[Federal Register: July 30, 2004 (Volume 69, Number 146)]
[Proposed Rules]
[Page 45616-45622]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30jy04-36]
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DEPARTMENT OF JUSTICE
Drug Enforcement Administration
21 CFR Part 1309
[Docket No. DEA-211P]
RIN 1117-AA62
Security Requirements for Handlers of Pseudoephedrine, Ephedrine,
and Phenylpropanolamine
AGENCY: Drug Enforcement Administration (DEA), Justice.
ACTION: Notice of proposed rulemaking.
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SUMMARY: DEA is proposing to require that manufacturers, distributors,
importers, and exporters of pseudoephedrine, ephedrine, and
phenylpropanolamine (PPA) implement security procedures to prevent the
theft and diversion of these List I chemicals. These chemicals are
available in over-the-counter medications and are widely used in the
illicit production of methamphetamine and amphetamine. Based on the
number of reports and the size of thefts from manufacturers and
distributors of these chemicals, DEA is proposing that these companies
implement security measures similar to or as effective as those used
for schedule III through V controlled substances. These measures will
limit the opportunity for theft and diversion of these chemicals. DEA
is soliciting the chemical industry for comments to describe alternate
security systems that are equal to the existing controlled substances
schedule III through V system.
DATES: To allow adequate time for industry to identify alternative
security solutions, written comments must be postmarked, and electronic
comments must be sent, on or before October 28, 2004.
ADDRESSES: To ensure proper handling of comments, please reference
``Docket No. DEA-211P'' on all written and electronic correspondence.
Written comments being sent via regular mail should be sent to the
Deputy Assistant Administrator, Office of Diversion Control, Drug
Enforcement Administration, Washington, DC 20537, Attention: DEA
Federal Register Representative/CCD. Written comments sent via express
mail should be sent to DEA Headquarters, Attention: DEA Federal
Register Representative/CCD, 2401 Jefferson-Davis Highway, Alexandria,
VA 22301. Comments may be directly sent to DEA electronically by
sending an electronic message to dea.diversion.policy@usdoj.gov.
Comments may also be sent electronically through http://www.regulations.gov
using the electronic comment form provided on that
site. An electronic copy of this document is also available at the
http://www.regulations.gov web site. DEA will accept electronic
comments containing MS Word, WordPerfect, Adobe PDF, or Excel files
only. DEA will not accept any file format other than those specifically
listed here.
FOR FURTHER INFORMATION CONTACT: Patricia M. Good, Chief, Liaison and
Policy Section, Office of Diversion Control, Drug Enforcement
Administration, Washington, DC 20537, Telephone (202) 307-7297.
SUPPLEMENTARY INFORMATION:
Special Notice
Due to concerns regarding possible harmful side effects, the Food
and Drug Administration (FDA) initiated action in November 2000, to
remove phenylpropanolamine (PPA) from the market and requested that all
drug companies discontinue marketing products containing PPA. As a
result, many firms voluntarily discontinued marketing products
containing phenylpropanolamine and removed them from the shelves for
disposal. Phenylpropanolamine is a List I chemical, which is used in
the illicit synthesis of amphetamine. Once products containing
phenylpropanolamine are removed from the market, the requirements being
proposed in this rule will affect mainly a few veterinary products
containing phenylpropanolamine.
Background
DEA's Legal Authority for These Regulations
DEA implements the Controlled Substances Act (21 U.S.C. 801-971),
as amended by the Chemical Diversion and Trafficking Act of 1988
(CDTA), the Domestic Chemical Diversion Control Act of 1993 (DCDCA),
the Comprehensive Methamphetamine Control Act of 1996 (MCA) and the
Methamphetamine Anti-Proliferation Act of 2000 (MAPA) (Title XXXVI of
Pub. L. 106-310), among others. DEA publishes the implementing
regulations for these statutes in Title 21 of the Code of Federal
Regulations pursuant to 21 U.S.C. 821 and 871(b). Regulations relating
to the control of listed chemicals are found in 21 CFR parts 1309, 1310
and 1313. These regulations are designed to deter the diversion of
listed chemicals to the illegal manufacture of controlled substances.
Persons authorized to distribute List I chemicals are registered with
the Drug Enforcement Administration, when such registration is
determined to be consistent with the public interest. Among other
factors used in determining the public interest is a registration
applicant's maintenance of effective controls against diversion of
listed chemicals into other than legitimate channels (21 U.S.C.
823(h)(1)).
Legitimate Uses of Pseudoephedrine, Phenylpropanolamine, and Ephedrine
Pseudoephedrine and ephedrine are chemicals that are widely used in
over-the-counter medications. As noted above, phenylpropanolamine,
although previously widely available for human consumption, is now
being withdrawn from use in over-the-counter drugs and has only a few
human and veterinary uses. Pseudoephedrine is a decongestant used for
the temporary relief of nasal congestion due to the common cold, hay
fever, or other upper respiratory allergies. Ephedrine is used for the
temporary relief of shortness of breath, tightness of chest, and
wheezing due to bronchial asthma. Each of the products is available in
a variety of dosage forms as a single entity or in combination with
antihistamines, antitussives, analgesics, expectorants, and/or
vitamins.
