[Federal Register Volume 85, Number 143 (Friday, July 24, 2020)]
[Rules and Regulations]
[Pages 44710-44734]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-16169]
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DEPARTMENT OF JUSTICE
Drug Enforcement Administration
21 CFR Parts 1301 and 1309
[Docket No. DEA-501]
RIN 1117-AB51
Registration and Reregistration Fees for Controlled Substance and
List I Chemical Registrants
AGENCY: Drug Enforcement Administration, Department of Justice.
ACTION: Final rule.
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SUMMARY: The Drug Enforcement Administration (DEA) is adjusting the fee
schedule for registration and reregistration fees necessary to recover
the costs of its Diversion Control Program relating to the registration
and control of the manufacture, distribution, dispensing, importation
and exportation of controlled substances and list I chemicals as
mandated by the Controlled Substances Act (CSA). This final rule adopts
the notice of proposed rulemaking published on March 16, 2020, to
change the fee schedule and codify existing practices of the issuance
of refunds by DEA for applicant registration fees, without change.
DATES: This final rule is effective October 1, 2020. The new fee
schedule will be in effect for all new applications submitted on or
after October 1, 2020, and for all renewal applications submitted on or
after October 1, 2020.
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.
I. Executive Summary
The Diversion Control Program
DEA's Diversion Control Program (DCP) is administered by the
Diversion Control Division (DC). DC ensures the availability of
controlled substances and listed chemicals for legitimate use in the
United States. The DCP is responsible for maintaining a closed system
of distribution by preventing diversion of controlled substances and
listed chemicals in the United States and enforcing the provisions of
the CSA for DEA. The DCP regulates over 1.8 million registrants,
ensuring their compliance with the CSA.
Legal Authority
The DCP is a strategic component of DEA's law enforcement mission,
which regulates the registration and control of the manufacture,
distribution, dispensing, importation, and exportation of
pharmaceutical controlled substances and listed chemicals. The DCP
implements and enforces the CSA to help prevent, detect, and eliminate
the diversion of controlled substances and listed chemicals into the
illicit market while ensuring a sufficient supply of controlled
substances and listed chemicals for legitimate medical, scientific,
research, and industrial purposes.\1\
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\1\ The Attorney General's delegation of authority to DEA may be
found at 28 CFR 0.100.
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Under the CSA, DEA is authorized to charge reasonable fees relating
to the registration and control of the manufacture, distribution,
dispensing, import, and export of controlled substances and listed
chemicals. 21 U.S.C. 821 and 958(f). DEA must set fees at a level that
ensures the recovery of the full costs of operating the various aspects
of its DCP. 21 U.S.C. 886a. Each year, DEA is required by statute to
transfer the first $15 million of fee revenues into the general fund of
the Treasury and the remainder of the fee revenues is deposited into a
separate fund of the Treasury called the Diversion Control Fee Account
(DCFA). 21 U.S.C. 886a(1). On at least a quarterly basis, the Secretary
of the Treasury is required to reimburse DEA an amount from the DCFA
``in accordance with estimates made in the budget request of the
Attorney General for those fiscal years'' for the operation of the
DCP.\2\ 21 U.S.C. 886a(1)(B) and (D). The first $15 million of fee
revenues that are transferred to the Treasury do not support any DCP
activities.
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\2\ The DCP consists of the pharmaceutical controlled substance
and listed chemical diversion control activities of DEA. These
activities are related to the registration and control of the
manufacture, distribution, dispensing, importation, and exportation
of controlled substances and listed chemicals (21 U.S.C. 886a(2)).
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The Proposed Rule
DEA published a notice of proposed rulemaking (NPRM) on March 16,
2020, in the Federal Register, proposing new registration and
reregistration fees for registrants, as well as proposing to codify
existing practices of issuing refunds for these fees in limited
[[Page 44711]]
circumstances. 85 FR 14810. In the NPRM, DEA proposed to amend 21 CFR
1301.13, 1309.11, 1309.12, and 1309.21 within the Code of Federal
Regulations.
In the NPRM, DEA proposed a new fee of $3,699 per year for
manufacturers of controlled substances. For distributors, reverse
distributors, importers, and exporters of controlled substances, DEA
proposed a new fee of $1,850 per year. For controlled substance
business activities involving dispensing, a new fee of $888 per three
year cycle was proposed. For all other business activities of
controlled substances (research, narcotic treatment programs (NTPs),
and chemical analysis), the proposed new fee was $296 per year. For
manufacturers of list I chemicals, DEA proposed a new fee of $3,699 per
year. For distributors, importers, and exporters of list I chemicals,
DEA proposed a new fee of $1,850 per year.
This final rule adopts the March 16, 2020, NPRM proposal to change
the fee schedule and codify existing practices of the issuance of
refunds by DEA for applicant registration fees, without change.
II. Background
History of Fees
In October 1992, Congress passed the Departments of Commerce,
Justice, and State, the Judiciary and Related Agencies Appropriations
Act of 1993 (Pub. L. 102-395), which changed the source of funding for
DEA's DCP from being part of DEA's annual Congressional appropriation
to full funding by registration and reregistration fees through the
establishment of the DCFA.\3\ The Appropriations Act of 1993 required
that ``[f]ees charged by the Drug Enforcement Administration under its
diversion control program shall be set at a level that ensures the
recovery of the full costs of operating the various aspects of that
program.'' The legislation did not, however, provide clarification on
what constituted the ``Diversion Control Program,'' thus leaving open
the issue as to what fee-setting criteria should be used to determine
which costs could be reimbursed from the DCFA.
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\3\ 21 U.S.C. 886a(1)(C).
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In response to the Appropriations Act of 1993, DEA published an
NPRM in December 1992 to adjust the registration and reregistration
fees for controlled substance registrants (57 FR 60148, December 18,
1992). In the absence of guidelines from Congress regarding the
specific criteria to be followed in identifying costs and setting the
fees, DEA relied on the plain language of the Appropriations Act of
1993 and proposed fees necessary to cover the costs of the activities
that were identified within the budget decision unit known as the
``Diversion Control Program.''
At the time that the Appropriations Act of 1993 was passed, 21
U.S.C. 821 did not extend to chemical control activities; accordingly,
there were no registration or fee requirements for handlers of list I
chemicals. DEA therefore excluded chemical control costs from its Final
Rule implementing the requirements of the Appropriations Act of 1993
(58 FR 15272, March 22, 1993). Congress amended 21 U.S.C. 821 on
December 17, 1993, to require reasonable fees relating to ``the
registration and control of regulated persons and of regulated
transactions'' (Domestic Chemical Diversion Control Act of 1993, 3(a),
Pub. L. 103-200, 107 Stat. 2333); however, despite this amendment, DEA
continued to endeavor to maintain separate funding for its controlled
substances diversion control and its chemical diversion control
activities.
Following publication of DEA's Final Rule, the American Medical
Association (AMA) and others filed a lawsuit objecting to the increase
in registration and reregistration fees on the grounds that DEA had
failed to provide adequate information as to what activities were
covered by the fees and how they were justified. The district court
issued its final order granting DEA's motion for summary judgment and
disposing of all claims on July 5, 1994.\4\ Upon AMA's appeal, the U.S.
Court of Appeals for the District of Columbia Circuit remanded, without
vacating, the rule to DEA, requiring the agency to provide an
opportunity for meaningful notice and comment on the fee-funded
components of the DCP. In doing so, the court confirmed the boundaries
of the DCP that DEA can fund by registration fees, finding that the
current statutory scheme (21 U.S.C. 821 and 958) required DEA to set
reasonable registration fees to recover the full costs of the DCP. See
AMA v. Reno, 57 F.3d 1129, 1135 (D.C. Cir. 1995). DEA responded to the
remand requirement through a notice and comment in the Federal Register
on December 30, 1996, describing the fee-funded components and
activities of the DCP with an explanation of how each satisfies the
statutory requirements for fee-funding (61 FR 68624-32, December 30,
1996).
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\4\ AMA v. Reno, 857 F. Supp. 80 (D.D.C. 1994).
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Thus, in the absence of a simple, objective measure by which DCP
costs could be identified and the appropriate fees calculated, both DEA
and the courts have looked to 21 U.S.C. 821 and 958 to define the
guidelines for determining what costs should be included in the
calculation of the fees and from whom the fees might be collected.
The Departments of Commerce, Justice, and State, the Judiciary, and
Related Agencies Appropriations Act of 2005 was signed into law on
December 8, 2004, as Division B of the Consolidated Appropriations Act
of 2005 (Pub. L. 108-447). Title IV, Section 634 of the Appropriations
Act of 2005 provided clarification as to the activities constituting
the DCP. The Appropriations Act of 2005 amended 21 U.S.C. 886a(2)(A) to
define the Diversion Control Program as ``the controlled substance and
chemical diversion control activities of the Drug Enforcement
Administration,'' which are further defined as the ``activities related
to the registration and control of the manufacture, distribution and
dispensing, importation and exportation of controlled substances and
listed chemicals.'' It also amended 21 U.S.C. 886a(1)(B) to provide
that reimbursements from the DCFA ``shall be made without
distinguishing between expenses related to controlled substances
activities and expenses related to chemical activities.'' Finally, the
Appropriations Act of 2005 amended 21 U.S.C. 821 and 958(f) to make the
language of those sections consistent with the definition of the DCP
(Pub. L. 108-447). The net effect of the amendments was to allow DEA to
deposit all registration and reregistration fees (controlled substance
and chemical) into the DFCA and fund all controlled substance and
chemical diversion control activities from the account without
distinguishing as to the type of activity (controlled substance or
chemical) being funded.
Independent of the passage of the Appropriations Act of 2005, DEA
undertook an internal reorganization to increase operational
efficiencies and overall effectiveness. As discussed in detail in DEA's
Final Rule published on August 29, 2006 (71 FR 51105), the resulting
internal reorganization removed the focus from the single business
decision unit of the DCP to a focus on diversion control activities
irrespective of the business decision unit. That is, the diversion
control activities of DEA are no longer contained in a single business
decision unit identified as the DCP. Thus, in identifying the
activities that constitute the DCP, DEA looks across the agency
[[Page 44712]]
at all functions related to the registration and control of the
manufacture, distribution, dispensing, importation, and exportation of
controlled substances and listed chemicals. This approach adheres both
to the language contained in 21 U.S.C. 821 and 958 and to the court's
requirement that there must be a nexus between the DCP's activities
funded through fees, and the registration and control of the
manufacture, distribution, and dispensing of controlled substances and
listed chemicals of regulated persons and regulated transactions.
In keeping with this organizational and functional change, DEA
continues to identify the diversion control activities to be funded by
the DCFA. Accordingly, this NPRM describes the activities that
constitute the DCP, irrespective of organizational structure within the
agency and in compliance with 21 U.S.C. 821 and 958, and 21 U.S.C.
886a, which require that DEA charge reasonable fees relating to the
registration and control of the manufacture, distribution, dispensing,
importation, and exportation of controlled substances and listed
chemicals and that DEA collect fees adequate to fully fund the
controlled substances and listed chemical diversion control activities
that constitute the DCP, as defined by DEA.
The Department of Justice's (DOJ) Office of the Inspector General
(OIG) completed a review of DEA's use of the DCFA in 2008 and did not
find any misused DCFA funds for non-diversion control activities
between Fiscal Year (FY) 2004 and FY 2007. To the contrary, the OIG
found that DEA did not fully fund all diversion control costs with the
DCFA as required by law.\5\ Therefore, in 2011 DEA published a NPRM to
continue efforts to fully fund the DCP. The 2011 NPRM included
additional DCP costs which were identified in the OIG report and
resulted in an approximately 33 percent fee increase across all
registrant groups. The 2011 NPRM was finalized in 2012, and this was
the last time DEA adjusted the fees prior to the current fee increase.
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\5\ ``Review of the Drug Enforcement Administration's Use of the
Diversion Control Fee Account,'' I-2008-002, February 2008, http://www.usdoj.gov/oig/reports/DEA/e0802/final.pdf.
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III. Diversion Control Program
Scope of the Diversion Control Program
The mission of DEA's DC is to prevent, detect and investigate the
diversion of pharmaceutical controlled substances and listed chemicals
from legitimate channels while ensuring an adequate and uninterrupted
supply of pharmaceutical controlled substances and listed chemicals to
meet legitimate medical, commercial, and scientific needs. This
Division administers the DCP, which is responsible for enforcing the
provisions of the CSA, as they pertain to ensuring the availability of
controlled substances and listed chemicals for legitimate uses in the
U.S., while exercising controls to prevent the diversion of these
substances and chemicals for illegal uses. This Division maintains an
overall geographic picture of drug and chemical diversion and abuse
problems to identify new trends or patterns in diversion and abuse,
which enables it to appropriately direct resources.
The DCP is executed by maintaining a closed system of distribution
by regulating and managing over 1.8 million DEA registrants and
investigating activity related to the diversion of pharmaceutical
controlled substances and listed chemicals. To ensure accountability
within the closed system of distribution, the DCP administers,
maintains, and oversees DEA's registration system. This entails
processing, reviewing, and, if necessary, investigating all
applications for registration and reregistration, collecting fees, and,
when appropriate, proposing to take administrative action on
registrations or applications for registration, such as restriction,
revocation, suspension, or denial of an application.
The DCP's regulatory function is accomplished by registering those
entities that handle controlled substances or listed chemicals,
conducting regulatory inspections, providing information and guidance
to registrants, and controlling and monitoring the manufacture,
distribution, dispensing, import, and export of controlled substances
and listed chemicals. The DCP determines the appropriate procedures
necessary for ordering and distributing schedule I and II controlled
substances, using DEA Form 222 or its electronic equivalent.\6\ This
enables the DCP to monitor the flow of certain controlled substances
from their point of manufacture through commercial distribution. The
DCP also executes its regulatory functions by fulfilling its U.S.
treaty obligations pertaining to the CSA, such as the preparation of
periodic reports for submission to the United Nations (UN) as mandated
by U.S. international drug control treaty obligations on the
manufacture and distribution of narcotic and psychotropic substances,
as well as determining the anticipated future needs for narcotic and
psychotropic substances.
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\6\ 21 U.S.C. 828, 21 CFR part 1305.
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The DCP ensures that registrants are in compliance with the
safeguards of the CSA. This allows for the identification and the
prevention of diversion of pharmaceutical controlled substances and
listed chemicals into illicit markets. Registrant compliance is
determined primarily through pre-registration, scheduled, and complaint
investigations. DCP regulatory activities have an inherent deterrent
function, and they are designed to ensure that those businesses and
individuals registered with DEA to handle controlled substances or
listed chemicals have sufficient measures in place to prevent the
diversion of these substances. These investigations also help
registrants understand and comply with the CSA, identify those
registrants who violate the CSA, and implement regulations. Pre-
registration investigations reduce the possibility of registering
unauthorized entities, ensure that the means to prevent diversion are
in place, and determine whether registration is consistent with the
public interest.
Not only does the DCP exercise authority and control over the
registrant population, the DCP exercises authority over the
classification of substances.\7\ This is accomplished by evaluating
drugs and chemicals to determine whether these substances are being
abused or potentially involved in illicit traffic, and to evaluate
whether any substances should be scheduled as a controlled substance or
regulated as a listed chemical. This requires the collection and
analysis of a large amount of data from various sources. These
evaluations are used by DEA as a basis for developing appropriate drug
control policies; determining the status of controlled, excluded, or
exempted drugs and drug products; and supporting U.S. initiatives in
international forums.
