South-Western Legal Studies in Business

States May Not Regulate Prices of Patented Drugs

Appeals court affirmed that the states violate the Supremacy Clause when they place restrictions on the prices of patented drugs. Congress intended for patents to provide special privilege for the inventors and the states may not interfere with that.

Topic Constitutional Law
Key Words

Supremacy Clause; Patent Law; Price Controls

C A S E   S U M M A R Y

The District of Columbia City Council adopted a law that prohibited any patented drug from being sold in the District for an “excessive price.” The Excessive Pricing Act specifically prohibited minimum resale price requirements for prescription drugs. It prohibited wholesale drug prices from being more than 30% higher than prices in Germany, Canada, Australia, or the United Kingdom. The Pharmaceutical Research and Manufacturers of America (PhRMA) and the Biotechnology Industry Organization (BIO) sued to challenge the law as in violation of the Commerce Clause. The district court held that the Act was preempted by federal patent laws and enjoined its enforcement. The City appealed.


Affirmed. PhRMA and BIO had standing to challenge the Act, as they stand to be injured by it. The Excessive Pricing Act was preempted by federal patent law, since it was a clear obstacle to the accomplishment and execution of the purpose and objective set by congress in passing federal patent laws regarding prescription drugs. The Supremacy Clause provides general principles of preemption that prohibit the states, and the District, from infringing in this area. State law must yield to congressional enactments if they stand as an obstacle to the intent of the federal statute.


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

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