Maine's prescription drug plan: a look into the controversy.

Author:Phelps, Whitney Magee


In the face of skyrocketing prescription drug costs, ensuring the availability of affordable medications, or at least finding a way to contain these costs, has become a national concern. (1) In response to this increasingly bitter national debate, the federal government has proposed remedial alternatives, but has failed to pass any meaningful legislation to alleviate the problem. (2) Although Vermont has proposed legislation, to date Maine is the only state to pass a law that encourages manufacturers to lower prescription drug prices for people who do not have a prescription drug insurance plan. (3)

Pharmaceutical Research and Manufacturers of America, (PhRMA), (4) is attacking the Maine legislation for allegedly violating the Commerce Clause of the United States Constitution. (5) In fact, the United States District Court for the District of Maine issued an order entitling PhRMA to a preliminary injunction preventing the enforcement of certain provisions of the Maine statute. (6) Maine appealed this decision. (7) The Court of Appeals for the First Circuit reversed, (8) allowing Maine to proceed with the program as enacted by the state legislature. The appeals process will likely continue to the U.S. Supreme Court, for, as stated by the First Circuit, "[t]his is a close case." (9)

This article will explore Maine's attempt to provide its citizens with affordable medications and prescription drugs. Part II focuses on the impetus for this legislation, and on the incredible burden that the elderly bear in attempting to pay for their prescription drugs. (10) Part III examines the Maine statute. (11) Part IV looks at the problems associated with the act. (12) Finally, Part V analyzes the constitutionality of the act under the Commerce Clause. (13)


    1. High Costs and Expenditures

      Rising prescription drug costs are alarming because prescription drugs have become "a larger factor in total national health expenditures." (14) While actual prescription prices only increased 3.2% in 1999, pharmaceutical expenditures rose 15.7%. (15) This trend is expected to worsen, as it has been reported that total drug expenditures between 1999 and 2004 will double. (16)

      The increase in pharmaceutical expenditures can be attributed to three significant factors. First, drugs are being used today more than ever before. (17) Drug utilization has increased because there are "newer, innovative and sometimes more costly medicines" on the market. (18) In addition, science has discovered the effectiveness of taking multiple drugs to treat particular conditions. (19) Further, more drugs have been created to treat conditions that were not treatable in the past, which has had the effect of increasing drug expenditures but, coincidently, of lowering the costs of surgery and hospitalization. (20) Second, the use of direct-to-consumer advertising has increased over the past ten years, resulting in higher prescription drug expenses. (21)Third, increased drug prices contribute to the prescription drug crisis. While PhRMA reports that price inflation was only 4.2% in 1999, (22) other studies show that "the 50 prescription drugs most frequently used by the elderly rose more than four times the rate of inflation ... [in] 1998." (23) Other reports have also indicated that prescription drug price inflation is higher than the general rate of inflation. (24) In addition, the newer drugs being used increase expenses because newer drugs, on average, cost twice as much as previously existing medications. (25)

    2. Those Affected

      Those uninsured needing medication and those senior citizens without a prescription drug plan, most significantly senior citizens on Medicare, are charged twice as much for drugs as are those covered under a prescription plan. (26) This situation exists because health maintenance organizations and large insurance companies are able to buy drugs at discounted prices, resulting in higher costs for the uninsured in order to compensate for the discounts afforded to the insured. (27)

      Senior citizens are the most affected group for several reasons. (28) For one, Medicare does not cover outpatient prescription drug costs. (29) In addition, "[o]lder Americans take more prescription drugs than any other population group in the United States." (30) For example, in 1987, the average older American took 15.3 prescriptions, as opposed to only 4.0 by those under the age of sixty-five. (31) The elderly also have more medical problems, requiring more frequent use of prescription drugs. (32) Although the elderly make up twelve percent of the population, they "use one-third of all prescription drugs." (33) It is estimated that the elderly spend "three times as much of their income (21%) on health care as do those under the age of 65 (8%)." (34)

