Pharmaceutical Research & Manufacturers of America v. Concannon

United States Court of Appeals
For the First Circuit

No. 00-2446

PHARMACEUTICAL RESEARCH AND MANUFACTURERS OF AMERICA,

Plaintiff, Appellee,

v.

KEVIN CONCANNON, COMMISSIONER, MAINE DEPARTMENT OF
HUMAN SERVICES, and MAINE ATTORNEY GENERAL,

Defendants, Appellants.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MAINE

[Hon. D. Brock Hornby, U.S. District Judge]

Before

Bownes, Senior Circuit Judge,
Keeton and Saris*, District Judges.

Andrew S. Hagler, Assistant Attorney General, with whom G.
Steven Rowe, Attorney General, Paul Stern, Deputy Attorney
General, John R. Brautigam, Assistant Attorney General, Cabanne
Howard, and University of Maine Law School, were on brief, for
appellant.

Thomas C. Bradley, Arn H. Pearson and Maine Citizen
Leadership Fund on brief for Viola Quirion, Michelle Campbell,
Maine Council of Senior Citizens and Richard Donahue, M.D.,
amici curiae.

Kathleen M. Sullivan, with whom Daniel M. Price, Allen S.
Rugg, Marinn F. Carlson, Powell, Goldstein, Frazer & Murphy,
L.L.P., Bruce C. Gerrity and Preti, Flaherty, Beliveau, Pachios
& Haley L.L.C., were on brief, for appellees.

Daniel J. Popeo, Richard A. Samp and Washington Legal
Foundation, on brief for Washington Legal Foundation, Allied
Educational Foundation, International Patient Advocacy
Association, Kidney Cancer Association, The Seniors Coalition,
and The 60 Plus Association, amici curiae.

Steven J. Rosenbaum, David H. Remes, Covington & Burling,
Robin S. Conrad and National Chamber Litigation Center on brief,
for the Chamber of Commerce of the United States, amicus curiae.

Edwin D. Schindler on brief pro se, amicus curiae.

May 16, 2001

-2-
______________________

*Of the District of Massachusetts, sitting by designation.

BOWNES, Senior Circuit Judge. In this case, we

consider whether a Maine statute providing for affordable

prescription drugs can survive facial constitutional challenges.

On October 26, 2000, the district court issued a preliminary

injunction preventing the implementation of the statute on the

ground that it is preempted by the Supremacy Clause and violates

the dormant Commerce Clause. We reverse.

I. BACKGROUND

On May 11, 2000, the Governor of Maine signed into law

an Act to Establish Fairer Pricing for Prescription Drugs, 2000

Me. Legis. Ch. 786 (S.P. 1026) (L.D. 2599) (the “Act”), which

establishes the “Maine Rx Program" (the "Program").1

The statute was enacted because of the Maine

Legislature's concern that many Maine citizens who were not

Medicaid recipients could not afford necessary prescription

1The full text of the relevant provisions of the Act is set
forth in the Appendix, infra.

-3-
drugs. It is predicated on the economic reality that volume

buying of prescription drugs by Medicaid administrators,

insurance companies and health maintenance organizations

(“HMOs”) resulted in substantially lower prices for these

entities than for individual purchasers. A minority staff

report for the United States House Committee on Government

Reform and Oversight found that the average retail price for

individual elderly purchasers was 86 percent higher than the

price charged to the federal government and other favored

customers, such as HMOs.

The Program is open to all State residents, and allows

enrollees to purchase prescription drugs from participating

Maine pharmacies at a discounted price. The discount offered by

the pharmacies is reimbursed by the State out of a dedicated

fund created with the money raised from “rebate payments”

collected from participating drug manufacturers. Me. Rev. Stat.

Ann. tit. 22, § 2681. The obligation to pay the “rebate” is

triggered by the retail sale of the manufacturer's drugs to a

Program enrollee through a participating pharmacy.

The Act directs the Commissioner of Maine's Department

of Health Services to negotiate rebate agreements with

manufacturers. Id. § 2681(3). These rebate agreements are

similar in form to the rebate agreements required of

-4-
manufacturers participating in the Maine Medicaid outpatient

drug program. Id. § 2681(4). In negotiating the rebate, the

Commissioner is directed to “consider” the rebate amount

calculated under the Federal Medicaid Rebate Program, 42 U.S.C.

§ 1396r-8, and to use his or her “best efforts” to obtain an

initial rebate in the same amount. Me. Rev. Stat. Ann. tit. 22,

§ 2681(4)(A)-(C). Rebate payments are made quarterly on the

basis of retail sales records for that quarter. Id. § 2681(3).

In order to create an incentive for manufacturers to

enter rebate agreements with the Commissioner, the Act provides

that names of manufacturers who do not enter into agreements be

released to health care providers and the public. Id. §

2681(7). More importantly, the drugs of all noncompliant

manufacturers are required to be subject, “as permitted by law,”

to the “prior authorization requirements” in the State Medicaid

program. Id. § 2681(7). When subjected to prior authorization,

a drug may not be dispensed to a Medicaid beneficiary without

the approval of the State Medicaid administrator.

The plaintiff-appellee, Pharmaceutical Research &

Manufacturers of America (“PhRMA”), brought an action in the

United States District Court in the District of Maine against

defendant-appellants Commissioner of the Maine Department of

Human Services and the Maine Attorney General, challenging the

-5-
constitutionality of the Act. PhRMA claimed that the Act

violated the dormant Commerce Clause and was preempted by the

federal Medicaid statute under the Supremacy Clause, and moved

for a preliminary injunction to prevent the implementation of

the Act.

The district court issued the preliminary injunction

and found the Act unconstitutional on the two asserted grounds.

First, the district court held that the Act had an impermissible

extraterritorial reach by regulating the revenues out-of-state

pharmaceutical manufacturers receive when selling to out-of-

state pharmaceutical distributors, thereby violating the dormant

Commerce Clause. As to those distributors located in the State

of Maine, the district court held that the Act was preempted

under the Supremacy Clause because it conflicted with the

federal Medicaid program.2

II. DISCUSSION

A. Standard of Review

2
The Act also contained a provision that made it “illegal
profiteering” for a manufacturer to “exact[] or demand[] an
unconscionable price” or to “exact[] or demand[] prices or terms
that lead to any unjust or unreasonable profit.” An Act to
Establish Fairer Pricing for Prescription Drugs, § 2697(2), 2000
Me. Legis. Ch. 786 (S.P. 1026) (L.D. 2599) (to be codified at
Me. Rev. Stat. Ann. tit. 22, § 2697(2)). The district court
found this provision unconstitutional. The State of Maine has
not appealed this ruling.

-6-
 "The criteria for the grant of a preliminary injunction

are the familiar four: likelihood of success, risk of

irreparable harm, the balance of equities and the public

interest." Langlois v. Abington Hous. Auth., 207 F.3d 43, 47

(1st Cir. 2000) (citing Ross-Simons of Warwick, Inc. v.

Baccarat, Inc., 102 F.3d 12, 15 (1st Cir. 1996)). When a

district court's grant of a preliminary injunction is appealed,

our standard of review depends on the issue under consideration:

we review pure issues of law de novo, findings of fact for clear

error, and "judgment calls" with considerable deference. Id.

(noting that our standard of review is sometimes summarized as

being for "abuse of discretion").

The district court concluded that PhRMA's likelihood

of success on the merits of most of its constitutional

challenges was "overwhelming." Accordingly, it dealt only

cursorily with the remaining preliminary injunction factors.

Our review also focuses on PhRMA's likelihood of success on the

merits of its challenges under the Supremacy Clause and the

Commerce Clause. See Weaver v. Henderson, 984 F.2d 11, 12 (1st

Cir. 1993) (stating that the “sine qua non” of preliminary

injunction analysis is whether plaintiff is likely to succeed on

merits of claim).

B. Standing

-7-
 The initial question we face is whether PhRMA has

prudential standing to challenge the prior authorization

provision of the Act. PhRMA contends that Maine's standing

argument was not briefed to the district court, and therefore

was waived. We assume, without deciding, that Maine may assert

this standing challenge on appeal, and hold that PhRMA falls

within the relevant "zone of interest."3

The Supreme Court recently reiterated the standard for

determining prudential standing:

[I]n applying the "zone of interests" test,
we do not ask whether, in enacting the
statutory provision at issue, Congress
specifically intended to benefit the
plaintiff. Instead, we first discern the
interests "arguably . . . to be protected"
by the statutory provision at issue; we then
inquire whether the plaintiff's interests
affected by the agency action in question
are among them.

3 There is some dispute among the circuits as to whether
prudential standing (as opposed to Article III standing) can be
raised for the first time on appeal. Compare Animal Legal Def.
Fund v. Espy, 23 F.3d 496, 499 (D.C. Cir. 1994) (prudential
standing is non-waivable); Thompson v. County of Franklin, 15
F.3d 245, 248 (2d Cir. 1994) (same); Cmty. First Bank v. Nat'l
Credit Union Admin., 41 F.3d 1050, 1053 (6th Cir. 1994) (same)
with Pershing Park Villas Homeowners Ass'n v. United Pac. Ins.
Co., 219 F.3d 895, 899 (9th Cir. 2000) (prudential standing is
waivable); Lindley v. Sullivan, 889 F.2d 124, 129 (7th Cir.
1989) (same). Because we hold that Maine's challenge to PhRMA's
standing would be unsuccessful in any event, as explained infra,
it is not necessary for us to decide the waiver issue now.

-8-
Nat'l Credit Union Admin. v. First Nat'l Bank & Trust Co., 522

U.S. 479, 492 (1998).

Maine contends that PhRMA's interest is purely

financial and is limited to ensuring that its members' drugs are

prescribed instead of competitors' drugs. Nothing in the

Medicaid statute, Maine argues, suggests that Congress intended

to protect sales of any particular drugs. See Tap Pharms. v.

U.S. Dep't of HHS, 163 F.3d 199, 208 (4th Cir. 1998) (holding

that pharmaceutical manufacturer lacked standing to challenge

Medicare rules reducing reimbursement amounts paid for their

products because manufacturer's financial interests were not

within zone of interests protected by Medicare).

