Pharmaceutical Care Management Ass'n v. Rowe

United States Court of Appeals
For the First Circuit

No. 05-1606

PHARMACEUTICAL CARE MANAGEMENT ASSOCIATION,

Plaintiff, Appellant,

v.

G. STEVEN ROWE, in his official capacity as
ATTORNEY GENERAL OF THE STATE OF MAINE,

Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. D. Brock Hornby, U.S. District Judge]

Before

Boudin, Chief Judge,
Torruella, Circuit Judge,
and Dyk,* Circuit Judge.

William J. Kayatta, Jr., with whom John J. Aromando, Catherine
R. Connors, Pierce Atwood LLP, Paul J. Ondrasik, Jr., Martin D.
Schneiderman, and Steptoe & Johnson LLP, were on brief, for
appellant.
Andrew L. Black, Assistant Attorney General, with whom Paul
Stern, Deputy Attorney General, G. Steven Rowe, Attorney General,
and Ronald W. Lupton, Assistant Attorney General, were on brief,
for appellee.

November 8, 2005

*
Of the Federal Circuit, sitting by designation.
 Per Curiam. The panel unanimously affirms the district

court's grant of summary judgment for defendant on all claims. On

the ERISA preemption, due process, and Commerce Clause issues, the

panel unanimously adopts Judge Torruella's reasoning. As to the

association standing, Takings Clause, and First Amendment issues,

the joint concurring opinion of Chief Judge Boudin and Judge Dyk

represents the opinion of the court.

Affirmed.

"Opinion follows."

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 TORRUELLA, Circuit Judge. This appeal arises from an

attempt by plaintiff-appellant Pharmaceutical Care Management

Association ("PCMA") to challenge the provisions of Maine's Unfair

Prescription Drug Practices Act ("UPDPA"), Me. Rev. Stat. Ann. tit.

22, § 2699 (2005). PCMA brought suit against defendant-appellee G.

Steven Rowe, Attorney General of the State of Maine, seeking to

obtain an order enjoining enforcement of the UPDPA. The parties

issued cross-motions for summary judgment, and the district court

denied PCMA's motion and granted the motion of the Attorney

General. PCMA now appeals this decision. For the reasons

hereinafter stated, we affirm the decision of the district court.

I. Factual Background

PCMA is a national trade association of pharmacy benefit

managers (PBMs). PBMs are major players in the delivery of health

care in the United States. They act as middlemen in the lucrative

business of providing prescription drugs. They serve as

intermediaries between pharmaceutical manufacturers and pharmacies

on the one hand (as the district court noted, the "supply" side of

the trade) and health benefit providers (e.g., insurers, self-

insured entities, health maintenance organizations, and public and

private health plans) on the other (the "demand" side). The

services that PBMs extend are designed to facilitate the provision

of prescription drug benefits to the people who utilize the

services of the health benefit providers.

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 For example, PBMs often provide health benefit providers

with access to an established network of pharmacies, where

customers of the health benefit providers can obtain drugs at

certain set prices. PBMs negotiate volume discounts and rebates

with drug manufacturers by pooling substantial numbers of health

benefit providers. This pooling gives the PBMs tremendous market

power to demand concessions from the manufacturers. PBMs also

provide drug utilization review services and "therapeutic

interchange programs" (in other words, substituting a drug for the

one actually prescribed by a doctor).

In this role as intermediary, however, PBMs have the

opportunity to engage in activities that may benefit the drug

manufacturers and PBMs financially to the detriment of the health

benefit providers. For example, in cases of "therapeutic

interchange," a PBM may substitute a more expensive brand name drug

for an equally effective and cheaper generic drug. This is done so

that the PBM can collect a fee from the manufacturer for helping to

increase the manufacturer's market share within a certain drug

category. Similarly, a PBM might receive a discount from a

manufacturer on a particular drug but not pass any of it on to the

health benefit provider, keeping the difference for itself. The

health benefit provider, however, often has no idea that a PBM may

not be working in its interest. This lack of awareness is the

result of the fact that there is little transparency in a PBM's

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dealings with manufacturers and pharmacies. As the district court

noted, "[w]hether and how a PBM actually saves an individual

benefits provider customer money with respect to the purchase of a

particular prescription drug is largely a mystery to the benefits

provider." Pharm. Care Mgmt. Ass'n v. Rowe, No. 05-1606, 2005 U.S.

Dist. LEXIS 2339, at *6 (D. Me. Feb. 2, 2005).

With the aim of placing Maine health benefit providers in

a better position to determine whether PBMs are acting against

their interests, and correspondingly, to help control prescription

drug costs and increase access to prescription drugs, the Maine

Legislature enacted the UPDPA in the spring of 2003. The UPDPA

imposes a number of requirements on those PBMs that choose to enter

into contracts in Maine with "covered entities" -- meaning health

benefit providers and including, in part, insurance companies, the

state Medicaid program, and employer health plans. Such PBMs are

required to act as fiduciaries for their clients and adhere to

certain specific duties. For example, they must disclose conflicts

of interest, disgorge profits from self-dealing, and disclose to

the covered entities certain of their financial arrangements with

third parties. Me. Rev. Stat. Ann. tit. 22, §§ 2699(2)(A-G)

(2005). The disclosures made by the PBMs to the covered entities

are protected by confidentiality. None of the disclosures are

available to the public.

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 PCMA, on behalf of its member PBMs, challenges the UPDPA

on five separate grounds. First, it claims that the Maine law was

preempted by either the Employee Retirement Income Security Act of

1974 ("ERISA") or the Federal Employee Health Benefits Act

("FEHBA"). PCMA's second argument is that the UPDPA violates the

Takings Clause of the Fifth Amendment because it conditions doing

business in Maine upon the forced disclosure or taking of

proprietary information. Third, PCMA states that the provisions of

the UPDPA violate due process because they provide no pre-

deprivation hearing. Fourth, the association claims that the UPDPA

disclosure provisions violate the First Amendment by compelling

commercial speech in the context of a voluntary business

relationship. PCMA's final argument is that the UPDPA violates the

Commerce Clause, either through its "extraterritorial reach" or by

excessively burdening interstate commerce.1

In the proceedings below, the parties issued cross-

motions for summary judgment. The magistrate judge responsible for

the case recommended to the district court that summary judgment be

1
PCMA also alleges a violation of 42 U.S.C. § 1983 (2000),
claiming that the UPDPA subjects PCMA's member PBMs to the
deprivation of "rights, privileges, or immunities secured by the
Constitution." The district court entered summary judgment in
favor of the appellee on this claim. It reasoned that since the
UPDPA did not run afoul of any of the federal rights raised by
PCMA, summary judgment was proper on PCMA's § 1983 claim. PCMA
raises this same § 1983 claim on appeal but provides no additional
discussion on the matter. Because we also find that the UPDPA is
not violative of any federal rights, we think the district court
was correct in disposing of this claim on summary judgment.

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entered in favor of the Attorney General on all claims. The

district court agreed with this recommendation and upheld the UPDPA

against all of PCMA's challenges. Upon careful review, we now

affirm.

II. Discussion

A. Standard of review

We review a district court's ruling on cross-motions for

summary judgment de novo. Calero-Cerezo v. Dep't of Justice, 355

F.3d 6, 19 (2004).

B. Preemption claims2

ERISA is "a comprehensive statute designed to promote the

interests of employees and their beneficiaries in employee benefit

plans." Shaw v. Delta Airlines, 463 U.S. 85, 90 (1983). The

statute includes a broadly-worded preemption provision, 29 U.S.C.

