Pharmaceutical Research & Manufacturers of America v. District of Columbia

MEMORANDUM OPINION

On October 12, 2005, Plaintiff, Pharmaceutical Research and Manufacturers of America (“PhRMA”), filed a motion for a temporary restraining order and a preliminary injunction against the District of Columbia, Anthony A. Williams, in his official capacity as Mayor of the District of Columbia, the Office of the Attorney General of the District of Columbia, Robert J. Spagnoletti, in his official capacity as the Attorney General of the District of Columbia, the Office of Documents and Administrative Issuances of the District of Columbia, and Arnold R. Finlayson, in his official capacity as Administrator of the Office of Documents and Administrative Issuances (collectively the “District”), contending *59 that D.C. Act 16-171, the Prescription Drug Excessive Pricing Act of 2005 (the “D.C. Act” or the “Act”), violates the Supremacy, Commerce, and Foreign Commerce Clauses of the Untied States Constitution. Civil Action No. 05-2015, Dkt. # 2. The motion for a temporary restraining order was denied the next day and a briefing schedule was set on October 21, 2005 for the motion for a preliminary injunction. See id., Minute Order dated Oct. 13, 2005 and Dkt. # 10.

The same day, PhRMA filed a motion for an order consolidating the merits of the plaintiffs action for a declaratory judgment with its application for a preliminary injunction pursuant to Federal Rules of Civil Procedure 57 and 65(a)(2). Id. at Dkt. # 9. The District, in turn, filed a motion on October 26, 2005 for expedited discovery from PhRMA. Id. at Dkt. # 11.

The next day Biotechnology Industry Organization (“BIO”) filed its complaint seeking the same declaratory relief as PhRMA against the District. See Civil Action No. 05-2106, Dkt. # 1. In the interests of judicial efficiency, the actions by PhRMA and BIO were consolidated on November 8, 2005, and the ruling on the merits and prayer for injunctive relief under Rule 65(a)(2) were eventually consolidated. Id. at Dkt. # 12; Civil Action No. 05-2015, Dkt. # 18 and Minute Order dated Nov. 17, 2005. Oral arguments were held on November 23, 2005, and supplemental memoranda were filed on December 1, 2005. Civil Action No. 05-2015, Dkts. # 24, 25. Due to conflicting reports from counsel regarding the calculation of the 30 legislative day review period, the Court issued an Order on December 12, 2005, requiring a statement from each party regarding its best calculation as to the expiration of the 30-day period and an update on what, if anything, Congress did regarding the Act. Id. at Dkt. # 27. On December 13, 2005, the parties submitted to the Court a joint status report which indicated that the 30-day congressional review period expired on December 9, 2005, and that Congress did not take any action as to the Act. Civil Action No. 05-2015, Dkt # 28.

Based on the pleadings, oral arguments, and record, the Court finds the D.C. Act unconstitutional and GRANTS the plaintiffs’ claims for declaratory and injunctive relief. 1

BACKGROUND FACTS

I. Legislative History

The Prescription Drug Excessive Pricing Act of 2005 was initially introduced as legislation to the District of Columbia’s City Council (the “Council”) on February 1, 2005. 52 D.C.Reg. 1295 (Feb. 11, 2005); Defs.’ Mem. of Points and Authorities in Opp’n to Pl.’s Mot. for Prelim. Inj. at 4 (hereinafter “Defs.’ Opp’n”). The legislation was an effort by the Council “to restrain the excessive prices of prescription drugs,” 2 D.C. Act § 28-4551(3), which it found to be threatening the “health, safety, and welfare of [the District’s] residents.” Id. at § 28^551(2). 3 Ultimately, the D.C. *60 Act was passed by the Council on September 20, 2005, and signed on October 4, 2005 by Mayor Williams. PhRMA’s Mem. of Points and Authorities in Supp. of Its Mot. for TRO and Prelim. Inj. at 1 (hereinafter “PhRMA’s Mot.”); D.C.Reg. 9061-63.

