## Facts

- The District of Columbia enacted the Prescription Drug Excessive Pricing Act of 2005, making it unlawful to sell a patented prescription drug in the District for an “excessive price.”
- The Act created a rebuttable presumption of “excessive” pricing when a drug’s wholesale price in the District exceeded specified thresholds tied to prices in certain foreign markets.
- Biotechnology Industry Organization (BIO) and Pharmaceutical Research and Manufacturers of America (PhRMA), trade associations whose members own and market patented pharmaceuticals, filed pre-enforcement challenges.
- Plaintiffs alleged the Act functioned as a price control aimed at patented drugs and conflicted with the federal patent system’s grant of exclusivity and expected economic returns.
- The District defended the Act as a consumer-protection and economic-regulation measure within local police powers.
- The district court held the Act was preempted by federal patent law and permanently enjoined enforcement; the District appealed.

## Issues

1. Whether the Prescription Drug Excessive Pricing Act’s constraints on prices for patented prescription drugs conflict with the objectives of federal patent law and are therefore preempted under the Supremacy Clause.
2. Whether a local pricing regime that targets patented pharmaceuticals stands as an obstacle to Congress’s patent-policy design, including the federal scheme governing pharmaceutical patents.

## Decision

- The Federal Circuit affirmed the judgment that the Act is preempted by federal patent law and upheld the permanent injunction barring enforcement.
- The court applied ordinary Supremacy Clause preemption principles to District of Columbia legislation.
- The court held the Act imposed an obstacle to federal patent objectives by restricting the economic return available from exploiting patent exclusivity, particularly because it singled out patented drugs.
- The court also concluded the Act conflicted with the federal balance for pharmaceutical patents reflected in the Hatch–Waxman framework.
- A dissent would have afforded greater room for local price regulation and resisted treating patent law as broadly preempting market regulation that does not change patent scope or duration.

## Legal Principles

- Conflict (obstacle) preemption applies when a sub-federal law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of federal patent law.
- The federal patent system aims to encourage innovation by granting an exclusive right whose expected economic rewards may include the ability to set market terms for sales of patented products.
- A sub-federal law that directly constrains pricing of patented products, especially by targeting patented goods as a class, may be preempted where it materially interferes with patent-law objectives.
- In the pharmaceutical context, sub-federal rules that impose additional, patent-targeted pricing constraints may be preempted when they conflict with Congress’s detailed regulatory balance for drug patents and market entry.

## Conclusion

The court held that D.C.’s patented-drug “excessive pricing” prohibition conflicted with federal patent objectives by limiting the economic exploitation of patent exclusivity and disrupting Congress’s pharmaceutical patent balance, so the statute was preempted and its enforcement permanently enjoined.


Biotechnology Indus. Org. v. District of Columbia, 496 F.3d 1362 (Fed. Cir. 2007)