Pharm. Research & Mfrs. of Am. v. Walsh - 538 U.S. 644, 123 S. Ct. 1855 (2003)

Rule:

The Maine Rx Program was intended to enable individuals to buy drugs from retail pharmacies at a discount roughly equal to the rebate on Medicaid purchases. Me. Rev. Stat. Ann. tit. 22, § 2681(4)(Supp. 2002). The Medicaid program authorized federal financial assistance to States that chose to reimburse certain costs of medical treatment for needy persons. A state plan for medical assistance approved by the Secretary of Health and Human Services defined the categories of individuals eligible for benefits and the specific kinds of medical services that were covered. The plan must provide coverage for the categorically needy and, at the State's option, may also cover the medically needy. 

Facts:

In 1990, Congress enacted a cost-saving measure that required drug companies to pay rebates to States on their Medicaid purchases as a response to the increasing Medicaid expenditures for prescription drugs. Since then, state legislatures have enacted supplemental rebate programs to achieve additional cost savings on Medicaid purchases as well as for purchases made by other needy citizens. In 2000, the "Maine Rx" program was enacted primarily to provide discounted prescription drugs to Maine's uninsured citizens, which was open to all residents of the State. Under the program, the state will attempt to negotiate rebates with drug manufacturers to fund the reduced price for drugs offered to the program’s participants. That, if a drug company did not enter into the rebate agreement, its Medicaid sales will be subjected to a prior authorization procedure that required state agency approval to qualify a doctor's prescription for reimbursement. Thus, petitioner Pharmaceutical Research and Manufacturers of America, an association of nonresident drug manufacturers, sued respondents Peter E. Walsh, the Acting Commissioner of the Department of Human Services, and others, challenging the constitutionality of the program in question and claimed that the program was pre-empted by the federal Medicaid statute, the Medicaid Act and that it violated the negative Commerce Clause. Petitioner argued that the program imposed a significant burden on Medicaid recipients by requiring prior authorization in certain circumstances without serving any valid Medicaid purpose and that the program effectively regulated out-of-state commerce. The district court sustained both challenges and entered a preliminary injunction preventing the implementation of the statute concluding that any obstacle, no matter how modest, to the federal program's administration was sufficient to establish pre-emption. However, the Court of Appeals reversed.

Issue:

Was the program at issue pre-empted by the federal Medicaid statute?

Answer:

No.

Conclusion:

The court affirmed the judgment of the appellate court. The Supreme Court of the United States ruled that petitioner was not entitled to a preliminary injunction for its failure to carry its burden of showing a probability of success on the merits of its claims. The court held that petitioner did not show that it was entitled to preliminary injunction based on its commerce-clause claim, or pre-emption claim. The court found that petitioner failed to show that there was no Medicaid-related purpose served by the program. As the court explained that the program could provide medical benefits to persons who could be described as medically needy, likewise, the program could reduce Medicaid expenses, and encourage the use of cost-effective medications. The Court further found that petitioner did not establish a negative Commerce Clause violation. The court, thus, rejected petitioner’s arguments that the rebate requirement constituted impermissible extraterritorial regulation and that it discriminated against interstate commerce to subsidize in-state retail sales.