On September 30, 2014, the Ninth Circuit affirmed the Northern District of California’s summary judgment that the Alameda Safe Drug Disposal Ordinance (the “Ordinance”) does not violate the dormant Commerce Clause of the United States Constitution. PRMA v. Alameda County, 2014 U.S. App. LEXIS 18737 (9th Cir. 2014). The Ninth Circuit held that the Ordinance does not discriminate against or directly regulate interstate commerce. Moreover, the Court found that, in the context of the judicially created Pike balancing test, the Ordinance does not substantially burden interstate commerce and that the Ordinance provides public benefits.
The decision will not impact the implementation timeframe for the Alameda County Ordinance, which is already underway. The Alameda decision triggers the implementation timeline for the Secure Medicine Return Rule & Regulation (the “Rule”) in King County, Washington. By Friday, November 14th 2014, King County producers must identify plan operator and notify pharmacies and law enforcement agencies of the opportunity to serve as drop-off sites. Proposed stewardship plans will be due to King County on February 12, 2015, which is 135 days after the decision.
Alameda was brought by non-profit trade groups representing manufacturers and distributors of pharmaceutical products. The Ordinance requires producers who sell, offer for sale, or distribute prescription drugs in Alameda County to develop, implement, and fund a collection and disposal plan for those drugs. The plaintiffs alleged that the Ordinance impermissibly regulates and discriminates against interstate commerce. Therefore, the plaintiffs argued that the Ordinance violates the dormant Commerce Clause.
The Ninth Circuit rejected the plaintiffs’ arguments, finding that the Ordinance is not discriminatory because it “treats all private companies exactly the same.” PRMA v. County of Alameda, No. 13-16833, slip op. at 9 (9th Cir. Sept. 30, 2014). According to the Court, the Ordinance “applies to all manufacturers that make their drugs available in Alameda County—without respect to the geographic location of the manufacturer.” Id. The court also found that, because the Ordinance applied “across-the-board” without providing any geographic advantages, it could not be called a discriminatory tariff. Id. at 10. Additionally, the Court found that the Ordinance does not discriminate against interstate commerce by shifting costs to counties and states outside Alameda County. Id. It stated that the Ordinance affected “interests in the County,” noting that three of the Plaintiff trade associations’ members have their headquarters or principal places of business in Alameda County, and added that while drug prices might rise outside Alameda County in response to the cost of this program, they would also rise within the County. Id. at 11.
The Court also rejected all of the plaintiffs’ arguments that the Ordinance directly regulates interstate commerce. Among other things, the Court refused to extend “nexus” and “fairly apportioned” requirements beyond the tax context. Id. at 12-14.
The Court then considered whether “the burden (the Ordinance) imposes on interstate commerce is ‘clearly excessive in relation to the putative local benefits,’” Id. at 15 (internal citation omitted), an analysis known as the Pikebalancing test. The Court stated that the plaintiffs offered “no evidence that the Ordinance will interrupt, or even decrease, the ‘flow of goods’ into or out of Alameda,” Id. (internal citation omitted), and that “we cannot say that the Ordinance substantially burdens interstate commerce.” Id. With regard to the benefits prong of the Pike balancing test, the plaintiffs stipulated that the Ordinance’s environmental, health, and safety benefits would not be contested for the purpose of cross-motions for summary judgment, but argued that the Ordinance provided no real benefit as the County could run its own program to achieve the exact same effect. Id. at 16. The court did not accept this argument, noting that “the fact that the county could run a similar program does not nullify the program’s benefits.” Id. at 17.