[Federal Register Volume 67, Number 109 (Thursday, June 6, 2002)]
[Notices]
[Pages 39041-39046]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-14218]
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DEPARTMENT OF JUSTICE
Drug Enforcement Administration
Johnson Matthey, Inc.: Conditional Grant of Registration To
Import Schedules II Substances
I. Background
Johnson Matthey, Inc., (Johnson Matthey) is registered with DEA to
import phenyl acetone, a Schedule II controlled substance, and as a
bulk manufacturer of a number of Schedule I and II substances,
including oxycodone and hydrocodone. On December 23, 1998, Johnson
Matthey submitted an application for renewal of its registration as an
importer of Schedule II controlled substances. The application sought
to renew Johnson Matthey's registration to import phenyl acetone, and
to modify Johnson Matthey's registration to include importation of the
narcotic raw materials concentrate of poppy straw (CPS) and raw opium
(hereinafter referred to collectively as ``NRMs''). On December 23,
1998, Johnson Matthey also applied for renewal of its registration to
manufacture Schedule I and II controlled substances in bulk. On April
9, 1999, DEA published notice of these applications in the Federal
Register. The notices advised that any manufacturer holding or applying
for registration as a manufacturer of this basic class of controlled
substance could file written comments or objections to the applications
and could also file a written request for a hearing on the applications
in accordance with 21 CFR 1301.43.
In response to the publication, on May 10, 1999, both Mallinckrodt,
Inc., (Mallinckrodt) and Noramco of Delaware, Inc., (Noramco) submitted
comments, objections and requests for hearing in connection with
Johnson Matthey's application to import NRMs. A Notice of
Administrative Hearing, Summary of Comments and Objections was
published in the Federal Register on December 3, 1999.
The requested hearing was held in Arlington, Virginia, from January
5, 2000, through January 13, 2000, before Administrative Law Judge Gail
A. Randall. At the hearing, each party called witnesses to testify and
introduced documentary evidence. After the hearing, each party
submitted Proposed Findings of Fact, Conclusions of Law and Argument.
The Antitrust Division of the Department of Justice filed a brief as
amicus curiae. On September 21, 2000, the Administrative Law Judge
issued her Recommended Rulings, Findings of Fact, Conclusions of Law
and Decision, recommending that the Deputy Administrator issue a
regulation permitting the importation of NRMs and that he conditionally
grant Johnson Matthey's application for registration as an importer of
NRMs. Both Noramco and Mallinckrodt filed exceptions to the
Administrative Law Judge's Findings. Johnson Matthey filed a response
to the exceptions, Johnson Matthey, Noramco and Mallinckrodt also
submitted Reply Briefs to the brief of the Antitrust Division.
On September 21, 2000, the Administrative Law Judge certified and
transmitted the record to the Deputy Administrator of DEA. The record
included the Recommended Rulings, Findings of Fact, Conclusions of Law
and Decision of the Administrative Law Judge, the findings of fact and
conclusions of law proposed by all parties, the exceptions filed by the
parties, the brief filed by the Antitrust Division of the Department of
Justice, the reply briefs, motions filed by all counsel, all of the
exhibits and affidavits, and the transcript of the hearing sessions.
II. Preliminary Matters
A. Regulatory Context
Because Johnson Matthey is applying for both a renewal of its
registration and permission to import, this proceeding is a combined
adjudication and rulemaking. The rulemaking determines whether Johnson
Matthey may lawfully import into the United States the Schedule II
controlled substances raw opium and CPS pursuant to 21 U.S.C. 952(a).
Johnson Matthey has the burden of proof, and must establish by a
preponderance of the evidence that such a rule can be issued. In order
to do this,
[[Page 39042]]
Johnson Matthey must show by a preponderance of the evidence that the
raw opium and CPS that it intends to import are necessary to provide
for medical, scientific or other legitimate purposes.
The adjudication determines whether DEA should grant Johnson
Matthey's application for registration as an importer of the Schedule
II controlled substances raw opium and concentrate of poppy straw. In
accordance with the DEA Statement of Policy and Interpretation on
registration of importers, 40 FR 43,745 (1975), the Deputy
Administrator will not grant Johnson Matthey's application unless
Johnson Matthey establishes that the requirements of 21 U.S.C.
