Amicus Curiae Brief — Pharmaceutical Research and Manufacturers of America v. Walsh, Acting Commissioner, Maine Department of Human Services

NOY 6 Xoz

No. 01-188

IN THE CLERK

SUPREME COURT OF THE UNITED STATES. ———

PHARMACEUTICAL RESEARCH & MANUFACTURERS

OF AMERICA,

Petitioner,

V.

KEVIN CONCANNON, COMMISSIONER,

MAINE DEPARTMENT OF HUMAN SERVICES, AND

G. STEVEN ROWE, ATTORNEY GENERAL

OF MAINE,

Respondents.

On Writ of Certiorari To The

United States Court of Appeals

For the First Circuit

BRIEF AMICI CURIAE OF AARP, COMMUNITY

CATALYST, FAMILIES USA AND

THE MEDICARE RIGHTS CENTER

IN SUPPORT OF RESPONDENTS

SARAH LENZ LOCK*

BRUCE-VIGNERY

DOROTHY SIEMON

AARP FOUNDATION LITIGATION

MICHAEL SCHUSTER

AARP

601 E Street, N.W.

Washington, DC 20049

(202) 434-2060

Counsel for Amici Curiae AARP

November 6, 2002 *Counsel of Record

(Additional Counsel Listed on Inside Cover)

A

'BEST AVAILABLE COPY

ADDITIONAL COUNSEL

AHAVIAH GLASER

COMMUNITY CATALYST

30 WINTER STREET, 10™ FLOOR

BOSTON, MA 02108

(617) 338-6035

RON POLLACK

FAMILIES USA

1334 G STREET, NW

WASHINGTON, DC 20005

(2020) 628-3030

ROBERT M HAYES

MEDICARE RIGHTS CENTER

1460 BROADWAY, 17™ FLOOR

NEw YorK, NY 10036

(212) 869-3850

TABLE OF CONTENTS

Page

, iii

STATEMENT OF INTEREST .........cccccccccecs |

SUMMARY OF ARGUMENT ..................... 4

DT cdbbon cotudebebeneseecesédeeeessoess 5

I DT hs teen Gsdadeoduacktacsececeoe< 5

Il. Neither the Letter nor the Intent of the

Social Security Act Prohibit a State from

Using Medicaid Prior Authorization to

Achieve Prescription Drug Savings ............. 8

Iii. Maine Rx is Consistent with the Best Interest

SEES, dsc cedanccesceecoceces 13

A. The Burden and Costs of Prescription

Drugs Show Why So Many Maine Residents

are in Need of Medical Assistance to Pay

for Them, and Why it is in Medicaid’s

Es << ides so ceesedocecs 14

IV. The Evidence that Individual Medicaid

Beneficiaries will Suffer Actual Harm from

Maine Rx’s Reasonable Limitations on So-called

First-Choice Rx Drugs is Insufficient to Support

Te teh bbb cbeccesécnecedoossescees 18

A. Prior Authorization Does Not /nevitably Harm

DE Whe Ge6h0 066666 680d eR dense ceece< 19

1. Studies have shown that prior authorization

can be implemented without resulting in

adverse clinical outcomes ............ 19

2. Maine’s existing prior authorization

programs has not caused many problems

with access to prescription medications . .

B. Physicians Will Not Abandon the Medical

Welfare of their Patients in the Face of Prior

Authorization Requirements ...............

1. Physicians are knowledgeable about

Ge b.0 ds bn ucenpteseaeetedseese<

2. Drug promotion activities influence

prescribing patterns .................

GSE on on sedéererancesanvenabenesusac:

21

25

TABLE OF AUTHORITIES

Cases

Gade v. Nat'l Solid Wastes Mgmt. Ass'n,

i sc<ccadench bhGe ee assecredccoese 8

Harris v. James,

EE is os Wnceeceekeesees 14

N.Y. Dep't of Soc. Servs. v. Dublino,

dete dancddubenectest sees cee 8

PhRMA v. Concannon,

249 F.3d 66 (Ist Cir. 2001) ........... 7,11, 13, 14, 19

PhRMA v. Meadows,

No. 02-10151, 2002 U.S. App. LEXIS 18487,

304 F.3d 1197 (11th Cir. Sept. 6, 2002) ............ 14

PhRMA v. Michigan Dep't of Cmty. Health,

No. 238862 (Mich. Ct. App. argued Sept. 5, 2002)... . . 2

PhRMA v. Thompson, 191 F. Supp.2d 48 (D.D.C. 2002),

peal docketed, No. 02-5110

DC. iD ice ncecdddegesesenesce 2,6

Rice v. Norman Williams Co.,

ee ei oS oe dee caeee sees 19

Rice v. Sante Fe Elevator Corp.,

ee tddcidcecdeccestdesecceceons 8

United States v. Salerno,

ET ne a a 19

Statutes and Reguiations

a th eee ie sc easeecbedéronce 12

ERE a ae ee 10

42 U.S.C. § 1396a(a(3) .. 22.2... eee ee eee.

42 U.S.C. §1396a(aX8) ........... 002.0 ee.

42 US.C.A. $1396a(a(10(3) ...........00.

42 U.S.C. § 1396a(a(10(C) .... 2.2.2.2...

42 U.S.C. §§1396a(a)(10)(EMi) .............

42 U.S.C. § 1396a(a(19) .......... 00.000.

42 U.S.C. § 1396a (a(30(A) ..............

ee

I Ses ice inne cccianns

42 U.S.C. § 1396r-8 (a(1) .... 2... ee eee

42 U.S.C. § 1396r-8(d) .. 2.0.00... eee ee ee.

42 U.S.C. § 1396r-8(d)(1)(A) and (d)(5) .....

Me. Rev. Stat. Ann. tit. 22,§ 258 ...........

Me. Rev. Stat. Ann. tit. 22, § 2681 ..........

GT WGI «ko. dase cedsusii..

Code Me. R. $10-144-332 ........ 0. cee ee.

LEGISLATIVE HISTORY

H.R. Rep. 101-881 (1990), reprinted in 1990

UR TIET 4d csadeck scoceceia:

Vv

MISCELLANEOUS

AARP, Prescription Drug Use Among Persons

Age 45+ 24-25 (June 2002) .... 2... eee ee ee ee ees 7

Kathryn J. Aikin, PhD, FDA, Direct-to-Consumer

Advertising of Prescription Drugs: Preliminary

Patient Survey Results (Apr. 18, 2002) ............. 25

Brian K. Bruen, Kaiser Comm'n on Medicaid and the

Uninsured, States Strive to Limit Medicaid

Expenditures for Prescribed Drugs (Feb. 2002) ... 15, 18

Kevin W. Concannon, Perspectives on Promoting the

Appropriate Use of Pharmaceuticals, available at

http://www.oregonrx.org/Ogrxpdf/ Governor's

tations%20PDF/

N_Revision_20021001.pdf. .. 20, 21

Letter from Kevin W. Concannon to Ronald Preston,

Associate Regional Administrator, Division of Medicaid and

State Operations of Oct. 31, 2002 ..........---20e0e 13

a Crystal et al., AARP Public Policy Institute,

States’ Approaches to Pharmaceutical Assistance:

A Guide for the Perplexed (2002) ..........+++++: 5,6

Carmen DeNavas-Walt & Robert W. Cleveland, U.S. Census

Bureau, P60-218, Money Income in the United States: 2001

GEOR. BEEP oc cccccccccccdeccccccccccsctcccceses 17

Joseph Eichenholz, Trends in Managed Care Pharmacy:

Responding to Changing Environments, 8 J. Managed

Care Pharmacy 104 Ahee. rer 21

Families USA, Bitter Pill: The Rising Prices of

Prescription Drugs for Older Americans

DEE ci cee gechededssbeopececsertoecccs 15

Steven D. Findlay, Nat'l Inst. for Health Care Mgmt.

