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Federal Circuit denies rehearing en banc in DC prescription drug price case

October 30, 2007
Post by Blog Staff

In a precedential order today, the Federal Circuit denied a petition for rehearing and rehearing en banc in Biotechnology Industry Organization vs. District of Columbia. On August 3, the court held that the Prescription Drug Excessive Pricing Act of 2005 enacted by the District of Columbia City Council, which prohibited a patented drug from being sold in the District of Columbia for an excessive price, was preempted by Federal Patent Law (click here for our previous coverage of the decision). The court's decision held that "[b]y penalizing high prices—and thus limiting the full exercise of the market power that derives from a patent—the District has chosen to re-balance the statutory framework of rewards and incentives insofar as it relates to inventive new drugs." The court also noted that the Act specifically targeted patented drugs and that "[t]he underlying determination about the proper balance between innovators' profit and consumer access to medication, though, is exclusively one for Congress to make." Judge Dyk dissented from the denial of rehearing en banc, expressing concerns that the panel's opinion is too broad, and could be read to signal preemption of any similar law, even one that arguably does not interfere with the patent law field. Judge Gajarsa concurred in the denial, arguing that the decision was not in conflict with an earlier panel decision or a decision of the Supreme Court, and that its scope is not as broad as Judge Dyk argued.More detail of the individual opinions in the order after the jump.In a dissent from the court's denial of rehearing en banc, Judge Dyk reasoned that the case "presented an important issue of broad significance." He disagreed with the conclusion of the panel primarily on two fronts. First, he stated that the "patent laws are not designed to confer immunity from antitrust type regulation," and second he stated that a patent grant is not "designed to allow the patent holder to exploit the grant for the maximum profit the market will bear, but merely to confer a right of exclusivity." He urged that patent rights are not affirmative grants but exclusionary grants. Because the D.C. act is price regulation, and does not grant to any other person the right to make use or sell the invention, it is not inconsistent with the patent laws. He also indicated that he felt the court "failed to give adequate consideration to the presumption against preemption."

Notably, however, Judge Dyk agreed that the statute was preempted, not because of the pricing aspects of the statute, but because of its "misguided effort to accommodate patent statutes," which caused it to attempt to "establish patent policy." Essentially, he sought to modify the grounds of the panel's holding in order to avoid arguments that similar statutes referring to price alone, if passed, were also preempted. In Judge Gajarsa's concurring opinion, he addressed the dissent urging that the D.C. act was impermissibly seeking to establish patent policy by requiring D.C. Courts to determine what price was necessary to spur innovation. He concluded that the D.C. act was not simply about preventing "price discrimination" but directly targeted and undermined the careful balance between innovation and drug costs. However, he noted that the opinion was not as broad as Judge Dyk suggested, because all preemption cases turn on the specific law at issue. As a result, Judge Gajarsa did not see the same danger of the opinion's applicability to future cases.To read the full order in Biotechnology Industry Organization vs. District of Columbia, click here.


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