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\7\ 21 U.S.C. 811-814.
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The DCP's authority over controlled substances and listed chemicals
requires its support of domestic and foreign investigations of these
substances. As such, the DCP serves as the competent national authority
for the U.S. regarding listed chemicals and international treaties. The
DCP works with the international community to identify and seize
international shipments of listed chemicals destined for the U.S. The
DCP also works on a bilateral basis to urge international partners to
take effective action, in cooperation with chemical companies, to
establish controls and prevent the diversion of listed chemicals from
legitimate trade. In
[[Page 44713]]
addition to its other oversight and regulatory responsibilities in this
area, the DCP reviews the importation and exportation notifications of
listed chemicals.
The DCP also controls the manufacture of controlled substances by
setting the aggregate production quotas, individual manufacturing
quotas, and procurement quotas for basic classes of schedule I and II
controlled substances. Similarly, the DCP controls the manufacture of
list I chemicals ephedrine, pseudoephedrine, and phenylpropanolamine by
setting the assessment of annual needs, individual manufacturing
quotas, procurement quotas and import quotas for these three list I
chemicals. As such, the DCP maintains and monitors the Year-End
Reporting System/Quota Management System (YERS/QMS), which provides
information on entities manufacturing schedule I and II controlled
substances and list I chemicals ephedrine, pseudoephedrine, and
phenylpropanolamine. Furthermore, the DCP issues import and export
registrations and permits, and monitors declared imports, exports, and
transshipments of these substances. The DCP must ensure that all
imports and exports of controlled substances and listed chemicals meet
the requirements of the CSA. As such, the DCP maintains and monitors
many electronic reporting systems, such as the Chemical Handlers
Enforcement Management System, which provides information on entities
manufacturing, distributing, and exporting and importing regulated
chemicals, and encapsulating and tableting machines.\8\
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\8\ See 21 U.S.C. 830, 957-58.
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To effectively execute its regulatory functions, the DCP reviews
legislation pertinent to the availability of controlled substances and
listed chemicals for legitimate uses in the U.S. and controls to
prevent the diversion of these substances and chemicals. The DCP drafts
and implements regulations to keep DEA in compliance with legislation
enacted by Congress. The DCP constantly reviews its own regulations and
develops and implements regulations designed to enhance DEA's diversion
control efforts. The DCP's regulatory activities also require education
and outreach to ensure understanding of and compliance with the CSA and
applicable regulations, and to ensure registrants have sufficient
measures in place to prevent diversion. The DCP's outreach efforts
include establishing and maintaining liaison and working relationships
with other Federal agencies, the regulated community, and foreign,
state, and local governments. Other efforts include developing and
maintaining manuals and other publications; organizing and conducting
national conferences on current issues, policies, and initiatives; and
providing scientific support for policy guidance, expert witness
testimony, and conference presentations.
The DCP continues to address the growing threat of synthetic
substances through the collection and evaluation of pharmacological,
medical, epidemiological and other scientific data for new drugs of
abuse and when appropriate, initiate the necessary administrative
procedures to place these substances under regulatory control.
Since the last fee increase in 2012, the nature of the diversion
control problem has increased in size and complexity. The increased
diversion threats and changing diversion schemes such as the opioid
epidemic, as well as amendments to the CSA, have necessitated the need
to increase DEA registration fees in order to fully fund all aspects of
the DCP.
Although DEA has been fiscally responsible and has not increased
registration fees since 2012, a registration fee increase is needed.
This increase will fund personnel and operations supporting the DCP's
mission to prevent and detect diversion, protect the closed system of
distribution in the U.S., and combat the nation's opioid crisis.
Without an increase in registration fees, DEA will be unable to
continue current operations and will be in violation of the statutory
mandate that fees charged ``shall be set at a level that ensures the
recovery of the full costs of operating the various aspects of [the
diversion control program].'' 21 U.S.C. 886a(1)(C).
IV. Discussion of Comments
Following publication of the NPRM on March 16, 2020, 85 FR 14810-
14837, DEA received twelve comments in response to the rule. Of these
comments, five comments are out of scope in their entirety, and did not
address the fee calculation or the issuance of refunds by DEA for
applicant registration fees. Two comments supported the proposed rule
in part. The remainder of the comments expressed concern about the fee
increase, as further described below.
Support for the Fee Increase and Proposal To Grant Registration Refunds
Issue: An association agreed with DEA's proposed methodology for
the new fee calculation and the proposal to grant registration fee
refunds under certain circumstances. The commenter expressed its
appreciation for DEA's acknowledgement that there will be a certain
amount of honest errors either on the part of the registrant or on
DEA's part. This commenter wrote that the proposed rule provides a
useful explanation of the three alternative methodologies to calculate
the new registration fees and agreed with DEA's selection of the
weighted-ratio method. The commenter wrote that because all supply
chain trading partners share a responsibility for helping to avoid the
misuse/abuse of the controlled substances and other products that DEA
regulates, adopting a method that applies an equivalent increase to all
registrants is reasonable.
Another association also supported the proposal to allow the
Administrator to refund registration fees under certain circumstances.
They requested that information regarding the refund process be easily
accessible, and that an efficient process be established to issue the
refunds.
DEA Response: DEA appreciates the support for the selected fee
calculation methodology, and the codification of DEA policy regarding
refunding of registration fees in certain circumstances. In developing
the fee schedule, DEA conducted a thorough analysis of the identified
fee calculation options--including the anticipated economic impact on
registrants--and determined that the weighted-ratio option represents
the most reasonable approach to calculate registrant fees sufficient to
fully fund the DCP.
Based on the Administrator's discretionary authority, the refunds
for fees will be issued under limited circumstances, to include
applicant error, DEA error, and death of a registrant within the first
year of the three-year registration cycle. The process for obtaining a
refund will be made available on DEA Diversion Control's website
(www.deadiversion.usdoj.gov).
Objection to the Fee Increase
Auditing Mechanisms
Issue: Two commenters, one of whom is a physician, the other of
whom is anonymous, raised concern about tracking DEA's accountability
with respect to the DCFA. These commenters wrote that an audit should
be done on the DCFA to avoid waste and to ensure that the DCFA does not
become a blank check for DEA to do whatever they want with it. In
particular, the commenters were concerned with how the fees are being
spent. The physician commenter objected to the fee increase and
proposed that an independent, non-
[[Page 44714]]
governmental audit be performed on an annual basis to ensure that there
is no fraud or waste of the fees.
DEA Response: As required by the Chief Financial Officers (CFO)
Act, DOJ OIG annually audits DEA's financial statements, using a third
party auditor (currently KPMG). These audits cover all of DEA's funding
sources and lines of business, including the DCFA. DEA has received an
unqualified audit opinion for approximately twenty years.
Additionally, DEA has established a robust system of internal
controls to ensure that DEA recovers the full cost of the DCP, and that
the DCFA is used only for all of that program's costs, as directed by
law. These internal controls over non-personnel expenses are managed by
the Cost Diversion Validation Unit. This unit is independent of the DCP
and resides within the Financial Management Division, which is
responsible for all of DEA's financial management, including that of
the DCFA. The unit reviews every DCFA expenditure over $500 for a
justification for how it relates to the DCP and ensures that DCFA
funding is in compliance with established methodologies. The Cost
Diversion Validation Unit recommends methodologies for the appropriate
and consistent use of DCFA funding across commodities and cost areas,
to ensure the funding is used to pay for only costs attributable to the
DCP.
Along with the oversight of the Cost Diversion Validation Unit over
non-personnel expenses, DEA's Office of Resource Management reviews the
investigative work performed by DEA's workforce, including Special
Agents, on a quarterly basis. These reviews enable DEA to ensure that
the DCFA pays for all payroll costs associated with DCP casework and
does not pay for the payroll or employees working on non-DCP casework.
In instances where DCFA funded employees work on non-DCP cases, DEA's
salaries and expenses (non-DCFA) account reimburses the DCFA for those
payroll expenses. These internal controls ensure that DCFA funding is
used only for the requirements of the DCP and not made available for
non-diversion related expenses within DEA.
DC, as part of DEA, must adhere to Office of Management and Budget
(OMB) Circular A-123, Management's Responsibility for Enterprise Risk
Management,\9\ and Internal Control and Federal Managers' and Financial
Integrity Act \10\ which have been at the center of Federal
requirements to improve accountability in Federal programs and
operations since 1981. Under OMB Circular A-123, DEA must maintain
internal controls that reduce the risk of fraud, waste, and error. DEA
is also responsible for establishing and maintaining internal controls
to achieve specific internal control objectives related to operations,
reporting, and compliance.
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\9\ Office of Management and Budget (OMB) Circular No. A-123,
Management's Responsibility for Internal Control.
\10\ 31 U.S.C. 3512.
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In addition to DEA's internal inspection and evaluation practices,
DEA's programs are subject to external audits and reviews, as part of
maintaining the public's trust in DEA's ability to manage resources in
fulfillment of its mission. DOJ, OIG, and the Government Accountability
Office (GAO) are the primary auditing agencies that review DEA's
programs on an ad hoc basis. The outcome of external audits, whether
positive or negative, has a significant impact on DEA's programs.
Moreover, all budget submissions for the DCP are subject to
multiple levels of scrutiny and review within DEA, the DOJ, and OMB.
Each of DEA's annual budget requests to Congress, which includes the
DCP, is available for public view. Each budget request is examined and
approved by both DOJ and OMB.
The DCP's implementation of internal inspection and evaluation
practices coupled with federal mandates established by OMB, OIG, and
GAO are sufficient to maintain DC's program integrity, efficiency, and
transparency. All aspects of the DCP are inspected to detect any waste,
fraud, or abuse. An external, non-governmental audit, as suggested by
the physician commenter, would require a large expenditure of
registrant fees, and would be excessive, given the other safeguards
that are already in effect.
Hiring of Additional Personnel To Address DCP's Mission; Finalizing
Rules and Updates to DEA Publications
Issue: The anonymous commenter raised concern about the increase in
fees as it relates to the hiring of additional personnel, and the
physician questioned what is being funded by registrant fees. The
anonymous commenter stated that hiring personnel did not seem to be the
answer because enforcement was not working on the opioid epidemic. The
anonymous commenter further suggested that hiring additional people
would not solve the problems of the opioid epidemic, and opined that
DEA believes that additional people will magically solve the opioid
epidemic. Both commenters stated that DEA has failed to meet many
Congressional deadlines that were imposed by the enactment of various
legislation. The physician also added that DEA has been slow to draft
implementing regulations for statutory amendments to the CSA, and to
draft other rules, schedule substances, or update manuals and
publications that help registrants.
DEA Response: As a part of executing the DCP's mission, DEA is
focused on combatting the opioid epidemic, as well as addressing the
diversion of other controlled substances and listed chemicals. While
DEA knows that the hiring of additional people will not automatically
solve the epidemic, hiring more people will improve DEA's ability to
successfully investigate diversion. By increasing personnel and
devoting more resources towards prioritizing and drafting rules, DEA
will be able to more efficiently and effectively meet deadlines and
address diversion.
While DEA aims to meet every deadline Congress puts in place when
creating new legislation, DEA's rulemaking process involves many steps.
Where Congress has enacted statutory amendments to the CSA, such as the
SUPPORT Act, DEA complies with these laws while finalizing implementing
regulations for these amendments. Moreover, finalizing and implementing
rules require the publication of proposed rules or interim final rules
and final rules. These documents require significant drafting and
analysis, as well as a lengthy review process to ensure that the rule
is legal, fair, and will be effective in meeting the goal of the
particular rule.
In the proposed rule to increase fees, DEA chose not to discuss any
other proposed rules or their status, due to the sensitive nature of
rule drafting, as well as the fact that proposed rules can change prior
to finalization. However, DEA received comments questioning the
necessity of the fee increase due to the fact that implementing
regulations for statutory amendments to the CSA, as well as a
regulation related to marijuana growers, have yet to be published. As
stated above, the rulemaking process is lengthy and involves multiple
phases. In 2019, DEA published two NPRMs, three Final Rules, and two
Notices (regarding the setting of the aggregate production quota and
assessment of annual needs). So far, in 2020, DEA has published three
NPRMs and one Notice (to adjust the established aggregate production
quotas and assessment of annual needs).
The physician commenter also noted that DEA's Diversion Control
website Manuals and Publications section contains older manuals.
However, this
[[Page 44715]]
is not indicative of DEA's continuous efforts to keep policies and
procedures current with regulations, technology, and industry best
practices. DEA is in the process of updating the entire Manuals and
Publications section on its website and several manuals are being
drafted. DCFA funds will be used to provide the DCP with additional
resources to update the manuals and outdated documents. The physician
also contended that DEA publishes an average of only three scheduling
actions per year. This is inaccurate. Since FY 2019 alone, DEA has
published in the Federal Register over twenty final rules placing
dangerous substances in schedules I and II of the CSA.
Quotas
Issue: The physician commenter raised a concern about DEA's process
for setting quotas. In particular, the commenter did not understand how
proposing new use-specific quotas would expedite the process or provide
clarity. The commenter wrote that it is unsettling to pay for
leadership that is unsure about how certain processes under their
purview work.
DEA Response: DC's leadership fully understands the quota setting
process and plays an active role in the rule-making process.
In addition, 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 U.S. DEA is required to
understand what is available for legitimate patient need versus what is
available for product development to properly calculate the Aggregate
Production Quota (APQ) and individual quotas. Additionally, as the
number of manufacturers continues to increase and industry practices
and specializations change, the ability to methodically track movements
of material between registrants at all stages of manufacturing becomes
more critical. Use-specific subcategories improve the efficiency of the
application and reporting process for DEA-registered manufacturers. The
specification of quota subcategories reflects the manufacturing
activity of the applying DEA registrant, has facilitated the issuance
of manufacturing and procurement quotas, and has provided a more
accurate calculation of the APQs for the U.S. by preventing double
counting of quotas. Use-specific quotas have been informally in place
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.
Education and Outreach Programs
Issue: The physician commenter suggested that DEA could save money
and manpower by eliminating programs such as DEA 360 Strategy, National
Take-Back Initiative (NTBI), and Tactical Diversion Squads (TDS). This
commenter believes that DEA has not been proactive enough in its
mission to address or prevent the opioid problem.
DEA Response: DEA works diligently to achieve operational
efficiencies in all of its programs, including the DCP, while keeping
costs as low as possible. Due to increased diversion and prescription
drug abuse, as well as an increase in the production and use of
chemicals that contribute to the health emergency, DEA's 360 Strategy,
NTBI, and TDS groups are necessary tools to aid ending the deadly cycle
of prescription opioid misuse.
Through DEA's 360 program, prescription opioid misuse is targeted
using a holistic approach while leveraging enforcement resources. Given
the number of opioid-related deaths, the coordinated and targeted
enforcement efforts of federal, state, and local law enforcement are
needed resources to help fight the epidemic. This epidemic is too
massive for state and local governments to handle alone. The opioid
epidemic is a national matter, which requires coordinated law
enforcement, diversion control, and community outreach efforts, and
which is aided by DEA's 360 Strategy initiative.
