Appeals Court Throws Out Maine Drug Law

December 26, 2002 ( - A Maine state law forcing drug makers to slash prices 18% to 25% has been tossed by a Washington federal appeals court.

The ruling by the US Appeals Court striking down Maine’s Healthy Maine Prescriptions law is expected to deal a setback to efforts by other states to provide prescription medication to low-income residents, according to a New York Times report.

The ruling came in a lawsuit filed by the Pharmaceutical Research and Manufacturers of America, the main trade association for brand-name drug companies, against Tommy Thompson, the secretary of health and human services. Maine defended its program before the appeals court.

According to the Times story, no state has been more inventive than Maine in trying to hold the line on soaring drug costs.

At Least Nine States Copy Maine’s Law

In fact, Richard Cauchi, a health program analyst at the National Conference of State Legislatures, said lawmakers in Colorado, Hawaii, Maryland, Massachusetts, New Mexico, New York, Vermont, Washington and Wisconsin, among other states, had filed bills to establish drug-discount programs like the one in Maine, the Times said.

Maine officials described their program as an experimental expansion of Medicaid, which is supposed to be financed jointly by the federal government and the states.

But the appeals court ruled that the Maine program was not permissible, even as a demonstration project, because there was no guarantee of any state contribution and there was no federal money at all, according to the Times. In effect, the court said, drug companies bore almost all the cost.

The federal Department of Health and Human Services approved the Maine program two days before President Bill Clinton left office. The Bush administration has defended that decision in court and has endorsed similar cost-control efforts by other states.

The appeals court said the Maine program violated the Social Security Act, which sets the terms for Medicaid. Under federal law, drug companies are required to sell drugs to state Medicaid programs at discounts that typically reduce retail prices by 18%.

Maine required drug makers to give similar discounts to tens of thousands of people who earn too much to qualify for Medicaid.

Court: State’s Share of Cost Not Mandated

Appeals Court Judge Harry Edwards wrote, “A central goal of Maine’s project design was to provide a prescription drug benefit without creating net costs for the state.” After the legality of this approach was challenged, Maine decided to cover 2% of the cost of each prescription.

But, Edwards pointed out, “the contribution is not mandated by state law,” can be cut back or cut out, and was not part of the plan approved by federal officials.

At least 34 states have passed laws intended to make prescription drugs less expensive, either by subsidizing costs or trying to secure discounts, the Times story said. The drug industry has sued Florida, Michigan and Vermont, as well as Maine.

Drug makers object to any compulsory discounts, calling them price controls and saying they will harm pharmaceutical innovation.