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Healthcare Distrib. Alliance v. Zucker

Healthcare Distrib. Alliance v. Zucker

United States District Court for the Southern District of New York

December 19, 2018, Decided

18 Civ. 6168 (KPF); 18 Civ. 8180 (KPF); 18 Civ. 9830 (KPF)

Opinion

 [*242]  OPINION AND ORDER

KATHERINE POLK FAILLA, District Judge:

New York State — like the rest of our Nation — is in the grips of an opioid  [*243]  epidemic. To counter that epidemic, New York has taken proactive measures to treat existing opioid addiction, to prevent future addiction, and to [**3]  educate New Yorkers about the dangers of opioid dependence. The centerpiece of these efforts is the Opioid Stewardship Act (the "OSA" or the "Act"), effective July 1, 2018, which established a $600 million "stewardship fund" to further these goals. The plaintiffs in these three related cases do not contest the existence of the epidemic or the wisdom of countermeasures, but instead take issue with the particular means that New York has chosen.

Plaintiff Healthcare Distribution Alliance ("HDA") initiated the first action on July 6, 2018, seeking (i) a declaratory judgment that the Act was unconstitutional and (ii) a permanent injunction prohibiting its implementation. On September 12, 2018, HDA moved for summary judgment on its claims. Two other plaintiffs, the Association for Accessible Medicines ("AAM") and SpecGx LLC ("SpecGx"), have presented a more surgical approach, challenging provisions of the OSA that forbid opioid distributors and manufacturers from passing on the costs of the OSA to downstream purchasers (the "pass-through prohibition") as unconstitutional and moving for injunctive relief.

New York1 has moved to dismiss all three cases on jurisdictional and prudential grounds. [**4]  Proceeding from the foundational premise that assessments for OSA's stewardship fund constitute a tax, New York argues that the Court is foreclosed from hearing Plaintiffs' challenges pursuant to the Tax Injunction Act (the "TIA"), or, in the alternative, that the Court should abstain from so hearing under principles of comity or Pullman abstention. As further fallback positions, New York asks the Court to find the OSA constitutional, either in its current state or, if need be, after the excision of the pass-through prohibition.

A review of the record in these cases2 confirms that while the animating concerns of the OSA are plainly valid, the method by which the Act extracts payments from opioid manufactures and distributors to redress those concerns violates the Dormant Commerce Clause of the United States Constitution. The OSA is not a tax, but is rather a regulatory penalty on opioid manufacturers and distributors. And as currently structured, it improperly burdens interstate commerce. Furthermore, the record demonstrates that New York did not intend the OSA to survive absent the pass-through prohibition. Accordingly, and for the reasons discussed in the remainder of this Opinion, HDA's motion for summary judgment is granted, as [**5]  are AAM's and SpecGx's motions for preliminary injunctive relief.

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353 F. Supp. 3d 235 *; 2018 U.S. Dist. LEXIS 213661 **; 2018 WL 6651682

HEALTHCARE DISTRIBUTION ALLIANCE, Plaintiff, v. HOWARD A. ZUCKER, in his official capacity as Commissioner of Health of New York; and BARBARA D. UNDERWOOD, in her official capacity as the Attorney General of New York, Defendants.ASSOCIATION FOR ACCESSIBLE MEDICINES, Plaintiff, v. BARBARA D. UNDERWOOD, in her official capacity as the Attorney General of New York; and HOWARD A. ZUCKER, in his official capacity as Commissioner of Health of New York, Defendants.SPECGX LLC, Plaintiff, v. BARBARA D. UNDERWOOD, in her official capacity as the Attorney General of New York; and HOWARD A. ZUCKER, in his official capacity as Commissioner of Health of New York, Defendants.

Subsequent History: Reversed by Ass'n for Accessible Meds. v. James, 2020 U.S. App. LEXIS 29016 (2d Cir. N.Y., Sept. 14, 2020)

CORE TERMS

opioid, pass-through, manufacturers, licensee, Dormant, ratable, cases, costs, stewardship, surcharge, purchasers, comity, distributors, abstention, challenges, ripeness, interstate commerce, motion to dismiss, out-of-state, distributed, parties, courts, taxes, summary judgment motion, preliminary injunction, provisions, entities, reply, sales, consumers

Civil Procedure, Subject Matter Jurisdiction, Jurisdiction Over Actions, Limited Jurisdiction, Responses, Defenses, Demurrers & Objections, Motions to Dismiss, Federal & State Interrelationships, Anti-Injunction Act, Tax Anti-Injunction Act, Governments, Legislation, Interpretation, Courts, Judicial Comity, Preliminary Considerations, Abstention, Justiciability, Ripeness, Constitutional Law, The Judiciary, Case or Controversy, Standing, Elements, Injury in Fact, Ripeness, Imminence, Standing, Summary Judgment, Entitlement as Matter of Law, Genuine Disputes, Materiality of Facts, Burdens of Proof, Movant Persuasion & Proof, Nonmovant Persuasion & Proof, Judgments, Evidentiary Considerations, Congressional Duties & Powers, Commerce Clause, Dormant Commerce Clause, Constitutionality of Legislation, Severability, Business & Corporate Compliance, Healthcare, Public Health & Welfare Law, Healthcare, State & Territorial Governments, Finance, Constitutional Questions, Necessity of Determination, Supremacy Clause, Federal Preemption, Remedies, Injunctions, Grounds for Injunctions, Preliminary & Temporary Injunctions, Grounds for Injunctions, Irreparable Harm