation Manufacturing' (325412)
6,739 `Drugs and Druggists' Sundries Merchant Wholesalers'
(424210)
The U.S. Small Business Administration (SBA) considers a size
standard as the largest that a concern can be and still qualify as a
small business for Federal government programs. For the most part, size
standards are the average annual receipts or the average employment of
a firm. The SBA size standards for the three industries are 1,000
employees for Medicinal and Botanical Manufacturing, 1,250 employees
for Pharmaceutical Preparation Manufacturing, and 250 employees for
Drugs and Druggists' Sundries Merchant Wholesalers.\20\
---------------------------------------------------------------------------
\20\ SBA ``Table of Small Business Size Standards Matched to
North American Industry Classification System Codes, Effective
August 19, 2019.''
---------------------------------------------------------------------------
Comparing the SBA size standards to the U.S. Census Bureau,
Statistics of U.S. Businesses (SUSB) detailed data on establishment
size by NAICS code for each affected industry, DEA estimates the
following number of small entities (and percent of establishments that
are small entities) by industry:
377 (93.3 percent of total) `Medicinal and Botanical
Manufacturing' (325411);
885 (92.5 percent of total) `Pharmaceutical Preparation
Manufacturing' (325412); and
6,475 (96.1 percent of total) `Drugs and Druggists'
Sundries Merchant Wholesalers' (424210).
The table below summarizes the calculation for the estimated number
of small entities (establishments) above.
BILLING CODE 4410-09-P
[[Page 60136]]
[GRAPHIC] [TIFF OMITTED] TR31AU23.001
BILLING CODE 4410-09-C
Because DEA registrants frequently hold more than one registration
for separate locations, one entity may hold many registrations. DEA
estimates the number of affected entities by multiplying the number of
DEA registrations in each business activity by its ``firm-to-
establishment'' ratio to find the total amount of entities. The firm-
to-establishment ratio is calculated by dividing the number of firms in
each industry NAICS code by the total number of establishments found in
the third and fourth columns of the previous table.\21\ DEA analyzed
how each provision of the proposed rule will affect DEA registrants,
including how many entities each provision will affect, and found that
at least one provision of this proposed rule will affect 561 DEA
registered entities. A summary of this analysis is detailed in the
table below:
---------------------------------------------------------------------------
\21\ For example, the firm-to-establishment ratio for NAICS
325412 is obtained by dividing the 957 total firms in the industry
by the 1,208 total establishments in the industry, yielding a ratio
of .79.
---------------------------------------------------------------------------
[[Page 60137]]
[GRAPHIC] [TIFF OMITTED] TR31AU23.002
After accounting for how many DEA registered entities are affected
by each provision, DEA applied the estimated percentage of
establishments that are small entities to each respective business
activity to estimate the number of affected small entities. DEA
estimates that of the 561 affected entities 525 are small entities: 161
distributors, 304 dosage-form manufacturers, 37 bulk manufacturers, and
23 importers. In summary, the percentages of small entities affected
are as follows:
9.8 percent `Medicinal and Botanical Manufacturing'
(325411);
34.4 percent `Pharmaceutical Preparation Manufacturing'
(325412); and
2.8 percent `Drugs and Druggists' Sundries Merchant
Wholesalers' (424210).
The table below summarizes the estimated number of small entities,
number of affected small entities, and the percentage of small entities
affected.
[GRAPHIC] [TIFF OMITTED] TR31AU23.003
As described above, the quota certification provision of this final
rule is estimated to cost a total of $23,494 to manufacturers annually
and a total of $11,747 to distributors annually, or an average cost of
$70 ($23,494/334) per affected manufacturer and $71 ($11,747/166) per
distributor. Additionally, the reduction to inventory allowances are
estimated to impose costs of $600,000 annually on the 44 affected bulk
manufacturers that are registered with DEA, 37 of which are small
entities. DEA generally uses 30 percent as a ``substantial'' number of
affected small entities. The analysis reveals that a non-substantial
percentage of small distributor entities (2.8 percent) and
[[Page 60138]]
small bulk manufacturer entities (9.8 percent) will be affected while a
substantial percentage of small dosage-form manufacturing entities
(34.3 percent) will be affected by this rule. DEA generally considers
impacts that are greater than three percent of yearly revenue to be a
``significant economic impact'' on an entity. DEA compared the
compliance cost of $70 and $71 to the average annual receipts of
dosage-form manufacturers and distributors/imports, respectively, for
each size range.\22\ Additionally, DEA compared the estimated $600,000
per-entity cost attributed to reducing inventory allowances to the
average annual receipts of bulk manufacturers for each size range. For
even the smallest of entities, the costs calculated above are much less
than three percent of yearly revenue and are not significant. The table
below summarizes the analysis.
---------------------------------------------------------------------------
\22\ Small Business Administration, Office of Advocacy ``Table
2--Number of firms, establishments, receipts, employment, and
payroll by firm size (in receipts) and industry, 2012.'' https://www.sba.gov/advocacy/firm-size-data, accessed 5/24/2018.
