Academic journal article Applied Health Economics and Health Policy

Remember the MaineRx

Academic journal article Applied Health Economics and Health Policy

Remember the MaineRx

Article excerpt

Published online: 14 January 2014

© Springer International Publishing Switzerland 2014

Abstract In 2000, Maine became the first state in the US to enact a law to establish maximum retail prices for prescription drugs for all qualified state residents-MaineRx. The purpose was to lower prescription drug prices for all eligible residents of the state. The state was to have the ability to negotiate manufacturer rebates and pharmacy discounts. Major drug manufacturers, represented by the Pharmaceutical Research and Manufacturers of America, challenged MaineRx in the courts, going to the Supreme Court where it was upheld in 2003. Fifteen other states enacted, proposed, or filed price-control bills in their state legislatures. The result would have been downward pressure on prices outside of the public programs, and the first instance of state-sponsored monopsony power in the US. MaineRx is viewed as one of the proximate causes of the pharmaceutical industry's successful lobbying effort to implement Medicare Part D in 2004. Medicare Part D is administered through private Pharmacy Benefit Managers (PBMs); it made administration via state government PBMs illegal. The lower prices that could have resulted from MaineRx-type laws did not occur and the magnitude of these reductions is commented upon.

1 Introduction

In 2000, Maine became the first state in the US to enact a law to establish maximum retail prices for prescription drugs for all qualified state residents, given the moniker MaineRx. The purpose of this bill was to lower prescription drug prices for all eligible residents of the state, without replacing or discouraging employer-based plans. Under the Maine Prescription Drug Price Reduction Act, the state would have acted as a Pharmacy Benefit Manager (PBM), with the ability to negotiate manufacturer rebates and pharmacy discounts for all Maine residents determined eligible for the program [1].

Major drug manufacturers, represented by the Pharmaceutical Research and Manufacturers of America (PhRMA), challenged MaineRx in the District Court and received an injunction against its implementation. The case went to the Supreme Court on January 2003, and it was ultimately decided in May 2003 to overturn the injunction on the MaineRx program [2]. The law, and the subsequent litigation after its enactment, was significant in that 15 other states enacted, proposed, or filed price-control bills in their state legislatures [1]. The introduction of state PBMs would probably have led to lower drug prices to many of the country's residents, downward pressure on prices outside of the public programs, and the first instance of statesponsored monopsony power in the US.

The MaineRx law, and the resulting litigation, is viewed as one of the proximate causes for the pharmaceutical industry's successful lobbying effort to implement Medicare Part D in 2004. Medicare Part D is administered through private PBMs; it made administration of Medicare Part D via state government PBM's illegal. Even though the Part D benefit would not have been available until 2006, the law limited the effect of MaineRx-type programs after 2004.

2 What was MaineRx?

MaineRx was passed into law in July 2000 after both houses of the Maine legislature approved the legislation. The intent of MaineRx was to reduce the prices of prescription drugs to all eligible Maine residents by extending the benefits of Medicaid to many outside of the program [1, 3]. The Medicaid program in Maine had been receiving discounts and quarterly rebates from drug companies since the start of its Medicaid rebate program in 1991 [3].

MaineRx authorized the state to create its own PBM and directly negotiate with drug manufacturers about rebates and pharmacy discounts for all the eligible residents of Maine [2]. MaineRx would have demanded rebates of drug manufacturers that exceed the level required by federal law [1]. The amount of rebate would have been negotiated by the Commissioner of the Department of Human Services, initially at a level equal to or greater than that of the Medicaid Rebate Program, and by 1 October 2001 to the level of any rebate provided to the federal government. …

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