The D.C. Act was transmitted to Congress on October 6, 2005 for a required 30-day review period under § 602(c)(1) of the District of Columbia Home Rule Act, D.C. Official Code § l-206.02(c)(l). Defs.’ Opp’n at 5-6. It was published in the District of Columbia Register on October 14, 2005, 52 D.C.Reg. at 9061-63, but would not take effect until after the 30-day period of congressional review was completed. 52 D.C. Reg at 9063; D.C. Act 16-171, § 4; see D.C. Code § l-206.02(c)(3) (1973). 4 It did so on December 10, 2005.

II. The D.C. Act

The D.C. Act specifically makes it “unlawful for any drug manufacturer or licensee thereof, excluding a point of sale retail seller, to sell or supply for sale or impose minimum resale requirements for a patented prescription drug that results in the prescription drug being sold in the District for an excessive price,” D.C. Act § 28-4553 (emphasis added), and empowers any “affected party” 5 to bring a suit in the Superior Court of the District of Columbia for damages and injunctive relief against the manufacturers or licensees. Id. at § 28-4555. By prohibiting excessive retail sales prices, while excluding retail sellers from enforcement, the Act necessarily directs “affected” parties to target the manufacturers’ wholesale prices, and the casual relation, if any, between those wholesale prices and the allegedly “excessive” prices set by retailers that result therefrom. 6

Although it does not specifically define what makes a price “excessive,” the Council did include in the statute a formulaic mechanism as an optional way for a plaintiff to establish a prima facie case of exces-siveness. See D.C. Act § 28-4554(a). *61 Specifically, a prima facie case of excessive pricing “shall be established where the wholesale price of a patented prescription drug” sold in the District of Columbia is “30% higher than the comparable price” in either the United Kingdom, Germany, Canada, or Australia, if the drug is protected in those countries “by patents or other exclusive marketing rights.” Id. Upon doing so, the burden shifts from the affected party to the manufacturer of the patented prescription drug to prove, by a preponderance of the evidence, that the price of the drug, presumably at the retail level, is not excessive. Id. at § 28 — 4554(b). The D.C. Act does not state whether this formulaic approach is the only way to establish a prima facie case that a patented prescription drug is excessive. Id.; Prelim. Inj. and Trial on the Merits Hr’g Tr. 9:23 — 12:13 (noting possible different interpretations of the D.C. Act as written). It does specifically provide, however, that once a prima facie case is established the manufacturer of the drug can prove that the price of the drug is not excessive given the cost of inventing, developing, and producing the drug, the global sales and profits from the drug to date, the amount of “government funded research that supported the development of the drug, and the impact of price” of the drug to access to the drug by the District of Columbia government and its residents. D.C. Act § 28-4554(b).

If the manufacturer fails to meet its burden, and a Superior Court judge finds that “excessive pricing” was the “result” of the manufacturers’ wholesale price, the judge can issue civil penalties and exercise any of the following additional options: “(1) Temporary, preliminary, or permanent injunctions to enjoin the sales of prescription drugs in the District at excessive prices; (2) Appropriate fines for each violation; (3) Damages, including treble damages; (4) Reasonable attorney’s fees; (5) The cost of litigation; or (6) Any other relief the Court deems proper.” D.C. Act § 28 — 4555(b)(1)—(6).

III. The Plaintiffs

PhRMA is a non-profit organization whose members consist of leading research based pharmaceutical and biotechnology companies who account for “close to 70% of the sales of prescription drugs in the United States.” Powell Decl. ¶¶ 2-3; PhRMA’s Compl. ¶ 16. PhRMA serves as a “policy advocate” for its members and the pharmaceutical industry before federal and state government entities. Powell Deck ¶ 4; PhRMA’s Compl. ¶ 16. BIO is a large biotechnology organization that consists of more than 1,100 members from around the world, Sachdev Aff. ¶ 5; BIO’s Compl. ¶ 13. BIO provides “advocacy, business development, and communications services” for its members and also represents other organizations which are related to the biotechnology field or provide services to the industry. BIO’s Compl. ¶ 13; see Sachdev Aff. ¶¶ 5-7.

