Craker v. Drug Enforcement Administration

United States Court of Appeals
For the First Circuit

No. 09-1220

LYLE E. CRAKER,

Petitioner,

v.

DRUG ENFORCEMENT ADMINISTRATION,

Respondent.

PETITION FOR REVIEW OF AN ORDER OF THE
DRUG ENFORCEMENT ADMINISTRATION

Before

Torruella, Lipez and Howard,
Circuit Judges.

Theodore P. Metzler, with whom Eugene Gulland, Covington &
Burling LLP, M. Allen Hopper, ACLU Foundation of Northern
California, Sarah R. Wunsch and ACLU of Massachusetts were on
brief, for petitioner.
Mark T. Quinlivan, Assistant United States Attorney, with whom
Carmen M. Ortiz, United States Attorney, was on brief, for
respondent.

April 15, 2013
 HOWARD, Circuit Judge. Petitioner Lyle E. Craker, a

professor at the University of Massachusetts, seeks review of an

order from the Drug Enforcement Administration ("DEA") denying his

application for registration to cultivate marijuana for medical

research. After review of the administrative record, we deny the

petition.

I. Statutory Landscape

In an effort to consolidate the nation's drug laws and

increase federal enforcement capabilities, Congress enacted the

Comprehensive Drug Abuse and Prevention and Control Act in 1970.

See Gonzales v. Raich, 545 U.S. 1, 11-12 (2005). Included within

that Act was the Controlled Substances Act ("CSA"), "a

comprehensive regime to combat the international and interstate

traffic in illegal drugs." Id. at 12. While observing that many

drugs within the purview of the CSA "have a useful and legitimate

medical purpose and are necessary to maintain the health and

general welfare of the American people," 21 U.S.C. § 801(1),

Congress also determined that the health and welfare of Americans

were detrimentally affected by "[t]he illegal importation,

manufacture, distribution, and possession and improper use of

controlled substances." Id. § 801(2).

Consonant with these concerns, "Congress devised a closed

regulatory scheme making it unlawful to manufacture, distribute,

dispense, or possess any controlled substance except in a manner

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authorized by the CSA." Raich, 545 U.S. at 13 (citing 21 U.S.C.

§§ 841(a)(1), 844(a)). Under this regime, controlled substances

were organized into five schedules, reflective of their accepted

medical uses, their potential for abuse, and their psychological

and physical effects. Id. at 13-14; 21 U.S.C. § 812. Congress

placed marijuana in schedule I, the most stringently controlled

group. 21 U.S.C. § 812(c).1 A schedule I drug "has a high

potential for abuse . . . [,] has no currently accepted medical use

in treatment in the United States[, and] . . . [lacks] accepted

safety for use . . . under medical supervision." Id. § 812(b)(1).

The manufacture of a schedule I substance is a criminal

offense unless the manufacturer has registered with the Attorney

General. Id. § 822(a)(1).2 The CSA provides that the Attorney

General3 "shall register an applicant to manufacture substances in

1
At the request of the Assistant Secretary of Health,
Education and Welfare (now Health and Human Services), marijuana
was originally classified under Schedule I on a preliminary basis,
pending the "completion of certain studies." Gonzales v. Raich,
545 U.S. 1, 14 (2005). The CSA allows for transfer of substances
to, from, or between schedules. 21 U.S.C. § 811. Although
considerable efforts have been made to reschedule marijuana, it
remains a Schedule I substance. Raich, 545 U.S. at 14-15 n.23; see
also Americans for Safe Access v. Drug Enforcement Admin., 706 F.3d
438, 449-452 (D.C. Cir. 2013) (finding that DEA's denial of
rescheduling petition was not arbitrary or capricious).
2
The CSA also contains separate registration provisions
relating to "distributors" and "practitioners" that are not
implicated in this case.
3
The Attorney General has delegated registration authority to
the Administrator of the DEA. 28 C.F.R. § 0.100(b).

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schedule I or II if he 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." Id. § 823(a). The "public interest"

determination must be based on the following statutory factors:

(1) maintenance of effective controls against
diversion of particular controlled substances
and any controlled substance in schedule I or
II compounded therefrom 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) prior conviction record of applicant under
Federal and State laws relating to the
manufacture, distribution, or dispensation of
such substances;

(5) past experience in the manufacture of
controlled substances, and the existence in
the establishment of effective control against
diversion;

(6) such other factors as may be relevant to
and consistent with the public health and
safety.

