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Noramco of Delaware, Inc. v. Drug Enforcement Administration

July 23, 2004

NORAMCO OF DELAWARE, INC., PETITIONER
v.
DRUG ENFORCEMENT ADMINISTRATION, RESPONDENT JOHNSON MATTHEY, INC., INTERVENOR
NORAMCO OF DELAWARE, INC., PETITIONER
v.
DRUG ENFORCEMENT ADMINISTRATION, RESPONDENT PENICK CORPORATION, INC. AND MALLINCKRODT, INC., INTERVENORS



On Petitions for Review of Orders of the United States Drug Enforcement Agency

Before: Ginsburg, Chief Judge, and Henderson and Rogers, Circuit Judges.

The opinion of the court was delivered by: Karen Lecraft Henderson, Circuit Judge

Argued December 11, 2003

Noramco of Delaware, Inc. (Noramco) has filed two petitions for review of final orders of the Drug Enforcement Agency (DEA, Agency) which grant applications by Johnson Matthey, Inc. (Johnson Matthey) and by Penick Corporation, Inc. (Penick) to register as importers of narcotic raw materials (NRMs) pursuant to the Controlled Substances Import and Export Act, 21 U.S.C. §§ 952 and 958, and the Controlled Substances Act, 21 U.S.C. §§ 823 et seq., (collectively referred to as CSA). For the reasons set out below, we deny both of Noramco's petitions.

I. Background

The CSA establishes a comprehensive regulatory system that controls the manufacture, distribution and use of hazardous drugs. MD Pharm., Inc. v. DEA, 133 F.3d 8, 10 (D.C. Cir. 1998). The DEA Administrator, by delegation of the United States Attorney General, 28 C.F.R. § 0.100(b), classifies each drug into one of five schedules according to such factors as its potential for abuse and its risk to the public health Id. (citing 21 U.S.C. § 811).*fn1 In order to import or export a controlled substance, a company must apply for and obtain registration with the DEA, 21 U.S.C. § 957, which is required to register an application for Schedule I or II substances if it "determines that such registration is consistent with the public interest and with United States obligations under international treaties, conventions, or protocols in effect on May 1, 1971," 21 U.S.C. § 958(a). Section 823(a) of title 21 sets out the factors to be considered in determining the public interest:

(1) "maintenance of effective controls against diversion of [controlled substances and their compounds] into other than legitimate medical, scientific, research, or industrial channels, by limiting the importation and bulk manufacture of such controlled substances to a number of establishments which can produce an adequate and uninterrupted supply of these substances under adequately competitive conditions for legitimate medical, scientific, research, and industrial purposes"; (2) "compliance with applicable State and local law"; (3) "promotion of technical advances in the art of manufacturing these substances and the development of new substances"; (4) the "prior conviction record of [the] applicant under Federal and State laws relating to the manufacture, distribution, or dispensing of such substances"; (5) "past experience in the manufacture of controlled substances, and the existence in the establishment of effective control against diversion"; and (6) "such other factors as may be relevant to and consistent with the public health and safety." Pursuant to these provisions, both Johnson Matthey and Penick filed applications with the DEA for registration.

Before filing its registration application, Johnson Matthey was already registered as an importer of phenyl acetone, a Schedule II controlled substance, and as a bulk manufacturer of Schedule I and II substances, including oxycodone and hydrocodone, which are active pharmaceutical ingredients (APIs) that it sells in bulk to manufacturers of narcotic-based prescription drugs. Because Johnson Matthey was not registered to import opium or poppy straw concentrate, the NRMs from which the narcotic alkaloids morphine, codeine and thebaine are extracted to produce oxycodone and hydrocodone, it had to rely on supplies from Noramco and Mallinckrodt, Inc. (Mallinckrodt), the two companies then registered to import the NRMs. Dissatisfied with this arrangement, on December 23, 1998 it filed an application to modify its registration to include importation of opium and poppy straw concentrate. At the same time it applied to renew its registration to manufacture Schedule I and II controlled substances in bulk. On May 10, 1999 Noramco and Mallinckrodt filed separate objections to and requests for hearing on Johnson Matthey's registration application.

An administrative law judge (ALJ) conducted a hearing in January 2000. In a decision filed September 21, 2000 the ALJ recommended that Johnson Matthey's application be granted, subject to the conditions that Johnson Matthey (1) demonstrate to the DEA's satisfaction, before receipt of its first NRM shipment, "the manner in which the NRMs will be imported, transferred to the processing facility, and processed," (2) provide the DEA with a timetable for its proposed "ramp-up activities" and (3) inform the DEA of "any changes to these procedures and/or any changes made to the physical plant" and obtain approval thereof before making any shipment under the "changed circumstances." Johnson Matthey, Inc., Docket No. 99-27 (September 21, 2000) ("Recommended Rulings, Findings of Fact, Conclusions of Law, and Decision") (ALJ Op. I), slip op. at 57.

In a decision dated May 22, 2002 the DEA Deputy Administrator adopted and incorporated the ALJ's findings and conclusions "in their entirety" and granted 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." Johnson Matthey, Inc., 67 Fed. Reg. 39,041, 39,045 (June 6, 2002) (conditional grant of registration to import Schedule II substances). The decision further directed that "Johnson Matthey should provide DEA with a timetable of its proposed activities and submissions so that DEA may plan for the prompt scheduling of its inspection and review activities." Id. at 39,045-46.

Penick filed its application on April 11, 2000 for registration to import the Schedule II NRMs coca leaves, raw opium, poppy straw and poppy straw concentrate and to manufacture Schedule II APIs, including oxycodone, hydrocodone, morphine, hydromorphone and codeine, from the imported NRMs. On September 15, 2000 Noramco and Mallinckrodt each filed objections to and requests for hearing on Penick's registration application.

An ALJ conducted a hearing on Penick's application in July and August 2001. In a decision filed May 29, 2002 the ALJ recommended that Penick's application be granted. Penick Corp., Docket No. 01-3 (May 29, 2002) ("Opinion and Recommended Ruling, Findings of Fact, Conclusions of Law and Decision of the Administrative Law Judge") (ALJ Op. II). On February 11, 2003, the DEA Deputy Administrator issued a final order adopting the ALJ's findings and conclusions "in their entirety." Penick Corp., Inc., 68 Fed. Reg. 6947, 6948 (Feb. 11, 2003) (grant of registration to import Schedule II substances).

Noramco filed a timely petition for review of each registration approval. Malinckrodt intervened in the challenge to Penick's registration. We ...


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