OCTOBER TERM, 2002
Syllabus
PHARMACEUTICAL RESEARCH AND MANUFACTURERS OF AMERICA
v.
WALSH, ACTING COMMISSIONER, MAINE DEPARTMENT
OF HUMAN SERVICES, ET AL.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIRST
CIRCUIT
No. 01-188. Argued January 22, 2003-Decided May 19,2003
A State participating in Medicaid must have a medical assistance
plan approved by the Secretary of Health and Human Services (HHS).
In response to increasing Medicaid expenditures for prescription
drugs, Congress enacted a cost-saving measure in 1990 that requires
drug companies to pay rebates to States on their Medicaid
purchases. States have since enacted supplemental rebate programs
to achieve additional cost savings on Medicaid purchases and
purchases for other needy citizens. The purpose of the "Maine Rx"
Program is to reduce prescription drug prices for state residents.
Under the program, Maine will attempt to negotiate rebates with
drug manufacturers. If a company does not enter into a rebate
agreement, its Medicaid sales will be subjected to a "prior
authorization" procedure that requires state agency approval to
qualify a doctor's prescription for reimbursement. Petitioner, an
association of nonresident drug manufacturers, challenged the
program before its commencement date, claiming that it is
pre-empted by the Medicaid Act and violates the negative Commerce
Clause. Without resolving any factual issues, the District Court
entered a preliminary injunction preventing the statute's
implementation, concluding,
inter alia, that any obstacle,
no matter how modest, to the federal program's administration is
sufficient to establish pre-emption. The First Circuit
reversed.
Held: The judgment is affirmed.
249
F.3d 66, affirmed.
JUSTICE STEVENS delivered the opinion of the Court with respect
to Parts I, II, III, and VI, concluding that petitioner has not
carried its burden of showing a probability of success on the
merits of its Commerce Clause claims. Its arguments-that the rebate
requirement constitutes impermissible extraterritorial regulation
and that it discriminates against interstate commerce in order to
subsidize in-state retail sales-are unpersuasive. Unlike the price
control statute invalidated in
Baldwin v. G.
A. F.
Seelig, Inc., 294 U. S. 511, and the
price affirma-
645
tion statute struck down in
Healy v.
Beer
Institute, 491 U.
S. 324, Maine Rx does not regulate the price of any
out-of-state transaction by its express terms or its inevitable
effect. Nor does Maine Rx impose a disparate burden on out-of-state
competitors. A manufacturer cannot avoid its rebate obligation by
opening production facilities in Maine and would receive no benefit
from the rebates even if it did so; the payments to local
pharmacists provide no special benefit to competitors of
rebatepaying manufacturers.
West Lynn Creamery, Inc. v.
Healy, 512 U.
S. 186, distinguished. pp. 668-670.
JUSTICE STEVENS, joined by JUSTICE SOUTER, JUSTICE GINSBURG, and
JUSTICE BREYER, concluded in Parts IV and VII:
(a) The answer to the question before the Court-whether
petitioner's showing was sufficient to support the District Court's
injunctionwill not determine the validity of Maine's Rx Program
since further proceedings may lead to another result. Moreover, the
Secretary may view Maine Rx as an amendment to its Medicaid Plan
that requires his approval before becoming effective. As the case
comes to this Court, the question is whether there is a probability
that Maine's program was pre-empted by the federal statute's mere
existence. Therefore, there is a presumption that the state statute
is valid, and the question asked is whether petitioner has
shouldered the burden of overcoming that presumption. pp.
660-662.
(b) At this stage of the litigation, petitioner has not carried
its burden of showing a probability of success on the merits of its
claims. P.670.
JUSTICE STEVENS, joined by JUSTICE SOUTER and JUSTICE GINSBURG,
concluded in Part V that petitioner's showing is insufficient to
support a finding that the Medicaid Act pre-empts Maine's Rx
Program insofar as it threatens to coerce manufacturers into
reducing their prices on non-Medicaid sales. Petitioner claims that
the potential interference with Medicaid benefits without serving
any Medicaid purpose is prohibited by the federal statute. However,
petitioner must show that Maine Rx serves no such goal. In fact,
Maine Rx may serve the Medicaidrelated purposes of providing
benefits to needy persons and curtailing the State's Medicaid
costs. While these purposes would not provide a sufficient basis
for upholding the program if it severely curtailed Medicaid
recipients' prescription drug access, the District Court erred in
assuming that even a modest impediment to such access would
invalidate the program. The Medicaid Act gives States substantial
discretion to choose the proper mix of amount, scope, and duration
limitations on coverage as long as care and services are provided
in the recipients' best interests.
Alexander v.
Choate, 469 U.
S. 287, 303. That a State's decision to curtail Medicaid
benefits may have been motivated by a state
646
Syllabus
policy unrelated to the Medicaid Act does not limit the scope of
its broad discretion to define the benefits package it will
finance. See
Beal v.
Doe, 432 U. S. 438. The
presumption against federal pre-emption of a state statute designed
to foster public health has special force when it appears, and the
Secretary has not decided to the contrary, that the two governments
are pursuing common purposes. At this stage of the proceeding, the
severity of any impediment that Maine's program may impose on a
Medicaid patient's access to the drug of her choice is a matter of
conjecture. Thus, the First Circuit correctly resolved the
pre-emption issue. Pp. 662-668.
JUSTICE BREYER concluded that petitioner cannot obtain a
preliminary injunction simply by showing minimal or quite modest
harm even though Maine offered no evidence of countervailing
Medicaid-related benefit. Proper determination of the pre-emption
question will demand a more careful balancing of Medicaid-related
harms and benefits than the District Court undertook. Thus, its
technical misstatement of the proper legal standard should not be
overlooked. Vacating the injunction will also help ensure that the
District Court takes account of the Secretary's views in further
proceedings, which is important since HHS administers Medicaid and
is better able than a court to assemble relevant facts and to make
relevant predictions, and since the law grants significant weight
to the Secretary's legal conclusions about whether Maine's program
is consistent with Medicaid's objectives. Under the Medicaid Act,
Maine may obtain those views when it files its plan with HHS for
approval. In addition, a court may "refer" a question to the
Secretary under the legal doctrine of "primary jurisdiction," which
seeks to produce better informed and uniform legal rulings by
allowing courts to take advantage of an agency's specialized
knowledge, expertise, and central position within a regulatory
regime. Where, as here, certain conditions are satisfied, see
Far East Conference v.
United States, 342 U. S. 570, 574-575, a
court may raise the doctrine on its own motion. A court may then
stay its proceedings to allow a party to initiate agency review.
Even if Maine chooses not to obtain the Secretary's views on its
own, the desirability of the District Court's having those views to
consider is relevant to the "public interest" determination that
often factors into whether a preliminary injunction should issue.
Pp.670-674.
JUSTICE SCALIA concluded that petitioner's statutory claim
should be rejected on the ground that the remedy for the State's
failure to comply with its Medicaid Act obligations is set forth in
the Act itself: termination of funding by the Secretary. Petitioner
must seek enforcement of Medicaid conditions by that authority and
may obtain relief in the courts
647
only when a denial of enforcement is arbitrary, capricious, an
abuse of discretion, or otherwise unlawful. 5 U. S. C. § 706(2)(A).
Pp. 674-675.
JUSTICE THOMAS concluded that Maine Rx is not pre-empted by the
Medicaid Act. The premise of petitioner's pre-emption claim is that
Maine Rx is "an obstacle to the accomplishment and execution of the
full purposes and objectives of Congress."
Hines v.
Davidowitz, 312 U. S. 52, 67. The Medicaid Act represents a
delicate balance between competing interests,
e. g.,
care and cost. It grants States broad discretion to impose prior
authorization, and proper consideration of the Secretary's role in
administering the Act forecloses petitioner's pre-emption claim.
The Act provides a complete list of the restrictions participating
States may place on prescription drug coverage. 42 U. S. C. §
1396r8(d)(1). The only stricture on a prior authorization program
is compliance with certain procedures, § 1396r-8(d)(5). The purpose
of § 1396r8(d)(1) is its effect-to grant participating States
authority to subject drugs to prior authorization subject only to §
1396r-8(d)(5)'s express limitations. In light of the broad grant of
discretion to States to impose prior authorization, petitioner
cannot produce a credible conflict between Maine Rx and the
Medicaid Act. Given the Secretary's authority to administer and
interpret the Medicaid Act, petitioner can prevail on its view that
the Medicaid Act pre-empts Maine Rx and renders it void under the
Supremacy Clause only by showing that the Medicaid Act is
unambiguous or that Congress has directly addressed the issue. See
Chevron U. S.
A. Inc. v.
Natural Resources Defense
Council, Inc., 467 U. S. 837, 842. However, the Act's text
cannot be read in such a way. Indeed, the Secretary has adopted an
interpretation of the Act that does not preclude States from
negotiating prices for non-Medicaid drug purchases. Obstacle
pre-emption's very premise is that Congress has not expressly
displaced state law and therefore not directly spoken to the
pre-emption question. Therefore, where an agency is charged with
administering a federal statute, as the Secretary is here,
Chevron imposes a perhaps-insurmountable barrier to an
obstacle pre-emption claim. Pp. 675-683.
STEVENS, J., announced the judgment of the Court and delivered
the opinion of the Court with respect to Parts I, II, III, and VI,
in which REHNQUIST, C. J., and O'CONNOR, KENNEDY, SOUTER, GINSBURG,
and BREYER, JJ., joined, an opinion with respect to Parts IV and
VII, in which SOUTER, GINSBURG, and BREYER, JJ., joined, and an
opinion with respect to Part V, in which SOUTER and GINSBURG, JJ.,
joined. BREYER, J., filed an opinion concurring in part and
concurring in the judgment,
post, p. 670. SCALIA, J.,
post, p. 674, and THOMAS, J.,
post, p. 675, filed
opinions concurring in the judgment. O'CONNOR, J., filed an opinion
concurring in part
648
Syllabus
and dissenting in part, in which REHNQUIST, C. J., and KENNEDY,
J., joined,
post, p. 684.
Carter G. Phillips argued the cause for petitioner. With him on
the briefs were Kathleen M. Sullivan, Daniel M. Price, Marinn F.
Carlson, Bruce C. Gerrity, and Ann R. Robinson.
Deputy Solicitor General Kneedler argued the cause for the
United States as amicus curiae urging reversal. With him on the
brief were Solicitor General Olson, Assistant Attorney General
McCallum, Lisa Schiavo Blatt, Mark B. Stern, Mark S. Davies, Alex
M. Azar II, Sheree R. Kanner, Henry R. Goldberg, and Janice L.
Hoffman.
Andrew S.
Hagler, Assistant Attorney General of
Maine, argued the cause for respondents. With him on the brief were
G.
Steven Rowe, Attorney General,
Paul Stern, Deputy
Attorney General,
John R. Brautigam, Assistant Attorney
General, and
Cabanne Howard. *
*Briefs of
amici curiae urging reversal were filed for
the Chamber of Commerce of the United States of America by
John G.