Id. § 823(a)(1)-(6). The applicant carries the burden of proof at

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any administrative hearing on a registration application. 21

C.F.R. § 1301.44(a).

Since 1968, the National Center for Natural Products

Research ("NCNPR") at the University of Mississippi has held the

necessary registration and a government contract to grow marijuana

for research purposes.4 Lyle E. Craker, 74 Fed. Reg. 2101, 2104

(Drug Enforcement Admin. Jan. 7, 2009) (Denial of Application)

("Craker II"). The contract is administered by the National

Institute on Drug Abuse ("NIDA"), a component of the National

Institutes of Health ("NIH"), which, in turn, is a component of the

Department of Health and Human Services("HHS"). Id. The contract

is opened for competitive bidding every five years. Id. The NCNPR

is the only entity registered by the DEA to manufacture marijuana.

Lyle E. Craker, Ph.D, No. 05-16 (Drug Enforcement Admin. Feb. 12,

2007) (opinion, recommended ruling and decision) ("Craker I").

Among the "international treaties, conventions or

protocols" referred to in section 823(a), the CSA implements the

provisions of the Single Convention on Narcotic Drugs, 18 U.S.T.

1407 ("Single Convention"), in an effort "to establish effective

control over international and domestic traffic in controlled

substances." 21 U.S.C. § 801(7). As relevant to this proceeding,

4
NCNPR's registration and contract incepted prior to the
enactment of the CSA. Lyle E. Craker, 74 Fed. Reg. 2101, 2104
(Drug Enforcement Admin. Jan. 7, 2009) (Denial of Application)
("Craker II").

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Article 28 of the Single Convention addresses cultivation of

marijuana -- referred to therein by its taxonomic genus, cannabis

-- with reference to "the system of controls as provided in article

23 respecting the control of the opium poppy." Pursuant to article

23, any signatory nation that "permits the cultivation of

[marijuana or opium]" must designate one or more agencies to:

license cultivators and designate where plants may be grown;

purchase and take physical possession of each year's crops; and

have the exclusive right of importing, exporting, wholesale trading

and maintaining stocks other than those held by manufacturers of

opium alkaloids, medicinal opium or opium preparations.

II. Adjudication of Dr. Craker's Application

Dr. Craker, a professor in the University of

Massachusetts' Department of Plant, Soil and Insect Sciences,

applied to the DEA for registration to manufacture marijuana for

clinical research in 2001. At the DEA's request, he supplemented

his application in August 2002. He stated that "a second source of

plant material is needed to facilitate privately funded [Food and

Drug Administration ("FDA")]-approved research into medical uses of

marijuana, ensuring a choice of sources and an adequate supply of

quality, research-grade marijuana for medicinal applications."

Craker II, 74 Fed. Reg. at 2107. Dr. Craker indicated that his

production costs would be underwritten by a grant from the

Multidisciplinary Association for Psychedelic Studies ("MAPS"), a

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non-profit, tax-exempt research and education organization seeking

to develop marijuana into an FDA-approved prescription medicine.

Id. at 2106.

In December 2004, a DEA official issued an order to show

cause, proposing the denial of Dr. Craker's registration

application. Id. at 2101; see 21 U.S.C § 824(c); 21 C.F.R.

§ 1301.37(a), (c). The order first concluded that Dr. Craker's

registration "would not be consistent with the public interest as

that term is used in 21 U.S.C. § 823(a)." Craker II, 74 Fed. Reg.

at 2101. The order also concluded that registration would be

inconsistent with the United States' obligations under the Single

Convention. Id. Dr. Craker timely requested a hearing, see 21

C.F.R. § 1301.37(d), which was conducted by an administrative law

judge ("ALJ") over nine days in August and December 2005. See

generally 21 C.F.R. § 1316.41-.67 (outlining hearing procedures).

In February 2007, the ALJ issued an eighty-seven page

opinion, recommending that the DEA grant Dr. Craker's application.

Craker I. The ALJ first concluded that the Single Convention was

not a bar to Dr. Craker's registration, noting that it appeared

that marijuana grown by the NCNPR or any other registrant for use

in research would qualify as either "medicinal" or "special stocks"

under the treaty, and thus not be prohibited by a government

monopoly requirement. See Craker I at 82; Craker II, 74 Fed. Reg.

at 2102.