Sec. 958(a) and Sec. 823(a) and 21 C.F.R. 1301.34(b)-(f) are met to
show that Johnson Matthey's plans are in the public interest. DEA has
the discretion to determine the weight assigned to each of the factors
that must be considered to determine whether Johnson Matthey's
registration to import will be granted. MD Pharmaceutical, Inc. v. DEA,
No. 95-1267, 1996 U.S. App. LEXIS 1229 (D.C. Cir. 1996) (unpublished
opinion.)
B. The Record
Nearly two months after the hearing, Johnson Matthey filed a Motion
to Reopen the Record. In the motion, Johnson Matthey asked the court to
allow into evidence the Report of the International Narcotics Control
Board (INCB) for 1999. Among other things, the report contained
information concerning the world-wide supply of opiate raw materials
and consumption of opiates. Both Mallinckrodt and Noramco filed
oppositions to the motion. By Memorandum and Order of March 15, 2000,
the Administrative Law Judge denied Johnson Matthey's motion.
In an adjudication, the Deputy Administrator issues his final order
based on the record made before the Administrative Law Judge. The
Deputy Administrator has the authority, however, to request that the
Administrative Law Judge reopen the record and admit evidence that was
not introduced in the hearing. The party seeking to introduce such
evidence must show, however, that the evidence was previously
unavailable and is relevant to the issues in dispute. Immigration and
Naturalization Service v. Abudu, 485 Y.S. 94 (1988).
There is no requirement, however, that the decision regarding the
issuance of a regulation be made solely on the record. In a rulemaking,
the purpose of the procedure is to gather evidence. As a result, the
informal rulemaking proceeding does not end with the same degree of
finality as does a formal adjudication. The Deputy Administrator may
consider evidence submitted after the close of the comment period. See
Hoffman-La Roche, Inc., v. Kleindienst, 478 F.2d 1, 13-15 (3rd Cir.
1973). Nonetheless, at some point the agency must make a decision, and
it is free to ignore comments that were filed late.
By Memorandum and Order of March 15, 2000, the Administrative Law
Judge denied Johnson Matthey's motion to reopen the record. In reaching
her decision, she noted that the record already contained much
information derived from the INCB, information that was highly disputed
during the hearing. She also found that the exclusion of the report
``does not fundamentally alter the core issues presented in this
proceeding.''
With respect to both the adjudication and rulemaking aspects of
this matter, the Deputy Administrator will not permit a reopening of
the record to include the INCB report. While it appears that the report
was unavailable until after the hearing, the report's relevance seems
questionable in light of the Deputy Administrator's final decision in
this matter, and the similar and highly disputed evidence already in
the record.
C. Designations of Confidentiality
Pursuant to a Protective Order issued by the Administrative Law
Judge on December 2, 1999, Mallinckrodt and Noramco requested that
portions of the transcript of the hearing of this matter be designated
as ``confidential'' or ``highly confidential.'' After the hearing, the
parties were provided an opportunity to file by motion requests for the
specific marking of the transcript. Noramco filed a Motion for
Designation of Confidentiality and Mallinckrodt filed its
Confidentiality Designations. In response, Johnson Matthey filed an
Objection to Noramco and Mallinckrodt's Proposed Confidentiality
Designations. Mallinckrodt then filed a Response to Objection of
Johnson Matthey Inc. to Noramco's and Mallinckrodt's Inc.'s Proposed
Confidentiality Designations.
By order of December 21, 2000, the Administrative Law Judge ruled
on these motions, granting some of the requested designations of
confidentiality and denying others. The Deputy Administrator has
reviewed the pleadings on this issue, and hereby adopts the
Administrative Law Judge's December 21, 2000, order.
III. Final Order
The Deputy Administrator has carefully reviewed the entire record
in this matter, as defined above, and hereby issues this final rule and
final order prescribed by 21 CFR 1316.67 and 21 CFR 1301.46, based upon
the following findings and conclusions. The Deputy Administrator adopts
the Findings of Fact, Conclusions of Law, and Decision of the
Administrative Law Judge in their entirety. They are incorporated into
this final order as though they were set forth at length herein. The
adoption of the judge's opinion is in no manner diminished by any
recitation of facts, issues and conclusions herein, or of any failure
to mention a matter of fact or law.