[GRAPHIC] [TIFF OMITTED] TR31AU23.004
DEA examined the economic impact of this final rule for each
affected industry for various size ranges. Based on the analysis above,
and because of these facts, DEA believes this rule will not have a
significant economic impact on a substantial number of small entities.
Unfunded Mandates Reform Act of 1995
This rule will not result in the expenditure by State, local, and
tribal governments, in the aggregate, or by the private sector, of $100
million or more (adjusted annually for inflation) in any one year and
will not significantly or uniquely affect small governments. Therefore,
no actions were deemed subject to the provisions of the Unfunded
Mandates Reform Act of 1995, 2 U.S.C. 1532.
Paperwork Reduction Act of 1995
Pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-
3521), this action revises existing information collections 1117-0006,
1117-0008, and 1117-0047 and creates one new information collection.
DEA is amending its regulations for establishing quotas for United
States companies manufacturing schedules I and II controlled substances
and ephedrine, pseudoephedrine, and phenylpropanolamine and for
procurement quota certification and recordkeeping requirements. A
person is not required to respond to a collection of information unless
it displays a valid OMB control number. DEA has submitted these
collection requests to the OMB for review and approval.
A. Collections of Information Associated With the Proposed Rule
1. Title: Application for Individual Manufacturing Quota for a
Basic Class of Controlled Substance and for Ephedrine, Pseudoephedrine,
and Phenylpropanolamine.
OMB Control Number: 1117-0006.
DEA Form Number: DEA-189.
DEA is formally implementing the use of subcategories to facilitate
the issuance of manufacturing quotas and provide a more accurate
calculation of the aggregate production quotas for the United States.
DEA will be adding the following five subcategories for quota: (1)
Quota for Commercial Sales; (2) Quota for Transfer; (3) Quota for
Product Development; (4) Quota for Replacement; and (5) Quota for
Packaging/Repackaging and Labeling/Relabeling. All types of quota could
be requested using the same application and format registrants are
accustomed to using in an online form. Manufacturers of schedules I and
II controlled substances and list I chemicals will continue to receive
manufacturing and procurement quotas appropriate to their manufacturing
and inventory requirements, and DEA will retain greater control over
the amount of these controlled substances and list I chemicals
produced, thereby reducing the amount of inventories at risk of
diversion.
DEA estimates the following number of respondents and burden
associated with reporting:
Number of respondents: 33.
Frequency of response: Annually/As-needed (26.0303
average).
Number of responses: 859.
Burden per response: 0.5 hour.
Total annual hour burden: 430.
2. Title: Application for Procurement Quota for Controlled
Substances and for Ephedrine, Pseudoephedrine, and Phenylpropanolamine.
OMB Control Number: 1117-0008.
DEA Form Number: DEA-250.
DEA is formally implementing the use of subcategories to facilitate
the issuance of procurement quotas and provide a more accurate
calculation of the aggregate production quotas for the
[[Page 60139]]
United States. DEA is adding the following five subcategories for
quota: (1) Quota for Commercial Sales; (2) Quota for Transfer; (3)
Quota for Product Development; (4) Quota for Replacement; and (5) Quota
for Packaging/Repackaging and Labeling/Relabeling. All types of quota
will be requested using the same application and format registrants are
accustomed to using in an online form. Manufacturers of schedules I and
II controlled substances and list I chemicals will continue to receive
manufacturing and procurement quotas appropriate to their manufacturing
and inventory requirements, and DEA will retain greater control over
the amount of these controlled substances and list I chemicals
produced, thereby reducing the amount of inventories at risk of
diversion.
DEA estimates the following number of respondents and burden
associated with reporting:
Number of respondents: 344.
Frequency of response: Annually/As-needed (8.9128
average).
Number of responses: 3,066.
Burden per response: 0.5 hour.
Total annual hour burden: 1,533.
3. Title: Application for Import Quota for Ephedrine,
Pseudoephedrine, and Phenylpropanolamine.
OMB Control Number: 1117-0047.
DEA Form Number: DEA-488.
DEA will be formally implementing the use of subcategories to
facilitate the issuance of import quotas and provide a more accurate
calculation of the assessment of annual needs for the United States.
DEA is adding the following five subcategories for quota: (1) Quota for
Commercial Sales; (2) Quota for Transfer; (3) Quota for Product
Development; (4) Quota for Replacement; and (5) Quota for Packaging/
Repackaging and Labeling/Relabeling. All types of quota will be
requested using the same application and format registrants are
accustomed to using in an online form. Importers of list I chemicals
will continue to receive import quotas appropriate to their
manufacturing and inventory requirements, and DEA will retain greater
control over the amount of these list I chemicals produced, thereby
reducing the amount of inventories at risk of diversion.
DEA estimates the following number of respondents and burden
associated with reporting:
Number of respondents: 49.
Frequency of response: Annually/As-needed (2.5714
average).
Number of responses: 126.
Burden per response: 0.5 hour.
Total annual hour burden: 63.
4. Title: Procurement Quota Certification and Recordkeeping
Requirements.
OMB Control Number: 1117-0055.
DEA Form Number: N/A.
