Noramco of Delaware, Inc. v. Drug Enforcement Administration

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United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued December 11, 2003 Decided July 23, 2004

No. 02-1211

NORAMCO OF DELAWARE, INC.,
PETITIONER

v.

DRUG ENFORCEMENT ADMINISTRATION,
RESPONDENT

JOHNSON MATTHEY, INC.,
INTERVENOR

Bills of costs must be filed within 14 days after entry of judgment.
The court looks with disfavor upon motions to file bills of costs out
of time.
 2

No. 03–1060

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

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.
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
 3

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 hazard-
ous 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), classi-
fies 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 In order to import or
1 The dangerousness and abuse potential of the drugs decrease

with each schedule. Section 812 directs that drugs be assigned to
the five schedules according to the following criteria:
(1) Schedule I.—
(A) The drug or other substance has a high potential for
abuse.
(B) The drug or other substance has no currently accepted
medical use in treatment in the United States.
(C) There is a lack of accepted safety for use of the drug or
other substance under medical supervision.
(2) Schedule II.—
(A) The drug or other substance has a high potential for
abuse.
(B) The drug or other substance has a currently accepted
medical use in treatment in the United States or a currently
accepted medical use with severe restrictions.
(C) Abuse of the drug or other substances may lead to
severe psychological or physical dependence.
(3) Schedule III.—
(A) The drug or other substance has a potential for abuse
less than the drugs or other substances in schedules I and II.
 4

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 consis-
tent with the public interest and with United States obli-
gations 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 com-
pounds] into other than legitimate medical, scientific, re-
search, 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 unin-
terrupted supply of these substances under adequately com-
petitive conditions for legitimate medical, scientific, research,

(B) The drug or other substance has a currently accepted
medical use in treatment in the United States.
(C) Abuse of the drug or other substance may lead to
moderate or low physical dependence or high psychological
dependence.
(4) Schedule IV.—
(A) The drug or other substance has a low potential for
abuse relative to the drugs or other substances in schedule
III.
(B) The drug or other substance has a currently accepted
medical use in treatment in the United States.
(C) Abuse of the drug or other substance may lead to limited
physical dependence or psychological dependence relative to
the drugs or other substances in schedule III.
(5) Schedule V.—
(A) The drug or other substance has a low potential for
abuse relative to the drugs or other substances in schedule
IV.
(B) The drug or other substance has a currently accepted
medical use in treatment in the United States.
(C) Abuse of the drug or other substance may lead to limited
physical dependence or psychological dependence relative to
the drugs or other substances in schedule IV.

21 U.S.C. § 812(b).
 5

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 develop-
ment 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 sub-
stances, 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 regis-
tered to import opium or poppy straw concentrate, the NRMs
from which the narcotic alkaloids morphine, codeine and
thebaine are extracted to produce oxycodone and hydroco-
done, it had to rely on supplies from Noramco and Mallinck-
rodt, 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 regis-
tration to include importation of opium and poppy straw
concentrate. At the same time it applied to renew its regis-
tration to manufacture Schedule I and II controlled sub-
stances 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 pro-
 6

cessed,’’ (2) provide the DEA with a timetable for its pro-
posed ‘‘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) (‘‘Rec-
ommended 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 Admin-
istrator adopted and incorporated the ALJ’s findings and
conclusions ‘‘in their entirety’’ and granted Johnson Matthey
‘‘a conditional registration until such time as Johnson Mat-
they’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, mor-
phine, 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 Recom-
mended 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
 7

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 registra-
tion approval. Malinckrodt intervened in the challenge to
Penick’s registration. We address each registration separate-
ly.

II. Johnson Matthey’s Registration
Noramco challenges the DEA’s conditional grant of John-
son Matthey’s registration application on two grounds: (1)
the DEA misconstrued its obligation to ensure effective diver-
sion 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 meritori-
ous.
First, Noramco contends the DEA’s approval of Johnson
Matthey’s registration contravenes the plain language of sec-
tion 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, No. 03–1120, slip op. at 10 (D.C.
Cir. June 22, 2004) (quoting Chevron U.S.A. Inc. v. Natural
Res. Def. Council, 467 U.S. 837, 842–43 (1984)). Noramco
contends that under Chevron step one, the 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
 8

