02-5243. Y & M Distributions, Inc.; Denial of Application

On or about July 27, 2000, the Deputy Assistant Administrator, Office of Diversion Control, Drug Enforcement Administration (DEA), issued an Order to Show Cause (OTSC) by certified mail to Y & M Distributors, Inc. (Y & M), located in Kissimmee, Florida, notifying it of an opportunity to show cause as to why the DEA should not deny its application, dated November 9, 1999, for a DEA Certificate of Registration as a distributor of the List I chemicals ephedrine, pseudoephedrine, and plhenylpropanolamine, pursuant to 21 U.S.C. 823(h), as being inconsistent with the public interest. The order also notified Y & M that, should no request for hearing be filed within 30 days, the right to a hearing would be waived.

The OTSC was received August 4, 2000, as indicated by the signed postal receipt. In addition, on August 2, 2000, DEA investigators from the Orlando, Florida District Office traveled to Y & M's business premises and, when there was no answer to repeated knocking, affixed a copy of the OTSC to the front door. Since that time, no further response has been received from the applicant nor any person purporting to represent the applicant. Therefore, the Administrator of the DEA, finding that (1) thirty days having passed since receipt of the Order to Show Cause, and (2) no request for a hearing having been received, concludes that Y & M is deemed to have waived its right to a hearing. After considering relevant material from the investigative file in this matter, the Administrator now enters his final order without a hearing pursuant to 21 CFR 1301.43(d) and (e) and 1301.46.

The Administrator finds as follows. List I chemicals are chemicals that may be used in the manufacture of a controlled substance in violation of the Controlled Substances Act. 21 U.S.C. 802(34); 21 CFR 1310.02(a). Pseudoephedrine, ephedrine, and phenylpropanolamine are List I chemicals that are commonly used to illegally manufacture methamphetamine, a Schedule II controlled substance. Methamphetamine is an extremely potent central nervous system stimulant, and its abuse is a growing problem in the United States.

The Administrator finds that on or about November 9, 1999, an application was received by the DEA Chemical Operations Registration section on behalf of Y & M for DEA registration as a distributor of the three above-mentioned List I chemicals. The DEA pre-registration inspection revealed that Y & M had no prior experience in distributing List I chemical products, and appeared unprepared to accept the responsibilities of a DEA registrant. The DEA investigation also revealed a number of Y & M's proposed customers and suppliers were being investigated for violations related to the distribution of List I chemicals; and further revealed substantial evidence that one of Y & M's corporate officers was involved in the illegal trafficking of pseudoephedrine.

Pursuant to 21 U.S.C. 823(h), the Administrator may deny an application for a DEA Certificate of Registration if he determines that granting the registration would be inconsistent with the public interest. Section 823(h) requires the following factors be considered:

(1) Maintenance by the applicant of effective controls against diversion of listed chemicals into other than legitimate channels;

(2) Compliance by the applicant with applicable Federal, State, and local law;

(3) Any prior conviction record of the applicant under Federal or State laws relating to controlled substances or to chemicals controlled under Federal or State law;

(4) Any past experience of the applicant in the manufacture and distribution of chemicals; and

(5) Such other factors as are relevant to and consistent with the public health and safety.

Like the public interest analysis for practitioners and pharmacies pursuant to subsection (f) of section 823, these factors are to be considered in the disjunctive; the Administrator may rely on any one or combination of factors and may give each factor the weight he deems appropriate in determining whether a registration should be revoked or an application for registration be denied. See, e.g. Energy Outlet, 64 FR 14,269 (1999). See also Henry J. Schwartz, Jr., M.D. 54 FR 16, 422 (1989).

The Administrator finds factors two, four, and five relevant to this application.

Regarding factor two, the applicant's compliance with applicable law, the investigation revealed evidence tha a corporate officer of Y & M is currently in violation of applicable law. the DEA investigation revealed substantial evidence from a reliable Confidential Source that a corporate officer of Y & M is involved in trafficking illegal pseudoephedrine.

Regarding factor four, the applicant's past experience in the distribution of chemicals, the DEA investigation revealed that the applicant has no previous experience related to handling or distributing listed chemicals.

Regarding factor five, other factors relevant to and consistent with the public safety, the Administrator finds that a corporate officer stated to investigators that, at the time of the pre-registration investigation, Y & M had only been in business approximately one year. Further, while Y & M and its employees/officers have no previous experience in distributing List I chemical products, a corporate officer expected these products to account for 20% of Y & M's business.

In addition, Y & M provided a proposed customer and supplier list that contains a number of firms that are currently under investigation for alleged diversion of List I chemicals. A corporate officer stated to investigators that Y & M planned to distribute List I chemical products to customers based outside of its usual geographical sales area. The corporate officer admitted that he knew maybe one or two of the 39 proposed customers listed. A number of the proposed customers are listed in a DEA computerized database as having derogatory information concerning their List I chemical handling practices. Therefore, Y & M has failed to adequately demonstrate either a legitimate supplier or a legitimate customer base for List I chemical products.

Therefore, for the above-stated reasons, the Administrator concludes that it would be inconsistent with the public interest to grant the application of Y & M. The Administrator finds the lack of knowledge concerning the proposed customers, the number of proposed suppliers and customers currently under investigation, and the lack of an adequately demonstrated legitimate supply of and demand for List I chemical products creates an environment conducive to diversion, and thus poses an unacceptable risk of diversion.

Accordingly, the Administrator of the Drug Enforcement Administration, pursuant to the authority vested in him by 21 U.S.C. 823 and 28 CFR 0.100(b) and 0.104, hereby orders that the application for a DEA Certificate of Registration submitted by Y & M be denied. This order is effective April 5, 2002.

Dated: February 22, 2002.

Asa Hutchinson,

Administrator.