Direct Sales Co. v. United States

Direct Sales Co. (defendant) was a registered drug manufacturer and wholesaler that conducted a nationwide mail-order business. In 1933, Direct Sales made contact with Dr. Tate, a small-town physician, and fulfilled orders for various pharmaceuticals. The character of Dr. Tate’s orders narrowed with time such that he ordered almost nothing but morphine sulphate. Between 1933 and 1940, the period in question, Dr. Tate purchased the major portion of his morphine sulphate from Direct Sales and placed regular orders. Evidence at trial revealed that the average physician in the United States did not require more than 400 one-quarter grain tablets of morphine sulphate annually for legitimate use; however, Dr. Tate’s purchases amounted to much more. In the last six months of 1939 alone, Direct Sales’s shipments to Dr. Tate averaged 5,000 to 6,000 half-grain tablets a month. Direct Sales’s mail-order model enabled it to sell at lower prices than its competitors, and it even offered discounts as much as 50 percent on narcotics. Direct Sales also listed narcotics in quantities far exceeding standard amounts. The discounted prices and large quantities of narcotics listed for order attracted customers to Direct Sales, in particular Dr. Tate, who in turn distributed the drugs to and through addicts and other suppliers at high profit margins. Both Direct Sales and Dr. Tate were convicted of conspiring to violate the Harrison Narcotic Act. Direct Sales alone appealed, arguing there was insufficient evidence to sustain the conviction.