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 con-
ditions for legitimate TTT purposes,’’ 21 U.S.C. § 823(a)(1).
We disagree.
Section 823(a)(1) does not expressly speak to whether the
DEA must consider the number of importers necessary to
provide an adequate supply if it determines diversion will be
effectively controlled regardless. The stated purpose of sec-
tion 823(a)(1) is to effectively control against diversion and it
expressly directs the DEA to limit competition only as a
means to achieve ‘‘maintenance’’ of such control. In the
absence of an express contrary statutory directive, the DEA
reasonably concluded under Chevron step 2 that ‘‘if DEA
determines that there would be no increased difficulty in
controlling diversion, the requirements of [section 823(a)(1)]
are satisfied, and an analysis of adequate competition is not
required.’’ 67 Fed. Reg. at 39,044; see also id. at 39,043–44
(‘‘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 register-
ing another manufacturer will not increase the difficulty of
maintaining effective controls against diversion.’ ’’) (quoting
Bulk Manufacture of Schedule I and II Substance, 39 Fed.
Reg. 12,138 (DEA April 13, 1974)).2 The DEA determined,
2 Noramco objects to the DEA’s citation to this 1974 policy
statement because the two rules proposed therein were not subse-
quently adopted. In this case, however, the DEA treated the policy
statement merely as instructive and supportive of its independent
construction of the statutory language. See ALJ Op. I at 43–44 &
n.37 (finding policy statement to be ‘‘instructive but not determina-
tive of the proper interpretation of the statute’’). As the ALJ
noted, the policy statement is also ‘‘consistent with the relevant
regulatory language currently controlling in the importer applica-
tion process’’ ALJ Op I. at 43–44 & n.38 (noting that ‘‘[t]he current
regulation concerning the registration of a manufacturer of Sched-
ule I and II substances states: ‘(b) In order to provide adequate
 9

based on substantial expert testimony, that Johnson Mat-
they’s registration is consistent with section 823(a)(1) because
it found that ‘‘Johnson Matthey is in compliance with DEA
regulations’’ and ‘‘maintain[s] effective controls against diver-
sion of controlled substances,’’ 67 Fed. Reg. at 39,044–45—
findings that Noramco does not dispute, see Pet’r Br. (02–
1211) at 24. After analyzing the other five statutory factors,
the DEA concluded that registration is in the public interest
based on findings that Johnson Matthey’s registration (1)
‘‘promote[s] technical advances in the manufacturing of oxyco-
done and hydrocodone’’ because Johnson Matthey had ob-
tained or applied for 6 patents to more efficiently produce
APIs and (2) helps ensure a steady supply of APIs and
pharmaceuticals. 67 Fed. Reg. at 39,045, ALJ Op. I at 16–17.
Thus, under the DEA’s permissible interpretation of section
823(a), it was required to approve Johnson Matthey’s regis-
tration
Noramco challenges the DEA’s reading of section 823(a)(1)
on two grounds. First, Noramco charges that the DEA’s
interpretation ignores the distinction between the statutory
regulation of Schedule I and II substances, at issue here, and
of Schedule III and IV substances. Noramco points out that
section 823(d), which governs Schedule III and IV substances,
lists the same six public interest factors as section 823(a)—
except that the first factor in 823(d)(1) lacks the limiting
prepositional phrase addressing supply and competition con-
tained in section 823(a)(1) (‘‘by limiting the importation and
bulk manufacture of such controlled substances to a number
of establishments which can produce an adequate and unin-
terrupted supply of these substances under adequately com-
petitive conditions for legitimate medical, scientific, research,
and industrial purposes’’). The DEA’s interpretation, No-
ramco argues, ‘‘eviscerates’’ this distinction by eliminating the

competition, the Administrator shall not be required to limit the
number of manufacturers in any basic class to a number less [than]
that consistent with maintenance of effective controls against diver-
sion solely because a smaller number is capable of producing an
adequate and uninterrupted supply.’ ’’ (quoting 21 C.F.R.
§ 1301.33(b) (1999))).
 10