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 The ALJ also found that Dr. Craker's application

satisfied the "public interest" requirements of 21 U.S.C. § 823(a).

The ALJ first noted a dispute that we will revisit: whether, as

Dr. Craker asserts, the "adequately competitive conditions"

requirement of section 823(a)(1) must be disregarded if there has

been a finding that the applicant can maintain effective 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 of diversion).

The government's position with respect to Dr. Craker's

application was and is that both the diversion and

supply/competition criteria must be satisfied. Without resolving

the issue, the ALJ considered both factors, concluding that Dr.

Craker had adequately proven that there is minimal risk that any

marijuana he cultivated would be diverted. With respect to supply,

the ALJ found that NIDA-approved researchers had not experienced

difficulty obtaining marijuana from NCNPR when it was needed.

Nevertheless, the ALJ found the supply to be inadequate because

NIDA refused to supply some researchers who held DEA registrations

and approvals from HHS. Finally, the ALJ concluded that the

competitive bidding process for renewing the single extant NIDA

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marijuana contract did not amount to "adequate competition" within

the meaning of the statute.

After finding that Dr. Craker satisfied all but one of

the remaining statutory factors -- promotion of technical advances

under section 832(a)(3) -- the ALJ recommended that his application

be granted.

In January 2009, the DEA Deputy Administrator

("Administrator") rejected the ALJ's recommendation and denied Dr.

Craker's application. Craker II, 74 Fed. Reg. at 2133. Turning

first to the Single Convention, the Administrator concluded that

Dr. Craker's application evinced an intent "to distribute marijuana

outside the HHS system." Id. at 2114. In support of this finding,

the Administrator noted that one of Dr. Craker's putative

colleagues, MAPS president Rick Doblin, testified that "[w]hat

we're trying to do is get the [Public Health Service] and NIDA out

of the picture." Id. at 2114-15. Dr. Craker's intent, the

Administrator ruled, is to elide "the very Government monopoly over

the wholesale distribution of marijuana that the Single Convention

demands. Thus, from the outset . . . [Dr. Craker]'s proposed

registration cannot be reconciled with United States obligations

under the treaty." Id. at 2115.

The Administrator additionally rejected Dr. Craker's

assertion that his plans fell within the Single Convention's

"medicinal opium" exception both because marijuana currently has no

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accepted use in the United States, id. at 2116-17, and that even if

considered analogous to medicinal opium, Dr. Craker's proposal

would run afoul of the Single Convention's "central theme," that a

single national agency must control the distribution and production

of raw marijuana used for research. Id. at 2117.

Next, the Administrator found that granting Dr. Craker's

application would not be within the public interest, as required by

21 U.S.C. § 823(a). In so doing, the Administrator first agreed

with the ALJ that the DEA had inconsistently construed section

823(a)(1) in the past, at times calling for consideration of supply

and competition regardless of the potential for diversion and at

other times ignoring adequacy of supply and competition if

effective diversion controls were in place. Id. at 2118. After a

lengthy disquisition on the issue, id. at 2127-32, the

Administrator determined that a registrant must prove both that

effective controls against diversion are in place and that supplies

and competition are inadequate. Id. at 2133 ("The alternative

interpretation, though found to be permissible, . . . provides no

mechanism to prevent the proliferation of bulk suppliers . . .

beyond that necessary to adequately supply . . . these materials

under adequately competitive conditions. [This] heightens the risk

of oversupply, which, in turn increases the risk of diversion.").

The Administrator then concluded that the existing supply

and quality of marijuana was adequate, observing that NIDA had been

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able to successfully supply research efforts and that the NIDA

denials cited by Dr. Craker were not due to insufficient supply,

but rather were due to lack of scientific merit. Id. at 2119. The

Administrator further accepted the ALJ's finding that the existing

marijuana supply was of sufficient quality to meet the research

community's needs, id. at 2102, observing further that Dr. Craker's

opposing anecdotal evidence of shortcomings in taste, potency and

freshness was countered by evidence of researchers' "overall

satisfaction" with marijuana received from NIDA. Id. at 2120.

