Original Notice.

     Preproposal statement of inquiry was filed as WSR 01-13-116.

     Title of Rule: Suspicious transactions.

     Purpose: The purpose of the proposed rule is to set criteria for reporting suspicious transactions involving ephedrine, pseudoephedrine, and phenylpropanolamine. The proposed rule will help eliminate methamphetamine laboratories in Washington state.

     Statutory Authority for Adoption: RCW 69.43.035, 18.64.005(7).

     Statute Being Implemented: RCW 69.43.035.

     Summary: The proposed rule sets criteria for reporting suspicious transactions involving ephedrine, pseudoephedrine, and phenylpropanolamine. These drugs are used to manufacture methamphetamine.

     Reasons Supporting Proposal: In 2001, the Washington state legislature enacted legislation mandating that the Board of Pharmacy develop criteria to identify suspicious transactions involving ephedrine, pseudoephedrine, and/or phenylpropanolamine.

     Name of Agency Personnel Responsible for Drafting, Implementation and Enforcement: Donald Williams, 1300 Quince Street S.E., P.O. Box 47863, Olympia, WA 98504-7863, (360) 236-4828.

     Name of Proponent: Department of Health, Board of Pharmacy, governmental.

     Rule is not necessitated by federal law, federal or state court decision.

     Explanation of Rule, its Purpose, and Anticipated Effects: The proposed rule sets the criteria for reporting a suspicious transaction of ephedrine, pseudoephedrine, and/or phenylpropanolamine. These drugs are used in the manufacturing of methamphetamine. The purpose of the rule is to identify suspicious transactions. Department of Health staff will investigate violations of the law restricting the sale of these drugs. The Board of Pharmacy will take action against the license of any manufacturer or wholesaler who is found in violation of the rule. The anticipated effect is to protect public health by eliminating methamphetamine labs.

     Proposal Changes the Following Existing Rules: The proposed rule establishes a new section that sets the criteria for identifying a suspicious transaction.

     A small business economic impact statement has been prepared under chapter 19.85 RCW.

     II. What industries (4 digit table here) are affected? The rule affects businesses in SIC 5122 - Drugs, proprietaries, and sundries. Specifically, it affects the ninety-five over-the-counter (OTC) wholesalers licensed by the Board of Pharmacy.

     III. What are the costs (lists and tables)? The Department of Health surveyed all OTC wholesalers (ninety-five) and used the thirty-six responses to estimate the costs of the rule.

     The majority of businesses responding to the survey reported they did not sell precursor products or would discontinue such sales. A few shops reported they would change some business practices to avoid having to report under the rule. The average cost of compliance for OTC wholesalers selling precursor products would be $1,416 per year.

     The rule will have no impact on 58% of the businesses surveyed because they do not sell precursor products, will discontinue such sales, or have such stringent controls in place as to eliminate the need for reporting.

     The following list of provisions indicates the costs by type for each part of the rule.

•     Reporting:

     Firms will incur a monthly cost to comply with the rule.

     Firms must calculate the monthly percentage of precursor sales for each customer. The average estimated cost was $1035 per year.

     Firms must prepare and submit a monthly report to the Board of Pharmacy. The average estimated cost was $381 per year.

•     Computer Equipment and Software:

     The proposed rule does not require the purchase of equipment. Companies with computerized sales and inventory systems, however, will spend much less than the average time to report suspicious sales.

     IV. Is the cost disproportionate? This rule has been reviewed and has been found to have a disproportionate impact on small businesses.

     Average employment in SIC 5122 does not reflect the likely pattern of employment among the OTC wholesalers affected by this rule. The firms affected by this rule are typically single proprietors employing one or two family members. Several of the small firms reported that they sold only precursor products. These firms also estimated a much higher than average time needed to report suspicious precursor sales. The large businesses we contacted reported that the rule would not affect them because precursor products made up a small percentage of their sales.

     Worst case analysis for SIC Code 5122

     Drugs, proprietaries, and sundries

	Small Business		Large Business
Average Employment	4.9		83.4
Average cost per employee	$287		$17

     V. What cost minimizing features were included? The rule places minimal reporting requirements on businesses. Each business can report the required information in whatever form is least cumbersome, i.e. electronic paper, etc. The criteria for evaluating individual suspicious sales are simple; suspicious sales can be identified at the time of sale. Businesses can take measures to mitigate the impact of the 10% rule, e.g. calculating subtotals for precursors and general products at the time of sale.