A. The Rulemaking
As explained above, Johnson Matthey cannot be registered as an
importer of NRMs unless the Deputy Administrator finds that Johnson
Matthey will be allowed to import NRMs pursuant to 21 U.S.C. 952(a)(1).
Because Johnson Matthey is the proponent of such a rule, it must
establish by a preponderance of the evidence that such a rule can be
issued.
21 U.S.C. 952 makes it unlawful to import controlled substances in
Schedule I or II except that ``such amounts of crude opium, poppy
straw, concentrate of poppy straw and coca leaves as the Attorney
General finds to be necessary to provide for medical scientific or
other legitimate purposes.'' Whether Johnson Matthey's importation of
opium and poppy straw is ``necessary'' was highly disputed at the
hearing of this matter.
Peter Bensinger, a former Administrator of DEA, testified that
United States policy prohibits the cultivation or production of NRMs in
the United States in favor of imports, in order to limit the potential
diversion problems of domestic cultivation and production. Gerald
Dumont, a consultant to the INCB, testified that he believed that the
major suppliers of NRM would be willing to sell to Johnson Matthey, if
registered. Mr. Dumont also believed that the registration of Johnson
Matthey would not cause shortages, price increases or any change to the
total U.S. allocation of NRMs. Dr. William Beaver, a physician and
expert in pharmacology, testified that the derivatives manufactured
from NRMs are necessary to the United States medical community, as
there are medical demands that cannot be met by non-opiate narcotics.
Dr. Beaver also testified that opiate pharmaceuticals have a long
history of medical use and the medical community continues to rely upon
opium-derived alkaloids rather than synthetic opiate analgesics.
[[Page 39043]]
These alkaloids and their semi-synthetic derivatives such as a
hydromorphone, hydrocodone, and oxycodone are critical therapeutic
agents today. Dr. Beaver concluded that morphine, codeine,
hydromorphone, hydrocodone and oxycodone are necessary to the United
States medical community.
Mallinckrodt and Noramco asserted that they have maintained an
adequate and uninterrupted supply of opiate pharmaceuticals from their
processing of opium and CPS. Therefore, in their opinion, Johnson-
Matthey's importation of such substances is not ``necessary,'' as
required by 21 U.S.C. Sec. 952. They also argued that the statutory
scheme required a full blown inquiry into the adequacy of competition
among existing manufacturers.
As the Administrative Law Judge explained, the term ``necessary''
is not defined in the Controlled Substances Act. The ``necessary''
standard, however, has been employed since the inception of narcotics
legislation. Moreover, the legislative history shows that the
prohibition of 21 U.S.C. Sec. 952 was intended to reduce diversion of
illicit drugs, while the exception was intended to supply the drugs
required by the medical community. There is nothing in the legislative
history that would support any intention to limit the number of
importers under the statute. Indeed, any such interpretation would mean
that if the needs for NRMs could be satisfied by one company, no other
companies would be allowed to import the raw materials. There is no
evidence, however, that Congress intended this provision to create a
monopoly for a single company. Nor does the legislative history show
any concern with competition among NRM importers. Accordingly, for
purposes of this rulemaking, the economic data supplied by the parties
is not relevant.
Based upon the above, the Deputy Administrator finds that Johnson
Matthey has met its burden of proof in showing that its proposed
importation of NRMS is ``necessary'' to provide for legitimate medical
purposes.
B. The Adjudication
Federal law prohibits the cultivation of the opium poppy in the
United States, and also generally prohibits the importation of bulk
narcotic alkaloids such as morphine and codeine. The NRMs raw opium and
CPS therefore must be imported into the United States for purposes of
extracting morphine and codeine for pharmaceutical use. Following the
extraction of these alkaloids, the manufacturers convert them into
active pharmaceutical ingredients (APIs), such as oxycodone and
hydrocodone. These APIs are then sold to other manufacturers to produce
either dosage formulations or other APIs. The formulated drugs are then
sold to drug wholesalers or directly to health care entities.
Johnson Matthey, Noramco and Mallinckrodt are currently registered
with DEA as bulk manufacturers of a number of Schedule I and II
substances, including the Schedule II controlled substances oxycodone
and hydrocodone. Noramco and Mallinckrodt are the only companies
registered with DEA, however, as importers of NRMs and bulk
manufacturers of codeine and morphine.
