By Kurt R. Karst –
In a September 30, 2014 decision, 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. The Court succinctly (and with a little snark) captures its decision in a concluding paragraph:
The parties agree that the Alameda County Safe Drug Disposal Ordinance constitutes a “first-in-the-nation” ordinance. Opinions vary widely as to whether adoption of the Ordinance was a good idea. We leave that debate to other institutions and the public at large. We 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.
The case was kicked off in December 2012 when the Pharmaceutical Research and Manufacturers of America (“PhRMA”), the Biotechnology Industry Organization (“BIO”), and the Generic Pharmaceutical Association (“GPhA”) challenged the county ordinance as a per se violation of the Commerce Clause of the U.S. Constitution. As we previously reported (here and here), the Alameda Ordinance, like other manufacturer take-back ordinances and laws, places the primary responsibility for end-of-life management of certain products on the manufacturers of the products. Specifically, the Alameda Ordinance requires “producers” of “covered drugs” to operate take-back programs after submitting a plan to the county’s Department of Environmental Health. Such operation includes the creation, administration, promotion, and payment of the program (including the payment of Alamada County’s costs to administer and enforce the Ordinance). Unless otherwise excused, every producer’s take-back program – which may be run by an individual producer or funded by a group of covered producers under a “product stewardship organization” – must accept and dispose of all covered drugs received, no matter who manufactured the drugs. (As an aside, we note that the Drug Enforcement Administration recently published a final rule implementing the Secure and Responsible Drug Disposal Act of 2010 that expands the options available to patients to dispose of controlled substances – see our post here.)
PhRMA, BIO, and GPhA argued that the Alameda Ordinance is a per se violation of the Commerce Clause of the U.S. Constitution, and, in particular, the dormant Commerce Clause, under which state and local governments may not enact regulations that unduly interfere with interstate commerce. Using the U.S. Supreme Court’s two-tiered approach to analyze whether a state or local economic regulation violates the dormant Commerce Clause, see Healy v. Beer Institute, 491 U.S. 324 (1989); Brown–Forman Distillers Corp. v. New York State Liquor Auth., 476 U.S. 573 (1986), the California District Court dispensed with the case in an 11-page ruling. The Ninth Circuit followed a similar analysis in its 17-page decision.
The first tier asks whether the Ordinance “either discriminates against or directly regulates interstate commerce.” It does neither, said the Ninth Circuit. As an initial matter, the Ordinance is not discriminiatory:
The Ordinance, both on its face and in effect, applies to all manufacturers that make their drugs available in Alameda County—without respect to the geographic location of the manufacturer. Even if one of the manufacturers represented by Plaintiffs were to close all of its production facilities, open a single production facility in Alameda County, and limit the sale of its products to intra-county commerce, the Ordinance would still apply to that manufacturer. In other words, the Ordinance does not discriminate, because it “treat[s] all private companies exactly the same.” . . .
And pointing to certain stipulations between the parties, the Court said that those stipulations reveal that the Ordinance does not control conduct beyond the boundaries of Alameda County.
Under the second tier of a dormant Commerce Clause analysis, which requires a certain balancing test, see Pike v. Bruce Church, Inc., 397 U.S. 137 (1970), a court must ask whether the burden imposed on interstate commerce by, in this case, the Alameda Ordinance is significant vis-à-vis the putative local benefits. It is not said the Court: “Plaintiffs provide no evidence that the Ordinance will interrupt, or even decrease, the ‘flow of goods’ into or out of Alameda. . . . Without any evidence that the Ordinance will affect the interstate flow of goods, we cannot say that the Ordinance substantially burdens interstate commerce.”
The challenge to Alameda’s Safe Drug Disposal Ordinance is not the only challenge to such a county law. In December 2013, PhRMA, BIO, GPhA, and the Consumer Healthcare Products Association filed a Complaint in the U.S. District Court for the Western District of Washington challenging as unconstitutional a King County, Washington Board of Health regulation establishing an industry-funded stewardship program for the collection and disposal of unwanted household medicines from county residents (see opur previous post here). That case was stayed pending resolution of the challenge to the Alameda Ordinance. According to an agreement between the parties, the Ninth Circuit’s panel decision triggers a countdown to implementation of certain provisions of the King County regulation, which is known as the Secure Medicine Return Regulations.
The Ninth Circuit’s decision could open the floodgates for other counties across the nation to create and implement their own take-back ordinances and regulations. That could be costly for the drug industry. Alameda County estimates that the annual total cost to each manufacturer for its take-back program is between $5,300 and $12,000. If each of the 3,144 counties and county equivalents in the U.S. implements a similar program with a similar cost range, then that would mean each manufacturer would need to cough up between $16,663,200 to $37,728,000 each year. Alternatively, Congress could create a national take-back law. Back in 2011, Rep. Louise Slaughter (D-NY) introduced H.R. 2939, the Pharmaceutical Stewardship Act of 2011. The bill didn’t go very far in the legislative process; however, the Ninth Circuit’s decision could reignite interest in such legislation.