PhRMA Suit Over Maine Prescription Pricing Law Heads to Court:

Oral arguments will begin Oct. 19 in a suit brought by the Pharmaceutical Research and Manufacturers of America (PhRMA) against Maine's new prescription drug law, the Wall Street Journal reports. Passed in May, the law directs the state to negotiate lower drug prices for an estimated 325,000 uninsured residents participating in a new program known as Maine Rx. Specifically, the law says the state should negotiate for "an initial rebate amount equal to or greater than the rebate calculated under the Medicaid program," which is set by federal law. The state would then pass that rebate on to pharmacies, which would pass the discount in turn to Maine Rx participants. If drug companies fail to agree to offer discounts, the state can take a "series of retaliatory steps," including publicizing through newspaper advertisements the names of companies that are not participating. The state could also force doctors to obtain prior authorization from the state before prescribing drugs from "nonparticipating companies" to Medicaid patients (Goo, Wall Street Journal, 10/16). Finally, the law authorizes the state to set price controls if negotiations have not sufficiently lowered prices by 2003 (American Health Line, 5/12). So far, 33 out of 300 companies notified of the law have agreed to offer rebates to Maine Rx members, most of them makers of generic drugs, according to Kevin Concannon, commissioner of the state's Department of Human Services. In a suit filed in August in Bangor's U.S. District Court, PhRMA says the Maine law is unconstitutional on two main fronts, the Wall Street Journal reports. First, the group contends, the law "interferes with interstate commerce," explaining that since drug companies sell to wholesalers and distributors, not to individual states, the rebates will effectively function as price controls on drug sales outside Maine's borders as well as within. Second, PhRMA says the law violates the Constitution's "supremacy clause" -- which says that federal law preempts state law when the two conflict -- because its requirement that Medicaid physicians obtain pre-authorization to prescribe drugs from nonparticipating companies "impedes the intent of the federal program to serve Medicaid patients." In response, Maine Attorney General Andrew Ketterer said that the law does not violate interstate commerce laws because it is intended only to "affect prices within the state," according to the Journal. As to the supremacy clause, the state writes in its court filing that federal Medicaid law specifically permits use of prior authorization at state discretion, quoting the law as saying, "A state may subject to prior authorization any covered drug" except in an "emergency situation." Hank Greely, a Stanford Law School professor, said it is unclear how the court will rule in the case, noting that precedents from past cases "don't fit this very well." Drug companies "won't suffer too much" if Maine prevails because of the state's small size, Greely added, but such a decision could clear the way for larger states to adopt similar statutes (Wall Street Journal, 10/16).