United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued April 17, 2007 Decided June 26, 2007
No. 06-1105
PENICK CORPORATION, INC.,
PETITIONER
v.
DRUG ENFORCEMENT ADMINISTRATION,
RESPONDENT
CHATTEM CHEMICALS, INC. AND
MALLINCKRODT, INC.,
INTERVENORS
On Petition for Review of an Order of the
United States Drug Enforcement Agency
Wayne H. Matelski argued the cause for the petitioner. Julia
C. Tierney was on brief.
Steven J. Poplawski and Scott M. Badami were on brief for
intervenor Mallinckrodt, Inc. in support of the petitioner.
Brian M. Tomney, Attorney, United States Department of
Justice, argued the cause for the respondent. Teresa
A. Wallbaum, Attorney, was on brief.
Douglas J. Behr was on brief for intervenor Chattem
Chemicals, Inc. in support of the respondent.
2
Before: SENTELLE, HENDERSON and RANDOLPH, Circuit
Judges.
Opinion for the court filed by Circuit Judge HENDERSON.
KAREN LECRAFT HENDERSON, Circuit Judge: Chattem
Chemicals, Inc. (Chattem) applied to the Drug Enforcement
Administration (DEA) for registration as an importer of narcotic
raw materials (NRMs) pursuant to the Controlled Substances
Act, 21 U.S.C. §§ 801 et seq., and the Controlled Substances
Import and Export Act, 21 U.S.C. §§ 952 and 958 (collectively
referred to as CSA). Penick Corp. (Penick) opposed the
application and requested a hearing before the DEA, arguing
that Chattem’s registration as a NRM importer would increase
the danger of NRM diversion to illicit use and thereby
undermine the public interest. The Deputy Administrator of the
DEA granted the application, concluding that Chattem “met its
burden of proof to show that it is in the public interest . . . to
grant its application to be registered as an importer of NRMs.”
Chattem Chems., Inc., 71 Fed. Reg. 9834, 9839 (Feb. 27, 2006).
Penick petitions for review of the Deputy Administrator’s
decision and, as detailed below, we deny the petition.
I.
The CSA requires that the importation of NRMs and the
manufacture of their alkaloids—the most prominent of which
are morphine and codeine—remain tightly controlled in order to
prevent their diversion to illicit use. Accordingly, the CSA
prohibits the importation of NRMs into the United States unless
the importing company is registered by the DEA, 21 U.S.C.
§§ 952(a), 958(a), and importation is limited to “such amounts
of [NRMs] . . . as the Attorney General finds to be necessary to
provide for medical, scientific, or other legitimate purposes,” id.
3
§ 952(a)(1).1 The Attorney General “register[s] an applicant to
import or export [NRMs] if he determines that such registration
is consistent with the public interest and with United States
obligations under international treaties, conventions, or
protocols.” Id. § 958(a). In determining whether registration is
consistent with the public interest, the Attorney General must
consider the factors enumerated in section 823(a) of Title 21, see
id., which include:
(1) maintenance of effective controls against diversion
of particular controlled substances . . . 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 . . .
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) prior conviction record of applicant under Federal
and State laws relating to the manufacture, distribution,
or dispensing of such substances;
1
The Attorney General has delegated this function under the CSA
to the Administrator of the DEA, see 28 C.F.R. § 0.100(b), who, in
turn, delegated it to the DEA Deputy Administrator, see 28 C.F.R.
§ 0.104, App. § 7(j).
4
(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.
Id. § 823(a). Pursuant to these provisions, on February 9, 2001,
Chattem applied to the DEA for registration as an importer of
NRMs and bulk manufacturer of their alkaloids.
On December 18, 2001, the DEA approved Chattem’s
application for registration as a bulk manufacturer. Its
concurrent application to import NRMs was opposed, however,
by Penick, Noramco of Delaware, Inc. (Noramco) and
Mallinckrodt, Inc. (Mallinckrodt), all of which requested a
hearing on Chattem’s application under 21 C.F.R. § 1301.34(a).2
At the time of Chattem’s application, Noramco and
Mallinckrodt were the only registered importers of NRMs, a
group that Penick joined in 2004.3 Because of these potential
competitors’ opposition, then, the administrative law judge
(ALJ) conducted hearings on Chattem’s application in
September and October 2002 at which all parties—as well as the
government—“called witnesses to testify and introduced
2
Section 1301.34(a) permits a bulk manufacturer of the controlled
substance an applicant seeks to import to “file a written request for a
hearing on the application” and “[i]f a hearing is requested, the
Administrator shall hold a hearing on the application.” 21 C.F.R.