In addressing the "adequately competitive conditions"

criterion, the Administrator focused on cost, noting that NIDA

provided marijuana either at cost (to privately-funded researchers)

or for free (to HHS-funded researchers), at no profit to NIDA. Id.

at 2121. Thus, Dr. Craker could not claim that his entry into

manufacturing would lower costs to researchers, beyond a

generalized reference to the idea that more competition would lead

to lower costs, a claim which itself was belied by the fact that,

as MAPS's president Mr. Doblin noted, MAPS's costs would be

affected by its own profit-making motivation. Id. As a final

consideration under section 823(a)(1), the Administrator accepted

the government's reasoning that the process by which the NIDA

marijuana contract was opened periodically for competitive bidding

helped to ensure adequate competition. Id. at 2121-22.

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 The Administrator next accepted the ALJ's recommendations

concerning sections (2), (3) and (4) of 823(a), agreeing that Dr.

Craker had adequately demonstrated that he would abide by

applicable laws, that he had failed to demonstrate that his

proposed activities would promote scientific advancements in the

field, and that he had never been convicted of violating any

controlled substance law. Id. at 2123-25. With respect to section

821(a)(5), the Administrator noted that while Dr. Craker had no

experience in the manufacture of controlled substances, he would

have satisfactory diversion control in place. Id. at 2125-26.

Finally, the Administrator concluded that Mr. Doblin's admission

that he regularly smoked marijuana in violation of federal drug

laws and that he was to play a central role in the proposed

manufacturing operation was another factor weighing against Dr.

Craker's application. Id. at 2126-27; 21 U.S.C. § 821(a)(6).

The Administrator ultimately concluded that any one of

three negative findings could provide a "compelling" basis to deny

the application: conflict with the Single Convention; existing

adequate supply and competition; and Mr. Doblin's conduct and

involvement. Craker II, 74 Fed. Reg. at 2133. Concurrent with the

denial, however, the Administrator also granted Dr. Craker fifteen

days in which to file a motion for reconsideration to refute any

facts of which the Administrator had taken official notice during

the proceedings. Id. at 2108 n.24; see 21 C.F.R. § 1316.59(e).

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 Availing himself of the opportunity, Dr. Craker filed a

motion for reconsideration in January 2009. He also requested that

the hearing be reopened for him to call additional witnesses. On

February 9, 2009, the Administrator issued an order permitting

further briefing and stating that she would decide on the basis of

those submissions whether to grant Dr. Craker's request to reopen

the administrative hearing or grant his request for

reconsideration. In December 2010, the Administrator denied the

request to reopen the hearing, but allowed Dr. Craker to further

supplement the record and to raise new arguments. In August 2011,

the Administrator denied the motion for reconsideration. Lyle E.

Craker, Ph.D, 76 Fed. Reg. 51403, (Drug Enforcement Admin. Aug. 8,

2011) (order regarding officially noticed evidence and motion for

reconsideration) ("Craker III").

The Administrator rejected claims that Dr. Craker had

made alleging political and institutional bias, as well as his

argument that the FDA, rather than NIDA, should assess registration

applications under 21 U.S.C. § 823. Id. at 51406-08. The

Administrator also reiterated the finding that Dr. Craker's

registration would be inconsistent with the Single Convention. Id.

at 51410. At the same time, the Administrator backed away somewhat

from the previous conclusion with respect to Mr. Doblin, observing

that some controls could conceivably be put into place to alleviate

concerns over his personal use of marijuana, but that the other

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grounds for denial of the application rendered analysis of that

issue unnecessary. Id. at 51411-12.

The final pieces of the background puzzle emerge from Dr.

Craker's initial filing with us after the DEA issued Craker II. On

February 13, 2009, while his motion for reconsideration was

pending, Dr. Craker filed a petition for review of Craker II in

this court, pursuant to 21 U.S.C. § 877. At the same time, he

filed a motion to stay the appellate proceedings and hold them in

abeyance, which we granted on March 12, 2009, until such time as

the motion for reconsideration before the Administrator was acted

on. In his appellate motion, Dr. Craker indicated that the goal of

the motion was to preserve his appeal rights in the event that

Craker II was deemed to be a "final decision" within the meaning of

21 U.S.C. § 877, thus triggering the statute's 30-day deadline for

seeking judicial review. On August 24, 2011, after receiving

notification that Craker III had been issued, we lifted the

abeyance and permitted the petition for review to proceed.