PhRMA has not asserted an action to enforce rights

under the Medicaid statute, however, but rather a preemption-

based challenge under the Supremacy Clause. In this type of

action, it is the interests protected by the Supremacy Clause,

not by the preempting statute, that are at issue. St. Thomas-

St. John Hotel & Tourism Ass'n v. Virgin Islands, 218 F.3d 232,

241 (3d Cir. 2000). As the Third Circuit recently pointed out,

an entity does not need prudential standing to invoke the

protection of the Supremacy Clause:

We know of no governing authority to the
effect that the federal statutory provision
which allegedly preempts enforcement of
local legislation by conflict must confer a

-9-
 right on the party that argues in favor of
preemption. On the contrary, a state or
territorial law can be unenforceable as
preempted by federal law even when the
federal law secures no individual
substantive rights for the party arguing
preemption.

Id. Thus, regardless of whether the Medicaid statute's relevant

provisions were designed to benefit PhRMA, PhRMA can invoke the

statute's preemptive force. Cf. Burgio & Campofelice, Inc. v.

N.Y. State Dep't of Labor, 107 F.3d 1000, 1006 (2d Cir. 1997)

(concluding that the Supremacy Clause creates an implied right

of action for injunctive relief against state officers who are

threatening to violate federal law).

Given that PhRMA has prudential standing grounded in

the Supremacy Clause, we think it may fairly assert the rights

of Medicaid recipients for purposes of this action. Where a

party has established a concrete injury in fact, and otherwise

has standing to challenge the lawfulness of the statute, it is

"entitled to assert those concomitant rights of third parties

that would be 'diluted or adversely affected' should [its]

constitutional challenge fail and the statute[] remain in

force.” Craig v. Boren, 429 U.S. 190, 195 (1976) (quoting

Griswold v. Connecticut, 381 U.S. 479, 481 (1965)).

Accordingly, “vendors and those in like positions have been

uniformly permitted to resist efforts at restricting their

-10-
operations by acting as advocates of the rights of third parties

who seek access to their market or function.” Id.; see also 1

L. Tribe, American Constitutional Law, § 3-19, p. 438 (3d ed.

2000).

C. Preemption

Having decided that PhRMA has standing to challenge the

Maine Act on preemption grounds, we now turn to the merits of

that argument. The district court addressed preemption only

with regard to the Act's regulation of sales to in-state

distributors, after concluding that such regulation would not be

barred by the Commerce Clause. It held that the prior

authorization review requirement of the Act, Me. Rev. Stat. Ann.

tit. 22, § 2681(7), conflicted with the purposes of the Medicaid

program such that the requirement was invalid under the

Supremacy Clause.4 If we affirm the district court's preemption

holding, it would invalidate the Act as to all distributors, not

just those who operate in Maine, and would obviate the need to

4
Only the prior authorization review requirement of the Act
is at issue for preemption purposes, not the public
identification requirement. Therefore, for simplicity's sake,
our use of the terms "the Act" or "Maine Rx Program" refer
solely to the prior authorization review requirement.

-11-
address the Commerce Clause. Therefore, we analyze the issue of

preemption first.5

Under the Supremacy Clause, a federal law may expressly

or impliedly preempt state law. U.S. Const. art. VI, cl. 2

(stating that federal law “shall be the supreme law of the Land

. . . any Thing in the Constitution or Laws of any State to the

Contrary notwithstanding”). As the parties agree, only "implied

conflict preemption" is at issue here.6 Our task, therefore, is

to consider if “compliance with both state and federal

regulations is impossible" or if "state law interposes an

5An amicus curiae brief offers another basis for federal
preemption: Edwin D. Schindler, Major Stockholder and Patent
Attorney, argues that the Maine Act is preempted by federal
patent law. Because these issues were raised for the first time
on appeal by an amicus, not by a party, we do not consider them.
Am. Fed'n of Gov't Employees, Local 3936 v. Fed. Labor Relations
Auth., 239 F.3d 66, 69 (1st Cir. 2001); United States v. Sturm,
Ruger & Co., 84 F.3d 1, 6 (1st Cir. 1996) ("an amicus cannot
introduce a new argument into a case").
6
Express preemption of a state law occurs where “a federal
statute explicitly confirms Congress’s intention to preempt
state law and defines the extent of that preclusion.” Grant's
Dairy-Me., LLC v. Comm'r of Me. Dep't of Agric., Food & Rural
Res., 232 F.3d 8, 15 (1st Cir. 2000). There is no explicit
language in the Medicaid statute that forbids the Maine Rx
Program. Nor is the doctrine of "field" preemption relevant, as
Medicaid is a cooperative federal and state program. This form
of implied preemption applies only when a federal regulatory
scheme is so pervasive as to create the inference that Congress
did not intend for the states to pass supplemental law in that
area. Gade v. Nat’l Solid Wastes Mgmt. Ass’n, 505 U.S. 88, 98
(1992). Therefore, we consider only implied conflict preemption
as a basis for PhRMA's argument.

-12-
obstacle to the achievement of Congress’s discernable

objectives.” Grant's Dairy-Me., LLC v. Comm'r of Me. Dep't of

Agric., Food & Rural Res., 232 F.3d 8, 15 (1st Cir. 2000)

(citing Gade v. Nat'l Solid Wastes Mgmt. Ass'n, 505 U.S. 88, 98

(1992)).

In doing so, we assume "that the historic police powers

of the States [are] not to be superceded by . . . Federal Act

unless that [is] the clear and manifest purpose of Congress.”

Id. at 14-15 (quoting Rice v. Santa Fe Elevator Corp., 331 U.S.

218, 230 (1947)). We also recognize that federal preemption of

a state law is “strong medicine,” and is “not casually to be

dispensed.” Id. at 18. This is especially true when the

federal statute creates a program, such as Medicaid, that

utilizes "cooperative federalism”: "Where coordinated state and

federal efforts exist within a complementary administrative

framework, and in the pursuit of common purposes, the case for

federal preemption becomes a less persuasive one." Wash., Dep’t

of Soc. & Health Servs. v. Bowen, 815 F.2d 549, 557 (9th Cir.

1987) (quoting N.Y. Dep't of Soc. Servs. v. Dublino, 413 U.S.

405, 421 (1973)).

To determine whether the state regulation is consistent

with the federal statute, we examine the "structure and purpose

of the [federal] statute as a whole." Gade, 505 U.S. at 98.

-13-
The primary purpose of Medicaid is to enable states to provide

medical services to those whose “income and resources are

insufficient to meet the costs of necessary medical services .

. . .” 42 U.S.C. § 1396 (2000). Congress expressly intended

that the provision of medical services be administered by the

state “in a manner consistent with simplicity of administration

and the best interests of the recipients.” Id. § 1396a(a)(19).

We perceive no conflict between the Maine Act and

Medicaid's structure and purpose. Neither the letter nor the

intent of the Medicaid statute prevents states from imposing

prior authorization requirements; indeed, they are explicitly

permitted. 42 U.S.C. § 1396r-8(d)(1)(A) (states may "subject to

prior authorization any covered outpatient drug"). The statute

sets forth only two limitations on a state’s use of prior

authorization: the state must provide “response by telephone or

other telecommunication device within 24 hours of a request for

prior authorization;" and, with respect to most drugs, provide

for "the dispensing of at least 72-hour [sic] supply of a

covered outpatient prescription drug in an emergency situation

(as defined by the Secretary).” Id. § 1396r-8(d)(5)(A) and (B).

The plain text of the Maine Act appears to incorporate

these Medicaid requirements. It provides: “The department

shall impose prior authorization requirements in the Medicaid

-14-
program under this Title, as permitted by law, for the

dispensing of prescription drugs . . . .” Me. Rev. Stat. Ann.

tit. 22, § 2681(7) (emphasis added). We read the language "as

permitted by law" to limit the Act's application to only those

situations in which prior authorization is permitted by

Medicaid.7 As the Department is charged with administering the

Maine Rx Program, we owe deference to its interpretation of the

Act. Fireside Nissan, Inc. v. Fanning, 30 F.3d 206, 212 (1st

Cir. 1994).

Moreover, as set forth in the affidavit of Kevin

Concannon, Commissioner of the Maine Department of Human

Services, Maine has proposed administrative rules governing

prior authorization aimed at ensuring that Medicaid recipients

will have access to needed medications. Specifically, the

decision to place a drug on the prior authorization list may be

made only by the State's Medicaid Drug Utilization Review [DUR]

Committee, which exclusively comprises physicians and

pharmacists licensed to prescribe or dispense medications in

Maine. Concannon states:

In making its determination of whether or
not a prior authorization requirement is

7
Kevin Concannon, Commissioner of the Maine Department of
Human Services, affirms in an affidavit that the Department will
not impose prior authorization that would conflict with the
Medicaid requirements.

-15-
 clinically appropriate, the DUR Committee
shall be guided by the law of Medicaid, and
particularly the principle that Medicaid
recipients shall be assured access to all
medically necessary prescription drugs.

PhRMA contends that prior authorization, however

implemented, necessarily interferes with the delivery of

Medicaid services by placing an administrative burden on

physicians and patients. This interference is acceptable, it

says, when performed in the usual course of the Medicaid

regulations concerning prior authorization, 42 U.S.C. § 1396r-

8(d)(5), because there is a countervailing "legitimate" purpose

of preventing abuse or overprescription of certain expensive

medications. In the case of a prior authorization under the

Maine Rx Program, however, PhRMA argues (and the district court

agreed) that there is no "Medicaid purpose" or "benefit" to

Medicaid that offsets the interference. Hence, it contends,

only when a prior authorization is motivated by the refusal to

enter into a Maine Rx Program rebate agreement is it preempted.

This argument is unpersuasive. First, we are not

convinced that the Medicaid statute is concerned with the

motivation behind imposing prior authorization, as long as the

24-hour response and the 72-hour drug-supply requirements, 42

U.S.C. § 1396r-8(d)(5), are satisfied. Thus, even if the

district court's conclusion that “Maine can point to no Medicaid

-16-
purpose in this new prior authorization requirement” is true, it

does not necessarily mean that the prior authorization scheme

conflicts with the objectives of the Medicaid program. We see

no basis for inflicting the "strong medicine" of preemption on

a state statute that, in the absence of an actual conflict,

merely fails to directly advance the purpose of the federal

program.

Moreover, even assuming that this inquiry into the

underlying objectives of the Act is appropriate, we disagree

that the Act serves no purpose related to Medicaid. The

purposes of the Medicaid statute, read broadly, are consonant

with the purposes of the Maine Rx Program. First, 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,” 42 U.S.C. § 1396, even if

the individuals covered by the Maine Rx Program are not poor

enough to qualify for Medicaid. Second, there is some evidence

in the record that by making prescription drugs more accessible

to the uninsured, Maine may reduce Medicaid expenditures. When

people whose incomes fall outside Medicaid eligibility are

unable to purchase necessary medication, their conditions may

worsen, driving them further into poverty and into the Medicaid

program, requiring more expensive treatment that could have been

-17-
avoided had earlier intervention been possible. See Stephen B.