2
In addition to its claim that the UPDPA is preempted by ERISA,
PCMA argues that the UPDPA is also preempted by FEHBA. FEHBA
authorizes the Office of Personnel Management to negotiate
contracts with private carriers to provide health benefits for
federal employees, retirees, and their dependents. The statute
includes an express preemption provision, 5 U.S.C. § 8902(m)(1)
(2000), that is nearly identical to ERISA's preemption provision.
Therefore, we look to ERISA precedent in determining the scope of
the preemption provision under FEHBA. See Botsford v. Blue Cross
& Blue Shield of Mont., Inc., 314 F.3d 390, 393-94 (9th Cir. 2002)
(noting that the FEBHA preemption provision closely resembles
ERISA's preemption provision and that "precedent interpreting the
ERISA provision thus provides authority for cases involving the
FEHBA provision"). Because both parties here, as they did before
the district court, agree that "whether the FEHBA preempts the
UPDPA depends on essentially the same analysis as the question of
whether ERISA preempts the UPDPA," we confine our discussion here
to examining the scope of the ERISA preemption provision. Pharm.
Care Mgmt. Ass'n, 2005 U.S. Dist. LEXIS 2339, at *29.

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§ 1144(a) (2000), that Congress included "to afford employers the

advantages of a uniform set of administrative procedures governed

by a single set of regulations." Fort Halifax Packing Co. v.

Coyne, 482 U.S. 1, 11 (1987). PCMA here claims that the UPDPA is

preempted by ERISA.

1.

In examining PCMA's preemption claim, a threshold issue

we must confront is whether the PBMs act as ERISA fiduciaries.3

This is an issue with high stakes, for classification as a

fiduciary or a nonfiduciary renders a defendant liable for

different types of damages. For example, under sections 409 and

502(a)(2) of ERISA, 29 U.S.C. §§ 1109(a), 1132(a)(2), an ERISA

fiduciary is personally liable for monetary damages, for

restitution, and for "such other equitable or remedial relief as

the court may deem appropriate." 29 U.S.C. § 1109(a). A non-

fiduciary, however, is not subject to monetary damages in a suit

brought under ERISA. See Mertens v. Hewitt Assocs., 508 U.S. 248,

262 (1993) (noting how "[p]rofessional service providers such as

3
Although the district court noted that "PCMA's member PBMs are
not ERISA fiduciaries," Pharm. Care Mgmt. Ass'n, 2005 U.S. Dist.
LEXIS 2339, at *16, and the parties state that they agree to this
fact, we feel it necessary to explore this issue in some depth
here, both because our subsequent analysis relies on its outcome
and because the briefs of the parties belie their mutual contention
that they are in agreement as to the status of PBMs under ERISA.

-8-
actuaries become liable for damages when they cross the line from

adviser to fiduciary").4

Under ERISA, a fiduciary is one who exercises

discretionary authority or control in the management and

administration of an ERISA plan. 29 U.S.C. § 1002(21)(A). See

also Mertens, 508 U.S. at 251, 262. The Attorney General argues

that since PBMs do not exercise discretionary authority or control

in the management and administration of ERISA plans, they are not

fiduciaries under the definition provided for under ERISA. PCMA,

in contrast, claims that the UPDPA makes PBMs fiduciaries in

performing administration activities for ERISA plans. The UPDPA,

after all, targets PBMs that contract with "covered entities" --

insurance companies, the state Medicaid program, and employer

health plans -- some of which may be ERISA plans. The UPDPA

requires PBMs to be fiduciaries of the covered entities with which

they contract. Therefore, when a PBM contracts with a covered

entity that happens to be an ERISA plan, the PBM is a fiduciary of

that ERISA plan.

Although the UPDPA does impose certain fiduciary duties

on the PBMs, these are duties imposed under state law. The key

4
In Mertens, the Supreme Court expressly reserved the question as
to whether ERISA provides for a cause of action against
nonfiduciaries who assist in a fiduciary's breach of duty. The
Court, however, did resolve the question as to whether a
nonfiduciary in such a suit would be subject to monetary damages.
See Mertens, 508 U.S. at 253-54.

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issue here, however, is whether the PBMs are fiduciaries under the

definition of a fiduciary provided in ERISA. Our review of the

requirements imposed on the PBMs under the UPDPA lead us to believe

that the PBMs do not exercise "discretionary authority or control

in the management and administration of the plan." 29 U.S.C.

§ 1002(21)(A). For example, the UPDPA provisions requiring

disclosure of conflicts of interest and payments from drug

manufacturers are administrative provisions involving no discretion

on the part of the PBMs. Such duties are purely ministerial and

simply not sufficient for us to find that the PBMs are acting as

fiduciaries under ERISA.

2.

With that threshold matter disposed of, we are now able

to confront the main issue at hand: Is the UPDPA preempted by

ERISA? PCMA claims that ERISA does preempt the UPDPA because ERISA

preempts all state laws that "relate to any ERISA covered employee

benefit plan," 29 U.S.C. § 1144(a), regardless of whether an entity

is acting as a fiduciary or not. The state, in contrast, argues

that the UPDPA is not preempted by ERISA because ERISA only

preempts state laws relating to acts performed by ERISA

fiduciaries. Since the PBMs regulated by the UPDPA are not

fiduciaries under ERISA, there can be no preemption in this

instance.

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 To answer the question of what exactly ERISA preempts, we

first turn to the statute itself. ERISA's preemption provision

states explicitly that ERISA "shall supersede any and all State

laws insofar as they may now or hereafter relate to any employee

benefit plan." 29 U.S.C. § 1144(a) (2000). Looking only at the

face of the statute, then, it appears that PCMA is correct. With

its broad and expansive language, the ERISA preemption provision

seems to say that all state laws that in any way "relate to" any

ERISA-covered employee benefit plan are preempted.

The Supreme Court, however, has stated that the language

of the ERISA preemption provision is not as broad as it seems. The

Court has emphasized that the expansive language of the provision

is still subject to "the starting presumption that Congress does

not intend to supplant state law" and has warned "that, unless

congressional intent to preempt clearly appears, ERISA will not be

deemed to supplant state law in areas traditionally regulated by

the states." New York State Conf. of Blue Cross & Blue Shield

Plans v. Travelers Ins. Co., 514 U.S. 645, 654, 661 (1995);

Carpenters Local Union No. 26 v. U.S. Fid. & Guar. Co., 215 F.3d

136, 139-40 (1st Cir. 2000).

Realizing, then, that the exact scope of the ERISA

preemption provision is imprecise and that the provision cannot be

read literally, the Court has developed a two-part test to

determine exactly what state laws ERISA preempts. The test

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established by the Court begins with reference to the preemption

provision itself. As already stated, ERISA expressly preempts "any

and all State laws insofar as they . . . relate to any employee

benefit plan." 29 U.S.C. § 1144(a) (2000). "[T]he incidence of

ERISA preemption turns on the parameters of the phrase 'relate

to.'" Carpenters Local Union No. 26, 215 F.3d at 139. The Court

has stated that a particular state law "relates to" an employee

benefit plan "if it [1] has a connection with or [2] a reference to

such a plan." California Div. of Labor Standards Enforcement v.

Dillingham Constr., N.A., Inc., 519 U.S. 316, 324 (1997);

Carpenters Local Union No. 26, 215 F.3d at 140. We use this test

to determine whether the UPDPA is preempted by ERISA.

a) The "connection with" prong

The Supreme Court has stated that when determining

whether a state law has a "connection with" ERISA plans, a court

must avoid an "uncritical literalism" and look instead to "the

objectives of the ERISA statute as a guide to the scope of the

state law that Congress understood would survive, as well as to the

nature of the effect of the state law on ERISA plans." Egelhoff v.