Before DEA began NTBI, most U.S. communities did not routinely
offer opportunities to properly dispose of expired, unused, or unwanted
pharmaceutical controlled substances. As a result, many people kept
these drugs because they did not know how to dispose of them. In many
cases, dispensed controlled pharmaceutical drugs remain in household
medicine cabinets well after medication therapy has been completed,
thus providing easy access to non-medical users for abuse or accidental
ingestion. NTBI events have been overwhelmingly successful for over a
decade, and have resulted in the collection and disposal of over 6,349
tons of pharmaceuticals. The huge volume of drugs must be transported
for proper disposal. The assistance from local points of contact is
necessary to pick up collected drugs for disposal in accordance with
Federal and State environmental standards. The NTBI program is an
example of the DCP's commitment to community outreach efforts and the
need to properly dispose of unused and unwanted controlled substances.
This collaborative effort between DEA and State and local law
enforcement agencies is focused on removing potentially dangerous
controlled pharmaceutical substances from our nation's medicine
cabinets to reduce opportunities for diversion.
The TDS program has been a successful tool employed by the DCP to
combat the illegal diversion of controlled substances. Combining the
criminal drug investigative experience of DEA Special Agents, the
subject matter expertise of Diversion Investigators (DIs), and the
local knowledge and capabilities of deputized Task Force Officers, the
TDSs can effectively confront the diversion problem on multiple levels.
Since the initial deployment, TDSs have initiated an average of more
than 1,500 cases and made more than 2,100 arrests per year.
The opioid epidemic is a national matter, which requires consistent
coordinated law enforcement, diversion control, and community outreach
efforts through DEA's 360, NTBI, and TDSs to represent the interests of
the nation as a whole. Elimination of these programs would reduce the
awareness of the opioid crisis, increase opportunities for diversion,
and possibly result in a rise in opioid-related deaths.
Fee Calculation Methodology
Issue: The physician commenter believes that the methods described
by the Agency that were used to come up with the fee increase seem
arbitrary.
DEA Response: In developing this rule, DEA considered three
methodologies to calculate registration and reregistration fees. DEA
selected the current weighted-ratio option to calculate the new fees.
This approach has been used since Congress established registrant fees
and continues to be a reasonable reflection of differing costs. The
registration fees under the weighted-ratio option result in
differentiated fees among registrant groups, where registrants with
generally larger revenues and costs pay higher fees than registrants
with lower revenues and costs. Furthermore, the weighted-ratio does not
create a disparity in the relative increase in fees from the current to
the new fees. The weighted-ratios used by DEA to calculate the current
fee have proven effective and reasonable over time, and generally
reflect the differences in activity level, notably in inspections,
scheduled investigations, and other control and monitoring, by
registrant category (i.e., these costs are higher for
[[Page 44716]]
manufacturers). DEA selected this option because it is the only option
that resulted in ``reasonable'' fees for all registrant groups.
Fees for Registrant Categories
Issue: The pharmaceutical company objected to the increased
registration fees, especially for small businesses. This commenter
proposed two alternatives for assessing registration fees: Assessing
fees based on the size of the business, or having registrants with a
significant history of CSA violations pay higher registration fees. The
commenter stated that in the first proposal, registration fees would be
assessed based on the size of the business (e.g., the number of
employees, annual earnings, etc.). The commenter's second proposal
requires registrants with a significant history of CSA violations to
pay dramatically increased registration fees. The commenter believes
that specific manufacturers and wholesale distributors contributed to
the opioid epidemic by turning a blind eye to CSA laws and implementing
regulations, and were lured by sales of opioid medications and profits
over their responsibilities as DEA registrants.
DEA also received a comment from an association agreeing with the
concern for imposing disproportionately higher fees on NTPs, but
objecting because they believe distributors will not be paying their
fair share under the proposed ``weighted ratio option.'' The comment
states that the ``past-based option'' would lead to a 117 percent
increase for distributors, as opposed to the lower 21 percent that is
being proposed. In their view, practitioners under the current and
proposed ``weighted ration option'' would be paying too much as
compared to manufacturers and distributors. The association also
included a suggestion to lower fees for physicians who comply with DEA
regulations that impose an extra cost upon the registrants, such as the
electronic prescribing of controlled substances (EPCS) or a waiver to
prescribe buprenorphine. The association takes the position that if
EPCS is supposed to reduce diversion, then DCP must be incurring lower
costs for those who adopt EPCS. Similarly, they state that physicians
trained to prescribe buprenorphine to treat opioid use disorder are
lowering DCP costs by lowering the costs associated with drug
addiction.
A company in support of the fee increase suggested that DEA
eliminate the duplicative registration requirement. This company
previously sent a letter to the Office of Legal Policy, U.S. Department
of Justice, dated August 14, 2017, requesting that DEA amend the
regulations to waive the chemical registration requirement for
wholesale distributors who are also registered as controlled substance
handlers. The company further stated that it is redundant, unnecessary,
and unfair to make a single facility pay two registration fees. The
company was specifically concerned that wholesale distributors that
possess and distribute both controlled substances and certain iodine
products must apply and pay registration fees for two separate
registrations, even though they are storing and distributing these
products at a single warehouse.
DEA Response: It is important to emphasize that the focus of DEA's
fee calculation methodology is to account for DCP program costs among
the registrant categories and not to set fees according to business
size or quantities of controlled substances handled. DEA provided
economic impact analysis demonstrating the relatively minor proportion
of registrant's total income needed to pay a registration fee.
Additionally, the analysis showed that the percentage fee increase is
comparable to inflation.
DEA continues to review possible methodologies for differentiating
fees between various registrant groups. However, at this time, DEA has
determined that it is both practicable and reasonable to continue to
apply the weighted-ratio methodology without distinction between small
and large businesses.
Regarding using CSA violations as a factor in setting registration
fees, DEA's statutory authority is to charge reasonable registration
fees set at a level that ensures the recovery of the full costs of
operating the various aspects of the DCP. As a practical matter, the
vast majority of DEA registrants are in compliance with the CSA, and
DEA works with any registrant who is not in full compliance with the
CSA to bring that registrant into compliance. The CSA provides for
mechanisms independent of the registration fee by which to exact
financial penalties from registrants who violate the law. Registrants
who violate the CSA may be subject to civil and criminal penalties, as
well as forfeitures. 21 U.S.C. 841, 842, 843, 881. Additionally, DEA
would move to suspend the registration of a person whose registration
is inconsistent with the public interest.
As discussed in the NPRM and in the final rule, DEA examined three
alternative methodologies to calculate registration and reregistration
fees. DEA did not select the past-based option for two key reasons.
First, the fee increase is disproportionately burdensome to a small
number of registrants. Narcotic treatment program fees would increase
by 856 percent, while the change for the remaining registrant groups
would range from a decrease of 44 percent to an increase of 131
percent. DEA deemed this option unreasonable. Second, the past-based
option is backward looking and implicitly assumes that the future will
be similar to the past. DEA cannot assume that future workload will
reflect past DEA work hour data. For example, DEA plans to conduct more
scheduled investigations in accordance with the new scheduled
investigation work plan. As a result, DEA has concluded that past data
is not the best basis for the calculation of new fees. The selected
methodology must be applied to all registrants. For example, DEA cannot
only apply the past-based option to distributors.
DEA does not have access to practitioners' rates of EPCS use or
buprenorphine prescribing rates. In fact, many states with prescription
drug monitoring programs prohibit law enforcement entities from using
prescribing data without specific, independent legal authority to do so
(e.g., a subpoena or warrant). Even so, DEA does not have the resources
to calculate the rate of prescribing for each registrant or to
personalize each registrant's registration fee. Additionally, allowing
individualized calculations based on EPCS use, prescribing rates,
business size, or type of patients served would introduce uncertainty
and unpredictable fluctuations in the collection cycle, thereby
jeopardizing the statutory mandate to recover the full costs of
operating the DCP.
Purchasers and suppliers of controlled substances and listed
chemicals are regulated under the CSA and are therefore subject to the
registration and reregistration requirement and fees.\11\ The CSA is
Federal law and cannot be changed by DEA. DEA carries out the mandates
of the CSA by preventing the diversion of controlled substances and
listed chemicals into the illicit market, but does not have the
authority to change Federal provisions. The commenter suggested that
DEA eliminate the duplicative registration requirement for certain
chemicals (e.g., iodine). The CSA requires a separate registration for
certain chemicals to prevent its diversion into the illicit market.
Iodine is not identified as a listed chemical that is contained in a
drug marketed or distributed lawfully in the U.S. under the Federal
Food, Drug, and Cosmetic
[[Page 44717]]
Act.\12\ Furthermore, iodine may be used for non-research, illegitimate
purposes, and is also used in the illicit manufacture of
methamphetamine. DEA requires a separate registration for this chemical
due to the high probability that it may be diverted to the clandestine
manufacture of methamphetamine.
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\11\ 21 U.S.C. 822(a)(1); 21 U.S.C. 833(b).
\12\ 21 CFR 1300.02(1)(iv).
---------------------------------------------------------------------------
Extension of Implementation Due to Coronavirus Disease 2019 Public
Health Emergency
Issue: Three commenters recommended deferring the proposed fee
increase and one objected to its implementation due to the Coronavirus
Disease (COVID-19) pandemic and the economic uncertainty that it has
engendered. A pharmaceutical company suggested that DEA postpone the
fee increases and the comment period at least until January 2021, and
noted that publishing a proposed fee increase during a worldwide health
pandemic with looming economic uncertainties was poorly timed, as the
nation's current priority is to focus public health and safety measures
on the COVID-19 pandemic. An association recommended that the fee
increases be postponed until the conclusion of the public health
emergency, stating that implementing the proposed 21 percent increase
would be a heavy burden to pharmacists who are already struggling
during this time, as the pandemic has led to a decrease in patient
services and revenues. A third commenter, also an association, urged
that DEA defer the registration fee increases for at least 12 months
due to the COVID-19 pandemic and resulting economic recession, or until
the business community has recovered.
A fourth commenter objected to the increase in practitioners'
registration fees because physicians cannot afford to pay higher DEA
registration and reregistration fees. It stated that Medicare payment
rates are in the midst of a six-year freeze, and COVID-19 has led to
steep declines in patient services and associated revenues, even for
frontline physicians caring for patients with COVID-19, who may face a
reduction in revenues from elective procedures and increased expenses
due to new infection control processes and supplies.
DEA Response: DEA recognizes that industry is experiencing unique
challenges, including financial challenges, during the current
coronavirus pandemic. Protecting the health and safety of our
communities is DEA's top priority, and that commitment has continued
during the unprecedented public health emergency caused by the ongoing
COVID-19 pandemic. During this emergency, DC is responding quickly and
appropriately to ensure continued access to necessary controlled
substances. DC's efforts include supporting prescribing practices that
limit exposure, enabling uninterrupted access to practitioners, and
safeguarding a consistent and reliable drug supply. Some of the ways DC
continues to fulfill its mission and serve the American people during
this challenging time include:
Working with registrants to facilitate satellite
hospitals and clinic locations;
Temporarily lifting restrictions on DEA's ``five
percent rule'';
Temporarily raising aggregate production quotas for
certain medications;
Providing clear guidance on electronic prescribing of
controlled substances;
Allowing Narcotic Treatment Programs to sign invoices
post delivery;
Ensuring Narcotic Treatment Programs can get medication
to their patients; and
Supporting responsible use of telemedicine while
providing medication assisted treatment.
These additional COVID-19-related responsibilities have put
additional pressure on the DCP and its resource needs.
Moreover, DEA's scope of responsibilities has expanded due to
Congressional mandates since the last fee schedule revision in 2012.
DEA outlined the legal authority, the history of the fees, the need for
an increase in fees, the methodology, and the proposed fee calculation
in the NPRM to explain why there is a fee, why there is a periodic
recalculation, and how the proposed new fee schedule was calculated.
The registration fee is a statutory requirement for those seeking to
participate in the closed system of distribution by handling, or having
access to, controlled substances or List I chemicals. These fees fund
the DCP, which includes providing and maintaining services to DEA
registrants.
DEA is sensitive to the challenges facing many registrants and has
endeavored to set the fee as low as possible, consistent with its
statutory mandates, and has provided a 60-day comment period to solicit
input from interested parties. DEA continuously strives to be fiscally
responsible. The last fee increase was set in FY 2012, and was intended
to encompass only FYs 2012-2014. Through various efforts and cost-
saving measures, the DCP has been able to operate under that fee
structure through FY 2020. While DEA is publishing this final rule at
this current time, the increase will not immediately go into effect on
the date of publication of this rule. The new fee schedule will be
implemented for all new applications submitted on or after October 1,
2020, and for all renewal applications submitted on or after October 1,
2020. Thus, not all registrants will be paying registration and
reregistration fees on October 1, 2020. Those whose reregistration fees
are due between now and September 30, 2020, will continue to pay the
current fees until their next date of renewal. As such, only a small
subset of registrants will be affected when the rule is first
implemented.
Without an adjustment in the annual registration fees, the DCP will
be unable to continue current operations and will be in violation of
the statutory mandate that fees ``shall be set at a level that ensures
the recovery of the full costs of operating the various aspects of [the
diversion control program.]'' 21 U.S.C. 886a(1)(C). Continued
collections under the current fee schedule would require the DCP to
significantly cut existing and planned DCP operations vital to its
mission. DEA relies on the DCP to maintain the integrity of the closed
system of distribution as outlined in the proposed rule, particularly
at this time of increased abuse and diversion.
V. Provisions of the Final Rule
After careful consideration of all the comments, DEA is finalizing,
without change, the fee schedule, and codifying existing practices of
the issuance of refunds by DEA for applicant registration fees as
proposed in the NPRM published on March 16, 2020. 85 FR 14810-14837.
Revised Fees
Based on thorough analysis of the identified fee calculation
options--including the anticipated economic impact on registrants--DEA
has determined that the weighed-ratio option represents the most
reasonable approach to calculate registrant fees sufficient to fully
fund the DCP.
The fee schedule replaces the current fee schedule for controlled
substance and chemical registrants to recover the full costs of the DCP
so it can continue to meet the programmatic responsibilities set forth
by statute, Congress, and the President. As discussed, without an
adjustment to fees, the DCP will be unable to continue current
operations, necessitating dramatic program reductions, and possibly
weakening the closed system of distribution. Accordingly, DEA finalizes
[[Page 44718]]
the following new fees for the FY 2021 to FY 2023 period.