competition factor from the public interest calculus. Not so.
Under the DEA’s interpretation, it must still ensure that the
number of importers and manufacturers is limited where such
limitation is necessary to maintain effective diversion con-
trols; it is only where, as here, the DEA affirmatively finds
that diversion will be effectively controlled without regard to
limiting competition that it is not required to inquire into
market competitiveness.
Second, Noramco contends the DEA’s interpretation is
inconsistent with the CSA’s legislative history and with the
testimony before the ALJ by a former DEA administrator.
The statements Noramco cites, however, simply reflect a
concern that the marketing of Schedule I and II controlled
substances not be so broadened as to enhance the risk of
diversion. See Pet’r Br. (02–1211) at 42–44 (quoting S. Rep.
No. 91–613 at 7 (1969) (explaining that section 823(a)(1)
addresses ‘‘concern TTT that parts of [the CSA] TTT may
tend to expand the commerce in controlled dangerous sub-
stances, particularly narcotics, possibly adding to the danger
of diversion and leading to unfavorable changes in the price
structures of these substances’’) (first ellipsis added); CSA,
Hearings before the Subcomm. to Investigate Juvenile De-
linquency of Sen. Comm. on the Judiciary, 91st Cong. 261–
62 (1969) (Statement of Attorney Gen. Mitchell) (‘‘[T]here is
no intention on the part of the Justice Department nor the
Bureau of Narcotics and Dangerous Drugs by this provision
to expand beyond necessity TTT any manufacturers in this
particular area’’); id. at 371 (Statement of Dep’t of Justice)
(‘‘If evidence indicates that additional licensing will result in
more reasonable prices with no significant diminution in the
effectiveness of drug control, the Attorney General should be
able to license the additional manufacturers.’’)); Pet’r Br.
(02–1211) at 40 (quoting testimony of former DEA Adminis-
trator Peter Bensinger) (‘‘Given the intent of the law and
regulations to limit the number of registrants, in administer-
ing the law one must accept that not all qualified persons
who seek to register are entitled to be registeredTTTT The
public interest is served by limiting the access to NRMS to a
much smaller number of companies than would be appropri-
 11

ate in a free market.’’). That concern is not in play where,
as here, the DEA affirmatively finds that diversion is effec-
tively controlled.
Noramco next contends that the DEA acted arbitrarily and
capriciously in not requiring that Johnson Matthey submit
‘‘concrete’’ plans for how it will import and process NRMs
(specifically regarding the technology it will use, the amount
and identity of NRMs imported, the kind of plant it will
construct, the technical expertise of its employees and its
commitment to spend sufficient funds). Noramco asserts
that by failing to do so the DEA held Johnson Matthey to a
‘‘lower standard of proof’’ than it imposed when it granted the
registration application of McNeilab, Inc. in 1981. Pet’r Br.
(02–1211) 57. We see no material difference in the DEA’s
treatment of the two applicants. McNeilab’s application was
approved ‘‘contingent upon the successful completion of all
necessary and pertinent actions outlined in the applications,
such as the construction of a secure manufacturing facility,
and upon the ultimate approval of those actions by the Drug
Enforcement Administration.’’ McNeilab, Inc., 46 Fed. Reg.
22,089 (DEA Apr. 15, 1981) (grant of registration; adopting
findings of fact and conclusions of law from NcNeilab, Inc,
Docket No. 78–12 (Aug. 20, 1980)). This is substantially what
the DEA did in approving Johnson Matthey’s application
‘‘upon Johnson Matthey’s providing to DEA, prior to the
receipt of the first shipment of NRMs, sufficient information
concerning its facilities and procedures contingent upon the
successful completion of all necessary and pertinent actions
outlined in the applications, such as the construction of a
secure manufacturing facility, and upon the ultimate approval
of those actions by the Drug Enforcement Administration.’’
67 Fed. Reg. at 39,045. In each case, the DEA withheld final
approval pending the applicant’s completion of its facilities
and the DEA’s ultimate approval thereof. Noramco com-
plains in particular that the DEA did not require that John-
son Matthey, as McNeilab was required to do, provide a
‘‘concrete business plan calling for the importation of opium
and the construction of a plant capable of converting opium
into APIs.’’ Pet’r Br. (02–1211) at 58. Unlike McNeilab,
 12

however, Johnson Matthey was already in the business of
importing and manufacturing controlled substances and had
facilities in place for doing so. Given Johnson Matthey’s
experience and its pre-existing facilities, the DEA reasonably
required less detailed specifications in advance of Jackson
Matthey’s proposed expansion.4