Egelhoff, 532 U.S. 141, 147 (2001) (citing Travelers, 514 U.S. at

656 and Dillingham, 519 U.S. at 325) (internal quotation marks

omitted). According to the Court, "[t]he basic thrust of the pre-

emption clause . . . was to avoid a multiplicity of regulation in

order to permit the nationally uniform administration of employee

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benefit plans." Travelers, 514 U.S. at 657. State laws that

impede this goal of national uniformity will be preempted.

Therefore, we must determine here whether the UPDPA, in placing

fiduciary duties and administrative burdens on PBMs operating in

Maine, thereby precludes the ability of plan administrators to

administer their plans in a uniform fashion.

In several different cases, the Supreme Court has found

this goal of "national uniformity" to be compromised (and therefore

the state law was preempted). For example, in Alessi v. Raybestos-

Manhattan, Inc., 451 U.S. 504, 526 (1981), the Court invalidated a

New Jersey law that prohibited offsetting worker compensation

payments against pension benefits. "Since such a practice [was]

permissible under federal law and the law of other States, the

effect of the [state] statute was to force the employer either to

structure all its benefit payments in accordance with New Jersey

law, or to adopt different payment formulae for employees inside

and outside the State." Fort Halifax, 482 U.S. at 10 (discussing

the holding in Alessi). Similarly, in Egelhoff, the Supreme Court

found that "[u]niformity [was] impossible" with regard to a

Washington statute that provided that the designation of a spouse

as the beneficiary of a nonprobate asset was revoked automatically

upon divorce. Egelhoff, 532 U.S. at 148. The Court held that the

statute was preempted by ERISA because "[p]lan administrators

[could not] make payments simply by identifying the beneficiary

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specified by the plan documents. Instead, they [had to]

familiarize themselves with [specific] state statutes so that they

[could] determine whether the named beneficiary's status [had] been

'revoked' by operation of law." Id. at 148-49.5

In contrast to the state laws at issue in Alessi and

Egelhoff, the goal of national uniformity poses no problems in the

instant case. In no way does the UPDPA circumscribe the ability of

plan administrators to structure or administer their ERISA plans.

As the district court stated, "[t]he fact that the UPDPA requires

PBMs to engage in certain 'required practices' in Maine, such as

divulging the terms of contracts with pharmaceutical manufacturers

5
Alessi and Egelhoff are not the only cases in which the Supreme
Court has encountered a state law that "created the prospect that
an employer's administrative scheme would be subject to conflicting
requirements." Fort Halifax, 482 U.S. at 10. For example, in
Shaw, the Court found that two New York laws were preempted by
ERISA. One of those laws, New York's Human Rights Law, prohibited
"employers from structuring their employee benefit plans in a way
that discriminated on the basis of pregnancy." Shaw, 463 U.S. at
97. The second, New York's Disability Benefits Law, required
"employers to pay employees specific benefits." Id. The Court
held that these laws were preempted by ERISA because they "could
have been honored only by varying the subjects of a plan's benefits
whenever New York law might have applied, or by requiring every
plan to provide all beneficiaries with a benefit demanded by New
York law. Travelers, 514 U.S. at 657 (discussing the holding in
Shaw). Similarly, in FMC Corp. v. Holliday, 498 U.S. 52 (1990),
the Court discussed a Pennsylvania law that prohibited plans from
"requiring reimbursement [from the beneficiary] in the event of
recovery from a third party." Id. at 60. The law was likewise
preempted by ERISA because the law "require[d] plan providers to
calculate benefit levels in Pennsylvania based on expected
liability conditions that differ from those in States that have not
enacted similar antisubrogation legislation, [thereby]
frustrat[ing] plan administrators' continuing obligation to
calculate uniform benefit levels nationwide." Id.

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and labelers does not restrict the freedom of employee benefit

plans to administer or structure their plans in Maine precisely as

they would elsewhere." Pharm. Care Mgmt. Ass'n, 2005 U.S. Dist.

LEXIS 2339, at *23-24. This is simply not a case where "uniformity

is impossible . . . [because] plans are subject to different legal

obligations in different States." Egelhoff, 532 U.S. at 148.

In attempting to demonstrate that the UPDPA would require

employee benefit plans to implement unique measures in Maine, PCMA

points to the way in which the UPDPA attempts "to dictate the terms

of contracts between ERISA plans and PBMs, including by redefining

the duties and liabilities of PBMs to such plans, their sponsors

and participants." PCMA also points out how the UPDPA "attempts

to regulate plans' relationship[s] with PBMs when PBMs perform

administrative functions for such plans." Although the ERISA plans

can re-evaluate their working relationships with the PBMs if they

wish in light of the UPDPA, nothing in the UPDPA compels them to do

so. This is not an instance, such as that confronted by the

Supreme Court in Egelhoff, where the plan administrators were bound

to a particular choice of rules -- rules mandated by the state for

determining beneficiary status. The plan administrators here have

a free hand to structure the plans as they wish in Maine. We find,

therefore, that the UPDPA does not have an impermissible

"connection with" ERISA plans.

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 b) The "reference to" prong

A state law is preempted by ERISA by virtue of an

impermissible "reference to" an ERISA plan "[w]here a State's law

acts immediately and exclusively upon ERISA plans . . . or where

the existence of ERISA plans is essential to the law's operation."

Dillingham, 519 U.S. at 325.

In Carpenters Local Union No. 26, when explaining the

scope of this test in light of the Supreme Court's decisions in

Travelers and Dillingham, we discussed two prior precedents of our

own: McCoy v. Mass. Inst. of Tech., 950 F.2d 13 (1st Cir. 1991) and

Williams v. Ashland Eng'g Co., 45 F.3d 588 (1st Cir. 1995). McCoy

dealt with a Massachusetts mechanics' lien statute that, "by its

terms, inured to the advantage of 'the trustee or trustees of any

fund or funds, established pursuant to section 302 of the Taft

Hartley [Act].'" Carpenters Local Union No. 26, 215 F.3d at 142

(noting also that any plan that grants benefits under section 302

is by definition an ERISA plan). Williams, in contrast, dealt with

a bond statute covering public works projects. Id. at 143. We

noted that this bond statute differed from the mechanics' lien

statute in McCoy in that the "bond statute makes no direct

reference to section 302" (and hence, no direct reference to ERISA)

and in that the language of the bond statute was not at all "ERISA-

specific." Id. The relevant language in Williams stood "at the

end of a long list of items," most of which had "nothing whatever

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to do with ERISA." Id. In Carpenters Local Union No. 26, we noted

that the specific reference to an ERISA plan in McCoy was what gave

rise to ERISA preemption. Id. at 142.

We think the UPDPA is similar to the state law at issue

in Williams. The existence of ERISA plans is not at all essential

to the operation of the UPDPA. The UPDPA applies regardless of

whether PBMs are serving ERISA plans. The law applies with respect

to a broad spectrum of health care institutions and health benefit

providers, including but not limited to ERISA plans. "Covered

entities" under the UPDPA includes health plans, labor union plans,

association plans, insurance companies, HMOs, medical service

organizations, and the state Medicaid program. Me. Rev. Stat. Ann.

tit. 22, § 2699(1)(A).

PCMA, in support of its proposition that ERISA plans are

essential to the UPDPA's operation, cites to Dist. of Columbia v.

Greater Washington Bd. of Trade, 506 U.S. 125 (1992). In that

case, the law at issue required an employer who provided health

insurance coverage to its employees to provide equivalent coverage

to injured employees eligible for workers' compensation benefits.