Since Johnson Matthey is not registered to import NRMs, it cannot
manufacture its own codeine and morphine, but must purchase these
compounds from Noramco and Mallinckrodt. In recent years, Noramco has
been unwilling or unable to supply Johnson Matthey with all of the
codeine and morphine that Johnson Matthey has requested. Johnson
Matthey has applied with DEA to be registered as an importer of NRMs,
so that the company can manufacture its own codeine and morphine.
Noramco and Mallinckrodt oppose Johnson Matthey's application.
Pursuant to 21 U.S.C. 958a, and 823(a), DEA is required to register
Johnson Matthey as an importer and manufacturer of Schedule I and II
substances if the registration is ``consistent with the public interest
and with United States obligations under international treaties,
conventions, or protocols in effect on May 1, 1971. In 823(a)(1)-(6).
See also 21 C.F.R. 1301.34(b)(1)-(6)(i). Accordingly, the Deputy
Administrator will first consider United States obligations under
international treaties, then each of the factors delineated in 21
C.F.R. 1301(b)(1)-(6)(i), as follows.\1\
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\1\ In this proceeding, Johnson Matthey, as the applicant, has
the burden of proof of showing that the public interest will be
served by its registration to import NRMs. 21 C.F.R. 1301.44(c).
Noramco and Mallinckrodt, however, have the burden of proving and
propositions of fact or law asserted by them in the hearing. Id.;
Roxane, 63 Fed Reg. 55,891 (DEA 1998).
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1. Treaty Obligations
There is no evidence that the importation of NRMs by Johnson
Matthey would be inconsistent with United States obligations under
international treaties, conventions or protocols. Under the treaty
Single Convention on Narcotic Drugs, 1961, the United States is
obligated to take all necessary measures to ensure that the
international movement of narcotics is limited to legitimate medical
and scientific needs. Peter B. Bensinger, former Deputy Administrator
of DEA, credibly testified that the primary goal of the Single
Convention and relevant United States drug policy is to encourage
production of NRMs only in countries that can control the illicit
diversion of these substances. DEA has developed a quota system to
meet, in part, the obligations of the United States under this treaty.
This ``80/20 rule,'' which requires the United States to purchase at
least 80 percent of its NRMs from India and Turkey, is designed to
achieve the goal of the Single Convention treaty. There is no evidence
that entry of Johnson Matthey into the market for importation of NRMs
would contravene this rule.
2. Maintenance of effective controls against diversion of
particular controlled substances and any controlled substance in
schedule I or II compounded therefrom into other than legitimate,
medical, scientific, research or industrial channels, by limiting the
importation of and bulk manufacture of such controlled substances to a
number of establishments which can product an adequate and
uninterrupted supply of these substances under adequately competitive
conditions for legitimate medical, scientific research, and industrial
purposes.
As the Administrative Law Judge noted, DEA has previously
interpreted identical language in the context of analyzing an
application for manufacturing a Schedule I and Schedule II controlled
substance as follows: ``The Drug Enforcement Administration of the
United States Department of Justice, presently interprets the statute
as requiring the registration of otherwise qualified applicants to
manufacture any controlled substance as long as the total number of
registrants remains within the effective control by the Administration.
We believe that (this section of the statute) permits the Drug
Enforcement Administration to restrict entry to a number of registrants
constituting adequate competition only when actually necessary to
maintain effective controls against diversion.'' Bulk Manufacture of
Schedule I and II Substance, 39 Fed. Reg. 12,138 (DEA 1974).
Furthermore, DEA has written that, stated conversely, DEA is
``required to register an applicant who meets all the other statutory
requirements, without regard to the adequacy of competition, if the
Administration determines that registering another manufacturer will
not increase the difficulty of maintaining effective controls against
[[Page 39044]]
diversion.'' Id.6 Accordingly, the Deputy Administrator finds that if
DEA determines that there would be no increased difficulty in
controlling diversion, the requirements of this provision are
satisfied, and an analysis of adequate competition is not required.
