Maine's pill plan faces court test

Supreme Court considers whether novel state program using 'coercion' to reduce prescription drug costs is legal.

Maine has come up with a novel way to counteract the skyrocketing cost of prescription drugs.

It is called coercion.

In 2000, state lawmakers enacted a mechanism in which drug manufacturers are given the option of either offering discounts to all Maine residents or facing a boycott of that company's products in the state's lucrative Medicaid program.

Faced with such a stark choice, the pharmaceutical companies did what any highly profitable industry would do under such circumstances - they hired a small army of lawyers and sued.

Wednesday, that lawsuit reaches the US Supreme Court, where the justices must decide whether the so-called Maine Rx program is an unconstitutional attempt by an individual state to impose regulations on a nationwide industry.

In addition, the justices must examine whether Maine Rx undermines federal law by using provisions within the Medicaid statute as the primary means to compel drug companies to offer discounted prices to all Maine residents, rather than solely to those who are Medicaid patients.

The case is of national significance. It arises at a time when the ballooning cost of prescription drugs is a major component of what many analysts say is a crisis in affordable healthcare in the US.

Twenty-eight states have filed a friend-of-the-court brief in support of Maine Rx, and many are considering adopting similar plans.

50 states, 50 regulations?

At the same time, a major American industry faces the potential for a massive, new level of regulation by as many as 50 states.

"If the court upholds the Maine program, what that would do is create a hodgepodge around the country," says Marjorie Powell, a lawyer with the Pharmaceutical Research & Manufacturers of America (PhRMA), the industry trade group challenging Maine Rx.

Analysts say it is unclear how a majority of the justices will view the case.

"They see that what Maine has done here is an innovative way to deal with this national problem [of expensive prescription drugs], and they want to talk about it before too many states [enact similar programs]," says Cabanne Howard, a professor at the University of Maine School of Law, who is helping the state fight the case.

Although it has been debated at the national level for many years, Congress has failed to directly confront the prescription-drug price problem. The rising costs strike particularly hard at seniors living on a fixed income and at those without health insurance.

Drug-industry officials say pricing for prescription drugs is no different from pricing for any other product in a capitalist, free-market system. Bulk buyers such as the federal government, state Medicaid administrators, and industry wholesalers are granted discounts and pass some of that discounted price on to consumers through organized health plans or other programs.

Bulk buying power

Individual patients who are not covered by a health plan do not reap the benefits of bulk buying power and thus must pay full price.

Jeff Trewhitt, a PhRMA spokesman, says drug profits in the US help support the most innovative research-and-development efforts in the world. "We think it is very instructive that the Canadian pharmaceutical industry barely registers on the radar screen on innovation because Canadian government controls keep prices too low," Mr. Trewhitt says.

Maine officials say their program is not designed to undercut industry profits. It is aimed instead at extending the benefit of bulk purchasing discounts to a wider pool of state residents.

What Congress did

Maine Rx builds on an idea that originated with Congress. In 1990, lawmakers amended the Medicaid statute to create a means to force drug companies to offer discounted prices to Medicaid patients. The law allows state Medicaid administrators to boycott those drug companies that refused to offer lower prices for the Medicaid program.

What Maine has done is use the same coercive mechanism, but expand it to include a wider pool of beneficiaries.

Lawyers for PhRMA say Maine Rx interferes with the Medicaid program by making it more difficult for Maine Medicaid recipients to continue to receive the same prescription drugs when the state enforces company boycotts.

"Holding Medicaid patients hostage to Maine's effort to reduce the costs of prescription drugs paid by other Maine residents interferes with the achievement of Congress's objectives in Medicaid and does so without any corresponding benefit to that federal program," says Daniel Price in PhRMA's brief to the high court.

Nothing in the language, structure, or goals of the Medicaid law forbids a state from creating a program like Maine Rx, counters Andrew Hagler, a Maine assistant attorney general, in his brief supporting the program.

"Maine Rx advances the goals of Medicaid by preserving the health and productivity of Maine residents who lack insurance," Mr. Hagler says.

Consistent with the intent?

He says making affordable prescription drugs available to all Maine residents will prevent an ever-larger number of patients from being forced for financial reasons into the Medicaid program. That outcome is consistent with Congress's intent in encouraging states to administer Medicaid in a way that benefits the program and its recipients.

PhRMA counters that Medicaid patients will have fewer choices about possible medicines and that in some cases, there may be bureaucratic delays and other mix-ups.

Maine officials insist that any patients who require a particular brand of a medicine will be able to obtain it despite the state boycott.

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