U.S. Supreme Court Agrees To Hear Maine Rx, Ky. Provider Cases

The U.S. Supreme Court last Friday agreed to hear a case on whether Maine may enact a program that would allow the state to serve as a pharmacy benefit manager and obtain reduced drug prices for the 325,000 state residents who lack prescription drug coverage, the New York Times reports. Under the Maine Rx program, which was enacted by the state Legislature in 2000 but has not taken effect, Maine would negotiate with drug makers for discounts similar to those given to the Medicaid program. The state would use the savings to reimburse pharmacies for giving discounts to customers who lack drug coverage (Greenhouse, New York Times, 6/29). State officials estimate that eligible residents would save 10% to 30% on prescription drug costs under the program. In an effort to encourage drug company participation, the program includes a provision under which doctors would have to receive prior approval from a patient's health plan administrator to prescribe medications from companies that are not part of the program (Walsh, Washington Post, 6/29).

In 2000, the Pharmaceutical Research and Manufacturers of America filed a lawsuit against Maine Rx, arguing that it was not authorized by federal Medicaid law and that it was a "burden on interstate commerce." Initially, a federal district court in Maine ruled in favor of PhRMA, but in May 2001 the 1st U.S. Circuit Court of Appeals in Boston overturned the decision and said the program could go forward (New York Times, 6/29). On May 31, the Bush administration asked the Supreme Court to reject PhRMA's appeal (California Healthline, 6/3). The Wall Street Journal reports that the case, Pharmaceutical Research and Manufacturers of America v. Concannon, is "being closely watched for a reading of how far states can go in asserting jurisdiction over drug pricing" (Greenberger/Caffrey, Wall Street Journal, 7/1).

The Supreme Court on Friday also agreed to hear a case that involves Kentucky's attempt to "force health plans to open closed networks of doctors" to any provider who meets the terms of the plan, the AP/Philadelphia Inquirer reports (Holland, AP/Philadelphia Inquirer, 6/29). Kentucky and about 24 other states have laws in place requiring HMOs to accept any provider willing to agree to the terms of contract (Wall Street Journal, 7/1). Insurers have resisted Kentucky's and other similar statutes, contending that a "limited pool of doctors is essential to holding down the costs of managed care." If too many doctors enter a plan, they cannot all be guaranteed a "big enough patient load" and will lose their incentive to limit costs, the HMOs said (New York Times, 6/29). The Kentucky Association of Health Plans also challenged the law, arguing that it "interferes with ... cost-control efforts" and violates the 1974 federal Employee Retirement Income Security Act, which prohibits states from regulating employee benefit plans. However, the 6th U.S. Circuit Court of Appeals in Cincinnati approved the Kentucky law in its review of the case, Kentucky Association of Health Plans v. Miller, finding that the requirement focused on insurance rather than benefit plans (Kemper, Los Angeles Times, 6/29). The New York Times reports that both the Maine and Kentucky cases "reflect efforts by state governments to move ahead with health care policy in the absence of action by Congress" (New York Times, 6/29).