Table 1--Registration and Reregistration Fees by Business Activity
----------------------------------------------------------------------------------------------------------------
Current fees Difference
Business activity ($) New fees ($) ($)
----------------------------------------------------------------------------------------------------------------
Registrants on Three Year Registration Cycle *
Pharmacy.................................................... 731 888 157
Hospital/Clinic............................................. 731 888 157
Practitioner................................................ 731 888 157
Teaching Institution........................................ 731 888 157
Mid-level Practitioner (MLP)................................ 731 888 157
Registrants on Annual Registration Cycle:
Manufacturer................................................ 3,047 3,699 652
Distributor................................................. 1,523 1,850 327
Researcher/Canine Handler................................... 244 296 52
Analytical Lab.............................................. 244 296 52
Importer.................................................... 1,523 1,850 327
Exporter.................................................... 1,523 1,850 327
Reverse Distributor......................................... 1,523 1,850 327
Narcotic Treatment Program.................................. 244 296 52
Chemical Manufacturer....................................... 3,047 3,699 652
Chemical Importer........................................... 1,523 1,850 327
Chemical Distributor........................................ 1,523 1,850 327
Chemical Exporter........................................... 1,523 1,850 327
----------------------------------------------------------------------------------------------------------------
* Pharmacy, hospital/clinic, practitioner, teaching institution, and mid-level practitioner registration fees
are for a three-year period. This current three-year fee is $731. The revised fee for the three-year
registration period is $888. The three-year difference is $157 or an annual difference of $52.
The fees are estimated to fund the full cost of the DCP--to include
the increased programmatic and personnel requirements currently, or
expected to be in place from FY 2021 to FY 2023, and have a FY 2023
end-of-year balance of at least $50 million.
Table 2--Overview of Diversion Control Fee Account
----------------------------------------------------------------------------------------------------------------
3-Years
FY 2021 ($M) FY 2022 ($M) FY 2023 ($M) combined ($M)
----------------------------------------------------------------------------------------------------------------
DCFA Balance Carried Forward From Prior Year.... 69 96 86 69
Total Collections............................... 576 596 625 1,797
Treasury Amount................................. (15) (15) (15) (45)
Other Collections (OGV, CMEA)................... 1 1 1 3
---------------------------------------------------------------
Net Collections............................. 562 582 611 1,755
Total Obligations............................... 555 613 670 1,838
Recoveries from Deobligations................... (20) (22) (24) (65)
---------------------------------------------------------------
Net Obligations............................. 535 591 647 1,773
End of Year DCFA Balance................ 96 86 50 50
----------------------------------------------------------------------------------------------------------------
Refund of Registration Fees
DEA is amending 21 CFR 1301.13(e) and 1309.12(b) to codify existing
practices of the issuance of refunds by DEA for applicant registration
fees. Generally, registration fees are not refundable. This regulation
was implemented when registration fees were nominal. With increased
registration fees, DEA recognizes the need to issue refunds in limited
circumstances. These provisions of the rule will give the DEA
Administrator discretionary authority to refund registration fees in
limited circumstances, such as: Applicant error, DEA error, and death
of a registrant within the first year of the three-year registration
cycle. Refunds will be issued for applicant error when there has been a
duplicate payment for the same renewal, incorrect billing or incorrect
transposing of credit card digits, payment for incorrect business
activity, or when an applicant is fee-exempt. Refunds will be issued
based on DEA error when DEA caused the error; for example, when DEA
incorrectly advised that a new application was needed, or advised a
registrant to submit payment for a wrong business activity. While these
provisions will have no economic costs or benefits, DEA believes it is
important to accurately codify existing practices.
VI. Need for a New Fee Calculation
As discussed in the NPRM, DEA last adjusted the fee schedule in
March 2012, with collections beginning in April 2012.\13\ This fee
schedule was intended to cover the ``full costs'' of the DCP for FY
2012 through FY 2014, or October 1, 2011 through September 30, 2014.
The DCP has continued to operate under this fee schedule by being
fiscally responsible, optimizing its organizational structure,
maximizing the use of technological enhancements, as
[[Page 44719]]
well as unforeseen delays in hiring. As indicated by the above-
referenced 2008 OIG report, the DCP has assumed a number of costs since
the last fee increase, including indirect pay and rightsizing,
additional salary, and other costs attributable to diversion control
activities. In addition, Congress has expanded DCP's responsibility to
address the opioid epidemic public health emergency. DEA's 360 Strategy
was launched with the purpose of ending the deadly cycle of
prescription opioid misuse through coordinated law enforcement,
diversion control, and community outreach efforts.
---------------------------------------------------------------------------
\13\ 77 FR 15234, March 15, 2012.
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Due to increased diversion and prescription drug abuse, as well as
an increase in the production and use of chemicals that contribute to
the opioid epidemic, the DCP has increased its use of TDS groups to
meet its enforcement mission, and hired more DIs working in Diversion
Groups (DG) and Diversion Staff (DS) across the nation to support its
increased regulatory mission. In April 2012, DEA had 48 TDSs, 65 DGs
and 17 DSs. At the end of FY 2019, DEA had 86 TDSs, 87, DG, 15 DSs, and
16 TDS-Extensions.\14\
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\14\ A TDS-Extension is an extension of a TDS into a location,
usually staffed by two Special Agents to provided law enforcement
coverage while not incurring the full cost of a TDS.
---------------------------------------------------------------------------
The DCP continues to draw technical expertise from DIs, and the DCP
has incorporated greater numbers of Special Agents, Chemists,
Information Technology Specialists, Attorneys, Intelligence Research
Specialists, and state and local personnel to meet its increased
responsibilities. In April 2012, DEA had 1,167 employees in DCFA funded
positions; at the end of FY 2019, DEA had 1,681. To continue to meet
diversion control challenges and to staff and support the increased
number of regulatory and enforcement groups, DEA must expand the DCP's
enforcement and regulatory capacity, as well as its support functions.
DEA plans to increase its full-time-equivalent (FTE) staffing level of
1,782 in FY 2020, DEA plans to increase FTEs by 90, 147, and 134, in FY
2021, FY 2022, and FY 2023, respectively, for a total of 2,153 FTEs in
FY 2023. The estimated increase for the three year period is 371 FTEs.
DEA has been, and will continue to be fiscally responsible and seek
to improve efficiencies and identify other cost saving measures. As
discussed above, however, a new fee calculation is needed. Without an
adjustment in the registration fees, DEA will be unable to continue
current operations and will be in violation of the statutory mandate
that fees charged ``shall be set at a level that ensures the recovery
of the full costs of operating the various aspects of [the diversion
control program].'' 21 U.S.C. 886a(1)(C). For example, collections
under the current fee schedule will require the DCP to significantly
cut existing and planned DCP operations vital to its mission. DEA
relies on the DCP to maintain the integrity of the closed system for
pharmaceutical controlled substances and listed chemicals, particularly
at this time of dramatic increases in drug abuse and diversion.
Fee Calculation
As described above, DEA is delegated the task of determining the
details of how to fulfill the statutory requirement to recover the full
costs of operating the DCP and charging registrants reasonable fees
relating to the registration and control ``of the manufacture,
distribution, dispensing'' \15\ and ``importers and exporters'' \16\ of
controlled substances and listed chemicals. In advance of actual
expenditures, DEA must determine reasonable fees to be charged. To
project the annual costs of the DCP, DEA uses historical data and
projections, together with actual and current costs. Additionally, a
reasonable fee must be calculated that will fully recover the costs of
the DCP based on a variable number of registrants in the different
categories of registration (e.g., manufacturers, distributors,
importers, exporters, reverse distributors, practitioners, and
individual researchers). Because the fees collected must be available
to fully fund the DCFA and to reimburse DEA for expenses incurred in
the operation of the DCP (21 U.S.C. 886a), DEA must collect more than
is actually spent to avoid running a deficit and being in violation of
federal fiscal law.\17\ In operating the DCP, DEA must be prepared for
changes in investigative priorities, diversion trends, and emerging
drugs or chemicals posing new threats to the public health and safety.
By definition, it is an inexact effort. Consequently, the agency must
select and follow a single methodology throughout any given fee cycle.
---------------------------------------------------------------------------
\15\ 21 U.S.C. 821.
\16\ 21 U.S.C. 958(f).
\17\ In general, no officer or employee of the United States
Government may make or authorize an expenditure or obligation in
excess of an amount available in an appropriation or fund. 31 U.S.C.
1341.
---------------------------------------------------------------------------
Since the inception of the fee, the agency has selected a weighted-
ratio method to determine a reasonable fee for each category of
registrants. Under this method, registrants are assigned to a business
activity or category (e.g., researcher, practitioner, distributor,
manufacturer, etc.) based on the statutory fee categories, and the
projected population is calculated for each category or business
activity. Then, DEA estimates the full cost of the DCP for the analysis
period, which is generally three years. The corresponding registration
fees required to pay the full cost of the DCP for the analysis period
are then calculated by employing a ratio of 1.0 for researchers, 3.0
for practitioners (for administrative convenience, the fee is collected
every three years for practitioners), 6.25 for distributors, and 12.5
for manufacturers. These are long-established ratios, utilized in
previous fee increases, and repeatedly determined to be reasonable.\18\
By utilizing these different ratios, DEA recognizes the statutory need
to charge reasonable fees relating to the registration and control of
the manufacture, distribution, dispensing, importation, and exportation
of controlled substances and listed chemicals.
---------------------------------------------------------------------------
\18\ 77 FR 15234 (March 15, 2012); 71 FR 51105 (August 29,
2006).
---------------------------------------------------------------------------
The current fees, some of which are paid annually, and some of
which are paid every three years, range from $244 for ratio 1 to $3,047
for ratio 12.5, depending upon the particular registrant category.
Practitioners, mid-level practitioners, dispensers, researchers, and
narcotic treatment programs pay an annual registration fee of $244. For
administrative convenience, both the collection and the payment,
practitioners pay a combined registration fee of $731 every three
years. Distributors, importers, and exporters pay an annual fee of
$1,523, while manufacturers pay an annual fee of $3,047. 21 CFR 1301.13
and 1309.11.
Since the last fee schedule adjustment in March 2012,\19\ DEA
continued to review possible alternative methodologies to differentiate
registration fees between various registration business activities. In
developing this rule, DEA examined three alternative methodologies to
calculate the registration and registration fees: Flat Fee Option,
Past-Based Option, and Weighted-Ratio Option (current and selected
method). In examining each alternative methodology, DEA considered
whether the fee calculation (1) was reasonable, and (2) could fully
fund the costs of operating the various aspects of the DCP. DEA has
determined that the current ``weighted-ratio'' fee structure is the
most reasonable. Therefore, DEA
[[Page 44720]]
selected the current weighted-ratio method to calculate and
differentiate fees between registrant groups. A detailed discussion of
the alternatives is provided below. Additionally, the selected fee
calculation method is summarized below and detailed in ``Proposed
Registration Fee Schedule Calculation'' in the rulemaking docket at
https://www.regulations.gov.
---------------------------------------------------------------------------
\19\ 77 FR 15234, March 15, 2012.
---------------------------------------------------------------------------
Projected Costs for the Diversion Control Program
In calculating fees to recover the mandated full costs of operating
the DCP, DEA estimated the cost of operating the DCP for the next three
fiscal years. To develop the DCFA budget request estimates for FY 2021
to FY 2023, DEA compiled: (1) The DCFA Budget for FY 2020, which forms
a base spending level for the current level of service, (2) the
estimated additional required funds for FY 2021 to FY 2023, and (3) the
required annual $15 million transfer to the United States Treasury as
mandated by the CSA (21 U.S.C. 886a). The following paragraphs explain
the annual revenue calculations and how the total amount to be
collected for the FY 2021 to FY 2023 period was calculated. In
developing this figure, DEA began with annual projected DCP
obligations, including payroll, operational expenses, and necessary
equipment. The DCP budget has increased due to inflationary adjustments
for rent and payroll, and adding staffing resources that support the
regulatory and law enforcement activities of the program. The basis of
current fees was to fund the DCP for the time period of FY 2012 to FY
2014, and the fees need to be adjusted to reflect these factors.
Specific details on the DCP budget are available in the annual
President's Budget Submission and supplemental budget justification
documents provided to Congress. \20\
---------------------------------------------------------------------------
\20\ See this rulemaking docket found at www.regulations.gov.
---------------------------------------------------------------------------
DEA must set fees to recover the full cost of the DCP. Therefore,
the estimated budget for FY 2021 to FY 2023 forms the basis for
required collections (target collections) from registration fees. The
process for estimating the budget for each year is the same. Generally,
the budget for a particular year is set by starting from the previous
year (base year), adjusting for inflation, and then adding enhancements
(growth) to the budget. DCP personnel growth is the key factor in
formulating the budget.
The estimated budget is based on two estimated components: (1)
Payroll obligations based on estimated FTEs, and (2) non-payroll
obligations based on changes to payroll obligations. The estimated
payroll obligations are based on the payroll cost of the FTEs described
earlier. The estimates also account for the difference in payroll cost
between personnel leaving the program, usually at a higher grade level,
and personnel entering the program. Additionally, the payroll
obligations include a yearly inflation factor of two percent to cover
Within-Grade Increases, Career Ladders,\21\ Cost of Living Adjustment,
and increased benefits costs. Non-payroll obligations generally follow
payroll obligations. As FTE and payroll obligations increase, non-
payroll obligations increase accordingly. Non-payroll obligations
include items such as rent, communications, utilities, services,
equipment, travel, etc. \22\ DEA believes its methodology supports the
estimated budget for the three-year period, FY 2021 to FY 2023. The
estimated payroll obligations and non-payroll obligations are added to
obtain the estimated total obligations.
---------------------------------------------------------------------------
\21\ The position is structured to allow for entry at a lower
grade level and allows for progression at predetermined GS-grade
level (usually multi-level) interval to the full performance grade
level.
\22\ The full list of non-payroll obligations is available in
the FY 2020 Congressional Budget Submission, Exhibits: Diversion
Control Fee Account (DCFA). https://www.justice.gov/doj/fy-2020-congressional-budget-submission.
---------------------------------------------------------------------------
In April 2012, when the last fee increase was made effective, DEA
had 48 TDSs, 65 DGs, and 17 DSs. At end of FY 2019, DEA had 86 TDSs, 87
DGs, 15 DSs, and 16 TDS-Extensions. To continue to meet diversion
control challenges, DEA continues to increase its field regulatory and
enforcement groups. DEA anticipates having 88 TDSs, 89 DGs, 17 DSs, and
14 TDS-Extensions by end of FY 2020 (beginning of FY 2021), expanding
to 94 TDSs, 95 DGs, 10 DSs, and 10 TDS-Extensions by end of FY 2023.
Table 3 summarizes the estimated number of field groups by year.
Table 3--Number of Field Groups by Year
----------------------------------------------------------------------------------------------------------------
Estimated EOY Estimated EOY
Regulatory and enforcement groups As of 4/2012 FY 2020 FY 2023
----------------------------------------------------------------------------------------------------------------
TDS............................................................. 48 88 94
DG.............................................................. 65 89 95
DS.............................................................. 17 13 10
TDS-Extension................................................... .............. 14 10
----------------------------------------------------------------------------------------------------------------
Additionally, in April 2012, DEA had 1,167 employees in DCFA funded
positions; at the end of FY 2020, DEA will have an estimated 1,803
employees in such positions. To continue to meet diversion control
challenges, and to staff and support the increased number of regulatory
and enforcement groups described above, DEA plans to expand the DCP's
enforcement and regulatory capacity, as well as its support functions.
From an estimated FTE of 1,782 DEA plans to increase FTEs by 90, 147,
and 134, in FY 2021, FY 2022, and FY 2023, respectively, for a total of
2,153 FTEs in FY 2023. The estimated increase for the three year period
is 371 FTEs.