The coverage for injured employees was "measured by reference to

'the existing health insurance coverage' provided by the employer,"

which the Court found to be a "reference to" an ERISA plan and

therefore preempted under ERISA. Id. at 130.

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 As we pointed out in Carpenters Local Union No. 26,

however, the law at issue in Greater Washington contained a

specific reference to an ERISA plan. See Carpenters Local Union

No. 26, 215 F.3d at 144 n.7. Such a law would be completely

inoperable if the reference to the ERISA plan were omitted. It

relied on the reference for its operation. The UPDPA, in contrast,

has no such deficiency. Although the UPDPA does operate to

regulate PBMs that contract with employee health plans -- some of

which may happen to be ERISA plans -- it also operates upon the

state Medicaid program and on insurance companies. If the

reference to employee health plans was deleted from the text of the

UPDPA, the statute would still be operable.6 As we have stated

previously, "[a] state law that applies to a wide variety of

situations, including an appreciable number that have no specific

linkage to ERISA plans, constitutes a law of general application

for purposes of 29 U.S.C. § 1144." Carpenters Local Union No. 26,

215 F.3d at 144-45 (adding that "state laws of general application

are safe from ERISA preemption").

6
We also note that in Dillingham, the Supreme Court faced a
similar situation with apprenticeship programs. Since the Court
found that the "approved apprenticeship programs [in that case]
need not necessarily be ERISA plans," it refused to find that the
California law at issue there "ma[de] reference to" ERISA plans.
Dillingham, 519 U.S. at 325.

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 c) Alternative enforcement mechanism

PCMA, therefore, is unable to show that the UPDPA

"relates to" an employee benefit plan under either the "connection

with" or "reference to" prongs of the test prescribed by the

Supreme Court. PCMA, however, offers an alternative argument. It

states that the UPDPA's remedial scheme (i.e., the UPDPA's

enforcement provision in Me. Rev. Stat. Ann. tit. 22, § 2699(4)

(2005)) conflicts with the "exclusive" remedial scheme set forth by

Congress in ERISA (in 29 U.S.C. § 1132 (2000)) and is therefore

preempted.

The civil enforcement provision of ERISA, 29 U.S.C.

§ 1132 (2000), provides a mechanism by which plan participants,

beneficiaries, fiduciaries, and the Secretary of Labor can sue to

enforce rights expressly guaranteed by ERISA. 29 U.S.C. § 1132

(2000) (ERISA § 502(a)). Accordingly, "ERISA preemption proscribes

the type of alternative enforcement mechanism that purposes to

provide a remedy for the violation of a right expressly guaranteed

and exclusively enforced by the ERISA statute." Carpenters Local

Union No. 26, 215 F.3d at 141. In Ingersoll-Rand Co. v. McClendon,

498 U.S. 133 (1990), the Supreme Court specifically recognized that

a state law can be preempted as an alternative enforcement

mechanism to ERISA § 502(a).

ERISA, however, does not preempt state laws that "touch

upon enforcement but have no real bearing on the intricate web of

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relationships among the principal players in the ERISA scenario

(e.g., the plan, the administrators, the fiduciaries, the

beneficiaries, and the employer)." Carpenters Union Local No. 26,

215 F.3d at 141. Here, the UPDPA targets the PBMs, which, as

stated above, are not ERISA fiduciaries. As such, they are outside

of the "intricate web of relationships among the principal players

in the ERISA scenario." Id. The district court correctly noted

that "[a]lthough ERISA prescribes the duties that are owed by ERISA

entities to one another, and prescribes remedies for their breach,

it is not designed to regulate or afford remedies against entities

that provide services to plans." Pharm. Care Mgmt. Ass'n, 2005

U.S. Dist. LEXIS 2339, at *28-29. Therefore, we hold that the

UPDPA does not provide an alternative enforcement mechanism to

ERISA's civil enforcement scheme and is not preempted.

PCMA, however, points to the Supreme Court's recent

decision in Aetna Health, Inc. v. Dávila, 124 S. Ct. 2488 (2004).

PCMA argues that in Dávila, the Court held that state causes of

action purporting to supplement ERISA §502(a) are preempted "even

if the elements of the state cause of action [do] not precisely

duplicate the elements of an ERISA claim." Id. at 2499-2500. In

that case, however, the plaintiffs were plan participants and

beneficiaries who brought suit "only to rectify a wrongful denial

of benefits promised under ERISA-regulated plans" and who did not

attempt to remedy any violation of a legal duty independent of

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ERISA. Id. at 2492-93, 2498. In other words, all the parties in

that case were part of the "intricate web of relationships among

the principal players in the ERISA scenario." Carpenters Union

Local No. 26, 215 F.3d at 141. That was the reason that the state

remedy in that case was preempted. Therefore, PCMA's use of Dávila

is misplaced.

C. Takings claim

Under the UPDPA, PBMs are required to disclose to their

customers in Maine information concerning the discounts and other

contract terms that they are able to negotiate with drug

manufacturers and pharmacies. According to the PCMA, this

information is confidential and proprietary and is to be considered

a "trade secret." Because the UPDPA requires PBMs to disclose

these trade secrets as a condition of doing business in Maine, PCMA

contends that the UPDPA effects a regulatory taking, and this

requires "just compensation" under the Fifth Amendment. "A

regulatory taking transpires when some significant restriction is

placed upon an owner's use of his property for which 'justice and

fairness' require that compensation be given." Philip Morris Inc.

v. Reilly, 312 F.3d 24, 33 (1st Cir. 2002) (quoting Goldblatt v.

Hempstead, 369 U.S. 590, 594 (1962)).

1.

Before we reach the merits of such a claim, however, we

first must assess whether PCMA has standing to bring a takings

-21-
claim here. The district court held that PCMA did not have

standing. Standing decisions are reviewed by this court de novo.

Donahue v. City of Boston, 304 F.3d 110, 116 (1st Cir. 2002); Nyer

v. Winterthur Int'l, 290 F.3d 456, 459 (1st Cir. 2002).

"[A]n association has standing to bring suit on behalf of

its members when: (a) its members would otherwise have standing to

sue in their own right; (b) the interests it seeks to protect are

germane to the organization's purpose; and (c) neither the claim

asserted nor the relief requested requires the participation of

individual members in the lawsuit." Hunt v. Washington State Apple

Adver. Comm'n, 432 U.S. 333, 343 (1977). The third factor of this

test is prudential. United Food and Commercial Workers Union Local

751 v. Brown Group, Inc., 517 U.S. 544, 557 (1996). PCMA here has

the burden to prove it has standing. Harvey v. Veneman, 396 F.3d

28, 34 (1st Cir. 2005); Donahue, 304 F.3d at 116.

The main point of conflict in this case regards the

third, prudential, prong of the Hunt test: "Neither the claim

asserted nor the relief requested requires the participation of

individual members in the lawsuit." The district court concluded

that the third factor for associational standing had not been met

because at least one PBM would have to participate in the suit to

prove that property was being taken. Also, the court noted that

because some PBMs might not be affected if they did not possess

trade secrets (because they had already contracted away access to

-22-
this information), the claim would require member-by-member

scrutiny. We disagree.

PCMA is indeed required to introduce evidence "pertaining

to how, inter alia, one or more of its members develops, and

maintains the secrecy of, its information and how one or more of

its members would be injured by disclosure." Pharm. Care Mgmt.