The majority of the products containing pseudoephedrine or
ephedrine purchased by the public are commonly used medications and are
easily accessible at pharmacies, grocery stores, convenience stores,
and a variety of other retail stores. Most of these products are
available to the public without a prescription. A few products
containing pseudoephedrine, phenylpropanolamine, or ephedrine require a
prescription issued by a practitioner prior to being dispensed to a
patient. This proposed regulation will not adversely impact the
public's access to these products as it applies solely to manufacturers
and wholesalers of the products. Persons unaffected by this rulemaking
include retailers, practitioners, and mid-level
[[Page 45617]]
practitioners, the vast majority of DEA's more than one million
registrants.
Need for Security Controls on Pseudoephedrine, Ephedrine, and
Phenylpropanolamine
Each of these chemicals is a List I chemical because they are used
to manufacture methamphetamine (otherwise known as ``speed,'' ``ice,''
``crystal,'' or ``meth'') and, in the case of phenylpropanolamine,
amphetamine. Methamphetamine and amphetamine, which are Schedule II
controlled substances, are potent central nervous system stimulants and
are drug threats in the U.S.
The earliest clandestine methamphetamine laboratories used the
chemical phenyl-2-propanone, also known as phenylacetone or P2P, to
produce methamphetamine. When P2P was placed into Schedule II as an
immediate precursor, traffickers adjusted by switching to production of
methamphetamine using other noncontrolled chemicals. Over the past
decade, ephedrine and pseudoephedrine have been the chemicals of choice
for the illegal production of methamphetamine. Similarly, clandestine
laboratories have used phenylpropanolamine in the illegal production of
amphetamine. The principal source of supply for these chemicals
continues to be over-the-counter medications. As controls on the sale
of over-the-counter products have become more effective, DEA has noted
an increase in the number of thefts of the products from distributors
and manufacturers. Almost all of the reports of List I chemical thefts
in the past few years have involved pseudoephedrine, ephedrine, or
phenylpropanolamine.
Illegal Manufacture of Methamphetamine and Amphetamine
Until recent years, most illegal methamphetamine produced in the
U.S. was manufactured in large illegal laboratories in California.
Large-scale methamphetamine production is still concentrated in
California, but smaller scale clandestine methamphetamine laboratories
have become common throughout the western and midwestern U.S. and have
begun moving into the southeast as well. Further, DEA has encountered
instances in which amphetamine is being sold on the street as
methamphetamine, as well as instances in which amphetamine/
methamphetamine mixtures are being sold. Since 1994, when DEA seized
224 clandestine methamphetamine laboratories, the number of clandestine
laboratory seizures has increased dramatically. In 2000, DEA and state
and local agencies reported 7,267 clandestine laboratory seizures. In
2001, DEA and state and local agencies reported 8,901 clandestine drug
laboratory seizures, 97 percent of which were producing
methamphetamine. Reported seizures increased again in 2002 to 9,612,
with 97 percent producing methamphetamine. Since not all state, local,
and federal agencies that seize clandestine laboratories report
seizures to DEA, the total number of clandestine laboratories seized is
higher than the numbers reported here.
Although California has the highest number of clandestine drug
laboratory seizures (1,168) and almost all of the large-scale
clandestine laboratories, other states have witnessed the development
of substantial clandestine drug laboratory problems. In 2002, 1,049
clandestine drug laboratories were seized in Missouri, 674 in
Washington, 481 in Oklahoma, 435 in Arkansas and Tennessee, 400 in
Oregon, 394 in Indiana, 391 in Texas, 364 in Iowa, 336 in Illinois and
334 in Kansas. Arizona, Kentucky and Mississippi had over 200 seizures
each while Alabama, Florida, Michigan, Minnesota, New Mexico and Utah
had more than 100 seizures each in 2002. Most of these clandestine
laboratories produce smaller quantities of methamphetamine for personal
use and local distribution. As noted earlier, almost all of the
clandestine laboratories, whether large or small, use over-the-counter
medications as their principal source of supply of precursor material.
The Source of Over-the-Counter Medications for Clandestine Drug
Laboratories
Operators of clandestine drug laboratories obtain over-the-counter
medications containing pseudoephedrine, ephedrine, and
phenylpropanolamine in three ways. First, some rogue manufacturers,
distributors, and retailers continue to sell these chemicals to illegal
producers. These purchases are often accomplished through multi-tier
sales structuring that attempts to insulate the seller of the chemicals
from direct contact with the ultimate criminal end-user. In the summer
of 2000, Federal agents, working with state and local law enforcement
agencies, arrested more than 140 people in eight cities who allegedly
were involved in diverting large quantities of these chemicals to
clandestine drug laboratories.
DEA has also seen a significant increase in the amount of product
that is illegally obtained from Canada. This product is typically used
at large clandestine laboratories. DEA believes that as recently
implemented Canadian regulations become more effective at curbing the
illegal distribution of product from Canada to the United States, there
will be greater pressure on other sources of supply. In fact, recent
information indicates a possible decrease in chemicals smuggled from
Canada, with an increase of suspicious shipments to and through Mexico.
