South-Western Legal Studies in Business

States May Impose Certain Controls on Drug Prices
Description Supreme Court upheld a program by the state of Maine that would require drug companies to bargain with the state regarding prices to be charged for their drugs if they wished to be included in public health programs that would be made available to all citizens of the state.
Topic Constitutional Law
Key Words Commerce Clause; Prices; Medicaid; Drugs
C A S E   S U M M A R Y
Facts States must have a medical assistance plan that is consistent with Medicaid and approved by the Secretary of Health and Human Services (HHS). Congress requires drug companies to pay rebates to states on their Medicaid purchases. The state of Maine enacted a program to reduce prescription drug prices for state residents. Maine will attempt to negotiate rebates with drug manufacturers. Companies that will not agree will be subjected to special procedures that make sale of the drug in the state less likely. The drug makers claimed that the act violates the Commerce Clause and is preempted by the Medicaid Act. The district court held for the drug companies, the appeals court reversed, the drug companies appealed.
Decision

Affirmed. Maine’s prescription drug rebate program, which enables enrollees to purchase prescription drugs from participating Maine pharmacies at discounted prices, with the discount reimbursed from rebate payments collected from participating drug companies, and under which any drug manufactured by nonparticipating makers could not be dispensed to a Medicaid beneficiary with approval of the state Medicaid administrator, does not impose disparate burdens on out-of-state drug makers in violation of the Commerce Clause.

Citation Pharmaceutical Research and Manufacturers of America v. Walsh, 123 S.Ct. 1855 (Sup. Ct., 2003)

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