At the hearing, Noramco and Mallinckrodt attempted to show that
Johnson Matthey's registration as an importer of NRMs would cause
further diversion of controlled substances and a potential interruption
in the supply of NRMs. Michael Misolovich, a Mallinckrodt executive,
testified that if Johnson Matthey was inefficient in extracting
narcotics from NRMs, its entry into the market would exaggerate
legitimate demand, resulting in more cultivation of NRMs than is
necessary and thereby increasing the risk of diversion. Richard A.
Hoyt, another Mallinckrodt executive, testified that registration of
Johnson Matthey could trigger a shortage of NRMs if Johnson Matthey
were inefficient in processing NRMs.
The Deputy Administrator finds that neither Mallinckrodt nor
Noramco offered any solid evidence in support of the view that
registration of Johnson Matthey to import NRMs would cause increased
diversion or a shortage of NRMs. Mr. Misolovich admitted that only
basis for his allegation that Johnson Matthey would be inefficient in
processing NRMs was based solely on the fact that Johnson Matthey had
not processed NRMs in the past. Indeed, none of the evidence offered in
support of these contentions rose above mere speculation. As noted
above, Gerard Dumont, a gentleman with 30 years experience in the
international market for NRMs, testified that the registration of
Johnson Matthey would not cause shortages, price increases, or any
change to the total U.S. allocation of NRMs. David Connor, an employee
of Johnson Matthey with twelve years experience in purchasing NRMs on
the world market, testified that supplied of NRMs from India, Turkey
and other countries would be adequate to meet Johnson Matthey's needs.
Mr. Connor testified further that Johnson Matthey's entry into the
market would not result in an increase in the demand for NRMs, but
would simply result in the displacement of NRMs from one buyer to
another. Furthermore, the Deputy Administrator notes that neither
Mallinckrodt nor Noramco has been unable to supply its customers with
sufficient product during the ``shortages'' of NRMs over the past
several years.
With regard to Johnson Matthey's efficiency in processing NRMs,
Frank Stermitz, Ph.D., a professor of chemistry, testified credibly
that the extraction of alkaloids from opium was a simple, uncomplicated
and well established procedure known for 200 years, and that permitting
Johnson Matthey to import NRMs would pose little danger to the world
supply of NRMs. Other witnesses testified credibly that Johnson
Matthey's registration as an importer of NRMs would not cause an
increase in Indian production, but would simply redistribute the same
amount of product among three, rather than two, companies.
Based upon the above, the Deputy Administrator finds that both
Noramco and Mallinckrodt have failed to meet their burdens of proof to
show that registration of Johnson Matthey as an importer of NRMs would
increase diversion of controlled substances or cause an interruption in
the supply of NRMs. Accordingly, the Deputy Administrator need not
conduct an analysis of adequate competition.\2\
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\2\ The Deputy Administrator also finds that even if he had
found that competition in the market for codeine phosphate and
morphine sulfate was adequate, he would still find it appropriate to
register Johnson Matthey as an importer of NRMs, since each of the
other factors to be considered in determining the public interest
weigh in Johnson Matthey's favor.
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3. Compliance with applicable State and local law;
David M. Connor testified that Johnson Matthey has never been
convicted of any offense relating to controlled substances under either
Federal or State Law, and that Johnson Matthey complies with all New
Jersey laws relating to controlled substances. There is nothing in the
record to contradict this assertion.
4. Promotion of technical advances in the art of manufacturing
these substances and the development of new substances.
Johnson Matthey has developed a patent that permits the manufacture
of hydrocodone in a one-step process and has four other patent
applications pending. It has also filed a patent application in Europe
for the production of thebaine, a precursor to oxycodone. Thus it
appears that Johnson Matthey promotes technical advances in the
manufacturing of oxycodone and hydrocodone.
5. Prior conviction record of applicant under Federal and State
laws relating to the manufacture, distribution, or dispensing of such
substances;
David Conner testified without contradiction that Johnson Matthey
has never been convicted of any offense relating to controlled
substances under Federal or State law.
6. Past experience in the manufacture of controlled substances and
the existence in the establishment of effective control against
diversion.
Johnson Matthey has been registered by DEA as a manufacturer of
Schedule I, II, and III controlled substances since 1985. Forrest F. K.