Second, operators of small clandestine laboratories may purchase
these drugs from legitimate retail outlets by making small purchases at
multiple stores or having a number of people buy small amounts at a
single location. The Methamphetamine Anti-Proliferation Act of 2000
(Title XXXVI of Pub. L. 106-310), reduced the threshold for retail
transactions involving non-blister pack products from twenty-four grams
to nine grams per individual transaction and added a package size
requirement of not more than three grams base ingredient per package.
For products sold in blister packs, there is no threshold unless the
package contains more than three grams of base ingredient or there are
more than two dosage units per blister pack. Several large retail chain
stores already limit purchases to three packages of these products at
any one time. These changes will make it more difficult for illegal
methamphetamine producers to obtain their supplies efficiently through
over-the-counter purchases.
Third, as the MCA and MAPA have made it more difficult to obtain
these chemicals through legitimate channels, and as DEA and state and
local agencies have moved against rogue manufacturers and distributors,
legitimate manufacturers and distributors have become targets for
employee and outsider theft. DEA anticipates that the pressure on rogue
manufacturers and distributors and the limits on legitimate sales will
cause even more illegal producers to try theft.
Existing Controls on the Sale of These Chemicals
The principal focus of DEA's requirements with respect to these
chemicals has been on regulating sales. Manufacturers, distributors,
importers, and exporters are required to identify their customers,
maintain records of their distributions, and report suspicious proposed
transactions. The requirements have emphasized that manufacturers,
distributors, importers, and exporters should ``know your customer''
and ensure that all sales of listed chemicals are for legitimate
purposes. Little emphasis has been placed on the security of the
products while in the possession of
[[Page 45618]]
manufacturers, distributors, importers, and exporters. DEA has noted an
increase in the reported theft of these products from manufacturers and
distributors.
The high street value of these over-the-counter medications makes
them an attractive target for thieves. Unlike most items that are
stolen, which can be sold on the black market for only a fraction of
their retail price, a case of these products (e.g., 144 bottles of 60
count 60-mg pseudoephedrine dosage units) commands a premium on the
black market. The wholesale value of a case is between $400 and $500,
while the black market price varies between $800 and $5000, depending
on the location.
Theft is also attractive because these products are usually stored
with other consumer products in warehouses and are sometimes left
unattended on loading docks and in freight yards while waiting to be
shipped or stored. Although most distributors have security controls
for high cost items, such as cameras, they have not usually applied
such controls to these products. As a result of the limited security
controls placed on these products (i.e., controlled access, employer
and employee responsibility to report diversion), an increasing number
of thefts are occurring and being reported to DEA.
The Theft Problem
From late 1995 through late 2003, DEA received reports of thefts
and losses of more than 1,000 kilograms of bulk ephedrine,
pseudoephedrine, and phenylpropanolamine and more than 15 million
dosage units or 823 kilograms of these chemical products. (The
calculations were based on the smallest dosage unit strength in the
absence of the specific information.) The bulk product thefts listed
below could produce 2,400 pounds of methamphetamine. The dosage unit
thefts could produce about 1,660 pounds. (These estimates are based on
theoretical yields. Actual yields depend on the practices and
sophistication of a specific clandestine laboratory.) The street value
of the methamphetamine that could have been produced from these thefts
ranges from $26 million to $122 million.
During the period covered by these reports (late 1995 through late
2003), DEA received very few theft reports that involved other listed
chemicals. The nature of the over-the-counter products, their demand
and value on the black market, and the absence of effective security
controls make them an attractive target for theft.
The lack of understanding of the widespread threat of theft of
these products is illustrated by the case of a major distributor with
multiple facilities. In 1998, employees at one of the distributor's
warehouses stole more than 72,000 dosage units of pseudoephedrine and
phenylpropanolamine, some of which were found at a clandestine
methamphetamine laboratory. The company responded by installing better
security systems at that one warehouse. A second 1998 theft from
another of the company's warehouses resulted in a loss of 800,000
dosage units. In 1999, employees at a third warehouse stole more than
500,000 dosage units of pseudoephedrine and phenylpropanolamine, which
were found at more than 20 clandestine methamphetamine laboratories and
dump sites. In 2000, employees at a fourth company warehouse stole
1,200 dosage units, and at a fifth warehouse, the company discovered
and reported eight separate thefts, which totaled almost a million
dosage units. In total, this single company lost well over two million
dosage units during a three year period. Despite this pattern of theft,
the company improved security only after the thefts and only at the
warehouses where a theft occurred; there was no apparent effort to
proactively establish additional security for the products at other
locations operated by the company.
Thefts reported to DEA include, but are not limited to, the
following:
Bulk Chemical Thefts
A manufacturer reported the theft of 90 kilograms (kg) of
pseudoephedrine
An employee stole 12 kg of pseudoephedrine from a
manufacturer.
A manufacturer was robbed of two 25-kg drums of
pseudoephedrine stolen, but recovered them. A subsequent inventory
check showed a third drum was missing.
A manufacturer had most of the chemical ingredients needed
to make methamphetamine clandestinely (hydriodic acid, red phosphorus,
iodine, ephedrine, and pseudoephedrine) stolen from outside a fence.
Included in the theft was 4.375 kg of pseudoephedrine.
A manufacturer had 11.22 kg of pseudoephedrine stolen from
a movable cart.
