Request By:
Robin Fields Kinney, General Counsel, Cabinet for Economic Development
Opinion
Opinion By: Albert B. Chandler, III, Attorney General; Jennifer Carrico, Assistant Attorney General; Janet Graham, Assistant Attorney General
Opinion of the Attorney General
I. Introduction
The Attorney General's opinion is requested on whether Kentucky Revised Statutes, Chapters 217, 218A or 315 prohibit pharmacies or pharmacists licensed in Kentucky from filling prescriptions written by out-of-state practitioners who are not licensed in Kentucky, but duly licensed in their home state. Such a prohibition serves Kentucky's legitimate interest in regulating controlled substances for the health, safety and welfare of its citizens. However, this prohibition obstructs uniform federal regulation of commerce in controlled substances, and excessively burdens interstate commerce. For these reasons, Kentucky pharmacies and pharmacists may fill prescriptions written by practitioners licensed in Kentucky, their home state, or under the Federal Controlled Substances Act.
The Cabinet for Economic Development requested this opinion upon receiving an inquiry from an out-of-state corporation regarding the location of a pharmacy facility in Kentucky. The corporation is considering a substantial capital investment and would employ approximately six hundred to eight hundred people. The facility would receive and fill prescriptions by mail. Kentucky licensed pharmacists employed by the facility would fill the prescriptions and return them to the patients. The facility would process and distribute a substantial volume of prescriptions including prescriptions written by medical practitioners from every state in the nation. In other words, the mail order facility necessarily would fill prescriptions written by practitioners who are licensed to practice in other states, but who are not licensed in Kentucky.
This type of facility is governed by Chapter 218A of the Kentucky statutes. Chapter 218A regulates commerce in controlled substances and therefore determines a pharmacy's authority to fill prescriptions. 1 KY. REV. STAT. ANN. Ch. 218A (Baldwin 1992). This chapter provides that "[e]xcept when dispensed directly by a practitioner to an ultimate user, no controlled substance...may be dispensed without the written prescription of a practitioner. " Id. at 218A.180(1),(2) (emphasis added). A practitioner is defined for the purposes of Chapter 218A as a "physician...or other person licensed, registered, or otherwise permitted to distribute, dispense. ..or administer a controlled substance in the course of professional practice in this state. " Id. at § 218A.010(19) (emphasis added).
The issue is whether Chapter 218A prohibits Kentucky pharmacies and pharmacists from filling prescriptions written by practitioners licensed in their home state but not licensed in Kentucky. The Attorney General concludes that Chapter 218A permits Kentucky pharmacies and pharmacists to fill prescriptions written by practitioners licensed in Kentucky, their home state, or under the Federal Controlled Substances Act. Although an argument may be made to the contrary, the Supremacy Clause and Commerce Clause mandate this conclusion.
II. Preemption
The issues implicated by the mail-order pharmaceutical facility require examination of both state and federal law. Sections (1) and (2) of Chapter 218A.180 almost are identical to provisions in the Federal Controlled Substances Act that regulate both intrastate and interstate commerce in controlled substances. FED. CONT. SUB. ACT, 21 U.S.C.A. § 801 (1998). The registration standards in this Act require information from practitioners such as their primary place of business, effective management of controlled substances, prior conviction record, compliance with state and local law, and past experience. 21 U.S.C.A. § 823, 21 C.F.R. § 1301.
In contrast, Kentucky's licensing requirements are more complex. In addition to fulfilling similar informational requirements, an out-of-state practitioner must complete Kentucky's licensing examination if the practitioner's license does not meet Kentucky's standards. 201 KY. ADMIN. REGS. 2:030 (1998). The practitioner also must successfully complete an examination in jurisprudence, and an extensive application process. Id. The question under the Supremacy Clause is whether federal registration requirements preempt state licensing requirements for out-of-state practitioners.
Congress' intent to preempt state statutes may be found in its express language, or inferred from the comprehensive scope of federal law.
Hillsborough County, Fla. v. Automated Medical Laboratories, Inc., 471 U.S. 707, 105 S. Ct. 2371 (1985). The Federal Controlled Substances Act states that it will not preempt state law "unless there is a positive conflict between that provision of this title and that State law so that the two cannot consistently stand together." 21 U.S.C.A. § 903. Therefore, Chapter 218A is preempted to the extent it "conflicts" with the Federal Controlled Substances Act. A conflict occurs when a state law stands as an obstacle to the accomplishment of a federal goal.
