Late last month, the Ninth Circuit affirmed the constitutionality of a California county ordinance requiring all manufacturers of both brand name and generic prescription drugs sold in the county to take equal responsibility for all of the county’s unwanted prescription drugs, including their collection, transportation, and disposal, regardless of whether the manufacturer is based within the county.
The 2012 Alameda County ordinance, known as the Safe Drug Disposal Ordinance, was challenged by organizations representing manufacturers and distributors of pharmaceuticals as violating the Commerce Clause of the United States Constitution. The ordinance is essentially likened to a tax on any drug manufacturers and distributors whose products are sold in Alameda County as it transfers the costs of the drug disposal from the country to the drug providers. As a practical matter, manufacturers who participate in this program must either perform the following actions or pay a third party to do so: distributing educational and outreach materials, providing disposal bins throughout the county, and arranging for the prescription drugs to be transported to medical waste facilities where they can be properly destroyed. Under the ordinance, manufacturers can share the costs by either operating a joint program to implement the steps above or by operating several individual programs that each handle a portion of the prescription drugs in the county; the disposal program currently in place is run by Alameda County itself and manufacturers are required to reimburse the state for its operating costs.
The Ninth Circuit – affirming the district court below – held that there was no Commerce Clause violation because 1) the ordinance does not discriminate against interstate commerce as the burden is applied equally to both in-state and out-of-state manufacturers and will ultimately affect drug pricing for consumers both in and outside the county; 2) the ordinance does not directly regulate interstate commerce because it does not control activity outside of the county; and 3) to the extent the ordinance indirectly affects interstate commerce, the county has a legitimate interest in the legislation, and the ordinance’s environmental, health, and safety benefits to the county are not outweighed by any burdens on interstate commerce. In fact, the court found that there were no substantial burdens on interstate commerce because there was no evidence to suggest that the ordinance would either interrupt or decrease the flow of goods into or out of the county.
Interestingly, the opinion notes that the ordinance is the first of its kind, and it remains to be seen whether it will garner the type of public support that will lead to the adoption of similar ordinances in other counties throughout the nation, especially given the Ninth Circuit’s ruling. And if it does, what if those other ordinances pose different or conflicting obligations on the manufacturers? Such a county-by-county hodge-podge of potentially disparate requirements hardly seems like good public policy. For generic and brand name drug manufacturers, for once on the same side of an issue, this could potentially pose an increase to the cost of their operations, and it will be interesting to see how they attempt to mitigate these costs and how they may respond to any future attempts at such localized regulation.