Ass'n, 2005 U.S. Dist. LEXIS 2339, at *39. However, in Playboy

Enters., Inc. v. Pub. Serv. Comm'n of Puerto Rico, 906 F.2d 25 (1st

Cir. 1990), we noted that "just because a claim may require proof

specific to individual members of an association does not mean the

members are required to participate as parties in the lawsuit."

Playboy Enters., 906 F.2d at 35. (emphasis in original). We think

that to be true here. Even though a takings inquiry is intensely

fact specific and PCMA will be required to introduce proof of

specific PBM practices and effects of the UPDPA on specific PBMs,

we see no reason that PCMA's member PBMs would be required to

participate as parties in this litigation.

In Playboy Enters., we discussed the Supreme Court's

holding in Warth v. Seldin, 422 U.S. 490 (1975). Playboy Enters.,

906 F.2d at 35. In Warth, the Court held that an association had

no standing to sue on behalf of its members when seeking monetary

relief to compensate for its members' injuries. Warth, 422 U.S. at

515-16. In Playboy Enters., we noted that "the crucial reason [in

Warth] for requiring the members' participation as parties must

-23-
have been so that the members [rather than the association] could

recover their own damages, should they prevail." Playboy Enters.,

906 F.2d at 35 (emphasis in original). The association in that

case was not entitled to be compensated for the various injuries

suffered by its members. "The members' participation as parties

was necessary so that judgment could be entered in their favor."

Id. at 35-36 (emphasis in original). In the instant case, however,

there is no similar claim for monetary damages. PCMA requests only

equitable relief. Such a remedy would, if granted, "inure to the

benefit of those members of the association actually injured."

Warth, 422 U.S. at 515. There is, in other words, no need here for

the member PBMs to participate as parties. As such, PCMA does have

associational standing to assert its claim.

2.

With the disposal of that threshold jurisdictional issue,

we can now address the merits of PCMA's takings claim. Here, PCMA

brings a facial challenge to the UPDPA, asserting that the UPDPA

violates the Takings Clause of the Fifth Amendment because it

conditions doing business in Maine upon the forced disclosure or

taking of proprietary information.

In the takings context, a facial challenge is usually

ripe "the moment the challenged regulation or ordinance is passed."

Suitum v. Tahoe Reg'l Planning Agency, 520 U.S. 725, 736 n.10

(1997). To succeed on a facial challenge to a statute, however, is

-24-
very difficult. As we have noted before, a plaintiff wishing to

bring a facial challenge "face[s] an uphill battle." Reilly, 312

F.3d at 52 (Lipez, J., dissenting) (quoting Keystone Bituminous

Coal Assn. v. DeBenedictis, 480 U.S. 470, 495 (1987)). "A facial

challenge to a legislative Act is . . . 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." Pharm. Research & Mfrs. of Am. v. Concannon, 249

F.3d 66, 77 (1st Cir. 2001) (internal quotation marks omitted).

Here, this would mean that PCMA has the burden to prove that every

disclosure under the UPDPA, if uncompensated, would result in an

unconstitutional taking.

PCMA, however, has not met this burden. This is a result

of the differing circumstances of PCMA's member PBMs. There are

certain PBMs that have already disclosed extensive information to

their clients, pursuant to contract or in the context of annual

audits. The state writes, for example, about how

. . . Medco [a PBM] allows United Healthcare
[a client] virtually unfettered access to
Medco's contracts, contract terms, rebates,
records and information; virtually complete
audit rights; and even the ability to
participate in negotiations with the drug
manufacturers. Appellee Br. 31-32.

All of this information is now also required to be disclosed under

the UPDPA. See, e.g., Me. Rev. Stat. Ann. tit. 22, § 2699(2)(D)

(2005) (requiring disclosure of all financial and utilization

-25-
information requested by a covered entity relating to the provision

of services to that covered entity).

None of this information, however, can in any way be

considered a trade secret. Under Maine law, a trade secret is

"information . . . that . . . [d]erives independent economic value

. . . from not being generally known to and not being readily

ascertainable by proper means by other persons who can obtain

economic value from its disclosure or use and . . . is the subject

of efforts that are reasonable under the circumstances to maintain

its secrecy." Me. Rev. Stat. Ann. tit. 10, § 1542(4) (2005). See

also Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1002 (1984)

("Because of the intangible nature of a trade secret, the extent of

the property right therein is defined by the extent to which the

owner of the secret protects his interest from disclosure to

others.").

The information disclosed as a result of these client

contracts, however, is readily available. The record is replete

with evidence demonstrating that the PBMs that made these contracts

have taken no special steps to protect their information. For

example, Timothy Wentworth, the group President of National

Accounts for Medco, stated that he was not aware of any written

security policy prohibiting the removal of client contracts at

Medco. Other PBMs keep these client contracts in unlocked cabinets

-26-
"in public areas such as hallways." Therefore, such information --

at least under Maine law -- cannot be considered a "trade secret."

Given that there are no trade secrets involved with these

client contracts, there is no "property" subject to the Takings

Clause. See Monsanto, 467 U.S. at 1002 ("If an individual

discloses his trade secret to others who are under no obligation to

protect the confidentiality of the information, or otherwise

publicly discloses the secret, his property right is

extinguished."). Hence, many disclosures required from the PBMs

under the UPDPA would not be considered unconstitutional takings.

Therefore, PCMA cannot show that every disclosure under the UPDPA

will result in an unconstitutional taking, for there are clear and

obvious circumstances when disclosures under the UPDPA are not

unconstitutional takings. We therefore hold that PCMA's facial

takings claim fails on the merits.

D. Due Process claim

As the district court recognized, this claim "tags along"

with PCMA's takings claim. In Zinermon v. Burch, 494 U.S. 113, 132

(1990), the Supreme Court held that due process requires that "[i]n

situations where the State feasibly can provide a predeprivation

hearing before taking property, it generally must do so regardless

of the adequacy of a postdeprivation tort remedy to compensate for

the taking." As we have already discussed, however, PCMA has not

been able to show that the UPDPA effects a taking. Since there is

-27-
no taking and no deprivation, it follows that no predeprivation

hearing is required. The district court was therefore correct to

grant summary judgment in favor of the state on this claim.

E. First Amendment claim

The district court also found that the provisions of the

UPDPA do not violate the First Amendment. PCMA claims that the

UPDPA violates the First Amendment because it compels PBMs to

engage in speech -- in the form of mandated disclosures -- as a

condition of doing business in Maine. In a number of different

cases, the Supreme Court has recognized that compulsion to speak

may be as violative of the First Amendment as prohibitions on

speech. See, e.g., Zauderer v. Office of Disciplinary Counsel of

the Supreme Court of Ohio, 471 U.S. 626 (1985); Wooley v. Maynard,

430 U.S. 705 (1977); Miami Herald Publ'g Co. v. Tornillo, 418 U.S.

241 (1974). We agree with PCMA that a compelled disclosure, such

as the one here, does indeed implicate the First Amendment.

In assessing whether the disclosures mandated by the

UPDPA are violative of the provisions of the First Amendment, the

initial question we must confront is the nature of the speech. The

degree of protection afforded by the First Amendment depends on

whether the speech here is commercial speech or noncommercial

speech.7 "'[C]ommercial speech' is entitled to the protection of

7
The district court simply assumed that the speech at issue here
is "commercial speech." We, however, think that the classification
of speech in this case is not at all clear and deserves a full

-28-
the First Amendment, albeit to protection somewhat less extensive

than that afforded 'noncommercial speech.'" Zauderer, 471 U.S. at

637; see also Ohralik v. Ohio State Bar Ass'n., 436 U.S. 447, 456

(1978) ("[W]e . . . have afforded commercial speech a limited

measure of protection, commensurate with its subordinate position

in the scale of First Amendment values, while allowing modes of

regulation that might be impermissible in the realm of

noncommercial expression."); Bolger v. Youngs Drug Prods. Corp.,

463 U.S. 60, 64-65 (1983) ("[t]he Constitution accords less

protection to commercial speech than to other constitutionally

safeguarded forms of expression.").