The estimated payroll obligations are based on the payroll cost of
the FTEs described above. The estimates also account for the difference
in payroll cost between personnel leaving the program, usually at
higher grade level, and personnel entering the program. Additionally,
the payroll obligations include a yearly inflation factor to cover
Within-Grade Increases, Career Ladders,\23\ Cost of Living Adjustment,
and increased benefits costs. From an estimated base of $289,450,003 in
FY 2020, estimated payroll obligations increase to an estimated
$311,587,162, $344,462,812, and $376,513,554 in FY 2021, FY 2022, and
FY 2023, respectively, reflecting the increase in FTEs.
---------------------------------------------------------------------------
\23\ Position structured to allow for entry at a lower grade
level that allows for progression at predetermined GS-grade level
(usually multi-level) interval to the full performance grade level.
---------------------------------------------------------------------------
Non-payroll obligations include items such as rent, communications,
utilities,
[[Page 44721]]
services, equipment, travel, etc. \24\ Non-payroll obligations
generally follow payroll obligations. As FTE and payroll obligations
increase, non-payroll obligations also increase. The year-over-year
increases to payroll are 7.6 percent, 10.6 percent and 9.3 percent in
FY 2021, 2022, and FY 2023, respectively. From an estimated base of
$225,747,874 non-payroll obligations in FY 2020, increasing non-payroll
obligations at the same rate as payroll obligations results in
estimated non-payroll obligations of $243,013,089, $268,653,469, and
$293,650,487 in FY 2021, FY 2022, and FY 2023, respectively.
---------------------------------------------------------------------------
\24\ Full list of non-payroll obligations is available in the FY
2020 Congressional Budget Submission, Exhibits: Diversion Control
Fee Account (DCFA). https://www.justice.gov/doj/fy-2020-congressional-budget-submission.
Table 4--Estimated Total Obligations
[Budget]
----------------------------------------------------------------------------------------------------------------
FY 2020 FY 2021 FY 2022 FY 2023
----------------------------------------------------------------------------------------------------------------
Payroll Obligations ($)......................... 289,450,003 311,587,162 344,462,812 376,513,554
Non-payroll Obligations ($)..................... 225,747,874 243,013,089 268,653,469 293,650,487
---------------------------------------------------------------
Total Obligations ($)....................... 515,197,876 554,600,250 613,116,281 670,164,040
FTE............................................. 1,782 1,872 2,019 2,153
----------------------------------------------------------------------------------------------------------------
In addition to the budget for each of the fiscal years, DEA also
considers the cost components outlined below in determining required
registration fee collections.
Recoveries From Money Not Spent as Planned (Deobligation of Prior Year
Obligations)
At times, DEA enters into an obligation to purchase a product or
service that is not delivered immediately, such as in a multi-year
contract, or not at all. Changes in obligations can occur for a variety
of reasons, (i.e., changes in planned operations, delays in staffing,
implementation of cost savings, changes in vendor capabilities, etc.).
When DEA does not spend the obligated money as planned, that obligation
is ``deobligated.'' The ``deobligated'' funds are ``recovered,'' and
the funds become available for DCP use. Based on historical trends, the
recovery of money not spent as planned (deobligation of prior year
obligations) is estimated at 3.5 percent of obligations.
Payment to Treasury
In the 1993 appropriations for DEA, Congress determined that the
DCP would be fully funded by registration fees and no longer by
appropriations.\25\ Congress established the DCFA as a separate account
of the Treasury to ``ensure the recovery of the full costs of operating
the various aspects of [the Diversion Control Program]'' by those
participating in the closed system established by the CSA. 21 U.S.C.
886a(1)(C). Fees collected are deposited into a separate Treasury
account. Each fiscal year, the first $15 million of collected fees is
transferred to the Treasury and is not available for use by the DCP.
Therefore, DEA needs to collect an additional $15 million per year
beyond estimated costs for payment to the Treasury.
---------------------------------------------------------------------------
\25\ Departments of Commerce, Justice, and State, the Judiciary
and Related Agencies Appropriations Act of 1993, Public Law 102-395,
codified in relevant part at 21 U.S.C. 886a.
---------------------------------------------------------------------------
DCFA Balance
DEA maintains a DCFA balance, as working capital, to maintain DCP
operations during low collection periods.\26\ Monthly collections and
obligations fluctuate throughout the year. There are times when
obligations (i.e., spending) exceed collections. This can happen
consecutively for several months. Therefore, DEA maintains a DCFA
balance to avoid operational disruptions due to these fluctuations. The
estimated DCFA balance at beginning of FY 2021 is $69 million. Based on
the history of these fluctuations, DEA has determined that an end-of-
year DCFA balance of $50 million is adequate. Therefore, the target
DCFA balance at the end of FY 2023 is $50 million.
---------------------------------------------------------------------------
\26\ ``DCFA balance'' was called the ``Operational Continuity
Fund (OCF)'' in the last fee schedule adjustment in March 2012.
---------------------------------------------------------------------------
Other Collections
DEA derives revenue from the sale/salvage of official government
vehicles dedicated for use in the DCP. Additionally, under the Combat
Methamphetamine Epidemic Act of 2005 (CMEA), DEA collects a self-
certification fee of $21 for regulated sellers of scheduled listed
chemical products. 21 CFR 1314.42(a). The fee is waived for any person
holding a current DEA registration in good standing, such as a pharmacy
authorized to dispense controlled substances. 21 CFR 1314.42(b). DEA's
estimate for these other collections is $1 million per year.
Estimated Total Required Collections (Target Collections)
Based on the estimated total obligations and other financial
components outlined above, DEA determined a 21 percent increase in
total collections is required to fund the DCP for the three-year period
and have a $50 million in DCFA balance at the end of FY 2023.
The target collections are $576 million, $596 million, and $624
million, for FY 2021, FY 2022, and FY 2023, respectively. In total, DEA
needs to collect $1.8 billion (or $1,796 million) in registration fees
over the three-year period, FY 2021 to FY 2023, to fully fund the DCP.
Table 5--Estimated DCFA Cash Flow under New Fee Calculation
----------------------------------------------------------------------------------------------------------------
3-Years
FY 2021 ($M) FY 2022 ($M) FY 2023 ($M) combined ($M)
----------------------------------------------------------------------------------------------------------------
DCFA Balance Carried Forward From Prior Year.... 69 95 86 69
Total Collections............................... 576 596 624 1,796
Treasury Amount................................. (15) (15) (15) (45)
[[Page 44722]]
Other Collections (OGV, CMEA)................... 1 1 1 3
---------------------------------------------------------------
Net Collections............................. 562 582 610 1,755
Total Obligations............................... 555 613 670 1,838
Recoveries from Deobligations................... (20) (22) (24) (65)
---------------------------------------------------------------
Net Obligations............................. 535 591 647 1,773
End of Year DCFA Balance................ 95 86 50 50
----------------------------------------------------------------------------------------------------------------
Note: This projection is based on the ``target'' collections for the purposes of calculated fees. To end with
exactly $50 million DCFA Balance, the calculated fees will need to have many decimal places. When fees are
rounded to the nearest whole dollar, the projected cash flow will vary slightly.
Without a fee increase, under current fee structure, the estimated
collection is $474 million, $491 million, and $514 million, for FY
2021, FY 2022, and FY 2023, respectively, for a total of $1.5 billion
(or $1,479 million) for the three-year period. Without a fee increase,
DEA would have obligations that would exceed the collections and DCFA
balance beginning in FY 2021.
Table 6--Estimated DCFA Cash Flow Under Current Fee Structure
[If no actions are taken to reduce obligations *]
----------------------------------------------------------------------------------------------------------------
3-Years
FY 2021 ($M) FY 2022 ($M) FY 2023 ($M) combined ($M)
----------------------------------------------------------------------------------------------------------------
DCFA Balance Carried Forward From Prior Year.... 69 (6) (121) 69
Total Collections (at Current Fee).............. 474 491 514 1,479
Treasury Amount................................. (15) (15) (15) (45)
Other Collections (OGV, CMEA)................... 1 1 1 3
---------------------------------------------------------------
Net Collections............................. 460 477 500 1,437
Total Obligations............................... 555 613 670 1,838
Recoveries from Deobligations................... (20) (22) (24) (65)
---------------------------------------------------------------
Net Obligations............................. 535 591 647 1,773
End of Year DCFA Balance................ (6) (121) (267) (267)
----------------------------------------------------------------------------------------------------------------
* This is a hypothetical scenario. DEA would not allow DCFA balance to go negative.
Selected Methodology for New Fee Calculation
As shown in Table 5 above, the target collections are $576 million,
$596 million, and $624 million, for FY 2021, FY 2022, and FY 2023,
respectively. In total, DEA needs to collect $1.8 billion in
registration fees over the three-year period, FY 2021 to FY 2023, to
fully fund the DCP. DEA must select a method for determining fees for
various business activities that would generate the target collections.
In developing this rule, DEA examined alternative methodologies to
calculate the registration and reregistration fees in light of its
statutory obligations under the CSA. First, pursuant to statute, DEA is
authorized to charge reasonable fees relating to the registration and
control of the manufacture, distribution, dispensing, importation, and
exportation of controlled substances and listed chemicals. 21 U.S.C.
821 and 958(f). Second, DEA must set fees at a level that ensures the
recovery of the full costs of operating the various aspects of its DCP.
21 U.S.C. 886a. Accordingly, in examining each alternative methodology,
DEA considered whether the fee calculation (1) was reasonable and (2)
could fully fund the costs of operating the various aspects of the DCP.
Moreover, the CSA requires that DEA charge fees to fully fund the
DCP, but that the fees collected by DEA are to be expended through the
budget process only. Specifically, each year, DEA is required by
statute to transfer the first $15 million of fee revenues into the
general fund of the Treasury, while the remainder of the fee revenues
is deposited into a separate fund of the Treasury called the DCFA. 21
U.S.C. 886a(1). On at least a quarterly basis, the Secretary of the
Treasury is required to refund DEA an amount from the DCFA ``in
accordance with estimates made in the budget request of the Attorney
General for those fiscal years'' for the operation of the DCP. 21
U.S.C. 886a(1)(B) and (D).
In developing this rule, DEA considered three methodologies to
calculate registration and reregistration fees: Flat Fee Option, Past-
Based Option, and Weighted-Ratio Option (current and selected method).
While the fee increases may be passed down to the registrants'
customers, the analysis below assumes they are absorbed fully by the
registrants.
For each of the alternatives, the calculated fees are analyzed for
reasonableness by examining: (1) The absolute amount of the fee
increase, (2) the change in fee as a percentage of revenue from 2012-
2021, and (3) the relative fee increase across registrant groups.
Additionally, each calculation methodology is re-evaluated for its
overall strengths and weaknesses.
Flat Fee Option
Option 1 is called the Flat Fee Option. The flat fee option would
provide equal fees across all registrant groups,
[[Page 44723]]
regardless of the proportion of DCP costs and resources the registrant
group may require (e.g., investigation resources). The fee calculation
is straightforward: The total amount needed to be collected over the
three-year period is divided by the total number of registration fee
transactions over the three year period, adjusting for registrants on a
three year registration cycle (so that the fees for a three-year period
are three times the annual fee).
DEA calculated the annual registration fees under Option 1 and
compared these fees to the current fees.
Table 7--Registration Fees Under Flat Fee Option
----------------------------------------------------------------------------------------------------------------
Current fees Option 1: Difference Increase over
Business activity ($) flat fee ($) ($) current (%)
----------------------------------------------------------------------------------------------------------------
Registrants on Three Year Registration Cycle *:
Pharmacy.................................... 731 896 165 23
Hospital/Clinic............................. 731 896 165 23
Practitioner................................ 731 896 165 23
Teaching Institution........................ 731 896 165 23
Mid-level Practitioner (MLP)................ 731 896 165 23
Registrants on Annual Registration Cycle:
Manufacturer................................ 3,047 299 (2,748) -90
Distributor................................. 1,523 299 (1,224) -80
Researcher/Canine Handler................... 244 299 55 23
Analytical Lab.............................. 244 299 55 23
Importer.................................... 1,523 299 (1,224) -80
Exporter.................................... 1,523 299 (1,224) -80
Reverse Distributor......................... 1,523 299 (1,224) -80
Narcotic Treatment Program.................. 244 299 55 23
Chemical Manufacturer....................... 3,047 299 (2,748) -90
Chemical Importer........................... 1,523 299 (1,224) -80
Chemical Distributor........................ 1,523 299 (1,224) -80
Chemical Exporter........................... 1,523 299 (1,224) -80
----------------------------------------------------------------------------------------------------------------
* Pharmacies, hospitals/clinics, practitioners, teaching institutions, and mid-level practitioners currently pay
a fee for a three-year period. This current three-year fee is $731. The fee under the flat fee scenario for
the three year registration period would be $896. The three-year difference is $165 or an annual difference of
$55.
In the flat fee option, the registration fee for practitioners
increases by 23 percent to $299 on an annual basis. The registration
fees for manufacturers and distributors are reduced significantly, from
$3,047 for manufacturers and $1,523 for distributors to $299 for both.
This reduction represents a 90 percent and 80 percent reduction for
manufacturers and distributors, respectively.
The calculation considered in Option 1 results in a disparity in
fee change among registrant groups. For each registrant group to pay
the same flat fee, the registration fee for practitioners increases by
23 percent, while registration fees for manufacturers and distributors
decrease 90 percent and 80 percent, respectively.
The flat fee option has positive and negative aspects. The
calculation is simple and straight-forward. The fee that DEA is
required to charge registrants is based on a statutory requirement--it
is not a user fee. A user fee calculation would require a calculation
of the direct and indirect costs associated with each registrant group,
and set fees to recover the costs associated with each group. Because
the registration fee is not a user fee, DEA is not required to
calculate fees according to the regulatory and enforcement costs
associated with each registrant group. However, general historical
costs of regulatory and enforcement activities support different fees
among the categories. DEA believes that setting the same fees for all
registrants, from multi-national corporations to mid-level
practitioners, is unreasonable.
Conclusion for Flat Fee Option
After consideration of the flat fee option, DEA did not select this
option to calculate the new fees. The fee disparity among registrant
groups caused by this calculation alternative is too great. Under this
option, the calculation would result in reduced fees for manufacturers
and distributors by 90 percent and 80 percent respectively, while
practitioner fees would increase by 23 percent. Setting the fees at the
same level across all registrant groups is therefore not ``reasonable''
as required by statute. While the vast majority of registrants are
practitioners, such as individual physicians and nurse practitioners,
DEA registrants also include some of the largest corporations in the
world. To satisfy the ``reasonable'' standard, registration fees should
be different among the categories to account for cost and economic
differences among the registrant categories. Option 1 did not satisfy
this requirement.
