United States v. Jamieson-McKames Pharmaceuticals, Inc.
651 F.2d 532 (1981)
Rule of Law:
The drug manufacturing industry is a "pervasively regulated business," making warrantless administrative searches under 21 U.S.C. § 374(a) reasonable under the Fourth Amendment, provided there is consent to the inspection or an administrative warrant. If consent is refused, inspectors must obtain an administrative warrant, for which traditional probable cause is not required.
Facts:
- Jamieson-McKames Pharmaceuticals, Inc., a Missouri corporation, along with closely interrelated corporate defendants Pharmacare, Inc., Payless Pharmacy, Inc., and Pharmacare Generic Drugs, Inc., manufactured, purchased, packaged, labeled, distributed, and sold drugs from before June 1972 until November 1975.
- James C. Jamieson, Sr. and James C. Jamieson, Jr., held leadership positions across these corporate entities and maintained complete control over their operations.
- During a nationwide shortage of Motrin in June 1975, Jamieson, Jr., ordered magnesium salicylate tablets from C.M. Bundy Company and specifically requested them to resemble Motrin tablets.
- Jamieson-McKames sent Dr. Zack Barnes a bottle with a Pharmacare Payless label printed with "Motrin," thereby falsely representing the contents as Motrin when they were actually magnesium salicylate.
- In January 1975, appellants received a shipment of potassium phenoxymethyl penicillin (pen V) from Zenith Laboratories with an expiration date of August 1975.
- Jamieson, Jr., directed Jamieson-McKames employees to remove the original pen V labels and replace them with new labels showing "Flavored Potassium Penicillin G Powder" (pen G) and an extended expiration date of July 1977, without conducting stability testing or seeking FDA approval.
- Jamieson, Jr., ordered potassium penicillin G (pen G) pills from Mallinckrodt Chemical Works, which were then ground up, packed into capsules, labeled "Ampicillin," and subsequently used to fill orders for ampicillin.
- Jamieson, Jr., directed employees to remove labels on Neomycin-Polymyxin eardrops with an expiration date of July 1975 and replace them with labels showing an expiration date of 8/76, without conducting stability tests or requesting FDA certification for the new date.
Procedural Posture:
- On December 19, 1975, the government filed a civil complaint for forfeiture of certain drug manufacturing equipment in the district court, alleging its use or design for use in making counterfeit drugs.
- Jamieson-McKames Pharmaceuticals, Inc., as claimant of the equipment, denied the allegations in its answer filed February 19, 1976.
- On May 12, 1977, James C. Jamieson, Sr., James C. Jamieson, Jr., and the corporate defendants (Jamieson-McKames Pharmaceuticals, Inc., Pharma-care Generic Drugs, Inc., Pharmacare, Inc., and Payless Pharmacy, Inc.) were charged in an 11-count indictment with counterfeiting, adulterating, and misbranding drugs, and conspiracy to do so, with intent to defraud and mislead.
- The criminal case and the civil forfeiture case were consolidated for trial before the district court by consent of the parties.
- The district court found the individual and corporate defendants guilty of criminal violations on all counts and entered a judgment of conviction, sentencing the individuals to imprisonment and fines, and the corporations to fines.
- The district court also entered a civil order of condemnation and forfeiture of certain drug manufacturing equipment.
- The defendants appealed the judgment of conviction and the civil order of condemnation and forfeiture to the United States Court of Appeals for the Eighth Circuit, with James C. Jamieson, Sr., James C. Jamieson, Jr., and the corporate defendants as appellants in the criminal case, and Jamieson-McKames as the appellant in the civil case.
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Issue:
Does a warrantless inspection of a drug manufacturer's premises under 21 U.S.C. § 374(a) violate the Fourth Amendment, and what constitutes valid "consent" for such an inspection in a pervasively regulated industry when the statute provides a penalty for refusal?
Opinions:
Majority - Arnold, Circuit Judge
Yes, a warrantless inspection of a drug manufacturer's premises under 21 U.S.C. § 374(a) does not violate the Fourth Amendment because the drug manufacturing industry is a pervasively regulated business, and "consent" for such an inspection means merely not refusing entry or inspection. The court held that the drug-manufacturing industry falls squarely within the "pervasively regulated business" exception to the Fourth Amendment's warrant requirement, established in Colonnade Catering Corp. v. United States and United States v. Biswell. This exception applies to industries with a long history of close government supervision, where there is an urgent public health interest, and where proprietors have a diminished expectation of privacy. While Marshall v. Barlow’s, Inc. generally requires a warrant for administrative searches in less regulated industries, it explicitly preserved the Colonnade-Biswell exception, noting that a regulatory scheme could be so pervasive that it justifies warrantless searches. The court emphasized the urgent public-health interests in regulating the drug industry, citing extensive federal oversight from manufacturing to marketing. However, the court found that because the Federal Food, Drug, and Cosmetic Act (like the liquor statute in Colonnade) contains provisions punishing the refusal to permit inspection (21 U.S.C. §§ 331(f) and 333(a)), forcible entry without a warrant is not authorized. Therefore, a warrantless inspection is permissible only if there is "valid consent," which the court clarified means merely that the appellants did not refuse to permit entry or inspection, thereby avoiding a statutory violation. If consent is withheld, FDA inspectors are required to obtain an administrative warrant. For searches conducted with an administrative warrant (as at Morganford Road), the court affirmed that "probable cause in the criminal law sense is not required"; instead, administrative probable cause, based on specific evidence of violations or reasonable administrative standards, suffices. The court distinguished Michigan v. Tyler, which requires criminal probable cause for searches aimed at gathering evidence for criminal prosecution, by noting that Tyler did not apply to pervasively regulated industries where a diminished expectation of privacy prevails. Searches at the Chambers Medical Group were also upheld due to valid third-party consent by Dr. Eckert, who had common authority over the dispensary. The court also affirmed that Miranda warnings were not required for defendants' statements as they were not in a custodial situation. Finally, the court found substantial evidence to support most of the criminal convictions (Counts I-VI and IX-XI) for counterfeiting, misbranding, and adulterating drugs with intent to defraud and mislead, and affirmed the civil condemnation order. However, convictions for Counts VII and VIII, related to the Wentzville search, were vacated and remanded for a factual determination on the issue of consent to inspect.
Analysis:
This case significantly clarifies the Fourth Amendment's application to administrative searches in the heavily regulated drug industry. It reinforces the principle that drug manufacturers operate with a reduced expectation of privacy, thereby allowing administrative warrants based on less than criminal probable cause. The ruling distinguishes between a failure to refuse entry (which constitutes consent) and an active refusal, which triggers a separate statutory penalty and necessitates obtaining an administrative warrant. This framework provides clear guidance for FDA enforcement actions, allowing for effective oversight of public health concerns while upholding a minimal Fourth Amendment safeguard against arbitrary government intrusion. It also underscores the importance of statutory language in determining the precise scope of administrative search authority.