      As a result of the high costs for prescription drugs and the government's failure to provide a solution, the elderly are resorting to various shortcuts. Some are not filling their prescriptions at all. (35) Other seniors, under the theory that some is better than none, have reduced their dosage by taking their pills every other day, in order to prolong the life of the prescription. (36) Better yet, groups of elderly people take bus trips to Canada, where the prices are, at times, one--third lower than in the United States. (37)

      A major complaint regarding the costs for prescription drugs is that the prices charged for the same medications of comparable quantity in America are significantly higher than in Canada and many other countries. (38) For example, Norvasc, a high blood pressure medication, is $87.71 in Canada, $88.08 in Mexico, and $111.71 in Maine--a price differential of 27%. (39) The prices of Zocor, a high cholesterol medication has an even greater price differential. (40) In Canada, the retail price is $43.97; in Mexico, $47.29; and in Maine, $103.92--a 120% to 136% difference in price. (41) The difference in prices is attributed to negotiations between the pharmaceutical companies and the governments of these other countries, much like the health maintenance organizations that negotiate with the drug manufacturers in America. (42)


    In response to the federal government's failure to provide any solutions to this problem, the State of Maine passed legislation creating the "Maine Rx Program" (43) to help protect an estimated 325,000 residents who do not have a prescription drug plan. (44) Maine is the first state to address the problem by having the state act as a "pharmacy benefit manager." (45) In other words, the state will contract with the pharmaceutical manufacturers on a negotiated rebate price, which will result in a discounted price for the state's uninsured citizens. (46) Ultimately, the goal of the program is to improve the health of Maine citizens, and consequently, to assist in the promotion and preservation of healthy communities and general public welfare. (47)

    Some speculate that the federal government has failed to act because the pharmaceutical industry is one of the major campaign contributors to the representatives of both houses of the federal government. (48) Resistance to federal programs is also found to exist due to the high costs associated with some of the proposals for drug coverage. (49) One such reason for resistance is that when these proposals are being considered, some may see a "universal drug benefit for Medicare beneficiaries as an unjustifiable transfer of income to persons already able to pay for private insurance." (50)

    1. Purpose

    The ultimate purpose of the statute is to protect the health of the citizens of the State of Maine by "reduc[ing] prescription drug prices for residents of the State." (51) The original bill tried to do this by creating a pricing board to suggest lower prices. (52) If the prices were not negotiated low enough by October 2001, then the legislation would have fixed drug prices in the state to the equivalent of prices in Canada. (53) The bill, however, was amended at the request of Maine's governor. (54) The final version removed the state's power to fix prices to Canadian standards and instead set a goal to have drug prices achieve the levels used in the federal Medicaid program within in the state. (55) The State Legislature enacted the Maine Rx Program "as a positive measure to make prescription drugs more affordable for qualified Maine residents." (56)

    The Maine legislature decided this statute was needed due to their investigation and discovery into the following areas. First, the citizens of Maine have been denied access to medically necessary drugs due to the excessively high prices being charged by pharmaceutical companies. (57) The inability of Maine's citizens to pay for these drugs often results in costly--and otherwise avoidable--hospitalization or institutionalization. (58) Second, Maine residents pay much higher prices for drugs than do citizens of other countries. (59) Third, prescription drug costs, the fastest growing area of health care expense, are driving up health care expenditures and insurance costs across the board. (60) Fourth,

    [e]xcessive pricing for prescription drugs threatens Maine's ability to assist with the health care costs of Maine citizens, undermines the financial capacity of Maine communities to meet the educational needs of Maine children, hurts the ability of the Maine business community to provide health insurance coverage to Maine's work force and has a negative effect on Maine's economy. (61) B. Nuts and Bolts of the Statute

    There are three major aspects of the Maine statute designed to address the findings of the Legislature and the underlying purpose of the program. First, the statute requires all drug manufacturers, who participate in any state supported Rx drug program, to enter into a rebate agreement with the State of Maine. (62) Under the act, Maine is authorized to serve as a...

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