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

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0492%3A21

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2003
- **Citation:** 538 U.S. 644

## Text

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

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ADDITIONAL COUNSEL

AHAVIAH GLASER

COMMUNITY CATALYST

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RON POLLACK

FAMILIES USA

1334 G STREET, NW
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ROBERT M HAYES

MEDICARE RIGHTS CENTER
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(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 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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0492%3A21. Public record. Not legal advice.