Big Pharma Crackdown|OK’d by 9th Circuit

SAN FRANCISCO (CN) - In 2012, Alameda County - which covers the east side of the San Francisco Bay - passed a law that requires prescription drug manufacturers to pick up and dispose of unused and unwanted drugs sold in the county, regardless of where or by whom the drugs were manufactured.

Specifically, the county ordered drug companies to set up disposal kiosks throughout the region and to promote the program to county residents. The drug companies were also tasked with emptying the kiosks and destroying the drugs at medical-waste facilities.

Prescription drugs in Alameda County alone generate sales of $965 million annually, but the drug companies balked at the cost of the disposal program - estimated by the county at $330,000 a year and by drug companies at $1.2 million. Alameda had wanted all the manufacturers that sell in the county to share the tab.

The Pharmaceutical Research and Manufacturers of America, Generic Pharmaceutical Association and Biotechnology Industry Organization - all nonprofit trade groups representing the drug companies - brought the disput to court.

They said that requiring out-of-state manufacturers to pay for and run the drug disposal program violates the dormant commerce clause.

A federal judge in San Francisco granted the county summary judgment, and the trade groups fared no better Monday in their appeal to the 9th Circuit.

Because the ordinance applies equally to all drug manufacturers that sell within Alameda County, there was no discrimination against out-of-state drugmakers, the court found.

There is also no basis to call the ordinance a tariff, according to the ruling.

"An ordinance that applies across-the-board provides no geographic advantages," Judge N. Randy Smith wrote for the court. "This holds true even where the ordinance only affects interstate commerce due to an absence of intrastate businesses. Given that the ordinance applies across the board, it does not discriminate at all, let alone in the same way as a tariff."

The trade groups also failed to show that the ordinance would affect transactions beyond the borders of Alameda County, another prong of the commerce clause.

In fact, the plain language of the ordinance exempts drug companies that do not conduct business in Alameda County from the program. Those that do are also not required to implement similar programs outside of the county unless they face such orders from another jurisdiction.

"There is nothing unusual or unconstitutional per se about a state or county regulating the in-state conduct of an out-of-state entity when the out-of-state entity chooses to engage the state or county through interstate commerce," Smith wrote. "For example, in Assoc. des Eleveurs, this court upheld a California statute that prohibited the sale of products that were the result of force feeding birds [for fois gras]. It did not matter that the practical effect of the statute was to regulate the conduct of farmers and producers that were 'non-California entities' who chose to engage California through interstate commerce."

Given the substantial pharmaceutical revenue stream in the county, the court also said that even $1.2 million to collectively administer the program cannot be considered "a substantial burden" under the commerce clause.

As to the merits of the law, Smith noted that "the Alameda County Safe Drug Disposal Ordinance constitutes a 'first-in-the-nation' ordinance."

"Opinions vary widely as to whether adoption of the ordinance was a good idea," he wrote. "We leave that debate to other institutions and the public at large. We needed only to review the ordinance and determine whether it violates the dormant Commerce Clause of the United States Constitution. We did; it does not."

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