Drug Wars in Maine

Published April 1, 2001

In an effort to provide affordable prescription drugs to state Medicare beneficiaries, Maine was the first state in the nation to pass legislation establishing state-level drug price controls. The law creating the MaineRx program was to take effect in January 2001 . . . but it hit a courtroom snag.

The Pharmaceutical Research and Manufacturers of America (PhRMA)—a trade group representing some 100 U.S. drug companies—sued the state to challenge the new drug-pricing law. The suit, filed late last October, claims the state program is unconstitutional and an abuse of trade practices.

U.S. District Court Judge D. Brock Hornby granted a preliminary injunction to delay the law’s January 1 effective date.

Siding with PhRMA, Hornby agreed Maine’s drug law may interfere with the federal Medicare program and, moreover, could be deemed unconstitutional because the program attempts to regulate prescription transactions outside of Maine. The judge further predicted the pharmacy group would win in federal appeals court as well.

What MaineRx Does

The MaineRx program authorizes the state to act as “benefits manager” on behalf of residents who have no drug benefits. In that role, the state would seek to extract rebates and discounts from drug manufacturers in order to lower the price of prescription drugs.

The MaineRx law requires the state to evaluate, by January 25, 2003, whether its “benefits manager” efforts have been effective. If they have not, the state would impose price controls, establishing by July 2003 maximum prices to be paid for prescriptions.

The new law would have given residents lacking prescription drug insurance an initial discount of 10 percent; that discount would have increased this fall.

One provision of the law would have mandated prior authorization before a drug could be prescribed if its manufacturer did not agree to the rebate. The injunction prevents that provision from going into effect, and also prevents the state attorney general from taking action against manufacturers it alleges are charging unfair prices. The law would penalize drug companies, distributors, and labelers with triple damages, plus cost and fines up to $100,000 for each violation.

In a news release, PhRMA spokesperson Jeff Trewhitt agreed access to pharmaceutical drugs can be a problem. But, he said, the MaineRx law does not provide what patients really need: better insurance coverage. He further noted, “This is a national problem that requires a national solution.”

Side-Stepping the Court Order

Last December, after Hornby issued his injunction in the PhRMA suit, the state pursued a second route for regulating prescription drug prices. It asked for and received from the Health Care Financing Administration (HCFA) a Medicaid waiver, allowing it to create the Maine Discount Drug Program.

Under the new Discount program, residents of the Pine Tree State who lack prescription drug insurance will pay the same discounted price for their drugs as do beneficiaries of Medicaid, the state’s program for the poor. Benefits would be available to people with incomes up to three times the federal poverty level: no more than $25,000 for singles and $33,750 for a couple. A family of four with a household income of $51,150 or less would also qualify. The MaineRx program had no income limits.

The new Discount program requires drug manufacturers to absorb the entire cost of the discount, so the program will not require any new state or federal dollars. Because it’s a Medicaid plan, beneficiaries would be limited to only those prescribed medications approved under Medicaid law.

In an interview published January 20th in the Portland Press Herald, Governor Angus King was quoted as saying the new program could be operational as soon as July 1. It “will provide much-needed assistance, which will have a huge impact on people’s lives,” he said.

Vermont Tried Price Regulation, Too

Maine’s Medicaid waiver is modeled after one granted to Vermont last November . . . after the state legislature there failed to pass a prescription drug measure similar to MaineRx.

Rancorous debate over the Vermont measure kept that state’s legislature in session days past a self-imposed Mother’s Day deadline last year. At 11:15 p.m. on May 15, a panel of House and Senate conferees that was attempting compromise threw in the towel.

The original pharmaceutical bill failed in the Vermont House on a vote of 83-62 and was sent back to the conference committee for reconsideration. Sen. John Bloomer (R-Rutland) said he would use parliamentary maneuvers to prevent the session’s end until the conference committee produced a bill that would pass the House—meaning a bill stripped of price controls.

Rep. Malcolm Severance (R-Colchester), a retired economics professor, lectured the House about the difficulties in attempting price regulation.

“It sends a powerful message that is negative relative to the business community in this state,” Severance said. And, he added, the private sector’s response to price controls generally is to reduce the availability of its products in the regulated area.

“When you regulate the price at less than market, you may have a favorable price, but you have no access,” Severance said. “We don’t need this. It doesn’t work. It has no clout.”

For more information . . .

Visit ElderWeb at http://www.elderweb.com. For a discussion of the price controls debate that took place last year in the Vermont legislature, see updates done by the Rutland Herald, at http://www.rutlandherald.com/legislature/leg2000/.