Waiver issued to reduce drug costs State moved quietly to avoid industry’s ire

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Stymied in earlier attempts to get pharmaceutical companies to lower drug prices, Maine quietly applied for a waiver in December to give about 225,000 Mainers who lack drug coverage the right to buy prescriptions at Medicaid prices.

Outgoing U.S. Secretary of Health and Human Services Donna Shalala issued the waiver Friday as the Clinton administration was folding its tents.

The Medicaid waiver will allow those without insurance but with incomes up to 300 percent of the federal poverty level to purchase drugs at a discount of about 25 percent. Any family of four, for instance, would fall under the income guidelines if it makes less than $51,150 a year.

The guidelines will cover about 70 percent of the Mainers who would have seen similar price reductions under the new Maine Rx Program. That law, passed last year, lost a round in federal District Court in Portland in October under a challenge from the pharmaceutical industry. It would require drug manufacturers to negotiate prices similar to those given to HMOs and Medicaid or face possible retribution under federal profiteering laws.

David Winslow, a spokesman for Kevin Concannon, commissioner of Maine’s Department of Human Services, said that while Friday’s waiver decision is a coup for Maine citizens, the DHS won’t give up on the Maine Rx law.

“We’re not backing off even one single bit on Maine Rx,” Winslow said.

Officials bent on reducing drug prices also have tried other approaches. A coalition of New England states is working on a plan to purchase drugs as a group to gain discounts.

And Eastern Maine Healthcare in Bangor is developing a pharmacy in Canada with a Canadian partner to reimport drugs at Canadian prices for patients who lack drug coverage.

A bill that would have allowed freer reimportation of drugs from Canada was passed and signed into law last year, but died when the Clinton administration said it wouldn’t work well.

Against this backdrop, leaders continue to look for creative ways to lower drug prices for those who need the help most.

The Medicaid waiver announced Friday is considered by proponents to be on solid legal ground and is expected to face fewer hurdles than Maine’s pioneering Rx program. The Pharmaceutical Research and Manufacturers Association, or PhRMA, already has lost its first legal challenge against Vermont’s groundbreaking waiver, which is similar to Maine’s.

Last week a judge denied PhRMA’s request for an injunction against the program. Once the judge issues a complete ruling, PhRMA, the nation’s largest pharmaceutical trade group, will decide whether to appeal, said assistant general counsel Marjorie Powell.

Regardless, PhRMA makes no secret that it’s firmly opposed to the waivers.

“We continue to think that HCFA [the Health Care Financing Administration, which oversees Medicaid] does not have the authority to grant these waivers,” Powell said Friday. The waivers extend some Medicaid benefits to those who don’t qualify for the program, she said. This waiver isn’t about providing medical care to the poor, she said.

Proponents said they are resigned to more legal challenges at every step.

“PhRMA’s just inevitably going to sue,” said Rep. Tom Allen. He said, however, that there’s momentum for change. Both Democrats and Republicans are calling for action on prescription benefits. That could prove an interesting dynamic to watch as President-elect Bush sets his agenda, Allen said.

Rep. John Baldacci said efforts such as the Maine Rx Program, the U.S. Drug Re-importation Act and others are just signs that change is coming and PhRMA will have to bend.

“They are going to have to recognize that the world is turning on them and they need to have affordable prices for all Mainers and all Americans,” Baldacci said.

The waiver forces drug companies to cut prices. PhRMA contends that access should be expanded with government subsidies, not by seeking mandatory price reductions that will hinder new drug development.

“We think it’s very important that somebody continue to research and develop new medicines,” said PhRMA’s Powell.

Sen. Olympia Snowe also praised the waiver Friday. Spokesman Dave Lackey said the Republican “welcomes the approval” of the plan. But, she believes it’s just a first step toward helping even more Mainers through a Medicaid prescription drug benefit, he said.

Winslow of the DHS said the waiver program will be operational in early spring. The state must foot temporarily the administrative costs of getting it running, and must create a brochure that passes muster with HCFA.

PhRMA and interested parties were learning details of the waiver Friday afternoon from press releases and reporters. That was in part because Concannon decided to proceed quietly, Winslow said.

He did not want to get people’s hopes up or tip off PhRMA, Winslow said. In early December it became clear that most pharmaceutical companies were going to dig in their heels and avoid negotiating with Maine to lower drug prices under its new law, he said.

The Maine Rx plan is an attempt to give the uninsured similar volume discounts as those enjoyed by HMOs and federal programs. PhRMA argued in court that the plan violates federal interstate commerce laws.

More than 70 mostly smaller pharmaceutical companies voluntarily negotiated reductions for their products. Most of the big players, who are members of PhRMA, opted not to negotiate, DHS officials have said.

So, Concannon had DHS officials work quietly on the waiver application during the holiday season, Winslow said.

The plan was modeled after Vermont’s version. Under Maine’s waiver, the state will collect a one-time $25 enrollment fee. The money will come from initial prescription discounts.

While PhRMA may sue again, some public officials have high hopes. Maine, having worked with other states like Vermont, has a stronger legal position, Baldacci said.

“I think PhRMA is going against the future and trying to fight to hold onto its profits,” he added.