This final rule will require all DEA registrants supplying
schedules I and II controlled substances or list I chemicals to DEA
manufacturers to obtain certification of the manufacturer's procurement
quota before completing the transaction. This provision will prevent
manufacturers from purchasing active pharmaceutical ingredients from
distributors, rather than other manufacturers, without including a
quota certification. Current DEA regulations stipulate only that orders
to entities registered as importers, manufacturers, or bulk
manufacturers must include quota certifications. Manufacturers
procuring schedules I and II controlled substances or list I chemicals
must maintain a copy of the certification they provide with their order
for a period of two years from the date of the certification. Under
this final rule, this recordkeeping requirement will apply to
certifications included with orders for schedules I and II controlled
substances or list I chemicals to all registrants, including
distributors.
DEA estimates that distributors fill an average of 3,000 orders to
manufacturers per year, which under this final rule, will require 3,000
certification letters to be drafted and retained by manufacturers and
reviewed by distributors. The estimated yearly cost of this activity is
$35,241. For the purposes of this final rule, DEA estimates the
following number of respondents and burden associated with the proposed
requirement that procuring manufacturers create and retain copies of
schedules I and II controlled substance and list I chemical quota
certifications for two years:
Number of respondents: 500 (334 manufacturers and 166
distributors).
Frequency of response: 9 per year.
Number of responses: 3,000.
Burden per response: .25 (minimal).
Total annual hour burden: 750 (minimal).
If you need a copy of the information collection instrument(s) with
instructions or additional information, please contact the Regulatory
Drafting and Policy Support Section (DPW), Diversion Control Division,
Drug Enforcement Administration; Mailing Address: 8701 Morrissette
Drive, Springfield, Virginia 22152; Telephone: (571) 362-3261.
No comments were received on any of the information collections
being modified in connection with this final rule. Any comments related
this collection of information may be sent in writing to the Office of
Information and Regulatory Affairs, OMB, Attention: Desk Officer for
DOJ, Washington, DC 20503. Please state that your comment refers to RIN
1117-AB49/Docket No. DEA-455.
Congressional Review Act
This rule is not a major rule as defined by the Congressional
Review Act, 5 U.S.C. 804. This rule will not result in an annual effect
on the economy of $100 million or more; a major increase in costs or
prices; or significant adverse effects on competition, employment,
investment, productivity, innovation, or on the ability of United
States-based companies to compete with foreign-based companies in
domestic and export markets.
List of Subjects
21 CFR Part 1303
Administrative practice and procedure, Drug traffic control.
21 CFR Part 1315
Administrative practice and procedure, Chemicals, Drug traffic
control, Imports, Reporting and recordkeeping requirements.
For the reasons set forth above, DEA is amending 21 CFR parts 1303
and 1315 as follows:
PART 1303--QUOTAS
0
1. The authority citation for 21 CFR part 1303 continues to read as
follows:
Authority: 21 U.S.C. 821, 826, 871(b).
0
2. Add Sec. Sec. 1303.03, 1303.04, and 1303.05 to read as follows:
Sec. 1303.03 Types of quotas.
The three types of quotas are:
(a) Aggregate production quotas, which establish the total quantity
of each basic class of schedules I and II controlled substances that
may be produced by all manufacturers in a calendar year.
(b) Individual manufacturing quotas, which establish the maximum
quantity of each basic class of schedules I and II controlled
substances that a registered manufacturer may manufacture during a
calendar year. This type of quota is only issued to DEA-registered bulk
manufacturers.
(c) Procurement quotas, which establish the maximum quantity of
each basic class of schedules I and II controlled substances that a
registered manufacturer may procure during a calendar year for the
purpose of manufacturing into dosage-forms or other substances.
[[Page 60140]]
Sec. 1303.04 Subcategories of manufacturing and procurement quotas.
The five subcategories of manufacturing and procurement quotas are:
(a) Quota for commercial sale. This is a quota for the amount of
bulk active pharmaceutical ingredients (API) initially acquired by a
registrant for the manufacture of approved schedule I or II controlled
substance drug products by the Food and Drug Administration (FDA), and
bulk API acquired by outsourcing facilities, manufacturers, etc. This
quota category is used to capture bulk API moving from a bulk
manufacturer to other registered manufacturers for their commercial
manufacturing efforts. This type of quota may only be used to support
commercial manufacturing efforts and may not be used to support other
manufacturing efforts.
(b) Quota for transfer. This is a quota for the amount of material
moved upstream from one registrant to another and does not include
material captured under procurement quota for commercial sale. Examples
include:
(1) Bulk API being transferred back to the original registrant
after milling;
(2) Transfer of in-process material or finished dosage-forms for
additional manufacturing efforts (coating, beading, encapsulation, and
so forth) back to the preceding registrant; and
(3) Return of material after the specified manufacturing activity
has been completed or return of rejected material to the upstream
manufacturer for destruction or additional processing.
(c) Quota for product development. This is a quota for the amount
of material needed for product development and validation of
manufacturing efforts. This quota is limited to that activity only and
only for the development efforts noted in the application; it shall not
be used or substituted for commercial production or the development of
a different product. This quota is issued with the understanding that
this material is not intended for commercial use, with the exception of
post-FDA approved validation batches. Validation batches shall be noted
specifically in an application and shall be considered product
development material that will be taken into account for net disposal
once a product is FDA-approved for commercial sale. No inventory will
be granted for these efforts, nor will replacement quota be considered
for destroyed material issued under this quota subcategory.
