PhRMA's case against Maine's Medicaid waiver program argues that the program, as currently operating, is not approved by HHS.

The D.C. federal appeals court heard arguments Dec. 5 on HHS' approval of the "Healthy Maine" Prescription Drug Discount Program, which went into effect June 1.

The Pharmaceutical Research & Manufacturers of America maintains that Maine's funding of the plan with state money was not approved by HHS.

The Maine demonstration program approved by HHS is identical to an invalidated pharmacy discount program instituted in Vermont through a Medicaid waiver, PhRMA argues.

The Vermont program was struck down by the D.C. appeals court June 8, 2001 because the state's payments were fully reimbursed by manufacturer rebates and produced no savings for the Medicaid program (¹ Also see "PhRMA v. HHS" - Pink Sheet, 11 June, 2001., In Brief).

On July 3, 2001, Maine began making a contribution of 2% toward the cost of Healthy Maine program beneficiaries' scripts using "state-only" money (i.e. money for which no federal matching funds are paid).

A D.C. federal court ruled Feb. 25 that Healthy Maine qualifies for manufacturer rebates because of the state payments (² Also see "Maine Medicaid Waiver Qualifies For Rx Rebates By State Contributions – Court" - Pink Sheet, 4 March, 2002., p. 13).

D.C. appeals court Judge Raymond Randolph asked whether the 2% contribution is a violation of the program that was approved by HHS.

While not necessarily a violation, it is an unapproved aspect of the plan, PhRMA counsel John Roberts (Hogan & Hartson) said.

"Maine unilaterally decided to modify the PDDP to provide for contributions of two percent of the cost of PDDP beneficiaries' prescriptions using non-Medicaid 'state-only' funds. Maine never sought the Secretary's approval for the change, and the Secretary never approved it," PhRMA's July 31 brief states.

"The agency's action must be judged on the approval that was actually given...not on what Justice Department counsel surmise the secretary might have done if Maine had submitted its current program for approval," the brief states.

Department of Justice attorney Sushma Soni explained that HHS approval of Medicaid demonstrations is an evolving process. There are still details to be worked out once the approval letter is issued, she said.

D.C. appeals court Judge Harry Edwards asked when HHS approved monetary contributions from Maine.

Soni responded that HHS approval did not rule out state payments. It was always contemplated that there would be state contributions above the 18% manufacturer rebates.

Edwards stated that the court does not know HHS' opinion of the change. Maine amended its plan because the state knew the original framework "would not play" because of the Vermont decision, he said.

Maine Assistant Attorney General John Brautigam said that Healthy Maine was implemented in a different fashion than Vermont's program, but did not describe the 2% contribution as an amendment.

Edwards disagreed with Brautigam's characterization. "This is an amended program and a tricky area. The Secretary has said nothing."

Maine has appropriated funds to cover the 2% payments, which are expected to cost the state up to $1 mil. per year. Edwards stated there is no requirement that any payments be made, nor any stipulation of their amount.

Maine has been making payments since July, Brautigam said. While it is not a requirement, if the state stopped the payments it is likely PhRMA would bring another legal challenge.

The Maine program provides state residents with incomes up to 300% of the federal poverty level and no prescription drug coverage access to drugs at Medicaid prices, less the program subsidy. Maine estimates enrollment will reach 225,000 by the time the demonstration project ends in 2006.

PhRMA's challenge of the "Maine Rx" drug assistance program, which was not approved by HHS, is scheduled to be heard by the Supreme Court Jan. 22. In an amicus brief, HHS wrote that the Maine Rx program undermines the federal Medicaid law by serving a broader population (³ [A#00640400005], p. 7).

Maine Medicaid Waiver Plan Is Not Approved By HHS, PhRMA Argues

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