PLAINTIFF APPLICATION FOR PRELIMINARY INJUNCTION League of by alicejenny

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									                             UNITED STATES DISTRICT COURT
                             FOR THE DISTRICT OF COLUMBIA

____________________________________
                                    )
PHARMACEUTICAL CARE                 )
MANAGEMENT ASSOCIATION,             )
                                    )
                  Plaintiff,        )
                                    )
      v.                            )                  Civil Action No. 04-1082 (RMU)
                                    )
DISTRICT OF COLUMBIA, et al.,       )
                                    )
                  Defendants.       )
____________________________________)


            DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES
                               IN OPPOSITION TO
            PLAINTIFF’S APPLICATION FOR A PRELIMINARY INJUNCTION


       The defendants herein (collectively, “the District”), by and through undersigned counsel

pursuant to LCvR 65.1(c), hereby submit this Memorandum of Points and Authorities in

Opposition to Plaintiff’s Motion for Preliminary Injunction.



                            I. Introduction and Summary of Argument

       Plaintiff here seeks to prevent the District from protecting its citizens. This is not a case of

impermissible regulation of ERISA plans, but of the District exercising its traditional police powers

to regulate a health care entity with ever-growing power. The pharmaceutical (or pharmacy)

benefit managers (“PBMs”), which originally arose as a way to take advantage of group-

purchasing power for prescription drugs and assist health plans in managing drug benefit

programs, now earn most of their profits from secret deals with the drug manufacturers

themselves—the very manufacturers that the health plans hire the PBMs to negotiate prices with.
This blatant conflict of interest has begun to draw the attention of state and federal regulators and

prosecutors, who are trying to step into the “regulatory vacuum” that the PBMs are profitably

exploiting. The District of Columbia’s attempt to do so is here challenged.

       This Court should deny the requested emergency relief because plaintiff has failed to

meet the familiar four-part test for granting such injunctive relief. Access Rx is simply an

attempt to the District to rein in spiraling prescription-drug prices. The Supreme Court has

already said that “Congress never envisioned ERISA pre-emption as blocking state health care

cost control . . . .” New York State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co.,

514 U.S. 645, 667 n.6 (1995) (“Travelers”).



                              II. Factual and Procedural Background

       In recent years, prices for prescription drugs have skyrocketed. See, e.g., Cyril T.

Zaneski, “Drug Brokers Scrutinized,” Baltimore Sun, at 1A (Apr. 7, 2004) (“Americans spend

about 10 cents out of every health care dollar on drugs—twice as much as in 1990.”).

“Prescription Drug Trends,” Henry J. Kaiser Foundation (May 2003) (“U.S. spending for

prescription drugs was $140.6 billion in 2001, more than tripling since 1990); Barbara Martinez,

“Pharmacy-Benefit Managers At Times Toil for Drug Firms,” Wall Street Journal Online at 1

(Aug. 14, 2002) (spending on prescription drugs more than doubled from 1996 to 2001);

Pharmaceutical Research & Manufacturers of Am. v. Walsh, 538 U.S. 644, 649 & n.1 (2003)

(“PhRMA”) (between 1982 and 1988, prescription drug costs increased at an average annual rate

of 9.5 %, more than any other component of the health care sector) (citation omitted).

       Moreover, drug manufacturers admit that the published prices for their drugs, on which

Medicaid reimbursements and co-payments are based, bear “no direct relation” to the actual




                                                -2-
prices charged. In re Pharmaceutical Indus. Average Wholesale Price Litig. (“AWP Lit.”), 263

F.Supp.2d 172, 180 (D.Mass. 2003).

       Naturally, those rising costs have increased premiums for employer health plans. See U.S.

General Accounting Office Rep. No. 03-196, “Federal Employees’ Health Benefits: Effects of

Using Pharmacy Benefit Managers on Health Plans, Enrollees, and Pharmacies,” at (inside

cover) (Jan. 2003) (“GAO Rep.”).

       A key development in the changing health care landscape is the rise in power and

influence of the PBMs, who act as “intermediaries” between the drug manufacturers and the

health plans, self-funded group plans, and government entities that purchase prescription drugs

for plan members. Plaintiff’s Memorandum in Support of its Motion for Preliminary Injunction

(“P.Mem.”) at 3; PCMA v. Rowe, 307 F.Supp.2d 164, 169 (D.Maine 2004) (“Rowe”) (“[PBMs]

have become a central force in the $175 billion national market for prescription drugs.”). These

health care providers and government entities contract with PBMs to manage the groups’

prescription drug programs. Id. PBMs purport to “negotiate” with the manufacturers to obtain

“rebates” which allegedly reduce the cost of the drugs. Id.1 However, the PBMs freely admit an

inherent conflict of interest—they are paid by the manufacturers directly for a variety of services,

including promoting the manufacturers’ drugs over competitors’, and actively soliciting the plans

(and in some cases the patients themselves) to switch to a certain manufacturer’s drugs. See, e.g.,

P.Mem. at 27; GAO Rep. at 25–27.

       The dramatic rise in prescription drug costs has coincided with burgeoning profits in the

PBM industry. See, e.g., Barbara Martinez, “Pharmacy-Benefit Firms Profit on Generic Drugs,”



       1
               Plaintiff cites the GAO Report for this cost-savings proposition. P.Mem. at 4 n.13.
However, that report is, by its own terms, acknowledged to be incomplete, because the PBMs
refused to provide key financial information. See n.2, infra, and accompanying text.


                                               -3-
Wall Street Journal Online, at 1 (Mar. 31, 2003) (Express Scripts’ net income up 63% from 2001

to 2002; AdvancePCS’ earnings up 44% for last nine months of 2002). Efforts to discover the

source of the PBMs’ striking profits have been impeded by the PBMs. See, e.g., Martinez 2002,

supra, at 3 (“PBMs reveal few details about their ties with drug companies or to what extent they

share rebates with customers.”); Zaneski, supra, at 1A (terms of PBMs’ arrangements with

manufacturers are “secret” and often withheld from the very companies that hire the PBMs);

David A. Balto, “Competitive Concerns and Price Transparency in the PBM Market,” Food &

Drug Law Institute Update, at 2 (Sept./Oct. 2003) (“PBMs consistently decline to provide

systematic and complete payment information to their plan sponsors.”); P.Mem., passim

(financial arrangements with manufacturers are confidential and “trade secrets”).2

       The Inspector General of the U.S. Department of Health and Human Services has warned

that these “rebates” may violate federal anti-kickback laws under state Medicaid programs. 68

Fed. Reg. 23731 (2003). Additionally, almost two dozen states and numerous health care

providers have brought suit against drug manufacturers and PBMs alleging fraudulent drug

pricing practices. See, e.g., Declaration of Mary Catherine Frye, dated July 22, 2004 (“Frye



       2
               See GAO Rep. at 27–28:

       “[Drug manufacturer] rebates and other payments were a large portion of PBMs’
       earnings, according to PBM officials and industry experts, but the actual amounts
       were undisclosed because they are proprietary. Public financial information
       suggests that manufacturer payments are important sources of earnings. For
       example, in financial reports submitted to the SEC, two of the PBMs we reviewed
       stated that manufacturer rebates and fees were key to their profitability.

Id. (citing the 10-K Forms of AdvancePCS and Medco Health Solutions filed with the
SEC on June 28, 2002, and April 17, 2002, respectively). See also Rowe, 307 F.Supp.2d
at 170 n.2 (report by Maine Legislature’s Health and Human Services Committee
estimated that the PBMs receive $12.2 billion in undisclosed payments from drug
manufacturers each year).



                                              -4-
Decl.”) at ¶¶ 3–6 (copy attached); AWP, 263 F.Supp.2d at 179–80 (plaintiffs, including the States

of Montana and Nevada, allege that manufacturers “vastly overstate” the actual price of drugs in

trade publications, then offer a highly “discounted” price to PBMs, who are urged to keep these

price “spreads” for themselves, while charging the health plans and the government fees based

on the inflated reported prices).3

       It is against this backdrop that the D.C. Council acted. Councilmembers Allen and

Catania introduced legislation on November 7, 2003, in an effort to confront the problem of

spiraling prescription drug costs. 50 D.C. Reg. 9923 (Nov. 21, 2003). The Committee on Human

Services, in reporting favorably on the proposed legislation, noted the dramatic rise in

prescription drug spending, which was also the fastest-growing component of health care costs.