(d) Quota for replacement. This is a type of individual
manufacturing quota or procurement quota that is granted to a
registrant after the registrant disposes of material that was initially
intended for commercial sale, but for some reason was unable to be
marketed. This quota is separate and shall not count against a
registrant's other issued quota. Replacement quota will be granted on a
case-by-case basis. The merits of the request will be determined by the
specifics of the registrant's justification and situation. DEA will
review the submitted DEA Form 41 or DEA Form 222 documenting the
destruction of the controlled substance and evaluate the justification
for the destruction to determine if replacement quota is warranted and
whether or not the destroyed material is required to meet the
legitimate demand of the market. Replacement quota is intended to
replace material from the current quota year and not a means to replace
disposed samples, analytical samples, product development material, or
inventory acquired under previous quota years.
(e) Quota for packaging/repackaging and labeling/relabeling. This
is the quota for the amount of material moved to a registrant to
undergo packaging and labeling activities. This quota is limited to
that activity only and only for the packaging/repackaging and labeling/
relabeling noted in the application; it may not be used or substituted
for commercial production. Packaging/repackaging and labeling/
relabeling quota is intended for tracking of schedules I and II
controlled substances as they undergo packaging/labeling activities;
however, packaging/repackaging and labeling/relabeling quotas shall not
be counted against the aggregate production quotas.
Sec. 1303.05 Estimation of Diversion.
(a) In establishing any quota under the sections in this part for a
covered controlled substance, the Administrator shall estimate the
amount of diversion of the covered controlled substance that occurs in
the United States.
(b) In estimating diversion under the sections in this part, the
Administrator:
(1) Shall consider information the Administrator, in consultation
with the Secretary of Health and Human Services, determines reliable on
rates of overdose deaths and abuse and overall public health impact
related to the covered controlled substance in the United States; and
(2) May take into consideration whatever other sources of
information the Administrator determines reliable.
(c) After estimating the amount of diversion of a covered
controlled substance, the Administrator shall make appropriate quota
reductions, as determined by the Administrator, from the quota the
Administrator would have otherwise established had such diversion not
been considered.
(d) For purposes of this Part, the term ``covered controlled
substances'' refers to fentanyl, oxycodone, hydrocodone, oxymorphone,
and hydromorphone.
0
3. Revise the undesignated center heading ``Aggregate Production and
Procurement Quotas'' to read as ``Aggregate Production Quotas''.
0
4. Amend Sec. 1303.11 by:
0
a. Adding a sentence to the end of paragraph (a);
0
b. Removing the date ``May 1'' in the first sentence of paragraph (c)
and adding in its place ``September 1''; and
0
c. Adding paragraph (d).
The revisions to read as follows:
Sec. 1303.11 Aggregate production quotas.
(a) * * * The Administrator may establish an aggregate production
quota in terms of pharmaceutical dosage-forms prepared from or
containing the schedule I or II controlled substance, if he determines
it will assist in avoiding the overproduction, shortages, or diversion
of a controlled substance.
* * * * *
(d) For any year for which the approved aggregate production quota
for a covered controlled substance, as defined in Sec. 1303.05(d), is
higher than the approved aggregate production quota for the covered
controlled substance for the previous year, the Administrator, in
consultation with the Secretary of Health and Human Services, shall
include in the final order an explanation of why the public health
benefits of increasing the quota clearly outweigh the consequences of
having an increased volume of the covered controlled substance
available for sale, and potential diversion, in the United States.
0
5. Add an undesignated center heading before Sec. 1303.15 to read as
follows:
* * * * *
Procurement Quotas
* * * * *
Sec. 1303.12 [Redesignated as Sec. 1303.15]
0
6. Redesignate Sec. 1303.12 as Sec. 1303.15 and add and reserve a new
Sec. 1303.12.
0
7. Amend newly redesignated 1303.15 Sec. by:
0
a. Adding a sentence to the end of paragraph (a);
0
b. Revising the first sentence in paragraph (b);
0
c. Removing ``July'' in paragraph (c) introductory text and adding in
its place ``December''; and
[[Page 60141]]
0
d. In paragraph (f), removing the words ``manufacturer'' and ``bulk
manufacturer'' and adding in their place ``registrant'', and removing
``Manufacturers'' and adding in its place ``A registrant''.
The revision to read as follows:
Sec. 1303.15 Procurement quotas.
(a) * * * The Administrator may establish a procurement quota in
terms of pharmaceutical dosage-forms prepared from or containing the
schedule I or II controlled substance, if they determine it will assist
in avoiding the overproduction, shortages, or diversion of a controlled
substance.
