U.S. v. 9/1 KG. Containers, More or Less, of an Article of Drug for Veterinary Use

• Decision Date: 06 September 1988
• Docket Number: No. 88-1233,88-1233
• Parties: UNITED STATES of America, Plaintiff-Appellant, v. 9/1 KG. CONTAINERS, MORE OR LESS, OF AN ARTICLE OF DRUG FOR VETERINARY USE, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 173

854 F.2d 173

UNITED STATES of America, Plaintiff-Appellant, v. 9/1 KG. CONTAINERS, MORE OR LESS, OF AN ARTICLE OF DRUG FOR

VETERINARY USE, Defendants-Appellees.

No. 88-1233.

United States Court of Appeals, Seventh Circuit.

Argued June 9, 1988.

Decided July 27, 1988.

Rehearing Denied Sept. 6, 1988.

Lawrence G. McDade, Office of Consumer Litigation, Dept. of Justice, Washington D.C., for plaintiff-appellant.

James R. Phelps, Hyman, Phelps & McNamara, P.C., Washington, D.C., for defendants-appellees.

Before EASTERBROOK and MANION, Circuit Judges, and ESCHBACH, Senior Circuit Judge.

EASTERBROOK, Circuit Judge.

No one may sell a new animal drug, or feed containing a new animal drug, without the approval of the Food and Drug Administration. 21 U.S.C. Sec. 360b. Obtaining approval takes a long time and costs a lot of money, for the FDA requires thorough experimentation to determine both the drug's effects on animals and whether its residues persist in the animals and enter the food chain. A drug that leaves potentially-dangerous residues will not be approved. Scientists' ability to determine the long-range effects of many chemical substances is limited; that lack of knowledge, coupled with the FDA's cautious approach, means that few new animal drugs have been approved. We must take it as given that for significant diseases there are no effective FDA-approved drugs. Acute mastitis, which may decimate a herd of dairy cattle in short order, cannot be treated with approved new animal drugs; neither can shipping fever and salmonella in feedlot cattle. The FDA has not approved any general anesthetic for field use in surgery on food animals. For the principal diseases of non-food animals, such as mink and fox, there are few, if any, approved remedies.

Many veterinarians find this state of affairs deplorable. Because they cannot buy in finished form the drugs they think they should be able to use, they have elected to make their own. They purchase the active ingredients, mix them in the proportions they think best, and administer their concoctions as professional judgment dictates. The veterinarians do not sell the drugs, so the FDA's usual methods of control do not come into play. The FDA looked the other way for decades. Cf. Heckler v. Chaney, 470 U.S. 821, 105 S.Ct. 1649, 84 L.Ed.2d 714 (1985). Recently, however, the FDA became concerned about the end-run around its approval process--perhaps because the practice has become widespread--and decided to put a stop to it. The FDA might have prosecuted thousands of individual veterinarians for administering unsafe drugs (any new animal drug is deemed unsafe unless approved by the FDA, 21 U.S.C. Sec. 360b(a)), but the agency thought it easier to cut off the veterinarians' supply of active ingredients. This case is the result.

The FDA decided to intercept the drugs in the hands of the middleman: in this case Schuyler Laboratories, Inc., which purchased unblended ingredients from their manufacturer and resold them, still in bulk, to veterinarians. Such a middleman does not manufacture drugs and therefore ordinarily does not need to seek the FDA's approval via new animal drug applications. (Things may be different when the drug is an antibiotic listed in 21 U.S.C. Sec. 321(w)(3); we shall not have to decide.) In July 1986 the FDA swooped down on Schuyler and seized every container of drugs on the premises. It carted off 52 lots and filed a complaint seeking their forfeiture as "misbranded" drugs. See 21 U.S.C. Sec. 334(a)(1). (How the caption of this case came to be as it is baffles us.) The bulk drugs were "misbranded", according to the FDA, as a result of this requirement in 21 U.S.C. Sec. 352:

A drug or device shall be deemed to be misbranded--

* * *

(f) Unless its labeling bears (1) adequate directions for use; ... Provided, That where any requirement of clause (1) of this subsection, as applied to any drug or device, is not necessary for the protection of the public health, the Secretary [of Health and Human Services] shall promulgate regulations exempting such drug or device from such requirement.

The labels of the containers on Schuyler's premises gave the name of the drug and its manufacturer, but no directions for use. It would be difficult to create labels with such directions, because bulk drugs are to be mixed or otherwise compounded rather than used in their current form. The drugs are therefore "misbranded" unless Schuyler can take advantage of the proviso.

