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PhRMA Wins Important Victory in the US Court of Appeals for the Federal Circuit

August 9, 2007

On August 1, 2007, a WilmerHale team secured an important victory in the US Court of Appeals for the Federal Circuit for its client, the Pharmaceutical Research and Manufacturers of America (PhRMA), when the court struck down the District of Columbia Prescription Drug Excessive Pricing Act of 2005 (the Act)—a pharmaceutical price control regime enacted by the District of Columbia City Council.

The stakes in the case for PhRMA and its members were very high. The Act attempted to impose price controls on any sale of patented pharmaceuticals by manufacturers and wholesalers, regardless of where the sale took place, as long as the sale was upstream from an eventual retail sale in the District of Columbia. The Act authorized enforcement by the DC Attorney General and created a private right of action – any person or organization could challenge the wholesale price of a patented pharmaceutical, and the DC courts were charged with administering the statute. The courts would examine benchmark prices in select foreign countries and weigh a few additional factors to determine whether a price was “excessive.” If a court deemed a price “excessive,” the law authorized fines, treble damages, and an injunction against sales at that price. The lack of specificity as to what prices would be deemed “excessive” left companies vulnerable to suit, whatever their price.

The Federal Circuit’s decision affirmed a judgment of the US District Court for the District of Columbia, which WilmerHale successfully obtained on December 22, 2005, less than three months after the mayor signed the Act into law. In its December 22, 2005 judgment, the district court enjoined DC from enforcing the Act, declaring that the law was preempted on its face under the federal patent laws and that it violated the Interstate Commerce Clause as applied to transactions occurring outside the District. DC did not appeal the district court’s ruling on the Commerce Clause. On August 1, the Federal Circuit affirmed the preemption holding, declaring that by restricting the prices pharmaceutical companies could charge for patented drugs, the act interfered with Congress’ scheme for encouraging the development of new, life saving medicines.

David Ogden argued the case in the Federal Circuit and the US District Court, and together with Randolph Moss led the WilmerHale litigation team. The team also included: Anne Small, Brian Boynton, Catherine Carroll, and Thomas Saunders.