(b) Any person who is registered to manufacture controlled
substances listed in any schedule and who desires to use during the
next calendar year any basic class of controlled substances listed in
schedule I or II (except raw opium being imported by the registrant
pursuant to an import permit) for purposes of manufacturing, shall
apply on DEA Form 250 for procurement quota and shall state separately
for each subcategory, as defined in 21 CFR 1303.04, each quantity of
such basic class. * * *
* * * * *
0
8. Add Sec. 1303.16 to read as follows:
Sec. 1303.16 Inventory allowance for procurement quotas.
(a) For the purpose of determining procurement quotas pursuant to
Sec. 1303.15, each registered manufacturer shall be allowed as part of
such quota an amount sufficient to maintain an inventory:
(1) Except as provided in paragraph (a)(3) of this section, for
current manufacturers, 35 percent of their average estimated net
disposal for the current calendar year and the last preceding calendar
year; or
(2) Except as provided in paragraph (a)(4) of this section, for new
manufacturers, 35 percent of their reasonably estimated net disposal
for the next calendar year as determined by the Administrator.
(3) For current liquid injectable dosage-form manufacturers, 50
percent of their average estimated net disposal for the current
calendar year and the last preceding calendar year; or
(4) For new liquid injectable dosage-form manufacturers, 50 percent
of their reasonably estimated net disposal for the next calendar year
as determined by the Administrator.
(b) Except as provided in paragraph (c) of this section, during
each calendar year, each registered manufacturer receiving a
procurement quota shall be allowed to maintain an inventory of a basic
class not exceeding 50 percent of his estimated net disposal of that
class for that year, as determined at the time their quota for that
year was determined. At any time the inventory of a basic class held by
a manufacturer exceeds 50 percent of their estimated net disposal,
their quota for that class is automatically suspended and shall remain
suspended until his inventory is less than 45 percent of their
estimated net disposal. The Administrator may, upon application and for
good cause shown, permit a manufacturer whose quota is, or is likely to
be, suspended pursuant to this paragraph to continue manufacturing and
to accumulate an inventory in excess of 50 percent of their estimated
net disposal, upon such conditions and within such limitations as the
Administrator may find necessary or desirable.
(c) For liquid injectable dosage-forms, each registered
manufacturer receiving a procurement quota shall be allowed to maintain
an inventory of a basic class not exceeding 65 percent of their
estimated net disposal of that class for that year during each calendar
year, as determined at the time their quota for that year was
determined. At any time the inventory of a basic class held by a
manufacturer exceeds 65 percent of their estimated net disposal, their
quota for that class is automatically suspended and shall remain
suspended until their inventory is less than 60 percent of his
estimated net disposal. The Administrator may, upon application and for
good cause shown, permit a manufacturer whose quota is, or is likely to
be, suspended pursuant to this paragraph to continue manufacturing and
to accumulate an inventory in excess of 65 percent of their estimated
net disposal, upon such conditions and within such limitations as the
Administrator may find necessary or desirable.
(d) Except as provided in paragraph (e) of this section, if, during
a calendar year, a registrant has procured the entire quantity of a
basic class allocated to him under an individual procurement quota, and
their inventory of that class is less than 25 percent of his estimated
net disposal of that class for that year, the Administrator may, upon
application pursuant to Sec. 1303.15(d), increase the quota of such
registrant sufficiently to allow restoration of the inventory to 35
percent of the estimated net disposal for that year.
(e) For liquid injectable dosage-forms, if, during a calendar year,
a registrant has procured the entire quantity of a basic class
allocated to them under an individual procurement quota, and their
inventory of that class is less than 40 percent of their estimated net
disposal of that class for that year, the Administrator may, upon
application pursuant to Sec. 1303.15(d), increase the quota of such
registrant sufficiently to allow restoration of the inventory to 50
percent of the estimated net disposal for that year.
0
9. Add Sec. 1303.17 to read as follows:
Sec. 1303.17 Abandonment of procurement quota.
Any manufacturer assigned a procurement quota for any basic class
of controlled substance listed in schedule I or II pursuant to Sec.
1303.12 may at any time abandon their right to manufacture all or any
part of such quota by filing a notice of such abandonment with the UN
Reporting and Quota Section, Diversion Control Division, Drug
Enforcement Administration in the online Quota Management System. The
Administrator may, in their discretion, allocate such amount among the
other manufacturers in proportion to their respective quotas.
0
10. In Sec. 1303.21 amend paragraph (a) by removing the date ``July
1'' in the first sentence and adding in its place ``December 1'' and
adding a new second sentence to read as follows
Sec. 1303.21 Individual manufacturing quotas.
(a) * * * The Administrator may establish an individual
manufacturing quota in terms of pharmaceutical dosage-forms prepared
from or containing the schedule I or II controlled substance, if they
determine it will assist in avoiding the overproduction, shortages, or
diversion of a controlled substance. * * *
* * * * *
0
10. Amend Sec. 1303.22 by revising the first sentence of the
introductory text to read as follows:
Sec. 1303.22 Procedure for applying for individual manufacturing
quotas.
Any person who is registered to manufacture any basic class of
controlled substance listed in schedule I or II and who desires to
manufacture a quantity of such class shall apply on DEA Form 189 for a
manufacturing quota and shall state separately for each subcategory, as
defined in Sec. 1303.04, each quantity of such class. * * *
* * * * *
Sec. 1303.23 Procedure for applying for individual manufacturing
quotas.