The regulation implementing the proviso states:

A drug in a bulk package, except tablets, capsules, or other dosage unit forms, intended for processing, repacking, or use in the manufacture of another drug shall be exempt from Sec. 502(f)(1) [21 U.S.C. Sec. 352(f)(1) ] of the act if its label bears the statement "Caution: For manufacturing, processing, or repacking"; .... But the exemption shall not apply to a substance intended for a use in manufacture, processing, or repacking which causes the finished article to be a new drug, unless:

(a) An approved new drug application or new animal drug application covers the production and delivery of the drug substance to the application holder by persons named in the application....

21 C.F.R. Sec. 201.122. Schuyler's bulk drugs do not qualify under this regulation as written, because although they are "intended for use in manufacture" (etc.) Schuyler has not offered to show that an approved new animal drug application covers the substance that will ensue. Schuyler argues that the qualification in the regulation starting with "But the exemption shall not apply ..." is unlawful because not "necessary for the protection of the public health" within the meaning of Sec. 352(f). In other words, Schuyler wants the benefit of the first sentence of Sec. 201.122 without the burden of satisfying the remainder of the regulation. Everything after the first sentence, Schuyler believes must be discarded; the bulk drugs would come within the remaining language.

The district 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 three reasons: Congress wanted to leave medical professionals free to practice as their judgment required; veterinarians are not regulated in compounding drugs, implying liberty to obtain drugs to compound; and the middleman cannot know whether its customer has the necessary approval. We stayed the district court's order pending appeal.

The statute treats drugs without directions for use as presumptively misbranded. Schuyler bears the burden of establishing its entitlement to treatment under the exception. United States v. An Article of Device "Toftness Radiation Detector", 731 F.2d 1253, 1260-62 (7th Cir.1984). Whether there is a safe harbor for Schuyler to seek depends in the first instance on the FDA's judgment about the conditions necessary to protect the public health. The phrase "necessary for the protection of the public health" in Sec. 352(f), like the phrase "public interest, convenience, and necessity" in other regulatory statutes, delegates authority to an agency. See Chicago & North Western Transportation Co. v. Kalo Brick & Tile Co., 450 U.S. 311, 321, 101 S.Ct. 1124, 1132, 67 L.Ed.2d 258 (1981); Colorado v. United States, 271 U.S. 153, 168-69, 46 S.Ct. 452, 455-56, 70 L.Ed. 878 (1926); Black v. ICC, 737 F.2d 643, 650 (7th Cir.1984). It requires the agency to make a judgment about where the public interest lies. Courts defer to the FDA when it construes its governing statutes. E.g., Young v. Community Nutrition Institute, 476 U.S. 974, 106 S.Ct. 2360, 90 L.Ed.2d 959 (1986); cf. Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984); Continental Air Lines, Inc. v. Department of Transportation, 843 F.2d 1444, 1448-54 (D.C.Cir.1988). The FDA's task was not, however, to "construe" a statute. It was to make a judgment about a medical subject. Someone must draw on knowledge about risks and needs and decide how much risk is too much; that someone is the Executive Branch of the government. "[T]he first question in determining the deference appropriate to the agency[] ... is whether Congress has transferred discretion to the agency. If the legislation either calls for the agency's decision or contains no disposition of the subject, then the agency has been deputized to make a rule, and its decision should be respected." Homemakers North Shore, Inc. v. Bowen, 832 F.2d 408, 411 (7th Cir.1987). So Schuyler is fighting a doubly-uphill battle: it bears the burden of establishing an exception to the labeling requirement, which it can get only by showing that the FDA's views about the needs of public health are arbitrary and capricious.

The district court thought that they are because "it was not the purpose of the Act to involve the agency in the practice of the healing arts." 674 F.Supp. at 1348. If not that, however, what does the statute do? Congress gave the FDA comprehensive powers to license the manufacture of drugs and limit their sales. To regulate drugs is to be "involved" in the "practice of the healing arts." True, the Senate report that accompanied the original statute in 1935 said that the bill was "not intended as a medical practices act and [would] not interfere with the practice of the healing art[s]", S.Rep. No. 361, 74th Cong., 1st Sess. 3 (1935), but the statute has undergone much amendment since then, including a complete overhaul in 1962. Phrases such as the one in the 1935 Senate report--not repeated in 1962--never meant more than that medical licensure and discipline would continue to be the states' business; states, not the FDA, would decide whether (for example) physicians had selected wisely from among methods of...