PhRMA’s members manufacture and sell patented prescription drugs within the United States from facilities outside of the District of Columbia to wholesalers who are also located, for the most part, outside the District of Columbia. PhRMA’s Statement of Material Facts Not in Dispute ¶ 2; Powell Deck ¶¶ 6-8; see Soto Deck ¶¶ 3, 5; see Fish Deck ¶¶ 3-6. In most circumstances, patented prescription drugs that are manufactured by PhRMA’s members are subsequently resold in the District of Columbia by retailers who are exempt from enforcement under the D.C. Act. Id. BIO’s members manufacture and sell patented prescription drugs and products which are mainly sold to entities outside of the District of Columbia, Sachdev Aff. ¶¶ 7-10; see Bowen Aff. ¶¶ 3-5; see Meyers Aff. ¶¶ 3-5. BIO represents compa *62 nies that maintain patents and create patentable inventions. Sachdev Aff. ¶ 7; see BIO’s Compl. ¶ 26.

While most of the wholesale sales by plaintiffs occur outside the District of Columbia, members of PhRMA and BIO both occasionally sell a small number of products, drugs, and therapies directly to doctors, hospitals, and pharmacies within the District of Columbia. See Powell Decl. ¶ 7 (“Although PhRMA members supply very limited quantities of patented prescription drugs directly to doctors and healthcare institutions in the District of Columbia, the vast majority of patented prescription drugs that are eventually provided to patients in the United States are initially sold by pharmaceutical manufacturers either to drug wholesalers ... or to large retail pharmacy chains that warehouse their own drugs ... ”); see Sachdev Aff. ¶ 8(“The overwhelming majority of therapies produced by BIO members are supplied to customers outside' the District of Columbia, Such therapies are rarely supplied directly from BIO members to doctors and healthcare institutions in the District.”); see Meyers Aff. ¶ 4; see Belknap Decl. ¶ 7.

ANALYSIS

I. Standing

As a preliminary matter, the District contends that PhRMA and BIO lack standing to bring a pre-enforcement challenge to the constitutionality of the statute on behalf of their member companies. See Defs.’ Posh-Trial Br. on Standing at 3-5. The defendants argue, in essence, that the plaintiffs have not submitted any evidence, or affidavits, that show a realistic danger that one of their members will suffer an imminent injury by being sued for violating Section 4553 of the D.C. Act. Id. at 7.1 disagree.

The burden of establishing standing, of course rests with the plaintiffs. See Sierra Club v. Envtl. Prot. Agency, 292 F.3d 895, 900 (D.C.Cir.2002). An organization can have standing to bring claims on behalf of its members “when: (a) its members would otherwise have standing to sue in their own right; (b) the interest it seeks to protect are germane to the organization’s purpose; and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit.” Hunt v. Washington State Apple Adver. Comm’n, 432 U.S. 333, 343, 97 S.Ct. 2434, 53 L.Ed.2d 383 (1977); see also Truckers United for Safety v. Mead, 251 F.3d 183, 188-189 (D.C.Cir.2001). In doing so, however, the organization must allege sufficient facts to establish that at least one member is threatened with a specific injury or has suffered an injury in fact. American Immigration Lawyers Assn. v. Reno, 18 F.Supp.2d 38, 50-51 (D.D.C.1998)(citing language from Valley Forge Christian College v. Americans United for Separation of Church & State, Inc., 454 U.S. 464, 487 n. 23, 102 S.Ct. 752, 70 L.Ed.2d 700 (1982)); see Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). For the following reasons, the plaintiff organizations have sufficiently demonstrated a realistic danger of imminent injury to one or more of their members.

The Supreme Court, in Babbitt v. United Farm Workers National Union, stated that in pre-enforcement challenges one “does not have to await the consummation of threatened injury to obtain preventative relief.” 442 U.S. 289, 298, 99 S.Ct. 2301, 60 L.Ed.2d 895 (1979)(quoting Pennsylvania v. West Virginia, 262 U.S. 553, 593, 43 S.Ct. 658, 67 L.Ed. 1117 (^^(determining certain claims challenging the Arizona Agricultural Employment Relations Act were justiciable, while others were not); *63 see Pennell v. City of San Jose, 485 U.S. 1, 8, 108 S.Ct. 849, 99 L.Ed.2d 1 (1988)(find-ing standing to challenge a city rent control ordinance when specificity of injury is not too detailed). Indeed, it is enough to determine “a realistic danger of sustaining a direct injury as a result of the statute’s operation or enforcement.” Babbitt, 442 U.S. at 298, 99 S.Ct. 2301.

