Manufacturer of Controlled Substances; Notice of Registration

DEPARTMENT OF JUSTICE

Manufacturer of Controlled Substances; Notice of Registration

By notice dated September 5, 1995, and published in the Federal

Register on September 13, 1995, (60 FR 47591), Mallinckrodt Chemical,

Inc., Mallinckrodt & Second Streets, St. Louis, Missouri 63147, made

application to the Drug Enforcement Administration (DEA) to be

registered as a bulk manufacturer of methylphenidate (1724) a basic

class of controlled substance listed in Schedule II. Also, by Notice

dated March 27, 1996, and published in the Federal Register on April 4,

1996 (61 FR 15120), Mallinckrodt Chemical, Inc., Mallinckrodt & Second

Streets, St. Louis, Missouri 63147, made application to the Drug

Enforcement Administration (DEA) to be registered as a bulk

manufacturer of the basic classes of controlled substances listed

below:

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Drug Schedule

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

Tetrahydrocannabinols (7370)................................ I

Methylphenidate (1724)...................................... II

Cocaine (9041).............................................. II

Codeine (9050).............................................. II

Diprenorphine (9058)........................................ II

Etorphine Hydrocholoride (9059)............................. II

Dihydrocodeine (9120)....................................... II

Oxycodone (9143)............................................ II

Hydromorphone (9150)........................................ II

Diphenoxylate (9170)........................................ II

Hydrocodone (9193).......................................... II

Levorphanol (9220).......................................... II

Meperidine (9230)........................................... II

Methadone (9250)............................................ II

Methadone-intermediate (9254)............................... II

Dextropropoxyphene, bulk (non-dosage forms) (9273).......... II

Morphine (9300)............................................. II

Thebaine (9333)............................................. II

Opium extracts (9610)....................................... II

Opium fluid extract (9620).................................. II

Opium tincture (9630)....................................... II

Opium powdered (9639)....................................... II

Opium granulated (9640)..................................... II

Levo-alphacetylmethadol (9648).............................. II

Oxymorphone (9652).......................................... II

Noroxymorphone (9668)....................................... II

Alfentanil (9737)........................................... II

Sufentanil (9740)........................................... II

Fentanyl (9801)............................................. II

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

On July 20, 1995, and January 31, 1996, Mallinckrodt Chemicals,

Inc. (Mallinckrodt) filed applications with the Drug Enforcement

Administration (DEA) for registration as a bulk manufacturer of

methylphenidate. DEA published notices of these applications in the

Federal Register on September 13, 1995, and April 4, 1996,

respectively. One registered manufacturer of bulk methylphenidate filed

comments in response to these notices. The commentor argues that DEA

failed to comply with the Administrative Procedure Act (APA) and

further alleges that Mallinckrodt's registration would be contrary to

the public interest pursuant to 21 U.S.C. 823(a). The commentor

requested a hearing on the 1995 application and urged DEA to deny the

1996 application, or, at a minimum, issue an order to show cause

proposing to deny the application.

With respect to the first notice, published September 13, 1995, the

commentor alleges that it is entitled to a hearing on Mallinckrodt's

application since the regulation terminating the third party hearing

right (21 C.F.R. 1301.43(a)) did not take effect until the end of the

day on July 20, 1995. The commentor argues that, since Mallinckrodt's

application was filed during the day on July 20, 1995, the commentor is

entitled to ask for and obtain a hearing. The commentor maintains that

if DEA were to consider the application under the new regulation, it

would be in violation of Section 553(d) of the Administrative Procedure

Act (APA) which dictates that there must be thirty days between

publication of a rule and its effective date.

DEA is not persuaded by the commentor's argument that the new

regulation could not have become effective until the end of the day on

July 20, 1995, i.e. after the filing of Mallinckrodt's application

during the day of July 20, 1995. In any event, the commentor's

contention regarding the effective date of the new regulation is, at

this point, moot. Mallinckrodt did not manufacture any methylphenidate

pursuant to its application published on July 20, 1995. The commentor

thus was not prejudiced by the lack of a hearing. Convening a hearing

regarding Mallinckrodt's July 1995 application would serve no purpose.

