Justices Allow Drug-Cost Plan to Go Forward
Maine's innovative effort to reduce prescription drug costs for uninsured state residents by pressuring manufacturers to grant price rebates received the Supreme Court's qualified approval today.

The 6-to-3 decision lifted an injunction that has kept the Maine Rx Program from taking effect since the state's Legislature enacted it in 2000. The court's action is likely to shift the drug pricing debate away from the courts and back to the executive branch and the states.

Other states have been following the Maine case closely, with 29 states filing a Supreme Court brief on Maine's behalf. As prescription drug legislation has remained stalled in Congress, about half the states have started experimenting with ways to hold down costs for various groups of consumers.

Among these efforts, the Maine program was not only one of the earliest but also one of the broadest. While the program was intended primarily for the state's 325,000 residents who lack medical insurance, it set no income ceiling or other description of financial need. The program is theoretically open to anyone, although the state has proposed regulations to disqualify those who have prescription drug coverage.

Under Maine Rx, the state assumes the role of a pharmacy benefit manager and requires drug manufacturers who want to sell their products in Maine to negotiate rebates similar to those the manufacturers have accepted on drugs they sell through the Medicaid program, which provides medical assistance for the poor.

Since a state cannot directly impose price regulation, Maine gave the drug companies a powerful incentive to go along: manufacturers that did not cooperate faced having their products subject to a "prior authorization" procedure, under which the state's Department of Human Services would have to approve prescriptions case by case before pharmacies could dispense them.

For drugs prescribed through Medicaid, federal law permits states to use this pre-authorization procedure, which manufacturers, doctors, and patients all regard as onerous. Doctors and patients tend to seek alternatives to drugs for which pre-authorization is required. The industry argued in its lawsuit that by using the procedure for a purpose not directly linked to Medicaid, Maine had gone beyond its legal authority.

The state had not sought federal approval for its program, a fact the Bush administration stressed in urging the justices to invalidate it.

The court today declined to take that step, instead leaving the next move up to the state and the administration. "We cannot predict at this preliminary stage the ultimate fate of the Maine Rx Program," Justice John Paul Stevens wrote in a portion of the opinion that was joined by Justices David H. Souter and Ruth Bader Ginsburg.…
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http://www.nytimes.com/2003/05/20/politics/20DRUG.html