Research & Educ. Found., DTC Advertising: Is it

vi

Helping or Hurting? (Sept. 10, 2002) ........... 24, 25

Food and Drug Administration, FDA Ensures

Equivalence of Generic Drugs, at http://www.fda.gov/

cder/about/whatwedo/testtube- 17.

Richard Frank, PhD, et al., Kaiser Family Foundation,

Trends in Direct-to-Consumer Advertising of

Prescription Drugs (Feb. 2002) .............0.2005. 24

Amy Goldstein, States’ Budget Woes Fuel Medicaid

Cuts: Poor Loses Coverage and Services, Wash. Post,

GUE, Sh, MENTE 66 bn Scab evnsccecccedecisoee 16

David Gross, AARP Public Policy Institute,

Medicare Beneficiaries and Prescription Drugs:

Costs and Coverage (2002) .......... 0. c ec eeeeee 10

Inst. Mgmt. & Admin., Jn Perspective, Managing Benefits

Pee FG GED 6-0 bb's oe sScddoud bin ocecos tees 21

Kaiser Comm'n on Medicaid and the Uninsured,

Medicaid and Prescription Drugs: An Overview

SL PE cewsn cosh ans 6oeduense Etec dickies 15

Kaiser Comm'n on Medicaid and the Uninsured,

Report on Medicaid Enrollment in 50 States:

December 2001 Data Update (Oct. 2002) ........... 12

Kaiser Comm'n on Medicaid and the Uninsured,

State Budgets Under Stress: How are States

Planning to Reduce the Growth in Medicaid Costs?

ED v6 bloc dbwde 66sWinOeee cub00esseesbe 16

Kaiser Foundation et al., Seniors and Prescription

Drugs, Findings From a Survey of Seniors in

PT Pre 7

Martin S. Lipsky, MD, & Christine A. Taylor,

The Opinions and Experiences of Family Physicians

Regarding Direct-to-Consumer Advertising,

vii

45 J. Fam. Pract. 495 (1997) ......... cece eeeeee 24

Maine Dep't of Human Servs., MaineCare Benefits

Manual, 10-144, ch. 101 § 80.07-3 .............4..

Maine Dep't of Human Servs., Prescription

Drug Assistance: A Guide to Programs and Benefits

RS Peer rer rrry Try TTT ETT T Te

Robert J. Mills, U.S. Census ~~

Current Population Reports, "

Health Insurance Coverage: 2001 (Sept. 2002) ......

John E. Murphy, PharmD, Generic Substitution

and Optimal Patient Care, 159 Archives

Internal Med. 429 (1999) ....... 0... c ce eee cece eee 22

Nat'l Ass'n of State Budget Officers, NASBO Analysis:

Medicaid to Stress State Budgets Severely

in Fiscal 2003 (Mar.15, 2002) ...........-00eee ee

Nat'l Inst. for Health Care

Prescription Drug itures in 2001: Another Year

of a Costs ( Desc eebetevetececcess

Tara Parker-Pope, The Ins and Outs of Getting Drugs (The

Legal Kind) From Across the Border, Wall St. J.,

LE ccc cc sbbeseonoeoecocevesoces

Bernadette D. Proctor & Joseph Dallaker, U.S. Census

Bureau, P60-219, Poverty in the United States:

2001 (Sept. 2002)... 1... ccc ccc cece eee eee e eens

Meredith B. Rosenthal, PhD, et. al., Promotion of

Prescription Drugs to Consumers 346 N. Eng.

J. Med. 498 (2000

Walter E. Smalley, M.D., et al., Effect of

Prior-Authorization Reguvemans on on the Use of

Nonsteriodal Anti-i g ty by Medicaid

Patients, 332 New Eng. J. of Med. 1612 (1995) ......

t. Research & Educ. Found.,

Dacbeecnaecesescceveccoccccccce a4

Vernon Smith, PhD, et al., Kaiser Comm'n on Medicaid

and the Uninsured, Medicaid a Growth:

Results From a 2002 Survey (Sept. Di wettcceanss 16

S.B. Soumerai et al., Effects of Limiting Medicaid

Drug-Reimbursement Benefits on the Use of

Psychotropic Agents and Acute Mental Health

Services By Patients With Schizophrenia,

331 New Eng. J. Med. 650 (1994) .............. 17, 18

S.B. Soumerai et al., Effects of Medicaid

Drug-Payment Limits on Admission to

Hospitals and Nursing Homes,

325 New Eng. J. Med. 1072 (1991) ................ 17

U.S. Census Bureau, State and County Quick Facts: Maine,

at http://quickfacts.census.gov/qfd/states/23000.html (last

Ce BE 6 nn cdbobbedds dean seubsnuviess 5

U.S. Soc. Sec. Admin., Fact Sheet: Social Security, at

http://www.ssa.gov/pressoffice/colafacts2003htm .... 11

A. Clinton White, Jr., et al., Effects of Requiring

Prior Authorization for Selected Antimicrobials:

Expenditures, Susceptibilities, and Ciinical

Outcomes, 25 Clinical Infectious Diseases

SPURIOUS cccccccccwewtedice dhs cceuesidetecss 20

Sidney M. Wolfe, MD, Direct-To-Consumer Advertising

- Education or Emotion Promotion? 346 N. Eng.

BF, CUE FEW GUE 6 vc bbevecivcuctisedsseceseess 24

No. 01-188

IN THE

Supreme Court of the United States

PHARMACEUTICAL RESEARCH & MANUFACTURERS

OF AMERICA,

Petitioner,

v.

KEVIN CONCANNON, COMMISSIONER,

MAINE DEPARTMENT OF HUMAN SERVICES, AND

G. STEVEN ROWE, ATTORNEY GENERAL

OF MAINE,

Respondents.

ON WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FIRST CIRCUIT

BRIEF AMICI CURIAE OF AARP, COMMUNITY

CATALYST, FAMILIES USA AND THE

MEDICARE RIGHTS CENTER

IN SUPPORT OF RESPONDENTS

STATEMENTS OF INTEREST’

AARP is a national, nonprofit, nonpartisan organization for

people 50 and over with more than 35 million members. More

' No counsel for any party authored any portion of this brief. No persons

other than amici curiae, their members, or their counsel have made a

monetary contribution to the preparation and submission of this brief. The

written consents of the parties have been filed with the Clerk of the Court

pursuant to Supreme Court Rule 37.3.

-

than 192,000 members live in Maine. AARP supports state and

national policy initiatives to broaden access to prescription

drugs and to lower costs for medications. Because Medicare

generally does not cover prescription drugs, AARP has been a

strong — of state programs that broaden consumer

access to affordable prescription drugs.

AARP in Maine advocated for passage of Maine’s Act to

Establish Fairer Pricing for Prescription Drugs (Maine Rx).

Me. Rev. Stat. Ann. tit. 22, § 2681 (2001); 2000 Me. Legis.

Serv. 786 (legislative history). AARP also supported the

Pharmacy Drug Discount Program (PDDP) (known as Healthy

Maine Prescriptions or HMP), a complementary program to

Maine Rx which provides the Medicaid discount price to

persons within 300% of the federal poverty threshold. AARP

assisted in enrolling the more than 112,000 beneficiaries in

Healthy Maine Prescriptions drug program. Thousands of

Maine AARP members obtain medication through Healthy

Maine Prescriptions, and many thousands more would

participate in Maine Rx.