Roberts, Jr., Catherine E. Stetson, and
Robin S.
Conrad; for the International Patient
Advocacy Association et al. by
Bert W Rein; for the Long
Term Care Pharmacy Alliance by
David C.
Todd; for the
Pacific Legal Foundation by
Deborah J. La
Fetra; and for the Washington Legal Foundation et al. by
Daniel J. Popeo and
Richard A.
Samp.
Briefs of
amici curiae urging affirmance were filed for
the State of Massachusetts et al. by
Thomas F.
Reilly, Attorney General of Massachusetts, and
Linda A.
Tomaselli and
Peter Leight, Assistant Attorneys General,
and by the Attorneys General for their respective jurisdictions as
follows:
Bruce M. Botelho of Alaska,
Janet Napolitano
of Arizona,
Mark Pryor of Arkansas,
Bill Lockyer of
California,
Earl I. Anzai of Hawaii,
Steve Carter of
Indiana,
Thomas J. Miller of Iowa,
Albert
B. Chandler III of Kentucky,
Richard P. Ieyoub of
Louisiana,
J. Joseph Curran, Jr., of Maryland,
Jennifer M. Granholm of Michigan,
Mike Hatch of
Minnesota,
Mike Moore of Mississippi,
Jeremiah W (Jay)
Nixon of Missouri,
Mike McGrath of Montana,
Philip T.
McLaughlin of New Hampshire,
Patricia A. Madrid of New
Mexico,
Eliot Spitzer of New York,
W A. Drew
Edmondson of Oklahoma,
Hardy Myers of Oregon,
D.
Michael Fisher of
649
JUSTICE STEVENS announced the judgment of the Court and
delivered the opinion of the Court with respect to Parts I, II,
III, and VI, an opinion with respect to Parts IV and VII, in which
JUSTICE SOUTER, JUSTICE GINSBURG, and JUSTICE BREYER join, and an
opinion with respect to Part V, in which JUSTICE SOUTER and JUSTICE
GINSBURG join.
In response to increasing Medicaid expenditures for prescription
drugs,l Congress enacted a cost-saving measure in 1990 that
requires drug companies to pay rebates to States on their Medicaid
purchases. Over the last several years, 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. The "Maine Rx" program, enacted in 2000, is
primarily intended to provide discounted prescription drugs to
Maine's uninsured citizens but its coverage is open to all
residents of the State. Under the program, Maine will attempt to
negotiate rebates with drug manufacturers to fund the reduced price
for drugs offered to Maine Rx participants. If a drug company does
not enter into a rebate agreement, its
Pennsylvania,
Sheldon Whitehouse of Rhode Island,
Charlie M. Condon of South Carolina,
Mark Barnett of
South Dakota,
John Cornyn of Texas,
William H.
Sorrell of Vermont,
Christine O.
Gregoire of
Washington,
Darrell V. McGraw, Jr., of West Virginia, and
Anabelle Rodriguez of Puerto Rico; for AARP et al. by
Sarah Lenz Lock, Bruce Vignery, Michael Schuster, and
Robert M. Hayes; for the Maine Council of Senior Citizens et
al. by
Arn H. Pearson and
Thomas C.
Bradley;
and for the National Conference of State Legislatures et al. by
Richard Ruda and
James I. Crowley.
Sheldon V. Toubman filed a brief for Legal Services
Organizations Representing Medicaid Beneficiaries as
amicus
curiae.
1 From 1980 to 1989, payments for Medicaid prescription drugs
increased 179% while Medicaid expenditures for all services
increased by only 134%. Between 1982 and 1988, prescription drug
costs "increased at an average annual rate of 9.5 percent ... ,
more than any other component of the health care sector." M. Ford,
Congressional Research Service Report to Congress, Medicaid:
Reimbursement for Outpatient Prescription Drugs, CRS-15 (Mar. 7,
1991) (hereinafter Ford).
650
Medicaid sales will be subjected to a "prior authorization"
procedure.
In this case, an association of nonresident drug manufacturers
has challenged the constitutionality of the Maine Rx Program,
claiming that the program is pre-empted by the federal Medicaid
statute and that it violates the negative Commerce Clause. The
association has not alleged that the program denies Medicaid
patients meaningful access to prescription drugs or that it has
excluded any drugs from access to the market in Maine. Instead, it
contends that the program imposes a significant burden on Medicaid
recipients by requiring prior authorization in certain
circumstances without serving any valid Medicaid purpose, and that
the program effectively regulates out-of-state commerce. The
District Court sustained both challenges and entered a preliminary
injunction preventing implementation of the statute. The Court of
Appeals reversed, and we granted certiorari because the questions
presented are of national importance. 536 U. S. 956 (2002).
I
Congress created the Medicaid program in 1965 by adding Title
XIX to the Social Security Act.2 The program authorizes federal
financial assistance to States that choose to reimburse certain
costs of medical treatment for needy persons. In order to
participate in the Medicaid program, a State must have a plan for
medical assistance approved by the Secretary of Health and Human
Services (Secretary). 42 U. S. C. § 1396a(b).3 A state plan defines
the categories of individuals eligible for benefits and the
specific kinds of medical services that are covered. §§
1396a(a)(10), (17). The plan must
279 Stat. 343, as amended, 42 U. S. C. § 1396
et seq.
3 The Centers for Medicare & Medicaid Services (CMS) is the
agency administering the Medicaid program on behalf of the
Secretary.
651
provide coverage for the "categorically needy"4 and, at the
State's option, may also cover the "medically needy."5
Prior to 1990, the Medicaid statute did not specifically address
outpatient prescription drug coverage. The Secretary's regulations
and guidelines "set upper limits on each State's aggregate
expenditures for drugs." 6 Under plans approved by the Secretary,
some States designed and administered their own formularies,
listing the drugs that they would cover. States also employed
"prior authorization programs" that required approval by a state
agency to qualify a doctor's prescription for reimbursement. See,
e. g., Dodson v.
Parham, 427 F. Supp.
97, 100-101 (ND Ga. 1977) ("Georgia has historically administered
its prescription drug program on the basis of a drug 'formulary'
or, in other words, a restricted list of drugs for which Medicaid
will reimburse provider pharmacists. Thus, any drug not
specifically included on the list will not be reimbursed unless
prior approval is granted by [the administrator of Georgia Medicaid
program]");
Cowan v.
Myers, 187 Cal. App. 3d 968,
974-975, 232 Cal. Rptr. 299, 301-303 (1986) (describing 1982
California law providing that certain drugs would be covered
under
4 The "categorically needy" groups include individuals eligible
for cash benefits under the Aid to Families with Dependent Children
(AFDC) program, the aged, blind, or disabled individuals who
qualify for supplemental security income (SSI) benefits, and other
low-income groups such as pregnant women and children entitled to
poverty-related coverage. § 1396a(a)(10)(A)(i).
5 The "medically needy" are individuals who meet the
nonfinancial eligibility requirements for inclusion in one of the
groups covered under Medicaid, but whose income or resources exceed
the financial eligibility requirements for categorically needy
eligibility. § 1396a(a)(1O)(C). Individuals are typically "entitled
to medically needy protection when their income and resources,
after deducting incurred medical expenses, falls
[sic] below
the medically needy standards." House Subcommittee on Health and
the Environment of the Committee on Energy and Commerce, Medicaid
Source Book: Background Data and Analysis, 103d Cong., 1st Sess.,
167 (Comm. Print 1993).
6 Ford, at CRS-l.
652
California Medicaid program only after prior authorization).
These programs were not specifically governed by any federal law or
regulations, but rather were made part of the State Medicaid plans
and approved by the Secretary because they aided in controlling
Medicaid costs.7
Congress effectively ratified the Secretary's practice of
approving state plans containing prior authorization requirements
when it created its rebate program in an amendment contained in the
Omnibus Budget Reconciliation Act of 1990 (OBRA 1990).8 The new
program had two basic parts. First, it imposed a general
requirement that, in order to qualify for Medicaid payments, drug
companies must enter into agreements either with the Secretary or,
if authorized by the Secretary, with individual States, to provide
rebates on their Medicaid sales of outpatient prescription drugs.9
The rebate on a "single source drug" or an "innovator multiple
source drug" is the difference between the manufacturer's average
price and its "best price," or 15.1% of the average manufacturer
price, whichever is greater. 42 U. S. C. §§ 1396r-8(c)(1), (2). The
rebate for other drugs is 11.1% of the average manufacturer price.
See § 1396r-8(c)(3).
Second, once a drug manufacturer enters into a rebate agreement,
the law requires the State to provide coverage for that drug under
its plan unless the State complies with one of the exclusion or
restriction provisions in the Medicaid Act. See § 1396r-8(d). For
example, a State may exclude
7 "Before 1990, States had routinely required prior
authorization for prescription or dispensing of drugs in order to
control Medicaid costs .... In enacting the drug rebate provisions
of Section 1396r-8 in 1990, Congress did not intend to upset that
practice." Brief in Opposition for United States as
Amicus
Curiae 14-15.
8104 Stat. 1388-143.
9 The statute authorizes payment for some drugs not covered by
rebate agreements if a State determines that their availability is
essential to the health of beneficiaries, if they have been given a
special rating by the Federal Food and Drug Administration, and if
a doctor has obtained prior authorization for their use. See 42 U.
S. C. § 1396r-8(a)(3).
653
coverage of drugs such as "[a]gents ... used for cosmetic
purposes or hair growth." § 1396r-8(d)(2)(C).
Most relevant to this case, Congress allowed States, "as a
condition of coverage or payment for a covered outpatient drug," §
1396r-8(d)(5), to require approval of the drug before it is
dispensed. Thus, under OBRA 1990, except for a narrow category of
new drugs,10 "[a] State may subject to prior authorization any
covered outpatient drug," § 1396r8(d)(1)(A), so long as the State's
prior authorization program (1) provides a response by telephone or
other telecommunication device within 24 hours of a request for
prior authorization, and, (2) except for the listed excludable
drugs, provides for the dispensing of at least a 72-hour supply of
a covered drug in an emergency situation, see § 1396r-8(d)(5).
In the Omnibus Budget Reconciliation Act of 1993,11 Congress
further amended the Act to allow the States to use formularies
subject to strict limitations. That amendment expressly stated that
a prior authorization program that complies with the 24-hour and
72-hour conditions is not subject to the limitations imposed on
formularies.12 The 1993 amendment reenacted the provisions for
state prior authorization programs that had been included in OBRA
1990, omitting, however, the narrow exception for new drugs.
II
In 2000, the Maine Legislature established the Maine Rx Program
"to reduce prescription drug prices for residents of the State."
Me. Rev. Stat. Ann., Tit. 22, § 2681 (West Supp.
10 "A State may not exclude for coverage, subject to prior
authorization, or otherwise restrict any new biological or drug
approved by the Food and Drug Administration after the date of
enactment of this section, for a period of 6 months after such
approval." 104 Stat. 1388-150, § 1927(d)(6).