§ 1301.34(a); see also infra note 9.
3
Penick was registered after we rejected Noramco’s challenge to
the DEA’s interpretation and application of 21 U.S.C. § 823(a) in
granting Penick’s registration. See Noramco of Del., Inc. v. DEA, 375
F.3d 1148 (D.C. Cir. 2004).
5
documentary evidence” relating to the impact on the public
interest of Chattem’s registration. Chattem Chems., Inc., 71
Fed. Reg. at 9835. The ALJ ultimately recommended that
Chattem’s application be granted. See id.
On February 17, 2006, the Deputy Administrator heeded that
recommendation and decided “to grant [Chattem’s] application
to be registered as an importer of NRMs.” Id. at 9839. The
Deputy Administrator, applying 21 U.S.C. § 958(a), first
determined that Chattem’s registration would not violate any
international obligations of the United States because the
registration “would not likely cause significant increased
diversion” and thus it was not “ ‘essential’ to deny Chattem’s
application” in order to prevent global diversion of NRMs. Id.
at 9836. The Deputy Administrator then moved on to consider
the public interest factors outlined in 21 U.S.C. § 823(a).
Regarding Chattem’s potential impact on diversion, the Deputy
Administrator recognized that diversion “at the retail level has
greatly increased in recent years, and is an extremely serious
problem,” id. at 9836, but nonetheless concluded that “Chattem
ha[d] met its burden of proof in showing that its registration as
an importer of NRMs will not significantly interfere with the
maintenance of effective controls against diversion,” id. at 9838.
The Deputy Administrator noted the unchallenged adequacy of
Chattem’s internal security measures to prevent diversion of
narcotics to illicit use, the complete lack of “documented cases
of diversion of NRMs imported into the United States,” the
“DEA[’s] continued . . . regist[ration of] bulk manufacturers”
during the pendency of Chattem’s application and the fact that
the DEA already conducts regular inspections of Chattem as a
registered bulk manufacturer of alkaloids. Id. at 9836–37.
Accordingly, the Deputy Administrator found that the first
factor under 21 U.S.C. § 823(a) supported Chattem’s
registration. See id. at 9838.
6
The Deputy Administrator further determined that all but
one of the remaining public interest factors weighed in favor of
registration. She found that “[t]here is no significant evidence
that Chattem has failed to comply with applicable State and
local law” or violated state or federal narcotics regulations. Id.
She also determined that “the evidence showed that Chattem
possesses sufficient technology to process NRMs with
efficiency” because “Chattem introduced credible evidence . . .
that the processing of NRMs is not complicated, and that
Chattem has sufficient facilities to carry out the process,”
facilities already approved by the DEA for bulk manufacture of
NRM alkaloids. Id. at 9838–39.4 In light of these
considerations, the Deputy Administrator concluded that
“Chattem . . . met its burden of proof to show that it is in the
public interest . . . to grant its application to be registered as an
importer of NRMs.” Id. at 9839. Penick now petitions for
review.5
4
The only factor weighing against Chattem’s registration was the
applicant’s likelihood to “promot[e] . . . technical advances,” 21
U.S.C. § 823(a)(3), because “[t]here was little evidence . . . that
Chattem ha[d] achieved any noteworthy success in technical advances
in the manufacturing of controlled substances, or in the development
of new substances or patents,” Chattem Chems., Inc., 71 Fed. Reg. at
9838.
5
Because Chattem applied for both a registration and permission
to import NRMs, the Deputy Administrator noted that the proceeding
was a combined adjudication (the registration) and rulemaking (the
permission). Regarding the rulemaking, the Deputy Administrator
determined that (1) Chattem intended to import NRMs only for
legitimate use; (2) “there is nothing in the legislative history of the
[CSA] that supports any intention to limit the number of importers”
and; (3) the precise quantity of NRMs necessary for legitimate use is
7
II.