III. Penick’s Registration
Noramco and intervenor Mallinckrodt raise both statutory
and evidentiary challenges to the DEA’s approval of Penick’s
registration. We address, and reject, each of their argu-
ments in turn.
First, Noramco and Mallinckrodt assert the DEA misinter-
preted section 823(a)(1) as not requiring it to consider the
effect of Penick’s registration on diversion overseas, specifi-
cally potential diversion in India, a primary source of import-
ed NRMs.5 This argument fails for two reasons. First, the
DEA in fact considered and rejected the contention that
Penick’s registration would increase diversion in India. No-
ramco argued before the agency that Penick’s use of mor-
phine-based technology was less efficient than Noramco’s use
of a high-thebaine-content poppy to produce oxycodone and
would therefore increase demand, cultivation and production
of opium in India and, in turn, the likelihood of diversion
there. See JA 145–49 (Decl. of Noramco Vice President
Michael Kindergan) (citing Decl. of Michael Wilson, Ph.D.).
The ALJ found that ‘‘Noramco’s and Mallinckrodt’s claims
that registering Penick would increase diversion in India are
speculative at best, particularly in light of the as-yet-unknown
impact of the expanded use of high-thebaine-content poppy
4 We have no basis to speculate, as Noramco asserts, that the

DEA’s review of Johnson Matthey’s final submissions will be less
than ‘‘rigorous.’’ See Pet’r Br. (02–1211) at 58.
5 The ‘‘80/20 Rule,’’ adopted by the DEA in 1981, requires that
‘‘[a]t least eighty (80) percent of the narcotic raw material imported
into the United States shall have as its original source Turkey and
India.’’ 21 C.F.R. § 1312.13(g).
 13

straw as a narcotic raw material.’’ ALJ Op. II at 94.6 We
agree with the ALJ’s assessment, especially in light of the
testimony by Penick’s research and development director that
Penick could also manufacture oxycodone from high-thebaine
poppy straw. See JA 997, 1004 (testimony of Bao–Shan
Huang, Ph.D.) In any event, the DEA’s alternate determina-
tion that it is not required to consider possible diversion
overseas reflects a reasonable construction of section
823(a)(1) and we therefore uphold it under step two of
Chevron.
As both the ALJ and the DEA noted, section 823(a)(1) is
silent on whether the ‘‘diversion’’ the DEA must consider is
limited to the United States or includes unlawful diversion
overseas as well.7 Nonetheless, the language of the statute
itself, in its focus on importation and domestic manufacturing,
suggests, reasonably enough, that the Congress was con-
cerned with preventing diversion in this country rather than
abroad. The legislative history similarly suggests an intent
to prevent diversion through control of commercial activities
that occur in this country, rather than in the countries of
origin. See Comprehensive Drug Abuse Prevention and Con-
trol Act of 1970, H. Rep. No. 91–1444 (Sept. 10, 1970),
6 It is questionable whether Noramco has preserved a challenge

to this finding, which it only barely disputes in a single paragraph of
the factual portion of its opening brief, Pet’r Br. (03–1060) at 43.
See United States v. Hall, 370 F.3d 1204, 1209 n.4 (D.C. Cir. 2004)
(‘‘[O]ne sentence, unaccompanied by argument or any citation to
authority, does not preserve the issue for decision.’’ (citing United
States v. Mathis, 216 F.3d 18, 27 n.4 (D.C. Cir. 2000); SEC v.
Banner Fund Int’l, 211 F.3d 602, 613–14 (D.C. Cir. 2000))).
7 Noramco’s brief repeatedly cites and quotes the Single Conven-
tion on Narcotic Drugs, a multinational treaty under which 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,’’ 68 Fed. Reg. at 6949. Nonetheless,
Noramco makes clear that ‘‘the command that DEA must take
account of ‘diversion’ comes from the text of the CSA itself,’’
specifically from section 823(a)(1), and not from the treaty. Pet’r
Br. (03–1060) at 48.
 14