Plaintiffs contend, in essence, that the danger of one or more of its members sustaining a direct injury is both “realistic” and “imminent” when one considers: (1) The District’s finding in the D.C. Act that excessive pricing is threatening the health and welfare of the District’s residents, D.C. Act § 28^551(1); (2) the nature of how the pharmaceutical industry actually operates vis a vis the District (i.e. the wholesale transactions by the manufacturers for those drugs later sold within the District occur overwhelmingly outside of the District), see Powell Decl. ¶ 7-8, see Sachdev Aff. ¶ 8-9; and (3) the statute’s litigation option to establish a prima facie case under Section 4554(b) by simply comparing the wholesale price of the drug sold in the District with the wholesale price of the same drug as sold in one of four “high income” countries abroad (e.g., the United Kingdom, Germany, Canada, and Australia), D.C. Act § 28-4554(b). I agree.

By choosing to exempt retailers of any liability for the excessive price of the drugs they sell, the District has, in effect, overwhelmingly focused its enforcement effort on out of state manufacturers and out of state transactions that “result in” excessive retail prices within the District. By finding that “excessive pricing” already exists in the District and by relying, in part, on a comparison to wholesale prices in certain foreign countries to determine excessive retail pricing within the District, the Council has apparently concluded that some of the wholesale manufacturers who sell their drugs for retail sale within the District are selling them at prices in excess of 30% of the wholesale price abroad and that that price, in their legislative judgment, is resulting in some cases in excessive retail prices within the District.

Accordingly, it is very “realistic” for the plaintiffs in this situation to believe and expect that one or more of their members has set a wholesale price 30% higher than that set for the same prescription drug sold in one of the four designated countries. If so, those manufacturers will unequivocally have to bear the litigation burden, and cost, of demonstrating under Section 4554(b) of the D.C. Act, that notwithstanding the prima facie case, the price set by the retailer is either not excessive or not the “result” of the wholesale price that the manufacturer set for the upstream sale.

Moreover, the vulnerability of those manufacturers to imminent litigation is heightened by the practical reality that any law suit triggered by a price that had been previously set for a wholesale transaction has since been priced for retail sale by a third party which has neither the incentive, nor risk, to modify this allegedly excessive retail price or withdraw the product from the market so that the manufacturer can avoid suit. As a consequence, manufacturers are essentially defenseless to avoid enforcement suits by either the District or “affected” parties empowered under the statute.

Therefore, for all of these reasons, the Court finds that the plaintiffs have more than sufficiently demonstrated the required standing by an organization suing on behalf of its members to challenge the constitutionality of the D.C. Act. 7

*64 II. The Supremacy Clause Challenge

PhRMA and BIO each facially challenge the D.C. Act as violative of the Supremacy Clause of the United States Constitution. PhRMA’s Mot. at 2, 13, 16-24; BIO’s Mot. for Prelim. Inj. (hereinafter “BIO’s Mot.”) at 2-3. In essence, they contend that the law is preempted by the Supremacy Clause because it is a direct obstacle to the purposes and execution of the federal patent laws relative to manufactured drugs. See Id.; Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 85 L.Ed. 581 (1941). The District disagrees, contending that the D.C. Act is not preempted by the Supremacy Clause since it neither excludes federal patent law, nor serves as an obstacle to the intended purpose of those laws as applied to the manufacturers of prescription drugs. Defs.’ Opp’n at 11-19.

For the following reasons, the Court finds the D.C. Act, as drafted, is a clear obstacle to the accomplishment and execution of the purpose and objectives set by Congress in passing federal patent laws relating to prescription drugs and, therefore, finds it violates the Supremacy Clause of the United States Constitution.

A. Conflict Preemption

The Supremacy Clause of the United States Constitution states that “the Laws of the United States ... shall be the supreme Law of the Land.” U.S. Const, art. VI, § 1, cl. 2. Thus, where Congress legislates within the scope of its constitutionally granted powers, that legislation may displace state law. Wardair Canada Inc. v. Fla. Dep’t of Revenue, 477 U.S. 1, 6, 106 S.Ct. 2369, 91 L.Ed.2d 1 (1986)(holding that a state tax on aviation fuel did not violate the Commerce Clause of the Constitution and was not preempted by Congress); Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 225, 229, 84 S.Ct. 784, 11 L.Ed.2d 661 (1964)(finding that a state’s unfair competition law cannot prohibit the copying of a product that is not protected by a patent or copyright because the law “clashed” with the objectives of the federal patent laws).

