US v. Algon Chemical Inc.
| Decision Date | 12 April 1988 |
| Docket Number | Civ. A. No. 87-1820. |
| Citation | 689 F. Supp. 394 |
| Parties | UNITED STATES of America, Plaintiff, v. ALGON CHEMICAL INC., a corporation; and Edward Latinsky, an individual, Defendants. |
| Court | U.S. District Court — District of New Jersey |
Samuel A. Alito, Jr., U.S. Atty. by Kevin J. McKenna, Asst. U.S. Atty., Newark, N.J., and Thomas Scarlett, Chief Counsel by Richard E. Geyer, Associate Chief Counsel for Veterinary Medicine, U.S. Food and Drug Admin., Rockville, Md., for plaintiff.
Crummy, Del Deo, Dolan, Griffinger & Vecchione by Robert A. Recio, Newark, N.J., and Hyman, Phelps & McNamara, P.C. by James R. Phelps, Robert A. Dormer, A. Wes Siegner, Jr., Washington, D.C., for defendants.
These cross-motions arise out of a Complaint filed on May 12, 1987 by the United States of America ("United States") against Algon Chemical, Inc. ("Algon") and Edward B. Latinski, President of Algon. In this cause, the United States sought preliminary and permanent injunctive relief against the distribution in interstate commerce of 13 lots of bulk drugs1 in contravention of § 331(a), (c)2 of the Federal Food, Drug and Cosmetic Act (the "Act"), 21 U.S.C. § 301 et seq., and temporary, preliminary and permanent injunctive relief against the receipt and distribution of similar drugs in future contravention of the Act. The Court ordered the defendants to show cause as to why an order should not be entered issuing a preliminary and permanent injunction restraining them from violation of the Act. After oral argument on May 28, 1987, the Court, finding no material issue of fact, dismissed plaintiff's application for preliminary injunction and sua sponte ordered the parties to file cross-motions for summary judgment.
Plaintiff's Complaint alleges that the drugs are not labeled with adequate directions for use and are, therefore, misbranded within the meaning of 21 U.S.C. § 352(f)(1). Additionally, plaintiff alleges that one of the lots of drugs, penicillin, is an unapproved new animal drug within the meaning of 21 U.S.C. § 321(w)(3),3 and therefore is adulterated under 21 U.S.C. § 360b(a)(1)(A)4 and § 351(a)(5).5 The United States brings this proceeding under 21 U.S.C. § 332(a) which vests the United States District Courts with jurisdiction to enjoin and restrain violations of the Act.
The defendant, Algon, argues that the 13 lots of drugs are exempt from the labeling requirements of § 352(f)(1) of the Act by virtue of an exempting regulation, 21 C.F. R. § 201.122. Additionally, defendant argues that the same exempting regulation serves to make § 321(w)(3) inapplicable to the seized penicillin.
Presently before the Court are cross-motions for summary judgment pursuant to Fed.R.Civ.P. 56. On a motion for summary judgment, "the judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The parties, in moving for summary judgment, have agreed that there exist no genuine issues of material fact.6 The Court will proceed therefore, upon consideration of the pleadings and affidavits submitted, to determine which party is entitled to judgment as a matter of law.
Algon has been engaged in receiving and selling in interstate commerce bulk pharmaceutical and chemical supplies for approximately eight years. Drugs that are in bulk form require further processing before actual use. The 13 lots of bulk drugs in question were purchased by Algon after importation into the United States by ICC Industries, and were stored by the NBC Warehouse and Storage Co. in Garfield, New Jersey. These bulk drugs were intended solely for the use of veterinarians in the practice of veterinary medicine. To prevent Algon from shipping the drugs, the Food and Drug Administration ("FDA") requested that the State of New Jersey embargo the drugs under state law until the FDA could obtain relief in federal court.7 The drugs were placed under embargo beginning September 3, 1986.
Prior to imposition of the embargo, Algon shipped portions of the 13 lots to, among others, Schuyler Laboratories, Rushville, Illinois and Brinton Veterinary Clinic, Willmar, Minnesota.8 Schuyler, Algon's principal customer, resells the drugs to veterinarians.9 None of the parties involved —Algon, Schuyler, Borge and their veterinarian consignees—holds FDA approvals for use of the drugs.
