[Ip-health] Fed Cir rejects DC Phrma Pricing Act

[Sean Flynn]

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The Fed Cir. denied DC's request to hear the case en banc.  There was an
interesting dissent arguing that states do have the right to regulate
price discrimination between countries.  It is unclear whether DC will
file a cert petition with the Supreme Court.


-Sean








D.C. Drug Pricing Law Dies, Again


By Marc Tracy, marc.tracy@portfoliomedia.com

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Portfolio Media, New York (October 30, 2007)--On Tuesday, the U.S. Court
of Appeals for the Federal Circuit hammered what may be the final nail
into the coffin of a District of Columbia law that would have regulated
the price of patented drugs in the U.S. capital.

Thirteen judges of the U.S. Court of Appeals for the Federal Circuit - a
majority of that circuit court's jurists - refused to rehear as a full
court an appeal of an August decision by a three-judge panel of the
Federal Circuit invalidating the ordinance.


a.                  Documents


Opinion/Decision
<http://newsroom.law360.com/articlefiles/38884-06-1593o.pdf>
[PDF]

They additionally refused to grant an appeal for a rehearing in front of
another three-judge panel.

The ruling was accompanied by one dissent, which argued that the circuit
court has an obligation to clarify and narrow its ruling, as well as a
forceful rebuttal to that dissent.

The decision means that the Federal Circuit's ruling will stand. In
August, a three-judge panel upheld a district court ruling striking down
the Excessive Pricing Act of 2005 and holding that federal patent law
preempts the D.C. ordinance.

The court cited the clause in the eighth section of Article I of the
U.S. Constitution that grants, it said, sole authority over patent law
to the U.S. Congress.

The law would have restricted the sale of patented drugs in D.C. "for an
excessive price," according to the circuit court. Though what is
"excessive" was not fully enumerated, there was a presumption, according
to court documents, that prices are excessive if they are 30% more than
the drug's prices in Great Britain, Germany, Canada or Australia if the
drug is similarly protected in that country.

"The act is a clear attempt to restrain those excessive prices, in
effect diminishing the reward to patentees in order to provide greater
benefit to District drug consumers. This may be a worthy undertaking on
the part of the District government, but it is contrary to the goals
established by Congress in the patent laws," the circuit court argued.

The Federal Circuit had claimed subject matter jurisdiction over the
case because it dealt with patent law.

A lawyer in the D.C. attorney general's office, which brought the
appeal, declined to comment on the decision Tuesday. A lawyer at Wilmer
Cutler <http://search.law360.com/search_results.aspx?CompanyID=4426>
Pickering Hale and Dorr LLP, which represented the two pharma advocacy
groups that initially sued D.C. over the ordinance, did not return a
request for comment.

On Tuesday, nearly three months after the appellate ruling, Circuit
Judge Timothy B. Dyk appeared to be the only one among the 13 circuit
judges who decided the merits of the appeal who wanted an en banc
hearing.

Judge Dyk, who was appointed to the court in 2000 by President Bill
Clinton, acknowledged that the statute as written did run aground of the
federal government's exclusive right to regulate U.S. patent policy.

But Judge Dyk nonetheless favored a full-court rehearing, he said, so
that the Federal Circuit could clarify that D.C., or a state, may in
theory regulate prices of patented drugs without running afoul of the
Constitution.

"Despite its poor drafting, which inadvertently invades the field of
patent policy, the main thrust of the D.C. act is designed to prevent
price discrimination between sales of patented pharmaceutical products
in the District and in certain other countries that confer exclusivity,"
Judge Dyk said.

Judge Dyk further emphasized that "the patent laws are not designed to
confer immunity from antitrust-type regulation," and that the disputed
ordinance did not conflict with "the purposes of federal patent law."

But Judge Dyk ultimately affirmed that the the letter of the law likely
did conflict with the letter of federal patent law. And he did not
dissent from the circuit court's ruling denying a rehearing by a
three-judge panel.

Circuit Judge Anthony J. Gajarsa, another Clinton appointee, penned a
rebuttal to Judge Dyk's dissent in the form of a concurring opinion.

Judge Gajarsa chastised what he characterized at Dyk's undue emphasis on
the ordinance's motive instead of the law's proposed effects.

"The D.C. act is not simply about preventing 'price discrimination,' but
directly targets and undermines this careful balance between innovation
and drug costs. The D.C. act's prohibition on 'excessive prices' for
patented drugs (and patented drugs only), is purposefully aimed at
adjusting the scope and reward of the federal patent right. It would
replace Congress's deliberate balance," Judge Gajarsa said.

Soon after the D.C. City Council passed the act in 2005, the
Biotechnology Industry Association and the Pharmaceutical Research and
Manufacturers of America filed suit against the District of Columbia and
several of its top officers, including Mayor Adrian Fenty and
then-Attorney General Robert Spagnoletti, according to court documents.

The act's enforcement would harm pharmaceutical companies who would not
be able to profit from their patented drugs as much as federal law
currently allows, the plaintiffs said, explaining their standing to sue.

The constitutional uniqueness of D.C.'s legal status required some
heavy-lifting on the part of the three-judge panel, which ultimately
ruled that the federal government's superiority over D.C. was analogous,
if not identical, to its superiority over a state.

Most arguments for preemption - the notion that state laws, regulations
and court decisions are preempted, or superseded, by federal laws,
regulations and court decisions - lean on the Supremacy Clause in
Article IV of the Constitution.

It states, "This Constitution, and the laws of the United States ...
shall be the supreme law of the land; and the judges in every state
shall be bound thereby, anything in the Constitution or laws of any
state to the contrary notwithstanding."

The circuit court, however, acknowledged the unique situation presented
by the District of Columbia. It is neither a state nor a territory but a
specific area, explicitly outlined in and even mandated by the
Constitution, over which the federal government holds ultimate
authority.

"The District of Columbia is federal territory whose self-governance is
authorized by Congress, so the act is in some sense a form of federal
regulation," the panel said.

"Nevertheless," it added, "as between District statutes and superior
enactments by Congress, the general principles of preemption from
Supremacy Clause law apply."

The act contradicts federal law because it interferes with the implied
pricing scheme of federal law and the explicit intentions of federal
legislators, the circuit court said.

The plaintiffs were represented on appeal by Wilmer Cutler Pickering
Hale and Dorr LLP and Sidley Austin
<http://search.law360.com/search_results.aspx?CompanyID=4637>  LLP.

The defendants were represented on appeal by the offices of the D.C.
attorney general and solicitor general.

The case is Biotechnology Industry Organization et al. v. District of
Columbia et al., case number 2006-1593, in the U.S. Court of Appeals for
the Federal Circuit.