Pharmaceutical Manufacturers Ass'n v. New Mexico Board of Pharmacy

525 P.2d 931, 86 N.M. 571

• Court: New Mexico Court of Appeals
• Decided: July 25, 1974
• Docket: 1009
• Status: Published

Opinions

OPINION

HENDLEY, Judge.

Appellants seek review of certain regulations adopted by the New Mexico Board of Pharmacy. Our standard of review is found in § 67-26-31 (C), N.M.S.A.1953 (Repl.Vol.1961, pt. 1, Supp.1973) which states:

s “C. Upon appeal, the court of appeals shall set aside the regulation only if found to be:

“(1) arbitrary, capricious or an abuse of discretion;

“(2) contrary to law; or “(3) against the clear weight of substantial evidence of the record.”

Regulations were adopted by the State Board of Pharmacy pursuant to the Drug and Cosmetic Act, § 54-6-26 et seq., N. M.S.A.1953 (Repl.Vol.1962, pt. 2, Supp. 1973), and the Controlled Substances Act, § 54-11-1 et seq., N.M.S.A.1953 (Repl.Vol. 1962, pt. 2, Supp.1973).

A public hearing was held pursuant to § 67-26-29, N.M.S.A.1953 (Repl.Vol.1961, pt. 1, Supp.1973). All appellants participated in the hearing through appellant, Pharmaceutical Manufacturers Association, which is compromised of the producers of approximately ninety-five percent of prescription drugs made and sold in the United States.

The regulations appealed from are as follows:

“ARTICLE 9

“Section 600. MINIMUM STANDARDS FOR MANUFACTURERS AND REPACKAGING FIRMS.

“The following minimum standards shall apply to all manufacturing establishments and repackaging firms for which licenses have been issued by the Board.

“1. All drugs and chemicals used in the manufacturing process or held [sic] sale shall conform to the New Mexico Drug and Cosmetic Act and shall be stored, preserved and disposed of as prescribed by laws regulating the labeling and manufacture of drugs.

“When necessary, and/or according to label" requirements, all drugs and chemicals which require refrigeration shall be stored and preserved under proper temperatures.

“2. All manufacturers must conform to current good manufacturing practices as set forth in Title 21, Code of Federal Regulations, Subsection 133.3 to 133.14 inclusive. The definitions and interpretations contained in Section 201 of the Federal Food and Drug Act shall be applicable.

“Section 602. LICENSURE OR REGISTRATION: Wholesale distributor and manufacturer distributor or manufacturer.

“No manufacturer shipping dangerous drugs into New Mexico or who sells or distributes dangerous drugs in this state through any person or media, other than a wholesaler who has obtained a license, shall conduct the business of selling or distributing dangerous drugs without obtaining an out-of-state drug license from the board. (Veterinarian drug suppliers are included in this provision).

“Applications for an out-of-state drug distributor’s license under this section shall be made on a form furnished by the Board of Pharmacy. The Board may require such information as it deems is reasonably necessary to carry out the purpose of this section.

“This requirement does not include the licensure of a parent corporation of a corporation or division.

“The license fee for manufacturers and wholesale distributors shall be $100.00 and shall be renewed annually before the last day of December of each year.

“No person acting as principal or agent (detail man) for any out-of-state manufacturer, wholesaler or distributor who has not obtained a license from the board, shall conduct the business of selling or distributing dangerous drugs within this state.

“Any person acting as principal or agent for any manufacturer, wholesaler or distributor who is licensed by the Board and who possess or distributes dangerous drugs, shall register as principal or agent for the licensed manufacturer, wholesaler or distributor. There shall be no fee for registration of such agent. “Registration of persons under this section shall be made on a form furnished by the Board. The Board may require such information as it deems is reasonably necessary to carry out the purpose of this section, including, but not limited to, the name and address of the registrant and the name and address of the manufacturer whose drugs he is selling or distributing.

“The board may deny, revoke, or suspend such person [’s] registration for any violation of the state drug laws.

“ARTICLE 12. FEES.

“Section 808. The fee for a license for a drug manufacturer or wholesale drug dealer shall be one hundred-dollars.

