Federal Court: Washington, D.C., Cannot Control Rx Prices
A federal appeals court on Wednesday ruled that a Washington, D.C., law that allows the district to control prescription drug prices violates federal patent law, the Washington Post reports (Leonnig, Washington Post, 8/3).
The legislation, sponsored by D.C. Council member David Catania, was designed to allow residents to file suit against a drug company if a judge determines the drug's cost to be excessive, which is defined in the law as more than 30% of the drug's price in Germany, Australia, Canada or the United Kingdom. Companies found to charge excessive prices could be fined or forced to lower their prices. Former Mayor Anthony Williams signed the measure into law in October 2005, after the council approved it in September 2005.
The Pharmaceutical Research and Manufacturers of America and the Biotechnology Industry Organization filed a legal challenge to the law. U.S. District Judge Richard Leon in December 2005 ruled that the law is unconstitutional, stating that the law violated protections of interstate commerce and was in opposition to the will of Congress (California Healthline, 1/3/06).
In Wednesday's decision, the judges wrote, "In the district's judgment, patents enable pharmaceutical companies to wield too much market power, charging prices that are 'excessive' for patented drugs," continuing, "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."
They wrote, "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."
According to the Post, city officials said they do not think the ruling immediately will cause a drug price increase in the district but added that drug makers now will have more freedom to charge higher-than-average prices.
Catania on Thursday said the ruling is "extreme in its scope," adding that he will consult with the D.C. attorney general about possible appeals.
Ken Johnson, senior vice president of PhRMA, said, "By ruling that federal patent law pre-empts the District of Columbia's price control law for patented prescription medicines, the court has preserved crucial incentives for continued discovery and creation of new medicines" (Washington Post, 8/3).