Court Rejects Prescription Drug Price Controls in D.C.

Published February 1, 2006

In December, a federal judge struck down a District of Columbia law that would have imposed price controls on prescription drugs.

United States District Judge Richard J. Leon wrote in his December 22 decision, “the Court finds the D.C. Act unconstitutional and grants the plaintiffs’ claims for declaratory and injunctive relief.” Leon also found the legislation violated interstate commerce and federal patent laws.

Foreign Prices Set Baseline

The “Prescription Drug Excessive Pricing Act of 2005” was described in the legislation as a “compulsory license to remedy excessive pricing of prescription drugs.” Written by D.C. Council Member David A. Catania (I-At Large), the bill was passed unanimously by the city council in September and signed by Mayor Anthony A. Williams (D) in October.

Later that month, the nonprofit Pharmaceutical Research and Manufacturers of America (PhRMA) filed suit against the council and the mayor.

Under provisions of the bill, the question of whether drugs are sold at an “excessive” price could be determined by “the disparity between the retail or wholesale price of the prescription drug” against the price for which the same product could be purchased in Australia, Canada, Germany, or Great Britain.

If domestic drugs were found to be more expensive than their foreign versions, the law stated, D.C. consumers could sue for being overcharged, or the drug company could be forced to allow the district to license its product to a different manufacturer.

Retailers Given Free Pass

Leon’s decision stated, “By choosing to exempt retailers of any liability for the excessive prices of the drugs they sell, the District has, in effect, overwhelmingly focused its enforcement effectively on out-of- state manufacturers and out-of-state transactions that ‘result in’ excessive retail prices within the district.”

Under the statute, Leon pointed out, “manufacturers are essentially defenseless” against lawsuits.

“The D.C. City Council has now demonstrated just how much mischief economic idiots can do,” said Merrill Matthews Jr., director of the Council for Affordable Health Insurance. “Did anyone bother to tell the Council that manufacturers of a product often don’t determine the final retail price, especially when the products generally go through one or two middlemen, as pharmaceuticals do? Pharmacies set the prices at the retail outlet, and pharmacy benefit managers (PBMs) act as middlemen for most drugs sold.

“So if the brand name drug company does provide the discount but the pharmacy doesn’t pass it on, who is the consumer to sue? I think the right answer to that question is the D.C. City Council,” Matthews said.

The National Legislative Association on Prescription Drug Prices (NLARX), a nonprofit group promoting accessible and affordable prescription drugs, cited the D.C. measure on its Web site as “model legislation.” Catania is vice chair of NLARX.

“Residents of the District of Columbia as well as Americans everywhere count on prescription medicines to protect their health, improve their quality of life, and in many instances keep them alive,” PhRMA President and CEO Billy Tauzin said in a statement following the decision. “The discovery, testing, and manufacturing of medicines are vitally important parts of the overall American health care system. This nation leads the world in the development of new medicines because of the market-based system in place that rewards innovation and drives future discovery.

“Today’s decision by the U.S. District Court protects both patients and the quality health care we enjoy in this country,” Tauzin concluded.

Susan Konig ([email protected]) is managing editor of Health Care News

For more information …

The full text of United States District Judge Richard J. Leon’s December 22 decision is available through PolicyBot™, The Heartland Institute’s free online research database. Point your Web browser to, click on the PolicyBot™ button, and search for document #18382.