reprinted in 1970 U.S.C.C.A.N. 4566, 4571–72 (‘‘The Bill is
designed to improve the administration and regulation of the
manufacturing, distribution, and dispensing of controlled
substances by providing for a ‘closed’ system of drug distribu-
tion for legitimate handlers of such drugs. Such a closed
system should significantly reduce the widespread diversion
of these drugs out of legitimate channels into the illicit
marketTTTT’’). On the flip side, we find unpersuasive the
authorities Noramco cites to support its assertion that ‘‘diver-
sion,’’ within the meaning of section 823(a)(1), is intended to
include pre-importation diversion overseas. Neither the
CSA’s restrictions on limiting the United States’ export of
narcotics nor policies, unrelated to the CSA, that reflect
concern over overseas diversion nor the testimony of a former
DEA Administrator (cautioning against registering importers
whose activities might adversely affect ‘‘ ‘the worldwide con-
trol, stability and supply of NRMs’ ’’ or ‘‘ ‘the international
drug control effort,’ ’’Pet’r Br. at (03–1060) at 53 (quoting
testimony of former Administrator Peter Bensinger)), negate
the reasonableness of the DEA’s construction of section
326(a)(1).8
Next, Noramco and Mallinckrodt challenge the DEA’s deci-
sion on a sufficiency of evidence ground. Under the CSA, the
8 Noramco and Mallinckrodt also argue that the DEA’s position
here is inconsistent with that expressed by DEA staff members in
two other proceedings pending before the DEA (Chattem Chems.,
Inc., DEA Docket No. 01–45, and Houba, Inc., DEA Docket No. 02–
6), in support of which Noramco has filed a supplemental appendix
of materials from those proceedings in No. 03–1060 and moved to
file a similar supplemental appendix in 02–1211. Challenging the
DEA’s decision here based on the agency’s subsequent position,
however, ‘‘puts the cart before the horse.’’ Cellular Mobile Sys. of
Penn., Inc. v. FCC, 782 F.2d 182, 207–08 (D.C. Cir. 1985). It is the
DEA’s position here to which it will be held in the later decisions.
Id. In any event, views expressed by staff do not constitute
authoritative agency action. See WHX Corp. v. SEC, 362 F.3d 854.
860 (D.C. Cir. 2004). Accordingly, we deny Noramco’s motion to
file a supplemental brief in No. 02–1211 and grant Penick’s motion
to strike the supplemental appendix filed in No. 03–1060.
 15

DEA’s findings of fact, ‘‘if supported by substantial evidence,
shall be conclusive.’’ 21 U.S.C. § 877; see MD Pharmaceuti-
cal, Inc. v. DEA, 133 F.3d 8, 14 (D.C. Cir. 1998). We
conclude that the challenged portions of the DEA’s decision
are supported by substantial evidence in the record.
Noramco and Mallinckrodt first assert that substantial
evidence does not support the DEA’s finding, in support of
registration, that competition among NRM importers that
process APIs is not adequate.9 See 21 U.S.C. § 823(a)(1)
(directing DEA to consider ‘‘maintenance of effective controls
against diversion of [controlled substances and their com-
pounds] into other than legitimate medical, scientific, re-
search, 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 unin-
terrupted supply of these substances under adequately com-
petitive conditions for legitimate medical, scientific, research,
and industrial purposes’’). The ALJ concluded that competi-
tion was inadequate based on the undisputed evidence that
‘‘the prices of active pharmaceutical ingredients rose steeply
from 1991 to 2000,’’ concluding that ‘‘[t]his price increase,
absent specific explanation, is strong evidence of a lack of
competition in the active pharmaceutical ingredient market.’’
ALJ Op. II at 92. The ALJ acknowledged that during the
period there were a number of ‘‘switches’’ by purchasers from
one of the bulk suppliers (Noramco and Mallinckrodt) to the
9 Mallinckrodt also complains that the DEA’s decisions are incon-
sistent regarding whether the Agency is required to analyze the
adequacy of competition and supply before issuing a registration,
noting that, while the DEA performed such an analysis in this case,
it did not do so in Johnson Matthey. We reject this argument for
two reasons. First, whatever injury Mallinckrodt may claim from
this inconsistency occurred not in this case but in Johnson Matthey,
in which Mallinckrodt elected not to participate before this court.
In any event, as noted supra pp. 8–9 & n.2, the DEA has long
adhered to the policy that it need not address adequacy of competi-
tion if, as the DEA found in the case of Johnson Matthey’s
registration, effective diversion controls are in place.
 16