11107 Stat. 613.
12 "A prior authorization program established by a State under
paragraph (5) is not a formulary subject to the requirements of
this paragraph." § 1396r-8(d)(4).
654
2002). The statute provides that "the State [shall] act as a
pharmacy benefit manager in order to make prescription drugs more
affordable for qualified Maine residents, thereby increasing the
overall health of Maine residents, promoting healthy communities
and protecting the public health and welfare." § 2681(1). The
program is intended to enable individuals to buy drugs from retail
pharmacies at a discount roughly equal to the rebate on Medicaid
purchases. See § 2681(4).
The statute provides that any manufacturer or "labeler" 13
selling drugs in Maine through any publicly supported financial
assistance program "shall enter into a rebate agreement" with the
State Commissioner of Human Services (Commissioner). § 2681(3). The
Commissioner is directed to use his best efforts to obtain a rebate
that is at least equal to the rebate calculated under the federal
program created pursuant to OBRA 1990. See § 2681(4). Rebates are
to be paid into a fund administered by the Commissioner, and then
distributed to participating pharmacies to compensate them for
selling at discounted prices. § 2681(6).
For those manufacturers that do not enter into rebate
agreements, there are two consequences: First, their
nonparticipation is information that the Department of Human
Services must release "to health care providers and the public." §
2681(7). Second, and more importantly for our purposes, the
"department shall impose prior authorization requirements in the
Medicaid program under this Title, as permitted by law, for the
dispensing of prescription drugs provided by those
[nonparticipating] manufacturers and labelers."
Ibid.
The statute authorizes the department to adopt implementing
rules. § 2681(14). The rules that have been proposed would limit
access to the program to individuals who
13 A "labeler" is a person who receives prescription drugs from
a manufacturer or wholesaler and repackages them for later retail
sale. §
2681(2)(C).
655
do "not have a comparable or superior prescription drug benefit
plan." 14 The proposed rules also explain that Maine intends to
appoint a "Drug Utilization Review Committee," composed of
physicians and pharmacists who will evaluate each drug manufactured
by a company that has declined to enter into a rebate agreement to
decide whether it is clinically appropriate to subject the drug to
prior authorization.15 The State represents that it "certainly will
not subject any single-source drug that fulfills a unique
therapeutic function to the prior authorization process" even if
its manufacturer does not enter into a rebate agreement.16 The
determination "whether a particular drug should be subjected to a
prior authorization requirement will be based firmly upon
considerations of medical necessity, and in compliance with the
State's responsibilities as the administrator of the Maine Medicaid
Program." 17
III
Several months before January 1,2001, the intended commencement
date of the Maine Rx Program, the Commissioner, then Kevin
Concannon, sent a form letter to drug manufacturers enclosing a
proposed rebate agreement.18
14 App. 317. The statute authorizes coverage for all "qualified
Maine residents," Me. Rev. Stat. Ann., Tit. 22, § 2681(1) (West
Supp. 2002), and defines a qualified resident as one "who has
obtained from the department a Maine Rx enrollment card," §
2681(2)(F). In describing program goals, it provides: "It is not
the intention of the State to discourage employers from offering or
paying for prescription drug benefits for their employees or to
replace employer-sponsored prescription drug benefit plans that
provide benefits comparable to those made available to qualified
Maine residents under this subchapter." § 2681(1). In their brief,
respondents state: "It would be economically irrational for a
person with prescription drug coverage to use Maine Rx, but if any
patient mistakenly attempts to do so, [the] proposed regulations
... will not allow it." Brief for Respondents 7.
15 See App. 268, 278.
16Id., at 149.
17 Ibid.
18 See
id., at 62-74.
656
Although 27 individual manufacturers elected to participate by
executing the proposed agreement, petitioner, the Pharmaceutical
Research and Manufacturers of America, an association representing
manufacturers that "account for more than 75 percent of brand name
drug sales in the United States," 19 responded by bringing this
action challenging the validity of the statute. Its complaint was
accompanied by a motion for a preliminary injunction, supported by
seven affidavits.
Four of the affidavits describe the nature of the association
and the companies' methods of distribution, emphasizing the fact
that, with the exception of sales to two resident distributors, all
of their prescription drug sales occur outside of Maine.20 Three of
them comment on the operation of prior authorization programs
administered by private managed care organizations, describing
their actual and potential adverse impact on both manufacturers and
patients. Thus, one executive stated: "Imposition of a prior
authorization [(PA)] requirement with respect to a particular drug
severely curtails access to the drug for covered patients and
sharply reduces the drug's market share and sales, as the P A
causes a shift of patients to competing drugs of other
manufacturers that are not subject to a P A. Because a P A imposes
additional procedural burdens on physicians prescribing the
manufacturer's drug and retail pharmacies dispensing it, the effect
of a PAis to diminish the manufacturer's goodwill that helped
foster demand for its drug over competing drugs produced by other
manufacturers, and to shift physician and patient loyalty to those
competing drugs, perhaps permanently." 21 Another affidavit
described how prior authorization by a managed care organization in
Nevada had sharply reduced the market share of four of SmithKline's
drugs. For example, the market share of Aug-
19Id., at 37 (Complaint ~ 6).
2°Id., at 50, 53,
76-77, 87.
21Id., at 57 (affidavit of George Bilyk of Janssen
Pharmaceutica, Inc.).
657
mentin, a drug used to treat bacterial infections, declined from
49% to 18% in the six months after the program was imposed.22 In
the third affidavit, Dr. Howell of SmithKline Beecham Corporation
expressed the opinion that prior authorization had never been
required in one program "for the purpose of influencing the
manufacturer's pricing behavior in another program," and that such
use, "without regard to safety or efficacy, will lead to drugs
being prescribed that are less safe and efficacious." 23
Respondents' opposition to the motion was supported by
Concannon's own affidavit and the affidavits of two doctors. They
do not dispute the factual assertions concerning the impact of
prior authorization on the drug companies' market shares, but
instead comment on the benefits of prior authorization for
patients. The State's Medicaid Medical Director, Dr. Clifford,
explained that "[p]hysicians in Maine are already well acquainted
with the extensive prior authorization programs of the four
HMO/Insurance programs which collectively cover nearly half the
state's residents" and that the State had taken steps to "ensure
that physicians will always be able to prescribe the safest and
most efficacious drugs for their Medicaid patients." 24 The second
doctor, Dr. Richardson, stated that he prescribed Augmentin as a
second line drug, that the drug amoxicillin was effective in
treating ear infections 80%-85% of the time, and that Augmentin
was
22Id., at 112 (affidavit of David Moules of SmithKline
Beecham Corp.). 23
Id., at 103-104. Dr. Howell further
stated: "Prior authorization is often employed by managed care
organizations ('MCOs') to enforce a drug formulary and is usually
intended to limit the drugs to be prescribed by health care
professionals. MCOs typically require health care professionals to
obtain prior authorization from the MCO before prescribing a drug
(1) to ensure proper use of prescription drugs with a high
potential for inappropriate use, (2) to limit the use of
prescription drugs with severe or life threatening side effects
and/or drug interactions; and (3) to encourage the use of
cost-effective medications without diminishing safety or efficacy."
Id., at 102-103.
24Id., at 149-150.
658
"3 to 6 times as expensive" as amoxicillin.25 Concannon's
affidavit described the composition of a committee of physicians
and pharmacists that would "make the final determination of the
clinical appropriateness of any recommendation that a prior
authorization requirement be imposed with respect to a particular
prescription drug manufactured by a manufacturer which has not
entered into a Maine Rx Rebate Agreement." 26
Without resolving any factual issues, the District Court granted
petitioner's motion for a preliminary injunction. Relying on
Healy v.
Beer Institute, 491 U. S. 324, 336
(1989), the court first held that Maine had no power to regulate
the prices paid to drug manufacturers in transactions that occur
out of the State. Recognizing that some of their sales were made to
two distributors in Maine, the court further held that the Medicaid
Act pre-empted Maine's Rx Program insofar as it threatened to
impose a prior authorization requirement on nonparticipating
manufacturers. In so holding, the court assumed for the purpose of
the decision that the" 'Department of Human Services will not deny
a single Medicaid recipient access to the safest and most
efficacious prescription drug therapy indicated for their
individual medical circumstances."'27 In that court's view,
pre-emption was nevertheless required because "Maine can point to
no
Medicaid purpose in this new prior authorization
requirement that Maine has added for Medicaid prescription drugs.
Maine has not just passed a law that might conflict with the
objectives of a federal law. It has actually taken the federal
Medicaid program and altered it to serve Maine's local purposes."
28 In the District Court's view, the fact that the
25Id., at 154. 26Id., at 167.
27Civ. No. 00-157-B-H (D. Me., Oct. 26,2000), App. to Pet. for
Cert. 68.
28 Ibid. The court further observed: "If Maine can
use its authority
over Medicaid authorization to leverage drug manufacturer
rebates for the benefit of uninsured citizens, then it can just as
easily put the rebates into
659
alteration served purposes outside the scope of the Medicaid
program and created an obstacle to the administration of the
federal program was sufficient to establish pre-emption: "No matter
how modest an obstacle the new prior authorization amounts to (the
parties disagree on the severity of the obstacle), it is an
obstacle-drugs on the list must be approved by the state Medicaid
Medical Director before they can be dispensed .... " 29
The Court of Appeals disagreed with the District Court's
analysis of the pre-emption issue for three reasons. First, since
the federal statute expressly authorizes use of prior
authorization, it found "no conflict between the Maine Act and
Medicaid's structure and purpose."
249 F.3d
66, 75
(CA1 2001). In its view, as long as there is
compliance with the federal 24- and 72-hour conditions, the State's
motivation for imposing the requirement is irrelevant. Second,
given the absence of an actual conflict, the court found that the
mere fact that Maine Rx "fails to directly advance the purpose of
the federal program" is an insufficient basis for "inflicting the
'strong medicine' of preemption" on a state statute.
Id., at
76. Third, the court further stated that, assuming the relevance of
the State's motivation, "the Maine Rx Program furthers Medicaid's
aim of providing medical services to those whose 'income and
resources are insufficient to meet the costs of necessary medical
services,' 42 U. S. C. § 1396, even if the individuals covered by
the Maine Rx Program are not poor enough to qualify for Medicaid."
Ibid. Moreover, the court held that there is evidence that
making prescription drugs more accessible to the uninsured may keep
some of them off Medicaid thereby minimizing the State's Medicaid
expenditures.
The Court of Appeals also reviewed the affidavits and concluded
that they "fall short of establishing that the Act will
a state program for highway and bridge construction or school
funding."
Ibid.
29 Ibid.
660
Opinion of STEVENS, J.
inflict inevitable or even probable harm" on Medicaid patients,
and thus were insufficient to support a pre-emptionbased facial
challenge.
