When a pharmaceutical wholesaler notifies a community pharmacy that it will no longer distribute controlled substances, the pharmacy seeks a temporary injunction.
Issue of the Case
When a pharmaceutical wholesaler notifies a community pharmacy that it will no longer distribute controlled substances to that outlet and the pharmacy owners go to federal court to seek a temporary injunction ordering the supplier to resume shipments, should the court enter an order mandating that the distributor resume providing the pharmaceuticals in that category to the pharmacy?
Facts of the Case
Owners of a pharmacy in a southwestern state filed a lawsuit against a national pharmacy wholesale organization seeking to have the court order the distributor to cease its action of cutting off the pharmacy from supplies of controlled substances. The pharmacy owners sought the equitable remedy of an injunction (ie, a court order that the wholesaler do or refrain from doing certain specific acts).
The distributor had decided to cease shipment of controlled substances to the pharmacy based on an internal review of purchasing patterns. The pharmacy owners had a distribution contract in place with the wholesaler, and the allegation of the operators of the pharmacy was that this contract had been breached when the wholesale firm ceased the shipments in question.
Employees of the wholesaler had conducted a compliance review of the pharmacy’s purchases to determine whether diversion of controlled substances might be occurring. The firm found inventory inconsistencies and a disproportionately large quantity of controlled substances being dispensed by the pharmacy. Citing the Federal Controlled Substances Act along with guidance from the US Drug Enforcement Administration (DEA), the distributor terminated all shipments of controlled substances to the pharmacy.
The Board of Pharmacy then entered the picture when a compliance officer conducted an ordering and dispensing inspection. This resulted in a citation from the state regulatory agency for drug overages and shortages as well as for having in stock medications that were out of date. It is noteworthy, however, that the state board made no specific findings of product diversion and there was no adverse board action against either the pharmacy or the pharmacist-in-charge.
At the time of the hearing on the matter in federal trial court, the DEA had taken no adverse action regarding the pharmacy’s registration with that agency. Further, no federal or state regulatory agency had concluded that diversion was occurring at the pharmacy.
Plaintiff pharmacy owners reported at the time of the proceeding that they had been unable to contract with an alternative distributor that would be willing to meet the total product needs of the firm. One alternative supplier had indicated a willingness to supply medications as long as supply restrictions were implemented regarding certain classes of controlled substances. The pharmacy responded that those quantity limitations would not allow the pharmacy to continue functioning. Yet a third wholesaler was reported to still be considering whether to supply controlled substances to the pharmacy.
The Court’s Ruling
The US District Court judge reviewed the facts of the case and applied the standards applicable to a decision to grant a preliminary injunction. His conclusion was that issuance of an injunction ordering the initial wholesaler to resume providing controlled substances to the pharmacy was not appropriate. The request for an injunction was denied.
The Court’s Reasoning
The court began its analysis by pointing out that the equitable remedy of a preliminary injunction is “an extraordinary and drastic remedy, one that should not be granted unless the movant, by a clear showing, carries the burden or persuasion.” The court also noted that “The basic function of a preliminary injunction is to preserve the status quo pending a determination of the action on the merits.”
The court then noted some weakness in the case advanced by the pharmacy owners. The purchasing agreement that governed the relationship between seller (wholesaler) and purchaser (pharmacy) bore a provision that the seller could terminate the agreement if the pharmacy “failed to comply with all applicable laws, rules, regulations, ordinances and guidance of the DEA.” Several factors identified by DEA as indicative of possible diversion were present when the wholesaler elected to cease distribution to the pharmacy. Those indicators included (1) ordering of a limited variety of controlled substances in quantities disproportionate to the quantity of non-controlled medications ordered; (2) 1 or more practitioners writing a disproportionate share of the prescriptions for controlled substances dispensed by the pharmacy; (3) high purchase rates for controlled substances; and (4) placement of orders of unusual frequency.
The court also weighed the potential damage to the pharmacy versus the possible harm to the wholesaler, concluding that the plaintiff pharmacy owners who were seeking the temporary injunction had “failed to demonstrate sufficient irreparable harm in the absence of an injunction.”
Dr. Fink is professor of pharmacy law and policy and Kentucky Pharmacists Association Endowed Professor of Leadership at the University of Kentucky College of Pharmacy, Lexington.