PBM Industry Loses Maine Drug Regulatory Battle

April 18, 2005 (PLANSPONSOR.com) - The state of Maine could be a step closer to enforcing its controversial pharmacy benefits management (PBM) industry bill requiring the PBMs to disclose data such as the amount of rebates they get from drug manufacturers and drugstores.

The latest development in the long-running dispute between the PBM industry and state officials over the mandated disclosures came with a federal judge’s decision to adopt a recommended ruling by a federal magistrate against an industry trade group.

US District Judge D. Brock Hornby of the US District Court for the District of Maine adopted the findings of US Magistrate Margaret Kravchuk that the law, An Act to Protect Against Unfair Prescriptive Drug Practices (UPDPA)” (MRSA. Section 2699), did not violate the federal Employee Retirement Income Security Act (ERISA) or involve an illegal taking of proprietary trade secret information.

In addition to disclosing negotiated rebates, the 2003 Maine law also requires PBMs to make public contract terms with customers, drug firms, and pharmacies. A federal court injunction has blocked implementation of the statute.

In her recommended order Kravchuk rejected PCMA’s arguments that the law was preempted by ERISA and the US Constitution  (See  PBMs Attempting To Stop Maine Drug Price Disclosure Law ).

“There is no question in this case but that the UPDPA is designed to serve a substantial governmental interest: increasing public access to prescription drugs,” Kravchuk wrote in her recommended order. “Thus, the only question is whether compelling PBMs to disclose confidential information to their provider customers, subject to confidentiality restrictions on further dissemination, is reasonably related to advancing the governmental interest the UPDPA is designed to achieve. I conclude that requiring PBMs to confidentially disclose to their provider customers… is reasonably related to controlling the cost of prescription drugs in Maine because it is designed to create incentives within the market for the abandonment of certain practices that are likely to unnecessarily increase cost without providing any corresponding benefit to the individual whose prescription is being filled and that appear to be designed merely to improve a drug manufacturer’s market share.”

After Hornby’s adoption of the magistrate’s findings,   PCMA President and Chief Executive Officer Mark Merritt called Hornby’s decision “disturbing for consumers,” and that implementation of the disclosure law would “make PBMs play poker with the drug companies with all of our cards facing up” according to a BNA report.  

PCMA said that similar legislation was rejected in California, Florida, Iowa, Kansas, Maryland, Minnesota, Mississippi, New York, Vermont, and Washington State.

Business practices of some PBMs have been the focus of recent criticism and the largest of the nation’s PBMs, Medco Health Solutions Inc. reached an agreement in April 2004 to pay $29.3 million to settle unfair trade practice allegations brought by the attorneys general of several states (See  Justice Department Slaps Medco With Civil Suit ).

The case is Pharmaceutical Care Management Association v. Rowe, D. Maine, No. 03-153-DBH.