Alameda County Drug Take-Back and Disposal Ordinance Not Unconstitutional Says Federal Judge

September 3, 2013

By Kurt R. Karst –      

Last week, Judge Richard Seeborg of the U.S. District Court for the Northern District of California issued an 11-page ruling in a lawsuit filed in December 2012 by the Pharmaceutical Research and Manufacturers of America (“PhRMA”), the Biotechnology Industry Organization (“BIO”), and the Generic Pharmaceutical Association (“GPhA”) challenging a “first in the nation” Safe Drug Disposal Ordinance passed by the Alameda County, California Board of Supervisors in July 2012, and that is slated to go into effect later this year.  In ruling on Cross-Motions for Summary Judgment (here and here; reply briefs here and here), Judge Seeborg refused to find that the Ordinance is a per se violation of the Commerce Clause of the U.S. Constitution.

As we previously reported, the Alameda Safe Drug Disposal Ordinance, like other extended producer responsibility (or “manufacturer take-back”) ordinances and laws, place the primary responsibility for end-of-life management of products on the manufacturers of the products.  The general intent of such laws is apparently to prevent unintentional poisonings and the improper disposal of products into the water treatment system.  

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).  A “covered drug” is defined in the Ordinance generally to include “all drugs as defined in 21 U.S.C. § 321(g)(l) of the Federal Food, Drug and Cosmetic Act,” “including both brand name and Generic Drugs.”  There are several exemptions, however, including exemptions for “nonprescription drugs,” vitamins, supplements, herbal remedies, cosmetics, soap, detergent, “household cleaning products,” biological products for which the producer already provides a take-back program, and certain “[p]et pesticide products.”  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, unless excused from that comprehensive obligation by the Department of Environmental Health.  The collection, shipping, and destruction of collected items must comply with all state and federal laws.  A violation of the Ordinance may result in a civil penalty up to $1,000 per day.

PhRMA, BIO, and GPhA alleged in their pleadings 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 state and local governments may not enact regulations that unduly interfere with interstate commerce.  According to the trade groups:

The Ordinance represents a per se violation of the Commerce Clause for three distinct reasons.  First, it directly regulates and burdens interstate commerce and its primary purpose and clear effect is to shift the costs of a local regulatory program directly onto interstate commerce and out-of-county consumers.  Second, the Ordinance discriminates against interstate commerce by targeting interstate commerce and products delivered from outside the County for burdens.  Finally, the Ordinance favors local interests by deliberately shifting costs away from local consumers and taxpayers and onto drug manufacturers and pharmaceutical consumers nationwide.

The trade groups also alleged that even if the Ordinance is not a per se infringement of the Commerce Clause it is still unconstitutional, because “[i]ts burden on interstate commerce is inherently excessive because the County could accomplish all of the purported benefits of a take-back program without any interstate burden,” such as “by developing and conducting the take-back program through government officials paid by the local taxpayers or consumers served by the program.” 

Using the U.S. Supreme Court’s two-tiered approach, laid out in Healy v. Beer Institute, 491 U.S. 324 (1989) and Brown–Forman Distillers Corp. v. New York State Liquor Auth., 476 U.S. 573 (1986), to analyze whether a state or local economic regulation violates the dormant Commerce Clause, and the application of that two-tiered approach by the U.S. Court of Appeals for the Ninth Circuit in National Collegiate Athletic Ass’n v. Miller, 10 F.3d 633 (9th Cir. 1993), where the Ninth Circuit explained that a local regulation will be found to be a per se violation of the dormant Commerce Clause if it “1) directly regulates interstate commerce; 2) discriminates against interstate commerce; or 3) favors in-state economic interests over out-of-state interests,” Judge Seeborg ruled that the Alameda Ordinance does not violate the dormant Commerce Clause.

Starting the with prongs 2 and 3 – i.e., the “discriminatory prongs” – Judge Seeborg said that the Alameda Ordinance cannot be invalidated as per se improper under either of these  prongs.

Here, plaintiffs contend that the Ordinance is a per se violation of the clause under any and all of the three prongs.  As opposed to the first prong, the second and third prongs both contain an element of discrimination—i.e., that a challenged regulation favors local commerce over interstate commerce, or in-state entities over out-of-state entities.  Plaintiffs argue there is such a discriminatory effect here because costs that would ordinarily be borne primarily by Alameda County—and hence its own taxpayers—are being shifted on to the community of producers as a whole, most of whom are based elsewhere. . . . 

The “discrimination” on which plaintiffs would rely, is indisputably not being visited on out-of-state producers as a means of favoring in-state producers. . . .   In the absence of “differential treatment favoring local entities over substantially similar out-of-state interests,” the kind of discrimination potentially prohibited by the dormant Commerce Clause is not implicated.  Accordingly, the Ordinance cannot be invalidated as per se improper under either the second or third prongs.

Moving on to prong one, under which a regulation may be per se invalid if it “directly regulates interstate commerce,” Judge Seeborg found that the Alameda Ordinance “is not specifically directed at regulating interstate organizations and has no remotely similar consequence to any conduct occurring outside county borders,” and therefore, cannot be found to be violative of the Commerce Clause.  According to the court:

The Ordinance applies to producers who elect to sell their products within Alameda County, regardless of where the producers are based or the product originates.  Nothing in the structure of the Ordinance targets producers on the basis of their location—they are being required to participate in providing take-back programs because they sell prescription drugs in the county, not because they are out-of-state actors.  Nothing in the Ordinance will require, as a practical matter, any producer to alter its manner of doing business in any jurisdiction outside Alameda County, although producers will be free to use programs that they may already be using elsewhere, provided they meet the standards of the Ordinance.

Judge Seeborg was also not convinced by arguments that the Alameda Ordinance is equivalent to a tariff, saying that the Ordinance shares none of the salient features of a tariff.  Moreover, wrote Judge Seeborg, “the happenstance that most producers of prescription drugs are located outside Alameda County is insufficient to transform what is fundamentally a local measure into one that could be found to burden interstate commerce impermissibly.”

The win for Alameda County might reinvigorate other similar initiatives around the country.  Indeed, legislation has been introduced in California – S.B. 727 – that would create a statewide take-back program.  King County, Washington is also in the process of enacting a drug take-back program, called the Secure Medicine Return Rule and Regulation.  In addition, it is possible that efforts to establish a nationwide drug take-back program will now proceed.  In 2011, Representative Loiuse Slaughter (D-NY) introduced H.R. 2939, the Pharmaceutical Stewardship Act of 2011.  The bill did not gain much traction at the time and died, but could resurface in the future. 

It is unclear whether any of the trade groups will appeal Judge Seeborg’s ruling, or whether a challenge to the King County, Washington regulation will be mounted.  We’ll be keeping our eyes open for developments.