Soumerai, Sc.D., Dennis Ross-Degnan, Sc.D., Inadequate

Prescription-Drug Coverage for Medicare Enrollees – A Call to

Action, New England Journal of Medicine, Vol. 340, No. 9, March

4, 1999 (contained in district court record); Minority Staff

Report, Prescription Drug Pricing in the 1st Congressional

District of Maine: Drug Companies Profit at the Expense of

Older Americans, Committee on Government Reform and Oversight,

U.S. House of Representatives, prepared for Rep. Thomas H.

Allen, October 9, 1998 (same).8

Thus, we disagree with the district court's statement

that "If Maine can use its authority over Medicaid authorization

to leverage drug manufacturer rebates for the benefit of

uninsured citizens, then it can just as easily put the rebates

into a state program for highway and bridge construction or

school funding." Neither highway construction nor school

funding relate in any way to the purposes of providing medical

services to the needy, see 42 U.S.C. § 1396, or of cost-

effective administration of the Medicaid program, see id. §

8
Moreover, the Amicus Curiae Brief of Viola Quirion,
Michelle Campbell, Maine Council of Senior Citizens and Richard
Donahue, M.D. attaches an affidavit from Maine resident Viola
Quirion indicating that because many older persons cannot afford
the high costs of prescription drugs, there may be increased
enrollment in nursing homes and an increased burden on Medicaid.

-18-
1396a(a)30(A) (state plans must assure that payments are

consistent with, inter alia, efficiency and economy).

PhRMA further contends that the Maine Rx Program will

necessarily harm Medicaid recipients by impeding access to their

doctors' first-choice medications. The district court agreed

with this argument, concluding that the Maine Act conflicted

with the Medicaid provision setting forth a general requirement

that a state Medicaid plan contain safeguards to assure that

care and services will be provided "in a manner consistent with

. . . the best interests of the recipients." 42 U.S.C. §

1396a(a)(19). PhRMA vigorously presses the argument that the

prior authorization provision is more than a de minimus obstacle

to achieving these best interests of the Medicaid recipient

because it will effectively require a doctor to shift to her

second choice drug where the first choice drug is manufactured

by a company that does not participate in the rebate program.

The state concedes that it will not authorize payment for the

first-choice drug manufactured by a non-participant where there

is another drug for the ailment manufactured by a participant,

but insists that the Medicaid recipient will always receive

medically necessary drugs. At this point in the proceedings, we

find insufficient basis for concluding that the Maine Act, on

its face, controverts the Medicaid goal of "best interests."

-19-
 Because this is a facial challenge to a statute, PhRMA

has a difficult burden of showing that Medicaid recipients will

be harmed by the Maine Rx Program. "A facial challenge to a

legislative Act is, of course, the most difficult challenge to

mount successfully, since the challenger must establish that no

set of circumstances exists under which the Act would be valid."

United States v. Salerno, 481 U.S. 739, 745 (1987). “The

existence of a hypothetical or potential conflict is

insufficient to warrant the preemption of the state statute.”

Rice v. Norman Williams Co., 458 U.S. 654, 659 (1982).

Here, the parties submitted competing affidavits

discussing whether the Maine Rx Program will necessarily inflict

harm on Medicaid patients. Dr. Scott Howell, Vice President of

National Accounts, Managed Care, SmithKline Beecham Corporation,

states that "when used wrongly," prior authorizations hurt

medical professionals and patients by adding administrative

burdens, delays, anxiety and confusion. He opines that the

Maine Rx Program "will create a high likelihood" of harm by

leading to inappropriate prescribing of medications, needlessly

burdening doctors, and causing unnecessary inconvenience for

Medicaid recipients. "[P]rior authorization of drugs, without

regard to safety or efficacy, will lead to drugs being

prescribed that are less safe and efficacious."

-20-
 Dr. Timothy S. Clifford, the Medical Director for the

Maine Bureau of Medical Services, which administers the Medicaid

program, disagrees with Dr. Howell's affidavit on several

points. He contends that the Department will address safety and

efficacy concerns in administering the Maine Rx Program's prior

authorization requirement; that it will consider the

availability of alternative drugs in deciding whether to subject

a particular drug to the requirement; and that Medicaid

recipients will continue to have access to medically necessary

drugs. Dr. Clifford states: "The Department certainly will not

subject any single-source drug that fulfills a unique

therapeutic function to the prior authorization process,

regardless of whether the manufacturer participates in the Maine

Rx Program . . . ."

Dr. H. Burtt Richardson, Jr., a Maine pediatrician and

Maine Medicaid provider, states that he supports the Maine Rx

Program "so long as the decision to put a prior authorization on

particular drugs is clinically appropriate, feasible for a

medical office, and accompanied by the assurance that all Maine

Medicaid recipients have access to medically necessary drugs."

These affidavits, along with other materials in the

record, fall short of establishing that the Act will inflict

-21-
inevitable or even probable harm on Medicaid patients or their

providers. In reviewing a preemption-based facial challenge,

"we do not rest our decision on consequences that, while

possible, are by no means predictable." Dep't of Taxation and

Fin. of N.Y. v. Milhelm Attea & Bros., Inc., 512 U.S. 61, 69

(1994). There is no evidence that the prior authorization

procedure is likely to foreclose a patient from receiving a

necessary drug. Although prior authorization review is

triggered by a manufacturer's refusal to participate in the

Maine Rx Program, the record indicates that the final decision

to require prior authorization for a particular drug is based

primarily on clinical criteria applied by health care

professionals.

Since both sides agree that the prior authorization

requirement is the "hammer" or "force" that coerces

manufacturers to enter into the Program, the possibility that

first-choice drugs will not be readily approved where second-

choice inferior alternatives exist concerns us. The possibility

that the administrative implications of the prior authorization

requirement will affect the quality of medical care for Medicaid

recipients in more subtle ways, i.e. through inconveniencing

prescribing physicians, also concerns us. Dr. Howell's

affidavit, however, is controverted by the affidavits of other

-22-
qualified individuals. We simply cannot say on this record that

the Act conflicts with Medicaid's requirement that state

Medicaid plans assure that care will be provided in a manner

consistent with the recipients' best interests. 42 U.S.C. §

1396a(a)(19).

This decision is without prejudice to PhRMA's right to

renew its preemption challenge after implementation of the Act,

should there be evidence that Medicaid recipients are harmed by

the prior authorization requirement "as applied." See United

States v. Hilton, 167 F.3d 61, 71 (1st Cir.), cert. denied, 528

U.S. 844 (1999) ("It makes little sense to strike down an entire

statute in response to a facial attack when potential

difficulties can be remedied in future cases through

fact-specific as-applied challenges."); see also Corgain v.

Miller, 708 F.2d 1241, 1251 (7th Cir. 1983) (upholding facial

adequacy of plan for prisoner's access to law library, but not

foreclosing future challenge to plan as implemented).

D. Dormant Commerce Clause

Holding that the Maine Act is not preempted by the

Medicaid statute, we next consider whether it violates the

dormant Commerce Clause. The Constitution provides that

Congress shall have the power "[t]o regulate Commerce with

foreign Nations, and among the several States, and with the

-23-
Indian Tribes[.]" U.S. Const. art. I, § 8, cl. 3. The

constitutional provision affirmatively granting Congress the

authority to legislate in the area of interstate commerce "has

long been understood, as well, to provide 'protection from state

legislation inimical to the national commerce [even] where

Congress has not acted. . . .'" Nat'l Foreign Trade Council v.

Natsios, 181 F.3d 38, 61 (1st Cir. 1999) (alterations in

original) (quoting Barclays Bank PLC v. Franchise Tax Bd. of

Cal., 512 U.S. 298, 310 (1994)), aff'd sub nom. Crosby v. Nat'l

Foreign Trade Council, 530 U.S. 363 (2000). This negative

command, known as the dormant Commerce Clause, prohibits states

from acting in a manner that burdens the flow of interstate

commerce. Okla. Tax Comm'n v. Jefferson Lines, Inc., 514 U.S.

175, 179-80 (1995); Healy v. Beer Inst., 491 U.S. 324, 326 n.1

(1989).

The restriction imposed on states by the dormant

Commerce Clause is not absolute, and "the States retain

authority under their general police powers to regulate matters

of legitimate local concern, even though interstate commerce may

be affected." Maine v. Taylor, 477 U.S. 131, 138 (1986)

(internal quotation marks omitted). The prohibitions imposed

upon state regulation by the dormant Commerce Clause have fallen

into several identifiable categories. To determine whether a

-24-
statute violates the dormant Commerce Clause, we apply one of

several levels of analysis, depending on the effect and reach of

the legislation.

First, a state statute is a per se violation of the

Commerce Clause when it has an "extraterritorial reach." Healy,

491 U.S. at 336. "[A] statute that directly controls commerce

occurring wholly outside the boundaries of a State exceeds the

inherent limits of the enacting State's authority and is invalid

regardless of whether the statute's extraterritorial reach was

intended by the legislature." Id. When a state statute

regulates commerce wholly outside the state’s borders or when

the statute has a practical effect of controlling conduct

outside of the state, the statute will be invalid under the

dormant Commerce Clause. Cotto Waxo Co. v. Williams, 46 F.3d

790, 793 (8th Cir. 1995) (citing Healy). A statute will have an

extraterritorial reach if it “necessarily requires out-of-state

commerce to be conducted according to in-state terms.” Id. at

794.

Second, if a state statute discriminates against

interstate commerce, we apply strict scrutiny. It will be

scrutinized under a “virtually per se invalid rule,” which means

that the statute will be invalid unless the state can “show that

it advances a legitimate local purpose that cannot be adequately

-25-
served by reasonable nondiscriminatory alternatives.” Or. Waste

Sys., Inc. v. Dep't of Envtl. Quality of Or., 511 U.S. 93, 100-

01 (1994) (alteration and internal quotation marks omitted).