A distributor had two 25-kg drums of pseudoephedrine
stolen from a locked trailer.
Employees stole 390.91 kg of ephedrine from a
manufacturer.
A manufacturer lost 23 kg of pseudoephedrine.
A manufacturer lost 55.6 kg of pseudoephedrine during the
manufacturing process.
A manufacturer had eight 55 pound drums of pseudoephedrine
(200 kg) stolen from a storage cage which was missing a lock.
An importer had 70.4 kg stolen from an unlocked quarantine
cage.
A manufacturer had an unexplained loss of 17.87 kg of
pseudoephedrine.
An analytical laboratory had 90 kg of ephedrine stolen
during a burglary.
Dosage Unit Thefts
An employee or employees stole 4,201,112 pseudoephedrine
dosage units from a manufacturer.
A distributor had 150,400 pseudoephedrine 30 mg dosage
units and phenylpropanolamine 24.3 mg dosage units stolen.
A distributor reported the loss of 674,800 pseudoephedrine
dosage units in seven thefts from an open area of the warehouse with
unrestricted access for employees. The same location reported another
theft of 294,900 dosage units from outside a cage.
A distributor reported the loss of 800,000 pseudoephedrine
dosage units due to employee theft.
A distributor lost 418,224 dosage units of ephedrine and
pseudoephedrine in an armed robbery.
A distributor had 85,000 dosage units of pseudoephedrine
and ephedrine stolen.
An employee stole more than 1,200 pseudoephedrine dosage
units.
A mail order pharmacy had more than 66,000 pseudoephedrine
dosage units stolen after they were dropped off by a delivery truck.
A manufacturing relabeler reported the loss of 83,333
ephedrine dosage units.
A distributor had a trailer stolen containing more than
22,080 dosage units of pseudoephedrine.
A hospital lost more than 756,600 pseudoephedrine 60 mg
dosage units from an open warehouse, where access was unrestricted.
A manufacturer had more than 266,669 ephedrine 180 mg
dosage units stolen from its waste stock.
A distributor found major shortages in 27 of 34 lots examined; more
than 1,578,628 pseudoephedrine and ephedrine dosage units were missing.
A distributor had a trailer stolen from a residence; the
trailer contained more than 96,768 dosage units, some of which were
later found at a clandestine laboratory dump site.
A distributor had a trailer stolen containing 9,216 dosage
units of pseudoephedrine.
[[Page 45619]]
An employee stole 8,000 dosage units of pseudoephedrine
from a distributor.
An employee stole 51,100 pseudoephedrine 60 mg dosage
units from manufacturer.
A distributor lost 311,040 pseudoephedrine 60 mg dosage
units during a burglary.
A locked trailer load of over the counter products
containing 1,833,504 dosage units of pseudoephedrine was stolen from a
distributor.
A manufacturer had an unexplained loss of 3,288 30 mg
dosage units of pseudoephedrine.
During a routine inventory 40,000 60 mg dosage units of
pseudoephedrine were found to be missing from a holding area in a
distributor's warehouse. Employee pilferage was suspected.
A distributor discovered the loss of 119,800 30 mg dosage
units of pseudoephedrine from its off site storage warehouse.
An employee of a manufacturer stole approximately 75,000
dosage units of pseudoephedrine and conspired with others to
manufacture methamphetamine. The employee was subsequently arrested.
An analytical laboratory lost 76,968 120 mg dosage units
of pseudoephedrine from a locked in process storage room.
A distributor lost 7,200 120 mg dosage units of
pseudoephedrine.
Impact of Methamphetamine Abuse
As the dramatic increase in the number of clandestine laboratory
seizures indicates, methamphetamine abuse is a serious problem.
According to the Substance Abuse and Mental Health Services
Administration (SAMHSA), Drug Abuse Warning Network, in 2002,
methamphetamine was mentioned in almost 18,000 emergency room visits;
from 1994 through 2002, there were about 130,000 emergency room visits
where methamphetamine was mentioned. (Drugs are often used in
combination; it is not possible to determine which drug led to the
emergency room visit, if any; in some cases, a patient may have sought
treatment unrelated to the drug use.) In 1993, amphetamine treatment
admission rates were high in a few Western States--California, Oregon,
and Nevada. By 1999, SAMHSA reported that high amphetamine treatment
admission rates were seen in most states west of the Mississippi.
Amphetamine treatment admission rates increased between 1993 and 1999
by 250 percent or more in 14 states and by 100 to 249 percent in
another 10 states. SAMHSA data from 23 metropolitan areas indicate that
methamphetamine was involved in more than 500 deaths in 2001.
The surge in methamphetamine abuse has caused serious law
enforcement and environmental problems, particularly in rural
communities. Rural areas are frequently the site of clandestine
laboratories because the manufacturing process produces distinctive
odors and can be identified if there are close neighbors. The district
attorney of Snohomish County in western Washington reported that two
thirds of all crimes in the county are tied to methamphetamine. The
number of lab seizures in the county exceeded the number of seizures in
New England, New York, and Pennsylvania combined.
Besides causing crime as people steal ingredients to make
methamphetamine and steal to support their addiction, the clandestine
laboratories often leave serious pollution behind. In 2002, Washington
state alone had more than 2,000 sites that required immediate clean-up.
