Update

Rx price controls: Maine gets a go-ahead

A court has given regulators a green light to control prescription drug prices.

By Wayne J. Guglielmo
Senior Editor

When the US district court in Maine slapped a temporary injunction on the state's groundbreaking drug-rebate law last October, few gave the program much chance of surviving. The order from the bench didn't mince words: The likelihood of the drug industry's prevailing in the constitutional challenges it raises, the judge ruled, was "overwhelming."

But in mid-May, a federal appeals court stunned nearly everyone by reversing the lower-court ruling. In occasionally soaring rhetoric, the court spoke approvingly of the ability of "a single courageous state" to serve as a "laboratory" of "novel social and economic experiments without risk to the rest of the country."

"The appeals court decision was as strong in the state's favor as the district court's was in the industry's favor," says Andrew MacLean, general counsel of the Maine Medical Association.

As expected, industry reaction was swift—and critical. But even Maine's doctors—who in principle support expanded prescription drug access—are worried. If not properly implemented, they believe, the Rx Program could turn into a hassle for them and a potential danger to their patients.

Given these uncertainties, the effect of the Maine decision on other states has led to widespread speculation. Is the US indeed facing a tidal wave of similar programs, or will the Maine experiment remain unique?

A slam dunk, but no victory

The impetus for the Maine Rx Program is a problem shared by other states: Given the rising cost of prescription drugs, how do you extend access to those drugs for people who don't have private insurance but earn too much to qualify for Medicaid?

Maine's answer was a mandatory drug-rebate program. Under it, the state has the authority to negotiate rebate agreements with pharmaceutical manufacturers and labelers. Proceeds are then set aside in a special fund used to reimburse pharmacies offering discounted prescription drugs to consumers.*

Involvement in the program is voluntary for retail pharmacies, but mandatory for manufacturers and labelers participating in Medicaid. Medicaid suppliers that refuse to negotiate lower prices, including those operating outside the state, are subject to preauthorization restrictions on their products. Companies failing to achieve certain price reductions by July 2003 are subject to state controls.

In its effort last August to halt the program, the Pharmaceutical Research and Manufacturers of America argued two points: First, the law illegally limits Medicaid beneficiaries' access to a manufacturer's drugs. And second, it violates the US Constitution's commerce clause in attempting to "regulate transactions outside the state."

The district court agreed, adding that it would allow the state to move forward with "a voluntary program with public stigma being the only incentive."

That's where things stood until the May ruling. Suddenly, what had seemed like a slam dunk for the drug industry was hailed as a stunning victory for the state. If Maine implements the Rx Program as it says it will, "access to medically necessary drugs" will not be compromised, said the three-judge panel. (The state has said that it will impose no restrictions on single-source drugs, allow 72-hour emergency supplies of preauthorized drugs, and respond to physicians' requests for authorization within 24 hours.)

The court also found little merit to the argument that—either by design or by effect—the Rx Program would regulate transactions beyond Maine's borders.

The industry vows to watch carefully as the program is rolled out. "If the state doesn't do what it promised the appeals court, we'll probably ask that the case be brought back," says PhRMA spokesman Jeff Trewhitt.

Beyond that, PhRMA in May asked the Circuit Court of Appeals for a rehearing before the full 12-member panel. All but one judge refused. Now the organization has one more legal trick up its sleeve: a petition for a hearing before the US Supreme Court.

Principle and practice divide Maine's doctors

Reaction to the ruling among Maine doctors has been mixed. "Who would disagree with access to affordable medications?" asks family practitioner Bruce Bates, president-elect of the Maine Osteopathic Association.

But Bates worries that the "stick" to enforce compliance—preauthorization of Medicaid drugs sold by nonparticipating companies—will spell trouble. He knows this, he says, because the state's other efforts to restrict certain Medicaid drugs have already proven a disaster.

"As a geriatrician, I have to say it's short-sighted," says Bates. "Sure, you can restrict a doctor from prescribing the newer classes of nonsedating antihistamines, as the state does now. But for my patients, one hip fracture resulting from a fall caused by a sedating alternative will outweigh whatever initial savings you realize."

Maine Medical Association's Andrew MacLean agrees: "We've had quite a debate with the Department of Human Services here about the expanded use of prior authorization in the Medicaid program. We don't like what we see."

For some doctors, the threat of price controls is another knock against the Rx Program. "I'm sure there are plenty of physicians who would say that slapping price controls on industry is just fine," says MacLean. "But there are plenty more who have a philosophical problem with that, especially when it affects a high-tech industry like prescription drugs."

The decision's real impact may be felt next session

At this point at least, Maine's Rx Program remains unique, despite a flurry of state legislative activity in recent years on the pharmacy issue.

This year, at least 27 states filed bills that seek to ease the burden of rising drug costs through assistance programs, bulk buying, manufacturer rebates, or price controls. Arkansas, Maine, Maryland, New Jersey, South Dakota, Virginia, and West Virginia have already passed bills, although none contains Maine-like mandatory rebates and price controls.

Additional legislation is pending in New York, Oregon, Pennsylvania, and Rhode Island. Each could still be affected this year by the Maine ruling, but any ripple effect is more likely next year—assuming new legal challenges fail.

"The decision will certainly have a future impact on Rhode Island law," says Steven DeToy of the Rhode Island Medical Society, who thinks proponents of tougher laws will point to Maine when they lobby lawmakers.

But DeToy is among those who think a state-by-state solution won't work. "It's like focusing on a local area when the real problem is much wider and systemic," he says.

In all, there's a lot going on with few solid answers. But one thing's certain: Whether in statehouses, Congress, or industry boardrooms, the prescription drug issue isn't likely to go away soon.

*See "These doctors' mission: Keeping drug costs down," April 23, 2001.

 

Wayne Guglielmo. Rx price controls: Maine gets a go-ahead. Medical Economics 2001;13:23.