“ARTICLE 20 CONTROLLED SUBSTANCES

“Section 901. REGISTRATION REQUIREMENTS “Persons required to register:

“Manufacturers includes repackagers.

“Distributors includes wholesale drug distributors.

“Dispensers includes pharmacies, hospitals, clinics.

“Practitioners includes medical physicians, osteopathic physicians, dentists, veterinarians, podiatrists or other persons authorized to prescribe controlled substances. “Scientific investigator includes practitioners conducting research, persons other than practitioners authorized to conduct reasearch, analytical laboratories, chemical analysis laboratories, teaching institutions.

“Special projects -or demonstrations which bear directly on misuse or abuse of controlled substances and includes public agencies, institutions of higher education and private organizations.”

A. Commerce Clause Violation

Appellants assert that the challenged regulations violate the Commerce Clause. The applicable rules for determining such violation in the present case were stated in Pike v. Bruce Church, Inc., 397 U.S. 137, 90 S.Ct. 844, 25 L.Ed.2d 174 (1970):

“. . . Where the statute regulates evenhandedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental, it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits. Huron Portland Cement Co. v. City of Detroit, 362 U.S. 440, 443, 80 S. Ct. 813, 816, 4 L.Ed.2d 852 [78 A.L.R.2d 1294 (1960)]. If a legitimate local purpose is found, then the question becomes one of degree. And the extent of the burden that will be tolerated will of course depend on the nature of the local interest involved, and on whether it could be promoted as well with a lesser impact on interstate activities. . . .”

See also Bibb v. Navajo Freight Lines, Inc., 359 U.S. 520, 79 S.Ct. 962, 3 L.Ed.2d 1003 (1959); Southern Pacific Co. v. Arizona, 325 U.S. 761, 65 S.Ct. 1515, 89 L.Ed. 1915 (1945) ; and South Carolina State H. Dept. v. Barnwell Bros., 303 U.S. 177, 58 S.Ct. 510, 82 L.Ed. 734 (1938).

Although different .rules may apply in the case of taxation of interstate commerce (see Nippert v. City of Richmond, 327 U.S. 416, 66 S.Ct. 586, 90 L.Ed. 760, 162 A.L.R. 844 (1946); Bell Telephone Laboratories v. Bureau of Revenue, 78 N.M. 78, 428 P.2d 617 (1966), appeal dismissed, 388 U.S. 457, 87 S.Ct. 2111, 18 L.Ed.2d 1318 (1967) ; and Spillers v. Commissioner of Revenue, 82 N.M. 41, 475 P. 2d 41 (Ct.App.1970)), we are not here concerned with taxation. Although the present regulations include a license fee, to cover administrative costs, their primary purpose is the protection of the public from' dangerous drugs. New Mexico ex rel. McLean v. Denver & R.G.R. Co., 203 U.S. 38, 27 S.Ct. 1, 51 L.Ed. 78 (1906); Busey v. District of Columbia, 138 F.2d 592 (D.C.Cir. 1943). Cf. Askren v. Continental Oil Co., 252 U.S. 444, 40 S.Ct. 355, 64 L.Ed. 654 (1920). That purpose is well within the traditional definition of police power and controls the analysis of this issue. Head v. New Mexico Board of Examiners in Optometry, 374 U.S. 424, 83 S. Ct. 1759, 10 L.Ed.2d 983 (1963); New Mexico ex rel. McLean v. Denver & R.G. R. Co., supra; United Artists Corporation v. James, 23 F.Supp. 353 (S.D.W.Vir. 1938), affirmed 305 U.S. 410, 59 S.Ct. 272, 83 L.Ed. 256 (1939).

The state interest in drug control is substantial and ever growing. In the present regulatory system that interest is magnified by a corresponding federal interest. The regulations questioned here, and their authorizing statutes are part of a coordinated state-federal drug abuse prevention system.

Opposing this state benefit is the burden of a fixed fee which might affect small interstate shippers. But the fee is not large and only the manufacturers and wholesale distributors, not salesmen, are required to pay it. Cf. Nippert v. City of Richmond, supra. That small burden does not outweigh the substantial state benefit derived from the control.