This level of scrutiny will be applied if the state statute

discriminates against interstate commerce on its face or in

practical effect. Taylor, 477 U.S. at 138; see also Bacchus

Imports, Ltd. v. Dias, 468 U.S. 263, 270 (1984) (indicating that

a finding of discriminatory purpose or discriminatory effect can

constitute economic protectionism subjecting the state statute

to a “stricter level of invalidity”). When a state statute

“discriminates against interstate commerce, or when its effect

is to favor in-state economic interests over out-of-state

interests, we have generally struck down the statute without

further inquiry.” Brown-Forman Distillers Corp. v. N.Y. State

Liquor Auth., 476 U.S. 573, 579 (1986).

Third, a lower standard of scrutiny is applied when the

state statute regulates evenhandedly and has only incidental

effects on interstate commerce. In this situation, a balancing

test is applied. Pike v. Bruce Church, Inc., 397 U.S. 137, 142

(1970). "Where the statute regulates evenhandedly to effectuate

a legitimate local public interest, and its effects on

interstate commerce are only incidental, it will be upheld

-26-
unless the burden imposed on such commerce is clearly excessive

in relation to the putative local benefits." Id.

PhRMA contends that the Maine Act is an impermissible

exercise in extraterritorial regulation and, therefore, is per

se violative of the dormant Commerce Clause. It argues that the

Act necessarily regulates the transaction that occurs between

the manufacturer and the distributor outside the borders of

Maine.

Maine first argues that we need not reach the issue of

whether the Act violates the dormant Commerce Clause because it

is acting as a "market participant" and is therefore exempt from

Commerce Clause restrictions.9 See South-Central Timber Dev.,

Inc. v. Wunnicke, 467 U.S. 82, 93 (1984) ("if a State is acting

as a market participant, rather than as a market regulator, the

dormant Commerce Clause places no limitation on its

activities"). We hold that Maine does not fall under the market

participant exception to the dormant Commerce Clause. Maine is

not a market buyer of prescription drugs, except as required by

the Medicaid statute. Its citizens will continue to directly

purchase prescription drugs as needed. Nothing in the Act makes

Maine a market participant.

9See Judge Lynch's opinion in Nat'l Foreign Trade Council,
181 F.3d at 62-65, for a thorough scholarly discussion of a
state as a market participant.

-27-
 Maine alternatively argues that the Act evenhandedly

regulates in-state conduct that only has an incidental effect on

interstate commerce. Maine contends that we should apply the

lower level of scrutiny, use the Pike balancing test, and find

that the local benefits of the Maine Rx Program outweigh the

incidental burden on interstate commerce.

The Maine Act represents a novel legislative approach

to one of the serious problems of our time, one that resists

easy analysis. We address each of the potentially applicable

dormant Commerce Clause prohibitions to determine the

appropriate analysis and level of scrutiny.

1. Per Se Invalidity: Extraterritorial Reach

A state may not pass laws that have the "'practical

effect' of regulating commerce occurring wholly outside that

State's borders . . . ." Healy, 491 U.S. at 332. When

evaluating the practical effect of the statute, the court should

consider the statute itself, and “how the challenged statute may

interact with the legitimate regulatory regimes of other States

and what effect would arise if not one, but many or every, State

adopted similar legislation.” Id. at 336.

PhRMA relies on three cases to support its argument

that the Maine Act is per se invalid because it regulates

conduct beyond the borders of Maine. The cases cited, however,

-28-
are inapposite to the facial construction of the Maine Act.

PhRMA construes these cases as standing for the proposition

that, "a state may not dictate the terms on which buyers and

sellers do business outside of the state." See, e.g., Healy,

491 U.S. at 338; Brown-Forman, 476 U.S. at 583-84. This is

partially correct but does not reflect the entire picture. The

cases on which PhRMA relies, however, involve price control,

price affirmation or price tying schemes. See Healy, 491 U.S.

at 326; Brown-Forman, 476 U.S. at 575-76; Baldwin v. G.A.F.

Seelig, 294 U.S. 511, 519 (1935) ("Seelig"). The statutes in

these cases involved regulating the prices charged in the home

state and those charged in other states in order to benefit the

buyers and sellers in the home state, resulting in a direct

burden on the buyers and sellers in the other states.

In Healy, the Court struck down a Connecticut Liquor

Control Act that required out-of-state shippers of beer to

affirm that the prices at which the products were sold to

Connecticut wholesalers were no higher than prices at which

those same products were sold in bordering states. 491 U.S. at

326. The Court held the statute to be unconstitutional because

it controlled prices in neighboring states and interfered with

the regulatory schemes in those states. Id. at 338-39.

-29-
 In Brown-Forman, the Court struck down a provision of

the New York Alcoholic Beverage Control Law that required liquor

distillers to affirm that their prices were no higher than the

lowest price at which the same product would be sold in any

other state during the month. 476 U.S. at 575-76. The Court

determined that this was an extraterritorial reach violative of

the Constitution. It held that "[o]nce a distiller has posted

prices in New York, it is not free to change its prices

elsewhere in the United States during the relevant month.

Forcing a merchant to seek regulatory approval in one State

before undertaking a transaction in another directly regulates

interstate commerce." Id. at 582 (footnote omitted).

In Seelig, the Court struck down the New York Milk

Control Act, which set minimum prices for milk purchased from

in-state and out-of-state producers and banned the resale of

milk in New York when that milk had been purchased out-of-state

for a lower price. 294 U.S. at 519. By requiring New York

wholesalers to buy out-of-state milk at certain prices, the

effect of the statute was to essentially set out-of-state milk

prices. The Court recognized that the Commerce Clause does not

permit a state to create a "scale of prices for use in other

states, and to bar the sale of products . . . unless the scale

has been observed." Id. at 528.

-30-
 The Maine Act is different from these statutes. Unlike

these price affirmation and price control 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.10 Similarly, Maine is not tying

the price of its in-state products to out-of-state prices.

There is nothing within the Act that requires the rebate to be

a certain amount dependent on the price of prescription drugs in

other states. The Act merely says that the Commissioner of the

Maine Department of Human Services shall use “best efforts to

obtain an initial rebate amount equal to or greater than the

rebate calculated under the Medicaid program . . . .” Me. Rev.

Stat. Ann. tit. 22, § 2681(4)(B). Furthermore, unlike Brown-

Forman and Seelig, the Maine Act does not impose direct controls

on a transaction that occurs wholly out-of-state.

PhRMA argues strenuously that the effect of the Act

will be to regulate the transaction that occurs between the

manufacturer and the wholesaler -- a transaction that occurs

entirely out of state. It argues that as a result of the rebate

provision, manufacturers will lose a portion of their profits

10
As noted above, supra fn.2, the anti-profiteering
provision of the Act was held unconstitutional and is not part
of this appeal.

-31-
otherwise obtained from distributors. Admittedly, it is

possible that the rebate provisions of the statute may decrease

the profits of manufacturers. Simply because the manufacturers’

profits might be negatively affected by the Maine Act, however,

does not necessarily mean that the Maine Act is regulating those

profits.

The Act does not regulate the transaction between

manufacturers and wholesalers. It provides for a negotiated

rebate agreement between "[a] drug manufacturer or labeler that

sells prescription drugs in [Maine] through the elderly low-cost

drug program . . . or any other publicly supported

pharmaceutical assistance program . . . ." Me. Rev. Stat. Ann.

tit. 22, § 2681(3). The rebate program is voluntary and either

the manufacturer or the State may withdraw at any time with

sixty days' notice. The Act directs the commissioner to "use

the commissioner's best efforts" to negotiate the amount of the

rebate required from the manufacturer. Id. § 2681(4)(B). We

note that the commissioner's "best efforts" may become coercive

or otherwise inappropriate, but we cannot say so on this facial

challenge. This may be an issue that needs to be revisited once

the Act takes effect. On a facial challenge, however, the use

of the commissioner's "best efforts" indicates that the Act is

not "regulating" prices, but merely "negotiating" rebates.

-32-
 The Act clearly does not interfere with regulatory

schemes in other states. Ultimately, the Maine Act simply

regulates activity that occurs in state: (1) the purchase of

the prescription drugs that triggers the rebate; (2) the

negotiation of a rebate amount; and (3) the State's action

subjecting a manufacturer's drug to prior authorization and

releasing the manufacturer's name to health care providers and

the public occurs in state. Because the regulation only applies

to in-state activities, there is no extraterritorial reach and

the Act is not per se invalid under the Commerce Clause.

One final consideration is the consequence of other

states passing similar statutes. See Healy, 491 U.S. at 336

(considering "what effect would arise if not one, but many or

every, State adopted similar legislation"). The most apparent

effect of similar statutes being passed in other states would be

a loss in profits for manufacturers. It does not appear, and

PhRMA does not argue, that statutes similar to the Maine Act, if

enacted, would result in manufacturers having inconsistent

obligations to states, or in creating a “price gridlock” linking

prices in some states to the prices in other states. See Healy,

491 U.S. at 340. Therefore, at this time, when we are dealing

with a facial challenge to the Act, there is no evidence that

adverse effects on interstate commerce will occur if such

-33-
legislation were passed in other states. The Act is not per se

violative of the Commerce Clause.

2. Strict Level of Scrutiny: Discriminatory Statute

A statute enacted for a discriminatory purpose is

subject to strict scrutiny. See Bacchus Imports, Ltd., 468 U.S.

at 270. Under this strict scrutiny analysis, a statute violates

the Commerce Clause unless the state can show that the statute

serves a legitimate local purpose that is unrelated to economic

protectionism and that the same purpose could not be achieved by

nondiscriminatory means. Hughes v. Oklahoma, 441 U.S. 322, 336

(1979). PhRMA does not contend, nor did the district court

find, that the Maine Act discriminates on its face or in its

effects. Therefore, we need not discuss it further.

3. Low Level of Scrutiny: Pike Balancing Test

When a state statute regulates evenhandedly and has

only incidental effects on interstate commerce, that statute

will be upheld unless the burden on interstate commerce is

“clearly excessive in relation to the putative local benefits.”

Pike, 397 U.S. at 142.

Where the statute regulates evenhandedly to
effectuate a legitimate local public
interest, and its effects on interstate
commerce are only incidental, it will be
upheld unless the burden imposed on such
commerce is clearly excessive in relation to
the putative local benefits. If a
legitimate local purpose is found, then the

-34-
 question becomes one of degree. And the
extent of the burden that will be tolerated
will of course depend on the nature of the
local interest involved, and on whether it
could be promoted as well with a lesser
impact on interstate activities.
Occasionally the Court has candidly
undertaken a balancing approach in resolving
these issues, but more frequently it has
spoken in terms of "direct" and "indirect"
effects and burdens.

