2004 | Cited 0 times | D. Maine | July 7, 2004


On March 9, 2004, Judge Woodcock granted the plaintiff's motionfor a preliminary injunction against enforcement of Maine'sUnfair Prescription Drug Practices Act ("UPDPA"), 22 M.R.S.A. §2699 (2004). He found that the plaintiff was likely to succeed ona claim that one statutory provision amounted to anunconstitutional taking and that ERISA generally preempted theMaine statute. Thereafter Judge Woodcock recused himself and thecase was assigned to me. The Attorney General has moved to amendor vacate the earlier preliminary injunction on two majorgrounds: first, that later legislation has cured any defects; andsecond, that any defective parts of the statute can be severedand that the remainder should be enforced. The motion to amend isDENIED. I. EFFECT OF RELEVANT AMENDMENTS

A. ERISA Preemption

In his opinion granting the motion for preliminary injunction,Judge Woodcock concluded that "the provisions of the UPDPA arevirtually bound to collide with the ERISA goal of a `nationallyuniform administration of employee benefit plans.'" OrderGranting Mot. for Prelim. Inj. at 23 (Mar. 9, 2004) (Docket Item28). He supported his conclusion by way of example. I onlysummarize his treatment, because the full discussion is availablein Judge Woodcock's opinion. Basically, Judge Woodcock pointedout that the Maine statute imposed a duty on pharmaceuticalbenefits management companies ("PBMs") both to their clients(covered entities, in Maine statutory terms) and to the ultimatebeneficiaries, the human beings who end up taking the prescribedmedicines. See id. The Maine statute gave both the coveredentities and the ultimate beneficiaries the right to sue in statecourt if they were unhappy. See id. at 24. Another part ofthe statute provided that PBMs can order more expensive drugsubstitutions only when the substitutions benefit both the clientand the beneficiary. Id. at 23. (citing 22 M.R.S.A. §2699(2)(E)(2)). Judge Woodcock noted that substitution of a moreexpensive drug easily could make the beneficiary happy, but thebill-paying covered entity unhappy. Id. at 23-24. JudgeWoodcock concluded this part of his discussion, saying: "Thisexample is only the first of a host of issues that this court concludeswill find their way to state court as an inevitable consequenceof the duties and remedies the UPDPA creates." Id. at 25(emphasis added). Then he went on to analyze the preemption issueaccordingly: The decision as to what drug to prescribe, the price of the drug, the comparative medical efficacy of the drug, and the disclosure requirements to the covered entity and covered individual all seem to fall squarely within the First Circuit's concern: state law interference with the administration of [ERISA] covered employee benefit plans, purporting to regulate plan benefits or impose additional reporting requirements.Id. (citing Carpenters Local Union No. 26 v. United StatesFiduciary & Guar. Co., 215 F.3d 136, 141 (1st Cir. 2000)). Henext described the state court remedies the UPDPA created and howthey conflict with the federal enforcement scheme. He concluded:"The terms of the UPDPA and its enforcement mechanisms intrudetoo far into the ambit of federal regulation of health benefitsby ERISA plans. Therefore, the UPDPA has an impermissible`connection with' ERISA." Id. at 26.

In this motion seeking that I alter the scope of, or rescindaltogether, Judge Woodcock's preliminary injunction, the AttorneyGeneral reasons: Parsing out the language of the decision, it appears that the Court's conclusion arises substantially or entirely from the effect of the UPDPA imposing on PBMs a duty to covered individuals that can be enforced under state law.Def.'s Supplemental Mem. in Support of His Mot. to Amend theOrder of Prelim. Inj. at 5 (Docket Item 47). The Attorney General points out thatsince Judge Woodcock's decision, the State has amended the UPDPAto eliminate any PBM duties to ultimate beneficiaries, and hasamended the drug substitution provision.1 Now the latterprovision requires only that a PBM notify its client (the coveredentity) of the respective drug prices and of any financialbenefit the PBM obtains for making the substitution. According tothe Attorney General, these amendments remove "provisions thatmight affect a PBM's decision to select a particular prescriptiondrug for a particular plan participant" and remove beneficiaries'right to go to state court to enforce any rights under thestatute. Id. at 5-6. Accordingly, all the reasons forpreemption, he argues, are gone.

That is too crabbed a reading of the original decision. It isclear that Judge Woodcock reached a general conclusion that ERISApreempts the UPDPA but, in the interests of time and brevity,chose only examples to demonstrate his conclusion. He specifiedthat his examples were "only the first of a host of issues." Iapplaud the State for reacting so quickly to the particularproblems Judge Woodcock highlighted; perhaps at the end of thecase, when final analysis and decision occur, the State will prevail (I make nopredictions). But the reasoning and scope of the preliminaryinjunction cannot be so easily avoided. Judge Woodcock'spreliminary conclusion that the UPDPA has an "impermissibleconnection" with ERISA stands. I therefore do not need to revisithis "impermissible reference to ERISA" conclusion.