A laboratory can produce 6 to 10 pounds of hazardous waste for every
pound of methamphetamine produced. In 2003, DEA funded clean-ups of
approximately 8,600 clandestine laboratories and estimates that states
have funded an equal number of clean-ups. California is reported to
have spent about $10 million in 2000 for clean-ups. The Federal and
State clean-ups are generally limited to removing chemicals that could
be reused; they do not address water and soil pollution that remain.
Owners of the property are responsible for completing the clean up of
contaminated water and soil, but if the owner cannot pay the cost,
local governments bear the burden or the contamination remains.
DEA's Proposal
DEA initially required manufacturers, distributors, importers, and
exporters of List I chemicals to implement minimal physical security
measures, such as tamper proof storage containers. DEA depended on the
individual firms to adequately safeguard the materials in their
possession. However, this approach has not been successful even though
the affected industry is aware of the problems associated with the
diversion of List I chemicals and their use to illegally manufacture
methamphetamine. Due to the reported thefts of pseudoephedrine,
ephedrine, and phenylpropanolamine and the significant increase in the
amount of illegal methamphetamine produced from these products, DEA is
proposing that a medium level of security be placed on the areas where
pseudoephedrine, ephedrine, and phenylpropanolamine are stored. The
proposed regulations allow for a number of security options that may be
used for the storage of these products. Therefore, small businesses
with minimal inventory will have low cost options available that comply
with the proposed regulations. In addition, many of the affected
entities with large inventories of pseudoephedrine, ephedrine, and
phenylpropanolamine already have secure storage facilities that comply
with the requirements.
DEA is proposing that manufacturers, distributors, importers, and
exporters of pseudoephedrine, ephedrine, and phenylpropanolamine
implement security procedures that are similar to or as effective as
those now used by registrants handling Schedule III through V
controlled substances. These procedures may include the storage of the
substances in a secure safe or steel cabinet, cage, or room and
installation of a monitored alarm system linked to a central location
or procedures that generally provide the same level of protection.
Safes or steel cabinets would need alarm systems only if more than a
total of one (1) kilogram of pseudoephedrine, ephedrine, and
phenylpropanolamine, combined, were stored at any one time. In
evaluating their overall security system, chemical registrants should
consider the factors which DEA considers relevant in evaluating overall
security requirements for chemical applicants and registrants. These
factors are specified in 21 CFR 1309.71(b)(1) through (8):
(1) The type, form, and quantity of List I chemicals handled;
(2) The location of the premises and the relationship such location
bears on the security needs;
(3) The type of building construction comprising the facility and
the general characteristics of the building or buildings;
(4) The availability of electronic detection and alarm systems;
(5) The extent of unsupervised public access to the facility;
(6) The adequacy of supervision over employees having access to
List I chemicals;
(7) The procedures for handling business guests, visitors,
maintenance personnel, and nonemployee service personnel in areas where
List I chemicals are processed or stored;
(8) The adequacy of the registrant's or applicant's systems for
monitoring the receipt, distribution, and disposition of List I
chemicals in its operations.
In light of the need for increased security chemical registrants
may also wish to consider the factors which DEA considers relevant in
evaluating overall security requirements for controlled
[[Page 45620]]
substances applicants and registrants. These factors are specified in
21 CFR 1301.71(b)(1) through (14):
(1) The type of activity conducted (e.g., processing of bulk
chemicals, preparing dosage forms, packaging, labeling, cooperative
buying, etc.);
(2) The type and form of controlled substances (regulated
chemicals) handled (e.g., bulk liquids or dosage units, usable powders
or nonusuable powders);
(3) The quantity of controlled substances (regulated chemicals)
handled;
(4) The location of the premises and the relationship such location
bears on security needs;
(5) The type of building construction comprising the facility and
the general characteristics of the building or buildings;
(6) The type of vault, safe, and secure enclosures or other storage
systems (e.g. automatic storage and retrieval system) used;
(7) The type of closures on vaults, safes, and secure enclosures;
(8) The adequacy of key control systems and/or combination lock
control systems;
(9) The adequacy of electric detection and alarm systems, if any,
including use of supervised transmittal lines and standby power
sources;
(10) The extent of unsupervised public access to the facility,
including the presence and characteristics of perimeter fencing, if
any;
(11) The adequacy of supervision over employees having access to
manufacturing and storage areas;
(12) The procedures for handling business guests, visitors,
maintenance personnel, and nonemployee service personnel;
(13) The availability of local police protection or of the
registrant's or applicant's security personnel, and
(14) The adequacy of the registrant's or applicant's system for
monitoring the receipt, manufacture, distribution and disposition of
controlled substances (regulated chemicals) in its operations.
DEA believes that schedule III through V controlled substances
security requirements implemented correctly by chemical handlers would
be one responsible approach in an effort to deter theft and diversion
of regulated chemicals. Keeping pseudoephedrine, ephedrine, and
phenylpropanolamine products in such secure areas limits the
opportunity for theft. Controlled limited access to such areas
discourages employee theft because it makes the identity of the thief
easier to determine. However, DEA is soliciting and will consider
recommendations regarding alternative means to achieve the same level
of security including industry-sponsored security systems and
activities, recognizing that in certain circumstances the
implementation and use of schedule III through V controlled substances
security may pose significant challenges. Therefore, in an effort to
accommodate the industry's concerns about implementing this type of
security system, DEA requests, invites, and solicits the chemical
industry to provide specific efficient and economically acceptable
alternatives to the system now required for controlled substances
registrants.