other but concluded they ‘‘do not demonstrate strong compe-
tition.’’10 Id.
Noramco and Mallinckrodt argue, as they did before the
agency, that the price increases are attributable to rising
costs of raw materials, rather than lack of competition, and
cite their expert’s testimony before the ALJ that their profit
10 The ALJ analyzed the adequacy of competition under the
factors set out in 21 C.F.R. § 1301.34(d), which provides:
(d) In determining whether competition among the domestic
manufacturers of a controlled substance is adequate within the
meaning of paragraphs (b)(1) and (b)(6)(iii) of this section, as
well as section 1002(a)(2)(B) of the Act (21 U.S.C. 952(a)(2)(B)),
the Administrator shall consider:
(1) The extent of price rigidity in the light of changes in:
(i) raw materials and other costs and
(ii) conditions of supply and demand;
(2) The extent of service and quality competition among the
domestic manufacturers for shares of the domestic market
including:
(i) Shifts in market shares and
(ii) Shifts in individual customers among domestic manu-
facturers;
(3) The existence of substantial differentials between domes-
tic prices and the higher of prices generally prevailing in
foreign markets or the prices at which the applicant for
registration to import is committed to undertake to provide
such products in the domestic market in conformity with the
Act. In determining the existence of substantial differentials
hereunder, appropriate consideration should be given to any
additional costs imposed on domestic manufacturers by the
requirements of the Act and such other cost-related and
other factors as the Administrator may deem relevant. In no
event shall an importer’s offering prices in the United States
be considered if they are lower than those prevailing in the
foreign market or markets from which the importer is ob-
taining his/her supply;
(4) The existence of competitive restraints imposed upon
domestic manufacturers by governmental regulations; and
(5) Such other factors as may be relevant to the determina-
tions required under this paragraph.
 17

margins actually decreased between 1988 and 2000. The
ALJ, however, found the increases in API prices and NRM
costs ‘‘do not correlate strongly,’’ id., and this finding is
supported by the evidence. Penick’s expert economic wit-
ness, Michael I. Cragg, disputed the opinions of Noramco’s
and Mallinckrodt’s experts, explaining they had compared
apples with oranges. Cragg testified that the comparison of
API prices and NRM costs ‘‘does not account for the relative
importance of NRM inputs in overall costs’’ because ‘‘[a]
kilogram of API and a kilogram of NRM are not compara-
ble—the mistake is analogous to comparing the price of a
gallon of gasoline to the price of a gallon of crude oil.’’ JA
193 (Written Revised Direct Testimony of Michael I. Cragg,
Ph.D.). The ALJ credited Cragg’s testimony over the other
experts’, see ALJ Op. II at 89 (‘‘[T]he two types of increases
[costs of NRMs and prices of APIs] seem to be only loosely
related when the proportion of the price of the active pharma-
ceutical ingredient that is attributable to the narcotic raw
material is taken into consideration.’’), and our review of her
choice among the ‘‘ ‘disputing expert witnesses’ ’’ is ‘‘particu-
larly deferential.’’ Fla. Mun. Power Agency v. FERC. 315
F.3d 362, 368 (D.C. Cir. 2003) (quoting Wis. Valley Improve-
ment Co. v. FERC, 236 F.3d 738, 746–47 (D.C. Cir. 2001)).
Moreover, it is not surprising that profit margins declined
somewhat after 1994 when Noramco joined Mallinckrodt in
the market, transforming it from a monopoly to a duopoly—
but this does not mean the minimal competition between two
market participants was adequate. Noramco and Mallinck-
rodt also cite the evidence of customer switches between
them as evidence of competition but, as the ALJ noted, citing
Cragg’s testimony, there was no evidence these switches were
related to changes in API prices. Last, Noramco and Mal-
linckrodt assert that increased competition will not reduce the
price of drugs to the consumer. This may be true but
expanding the playing field may yield other benefits such as
reduced prices for bulk API purchasers and improved prod-
uct quality, reliability of supply, financial terms and condi-
tions and order lead times.
 18

Finally, Noramco challenges the DEA’s finding that Pen-
ick’s registration will promote technical advances. Specifical-
ly, Noramco asserts that Penick’s morphine-based production
technology is less efficient than Noramco’s high-thebaine
poppy technology. This argument overlooks the substantial
evidence that Penick has developed and patented numerous
other processing technologies. See, e.g., JA 42–43, 72, 2384–
85, 2696. Accordingly, we reject this argument as well.

* * *
For the foregoing reasons, the petitions for review in these
cases are denied.
So ordered.