Local Drug Take-Back Law Creates Regulatory Burden for Manufacturers

On September 30, 2014, the US Court of Appeals for the Ninth Circuit unanimously held that the first-in-the-nation Safe Drug Disposal Ordinance passed by Alameda County, California is constitutional. The Safe Drug Disposal Ordinance requires all prescription drug manufacturers that sell drugs in Alameda, including both brand name and generic companies, to operate and finance a “Product Stewardship Program.” As part of this Product Stewardship Program, the manufacturers must either individually or jointly provide for the collection, transportation, and disposal of unwanted drugs, regardless of who made them.

Plaintiffs Pharmaceutical Research and Manufacturers of America, the Biotechnology Industry Organization, and the Generic Pharmaceutical Association challenged the ordinance as being unconstitutional because it violates the dormant Commerce Clause by unduly burdening interstate commerce.

Under the first tier of the Supreme Court’s two-tiered dormant Commerce Clause analysis, the Ninth Circuit determined whether the Ordinance discriminates against or directly regulates interstate commerce. The Court found that the Ordinance is not discriminatory because it treats all drug manufacturers the same, without any regard to the manufacturer’s geographical location. Furthermore, the Court held that the Ordinance does not regulate interstate commerce because it only controls conduct within Alameda County. The fact that the Ordinance governs the in-state conduct of an out-of-state entity does not automatically make such rule unconstitutional.

Under the second tier of the dormant Commerce Clause analysis, the Court examined whether the burden imposed by the Ordinance on interstate commerce is “clearly excess in relation to the putative local benefits.” Given the lack of evidence presented by the plaintiffs on the effects of the Ordinance on interstate commerce, the Ninth Circuit could not rule that the burdens outweighed the benefits derived from the Product Stewardship Program.

By ruling that Alameda County’s Safe Drug Disposal Ordinance is constitutional, the Ninth Circuit has shifted the regulatory landscape upon which drug manufacturers lay. Manufacturers may now have to face increased costs for providing for these disposal programs, which could take on various local flavors.

If you have any questions about this alert, please contact Wayne H. Matelski, Joanne S. Hawana, or Stephanie Trunk, or the Arent Fox professional who handles your matters.

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