AARP has participated as amicus curiae in numerous

recent cases involving state Medicaid prescription drug

coverage, including filing briefs in support of Maine’s Healthy

Maine Prescriptions in PhRMA v. Thompson, 191 F. Supp.2d

48 (D.D.C. 2002), appeal docketed, No. 02-5110 (D.C. Cir.

Mar. 29, 2002), and in support of Michigan in PhRMA v.

Michigan Dep’t of Cmty. Health, No. 238862 (Mich. Ct. App.

argued Sept. 5, 2002). The latter case involves PhRMA’s

challenge to Michigan’s attempt to contain drug costs in its

Medicaid and other low-income prescription drug programs.

AARP also is supporting numerous other states’ pharmacy

assistance programs providing coverage and/or reducing drug

costs such as Oregon and Hawaii. Nationally, AARP is working

for passage of a Medicare prescription drug benefit and

AARP’s “Check Up on Your Prescriptions’ campaign

encourages consumers to use medications wiseiy and safely,

and to consider if lower cost generic drugs are appropriate for

them.

Community Catalyst is a Boston-based national advocacy

3

organization that works in partnership with consumer and

community groups around the country to promote health care

justice. Community Catalyst seeks to strengthen the voice of

consumers and communities wherever decisions shaping the

future of our health system are being made. Community

Catalyst provides a range of technical assistance services that

includes policy analysis, legal assistance, strategic planning and

community organizing support. Community Catalyst also

builds coalitions among its constituencies on a range of issues,

from hospital conversions and quality care to Medicaid

expansions and prescription drug access.

Families USA is a national not-for-profit consumer

advocacy organization that promotes policies to achieve high-

quality, affordable health coverage for all Americans. Founded

in 1982, Families USA has been and continues to be the leading

voice for expanded health coverage to the uninsured and for

low-income individuals and families. In support of this

mission, Families USA has worked to strengthen the Medicaid

and Medicare programs so that they are increasingly responsive

to economically vulnerable individuals and families. Families

USA also convenes and leads a broad coalition of consumer

organizations that support and defend the continued viability of

the Medicaid program. As an integral part of its mission,

Families USA has developed and promoted policies that

expand access to affordable prescription drugs for seniors and

low-income families. Directly and through its support of health

care advocacy groups nationwide, Families USA promotes

programs designed to help individuals who lack prescription

drug insurance to gain access to affordable medications.

Families USA’s interest in the Maine Rx Program directly

stems from that program’s goal of providing Maine residents

with access to more affordable prescription drugs.

The Medicare Rights Center (MRC) is a national,

consumer service organization that assists older and disabled

Americans secure needed health care. MRC receives over

75,000 calls annually to its national and New York State

consumer hotlines. Many MRC clients are struggling to pay for

their health care, and MRC works with them to enroll in

Medicaid and other assistance programs. By far, the most

4

common life-threatening health care need of MRC clients is

their inability to afford drugs that their doctors prescribe. The

Medicare Rights Center is leading a nation-wide campaign to

bring the plight of older and disabled Americans who go

without prescribed medication to the attention and conscience

of the nation.

SUMMARY OF ARGUMENT

Amici Curiae, AARP, Community Catalyst, Families USA,

and the Medicare Rights Center join together in supporting

Maine Rx, a state program seeking to improve access to

prescription drugs for the people of Maine. The prices of

prescription drugs place many drugs beyond the reach of many

of the residents of Maine. Medicaid is a state-federal

cooperative program designed to assist people to get medically

health care, and Congress has expressly granted states

the authority to implement prescription drug prior authorization

in their Medicaid programs. 42 U.S.C. § 1396r-8(d). Maine’s

use of prior authorization to induce manufacturers to provide

discounts to all residents, not just persons eligible for the basic

Medicaid benefits, does not conflict with the intent of Congress

in establishing Medicaid. Maine Rx is consistent with the best

interests of Medicaid recipients because, by expanding access

to medicines for the general population, Maine Rx will keep

more people healthier longer so they are less likely to become

eligible for Medicaid benefits and further deplete the limited

resources of the Medicaid program.

Based on the record in this case, PhRMA is unable to

demonstrate that Medicaid recipients are likely to suffer

irreparable harm as a result of prior authorization. First, the use

of an effectively implemented, clinically sound prior

authorization requirement does not inevitably harm patients.

Second, Maine already has a Medicaid prior authorization

program independent of Maine Rx which has shown few

problems thus far. And third, there is little basis to believe that

physicians will abandon the medical welfare of their patients in

the face of a properly run prior authorization system. Prior

authorization may even serve the salutary effect of counter-

balancing the heavy pressure on doctors to prescribe a

5

particular drug because of promotion by the drug companies

rather than its distinct therapeutic advantages.

Prescription drugs have become an increasingly important

part of health care. But the dramatic increase in their costs

means that many people simply cannot obtain the drugs to

improve the quality of their lives and in some cases even

prolong them. Maine recognizes that the health and welfare of

its residents d upon access to these medicines, and,

through Maine Rx, believes it has found a way to lower the

costs by connecting voluntary discounts to a reasonable

limitation in the Medicaid program. The First Circuit decision

should be affirmed, and Maine Rx should be implemer ted so

that whatever discounts the manufacturers can be persuaded to

offer can start benefitting the health of the people of Mane.

ARGUM

I. Introduction

Maine is a low-income state, ranking thirty-sixth in the

nation in per capita income.’ The high and rising costs of

prescription drugs has made it difficult for the State to publicly

finance prescription drug programs. The availability of

dramatically lower priced prescription medications in nearby

Canada highlights the problem of unaffordable medications for

Maine citizens and policy makers alike, and is a principal

impetus for Maine’s history of experimenting with programs

aimed at increasing access to wou medications for its

citizens. Stephen Crystal et al., Public Policy Institute,

Three States’ Approaches to Pharmaceutical Assistance: A

Guide for the Perplexed 34 (2002); Tara Parker-Pope, The Ins

and Outs of Getting Drugs (The Legal Kind) From Across the

Border, Wall St. J., Oct. 22, 2002, at D1 (for example, showing

2 In 1999, Maine had a per capita money income of $19,533, compared

with a national per capita income of $21,587. U.S. Census Bureau, State

and County Quick Facts: Maine, at

http://quickfacts.census.gov/qfd/states/23000.html (last visited Nov. 5,

2002).

6

Tamoxifen, a breast cancer drug, is $287.15 in the U.S. for 90

pills (20 mg), but $47.38 in Canada; Celebrex, an arthritis drug,

is $133.25 in the U.S. for 100 pills (100mg) and $68.21 in

Canada — prices are in U.S. dollars.)

In 1975, Maine established one of the country’s first

y assistance programs, Low Cost Drugs for the Elderly

and Disabled Program (DEL or Low Cost Drug). Eligibility is

restricted to persons 62 years-of-age and older and disabled

persons age 19 or older, with both groups allowed incomes no

more than 185 percent of poverty ($16,391 for one person in

2002). DEL is a subsidy plan so that these beneficiaries can

obtain medications to treat specified illnesses. See Maine Dep't

of Human Servs., Prescription Drug Assistance: A Guide to

Programs and Benefits (2002), available at

http://www.state.me.us/dhs/beas/medbook.htm [hereinafter

Prescription Drug Assistance]. DEL is entirely financed

through state funds. Crystal, supra, at 48.

Maine’s standard Medicaid program, Maine Care, provides

prescription drug benefits to eligible individuals, generally only

to children and their families, the elderly and disabled who are

extremely poor. As of March of 2002, the income eligibility

uirements are a gross monthly income under $8 13 and assets

under $2,000, or a couple with a gross monthly income under

$1,095 and assets under $3,000. Prescription Drug Assistance,

supra. Finding that access to prescription drugs was still a

critical problem for the rest of the people of Maine, the State

recently established two pharmacy discount programs, Maine

Rx and Healthy Maine Prescriptions. Healthy Maine is a

Medicaid waiver program, established under section 1115 of

the Social Security Act, which allows the state to conduct

experimental projects which further the objectives of the

Medicaid . Me. Rev. Stat. Ann. tit. 22, § 258 (2001).

