Federalism, Patents, and the Constitutionality of State Pharmaceutical Regulation

Abstract

In recent years, pharmaceutical prices have risen at an alarming rate, putting increasing pressure on state budgets. In response, numerous states have begun to explore methods of addressing the problem, with some considering legislation to regulate drug prices directly. In fact, one recent study indicates that in 2017, more than 80 pharmaceutical pricing bills were proposed in over 30 states nationwide. This essay addresses issues of federalism, preemption and the Takings Clause as they relate to the intersection of patent law and state drug rate setting legislation. This work proceeds in three parts. Part I provides general background on the preemption doctrine as it applies to state regulation of areas that involve patents. Part II describes the three levels of preemption and applies those levels to state regulation of drug payment rates. Part III examines whether state regulation of drug payments would rise to the level of a regulatory taking under the takings clause of the Fifth Amendment of the United States Constitution. Part IV provides existing examples of state regulation of health care rates. In addition, this section considers the issue of the state in its role as a commercial payer in the marketplace.