Id. (internal citations omitted). The Maine Act is neither an

impermissible extraterritorial reach nor is it discriminatory;

rather, it regulates evenhandedly and only has incidental

effects on interstate commerce. Therefore, we apply this lower

level of scrutiny, known as the Pike balancing test.

The district court found the Maine Act to be per se

invalid, and therefore never determined whether it survives the

Pike balancing test. Though the district court did not

undertake such an analysis, we may conduct the Pike balancing

test for the first time on appeal. See Instructional Sys., Inc.

v. Computer Curriculum Corp., 35 F.3d 813, 826 (3d Cir. 1994).

In Instructional Systems, the Third Circuit considered a facial

challenge to the New Jersey Franchise Practices Act after the

district court had declared the statute per se invalid under the

dormant Commerce Clause. Id. at 826. The court found that the

statute, from a facial standpoint, survived the Pike test, and

reversed the district court judgment which had declared the

-35-
statute unconstitutional. Id. at 827. The Third Circuit

recognized, however, that the issue of whether the statute, when

applied, burdens interstate commerce could not be resolved as a

matter of law. Id.

Applying the Pike balancing test to the Maine Act, we

consider: (1) the nature of the putative local benefits

advanced by the statute; (2) the burden the statute places on

interstate commerce; and (3) whether the burden is “clearly

excessive” as compared to the putative local benefits. See

Pike, 397 U.S. at 142.

Arguably, the only burden imposed on interstate

commerce by the Maine Act is its possible effects on the profits

of the individual manufacturers. As the Third Circuit stated,

however, “the fact that a law may have 'devastating economic

consequences' on a particular interstate firm is not sufficient

to rise to a Commerce Clause burden.” Instructional Sys., 35

F.3d at 827 (quoting Ford Motor Co. v. Ins. Comm’r, 874 F.2d

926, 943 (3d Cir. 1989)); see also Exxon Corp. v. Governor of

Md., 437 U.S. 117, 127-28 (1978) (stating that “the [Commerce]

Clause protects the interstate market, not particular interstate

firms, from prohibitive or burdensome regulations.”).

We next consider the local benefits of the Act, which

we find to be substantial. The Maine Rx Program will

-36-
potentially provide prescription drugs to Maine citizens who

could not otherwise afford them. The Maine Legislature has

decided that without the Maine Rx Program, needy Maine citizens

will continue to be deprived of necessary medical care because

of rising prescription drug costs. When measuring

manufacturers' possible loss of profits against the increased

access to prescription drugs for Maine citizens, the local

benefits appear to outweigh the burden on interstate commerce.

At the very least, the burden on interstate commerce is not

“clearly excessive” as compared to the local benefits.

It is necessary to recognize the difficulty in

foreseeing what events actually will occur from the enforcement

of this Act, which admittedly makes the Pike balancing test more

challenging to apply. We are forced to balance the possible

effects, instead of the actual effects of the statute in action.

For now, it is enough to say that the Act survives the facial

challenge under the dormant Commerce Clause.11

11
On appeal, Maine argues in the alternative that the Act
does not violate the dormant Commerce Clause because if the
rebate provision of the Act is construed as a tax, it satisfies
the requirements set forth in the Complete Auto line of cases
dealing with taxation on interstate commerce. See Complete Auto
Transit, Inc. v. Brady, 430 U.S. 274, 279 (1977) (holding that
a state's tax on interstate commerce will be upheld only if it
"is applied to an activity with a substantial nexus with the
taxing State, is fairly apportioned, does not discriminate
against interstate commerce, and is fairly related to the
services provided by the State."). PhRMA replies, arguing that

-37-
E. Remaining Preliminary Injunction Factors

Having concluded that PhRMA is not likely to succeed

on the merits of its constitutional challenges, we need not

delve into the three remaining preliminary injunction factors

(risk of irreparable harm, the balance of equities and the

public interest). This court has recognized that the “sine qua

non” of the preliminary injunction analysis is whether the

plaintiff is likely to succeed on the merits of the claim.

Weaver v. Henderson, 984 F.2d 11, 12, 14 n.5 (1st Cir. 1993)

(concluding that, after determining that there was no likelihood

of success on the merits, it was not necessary to examine the

other factors). We must conclude that PhRMA has not satisfied

its burden to obtain a preliminary injunction preventing the

implementation of the Act.

III. CONCLUSION

In this facial challenge, we perceive no conflict

between the Maine Act and the Medicaid statute that would result

the Complete Auto test is not satisfied. We need not address
this argument on the merits, however, because this legal theory
was not raised before the district court. "'If any principle is
settled in this circuit, it is that, absent the most
extraordinary circumstances, legal theories not raised squarely
in the lower court cannot be broached for the first time on
appeal.'" Boateng v. Interamerican Univ., Inc., 210 F.3d 56, 62
(1st Cir. 2000) (quoting Teamsters Union, Local No. 59 v.
Superline Transp. Co., 953 F.2d 17, 21 (1st Cir. 1992)). This
is not one of those extraordinary circumstances.

-38-
in federal preemption. The Act sets forth prior authorization

procedures that are consistent with those explicitly permitted

by Medicaid. PhRMA has not established at this point that the

administrative burden imposed by prior authorization will likely

harm Medicaid recipients. In the absence of such evidence, we

cannot conclude that the Act violates the Supremacy Clause.

Nor does the Act offend the dormant Commerce Clause.

It is not an extraterritorial regulation on interstate commerce

because it does not regulate conduct occurring outside the

state, but only regulates in-state activities. Moreover, from

a facial standpoint, the local benefits of the Act appear to

outweigh any incidental burden on interstate commerce. For the

reasons stated, the Maine Act survives the facial dormant

Commerce Clause challenge.

This is a close case but we do not think that, under

the applicable law, the State of Maine should be prohibited from

putting the Act into play. We heed the dissent of Justice Louis

Brandeis in New State Ice Co. v. Liebmann, 285 U.S. 262, 310

(1932):

To stay experimentation in things social and
economic is a grave responsibility. Denial
of the right to experiment may be fraught
with serious consequences to the nation. It
is one of the happy incidents of the federal
system that a single courageous state may,
if its citizens choose, serve as a
laboratory; and try novel social and

-39-
 economic experiments without risk to the
rest of the country. This Court has the
power to prevent an experiment. We may
strike down the statute which embodies it on
the ground that, in our opinion, the measure
is arbitrary, capricious, or unreasonable.
We have power to do this, because the due
process clause has been held by the Court
applicable to matters of substantive law as
well as to matters of procedure. But, in
the exercise of this high power, we must be
ever on our guard, lest we erect our
prejudices into legal principles. If we
would guide by the light of reason, we must
let our minds be bold.

(footnote omitted).

The decision of the district court is REVERSED and the

temporary injunction is VACATED.

- Concurring Opinion Follows -

-40-
 APPENDIX

The relevant provisions of the Act are as follows:

The Maine Rx Program, referred to in this
subchapter as the “program,” is established
to reduce prescription drug prices for
residents of the State. The program is
designed for the State to utilize
manufacturer rebates and pharmacy discounts
to reduce prescription drug prices. In
implementing the program, the State shall
serve as a pharmacy benefit manager in
establishing rebates and discounts on behalf
of qualified residents.

1. Program goals. The Legislature finds
that affordability is critical in providing
access to prescription drugs for Maine
residents. This subchapter is enacted by
the Legislature to enable the State to act
as a pharmacy benefit manager in order to
make prescription drugs more affordable for
qualified Maine residents, thereby
increasing the overall health of Maine
residents, promoting healthy communities and
protecting the public health and welfare.
It is not the intention of the State to
discourage employers from offering or paying
for prescription drug benefits for their
employees or to replace employer-sponsored
prescription drug benefit plans that provide
benefits comparable to those made available
to qualified Maine residents under this
subchapter.

* * * *

3. Rebate agreement. A drug manufacturer
or labeler that sells prescription drugs in
this State through the elderly low-cost drug
program under section 254 or any other
publicly supported pharmaceutical assistance
program shall enter into a rebate agreement
with the department for this program. The
rebate agreement must require the

-41-
manufacturer or labeler to make rebate
payments to the State each calendar quarter
or according to a schedule established by
the department.

4. Rebate amount. The commissioner shall
negotiate the amount of the rebate required
from a manufacturer or labeler in accordance
with this subsection.

A. The commissioner shall take into
consideration the rebate calculated under
the Medicaid Rebate Program pursuant to 42
United States Code, Section 1396r-8, the
average wholesale price of prescription
drugs and any other information on
prescription drug prices and price
discounts.

B. The commissioner shall use the
commissioner’s best efforts to obtain an
initial rebate amount equal to or greater
than the rebate calculated under the
Medicaid program pursuant to 42 United
States Code, Section 1396r-8.

-42-
 KEETON, District Judge (concurring).

I. Introduction

I concur in the judgment reversing the decision of the

district court and vacating the preliminary injunction. Because

the appropriate grounds of the decision involve issues that are

fundamental to harmonizing interests in liberty and order under

the Constitution of the United States, I conclude that it is

appropriate, if not obligatory, that I state in a concurring

opinion the grounds as I see them for reaching this judgment.

For reasons associated with undisputed facts about

Pharmaceutical Benefit Managers (PBMs) and relationships between

interests they represent and interests of citizens of Maine

represented by the Commissioner, Maine Department of Human

Services, Maine’s Legislature, and Maine’s Attorney General, I

turn first to a more extended recitation of background facts

regarding standing and jurisdiction than appears in the opinion

of the Court of Appeals, delivered by Judge Bownes.

II. Background Facts on Standing and Jurisdiction
to Consider Group or Association Contentions

Did the district court have authority, and does the

Court of Appeals have authority, to consider positions stated in

briefs on behalf of groups or associations seeking to represent

the interests of their members that they claim are materially

-43-
affected by orders made, or that might be made, in the district

court and on appeal?

The case before us is styled Pharmaceutical Research

and Manufacturers of America, Plaintiff, Appellee, v. Kevin

Concannon, Commissioner, Maine Department of Human Services, and

Maine Attorney General, Defendants, Appellants.

Plaintiff/Appellee’s CORPORATE DISCLOSURE STATEMENT

says that “plaintiff/appellee, Pharmaceutical Research and

Manufacturers of America, by and through its undersigned

counsel, and, pursuant to Fed.R.Civ.P. 26.1, states that it has

no parent company and that no publicly held company owns any of

its stock.”

