In a highly splintered opinion, the Supreme Court concluded 5/19/03 that the “Maine Rx Program” does not violate the Commerce Clause and could not be preliminarily enjoined from implementation on preemption grounds. The Program authorizes the State of Maine to negotiate agreements with drug companies for rebates on Medicaid drug purchases. Further, where no rebate agreement is entered with respect to a drug, the State may subject the drug to a “prior authorization” procedure, under which a doctor’s prescription will not qualify for reimbursement approval unless authorized by a state agency. The Court held that the Program does not violate the Commerce Clause because it does not regulate the price of any out-of-state transaction and does not impose a disparate burden on out-of-state competitors. Six justices also concluded that the district court erred when it preliminarily enjoined the Program on the ground that it was preempted by the Medicaid Act. No five Justices could agree, however, on a single rationale for this result.A plurality of Justices (Justices Stevens, Souter and Ginsburg) held that the Medicaid Act conferred substantial discretion on States such that a state rebate program could modestly undercut the Act without being preempted by it. Moreover, any determination about the Program’s impact on a Medicaid patient’s access to drugs would be sheer conjecture during a preliminary hearing. In an opinion concurring in part and concurring in the judgment, Justice Breyer took a similar tack, concluding that the Program could not be enjoined on preemption grounds simply upon a showing that the Medicaid Act would be harmed. Rather, Justice Breyer concluded that a court would have to conduct a careful balancing of harm and benefit and should give the Secretary of Health and Human Services an opportunity to comment on a State’s rebate program before enjoining it.
Justice Scalia provided a fifth vote for the result in the case, but adopted an entirely different approach to the preemption question in his concurrence in the judgment. He concluded that the only remedy permitted for a State’s failure to comply with its Medicaid Act obligations is set forth in the Act itself –- termination of funding by the Secretary. The instant suit was thus entirely improper. Justice Thomas also authored an opinion concurring in the judgment, but adopting a separate rationale. He concluded that the Program is not preempted as a matter of law because neither the Medicaid Act nor the relevant regulations contains a provision precluding States from negotiating prices for non-Medicaid drug purchases.
Finally, Justice O’Connor wrote a dissenting opinion on the preemption issue (in which the Chief Justice and Justice Kennedy joined), reasoning that the Program related to no purpose of the Medicaid Act and impeded its goal of helping the Act’s beneficiaries access medically necessary prescription drugs.