Report of the Committee on Human Services on the Access Rx Act of 2004, at 10 (Dec. 10,

2003) (“Comm. Rep.”).4




       3
              Indeed, in the AWP Lit. case, the court denied the defendant manufacturers’
motion to dismiss the RICO claims, finding that plaintiffs had sufficiently alleged a price-fixing
conspiracy between the manufacturers and the PBMs. See AWP Lit., 307 F.Supp.2d at 202.
       4
               Specifically, the report noted:

       Unfortunately, one-fourth of the American population does not have prescription
       drug coverage. Escalating costs and limited access to health coverage have
       collided to create the current prescription drug crisis. [I]t is necessary for
       reasonable, but concrete proposals to deal with the prescription drug crisis.
       [A]ccess Rx will require the District of Columbia government to look at cost
       containment in an effort to lower the cost of prescription drugs. [A]ccess Rx is a
       prescription drug program for District residents who are low-income elderly or
       uninsured. [T]his legislation requires the Department of Health to use
       manufacturer rebates, pharmacy discounts, and aggregate purchasing to reduce
       drug prices and to investigate the purchase of drugs from outside the United
       States.

Id.



                                                 -5-
       On March 2, 2004, the D.C. Council unanimously approved the Access Rx Act of 2004,

51 D.C. Reg. 3249 (Mar. 26, 2004), which the Mayor signed on March 24, 2004. Act No. 15-

410, 51 D.C. Reg. 3688–3701 (Apr. 9, 2004).

       Congress raised no objection to the legislation during its mandated 30-day period of

review, and the law became effective May 18, 2004. See 51 D.C. Reg. 5704 (Jun. 4, 2004). The

Access Rx Act of 2004 is codified at D.C. Official Code §§ 48-831 et seq. (2004 Supp.).5

       Title I of Access Rx establishes a program to assist District residents who are low-income

elderly or uninsured to purchase prescription drugs. Title II establishes transparent business

practices for PBMs and Title III requires drug manufacturers and labelers to disclose and report

marketing costs. Finally, violation of the law is actionable under the District’s Consumer

Protection Procedures Act (“DCCPPA”), codified at D.C. Official Code §§ 28-3901 et seq.

(2001 ed.).

       Title I’s goals and methods were, as noted below, implicitly authorized by Congress and,

subsequently, by the Supreme Court. Specifically, Title I establishes the Access Rx program,

which, inter alia, authorizes the District to take advantage of aggregate purchasing and enter into

rebate agreements directly with drug manufacturers “to reduce and contain the cost of

prescription drug purchases for publicly funded pharmaceutical assistance programs” such as

Medicaid. Access Rx §§103–104.

       Almost 15 years ago, Congress took action to help States reduce the price of prescription

drugs. “In response to increasing Medicaid expenditures for prescription drugs, Congress enacted



       5
              In contrast to plaintiff’s assertion that its customers did not support the “dubious”
protections of Access Rx, P.Mem. at 5, the law was supported by the D.C. Primary Care
Association and the D.C. chapter of the American Association of Retired Persons, who represent
not the PBM’s “customers” but the potential ultimate beneficiaries of Access Rx—elderly and
low-income prescription drug users. See Comm. Rep. at 8–9.


                                               -6-
a cost-saving measure in 1990 that requires drug companies to pay rebates to States on their

Medicaid purchases.” PhRMA, 538 U.S. at 649 (citation omitted). That law, part of the Omnibus

Budget Reconciliation Act of 1990, 104 Stat. 1388–143, authorized the States to enter into

agreements with drug manufacturers for rebates on their Medicaid purchases of outpatient

prescription drugs. Id. at 652.

        As might be expected, the pharmaceutical industry challenged the subsequent state

efforts. Maine, in 2000, took advantage of Congress’ action, and established the Maine Rx

Program, “to reduce prescription drug prices for residents” by making Maine itself a PBM. Id. at

653–54. The pharmaceutical industry sued on the grounds that the Maine law was preempted by

federal law, and violated the Commerce Clause. Id. at 656–57. The Supreme Court rejected both

arguments. See id. at 666–67, 669–79. See also PhRMA v. Thompson, 362 F.3d 817, 827 (D.C.

Cir. 2004) (rejecting similar arguments regarding Michigan’s initiative).

        Title III of Access Rx requires manufacturers and labelers of drugs dispensed in the

District to disclose their marketing costs for prescription drugs in the District. Id. at § 301. The

information reported pursuant to Title III is “confidential.” Id. at § 305.

        Title II, the only section of Access Rx challenged by plaintiff, is entitled “Transparent

Business Practices Among Pharmacy Benefits Managers.” Title II statutorily defines the

relationship between a PBM and its clients operating in the District as a fiduciary relationship.

Id. at § 201. Title II also requires a PBM to disclose to its clients conflicts of interest, and to pass

on to clients “in full” any financial or other consideration the PBM receives from a drug

manufacturer. Id. at § 201(b)(2). The PBM and the client, however, may agree by contract for the

return of some or all of the manufacturer-derived consideration. Id. Upon request of the client,

Title II requires a PBM to disclose to the client “all financial terms and arrangements for




                                                 -7-
remuneration of any kind” between the PBM and drug manufacturers, and provides that that

information may be designated as confidential by the PBM and not disclosable by the client. Id.

at § 201(c)(1). Title II also mandates that a PBM may not substitute a therapeutically equivalent

higher-priced drug for a lower-priced drug unless the switch is “for medical reasons that benefit

the covered individual.” Id. at § 201(d)(2). Moreover, the substitution may not be made without

the approval of the prescribing health professional, after disclosing the cost of both drugs and

any benefit or payment accruing to the PBM as a result of the proposed substitution. Id. at §

201(d). Finally, Title II makes a violation of Access Rx a violation of the DCCPPA. Id. at § 203.

       Plaintiff Pharmaceutical Care Management Association (“PCMA”), a trade association of

PBMs, filed the instant Complaint and Motion for Preliminary Injunction on June 29, 2004.6

       Plaintiff’s Motion challenges only Title II of AccessRx.7 Specifically, plaintiff alleges

that Title II of Access Rx is preempted by the Employee Retirement Income Security Act of



       6
                Although PCMA’s only ten members appear to all be PBMs, the PCMA asserts
that it represents PBMs and “other health care stakeholders . . . .” P.Mem. at 4. See Plaintiff’s
Corporate Disclosure Statement (Jun. 29, 2004).
         PCMA claims that its members manage over 70% of all prescriptions dispensed in the
United States, affecting some 200 million Americans. PCMA, “Pharmacy Benefit Managers
(PBMs): Tools for Managing Drug Benefit Costs, Quality, and Safety,” (2003) (available online
at http://www.pcmanet.org/2004_pdf_downloads/HPA_Study_Final.pdf); P.Mem. at 3. PCMA’s
members thus have major roles in the health care decisions of most Americans.
       7
                Like Maine, see n.20, infra, the District of Columbia has a law on severability,
D.C. Official Code § 45-201 (2001 ed.), which requires that, if any portion of any act of the
Council is held invalid, “the declaration of invalidity shall not affect other provisions or
applications of the act which can be given effect without the invalid provision . . . .” Id. Thus,
because plaintiff here challenges only Title II of Access Rx, to the extent the Court invalidates
that portion of the law, the remainder of the law should remain in full force and effect. See RDP
Development Corp. v. District of Columbia, 645 A.2d 1078, 1082 n.18 (D.C. 1994) (provision
allows severability of invalid portions of District legislation, unless the Council has included a
non-severability clause in the suspect litigation). Here, the Council did not include a non-
severability clause within Access Rx. See also Community for Creative Non-Violence v. Turner,
893 F.2d 1387, 1394 (D.C. Cir. 1990) (even if no severability clause, question for courts
becomes whether legislature would have enacted the other provisions in the absence of the


                                              -8-
1974 (“ERISA”), codified as amended at 29 U.S.C. §§ 1001 et seq. (2000), and by the Federal

Employees Health Benefits Act (“FEHBA”), 5 U.S.C. §§ 8901 et seq. (2000). Plaintiff

additionally alleges that Title II’s disclosure requirements would be an unconstitutional taking of

its members’ property, and violate the Commerce Clause.8

        Plaintiff’s allegations each fail as a matter of law; plaintiff is not entitled to emergency

injunctive relief.