Healthy Maine Prescriptions provides the Medicaid discount

price to any Maine resident whose income is within 300% of

the federal poverty threshold, and generally provides an average

of 25% savings off retail drug prices. Prescription Drug

Assistance, supra. Healthy Maine is also being challenged by

PhRMA in PARMA v. Thompson, supra.

7

Maine Rx is an innovative state program aimed at

remedying the serious financial barriers to access for

pe drugs faced by many Maine residents who still

ve a problem affording medications yet whose incomes are

not low enough —— for other prescription drug assistance

. Maine Rx helps people obtain needed prescription

drugs, drugs they do without when costs are too great.’

Lowering the cost of drugs is one way to increase access so that

consumers will fill the prescriptions their doctors have

determined they need. Judge Keeton recognized that “many and

probably most citizens of Maine who have a need for pharmacy

products would not have adequate resources and practical

means to get the y products they need absent the Maine

Rx wi v. Concannon, 249 F.3d 66, 97 (1st Cir.

2001 , J., concurring).

Maine Rx uses a prior authorization mechanism in its

Medicaid program to encourage drug manufacturers to

negotiate price rebates with Maine so that the State can lower

the cost of drugs for all the people of the state. PhRMA argues

that Maine Rx's use of prior authorization in its Medicaid

program to leverage manufacturer participation in Maine Rx

violates the ——s Clause of the United States Constitution

because it conflicts with the Social Security Act, and that Maine

Rx’s rebate provision conflicts with the Commerce Clause.

This brief will address only the question of whether Maine Rx’s

> A recent survey of eight states reports that nearly one quarter of all seniors

said that they did not fill a prescription because it was too expensive or

skipped doses of their medications to make them last longer. Even patients

with severe and chronic conditions like heart disease and diabetes often go

without medication because of costs. Kaiser Foundation et al., Seniors and

Prescription Drugs, Findings From a Survey of Seniors in Eight States

(July 2002). In a March 2002 national survey of Americans aged 45 or

older, more than one in five (22%) reported they did not fill at least one

prescription prescribed by their doctor during the last two years, with the

cost of the drug being the main reason people cited for not getting their

prescription filled. AARP, Prescription Drug Use Among Persons Age

45+ 24-25 (June 2002). Of particular concern is that the proportion of

people who say cost was a main reason for not getting a prescription is

rising, up from 13% during a 1986 survey to 32% in 2002. /d. at 72.

attempt to bring down the cost of prescription drugs for all its

people violates the Supremacy Clause.

Il. Neither the Letter nor the Intent of the Social

Act Prohibit a State from Using Medicaid Prior

Authorization to Achieve Prescription Drug

Savings.

Under the Supremacy Clause, a federal law may expressly

or impliedly preempt state law. Gade v. Nat'l Solid Wastes

Mgmt. Ass'n, 505 U.S. 88, 98 (1992). The ——

sciliseeeneetindn indeed aieaaonannieten are}

not to be superseded by the Federal Act unless that [is] the clear

and manifest of Congress.” Rice v. Sante Fe Elevator

Corp., Ya S. ys 230 (1947)(citations omitted). This is

especially true wi ive ~deralism programs such as

Medicaid. Wan encelinnsn alli and teteed clleme exter

within a complementary framework, and in the pursuit of

common purposes, the case for federal preemption becomes a

less persuasive one. N.Y. Dep’t of Soc. Servs. v. Dublino, 413

U.S. 405 (1973).

PhRMA argues that Maine’s use of prior authorization in

its Medicaid program impliedly conflicts with the Social

Secunty Act despite the Act’s expressed authorization of state

prior authorization programs for any benefit it

provides. 42 U.S.C. § 1396r-8(d)(“A State may subject to prior

authorization any covered outpatient drug.”) Their argument

stretches implied conflict preemption far beyond any precedent

of this Court. PhRMA cites no court decision holding anything

, other than the district court decision reversed by the

First Circuit. Precedent aside, PhRMA argues that Maine Rx

must be struck down even before it is implemented because

authorization necessarily creates such a burden on

beneficiaries that it conflicts with the object and

cane al CHumtad aaa

Far from conflicting with congressional intent, Maine Rx

is consistent with long-standing Congressional concern with the

costs of prescription drugs and the ing burden on

publicly financed health care coverage. 1990, Congress

9

that it had to do something about the costs of

am ny tod af Bodh mene Medicaid is one of

the largest purchasers of drug manufacturers’ products -- if the

not the largest -- yet the manufacturers were routinely charging

Medicaid-more than what they charged other large. drug

rey x 101-881, at 96 (1990), reprinted in

1990 U.S.C.C.A.N. 2017, 2108. Congress established a rebate

t for manufacturers who participate in Medicaid,

allowing state Medicaid to use their positions as a

huge of the manufacturers’ products to require

manufacturers to reduce their profits.

42 U.S.C. §-1396r-8 (a)(1)(2002)(“In order for payment to be

available . . . [under Medicaid] the manufacturer must have

entered into and have in effect a rebate agreement . . . with the

Secretary, on behalf of States.”) The goal was to allow

Medicaid programs to reduce the prices of prescription drugs.

At the same time, Congress permitted individual state

nan + set on ea day: ~pennen daptronsydaen dd

providing prescription dru ugs. For example, states can restrict

or exclude entire classes of drugs, limit quantities, or impose

sviar enthasiention 0a cundiian of epventep. See 42 U.S.C.

§ 1396r-8(d)(“Limitations on coverage of drugs.”) Congress

made sure that when a state chooses to require prior

authorization, it must do so in a fashion that does not harm

Medicaid beneficiaries. State programs must provide fast

to authorization requests and dispense a three day

supply of the requested drug in an emergency situation.

42 U.S.C. § 1396r-8(d)(1)(A) and (d)(5).*

Much has been made of the fact that Maine is attempting

to use Medicaid prior authorization to assist all its people with

“ Maine must also comply with other Medicaid requirements designed to

assure beneficiaries efficiently receive good quality health care, such as

promptly furnishing health care, 42 U.S.C. §1396a(a)(8); timely providing

the beneficiary with notice and hearing rights upon reductions, terminations

and denial of care, 42 U.S.C § 1396a(a)(3); and assuring that care and

services are available to Medicaid beneficiaries at least to the extent that

those services are available to the general population, 42 U.S.C. §

1396a(a)(30)(A).

10

drug c sts, not just the poorest of the poor who are eligible for

all of the state’s Medicaid benefits. Because Maine is using the

authority given it by Congress to use prior authorization in its

Medicaid program to help those who are beyond the financial

eligibility limits of basic Medicaid, both PhRMA and the

Solicitor General argue it does not serve the interests of the

Medicaid program. (Pet'r Br. at 26; United States Br. Supp.

Reversal at 10.)

The purpose of the Medicaid is to provide health

care to those in need, therefore, Maine’s attempt to expand

access to health care does not contradict Congressional intent.

Maine Rx is entirely consistent with the Medicaid provisions of

the Social Security Act; nothing in the Act prohibits either

pharmacy discount oe. or states from expanding

Medicaid coverage. viding pharmacy discounts serves

Medicaid’s objective to furnish medical assistance on behalf of

families with dependant children, and of aged, blind, or

disabled individuals, whose income and resources are

insufficient to meet the costs of necessary medical services.