The Deputy Administrator’s findings of fact are conclusive
“if supported by substantial evidence,” 21 U.S.C. § 877, viewing
“the record in its entirety,” Universal Camera Corp. v. NLRB,
340 U.S. 474, 488 (1951). And although the DEA’s reasoning,
as distinguished from its factfinding, may be set aside if the
action is “arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law,” Tourus Records, Inc. v.
DEA, 259 F.3d 731, 736 (D.C. Cir. 2001) (quoting 5 U.S.C.
§ 706(2)(A)), that review is narrow and “we will uphold a
decision of less than ideal clarity if the agency’s path
may reasonably be discerned,” Bowman Transp., Inc. v.
Arkansas-Best Freight Sys., Inc., 419 U.S. 281, 286 (1974).
“At a minimum,” however, the arbitrary or capricious “standard
requires the agency to ‘examine the relevant data and articulate
a satisfactory explanation for its action including a rational
connection between the facts found and the choice made.’ ”
Tourus Records, 259 F.3d at 736 (quoting Motor Vehicle Mfrs.
Ass’n of United States, Inc. v. State Farm Mut. Auto. Ins. Co.,
463 U.S. 29, 43 (1983) (internal quotation omitted)). Our
statutory interpretation is governed by the deferential two-step
analysis of Chevron U.S.A. Inc. v. Natural Resources Defense
determined in separate proceedings. Chattem Chems., Inc., 71 Fed.
Reg. at 9835. Consequently, the Deputy Administrator concluded that
“Chattem’s proposed importation of [NRMs] is ‘necessary to provide
for medical, scientific, or other legitimate purposes,’ ” thereby
meeting the rulemaking requirements pursuant to 21 U.S.C. § 952(a).
Id. On appeal, neither Penick nor intervenor Mallinckrodt challenges
the rulemaking decision, focusing entirely on Chattem’s registration
(the adjudication) under 21 U.S.C. § 958(a). See Pet’r’s Br. at iii; Br.
of Intervenor Mallinckrodt at iii.
8
Council, Inc., 467 U.S. 837, 842–43 (1984). See Noramco of
Del., Inc. v. DEA, 375 F.3d 1148, 1152 (D.C. Cir. 2004).
Penick raises two primary challenges to the DEA’s approval
of Chattem’s registration application: (1) the DEA misconstrued
its obligations under 21 U.S.C. § 823(a)(1) by ignoring “the
systemic impact of [Chattem’s] registration” on diversion
“throughout the chain of distribution,” Pet’r’s Br. at 12; and (2)
the DEA acted arbitrarily and capriciously by “improperly
shifting the burden of proof from Chattem to the objectors,” id.
at 15. We find neither ground meritorious.
A.
Section 823(a)(1) requires the Deputy Administrator to
consider “maintenance of effective controls against diversion of
particular controlled substances . . . into other than legitimate
medical, scientific, research, or industrial channels” in
determining whether registration is consistent with the public
interest. 21 U.S.C. § 823(a)(1). Penick argues that, in section
823(a)(1), the Congress has “directly spoken”6 and “requires the
applicant to establish the systemic impact of its registration
throughout the chain of distribution, including the registration’s
6
In reviewing an agency’s interpretation of a statute it is charged
with implementing, “under the Chevron two-step, we stop the music
at step one if the Congress ‘has directly spoken to the precise question
at issue’ because we—and the agency—‘must give effect to [its]
unambiguously expressed intent.’ ” Northpoint Tech., Ltd. v. FCC,
412 F.3d 145, 151 (D.C. Cir. 2005) (quoting Chevron, 467 U.S. at
842–43) (alteration in original). “But if the statute is silent or
ambiguous, we dance on and, at step two, defer to the [agency’s]
interpretation if it is ‘based on a permissible construction of the
statute.’ ” Id. (quoting Chevron, 467 U.S. at 843).
9
impact on” diversion at the retail level.7 Pet’r’s Br. at 11–12.
