From Page 5 of the Sept. 14, 1905 NYT:

WASHINGTON -- The Commissioner of Internal Revenue to-day rendered a decision that will seriously affect a number of patent medicines composed largely of distilled liquors...the manufacturers of these medicines must take out licenses as rectifiers and liquor dealers and...druggists and others handling them will have to pay the usual retail liquor dealer's license.
.
.
While no statement is made by the Commissioner as to the medicines that will be affected it is believed that the decision affects several prominent and highly advertised medicines. In some instances these medicines have been found to contain as high as 45 perc cent. of alcohol, and there are many on the market, it is said, that contain 25 per cent. of alcohol.

These medicines are said to have immense sales in prohibition communities (emphasis added), figures collected in Massachussetts recently showing. It is stated that one such advertised compound with a high percentage of whisky had been bought to the extent of 300,000 bottles in one year in prohibition communities in one New England state.

Prohibition at the local level was avoided through the NyQuill-approach? Go figure.

Was this a public safety issue or a revenue issue? To me it reads like a revenue issue - whether basic principle (against tax evasion) or revenue-hunger on the part of the government is less clear.

Over time the medicinal use of alcohol gave way to better compounds - whether that was an outcome of such regulation is an interesting question. I doubt the tax savings were greater than the revenue enhancement from more effective drugs, but if the extended reach of the tax man increased incentives for research and development of new drugs? Hmmm....