Furthermore, Mallinckrodt has since filed a new application,

published in April 1996. There is no question that Mallinckrodt's 1996

application was filed after the effective date of the new regulation.

As a result, the commentor enjoys no right to request or receive a

hearing regarding Mallinckrodt's 1996 application.

The commentor next asserts that the 60 day comment period was an

insufficient amount of time for the commentor to gather information

regarding Mallinckrodt' application. However, in amending the

regulation, DEA did not intend to encourage third parties to become, in

essence, independent investigators. DEA's intent in amending 21 C.F.R.

1301.43(a) was to allow third parties to provide information already

known to the third parties regarding an applicant. It is DEA's

position, therefore, that 60 days are sufficient to permit third

parties to share information of which they are aware regarding an

applicant.

The commentor argues that the notices of Mallinckrodt's

applications failed to provide third parties, including the commentor,

with an opportunity for meaningful, informed comment. The commentor

concludes that DEA has violated the rulemaking provisions of Section

553(b) of the APA. Contrary to the commentor's contention, for the

reasons set forth below, DEA's registration of bulk manufacturers does

not constitute a ``rulemaking'' proceeding. Nor did DEA voluntarily

adopt notice and comment rulemaking procedures when it amended 21

C.F.R. 1301.43(a).

First, the commentor has ignored the definitions set forth in the

APA and, in so doing, confuses notice and comment rulemaking with

agency licensing proceedings. The commentor insists that DEA

proceedings to grant or deny an application for registration as a bulk

manufacturer are rulemakings. The APA, however, defines ``rule making''

to mean an ``agency process for formulating, amending, or repealing a

rule.'' 5 U.S.C. 551(5). The APA defines a ``rule'' as:

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the whole or a part of an agency statement of general or

particular applicability and future effect designed to implement,

interpret, or prescribe law or policy or describing the

organization, procedure, or practice requirements of an agency and

includes the approval or prescription for the future of rates,

wages, corporate or financial structures or reorganizations thereof,

prices, facilities, appliances, services or allowances therefor or

of valuations, costs, or accounting, or practices bearing on any of

the foregoing.

5 U.S.C. 551(4).

Review of the APA's definitions of license and licensing reveals

that the granting or denial of a manufacturer's registration is a

licensing action, not a rulemaking. Courts have frequently

distinguished between agency licensing actions and rulemaking

proceedings. See e.g., Gateway Transp. Co. v. United States, 173 F.

Supp. 822, 828 (D.C. Wis. 1959); Underwater Exotics, Ltd. v. Secretary

of the Interior, 1994 U.S. Dist. LEXIS 2262 (1994). Courts have

interpreted agency action relating to licensing as not falling within

the APA's rulemaking provisions.

In Underwater Exotics, the United States District Court for the

District of Columbia drew the distinction between an agency placing

conditions on a license and an agency creating a rule. In that case,

the plaintiff was licensed by the Fish and Wildlife Service (Service)

to import and export certain aquatic species. When the Service imposed

certain conditions on the plaintiff's license, plaintiff sued, arguing,

inter alia, that the Service failed to comply with the APA's rulemaking

requirements.

The court looked to the APA's definitions of ``licensing'' and

``rule'' and concluded that ``the Service's imposition of these

conditions on a license did not violate the APA, because the Service's

actions did not involve the creation of a rule.'' 1994 U.S. Dist. LEXIS

2262, *26. The court further stated that:

the Service's imposition of conditions on the plaintiff's

import/export license clearly fall within the definitions of

``license'' and ``licensing,'' * * * this agency action is not a

``rule making.'' Absent specific statutory direction otherwise, a

court should not force an agency to employ a certain procedural

format * * *.

Id.

Since the registration of bulk manufacturers is not a ``rule,'' DEA

is not required to follow traditional notice and comment rulemaking

procedures when granting or denying applications for such registration.