42 U.S.C. § 1396 (2002). Maine Rx simply increases the

number of eligible to receive the benefit of a discount

obtained the State’s efforts to furnish medical

assistance -- in this case, access to pharmaceuticals.

As a practical matter, the enrollees in Maine Rx most likely

to benefit from the are the population most sensitive

to the high costs of prescription medications-- lower income

persons, without prescription drug coverage insurance or the

means to purchase prescription drugs, such as the 40% of

Medicare beneficiaries with annual incomes below $10,000

who lacked prescription drug coverage in the fall of 1999.

David Gross, Public Policy Institute, Medicare

Beneficiaries and iption Drugs: Costs and Coverage

(2002), available at http:/ aarp.

dd77_rx.html. The Maine Legislature passed Maine Rx “to

enable the State to act as a pharmacy benefit manager in order

to make prescription drugs more affordable for qualified Maine

resideiits, thereby increasing the overall health of Maine

residents, ing healthy communities and protecting the

public and welfare.” Me. Rev. Stat. Ann. tit. 22,

ll

§ 2681 (2001). The First Circuit yyy was

consistent with Medicaid: a, 4 4. Program =

potentially provide prescription drugs to Maine citizens w

ceuldeutcthapetan afford them.” Concannon, 249 F.3d at 84.

Medicaid benefits are not restricted to a static population

subject to a uniform set of eligibility requirements, such as

those persons who meet the low income and resources

standards of Supplemental Security Income (SSI).* There are

many state programs which utilize the Medicaid program to

expand health care assistance beyond the group it traditionally

covers. While state Medicaid programs must provide coverage

to individuals receiving cash assistance through the Temporary

Assistance for Needy Families (formerly ) or SSI, states

can elect to provide Medicaid coverage to "medically needy”

individuals whose incomes exceed state established income

levels. 42 U.S.C § 1396a(a)(10)(C) (2002). Maine has a

medically needy program under which children, elderly, or

disabled with very high medical bills can become eligible for

services by spending enough of their income on health care to

meet a state established income limit.° In addition, as of 1989,

States participating in the Medicaid program were required to

y Medicare ijums aid cost sharing amounts for certain

ow income j beneficiaries whose income exceeded

SSI eligibility levels. 42 U.S.C. §§1396a(a)(10)(E)(i);

1396d(p) (2002).

States can also use a variety of mechanisms such as

waivers, like Maine has done with the Healthy Maine program

discussed eailier, to cover broader populations and provide

5 In 2002, in order to be eligible for SSI, a single person could earn no

more than $780 per month, with a $2,000 resources limitation. U.S. Soc.

Sec. Admin., Fact Sheet: Social Security, available at

http://www.ssa.gov/pressoffice/colafacts2003.htm (last visited Nov. 5,

2002).

* The provision of the Maine Medicaid program, known as MaineCare, that

establishes the medically needy category of eligibility can be found at CODE

ME. R. §10-144-332.1100 (2002). The income requirements are covered in

§ 10-144-332.2450.

12

additional services. See Medicaid home and community based

waivers (§1915(c) of the Social Security Act codified at 42

U.S.C. § 1396n (2002)); "Freedom of choice” waivers

(§ 1915(b)of the Social Security Act codified at 42 U.S.C.

§ 1396n (2002)) and "research and demonstration” waivers

(§ 1115 of the Social Security Act codified at 42 U.S.C. § 1315

(2002). Under these provisions, states can request the Secretary

of Health and Human Services waive certain federal

requirements in the general Medicaid program so that they can

provide health care benefits which may provide different

services, use a more generous financial eligibility criteria, or

provide benefits to a particular group which are not provided to

all Medicaid beneficiaries. See, ie, 42 USC.

§1396a(a)(10)(B) (2002) (relating to comparability of service

requirements). “Waivers are intended to provide flexibility

needed to enable States to try new or different approaches to the

efficient or cost — eps of health care services, or to

adapt their programs dye needs of particular areas or

groups of dts. mo "42 C.F.R. §430.25(b) £2002).

Extending care to persons in need beyond just the poorest

of the poor is a long-standing purpose of the Medicaid

There are many more examples of this, but a recent study _

summarizing the Medicaid enrollment data from the states

demonstrates "that Medicaid continues to evolve from a

welfare-based program to a more traditional health insurance

." Kaiser Comm'n on Medicaid and the Uninsured,

Report on Medicaid Enrollment in 50 States: December 2001

Data Update (Oct. 2002) available at

http://www.kff.content/2002/4067/4067 .pdf.

Maine Rx allows the Commissioner, if he is successful in

his negotiations with drug manufacturers, to provide a discount

for Maine residents who need to purchase prescription drugs.

Such discounts help those whose income is above current

eligibility levels for all Medicaid’s benefits, but it also serves

the interest of the Maine’s Medicaid program as a whole, as is

further described below. Lowering the cost of the prescriptions

means that more people can afford health-sustaining

medications and prevents their health from deteriorating to the

point that those persons become financially eligible for

13

Medicaid benefits. This acts to preserve limited Medicaid

funds for those already eligible. See Concannon, 249 F.3d at

76-77 (citing evidence on the limited record before it showing

Maine Rx may reduce Medicaid expenditures). Moreover, the

Medicaid program itself will save money when clinically

appropriate, less expensive drugs are prescribed over more

= drugs with no therapeutic advantage through an

ectively implemented prior authorization program.’

III. Maine Rx is Consistent with the Best Interests of

Medicaid Recipients.

The Medicaid statute directs states to consider the “best

interests” of Medicaid beneficiaries. State plans must “assure

that eligibility for care and services under the plan will be

determined, and such care and services will be provided, in a

manner consistent with simplicity of administration and the best

’ Maine should thoughtfully and effectively implement its prior

authorization program because all Medicaid recipients must have efficient

__ access to all medically necessary prescription drugs. Maine Rx has not yet

Maine Department of Human Services will assure that Medicaid

beneficiaries receive all medically necessary medications. Concannon, 249

F.3d at 76. Given Maine’s history of attempting to expand access to

prescription drugs, see discussion supra at 5-6, there is no reason to doubt

Maine official’s assertions. Moreover, Maine provides protection in the

law only requires that a 72-hour supply of medicine be dispensed in an

emergency situation, Maine is more generous, authorizing the pharmacist

to provide a 96-hour supply of the prescribed drug whenever the

Department is unable to promptly respond to the prior authorization request.

See Maine Dep't of Human Servs., MaineCare Benefits Manual, 10-144, ch.

101 § 80.07-3, available at

http://www.state.me.us/sos/cec/rcn/apa/10/ch101.htm. Commissioner

Concannon has also given pharmacists the ability to "provide a one-time fill

of a 34-day supply prior to establishing medical necessity via the prior

authorization process.” (Letter from Kevin W. Concannon to Ronald

Preston, Associate Regional Administrator, Division of Medicaid and State

Operations of Oct. 31, 2002, at 3.) See Lodging of Amicus ~uriae Maine

14

interests of the recipients.” 42 U.S.C. § 1396a(a)(19) (2002).

PhRMA argues that this provision is violated because some

unidentified and unknown number of people may encounter

obstacles in receiving “first-choice” prescription drugs because

of a prior authorization requirement. (Pet’r Br. at 17.)

However, both the First and Eleventh Circuits have considered

the best interests language and determined it to be directed at

the state’s Medicaid program as a whole, not to its individual

recipients.

The First Circuit decided that Maine Rx furthered

Medicaid purposes because making prescription drugs more

accessible to the uninsured and underinsured may reduce

Maine’s Medicaid expenditures by keeping people healthier

longer so they do not ultimately end up using more costly

Medicaid services. Concannon, 249 F.3d at 76. The Eleventh

Circuit recently upheld a prior authorization in

Florida’s Medicaid program, concluding that the Florida law

“operates to drive down the cost of prescription drugs under the

Medicaid program by providing drug manufacturers with strong

economic incentives to offer the state supplemental rebate....