In its brief, which uses the short title PhRMA to

designate itself, Plaintiff/Appellee refers to additional

characteristics and rights of PhRMA.

+ It has the ability to challenge adverse treatment

under the Maine Act, including a challenge on

preemption grounds. Plaintiff/Appellee’s Brief

at 34.

+ It has members who are “regulated by and make

payments consistent with the provisions of the

Medicaid prescription drug program.” Id. at 36

n.21.

-44-
 Also, on the basis of the limited information available

in the record, I infer that some of PhRMA’s members are Pharmacy

Benefit Managers (PBMs). No party or amicus, or attorney for a

party or amicus, has called attention to any case explicitly

declaring that PBMs have standing and a United States district

court has jurisdiction to consider either a facial challenge or

an as-applied challenge by a PBM to a state statute like Maine’s

Act to Establish Fairer Pricing for Prescription Drugs, and I am

aware of none. Treating the issue as one of first impression,

I would recognize both standing and jurisdiction, in the United

States District Court for the District of Maine, and on appeal.

In the world outside the court system, as a pragmatic matter no

other person or entity is as active and effective in protecting

benefits and beneficiaries of availability of pharmacy products

at reasonable cost as PBMs. It is entirely appropriate in these

circumstances that the standing of PBMs be recognized in United

States district courts and on appeal from adjudications

interpreting and applying state legislation affecting the

benefits and interests of beneficiaries of marketing of pharmacy

products. As the Court of Appeals for the First Circuit has

previously stated, “Article III standing is largely . . . albeit

not entirely . . . a practical jurisprudence.” New Hampshire

Hemp Council v. Marshall, 203 F.3d 1, 4 (1st Cir. 2000) (citing

-45-
13 Charles Alan Wright, Arthur R. Miller & Edward H. Cooper,

Federal Practice and Procedure § 3531.1, at 352, 362-63 (2d

ed.1984)).

The basis for the foregoing conclusions is a principled

proposition that applies broadly. I state explicitly, for the

sake of clarity, that in my view it applies to each of the

following contentions, in addition to the standing of PhRMA and

the standing of PBMs to make the contention stated above:

(A) claims of violation of the Supremacy Clause;

(B) claims of violation of Dormant Commerce Clause

jurisprudence (as to which, with respect to PhRMA’s standing,

see also Part II.D of opinion of the Court of Appeals, delivered

by Judge Bownes).

For the reasons explained in the remainder of this

opinion concurring in the judgment, I would allow standing and

jurisdiction but reject on the merits other specific challenges

to the Maine Rx Program.

III. Madisonian Influences on Allocation of Legislative Power
in the American Legal System

The roles of state legislatures and the Congress of the

United States in the American legal system owe much to James

Madison’s seminal thinking expressed publicly and privately

during debates over the structure of the new form of federalism

to be established under a constitution drafted in May, 1787 to

-46-
cure deficiencies in the Articles of Confederation of 1777. See

generally John P. Kaminski, Ph.D., Director, and Richard

Leffler, Ph.D., Co-Director, The Center for Study of the

American Constitution, The University of Wisconsin-Madison

(Wisconsin Study), The Origins of the Three Branches of

Government, Federal Judicial Center Traveling Seminar 3-9

(2001).

Madison, a Virginian, writing to Edmund Randolph of New

York on 8 April 1787, mused:

I hold it for a fundamental point that an
individual independence of the States, is
utterly irreconcileable with the idea of an
aggregate sovereignty. I think at the same
time that a consolidation of the States into
one simple republic is not less unattainable
than it would be inexpedient. Let it be
tried then whether any middle ground can be
taken which will at once support a due
supremacy of the national authority, and
leave in force the local authorities so far
as they can be subordinately useful.

. . . .

Let the national Government be armed with
a positive & compleat authority in all cases
where uniform measures are necessary. As in
trade &c. &c. Let it also retain the powers
which it now possesses.

Let it have a negative in all cases
whatsoever on the Legislative Acts of the
States as the K. of G.B. heretofore had.
This I conceive to be essential and the
least possible abridgement of the State
Soveriegnties. Without such a defensive

-47-
 power, every positive power that can be
given on paper will be unavailing. . . .

Let this national supremacy be extended
also to the Judiciary departmt. If the
judges in the last resort depend on the
States & are bound by their oaths to them
and not to the Union, the intention of the
law and the interests of the nation may be
defeated by the obsequiousness of the
Tribunals to the policy or prejudices of the
States. It seems at least essential that an
appeal should lie to some national tribunals
on all cases which concern foreigners, or
inhabitants of other States. . . .

The supremacy of the whole in the
Executive department seems liable to some
difficulty. Perhaps an extension of it to
the case of the Militia may be necessary and
sufficient.

A Government formed of such extensive
powers ought to be well organized. . . .

. . . .

To give the new system its proper energy
it will be desirable to have it ratified by
the authority of the people, and not merely
by that of the Legislatures.

The Origins of the Three Branches of Government, id., at 4-5.

Madison concluded these thoughts with a statement that, fearing

“you will think this project, if not extravagant, absolutely

unattainable and unworthy of being attempted,” he conceived it

“to go no further than is essential.” Id. at 6.

In his Notes of Convention Debates, Madison records

Resolutions proposed by Mr. Randolph in Convention on May 29,

-48-
1787, including a set of proposals for a form of federalism

remarkably similar to Madison’s suggestions six weeks earlier.

Those Madisonian suggestions are reminders of two

salient points relevant to our consideration of the issues

presented in the present appeal.

First. The genius of the Constitution of the United

States of America is that it establishes a unique form of

federalism, unlike any ever fashioned before, that harmonizes

and accommodates in new and distinctive ways national and state

centers of governmental power.

Second. The authority for this new form of federalism

is declared by “the people, and not merely by the Legislatures.”

See id. at 5.

The eighteenth-century debates in which Madison and

Randolph were among the key participants occurred more than two

centuries ago. Twenty-first century readers are even more

removed than the lapse of time suggests from being in tune with

the spirit and culture surrounding the debates over what became

the Constitution of the United States and the Bill of Rights

embodied in the Amendments adopted forthwith. Those debates

were strikingly lively and thorough examinations of the history

of peoples’ ideas and efforts to form governments powerful

enough to preserve the order essential to protection of

-49-
individual liberty and at the same time subject to inherent

controls against abuse of power likely to lead to despotism.

Ideas about liberty and order are no less relevant now

than they were when the Founders developed the Constitution of

the United States of America. “The aim of the American legal

system is liberty and justice for all. How close we come to

that aim depends on good judging.” Robert E. Keeton, Judging in

the American Legal System 1 (Lexis Law Publishing 1999).

The quality of judging in a legal system
depends on commitment. It depends, first,
on commitment to the aim of justice.
Second, it depends on commitment to
professionalism. The declared beliefs of
all professionals in the system – including
advocates, counselors, and academic critics
as well as judges – affect the quality of
judging in the system. Third, the quality
of judging depends on commitment to method.
Judicial choice, at its best, is reasoned
choice, candidly explained.

Id. at 5. Reasoned judicial choice in the matter currently

pending before us requires, in my view, that we reject

plaintiff’s facial challenge to the constitutionality of the

Maine statute, but does not require that we consider the

constitutionality of every possible interpretation or

application of the Maine statute. This view is reenforced by

taking into account James Madison’s contributions to federalist

thought and actions. This historical background is especially

relevant, in my view, to disputes over supremacy of national

-50-
legislation and associated issues of interpretation of the Maine

statute that was before the district court and is before us in

this appeal.

IV. In the American Legal System,
a State is a Sovereign

Under fundamental premises of the American legal

system, the State of Maine, like all other States of the United

States of America, is a sovereign. Each State has authority to

govern persons and institutions and their transactions within

its territorial boundaries.

I do not understand that any of the briefs before us

challenges the sovereignty of states within the Union, and I do

not understand the opinion of the Court of Appeals as

challenging this proposition. Thus, I say no more here on the

existence of sovereignty of states within the Union. Some

important implications of this sovereignty, however, are noted

in other sections of this opinion, infra.

V. A State May Act in Multiple Roles

A sovereign State of the United States, in addition to

governing, may be an active participant in a market for any kind

of goods or services that it seeks to buy for its own use,

including a purchase for (1) a use such as obtaining furniture

for a State office and (2) a use such as obtaining pharmacy

-51-
products for State-sponsored programs such as Medicaid and

Medicare.

Thus, the State of Maine may act

(1) as a sovereign,

(2) as a market participant itself because it buys

pharmacy products for Medicaid patients, and

(3) in “the role of each State as a guardian and

trustee for its people” who need pharmacy

products at affordable prices. White v.

Massachusetts Council of Constr. Employers, 460

U.S. 204, 207 n.3 (1983).

The third of these roles has special relevance to

issues in this case because Maine has undertaken to represent

“its people” who need pharmacy products at affordable prices.

It would be a curious irony indeed if dozens of

privately organized groups of Pharmacy Benefit Managers (PBMs)

could participate freely in the market for purchasing products

from pharmacy product manufacturers but States as guardians and

trustees for their people could not because the States are also

sovereign. In my view, we should make the commonsense ruling

that the State of Maine as well as PBMs may participate in the

market for purchasing pharmacy products.

-52-
 Any conflict of interest problems that might

theoretically be raised are answered in the distinctive

circumstances of this case by the fact that the State of Maine

faces no conflicting interests because it believes that in all

its roles it is trying to serve the best interests of its people

and each of the groups of its people who have an interest in and

need for pharmacy products.

-53-
 VI. Interpreting “Best Efforts” Provisions
of the Maine Statute

A. The Statutory Maine Rx Program

By a legislative enactment in the first quarter of the

year 2000, the State of Maine established The Maine Rx Program

(“the program”). Maine’s Act to Establish Fairer Pricing for

Prescription Drugs, 2000 Me. Legis. Ch. 786 (S.P. 1026) (L.D.

2599) (“The Act”). The Act established the program “to reduce

prescription drug prices for residents of the State.” Id., Me.

Rev. Stat. Ann. tit. 22, § 2681 (unnumbered introductory

paragraph).

The program is designed for the State to
utilize manufacturer rebates and pharmacy
discounts to reduce prescription drug
prices. In implementing the program, the
State shall serve as a pharmacy benefit
manager in establishing rebates and
discounts on behalf of qualified residents.

Id. (emphasis added).

The legislation was explicit in declaring program

goals.

