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Supreme Court Hears Maine Rx Case

Donna Young

The Supreme Court heard arguments on January 22 about a Maine law that uses the state’s control over the Medicaid program to obtain discounts on prescription drug products from manufacturers.

Maine’s legislature created the law in 2000, giving the state’s human services commissioner the power to negotiate prices with pharmaceutical companies and obtain rebates to fund a discount program for residents who lack prescription drug coverage.

The program, known as Maine Rx, was created to address the rising costs of prescription drugs and the growing number of uninsured residents, said Representative Michael Michaud (D-Maine), during a January 22 appearance on C-SPAN’s Washington Journal. “What this is all about is helping to lower the cost so people can get the prescriptions they need to stay alive,” he said.

About 325,000 people are eligible for the program, according to the state’s human services department.

Under the law, drug products from manufacturers that do not sign rebate agreements with Maine would be placed on Medicaid’s prior authorization list and could not be dispensed to a Medicaid beneficiary without the state’s approval. The state would provide health care providers and the public with the names of manufacturers that did not enter into rebate agreements.

But the Pharmaceutical Research and Manufacturers of America (PhRMA) sued Maine in August 2000—one day before the law was to take effect—arguing that the program would harm Medicaid recipients by impeding access to their physician’s first-choice medications.

Marjorie Powell, PhRMA’s senior assistant general counsel, also appearing on Washington Journal, said Maine Rx provides a benefit for people ineligible for Medicaid but does so at the expense of the state’s sickest and poorest residents. Maine can use prior authorization “for purposes of clinical treatment for patients or to manage Medicaid,” she said. But federal law, she added, does not allow the state to use prior authorization for non-Medicaid purposes.

PhRMA also argued before the high court that Maine’s law would violate the Constitution’s commerce clause by seeking to regulate commercial transactions that take place outside the state.

In October 2000, a U.S. district judge agreed with PhRMA, finding that Maine Rx violated both the Medicaid law and the interstate commerce clause. But in May 2001, a three-judge panel of the 1st Circuit Court of Appeals in Boston, Massachusetts, upheld the legislation that created Maine Rx. The program’s prior-authorization procedures, the court said, “are consistent with those explicitly permitted by Medicaid.” PhRMA, the judges said, had not established that “the administrative burden imposed by prior authorization will likely harm Medicaid recipients.”

The Supreme Court is expected to rule on the case by early summer.

In other legal proceedings, the Court of Appeals for the District of Columbia on December 24, 2002, struck down another of the state’s discount drug programs in a suit brought by PhRMA. The court ruled that Healthy Maine, which lowered drug prices to more than 110,000 of the state’s low- and moderate-income residents, was an inappropriate expansion of the Medicaid program. Maine had implemented Healthy Maine under a waiver issued by the federal Department of Health and Human Services (HHS).

The program was patterned after a program in Vermont, which had also been established with an HHS waiver. Vermont’s program was struck down in June 2001 by the same federal appeals court that later ruled on Healthy Maine. The lawsuit was brought by PhRMA.

Neither state is appealing the rulings, and both are planning to revise their programs.