III. Analysis

A. Jurisdiction

The government argues that we are without jurisdiction to

address the merits of Dr. Craker's petition. Its jurisdictional

theory starts with the fact that Congress has permitted judicial

review only of "final" agency decisions. 21 U.S.C. § 877; see also

John Doe, Inc. v. Drug Enforcement Admin., 484 F.3d 561, 565 (D.C.

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Cir. 2007) (final decision requirement under § 877 is

jurisdictional in nature); Fry v. Drug Enforcement Admin., 353 F.3d

1041, 1044 (9th Cir. 2003); Nutt v. Drug Enforcement Admin., 916

F.2d 202, 203 (5th Cir. 1990) (same). The government's position is

that the only final decision is Craker III, from which Dr. Craker

did not seek review. While the government acknowledges that Dr.

Craker did seek review of Craker II, it argues that the pendency of

the motion for agency reconsideration of that decision deprived the

order of finality, and thus us of jurisdiction. The premature

petition for review, the government further contends, did not ripen

so as to vest us with jurisdiction once the agency issued its final

decision on reconsideration.

The government relies on a rule, established by the D.C.

Circuit and adopted by others, whereby a petition for review filed

during the pendency of a motion for agency reconsideration is

"incurably premature and in effect a nullity." Gorman v. NTSB, 558

F.3d 580, 586 (D.C. Cir. 2009) (internal quotation omitted);

accord Council Tree Commc'ns, Inc. v. FCC, 503 F.3d 284, 287 (3d

Cir. 2007). In the cases in which that rule has been applied,

however, either the governing statute or the implementing

regulations expressly provided for agency reconsideration. See,

e.g., Council Tree Commc'ns, 503 F.3d at 286 (petition for

reconsideration of FCC order pursuant to 47 C.F.R. § 1.106);

Clifton Power Corp. v. FERC, 294 F.3d 108, 110 (D.C. Cir. 2002)

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(motion for rehearing and reconsideration of FERC order pursuant to

16 U.S.C. § 825(b)). No similar procedural guarantee existed here,

which is why Dr. Craker filed his protective petition with us.

Nevertheless, the government argues that the facts of this case

still favor applying the "incurably premature" rule. The

Administrator expressly afforded Dr. Craker the opportunity to

refute the facts of which she had taken official notice by filing

a motion for reconsideration and, after Dr. Craker availed himself

of that opportunity and also sought broader reconsideration of the

order, permitted him to file supplemental briefing. Accordingly,

the government argues, Dr. Craker's appeal was premature despite

the fact that neither the CSA nor DEA's implementing regulations

provide for a motion for reconsideration.5

It is not clear that even those courts that have adopted

the maturation rule would apply it here, where the opportunity

granted to the petitioner was limited to contesting facts of which

the agency had taken official notice, while broader reconsideration

of the factual and legal bases for the agency's final order

remained only, at the time of the filing of the petition for

review, a mere possibility. See supra p. 13 (noting that the

Administrator's February 9, 2009 order withheld judgment on the

propriety of Dr. Craker's motion for reconsideration). In

5
The parties do not dispute that motions for reconsideration
of DEA orders are not contemplated. We assume, without deciding,
the correctness of that position.

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concluding that, where a party's original petition for review of an

agency order was unripe, that party must file a new petition upon

disposition of its motion for reconsideration, the D.C. Circuit

explained:

We develop this bright line test to discourage the
filing of petitions for review until after the
agency completes the reconsideration process. If a
party determines to seek reconsideration of an
agency ruling, it is a pointless waste of judicial
energy for the court to process any petition for
review before the agency has acted on the request
for reconsideration.

TeleSTAR, Inc. v. FCC, 888 F.2d 132, 134 (D.C. Cir. 1989).