By stretching its Medicaid dollars, the Florida law has the

potential for providing more and better medical services to its

target population.” PhRMA v. Meadows, No. 02-10151, 2002

U.S. App. LEXIS 18487, at *31-31, 304 F.3d 1197 (11th Cir.

Sept. 6, 2002). Cf. Harris v. James, 127 F.3d 993, 1010 (11"

Cir. 1997) (finding §1396a(A)(19) imposes a generalizec duty

on the States and is insufficiently specific to coufer any

particular rights on a plaintiff, and citing other similar cases).

Protecting the program as a whole is the only way to ultimately

protect the program for the individual, particularly when states

face budget crises and are forced to cut eligibility and services

as described below.

A. The Burden and Costs of Prescription Drugs Show

Why So Many Maine Residents are in Need of Medical

Assistance to Pay for Them, and Why it is in

Medicaid’s Interest to Assist Them.

Prescription drug costs are becoming the major strain on

publicly funded insurance programs as drug costs are the fastest

15

growing component of health care, rising 15% or more per year

over the past several years. Nat’! Inst. for Health Care Mgmt.

Research & Educ. Found., Prescription Drug Expenditures in

2001: Another Year of Escalating Costs 2 (2002), available at

http://www.nihcm.org/spending2001 .pdf. A key factor in rising

drug costs is rising drug prices. According to the National

Institute for Health Care Management, roughly one-third of the

increase in drug covts is attributable to rising drug prices. Id. at

3. Prices have a disproportionate impact on those individuals

who lack coverage for prescription drugs. In fact, in calendar

year 2001, the prices of the 50 drugs most commonly

prescribed for seniors, increased three times the rate of

inflation. See Families USA, Bitter Pill: The Rising Prices of

Prescription Drugs fer Older Americans (June 2002), available

at http://www.familiesusa.org/BitterPillreport.pdf. These price

increases are reflective of a long standing trend of rising drug

prices. This same study found that prices for the 50 drugs most

commonly prescribed for seniors, increased at rates far faster

than inflation over the last 5 years and the last 10 years. Id.

One of the main goals of the Maine Rx Program is to moderate

these price increases and ameliorate the impact of these rising

prices for those individuals who lack coverage.

Not only are rising prescription drug costs a strain on

individuals, they are also placing a tremendous strain on

public .y funded programs such as Medicaid. The Medicaid

program is a vitally important source of drug coverage for low-

income disadvantaged people nationwide, paying for

approximately 14 t of prescriptions written in the U.S. in

2000. See Brian kK B , Kaiser Comm'n on Medicaid and

the Uninsured, States Strive to Limit Medicaid Expenditures for

Prescribed Drugs 2 (Feb. 2002), available at

http://www.kff.org/content/2002/200202 13/4030.pdf. Medicaid

spent $16.6 billion of federal and state funds on outpatient

drugs in 2000; that figure does not include what was spent in

Medicaid managed care plans, or hospitals or other settings

where drugs are included in the total payment for services. Id.

at 3. Older persons and with disabilities accounted for

80 percent of Medicaid spending in 1998. Kaiser Comm'n

on Medicaid and the Uninsured, Medicaid and Prescription

Drugs: An Overview (Oct. 2000), at http://www.kff.org/

ee ee ee ee

16

content/2001/1609/ 1609.pdf.

Medicaid programs are under great pressure to reduce

coverage and services due to soaring costs and budget

pressures.* In fiscal year 2002, state spending on Medicaid

increased 11 percent. See Kaiser Survey, supra note 8, at 15.

Medicaid programs are stressed not only by the rising costs for

curreat beneficiaries, but also by the increasing number of

persons being driven into poverty and therefore becoming

eligible for Medicaid. The poverty rate in 2001 rose for the

first time since 1991-1992, reaching 32.9 million persons or

11.7% of the population, up from 11.3% in 2000. Bernadette

* The vast majority of states are facing significant budget shortfalls. See

Kaiser Conim’n on Medicaid and the Uninsured, State Budgets Under

Stress: How are States Planning to Reduce the Growth in Medicaid Costs?

(July 2002) [hereinafter Kaiser State Budget Report); Nat'l Ass'n of State

Budget Officers, NASBO Analysis: Medicaid to Stress State Budgets

Severely in Fiscal 2003 (March 15, 2002). In an effort to control Medicaid

expenditures, states are reducing benefits and restricting Medicaid

eligibility criteria, cost containment strategies that eliminate health care for

Medicaid beneficiaries. See Kaiser State Budget Report, supra, at 23-5;

Amy Goldstein, States’ Budget Woes Fuel Medicaid Cuts: Poor Lose

Coverage and Services, Wash. Post, Oct. 11, 2002, at AOl. Missouri, for

example, cut over 30,000 peop: from Medicaid by lowering the threshold

at which parents become eligible. Vernon Smith, PhD, et al., Kaiser

Comm'n on Medicaid and the Uninsured, Medicaid Spending Growth:

Results From a 2002 Survey 25 (Sept. 2002), available at

http://www.kff.org/content/2002/4064/4064.pdf [hereinafter Kaiser

Survey]. Massachusetts is eliminating coverage for approximately 50,000

long-term unemployed individuals and Nebraska is enacting eligibility cuts

that will cause 12% of the state’s total Medicaid enrollees to lose eligibility.

Id. In fact, 18 states are planning eligibility cuts or restrictions for 2003, up

from eight states restricting eligibility in 2002. Jd. Meanwhile, the number

of states making Medicaid benefit reductions is increasing. After nine states

reduced benefits in fiscal year 2002. 15 states have passed benefit

reductions for 2003. Id. at 24. Thirtee’: states have reduced lorg term care;

cuts include shutting down nursing homes and instituting new

reimbursement methodologies. /d States are also reducing benefits

through copays, increased cost sharing, managed care expansions, and

increased disease management programs. /d.

17

D. Proctor & Joseph Dallaker, U.S. Census Bureau, P60-219,

Poverty in the United States: 2001 2 (Sept. 2002), available at

http://www.census.gov/prod/2002pubs/p60-219.pdf.° The

number of uninsured also rose in 2001 to 41.2 million people

or 14.6% of the population up from 14.2 % in 2000. Robert J.

Mills, U.S. Census Bureau, P60-220, Current Population

Reports, Health Insurance Coverage: 2001 2 (Sept. 2002),

available at http://www.census.gov/prod/2002pubs/p60-

220.pdf. Concomitant with the increase in poverty and decrease

in insurance coverage, is an increase in the number of

on Medicaid. The percentage of people covered by Medicaid

rose from 10.6 % in 2000 to 11.2 % in 2001. Id.

Medicaid budgets simply cannot sustain prescription drug

prices rising at current rates, and in many states the result has

been, and will continue to be, program cuts. The objectives of

the Medicaid Act are served when states reduce prescription

drug costs “xpanding access, not when they are forced to cut

benefits and eligibility for Medicaid programs. Limiting access

for effective drugs puts frail, low-income, elderly patients at

increased risk of institutionalization in nursing homes and may

actually increase Medicaid costs. S.B. Soumerai et al., Effects

of Medicaid Drug-Payment Limits on Admission to Hospitals

and Nursing Homes, 325 New Eng. J. Med. 1072 (1991). Most

of these patients once admitted to nursing homes never returned

to the community. Jd. Other research by these authors found

that limits on coverage for the costs of mental health

medication resulted in sharp increases in the use of emergency

mental health services and partial hospitalizations. S.B.