Id., at 78. The court did, however, express
concern that the prior authorization requirement might affect the
quality of medical care for Medicaid recipients in subtle ways,
such as inconveniencing prescribing physicians. It therefore
expressly preserved petitioner's right to renew its pre-emption
challenge after implementation of the program "should there be
evidence that Medicaid recipients are harmed by the prior
authorization requirement 'as applied.'"
Ibid. The Court
also found no violation of the dormant Commerce Clause and vacated
the temporary injunction, but stayed its mandate pending our review
of the case.
IV
The question before us is whether the District Court abused its
discretion when it entered the preliminary injunction. See
Doran v.
Salem Inn, Inc., 422 U. S. 922, 931-932
(1975). By no means will our answer to that question finally
determine the validity of Maine's Rx Program. The District Court
did not conduct an evidentiary hearing and did not resolve any
factual disputes raised by the affidavits filed by the parties.
Accordingly, no matter how we answer the question whether
petitioner's showing was sufficient to support the injunction,
further proceedings in this case may lead to a contrary result.
Moreover, there is also a possibility that the Secretary may
view the Maine Rx Program as an amendment to its Medicaid Plan that
requires his approval before it becomes effective.30 While the
petition for certiorari was pending,
30We note that CMS, acting on behalf of the Secretary, see n. 3,
supra, sent a letter on September 18, 2002, to all of the
state Medicaid directors. In that letter, the CMS Director
indicated that "the establishment of a prior authorization program
for Medicaid covered drugs to secure drug benefits, rebates, or
discounts for non-Medicaid populations is a significant component
of a State plan and we would therefore expect that a State
661
the United States filed a brief recommending that we deny
review, in part because further proceedings may clarify the issues.
Its brief cautioned against the adoption of a rule prohibiting
prior authorization programs whenever they operate in part to
benefit a non-Medicaid population, and suggested that a program
tailored to benefit needy persons who are not Medicaid-eligible
might advance Medicaid-related goals.31 That brief, however, as
well as the Federal Government's brief filed after we granted
review, expressed the opinion that, because Maine's program was
adopted without the Secretary's approval and was open to all Maine
residents regardless of financial need, it was not tailored to
achieve Medicaid-related goals and was therefore invalid. Like the
interlocutory judicial rulings in this case, we assume that a more
complete understanding of all the relevant facts might lead to a
modification of the views expressed in those briefs. In all events,
we must confront the issues without the benefit of either a
complete record or any dispositive ruling by the Secretary.
The issue we confront is, of course, quite different from the
question that would be presented if the Secretary, after a hearing,
had held that the Maine Rx Program was an impermissible amendment
of its Medicaid Plan. In such event, the Secretary's ruling would
be presumptively valid. As the case comes to us, however, the
question is whether there is a probability that Maine's program was
pre-empted by the mere existence of the federal statute. We start
therefore with a presumption that the state statute is valid, see
Davies Warehouse Co. v.
Bowles, 321 U. S. 144, 153
(1944), and ask
would submit such a program for CMS review under the State plan
process." App. to Brief in Opposition for United States as
Amicus Curiae 48a.
31 Brief in Opposition for United States as
Amicus Curiae
9, 12 ("A prescription drug discount, made possible by encouraging
manufacturers to give rebates to the State, may significantly
decrease the chance that such individuals will become
Medicaid-eligible").
662
Opinion of STEVENS, J.
whether petitioner has shouldered the burden of overcoming that
presumption.
v
The centerpiece of petitioner's attack on Maine's Rx Program is
its allegedly unique use of a threat to impose a prior
authorization requirement on Medicaid sales to coerce manufacturers
into reducing their prices on sales to non-Medicaid recipients.
Petitioner argues, and the District Court held, that the potential
interference with the delivery of Medicaid benefits without any
benefit to the federal program is prohibited by the federal
statute. In accepting this argument, the District Court relied
heavily on the fact that Maine had failed to identify any
"Medicaid purpose" in its new authorization requirement. It
appears that Maine had argued before the District Court that such a
purpose was unnecessary because the federal statute expressly
authorizes what it has done.
In this Court, petitioner argues that it could not have been an
abuse of discretion for the District Court to decide the case on
the assumption that the program will serve no Medicaid purpose,
even if that assumption is erroneous, given that the State,
insisting that no such purpose was necessary, offered no Medicaid
purpose in its opposition to the motion for a temporary injunction.
To the extent that petitioner is relying on a waiver theory, such
reliance is inappropriate because the State never represented that
there was no Medicaid purpose served by its program; it simply
argued that it did not need to offer one. Regardless of the legal
position taken by the State, petitioner bore the burden of
establishing, by a clear showing, a probability of success on the
merits. See
Mazurek v.
Armstrong, 520 U. S. 968, 972 (1997)
(per curiam); cf.
Benten v.
Kessler, 505 U. S. 1084, 1085
(1992) (per curiam) (requiring movant to demonstrate
a substantiallikelihood of success on the merits). Accordingly, it
was petitioner's burden to show that there was no Medicaidrelated
goal or purpose served by Maine Rx. Given that
663
burden, if the program on its face clearly serves some
Medicaid-related goals, it would follow that the District Court's
evaluation rested on an erroneous predicate. We are persuaded that
there are three such goals plainly present in the Maine Rx
Program.
The Court of Appeals identified two Medicaid-related interests
that will be served if the program is successful and rebates become
available on sales to uninsured individuals. First, the program
will provide medical benefits to persons who can be described as
"medically needy" even if they do not qualify for AFDC or SSI
benefits. There is some factual dispute concerning the extent to
which the program will also benefit nonneedy persons, but even if
the program is more inclusive than the Secretary thinks it should
be, the potential benefits for nonneedy persons would not nullify
the benefits that would be provided to the neediest segment of the
uninsured population.32 Second, there is the possibility that, by
enabling some borderline aged and infirm persons better access to
prescription drugs earlier, Medicaid expenses will be reduced. If
members of this borderline group are not able to purchase necessary
prescription medicine, their conditions may worsen, causing further
financial hardship and thus making it more likely that they will
end up in the Medicaid program and require more expensive
treatment.
A third rather obvious Medicaid purpose will be fostered
whenever it is necessary to impose the prior authorization
requirement on a manufacturer that refuses to participate. As the
record demonstrates, private managed care organizations typically
require prior authorization both to protect patients from
inappropriate prescriptions and "to encourage the use of
cost-effective medications without diminishing
32We note in this regard that it is estimated that almost
two-thirds of the nonelderly uninsured are low-income individuals
or come from lowincome families making less than 200% of the
federal poverty level. See Kaiser Commission on Medicaid and the
Uninsured, The Uninsured: A Primer 2 (Mar. 2001).
664
Opinion of STEVENS, J.
safety or efficacy."33 No doubt that is why Congress expressly
preserved the States' ability to adopt that practice when it passed
the Medicaid amendments in 1990.34 The fact that prior
authorization actually does produce substantial cost savings for
organizations purchasing large volumes of drugs is apparent both
from the affidavits in the record describing the impact of such
programs on manufacturers' market shares and from the results of a
program adopted in Florida. See
Pharmaceutical Research and
Manufacturers of America v.
Meadows, 304 F.3d
1197 (CAll 2002).35 Avoiding unnecessary costs in the
administration of a State's Medicaid program obviously serves the
interests of both the Federal Government and the States that pay
the cost of providing prescription drugs to Medicaid patients.
The fact that the Maine Rx Program may serve Medicaidrelated
purposes, both by providing benefits to needy persons and by
curtailing the State's Medicaid costs, would not
33 See n. 23,
supra.
34 "As under current law, States would have the option of
imposing prior authorization requirements with respect to covered
prescription drugs in order to safeguard against unnecessary
utilization and assure that payments are consistent with
efficiency, economy, and quality of care." H. R. Rep. No. 101-881,
p. 98 (1990).
35 "The new Florida law ... exempts certain Medicaid-eligible
drugs from a 'prior authorization' requirement. If a drug is not on
the preferred list, the prescribing doctor must call a state
pharmacist to obtain approval of its use. In the course of this
procedure, the pharmacist informs the doctor of the availability of
other drugs (usually on the preferred drug list) that allegedly
have comparable therapeutic value but are less expensive. The
actual phone calls tend to be relatively brief (usually less than
10 minutes in length), and approval of the prescribing doctor's
first-choice drug is guaranteed in 100 percent of all cases,
provided only that he or she make the telephone call. During the
first three months of the program, approximately 55 percent of all
these calls have resulted in a change of the prescription to a drug
on the preferred drug list. Naturally, because this procedure may
tend to promote less profitable drugs at the expense of more
profitable ones, it is not favored by the pharmaceutical
manufacturers that brought this lawsuit." 304 F. 3d, at 1198.
665
provide a sufficient basis for upholding the program if it
severely curtailed Medicaid recipients' access to prescription
drugs. Cf. 42 U. S. C. § 1396a(a)(19) (State Medicaid plan must
assure that care and services are to be provided "in a manner
consistent with ... the best interests of the recipients"). It was,
however, incorrect for the District Court to assume that any
impediment, "[n]o matter how modest," to a patient's ability to
obtain the drug of her choice at state expense would invalidate the
Maine Rx Program. Civ. No. 00-157-B-H, App. to Pet. for Cert.
68.
We have made it clear that the Medicaid Act "gives the States
substantial discretion to choose the proper mix of amount, scope,
and duration limitations on coverage, as long as care and services
are provided in 'the best interest of the recipients.'"
Alexander v.
Choate, 469 U. S. 287, 303
(1985). In that case, we rejected a challenge brought by a class of
handicapped persons to a Tennessee cost-saving measure that reduced
the number of annual days of inpatient hospital care for Medicaid
patients from 20 to 14, emphasizing that the change did not deny
beneficiaries "meaningful access" to medical services.
Id.,
at 302, 306. The District Court's finding that the 14-day
limitation would fully serve 95% of handicapped individuals
eligible for Medicaid satisfied the statutory standard.
In this case, the District Court made no comparable finding, but
assumed that Maine would fully comply with all federal requirements
and "not deny a single Medicaid recipient access to the safest and
most efficacious prescription drug therapy indicated for their
[sic] individual medical circumstances." 36 The District
Court's assumption gave appropriate credence to the affidavits
filed on behalf of the State, and, under our reasoning in
Alexander, reflects compliance with the statutory
standard.
36 Civ. No. 00-157-B-H, App. to Pet. for Cert. 68 (internal
quotation marks omitted).
666
Opinion of STEVENS, J.
The fact that a State's decision to curtail Medicaid benefits
may have been motivated by a state policy unrelated to the Medicaid
Act does not limit the scope of its broad discretion to define the
package of benefits it will finance. In
Beal v.