Sheffy, Ph.D., a Johnson Matthey employee, testified that Johnson
Matthey was founded in 1817 as a precious metals company, and has grown
into a large, international corporation with businesses in numerous
fields, including the manufacture of active pharmaceutical ingredients
for sale to pharmaceutical companies. Mr. Sheffy also testified that
Johnson Matthey today is a leader in the manufacture of controlled
substances for use in pharmaceuticals.
A DEA Diversion Investigator (DI), testified that he conducted a
303 analysis of Johnson Matthey. The DI credibly concluded that Johnson
Matthey's record keeping and security practices were in compliance with
relevant law and regulation. DEA's Chief of the Drug Operations
Section, Office of Diversion Control, credibly testified that his
office found no reason why DEA should not grant the application of
Johnson Matthey to import raw opium and CPS.
Johnson Matthey also hired former DEA agent, to conduct a review of
the security of its physical plant and of its standard operating
procedures. The former agent credibly testified that Johnson Matthey is
in compliance with DEA regulations to prevent diversion with respect to
the handling of controlled substances.
David Connor is responsible for Johnson-Matthey's compliance with
DEA regulations. He previously worked for Noramco, and has 15 years
experience in DEA compliance issues. At the hearing, he testified that
Johnson Matthey is committed to the ``highest level of compliance with
DEA regulations.'' Since he has worked for Johnson Matthey, there have
been three on-site visits by DEA inspectors, without any violations. In
the fourth quarter of 1998, DEA conducted an on-site inspection of the
Johnson Matthey plant in New Jersey. At the end of the inspection the
DEA investigator advised him that she had found no violations of DEA
regulations, and since that time Johnson Matthey has received no notice
of violations from DEA.
Accordingly, the Deputy Administrator finds that Johnson Matthey
has had sufficient experience in the manufacture of controlled
substances. The Deputy Administrator also finds that Johnson Matthey is
in compliance with DEA regulations,
[[Page 39045]]
maintain effective controls against diversion of controlled substances
and Johnson Matthey's importation of NRMs will not increase the risk of
diversion of these substances for illicit uses.
7. Such other factors as may be relevant to and consistent with the
public health and safety.
As the Administrative Law Judge noted, registration of Johnson
Matthey as an importer of NRMs would also serve the public interest as
further assurance that opiate pharmaceutical products such as oxycodone
and hydrocodone will be available to the public. At present, all
pharmaceuticals derived from NRMs in this country are manufactured by
only two companies. Adding a third company would reduce the risk of
supply problems in the event of regulatory recalls, fire, flood or
other natural disasters.
8. Conclusion
Based upon the foregoing, the Deputy Administrator finds that it is
in the public interest, as defined by 21 U.S.C. 823(a)(1)-(6) and 21
CFR 1304.34(b)(1)-(6)i to grant Johnson Matthey's application to be
registered as an importer of NRMs.
C. Exceptions
Both Noramco and Mallinckrodt filed exceptions to the
Administrative Law Judge's Recommended Ruling, Findings of Fact,
Conclusions of Law and Decision. Johnson Matthey responded to those
exceptions. Having considered the record in its entirety, including the
parties' exceptions and responses, the Deputy Administrator finds no
merit in Noramco and Mallinckrodt's exceptions, many of which concerned
matters that were addressed at length at the hearing. The exceptions
were extensive and are part of the record. Only some of the exceptions
merit further discussion, and they will not be restated at length
herein.
In its exceptions, Normaco contends that licensing Johnson Matthey
to import NRMs will ``dramatically'' weaken the standards for such
licensing. Noramco claims that granting Johnson Matthey a license
before the company has demonstrated that it is immediately prepared to
start processing NRMs will create a standard by which any company will
be able to obtain a license to import NRMs. This argument has no merit.
Johnson Matthey has not yet constructed a new facility to process NRMs,
but plans to do so in the near future. Furthermore, Johnson Matthey has
had extensive experience in manufacturing controlled substances.
Moreover, DEA's licensing of Johnson Matthey will be contingent upon
Johnson Matthey's providing to DEA, prior to the receipt of the first
shipment of NRMs, sufficient information concerning its facilities and
procedures.