Hines v. Davidowitz, 312 U.S. 52, 61 S. Ct. 399 (1941). A conflict also may occur when the state statute disrupts a system of national uniformity or, in governing the same subject matter for the same purpose, subjects the object of regulation to varying standards.
Fidelity Federal Sav. and Loan Ass'n. v. de la Cuesta, 458 U.S. 141, 102 S. Ct. 3014 (1982);
Huron Portland Cement, Co. v. City of Detroit, Mich., 362 U.S. 440, 80 S. Ct. 813 (1960).
Congress promulgated the Federal Controlled Substances Act to regulate commerce in controlled substances uniformly nationwide. 21 U.S.C.A. § 801. The Act accomplishes this purpose by authorizing registered practitioners to write prescriptions in interstate commerce. Id. Preventing Kentucky pharmacies from filling prescriptions written by out-of-state practitioners prevents interstate pharmaceutical transactions and subjects the nation's practitioners to Kentucky's complex licensing requirements. Such a prohibition is preempted because it obstructs uniform regulation of interstate pharmaceutical transactions contemplated by the Act. See Huron, 362 U.S. at 444 (a state may not impose a burden which materially affects interstate commerce in an area where uniformity of regulation is necessary).
Even if state statutes merely add to federal registration requirements, they are nevertheless preempted to the extent that they obstruct the federal scheme.
Hines v. Davidowitz, 312 U.S. 52, 61 S. Ct. 399 (1941) ("Our primary purpose is to determine whether, under the circumstances of this particular case, Pennsylvania's law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of congress"). Although Kentucky's licensing requirement seems to add to federal registration standards, the Commonwealth's unique licensing requirements operate to obstruct the uniform federal scheme. In this context, Kentucky's statute is preempted to the extent it applies to practitioners licensed by their home state or under the Federal Controlled Substances Act. This principle provides the distinction between Chapter 218A and the ordinances challenged in
Hillsborough County, Fla. v. Automated Medical Laboratories, Inc., 471 U.S. 707, 105 S. Ct. 2371 (1985). In Hillsborough, the court found that state ordinances merely added to federal statutory requirements. Id. However, unlike Kentucky's licensing requirements, such ordinances did not obstruct the purpose of the federal provision. Id. at 2379.
Chapter 218A also differs from the Oregon statute discussed in
Nichols v. Board of Pharmacy, 657 P.2d 216 (Or. Ct. App. 1983). In Nichols, the court upheld Oregon statutes authorizing registered pharmacists to dispense controlled substances only upon a prescription written by a practitioner licensed in Oregon. Id. The court found that the state statute was not preempted because it was consistent with the Federal Controlled Substances Act. Id. This decision is not instructive regarding the present question because the Oregon statutory framework differed significantly from Chapter 218A.
Requiring out-of-state practitioners to be licensed in Kentucky before their prescriptions may be filled there prevents uniform federal regulation of interstate commerce in controlled substances, and subjects practitioners to varying standards. Therefore, Kentucky's licensing requirement is preempted by the Federal Controlled Substances Act to the extent it applies to practitioners licensed by another state or registered under the Act. However, in the event that Chapter 218A is not preempted by federal law, prohibiting Kentucky pharmacies and pharmacists from filling prescriptions written by out-of-state practitioners who are not licensed in the Commonwealth excessively burdens interstate commerce.
III. Interstate Commerce
Chapter 218A is analyzed under the Commerce Clause in a two-tiered approach.
Brown-Forman Distillers Corp. v. New York State Liquor Authority, 476 U.S. 573, 106 S. Ct. 2080 (1986). When a state statute regulates or discriminates against interstate commerce on its face or in effect, the statute is virtually per se invalid. See
City of Philadelphia v. New Jersey, 437 U.S. 617, 98 S. Ct. 2531 (1978);
Edgar v. MITE Corp., 457 U.S. 624, 102 S. Ct. 2629 (1982). When a statute only indirectly affects interstate commerce and regulates evenhandedly, courts examine whether the state's interest is legitimate and whether the burden on interstate commerce clearly exceeds the local benefits.
Pike v. Bruce Church, Inc., 397 U.S. 137, 90 S. Ct. 844 (1970);
Huron Cement Co. v. City of Detroit, Mich., 362 U.S. 440, 80 S. Ct. 813 (1960).