Doe,
432 U. S. 438
(1977), despite accepting the plaintiffs' submission that
nontherapeutic abortions are both less dangerous and less expensive
than childbirth, we held that Pennsylvania's interest in
encouraging normal childbirth provided an adequate justification
for its decision to exclude the abortion procedure from its
Medicaid program. Maine's interest in protecting the health of its
uninsured residents also provides a plainly permissible
justification for a prior authorization requirement that is assumed
to have only a minimal impact on Medicaid recipients' access to
prescription drugs. The Medicaid Act contains no categorical
prohibition against reliance on state interests unrelated to the
Medicaid program itself when a State is fashioning the particular
contours of its own program. It retains the "considerable latitude"
that characterizes optional participation in a jointly financed
benefit program.37
The presumption against federal pre-emption of a state statute
designed to foster public health,
Hillsborough County v.
Automated Medical Laboratories, Inc., 471 U. S. 707, 715-718
(1985), has special force when it appears, and the Secretary has
not decided to the contrary, that the two governments are pursuing
"common purposes,"
New York State Dept. of Social Servs. v.
Dublino, 413
U. S. 405, 421 (1973). In
Dublino, we rejected a
pre-emption challenge to a state statute that imposed employment
requirements as conditions for continued eligibility for AFDC
benefits that went beyond the federal requirements. Commenting
on
37 "There is no question that States have considerable latitude
in allocating their AFDC resources, since each State is free to set
its own standard of need and to determine the level of benefits by
the amount of funds it devotes to the program."
King v.
Smith, 392 U.
S. 309, 318-319 (1968) (footnotes omitted).
667
New York's interest in encouraging employment of its citizens,
we wrote:
"To the extent that the Work Rules embody New York's attempt to
promote self-reliance and civic responsibility, to assure that
limited state welfare funds be spent on behalf of those genuinely
incapacitated and most in need, and to cope with the fiscal
hardships enveloping many state and local governments, this Court
should not lightly interfere. The problems confronting our society
in these areas are severe, and state governments, in cooperation
with the Federal Government, must be allowed considerable latitude
in attempting their resolution." Id., at 413.
The mere fact that the New York program imposed a nonfederal
obstacle to continued eligibility for benefits did not provide a
sufficient basis for pre-emption, but we left open questions
concerning possible conflicts with the federal program for
resolution in further proceedings.
Id., at 422-423.
Similarly, in this case, the mere fact that prior authorization may
impose a modest impediment to access to prescription drugs provided
at government expense does not provide a sufficient basis for
pre-emption of the entire Maine Rx Program.
At this stage of the proceeding, the severity of any impediment
that Maine's program may impose on a Medicaid patient's access to
the drug of her choice is a matter of conjecture. To the extent
that drug manufacturers agree to participate in the program, there
will be no impediment. To the extent that the manufacturers refuse,
the Drug Utilization Review Committee will determine whether it is
clinically appropriate to subject those drugs to prior
authorization. If the committee determines prior authorization is
required, that requirement may result in the delivery of a less
expensive drug than a physician first prescribed, but on the
present record we cannot conclude that a significant
668
number of patients' medical needs-indeed, any patient's medical
needs-will be adversely affected.
The record does demonstrate that prior authorization may well
have a significant adverse impact on the manufacturers of brand
name prescription drugs and that it will impose some administrative
costs on physicians. The impact on manufacturers is not relevant
because any transfer of business to less expensive products will
produce savings for the Medicaid program. The impact on doctors may
be significant if it produces an administrative burden that affects
the quality of their treatment of patients, but no such effect has
been proved. Moreover, given doctors' familiarity with the
extensive use of prior authorization in the private sector, any
such effect seems unlikely.
We therefore agree with the Court of Appeals' resolution of the
pre-emption issue based on the record before us. We again reiterate
that the question whether the Secretary's approval must be sought
before Maine Rx Program may go into effect is not before us. Along
these same lines, we offer no view as to whether it would be
appropriate for the Secretary to disapprove this program if Maine
had asked the Secretary to review it. We also offer no view as to
whether it would be proper for the Secretary to disallow funding
for the Maine Medicaid program if Maine fails to seek approval from
the Secretary of its Maine Rx Program. Based on the CMS letter of
September 18, 2002,38 it appears that the Secretary is likely to
take some action with respect to this program. Until the Secretary
does, however, we cannot predict at this preliminary stage the
ultimate fate of the Maine Rx Program, and we limit our holding
accordingly.
VI
Whereas petitioner's pre-emption challenge focused on the
effects of the prior authorization requirement that would fol-
38 See n. 30,
supra.
669
low a manufacturer's refusal to participate in the Rx Program,
its Commerce Clause challenge focuses on the effects of the rebate
agreements that will follow manufacturer compliance with the
program. As we understand the challenge, the alleged harm to
interstate commerce would be the same regardless of whether
manufacturer compliance is completely voluntary or the product of
coercion. Petitioner argues, first, that the rebate requirement
constitutes impermissible extraterritorial regulation, and second,
that it discriminates against interstate commerce in order to
subsidize in-state retail sales. Neither argument is
persuasive.
Writing for the Court in
Baldwin v. G.
A. F. Seelig,
Inc., 294 U. S.
511, 521 (1935), Justice Cardozo made the classic observation
that "New York has no power to project its legislation into Vermont
by regulating the price to be paid in that state for milk acquired
there." That proposition provided the basis for the majority's
conclusion in
Healy v.
Beer Institute, 491 U. S. 324 (1989),
that a Massachusetts price affirmation statute had the
impermissible effect of regulating the price of beer sold in
neighboring States. Petitioner argues that the reasoning in those
cases applies to what it characterizes as Maine's regulation of the
terms of transactions that occur elsewhere. But, as the Court of
Appeals correctly stated, unlike price control or price affirmation
statutes, "the Maine Act does not regulate the price of any
out-of-state transaction, either by its express terms or by its
inevitable effect. Maine does not insist that manufacturers sell
their drugs to a wholesaler for a certain price. Similarly, Maine
is not tying the price of its in-state products to out-of-state
prices." 249 F. 3d, at 81-82 (footnote omitted). The rule that was
applied in
Baldwin and
Healy accordingly is not
applicable to this case.
In
West Lynn Creamery, Inc. v.
Healy, 512 U. S. 186 (1994), we
reviewed the constitutionality of a Massachusetts pricing order
that imposed an assessment on all fluid milk sold by dealers to
Massachusetts retailers and distributed
670
Opinion of BREYER, J.
the proceeds to Massachusetts dairy farmers. Because two-thirds
of the assessed milk was produced by out-of-state farmers while the
entire fund was used to benefit in-state farmers, the order
effectively imposed a tax on out-of-state producers to subsidize
production by their in-state competitors. We concluded that the
program was invalid because it had a discriminatory effect
analogous to a protective tariff that taxes goods imported from
neighboring States but does not tax similar products produced
locally.
Petitioner argues that Maine's Rx fund is similar because it
would be created entirely from rebates paid by out-of-state
manufacturers and would be used to subsidize sales by local
pharmacists to local consumers. Unlike the situation in
West
Lynn, however, the Maine Rx Program will not impose a disparate
burden on any competitors. A manufacturer could not avoid its
rebate obligation by opening production facilities in Maine and
would receive no benefit from the rebates even if it did so; the
payments to the local pharmacists provide no special benefit to
competitors of rebate-paying manufacturers. The rule that was
applied in
West Lynn is thus not applicable to this
case.
VII
At this stage of the litigation, petitioner has not carried its
burden of showing a probability of success on the merits of its
claims. And petitioner has not argued that the Court of Appeals was
incorrect in holding that other factors-such as the risk of
irreparable harm, the balance of the equities, and the public
interest-do not alter the analysis of its injunction request. The
judgment of the Court of Appeals is affirmed.
It is so ordered.
JUSTICE BREYER, concurring in part and concurring in the
judgment.
I join Parts I-III and Part VI of the Court's opinion and Parts
IV and VII of the plurality's opinion. I also agree
671
with Part V's conclusion. The District Court's entry of a
preliminary injunction rested upon a determination that federal
Medicaid law pre-empted the Maine Rx Program as long as Maine's
prior authorization program posed some obstacle,
"'[n]o matter
how modest,'" to realizing federal Medicaid goals.
Ante,
at 659 (majority opinion) (emphasis added). Like the plurality, I
believe that the italicized phrase understates the strength of the
showing that the law required petitioner to make.
Ante, at
667.
To prevail, petitioner ultimately must demonstrate that Maine's
program would "seriously compromise important federal interests."
Arkansas Elec. Cooperative Corp. v.
Arkansas Pub. Servo
Comm'n, 461 U. S.
375, 389 (1983). Cf.
Rosado v.
Wyman, 397 U. S. 397, 422-423
(1970). Petitioner consequently cannot obtain a preliminary
injunction simply by showing minimal or quite "modest" harmeven
though Maine offered no evidence of countervailing Medicaid-related
benefit,
post, at 687-688 (O'CONNOR, J., concurring in part
and dissenting in part). The relevant statutory language, after
all, expressly permits prior authorization programs, 42 U. S. C. §
1396r-8(d)(1), and Congress may well have believed that such
programs, in general, help Medicaid by generating savings. See
ante, at 651-653, and n. 7 (majority opinion). That being
so, Congress would not have intended to forbid prior authorization
programs virtually
per se-i. e., on the showing of slight
harm-even if no specific Medicaid-related benefit is apparent in a
particular case.
I recognize that petitioner presented evidence to the District
Court that could have justified a stronger conclusion.
E.
g., App. 57, 103-104. Cf. Brief for Legal Services Organizations
Representing Medicaid Beneficiaries as
Amici Curiae 14. Yet
the District Court's preliminary injunction nonetheless rests upon
premises that subsequent developments have made clear are
unrealistic. For one thing, despite Maine's initial failure to
argue the matter, Maine's program may further certain
Medicaid-related objectives, at
672
Opinion of BREYER, J.
least to some degree.
Ante, at 663-665 (plurality
opinion). For another, the Secretary of Health and Human Services
(whose views are highly relevant to the question before us,
infra this page) has indicated that state programs somewhat
similar to Maine's may prove consistent with Medicaid objectives,
and the Secretary has approved at least one such program.
Ante, at 660-661, n. 30 (plurality opinion); Letter from
Theodore B. Olson, Solicitor General, to William K. Suter, Clerk of
the Court (Jan. 10, 2003). As a result, it is now apparent that
proper determination of the pre-emption question will demand a more
careful balancing of Medicaidrelated harms and benefits than the
District Court undertook. Cf.
California v.
FERC,
495 U. S. 490,
506 (1990) (finding a state law pre-empted where it "would disturb
and conflict with the balance embodied in [a] considered federal
agency determination"). These postentry considerations, along with
the general importance of the pre-emption question, convince me
that we should not overlook the District Court's technical
misstatement of the proper legal standard, and that we should
therefore affirm the Court of Appeals' judgment vacating the
injunction.