Where federal legislation contains no specific preemption language, however, it is the duty of the federal courts to inquire whether a implied preemption exists in a given situation. Gade v. Nat’l Solid Wastes Mgmt. Ass’n, 505 U.S. 88, 98, 112 S.Ct. 2374, 120 L.Ed.2d 73 (1992)(hold-ing that a state’s licensing laws were preempted to the extent that they conflicted with the Occupational Safety and Health Act of 1970). In that regard, two types of implied preemption have been recognized by the courts: field and conflict preemption. Id. Field preemption applies to those situations, unlike here, where the scheme of federal regulation is “so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it.” Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230, 67 S.Ct. 1146, 91 L.Ed. 1447 (1947). Hines is a classic example of field preemption. 312 U.S. 52, 61 S.Ct. 399, 85 L.Ed. 581. In Hines, the Supreme Court found that the immigration system that Congress had enacted in regard to the registration of aliens was enacted in order to create “one uniform national registration system,” and that the federal regulation was such that a *65 state law could not be enforced when it interfered with the congressional regulation. 312 U.S. at 73-74, 61 S.Ct. 399.

Conflict preemption, on the other hand, applies to those situations where compliance with both state and federal regulations is either a “physical impossibility,” 8 or, as alleged here, “stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” Id. at 67, 61 S.Ct. 399. Plaintiffs contend that the D.C. Act is preempted by the Supremacy Clause because it poses such a conflict to the accomplishment and execution of the very purpose and objectives Congress had in mind when it passed the Patent Term Restoration Act and related non-patent market exclusivity statutes. PhRMA’s Mot. at 2, 13, 16-24; see BIO’s Mot. at 3. How so?

Plaintiffs’ argument is premised on its assertion that the federal patent laws and related pharmaceutical market exclusivity laws reflect Congress’ considered judgment of the economic incentives and protections necessary to best promote the development of new medications. PhRMA’s Mot. at 17-18. Indeed, plaintiffs contend that Congress gave pharmaceutical innovation even greater statutory protection than other types of innovation when it passed the Patent Term Restoration Act of 1984, which allowed pharmaceutical manufacturers to extend the terms of their patents and provided certain market exclusivity provisions that insulate manufacturers from generic competition after its original patent expires. Id. at 17; Patent Term Restoration Act of 1984, 35 U.S.C. § 156 (2005); 21 U.S.C. §§ 355 et seq. Unfortunately for the District, even a casual review of the congressional history attendant to these considerable legislative achievements bears out the truth of the plaintiffs’ unmistakable assertion.

Congress’ regulation of our nation’s pharmaceutical industry is grounded in large part in a complex balance of economic forces and regulatory exclusivity designed to encourage and reward the innovation, research, and development of new drugs. Indeed, Congressman Henry Wax-man, one of the principle sponsors of the Patent Term Restoration Act, articulated Congress’ very purpose behind allowing pharmaceutical patent holders to set a price in their discretion:

because there is no one else in competition, and as a matter of public policy we, under the patent law, give that protection to the person who has put money into research and development for an innovative and new product. But at some point public policy calls for the free market system competition which will bring about the result of a lower price for the consumer. That is the purpose of the legislation.

130 Cong. Rec. 24,427 (1984)(statement of Rep. Waxman). 9 Not surprisingly, some *66 of the federal courts have also acknowledged the same.

In Pfizer Inc v. Dr. Reddy’s Laboratories, Ltd., the Federal Circuit specifically commented on the empirical balance within the Patent Term Restoration Act as follows:

By restoring a portion of the patent term that is consumed during the approval phase, the incentive to develop and market products that require lengthy pre-marketing approval is intended to be preserved: The purpose of [the Patent Term Restoration Act] is to create a new incentive for increased expenditures for research and development of certain products which are subject to premarket government approval.

