AUGUST 6, 2001 VOLUME 9, NUMBER 6
Medicare is a federal program providing medical care to millions of seniors and disabled individuals. Although beneficiaries may pay some portion of their own care costs those contributions are in most cases modest. By any reckoning, however, there are two important medical needs not covered by the Medicare program—long term nursing care costs and prescription drugs. While about half of the national cost of long term care ends up being paid by other government programs (primarily Medicaid, a federal/state program for the poor), prescription drugs are paid for by individual Medicare recipients in most cases.
With medication taking a more central role in medical care, and in the face of rapidly rising drug costs, advocates and governments seek to make drugs affordable to individuals without forcing them to qualify for Medicaid coverage. One innovative approach was adopted by the State of Maine last year, and the State was promptly sued by representatives of the drug industry.
Maine’s approach was to establish a state-sponsored group purchasing plan. The "Maine Rx Program" would create a state fund from rebates collected from participating drug companies, allowing Maine residents to effectively wield the same group purchasing power enjoyed by Medicaid programs, HMOs and other large, organized groups.
Any drug company which declined to participate in the Maine Rx Program would be publicly identified, and could presumably expect to see its sales shrink. More powerfully, uncooperative drug companies would have their products removed from the list of drugs which are automatically approved for use in Maine’s Medicaid program.
The Pharmaceutical Research and Manufacturers of America, an industry group, sued to enjoin Maine from implementing its new program. Federal Judge Brock Hornby granted the injunction, and the State appealed to the First Circuit Court of Appeals in Boston.
The drug industry argued that the federal Medicaid program preempts Maine or any other state from adopting its own drug plan that includes Medicaid penalties for noncompliance. Not so, ruled the appellate judges: "We perceive no conflict between the Maine Act and Medicaid’s structure and purpose."
The drug industry also argued that the Maine Rx Program is an impermissible attempt by Maine to control companies located outside its own borders. Once again the Court of Appeals disagreed, saying that the program does not "regulate" the drug companies’ interstate commerce, and that the effect on the drug industry is not excessive in relation to the benefits sought to be obtained. Pharmaceutical Research and Manufacturers of America v. Concannon, May 16, 2001
The Court of Appeals permitted Maine’s experimental program for controlling drug prices to go forward. It remains to be seen whether the Maine Rx Program will actually be effective at controlling prices.