Grand Laboratories, Inc. v. Harris, 80-1331

• Decision Date: 02 October 1981
• Docket Number: No. 80-1331,80-1331
• Parties: GRAND LABORATORIES, INC., Appellee, v. Patricia HARRIS, Secretary of Health, Education, and Welfare, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1288

660 F.2d 1288

GRAND LABORATORIES, INC., Appellee, v. Patricia HARRIS, Secretary of Health, Education, and Welfare, Appellant.

No. 80-1331.

United States Court of Appeals,

Eighth Circuit.

Submitted June 15, 1981.

Decided Oct. 2, 1981.

John J. Powers, III, Atty., Dept. of Justice, Washington, D. C., for appellant.

Harold Carter, Washington, D. C., for appellee.

Before LAY, Chief Judge, and HEANEY, BRIGHT, ROSS, STEPHENSON, HENLEY, McMILLIAN and ARNOLD, Circuit Judges, en banc.

ARNOLD, Circuit Judge.

This is a suit by Grand Laboratories, Inc., to enjoin the Food and Drug Administration from inspecting its facilities in South Dakota. Grand manufactures animal biologics, which are products prepared from animal tissues or fluids, or from microorganisms, and used for the prevention or treatment of disease in animals. Plaintiff distributes its product wholly within the state of South Dakota, but some ingredients are shipped interstate to Grand's laboratory. The FDA argued that it had the right to inspect Grand's facilities because animal biologics are "drugs" within the meaning of the Food, Drug, and Cosmetic Act, 21 U.S.C. § 321(g)(1)(B), which defines "drug" to include "articles intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease in man or other animals ...." The District Court relying on later Acts of Congress which will be detailed below, disagreed with FDA and held that animal biologics are not "drugs" for present purposes. It therefore issued the injunction prayed for. Grand Labs., Inc. v. Harris, 488 F.Supp. 618 (D.S.D.1980). A panel of this Court affirmed, one judge dissenting. Grand Labs., Inc. v. Harris, 644 F.2d 729 (8th Cir. 1981). We then granted the FDA's petition for rehearing en banc, and now, after hearing argument, we reverse the District Court.

I.

An understanding of the issue presented in this case requires a brief summary of statutory law in the field of drugs and biologics. A number of relevant propositions are undisputed. Laboratories making animal biologics for sale interstate are subject to regulation by the Department of Agriculture, and have been since the enactment of the Virus, Serum, and Toxin Act of 1913 (VSTA), 21 U.S.C. §§ 151-58. That Act provides in part:

It shall be unlawful for any person, firm, or corporation to prepare, sell, barter, or exchange in any place under the jurisdiction of the United States, or to ship or deliver for shipment from one State or Territory or the District of Columbia, any worthless, contaminated, dangerous, or harmful virus, serum, toxin, or analogous product intended for use in the treatment of domestic animals, and no person, firm, or corporation shall prepare, sell, barter, exchange, or ship as aforesaid any virus, serum, toxin, or analogous product manufactured within the United States and intended for use in the treatment of domestic animals, unless and until the said virus, serum, toxin, or analogous product shall have been prepared, under and in compliance with regulations prescribed by the Secretary of Agriculture, at an establishment holding an unsuspended and unrevoked license issued by the Secretary of Agriculture as hereinafter authorized.

21 U.S.C. § 151.

It is agreed, on the other hand, that the VSTA does not authorize the Agriculture Department to regulate animal biologics manufactured and distributed wholly within one state, as Grand's products are, even if a component used in the biologic has passed through interstate commerce. See Animal Health Inst. v. USDA, 487 F.Supp. 376 (D.Colo.1980).

It is also clear that all animal biologics, whether interstate or intrastate, are within the literal definition of "drug" in FDA's governing statute, the Food, Drug, and Cosmetic Act of 1938. That definition, in full, is as follows:

(g)(1) The term "drug" means (A) articles recognized in the official United States Pharmacopoeia, official Homoeopathic Pharmacopoeia of the United States, or official National Formulary, or any supplement to any of them; and (B) articles intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease in man or other animals; and (C) articles (other than food) intended to affect the structure or any function of the body of man or other animals; and (D) articles intended for use as a component of any article specified in clauses (A), (B), or (C) of this paragraph; but does not include devices or their components, parts, or accessories.

21 U.S.C. § 321(g)(1). The portion of this definition that is relevant for present purposes originated in the Food and Drug Act of 1906, 34 Stat. 768, 769, which defined "drug" to include "any substance or mixture of substances intended to be used for the cure, mitigation, or prevention of disease of either man or other animals."