                                            III. Argument

        In order to obtain a preliminary injunction, plaintiff must satisfy each prong of the following

four-part test: (1) there is a substantial likelihood of success on the merits; (2) plaintiff will suffer

irreparable harm should the relief be denied; (3) an injunction would not substantially injure other

interested parties; and (4) the public interest will be furthered by the issuance of the requested

order. Mova Pharmaceuticals Corp. v. Shalala, 140 F.3d 1060, 1066 (D.C. Cir. 1998) (quoting

CityFed Fin. Corp. v. Office of Thrift Supervision, 58 F.3d 738, 746 (D.C. Cir. 1995));

Washington Metro. Area Transit Comm’n v. Holiday Tours, Inc., 559 F.2d 841, 843 (1977);

Virginia Petroleum Jobbers Ass’n v. Federal Power Comm’n, 104 U.S. App. D.C. 106, 110, 259

F.2d 921, 925 (1958).




challenged provision; “In such an inquiry, the presumption is always in favor of severability.”)
(citing Regan v. Time, 486 U.S. 641, 653 (1984)).
        8
               On June 13, 2003, the governor of Maine signed into law the Unfair Prescriptive
Drug Practices Act, with many provisions similar to Title II of Access Rx. 22 M.R.S.A. § 2699
(2003); Rowe, 307 F.Supp.2d at 171. For instance, the Maine law established a fiduciary
relationship between PBMs and their clients, required disclosure of conflicts of interest and any
consideration the PBMs receive from drug manufacturers, and prohibited PBMs from switching
to higher-priced drugs unless medically beneficial to the patient. Id. at 171. The PCMA similarly
sought a preliminary injunction, alleging that the Maine law was preempted by ERISA, was an
unconstitutional taking of PBMs’ trade secrets, and violated the Commerce Clause. Id.


                                                  -9-
         Because interim injunctive relief is an extraordinary form of judicial relief, courts should

grant such relief sparingly. See, e.g., Mazurek v. Armstrong, 520 U.S. 968, 972 (1997) (a

preliminary injunction is “an extraordinary and drastic remedy” that should not be granted unless

the movant carries the burden of persuasion “by a clear showing”).

         While a strong showing on one of the four factors may make up for a weaker showing on

another, Serono Labs. v. Shalala, 158 F.3d 1313, 1318 (D.C. Cir. 1998), a particularly weak

showing on one factor may be more than the other factors can “compensate” for. Taylor v. RTC, 56

F.3d 1497, 1506 (D.C. Cir. 1995), amended on other grounds on reh’g., 66 F.3d 1226 (D.C. Cir.

1995).

         Plaintiff’s feared injuries are entirely speculative. Despite the hundreds of pages of, at best,

marginally relevant information that plaintiff has required the District and the Court to wade

through, plaintiff has failed to meet its burden. Plaintiff”s “evidence” does not show that it faces the

imminent threat of irreparable harm necessary for the grant of emergency relief.

         ERISA was enacted to protect the interests of participants in employee benefit plans, not to

shield every entity with whom an ERISA plan does business from reasonable government

regulation.



         A.      Plaintiff Fails to Establish A Substantial Likelihood of Success On the Merits.

         Plaintiff cannot show a substantial likelihood of success on the merits of any of its

theories. Access Rx is a reasonable exercise of the District’s police power, of a kind found

repeatedly not to be preempted by federal law. Moreover, the District’s law does not “take” any

property, even assuming the hidden deals the PBMs make with manufacturers are “trade secrets”




                                                  - 10 -
as claimed. Finally, Access Rx does not violate the Commerce Clause, either directly or through

an impermissible burden on interstate commerce.



               1. The District of Columbia’s Police Powers and the Legislation

       Unlike States, such as Maine, see n. 8, supra, the “unique feature” of the legislative

process in the District is that, with some exceptions irrelevant here, legislation duly enacted by

the District may not take effect until approved by Congress. See Atkinson v. D.C. Bd. of

Elections & Ethics, 597 A.2d 863, 864 (D.C. 1991).

       Article I, section 8, clause 17 of the Constitution empowers Congress to exercise

exclusive legislative authority over the District of Columbia. See, generally, Bliley v. Kelly, 23

F.3d 507, 508 (D.C. Cir. 1994). In 1973, Congress delegated most of this authority to the District

by passing the Home Rule Act, Pub. L. No. 93-198, codified at D.C. Official Code §§ 1-201.01

et seq. (2001 ed.). The Home Rule Act allows Congress a 30-day period to review legislation

enacted by the District. If Congress fails to pass a joint resolution of disapproval within that

period, the legislation becomes law. Id. Congress therefore always maintains final control over

all legislation adopted for the District of Columbia. Seegars v. Ashcroft, 297 F.Supp.2d 201, 237

(D.D.C. 2004).

       Because of Congress’ continuing and dominant role in District affairs, courts “must be

cautious in assessing the validity of the District of Columbia’s statutes being challenged, as they

are not only the product of the District of Columbia Council, but also congressional approval.”

Id. at 215 (citing Martin Tractor Co. v. FEC, 627 F.2d 375, 380 (D.C. Cir. 1980)).

       Congress has historically not been reticent to intervene in District affairs. See, e.g., Bliley,

23 F.3d at 509 (D.C. legislation making manufacturers of assault weapons strictly liable “met




                                                - 11 -
with immediate opposition in Congress;” resolution of disapproval introduced seven days after

transmittal to Congress). See also Spencer S. Hsu and Lori Montgomery, “Lawmakers Say

Congress Won’t Allow Slots in D.C.,” The Washington Post, at A1 (July 13, 2004).

       In light of the above, Congress’ utter silence during the mandated review period of

Access Rx is significant. Cf. AWP Lit., 263 F.Supp.2d at 181 (noting general “reluct[ance] to

draw inferences from Congress’ failure to act.”) (quoting Schneidewind v. ANR Pipeline Co., 485

U.S. 293, 306 (1988)). This silence is particularly telling in light of Congress’ recent and

continuing efforts to address the problem of high prescription drug prices. See, e.g., Medicare

Preservation and Drug Price Fairness Act, S.1974, 108th Cong. (1st Sess. 2003); Medicare

Prescription Drug Price Reduction Act, S.1999, 108th Cong. (1st Sess. 2003); Drug Discount

Card Improvement Act of 2004, S.2234, 108th Cong. (2nd Sess. 2004).



       2. Plaintiff’s Facial Challenge Cannot Succeed.

       Because the law has not yet been enforced, plaintiff here brings a facial challenge to

Access Rx. 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.” 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). See also Steffan v. Perry, 41 F.3d 677,

693 (1994) (en banc); Chemical Waste Management, Inc. v. U.S. Environmental Protection

Agency, 56 F.3d 1434, 1437 (1995).

       Legislative enactments are presumed to be constitutional and the burden of establishing

invalidity is on the challenger. PhRMA, 538 U.S. at 661 (citing Davies Warehouse v. Bowles,




                                              - 12 -
312 U.S. 144, 153 (1944)). See Pegram v. Herdrich, 530 U.S. 211, 221 (2000) (legislature is the

“preferable forum” for judgments of social value, such as the level of optimum health care

expenditures); FTC v. Beach Communications, Inc., 508 U.S. 307, 313–14 (1993) (where there

are “plausible reasons” for the legislature’s action, “our inquiry is at an end.”) (quoting United

States Railroad Retirement Bd. v. Fritz, 449 U.S. 166, 179 (1980)); Vance v. Bradley, 440 U.S.

93, 97 (1979) (“The Constitution presumes that, absent some reason to infer antipathy, even

improvident decisions will eventually be rectified by the democratic process and that judicial

intervention is generally unwarranted no matter how unwisely we may think a political branch

has acted.”) (footnote omitted). See also AFGE v. United States, 104 F.Supp.2d 58, 66 (D.D.C.

2000) (the Constitution does not give courts power “to impose . . . their views of what constitutes

wise economic or social policy. [L]egislatures are presumed to have acted constitutionally even

if source materials normally resorted to for ascertaining their grounds for action are otherwise

silent . . . .”) (citations and quotation marks omitted).