359 F.3d 1361, 1364 (Fed.Cir.2004)(quoting H.R.Rep. No. 98-857, at 15 (1984), as reprinted in 1984 U.S.C.C.A.N. 2647, 2670). And on a more general note, the Supreme Court itself has also recognized that the federal patent laws reflect a “carefully crafted bargain” among the various interests at stake. Pfaff v. Wells Elecs., Inc., 525 U.S. 55, 63, 119 S.Ct. 304, 142 L.Ed.2d 261 (1998); Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 150-51, 109 S.Ct. 971, 103 L.Ed.2d 118 (1989)(stating that the patent system “embodies a carefully crafted bargain for encouraging the creation and disclosure of new, useful, and nonobvious advances in technology and design in return for the exclusive right to practice the invention for a period of years”).

How then does the D.C. Act’s thinly veiled effort to force manufacturers to limit the wholesale price of those drugs to less than 30% more than the wholesale price of the same patented drugs sold in four designated “high income” countries square with the congressional purpose and objectives inherent in the Patent Term Restoration Act? It doesn’t!

B. The D.C. Act is an Unmistakable Obstacle to Congress’ Objectives

Although well motivated, the D.C. Act was unequivocally designed to force drug manufacturers who sell their products both in the District and in certain foreign countries to either limit the price of their product, or face the consequences of expensive litigation over an undefined standard of “excessiveness” which is likely to vary widely across the spectrum of judges on the Superior Court. Considering the relative ease of the prima facie case litigation option provided for in the statute, and the severity of the penalties at the judges’ disposal, manufacturers will be hard pressed to chose to roll the dice on the expensive option of convincing a given Court that an application of the factors set forth in Section 4554(b) of the D.C. Act yields a non-excessive assessment or a lack of casual connection between the domestic wholesale price and the retailers’ “excessive” price. Such choices give new meaning to that old expression: caught between a rock and a hard place. Most manufacturers who want to continue selling their products in the District will undoubtedly do exactly what the City Council wants: adjust their wholesale price to an amount no greater than 30% more than the wholesale price of the samé product in the four designated foreign countries. And one need not speculate too long as to the likely collateral consequences throughout the pharmaceutical industry nationwide that such capitulations would cause. Punishing the holders of pharmaceutical patents in this manner flies directly in the face of a *67 system of rewards calculated by Congress to insure the continued strength of an industry vital to our national interests. Ironically, the factors Congress weighed in calculating their system of rewards are the very same factors the Act requires manufacturers to litigate in Superior Court in response to a prima facie case. See D.C. Act § 28-4554(b).

In short, using the litigation process to determine on a drug to drug basis the application of a given drug’s pricing vis a vis that in a foreign country directly interferes with, and second guesses, the balance set by Congress in the current system of patents and market exclusivity for pharmaceutical products. Moreover, by allowing foreign drug prices to serve as the benchmark by which excessiveness may be determined in this country, the City Council is effectively substituting Congress’ regulatory scheme for this industry with the regulatory system that has been formulated by these enumerated foreign countries. Because Congress’ judgment in this area is supreme, the D.C. Act is preempted and therefore facially unconstitutional.

III. The Commerce Clause Challenge

Plaintiffs next challenge the constitutionality of the D.C. Act under the Interstate Commerce Clause (the “Commerce Clause”) of the United States Constitution. See U.S. Const, art. I, § 8, cl. 3. Their challenge can be stated succinctly: The D.C. Act, in direct contravention of the Commerce Clause, effectively seeks to regulate transactions that occur wholly out of state. Unlike their Supremacy Clause challenge, however, plaintiffs do not facially challenge the Act. See Pis.’ Reply at 16 & n. 15. Instead, plaintiffs merely challenge it as it applies to transactions that occur entirely out of state (i.e., between the manufacturer and an out-of-state wholesaler/retailer). 10 Id. The Court will limit its focus accordingly, acknowledging at the outset that it would not otherwise consider this additional constitutional challenge but for the significance of the issues and the clear need, in this case, for judicial efficiency.