Soumerai et al., Effects of Limiting Medicaid Drug-

Reimbursement Benefits on the Use of Psychotropic Agents and

Acute Mental Health Service:; By Patients With Schizophrenia,

331 New Eng. J. Med. 650 (994). The authors concluded that

in addition to increasing the use of acute mental health services

* The poverty threshold is $8,494 for a single person 65 years of age and

older and $9,214 for a person under 65. /d. at 5. Maine's household

median income fell 5.9% in 2000-2001 from the previous two-year period.

Carmen DeNavas-Walt & Robert W. Cleveland, U.S. Census Bureau, P60-

218, Money Income in the United States: 200] 11 (Sept. 2002), available

at http://www.census.gov/prod/2002pubs/p60-2 1 8.pdf.

18

among low-income patients with chronic mental illnesses,

limits on coverage for the costs of prescription drugs also

increased costs to the government and caused pain and

suffering on the part of the patients. Jd. Therefore, increasing

access to effective prescription drugs -- both within the

Medicaid program and the general population -- will save

money for the Medicaid program as a whole.

States reported that the most significant factor contributing

to higher Medicaid spending was the increasing costs of

prescription drugs. Bruen, supra, at 15. Forty-four states cited

prescription drugs among the three most significant factors

driving Medicaid costs, with 25 states ranking prescription

drugs as the single most significant factor behind increased

Medicaid spending. Jd. at 16. With the costs of drugs being so

high, this is an area where States are looking to cut. The survey

of Medicaid officials in all 50 states and the District of

Columbia revealed that, in fiscal year 2003, 40 states plan to

implement prescription drug cost controls, up from 32 states in

FY 2002. Id. at 4. Cost containment controls such as prior

authorization requirements are one way states are contending

with increasing Medicaid costs. In fact, in fiscal year 2003, 23

state Medicaid programs plan to place more prescription drugs

under prior authorization. Id. at 23. Maine can, and already is,

doing the same. When Maine, acting as a pharmacy benefits

manager for the entire population, leverages its buying power

in the Medicaid program to bring down the costs for everyone,

thereby facilitating greater access to medicines, its entire

population is healthier and therefore less likely to incur the

illnesses that will require them to need the resources of an

already overburdened Medicaid program.

IV. The Evidence that Individual Medicaid

Beneficiaries will Suffer Actual Harm from Maine

Rx’s Reasonable Limitations on So-Called First-Choice

Rx Drugs is Insufficient to Support an Injunction.

PhRMA argues that creating an obstacle to “first-choice

drugs” constitutes a harm to Medicaid beneficiaries sufficient

to warrant an injunction against the implementation of Maine

Rx. (Pet’r Br. at 5.) But that argument fails because PhRMA is

19

unable to show that the obstacle of prior authorization will

result in irreparable harm to Medicaid beneficiaries. “A facial

challenge to a legislative act is of course the most difficult

challenge to mount successfully since the challenger must

establish that no set of circumstance exist under which the act

would be valid.” United States v. Salerno, 482 U.S. 739, 745

(1987). “The existence of a hypothetical or potential conflict

is insufficient to warrant the preemption of the state statute.”

Rice v. Norman Williams Co., 458 U.S. 654, 659 (1982). The

First Circuit correctly concluded that dueling affidavits and

other materials in the record fell short of establishing that the

Act will inflict inevitable or even probable harm on Medicaid

patients. Concannon, 249 F.3d at 77-78."°

PhRMA’s argument presupposes that whenever so-called

first-choice drugs face the need for prior authorization

beneficiaries will be harmed, and further assumes that

physicians will fail to advocate for clinically appropriate drugs

for their patients. Prior authorization does not inevitably or

necessarily harm Medicaid beneficiaries, and doctors can work

with an effectively administered prior authorization program to

assure Medicaid beneficiaries receive medically appropriate

drugs.

A. Prior Authorization Does Not Inevitably Harm

Patients.

1. Studies have shown that prior authorization can

be implemented without resulting in adverse

clinical outcomes.

study in an urban teaching hospital found no

Pr. ects on clinical outcomes as a result of prior

authorization requirements for selected drugs. A. Clinton

‘© PhRMA argues that there is actual harm to Medicaid recipients despite

the fact that Maine Rx has never been implemented by citing the dispensing

limitation (four drugs) in the Florida prior authorization program, and

arguing that problems there demonstrates harm to Maine Medicaid

beneficiaries. Maine Rx does not contain a dispensing limitation— a feature

that apparently does cause problems with access to drugs.

20

White, Jr., et al., Effects of Requiring Prior Authorization for

Selected Antimicrobials: Expenditures, Susceptibilities, and

Clinical Outcomes, 25 Clinical Infectious Diseases 230 (1997)

(concluding that requiring prior authorization of selected

antimicrobial drugs can decrease expenditures and improve

susceptibilities to antibiotics without compromising patient

outcomes or length of hospital stay.) A study of the Tennessee

Medicaid program’s implementation of a prior authorization

requirement for non-generic nonsteroidal anti-inflammatory

drugs found a 53% decrease in expenditures for NSAID

iptions, with no concomitant increase in Medicaid

iture for other medical care. Walter E. Smalley, M.D.,

et al., Effect of Prior-Authorization Requirement on the Use of

Nonsteriodal Anti-inflammatory Drugs by Medicaid Patients,

332 New Eng. J. of Med. 1612 (1995).

The studies do not establish by any means that prior

authorization can never cause problems for a particular patient,

but do show that prior authorization programs do not inevitably

or even probably result in harmful clinical outcomes.

2. Maine’s existing prior authorization program

has noi caused many problems with access to

prescription medications.

Since 2001, Maine has subjected some spay 1

to prior authorization under the authority of 42 U.S.C. § 1396r-

8(d) and has data on its implementation. During the most

recently analyzed aay pee January to September , Maine

filled more than 3. million prescriptions through the Medicaid

program. Kevin W. Concannon, Perspectives on Promoting the

Appropriate Use of tgp eee oe

http://www.oregonrx.org/ rx

Governor's%20Conference % G20PDE Nor

isioner_ OREGON mere ge erngs okey visited Nov.

5, 2002). During that period, Maine's program had

31, st lan ety for prior authorization, or .94 percent of the

of prescriptions. Ninety-three percent were

TP rceis cosenendlGs mantaciendiemtaneniin

Id. Ninety one percent of the requests were determined within

24 hours. Jd. Less than one tenth of one percent, or 2,182, of

21

the total Medicaid camel teen ved, and a

number were of i cient data for

determinations YX as incorrect NDC codes, ineligible

patients, and absent or insufficient clinical support. Jd. A

grievance or fair hearing process should ensure that the

remaining disputes are resolved in a manner that ensures

beneficiaries in medically necessary drugs.

B. Physicians Will Not Abandon the Medical Welfare

of their Patients in the Face of Prior Authorization

Requirements.

1. Physicians are knowledgeable about prior

authorization systems because they

are extensively utilized in the health care system.

Because doctors are familiar with prior authorization

programs, Maine’s 2 of prior authorization in its

Medicaid program not inexorably lead to harm for its

Medicaid ontiisiesten. “The percentage of employers using

cee cae tae cas el Pee

has increased e since PBMI [Pharmacy Benefit

Management instioute} ‘frst asked about its use. In 1996, 43%

of employers used prior authorization ; in 2000, that

number increased to 77%.” Inst. t. & Admin., In

Perspective, Managing Benefits Plans 7 . 2002). Eighty-

two percent of HMO plans used prior drug authorization in

2000. Joseph Eichenholz, Trends in Managed Care Pharmacy:

Responding to Changing Environments, 8 J. Managed Care

Pharmacy 104 (Mar./Apr. 2002).