Past-Based Option
Option 2 is called the Past-Based Option, and uses historic
investigative work hour data to apportion the cost to each registrant
category. In considering Option 2, DEA used historic investigative work
hour data from FY 2016-FY 2018. DEA's records provide an accurate
apportionment of work hours for certain types of diversion control
activities (e.g., investigations) among different classes of
registrants. DEA estimates that approximately three percent of costs
can be directly linked to pre-registration and scheduled
investigations. Although some criminal investigations can be attributed
to registrant groups, DEA did not include the cost of criminal
investigations for the fee calculation under the Past-Based Option due
to the unpredictable nature of this investigations. While DEA develops
annual work plans for the number of scheduled investigations by
registrant type, DEA does not develop such plans for criminal
investigations. Therefore, the cost of criminal investigations is
allocated equally across all registrant groups, regardless of business
activity. The remaining costs associated with DCP activities and
components benefit all registrants (e.g., policy, registration, and
legal activities); however, DEA records cannot attribute these costs by
registrant class. Under
[[Page 44724]]
Option 2, pre-registration and scheduled investigation costs are
assigned to registrant classes and all other costs are recovered on an
equal, per-registrant basis.
DEA calculated the annual registration fees under Option 2 and
compared these fees to the current fees. Although distributors and
importers/exporters are in the same fee class in the current fee
structure (Weighted-Ratio Option), in this analysis, distributors are
separated from importers and exporters based on the available historic
work hour data and reported work hours by type of registrant.
Table 8--Registration Fees Under Past-Based Option
----------------------------------------------------------------------------------------------------------------
Option 2: % Increase
Business activity Current fees Past-Based Difference over current
($) ($) ($) (%)
----------------------------------------------------------------------------------------------------------------
Registrants on Three Year Registration Cycle:
Pharmacy.................................... 731 1,030 299 41
Hospital/Clinic............................. 731 872 141 19
Practitioner................................ 731 873 142 19
Teaching Institution........................ 731 1,694 963 132
Mid-level Practitioner (MLP)................ 731 868 137 19
Registrants on Annual Registration Cycle:
Manufacturer................................ 3,047 4,212 1,165 38
Distributor................................. 1,523 3,303 1,780 117
Researcher/Canine Handler................... 244 565 321 132
Analytical Lab.............................. 244 565 321 132
Importer.................................... 1,523 1,906 383 25
Exporter.................................... 1,523 1,906 383 25
Reverse Distributor......................... 1,523 3,303 1,780 117
Narcotic Treatment Program.................. 244 2,332 2,088 856
Chemical Manufacturer....................... 3,047 1,703 (1,344) -44
Chemical Importer........................... 1,523 1,386 (137) -9
Chemical Distributor........................ 1,523 1,824 301 20
Chemical Exporter........................... 1,523 1,386 (137) -9
----------------------------------------------------------------------------------------------------------------
In the Past-Based option, the percent change in fees from current
fees ranges from negative 44 percent (reduction of 44 percent) for list
I chemical manufacturers to an increase of 856 percent for narcotic
treatment programs. The increase for a large majority of registrations,
practitioners, mid-level practitioners, and hospital/clinics, is 19
percent.
While Option 2 is based on accurate historical data, it does not
allow for future needs, demands, and shifting responsibilities of the
DCP, including Agency priorities, new legislation, control of
substances, new investigative requirements, and other program needs.
Conclusion for Past-Based Option
DEA did not select the Past-Based option for two key reasons.
First, the fee increase is disproportionately burdensome to a small
number of registrants. Narcotic treatment program fees would increase
by 856 percent, while the change for the remaining registrant groups
range from a decrease of 44 percent to an increase of 131 percent. DEA
deemed this unreasonable. Second, the Past-Based option is backward
looking and implicitly assumes that the future will be similar to the
past. DEA cannot assume that future workload will reflect past DEA work
hour data. For example, DEA plans to conduct more scheduled
investigations in accordance with the new scheduled investigation work
plan. As a result, DEA has concluded that past data is not a reasonable
basis for the calculation of new fees.
Weighted-Ratio Option (Current and Selected Method)
The Weighted-Ratio Option has been used since the inception of the
fee. This option distinguishes among the categories to establish a
``reasonable'' fee for each category. In this option, fees are assigned
to different registrant categories based on DEA's general historical
cost data expressed as weighted ratios. The different fees are
expressed in ratios: 1.0 for researchers, canine handlers, analytical
labs, and narcotics treatment programs; 3.0 for registrants on three-
year registration cycles, pharmacies, hospitals/clinics, practitioners,
teaching institutions, and mid-level practitioners; 6.25 for
distributors and importers/exporters; and 12.5 for manufacturers. The
adopted ratios are applied for administrative convenience because
historically costs vary and a fee must be set in advance. To determine
the fee, the amount needed to be collected over the FY 2021 to FY 2023
period is divided by the weighted number of estimated registrations.
Table 9--Registration Fees Under Weighted-Ratio Option
----------------------------------------------------------------------------------------------------------------
Option 3:
Business activity Current fees Weighted Ratio Difference Increase over
($) ($) ($) current (%)
----------------------------------------------------------------------------------------------------------------
Registrations on Three Year Registration Cycle:
*
Pharmacy.................................... 731 888 157 21
Hospital/Clinic............................. 731 888 157 21
Practitioner................................ 731 888 157 21
Teaching Institution........................ 731 888 157 21
Mid-level Practitioner (MLP)................ 731 888 157 21
[[Page 44725]]
Registrations on Annual Registration Cycle:
Manufacturer................................ 3,047 3,699 652 21
Distributor................................. 1,523 1,850 327 21
Researcher/Canine Handler................... 244 296 52 21
Analytical Lab.............................. 244 296 52 21
Importer.................................... 1,523 1,850 327 21
Exporter.................................... 1,523 1,850 327 21
Reverse Distributor......................... 1,523 1,850 327 21
Narcotic Treatment Program.................. 244 296 52 21
Chemical Manufacturer....................... 3,047 3,699 652 21
Chemical Importer........................... 1,523 1,850 327 21
Chemical Distributor........................ 1,523 1,850 327 21
Chemical Exporter........................... 1,523 1,850 327 21
----------------------------------------------------------------------------------------------------------------
* Pharmacies, hospitals/clinics, practitioners, teaching institutions, and mid-level practitioners currently pay
a fee for a three-year period. This current three-year fee is $731. The fee under the weighted-ratio scenario
for the three-year registration period would be $888. The three-year difference is $157, or an annual
difference of $52.
In the Weighted-Ratio Option, the registration fees for all
registrant groups increase by 21 percent from current fees, although
the absolute dollar amount may differ. The registration fees range from
$296 annually (or annual equivalent) to $3,699, and a corresponding
increase of $52 annually (or annual equivalent) to $652. Registration
fees are collected by location and by registered business activity.
Registration fees for all registrant groups increase by 21 percent, and
as a result, there is no disparity in the percentage fee increase among
registrant groups. Furthermore, a 21 percent increase ($731 to $888)
over nine years, from FY 2012 to FY 2021, equates to a 2.2 percent
annual rate (on a compound annual growth rate basis), which is
comparable to the rate of inflation. The same increase equates to a 1.8
percent annual rate over 11 years, from FY 2012 to FY 2023.
The Weighted-Ratio methodology, much like the flat fee, is
straightforward and easy to understand, but unlike the flat fee, it
applies historic weighted ratios to differentiate fees among registrant
groups. This methodology has the advantage of differentiating fees
based on historic weighted ratios, but does not create a
disproportionate fee increase in any registrant group.
Conclusion for Weighted-Ratio Option
DEA selected this option to calculate the new fees. This approach
has been used since Congress established registrant fees and continues
to be a reasonable reflection of differing costs. The registration fees
under the Weighted-Ratio option result in differentiated fees among
registrant groups, where registrants with generally larger revenues and
costs pay higher fees than registrants with lower revenues and costs.
Furthermore, the Weighted-Ratio option does not create a disparity in
the relative increase in fees from the current to the new fees. The
weighted-ratios used by DEA to calculate the current fee have proven
effective and reasonable over time, and generally reflects the
differences in activity level, notably in inspections, scheduled
investigations, and other control and monitoring, by registrant
category (i.e., these costs are higher for manufacturers). DEA selected
this option because it is the only option that resulted in
``reasonable'' fees for all registrant groups.
Regulatory Analyses
Executive Orders 12866 (Regulatory Planning and Review), 13563
(Improving Regulation and Regulatory Review), and 13771 (Reducing
Regulation and Controlling Regulatory Costs)
This 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 as established
in E.O. 12866. The Executive Order classifies a ``significant
regulatory action'' requiring review by 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.
DEA estimates that this rule will have an annual effect, in the
form of transfers, on the economy of $100 million or more and,
therefore, is an economically significant regulatory action. Fees paid
to DEA are considered transfer payments and not costs.\27\ The analysis
of benefits and transfers is below. The OMB's Office of Information and
Regulatory Affairs has determined that this rulemaking is a significant
regulatory action under the meaning of E.O. 12866, and it therefore has
been reviewed by the OMB.
---------------------------------------------------------------------------
\27\ OMB Circular A-4.
---------------------------------------------------------------------------
a. Need for the Rule
Under the CSA, DEA is authorized to charge reasonable fees relating
to the registration and control of the manufacture, distribution,
dispensing, import, and export of controlled substances and listed
chemicals. 21 U.S.C. 821 and 958(f). DEA must set fees at a level that
ensures the recovery of the full costs of operating the various aspects
of the DCP. 21 U.S.C. 886a(1)(C).
[[Page 44726]]
DEA continually monitors the anticipated budget and collections to
determine whether the registration fees need to be adjusted. DEA has
determined that the fees need to increase in beginning October 1, 2020,
FY 2021, to the amounts indicated above in order to fully fund the DCP
as required by statute. Therefore, this rulemaking is required for DEA
to recover the full costs of operating the DCP.
b. Alternative Approaches
As described in detail above, DEA examined three alternative
methodologies to calculate the registration and registration fees: Flat
Fee Option, Past-Based Option, and Weighted-Ratio Option (current and
selected method).
For each of the alternatives considered, the calculated fees are
analyzed for reasonableness by examining: (1) The absolute amount of
the fee increase; (2) the change in fee as a percentage of revenue from
2012 to 2021; and (3) the relative fee increase across registrant
groups. Additionally, each calculation methodology is re-evaluated for
its overall strengths and weaknesses.
Flat Fee Option
Option one is called the Flat Fee Option. The flat fee option would
provide equal fees across all registrant groups, regardless of the
proportion of DCP costs and resources the registrant group may require
(e.g., investigation resources). The calculation results in a dramatic
disparity in fee change among registrant groups. After consideration of
the flat fee option, DEA did not select this option to calculate the
new fees. The fee disparity among registrant groups caused by this
calculation alternative is too great. Under this option, the
practitioner fees would increase by 23 percent to $299 on an annual
basis, while manufacturer and distributor fees would decrease by 90
percent and 80 percent respectively, to an annual fee of $299. Setting
the fees at the same level across all registrant groups is therefore
not ``reasonable'' as required by statute. While the vast majority of
registrants are practitioners, such as individual physicians and nurse
practitioners, DEA registrants also include some of the largest
corporations in the world. To satisfy the ``reasonable'' standard,
registration fees should be different among the categories to account
for cost and economic differences among the registrant categories. This
option did not satisfy this requirement.
Past-Based Option
Option two is called the Past-Based Option, and uses historic
investigative work hour data to apportion the cost to each registrant
category. Under Option two, pre-registration and scheduled
investigation costs are assigned to registrant classes and all other
costs are recovered on an equal, per-registrant basis. In the Past-
Based option, the percent change in fees from current fees ranges from
negative 44 percent (reduction of 44 percent) for list I chemical
manufacturers to an increase of 856 percent for narcotic treatment
programs. The increase for a large majority of registrations,
practitioners, mid-level practitioners, and hospital/clinics, is 19
percent. DEA did not select the Past-Based option for two key reasons.
First, the fee increase is disproportionately burdensome to a small
number of registrants. Narcotic treatment program fees would increase
by 856 percent, while the change for the remaining registrant groups
range from a decrease of 44 percent to an increase of 131 percent. DEA
deemed this unreasonable. Second, the Past-Based option is backward
looking and implicitly assumes that the future will be similar to the
past. The past may not necessarily be a bad estimate. However, DEA
develops a work plan for scheduled investigations annually and
investigation frequency may be modified based on need or diversion
risk. DEA cannot assume that future workload will reflect past DEA work
hour data. As a result, DEA has concluded that past data is not a
reasonable basis for the calculation of new fees.
Weighted-Ratio Option (Current and Selected Method)
The Weighted-Ratio Option has been used since the inception of the
fee. This option distinguishes among the categories to establish a
``reasonable'' fee for each category. In this option, fees are assigned
to different registrant categories based on DEA's general historical
cost data expressed as weighted-ratios. The Weighted-Ratio methodology,
much like the flat fee, is straightforward and easy to understand, but
unlike the flat fee, it applies historic weighted ratios to
differentiate fees among registrant groups. This method would result in
across-the-board 21 percent increase in fees for all registrations.
DEA selected this option to calculate the new fees. This approach
has been used since Congress established registrant fees and continues
to be a reasonable reflection of differing costs. The registration fees
under the Weighted-Ratio option result in differentiated fees among
registrant groups, where registrants with generally larger revenues and
costs pay higher fees than registrants with lower revenues and costs.
Furthermore, the Weighted-Ratio option does not create a disparity in
the relative increase in fees from the current to the new fees. The
weighted-ratios used by DEA to calculate the current fee have proven
effective and reasonable over time, and generally reflects the
differences in activity level, notably in inspections, scheduled
investigations, and other control and monitoring, by registrant
category (i.e., these costs are higher for manufacturers). DEA selected
this option because it is the only option that resulted in
``reasonable'' fees for all registrant groups.
c. Summary of Impact of New Fees Relative to Current Fees
Affected Entities
As of September 2019, DEA issued 1,840,501 issued controlled
substances and chemical registrations (1,839,556 controlled substances
registrations and 945 chemical registrations), as shown in Table 10.
Table 10--Number of Registrations by Business Activity
[September 2019]
------------------------------------------------------------------------
Controlled
Registrant class/business substances Chemicals
------------------------------------------------------------------------
Pharmacy................................ 70,851 ..............
Hospital/Clinic......................... 18,305 ..............
Practitioner............................ 1,324,438 ..............
Teaching Institute...................... 264 ..............
Mid-Level Practitioner.................. 408,468 ..............
[[Page 44727]]
Researcher.............................. 11,986 ..............
Analytical Labs......................... 1,514 ..............
Narcotic Treatment Program.............. 1,738 ..............
Manufacturer............................ 570 207
Distributor............................. 843 370
Reverse Distributor..................... 68 ..............
Importer................................ 253 209
Exporter................................ 258 159
-------------------------------
Total............................... 1,839,556 945
-------------------------------
Grand total (all registrations). 1,840,501
------------------------------------------------------------------------
* Includes fee-paying and fee-exempt registrations.
Not all registrants listed in Table 10 are subject to the fees. Any
hospital or other institution operated by an agency of the U.S. of any
state, or any political subdivision of an agency thereof, is exempt
from the payment of registration fees. Likewise, an individual who is
required to obtain a registration in order to carry out his/her duties
as an official of a federal or state agency is also exempt from
registration fees.\28\ Fee-exempt registrants are not affected by the
new fees.
---------------------------------------------------------------------------
\28\ See 21 CFR 1301.21 for complete fee exemption requirements.
---------------------------------------------------------------------------
Based on historical registration data and estimated growth trends,
DEA estimates the average total registration population over the three-
year period, FY 2021 to FY 2023, will be 2,004,358 as shown in Table
11. Estimated annual growth in fee-paying registrations is
approximately 3.8 percent. The largest growth is in the MLPs.