Cost of Proposed Security Measures
The ultimate costs of the proposed security will depend on the
types of economically acceptable alternatives to the system now
required for controlled substance registrants that the chemical
industry can provide to DEA. The costs of an alternative system, if
adopted, may be significantly less than those discussed in the ensuing
paragraphs.
DEA investigated the costs of security systems currently used by
controlled substances registrants with emphasis that the economic
impact would not place an unreasonable burden on small distributors.
These systems allow for a number of security options for the storage of
ephedrine, pseudoephedrine, and phenylpropanolamine, including a safe
or steel cabinet, a cage, and a separate room within the facility. To
develop unit cost estimates, DEA contacted several firms that supply
and install various types of security containers and alarm systems to
determine the range of costs for each system. DEA determined that a
cage is the least expensive storage option if a specific structure is
selected. Safes and steel cabinets that meet DEA security requirements
would be more costly than a cage. Setting aside a room may not be a
feasible option for warehouse operations; many distributors already use
cages to store items that are likely to be targets of theft.
As of November 3, 2003, 3,232 distributors were registered to
handle at least one of the three drugs; of these, 1,228 were registered
to handle all three. Most registrants handle pseudoephedrine (3,092).
Of the 3,232 handlers registered with DEA, five are retailers who will
not be subject to the new security requirements and are therefore not
part of the affected population. Further, DEA determined that 96 of 206
registered importers and exporters do not actually conduct import and
export transactions of these drugs. However, to account for constant
fluctuations in the registrant population, DEA estimated that this
rulemaking would affect approximately 3,100 DEA registrants, including
wholesale distributors, manufacturers, and importer/exporters.
As noted above, according to security firms, a cage is likely to be
the least expensive option for a facility that stores materials in a
warehouse, costing between $2,400 and $3,670 (in 2004 dollars) to
purchase and install. Cages vary in cost based on their size. DEA
assumed that most distributors are not storing large quantities of
these products at any one time and that an 800 cubic feet cage would be
sufficient; such a cage could hold at least 5 million dosage units. The
costs of a cage were depreciated over 15 years, hence the annual cost
of the cage would be between $265 and $403.
An alarm system would cost between $2,100 and $4,190 to purchase
and install. Although an alarm system is likely to function for at
least 15 years, the analysis depreciated the costs over five years; the
annual cost of the alarm system would be between $511 and $1,022.
Annual costs for alarm system monitoring and maintenance would be about
$1,150. The total annual cost of the equipment per distributor facility
(present value over 15 years) would range from $5,700 to $ 9,000. The
annualized cost for the equipment and ongoing costs is approximately
$1,900 to $2,600 for each distributor.
DEA assumed that the manufacturers and exporters would already have
secure storage systems and alarms and would only need to add an annual
alarm monitoring system. Because these registrants were assumed to have
a much larger alarm system than distributors have, the annual cost for
monitoring the system is higher, about $3,100.
The total annualized cost for all affected entities (the
approximately 3,100 manufacturers, distributors, importers, and
exporters) is between $6.8 million and $8.7 million. The total cost of
meeting the security requirements over a 15-year time frame for all
affected manufacturers, distributors, importers, and exporters of
pseudoephedrine, ephedrine, and phenylpropanolamine is estimated to be
between $62 million and $80 million. DEA has been cautious in its
approach to estimating the actual costs of implementing the proposed
security requirements. Many of the affected entities may already have
monitored alarm systems and/or secure storage areas in their facilities
to secure other types of products such as small electronic devices,
tobacco, or controlled substances. Therefore, the
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existing systems could be used to comply with these proposed
regulations and the actual additional costs to implement the security
requirements will be less than the estimates provided here.
Manufacturers, distributors, importers, and exporters are asked to
comment on the security measures that are currently utilized in their
facilities.
Benefits of the Proposed Rule
If the thefts reported to DEA from 1995 to 2003 constituted all
relevant thefts, and if the pattern of thefts were to continue for the
next 15 years, assuming no increase in thefts or in the street value of
clandestinely produced methamphetamine, the total value of the
methamphetamine that could be produced from stolen chemicals over that
time would range from $66 million to $307 million. These drugs impose
substantial costs on the U.S. economy. As noted above, methamphetamine
was mentioned in almost 18,000 emergency room visits in 2002. The cost
of these visits range from $8.5 million to $29 million. (Estimates are
based on a 1996 national average cost of emergency room visits of $383
reported in the New England Journal of Medicine and a 1997estimate from
the Centers for Disease Control of $1,324 for the average cost of
emergency room visit for asthma, adjusted to 2004 dollars). In
addition, there are costs associated with addiction treatment, law
enforcement, and clean up of lab sites. Each of these costs
individually is likely to be higher than the total annual costs of
security measures. Finally, some of the more than 500 deaths a year
associated with methamphetamine could be averted if diversion of these
over-the-counter drugs could be curtailed.