By vacating the injunction, we shall also help ensure that the
District Court takes account of the Secretary's views in further
proceedings that may involve a renewed motion for a preliminary
injunction. It is important that the District Court do so. The
Department of Health and Human Services (HHS) administers the
Medicaid program. Institutionally speaking, that agency is better
able than a court to assemble relevant facts
(e. g.,
regarding harm caused to present Medicaid patients) and to make
relevant predictions
(e. g., regarding furtherance of
Medicaid-related goals). And the law grants significant weight to
any legal conclusion by the Secretary as to whether a program such
as Maine's is consistent with Medicaid's objectives. See,
e.
g., Chevron U. S.
A. Inc. v.
Natural
Resources Defense Council, Inc., 467 U. S.
673
837 (1984);
Skidmore v.
Swift &
Co.,
323 U. S. 134
(1944). Cf.
post, at 680-681 (THOMAS, J., concurring in
judgment).
The Medicaid statute sets forth a method through which Maine may
obtain those views. A participating State must file a Medicaid plan
with HHS and obtain HHS approval. 42 U. S. C. § 1396. A State must
also promptly file a plan amendment to reflect any "[m]aterial
changes in State law, organization, or policy, or in the State's
operation of the Medicaid program." 42 CFR § 430. 12(c) (2002). And
the Secretary has said that a statute like Maine's is a
"significant component of a state plan" with respect to which Maine
is expected to file an amendment. App. to Brief for United States
as
Amicus Curiae 48a.
In addition, the legal doctrine of "primary jurisdiction"
permits a court itself to "refer" a question to the Secretary. That
doctrine seeks to produce better informed and uniform legal rulings
by allowing courts to take advantage of an agency's specialized
knowledge, expertise, and central position within a regulatory
regime.
United States v.
Western Pacific R. Co.,
352 U. S. 59,
63-65 (1956). "No fixed formula exists" for the doctrine's
application.
Id., at 64. Rather, the question in each
instance is whether a case raises "issues of fact not within the
conventional experience of judges," but within the purview of an
agency's responsibilities; whether the "limited functions of review
by the judiciary are more rationally exercised, by preliminary
resort" to an agency "better equipped than courts" to resolve an
issue in the first instance; or, in a word, whether preliminary
reference of issues to the agency will promote that proper working
relationship between court and agency that the primary jurisdiction
doctrine seeks to facilitate.
Far East Conference v.
United States, 342 U. S. 570, 574-575
(1952); see also
Western Pacific R. Co., supra, at 63-65.
Cf. 2 R. Pierce, Administrative Law § 14.4, p. 944 (2002)
(relatively frequent application of the doctrine in pre-emption
cases).
674
SCALIA, J., concurring in judgment
Where such conditions are satisfied-and I have little doubt that
they are satisfied here-courts may raise the doctrine on their own
motion.
E. g., Williams Pipe Line Co. v.
Empire Gas
Corp., 76 F.3d
1491, 1496 (CAlO 1996). See also 5 J. Stein, G. Mitchell, &
B. Mezines, Administrative Law § 47.01[1], pp. 47-5 to 47-6 (2002);
2 Federal Procedure: Lawyers Edition § 2:337, p. 373 (2003). A
court may then stay its proceedings-for a limited time, if
appropriate-to allow a party to initiate agency review.
Western
Pacific R. Co., supra, at 64; see also
Wagner &
Brown v.
ANR Pipeline Co., 837 F.2d
199, 206
(CA5 1988) (stay of limited duration). Lower
courts have sometimes accompanied a stay with an injunction
designed to preserve the status quo.
E. g.,
Wheelabrator
Corp. v.
Chafee, 455 F.2d
1306, 1316
(CADC 1971). And, in my view, even if Maine
should choose not to obtain the Secretary's views on its own, the
desirability of the District Court's having those views to
consider,
supra, at 672, is relevant to the "public
interest" determination that often factors into whether a
preliminary injunction should issue, see,
e. g., MacDonald
v.
Chicago Park District, 132 F.3d
355, 357
(CA7 1997); llA C. Wright, A. Miller, & M.
Kane, Federal Practice and Procedure §2948, pp. 131-133 (1995). But
cf.
Rosado, 397 U. S., at 406.
For these reasons, I concur in the Court's judgment and in major
part in the plurality's opinion.
JUSTICE SCALIA, concurring in the judgment.
I would reject petitioner's negative-Commerce-Clause claim
because the Maine statute under challenge is neither facially
discriminatory against interstate commerce nor (as the Court
explains,
ante, at 668-670) similar to other state action
that we have hitherto found invalid on negativeCommerce-Clause
grounds; and because, as I have explained elsewhere, the negative
Commerce Clause, having no foundation in the text of the
Constitution and not lending itself to judicial application except
in the invalidation of facially
675
discriminatory action, should not be extended beyond such action
and nondiscriminatory action of the precise sort hitherto
invalidated. See
West Lynn Creamery, Inc. v.
Healy,
512 U. S. 186,
209-210 (1994) (opinion concurring in judgment).
I would reject petitioner's statutory claim on the ground that
the remedy for the State's failure to comply with the obligations
it has agreed to undertake under the Medicaid Act, see
Blessing v.
Freestone, 520 U. S. 329, 349 (1997)
(SCALIA, J., concurring);
Pennhurst State School and
Hospital v.
Halderman, 451 U. S. 1, 17 (1981), is
set forth in the Act itself: termination of funding by the
Secretary of the Department of Health and Human Services, see 42 U.
S. C. § 1396c. Petitioner must seek enforcement of the Medicaid
conditions by that authority-and may seek and obtain relief in the
courts only when the denial of enforcement is "arbitrary,
capricious, an abuse of discretion, or otherwise not in accordance
with law." 5 U. S. C. § 706(2)(A).
JUSTICE THOMAS, concurring in the judgment.
I agree with the plurality that petitioner was not entitled to a
preliminary injunction against the enforcement of the Maine Rx
Program. I write separately because I do not believe that "further
proceedings in this case may lead to a contrary result,"
ante, at 660, and because I do not agree with the
plurality's reasoning. It is clear from the text of the Medicaid
Act and the Constitution that petitioner's preemption and negative
Commerce Clause claims are without merit. I therefore concur in the
judgment of the Court.
I
The premise of petitioner's pre-emption claim is that Maine Rx
"stands as an obstacle to the accomplishment and execution of the
full purposes and objectives of Congress."
Hines v.
Davidowitz, 312
U. S. 52, 67 (1941). The plurality agrees that to succeed
petitioner must demonstrate "that
676
THOMAS, J., concurring in judgment
there was no Medicaid-related goal or purpose served by Maine
Rx."
Ante, at 662. Both JUSTICE STEVENS and JUSTICE O'CONNOR
treat the Medicaid Act as embodying an abstract and highly
generalized purpose that is inconsistent with the Act's depth. The
text of this complex statute belies their efforts to distill from
it a single purpose.
The Medicaid Act represents a delicate balance Congress struck
between competing interests-care and cost, mandates and
flexibility, oversight and discretion. While petitioner principally
relies on 42 U. S. C. § 1396a(a)(19), which requires the Secretary
of the Department of Health and Human Services to ensure that state
plans "provide such safeguards as may be necessary to assure that
... care and services will be provided, in a manner consistent with
... the best interests of the recipients," the Medicaid Act also
pursues arguably competing interests such as cost control, see §
1396a(a)(30), and affording States broad discretion to control
access to prescription drugs, see
Pharmaceutical Research and
Mfrs. of America v.
Thompson, 259 F. Supp. 2d 39, 72
(DC 2003) (hereinafter
Pharmaceutical Research)
(noting that prior authorization may be in tension with the " 'best
interests'" of Medicaid recipients).
The plurality's conclusion that § 1396a(a)(19) imposes a silent
prohibition on prior authorization programs that "severely
curtai[l] Medicaid recipients' access to prescription drugs,"
ante, at 665, ignores this complexity. In my view, the
Medicaid Act grants States broad discretion to impose prior
authorization and proper consideration of the Secretary of the
Department of Health and Human Services' role in administering the
Medicaid Act forecloses petitioner's pre-emption claim.
A
I begin with an analysis of the relevant provisions of the
Medicaid Act. Title 42 U. S. C. § 1396r-8(d)(1) provides a complete
list of the restrictions participating States may
677
place on prescription drug coverage under Medicaid. Importantly,
it says that "[a] State may subject to prior authorization any
covered outpatient drug." § 1396r-8(d)(1)(A). The only stricture
placed on a prior authorization program is compliance with certain
enumerated procedures, § 1396r8(d)(5). Undoubtedly, the "purpose"
of § 1396r-8(d)(1) is its effect-to grant participating States the
authority to subject drugs to prior authorization subject only to
the express limitations in § 1396r-8(d)(5).
This reading of the Medicaid Act's prior authorization
provisions is confirmed by its near-neighbors. Section 1396r8(d)
allows States to exclude or further restrict coverage (beyond prior
authorization) of a "covered outpatient drug" if "the prescribed
use is not for a medically accepted indication," §
1396r-8(d)(1)(B)(i), or if the drug or use is on a list specified
in § 1396r-8(d)(2). That list includes, for example, prescriptions
for "anorexia ... or weight gain," § 1396r8(d)(2)(A), and "cosmetic
purposes or hair growth," § 1396r8(d)(2)(C), as well as all
barbiturates, § 1396r-8(d)(2)(I). Furthermore, under §
1396r-8(d)(6), "[a] State may impose limitations, with respect to
all such drugs in a therapeutic class, on the minimum or maximum
quantities per prescription ... if such limitations are necessary
to discourage waste .... " This fine-tuning of a State's ability to
restrict drug coverage beyond prior authorization stands in stark
contrast to the broad authority granted to States to impose prior
authorization. Indeed, these provisions confirm that when Congress
meant to impose limitations on state authority in this area it did
so explicitly.
The authority to entirely exclude coverage of certain drugs or
uses, for any reason,l again illustrates the futility
1 Neither the plurality nor the opinion concurring in part and
dissenting in part (hereinafter dissent) suggests that there is any
purpose-based limitation on a State's authority under §
1396r-8(d)(2). Nor can they. The restrictions enable States to make
value, rather than cost or care, judg-
678
THOMAS, J., concurring in judgment
of discerning one "purpose" from the Medicaid Act. If, as the
plurality reasons, the" 'best interests'" of Medicaid beneficiaries
require that access to prescription drugs not be "severely
curtailed," then § 1396r-8(d)(2) empowers States to do what the
plurality believes is precisely opposed to the best interests of
Medicaid beneficiaries. This is just a further illustration of the
compromises embodied in the Medicaid Act and demonstrates the
impossibility of defining "purposes" in complex statutes at such a
high level of abstraction and the concomitant danger of invoking
obstacle pre-emption based on the arbitrary selection of one
purpose to the exclusion of others.
In light of the broad grant of discretion to States to impose
prior authorization, petitioner cannot produce a credible conflict
between Maine Rx and the Medicaid Act. Both the plurality and the
dissent fail to explain how a State's purpose (and there may be
many) in enacting a prior authorization program makes any
difference in determining whether that program is in the "best
interests" of Medicaid beneficiaries. The mere existence of a prior
authorization procedure, as contemplated by § 1396r-8(d)(5), cannot
"severely curtai[l]" access to prescription drugs (the Court's
touchstone for a "conflict" with § 1396a(a)(19),
ante, at
665). Otherwise the plurality has rendered an interpretation of the
Medicaid Act that leaves it with an internal conflict.
