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Wedgewood Village Pharmacy, Inc. v. United States

September 1, 2005

WEDGEWOOD VILLAGE PHARMACY, INC., IN THE MATTER OF ESTABLISHMENT INSPECTION OF: D/B/A WEDGEWOOD PHARMACY, APPELLANT
v.
UNITED STATES OF AMERICA



On Appeal from the United States District Court for the District of New Jersey (District Court No. 03-cv- 03438) District Judge: Honorable Jerome B. Simandle.

The opinion of the court was delivered by: McKee, Circuit Judge

PRECEDENTIAL

Argued: November 16, 2004

Before: McKEE and CHERTOFF,*fn1 Circuit Judges, and BUCKWALTER,*fn2 District Judge.

OPINION

Wedgewood Village Pharmacy appeals the District Court's order affirming the Magistrate Judge's denial of Wedgewood's motion to quash an administrative warrant issued to agents of the Food and Drug Administration. Wedgewood argues that it is exempt from FDA inspection under provisions of the Food, Drug, and Cosmetic Act (the "FDCA"), 21 U.S.C. § 301 et seq. Wedgewood also contends that it was denied procedural due process. For the reasons that follow, we hold that Wedgewood was not exempt from FDA inspection under the FDCA, and that issuance of the warrant did not deny Wedgewood procedural due process. Accordingly, we will affirm the decision of the District Court.

I. Background

Wedgewood is a pharmacy specializing in compounding drugs used for treating humans and animals. "Compounding" refers to the process of modifying prescription drugs to meet the specific needs of individual patients.

Drug compounding is a process by which a pharmacist or doctor combines, mixes, or alters ingredients to createa medication tailored to the needs of an individual patient. Compounding is typically used to prepare medications that are not commercially available, such as medication for a patient who is allergic to an ingredient in a mass-produced product. It is a traditional component of the practice of pharmacy, and is taught as part of the standard curriculum at most pharmacy schools . . . .

Thompson v. W. States Med. Ctr., 535 U.S. 357, 360-61 (2002) (internal citation omitted).

Drug compounding is frequently regulated by states "as part of their regulation of pharmacies," and the FDA was content to allow the states to regulate compounding for "approximately . . . 50 years after the enactment of the FDCA." Id. at 361. However, the FDA eventually became concerned that some pharmacies were "manufacturing and selling drugs under the guise of compounding, thereby avoiding the FDCA's [regulation of new drugs]." Id. at 362. Accordingly, in 1992, the FDA issued a Compliance Policy Guide (the "CPG"), "which announced that the 'FDA may, in the exercise of its enforcement discretion, initiate enforcement actions . . . when the scope and nature of a pharmacy's activities raises the kinds of concerns normally associated with a manufacturer and . . . results in significant violations of the new drug, adulteration, or misbranding provisions of the [FDCA].'" Id.

Pursuant to the regulatory authority of the FDCA and concerns that had been raised about the scope and nature of Wedgewood's drug compounding and related activities, on March 10, 2003, FDA Agent Margaret Sands applied for a warrant to inspect Wedgewood's facilities. In her warrant application, Sands stated that the FDA sought to:

have access to production and distribution records to determine the extent to which [Wedgewood's] activities are consistent with those of a drug manufacturer rather than a retail pharmacy, and to evaluate the extent of violations of the [FDCA], including the new drug and new animal drug approval requirements, and the Act's adulteration provisions."

App. A14.

In the warrant application, the FDA cited several reasons for the inspection, and noted that the DEA had requested FDA assistance for an inter-agencyinvestigation of Wedgewood because of the pharmacy's failure to report the theft of certain controlled substances that were believed to have been consumed in several overdoses by high school students in October, 2001. App. A03.*fn3

Although the FDCA provides pharmacies with a limited exemption from intrusive inspection subject to certain conditions, the FDA asserted in its application that Wedgewood did not qualify for the exemption because Wedgewood was not operating strictly as a retail business as is required for the statutory exemption. The application asserted that: in early 1998, Wedgewood had shipped over 1,000 vials of Poison Ivy Extract without receiving the requisite prescriptions for specific patients; in May 2002, Wedgewood had acquired an encapsulation machine which could be used for large-scale drug manufacturing; in 2001 and 2002, it had purchased bulk quantities of substances in excess of the amounts normally associated with a retail pharmacy, including enough diazepam (the active ingredient in Valium) to manufacture over one million 10 mg doses during a six-month period, an amount "typical of a commercial drug manufacturer"; and it routinely produced veterinary drugs in bulk, without receiving specific veterinary prescriptions. App. 06-09.

Each of these acts suggested to the FDA that Wedgewood's operations exceeded those of a retail pharmacy. Accordingly, the FDA believed that Wedgewood did not qualify for the limited statutory exemption afforded retail pharmacies under the FDCA. App. A06-11. Although the FDCA does not require the FDA to obtain a warrant for an administrative inspection, the FDA chose to request a warrant because, "based on past agency experience with Wedgewood Pharmacy," the FDA expected that Wedgewood would attempt to refuse the inspection. App. A03. The Agency also recognized that its current information regarding Wedgewood's business practices was not entirely conclusive, and that it needed the full inspection in order "to determine the extent to which this firm's activities are consistent with those of a drug manufacturer rather than a ...


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