If the speech here is of a commercial nature, there is a

reduced burden on the state to justify the UPDPA. See Zauderer,

471 U.S. at 650-651; Riley v. Nat'l Fed'n of the Blind of North

Carolina, Inc., 487 U.S. 781, 796 n.9 (1988) ("Purely commercial

speech is more susceptible to compelled disclosure requirements.").

If, however, the speech is of a noncommercial nature, the compelled

disclosure will be subject to "exacting First Amendment scrutiny."

Riley, 487 U.S. at 798. In such a case, the state, to justify its

law, would have to advance a compelling state interest and also

show that the means chosen to accomplish that interest are narrowly

tailored. See id. at 795 (noting that a statute that mandates

speech "that a speaker would not otherwise make necessarily alters

analysis.

-29-
the content of the speech" and that such a statute is therefore

considered a content-based regulation of speech); Madsen v. Women's

Health Ctr., 512 U.S. 753, 790-91 (1994) (noting that content-based

regulations receive strict scrutiny).

We have stated that commercial speech is defined as

"expression related solely to the economic interests of the speaker

and its audience." El Día, Inc. v. Puerto Rico Dept. of Consumer

Affairs, 413 F.3d 110, 115 (1st Cir. 2005) (citing Central Hudson

Gas & Elec. Corp. v. Public Serv. Comm'n of New York, 447 U.S. 557,

561 (1980)). Although it is a close question, we think that the

speech mandated by the UPDPA meets this definition. Many of the

UPDPA's provisions are overtly geared at the economic interests of

the PBMs and the covered entities. See, e.g., Me. Rev. Stat. Ann.

tit. 22, § 2699(2)(F) (requiring PBMs to disclose and disgorge any

payment or benefit based on volume of sales or classes or brands of

prescription drugs). Even those provisions of the UPDPA that are

on their face less related to "economic interests" -- e.g., id.

§ 2699(2)(C) (requiring PBMs to disclose conflicts of interest) --

are aimed at eliminating certain PBM practices that unnecessarily

increase the cost of prescription medications.

We discuss this case, therefore, on the basis that

commercial speech is at issue. In Zauderer, the Supreme Court held

that "[b]ecause the extension of First Amendment protection to

commercial speech is justified principally by the value to

-30-
consumers of the information such speech provides," a party who was

faced with a disclosure requirement had only a minimal interest in

withholding the information requested of him by law. Zauderer, 471

U.S. at 651. The Court also held that the party's rights are

adequately protected "as long as disclosure requirements are

reasonably related to the State's interest in preventing deception

of consumers." Id.8

Applying these principles here, we find that the UPDPA

disclosure provisions do not run afoul of the First Amendment.

PCMA's member PBMs only have a minimal interest in withholding the

information the UPDPA requires from them, especially given Maine's

interest in ensuring that its citizens receive the best and most

cost-effective health care possible. The information disclosed

under the UPDPA will help the "covered entities" that are

responsible for paying for medications in Maine ensure that they

and their customers are not adversely affected by the abuses and

self-dealing of certain PBMs. Furthermore, we think it obvious

that the UPDPA's disclosure requirements are "reasonably related"

to Maine's interest in preventing deception of consumers and

increasing public access to prescription drugs. Id. As the

district court noted, these disclosure requirements are

8
In its reply brief, PCMA states that the holding in Zauderer is
"limited to potentially deceptive advertising directed at
consumers." Appellant Reply Br. 28. None of the cases it cites,
however, support this proposition, and we have found no cases
limiting Zauderer in such a way.

-31-
 designed to create incentives within the
market for the abandonment of certain
practices that are likely to unnecessarily
increase cost without providing any
corresponding benefit to the individual whose
prescription is being filled and that appear
to be designed merely to improve a drug
manufacturer's market share.

Pharm. Care Mgmt. Ass'n, 2005 U.S. Dist. LEXIS 2339, at *82-83.

PCMA argues that the PBMs' interest in not disclosing,

rather than being minimal, is acute. This is because "the

compelled speech takes their valuable property." Appellant Reply

Br. 28. Aside from the fact that PCMA offers no proof supporting

this contention, we have already held that PCMA failed to show that

the UPDPA effects a taking of the PBMs' property. We do not see

how the situation is any different in the First Amendment context.

We think, therefore, that the district court was correct in holding

that UPDPA's provisions do not contravene the First Amendment.

F. Commerce Clause claim

The district court held that the UPDPA was not in

violation of the Commerce Clause. The Commerce Clause provides

that Congress shall have the power "to regulate Commerce . . .

among the several States." U.S. Const. art. I, § 8, cl. 3. It has

long been understood, however, that this affirmative grant of

authority to Congress necessarily encompasses a limitation on the

power of states to enact legislation that burdens the flow of

interstate commerce. This restriction on the states, known as the

dormant Commerce Clause, is not absolute and in the absence of

-32-
conflicting legislation by Congress, "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).

PCMA argues that the UPDPA violates the dormant Commerce

Clause on two grounds. First, it claims that the UPDPA has

"extraterritorial reach." A state statute is per se invalid under

the dormant Commerce Clause when it "regulates commerce wholly

outside the state's borders or when the statute has a practical

effect of controlling conduct outside of the state." Pharm.

Research & Mfrs. of Am., 249 F.3d at 79. A statute has this

impermissible extraterritorial reach if it "necessarily requires

out-of-state commerce to be conducted according to in-state terms."

Id. (quoting Cotto Waxo Co. v. Williams, 46 F.3d 790, 794 (8th Cir.

1995)).

The Supreme Court has discussed "extraterritorial reach"

in a number of cases. PCMA, for example, invokes Edgar v. MITE

Corp., 457 U.S. 624, 640-43 (1982), a case involving an Illinois

law that sought to regulate tender offers for the stock of Illinois

corporations. The law required that all such offers be registered

in advance with the Illinois Secretary of State. Under the terms

of the statute, a Delaware corporation soliciting the shares of an

Illinois corporation from a resident of Arkansas would be required

-33-
to register with the state of Illinois. The Supreme Court,

however, struck down the statute under the dormant Commerce Clause,

noting that the law "directly regulates transactions which take

place across state lines, even if wholly outside the State of

Illinois." Edgar, 457 U.S. at 641.

The district court, similarly, discussed Brown-Forman

Distillers Corp. v. New York State Liquor Auth., 476 U.S. 573

(1986). In that case, the Supreme Court invalidated a provision of

the New York Alcoholic Beverage Control Law that required liquor

distillers and producers doing business in New York 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. The

Court determined that this was extraterritorial reach violative of

the Commerce Clause because during the period that the affirmation

was in effect, New York made it illegal, without prior permission

from state authorities, for a distiller or producer to reduce its

price in other states. Thus, the New York law effectively regulated

the price at which liquor was sold in other states. As the Court

stated, "[f]orcing a merchant to seek regulatory approval in one

State before undertaking a transaction in another directly

regulates interstate commerce." Brown-Forman, 476 U.S. at 582.

PCMA draws here on this idea of "extraterritorial reach"

and attempts to apply it to the UPDPA. It argues that if a PBM

operating outside of Maine enters into a contract outside of Maine

-34-
with a national insurer similarly operating beyond the state's

borders but licensed in the state, the PBM would have to comply

with the UPDPA's disclosure requirements. "This is exactly the

sort of extraterritorial reach condemned in Edgar v. MITE Corp.,"

says PCMA.

