The "Maine Rx" discount law seeks Federal Supply Schedule-level rebates for prescriptions filled in Maine by October 2001.

A bill signed into law by Maine Gov. Angus King (I) May 11 directs the state Department of Human Services to enter into rebate agreements with manufacturers to provide discounted drugs for residents of Maine who do not have prescription drug insurance.

The law directs the state agency to negotiate rebates at the level of the federal Medicaid program (15.1% or the "best price" charged to any private customer) by Jan. 1.

By Oct. 1, 2001, the department would be directed to seek rebates at the level of the best price paid by the federal government. Federal Supply Schedule prices (with a minimum 24% discount) are generally viewed as the lowest prices paid by the federal government, and are the focus of Rep. Allen's (D-Maine.) federal bill to mandate discounts for Medicare beneficiaries.

Manufacturers who do not enter into rebate agreements will be publicly identified and will have their products placed on prior authorization in the state Medicaid program "as permitted by law," the bill states.

In addition, the State Department of Human Services would be authorized to set maximum retail prices starting in January 2003 if the Maine Rx rebates are not sufficiently low. Moreover, the law would define pharmaceutical "profiteering" as a crime that could result in civil penalties against manufacturers.

The law was touted as a "compromise" measure negotiated by Gov. King and State Sen. Pingree (D) after the Maine legislature passed a price control bill in April which would have set maximum manufacturer prices in the state based in part on an analysis of Canadian prices (¹ Also see "Maine Rx Pricing Board Would Use FSS, Canadian Prices As Benchmark" - Pink Sheet, 17 April, 2000.). King threatened to veto the bill, citing concerns that it would not survive a court challenge.

The Governor's office described the new law as creating a pharmacy benefit management-style discount program administered by the state.

The Department of Human Services would be authorized to contract with private companies "to administer any or all components of the program, including but not limited to outreach, eligibility, claims, administration and rebate recovery and redistribution."

The new bill would direct the state to negotiate discounts with manufacturers for "qualified residents" who enroll in the "Maine Rx" program. The program would be open to any Maine resident who does not have public or private pharmaceutical insurance, the governor's office explained.

Retail pharmacists would be directed to charge Maine Rx card holders the discounted price, plus a professional fee set by the Department of Human Services (initially $3).

Pharmacists would be reimbursed by the state from a dedicated rebate fund, supplemented by appropriations as needed.

The bill retains the concept of maximum retail prices tied to a Prescription Drug Advisory Commission. The state is authorized to set maximum prices only if Maine Rx is unable to obtain discounts that are comparable to the lowest prescription drug prices in the state; the earlier bill would have compared prices to those available in Canada.

The elimination of Canadian referencing pricing does not appear to change the spirit of the law. Gov. King declared that the legislation will "use the power of the market to bring prices down to a level that is comparable to the lowest prescription drug prices paid in the state under Medicaid or by the Veterans Administration, and comparable to prices paid in Canada and other countries."

The law creates a 12-member Prescription Drug Advisory Commission composed of three Senate appointees, three House appointees, two prescribers appointed by the Governor, two pharmacists appointed by the Governor and two state officials as ex officio members.

The board will provide annual reports on "access to prescription drugs for residents of the state, including but not limited to pricing and affordability information."

The Department of Human Services would be authorized to establish maximum retail prices effective Jan. 5, 2003 if the average price paid by the Maine Rx program is not "reasonably comparable to" the lowest average cost paid in the state, "taking into consideration the federal supply schedule and prices paid by pharmaceutical benefits managers and by large purchasers."

The law directs the Department of Human Services to "adopt rules establishing the procedures for adoption and periodic review of maximum retail prices, the procedures for establishing maximum retail prices for new prescription drugs and for reviewing maximum retail prices for selected drugs, and the procedure for phasing out or terminating maximum retail prices."

The bill would also allow civil prosecution of manufacturers for "profiteering." Cases could be brought against manufacturers who charge "an unconscionable price," set pricing terms that "lead to any unjust or unreasonable profit," engage in price discrimination, or restrict sale of pharmaceuticals "in this state in retaliation for the provisions of this chapter."

The emphasis on "maximum retail prices" has drawn criticism from retail pharmacy groups. The National Association of Chain Drug Stores declared that the original bill "correctly targeted the source of the problem" by concentrating on manufacturer's prices.

The emphasis on retail prices represents "a perplexing and dramatic reversal," NACDS declared.

The Maine law reflects the continuing enthusiasm for pharmaceutical price controls, especially in the states bordering on Canada.

Another sign of that enthusiasm was the May 5 introduction of a new pharmaceutical re-importation bill by Sen. Jeffords (R-Vt.).

The Medicine Equity & Drug Safety Act would allow pharmacies and wholesalers to import prescription drugs, provided they can be demonstrated to have been manufactured at an FDA-registered facility in the U.S. or abroad and that they meet conditions imposed by FDA to ensure they are safe and effective.

Jeffords' original importation bill focused on personal use imports. The new bill is modeled on House legislation sponsored by Vermont Rep. Sanders (I) and a Senate bill sponsored by Sen. Wellstone (D-Minn.).

Wellstone is a cosponsor of the Jeffords bill, as are both Maine Senators, Snowe (R) and Collins (R). Wellstone and Collins are both members of the Health Committee chaired by Jeffords.

Jeffords has scheduled a hearing on the bill for May 23. His legislation may have the best opportunity to move through committee this session among the various pending overt pricing bills in Congress.

In a May 9 statement opposing the Jeffords bill, the Pharmaceutical Research & Manufacturers of America maintained that it would repeal "core provisions of the Prescription Drug Marketing Act of 1988, which was passed specifically to protect American patients from adulterated and counterfeit drugs and drugs that may have lost their potency during foreign handling and shipping."

PhRMA is also fighting another Republican legislative effort, Sen. Gorton's (R-Wash.) proposal to prohibit international pricing differences (² Also see "Rx Trade Negotiations Tied To International Pricing Bill By Sen. Gorton" - Pink Sheet, 1 May, 2000.).

The emphasis on pricing bills has shifted the tenor of the overall Medicare reform debate, Health Insurance Association of America Senior VP-Policy Dean Rosen told the International Foundation of Employee Benefit Plans' "Washington Legislative Update" May 8.

"The issue and concerns that people have about the cost of drugs is driving the coverage issue," Rosen maintained. HIAA opposes PhRMA's preferred Medicare approach, which would rely on private insurance to supply a drug benefit.

"In a very subtle way the issue has shifted to something I think most Americans understand, that we have seen really astronomical increases in the prices of drugs," Rosen maintained.

The change underscores the importance of comprehensive reform of Medicare, rather than adding "a very expensive benefit" to the existing structure, he continued.

"The impetus for broader reform needs to happen at some point," Rosen declared. "It will be significantly curtailed if you have your dessert before you have your main course. And the drug benefit for members of Congress is the dessert."

Maine Rx Pricing Law Seeks FSS-Level Prices By October 2001

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