B. Takings

The Legislature made another recent amendment to the statute.The UPDPA has two subsections, 22 M.R.S.A. §§ 2699(2)(D) and (G),requiring PBMs to disclose certain financial information to theirclients, information that Judge Woodcock concluded (for purposesof the preliminary injunction ruling) was trade secretinformation. Judge Woodcock upheld one of the disclosurerequirements, section (2)(D), against attack, in part because itcontained a confidentiality component that prevented the clientfrom disclosing the information further. He concluded(preliminarily), however, that the other disclosure requirement,section (2)(G), was an unconstitutional taking. The legislaturehas now added section (2)(D)'s confidentiality language to thedisclosure requirement of section (2)(G). As a result, theAttorney General asks me to vacate Judge Woodcock's preliminaryruling that section (2)(G) was a taking. I decline to do so.

Judge Woodcock's ruling upholding section (2)(D) was based ontwo factors. First, he assumed that its scope was "limited toinformation about benefits the covered entity has paid for orservices the PBM provided to it" and concluded on that basisalone that it did not violate constitutional requirements. OrderGranting Mot. for Prelim. Inj. at 17. The confidentialityprovision in section (2)(D) was a "Moreover" to the opinion'sreasoning. Id. Judge Woodcock then continued: "To the extentthis information is in fact a trade secret, the statute'sprotection from further disclosure inoculates it fromconstitutional infirmity." Id. (emphasis added). Obviouslythere is some doubt whether disclosure to the covered entity ofinformation about benefits it has paid for or about servicesprovided to it could really amount to divulgence of a tradesecret.

In the case of section (2)(G), however, the PBM is required todisclose to its clients "all financial terms and arrangements forremuneration of any kind that apply between the pharmacy benefitsmanager and any prescription drug manufacturer or labeler,including, without limitation, formulary management anddrug-switch programs, educational support, claims processing andpharmacy network fees that are charged from retail pharmacies anddata sales fees." 22 M.R.S.A. § 2269(2)(G). According to JudgeWoodcock, section (2)(G) presents "a different problem" fromsection (2)(D) in two ways: "It not only mandates disclosure ofinformation that goes to the heart of what the PBMs contend aretrade secrets, but it also fails to protect that information from further disclosure." Order Granting Mot. for Prelim. Inj. at 18.Thus, although Judge Woodcock had been skeptical whether section(2)(D) involved a trade secret at all, he recognized that tradesecrets (as the plaintiff sees them) were central to section(2)(G). This is not information about services provided to theclient or about benefits paid for. Instead, possession of thisinformation is an important part of a PBM's proprietaryinformation. Unlike section (2)(D), disclosure to the client ofthis information threatens its value regardless of protectionagainst further disclosure.2 Again, I applaud the State'squick response to Judge Woodcock's Order, but whatever effect itmay have on the final decision, it is not sufficient to justifyvacating the preliminary injunction.


Judge Woodcock's preliminary injunction did not discuss whetherMaine could enforce those parts of the UPDPA that are notunconstitutional or preempted. This is what lawyers and judgescall a "severability" question: Can the unproblematic parts of astatute be saved, or has the court's ruling so gutted the statutethat it cannot go into effect at all?

Unlike some statutes, the UPDPA has no severability provisionspecifying the Legislature's intent in the event of partialinvalidity. For such cases, Maine has a general statute. Itprovides: The following rules shall be observed in the construction of statutes, unless such construction is inconsistent with the plain meaning of the enactment.

8. SEVERABILITY. The provisions of the statutes are severable. . . . If any provision of the statutes . . . is invalid, or if the application of [it] to any person or circumstance is invalid, such invalidity does not affect other provisions or applications which can be given effect without the invalid provision or application.1 M.R.S.A. § 71(8) (Supp. 2003). The Maine Law Court has stated: [P]artial unconstitutionality of a statute or ordinance does not necessarily result in tainting the whole legislation, even in the absence of a severability clause. Where it appears that the valid provisions would have been enacted, even if the invalid portion had been deleted, then the valid part may stand and the i nvalid may be rejected. On the other hand, when the legislative provisions are so related in substance and object that it is impossible to determine that the legislation would have been enacted except as an entirety, if one portion offends the Constitution, the whole must fall.Town of Windham v. LaPointe, 308 A.2d 286, 292 (1973)(citations omitted). In short, there is a presumption in favor ofseverability, but the key question is legislative intent. SeeOpinion of the Justices, 2004 Me. 54, ¶ 23 (citations omitted)("[T]he Law Court has explained that if a provision of a statuteis invalid, that provision is severable from the remainder of thestatute as long as the rest of the statute `can be given effect'without the invalid provision, and the invalid provision is notsuch an integral part of the statute that the Legislature wouldonly have enacted the statute as a whole. The Law Court considersthe legislative purpose or purposes of the statute under consideration whenexamining questions of severability.").3

