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Court Rules That Maine Rx Can Move Forward

Donna Young

A federal appeals court last Thursday denied a petition by the Pharmaceutical Research and Manufacturers of American (PhRMA) to review the court’s May 16 ruling to lift an injunction on Maine’s discount drug and price control program.

In that May ruling, a three-judge panel of the 1st U.S. Circuit Court of Appeals in Boston upheld legislation that created the program known as Maine Rx.

The program will allow the state to negotiate lower prices with pharmaceutical companies for its 325,000 uninsured or underinsured residents. The program is open to all Maine residents.

If negotiations with drug makers do not lead to major price reductions, the state will impose price controls by 2003.

PhRMA sued the state last year, arguing that Maine Rx would hurt Medicaid recipients and would violate the Constitution's commerce clause by seeking to regulate commercial transactions that take place outside of the state.

A federal district court’s ruling last October prevented the state from implementing Maine Rx.

But in May, the appellate court reversed the district court’s decision.

The higher court said Maine Rx did not violate the commerce clause "because it does not regulate conduct occurring outside the state, but only regulates in-state activities."

Under Maine Rx, the state will provide health care providers and the public with the names of manufacturers who do not enter into rebate agreements. The drug products from all noncompliant drug makers will require prior authorization and cannot be dispensed to a Medicaid beneficiary without the approval of the state.

PhRMA contends that the Maine Rx Program will harm Medicaid recipients by impeding access to their physicians' first-choice medications.

But the appellate court disagreed with PhRMA.

"The Act sets forth prior authorization procedures that are consistent with those explicitly permitted by Medicaid," the court said. "PhRMA has not established at this point that the administrative burden imposed by prior authorization will likely harm Medicaid recipients. In the absence of such evidence, we cannot conclude that the Act violates the Supremacy Clause."

But the court left an opening for PhRMA to have the case revisited. "Since both sides agree that the prior authorization requirement is the ‘hammer’ or ‘force’ that coerces manufacturers to enter into the Program, the possibility that first-choice drugs will not be readily approved where second-choice inferior alternatives exist concerns us," the court said last month in its opinion.

"We simply cannot say on this record that the Act conflicts with Medicaid's requirement that state Medicaid plans assure that care will be provided in a manner consistent with the recipients' best interests.

"This decision is without prejudice to PhRMA's right to renew its preemption challenge after implementation of the Act, should there be evidence that Medicaid recipients are harmed by the prior authorization requirement ‘as applied.’"

The state said the program will go into effect this fall.