A. Impermissible Reach Under the Commerce Clause

The United States Constitution provides that “Congress shall have [the] Power ... To regulate commerce ... among the several States.” U.S. Const, art. I, § 8, cl. 3. This Grant of power to the national Congress prohibits states (and the District of Columbia 11 ) from regulating interstate commerce and enacting legislation that would “offend sister States and exceed the inherent limits of the State’s power.” Healy v. Beer Inst., 491 U.S. 324, 336 n. 13, 109 S.Ct. 2491, 105 L.Ed.2d 275 (1989) (citation omitted).

The Supreme Court has held that a state statute “directly regulating]” commerce occurring beyond the boundaries of that state is per se invalid and “generally struck down ... without further inquiry.” 12 Brown-Forman Distill *68 ers Corp. v. New York State Liquor Author., 476 U.S. 573, 579, 106 S.Ct. 2080, 90 L.Ed.2d 552 (1986); see also Healy, 491 U.S. at 336, 109 S.Ct. 2491 (“[A] statute that directly controls commerce occurring wholly outside the boundaries of a State exceeds the inherent limits of the enacting State’s authority and is invalid.... ”). This is so “regardless of whether the statute’s extraterritorial reach was intended by the legislature.” Healy, 491 U.S. at 336, 109 S.Ct. 2491. For the following reasons, this Court finds that the D.C. Act has a per se invalid extraterritorial reach in violation of the Commerce Clause as applied to transactions between manufacturers and wholesalers that occur wholly out of state.

As discussed previously, Section 4553 of the D.C. Act makes it unlawful for any drug manufacturer or licensee thereof “to sell or supply for sale or impose minimum resale requirements for a patented prescription drug that results in the prescription drug being sold in the District for an excessive price.” (emphasis added). Plaintiffs’ members manufacture patented prescription drugs wholly outside the District of Columbia and are neither headquartered in the District, nor operate warehouses in the District. PhRMA’s Mot. at 25 (citing Powell Decl. ¶ 8); BIO’s Mot. at 3 (citing Sachdev Aff. ¶ 9; Bowen Aff. ¶ 5; Clark Aff. ¶ 5; Meyers Aff. ¶ 5; Hamm Aff. at ¶ 5). Thus, in practice, plaintiffs’ members sell “the overwhelming bulk” of their patented prescription drugs in out-of-state transactions to wholesalers or large retail chains that maintain their own warehousing and retail distribution system. PhRMA’s Mot. at 25 (citing Powell Deck ¶ 7; Marmontello Deck ¶ 4; Broughton Deck ¶ 4; Belknap Deck ¶ 4; Fish Deck ¶.4; Soto Deck ¶ 5); see also BIO’s Mot. at 4 (citing Sachdev Aff. ¶ 9; Bowen Aff. ¶¶ 4-5; Clark Aff. ¶¶ 4-5; Meyers Aff. ¶ 5; Hamm Aff. at ¶¶ 4 — 5). Like plaintiffs’ members, none of these wholesalers or large retail chains have their headquarters in the District, nor do they operate warehouses in the District from which they ship patented prescription drugs. PhRMA’s Mot. at 25 (citing Powell Deck ¶ 8); BIO’s Mot. at 3 (citing Sachdev Aff. ¶ 9; Bowen Aff. ¶ 5; Clark Aff. ¶ 5; Meyers Aff. ¶ 5; Hamm Aff. at ¶ 5). Thus, the overwhelming majority of plaintiffs’ members’ sales occur entirely outside the District of Columbia between out-of-state manufacturers and out-of-state wholesalers. Because the D.C. Act explicitly exempts in-state retailers from liability under the statute, the Act effectively seeks to regulate transactions that occur wholly out of state. See PhRMA’s Mot. 24-25. The District contends, however, that since liability is not triggered under the Act until a retail sale is made “in the District,” see D.C. Act § 28^4553, “[t]he Act does not control any *69 out-of-state transaction.” Defs.’ Opp’n at 24. I disagree.

The Supreme Court in Baldwin v. G.A.F. Seelig, Inc., 294 U.S. 511, 55 S.Ct. 497, 79 L.Ed. 1032 (1935), confronted and held unconstitutional a similar situation involving the effective regulation of an out-of-state transaction triggered by an instate sale. In Baldwin, Justice Cardozo reviewed the New York Milk Control Act, which set minimum prices to be paid by milk dealers to milk producers. Id. at 519,