In a 12-1 vote, with Judge Gajarsa concurring and Judge Dyk dissenting, the U.S. Court of Appeals for the Federal Circuit denied petitions for rehearing and rehearing en banc in Biotechnology Industry Organization v. District of Columbia. Case No. 06-1593 (Fed. Cir., Oct. 30, 2007) (Gajarsa, J., concurring; Dyk, J., dissenting).
In the decision being challenged, the Federal Circuit this August had upheld the United States Court of Appeals for the District of Columbia’s judgment declaring the District’s Prescription Drug Excessive Pricing Act of 2005 (the D.C. Act), codified at D.C. Code § 28-4551 to 28-4555, was preempted by federal patent laws and enjoining its enforcement. According to the D.C. Act, "[a] prima facie case of excessive pricing shall be established where the wholesale price of a patented prescription drug in the District is over 30% than the comparable price in any high income country in which the product is protected by patents or other exclusive marketing rights." Once a prima facie case of "excessive pricing" is shown, the burden shifts to the defendant to prove that the price is not excessive (see IP Update, Vol. 10, No. 8).
The concurrence and dissent agreed that the outcome was correct, i.e., that the "the panel was correct to hold that the [D.C. Act] is preempted by federal patent laws." Their points of disagreement, however, appear to reveal an undercurrent of disagreement on the appropriate balance between patent and antitrust laws.
Judge Dyk, in dissent, conceded that the D.C. Act was probably invalid, but attacked the panel opinion for going too far, noting that it "suggests that even legitimate price regulation is invalid." According to the dissent, the benefits conferred to patent holders by patent law—i.e., limited exclusivity—do not extend so far as to guarantee patent holders prices unfettered by anything but market forces. Thus, argued the dissent, patent holders are still subject to state taxes, state regulations and antitrust laws. Similarly, the D.C. Act, which the dissent interpreted as addressing only price discrimination, could be a legitimate law, except for its artless drafting.
The concurring opinion by Judge Gajarsa reflects a broader reading of both patent law and the D.C. Act and a narrower reading of the panel’s opinion. According to the concurrence, patent law works to promote innovation via the right to "exclude others from making, using, or selling a claimed invention for a limited period of time." Judge Gajarsa finds that the D.C. Act "is not simply about preventing ‘price discrimination.’" Rather, by imposing its own pricing scheme on patented drugs, Judge Gajarsa argues that the D.C. Act "directly targets and undermines this careful balance between innovation and drug costs." Finally, Judge Gajarsa explains that the dissent overstated the breath of the panel opinion "to the extent that it suggests that the opinion would require the preemption of ‘any state law regulating the prices of patented pharmaceutical products.’ … Whether future efforts of states to regulate drug prices, which for example did not only target patent drugs or did not as significantly or directly undermine the balance of the federal patent right, would also be preempted is a question that remains for another day."
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