The dissent reasons that prior authorization programs must
"safeguar[d] against unnecessary utilization,"
post, at 685
(O'CONNOR, J., concurring in part and dissenting in part) (internal
quotation marks omitted), of prescription drugs and
ments as to whether a drug should be covered. See,
e.
g., § 1396r8(d)(2)(B) (fertility drugs), § 1396r-8(d)(2)(C)
(cosmetic purposes). Again, this begs the question of why, for
example, Congress would give States greater authority over the
decision whether or not to cover a prescription hair growth drug
than whether or not to subject the same hair growth drug to prior
authorization.
679
control costs, but also never explains how the motivation for
imposing prior authorization affects whether it furthers these
ends.2 The dissent points to nothing in the record that suggests
that Maine Rx will not limit unnecessary use of the covered drugs
or control costs associated with prescription drug expenditures
under Medicaid. Rather, the dissent merely asserts that because
Maine Rx conditions prior authorization on nonparticipation in the
rebate program it follows
ipse dixit that Maine Rx does not
further these objectives.
Post, at 688-689 (O'CONNOR, J.,
concurring in part and dissenting in part). Obstacle pre-emption
turns on whether the goals of the federal statute are frustrated by
the effect of the state law. The dissent's focus on the subjective
intent of the state legislature enacting the law targeted for
pre-emption asks an irrelevant question.
B
The plurality and dissent also fail to consider the necessary
implications of the Secretary's role in approving state Medicaid
plans and otherwise administering the Act. The Secretary is
delegated a type of pre-emptive authority-he must approve state
plans that comply with § 1396a, § 1396a(b), but is given the
authority to withhold funds if he deems a State to be noncompliant,
§ 1396c.3 While acknowledging the pos-
2 These requirements, of course, have no basis in the text of
the Medicaid Act. I discuss the dissent's reasoning only because
its reliance on Maine Rx's express "purpose" turns the presumption
against pre-emption on its head. If Maine Rx also stated that its
purpose was to control prescription drug costs under Medicaid would
it be safe from pre-emption? I find it odd that application of
federal statutory pre-emption under the Supremacy Clause should
turn on whether a state legislature has recited what this Court
deems to be the proper rationale.
3 In fact, the Secretary's power to withhold funds from States
that breach the Medicaid Act's terms indicates that the Act itself
contemplates the existence of state plans that do not comply with
the requirements of § 1396a(a). Title 42 U. S. C. § 1396c
provides:
680
THOMAS, J., concurring in judgment
sibility that the Secretary "may view the Maine Rx Program as an
amendment to its Medicaid Plan that requires ... approval before it
becomes effective,"
ante, at 660, and potentially withhold
such approval, the plurality does not discuss the logical
consequences of petitioner's view that Maine Rx is pre-empted by
the Medicaid Act.
According to petitioner, the Secretary is forbidden by the
Medicaid Act from approving Maine Rx because the Act itself
pre-empts Maine Rx and renders it void under the Supremacy Clause.
If the Secretary approved Maine Rx, his interpretation would
necessarily, if petitioner is correct, be rejected by a reviewing
court under the first step of the inquiry of
Chevron U. S.
A. Inc. v.
Natural Resources Defense Council, Inc.,
467 U. S. 837,
842-843 (1984), which asks whether the statute is unambiguous.4
See,
e. g., Smiley v.
"If the Secretary, after reasonable notice and opportunity for
hearing to the State agency administering or supervising the
administration of the State plan approved under this subchapter,
finds-
"(1) that the plan has been so changed that it no longer
complies with the provisions of section 1396a of this title; or
"(2) that in the administration of the plan there is a failure
to comply substantially with any such provision;
"the Secretary shall notify such State agency that further
payments will not be made to the State ... until the Secretary is
satisfied that there will no longer be any such failure to
comply."
The Medicaid Act cannot meaningfully be interpreted to
invalidate state laws, such as Maine Rx, that do not comply with
its express terms, much less state laws a court concludes pose an
obstacle to the Act's "purpose." State plans that do not meet §
1396a(a)'s requirements are to be defunded by the Secretary-they
are not void under the Supremacy Clause. It is not apparent to me
where the plurality finds the congressional directive to pre-empt
state plans that breach a contract between the Federal Government
and the State. Cf. Part I-D,
infra. In my view, no such
directive exists, and States are free to deviate from the Medicaid
Act's requirements, subject only to sanctions by the Secretary.
4 If a federal statute is ambiguous with respect to whether it
pre-empts state law, then the presumption against pre-emption
should ordinarily prevent a court from concluding that the state
law is pre-empted. Therefore, a court's conclusion that Maine Rx is
pre-empted would require rejection
681
Citibank (South Dakota), N.
A., 517 U. S. 735, 739
(1996). Petitioner must therefore show that the Medicaid Act is
unambiguous or, in other words, that Congress "has directly spoken
to the precise question at issue."
Chevron, supra, at 842.
However, given the foregoing discussion of the text of the Medicaid
Act, it cannot be read to unambiguously prohibit Maine Rx, or
indicate that Congress, in enacting § 1396a(a)(19), directly
addressed this issue. Indeed, the Department of Health and Human
Services has already adopted an interpretation of the Medicaid Act
that "does not preclude States from negotiating prices, including
manufacturer discounts and rebates for non-Medicaid drug
purchases." Letter from D. Smith, Dir. of Center for Medicaid and
State Operations, Centers for Medicare & Medical Services, to
all State Medicaid Dirs. (Sept. 18, 2002), App. to Brief for United
States as
Amicus Curiae 48a.5 Obstacle preemption's very
premise is that Congress has not expressly displaced state law, and
thus not "directly spoken" to the pre-emption question. Therefore,
where an agency is charged with administering a federal statute as
the Secretary is here,
Chevron imposes a
perhaps-insurmountable barrier to a claim of obstacle
pre-emption.
I note that the interpretation of the Medicaid Act I offer,
unlike petitioner's, does not require the Secretary to reach a
particular decision with respect to Maine Rx. The Secretary is
expressly charged with determining whether state plans comply with
the numerous requirements of 42 U. S. C. §§ 1396a(a), 1396a(b),
1396c. Among these, as discussed earlier, is the requirement that
the plan serve "the best in-
of the Secretary's contrary construction of the statute at
Chevron's first step, not its second, which asks whether the
agency construction is reasonable. 467 U. S., at 843.
5 This interpretation has been upheld by the District Court for
the District of Columbia.
Pharmaceutical Research and Mfrs. of
America v.
Thompson, 259 F. Supp. 2d 39, 69-72 (2003).
Petitioner's arguments provide no answer to the careful analysis
offered by that court.
682
THOMAS, J., concurring in judgment
terests of [Medicaid] recipients." § 1396a(a)(19). While I
maintain that federal courts cannot use obstacle pre-emption to
determine whether or not Maine Rx serves these interests, the
Secretary must examine the entire state plan, not just Maine Rx in
isolation. Moreover, the Secretary's mandate from Congress is to
conduct, with greater expertise and resources than courts, the
inquiry into whether Maine Rx upsets the balance contemplated by
the Medicaid Act. Congress' delegation to the agency to perform
this complex balancing task precludes federal-court intervention on
the basis of obstacle pre-emption-it does not bar the Secretary
from performing his duty to adjudge whether Maine Rx upsets the
balance the Medicaid Act contemplates and withhold approval or
funding if necessary. If petitioner or respondents disagree with
the Secretary's decision, they may seek judicial review, as
petitioner has already done for plans similar to Maine Rx that the
Secretary has approved. See
Pharmaceutical Research and Mfrs. of
America v.
Thompson, 259 F. Supp. 2d 39, 69-72
(DC
2003).
C
Maine Rx is not pre-empted by the Medicaid Act. This conclusion
is easily reached without speculation about whether Maine Rx
advances "Medicaid-related goals" or how much it does so. The
disagreement between the plurality and dissent in this case aptly
illustrates why "[a] freewheeling judicial inquiry into whether a
state statute is in tension with federal objectives ... undercut[s]
the principle that it is Congress rather than the courts that
pre-empts state law."
Gade v.
National Solid Wastes
Management Assn., 505 U. S. 88, 111 (1992)
(KENNEDY, J., concurring in part and concurring in judgment).
D
I make one final observation with respect to petitioner's
pre-emption claim. The Court has stated that Spending Clause
legislation "is much in the nature of a contract."
683
Pennhurst State School and Hospital v.
Halderman,
451 U. S. 1, 17 (1981). This contract analogy raises serious
questions as to whether third parties may sue to enforce Spending
Clause legislation-through pre-emption or otherwise. See
Blessing v.
Freestone, 520 U. S. 329, 349-350
(1997) (SCALIA, J., concurring). In contract law, a third party to
the contract (as petitioner is here) may only sue for breach if he
is the "intended beneficiary" of the contract. See,
e.
g., Restatement (Second) of Contracts § 304 (1979) ("A
promise in a contract creates a duty in the promisor to any
intended beneficiary to perform the promise, and the intended
beneficiary may enforce the duty"). When Congress wishes to allow
private parties to sue to enforce federal law, it must clearly
express this intent. Under this Court's precedents, private parties
may employ 42 U. S. C. § 1983 or an implied private right of action
only if they demonstrate an "unambiguously conferred right."
Gonzaga Univ. v.
Doe, 536 U. S. 273, 283
(2002). Petitioner quite obviously cannot satisfy this requirement
and therefore arguably is not entitled to bring a pre-emption
lawsuit as a third-party beneficiary to the Medicaid contract.
Respondents have not advanced this argument in this case. However,
were the issue to be raised, I would give careful consideration to
whether Spending Clause legislation can be enforced by third
parties in the absence of a private right of action.
II
Petitioner's Commerce Clause challenge is easily met, because
"[t]he negative Commerce Clause has no basis in the text of the
Constitution, makes little sense, and has proved virtually
unworkable in application."
Camps Newfound/ Owatonna, Inc.
v.
Town of Harrison, 520 U. S. 564, 610 (1997)
(THOMAS, J., dissenting). I therefore agree with the Court that
petitioner cannot prevail on this claim.
684
Opinion of O'CONNOR, J.
JUSTICE O'CONNOR, with whom THE CHIEF JUSTICE and JUSTICE
KENNEDY join, concurring in part and dissenting in part.
I join Parts I-III and VI of the Court's opinion, and I agree
with the plurality's conclusion that States may not impose on
Medicaid beneficiaries the burdens of prior authorization in the
absence of a countervailing Medicaid purpose,
ante, at 662.