Instead, Penick claims, the Deputy Administrator misinterpreted
this requirement and rendered the factor superfluous by focusing
her diversion discussion solely on Chattem’s internal security
measures, a factor properly covered by section 823(a)(5)’s
mandate to consider “the existence in the establishment of
effective control against diversion.” Id. at 12 (citing 21 U.S.C.
§ 823(a)(5)). Yet this claim fails for a simple reason: the
Deputy Administrator plainly considered and rejected the
contention that Chattem’s registration would increase retail-
level diversion.
Before the Deputy Administrator, “[t]he Government argued
that registering another importer could lead to increase[d]
diversion at the retail level because of the potential of increased
importation, increased manufacturing . . . and greater availability
of narcotic medication.” Chattem Chems., Inc., 71 Fed. Reg. at
9836. Indeed, the Deputy Administrator found “that the
diversion of . . . narcotics at the retail level has greatly increased
in recent years, and is an extremely serious problem.” Id. She
nonetheless concluded that Chattem’s registration would not
increase retail-level diversion because “there [was] little
evidence in the record that Chattem’s registration as an importer
would have any greater effect on diversion downstream
than DEA’s continued registration of bulk manufacturers.” Id.
Moreover, the Deputy Administrator noted the DEA’s ability to
control the level of NRM importation and diversion through
quotas and inspections, both of which already included Chattem
in its capacity as a registered bulk manufacturer of controlled
substances. Id. at 9836–37; cf. Noramco, 375 F.3d at 1155
7
Diversion at the retail level is also referred to as “downstream”
diversion. See Chattem Chems., Inc., 71 Fed. Reg. at 9836.
10
(rejecting, in part, claim that DEA misinterpreted CSA as not
requiring consideration of foreign diversion because “the DEA
in fact considered and rejected the contention that Penick’s
registration would increase diversion in India”). Accordingly,
we reject Penick’s challenge to the DEA’s interpretation of
section 823(a)(1).8
B.
Still, an agency’s action will be overturned if its findings are
not “supported by substantial evidence,” see, e.g., 21 U.S.C.
§ 877, or its reasoning is “arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law,” 5 U.S.C.
§ 706(2)(A). Penick asserts that the DEA’s registration of
Chattem fails both of these standards because the Deputy
Administrator arbitrarily and “improperly shift[ed] the burden
of proof from Chattem to the objectors.” Pet’r’s Br. at 15. In
light of this alleged shift in the burden of proof—requiring the
8
In any event, the Deputy Administrator’s decision to supplement
her discussion of diversion under section 823(a)(1) with evidence of
Chattem’s internal security measures was reasonable. The overall goal
of section 823(a)(1) “is to effectively control against diversion,”
Noramco, 375 F.3d at 1153, and evidence that the applicant’s facilities
include adequate controls against diversion logically connects to that
goal. Moreover, both the DEA and this court have previously upheld
importation registrations that relied on evidence of the applicant’s
internal controls as “consistent” with the consideration of section
823(a)(1), particularly where, as here, the adequacy of those controls
is not disputed. See Penick Corp., 68 Fed. Reg. 6947, 6949 (Feb. 11,
2003) (relying on Penick’s internal security measures to find that
section 823(a)(1) weighed in favor of its registration); cf. Noramco,
375 F.3d at 1153 (describing DEA’s section 823(a)(1) findings, based
solely on the applicant’s internal diversion controls, and noting that
DEA “was required to approve [applicant’s] registration”).
11
objectors to establish that Chattem’s registration does not satisfy
the public interest standards of 21 U.S.C. § 823(a) rather than
requiring Chattem to establish that its registration is in the
public interest—Penick claims that the Deputy Administrator’s
registration of Chattem was not supported by substantial public
interest evidence supplied by Chattem. See id. at 16–18. We
disagree.
It is true that an applicant for registration as an NRM
importer has “the burden of proving that the requirements for
such registration pursuant to [21 U.S.C. § 958(a) and (d)] are
satisfied,” while “[a]ny other person participating in the
[registration] hearing . . . ha[s] the burden of proving any
propositions of fact or law asserted by him/her.” 21 C.F.R.
