Noramco of Delaware v. Drug Enforcement Admin., No. 02-1211.

CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)
Writing for the CourtKaren Lecraft Henderson
Citation375 F.3d 1148
PartiesNORAMCO 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.
Docket NumberNo. 03-1060.,No. 02-1211.
Decision Date23 July 2004
375 F.3d 1148
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.
No. 02-1211.
No. 03-1060.
United States Court of Appeals, District of Columbia Circuit.
Argued December 11, 2003.
Decided July 23, 2004.

Page 1149

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

Thomas C. Morrison argued the cause for the petitioners. John A. Gilbert, Jr. and Douglas B. Farquhar were on brief.

Harry J. Matz, Attorney, United States Department of Justice, argued the cause for the respondents. Joseph S. Uberman, Attorney, United States Department of Justice, was on brief. Rose A. Briceno, Attorney, United States Department of Justice, entered an appearance.

Page 1150

James Dabney Miller argued the cause for intervenor Johnson Matthey, Inc.

Steven J. Poplawski and Scott M. Badami were on brief for intervenor Mallinckrodt, Inc.

Wayne H. Matelski and Deborah M. Shelton were on brief for intervenor Penick Corporation, Inc.

Before: GINSBURG, Chief Judge, and HENDERSON and ROGERS, Circuit Judges.

Opinion for the court filed by Circuit Judge HENDERSON.

KAREN LECRAFT HENDERSON, Circuit Judge:


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).1

Page 1151

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

Page 1152

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 address each registration separately.

II. Johnson Matthey's Registration

Noramco challenges the DEA's conditional grant of Johnson Matthey's registration application on two grounds: (1) the DEA misconstrued its obligation to ensure effective diversion control under section 823(a) and (2) the DEA acted arbitrarily and capriciously in failing to require Johnson Matthey to submit detailed plans for importing NRMs and processing them into APIs. We find neither ground meritorious.

First, Noramco contends the DEA's approval of Johnson Matthey's registration contravenes the plain language of section 823(a)(1). We review the DEA's interpretation of section 823 under the familiar two-step Chevron framework:

We first ask "whether Congress has directly spoken to the precise question at issue," in which case we "must give effect to the unambiguously expressed intent of Congress." If the "statute is silent or ambiguous with respect to the specific issue," however, we move to the second step and defer to the agency's interpretation as long as it is "based on a permissible construction of the statute."

Bluewater Network v. EPA, 372 F.3d 404, 410 (D.C.Cir.2004) (quoting Chevron U.S.A. Inc. v. Natural Res. Def. Council, 467 U.S. 837, 842-43, 104 S.Ct. 2778, 2781, 81 L.Ed.2d 694 (1984)). Noramco contends that under Chevron step one, the

Page 1153

unambiguous language of section 823(a)(1) requires that, before the DEA approves an application for registration to import a Schedule I or II controlled substance, the agency is required to balance the risk of unlawful diversion of the substance against the need for competition by ensuring both (1) that effective controls will be maintained against diversion and (2) that approval will not increase the number of importers beyond that which can "produce an adequate and uninterrupted supply of these substances under adequately competitive conditions for legitimate ... purposes," ...

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11 practice notes
  • Registration revocations, restrictions, denials, reinstatements: Chein, Edmund, MD,
    • United States
    • Federal Register February 12, 2007
    • 12 Febrero 2007
    ...factor one supports a finding that granting Respondent's application would be inconsistent with the public interest. \24\ Noramco v. DEA, 375 F.3d 1148, 1156 (D.C. Cir. 2004), is not to the contrary. That case involved an assertion by a competitor of a domestic manufacturer that granting th......
  • John Doe, Inc. v. Drug Enforcement Admin., No. 06-1270.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • 27 Abril 2007
    ...under the CSA have been filed directly in the courts of appeals pursuant to 21 U.S.C. § 877. See, e.g., Noramco of Del., Inc. v. DEA, 375 F.3d 1148, 1152 (D.C.Cir.2004); Fry v. DEA, 353 F.3d 1041, 1042-44 (9th Cir. 2003); Humphreys v. DEA, 96 F.3d 658, 659-60 (3d Cir.1996); Alra Labs., Inc.......
  • Craker v. Drug Enforcement Admin., No. 09–1220.
    • United States
    • U.S. Court of Appeals — First Circuit
    • 15 Abril 2013
    ...controls against diversion. Craker I at 85; Craker II, 74 Fed. Reg. at 2102–03;see Noramco of Del., Inc. v. Drug Enforcement Agency, 375 F.3d 1148, 1152–54, 1157 n. 8 (D.C.Cir.2004) (noting DEA's position that supply and competition can be disregarded if registration does not increase risk ......
  • Penick Corp., Inc. v. Drug Enforcement Admin., No. 06-1105.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • 26 Junio 2007
    ...Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). See Noramco of Del., Inc. v. DEA, 375 F.3d 1148, 1152 Penick raises two primary challenges to the DEA's approval of Chattem's registration application: (1) the DEA misconstrued its obligati......
  • Request a trial to view additional results
8 cases
  • John Doe, Inc. v. Drug Enforcement Admin., No. 06-1270.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • 27 Abril 2007
    ...under the CSA have been filed directly in the courts of appeals pursuant to 21 U.S.C. § 877. See, e.g., Noramco of Del., Inc. v. DEA, 375 F.3d 1148, 1152 (D.C.Cir.2004); Fry v. DEA, 353 F.3d 1041, 1042-44 (9th Cir. 2003); Humphreys v. DEA, 96 F.3d 658, 659-60 (3d Cir.1996); Alra Labs., Inc.......
  • Craker v. Drug Enforcement Admin., No. 09–1220.
    • United States
    • U.S. Court of Appeals — First Circuit
    • 15 Abril 2013
    ...controls against diversion. Craker I at 85; Craker II, 74 Fed. Reg. at 2102–03;see Noramco of Del., Inc. v. Drug Enforcement Agency, 375 F.3d 1148, 1152–54, 1157 n. 8 (D.C.Cir.2004) (noting DEA's position that supply and competition can be disregarded if registration does not increase risk ......
  • Penick Corp., Inc. v. Drug Enforcement Admin., No. 06-1105.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • 26 Junio 2007
    ...Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). See Noramco of Del., Inc. v. DEA, 375 F.3d 1148, 1152 Penick raises two primary challenges to the DEA's approval of Chattem's registration application: (1) the DEA misconstrued its obligati......
  • Eagle Pharms., Inc. v. Alex M. Azar II in His Official Capacity, Civil Action No. 16-790 (TJK)
    • United States
    • United States District Courts. United States District Court (Columbia)
    • 8 Junio 2018
    ...are up. This benefit is much less substantial than the first manufacturer's, but still meaningful. Cf. Noramco of Del., Inc. v. DEA, 375 F.3d 1148, 1158 (D.C. Cir. 2004) (noting that a drug duopoly offered higher profit margins than free competition). And so on for subsequent manufacturers.......
  • Request a trial to view additional results

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