        Access Rx is simply a permissible exercise of the District’s police power to protect

consumers, in a reasonable attempt to rein in out-of-control prescription drug prices in the

District. See SEIU, Local 82 v. District of Columbia, 608 F.Supp. 1434, 1444 (D.D.C. 1985)

(consumer protection is a permissible police power objective) (citing City of New Orleans v.

Dukes, 427 U.S. 297, 304–305 (1976) (per curiam)). See also Med. Soc’y of the State of NY v.

Cuomo, 976 F.2d 812, 816 (2nd Cir. 1992) (holding that “regulation of public health and the cost

of medical care are virtual paradigms of matters traditionally within the police powers of the

state.”).

        Essentially, Access Rx makes nondisclosure of certain information actionable under

DCCPPA. Access Rx merely requires disclosure of a material term in the PBMs contracts with




                                                 - 13 -
manufacturers—the amount of financial (and other) incentives the PBMs receive. Courts have

already allowed such “nondisclosure as fraud” claims under the DCCPPA to proceed. See

Witherspoon v. Philip Morris, Inc., 964 F.Supp. 455, 463–64 (D.D.C. 1997).

       Plaintiff’s fears are entirely speculative. “[I]n the absence of an enforcement action either

commenced or specifically threatened, we have no actual or imminent concrete application of the

statute in which to anchor our inquiry into whether any valid application is possible. [The

appellants’ challenges] are not justiciable at this time.” Navegar, Inc. v. United States, 103 F.3d

994, 1002 (D.C. Cir. 1997). See also Shell Oil v. Iowa Dept. of Revenue, 488 U.S. 19, 29 (1988)

(“the fears and doubts of the opposition are no authoritative guide to the construction of

legislation.”) (citations and quotation marks omitted); NLRB v. Fruit & Vegetable Packers &

Warehousemen, Local 760, 377 U.S. 58, 66 (1964) (The Supreme Court has often “cautioned

against the danger, when interpreting a statute, of reliance upon the views of its legislative

opponents. In their zeal to defeat a bill, they understandably tend to overstate its reach.”).



       3. Access Rx is Not Preempted by ERISA.

       Plaintiff alleges that Access Rx is preempted by ERISA because it has a “connection

with,” and “reference to” ERISA-covered employee benefit plans and because it “undermines the

exclusivity of ERISA’s enforcement schemes. Plaintiff is incorrect on all three claims.9



       9
               Plaintiff additionally claims that “[b]ecause FEHBA preemption mirrors ERISA
preemption, FEHBA also preempts Title II.” P.Mem. at 21. Plaintiff failed correctly to cite the
Supreme Court decision it referenced, Montemayor v. Corporate Health Ins., 536 U.S. 935
(2002), a one-page opinion vacating and remanding Corporate Health Ins., Inc. v. Texas Dept. of
Ins., 215 F.3d 526 (5th Cir. 2000) in light of Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355
(2002). The District assumes the truth of plaintiff’s FEHBA theory for the purposes of this
motion only, despite plaintiff’s failure to cite any controlling precedent. Cf. Bridges v. Blue
Cross & Blue Shield Assn., 935 F.Supp. 37, 44–45 (D.D.C. 1996) (“cases arising under ERISA
law are of no moment in the context of the FEHBA.” FEHBA is “a different scheme altogether;”


                                                - 14 -
       ERISA was enacted to protect the interests of participants in “employee benefit plans”

(which term includes both pension plans and “welfare plans”) by establishing a uniform

regulatory regime over such plans. See Aetna Health, Inc. v. Davila, ___ U.S. ___, 124 S.Ct.

2488, 72 U.S.L.W. 4516 (Jun. 21, 2004). “Welfare plans” are defined by ERISA to include plans

for the purpose of providing medical or other health benefits for employees or their beneficiaries.

See, generally, District of Columbia v. Greater Washington Bd. of Trade, 506 U.S. 125, 127

(1992) (citing 29 U.S.C. § 1002(1)).

       ERISA was enacted for the benefit of employers and plans, to establish a uniform scheme

for processing plans and disbursing benefits. Egelhoff v. Egelhoff, 532 U.S. 141, 148 (2001)

(quoting Fort Halifax Packing Co. v. Coyne, 481 U.S. 1, 9 (1987)). The PBMs are neither

participants, employers, nor plans under ERISA.

       ERISA also includes expansive preemption provisions, which were apparently intended

to ensure that employee benefit plan regulation would be “exclusively a federal concern.”

Davila, 124 S.Ct. at 2491 (quoting Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 523

(1981)). Specifically, the preemption clause provides that ERISA shall “supersede any and all

State laws insofar as they may now or hereafter relate to any [covered] employee benefit plan.”

ERISA § 514(a); 29 U.S.C. § 1144(a). Thus, the scope of ERISA preemption turns on the scope

of the words “relate to.” Calif. Div. of Labor Standards Enforcement v. Dillingham Constr., 519

U.S. 316, 324 (1997). Cf. id. at 335 (Scalia, J., concurring) (applying the words “relate to” is




“comparisons to ERISA law “are unavailing in this context.”); Robinson v. Humana Group
Health Plan, Inc., 1996 West Law 653846 (D.D.C. 1996) (FEHBA preempts only state law
claims which “relate to the extent of coverage under a FEHBA policy” and are inconsistent with
the terms of such a policy; the Circuit has not yet squarely addressed the question of FEHBA
preemption).


                                              - 15 -
“doomed to failure, since, as many a curbstone philosopher has observed, everything is related to

everything else.”); Egelhoff, 532 U.S. at 152 (Scalia, J., concurring) (same).

       “That locution [i.e., “relate to”] is not self-defining, and the Justices have been at least

mildly schizophrenic in mapping its contours.” Carpenters Local Union No. 26 v. U.S. Fidelity

& Guaranty Co., 215 F.3d 136 (1st Cir. 2000). See also Travelers, 514 U.S. at 656 (Supreme

Court has repeatedly attempted to interpret the “unhelpful text” of ERISA’s preemption

provision).

       Indeed, “[i]f ‘relate to’ were taken to extend to the furthest stretch of its indeterminacy,

then for all practical purposes pre-emption would never run its course . . . .” Travelers, 514 U.S.

at 655. Case law has developed a test: a state law “relates to” ERISA if it has a “connection

with” or “reference to” a covered employee benefits plan. Dillingham, 519 U.S. at 324.

       Thus, ERISA preempts state laws that make explicit “reference to” ERISA-covered

programs, see Greater Washington Bd of Trade, 506 U.S. at 130–31; state laws that specifically

exempt ERISA plans from an otherwise generally applicable law, Mackey v. Lanier Collection

Agency & Service, Inc., 486 U.S. 825, 828 (1988); state laws that require employers to provide

certain benefits, see Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983); and state laws that

authorize a cause of action premised on the existence of an ERISA plan (i.e., the existence of an

ERISA plan is a critical element of the state-law cause of action), see Ingersoll-Rand Co. v.

McClendon, 498 U.S. 133, 140 (1990).

       Access Rx does not fit into any of these categories: it does not make any explicit

reference to ERISA plans, and by its own terms applies to all plans, including those that fall

outside ERISA. Access Rx § 102(4)(A). Moreover, Access Rx does not require any ERISA

entity to provide any “benefit,” and Access Rx’s cause of action (under DCCPPA) is entirely




                                               - 16 -
independent of the existence of any ERISA plan. Access Rx is targeted to PBMs and nobody

else.

        However, a state law may be preempted if it has a “connection with” an ERISA plan, but

an “uncritical literalism” in reading that phrase, said the Supreme Court, is not helpful in

determining ERISA’s scope. Dillingham, 519 U.S. at 325. Rather, courts must look to the

objectives of ERISA “as a guide to the scope of the state law that Congress understood would

survive,” as well as the effect of the state law on ERISA plans. Id. (quoting Travelers, 514 U.S.

at 656).

        Courts must start with the presumption that Congress does not intend to supplant state

law in fields of traditional state regulation under police power. DeBuono v. NYSA-ILA Medical &

Clinical Svcs. Fund, 520 U.S. 806, 814 (1997) (historic police powers of states include

regulation of matters of health and safety); Travelers, 514 U.S. at 654 (general health care

regulation has historically been a matter of local concern); Dillingham, 519 U.S. at 325; PhRMA,

538 U.S. at 666 (presumption against federal preemption of state law “designed to foster public

health” has “special force” when it appears that the two governments are pursuing “common

purposes.”) (citing Hillsborough County v. Automated Medical Labs., Inc., 471 U.S. 707, 715–18

(1985)).10

        Moreover, ERISA does not preempt a “generally applicable statute” that makes no

reference to, and functions irrespective of, an ERISA plan. See Ingersoll-Rand Co. v.