In fact, the D.C. Circuit clearly supported this analysis in a 1980

decision in which the court stated that ``agency action that clearly

falls outside the definition of `rule' is also freed from rulemaking

procedures.'' Batterton v. Marshall, 648 F. 2d 694, 701 n. 25 (D.C.

Cir. 1980).

Furthermore, the commentor's contention that DEA voluntarily

adopted notice and comment rulemaking with its amendment of 21 C.F.R.

1301.43(a) is not supported by either the notice of proposed rulemaking

or the final rule. In fact, while the final rule does invite written

comments form current manufacturers and applicants, nowhere in the

final rule does DEA state, implicitly or explicitly, that it intended

to follow notice and comment rulemaking procedures when acting upon a

bulk manufacturer's application. DEA simply stated in the final rule

that it would take into account such written comments when deciding

whether to grant a particular registration or issue an order to show

cause proposing to deny an application.

If DEA determines, based on information provided to it in written

comments and its own investigation, that the registration of an

applicant would not be in the public interest, an order to show cause

will be issued. The decision of whether to issue an order to show cause

is solely within DEA's discretion. If the applicant requests a hearing,

the ensuing adjudicatory proceedings will comply with the APA. DEA's

decision to address applications via individual adjudication, and not

by notice and comment rulemaking, is within its discretion and in

conformity with both the APA and the Controlled Substances Act (CSA).

Courts have held that agencies have this discretion to determine

whether to proceed by rulemaking or individual adjudication. See PBW

Stock Exchange v. Securities and Exchange Commission, 485 F. 2d 718,

731 (3d Cir. 1973) cert denied 94 S. Ct. 1992 (1974).

Finally, the commentor's citation to Rodway v. USDA, 514 F. 2d 809

(D.C. Cir. 1975) and Heron v. Heckler, 576 F. Supp. 218 (N.D. Cal.

1983) is inappropriate. In those cases, as the commentor itself

acknowledges, the agencies in question had either promulgated a

regulation or adopted a policy statement specifically espousing the

APA's notice and comment requirements. DEA has done neither.

DEA's action upon a bulk manufacturer's application is not a

rulemaking action. DEA is therefore not required to follow notice and

comment rulemaking when considering these applications. Neither the APA

nor the CSA requires DEA to follow notice and comment rulemaking when

acting upon bulk manufacturer applications. While DEA invites comments

from competitors and applicants, such invitation does not translate

into an implicit adoption of notice and comment rulemaking.

The commentor makes several allegations regarding its claim that

Mallinckrodt's registration would not be consistent with the public

interest pursuant to 21 U.S.C. 823(a). First, with respect to 21 U.S.C.

823(a) (1), (2), and (5), the commentor alleges that Mallinckrodt lacks

effective controls to prevent diversion, noting past instances of

violations of the CSA and its implementing regulations relating to

recordkeeping and security. The commentor also draws attention to

violations of the Food Drug and Cosmetic Act. The commentor further

notes that Mallinckrodt has been cited by both federal and state

authorities for violations of environmental laws and regulations.

With respect to Mallinckrodt's compliance with the CSA and its

implementing regulations, Mallinckrodt is currently registered with DEA

as a bulk manufacturer of other Schedule II controlled substances. It

is true that DEA issued letters of admonition to Mallinckrodt in 1990

and 1991. The problems identified in these letters, however, were not

significant enough to prompt DEA to seek revocation of Mallinckrodt's

registration. Further, Mallinckrodt acted expeditiously to correct

those problems.

Since the issuance of the letters of admonition, DEA has

investigated Mallinckrodt to ensure that the company's continued

registration is consistent with the public interest. These

investigations have included inspection and testing of the company's

physical security systems, audits of the company's records,

verification of the company's compliance with state and local laws, and

a review of the company's background and history. The results of these

investigations have led DEA to conclude that Mallinckrodt is in

compliance with the CSA and that its continued registration is

consistent with the public interest.

The commentor also notes Mallinckrodt's violation of Food and Drug

Administration (FDA) regulations. DEA has verified that Mallinckrodt's

registration with the FDA is current and is confident that the nature

of the FDA violations does not warrant the initiation of proceedings to

deny Mallinckrodt's applications.

