CHAPTER § 2.03 Controlled Substance Regulatory Requirements

• Jurisdiction: United States

§ 2.03 Controlled Substance Regulatory Requirements

Controlled substance laws establish a restricted, accountability-focused system intended to maintain products within legitimate channels. This section describes four primary implementing systems: registration, security controls, record-keeping and reporting requirements, and the quota system. Certain other regulatory requirements are also briefly summarized.

[1] Registration

One key measure intended to support controlled-substance accountability is the qualification, and sometimes limitation, of persons authorized to handle such substances.

[a] Persons Required to Register

It is unlawful for most persons to handle a controlled substance without first being "registered" by DEA—both for each relevant business activity and for each schedule of substance involved. Distinct registration categories have been established for: manufacturing; distributing; reverse distributing (e.g., disposal of damaged or expired products); dispensing or instructing (includes practitioners, hospitals/clinics, retail pharmacies, centralized pharmacy fulfillment operations, and teaching institutions); performing research; conducting chemical analysis; importing; exporting; and administering a narcotic-treatment program.²⁴ DEA has briefly identified "coincident activities" that are authorized under each registration category: for example, a DEA-registered manufacturer may distribute the controlled pharmaceuticals it lawfully produces without having to obtain a separate "distributor" registration.²⁵ Other activities, however, may necessitate multiple registrations for a single person or entity (e.g., in order to manufacture and then export a drug product, a pharmaceutical firm must obtain both manufacturer and exporter registrations from DEA).

Note that DEA's definitions of business activity sometimes have unique interpretation. In a 1995 policy statement, for example, DEA advised that the following product-development activities, which may be considered "research" under FDA requirements, nevertheless are considered "manufacturing" for purposes of DEA registration and regulatory compliance: activities for satisfying regulatory requirements such as FDA submissions or good manufacturing practice; activities associated with establishing manufacturing processes and procedures including the production of material for pilot, scale-up, and reformulation studies, and the studies themselves; and all activities associated with development including (but not limited to) studies of in vivo bioavailability, formulation, stability, and validation.²⁶

The CSA requires a separate registration covering each principal place of business or professional practice where a person manufactures, distributes, imports, exports, or dispenses a controlled substance.²⁷ Thus, a corporation that maintains a manufacturing plant for controlled substances and two separate distribution centers may require at least three facility-specific DEA registrations. The following locations are not considered places where controlled substances are manufactured, distributed, or dispensed and are therefore deemed exempt from registration: (i) a warehouse where controlled substances are stored by or on behalf of a registrant and from which the substances are returned solely to the registered location from which they were delivered; (ii) an office used by agents of a registrant where sales of controlled substances are solicited, made, or supervised but which neither contains controlled substances (other than displays or lawful samples) nor serves as a distribution point for filling sales orders; (iii) an office used by a practitioner (who is registered at another location within the same state) where controlled substances are prescribed but neither administered nor otherwise dispensed as a regular part of the professional practice of the practitioner at that office, and where no supplies of controlled substances are maintained; and (iv) certain freight-forwarding facilities operated by registered dis-tributors.²⁸

Only persons actually engaged in regulated activities are required to obtain DEA registration. Related or affiliated persons who are not engaged in such activities are not required to be registered. For example, a stockholder or parent corporation of a controlled-substance manufacturer need not register (assuming the stockholder and parent corporation are not independently handling controlled substances).²⁹ There are other exceptions from the general registration requirement. An agent or employee of a registered manufacturer, distributor, or dispenser, acting in the usual course of his business or employment, need not obtain a personal registration.³⁰ A common or contract carrier or warehouseman, or an employee thereof, who possesses a controlled substance in the usual course of his business or employment likewise is exempt from the need to register.³¹ DEA is authorized by regulation to waive the requirement for registration of certain manufacturers, distributors, or dispensers if consistent with the public health and safety.³²

Some registrations are issued on a schedule-specific basis; for example, a registrant that is a Schedule IV distributor can handle any controlled substance in Schedule IV. Registrations for controlled substances in Schedules I and II and for importation are more limited, and encompass only specifically identified "basic classes" of controlled substances within applicable regulatory schedules.³³

[b] Standards for Registration

DEA must consider a variety of "public-interest" factors when assessing an application for registration to manufacture or distribute controlled substances. Many are common to Schedules I-V, including: (i) maintenance of effective controls against the diversion of controlled substances into channels other than legitimate medical, scientific, or industrial ones; (ii) compliance with applicable state and local law; (iii) promotion of technical advances in the art of manufacturing controlled substances and the development of new substances; (iv) prior conviction record of the applicant under federal or state laws relating to the manufacture, distribution, or dispensing of controlled substances; (v) past experience in the manufacture, distribution, or dispensing of controlled substances and the existence in an applicant's establishment of effective controls against diversion; and (vi) other factors relevant to and consistent with public health and safety. Additional considerations that apply to applications to manufacture or to import controlled substances in Schedules I and II include: consistency with obligations under international treaties, and "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."³⁴

The burden of proof varies by controlled-substance schedule. For example, DEA must register an applicant to distribute a controlled substance in Schedule I or II, or to manufacture or distribute controlled substances in Schedules III-V, "unless [the agency] determines that the issuance of such registration is inconsistent with the public interest."³⁵ By contrast, DEA is required to register an applicant to manufacture a Schedule II controlled substance only "if [the agency] determines that such registration is consistent with the public interest" and with treaty obligations.³⁶

Registration procedure also varies, to some degree, according to business activity and schedule. For example, the various applications to handle Schedule III-V controlled substances are vetted solely by DEA, as the agency deems appropriate. By contrast, applications to manufacture bulk quantities of Schedule II controlled substances typically are subject to public notice and the opportunity for comment from interested persons (including competitors).³⁷ An administrative-hearing process involving a DEA Administrative Law Judge may be required to process an application to import Schedule II substances into the United States from abroad.³⁸

[c] Expiration, Suspension, or Revocation of Registration

DEA registrants must periodically renew their authorizations to handle controlled substances. Registrations for manufacturers, distributors, and others usually last 1 year.³⁹ Registrations for dispensing or instruction (e.g., applicable to practitioners and pharmacies) are generally valid for 3 years after issuance.⁴⁰

Registrations may be suspended or revoked for cause, in accordance with procedural and evidentiary standards.⁴¹

[2] Physical and Other Security Controls

A second key system for accountability of controlled substances requires stringent physical and other security controls. These are intended to minimize opportunities for the diversion of controlled substances from licit into illicit channels.

Security standards vary according to the type of controlled substance handled and the business activity at issue. Manufacturers, distributors, importers, and exporters of Schedule I or Schedule II controlled substances are subject to the most demanding requirements, including an obligation to store materials in a safe or vault that complies with DEA standards.⁴² Regulations applicable to Schedule III-V controlled substances, by contrast, provide alternative storage means, including an alarmed, fenced cage.⁴³ Manufacturing areas for all controlled substances must be carefully controlled and monitored.⁴⁴ There are restrictions on the ability of registrants to commingle controlled substances for storage and other purposes.⁴⁵

Other security requirements applicable to registered manufacturers, distributors, importers, and exporters include: a good-faith obligation to determine that a prospective purchaser...