Judge Rules Federal Government Right To Permit Maine To Offer Non-Medicaid-Eligible Residents Drug Discounts Through Medicaid Program

A federal judge on Feb. 25 rejected a pharmaceutical industry challenge to a Maine prescription drug discount program for low- and moderate-income residents, ruling that HHS had the authority to grant the state a waiver to use its Medicaid program to provide discounts to non-Medicaid-eligible individuals, the Wall Street Journal reports. The ruling by U.S. District Court Jude Ricardo Urbina in Washington, D.C., upholds the Healthy Maine program, which covers 108,000 residents with incomes up to 300% of the federal poverty level who are uninsured and not eligible for Medicaid. "Essentially," the Journal reports, the state "enrolls the recipients in the Medicaid program" so that they are eligible for the same rebates or drug discounts that drug makers must offer state Medicaid programs. State officials estimate that up to 225,000 residents are eligible for the discounts, which can be as much as 25% off a drug's retail price. Following Healthy Maine's June 1 launch, the Pharmaceutical Research and Manufacturers of America sued to block the program, arguing that it had been improperly approved by HHS. The lawsuit came on the heels of a separate PhRMA lawsuit in which the group successfully blocked a similar discount established by Vermont, called the Pharmacy Discount Program. In that case, the U.S. Court of Appeals in Washington ruled that Vermont had violated federal law by not "us[ing] any additional Medicaid funds to underwrite the discount." The Journal reports that Maine "amended its program" in light of the Vermont case by paying 2% toward the cost of the discount, or about $1 per prescription. Urbina then rejected PhRMA's argument that this set-up should not qualify as a payment of Medicaid funds. PhRMA said it was considering appealing the ruling to the U.S. Court of Appeals. The decision marks the third "major legal defeat in as many months" for the drug industry in its battle with state governments over drug costs. Separate rulings in December 2001 and January 2002 let stand programs in Michigan and Florida that require drug makers to offer greater discounts in order to be placed on the states' Medicaid preferred drug lists (Caffrey/Gold, Wall Street Journal, 2/26).