By Kurt R. Karst –
Late last month, the Pharmaceutical Research and Manufacturers of America (“PhRMA”), the Biotechnology Industry Organization (“BIO”), and the Generic Pharmaceutical Association (“GPhA”) jointly filed a Petition for a Writ of Certiorari (Case No. 14-751) with the U.S. Supreme Court asking the Court to take up a case that could significantly affect the pharmaceutical industry (and beyond). The appeal comes after a September 30, 2014 decision in which a unanimous panel of judges from the U.S. Court of Appeals for the Ninth Circuit affirmed an August 2013 decision from the U.S. District Court for the Northern District of California finding that a first-in-the-nation Safe Drug Disposal Ordinance passed by the Alameda County, California Board of Supervisors in July 2012 is not unconstitutional. States, counties, and municipalities across the nation will be closely following this latest development as they consider whether or not to develop similar extended producer responsibility (a.k.a. product stewardship) legislation and programs targeting pharmaceuticals and that require manufacturers to finance the costs of safe disposal of their products.
As we previously reported (here, here, and here), PhRMA, BIO, and GPhA challenged the Alameda Ordinance as a per se violation of the Commerce Clause of the U.S. Constitution, and, in particular, the dormant Commerce Clause. Under that Clause, state and local governments may not enact regulations that unduly interfere with interstate commerce. While the Ninth Circuit noted that “[o]pinions vary widely as to whether adoption of the Ordinance was a good idea,” the Court “needed only to review the Ordinance and determine whether it violates the dormant Commerce Clause of the United States Constitution.” “We did; it does not,” wrote the panel after examining the Ordinance under the U.S. Supreme Court’s two-tiered approach to analyze whether a state or local economic regulation violates the dormant Commerce Clause.
In their Petition to the U.S. Supreme Court, PhRMA, BIO, and GphA present the following question:
Whether the dormant Commerce Clause permits a local law that directly conscripts out-of-state manufacturers to enter the locality and to assume all costs and responsibility for collecting and disposing of unused medicines from local residents, for the avowed purpose of shifting the costs of this traditional government function from local taxpayers and consumers to foreign producers and consumers?
Urging the Court to review the Ninth Circuit’s decision, the trade groups state:
The Ninth Circuit’s unqualified endorsement of local laws requiring interstate producers to enter the locality, to perform an uncompensated local public service at the expense of the interstate market, sharply conflicts with this Court’s precedent. It violates both the specific precedent forbidding laws requiring interstate actors to establish operations in the local jurisdiction, and the general precedent forbidding laws that attach conditions to the sale of products in order to secure a local economic advantage at the expense of outsiders. While the dormant Commerce Clause provides states with broad leeway to regulate interstate products to protect local residents, it imposes a virtually per se prohibition against leveraging the local presence of products to coerce interstate producers to enrich local residents at the expense of non-local businesses and consumers. [(Emphasis in original.)]
The trade groups go on to note the potentially expansive – i.e., “Balkanizing” – effect of the Alameda Ordinance:
Nor will this effort to dragoon out-of-state actors into local jurisdictions to provide services to local residents be confined to pharmaceutical products. The sole mission of the California Product Stewardship Council (CPSC), a group at the heart of the lobbying effort to pass the Alameda Ordinance, is to ensure that “Producers have the primary responsibility to establish, fund, and manage end of life systems for their products with state government setting performance goals.” The CPSC hailed the decision below as a “landmark victory” for extended producer responsibility and is pressing for programs comparable to the Alameda pharmaceutical takeback program for medical sharps, paint, and batteries.
There is no reason to think that other jurisdictions in the Nation will not follow suit, as localities have every incentive to favor their own residents by shifting regulatory costs onto the interstate market.
Regulations similar to the Alameda County Safe Drug Disposal Ordinance have been enacted in King County, Washington. There too, PhRMA, BIO, and GphA, along with the Consumer Healthcare Products Association (“CHPA”), challenged as unconstitutional the County’s Secure Medicine Return Regulations establishing an industry-funded stewardship program for the collection and disposal of unwanted household medicines from county residents (see our previous post here). That lawsuit is on hold for the moment. According to an updated agreement between the parties, the matter “is stayed until such time as the as the Alameda County plaintiffs exhaust United States Supreme Court review or until the time for seeking such review has lapsed.”
Meanwhile, other state and local governments are pursuing (or are being pursued) to draft legislation and regulations modeled after the Alameda Ordinance. For example, an Ordinance was recently proposed by the San Francisco Board of Supervisors that’s inspired by the Alameda Ordinance. Indeed, the “Findings” section of the proposal mentions the Alameda County and King County regulations, as well as the Ninth Circuit’s decision (and a recent rule from the DEA on controlled substance disposal – see our previous post here), as justification for the passage of a San Francisco drug stewardship program. Other California government authorities – including Sonoma County and Turlock City – are also reportedly considering Alameda-like ordinances, and appear to be taking steps (see here) to mobilize. Indeed, in late October 2014, one California State Senator sent a letter to every county in the State informing them of the Ninth Circuit’s decision and urging them to adopt programs modeled after Alameda’s Ordinance.