Innovative Maine health care bill challenged

As was the case with the MaineRx prescription drug bill, a powerful industry group has challenged another innovative piece of Maine health care legislation in court.

The new law, scheduled to be implemented Sept. 13, 2003, requires pharmacy benefit managers, or PBMs, doing business in Maine to disclose their financial agreements with manufacturers and retailers to their clients.

Seeking to delay implementation of the Maine law until the case can be heard, the Washington, D.C.-based Pharmaceutical Care Management Association, the PBM trade organization, filed the complaint Wednesday in U.S. District Court in Bangor.

According to bill sponsor Senate Majority Leader Sharon Treat, D-Farmingdale, the goal of disclosure is to “put tools in the hands of insurance companies” as they attempt to provide lower-cost drugs to policyholders.

PBMs contract with health insurers to negotiate lower prices with drug manufacturers and retailers and to manage the complexities of prescription coverage. In addition to their contractual agreements with their clients, PBMs commonly negotiate for manufacturer incentives, including rebates and other awards for steering prescribers and consumers toward particular product lines.

While there are dozens of PBM companies, four firms dominate the industry and manage the drug benefits of about 200 million people: AdvancePCS and Caremark Rx, which announced a merger of their two companies Wednesday afternoon, and Express Scripts and Medco Health Solutions, which do business in Maine.

Critics of this “middleman” industry charge that PBMs make huge corporate profits from lucrative incentives when they could be passing on lower drug prices to their clients. Several states are considering legislation that would regulate the way PBMs do business, but Maine’s law is the first to impose such controls.

By specifying the fiduciary obligations of PBMs to their clients, Treat said Wednesday the law requires PBMs “to follow ethical standards and disclose any conflicts of interest.” Acknowledging that PBMs frequently save money for insurance companies and employers, she said some firms have engaged in “secret side deals” with manufacturers.

“Ultimately, this law will shine the light of day on practices that don’t meet ethical standards and cost consumers money,” said Treat.

The law also requires PBMs to pass on incentive payments from manufacturers to insurance plans and to consult with prescribers before making substitutions for prescribed medications. The state may impose a $10,000 fine for each violation.

The trade group charges that the law violates state and federal statutes and undermines competition while paving the way for frivolous lawsuits and emboldening drug companies to charge even higher prices. PCMA attorney Stephanie Kanwit said Wednesday that Maine’s attempt to assign fiduciary obligations to PBMs’ client relationships is “ridiculous.”

Public disclosure of rebates and other incentives in contracts with manufacturers will make it harder to negotiate meaningful drug discounts, said Mark Merritt, chief executive officer of PCMA.

Treat said the law does not make information public or available to competing firms, but allows insurance companies to realize the full benefit of their PBM contracts.

A veteran of the recent high-profile U.S. Supreme Court battle between the state and the pharmaceutical industry over the Maine Rx bill, Treat said the PBM law has similar national implications. Maine Rx empowers the state to negotiate lower drug prices with manufacturers, and its approval by the U.S. Supreme Court inspired similar legislation in several other states.

“When you look into the high cost of prescription drugs, you find billions of dollars in places you never expected,” Treat said. “This is clearly the next place to go.”

According to a brief statement issued Wednesday by the Maine Attorney General’s office, “The new law is intended to reduce prescription drug prices for Mainers by requiring price disclosures to health plans and prohibiting secret kickbacks from drug manufacturers to PBMs. It is not surprising that the PBM industry finds the law objectionable.

“The Maine Legislature is leading the way in reducing the cost of prescription drugs for Mainers. We have learned to expect that innovation sparks litigation. Mainers know that the first group down the trail always has to clear the trees.”