McClendon, 498 U.S. 133, 139–40 (1990). Generally, then, plaintiff is correct that ERISA




        10
                Cf. PhRMA., 538 U.S. at 682 (Thomas, J., concurring): “The disagreement
between the plurality and dissent in this case aptly illustrates why ‘[a] freewheeling judicial
inquiry into whether a state statute is in tension with federal objectives . . . undercut[s] the
principle that it is Congress rather than the courts that pre-empts state law.”) (quoting Gade v.


                                             - 17 -
preemption is fairly broad. But that preemption is not without limits, and Access Rx fits

comfortably outside the boundaries of preemption established by considerable case law.

       As the Supreme Court has noted, “[t]he boundaries of ERISA’s pre-emptive reach have

been the focus of considerable attention from this Court” and have “generated an avalanche of

litigation in the lower courts.” DeBuono, 520 U.S. at 808 n.1 (citing cases).

       A series of key Supreme Court cases has limned the outer reaches of ERISA preemption,

and reveal that Access Rx fits outside those boundaries.

       In Travelers, a unanimous Supreme Court ruled not preempted by ERISA a New York

law that imposed surcharges on patients covered by commercial insurers (but not those insured

by Blue Cross/Blue Shield) and on health maintenance organizations (“HMOs”), depending on

the Medicaid recipients they enroll. Travelers, 514 U.S. at 649. Specifically, the Supreme Court

reversed the 2nd Circuit’s conclusion that the surcharges “relate to” ERISA because they imposed

a “significant economic burden on commercial insurers and HMOs” and therefore “have an

impermissible impact on ERISA plan structure and administration.” Id. at 654. The Court

specifically noted that ERISA preemption cannot be interpreted so broadly as to completely

eliminate attempted state regulation of health care costs:

       Indeed, to read the pre-emption provision as displacing all state laws affecting
       costs and charges on the theory that they indirectly relate to ERISA plans . . .
       would effectively read the limiting language in § 514(a) out of the statute, a
       conclusion that would violate basic principles of statutory interpretation and could
       not be squared with our prior pronouncement that “[p]re-emption does not occur .
       . . if the state law has only a tenuous, remote, or peripheral connection with
       covered plans, as is the case with many laws of general applicability.”

Id. at 661 (quoting Greater Washington Bd. of Trade, 506 U.S., at 130 n. 1).




National Solid Wastes Management Assn., 505 U.S. 88, 111 (1992) (Kennedy, J., concurring in
part and concurring in judgment)).


                                               - 18 -
       Perhaps most importantly for the instant matter, the Court noted that the same Congress

that passed ERISA passed the National Health Planning and Resources Development Act of

1974 (“NHPRDA”), “to encourage and help fund state responses to growing health care costs

and the widely diverging availability of health services.” Id. at 665 (citing Pub.L. 93-641, 88

Stat. 2225, repealed by Pub.L. 99-660, title VII, § 701(a), 100 Stat. 3799). The NHPRDA

specifically encouraged the states, through financial incentives, to demonstrate the effectiveness

of state-agency regulation of rates for the provision of health care; indeed, one of the stated

purposes of the NHPRDA was to provide that such rates reflect the “true cost” of providing the

services. Travelers, 514 U.S. at 666.

       To interpret ERISA’s pre-emption provision as broadly as respondents suggest,
       would have rendered the entire NHPRDA utterly nugatory, since it would have
       left States without the authority to do just what Congress was expressly trying to
       induce them to do by enacting the NHPRDA. Given that the NHPRDA was
       enacted after ERISA and by the same Congress, it just makes good sense to reject
       such an interpretation.

       ***

       The history of Medicare regulation makes the same point, confirming that
       Congress never envisioned ERISA pre-emption as blocking state health care cost
       control, but rather meant to encourage and rely on state experimentation

Id. (footnote omitted).

       Access Rx acts in a similar vein, in an attempt to rein in health care costs, so that they

reflect the “true cost” of providing the service. As the Supreme Court noted, Congress never

envisioned ERISA as blocking these kinds of efforts, but intended to encourage and rely on state

experimentation, like the District’s. Id. at 667 n.6.11




       11
               See also id. (“State systems provide a laboratory for innovative methods of
controlling health care costs and should, therefore, not be limited to one methodology.”) (quoting
H.R.Rep. No. 98-25, pt. 1, pp. 146–47 (1983)).


                                                - 19 -
        Similarly, in Dillingham, a unanimous Supreme Court rejected a challenge to California’s

prevailing-wage statute, finding that apprenticeship programs (which respondents claimed were

“employee benefit plans”) were not necessarily all ERISA plans, hence the state law, requiring

those programs to pay the prevailing wage, was not preempted. Dillingham, 519 U.S. at 325. The

Court noted that merely because “most” state-approved apprenticeship programs were ERISA

plans (because they were funded through separate funds), not all such programs affected by the

California law were ERISA plans. Id. at 327 n.5 (Court implied that even a state law reach of

88% of affected ERISA plans was not enough, alone, to trigger ERISA preemption) (citing The

Travelers Ins. Co. v. Cuomo, 14 F.3d 708, 711 (2nd Cir. 1993), reversed by Travelers, 514 U.S.

645 (1995)).

        The Court noted that the California law functioned irrespective of the existence of an

ERISA plan and was “indifferent to” the funding and ERISA coverage of the referenced

programs, hence did not make “reference to” ERISA plans. Dillingham, 519 U.S. at 328. The

Court cautioned against an ERISA preemption analysis that focuses solely on the financial

effects of the state law on the affected entities:

        Indeed, if ERISA were concerned with any state action—such as medical-care
        quality standards or hospital workplace regulations—that increased costs of
        providing certain benefits, and thereby potentially affected the choices made by
        ERISA plans, we could scarcely see the end of ERISA’s pre-emptive reach, and
        the words “relate to” would limit nothing.

Id. at 329 (citing Travelers).

        The Dillingham Court also referenced the NHRPDA, and noted it “unlikely that the

Congress that enacted ERISA would later have sought to encourage a state program that ERISA

would preempt.” Id. at 329 n.6. Finally, the Court noted that the California law, while altering




                                                 - 20 -
the incentives facing, but not dictating the choices of, ERISA plans, did not have a “connection

with” ERISA plans.

          Here, Access Rx similarly does not dictate the choices facing ERISA plans and does not

“bind ERISA plans to anything.” Id. at 333. It merely regulates the actions of companies who

provide services to ERISA plans—the PBMs—whether their customers are ERISA plans,

governments, or other entities, and is entirely “indifferent to” the funding and ERISA coverage

of the referenced plans. Access RX functions irrespective of the existence of any ERISA plan. Id.

at 328.

          The Supreme Court, in Pegram v. Herdrich, 530 U.S. 211 (2000) discussed the often

perverse financial incentives facing health care providers today, in finding that “mixed”

eligibility and treatment decisions made by an HMO were not fiduciary acts within ERISA, and

hence could be challenged in state court. Id. at 219–20. The Court noted that judgments about the

appropriate level of expenditure for health care was not a proper subject of the judiciary:

          [S]uch complicated factfinding and such a debatable social judgment are not
          wisely required of courts unless for some reason resort cannot be had to the
          legislative process, with its preferable forum for comprehensive investigations
          and judgments of social value, such as optimum treatment levels and health-care
          expenditure. Cf. Turner Broadcasting System, Inc. v. FCC, 512 U.S. 622, 665-666
          (1994) (plurality opinion) (“Congress is far better equipped than the judiciary to
          ‘amass and evaluate the vast amounts of data’ bearing upon an issue as complex
          and dynamic as that presented here” (quoting Walters v. National Assn. of
          Radiation Survivors, 473 U.S. 305, 331, n. 12 (1985))); Patsy v. Board of Regents
          of Fla., 457 U.S. 496, 513 (1982) (“[T]he relevant policy considerations do not
          invariably point in one direction, and there is vehement disagreement over the
          validity of the assumptions underlying many of them. The very difficulty of these
          policy considerations, and Congress’ superior institutional competence to pursue
          this debate, suggest that legislative not judicial solutions are preferable”).