In addition, the commentor points out that Mallinckrodt has been

cited by the United States Environmental Protection Agency and the

State of North Carolina for violations of environmental regulations. In

the absence of evidence

[[Page 37081]]

that these violations relate to the manufacture, distribution, or

dispensing of controlled substances, DEA declines to consider them for

purposes of determining whether Mallinckrodt's registration would be in

the public interest.

The commentor further alleges that there currently exists an

adequate and uninterrupted supply of methylphenidate under adequately

competitive conditions. Consequently, the commentor claims that

registration of an additional manufacturer could lead to an increased

threat of diversion. In support of its position, the commentor points

to a background paper published by DEA in which DEA voiced concerns

about the diversion of methylphenidate. As the commentor itself noted,

however, DEA's paper concluded that this diversion results from illegal

sales by health care professionals, overprescribing by physicians, and

illegal sales by end-users. As the commentor acknowledges, there is

little evidence of diversion occurring at the bulk manufacturer level.

The commentor contends that, since currently registered

manufacturers of methylphenidate produce an adequate and uninterrupted

supply of the drug to meet the legitimate needs of the United States,

registration of another manufacturer is not needed. The commentor

argues that ``there is no evidence that the registration of

Mallinckrodt * * * will have a beneficial effect upon competition.''

The CSA, however, does not demand that such a finding be made before

DEA can register a bulk manufacturer. Furthermore, pursuant to 21 CFR

1301.43(b), DEA is not:

required to limit the number of manufacturers in any basic class

to a number less than that consistent with maintenance of effective

controls against diversion solely because a smaller number is

capable of producing an adequate and uninterrupted supply.

As is discussed above, DEA is confident that registration of

Mallinckrodt will not impede DEA's statutory obligation to guard

against the diversion of controlled substances.

With respect to 21 U.S.C. 823(a)(3), the commentor questions

whether Mallinckrodt will promote technical advances in the art of

manufacturing methylphenidate and the development of new substances.

Mallinckrodt has been registered with DEA since 1971. In the past 25

years, Mallinckrodt has demonstrated its technical and manufacturing

expertise with respect to other controlled substances. Based on this

history, DEA is confident that Mallinckrodt will continue this practice

if registered to manufacture methylphenidate.

Regarding 21 U.S.C. 823(a)(4), the commentor admits that it is

unaware of any prior convictions of Mallinckrodt. DEA has verified that

Mallinckrodt and its principals have not been convicted under Federal

or state laws relating to the manufacture, distribution or dispensing

of controlled substances.

Finally, under 21 U.S.C. 823(a)(6), the commentor again argues that

Mallinckrodt's alleged lack of compliance with various FDA regulations

indicates that its registration as a bulk manufacturer of

methylphenidate would be inconsistent with the public interest. For the

reasons set forth above, DEA does not feel that the nature of the noted

violations warrants issuing an order to show cause to seek to deny

Mallinckrodt's applications.

After reviewing all the evidence, including the comments filed, DEA

has determined, pursuant to 21 U.S.C. 823(a), that registration of

Mallinckrodt as a bulk manufacturer of methylphenidate is consistent

with the public interest at this time. Therefore, pursuant to 21 U.S.C.

823 and 28 CFR 0.100 and 0.104, the Deputy Assistant Administrator

hereby orders that the 1996 application submitted by Mallinckrodt for

registration as a bulk manufacturer of the listed controlled

substances, including methylphenidate, is granted. The Deputy Assistant

Administrator declines to take action on Mallinckrodt's 1995

application since, given that Mallinckrodt did not manufacture

methylphenidate pursuant to its 1995 application and has since

submitted an application for 1996, it is unnecessary to do so.

Dated: July 10, 1996.

Gene R. Haislip,

Deputy Assistant Administrator, Office of Diversion Control, Drug

Enforcement Administration.

[FR Doc. 96-18024 Filed 7-15-96; 8:45 am]

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