1. Program goals. The Legislature finds
that affordability is critical in providing
access to prescription drugs for Maine
residents. This subchapter is enacted by
the Legislature to enable the State to act
as a pharmacy benefit manager in order to
make prescription drugs more affordable for
qualified Maine residents, thereby
increasing the overall health of Maine
residents, promoting healthy communities and
protecting the public health and welfare.

-54-
 It is not the intention of the State to
discourage employers from offering or paying
for prescription drug benefits for their
employees or to replace employer-sponsored
prescription drug benefit plans that provide
benefits comparable to those made available
to qualified Maine residents under this
subchapter.

Me. Rev. Stat. Ann. tit. 22, § 2681 (emphasis added).

Some of the statutory definitions of terms are relevant

to interpretive issues before us in this appeal.

2. Definitions. As used in this
subchapter, unless the context otherwise
indicates, the following terms have the
following meanings.

. . . .

B. “Initial discounted price” means
a price that is less than or equal to
the average wholesale price, minus
6%, plus the dispensing fee provided
under the Medicaid program under this
Title.

. . . .

E. “Pharmacy benefit manager” means
an entity that procures prescription
drugs at a negotiated rate under a
contract.

. . . .

G. “Secondary discounted price”
means a price that is equal to or
less than the initial discounted
price minus the amount of any rebate
paid by the State to the
participating retail pharmacy.

Id.

-55-
 Also relevant to the matters before us are the

statutory provisions on rebate amount.

4. Rebate amount. The commissioner shall
negotiate the amount of the rebate required
from a manufacturer or labeler in accordance
with this subsection.

. . . .

B. The commissioner shall use the
commissioner’s best efforts to obtain
an initial rebate amount equal to or
greater than the rebate calculated
under the Medicaid program pursuant
to 42 United States Code, Section
1396r-8.

C. With respect to the rebate taking
effect no later than October 1, 2001,
the commissioner shall use the
commissioner’s best efforts to obtain
an amount equal to or greater than
the amount of any discount, rebate or
price reduction for prescription
drugs provided to the Federal
Government.

Id. (emphasis added).

Finally, statutory provisions on discounted prices for

qualified residents, in subsection 5, are relevant to the

matters before us.

B. Beginning January 1, 2001, a
participating retail pharmacy shall
offer the initial discounted price.

C. No later than October 1, 2001, a
participating retail pharmacy shall
offer the secondary discounted price.

-56-
Id.

B. Statutory Interpretation

We should be guided primarily by the plain language of

all the provisions of the statute that are relevant to the

issues before us, and the plain and ordinary meaning of the

words used in all the relevant provisions. The relevant

provisions include the definitions in the statute, the

declaration of program goals, and the operational directives to

Defendant/Appellant Kevin Concannon, Commissioner, Maine

Department of Human Services. With these guideposts in mind, I

conclude that a reasonable interpretation of the Maine statute

includes the following elements:

+ The Maine statute authorizes “best efforts” of Maine

administrators rather than requiring

prohibitive administrative decisions and

actions.

+ The courts should respect the legislative drafters’

thoughtful use of the idea of “best efforts.”

+ It would be a mistake to accept the suggestions of

challenges to the Maine statute that propose to

interpret it in a way that, in effect, reads

“best efforts” out of the statute.

-57-
 The provision that opponents describe as requiring

authorization for participating pharmacies to offer discounted

prices to some defined group of Maine residents and obtain

rebates from a state fund, created by an assessment against

manufacturers, is not a statutory mandate. Instead, the statute

requires only “best efforts” of Administrators to achieve the

legislative aim of protecting interests of the people of Maine

by ongoing creative mediation and negotiation that appeals to

the executives of pharmacy products manufacturers to cooperate

with Maine’s administration of legislatively authorized

programs. The statutory provisions providing for “best efforts”

and for “negotiation” make clear that the drafters intended the

rebate process to entail negotiation and compromise between the

state and the manufacturers to reach a mutually beneficial

outcome. Although conceivably these “best efforts” could fail,

and manufacturers could be subject to the prior authorization

provisions of the statute, this outcome is not mandated by the

language of the statute, and it is not necessary, in a facial

challenge to the statute, to reach questions that may be

presented in the future if “best efforts” fail.

As a practical matter, it is obvious that many,

probably most, citizens of Maine who have a need for pharmacy

products but have less than the economic resources of, say, the

-58-
top ten percent of citizens of the state, do not have adequate

resources and practical means to get the pharmacy products they

need unless

(i) by travel to Canada, or

(ii) by mail, or

(iii) in some other way that

involves aid or

assistance comparable to

that PBMs provide.

If these citizens have a need for prescription medication, and

choose to forgo that medication rather than resort to these

resources, it may well be in the interests of PhRMA members to

negotiate with the State of Maine. In light of allegations made

in their submissions, I infer that PhRMA members believe that a

rebate in the amount of the Medicaid rebate would not be in

their best interest, but the plain language of the statute

allows for negotiation in a way that will serve the best

interests of both PhRMA members and previously unrepresented

citizens of the State of Maine.

VII. The Timing of Adjudications on Constitutionality

The Maine statute, interpreted in the way explained in

Part VI, is consistent with all State and Federal constitutional

doctrines and is permissible legislation. The district court’s

-59-
ruling to the contrary must be vacated. No federal law

(constitutional, statutory, or decisional) preempts and thus

forbids reasonable implementation of Me. Rev. Stat. Ann. tit.

22, § 2681.

Properly interpreted, that law is compatible with

rather than conflicting with federal Medicaid legislation and

administrative supervision of Medicaid.

It is error to say -- as is said in

Defendants/Appellants’ Brief at page 18 -- that the extent to

which the Act advances the purposes of Medicaid is irrelevant

Also, it is error to say that the “proper question” in this

appeal “is whether the Act conflicts with the purposes of

Medicaid,” as Defendants/Appellants’ Brief asserts at page 18.

The core question is multifarious, not singular. An evaluative

legal test applies, not a bright-line elements legal test.

Plaintiff/Appellee proposes in its waiver and

preclusion arguments that we should hold that the fact that

Defendants/Appellants make these fallacious arguments bars

relief to Defendants/Appellants in this appeal. I would reject

this argument. It does not state a valid reason for depriving

the citizens of Maine of a fair adjudication of their interests

at stake in this appeal, based on a proper interpretation of the

Maine statute. Our federal system permits a State’s advocacy in

-60-
court in support of its interests and those of its people.

Penalizing a state and its people whenever the state makes an

argument rejected by the court is not appropriate.

Other arguments presented by Defendants/Appellants both

here and in the district court are consistent with the

interpretation of the Maine statute explained in Part VI of this

opinion and support reversal of the judgment of the district

court.

An unstated but implicit premise of

Plaintiff/Appellee’s position in this case is that all

Plaintiff/Appellee need do to succeed in a facial challenge to

the Maine Act is to show that the administration of the Act is

putting pressure on Plaintiff/ Appellee, thus making its choice

about how it responds to the circumstances developing under

ongoing administration of the Act not entirely voluntary.

The fallacy of that position stems from the fact that

few choices of individuals and entities in a geographical

territory that has a government are entirely voluntary. True,

some transactions are beyond governmental authority to intrude.

They are “transactions beyond law” in the sense that individuals

and private (non-governmental) entities they create and maintain

have a large range of freedom under law to do as they please

without governmental intrusion on that freedom. But a demand by

-61-
any individual or entity for entire freedom is fundamentally in

conflict with having a government that maintains the order

essential to protection of individual freedom.

It is possible, as explained in Part VIII, infra, to

fashion remedies for any threats that may arise from

overstepping the bounds of statutorily authorized “best efforts”

of Maine’s Commissioner of Human Services during the ongoing

administration of the Maine Rx Program. It is appropriate to

wait and see what happens, and fashion appropriate remedies for

any overstepping, rather than declaring Maine’s Act

unconstitutional because of an outside chance that something

beyond constitutional bounds will be attempted unless an advance

declaration of facial invalidity of the statute by the district

court is allowed to stand.

VIII. Remedies for Threats
to Overstep Statutory Authorization

A United States district court, confronted with a

facial challenge to validity of a state statute on grounds like

those asserted in this case, should dismiss the facial challenge

for failure to meet the requirements of applicable precedents.

The court might also find it appropriate to declare

explicitly that the dismissal on this ground would not be a bar

to an otherwise properly supported claim for relief against a

threatened administrative overstepping of the bounds of the

-62-
statutory authorization for administrative “best efforts” to

negotiate and implement a suitable accommodation of legitimate

interests by methods acceptable to Maine’s Commissioner of Human

Services, acting both for the State and as a PBM for its people,

and to manufacturers of pharmacy products who wish to market

their products in Maine consistently with the Maine Rx Program.

The decision would be one to wait and see, and act then

if needed, instead of prohibiting legislatively sponsored

administrative aid to the people of Maine because of a

possibility that at some time in the future some administrator

will overstep the bounds of the legislative authorization.

For example, acting under this wait-and-see principle,

the Court of Appeals would vacate the District Court’s

preliminary injunction, but at the same time declare that its

ruling would not stand as a bar to renewed proceedings in the

District Court if at some future time the Legislative or

Executive Branch of the sovereign State of Maine, or an

Administrative Agency authorized to act to serve the declared

legislative aim of the statute in issue, takes action that is an

imminent threat to legally protected interests of a person or

entity (including any out-of-state as well as any in-state

person or entity) claiming a right to market pharmacy products

in Maine. An as-applied challenge to state legislation is a

-63-
more flexible instrument of adjudication, more capable of

reaching an outcome tailored to the circumstances and needs of

a case at hand than the all-or-nothing nature of a facial

challenge to validity.

A federal district or appellate court’s acting in

advance of overstepping, because of the possibility overstepping

might occur in the future, is fundamentally inconsistent with

the body of precedents establishing the elements of a successful

facial challenge in a federal court to the consistency of a

state statute with potentially preemptive federal law. See,

e.g., California Coastal Comm’n v. Granite Rock Co., 480 U.S.

572, 579-80 (1987) (holding that state permit requirements were

not preempted by federal law, and stating that the party arguing

in favor of preemption would have to demonstrate “that there is

no possible set of conditions that the [state] could place on

its permit that would not conflict with federal law – that any

state permit requirement is per se preempted”) (underscoring

added). These precedents would require PhRMA to demonstrate

“that there is no possible” application of the statute that

would not conflict with the structure and purpose of Medicaid.

