WASHINGTON - A federal appeals court has cleared the way for states to punish drug companies that refuse to lower prices for those who can't afford the prescriptions.
A three-judge panel of the 1st U.S. Circuit Court of Appeals revived a Maine law that gives the state unprecedented powers to provide lower drug prices for 325,000 residents who lack insurance coverage.
The ruling reversed a lower court decision in October. The earlier opinion suspended the law, saying it violated the Constitution's interstate commerce provision.
Lawmakers and analysts say the ruling could breathe new life into legislation in other states that had been stalled since the lower court's action.
"A number of us were waiting for a court decision to see what the future would be for fair-pricing legislation," said Peter Shumlin, Vermont Senate president pro tem.
"I'm incredibly happy about the court decision. It gives many of us the green light to move forward."
The pharmaceutical industry's trade group, which filed the lawsuit against Maine, said it might request a rehearing by the full circuit court or appeal to the Supreme Court.
"We actually were quite disappointed," said Marjorie Powell, assistant general counsel of the Pharmaceutical Research and Manufacturers of America, known as Pharma.
Maine's law allows state officials to impose price controls in 2003 if drug makers do not lower their prices. In the meantime, Maine can place restrictions on drugs whose manufacturers refuse to negotiate.
Those restrictions include "prior authorization," which forces doctors to receive special permission to prescribe a drug for each patient who needs it. State regulators expect doctors to use other treatment to avoid the red tape, which would undercut a drug company's sales.
Pharma says prior authorization will deprive patients of the drugs they need. The state says doctors have an appeals mechanism if the drug is the only successful treatment for a patient.
At least 27 states have introduced bills this year that borrow features of Maine's law. Twelve of those include price controls. None of the bills has been enacted, and 13 states have already ended their regular sessions, according to the National Conference of State Legislatures.
Health policy experts say Pharma succeeded in defusing the issue this year by moving it from the legislative arena to the courts.
"They've held the lid down this year, but the pressure is building up inside," said Alan Sager, a public health professor at Boston University. "That will work against Pharma's long-term self-interest. Good tactics, bad strategy."
In its ruling, the appeals court rejected all of Pharma's arguments.
"The Maine act represents a novel legislative approach to one of the serious problems of our time, one that resists easy analysis," the court wrote.
"When measuring manufacturers' possible loss of profits against the increased access to prescription drugs for Maine citizens, the local benefits appear to outweigh the burden of interstate commerce."
Opponents of the Maine law say the court erred. But the industry will be able to return to court after the law takes effect to illustrate the harm it has caused, said Richard Samp, chief counsel of the Washington Legal Foundation.
Maine didn't wait for the court ruling to begin the process for lowering drug prices. With the blessing of the federal government, the state has been preparing to provide cheaper drugs through the state's Medicaid program to 225,000 residents, beginning next month.