Effective Date for Installation of the Security Measures
If finalized, manufacturers, distributors, importers and exporters
will have 90 days after the effective date of the final rule to install
the security systems. The final rule will become effective 30 days
after publication in the Federal Register; therefore affected entities
will have a total of 120 days to implement the security requirements.
If a timely and good faith effort has been made to implement the
requirements, and it is determined that an affected entity will be
unable to meet the required deadline, then the local DEA office must be
notified to make alternate arrangements in the interim.
Regulatory Certifications
Regulatory Flexibility Act
The Deputy Assistant Administrator hereby certifies that this
rulemaking has been drafted in accordance with the Regulatory
Flexibility Act (5 U.S.C. 605(b)). Although the proposed rule will
impact a substantial number of small entities (about 2,800
distributors, most of them small businesses), it will not have a
significant adverse financial impact on them.
In the North American Industry Classification System (NAICS) (the
successor to the Standard Industrial Classification System (SIC code)),
the affected manufacturers are most likely to be classified as part of
the pharmaceutical industry while importers and exporters are likely to
be classified as part of the ``all other inorganic chemical
manufacturing'' industry. Distributors are most likely to be captured
as part of either the drug and druggists' sundries wholesale sector or
the tobacco and tobacco product wholesale sector. DEA further assumes
that all manufacturers, exporters, and importers are relatively large
in size, but that all of the affected distributors are small
businesses, based on the small business size standards provided by the
Small Business Administration.
The annual costs for distributors ($1,900-$2,600) represent 0.1
percent to 0.2 percent of the average annual sales of the smallest
class of distributors (one to four employees) in the drug and druggist
sundries sector (annual sales $1.3 million) and tobacco and tobacco
products sector (annual sales $1.9 million) sectors and less than 0.05
percent of average annual sales for the next class (five to nine
employees) (annual sales of $4.7 million and $6.3 million
respectively). Sales data are from the 1997 Economic Census and,
therefore, are likely to be understated.
Even if costs are considered as one-time, non-amortized values,
they represent no more than 0.7 percent of the smallest distributor's
1997 sales. Although the Small Business Administration provides no
definitive guidance on how to define a significant economic impact, one
percent of sales or revenues is a commonly used standard to define the
level at which costs may impose an adverse economic impact. The costs
of this rule do not approach that level and are likely to be
considerably less than the estimated costs because most distributors
already have some security systems to protect other goods.
Executive Order 12866
The Deputy Assistant Administrator further certifies that this
rulemaking has been drafted in accordance with the principles of
Executive Order 12866 Section 1(b). It has been determined that this
rule is a significant rulemaking action, and, therefore, this
rulemaking has been reviewed by the Office of Management and Budget. As
discussed above, DEA has conducted an economic analysis of the security
requirements proposed in this rulemaking and does not believe that
these proposed security requirements would have a significant economic
impact. DEA believes that the security requirements proposed here are
necessitated by the value of pseudoephedrine, ephedrine and
phenylpropanolamine on the black market, and the value of amphetamine
and methamphetamine on the streets. The benefits of preventing the
diversion of these drugs far outweigh the costs.
DEA is requesting manufacturers, distributors, importers, and
exporters of List I chemicals to comment on the specific types of
security measures that are currently utilized in their facilities and
the specific costs that will be necessary to adopt the proposed new
security requirements.
Executive Order 12988
This regulation meets the applicable standards set forth in
Sections 3(a) and 3(b)(2) of Executive Order 12988.
Executive Order 13132
This rulemaking does not preempt or modify any provision of state
law; nor does it impose enforcement responsibilities on any state; nor
does it diminish the power of any state to enforce its own laws.
Accordingly, this rulemaking does not have federalism implications
warranting the application of Executive Order 13132.
Unfunded Mandates Reform Act of 1995
This rule will not result in the expenditure by state, local and
tribal governments, in the aggregate, or by the private sector, of
$113,000,000 or more in any one year, and will not significantly or
uniquely affect small governments. Therefore, no actions were deemed
necessary under the provisions of the Unfunded Mandates Reform Act of
1995.
Small Business Regulatory Enforcement Fairness Act of 1996
This rule is not a major rule as defined by Section 804 of the
Small Business Regulatory Enforcement Fairness Act of 1996. This rule
will not result in an annual effect on the economy of $100,000,000 or
more; a
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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 in 21 CFR Part 1309
Administrative practice and procedure, Drug traffic control, List I
and II chemicals, Security measures.
For the reasons set out above, 21 CFR part 1309 is proposed to be
amended as follows:
PART 1309--REGISTRATION OF MANUFACTURERS, DISTRIBUTORS, IMPORTERS,
AND EXPORTERS OF LIST I CHEMICALS
1. The authority citation for part 1309 continues to read as
follows:
Authority: 21 U.S.C. 821, 822, 823, 824, 830, 871(b), 875, 877,
958.
Sec. 1309.24 [Amended]
2. Sec. 1309.24(k) is proposed to be amended by removing the
phrase ``Sec. Sec. 1309.71-1309.73'' and replacing it with the phrase
``Sec. Sec. 1309.71-1309.74'.
3. Section 1309.74 is proposed to be added to read as follows:
Sec. 1309.74 Security requirements for pseudoephedrine, ephedrine,
and phenylpropanolamine.