Id. at 221 (parallel citations omitted).




                                                - 21 -
       In Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355, 359 (2002), the Supreme Court

held that an Illinois law that granted health-plan recipients a right to independent medical review

of certain benefit denials was not preempted by ERISA. The Court based its decision, in part, on

ERISA’s “savings clause,” 29 U.S.C. § 1144(b)(2)(A), which saves from preemption those state

laws that regulate insurance; the Court found that the plaintiff was, in fact, an insurer, as well as

a health care provider. The Court noted that:

       it is the HMO contracting with a plan, and not the plan itself, that will be subject
       to these regulations, and every HMO will have to establish procedures for
       conforming with the local laws, regardless of what this Court may think ERISA
       forbids. This means that there will be no special burden of compliance upon an
       ERISA plan beyond what the HMO has already provided for. And although the
       added compliance cost to the HMO may ultimately be passed on to the ERISA
       plan, we have said that such “indirect economic effect[s],” New York State
       Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S.
       645, 659 (1995), are not enough to preempt state regulation even outside of the
       insurance context.

Rush Prudential, 536 U.S. at 381 n.11 (emphasis added).

       Here, Access Rx regulates the PBMs, some of whom contract with ERISA plans, not the

ERISA plans themselves, and the indirect economic effects of Access Rx on the ERISA plans, if

any, are not enough to preempt the law. Nor is the direct economic effect on PBMs sufficient for

this purpose. Id. Access Rx certainly creates new standards that PBMs must adhere to with

respect to its clients, but the law does not impose obligations on any ERISA-covered entities.

Access Rx is directed only at PBMs, without regard to whether the PBM has contracted with an

ERISA-covered plan or a non-ERISA-covered plan.

       In its most recent ERISA case, the Supreme Court in Davila reiterated that ERISA

preempts state-law causes of action that “duplicate, supplement, or supplant” the civil

enforcement remedies of ERISA. Davila, 124 S.Ct. at 2495 (citing Pilot Life Ins. Co. v.




                                                - 22 -
Dedeaux, 481 U.S. 41, 54–56 (1987)). But Access Rx is distinguishable from the state law

preempted in Davila.

       In Davila, the Texas law imposed a duty of care on “managed care entities” to exercise

ordinary care when making health care treatment decisions. Id. at 2497. The Court noted that

respondents there complained only about denials of coverage under ERISA plans, a remedy

specifically authorized in an ERISA action. The Court stated that interpretation of the terms of

ERISA plans was an “essential part” of respondents’ state-law claims, and hence those claims

“were not entirely independent of the federally regulated contract itself.” Id. at 2498. In other

words, ERISA preempts those state laws that attempt to provide a vehicle to assert a claim for

benefits outside of, or in addition to, ERISA’s scheme. Id. at 2499.

       Here, in contrast, Access Rx does not impose any duty on ERISA entities making

treatment decisions, and does not contemplate remedying “denials of coverage” under ERISA

plans. Access Rx governs all PBMs, those that provide services to ERISA plans, and those that

provide services to non-ERISA plans. Access Rx § 102(4)(A). Access Rx merely authorizes

local suits to enforce the District’s consumer-protection law against PBMs, who by their own

admission are not ERISA fiduciaries, but only managers of portions of ERISA-covered plans.

P.Mem. at 2 (PBMs “perform . . . functions for plans, but are not fiduciaries as defined by

ERISA or FEHBA.”) Because Access Rx creates a cause of action to remedy a duty independent

of ERISA, it is not preempted. See Davila, 124 S.Ct. at 2491.12




       12
               There can be no reasonable doubt that if PBMs were ERISA fiduciaries, their
secret arrangements with drug manufacturers would clearly violate federal law. See 29 U.S.C. §
1106(b)(3) (fiduciaries are prohibited from receiving any consideration from any party dealing
with the plan in connection with any transaction involving the assets of the plan). See, e.g.,
Patelco Credit Union v. Sahni, 262 F.3d 897, 911 (9th Cir. 2001) (insurance broker for employer
and ERISA plan breached fiduciary duty where he received “commissions” from insurance


                                              - 23 -
       Indeed, federal courts have found that ERISA does not preempt important state-law

causes of action against entities who offer administrative services to ERISA plans and others, in

spite of the entities’ claims that they were within the scope of ERISA. See AWP, 263 F.Supp.2d

at 191 (“The consumer protection statutes at issue here are laws of general application and do not

single out ERISA plans by reference or for special treatment.”); see also Group Hospitalization

and Medical Servs. v. Merck-Medco Managed Care, LLP, 295 F.Supp.2d 457, 465 (D.N.J. 2003)

(state-law contract action against PBM not preempted by ERISA; “jurisdiction is questionable

here because both parties insist that [the PBMs] are not ERISA fiduciaries.”).

       PBMs want to have their cake and eat it too; they allege that Access Rx “duplicates” the

fiduciary duties found in ERISA, but insist that they are not ERISA fiduciaries. See id. at 462

(defendant PBMs “fervently den[y] that they are ERISA fiduciaries” and have consistently

argued that to the court, the press, and in internal documents). But the Group Hospitalization

court found that, because the PBMs may not be ERISA fiduciaries, they could be sued in a state-

law breach-of-contract claim, because the PBMs were only performing “ministerial functions”

for ERISA plans. Id. at 463.

       In plaintiff’s view, PBMs are shielded by ERISA from State oversight, but not subject to

federal regulation. PBMs thus live in a Panglossian world—they are protected by ERISA but not

governed by it.13 The Supreme Court has ruled otherwise: “Congress never envisioned ERISA

pre-emption as blocking state health care cost control . . . .” Travelers, 514 U.S. at 666 n.6.



companies with whom he placed plans’ coverage; broker required to restore to the plans all
unaccounted-for funds).
       13
                  See Websters’ New Collegiate Dictionary (1973 ed.) at 827 (“marked by the view
that all is for the best in this best of [all] possible worlds.” (from Pangloss, the optimistic tutor in
Voltaire’s Candide (1759)).



                                                 - 24 -
       4. PBMs and Price Regulation

       Plaintiff repeatedly asserts that the PBM industry is “fiercely competitive,” P.Mem. at 3,

and cites to (and provides) a mountain of paper to support this assertion. But the District, given

similar time and resources, could cite to at least as much authority for the opposite conclusion—

that the PBM industry is highly concentrated, with tremendous barriers to entry. See, e.g., Balto,

supra, at 35 (PBM market is highly concentrated, in which the four largest firms hold about a

combined 80% of the market share).14

       In any event, such discussions (and the possible antitrust violations of the PBMs) are

outside the reach of this litigation, and divert attention from what should be the primary focus

here: is the Council’s legislative judgment, which cannot reasonably be questioned, preempted

by ERISA? The answer to that question, as the District has shown above, is “no.”

       As noted briefly earlier, many different entities, including the federal government and the

States, have recently brought suit against drug manufacturers and PBMs alleging fraudulent drug

pricing practices. See, e.g., Frye Decl. ¶¶ 3–6; Mulder v. PCS Health Systems, Inc., 216 F.R.D.

307, 314 (D.N.J. 2003) (certifying class action against PBM alleging, inter alia, failure to pass

on all rebates from drug manufacturers, and “improper payments” from the manufacturers to the

PBMs to promote various drugs); AWP Lit., 307 F.Supp.2d 196, 201 (D.Mass. 2004) (in this

“massive proposed class action,” plaintiffs, including the States of Montana and Nevada, allege

fraudulent overstatement of the prices of some 321 different drugs) (list of counsel alone runs

almost five full pages; see AWP Lit., 2004 West Law 1368837 (D.Mass. 2004); Lynch v. Nat’l



       14
                Since Mr. Balto published his article, the industry has become even more
concentrated, as one of the four largest PBMs—Caremark Rx, Inc.—has acquired another of the
four, AdvancePCS (both members of plaintiff here). See Plaintiff’s Corporate Disclosure
Statement at 2 n.1. Thus, now, presumably, the top three PBMs control about 80% of the market
for prescription drugs.


