Bitter Pill for Pharmacy Giants

The nation's first-ever state law designed to regulate pharmacy benefit managers will remain intact.

Ending a three-year legal battle, the Supreme Court on Monday declined to review a Maine law requiring PBMs to put their clients' interests ahead of their own. Giant PBMs like Caremark (CMX Quote - Cramer on CMX - Stock Picks) and Medco (MHS Quote - Cramer on MHS - Stock Picks) have been accused of engaging in secret deals that line their own pockets and cut into the savings that they are hired to secure for others. The PBMs have consistently stood by their business practices while fighting against state laws that threaten their lucrative strategy.

But this week a Maine senator, who chairs a multi-state group pushing for widespread reforms, was quick to celebrate the survival of his state's PBM law.

"By allowing the state to address pricing issues by middlemen, we can have a real impact on prescription drug prices," says Arthur Mayo III, chairman of the National Legislative Association on Prescription Drug Prices, or NLARx. "This is good news for Maine's consumers -- and I hope it acts as a green light for other states who were awaiting this decision to enact similar laws."

The Pharmaceutical Care Management Association, a powerful lobbying group representing the PBM industry, has fought hard to derail the Maine law and a similar one passed by the District of Columbia that's tied up in the court system right now. For its part, PCMA portrayed the Supreme Court's action as "an expected procedural move" that still leaves the door open for review of the Maine law down the road. PCMA hopes to win its court battle in D.C. and then ask the Supreme Court to review the conflicting Maine and D.C. decisions.

But NLARx foresees a different scenario entirely.

"Although a final decision has not been rendered in the D.C. case, we are hopeful that upon reconsideration, the D.C. Circuit will follow the clear reasoning of the First Circuit" upholding Maine's PBM law, says Sharon Treat, a former Maine senator who sponsored the state's law and now serves as executive director of NLARx. "The Supreme Court's action makes that result more -- not less -- likely."

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