Oral argument: Jan. 19, 2011
Appealed from: United States Court of Appeals for the Ninth Circuit (Dec. 9, 2009)
PRIVATE RIGHT OF ACTION, DRUG PRICING AGREEMENTS, THIRD-PARTY BENEFICIARY
Congress enacted Section 602 of the Veterans Health Care Act (“Act”) in 1992 in order to provide relief to certain federally funded organizations for the cost of prescription drugs. The Act requires the federal government and drug manufacturers to enter into pricing agreements which set price ceilings for the drugs. The County of Santa Clara and several other third-party beneficiaries of the pricing agreement (collectively “Santa Clara”) filed suit against several drug manufacturers (“Manufacturers”) under the Act, alleging that the Manufacturers had overcharged them for prescription drugs. The District Court for the Northern District of California dismissed Santa Clara’s claim, but the Ninth Circuit reinstated the claim, holding that third-party beneficiaries of the Act have the right to sue for violations of the Act. The Manufacturers subsequently appealed the ruling to the Supreme Court on the grounds that, because there was no federal statutory right of action, Santa Clara lacked standing to sue. The Supreme Court’s decision will affect the rights of third-party beneficiaries of a federal contract, states’ rights to make decisions regarding prescription drugs, and the litigation burden of companies that contract with the federal government.