Have We Lost Our Minds???

I'm sure you've all heard stories like this before, but it finally happened to someone I know.
My friend got a message the other day from her 10-year old son's school, saying that they had heard that her son had been seen with drugs in school and they were going to check this out immediately. My friend didn't believe it for a minute and actually was quite curious as to what the school was going to tell her. Sure enough. She got in touch with the vice-principal, who told her that, indeed, they found drugs in his possession, Milk of Magnesia. That day happened to be her son's first day back to school after being out for 2 days with, what her doctor called "a nervous stomach" (which the teacher knew about) and had told her to give him MOM. She just didn't know he had taken it to school, but the poor kid was afraid he was going to get sick in school, so he brought it "just in case." Because of their "zero tolerance policy" and because this school district doesn't suspend students, he, instead, was put in a class for kids with "chronic" behavior problems. Of course, this has done nothing for his "nervous" stomach. He's scared to death of some of these kids, the school bullies and "tough" guys, that make up this class.
When did school administrators give up their authority to discipline on a case by case basis? And why? Don't these school boards trust the people they put in these positions to be able to identify between a student with illegal drugs and a poor kid afraid he's going to get sick in school? God only knows what this experience has done to the boy.