We beg to differ. There is a key difference between the

UPDPA and the laws in Edgar and Brown-Forman. In Edgar and Brown-

Forman, the state laws at issue gave the state power to determine

whether a transaction in another state could occur at all. For

example, the law in Edgar gave the Illinois Secretary of State

power to determine whether to allow a tender offer by a Delaware

corporation for stock held by an Arkansas resident. Similarly, the

New York law in Brown-Forman gave the New York State Liquor

Authority power to determine whether a liquor distiller or producer

would be permitted to reduce its price in other states. It was

this sort of "extraterritorial reach" that led the Court to

invalidate the statutes at issue in those cases.

The UPDPA, however, does not give Maine any such

authority. Under the UPDPA, a transaction outside of Maine between

two parties -- for example, between PCMA's hypothetical out-of-

state PBM and insurance company -- can take place regardless of

whether Maine consents or not. Maine law does not "regulate . . .

[the] out-of-state transaction, either by its express terms or by

its inevitable effect." Pharm. Research & Mfrs. of Am., 249 F.3d

-35-
at 81. Maine does not dictate the terms of such a transaction.

Nor is Maine in any way "project[ing] its legislation" into those

other states. Baldwin v. G.A.F. Seelig, Inc., 294 U.S. 511, 521

(1935). It simply requires that PBMs, should they choose to do

business within Maine, provide "covered entities" with certain

information about their business relationships. In other words,

the UPDPA does not require out-of-state commerce to be conducted

according to in-state terms. It requires only that in-state

commerce be conducted according to in-state terms. See Me. Rev.

Stat. Ann. tit. 22, § 2699(1)(B), (3) & (5) (2005) (showing that

the UPDPA covers only contracts entered in Maine with respect to

covered entities in Maine). In light of this distinction, we think

that the UPDPA cannot properly be said to have an extraterritorial

reach violating the Commerce Clause.

Alternatively, PCMA argues that the UPDPA violates the

Commerce Clause under the more lenient test set out by the Supreme

Court in Pike v. Bruce Church, Inc., 397 U.S. 137 (1970). Under

that test -- to be used when the state statute at issue regulates

evenhandedly and has only incidental effects on interstate commerce

-- courts employ a balancing approach whereby they examine whether

the state's interest is legitimate and whether the burden on

interstate commerce clearly exceeds the local benefits. Pike, 397

U.S. at 142. Since we have held that the UPDPA is not per se

invalid because it does not effect any "extraterritorial reach,"

-36-
and because the Maine statute does regulate evenhandedly and has

only incidental effects on interstate commerce, we employ here the

Pike balancing test to assess the constitutionality of the UPDPA.

In Pharm. Research & Mfrs. of Am., we noted that the Pike

test involves three separate steps. First, we are to evaluate the

nature of the putative local benefits advanced by the statute.

Second, we must examine the burden the statute places on interstate

commerce. Finally, we are to consider whether the burden is

"clearly excessive" as compared to the putative local benefits.

Pharm. Research & Mfrs. of Am., 249 F.3d at 83-84.

The putative local benefits of the UPDPA are clear. The

aim of the UPDPA is to reduce the costs of, and increase the

public's access to, prescription drugs. The law was designed to

deal with "one of the serious problems of our time." Id. at 80.

PCMA, for its part, thinks these benefits are not likely to

materialize as a result of the UPDPA. It is not the place of this

court, however, to pass judgment on the wisdom of the policies

adopted by the Maine legislature. See Kassel v. Consol.

Freightways Corp., 450 U.S. 662, 679 (1981) (Brennan, J.,

concurring) (stating that courts should refrain from attempting to

"second-guess the empirical judgments of lawmakers concerning the

utility of legislation"). Furthermore, as the district court

points out, under Pike, it is the putative local benefits that

-37-
matter. It matters not whether these benefits actually come into

being at the end of the day.

On the "burden" side of the Pike balancing equation, PCMA

only asserts that as a result of the UPDPA, certain PBMs will no

longer do business in Maine. PCMA states that "the extraordinary

restrictions imposed [by the UPDPA] on the business operations of

pharmacy benefit managers (PBMs) will make it virtually impossible

to establish or maintain a prescription drug program that relies on

a for-profit PBM for administrative services." In Pharm. Research

& Mfrs. of Am., we said that "[a]rguably, the only burden imposed

on interstate commerce by the . . . Act [in that case] is its

possible effects on the profits of the individual manufacturers."

Pharm. Research & Mfrs. of Am., 249 F.3d at 84. We think the same

to be true here. However, as we noted in Pharm. Research & Mfrs.

of Am., such a burden is not violative of the Commerce Clause

because the Clause "protects the interstate market, not particular

interstate firms, from prohibitive or burdensome regulations." Id.

(quoting Exxon Corp. v. Governor of Md., 437 U.S. 117, 127-28

(1978)).

Even if such a burden was cognizable under the Commerce

Clause, at the very least the burden on interstate commerce in this

instance would not be "clearly excessive" as compared to the local

-38-
benefits provided by the UPDPA.9 Pharm. Research & Mfrs. of Am.,

249 F.3d at 84; see Edgar, 457 U.S. at 643 ("[F]or even when a

state statute regulates interstate commerce indirectly, the burden

imposed on that commerce must not be excessive in relation to the

local interests served by the statute."). "[T]he burden of proving

'excessiveness' falls upon the [plaintiff], not the state," N.H.

Motor Transp. Ass'n v. Flynn, 751 F.2d 43, 48 (1st Cir. 1984), and

PCMA here has clearly failed to carry that burden.

Given the set of competing concerns we are presented with

here, we think the district court was correct in asserting that

PCMA "failed to provide the court with any great weight to place on

the excessive burden side of the scale." Pharm. Care Mgmt. Ass'n,

2005 U.S. Dist. LEXIS 2339, at *73-74. When measuring PCMA's

concern about its members' profits against the increased access to

prescription drugs for Maine citizens, the local benefits clearly

outweigh any incidental burden on interstate commerce.

Accordingly, PCMA's Commerce Clause claim fails under the balancing

test set forth in Pike.

III. Conclusion

For the reasons set forth above, we affirm the decision

of the district court.

"Concurrence follows."

9
It is not the case, as the appellants claim, that "the UPDPA
must fall if any burden is imposed on interstate commerce."

-39-
 BOUDIN, Chief Judge, and DYK, Circuit Judge, Concurring.

The association standing question in this case is difficult. There

is no well developed test in this circuit as to how the third prong

of the Hunt test--whether "the claim asserted [or] the relief

requested requires the participation of individual members in the

lawsuit," Hunt v. Wash. State Apple Adver. Comm'n, 432 U.S. 333,

343 (1977)--applies in cases where injunctive relief is sought.

This prong of the test is prudential rather than constitutional in

nature, United Food & Commercial Workers Union Local 751 v. Brown

Group, Inc., 517 U.S. 544, 555 (1996), and there exists some

latitude in case-by-case judgments.

That only injunctive relief is sought here distinguishes

this case from damages cases; in those, association standing is

precluded where the damages turn upon the varying circumstances of

the individual plaintiffs. See Warth v. Seldin, 422 U.S. 490, 515-

16 (1975). Where only injunctive relief is sought, an association

may sometimes be allowed to sue even if some proof from individual

non-party members is required; on the other hand, plenty of

injunction cases have been dismissed because of the need for

individualized proof.10

10
E.g., Ga. Cemetery Ass'n. v. Cox, 353 F.3d 1319, 1322 (11th Cir.
2003); Rent Stabilization Ass'n. v. Dinkins, 5 F.3d 591, 596-97 (2d
Cir. 1993); Kan. Health Care Ass'n. v. Kan. Dept. of Soc. & Rehab.
Svcs., 958 F.2d 1018, 1022-23 (10th Cir. 1992).