The questioned regulations also do not discriminate against interstate commerce. The appellant’s supplemental brief admits, “ . . . that there presently are no drug manufacturers within the state. . . . ” Since only one class, out-of-state manufacturers, is affected by the regulation and since all persons in that class are treated equally, there is no discrimination.

B. Equal Protection Violation

Appellants contend that § 54 — 6-41(A)(1), supra, denies equal protection to residents of New Mexico. Again, since the appellant admits that there are no New Mexico manufacturers there is no factual basis for their claim.

C.Due Process Violation

The appellant asserts that the present regulations require licenses “. . . of out-of-state corporations with no contact with New Mexico. . . ” in violation of due process. Due process imposes a limitation on state power exercised extra-territorially. In the area of taxation the controlling question is stated at times to be whether there is “ . some definite link, some minimum connection, between a state and the person, property or transaction it seeks to tax.” Miller Bros. Co. v. State of Maryland, 347 U.S. 340, 74 S.Ct. 535, 98 L.Ed. 744 (1954).

But we are here concerned with the police power (see Section A, supra). State exercise of that power is subject to a somewhat different rule (compare the analysis under the Commerce Clause, Section A, supra). The proper inquiry there “ . . .is whether [the state] has taken hold of a matter within her power, or has reached beyond her borders to regulate a subject which was none of her concern because the Constitution has placed control elsewhere.” Osborn v. Ozlin, 310 U.S. 53, 60 S.Ct. 758, 84 L.Ed. 1074 (1940).

The regulations in this case propose to license only manufacturers or wholesale distributors who sell or distribute dangerous drugs in New Mexico. This state has a legitimate interest in the control of dangerous drugs sold or distributed in this state (see Section A, supra). By regulating these drugs New Mexico has “reached beyond her borders.” But “[t]he mere fact that state action may have repercussions beyond state lines is of no judicial significance. . . . ” Osborn v. Ozlin, supra. The controlling fact is that New Mexico has not brought “. . . within the orbit of state power matters unrelated to any local interests.” Osborn v. Ozlin, supra.

D. Statutory Authority

Appellant argues that “registration” under § 602 is really licensing and that § 54— 6-41, supra, gives the Board the power to license only those people who ship dangerous drugs interstate. Detailmen, it is argued, in no way ship drugs. They are state resident “drummers” who show samples but do not deliver.

Reviewing courts overturn the administrative interpretation of statute by appropriate agencies only if they are clearly incorrect. 2 Am.Jur.2d Administrative Law § 241 (1962). The objective of the Drug and Cosmetic Act, in general, is to help “ . . . establish a closed regulatory system for the legitimate handlers of controlled drugs. . . . ” Detailmen do handle controlled drugs, and they are part of the interstate drug shipment operation, even though they do not ship drugs themselves. The interpretation of § 54-6-41, supra, to allo.w licensing of detailmen is therefore not clearly erroneous.

E. No Reasons Stated

The appellant argues that City of Roswell v. New Mexico Water Qual. Con. Com’n, 84 N.M. 561, 505 P.2d 1237 (Ct. App.1972) was not followed in this case, in that the “ ‘ . . . board [did not] indicate the testimony adopted, the standard followed and the reasoning it used in reaching its conclusion.’ . . .” Citing McClary v. Wagoner, 16 Mich.App. 326, 167 N.W.2d 800 (1969).

Appellee contends that statements by Board members sufficiently states the reasoning of the Board. We agree as a matter of policy. Formal findings are not required. The only requirements are that the public and the reviewing courts are informed as to the reasoning behind the regulation. The comments of the one Board member regarding illicit drug trafficking suffice in this regard. Further, since those comments were uncontradicted by other Board members we can assume that his reasoning was adopted by the Board.

F. Against Substantial Evidence

Substantial evidence supporting the challenged regulations can be found in the testimony of Mr. Daily, Mr. Brito and Counsel Dickson.

Although there is testimony to the contrary it basically raises the Commerce Clause issues, which were no more dispositive in that hearing than they are in this appeal. The regulations are valid.

Affirmed.

It is so ordered.

LOPEZ, J., concurs.