Supreme Court agrees to hear prescription drug case next year

WASHINGTON (AP) _ The Supreme Court agreed Friday to decide how far states can go in negotiating lower prescription costs for the poor, accepting drug companies' challenge of a pioneering Maine law.

Friday, June 28th 2002, 12:00 am

By: News On 6

WASHINGTON (AP) _ The Supreme Court agreed Friday to decide how far states can go in negotiating lower prescription costs for the poor, accepting drug companies' challenge of a pioneering Maine law.

The intervention stops, for now, Maine's effort to press companies to drop prices for about 325,000 residents who don't have insurance.

An appeals court had rejected arguments from a drug industry trade group that the Maine program unconstitutionally regulates transactions in other states and conflicts with federal Medicaid law. The high court will review the case next year.

The court's decision to take the Maine case came just hours after the House approved a prescription drug bill targeting the Medicare program, which covers the elderly and disabled. The proposal, which has not been voted on in the Senate, would spend $320 billion over 10 years to offer seniors a prescription drug benefit and rely mainly on private insurers.

The Bush administration had urged the Supreme Court to leave a lower court's decision in Maine's favor undisturbed.

The program, if allowed to take effect in Maine, would extend prescription drug benefits offered under Medicaid _ the federal insurance program for the poor _ to the working poor or others whose incomes, while low, do not qualify for Medicaid.

Under the plan, companies would be pressured to sell drugs to uninsured customers at the same discounted price the government pays for Medicaid patients. The state would penalize drug companies that refused by requiring doctors to get prior approval before prescribing one of those drugs to a Medicaid recipient.

``However desirable national public policy attention to this issue may be, states may not in the meantime balkanize the national economy'' with regulations, Daniel M. Price, a lawyer for the drug companies, had told the Supreme Court.

The program, which could cut drug costs for the poor by a third, has been on hold pending the court fight.

Price said Maine was trying to control commerce outside the state _ a function reserved to Congress by the Constitution.

``It does not tie in-state prices to pricing elsewhere. It does not constrain manufacturers' pricing freedom, and does not interfere with economic force,'' Maine Attorney General G. Steven Rowe told justices in a filing.

Meanwhile Friday, the court also said it would consider a case from Kentucky that asks whether states can force health plans to open closed networks of doctors or other medical providers.

HMOs try to contain costs by using only a select group of doctors and providers. Sometimes doctors, pharmacies, hospitals and so forth are under exclusive contract to serve patients enrolled in one plan, and agree to accept lower fees in return for a guaranteed stream of patients.

HMOs say forcing them to open their networks to all would raise the cost of health care. States that have tried to require open networks say the closed systems can unfairly limit patients' choices.

About half the states have adopted laws that require health plans to open their networks to outsiders, so long as the providers agree to abide by terms of the plan.

In Kentucky, such a law was part of a larger effort to reform the health care market in 1994.

Health care plans challenged the Kentucky law, claiming it was invalidated by the overarching federal law governing employee benefit plans.

A divided federal appeals court upheld the state law, and the Supreme Court will review that decision.

The cases are Kentucky Association of Health Plans v. Miller, 00-1471 and Pharmaceutical Research and Manufacturers of America v. Concannon, 01-188.