In light of the presumption, the burden ordinarily should fallon the party challenging severability (here, the plaintiff) todemonstrate that the Maine legislature would not have enacted theprovision had it known that ERISA would preempt its applicationin most instances and that even where ERISA does not preempt it,one of the disclosure provisions cannot be enforced. Cf.Beacon Products Corp. v. Reagan, 633 F. Supp. 1191, 1196 (D.Mass. 1986) (citing Alaska Airlines, Inc. v. Donovan,766 F.2d 1550, 1560 (D.C. Cir. 1985)). But there is also a proceduralhistory in this case that puts some burden on the AttorneyGeneral. As I pointed out in my Order of May 3, 2004, theAttorney General barely mentioned the severability issue in hislegal memorandum on the preliminary injunction. Order on Def.'sMot. to Amend the Order of Prelim. Inj. at 3 (May 3, 2004)(Docket Item 44). Judge Woodcock obviously did not recognize thatthe Attorney General was pressing that issue. Indeed, he observedin his opinion that "[a]t oral argument, the State did notdisagree with PCMA's contention that the `vast amount' of thecovered individuals the PBMs service in Maine are covered under ERISA plans." Order Granting Mot. for Prelim. Inj. at 28.In this context it is not surprising that Judge Woodcock did notgo on to analyze whether the Maine Legislature would have enactedUPDPA had it known that much of it could be preempted. TheAttorney General thus has some burden in attempting to revisitthe issue now.

In fact, nothing in the legislative history sheds any light onthis issue. The sponsors were concerned about PBMs in general andthe legislative debate demonstrates concern about all facets oftheir role in Maine's health care and drug pricing environment.See, e.g., Testimony of Senator Treat, Sponsor LD 554 (Mar.24, 2003) (Ex. H, Docket Item 47); Legis. Rec. House H-871 (2003)(Ex. J, Docket Item 47).4 The real question is whetherthe statute "can be given effect" without its problematicsections. 22 M.R.S.A. § 71(8) (emphasis added). See alsoOpinion of the Justices, 2004 Me. 54, ¶ 23; Bayside Enters.,Inc. v. Maine Agric. Bargaining Bd., 513 A.2d 1355, 1360 (Me.1986). I will assume (without deciding) that elimination of theunconstitutional disclosure section will not destroy theunderlying purpose of the UPDPA. But the plaintiff has questionedwhether "the remaining provisions can function . . . absent theinvalid" portions that ERISA preempts. See Opinion of the Justices, 2004 Me. 54, ¶ 24. TheUPDPA applies to PBMs. PBMs contract with covered entities. Atthe time the UPDPA was first enacted, at least some coveredentities had both ERISA (e.g., private employers) and non-ERISA(e.g., government entities and individuals) members andsubscribers. See PCMA's Reply Mem. in Support of Prelim. Inj.,Levy Rebuttal Decl., Ex. 2 (Ex. 1, Docket Item 18);5Def.'s Supplemental Mem. in Support of His Mot. to Amend theOrder of Prelim. Inj. at 12 (stating that Maine insurancecompanies sell policies to individuals and governmental entitiesnot subject to ERISA); Schuldes Decl. ¶ 7 (Docket Item 51)(stating that insurance companies have contracts with privateemployers and governmental entities). How can the UPDPAchallenged provisions govern these covered entities or insurancecompanies without forbiddenly affecting the ERISA plans? TheMaine Attorney General's response is that it is "pure conjecture"that some covered entities may provide healthcare benefits toboth individuals not covered by ERISA and employers who are.See Def.'s Reply Mem. in Support of His Motion to Amend theOrder of Prelim. Inj. at 6 (Docket Item 53). However, there issome record support for the plaintiff's assertion. I also find itunlikely that the Maine Legislature would have intended serendipitous enforcement,depending upon the mix of a particular covered entity's members.For preliminary injunction purposes, the challenged provisionscannot "be given effect" without interfering with ERISApreemption.