Chapter 218A regulates evenhandedly, requiring both in-state and out-of-state licensed practitioners to be licensed in the Commonwealth. KY. REV. STAT. ANN. § 218A.180(1) (Baldwin 1992). However, since it impacts interstate commerce, Chapter 218A is valid only if it furthers a legitimate local interest, and its benefits exceed the burden imposed on interstate commerce. The principal focus when analyzing the burden on interstate commerce must be the practical operation of the statute "since validity of state laws must be determined chiefly in terms of their probable effect."
Lewis v. B.T. Inv. Managers, Inc., 447 U.S. 27, 100 S. Ct. 2009 (1980). In addition, the extent of the burden that will be tolerated depends on the nature of the local interest involved, and whether it may be promoted as well by other means with lesser impact on interstate commerce. Pike, 397 U.S. at 142;
Great Atlantic & Pac. Tea Co., Inc. v. Cottrell, 424 U.S. 366, 96 S. Ct. 923 (1976).
Kentucky's legitimate local interests in the area of the distribution of controlled substances include regulating those who dispense controlled substances within its borders, the health and safety of its citizens, and the qualifications and conduct of its licensed practitioners. These interests are presumed valid since they concern public health, safety and welfare.
Bibb v. Navajo Freight Lines, Inc., 79 S. Ct. 962, 359 U.S. 520 (1959);
Huron Cement Co. v. City of Detroit, Mich., 362 U.S. 440, 80 S. Ct. 813 (1960). The benefits of regulating in these areas include managing commerce in controlled substances in Kentucky, and protecting citizens from fraudulent or incompetent prescriptions.
However, the burden Chapter 218A places on interstate commerce far exceeds these benefits. Requiring out-of-state practitioners to be licensed in Kentucky places an enormous burden on practitioners, pharmacies, and consumers. To obtain a license in Kentucky, practitioners must fulfill cumbersome licensing requirements that may include practical and jurisprudential examinations. The practical operation of this statute discourages practitioners from becoming licensed in
Kentucky. Tyson Foods, Inc. v. McReynolds, 700 F.Supp. 906, 910-11 (M.D. Tenn. 1988) (statutes that adversely affect interstate commerce by subjecting activities to inconsistent regulations violate the Commerce Clause);
TLX Acquisition Corp. v. Telex Corp., 679 F.Supp.1022 (W.D. Okla. 1978) (constitution limits state's ability to impose its chosen theory on other states and their citizens and corporations).
In addition to discouraging practitioners from obtaining a license in Kentucky, the statute acts as an economic embargo on commerce between Kentucky and other states. In other words, the requirement prevents Kentucky pharmacies from filling prescriptions written by practitioners in every other state in the nation. Conversely, customers will be deprived of the service of Kentucky pharmacies if they have prescriptions written by out-of-state practitioners. In fact, the statute poses a serious threat to the health and safety of patients who cannot travel to another state to fill a prescription because Kentucky businesses are prohibited from serving them. See e.g. Bibb, 79 S. Ct. at 966-67; Tyson Foods, Inc., 700 F.Supp. at 911-912 (statute requiring offeror in take-over to register in state violates due process for failing to meet stated purpose of protecting shareholders).
Most importantly, this burden on interstate commerce hobbles the competitive market in controlled substances in Kentucky. If Kentucky pharmacies cannot obtain business from other states, they will not locate in the Commonwealth. The lack of competition in this market will encourage artificially high prices for pharmaceuticals in Kentucky. Cf. Tyson Foods, Inc., 700 F.Supp. at 911 (considering impact of state regulation on highly integrated national economy).
This significant burden on interstate commerce cannot be tolerated if reasonable alternatives exist that preserve the legitimate local interest.
Great Atlantic & Pac. Tea Co., Inc. v. Cottrell, 424 U.S. 366, 96 S. Ct. 923 (1976). The interests served by the licensing requirement may be met through less burdensome alternatives. The registration system under the Federal Controlled Substances Act provides a reasonable alternative that serves Kentucky's interest in regulating intrastate commerce in controlled substances and ensuring the health, safety and welfare of its citizens. In addition, Kentucky is authorized to enter into mutually beneficial reciprocal agreements with other states that permit practitioners licensed in their home state to write prescriptions in participating states. KY. REV. STAT. ANN. § 315.210 (Baldwin 1997).