The D.C. Circuit has, however, declined to apply the rule

where the motion for reconsideration was not timely filed. That is

because, "at least where . . . the agency does not consider the

merits of the tardy request," there is no "possibility that the

order complained of will be modified in any way which renders

judicial review unnecessary." See Gorman, 558 F.3d at 587

(internal quotation omitted). Similarly, the possibility of

concurrent jurisdiction and the judicial economy concerns that

arise from it, while not wholly eliminated, are considerably

diminished in cases, such as this one, in which reconsideration may

or may not have been permitted in the agency's discretion. See

Craker III, 76 Fed. Reg. at 51405 (explaining the decision to

permit reconsideration as an "exercise of [the Administrator's]

discretion"); see also City of Colo. Springs v. Solis, 589 F.3d

1121, 1131 (10th Cir. 2009) (concluding that the rule announced in

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ICC v. Bhd. of Locomotive Eng'rs, 482 U.S. 270, 284 (1987), whereby

the timely filing of a motion for administrative reconsideration

renders the underlying order non-final for purposes of judicial

review, "is not applicable in this case because the [agency] has

not established a rehearing or reconsideration procedure for [the

type of order at issue]").

Moreover, such jurisdictional concerns are further

alleviated here, because we suspended and then resumed

consideration of a petition for review upon completion of the

reconsideration process. As the Supreme Court has observed, "a

stay is as much a refusal to exercise federal jurisdiction as a

dismissal." Moses H. Cone Mem. Hosp. v. Mecury Const. Corp., 460

U.S. 1, 28 (1983); see also In re Graves, 69 F.3d 1147, 1151 (Fed.

Cir. 1995) (concluding that although the court "cannot exercise

jurisdiction over the appeal before the [agency] enters its

reconsideration decision," its jurisdiction "was, in effect,

suspended until the [agency] acted"); Northside Sanitary Landfill,

Inc. v. Thomas, 804 F.2d 371, 379 (7th Cir. 1986) ("Once our

jurisdiction has been [timely] invoked by a petition for review, it

makes little sense to require an amendment to the petition to

preserve that jurisdiction only because the agency has ruled on the

motion for reconsideration.").

Given that, in the circumstances of this case, holding

the petition in abeyance served equally the interests of judicial

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economy, we are not persuaded that we should impose a bright line

test requiring dismissal or amendment of a petition filed during

the pendency of a motion for reconsideration, at least where the

reconsideration process is ad hoc, as here. We also hesitate to

apply such a rule retroactively in any event. See TeleSTAR, Inc.,

888 F.2d at 134 (giving newly adopted "incurably premature" rule

prospective effect only); see generally Crowe v. Bolduc, 365 F.3d

86, 93 (1st Cir. 2004) (noting that in determining whether to give

a new rule prospective effect, we consider, among other factors,

whether "retroactive application give[s] rise to a substantial

inequity"). Accordingly, we conclude that we have jurisdiction to

consider Dr. Craker's petition for review and turn to the merits.6

B. Chevron Analysis

In reviewing the Administrator's decision, we first

address whether Congress has unambiguously spoken to the precise

question that is at issue, Chevron, U.S.A. Inc. v. Natural

Resources Defense Council Inc., 467 U.S. 837, 842-43 (1997). If it

turns out that the statute is ambiguous, then Chevron deference

must be afforded; the agency's interpretation of the statute will

be upheld as long as it is "based on a permissible construction of

the statute." Id. at 843. In the end, we may set aside the

6
As previously noted, Dr. Craker is seeking review of Craker
II, the Administrator's original decision, and not Craker III, the
decision on reconsideration. Given our ultimate disposition, we
needn’t consider the agency’s order in Craker III.

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Administrator's decision if it is arbitrary, capricious, an abuse

of discretion, not supported by substantial evidence, or otherwise

not in accordance with the law. NLRB v. Reg'l Home Care Servs.,

237 F.3d 62, 71 (1st Cir. 2001); see also 5 U.S.C. § 706(2)(A),

(E). A decision is arbitrary and capricious "if the agency has

relied on factors which Congress has not intended it to consider,

entirely failed to consider an important aspect of the problem,

offered an explanation for its decision that runs counter to the

evidence before the agency, or is so implausible that it could not

be ascribed to a difference in view or the product of agency

expertise." Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto.

Ins. Co., 463 U.S. 29, 43 (1983). We may not substitute our

judgment for that of the agency, even if we disagree with its

conclusions. River Street Donuts, LLC v. Napolitano, 558 F.3d 111,

114 (1st Cir. 2009). Here, to set the stage for the Chevron

analysis, we engage in a more detailed review of the decision at

issue.

As previously noted, the Administrator rejected Dr.

