Richard Sieg, Inmar Regulatory Counsel
Three pharmaceutical manufacturer associations have asked the United States Supreme Court to review the first pharmaceutical extended-producer responsibility law in the nation. It is no surprise that this case arises out of the State of California.
The Alameda County Safe Drug Disposal Ordinance requires “any prescription drug producer [manufacturer] who either sells, offers for sale, or distributes brand name or generic drugs in Alameda County, to collect and safely dispose of the County’s unwanted prescription drugs, no matter which manufacturer made the drug in question,” exempting nonprescription drugs and other products from coverage under this law.
The three trade organizations (Pharmaceutical Research and Manufacturers of America, Generic Pharmaceutical Association and Biotechnology Industry Organization) have challenged the ordinance, alleging that it violates the U.S. Constitution’s commerce clause. The local law places responsibility (and its associated costs) on the associations’ members, out-of-state manufacturers, for the collection and disposal of unused medicines from local Alameda County citizens. The associations argue that this is merely an unlawful shifting of traditional government function from local taxpayers and consumers to the “interstate market” (e.g., out-of-county members and consumers). In addition to heaping this cost on drug manufacturers and distributors, the ordinance expressly prohibits the producers from charging a local fee to recoup the costs of the program.
The Ninth Circuit Court of Appeals, not immune to being overturned by the Supreme Court, dismissed the trade associations’ arguments, ruling that the ordinance does not violate the U.S. Constitution. Such a product stewardship program comes with significant cost. In the Ninth Circuit opinion, start-up costs for such a program were estimated to be $1.1 million, including $200,000 earmarked to the county for its costs administering the ordinance it created. The parties disputed the costs of maintaining this program. The county estimates the annual cost to the producers will be $330,000.00 and the Associations estimate $1.2 million.
Keep in mind that this estimate is for one county in California. One major chain drug store has more than 350 stores in California alone. There are more than 3,000 counties in the United States. Although not all counties in the U.S. set their own local ordinances for hazardous waste or medicine disposal, that number illustrates the scale and cost potential for a multi-state manufacturer. If such an ordinance serves as a benchmark, followed by other counties across the United States, the potential cost to manufacturers is staggering, considering the logistics of compliant collecting, transport and disposal, store-to store, across a manufacturer’s entire sales footprint.
This case could have major ramifications on the healthcare industry, as well as on consumer goods manufacturers in general. Supreme Court action or inaction could open the door for many, many counties across the U.S. to replicate the ordinance for their purposes. Given the estimated costs of compliance for just the one California county, the costs to the industry could be tremendous if such an ordinance were to be adopted by many other counties across the U.S.
The impact of such a case could be felt on the consumer product goods side as well. Mandatory take-back programs for electronic devices and other items already exist. These come in the form of disposal bans and/or recycling laws, depending on the specific state and manufacturer take back programs may be mandated as well. State laws currently regulating this activity cover a wide range of devices, including: televisions, mp3 players, computers, CRTs, printers and more. A U.S. Supreme Court approved ordinance for Alameda County could give much traction to those efforts. Imagine the extended producer responsibility framework spreading across the country and encapsulating these and other consumer goods on a county-by-county basis. Alameda County’s response to the industry petition was due to be filed by January 28th. We will be watching closely to see how the Court responds to the associations’ request to intervene on this issue.
Questions? Comments? Contact Richard Sieg at Richard.Sieg@inmar.com