Two of the embargoed articles were in containers bearing cautionary labels stating "to be used only for manufacturing, processing or repacking." The remaining articles bore labeling indicating only the name of the drug and its origin. None of these drug items were accompanied by labeling that indicated directions for use.
In its Complaint, plaintiff alleges that defendant introduced or delivered for introduction into interstate commerce drugs which were misbranded within the meaning of 21 U.S.C. § 352(f)(1). Section 352 provides that:
(Emphasis supplied). The Secretary promulgated an exemption for bulk drugs in response to the mandatory proviso of § 352(f)(1):
21 C.F.R. § 201.122.
The limitation in 21 C.F.R. § 201.122 indicates that labeling requirements of 21 U.S. C. § 352(f)(1) are not suspended if a bulk drug is to be used in a finished article that is a new (animal) drug unless an approved new animal drug application covers the production and delivery of the drug substance to the application holder.
Defendant contends that its bulk drug materials, when shipped, are labeled "for manufacturing, processing or repacking" in conformity with the language prescribed in 21 C.F.R. § 201.122 and are therefore exempt from the labeling requirement in 21 U.S.C. § 352(f)(1). Plaintiff argues that Algon's bulk drugs are not exempt from such labeling requirements because they are used by veterinarians to compound finished articles which are unapproved new animal drugs. The issue to be decided, therefore, is whether the exception to the exemption in 21 C.F.R. § 201.122 applies to the defendant in this case.
Plaintiff contends that defendant has the burden of proving that its bulk drugs are exempt from the labeling requirements of 21 U.S.C. § 352(f)(1) and that defendant cannot meet this burden. In United States v. An Article of Device ... Toftness Radiation Detector, 731 F.2d 1253 (7th Cir. 1984), the court dealt with a similar situation in which defendant was relying on exemptions found in a series of regulations to remove it from the labeling requirements of 21 U.S.C. § 352(f)(1). After examining the language of the statute and appropriate regulations, the court concluded that the "party claiming entitlement to a statutory exemption bears the burden of proving the entitlement * * * unless placing the burden of proof on the defendant would be contrary to the letter and intent of the Act." Id. at 1260, 1261. The precise question for this Court is whether the exception to the exemption in 21 C.F.R. § 201.122 is consistent with the letter and intent of the Act under which it was enacted, thus requiring the defendant to prove that its bulk drugs are entitled to be exempt from the labeling requirements of § 352(f)(1).
The Food, Drug and Cosmetic Act was enacted in 1938, after years of deliberation. The legislative history of the Act demonstrates that Congress had no intention through passage of this Act to interfere with the practice of the healing arts10 and that all the healing arts "licensed by law in the various States" should be accorded this independence.11 The Drug Amendments of 1962, Pub.L. No. 87-781, 76 Stat. 780 (1962), expanded the FDA's authority in carrying out the intent of the Act, however, certain notable exclusions from this expanded authority indicated Congress' intent that the FDA should not exercise the same type of control over the healing arts. Title 21 U.S.C. § 374(a)(1)(B) empowers the FDA to "inspect ... such factory, warehouse, establishment, or vehicle ... in which prescription drugs ... are manufactured ... (including records, files, papers, processes, controls, and facilities) bearing on whether prescription drugs ... are adulterated or misbranded within the meaning of this Act." Title 21 U.S.C. § 374(a)(2) states, however, that "the provisions ... of this subsection shall not apply to— ... (B) practitioners licensed by law to prescribe or administer drugs ... and who manufacture, prepare, propagate, compound, or process drugs ... solely for use in the course of their professional practice." Similarly, 21 U.S.C. § 360(b) requires that "every person ... engaged in the manufacture, preparation, propagation, compounding or processing of a drug or drugs ... register with the Secretary his name, and places of...
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...court agreed with Schuyler and ordered the FDA to return the drugs. 674 F.Supp. 1344 (C.D.Ill.1987). Accord, United States v. Algon Chemical Inc., 689 F.Supp. 394 (D.N.J.1988). As it saw things, the limits on the permission to sell unlabeled bulk drugs are neither necessary nor prudent for ......
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