Constitutional Law Class Notes 2/9/04

Pharmaceutical Research and Mfrs. of America v. Walsh

The hardest case all semester! This is a very conceptually difficult case. But the Supreme Court thought the same thing. This case failed to produce a majority opinion! (Sort of like Asahi!)

They split up the opinion! The Court agrees on the facts in Parts I-III. Stevens gets four votes for Parts IV and VII. He gets three votes for Part V.

It is theorized that these split opinions have happened less often as the same nine justices have sat on the Court for more time. The Court might vote for a certain judgment, but they may have trouble joining each others’ drafts. Over time, the opinion writers become more adept at writing opinions that will draw a majority.

But when there’s such a split decision as this, we know it was a difficult case. It may be that when we get some turnover on the Court we’ll get more fragmentation in opinions.

It is very, very important to pay attention to when you have majority opinions of the Court as opposed to plurality opinions of the Court. Even though Justice Stevens may win the vote count on the judgment, he doesn’t speak for the Court except where it’s noted. You must be aware of that. You need to make sure that you have an authoritative statement of the U.S. Supreme Court.

The Marks doctrine says that when you have a plurality situation, you have multiple opinions supporting the judgment. The opinion that lower courts and lawyers should look to is the opinion which articulates the narrowest ground for that judgment.

The Stevens opinion got the most votes among those supporting the judgment in this case. That’s why Stevens is allowed to “announce the opinion of the Court”.

When you write briefs, the very last line of your brief should be “For the foregoing reasons, we ask this Court to affirm (or reverse).” You always must give the bottom line.

So what are the facts? What’s going on here?

What is the Medicaid statute? It’s a federal statute that uses federal money to provide additional funds for needy people who would otherwise not be able to get medical care.

The states can set up a prescription drug benefit as part of the program.

What’s the Maine Rx statute? Maine adopts a program that’s not just for the neediest folks who are covered by Medicaid, but also other folks.

The district court grants the injunction, while the Court of Appeals reverses, and the Supreme Court justices disagree. There is a lack of factual clarity because the case is at the level of summary judgment in procedure.

It seems as though even though all Maine residents are covered by Maine Rx, it’s a bit tricky. If you’re a Maine citizen and have private health insurance (a comparable or superior plan) then you wouldn’t get your drug benefit from Maine Rx itself. What Maine Rx is designed to do is provide prescription drug coverage to uninsured Maine citizens. The people who would be helped would be those who were too rich to qualify for Medicaid, but not rich enough to get their own private insurance.

How does the state’s provision of a benefit under Maine Rx affect the Medicaid program? If the Maine Rx program would be entirely free-standing, with no potential effect on Medicaid, then there wouldn’t be a challenge. But the drug companies charge that Maine Rx interferes with Medicaid. What do they mean by interference?

It’s dense material. Let’s “unpack”.

Suppose Maine hadn’t adopted Maine Rx. Medicaid had been around a long time, including in the state of Maine. How would Medicaid have worked in the state of Maine in the absence of Maine Rx? Only poor people would have been able to get discounted drugs under Medicaid. So the discounted drugs provision and the rebate is present both in Medicaid and in Maine Rx.

From the drug companies’ point of view, they have to take a hit in terms of the prices that they charge.

What about this prior authorization bit? Would that exist in the Medicaid program alone, putting aside the Maine Rx program? Prior authorization was part of Medicaid itself. What does that mean? For certain types of drugs, authorization would have to be obtained from a state agency. They would check if there was a cheaper equivalent drug out there so that the funding agency won’t take as big of a hit.

HMOs do this often. A doctor says: “There’s this great new drug and I want to prescribe it for you.” The HMO says, for example: “Try Advil first, maybe you don’t need the fancy drugs.” The insurance mechanism intervenes in the doctor-patient relationship. The doctor must tell the insurance company why the particular fancy, expensive drug is necessary.

Medicaid has prior authorization built-in. Medicaid insisted that the states adopted a prior authorization mechanism.

If prior authorization was a feature of the Medicaid program itself, why is the prior authorization so important when we’re thinking about the relationship of the new program, Maine Rx, to Medicaid? What is the importance of the “interference” theory?

The key concept here is that Maine Rx imposed prior authorization on any drug company that refused to participate in the rebate plan for the folks who weren’t in Medicaid, but in another category. Maine imposed a Medicaid consequence for failure to participate in a non-Medicaid program. “You’ve got to lower prices for these folks who are falling between the cracks! If you don’t, then we’ll take the drugs you refuse to give lower prices for and automatically put them in the prior authorization category for Medicaid use!

Note what we’re not talking about: prior authorization for the people isn’t the only thing at stake. Prior authorization is going to become required for people who are already eligible for Medicaid. The “cross-cutting” nature of the punishment becomes the problem.

The penalty for not participating in Maine Rx would have been a Medicaid penalty. There is a “stick” related to the federal program.

How did the drug companies make a legal claim out of the interference point? What’s the Maine Rx program doing to the federal program?

The drug companies are claiming that there is interference by the Maine Rx program with Medicaid. They claim there is a conflict between the state law and the federal law.

Where does the ability of federal law to trump state law come from? It comes from the Supremacy Clause. An act of Congress is supreme if it’s constitutional. Inconsistent state law must give way by virtue of the Supremacy Clause. What makes this a constitutional law case is the Supremacy Clause.

Medicaid is a federal statute. There is no constitutional challenge to Medicaid in this case. The drug companies aren’t saying that federal Medicaid law is unconstitutional. In fact, they are relying on federal Medicaid law. They don’t say that Medicaid is beyond the scope of federal power.

So if we assume Congress had the power to enact Medicaid, then if Maine Rx is inconsistent with that federal law, then the state law must go. The Supremacy Clause says that when there is a conflict, federal law wins.

The key point is that the constitutional proposition about the Supremacy Clause is straightforward. All the work of lawyering in preemption cases is figuring out: “Do we have a conflict between federal law and state law?” If there is a conflict, preemption will occur. So if you want to keep a state law, you must argue that it doesn’t really conflict with any federal law.

How does the Supreme Court try to find out if we have inconsistency?

Think about the relationship between the Supremacy Clause to the dormant (or negative) Commerce Clause. The drug companies make two claims: they make (1) a preemption claim, and also (2) a negative Commerce Clause claim. They say even if there is no inconsistency, the state law must be struck down because it somehow interferes with interstate commerce.

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