Federal Court Upholds California County’s Safe Drug Disposal Ordinance
The U.S. District Court for the Northern District of California recently issued an order upholding Alameda County's Safe Drug Disposal Ordinance as constitutional. Pharmaceutical Research and Manufacturers of America, et al. v. County of Alameda, et al., No. C 12-6203 RS, Order Denying Plaintiffs’ Motion for Summary Judgment and Granting Defendants’ Cross-Motion. The ordinance, passed in July 2012 by the Alameda County supervisors, is the first of its kind in the nation, mandating that pharmaceutical manufacturers with sales of prescription drugs in the county finance drug take-back programs. In an action brought by trade organizations representing the pharmaceutical industry against Alameda County, the plaintiffs argued that the ordinance was unconstitutional, as they alleged that it violated the Commerce Clause by unfairly discriminating against out-of-state producers in transferring costs from the county to these drug manufacturers.
Rejecting the plaintiffs' assertions and granting summary judgment in favor of the county, the court found that the ordinance does not burden interstate commerce or unfairly discriminate against out-of-state manufacturers because both local and out-of-state actors are required to pay for the drug take-back programs based on their sales of prescription drugs within the county. The court also found the ordinance to be in the public interest, citing the county's rationale of ensuring accountability for the safe disposal of unused drugs, which have the potential to contaminate drinking water supplies.
The ordinance, scheduled to go into effect this November, has the potential to significantly alter the pharmaceutical industry by increasing costs for both patients and insurers as pharmaceutical manufacturers are left to bear the burden of these increased costs for sales within Alameda County, increasing their overall operational costs. Although sellers are prohibited under the ordinance from passing the expense directly to Alameda County consumers by adding a fee at the point of sale, there is no doubt that the pharmaceutical manufacturers will inevitably have to increase the costs of their drugs to compensate for the increased operational expenses. Furthermore, if other states or counties begin to follow Alameda County and enact similar ordinances, the pharmaceutical industry could be left with some serious financial burdens, which could lead companies to try to sell the majority of their prescription drugs in certain counties without these ordinances in order to avoid an unduly burdensome allocation of the disposal programs' costs.
Set for implementation next month, pharmaceutical companies must prepare for and anticipate their allocated costs for the program according to their sales within the county. Meanwhile, the pharmaceutical industry must also keep an eye out for the federal rules being drafted by the Drug Enforcement Administration for the secure disposal of controlled medicines to see how these provisions will coincide with each other. Although the county and the public may be happy with the implementation of the safe drug disposal program, they may come to regret the funding for these programs if the administrative costs rage out of control and the pharmaceutical companies are left with no other choice but to raise sale prices or divert sales away.