                                              - 25 -
Prescription Administrators, 2004 West Law 385156 (S.D.N.Y. 2004) (class action on behalf of

all self-funded prescription drug plans and employee benefit plans against PBM alleging breach

of fiduciary duty under ERISA for benefiting from “pricing spreads” and “kickbacks” from drug

manufacturers); In re Medco Health Solutions, Inc., Pharmacy Benefits Management Litig., 2003

West Law 21303228 (S.D.N.Y. 2003) (class action against PBM under ERISA).15



       15
                On April 26, 2004, the United States (through the U.S. Attorney for the Eastern
District of Pennsylvania) together with 20 state Attorneys General settled claims for injunctive
relief and state-law unfair trade practices against Medco Health Solutions, Inc., the world’s
largest PBM (and a member of PCMA here); a copy of the Consent Order is attached. See Frye
Decl. ¶¶ 3–6.
        According to the Consent Order, the United States’ remaining claims for damages,
penalties, and restitution will go forward, including those pursuant to the False Claims Act, 31
U.S.C. § 3279 et seq., the Anti-Kickback Act, 41 U.S.C. § 55(a)(1)(B), common law and equity,
criminal law, and any claims related to Average Wholesale Price or Medicaid fraud or abuse. See
Consent Order at 33–35. This litigation alleges, inter alia, that Medco encouraged prescribers to
switch patients to different prescription drugs but failed to pass on the resulting savings to
patients or their health care plans. It also alleged that Medco did not disclose, to either
prescribers or patients, the financial incentives and other economic benefits that Medco and drug
manufacturers received for these switches. The States alleged that these switches increased
health care costs for the plans and the patients. See http://www.usdoj.gov/usao/pae/
News/Pr/2004/apr/medcoinjunctivereliefrelease.pdf (Apr. 26, 2004, press release announcing
Consent Order).
        It appears that the Consent Order requires Medco to follow many of the practices that
PCMA claims Title II of Access impermissibly requires of PBMs. The Consent Order, inter alia,
prohibits Medco, unless specifically directed by a client health plan, from (1) requesting the
substitution of more expensive drugs for less expensive ones; (2) requesting the substitution of a
drug without generic equivalents for one with them unless the former is less expensive; (3)
making any drug switch that fails to disclose, “Clearly and Conspicuously,” the cost savings and
impact on patient co-payments, if any. Consent Order at 13-14. The Consent Order also requires
Medco, if it receives any compensation or remuneration from drug manufacturers as a result of a
proposed drug switch not reflected in the drug’s cost (i.e., because it does not inure to the benefit
of the client plan), to disclose that it receives such compensation or potential compensation,
depending on the circumstances, to both the prescriber and the patient. Id. at 16–20.
        The Consent Order requires Medco to make quarterly and annual disclosures to its client
plans that have contracted to receive (directly or by credit) any drug manufacturer payments.
Those disclosures must include the dollar amount of all drug manufacturer payments earned by
Medco for the reporting period, by percentage of payments earned as “formulary” payments and
other payments. Id. at 26–27.
        Medco must also disclose, to each existing client plan or potential client plan, in advance
of executing an agreement (either initial or renewal), that Medco will solicit and receive drug


                                               - 26 -
        This is not to suggest that all of the allegations in these suits are germane here, but merely

to demonstrate that the District, far from overreaching its mandate, is, if anything, playing catch-

up regarding regulation of PBM behavior.



        5. Access Rx is Not a Taking

        Plaintiff challenges the disclosure provisions of Title II of Access Rx as a “taking” of its

members’ property. P.Mem. at 21. But even assuming that the secret deals plaintiff references

are “property” under applicable law, Access Rx does not effect a taking of the PBMs’ “trade

secrets.”16



manufacturer payments and that Medco may pass those payment through or retain them,
depending on the terms of the contract. Id. at 27–28.
       To further augment drug price transparency remedies, the Consent Order also requires
Medco, if asked, to tell client plans (or potential client plans) that drug pricing methods other
than Average Wholesale Price are available. Id. at 30.
        16
                As plaintiff correctly notes, P.Mem. at 24, the District has a trade secrets act
similar to many other jurisdictions, such as Maine, that protects some types of confidential
information. See D.C. Official Code §§ 36-401 et seq. (2001 ed.). The District is aware of only
one case interpreting the District’s trade secret law, which plaintiff failed to cite. See Morgan
Stanley DW Inc. v. Rothe, 150 F.Supp.2d 67 (D.D.C. 2001).
        Plaintiff asserts that the contents of the PBMs’ secret deals with the drug manufacturers,
of which Access Rx purportedly requires disclosure, are “trade secrets.” P.Mem. at 24. Despite
the general arguments made, plaintiff has failed to cite any case where any court has found that a
PBMs’ hidden agreements with drug manufacturers are trade secrets entitled to legal protection.
The court in Rowe noted that it was “disquieted by the notion that the rebate and secret
contractual arrangements in this case can constitute a protected trade secret.” Rowe, 307
F.Supp.2d at 178 n.15. The court stated that “information about negotiated contractual terms has
no intrinsic economic value. Its true value is derived from the non-competitive impact of its
confidentiality.” Id.
        In any event, there is ample support for the proposition that “secret” pricing arrangements
inevitably lead to higher prices. See, e.g., Balto, supra, at 36 (citing Dennis W. Carlton & Jeffrey
M. Perloff, “Modern Industrial Organization” at 431 (2000)). Indeed, extensive antitrust case law
indicates that price transparency invariably leads to lower prices. See, e.g., Nat’l Soc’y of
Professional Engineers v. United States, 435 U.S. 679, 695 (1978) (Supreme Court held that
engineering association’s ethics provision that prohibited competitive bidding by its members
was invalid and violated antitrust law; “ultimately competition will produce not only lower


                                                - 27 -
       A party challenging government action as an unconstitutional taking bears a “substantial

burden.” District Intown, 198 F.3d at 878 (quoting Eastern Enterprises v. Apfel, 524 U.S. 498,

523 (1998)). Here plaintiff cannot meet this burden because its feared injuries are entirely

speculative and hypothetical. 17



prices, but also better goods and services.” “[A]ll elements of a bargain . . . are favorably
effected by the free opportunity to select among alternative offers.”); Virginia State Bd. of
Pharmacy v. Virginia Citizens Consumer Council, 425 U.S. 748 (1976) (Court invalidated a state
law that declared a pharmacist’s advertising of prescription drug prices “unprofessional
conduct”):

       Those whom the suppression of prescription drug price information hits the
       hardest are the poor, the sick, and particularly the aged. A disproportionate
       amount of their income tends to be spent on prescription drugs . . . . When drug
       prices vary as strikingly as they do, information as to who is charging what
       becomes more than a convenience. It could mean the alleviation of physical pain
       or the enjoyment of basic necessities. [T]here is, of course, an alternative to
       [Virginia’s] highly paternalistic approach. That alternative is to assume that this
       information is not in itself harmful, that people will perceive their own best
       interests if only they are well enough informed, and that the best means to that
       end is to open the channels of communication rather than to close them.

Id. at 763–64, 770. See also AWP Lit., 2004 West Law 1368837 at * 6 (confidentiality of drug
pricing information and lack of audit powers inhibits the ability of the states to monitor drug
fraud).
       17
               Case law dictates that, because the Fifth Amendment prohibits takings without
just compensation, a takings claim is not ripe until the property owner has sought compensation
through state procedures such as an inverse-condemnation claim. Williamson County Regional
Planning Comm’n v. Hamilton Bank, 473 U.S. 172, 194 n.13 (1985). See also District Intown
Properties Ltd. Partnership v. District of Columbia, 23 F.Supp.2d 30, 33 (D.D.C. 1998):

       Before a regulatory taking claim brought against a state entity is ripe for decision
       in federal court, the claimant must demonstrate that: (1) the responsible state
       agency has made a final decision as to “application of the [challenged] regulation
       to the property at issue”; and that (2) the claimant has “sought” compensation
       through available state procedures.

Id. (citations omitted). See also United States v. Riverside Bayview Homes, Inc., 474 U.S. 121,
127–28 (1985) (“[I]n general, ‘[equitable] relief is not available to enjoin an alleged taking of
private property for a public use, duly authorized by law, when a suit for compensation can be
brought against the sovereign subsequent to a taking.’”) (quoting Ruckelshaus v. Monsanto Co.,


                                              - 28 -
       There are essentially two types of takings, physical takings and regulatory takings. Brown

v. Legal Found. of Washington, 538 U.S. 216, 233 (2003). The government may physically

acquire private property, through a condemnation proceeding or an outright physical

appropriation. Id. (citing, inter alia, Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S.

