US Court ruling could be $7bn blow to industry

A ruling by the US Supreme Court could clear the way for US states to enforce hugely increased prescription price discounts costing pharmaceutical companies up to $7 billion.

The court ruled that the state of Maine could introduce a state prescription drug benefit that would extend Medicaid-type discounts to tens of thousands of uninsured patients, forcing pharma companies to reduce their prices.

The ruling upholds a Federal court's decision to overturn an injunction demanded by industry trade organisation PhRMA, which said the programme was unconstitutional.

But the outcome of the case is far from certain, as the Supreme Court's decision does not determine the validity of the programme, only that PhRMA failed to show it was unconstitutional.

Justice John Paul Stevens said: "We cannot predict at this preliminary state the ultimate fate of the Maine Rx programme", but Justice Oonner said there was "concrete evidence" of the burdens it would impose on Medicaid beneficiaries.

Should the programme go ahead and be implemented in other states, analysts Deutsche Bank estimates the industry stands to lose between $5 and $7 billion 6 to 8% of total profits over the course of several years.

Under the programme, should pharma companies fail to provide discounts for the uninsured, Maine would restrict access to their drugs for insured Medicaid patients. Doctors would then need to either obtain state approval to prescribe such drugs or prescribe drugs from companies complying with the programme.

The state would also be able to fine companies up to $100,000 per offence if they charged excessive prices or restricted supply.

Companies focusing on diseases mainly affecting the elderly stand to lose the most, with Novartis, AstraZeneca, Novo and Sanofi-Synthlabo among the most exposed European companies, said Deutsche Bank.

PhRMA said the programme would effectively mean Government officials, rather than doctors and patients, would decide what drugs should be prescribed and these decisions would be based on cost rather than medical grounds.

"There are better answers than the one Maine offers to assuring patients' access to needed prescription medicines", said PhRMA spokeswoman Marjorie Powell. "Real solutions that help rather than hurt patients begin with passing a Medicare prescription drug benefit for seniors and disabled persons this year".

President George Bush has announced plans for a $400 billion reform of the Medicare insurance scheme, which would provide seniors with discounted medicines. Patient lobby groups have expressed their concerns at the plans, however, which they say plays into the hands of the pharma industry.

Around a quarter of Maine's 1.3 million population are thought to be uninsured. The Centres for Medicaid and Medicare Services (CMS) estimate uninsured patients accounted for 17% of total healthcare spending in the US in 1999, around $34 billion.