The question in this case is distinguished from the issue addressed in
Budget Marketing, Inc. v. Com. ex rel. Stephens, 587 S.W.2d 245 (Ky. 1979). In Stephens, the Kentucky Supreme Court held that the legislature could require nonresidents to register in the Commonwealth if they solicited magazine subscriptions from Kentucky residents. Id. at 249. The court reached this holding on the basis of a jurisdictional analysis, limiting the holding to solicitations of long-term subscriptions which amounted to a continuing course of conduct in Kentucky by the solicitor. Id. Thus, the decision was made on the basis of a sufficient nexus between the solicitor and the state, with no meaningful discussion of restrictions on state power imposed by the Commerce Clause. The state may have jurisdiction over persons and conduct under principles of due process that may not be justified as an act of regulation under the Commerce Clause. Therefore, Stephens is not dispositive of this issue. 2
Although Kentucky case law is limited in the area of analysis of public health and safety measures under the Commerce Clause, other states have reached the same conclusion. 3 For example, in
State v. Rasmussen, 213 N.W.2d 661 (Iowa 1973), the court found that requiring out-of-state physicians to register in order to have their prescriptions filled by Iowa pharmacies was an impermissible burden on interstate commerce. Similarly, in
Ferndale Laboratories, Inc. v. Cavendish, 1994 WL 749469 (N.D. Ohio 1994), the court held that a state statute requiring out-of-state wholesalers to register in states where they ship pharmaceuticals violated the Commerce Clause. The court reasoned on the basis of an Ohio Attorney General's Opinion that "requiring a retailer to obtain licenses from the various states into which it ships its goods will almost certainly impede its interstate business." Id. at *5.
Finally, in National Steel Corp. v. Long, 718 F.Supp. 622 (W.D. Mich. 1989), the court recognized the possibility that a registration requirement could impose an unreasonable burden on interstate commerce.
Applying Kentucky's licensing requirement to licensed out-of-state practitioners places a tremendous burden on interstate commerce by imposing an economic embargo on pharmaceutical transactions. This burden is too great in light of equally viable alternatives that regulate pharmaceutical commerce and protect the health, safety and welfare of Kentuckians. Kentucky's interest in regulating commerce in controlled substances fails to support the licensing requirement as it applies to licensed out-of-state practitioners and practitioners registered under the Federal Controlled Substances Act.
IV. Conclusion
Kentucky has a legitimate interest in protecting the health and safety of its citizens and regulating traffic in controlled substances in the Commonwealth. However, Kentucky's licensing requirement imposes an economic embargo on commerce between Kentucky and other states when applied to out-of-state licensed practitioners. In addition, the licensing requirement thwarts uniform regulation of commerce in controlled substances under federal law. For these reasons, the licensing requirement violates the Commerce Clause and is preempted by the Federal Controlled Substances Act. Therefore, Kentucky pharmacies and pharmacists may fill prescriptions written by practitioners licensed in Kentucky, their home state, or under the Federal Controlled Substances Act.
Footnotes
Footnotes
1 Chapter 217, Foods, Drugs and Poisons, governs quality standards and labeling requirements for food, drugs, cosmetics and poisons. KY. REV. STAT. ANN. § 217.175 (Baldwin 1992). This Chapter is relevant to the extent that it prohibits the sale of misbranded, mislabeled or adulterated drugs. Chapter 315, Pharmacies and Pharmacists, establishes licensing requirements for pharmacists, and authorizes the Kentucky Board of Pharmacy to regulate the practice of pharmacy in the Commonwealth. KY. REV. STAT. ANN. § 315.191 (Baldwin 1997). Both Chapters define a "practitioner" in general as a person licensed under the professional licensing laws of Kentucky. KY. REV. STAT. ANN. § 217.015(23) (Baldwin 1992).
2 Similarly, Kentucky Attorney General Opinion 92-28 provides no guidance in this analysis. The question posed in that opinion was whether a Kentucky pharmacy may fill a prescription written by a Tennessee physician if such prescription violates Tennessee's Medical Board Regulations. Id. The Attorney General's answer in the negative is not relevant to the instant issue since a physician in violation of state regulations would not be permitted to write prescriptions under the Federal Controlled Substances Act or state law generally. Id.
3 Kentucky case law regarding the Commerce Clause primarily involves taxation of interstate commerce, requiring special analysis not relevant when analyzing public health and safety measures. Carpenter v. Commonwealth, 831 S.W.2d 188 (Ky.Ct.App. 1992).