Certainly the record before me leaves a lot to be desired onwhether enforcement can or cannot occur without interfering withERISA preemption, and after reading the legal memoranda manytimes, I am still uncertain exactly how UPDPA enforcement wouldwork, given preemption. One additional factor matters, and thatis timing. Ultimately, at the end of the case, severability mayturn out to be a persuasive argument for the final decision (if Iadhere to the preliminary finding of preemption). But itcertainly would disserve procedural justice to divert the lawyersand judge now into a contested evidentiary hearing over how thisstatute would work, if at all, with parts of itinvalidated.6 Discovery on the merits is to be completed by August 20, 2004 and finalsummary judgment motions are to be filed by September 17, 2004.All efforts should be focused on reaching that finaldetermination, not on creating delay by skirmishing overtemporary relief.7

The motion to amend the preliminary injunction is DENIED,without prejudice to renewal of the arguments at the time offinal disposition.


1. The Maine Legislature enacted two pieces of legislation toamend the UPDPA. The first, dealing directly with disclosureprovisions (i.e., amending 22 M.R.S.A. §§ 2269(2)(D) and (G))was enacted on an emergency basis and is now effective. P.L.2003, ch. 688, § C-9 — C-11 (Ex. B, Docket Item 47). The second,dealing with ERISA issues (i.e., eliminating any duties of PBMsto covered individuals and removing provisions that might affecta PBM's decision to select a particular drug for a planparticipant by repealing 22 M.R.S.A. § 2699(2)(B) and amending 22M.R.S.A. § 2699(2)(E)(2)), will be effective on July 30, 2004.P.L. 2003, ch. 673 §§ FFF-1, FFF-2 (Ex. A, Docket Item 47). Dueto the proximity of this date, I treat all provisions aseffective.

2. Like Judge Woodcock, I make no final ruling on whether thisdata is a trade secret. See Order Granting Mot. for Prelim.Inj. at 15 n. 15.

3. Although this is an issue of Maine statutory construction,federal caselaw also recognizes such a presumption. See,e.g., Regan v. Time, Inc., 468 U.S. 641, 653 (1984) (statingthat "the presumption is in favor of severability"); Buckley v.Valeo, 424 U.S. 1, 108 (1976) (citation omitted) ("Unless it isevident that the legislature would not have enacted thoseprovisions which are within its power, independently of thatwhich is not, the invalid part may be dropped if what is left isfully operative as a law.").

4. The Attorney General recognizes that "[t]he brieflegislative debate centered largely on the need for anylegislation at all, and whether enactment would save Maineconsumers and plans any money." Def.'s Supplemental Mem. inSupport of His Mot. to Amend the Order of Prelim. Inj. at 19.There were both references to both ERISA and non-ERISA planswithout differentiation.

5. The plaintiff points to the Maine Healthcare PurchasingCollaborative as another covered entity that has both ERISA andnon-ERISA members. See Pl.'s Supplemental Mem. in Opp'n toDef.'s Mot. to Amend Prelim. Inj. at 16 (Docket Item 49).However, the Collaborative may no longer be affected by the UPDPAas a result of the recent amendment limiting the application ofUPDPA to contracts entered into after its original effectivedate. See P.L. 2003, ch. 688, § C-10.

6. The Attorney General says that no evidentiary hearing isnecessary, and that there is no precedent for having anevidentiary hearing on whether portions of the legislation areseverable. Def.'s Reply Mem. in Support of Mot. to Amend theOrder of Prelim. Inj. at 3 n. 3 (Docket Item 39). That argumentmakes sense where the issue is legislative purpose divined merelyfrom the words of the statute or perhaps legislative history.Here, however, the question is whether the rest of the UPDPA canin fact be given effect in the face of ERISA preemption. Theanswer to that question depends on factual premises. For example,the Attorney General asserts that perhaps 112,891 Mainers in thenon-ERISA sector could be helped by the statute. Def.'sSupplemental Mem. in Support of His Mot. to Amend the Order ofPrelim. Inj. at 16; Def.'s Reply Mem. in Support of His Motion toAmend the Order of Prelim. Inj. at 6 (Docket Item 53). Theplaintiff asserts that the number is 38,000, an "extremely smallgroup by comparison to the almost 690,000 Maine residents whoreceive private health insurance coverage through employers."Pl.'s Supplemental Mem. in Opp'n to Def.'s Mot. to Amend Prelim.Inj. at 15. Certainly if the Legislature enacted legislationdesigned to assist 690,000 residents and, by virtue ofpreemption, the legislation could assist only 38,000, there isserious question whether the legislative purpose would have beento go forward in any event, or whether the ERISA-related aspectwas so integral that the Legislature would only have enacted thestatute as a whole. See Opinion of the Justices, 2004 Me. 54,¶ 23 (citations omitted).

7. A hearing now would be taking place at a time when we donot even know which parts of the UPDPA, if any, will fail tosurvive. After all, despite the diligent efforts of the lawyersand the lengthy opinion by Judge Woodcock, only a preliminarydetermination has been made so far. A final answer should beavailable within a few months.

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