0
11. In Sec. 1303.23, amend paragraph (c) by removing the date ``March
1'' in the first sentence and adding in its place ``July 1''.
[[Page 60142]]
0
12. Revise Sec. 1303.24 to read as follows:
Sec. 1303.24 Inventory allowance for individual manufacturing quotas.
(a) For the purpose of determining individual manufacturing quotas
pursuant to Sec. 1303.23, each registered manufacturer shall be
allowed as part of such quota an amount sufficient to maintain an
inventory equal to:
(1) For current manufacturers, 40 percent of their average
estimated net disposal for the current calendar year and the last
preceding calendar year; or
(2) For new manufacturers, 40 percent of their reasonably estimated
net disposal for the next calendar year as determined by the
Administrator.
(b) During each calendar year, each registered manufacturer shall
be allowed to maintain an inventory of a basic class not exceeding 55
percent of their estimated net disposal of that class for that year, as
determined at the time their quota for that year was determined. At any
time the inventory of a basic class held by a manufacturer exceeds 55
percent of their estimated net disposal, their quota for that class is
automatically suspended and shall remain suspended until their
inventory is less than 50 percent of their estimated net disposal. The
Administrator may, upon application and for good cause shown, permit a
manufacturer whose quota is, or is likely to be, suspended pursuant to
this paragraph to continue manufacturing and to accumulate an inventory
in excess of 55 percent of their estimated net disposal, upon such
conditions and within such limitations as the Administrator may find
necessary or desirable.
(c) If, during a calendar year, a registrant has manufactured the
entire quantity of a basic class allocated to them under an individual
manufacturing quota, and their inventory of that class is less than 30
percent of their estimated net disposal of that class for that year,
the Administrator may, upon application pursuant to Sec. 1303.25,
increase the quota of such registrant sufficiently to allow restoration
of the inventory to 40 percent of the estimated net disposal for that
year.
0
13. Amend Sec. 1303.27 by revising the section heading and the first
sentence to read as follows:
Sec. 1303.27 Abandonment of quota for Individual Manufacturing Quota.
Any manufacturer assigned an individual manufacturing quota for any
basic class of controlled substance listed in schedule I or II pursuant
to Sec. 1303.23 may at any time abandon their right to manufacture all
or any part of such quota by filing a notice of such abandonment with
the UN Reporting and Quota Section, Diversion Control Division, Drug
Enforcement Administration in the online Quota Management System. * * *
PART 1315--IMPORTATION AND PRODUCTION QUOTAS FOR EPHEDRINE,
PSEUDOEPHEDRINE, AND PHENYLPROPANOLAMINE
0
14. The authority citation for part 1315 continues to read as follows:
Authority: 21 U.S.C. 802, 821, 826, 871(b), 952.
0
15. Add Sec. 1315.06 to read as follows:
Sec. 1315.06 Assessment of Annual Needs; Types of quotas.
The four types of quotas are:
(a) Assessment of annual needs, which establishes the total
quantity of ephedrine, pseudoephedrine, and phenylpropanolamine
necessary to be manufactured and imported by all manufacturers and
importers in a calendar year.
(b) Individual manufacturing quotas, which establish the maximum
quantity of ephedrine, pseudoephedrine, and phenylpropanolamine that a
registered manufacturer may manufacture during a calendar year. This
type of quota is only issued to DEA-registered bulk manufacturers.
(c) Procurement quotas, which establish the maximum quantity of
ephedrine, pseudoephedrine, and phenylpropanolamine that a registered
manufacturer may procure during a calendar year for the purpose of
manufacturing into dosage-forms or other substances.
(d) Import quotas, which establish the maximum quantity of
ephedrine, pseudoephedrine, and phenylpropanolamine that a registered
importer may import during the calendar year for distribution to their
DEA-registered customers.
0
16. Add Sec. 1315.07 to read as follows:
Sec. 1315.07 Subcategories of manufacturing and procurement quota.
The five subcategories are:
(a) Quota for Commercial Sale is a quota for the amount of bulk
active pharmaceutical ingredients (API) initially acquired by a
registrant for the manufacture of ephedrine, pseudoephedrine, and
phenylpropanolamine products and bulk API acquired by outsourcing
facilities, manufacturers, etc. This type of quota shall only be used
to support commercial manufacturing efforts and shall not be used to
support other manufacturing efforts.
(b) Quota for Transfer is a quota for the amount of material moved
from one registrant to another and does not include material captured
under procurement quota for commercial sale. Examples include: 1. Bulk
API being transferred back to the original registrant after milling; 2.
Transfer of in-process material or finished dosage-forms for additional
manufacturing efforts (coating, beading, encapsulation, and so forth)
back to the preceding registrant; and 3. Return of material after the
specified manufacturing activity has been completed.
(c) Quota for Product Development is a quota for the amount of
material needed for product development and validation manufacturing
efforts. This quota is limited to that activity only and only for the
development efforts noted in the application; it shall not be used or
substituted for commercial production or the development of a different
product. This quota is issued with the understanding that this material
is not intended for commercial use, with the exception of FDA-approved
or OTC Monograph validation batches. Validation batches shall be noted
specifically in an application and shall be considered product
development material that will be taken into account once a product is
FDA-approved for commercial sale. No inventory shall be granted for
these efforts, nor shall replacement quota be considered for destroyed
material issued under this quota subcategory.