As PhRMA phrases it, the law ae the physician to

choose between a first-choice dru; uires prior

authorization and second-choice, ective drug,

that does not.” (Pet’r Br. at 15.) ae he does not rise

to the level of demonstrating an inevitable conflict with the best

interests of Medicaid recipients. For any given Medicaid

beneficiary, no one knows what would be a “first-choice drug.”

The first choice may be one which does not require prior

authorization. And if a first choice drug does require prior

approval, if it is superior for that patient, the physician can

OL EEE EEE

22

request it. If a drug requiring prior authorization is first-choice

for any reason other than for that particular patient it is

medically superior, then substitution will not harm the

Medicaid beneficiary.

Substitution itself is not necessarily harmful, although for

any particular patient there may be clinical reasons a ific

drug is better. But with respect to the medical for a

eS Se eee ty. For example, the

and Drug Administration (FDA) recognizes that simply

because generic drugs cost less money, many people falsely

perceive them as less effective than more expensive name brand

medications. FDA, FDA Ensures Equivalence of Generic

Drugs, at http://www.fda.gov/cder/about/whatwedo/testtube-

17.pdf (“Generic drugs contain exactly the same active

i ients as the brand-name drug and are just as safe and

ive.”) The reality is that if there is a generic available for

a name brand medication, it must be bio equivalent in that it

performs in the same manner. /d.

A pharmacist sums up generic switching for brand names:

Making unnecessary switches for economic motives

po ape my ee verse effects for patients or

actually cost care system more in other

costs because of greater use of system resources

elsewhere . . . should be avoided in every instance. It

would be foolish and harmful to argue against real

cases where patients are hurt by switches. But, in

reality, few cases have been published suggesting

problems despite the millions of prescriptions filled

with generic equivalents annually.

John E. Murphy, PharmD, Generic Substitution and

Patient Care, 159 Archives Internal Med. 429 (1999).

Maine’s prior authorization requirement wil] undoubtedly

force the doctors to make informed prescription choices among

23

therapeutically equivalent drugs.'’ Savings are achieved when

doctors determine that there is no medical reason to prescribe

a drug preauthorization. These are the kinds of

seaeath aula oemmmabereteidansaeenr tan. There is

no basis on this record to believe that physicians in Maine will

ae i oe ies for their patients because

ne requires them to think about which drugs they are

at, Educating medical providers about how to obtain

necessary medications and ensuring an efficient state

administrative process are issues that go to the implementation

of a prior authorization program, not grounds for concluding

that it is necessarily against the best interests of patients.

" The House Report accompanying H.R. 5835, the legislation which

eventually became the prescription drug prior authorization provision of the

As under current law, States would have the option of

imposing prior authorization requirements with respect to

covered prescription drugs in order to safeguard against

establish or implement prior authorization controls that

have the effect of preventing competent physicians from

prescribing in accordance with their medical judgment.

This would defeat the intent of the Committee bill in

prohibiting States from excluding coverage of

prescription drugs of manufacturers with agreements —

ie., assuring access by Medical beneficiaries to

H.R. Rep. 101-881 at 98 (1990), reprinted in 1990 U.S.C.C.A.N. 2017,

2110. Congress clearly understood that prior authorization has the potential

to limit coverage, but that as long as beneficiaries get medically necessary

drugs, it is an acceptable limitation.

24

2. Drug promotion activities influence prescribing

patterns.

Indeed, prior authorization requirements may serve to

counter-balance the heavy pressure put on physicians to

prescribe a drug, nct because of its therapeutic

advantages, rather because of promotion by the drug

ies. While the link between drug promotion and

prescriber behavior is not yet well understood, one survey

found that 71 percent of family physicians believe that direct-

to-consumer (“DTC”) advertising pressures physicians into

Einrtin S. Lipely that they w not ordinarily prescribe.

Martin S MD, & Christine A. Taylor, The Opinions

and Epevtaion of Family Physicians Regarding Direct-to-

Consumer Advertising, 45 J. Fam. Pract. 495, 497 (1997).

There is at least a suggestion that DTC campaigns may result in

increased prescribing for certain drugs. Promotional ing

directed at consumers has increased significantly. Richard

Frank, PhD, et al., Kaiser Family Foundation, Trends in Direct-

to-Consumer Advertising of Prescription Drugs, (Feb.

2002)(finding a nine-fold increase in DTC advertising between

1994 and 2000). There “is strong circumstantial evidence that

sales of the three iption oral antihistamine drugs Claritin,

Allegra and Zyrtec — all approved in the early to mid 1990s —

have been substantially boosted by heavy DTC ad igns

from 1998 to 2000.” Steven D. Findlay, Nat Inst. for th

Care Mgmt. Research & Educ. Found., DTC Advertising: Is it

Helping or Hurting? 3 (Sept. 10, 2002)(statement before the

Federal Trade Commission health care workshop).

Unfortunately, prescriptions driven by patient demand or based

on promotional information may not always be the most

appropriate choice; “previous findings [demonstrate] that

touee be aumanier hig” Seen

physicians inappropriate prescribing.” Meredith B

Rosenthal, PhD, et. al., Promotion of Drugs to

Consumers 346 N. Eng. J. Med. 498, (2002\(citing

Schwartz, et al., Motivations for Nonscientific Drug

Prescribing, 28 Soc. Sci. Med. 577-82 (1989)). In addition,

there is evidence that many

or accurate. Sidney M. Wolfe, '

Advertising — Education or Emotion Promotion? 346 N. Eng.

—<——— << —

TT Wr Oe

25

J. Med. 524, 526 (2002)(suggesting that “confusion arises when

commercially driven promotional information is represented as

educational.”’)

An FDA survey found that when patients asked their

doctor about a drug, 48% received a prescription for that

medication. Kathryn J. Aikin, PhD, FDA, Direct-to-Consumer

Advertising of oe Drugs: Preliminary Patient Survey

Results (Apr. 002), available at

htepclleverw fda geovicderiddmmac/D TC sational002a/sh6040 hn

m. Moreover, for patients who asked about a specific brand,

69% received a script compared to 41% of those who asked

about more general treatment.

In 2001, pharmaceutical companies spent $4.7 billion on

physician detailing (the term of art for promotion of drugs to

physicians) and over $2 billion on educational events aimed at

physicians. Findlay, supra. Manufacturers also provided

physicians with $10 billion worth of free samples to give

patients and spent $2.8 bi'lion direct-to-consumer marketing.

Id. PhRMA keenly appreciates the fact that prior authorization

may cause doctors to choose one over another, causing a

potential of loss of sales for a that requires prior

authorization yet is not clinically superior to one does not

require prior authorizziion. But harm to a patient would only

occur if his or her physician refused to prescribe medically

necessary drugs.

Amici believe the answer is to educate physicians, the

public and administrators of the appropriateness of particular

drugs for particular medical and the need to have a

good system in place -- not prohibit a State from using its

Medicaid prior authorization program to achieve savings for all

its residents.

CONCLUSION

Maine’s attempt to expand access to medically necessary

drugs to all of its residents by using its prior authorization

authority in Medicaid does not on its face conflict with the

Medicaid program. Maine has continually attempted to

26

broaden, not diminish, access to prescription drugs for its

residents. The First Circuit’s decision on the question of

Medicaid preemption should be affirmed, and Maine Rx should

be implemented.

Respectfully Submitted,

Sarah Lenz Lock*

Bruce My mes

Dorothy Siemon

AARP Foundation Litigation

Michael Schuster

AARP

601 E Street, NW

Washington, DC 20049

(202) 434-2060

Attorneys for Amicus Curiae

AARP

*Counsel of Record