Craker's application both because it was inconsistent with the

Single Convention and because it did not meet the "public interest"

requirement of 21 U.S.C. § 823. Because we resolve the matter

under section 823, we need not review the arguments relative to the

Single Convention, since failure to satisfy either is fatal to Dr.

Craker's claim. 21 U.S.C. § 823(a).

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 In analyzing the CSA, the Administrator first compared

Congress' treatment of Schedule I and II substances in section

823(a)(1) with that of Schedule III, IV and V substances, as set

forth in section 823(d). Notably, the two statutory sections

contain identical public interest factors, except that in section

(d) -- which deals with substances that Congress regards as less

dangerous -- there is no reference as there is in section (a)(1) to

"limiting supply" and "competitive conditions." Unlike

considerations with respect to less dangerous drugs, then,

according to the Administrator, section 823(a)(1) explicitly sets

out both Congress' stated purpose (to maintain effective controls

against diversion) and how it intends that the objective is to be

achieved (by limiting the number of manufacturers to that which can

produce an adequate and uninterrupted supply under adequately

competitive prices). Craker II, 74 Fed. Reg. at 2118-23.

Moreover, the Administrator also found that section 823(a)(5)'s

mandate to consider "the existence in the establishment of

effective control against diversion" suggests that section (a)(1)'s

reference to diversion is directed toward preventing diversion by

limiting the number of manufacturers. Id. at 2128.

The Administrator also detailed the legislative history

of the CSA to buttress her conclusion, observing that the CSA's

predecessor, the Narcotics Manufacturing Act of 1960, called for

the limitation of manufacturers to the smallest number that could

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produce an adequate, uninterrupted supply, without referencing

competition. Id. Thus, the Administrator concluded, in enacting

the CSA, Congress increased the potential number of approved

manufacturers from that which can produce an adequate and

uninterrupted supply to that which can do so under adequately

competitive conditions. Id.

The Administrator acknowledged that the 1960 Act, unlike

the CSA, referred to allowing only "the smallest number of

establishments that can produce an adequate and uninterrupted

supply," and that the CSA dropped the "smallest number"

formulation. Nevertheless, she concluded that the CSA's continued

use of the term "limiting" retained the concept of an upper limit

on manufacturers as a consideration. Id. at 2128-29 n.105.

Finally, the Administrator cited Justice Department

written testimony which noted the "primary objective" of "effective

control" and that additional manufacturers could be licensed if the

additional licenses do not significantly affect drug control.

Id. at 2129.

1. Chevron Step One

At the outset, we reject each party's contention that

section 823(a)(1) unambiguously supports its respective position.

It is not clear from the text of the section whether, as Dr. Craker

argues, limiting supply is allowed only where diversion is a

concern, or, as the Administrator contends on appeal, the statute

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must be construed to require that limiting supply be the means by

which effective controls against diversion are implemented.

Indeed, as the Administrator observed, 74 Fed. Reg. 2127-32, and as

the DEA concedes, the DEA itself has taken inconsistent positions

on this question. Compare Noramco, 375 F.3d at 1153 (observing

that the DEA argued in one registration (Johnson Matthey) that no

analysis of competition is required), with id. at 1157 (noting that

in a different registration (Penick) the DEA addressed competition

and supply factors). As it does not appear that the statute either

mandates or excludes either side's view, we turn to step two and

resolve whether the administrator's interpretation is a reasonable

one. We hold that it is.

2. Chevron Step Two

We conclude that the government's view prevails at

Chevron's second step. Dr. Craker advances three reasons why this

should not be the outcome. We address them in turn.

First, he argues that the court in Noramco squarely

rejected the DEA's present view. But contrary to this assertion,

the court in Noramco did not hold that section 823(a)(1)

unambiguously required the DEA to forego consideration of supply

and competition if it found no increased difficulty in controlling

diversion. Instead, the court held that the statute did not

directly answer the question, but that the Agency's interpretation

of the statute -- that analysis of competition and supply was

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unnecessary -- was reasonable. Noramco, 375 F.3d at 1153; see also

Chevron, 467 U.S. at 843 n.11 ("The court need not conclude that

the agency construction was the only one it permissibly could have

adopted . . . or even the reading the court would have reached if

the question initially had arisen in a judicial proceeding.").7

Dr. Craker next takes aim at the Administrator's

assessment that section (a)(1) speaks to diversion on a

"registrant-wide" scale, whereas section (a)(5) refers to an

individual registrant. He argues that even if this dichotomy is

permissible, the Administrator failed to demonstrate any diversion

concern. We disagree, as the Administrator cited legislative

history noting Congress' recognition that the risk of diversion

increases with the addition of new manufacturers. 74 Fed. Reg. at

2129.