In an attempt to harmonize these provisions, both sides point to Section 902(c) of the Food, Drug, and Cosmetic Act (FDCA), as amended in 1968, 21 U.S.C. § 392(b). This statute provides:

(b) Nothing contained in this chapter shall be construed as in any way affecting, modifying, repealing, or superseding the provisions of section 262 of Title 42 (relating to viruses, serums, toxins, and analogous products applicable to man); the virus, serum, toxin, and analogous products provisions, applicable to domestic animals, of the Act of Congress approved March 4, 1913; the Filled Cheese Act of June 6, 1896, the Filled Milk Act of March 4, 1923; or the Import Milk Act of February 15, 1927.

Thus, we know that the FDCA does not modify or affect the power of the Department of Agriculture under the VSTA of 1913 over interstate animal biologics. Grand contends, and the District Court held, that Section 902(c) also bars FDA from regulating intrastate animal biologics. (It is agreed that the FDCA, read without reference to the harmonizing clause contained in Section 902(c), would validly give FDA power to regulate animal biologics sold intrastate, if an ingredient of the products had previously been transported interstate.) Under Grand's view, it is subject to no federal regulation. FDA, on the other hand, would read Section 902(c) more literally. If a product is not subject to the VSTA (as intrastate animal biologics are not), it must, according to FDA, remain subject to its jurisdiction under the FDCA, assuming the product is within the words of the FDCA's definition of "drug" (as intrastate animal biologics concededly are). FDA's view, if accepted, would subject both interstate and intrastate animal biologics to federal regulation, although, perhaps anomalously, the regulation would be by different agencies.

II.

This case concerns products admittedly used for the prevention or treatment of disease in animals. The particular product around which the dispute here centers is known as "porcine mastitis-metritis-arthritis-infertility bacterin." This bacterin contains, among other ingredients, aluminum hydroxide (itself a "drug"), which, according to evidence introduced in the court below, was purchased by the plaintiff Grand Laboratories, Inc., from a chemical firm in New Jersey and then shipped to South Dakota for use in the manufacturing process.

There is thus no doubt that the product involved here is within the literal definition of "drug" that Congress has adopted. Grand urges us not to apply the words of the statute as written for two main reasons: (1) the interpretation thus produced is unreasonable; and (2) Congress, by its actions in later years, primarily in 1913 and 1968, has shown that it really did not mean what it said in 1906.

We start with the proposition, recently repeated by the Supreme Court, that

When we find the terms of the statute unambiguous, judicial inquiry is complete, except "in 'rare and exceptional circumstances.' " TVA v. Hill, 437 U.S. 153, 187, n. 33 (98 S.Ct. 2279, 2298, n.33, 57 L.Ed.2d 117) (1978) (quoting Crooks v. Harrelson, 282 U.S. 55, 60, (51 S.Ct. 49, 50, 75 L.Ed. 156) (1930)).

Rubin v. United States, --- U.S. ----, ----, 101 S.Ct. 698, 701, 66 L.Ed.2d 633 (1981). ¹ That Court has affirmed this principle with special force in respect of the very definition at issue in this case. In United States v. An Article of Drug ... Bacto-Unidisk ..., 394 U.S. 784, 89 S.Ct. 1410, 22 L.Ed.2d 726 (1969), the question was whether a laboratory aid known as an antibiotic sensitivity disc, used in a screening test for help in determining the proper antibiotic drug to administer to patients, was a "drug" within the meaning of 21 U.S.C. § 321(g)(1)(B), notwithstanding the fact that it was used exclusively in laboratory work and never came in contact with any part of the patient's body. The Supreme Court reversed holdings by two courts below that the antibiotic discs were not drugs. The Court said:

... Congress fully intended that the Act's coverage be as broad as its literal language indicates ....

394 U.S. at 798, 89 S.Ct. at 1418. The Court also referred, ibid., to "the well-accepted principle that remedial legislation such as the Food, Drug, and Cosmetic Act is to be given a liberal construction consistent with the Act's overriding purpose to protect the public health ...."

The significance of this holding for present purposes is enhanced when it is recalled that the effect of a contrary holding in Bacto-Unidisk would probably not have been to exempt the discs from regulation altogether, since, if they had not been held to be "drugs," they would almost certainly have been considered "devices," and thus subject to regulation, though to a lesser extent, under another provision of the statute. Here, by contrast, a holding that animal biologics are not "drugs" would leave those substances, in cases where they are not actually shipped in their finished form across state lines, entirely free of all federal regulation.

The District Court ably argued that the result advocated by the Food and Drug Administration here would be illogical, in that certain kinds of...