I part with the plurality because I do not agree that the District
Court abused its discretion in enjoining respondents from imposing
prior authorization under the Maine Rx Program. Before the District
Court, respondents "point[ed] to no
Medicaid purpose" served
by Maine Rx's prior-authorization requirement. App. to Pet. for
Cert. 68 (emphasis in original). This is not surprising. The
program is open to all Maine residents, rich and poor. It does not
purport to further a Medicaid-related purpose, and it is not
tailored to have such an effect. By imposing prior authorization on
Maine's Medicaid population to achieve wholly non-Medicaid related
goals, Maine Rx "stands as an obstacle to the accomplishment and
execution of the full purposes and objectives" of the federal
Medicaid Act.
Hines v.
Davidowitz,
312 U. S. 52, 67 (1941). I
would uphold the District Court's injunction on this basis, and I
therefore respectfully dissent from Parts IV, V, and VII of the
plurality's opinion.
I
Our ultimate task in analyzing a pre-emption claim is "to
determine whether state regulation is consistent with the structure
and purpose" of the federal statutory scheme "as a whole."
Gade v.
National Solid Wastes Management Assn.,
505 U. S. 88, 98
(1992) (plurality opinion of O'CONNOR, J.). We look to "'the
provisions of the whole law, and to its object and policy.'"
Ibid. (quoting
Pilot Life Ins. Co. v.
Dedeaux,
481 U. S. 41, 51
(1987)). Our touchstone is Congress' intent.
Gade v.
National Solid Wastes Management Assn., supra, at 96. "The
nature of the power exerted by
685
Congress, the object sought to be attained, and the character of
the obligations imposed by the law, are all important in
considering the question of whether supreme federal enactments
preclude enforcement of state laws on the same subject."
Hines v.
Davidowitz, supra, at 70.
Under the Medicaid Act, once a drug manufacturer enters into a
Medicaid rebate agreement with respect to a particular outpatient
drug, a State that has elected to offer prescription drug coverage
must cover the drug under its state plan unless it complies with
one of the Medicaid Act's provisions that permits a State to
exclude or restrict coverage. 42 U. S. C. § 1396r-8(d); see
ante, at 652. Prior authorization is one such restriction.
Section 1396r-8(d)(5) provides that a state plan "may require, as a
condition of coverage or payment for a covered outpatient drug ...
the approval of the drug before its dispensing for any medically
accepted indication."
Prior authorization is, by definition, a procedural obstacle to
Medicaid beneficiaries' access to medically necessary prescription
drugs covered under the Medicaid program. It nevertheless may serve
a Medicaid purpose by "safeguard[ing] against unnecessary
utilization and assur[ing] that payments are consistent with
efficiency, economy and quality of care." H. R. Rep. No. 101-881,
p. 98 (1990). A State accordingly may impose prior authorization to
reduce Medicaid costs. Cf.
New York State Dept. of Social
Servs. v.
Dublino, 413 U. S. 405, 421 (1973)
("Where coordinate state and federal efforts exist within a
complementary administrative framework,
and in the pursuit of
common purposes, the case for federal pre-emption becomes a
less persuasive one" (emphasis added)). A State may not, however,
impose prior authorization to generate revenue for purposes wholly
unrelated to its Medicaid program.
While the Medicaid Act does not expressly bar States from using
prior authorization to accomplish goals unrelated to the Medicaid
program, such a limit on States' authority is
686
Opinion of O'CONNOR, J.
inherent in the purpose and structure of the Medicaid Act. As
the District Court recognized, a contrary rule would permit Maine
to use prior authorization to raise funds for "highway and bridge
construction or school funding," and presumably any other purpose,
so long as the Secretary of Health and Human Services took no
action to prevent it. App. to Pet. for Cert. 68. The purpose and
structure of the Medicaid Act make clear that Congress did not
intend such an absurd result.
Congress created the Medicaid program to "enabl[e] each State,
as far as practicable under the conditions in such State, to
furnish ... medical assistance on behalf of families with dependent
children and of aged, blind, or disabled individuals, whose income
and resources are insufficient to meet the costs of necessary
medical services." 42 U. S. C. § 1396. Consistent with that
purpose, Congress has imposed income and resource limitations on
many of the groups eligible for assistance under the Act. See,
e. g., §§ 1396a(a)(10)(A)(i) (IV), (VI), and (VII); §
1396b(f).
A requirement that prior authorization be used only where it
furthers a Medicaid purpose is reinforced by the structure of the
Medicaid Act. Congress has afforded States broad flexibility in
tailoring the scope and coverage of their Medicaid programs, see
Alexander v.
Choate, 469 U. S. 287, 303
(1985), but the Act establishes a number of prerequisites for
approval of a state plan by the Secretary. 42 U. S. C. §§
1396a(a)(1)-(65). Two such requirements are of particular relevance
here. First, a state plan must contain safeguards to ensure covered
services are provided in a manner consistent with "the best
interests of the [Medicaid] recipients." § 1396a(a)(19). Second, a
state plan must "safeguard against unnecessary utilization" of
services and ensure that "payments are consistent with efficiency,
economy, and quality of care." § 1396a(a)(30)(A). These provisions
confirm Congress' intent that state Medicaid initiatives not
burden
687
Medicaid beneficiaries without serving a Medicaid goal such as
stretching available resources to the greatest effect.
II
The District Court correctly concluded that the Maine Rx
Program's prior-authorization provision is invalid because it
burdens Medicaid recipients while advancing no Medicaid goals.
Under the Maine Rx Program, the State "shall impose prior
authorization requirements in the Medicaid program" on any
"nonparticipating" drug manufacturer that does not enter into a
rebate agreement with the State for drugs dispensed to non-Medicaid
patients. Me. Rev. Stat. Ann., Tit. 22, § 2681(7) (West Supp.
2002). The rebate agreements are designed to reduce prescription
drug prices for all residents of the State, regardless of financial
or medical need. §§ 2681(1), (2)(F). The program thus serves the
State's non-Medicaid population by threatening to erect an obstacle
to Medicaid recipients' ability to receive covered outpatient
drugs.
The plurality concedes that Maine Rx cannot survive a
pre-emption challenge if it does not have as its purpose or effect
a "Medicaid-related goal or purpose."
Ante, at 662. Based on
the record before the District Court, I would hold that the court
did not abuse its discretion in concluding that petitioner
demonstrated a likelihood of success on its preemption claim.
Petitioner alleged that the Maine Rx Program does not serve a
Medicaid purpose. The Maine Rx statute on its face bears this out.
The program is designed "to reduce prescription drug prices for
residents of the State," and it accomplishes this goal by
threatening to impose prior authorization on otherwise covered
outpatient drugs. Me. Rev. Stat. Ann., Tit. 22, §§ 2681(1), (2)(F),
(7) (West Supp. 2002). In the District Court, Maine did not attempt
to justify the program on the basis that it served a Medicaid
purpose. Instead, Maine took the position that it was not required
to demonstrate any such purpose. An ap-
688
Opinion of O'CONNOR, J.
pellate court reviewing a preliminary injunction is confined to
the record before the District Court, and here, neither the record
before the District Court nor the Maine Rx statute itself reveals a
Medicaid purpose that will be served by the Maine Rx Program.
The plurality speculates about three "Medicaid-related interests
that will be served if the [Maine Rx] program is successful."
Ante, at 663. First, the plurality asserts that Maine Rx
"will provide medical benefits to persons who can be described as
'medically needy' even if they do not qualify for [Aid to Families
with Dependent Children] or [Supplemental Security Income]
benefits."
Ibid. Second, the plurality contends that "there
is the possibility that, by enabling some borderline aged and
infirm persons better access to prescription drugs earlier,
Medicaid expenses will be reduced."
Ibid. Third, the
plurality posits that "whenever it is necessary to impose the prior
authorization requirement on a manufacturer that refuses to
participate," Maine Rx will promote the use of cost-effective
medications and thereby "[a]voi[d] unnecessary costs in the
administration of [the] State's Medicaid program."
Ante, at
663, 664. Asserting that these "Medicaid-related goals" are
"plainly present in the Maine Rx Program," the plurality concludes
that the District Court's failure
sua sponte to recognize
them constituted "an erroneous predicate" for the preliminary
injunction.
Ante, at 663.
I disagree. I would not say it was an abuse of discretion for
the District Court to conclude petitioner met its burden in showing
that there was no Medicaid-related goal or purpose served by Maine
Rx. Cf.
ante, at 662-665. Each of the plurality's
post-hoc justifications for the Maine Rx Program's burden on
Medicaid beneficiaries rests on factual predicates that are not
supported in the record. Even assuming the predicate assumptions
behind the plurality's first and second justifications-that some of
the potential beneficiaries of Maine Rx can be classified as
"medically needy" or
689
"borderline aged and infirm"-it is impossible to discern based
on the facts in the record whether the Medicaid program would reap
a benefit from the discounts made available to such populations.
The proposition that discounts on prescription drugs purchased
out-of-pocket might produce Medicaid cost savings by preventing
Maine residents from becoming eligible for Medicaid is not
self-evident. With no party before it advocating such an attenuated
causal chain, and with no facts in the record to support it, the
District Court can hardly be said to have abused its discretion in
divining no Medicaid purpose on the face of the Maine Rx
statute.
The plurality's third rationale fails on similar grounds.
The assertion that prior authorization under the Maine Rx
Program will
necessarily produce cost savings for Maine's
Medicaid program is unsupportable. Under Maine Rx, the imposition
of prior authorization is in no manner tied to the efficacy or
cost-effectiveness of a particular drug. Rather, the sole trigger
for prior authorization is the failure of a manufacturer or labeler
to pay rebates for the benefit of non-Medicaid populations. Me.
Rev. Stat. Ann., Tit. 22, § 2681(7) (West Supp. 2002). It is thus
entirely possible that only the most efficacious and cost-effective
drugs will be subject to a prior-authorization requirement under
Maine Rx. Maine Rx's prior-authorization requirement would, in that
event, at best serve no purpose and at worst delay and inhibit
Medicaid beneficiaries' access to necessary medication. In
concluding that the District Court abused its discretion, the
plurality essentially rejects, out of hand, this possibility. In so
doing, the plurality distorts the limitations on the scope of our
appellate review at this interlocutory stage of proceedings. See
Doran v.
Salem Inn, Inc., 422 U. S. 922, 931932
(1975) ("[WJhile the standard to be applied by the district court
in deciding whether a plaintiff is entitled to a preliminary
injunction is stringent, the standard of appellate review
690
Opinion of O'CONNOR, J.
is simply whether the issuance of the injunction ... constituted
an abuse of discretion").
The District Court had before it, on one hand, concrete evidence
of the burdens that Maine Rx's prior-authorization requirement
would impose on Medicaid beneficiaries. On the other hand, the
District Court had no evidence or argument suggesting that Maine Rx
would achieve cost savings or any other Medicaid-related goal.
Finding that the District Court, under these circumstances, did not
abuse its discretion by preliminarily enjoining Maine Rx's
priorauthorization requirement, I would reverse the judgment of the
Court of Appeals and remand for further proceedings.
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