(d) Quota for Replacement is a type of individual manufacturing
quota or procurement quota that is granted to a registrant after the
registrant disposes of material that was initially intended for
commercial sale, but for some reason was unable to be marketed. This
quota is separate and shall not count against a registrant's other
issued quota. Replacement quota will be granted on a case by case
basis. The merits of the request shall be determined by the
registrant's justification. Replacement quota is intended to replace
material from the current quota year and shall not be used to replace
disposed samples, analytical samples, product development material or
inventory acquired under previous quota years.
(e) Quota for Packaging/Repackaging and Labeling/Relabeling is
quota for the amount of material moved to a registrant to undergo
packaging and labeling activities. This quota is limited to that
activity only and only for the packaging/repackaging and labeling/
relabeling noted in the application; it shall not be used or
substituted for commercial
[[Page 60143]]
production or the packaging of a different product.
Sec. 1315.11 Assessment of annual needs.
0
17. In Sec. 1315.11, amend paragraph (c) by removing the date ``May
1'' in the first sentence and adding in its place the date ``September
1''.
Sec. 1315.21 Individual manufacturing quotas.
0
18. Amend Sec. 1315.21 by removing the date ``July 1'' in the first
sentence and adding in its place the date ``December 1''.
0
19. Amend Sec. 1315.22 by revising the first sentence of the
introductory text to read as follows:
Sec. 1315.22 Procedure for applying for individual manufacturing
quotas.
Any person who is registered to manufacture ephedrine,
pseudoephedrine, or phenylpropanolamine and who desires to manufacture
a quantity of the chemical must apply on DEA Form 189 for a
manufacturing quota for the quantity of the chemical and shall state
separately for each subcategory, as defined in Sec. 1315.07, each
quantity of such chemical. * * *
* * * * *
Sec. 1315.23 Procedure for fixing individual manufacturing quotas.
0
20. In Sec. 1315.23, amend paragraph (c) by removing the date ``March
1'' in the first sentence and adding in its place the date ``July 1''.
0
21. Revise Sec. 1315.24 to read as follows:
Sec. 1315.24 Inventory allowance for individual manufacturing quotas.
(a) For the purpose of determining individual manufacturing quotas
pursuant to Sec. 1315.23, each registered manufacturer shall be
allowed as part of such quota an amount sufficient to maintain an
inventory:
(1) For current manufacturers, 40 percent of their average
estimated net disposal for the current calendar year and the last
preceding calendar year; or
(2) For new manufacturers, 40 percent of their reasonably estimated
net disposal for the next calendar year as determined by the
Administrator.
(b) During each calendar year, each registered manufacturer
receiving a manufacturing quota shall be allowed to maintain an
inventory of a chemical not exceeding 55 percent of their estimated net
disposal of that chemical for that year, as determined at the time his
quota for that year was determined. At any time the inventory of a
chemical held by a manufacturer exceeds 55 percent of their estimated
net disposal, their quota for that chemical is automatically suspended
and shall remain suspended until their inventory is less than 50
percent of his estimated net disposal. The Administrator may, upon
application and for good cause shown, permit a manufacturer whose quota
is, or is likely to be, suspended pursuant to this paragraph to
continue manufacturing and to accumulate an inventory in excess of 55
percent of their estimated net disposal, upon such conditions and
within such limitations as the Administrator may find necessary or
desirable.
(c) If, during a calendar year, a registrant has manufactured the
entire quantity of a chemical allocated to them under an individual
manufacturing quota, and their inventory of that chemical is less than
30 percent of his estimated net disposal of that class for that year,
the Administrator may, upon application pursuant to Sec. 1315.25,
increase the quota of such registrant sufficiently to allow restoration
of the inventory to 40 percent of the estimated net disposal for that
year.
0
22. Amend Sec. 1315.27 by revising the first sentence to read as
follows:
Sec. 1315.27 Abandonment of individual manufacturing quota.
Any manufacturer assigned an individual manufacturing quota for a
chemical pursuant to Sec. 1315.23 may at any time abandon their right
to manufacture all or any part of such quota by filing a notice of such
abandonment with the UN Reporting and Quota Section, Diversion Control
Division, Drug Enforcement Administration in the online Quota
Management System. * * *
0
23. Add Sec. 1315.31 to read as follows:
Sec. 1315.31 Inventory allowance for procurement quotas.
(a) For the purpose of determining procurement quotas pursuant to
Sec. 1315.32, each registered manufacturer shall be allowed as part of
such quota an amount sufficient to maintain an inventory:
(1) Except as provided in paragraph (a)(3) of this section, for
current manufacturers, 35 percent of his average estimated net disposal
for the current calendar year and the last preceding calendar year; or
(2) Except as provided in paragraph (a)(4) of this section, for new
manufacturers, 35 percent of his reasonably estimated net disposal for
the next calendar year as determined by the Administrator.
