PHARMACEUTICAL RESEARCH AND MANUFACTURERS OF AMERICA v. WALSH, ACTING COMMISSIONER, MAINE DEPARTMENT OF HUMAN SERVICES, ET AL.
No. 01-188
SUPREME COURT OF THE UNITED STATES
Argued January 22, 2003—Decided May 19, 2003
538 U.S. 644
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
Sheldon V. Toubman filed a brief for Legal Services Organizations Representing Medicaid Beneficiaries as amicus curiae.
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,1 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
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).
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
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.
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
Most relevant to this case, Congress allowed States, “as a condition of coverage or payment for a covered outpatient drug,”
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.”
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).
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.”
The statute authorizes the department to adopt implementing rules.
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
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 PA causes a shift of patients to competing drugs of other manufacturers that are not subject to a PA. Because a PA imposes additional procedural burdens on physicians prescribing the manufacturer‘s drug and retail pharmacies dispensing it, the effect of a PA is 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 Smith-Kline‘s drugs. For example, the market share of Aug-
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
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
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,’
The Court of Appeals also reviewed the affidavits and concluded that they “fall short of establishing that the Act will
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,
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
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 substantial likelihood of success on the merits). Accordingly, it was petitioner‘s burden to show that there was no Medicaid-related goal or purpose served by Maine Rx. Given that
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
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 (CA11 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 Medicaid-related purposes, both by providing benefits to needy persons and by curtailing the State‘s Medicaid costs, would not
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.
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
“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
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
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
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
To prevail, petitioner ultimately must demonstrate that Maine‘s program would “seriously compromise important federal interests.” Arkansas Elec. Cooperative Corp. v. Arkansas Pub. Serv. 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” harm—even 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,
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
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. 837 (1984);
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.
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).
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 negative-Commerce-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
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
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 pre-emption 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
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
The plurality‘s conclusion that
A
I begin with an analysis of the relevant provisions of the Medicaid Act. Title
This reading of the Medicaid Act‘s prior authorization provisions is confirmed by its near-neighbors. Section
The authority to entirely exclude coverage of certain drugs or uses, for any reason,1 again illustrates the futility
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
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
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
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. Citibank (South Dakota), N. A., 517 U. S. 735,
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
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.”
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.
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
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.
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
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.”
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.
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 pre-emption 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
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
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, 931-932 (1975) (“[W]hile 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
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 prior-authorization requirement, I would reverse the judgment of the Court of Appeals and remand for further proceedings.