Approximately eight percent of all registrations are fee-exempt.
Table 11--Estimated Average Fee-Paying Registrations, FY 2021-FY 2023
------------------------------------------------------------------------
Controlled
Registrant class/business substances Chemicals
------------------------------------------------------------------------
Pharmacy................................ 80,199 ..............
Hospital/Clinic......................... 16,638 ..............
Practitioner............................ 1,356,876 ..............
Teaching Institute...................... 130 ..............
Mid-Level Practitioner.................. 539,899 ..............
Researcher.............................. 5,038 ..............
Analytical Labs......................... 908 ..............
Narcotic Treatment Program.............. 1,978 ..............
Manufacturer............................ 578 208
Distributor............................. 666 329
Reverse Distributor..................... 73 ..............
Importer................................ 222 202
Exporter................................ 264 150
-------------------------------
Total............................... 2,003,469 889
-------------------------------
Grand total (all registrations). 2,004,358
------------------------------------------------------------------------
The CSA requires a separate registration for each location where
controlled substances are handled, and a separate registration for each
business activity--that is, a registration for activities related to
the handling of controlled substances, and a registration for
activities related to the handling of list I chemicals. Some
registrants may conduct multiple activities under a single registration
(e.g., manufacturers may distribute substances they have manufactured
without being registered as a distributor), but firms may hold multiple
registrations for a single location. Individual practitioners who
prescribe, but do not store controlled substances, may use a single
registration at multiple locations within a state, but need separate
registrations for each state in which they practice and are authorized
to dispense controlled substances. Firms with multiple locations must
have separate registrations for each location.
Characteristics of Entities
This rule affects those manufacturers, distributors, dispensers,
importers, and exporters of controlled substances and list I chemicals
that are required to obtain and pay a registration fee with DEA
pursuant to the CSA. As of September 2019, DEA issued 1,840,501 total
controlled substances and chemical registrations (1,839,556 controlled
substances registrations and 945 chemical registrations), as shown
above in Table 10. DEA estimates an average total fee-paying population
of 2,004,358 over the three-year period, FY 2021 to FY 2023, as shown
in Table 11.
The registrations on a three-year cycle (i.e., pharmacies,
hospitals/clinics, practitioners, teaching institutions, and
[[Page 44728]]
mid-level practitioners), make up 99.5 percent of all registrations not
exempt from paying registration applications fees. All other categories
of registration (i.e., manufacturers, distributors, reverse
distributors, importers, exporters, chemical manufacturers, chemical
distributors, chemical importers, and chemical exporters) maintain an
annual registration. Registration and reregistration costs vary by
registrant category as is described in more detail in the sections
below.
The new fees would affect a wide variety of entities. Table 12
indicates the sectors, as defined by the North American Industry
Classification System (NAICS), affected by the rule and their
enterprise average annual revenue, provided by the U.S. Census Bureau,
Statistics of U.S. Businesses (SUSB). Most DEA registrants are, or are
employed by, small entities under Small Business Administration (SBA)
standards.
Table 12--Industrial Sectors of DEA Registrants
----------------------------------------------------------------------------------------------------------------
Average annual
Business activity NAICS code NAICS code description revenue ($)
----------------------------------------------------------------------------------------------------------------
Manufacturer............................ 325411 Medicinal and Botanical 33,905,094
325412 Manufacturing. 148,265,482
Pharmaceutical Preparation
Manufacturing.
Distributor, Importer, Exporter......... 424210 Drugs and Druggists' Sundries 103,097,459
Merchant Wholesalers.
Reverse Distributor..................... 5621 Waste Collection................ 5,168,825
5622 Waste Treatment and Disposal.... 11,553,838
Pharmacy................................ 445110 Supermarkets and Other Grocery 12,740,365
446110 (except Convenience) Stores. 12,533,279
* 452210 Pharmacies and Drug Stores...... 2,899,338,610
* 452311 Department Stores............... 13,159,528,688
Warehouse Clubs and Supercenters
Analytical Labs......................... 541380 Testing Laboratories............ 3,031,746
Teaching institute...................... 611310 Colleges, Universities and 97,657,501
Professional Schools.
Researcher.............................. * 541715 Research and Development in the 11,331,597
Physical, Engineering, and Life
Sciences (except Nanotechnology
and Biotechnology).
Canine Handler.......................... 561612 Security Guards and Patrol 3,740,383
Services.
Practitioner, Mid-level Practitioner,** 541940 Veterinary Services............. 1,067,601
Narcotic Treatment Program, Hospital/ 621111 Offices of Physicians (except 2,299,354
Clinic. 621112 Mental Health Specialists). 476,408
621210 Offices of Physicians, Mental 836,911
621330 Health Specialists. 393,471
621391 Offices of Dentists............. 550,257
621420 Offices of Mental Health 2,982,804
621491 Practitioners (except 68,506,712
621493 Physicians). 5,844,323
622110 Offices of Podiatrists.......... 284,660,783
622210 Outpatient Mental Health and 48,476,596
622310 Substance Abuse Centers. 97,844,233
HMO Medical Centers.............
Freestanding Ambulatory Surgical
and Emergency Centers.
General Medical and Surgical
Hospitals.
Psychiatric and Substance Abuse
Hospitals.
Specialty (except Psychiatric
and Substance Abuse) Hospitals.
Chemical Manufacturer................... 325 Chemical Manufacturing.......... 80,834,558
Chemical Distributor, Chemical Importer, 424690 Other Chemical and Allied 26,492,119
Chemical Exporter. Products Merchant Wholesalers.
----------------------------------------------------------------------------------------------------------------
Source: SUSB, 2012 SUSB Annual Datasets by Establishment Industry. (latest available) https://www.census.gov/data/datasets/2012/econ/susb/2012-susb.html (accessed 10/5/2019).
* NAICS code was updated in the 2017 NAICS. The annual revenue figures for these industries are based on
corresponding 2012 SUSB industry data.
** Practitioners and mid-level practitioners are generally employed in one of these industries.
Additionally, while many practitioner and mid-level practitioner
registration application fees may be paid by the employer, some may pay
out-of-pocket. Table 13 indicates the labor categories and average
annual wages, as provided by the U.S. Department of Labor, Bureau of
Labor Statistics (BLS), affected by the rule.
Table 13--Labor Categories of DEA Registrants
------------------------------------------------------------------------
Annual mean wage
Occupation code Occupation title ($)
------------------------------------------------------------------------
29-1021....................... Dentists, General.... 175,840
29-1060....................... Physicians and 210,980
Surgeons.
29-1071....................... Physician Assistants. 108,430
29-1171....................... Nurse Practitioners.. 110,030
------------------------------------------------------------------------
Source: BLS, May 2018 National Occupational Employment and Wage
Estimates, United States. https://www.bls.gov/oes/current/oes_nat.htm
(accessed 10/5/2019).
The listing of industry sectors and labor categories in Tables 12
and 13 are not intended to be exhaustive, but to generally represent
DEA registrants.
Economic Impact Analysis of New Fee
The new fees are expected to have two levels of impact. Initially,
the fee increase will impact the registrants. Then, the fee increase,
or portion of the fee increase, is expected to be eventually passed on
to the general public. To be analytically conservative, the analysis
below assumes that the impact of the fee increase is absorbed entirely
by the registrants.
DEA assumes that the registration fees are business expenses for
all registrants. As a result, the increase in registration fees may
result in reduced tax liability, which may diminish the impact of the
increase. For example, if a practitioner pays an additional $52 per
year in registration fees, and the combined federal and state income
tax is 35 percent, the net cash impact is $34, not $52. The additional
expense of $52
[[Page 44729]]
causes income/profit to decrease by $52, decreasing the tax liability
by $18. The net cash outlay is $34.\29\ However, to be analytically
conservative, the analysis does not consider the impact of reduced tax
liability.
---------------------------------------------------------------------------
\29\ This example is for illustration purposes only. Each entity
should seek competent tax advice for tax consequences of the rule.
---------------------------------------------------------------------------
As individual practitioners and small businesses are expected to
experience the greatest impact, DEA examined the new fees as a
percentage of income for physicians, dentists, physician assistants,
nurse practitioners, and small businesses. Physicians, dentists,
physician assistants, and nurse practitioners reflect a representative
sub-group of the practitioner and mid-level practitioner registrant
groups. The new fee for practitioners and mid-level practitioners of
$888 per three years represents a $157 increase over the current fee of
$731 per three years. The annual increase is $52, representing 0.025
percent, 0.030 percent, 0.048 percent, and 0.048 percent of average
annual income for physicians, dentists, physician assistants, and nurse
practitioners, respectively. Table 14 indicates the annual effect as a
percentage of income. The impact on small businesses is discussed in
the Regulatory Flexibility Act section.
Table 14--Fee Increase as Percentage of Annual Mean Wage
----------------------------------------------------------------------------------------------------------------
Annual fee
Annual mean wage increase of
Occupation code Occupation title ($) annual mean wage
(%)
----------------------------------------------------------------------------------------------------------------
29-1060................................. Physicians and Surgeons......... 210,980 0.025
29-1021................................. Dentists, General............... 175,840 0.030
29-1071................................. Physician Assistants............ 108,430 0.048
29-1171................................. Nurse Practitioners............. 110,030 0.048
----------------------------------------------------------------------------------------------------------------
Additionally, the impact of the fee increase is also diminished by
an estimated increase in registrant income. The table below describes
the annual-equivalent fee as a percentage of income in 2012, the year
of the last fee increase, and 2021. This analysis assumes that the fee
increase is absorbed personally by each practitioner or mid-level
practitioner. In 2012, the new fee of $244 (on an annual basis)
represented approximately 0.15 percent, 0.13 percent, 0.26 percent, and
0.27 percent of annual income for dentists, physicians, physician
assistants, and nurse practitioners, respectively. While the new fees
are 21 percent above the current fees implemented in 2012, the average
incomes for dentists, physicians, physician assistants, and nurse
practitioners increased an average 12 percent, 17 percent, 26 percent,
and 30 percent, respectively, since that time.\30\ This estimated
increase in average income lessens the impact of the fee increase as a
percentage of average income. The new fees are estimated to represent
approximately 0.16 percent, 0.13 percent, 0.25 percent, and 0.25
percent of annual income for dentists, physicians, physician
assistants, and nurse practitioners, respectively. Furthermore, a 21
percent increase ($731 to $888) over nine years, from FY 2012 to FY
2021, equates to a 2.2 percent annual rate (on compound annual growth
rate basis), which is comparable to the rate of inflation. The same
increase equates to a 1.8 percent annual rate over 11 years, from FY
2012 to FY 2023. This analysis ignores the dampening effect of
registration fees as a business expense and the potential that the fee
increase might be passed on to customers. Table 15 represents fees as
percentage of average income.
---------------------------------------------------------------------------
\30\ From Table 14, the increase in annual mean wages from 2012
to 2021 are for dentists 12 percent (182,140/163,240-1), physicians
17 percent (221,440/190,060-1), physician assistants 26 percent
(116,415/92,460-1), and nurse practitioners 30 percent (119,320/
91,450-1).
Table 15--Fees as Percentage of Annual Mean Wage in 2012 and 2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
2012 2018 2021
------------------------------------------------------------------------------------------
Occupation title Annual mean
Annual mean Annual fee Fee of wage Annual mean wage ($) Annual fee Fee of wage
wage ($) ($) * (%) wage ($) ** ($) *** (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Dentists, General............................................ 163,240 244 0.15 175,840 182,140 296 0.16
Physicians and Surgeons...................................... 190,060 244 0.13 210,980 221,440 296 0.13
Physician Assistants......................................... 92,460 244 0.26 108,430 116,415 296 0.25
Nurse Practitioners.......................................... 91,450 244 0.27 110,030 119,320 296 0.25
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: BLS. https://www.bls.gov/oes/tables.htm (accessed 10/5/2019).
* The current fee is $731 per three years, annual-equivalent of $244.
** Annual mean wage data for 2012 and 2018 is provided by the Bureau of Labor Statistics. The 2021 annual mean wage figures are estimated based on
linear extrapolation, where an average annual increase is calculated from years 2012 to 2018, then extending out the increase for three more years to
2021.
*** The new fee is $888 per three years, annual-equivalent of $296.
Exempt from the payment of registration fees are any hospital or
other institution that is operated by an agency of the U.S., of any
State, or any political subdivision of an agency thereof. Likewise, an
individual who is required to obtain a registration in order to carry
out his/her duties as an official of a federal or State agency is also
exempt from registration fees. Fee exempt registrants are not affected
by the new fees.
[[Page 44730]]
d. Analysis of Benefits, Costs, and Transfers
Benefits
The primary benefit of the rule is continued support to the DCP,
without the need for any additional congressional appropriations. The
DCP is a strategic component of U.S. law and policy aimed at
preventing, detecting, and eliminating the diversion of controlled
substances and listed chemicals into the illicit market while ensuring
a sufficient supply of controlled substances and listed chemicals for
legitimate medical, scientific, research, and industrial purposes. The
absence of, or significant reduction in, this program would result in
enormous costs for the citizens and residents of the U.S. due to the
diversion of controlled substances and listed chemicals into the
illicit market as discussed earlier in this document.
Costs
This rule has little or no cost, as fees to DEA are transfer
payments.
Transfers
The difference between the current fees and the new fees--the fee
increase--is $318 million over the three year period, from FY 2021 to
FY 2023, or approximately $106 million annually. The difference in the
fees projected to be collected under the current fee rates and the new
fee rates is $102 million, $105 million, and $110 million in FY 2021,
FY 2022, and FY 2023, respectively. Table 16 summarizes the estimated
collections under the current fees, estimated collections under the new
fees, and the difference between the current and the new fees.
Table 16--Estimated Collections Under Current and New Fees
----------------------------------------------------------------------------------------------------------------
Estimated collections FY 2021 ($M) FY 2022 ($M) FY 2023 ($M) Total ($M)
----------------------------------------------------------------------------------------------------------------
Current Fee..................................... 474 491 514 1,479
New Fee......................................... 576 596 625 1,797
Difference...................................... 102 105 110 318
----------------------------------------------------------------------------------------------------------------
The present value of the transfer is $299 million at a three
percent discount rate and $277 million at a seven percent discount
rate.
E.O. 13771 was issued on January 30, 2017, and published in the
Federal Register on February 3, 2017. 82 FR 9339. This rule is not
subject to the requirements of E.O. 13771 because this rule is expected
to result in no more than de minimis costs.