(3) For current liquid injectable dosage-form manufacturers, 50
percent of his average estimated net disposal for the current calendar
year and the last preceding calendar year; or
(4) For new liquid injectable dosage-form manufacturers, 50 percent
of his reasonably estimated net disposal for the next calendar year as
determined by the Administrator.
(b) Except as provided in paragraph (c) of this section, during
each calendar year, each registered manufacturer receiving a
procurement quota shall be allowed to maintain an inventory of a
chemical not exceeding 50 percent of his estimated net disposal of that
chemical for that year, as determined at the time his quota for that
year was determined. At any time the inventory of a chemical held by a
manufacturer exceeds 50 percent of his estimated net disposal, his
quota for that chemical is automatically suspended and shall remain
suspended until his inventory is less than 45 percent of his estimated
net disposal. The Administrator may, upon application and for good
cause shown, permit a manufacturer whose quota is, or is likely to be,
suspended pursuant to this paragraph to continue manufacturing and to
accumulate an inventory in excess of 50 percent of his estimated net
disposal, upon such conditions and within such limitations as the
Administrator may find necessary or desirable.
(c) For liquid-injectable dosage-forms, during each calendar year,
each registered manufacturer receiving a procurement quota shall be
allowed to maintain an inventory of a chemical not exceeding 65 percent
of his estimated net disposal of that chemical for that year, as
determined at the time his quota for that year was determined. At any
time the inventory of a chemical held by a manufacturer exceeds 65
percent of his estimated net disposal, his quota for that chemical is
automatically suspended and shall remain suspended until his inventory
is less than 60 percent of his estimated net disposal. The
Administrator may, upon application and for good cause shown, permit a
manufacturer whose quota is, or is likely to be, suspended pursuant to
this paragraph to continue manufacturing and to accumulate an inventory
in excess of 65 percent of his estimated net disposal, upon such
conditions and within such limitations as the Administrator may find
necessary or desirable.
(d) If, during a calendar year, a registrant has procured the
entire quantity of a chemical allocated to him under an individual
procurement quota, and his inventory of that chemical is less than 25
percent of his estimated net disposal of that class for that year, the
[[Page 60144]]
Administrator may, upon application pursuant to Sec. 1315.25, increase
the quota of such registrant sufficiently to allow restoration of the
inventory to 35 percent of the estimated net disposal for that year.
(e) For liquid-injectable dosage-forms, if, during a calendar year,
a registrant has procured the entire quantity of a chemical allocated
to him under an individual procurement quota, and his inventory of that
chemical is less than 40 percent of his estimated net disposal of that
class for that year, the Administrator may, upon application pursuant
to Sec. 1315.25, increase the quota of such registrant sufficiently to
allow restoration of the inventory to 50 percent of the estimated net
disposal for that year.
0
24. Amend Sec. 1315.32 by:
0
a. Revising the first sentence in paragraph (a);
0
b. Removing the date ``July 1'' in the introductory text of paragraph
(f) and adding in its place the date ``December 1'';
0
c. Removing ``manufacturer or importer'' in paragraph (h) and adding in
its place ``registrant''.
The revision to read as follows:
Sec. 1315.32 Obtaining a procurement quota.
(a) Any person who is registered to manufacture ephedrine,
pseudoephedrine, or phenylpropanolamine, or whose requirement of
registration is waived pursuant to Sec. 1309.24 of this chapter, and
who desires to use during the next calendar year any ephedrine,
pseudoephedrine, or phenylpropanolamine for purposes of manufacturing
(including repackaging or relabeling), must apply on DEA Form 250 for a
procurement quota for the chemical and shall state separately for each
subcategory, as defined in 21 CFR 1315.07, each quantity of such
chemical. * * *
* * * * *
Sec. 1315.34 Obtaining an import quota.
0
25. In Sec. 1315.34 amend paragraph (f) by removing the date ``July
1'' and adding, in its place, the date ``December 1''.
0
26. Add Sec. 1315.37 to read as follows:
Sec. 1315.37 Abandonment of procurement quota.
Any manufacturer assigned a procurement quota for a chemical
pursuant to Sec. 1315.23 may at any time abandon his right to
manufacture all or any part of such quota by filing a notice of such
abandonment with the UN Reporting and Quota Section, Diversion Control
Division, Drug Enforcement Administration in the online Quota
Management System. The Administrator may, in his discretion, allocate
the amount among the other manufacturers in proportion to their
respective quotas.
Signing Authority
This document of the Drug Enforcement Administration was signed on
August 28, 2023, by Administrator Anne Milgram. That document with the
original signature and date is maintained by DEA. For administrative
purposes only, and in compliance with requirements of the Office of the
Federal Register, the undersigned DEA Federal Register Liaison Officer
has been authorized to sign and submit the document in electronic
format for publication, as an official document of DEA. This
administrative process in no way alters the legal effect of this
document upon publication in the Federal Register.
Scott Brinks,
Federal Register Liaison Officer, Drug Enforcement Administration.
[FR Doc. 2023-18885 Filed 8-30-23; 8:45 am]
BILLING CODE 4410-09-P