§ 1301.44(c). Yet 21 C.F.R. § 1301.44(c) and 21 U.S.C.
§ 958(a) together simply require that the applicant prove by a
preponderance of the evidence that its registration is consistent
with the “public interest” as defined by 21 U.S.C. § 823(a).
Indeed, section 823(a)’s enumerated factors represent
components of the public interest rather than independent
requirements for registration and thus, the Deputy Administrator
may find a given registration consistent with the public interest
even if one (or possibly more) of the public interest factors is not
satisfied. See Johnson Matthey, Inc., 60 Fed. Reg. 26,050,
26,052 (May 16, 1995) (“It is well established that the Deputy
Administrator is not required to make findings with respect to
each of the [section 823(a)] factors, but has discretion to give
each factor the weight he deems appropriate, depending upon
the facts and circumstances in each case.”); cf. Air Line Pilots
Ass’n v. Dep’t of Transp., 791 F.2d 172, 177–78 (D.C. Cir.
1986) (although statute requires agency to “consider all these
factors, the weight to be given to any particular factor lies
largely within its discretion” because “[t]he Act itself does not
dictate that the Board give priority to” any one factor); MD
12
Pharm., Inc. v. DEA, 72 F.3d 920 (unpublished judgment)
(relying on Air Line Pilots to reject claim that DEA gave “too
little weight” to section 823(a) factor).
Here, the Deputy Administrator recognized that the ultimate
burden of proof rested with Chattem, see Chattem Chems., Inc.,
71 Fed. Reg. at 9835, 9839, and relied on Chattem’s evidence
with respect to each of the enumerated public interest factors.
For instance, in deciding that section 823(a)(1) weighed in favor
of Chattem’s registration, the Deputy Administrator noted the
undisputed evidence “that Chattem maintains adequate security
at its manufacturing plant.” Id. at 9836. In addition, the Deputy
Administrator concluded that the risk of diversion at the retail
level would not be significantly increased by Chattem’s
registration in light of Chattem’s evidence that the DEA
continued to register additional bulk manufacturers of opium
alkaloids even though those manufacturers present comparable
diversion dangers. See id. at 9837.9 Finally, the Deputy
9
Penick contends that the Deputy Administrator arbitrarily
departed from DEA policy—which Penick claims treats an importer’s
registration more strictly than a bulk manufacturer’s—in basing her no
diversion finding in part, “on the presumption that applicants for
registration as importers are subject to the same standards, and the
same level of scrutiny, as applicants for registration as manufacturers
of controlled substances.” Pet’r’s Br. at 21 (emphasis in original).
“An agency may of course alter its positions over time, but the agency
acts arbitrarily when it departs from its precedent without giving any
reason.” PDK Labs. v. DEA, 362 F.3d 786, 798–99 (D.C. Cir. 2004).
Yet Penick ignores the context of the Deputy Administrator’s
comparison of importers and manufacturers. The Deputy
Administrator did not suggest that importers and manufacturers be
registered under identical standards but rather that—according to
evidence offered by the government—“both bulk manufacturers of . . .
controlled substances and importers of NRMs [are] a potential source
13
Administrator relied on the existence of DEA quotas and
inspections to control diversion, see id., as well as testimony that
“there were no documented cases of diversion of NRMs
imported into the United States, and no significant diversion at
the bulk manufacturing level,” id. at 9836.10 Given all of this
evidence, the Deputy Administrator concluded that “Chattem
. . . met its burden of proof in showing that its registration as an
importer of NRMs will not significantly interfere with the
of increased diversion.” Chattem Chems., Inc., 71 Fed. Reg. at
9836–37 (second emphasis added). In the absence of evidence that
“Chattem’s registration as an importer would have any greater effect
on diversion downstream than DEA’s continued registration of bulk
manufacturers,” the Deputy Administrator declined to credit the
objectors’ claim that registration of an additional importer would
increase diversion beyond the DEA’s capacity to control. Id. Thus,
the Deputy Administrator recognized that, whatever differences exist
between the procedures for registering importers and manufacturers,
they possess a similar capacity to increase diversion—highlighting an
inconsistency in the objectors’ arguments rather than announcing any
shift in DEA policy. Indeed, the CSA commands the DEA to maintain
control over diversion “by limiting the importation and bulk
manufacture” of controlled substances. 21 U.S.C. § 823(a)(1)
(emphasis added). While Mallinckrodt notes that, unlike an objector
to an importer applicant, an objector to a manufacturer has no right to
a hearing, see Br. for Mallinckrodt at 4–5, the DEA eliminated
manufacturer hearings only “to discourage potential future abuse of
the hearing process” in the interest of “judicial economy.”