Executive Order 12988, Civil Justice Reform
This rulemaking meets the applicable standards set forth in
Sections 3(a) and 3(b)(2) of E.O. 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, 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 E.O. 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
The Acting Administrator, in accordance with the Regulatory
Flexibility Act (RFA), 5 U.S.C. 601-602, has reviewed this rule and by
approving it, certifies that it will not, if promulgated, have a
significant economic impact on a substantial number of 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 above and in the Economic Analysis section above, DEA
analyzed three fee calculation methodologies--Flat Fee, Past-Based, and
Weighted-Ratio. DEA selected the Weighted-Ratio (current) methodology
to calculate the new fee structure. This approach has been used since
Congress established registration fees, and continues to be a
reasonable reflection of differing costs. The registration fees under
the Weighted-Ratio option result in differentiated fees among
registrant groups, where registrants with larger revenues pay higher
fees than registrants with lower revenues. Furthermore, the Weighted-
Ratio option does not create a disparity in the relative increase in
fees from the current to the new fees. The weighted-ratios used by DEA
to calculate the current fee have proven effective and reasonable over
time. Additionally, the weighted-ratio calculation methodology
generally reflects the differences in activity level, notably in
inspections, scheduled investigations and other control and monitoring,
by registrant category; for example, these costs are greatest for
manufacturers. DEA selected this option because it is the only option
that results in reasonable fees for all registrant groups.
This approach increases fees proportionally (21 percent) across all
registrant groups, maintaining the weighted-ratio of 1.0, 3.0, 6.25,
and 12.5. The annual increase in fees are $52, $327, and $652 based on
business activity. The table below summarizes the difference in fees
between the new and current fees.
[[Page 44731]]
Table 17--Difference in Fees Under Current and New Fees
----------------------------------------------------------------------------------------------------------------
Total Total
registrations Current fees collections Difference in
Business activity (FY 2021- FY ($) New fees ($) under new fees ($) *
2023) fees ($)
----------------------------------------------------------------------------------------------------------------
Registrants on Three Year
Registration Cycle:
Pharmacy.................... 80,199 731 888 71,216,712 157
Hospital/Clinic............. 16,638 731 888 14,774,544 157
Practitioner................ 1,356,876 731 888 1,204,905,888 157
Teaching Institution........ 130 731 888 115,440 157
Mid-level Practitioner (MLP) 539,899 731 888 479,430,312 157
Registrants on Annual
Registration Cycle:
Manufacturer................ 1,733 3,047 3,699 6,410,367 652
Distributor................. 1,999 1,523 1,850 3,698,150 327
Researcher/Canine Handler... 15,113 244 296 4,473,448 52
Analytical Lab.............. 2,724 244 296 806,304 52
Importer.................... 666 1,523 1,850 1,232,100 327
Exporter.................... 792 1,523 1,850 1,465,200 327
Reverse Distributor......... 219 1,523 1,850 405,150 327
Narcotic Treatment Program.. 5,935 244 296 1,756,760 52
Chemical Manufacturer....... 624 3,047 3,699 2,308,176 652
Chemical Importer........... 606 1,523 1,850 1,121,100 327
Chemical Distributor........ 988 1,523 1,850 1,827,800 327
Chemical Exporter........... 450 1,523 1,850 832,500 327
-------------------------------------------------------------------------------
Total................... 2,025,591 N/A N/A 1,796,779,951 N/A
----------------------------------------------------------------------------------------------------------------
* The difference for registrations on a three-year cycle is $157 or $52 on annual basis.
As shown in Table 12, the new fees would affect a wide variety of
entities across many industry sectors. As some industry sectors are
expected to consist primarily of DEA registrants, i.e., 446110-
Pharmacies and Drug Stores, 622110-General Medical and Surgical
Hospitals, etc., this rule is expected to affect a substantial number
of small entities.
DEA compared the annual increase in fees from current fees to new
fees for the smallest of small businesses in each industry sectors. For
each of the affected industry sectors, the annual increase was not more
than 0.1 percent of average annual revenue. The table below summarizes
the results.
Table 18--Fee Increase as Percentage of Annual Revenue
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average
Enterprise Number of revenue per Fee increase Fee increase
NAICS code NAICS code description size (number establishments establishment ($) of revenue
of employees) ($) (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
325.............................. Chemical Manufacturing............... 0-4 3,148 1,938,546 652 0.0319
325411........................... Medicinal and Botanical Manufacturing 0-4 108 727,444 652 0.0851
325412........................... Pharmaceutical Preparation * 5-9 129 2,639,287 652 0.0235
Manufacturing.
424210........................... Drugs and Druggists' Sundries 0-4 3,630 1,367,131 327 0.0239
Merchant Wholesalers.
424690........................... Other Chemical and Allied Products 0-4 3,352 2,007,996 327 0.0154
Merchant Wholesalers.
445110........................... Supermarkets and Other Grocery 0-4 23,710 453,787 52 0.0108
(except Convenience) Stores.
446110........................... Pharmacies and Drug Stores........... 0-4 6,360 1,069,655 52 0.0046
452112........................... Discount Department Stores........... 0-4 6 266,167 52 0.0184
452910........................... Warehouse Clubs and Supercenters..... 0-4 12 326,333 52 0.0150
541380........................... Testing Laboratories................. 0-4 2,415 297,737 52 0.0165
541712........................... Research and Development in the 0-4 5,013 427,790 52 0.0115
Physical, Engineering, and Life
Sciences (except Biotechnology).
541940........................... Veterinary Services.................. 0-4 8,881 292,166 52 0.0168
561612........................... Security Guards and Patrol Services.. 0-4 2,162 114,198 52 0.0429
5621............................. Waste Collection..................... 0-4 3,853 365,902 327 0.0844
5622............................. Waste Treatment and Disposal......... 0-4 616 461,159 327 0.0670
611310........................... Colleges, Universities, and 0-4 372 913,078 52 0.0054
Professional Schools.
621111........................... Offices of Physicians (except Mental 0-4 95,648 447,715 52 0.0109
Health Specialists).
621112........................... Offices of Physicians, Mental Health 0-4 8,980 253,837 52 0.0193
Specialists.
621210........................... Offices of Dentists.................. 0-4 50,781 330,868 52 0.0148
621320........................... Offices of Optometrists.............. 0-4 10,939 269,348 52 0.0182
[[Page 44732]]
621330........................... Offices of Mental Health 0-4 16,149 145,005 52 0.0338
Practitioners (except Physicians).
621391........................... Offices of Podiatrists............... 0-4 5,300 288,546 52 0.0170
621420........................... Outpatient Mental Health and 0-4 1,810 211,249 52 0.0232
Substance Abuse Centers.
621491........................... HMO Medical Centers.................. * 5-9 16 620,188 52 0.0079
621493........................... Freestanding Ambulatory Surgical and 0-4 1,011 549,974 52 0.0089
Emergency Centers.
622110........................... General Medical and Surgical 0-4 39 10,621,308 52 0.0005
Hospitals.
622210........................... Psychiatric and Substance Abuse * 20-99 27 5,142,444 52 0.0010
Hospitals.
622310........................... Specialty (except Psychiatric and 0-4 21 8,561,238 52 0.0006
Substance Abuse) Hospitals.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Where the revenue figure for the smallest size category is unavailable, the next size up with available revenue figure is used.
While this rule affects a substantial number of small businesses,
because the economic impact for the smallest of small businesses is not
significant, the rule will not have a significant impact on small
entities as a whole. In summary, DEA's evaluation of economic impact by
size category indicates that the 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 $154
million or more (adjusted 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
This rulemaking does not create or modify a collection of
information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
et seq.). This rulemaking will not impose additional recordkeeping or
reporting requirements on State or local governments, individuals,
businesses, or other organizations. An agency may not conduct or
sponsor, and a person is not required to respond to, a collection of
information unless it displays a valid OMB control number.
Congressional Review Act
This final rule is a major rule as defined by the Congressional
Review Act, 5 U.S.C. 804. This rule will result in an annual effect on
the economy of $100,000,000 or more in the form of transfers, as fees
paid to DEA are considered transfer payments and not costs. However,
this rule will not cause a major increase in costs or prices; or
significant adverse effects on competition, employment, investment,
productivity, innovation, or on the ability of U.S.-based companies to
compete with foreign-based companies in domestic and export markets.
DEA submitted a copy of the final rule to both Houses of Congress and
to the Comptroller General.
List of Subjects
21 CFR Part 1301
Administrative practice and procedure, Drug traffic control,
Security measures.
21 CFR Part 1309
Administrative practice and procedure, Drug traffic control,
Exports, Imports, Security measures.
For the reasons set forth above, DEA amends 21 CFR parts 1301 and
1309 as follows:
PART 1301--REGISTRATION OF MANUFACTURERS, DISTRIBUTORS AND
DISPENSERS OF CONTROLLED SUBSTANCES
0
1. The authority citation for part 1301 continues to read as follows:
Authority: 21 U.S.C. 821, 822, 823, 824, 831, 871(b), 875, 877,
886a, 951, 952, 956, 957, 958, 965.
0
2. Amend Sec. 1301.13 by revising the fourth sentence in paragraph (e)
introductory text and revising paragraph (e)(1) to read as follows:
Sec. 1301.13 Application for registration; time for application;
expiration date; registration for independent activities; application
forms, fees, contents and signature; coincident activities.
* * * * *
(e) * * * Generally, the application fees are not refundable;
however, they may be issued in limited circumstances at the discretion
of the Administrator. These circumstances include: Applicant error,
such as duplicate payments, payment for incorrect business activities,
or payments made by persons who are exempt under this section from
application or renewal fees; DEA error; and death of a registrant
within the first year of the three-year registration cycle. * * *
(1)
[[Page 44733]]
Summary of Registration Requirements and Limitations
--------------------------------------------------------------------------------------------------------------------------------------------------------
Registration
Business activity Controlled substances DEA application forms Application period Coincident activities allowed
fee ($) (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
(i) Manufacturing.................... Schedules I -V.......... New--225................ 3,699 1 Schedules I-V: May distribute
Renewal--225a........... that substance or class for
which registration was
issued; may not distribute
or dispose any substance or
class for which not
registered.
Schedules II-V: May conduct
chemical analysis and
preclinical research
(including quality control
analysis) with substances
listed in those schedules
for which authorization as a
mfr. was issued.
(ii) Distributing.................... Schedules I-V........... New--225................ 1,850 1 May acquire Schedules II-V
Renewal--225a........... controlled substances from
collectors for the purposes
of destruction.
(iii) Reverse distributing........... Schedules I-V........... New--225................ 1,850 1
Renewal--225a...........
(iv) Dispensing or instructing Schedules II-V.......... New--224................ 888 3 May conduct research and
(includes Practitioner, Hospital/ Renewal--224a........... instructional activities
Clinic, Retail Pharmacy, Central with those substances for
fill pharmacy, Teaching Institution). which registration was
granted, except that a mid-
level practitioner may
conduct such research only
to the extent expressly
authorized under state
statute. A pharmacist may
manufacture an aqueous or
oleaginous solution or solid
dosage form containing a
narcotic controlled
substance in Schedule II-V
in a proportion not
exceeding 20% of the
complete solution, compound
or mixture. A retail
pharmacy may perform central
fill pharmacy activities.
(v) Research......................... Schedule I.............. New--225................ 296 1 A researcher may manufacture
Renewal--225a........... or import the basic class of
substance or substances for
which registration was
issued, provided that such
manufacture or import is set
forth in the protocol
required in Sec. 1301.18
and to distribute such class
to persons registered or
authorized to conduct
research with such class of
substance or registered or
authorized to conduct
chemical analysis with
controlled substances.
(vi) Research........................ Schedules II-V.......... New--225................ 296 1 May conduct chemical analysis
Renewal--225a........... with controlled substances
in those schedules for which
registration was issued;
manufacture such substances
if and to the extent that
such manufacture is set
forth in a statement filed
with the application for
registration or
reregistration and provided
that the manufacture is not
for the purposes of dosage
form development; import
such substances for research
purposes; distribute such
substances to persons
registered or authorized to
conduct chemical analysis,
instructional activities or
research with such
substances, and to persons
exempted from registration
pursuant to Sec. 1301.24;
and conduct instructional
activities with controlled
substances.
(vii) Narcotic Treatment Program Narcotic Drugs in New--363................ 296 1
(including compounder). Schedules II-V. Renewal--363a...........
(viii) Importing..................... Schedules I-V........... New--225................ 1,850 1 May distribute that substance
Renewal--225a........... or class for which
registration was issued; may
not distribute any substance
or class for which not
registered.
(ix) Exporting....................... Schedules I-V........... New--225................ 1,850 1
Renewal--225a...........
(x) Chemical Analysis................ Schedules I-V........... New--225................ 296 1 May manufacture and import
Renewal--225a........... controlled substances for
analytical or instructional
activities; may distribute
such substances to persons
registered or authorized to
conduct chemical analysis,
instructional activities, or
research with such
substances and to persons
exempted from registration
pursuant to Sec. 1301.24;
may export such substances
to persons in other
countries performing
chemical analysis or
enforcing laws related to
controlled substances or
drugs in those countries;
and may conduct
instructional activities
with controlled substances.
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 44734]]
* * * * *
PART 1309--REGISTRATION OF MANUFACTURERS, DISTRIBUTORS, IMPORTERS,
AND EXPORTERS OF LIST I CHEMICALS
0
3. The authority citation for part 1309 continues to read as follows:
Authority: 21 U.S.C. 802, 821, 822, 823, 824, 830, 871(b), 875,
877, 886a, 952, 953, 957, 958.
0
4. Revise Sec. 1309.11 to read as follows:
Sec. 1309.11 Fee Amounts.
(a) For each application for registration or reregistration to
manufacture for distribution the applicant shall pay an annual fee of
$3,699.
(b) For each application for registration or reregistration to
distribute (either retail distribution or non-retail distribution),
import, or export a list I chemical, the applicant shall pay an annual
fee of $1,850.
0
5. Amend Sec. 1309.12 by revising the last sentence in paragraph (b)
to read as follows:
Sec. 1309.12 Time and method of payment; refund.
* * * * *
(b) * * * Generally, the application fees are not refundable;
however, they may be issued in limited circumstances at the discretion
of the Administrator. These circumstances include: Applicant error,
such as duplicate payments, payment for incorrect business activities,
or payments made by persons who are exempt under this section from
application or renewal fees; DEA error; and death of a registrant
within the first year of the three-year registration cycle.
0
6. Amend Sec. 1309.21 by revising the table in paragraph (c) to read
as follows:
Sec. 1309.21 Persons required to register.
* * * * *
(c) * * *
Summary of Registration Requirements and Limitations
----------------------------------------------------------------------------------------------------------------
Registration Coincident
Business activity Chemicals DEA forms Application period activities
fee (years) allowed
----------------------------------------------------------------------------------------------------------------
(1) Manufacturing............ List I,........ New-510........ 3,699 1 May distribute
Drug products Renewal-510a... that chemical
containing for which
ephedrine, registration
pseudoephedrin was issued;
e, may not
phenylpropanol distribute any
amine. chemical for
which not
registered.
(2) Distributing............. List I,........ New-510........ 1,850 1 ...............
Scheduled Renewal-510a...
listed
chemical
products.
(3) Importing................ List I,........ New-510........ 1,850 1 May distribute
Drug Products Renewal-510a... that chemical
containing for which
ephedrine, registration
pseudoephedrin was issued;
e, may not
phenylpropanol distribute any
amine. chemical for
which not
registered.
(4) Exporting................ List I,........ New-510........ 1,850 1 ...............
Scheduled Renewal-510a...
listed
chemical
products.
----------------------------------------------------------------------------------------------------------------
Timothy J. Shea,
Acting Administrator.
[FR Doc. 2020-16169 Filed 7-23-20; 8:45 am]
BILLING CODE 4410-09-P