The Pharmaceutical Research and Manufacturers of America (“PhRMA”), the Biotechnology Industry Organization (“BIO”), and the Generic Pharmaceutical Association (“GPhA”) challenged a “safe drug disposal ordinance” that was passed by the Alameda County, California Board of Supervisors in 2012. [1] The United States Circuit Court of Appeals for the Ninth Circuit recently upheld a district court decision requiring drug makers to pay for a drug “take back” program, ruling that the ordinance was not unconstitutional. [2] The manufacturers have appealed to the United States Supreme Court to determine whether the ordinance unconstitutionally burdens interstate commerce.
Alameda County passed “The Safe Drug Disposal Ordinance” in 2012. The Ordinance required prescription drug producers that sell, offer for sale, or distribute brand name and generic drugs in Alameda County to collect and safely dispose of the County’s unwanted prescription drugs, regardless of which manufacturer produced the drug in question. [3] The Ordinance also contained provisions specifically prohibiting manufacturers from imposing any local taxes or fee to pay for the services, and effectively forcing the manufactures to bear the entire cost of the program. [4] The goal of the Ordinance was to reduce contaminants in drinking water and reduce the threat of drug abuse. [5] In order to accomplish these goals and avoid placing any undue burden on the local economy, the County attempted to externalize the manufacturer’s financial woes by calling upon them for funding. Supporters of the Ordinance “feel ,the industry that profits from the sales of these products should have the financial responsibility for proper management and disposal.” [6]
PhRMA, BIO, and GPhA alleged that the Ordinance violates the now dormant Commerce Clause by requiring interstate drug manufacturers to conduct and pay for Alameda County’s drug disposal program because it allowed the local government to enact regulations that unduly interfere with interstate commerce. [7] The District Court applied the United States Supreme Court’s two- tiered approach to analyzing state economic regulation under the Commerce Clause articulated in Brown-Forman Distillers Corp. v. N.Y. State Liquor Auth., 476 U.S. 573, 578–79 (1986), which states: (1) when a state statute directly regulates or discriminates against interstate commerce, or when its effect is to favor in-state economic interests over out-of-state interests, [the Court has] generally struck down the statute without further inquiry; however, (2) when, a statute has only indirect effects on interstate commerce and regulates evenhandedly, [the Court has] examined whether the State’s interest is legitimate and whether the burden on interstate commerce clearly exceeds the local benefits. [8]
The District Court found that the Ordinance passed constitutional muster under this two-tiered approach, and the Ninth Circuit Court of Appeals affirmed. [9] The court maintained that the ordinance treated all drug makers equally and did not place a substantial burden on interstate business. [10] The court stated that the Ordinance “applie[d] to manufacturers that make their drugs available in Alameda County, without respect to the geographic location of the manufacturer,” and “[did] not directly regulate interstate commerce, because it [did] not control conduct beyond the boundaries of the County . . . Given that the ordinance applies across the board, it does not discriminate at all.” [11] The court was quick to point out that although the program would cost the manufacturers around $1.2 million, the pharmaceutical industry generates $950 million each year from sales in Alameda County. [12] The County argued that because drug manufacturers profit on local sales, they are obligated to pay for disposal. [13]
The plaintiffs are justifiably concerned that other jurisdictions will follow suit, as localities have incentive to favor their own residents by shifting regulatory costs onto the interstate market. [14] On December 30, 2014, the plaintiffs appealed to the United States Supreme Court to review the Ninth Circuit’s decision. Similar ordinances have been considered throughout the country, and unless the Supreme Court intervenes, they are likely to be upheld.
Brian King is a current student at DePaul University College of Law in Chicago. Dr. King holds a PharmD from Purdue University and is a practicing Pharmacist in the Chicago area. He will complete his law degree and certificate in health law in 2017.
References:
[1] Kurt R. Karst, Alameda County Drug Take-Back and Disposal Ordinance Not Unconstitutional Says Federal Judge. (September 03, 2013), http://www.fdalawblog. net/ fda_law_ blog_hyman_phelps/2013/09/alameda-county-drug-take-back-and disposal-ordinance-not-unconstitutional-says-federal-judge.html.
[2] Edward Silverman, That Flushing Sound: Pharma Must pay for a Drug Take-Back Program. (October 1, 2014), http://blogs.wsj.com/pharmalot/2015/02/27/that-flushing-sound-san-francisco-moves-closer-to-a-take-back-program.
[3] Pharmaceutical Research & Mfrs. of Am., et al. v. Cnty. of Alameda, No. 13-16833.
[4] Id.
[5] Silverman, supra note 2.
[6] Andrew Pollak, Unused Pills Raise Issue of Disposal and Risks. (December 6, 2012), available at http://www.nytimes.com/2012/12/07/business/drug-makers-challenge-pill-disposal-law-in-california.html.
[7] Karst, supra note 1; PRMA, supra note 3.
[8] PRMA, supra note 3.
[9] Id.
[10] Silverman, supra note 2.
[11] PRMA, supra note 3.
[12] Id.
[13] Pollak, supra note 6.
[14] Edward Silverman, Pharma Asks U.S. Supreme Court to Review County Take-Back Program. http://blogs.wsj.com/pharmalot/2015/01/06/pharma-asks-u-s-supreme-court-to-review-county-take-back-program