Registration of Mfrs. and Importers of Controlled Substances, 60 Fed.
Reg. 32,099, 32,100–01 (June 20, 1995) (final rule).
10
Although the Deputy Administrator expressly cited an objector
witness’s statement on cross-examination, see Chattem Chems., Inc.,
71 Fed. Reg. at 9836, the identical statement was made by one of
Chattem’s witnesses.
14
maintenance of effective controls against diversion.” Id. at
9838.11
The Deputy Administrator similarly relied on Chattem’s
evidence regarding the remaining public interest factors.
Specifically, Chattem’s vice president provided evidence that
Chattem has complied with state and local narcotics laws, see id.
at 9838 (section 823(a)(2)), and it was “undisputed” that
Chattem has never violated state or federal laws relating to
narcotic production and distribution, see id. (section 823(a)(4)).
With respect to Chattem’s past experience in the manufacture of
controlled substances (section 823(a)(5)), the Deputy
Administrator recognized that “Chattem ha[d] experience in
manufacturing [non-NRM] controlled substances” and noted
that “Chattem introduced credible evidence . . . that the
processing of NRMs is not complicated, and that Chattem has
sufficient facilities to carry out the process.” Id. Thus, the
Deputy Administrator affirmatively kept the burden of proving
the public interest on Chattem and relied on Chattem’s evidence
in concluding that each statutory public interest factor supported
its registration.12
11
While the Deputy Administrator did not consider the second part
of section 823(a)(1)—the adequacy of competition in the existing
market—we have previously sustained the DEA’s interpretation of the
CSA that where, as here, “[the Deputy Administrator] 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.” Noramco, 375 F.3d at 1153
(alteration original) (internal quotation omitted).
12
She did find that Chattem proffered “little evidence” it would
promote technical advances in manufacturing or the development of
new substances. Chattem Chems., Inc., 71 Fed. Reg. at 9838 (section
15
The objectors primarily contended that Chattem’s
registration would increase diversion both at the retail, see id. at
9836–37, and international levels, see id. at 9837. As noted
earlier, however, the Deputy Administrator cited significant
evidence of diversion controls in rejecting the claim that
Chattem’s registration would increase retail diversion. With
respect to international diversion, the Deputy Administrator
correctly noted that we have held that the DEA need not
consider foreign diversion under section 823(a)(1), see Chattem
Chems., Inc., 71 Fed. Reg. at 9837 (citing Noramco, 375 F.3d at
1156 (“[T]he Congress was concerned with preventing diversion
in this country rather than abroad.”)), and concluded, at any rate,
that the objectors “adduced insufficient evidence that foreign
diversion was likely to occur . . . and no evidence of the effect
of such diversion . . . on the diversion of narcotics in the United
States,” id.
Given the significant evidence Chattem supplied, the Deputy
Administrator’s decision was neither based on insubstantial
evidence nor arbitrary or capricious. We “will not disturb the
decision of an agency that has ‘examine[d] the relevant data and
articulate[d] a satisfactory explanation for its action including a
rational connection between the facts found and the choice
made.’ ” MD Pharm., Inc. v. DEA, 133 F.3d 8, 16 (D.C. Cir.
1998) (quoting State Farm, 463 U.S. at 43). This is all that is
required in our limited review of the DEA’s decision.
III.
Penick raises an additional challenge to Chattem’s
registration which we also reject. The DEA may register an
importer only if “it determines that such registration is
823(a)(3)); see also supra note 4.