     VI. Any other mitigation techniques: Any mitigation would represent a danger to public health. The reporting requirements must be uniformly implemented to prevent illicit drug manufacturers from simply limiting their purchases of precursors to wholesalers who report less frequently, report fewer sales, or are simply not required to report.

     VII. How will you involve small business in the rule making? Small businesses were invited to participate in stakeholder meetings. Stakeholder meetings were held on July 11 and August 1, 2001, and January 23, 2002.

     A copy of the statement may be obtained by writing to Lisa Salmi, Department of Health, Board of Pharmacy, Lisa.Salmi@doh.wa.gov, P.O. Box 47863, Olympia, WA 98504-7863, phone (360) 236-4828, fax (360) 586-4359.

     A copy of the statement may be obtained by writing to

     RCW 34.05.328 applies to this rule adoption. The rule subjects a violator of the rule to a penalty or sanction.

     Hearing Location: WestCoast Hotel at Yakima Center, 607 East Yakima Avenue, Yakima, WA 98901, on April 9, 2002, at 1:00 p.m.

     Assistance for Persons with Disabilities: Contact Lisa Salmi by April 1, 2003, TDD (800) 833-6388 or (360) 236-4828.

     Submit Written Comments to: Lisa Salmi, Department of Health, Board of Pharmacy, Lisa.Salmi@doh.wa.gov, P.O. Box 47863, Olympia, WA 98504-7863, fax (360) 236-4828, by April 1, 2003.

     Date of Intended Adoption: April 9, 2003.

January 27, 2003

D. H. Williams

Executive Director

OTS-5964.2

NEW SECTION
WAC 246-889-050   Suspicious transactions.   Any manufacturer or wholesaler who sells, transfers, or furnishes any substance specified in RCW 69.43.010(1) or WAC 246-889-020 to any person shall report any suspicious transaction in writing to the state board of pharmacy.

     (1) For the purpose of this rule, a "suspicious transaction" is defined as:

     (a) Any sale or transfer that would lead a reasonable person to believe that the substance is likely to be used for the purpose of unlawfully manufacturing a controlled substance under chapter 69.50 RCW, based on:

     (i) The amount of the substance involved;

     (ii) The method of payment;

     (iii) The method of delivery; or

     (iv) Any past dealings with any participant in the transaction.

     (b) The transaction involves payment for any substance specified in RCW 69.43.010(1) or WAC 246-889-020 in cash or money orders in a total amount of more than two hundred dollars.

     (c) Any sale or transfer of any substance specified in RCW 69.43.010(1) or WAC 246-889-020 that meets the criteria identifying suspicious orders in Appendix A of the U.S. Department of Justice, Drug Enforcement Administration, Diversion Control Program Report of the Suspicious Orders Task Force. Copies of the publication are available upon request from the state board of pharmacy.

     (2) In addition to the above suspicious transaction criteria, the following requirements apply to over-the-counter wholesalers and full-line wholesalers:

     (a) An over-the-counter wholesaler shall also use the following formula to identify a suspicious transaction:

     (i) Any wholesaler whose individual sale or transfer of any product specified in RCW 69.43.010(1) or WAC 246-889-020 exceeds ten percent of the seller's distribution, during the same calendar month, shall be considered a suspicious transaction (e.g., if a wholesaler sells one thousand dollars' worth of pseudoephedrine tablets during a month in which less than ten thousand dollars of other goods are sold to its customers). In this case, the sales to each of the customers must be reported to the board.

     (ii) Any time the value of a sale to a single customer of any product listed in RCW 69.43.010(1) or WAC 246-889-020 exceeds ten percent of the value of the full order shipped to the customer (e.g., if a wholesaler sells an order to a customer which contains one hundred dollars' worth of the pseudoephedrine tablets either alone or along with twenty-five dollars' worth of aspirin tablets).

     (b) A full-line wholesaler shall also use the formula listed in Appendix E-3 of the U.S. Department of Justice, Drug Enforcement Administration, Diversion Control Program Report of the Suspicious Orders Task Force to identify a suspicious transaction.

     (3) The written report of a suspicious transaction must contain, at a minimum, the following information:

     (a) Name, address and phone number of the manufacturer and/or wholesaler making the report;

     (b) Name and address of the person or firm receiving the suspicious transaction;

     (c) Quantity of substance purchased, transferred, or furnished;

     (d) Date of purchase, transfer, or furnish; and

     (e) Method of payment of the substance.

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