Trial Over Maine Drug Discounting Law Begins in Federal Appeals Court

The state of Maine and the Pharmaceutical Research and Manufacturers of America in federal appeals court on March 5 renewed their "legal sparring" over the Maine Rx program, which would allow the state to negotiate discounts on drugs for individuals without prescription drug coverage (Guiden, Stateline.org, 3/6). The battle began last May, when Maine passed a law that allows the state to negotiate lower drug prices for its 325,000 residents participating in the Maine Rx program. The program would allow the state to negotiate for an initial rebate equal to or greater than the prescription drug rebate given under Medicaid, which is set by federal law. The state would then pass that rebate on to pharmacies, which would pass the discount to Maine Rx participants. The law permits the state to take punitive measures against drug companies who refuse to offer discounts, including publicizing those companies' names, forcing doctors to obtain prior authorization from the state before prescribing their drugs and implementing price controls (Kaiser Daily Health Policy Report, 10/16/2000). In August, PhRMA filed a lawsuit against the state, alleging that the law was unconstitutional because it regulated out-of-state commerce and conflicted with federal Medicaid law. In October, a district court judge upheld the industry's arguments, calling the law "unconstitutional legislation" (Kaiser Daily Health Policy Report, 10/27/2000). The state filed an appeal to the ruling and decided to delay the implementation of the program until April 1, 2001 (Kaiser Daily Health Policy Report, 12/20/2000).

Monday's Debate
During Monday's oral arguments in Boston's First U.S. Court of Appeals, industry attorney Kathleen Sullivan, dean of the Stanford University Law School, said that Maine's law "amounts to Maine taxing an out-of-state sale or imposing a price ceiling on drugs" (AP/Nashua Telegraph, 3/6). "[N]o one state may tell the transactors in another state what price they may pay," she added. But Maine Assistant Attorney General Andrew Hagler argued that the law -- "by allowing the state to favor companies that negotiate rebates on drugs -- is "merely using market forces to encourage price reductions" (Lavoie, AP/Bangor Daily News, 3/6). Following the hearing, both sides "expressed confidence about the eventual outcome" of the case, expected to be decided in three months. PhRMA assistant general counsel Marjorie Powell said that her group "has a very strong case, demonstrated by the initial court ruling for the temporary injunction." She added, "We continue to be confident the courts will support our position that Maine Rx violates federal Medicaid law." Chuck Dow, spokesperson for Maine Attorney General G. Steven Rowe said, "Our people left (the courtroom) with the impression that the court really understood the issues and that's the best you can hope for" (Stateline.org, 3/6). The three-judge panel did not indicate when it would deliver a ruling on the case (AP/Bangor Daily News, 3/6).