Noramco also contends that the Administrative Law Judge failed to
correctly balance the risk of diversion that will result from the
licensing of Johnson Matthey to import NRMs. This argument also has no
merit. On the contrary, the Administrative Law Judge made extensive
findings concerning the issue of potential diversion. The
Administrative Law judge correctly stated that both Mallinckrodt and
Noramco, without offering any specific evidence, speculated that merely
permitting another party to import NRMs increases the risk that those
NRMs will be diverted, on both the national and international level.
The Administrative Law Judge found that Johnson Matthey has had a great
deal of experience in handling opiate-derived compounds, without any
alleged violations of DEA security regulations, and the The DI
testified at the hearing that he had inspected Johnson Matthey's
facilities and concluded that its security plans and practices comport
with DEA regulations. Accordingly, the Deputy Administrator finds that
there is no evidence that the licensing of Johnson Matthey to import
NRMs would result in diversion of controlled substances.
In its exceptions, Mallinckrodt contends that the Administrative
Law Judge erred in her finding that Johnson Matthey intends to import
both CPS and raw opium. As evidence of Johnson Matthey's alleged intent
only to import CPS, Mallinckrodt points to the fact that Johnson
Matthey has only allocated $10 million to building a new facility to
process NRMs. With little discussion, Mallinckrodt's witnesses
testified that a plant to process both CPS and raw opium would required
two separate lines and would cost more than $10 million. Mallinckrodt
failed to demonstrate, however, that Johnson Matthey would be unable to
process both raw opium and CPS. The Deputy Administrator finds that
Johnson Matthey is still in the preliminary stages of its importation
and processing of NRMs. If it turns out that the projected costs are
greater than expected, there is no evidence that Johnson Matthey would
fail to allocate sufficient funds to process both raw opium and CPS.
Indeed, Forrest K. Sheppy, a Johnson Matthey executive, testified that
the company was committed to expending the necessary sums to install an
appropriate manufacturing facility.
Mallinckrodt also contends that the Administrative Law Judge, in
her determination that an analysis of adequacy of competition was not
necessary in this matter, erred in applying a DEA policy statement that
referred to the manufacturing, rather than the importation, of
controlled substances. In the policy statement, DEA stated that it
interpreted the language of 21 U.S.C. 823(a)(1) to permit DEA to
restrict entry to a number of registrants constituting adequate
competition only when actually necessary to maintain effective controls
against diversion. Mallinckrodt's argument has no merit. As the
Administrative Law Judge stated, she found the statement of policy
``instructive'' rather than ``determinative.'' Moreover, the policy
statement interpreted the exact same standards at issue here. Pursuant
to 21 U.S.C. 958, in determining whether a license to import is in the
public interest, the Deputy Administrator must look to the standards
applicable to manufacturers at 21 U.S.C. 823. Thus for purposes of
determining whether the importation or manufacture of controlled
substances is in the public interest, Congress, in enacting the
statute, made clear that both importers and manufacturers are to be
treated alike in determining the public interest will be served.
IV. Conclusion
The Deputy Administrator concludes that, except for one factor,
Johnson Matthey has satisfied all of the factors to be considered in
both a rulemaking and adjudication to permit registration of Johnson
Matthey to import NRMs. The unsatisfied factor concerns the fact that
Johnson Matthey's proposal to import NRMs is not now adequately
supported by concrete pans or proposals regarding the location and type
of processing facility that it intends to use in processing NRMs.
Johnson Matthey has neglected to produce sufficient evidence to show
that its intended facility will substantially comply with requirements.
The Deputy Administrator agrees with the Administrative Law Judge that
this is not an insurmountable obstacle, however, and pursuant to the
authority vested in him by 21 U.S.C. 952 and 958 and 28 CFR 0.100(b),
hereby grants Johnson Matthey a conditional registration until such
time as Johnson Matthey's facilities are complete and DEA can complete
its requisite physical security and record keeping evaluation to ensure
Johnson Matthey's continued protection of NRMs against diversion. The
Deputy Administrator also finds that Johnson Matthey should provide DEA
with a timetable of its proposed activities and submissions so that DEA
[[Page 39046]]
may plan for the prompt scheduling of its inspection and review
activities. This decision is effective July 8 2002.
Dated: May 22, 2002.
John Brown III.
Deputy Administrator.
[FR Doc. 02-14218 Filed 6-5-02; 8:45 am]
BILLING CODE 4410-09-M