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High Court Reviews Drug Discounts for Uninsured

January 23, 2003|David G. Savage | Times Staff Writer

WASHINGTON — The Supreme Court took up a closely watched case on discount drugs Wednesday, but most of the justices said they were inclined to turn the decision over to the Bush administration officials who run the Medicaid program.

If that happens, it is likely to be several months before the administration -- or perhaps Congress -- decides whether states can force drug makers to offer lower prices to uninsured persons as a condition of selling their drugs through the Medicaid program.

Four years ago, Maine enacted a first-in-the-nation law to do just that. The pharmaceutical industry sued to stop the law from going into effect, and the Supreme Court heard arguments Wednesday in the industry's legal challenge.

"What are you bothering us for?" Justice Antonin Scalia asked one government lawyer. "If the secretary [of Health and Human Services] has the power to stop this, why do we have to get involved?"

Another justice agreed. This "sounds to me like a case that has to go to the secretary," said Justice Stephen G. Breyer.

Since Medicaid is a joint federal-state program to aid the needy, federal officials should voice their view on whether Maine's law does that, Breyer said.

None of the lawyers standing before the justices answered Scalia's question directly. They were there because the Supreme Court voted to take the case -- against the advice of the government lawyers.

Last year, U.S. Solicitor Gen. Theodore B. Olson urged the court to stay out of the Maine case. He said other states were moving ahead with similar experiments, and federal health officials wanted to examine how the programs worked in practice.

But the high court ignored his recommendation and voted to take up the appeal in PhRMA vs. Maine.

At one point, Scalia referred to the Maine plan as a "shakedown" scheme. If it were approved, he asked, why couldn't state legislators demand $100 kickbacks from the drug companies?

Maine's lawyer replied the state law was intended to get a better deal for uninsured consumers, including senior citizens.

"People without insurance are charged more for prescription drugs at the pharmacy counter," Andrew Hagler, assistant attorney general. If the law were put into effect, the state would negotiate with drug companies in hopes of obtaining for these consumers the low wholesale prices that are paid by the Medicaid program, he said.

But most of the justices said they did not favor allowing the Maine law to go into effect until the Bush administration's Medicaid office gave it their approval.

The administration has recently sent conflicting signals on the issue.

In September, the government said Maine's program goes too far because it is open to all consumers, regardless of their wealth.

Medicaid is supposed to help the poor, yet the Maine program is "not tailored to serve low-income populations," the administration said. However, if a state set out to obtain lower drug prices for a "narrowly defined class of persons" whose incomes exceed the poverty rate, it could be upheld as a supplement to Medicaid, the government said.

Maine itself has a second program in the works open to persons whose income is up to three times the poverty rate.

Meanwhile, Senate Minority Leader Tom Daschle (D-S.D.) and Sen. Debbie Stabenow (D-Mich.) said they would press to revise the Medicaid law to clear the way for state programs like Maine's.

"Every state should have the flexibility and the power to be able to do what Maine would like to do," Daschle said.

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