(a) Manufacturers, distributors, importers, and exporters must
store pseudoephedrine, ephedrine, and phenylpropanolamine raw
materials, bulk materials awaiting further processing, and finished
products in a secure storage area. The secure area may be a safe or
steel cabinet, as specified in paragraph (c) of this section; a secure
room that meets the requirements of paragraph (d) of this section; a
cage that meets the requirements of paragraph (e) of this section; or
other areas approved by the Administrator (paragraphs (f) and (g) of
this section). Secure rooms, cages, and other areas approved by the
Administrator must have an alarm system that meets the requirements of
paragraph (b) of this section. A safe or steel cabinet must have an
alarm system if a total of 1 kilogram or more, combined, of
pseudoephedrine, ephedrine, and phenylpropanolamine materials are
stored at any one time.
(b) The secure storage area must be equipped with an alarm system
that, upon attempted unauthorized entry, transmits a signal directly to
a central protection company, a local or State police agency that has a
legal duty to respond, a 24-hour control station operated by the
registrant, or such other protection as the Administrator may approve.
(c) Where small quantities (less than one (1.0) kilogram of
pseudoephedrine, ephedrine or phenylpropanolamine, combined) permit,
pseudoephedrine, ephedrine, and phenylpropanolamine may be stored in a
safe or steel cabinet that meets the following requirements:
(1) The safe or steel cabinet must conform to the following
specifications or the equivalent: 30 man-minutes against surreptitious
entry, 10 man-minutes against forced entry, 20 man-hours against lock
manipulation, and 20 man-hours against radiological techniques; and
(2) If the safe or cabinet weighs less than 750 pounds, it must be
bolted or cemented to the floor or wall in such a way that it cannot be
readily removed.
(d) Pseudoephedrine, ephedrine, and phenylpropanolamine may be
stored in a secure room with perimeter security that limits access
during working hours and provides security after working hours. The
secure room must be equipped with self-closing, self-locking doors
constructed of substantial material. A door that is kept closed and
locked at all times when not in use and when in use is kept under
direct observation of a responsible employee or agent of the registrant
is permitted in lieu of a self-closing, self-locking door. Doors may be
sliding or hinged. Where hinges are mounted on the outside, the hinges
must be sealed, welded, or otherwise constructed to inhibit removal.
Locking devices for such doors must be of either the multiple-position
combination or key lock type and must comply with one of the following:
(1) In the case of key locks, the lock must require key control
that restricts access to a limited number of employees.
(2) In the case of combination locks, the combination must be
limited to a minimum number of employees and must be changed upon
termination of employment of an employee having knowledge of the
combination.
(e) Pseudoephedrine, ephedrine, and phenylpropanolamine may be
stored in a cage, located within a building on the premises, meeting
the following specifications:
(1) The cage walls must be constructed of not less than No.10 gauge
steel fabric mounted on steel posts. The posts must be:
(i) At least one inch in diameter;
(ii) Set in concrete or installed with lag bolts that are pinned or
brazed; and
(iii) Placed no more than ten feet apart with horizontal one and
one-half inch reinforcements every sixty inches.
(2) The cage must have a mesh construction with openings of not
more than two and one-half inches across the square.
(3) The cage must have a ceiling constructed of the same material
or, in the alternative, a cage must be erected which reaches and is
securely attached to the structural ceiling of the building. A lighter
gauge mesh may be used for the ceilings of large enclosed areas if
walls are at least 14 feet in height.
(4) The cage must be equipped with a door constructed of No. 10
gauge steel fabric on a metal door frame in a metal door flange, and
which conforms to all the requirements of paragraph (d) of this section
in all other respects.
(f) Pseudoephedrine, ephedrine, and phenylpropanolamine may be
stored in an enclosure of masonry or other material, approved in
writing by the Administrator as providing security comparable to a
cage.
(g) Pseudoephedrine, ephedrine, and phenylpropanolamine may be
stored in such other secure storage areas as may be approved by the
Administrator after considering the factors listed in Sec.
1309.71(b)(1) through (8).
(h) Nonregulated chemicals and other materials may be stored with
pseudoephedrine, ephedrine, and phenylpropanolamine in any of the
secure storage areas required by this section, if permission for the
storage of non-controlled items is obtained in advance, in writing,
from the DEA Special Agent in Charge for the area in which the storage
area is located. Any permission granted must be based on the Special
Agent in Charge's written determination that such non-segregated
storage does not diminish the effectiveness of security for
pseudoephedrine, ephedrine, and phenylpropanolamine.
(i) The pseudoephedrine, ephedrine, and phenylpropanolamine storage
areas must be accessible only to an absolute minimum number of
specifically authorized employees. When it is necessary for employee
maintenance personnel, nonemployee maintenance personnel, business
guests, or visitors to be present in or pass through pseudoephedrine,
ephedrine, and phenylpropanolamine storage areas, the registrant must
provide for adequate observation of the area by an employee
specifically authorized in writing.
Dated: July 23, 2004.
William J. Walker,
Deputy Assistant Administrator, Office of Diversion Control.
[FR Doc. 04-17356 Filed 7-29-04; 8:45 am]
BILLING CODE 4410-09-P