In a decision closely watched by dozens of states, the U.S. Supreme Court Monday allowed Maine to implement Maine Rx, a trail-blazing program that enables the state to offer discounted prescription drugs to the working poor and elderly people.
Under the program, which has been in limbo due to a legal challenge, Maine asserts the authority to force drug makers to sell their products to the state at the same price as under Medicaid, the state-federal health insurance program for the poor and disabled.
The prescription drug industry had sued to block the program, claiming it violates federal law and would limit the range of prescription drugs patients could purchase.
"Its arguments that the rebate requirement constitutes impermissible extraterritorial regulation and that it discriminates against interstate commerce in order to subsize in-state retail sales are unpersuasive," the Supreme Court said in Pharmaceutical Research and Manufacturers of America v Walsh.
Maine lawmakers applauded the limited ruling, which does not preclude further legal action but merely allows the program to be implemented in the interim.
"The Court ... made the right decision in permitting Maine to move ahead in implementing the innovative Maine Rx law. This decision is a victory for consumers who deserve access to more affordable prescription drugs, " Maine Sen. Olympia J. Snowe (R) said in a statement. Drug industry officials said the decision does not settle the issue.
"The key factual issues have yet to be decided by the District Court," said a press release issued by the plaintiff, the Pharmaceutical Research and Manufacturers of America (PhRMA).
State officials and policy analysts said the decision could have far-reaching implications for other states. The attorneys general of 29 states signed a joint brief of support for Maine in late 2002.
"This is a big victory for states. This reenergizes state efforts to provide major discounts to a broad range of citizens. The Court upheld the states' right to innovate," said Bernie Horn, policy director at the Center for Policy Alternatives, a left-leaning policy group based in Washington, DC.
Hawaii last year enacted a law similar to Maine Rx, but delayed its effect pending a ruling on the program that inspired it. Eighteen other states are considering comparable programs, although legislatures in seven of these states have adjourned for the year, according to the National Conference of State Legislatures.
Other states considering prescription drug discount programs have tried to avoid the legal minefield Maine encountered.
The Illinois legislature, for example, passed a law May 15 that allows the state to use the purchasing power of state programs other than Medicaid to negotiate lower prices for prescription drugs. It does not use price controls.
Illinois spends $1.8 billion per year on prescription drugs. Under the legislation, which is awaiting Democratic Gov. Rod Blagojevich's signature, the state expects to save $120 million per year. Benefits for seniors could reach into the hundreds of millions of dollars.
In Ohio, the Coalition for Affordable Prescription Drugs, a group of labor, senior citizen and consumer advocacy groups, is trying to place a "Maine Rx-style" initiative on the ballot in November 2004. PhRMA has challenged the validity of petition signatures, thereby delaying the effort. But advocates are hopeful the Maine ruling will make it easier to get the initiative on the ballot.
State policy analysts differed on what Monday's ruling will mean for other states. Some think it will provide an impetus to continue experimenting.
"States now have the freedom to try some untested things to control health care costs, and given the state budget crisis, states need that flexibility," said Trudi Matthews, chief health policy analyst at the Council of State Governments.
Others said legal wrangling over the Maine program has not kept other states from trying to reduce drug costs.
"States have not been shy in creating and enacting prescription drug related programs ... but that was true before the Court ruling and it will continue to be true," said Richard Cauchi, a health care expert at NCSL.