-40-
 There is one decision in this circuit upholding

association standing in a case dealing with injunctive relief.

Playboy Enters. v. Pub. Svc. Comm'n of P.R., 906 F.2d 25 (1st Cir.

1990), cert. denied, 498 U.S. 959 (1990). In that case, however,

the impact on individual members necessary for injunctive relief

was readily established as to at least one member. Furthermore,

the challenged law in Playboy was a state statute regulating

expression; in such cases, courts are generally more inclined to

permit jus tertii claims. See Osediacz v. City of Cranston, 414

F.3d 136, 140 (1st Cir. 2005). Playboy is not an open door for

association standing in all injunction cases where member

circumstances differ and proof of them is important.

Sensibly, the Third Circuit in Pennsylvania Psychiatric

Society v. Green Spring Health Services, Inc., 280 F.3d 278 (3d

Cir. 2002), cert. denied, 537 U.S. 881 (2002), did not adopt an

all-or-nothing test. The court there stated that it would allow

for association standing if proof as to member circumstances were

"limited," but it noted that "conferring associational standing

would be improper for claims requiring a fact-intensive-individual

inquiry." Id. at 286-87. This is not a complete compendium of

relevant considerations, but it is a useful start.

In this case, putting to one side their generic weakness,

individual takings claims could in principle be significantly

strengthened or weakened by the particularized circumstances of

-41-
each individual member. Furthermore, there appears to be

considerable variation in each member company's particular

circumstances--for example, whether a member already discloses the

information in question to its customers, the methods by which it

stores copies of its contracts, and so on. The district court

acted reasonably in concluding that in this case the association

should not be allowed to sue as to the takings claim and that

individual members should bring their own cases.

However, as we are dealing with a matter of prudential

standing, the limitation has no Article III implications. Because

at least some members could doubtless show that their materials

were not disclosed and were well protected, the district court

sensibly went on to forestall individual actions that would

inevitably follow a dismissal of the association's takings claim on

standing grounds. It correctly held that even if association

standing were assumed to be adequate, such takings claims fail on

the merits.

Putting aside a separate threshold concern,11 the Supreme

Court in Ruckelshaus v. Monsanto, 467 U.S. 986 (1984), made clear

that trade secrets--as defined by state law--can constitute

11
Typically, no injunctive relief claim based on taking would be
ripe until state compensation remedies were exhausted, Williamson
County Reg'l Planning Comm'n v. Hamilton Bank of Johnson City, 473
U.S. 172, 195 (1985), but because there may be some circumstances
that avoid this bar, see Philip Morris, Inc. v. Reilly, 312 F.3d 24
(1st Cir. 2002) (en banc), we do not address this issue.

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property interests for Takings Clause purposes. Id. at 1003-04.

It is far from clear that the Maine courts would find the

information required to be disclosed here to represent a trade

secret under Maine law. However, as there is no definitive state

court judgment on this issue, it is possible that the information

sought to be disclosed could potentially represent a valid property

interest for Takings Clause purposes.

Nevertheless, even assuming a property interest, the

Maine statute does not work a full taking. It does not confiscate

the supposed trade secret in the conventional sense; at most, it

requires limited disclosure to customers of transactions possibly

adverse to the customers' interests, which may reduce the value of

the trade secret to the PBM. PBMs may still negotiate rebate

contracts with drug companies, but their plan customers may--as a

result of PBMs' disclosures--look elsewhere for benefits

management.

In this context, a takings claim is far from

straightforward. In Penn Central Transportation Co. v. City of New

York, 438 U.S. 104 (1978), the Supreme Court--while noting that

such analyses are "essentially ad hoc, factual inquiries"--outlined

three relevant factors in determining whether a regulation effects

a taking: (1) "the extent to which the regulation [would]

interfere[] with distinct investment-backed expectations"; (2)

"[t]he economic impact of the regulation on the claimant"; and (3)

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"the character of the governmental action." Id. at 124. Given the

absence of a full-scale taking and the presence of a traditional

regulatory interest, it is enough to defeat the takings claim that

no reasonable investment-backed expectation is present at all. See

Good v. United States, 189 F.3d 1355, 1363 (Fed. Cir. 1999), cert.

denied, 529 U.S. 1053 (2000).

Under the terms of the statute, the PBMs' disclosure

requirements run only to their "covered entity" customers and apply

only to contracts entered into or renewed after the statute's

effective date, namely, September 13, 2003 (three months after the

statute was enacted). As the district court noted, PBMs and drug

manufacturers typically negotiate their rebate terms on an annual

basis. More than two years have elapsed since the statute gave

warning of the new regime (in June 2003), so one-year rebate

contracts negotiated before that date have expired or have been

renewed in the teeth of the statute, and any rebate contracts first

entered into after June 2003 would have been made with knowledge of

the statute's requirements. There is no basis for forward-looking

injunctive relief with respect to rebate contracts entered into

after the statute's effective date.

Even as applied to trade secrets arising before the

statute's effective date, the statute would not constitute a

taking. "A manufacturer or vendor has no constitutional right to

sell goods without giving to the purchaser fair information of what

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it is that is being sold." Corn Prods. Ref. Co. v. Eddy, 249 U.S.

427, 431 (1919). PBMs should therefore have expected the

possibility that they would have to disclose to their covered

entity customers information needed to forestall what could

reasonably be deemed abusive control. PBMs are undoubtedly aware

of the heavily regulated nature of the healthcare industry; in

fact, as the district court noted, they are already subject to

extensive regulation under federal and state law.

If PBMs truly assumed that they would be free from

disclosure requirements of the sort set forth in the Maine law

here, this would be more wishful thinking than reasonable

expectation. Whether or not the law strikes the right economic

balance between competing producer and consumer interests, it is no

more a taking than the requirement that public corporations

disclose private corporate information about financial prospects to

the public through regular SEC filings.

Lastly, PCMA's First Amendment claim is completely

without merit. So-called "compelled speech" may under modern

Supreme Court jurisprudence raise a serious First Amendment concern

where it effects a forced association between the speaker and a

particular viewpoint. See, e.g., Wooley v. Maynard, 430 U.S. 705

(1977) (requiring all New Hampshire drivers to display "Live Free

or Die" on their license plates); Miami Herald Publ'g Co. v.

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Tornillo, 418 U.S. 241 (1974) (requiring newspapers to afford

political candidates a right to reply to editorial critiques).

What is at stake here, by contrast, is simply routine

disclosure of economically significant information designed to

forward ordinary regulatory purposes--in this case, protecting

covered entities from questionable PBM business practices. There

are literally thousands of similar regulations on the books--such

as product labeling laws, environmental spill reporting, accident

reports by common carriers, SEC reporting as to corporate losses

and (most obviously) the requirement to file tax returns to

government units who use the information to the obvious

disadvantage of the taxpayer.

The idea that these thousands of routine regulations

require an extensive First Amendment analysis is mistaken.

Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626 (1985),

makes clear "that an advertiser's rights are adequately protected

as long as disclosure requirements are reasonably related to the

State's interest in preventing deception of consumers." Id. at

651. This is a test akin to the general rational basis test

governing all government regulations under the Due Process Clause.

The test is so obviously met in this case as to make elaboration

pointless.

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