PhRMA cannot meet this burden. It could not do so even if we

softened the legal standard a bit by substituting “reasonably

-64-
likely” for “possible.” PhRMA’s facial challenge must be

denied.

A federal court’s acting in advance of overstepping by

state officials, and responding to a facial challenge, is also

inconsistent with relevant precedents for a facial challenge on

constitutional grounds. In United States v. Salerno, 481 U.S.

739 (1987), the Supreme Court stated that “a facial challenge to

a legislative Act is, of course, the most difficult challenge to

mount successfully, since the challenger must establish that no

set of circumstances exists under which the Act would be valid.”

Id. at 745.

It is true that the Salerno decision has been

criticized in later opinions of some Justices of the Supreme

Court. See, e.g., Washington v. Glucksberg, 521 U.S. 702, 740

(1997) (Stevens, J., concurring in the judgments) (declaring

that the Court has never in fact applied “such a strict

standard.”); Janklow v. Planned Parenthood, 517 U.S. 1174, 1175-

76 (1996) (Stevens, J., respecting the denial of the petition

for certiorari) (calling the Salerno decision “draconian” and

declaring that it “does not accurately characterize the standard

for deciding facial challenges.”).

Salerno, nevertheless, continues to be cited by both

the Supreme Court and the Courts of Appeals. See, e.g.,

-65-
Anderson v. Edwards, 514 U.S. 143, 155 n.6 (1995); Reno v.

Flores, 507 U.S. 292, 301 (1993); Rust v. Sullivan, 500 U.S.

173, 183 (1991). We need not reach the issue of the

applicability of the Salerno test, however, because the statute

in this case, as explained in Part VI of this opinion, is

capable of an interpretation and an application that is

respectful of limits imposed by the Constitution.

The application of facial-challenge jurisprudence in

the circumstance of this case before the District Court and in

this appeal is, in practical effect, a considerable stretch

beyond any thus-far-successful facial challenge. If such an

extension of the jurisprudence of facial challenges expressed in

decisions of the Supreme Court of the United States is to occur,

it is more appropriate that it occur in an opinion of that Court

than in an opinion of a Court of Appeals.

My own reading of the array of Supreme Court opinions

on this subject, even in light of the ongoing differences both

within the Court and among scholars on the applicability of the

Salerno test, is that precedent points away from rather than

toward softening in any way the rigorous requirements for

presenting a successful facial challenge to validity of a state

statute.

-66-
 This conclusion is supported not only by the opinions

explicitly reasoned as part of the facial-challenge

jurisprudence but also by other ongoing developments of federal

law.

One ongoing development supportive of the conclusion

I propose is the resurgence in recent years of emphasis on the

respect that inferior federal courts are directed to show for

the freedom of the people of a locality and local governmental

institutions to make their own decisions. For illustrative

citations, see Part IX of this opinion, infra. See also the

Madisonian principles identified in Part III, supra. This

emphasis is in part a feature of the distinctive version of

federalism underlying what is commonly called the American legal

system. It is associated with the Supreme Court’s invoking the

Commerce Clause not for the ordinary purpose of sustaining

federal legislation but to strike down state legislation. This

emphasis on federalism weighs in favor of sustaining rather than

striking down the Maine Rx Program, as explained in Part IX,

infra.

IX. The Commerce Clause and Concerns of Federalism

The Brief of Washington Legal Foundation and five other

associations as Amici Curiae in support of affirming the

preliminary injunction ordered by the District Court for the

-67-
District of Maine argues that the District Court was correct in

“find[ing] that the [Maine Rx] Program violated the Commerce

Clause because it attempted to regulate transactions taking

place solely outside the State,” and in adding, “Maine may have

power over what pharmacies later do here in Maine, or over the

few distributors who transact business in Maine, but it has no

power to regulate the price paid in earlier transactions in

other states.” Brief of Washington Legal Foundation et al. at

6.

A similar position is developed in the Brief Amicus

Curiae of the Chamber of Commerce of the United States in

Support of Appellee Recommending Affirmance.

The Commerce Clause [of the United States
Constitution] provides that “[t]he Congress
shall have Power . . . [t]o regulate
Commerce . . . among the several States. . .
.” Art. I, §8, cl. 3. It is long
established that, while a literal reading
evinces a grant of power to Congress, the
Commerce Clause also directly limits the
powers of the States. . . . [Wyoming v.
Oklahoma, 502 U.S. 437, 454 (1992) (citing
authorities).]

Brief Amicus Curiae of the Chamber of Commerce of the United

States in Support of Appellee Recommending Affirmance at 7. The

citations relied upon include the following:

Healy v. The Beer Institute, 491 U.S. 324,
336 (1989) (“a statute that directly
controls commerce occurring wholly outside
the boundaries of a State exceeds the

-68-
 inherent limits of the enacting State’s
authority and is invalid regardless of
whether the statute’s extraterritorial reach
was intended by the legislature. The
critical inquiry is whether the practical
effect of the regulation is to control
conduct beyond the boundaries of the
State.”); see generally Laurence H. Tribe,
American Constitutional Law, §6-12 at 1098
(3d ed. 2000) (referencing “the per se
principle against extraterritorial state
regulation”).

Id. at 9.

These arguments are classic illustrations of the

controversial efforts that have occurred from time to time to

treat the Commerce Clause not only as authorizing legislation by

the Congress of the United States but also as constraining state

legislation.

Consider, for example, a case emphasized in the Brief

of the Chamber of Commerce, Wyoming v. Oklahoma, 502 U.S. 437

(1992). Unlike the case before us, this was a direct clash

between two States of the Union. Wyoming, a major coal-

producing State, though not a seller of coal, imposed a

severance tax on those who extracted coal. The direct impact of

that severance tax on the price of Wyoming coal purchased by

four Oklahoma electric utilities was obvious. The Oklahoma

legislature passed an act requiring coal-fired electric

utilities in Oklahoma to burn a mixture containing at least 10%

Oklahoma-mined coal. The utilities reduced their purchases of

-69-
Wyoming coal. Wyoming’s severance tax revenues declined.

Wyoming sought relief under the original jurisdiction of the

Supreme Court of the United States. The Court accepted

Wyoming’s complaint and held the Oklahoma act invalid under the

“negative” aspect of the Commerce Clause on the reasoning that

it “prohibits economic protectionism – that is, regulatory

measures designed to benefit in-state economic interests by

burdening out-of-state competitors.” Id. at 454. Even so, the

Court added that a clearly discriminatory statute will be struck

down “unless the discrimination is demonstrably justified by a

valid factor unrelated to economic protectionism,” citing Maine

v. Taylor, 477 U.S. 131 (1986).

I need not and do not consider whether the case before

us would qualify for the exception. Instead, I conclude that

the case before us is not one subject to the “negative” rule

itself, quite apart from the exception.

Wyoming v. Oklahoma and other opinions of the Supreme

Court that have gone farthest in the direction of a “negative”

application of the Commerce Clause do not support the

proposition that a federal court acts properly when it

disregards all the indicia of the State’s purpose in

establishing the Maine Rx Program to regulate transactions

within the territorial boundaries of Maine and to protect the

-70-
health of the people of Maine. In these circumstances a federal

court does not act properly when it makes a judicial “finding”

that the State’s declaration of purpose is a facade and the real

purpose was “to regulate the price paid in earlier transactions

in other states.”

First. The legislative aim of the Act was fully stated

in the Act itself, as explained in Part VI.A of this opinion,

supra. This is not a case of hidden or obscure aims.

Second. Any suggestion to the contrary in briefs

before this court is in disregard of our obligation, and that of

the District Court, in reading the statute, to be guided, as

stated in Part VI.B of this opinion, by the plain language of

the statute, the definitions in the statute, and the plain and

ordinary meaning of the words used in the declaration of program

goals, in the statutory definitions, and in the operational

directives to Maine’s Commissioner of Human Services. See

Whiting v. Town of Westerly, 942 F.2d 18, 21 n.3 (1st Cir. 1991)

(“In evaluating a facial challenge to a state law, a federal

court must consider any limiting construction that a state court

or enforcement agency has proffered.”).

Third. As stated in Part VI.B, the provision of the

Maine Act that opponents describe as requiring authorization for

participating pharmacies to offer discounted prices to some

-71-
defined group of Maine residents and obtain rebates from a state

fund, created by an assessment against manufacturers, is not a

statutory mandate. Instead, it is a statement of aim. The

statute requires only “best efforts” of Administrators to

achieve the legislative aim of protecting interests of the

people of Maine by ongoing creative mediation and negotiation.

Fourth. As stated in Part VI.B, many and probably most

citizens of Maine who have a need for pharmacy products would

not have adequate resources and practical means to get the

pharmacy products they need absent the Maine Rx Program. In the

course of the creative mediation and negotiation required by the

statute, the pharmaceutical companies themselves may find it is

in their best interests to enter into agreements to allow them

to reach this previously untapped market for their products.

Fifth. In view of the foregoing four points, it cannot

be proper for a federal court to make judicial “findings”

contrary to Maine’s legislative declarations and on that basis

declare that Maine’s Act is invalid because “it attempted to

regulate transactions taking place solely outside the State” and

attempted “to regulate the price paid in earlier transactions in

other states.” In so doing, the District Court acted beyond its

authority.

-72-
 The ideals of federalism explained above weigh in favor

of respect for a state’s experimentation and respect for a

state’s sovereignty. The precedents that govern our examination

and that of the District Court of a facial challenge to state

legislation are consistent with these ideals of federalism, and

indeed are consistent with the delicate balance of power

explained by Madison in his early writings.

The District Court’s preliminary injunction must be

vacated.

X. Conclusion and Order

The decision I would make, for the reasons explained

in this concurring opinion, would not bar further proceedings,

either in the civil action in which the preliminary injunction

was issued or in a civil action newly filed at some future time,

if at that time a showing could be made by the complaining party

that the Legislative or Executive Branch of the sovereign State

of Maine, or an Administrative Agency authorized to act to serve

the declared legislative aim of the statute in issue, had taken

action that is a threat to legally protected interests of a

person or entity (including any out-of-state as well as any in-

state person or entity) making the complaint. That person or

entity might appropriately seek a form of limited injunctive

relief needed to protect identified interests without deeper

-73-
intrusions on the State of Maine’s legitimate interests than

would be necessary and appropriate for that purpose.

For the reasons stated in this opinion, the District

Court’s preliminary injunction should be vacated, and I concur

in the judgment of the Court of Appeals, delivered by Judge

Bownes, so ordering.

-74-