Direct Sales Co. v. United States

319 U.S. 703 (1943)

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Nature of the Case

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Facts

D is a registered drug manufacturer and wholesaler and conducts a nationwide mail-order business from Buffalo, New York. Dr. John V. Tate was a registered physician, practicing in Calhoun Falls, South Carolina, a very small town. Tate dispensed illegally vast quantities of morphine sulphate purchased by mail from D. D first made contact with Tate prior to 1933. Tate purchased a variety of pharmaceuticals, but eventually, he ordered almost nothing but morphine sulphate. Tate purchased the major portion of his morphine sulphate from petitioner. The average physician in the United States does not require more than 400 one-quarter grain tablets annually for legitimate use. From November, 1937, to January, 1940, Tate's purchases amounted to 79,000 one-half grain tablets. In the last six months of 1939, petitioner's shipments to him averaged 5,000 to 6,000 half-grain tablets a month, enough as the Government points out to enable him to give 400 average doses every day. These quantity sales were in line with the general mail-order character of D's business. Narcotics represented about fifteen percent and two-and-a-half percent by volume were in narcotics. By offering fifty percent discounts on narcotics, D 'pushed' quantity sales. D listed narcotics in greater quantities than the industry standard 100 table purchase. D offered them in 500, 1000 and 5000 tablet units. In 1936, the Bureau of Narcotics informed D it was being used as a source of supply by convicted physicians. D eliminated the listing of 5000 lots. In 1940, at the Bureau's suggestion, D eliminated its fifty and ten percent discounts. But, on doing so, it translated its discount into its net price. Tate distributed the drugs to and through addicts and purveyors. D and Tate were convicted of conspiracy to violate the Harrison Narcotic Act. D appealed.