Summary
The Supreme Court of Nevada reviewed disciplinary action against two pharmaceutical wholesalers whose licenses were revoked and who were fined for violations involving adulterated or misbranded drugs, prescription-drug pedigrees, recordkeeping, and unlicensed distributors. The court held that the Nevada State Board of Pharmacy had jurisdiction over the Nevada licensees’ out-of-state conduct, acted within its discretion in joining the parties and limiting discovery, and provided adequate due process. It further held that liability under NRS 585.520(1) did not require proof of intent and that NAC 639.603(1) required pedigrees for subsequent sales when the drugs had been purchased from another wholesaler.
Topics
Practice areas
Questions Presented
- Whether the Nevada State Board of Pharmacy had jurisdiction to discipline Nevada licensees for conduct occurring outside Nevada.
- Whether the Board had discretion to join Dutchess and Legend in one administrative disciplinary proceeding.
- Whether the appellants were denied due process through inadequate notice, adjudication of charges allegedly not stated in the accusation, or denial of prehearing discovery and a witness list.
- Whether NRS 585.520(1) imposes liability without proof of intent or knowledge.
- Whether NAC 639.603(1) requires an authorized distributor to provide a pedigree when it purchased the prescription drug from another wholesaler.
- Whether the Board incorrectly determined that Dutchess violated Nevada law by accepting and selling drugs handled or shipped by Overseas International, an out-of-state wholesaler.
- Whether the Board incorrectly required Dutchess to maintain and provide shipping records under NAC 639.602.
- Whether the Board's orders were arbitrary and capricious because of its fines, license revocations, or citation of incorrect statutory authority.
- Whether the Board impermissibly pierced the corporate veil by directing staff to seek payment from company principals.
Holdings
- The Board had jurisdiction under NRS 639.210 to discipline and impose penalties on Dutchess and Legend as Nevada license holders, even when the conduct supporting the disciplinary charges occurred outside Nevada.
- The Board acted within its discretion by joining Dutchess and Legend in a single administrative proceeding, and the appellants failed to establish undue prejudice.
- The appellants received constitutionally adequate notice, and the Board adjudicated Dutchess guilty only of conduct charged in the accusation.
- The appellants had no constitutional right to prehearing discovery or disclosure of intended witnesses, and the Board acted within its discretion in declining to provide such discovery.
- NRS 585.520(1) contains no knowledge or intent requirement; the Board may impose administrative liability for selling or delivering adulterated or misbranded drugs without proof that the licensee knew of the violation or intended harm.
- A wholesaler must provide a pedigree for a subsequent sale when it purchased the prescription drug from another wholesaler, even if it also has an ongoing relationship with the manufacturer or authorized-distributor status.
- The Board erred in determining that Dutchess violated Nevada law by accepting and selling drugs handled or shipped by Overseas International because the version of NRS 639.233(2) in effect in 2003 exempted out-of-state wholesalers or manufacturers whose principal place of business was outside Nevada from Nevada's licensing requirement.
- NAC 639.602 requires a wholesaler to maintain and provide shipping records evidencing shipments from suppliers to the wholesaler and from the wholesaler to purchasers.
- The Board's orders were not arbitrary or capricious. The Board had authority to impose the fines, its evidentiary determinations were entitled to deference, and its inadvertent citation to an incorrect statutory provision did not invalidate an otherwise correct order.
- The Board did not pierce Dutchess's or Legend's corporate veil or enter a judgment against their principals by directing Board staff to pursue collection from the principals to the extent legally possible.
Key quotations
“Based on the plain language of NRS 585.520(1), and supported by the Supreme Court's interpretation of the statute's federal counterpart, we conclude that NRS 585.520(1) contains no knowledge requirement and that liability may be imposed under that section absent consciousness of any wrongdoing.” (1169)
“An exception exists only if the wholesaler is both an authorized distributor and purchased the drug from an entity other than another wholesaler.” (1170)
“Accordingly, we reverse the district court's denial of the petition for judicial review and remand to the district court with instructions to remand to the Board.” (1175)
Factual background
Dutchess and Legend were Nevada-licensed pharmaceutical wholesalers that purchased and resold prescription drugs, including Lupron, Zoladex, and Serostim. The Board found that the companies dealt with questionable wholesalers, handled counterfeit or adulterated drugs, failed to maintain accurate pedigrees and shipping records, and purchased drugs that had been handled or shipped by Overseas International. Dutchess and Legend also used their authorized-distributor relationship with TAP Pharmaceuticals in connection with resales of Lupron without disclosing prior wholesale sources.
Procedural history
After a five-day disciplinary hearing, the Board found Dutchess and Legend guilty of 11 violations, revoked their wholesaler licenses, and imposed fines and fees. The district court denied judicial review except that it remanded for reconsideration of the fines; the Board then reduced the fines. The Supreme Court granted rehearing, reversed the district court's denial of judicial review, and remanded for further remand to the Board to recalculate Dutchess's fines related to transactions involving Overseas International.
Remand instructions
Reverse the district court's denial of the petition for judicial review and remand to the district court with instructions to remand to the Board. The Board must determine what portion of Dutchess's fines related to the erroneous Overseas International licensing determination and reconsider and recalculate Dutchess's fines accordingly.