16
consistent . . . with United States obligations under international
treaties, conventions, or protocols.” 21 U.S.C. § 958(a). Penick
asserts that Chattem’s registration is inconsistent with the
United Nations Single Convention on Narcotic Drugs of 1961
(Single Convention), 18 U.S.T. 1407, which obligates the United
States “to take all necessary measures to ensure that the
international movement of narcotics is limited to legitimate
medical and scientific needs,” Chattem Chems., Inc., 71 Fed.
Reg. at 9836. The Single Convention’s commentary, see Nat’l
Org. for Reform of Marijuana Laws v. DEA, 559 F.2d 735, 751
(D.C. Cir. 1977), notes that “it may be advisable or even
essential to keep to a minimum the number of . . . manufacturers
and international traders (importers as well as exporters) . . .
engaged in these activities.” Commentary on the Single
Convention on Narcotic Drugs, 1961 (Commentary), United
Nations, New York, 1973, p. 264. Although the Deputy
Administrator found Chattem’s registration consistent with the
Single Convention, Penick argues that (1) the Single Convention
requires the DEA to control diversion by “first . . . restricting the
registration of importers.” Pet’r’s Br. at 20 (emphasis in
original) and (2) the Deputy Administrator improperly ignored
the danger of increased foreign diversion from Chattem’s
registration. Penick’s contentions ignore the requirements of the
Single Convention, the Deputy Administrator’s opinion and our
precedent.
First, the Single Convention does not, as Penick asserts,
require that the number of importers be limited as the first step
in preventing diversion. Instead, the commentary merely
suggests “it may be advisable or even essential to keep to a
minimum the number of . . . importers” without defining the
“minimum” that would be “advisable,” Commentary at 264
(emphasis added), and the Deputy Administrator found “that the
evidence did not show that it would be ‘advisable’ or ‘essential’
17
to deny Chattem’s application for registration,” Chattem
Chems., Inc., 71 Fed. Reg. at 9836 (quoting Commentary at
264). Indeed, the Deputy Administrator considered Chattem’s
registration’s potential effect on downstream diversion and the
potential “contribution of foreign diversion to diversion in the
United States,” Chattem Chems., Inc., 71 Fed. Reg. at 9837,
specifically referencing this diversion discussion in finding that
Chattem’s registration would not circumvent the Single
Convention, see id. at 9836 (Single Convention not violated
because “registration of Chattem would not likely cause
significant increased diversion”); id. at 9836–38 (considering
retail and foreign diversion in concluding that Chattem’s
registration did not carry increased risk of diversion).
Moreover, while the Deputy Administrator considered
evidence of foreign diversion only to the extent such diversion
might “contribut[e] . . . to diversion in the United States,” id. at
9838, her decision is consistent with our holding that, in
enacting the CSA, “the Congress was concerned with preventing
diversion in this country rather than abroad,” Noramco, 375 F.3d
at 1156. In light of the speculative nature of any increased
foreign diversion stemming from Chattem’s registration and the
existence of alternative means of controlling diversion, such as
quotas, “the Deputy Administrator f[ound] no substantial
evidence in the record that Chattem’s registration as an importer
would result in a significant increase in foreign diversion of
NRMs, or that such diversion, if it were to occur, would
significantly increase diversion of controlled substances in this
country.” Chattem Chems., Inc., 71 Fed. Reg. at 9838. Because
the Deputy Administrator’s conclusion under 21 U.S.C. § 958(a)
18
is consistent with the Single Convention, the evidence and our
precedent, we reject Penick’s challenge.13
For the foregoing reasons, Penick’s petition for review is
denied.
So ordered.
13
Although we decline Chattem’s invitation to impose sanctions
on Penick, see Br. for Chattem at 28 (“This petition for review is
frivolous and damages and double costs should be awarded under Fed.
R. App. P. 38 . . . .”), we note, as evidenced above, the similarity
between Penick’s challenges to Chattem’s registration and Noramco’s
earlier challenges to Penick’s registration, which we rejected in
Noramco of Del., Inc. v. DEA, 375 F.3d 1148 (D.C. Cir. 2004). The
Deputy Administrator expressly relied on Noramco to find Chattem’s
registration consistent with the CSA and our decision today—iterating
the deference we owe to the DEA in these circumstances—should
curtail this rite of passage for new entrants in the NRM importation
market.