Finally, Dr. Craker argues that the Administrator did not

adequately explain why the DEA was changing its position from the

one that it had advocated in Noramco. To the contrary, and as

previously noted, Craker II contains a lengthy analysis of that

very issue. 74 Fed. Reg. at 2127-33. "[P]ursuant to Chevron, an

agency's change in precedent is not invalidating if the agency

adequately explains its reasons. The agency's explanation must be

7
We note that Dr. Craker's brief truncates a quote from the
Noramco opinion to make it appear that the DEA's interpretation of
section 823(a)(1) is actually the court's holding of how the
statute must be read.

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accompanied by some reasoning that indicates that the shift is

rational and, therefore, not arbitrary and capricious. This is not

a difficult standard to meet." River Street Donuts, LLC, 558 F.3d

at 115 (internal citations and quotation marks omitted). Here, the

Administrator addressed the agency's prior positions, including

that taken in an opinion that was issued while the instant matter

was pending before the DEA8 -- and explained that the

interpretation now urged better effectuated the CSA. We find its

reasoning sufficient.

Accordingly, we conclude that the Administrator's

interpretation of 21 U.S.C. § 823(a)(1) is a reasonable one, to

which we defer.

3. Administrator's Decision

Dr. Craker's final claim is that, even if the DEA is

permitted to consider supply and competition, the Administrator

erred because Dr. Craker demonstrated that both competition and

supply are inadequate. On the contrary, the Administrator's

findings are supported by the record.

a. Competition

Dr. Craker's argument with respect to competition is

essentially that there cannot be "adequately competitive

conditions" when there is only one manufacturer of marijuana.

8
See Penick Corp. v. Drug Enforcement Admin., 491 F.3d 483
(D.C. Cir. 2007).

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Invoking anti-trust doctrine, he asserts that a monopoly cannot

constitute competition within the meaning of the statute.

The Administrator addressed competition through the lens

of price, and observed that NIDA had provided marijuana

manufactured by the University of Mississippi either at cost or

free to researchers, and that Dr. Craker had made no showing of how

he could provide it for less, especially when his associate Mr.

Doblin acknowledged MAPS' profit motive in its manufacturing

enterprise. 74 Fed. Reg. at 2121. Additionally, the Administrator

noted that Dr. Craker is free to bid on the contract when it comes

up for renewal. Id.

We see nothing improper in the Administrator's approach.

The statutory term "adequately competitive conditions" is not

necessarily as narrow as the petitioner suggests. This is not an

anti-trust case, and Dr. Craker does not point to any authority

suggesting that anti-trust laws must guide the "adequacy of

competition" inquiry or that price considerations must not. That

the current regime may not be the most competitive situation

possible does not render it "inadequate."

b. Adequate and Uninterrupted Supply9

In finding that Dr. Craker failed to demonstrate that the

current supply of marijuana was not adequate and uninterrupted, the

9
Dr. Craker does not renew on appeal his argument that the
current marijuana supply is lacking in quality.

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Administrator observed that there were over 1000 kilograms of

marijuana in NIDA possession, an amount which far exceeds present

research demands and "any foreseeable" future demand. Id. at 2119.

Dr. Craker does not dispute this finding, or that the current

amount is more than ninety times the amount he proposes to supply.

Id. Instead, he argues that the adequacy of supply must not be

measured against NIDA-approved research, but by whether the supply

is adequate to supply projects approved by the FDA. But even if we

were to accept his premise -- which we don't -- Dr. Craker fails to

demonstrate that the supply is inadequate for those needs, either.

He merely states that certain projects were rejected as "not bona-

fide" by NIDA, a claim which does not address the adequacy of

supply. The fact that Dr. Craker disagrees with the method by

which marijuana research is approved does not undermine the

substantial evidence that supports the Administrator's conclusion

or render that conclusion arbitrary or capricious.

IV. CONCLUSION

Because the Administrator's interpretation of the CSA is

permissible and her findings are reasonable and supported by the

evidence, the petition for review is denied.

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