419 (1982)). The government may also, through regulation, prohibit certain uses of a portion of

an owner’s property. Id. (citing, inter alia, Village of Euclid v. Ambler Realty Co., 272 U.S. 365

(1965) and Penn Central Transp. Co. v. New York City, 438 U.S. 104 (1978)). “The first

category of cases requires courts to apply a clear rule; the second necessarily entails complex

factual assessments of the purposes and economic effects of government actions.” Yee v.

Escondido, 503 U.S. 519, 523 (1992).

       Regulatory takings—the kind plaintiff alleges here—must be analyzed under the factors

set forth in Penn Central. Brown, 538 U.S. at 234. To decide if there has been a taking, courts

must examine a “complex of factors,” public and private, including, inter alia, (1) the

regulation’s economic effect on the property owner; (2) the extent to which the regulation

interferes with reasonable investment-backed expectations; and (3) the character of the

government action. Penn Central, 438 U.S. at 124; Palazzolo v. Rhode Island, 533 U.S. 606, 617

(2001); District Intown Properties v. District of Columbia, 198 F.3d 874, 879 (D.C. Cir. 1999),

cert. denied, 531 U.S. 812 (2000), affirming 23 F.Supp.2d 30 (D.D.C. 1998).

       A regulatory taking will not generally be found where the government’s action “advances

a substantial government interest . . . .” Tahoe-Sierra Preservation Council v. Tahoe Regional

Planning Agency, 535 U.S. 302, 323 (2002); City of Monterey v. Del Monte Dunes at Monterey,



467 U.S. 986, 1016 (1984)); Bldg. Owners & Managers Ass’n Int’l v. FCC, 254 F.3d 89, 100
(D.C. Cir. 2001).



                                              - 29 -
Ltd., 526 U.S. 687, 704 (1999); United States v. Riverside Bayview Homes, Inc., 474 U.S. 121,

126 (1985) (government action will effect a regulatory taking in “extreme circumstances,” i.e.,

only if it does not substantially advance legitimate state interests or denies an owner

economically viable use of his land) (quoting Agins v. Tiburon, 447 U.S. 255, 260 (1980)).

       Here, Access Rx rationally advances a substantial government interest, control of

prescription drug prices, see PhRMA, 538 U.S. at 663–64, with only speculative claims of future

financial harm by plaintiff. Even if proven, plaintiff’s claims are not irreparable, because they

may be remedied by money damages.

       The Circuit in District Intown noted that claimants cannot establish a takings claim

“simply by showing that they were denied the ability to exploit a property interest that they

heretofore had believed was available for development.” Id. (quoting Penn Central, 438 U.S. at

130). The Circuit there also found that the “character of government action” element of a takings

analysis depends primarily on whether the action “has a legitimate public purpose.” Id. (citing

Keystone Bituminous Coal Ass’n v. DeBenedictis, 480 U.S. 470, 485 (1987).

       There can be no reasonable doubt that control of health care costs is a “legitimate public

purpose.” PhRMA, 538 U.S. at 663–64; Travelers, 514 U.S. at 667 n.6.

       A property owner’s reasonable expectations must be put in the context of the underlying

regulatory regime. Rowe, 307 F.Supp.2d at 180 (PBMs, as “unregulated island[s] in a highly

regulated sea” might well have expected that government regulation was inevitable) (citations

omitted). PCMA could not reasonably have expected that the PBMs would be essentially

unregulated forever. See Palazzolo, 533 U.S. at 634 (Rhode Island Supreme Court erred by

elevating element of investment-backed expectations to dispositive status; that factor, though

important, is not “talismanic” under Penn Central.) (O’Connor, J, concurring).




                                               - 30 -
       The judge in Rowe granted the PCMA’s motion for preliminary injunction, finding that

although the PBMs’ secret agreements with the drug manufacturers may or may not ultimately

be “trade secrets” and therefore constitutionally protected property, their disclosure would

apparently destroy their value and constitute a “taking,” at least for purposes of deciding the

preliminary injunction motion. Id. at 178–79. The court also found, for the purposes of the

motion, that the Maine law was preempted by ERISA. Id. at 187.

       To prevail in a regulatory takings claim, “a claimant must put forth striking evidence of

economic effects to prevail even under an ad hoc inquiry.” District Intown, 198 F.3d at 883

(citing Penn Central, which cited cases upholding regulations despite diminution of a property’s

value by more than 75%).

       Access Rx plainly is not a taking because it does not deprive the PBMs of all economic use

of its property. The secret arrangements with drug manufacturers, if disclosed, would still be in

effect, requiring PBMs to arrange rebates for their clients. What plaintiff fears, however, is the

future effect of such disclosures, which the Council hopes will eventually drive down the ultimate

cost of prescription drugs, to the potential financial discomfort of the PBMs. Such a tenuous claim is

insufficient to support emergency injunctive relief on a takings claim.



       6. Access Rx Does Not Violate the Commerce Clause

       Despite Rowe, plaintiff alleges that Access Rx violates the Commerce Clause because

Title II is an “extraterritorial regulation” of PBM conduct outside the District and because it

imposes “heavy burdens” on interstate commerce without countervailing public benefits. P.Mem.

38–42. Plaintiff is incorrect on both counts.




                                                - 31 -
       Plaintiff has clearly “misconstrued the role of” the Commerce Clause here. SEIU, 608

F.Supp. at 1437. In the typical case in which state laws have been struck down as violative of the

Commerce Clause, the law is usually a protectionist measure designed to insulate local industry

from out-of-state competition, by burdening the flow of articles in interstate commerce. Id.

(citing cases). But here, just as the Rowe court found in relation to the Maine law, plaintiff has

failed to show how Access Rx has any effect whatever on interstate commerce, much less the

burdensome effect required for invalidation.

       The Rowe court rejected the claim that the challenged Maine law violated the Commerce

Clause, because it had no effect outside Maine, did not discriminate against interstate commerce

(by impermissibly favoring in-state economic interests over out-of-state interests), and had only

an incidental effect (if any) on interstate commerce, which was “substantially outweigh[ed]” by

“the potential benefit to Maine consumers in reducing the enormous burden of” the costs of

prescription drugs. Rowe, 307 F.Supp.2d at 175–76.

       On its face, Access Rx does not favor intra-District economic interests over out-of-state

ones, hence the “virtually per se rule of invalidity” has no application here. See, e.g., Oregon

Waste Sys., Inc. v. Dept. of Environmental Quality, 511 U.S. 93 (1994) (state law imposed higher

disposal fee on out-of-state waste). Access Rx, as the Rowe court found the Maine law,

“regulates evenhandedly with only ‘incidental’ effects on interstate commerce” and does not

“discriminate against interstate commerce either on its face or in practical effect.” Rowe I, 307

F.Supp.2d at 176 (quoting Oregon Waste, 511 U.S. at 99).

       Moreover, like the Maine law, Access Rx defines “covered entities” as those licensed or

organized in the District that contract with PBMs. Access Rx at § 102(4)(A). Thus, Access Rx

clearly ties its reach only to the District, and does not have the impermissible “extraterritorial




                                               - 32 -
reach” proscribed by case law. See Healy v. Beer Inst., 491 U.S. 324, 334 (1989). If a PBM does

not contract with a District-covered entity, Access Rx has no application, and hence the District

is not seeking to “project its legislation” into other States. Baldwin v. G.A.F. Seeling, Inc., 294

U.S. 511, 521 (1935).

       Plaintiff also argues that the “compelled disclosure of trade secret information” in the

District could not be limited to the District, and such disclosure would have serious financial

effects on the PBMs “across the country.” P.Mem. 39. But as the First Circuit noted in PhRMA v.

Concannon, 249 F.3d 66, 82 (1st Cir. 2001), “simply because the manufacturers’ profits might be

negatively affected by [the state law] does not necessarily mean that [the law] is regulating those

profits.”18 That court also noted that “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.” Id. at 84 (quoting Instructional Sys., Inc. v. Computer Curriculum Corp., 35 f.3d 813,

826 (3rd Cir. 1994)). See also Exxon Corp. v. Governor of Md., 437 U.S. 117, 127–28 (1978)

(Commerce Clause “protects the interstate market, not particular interstate firms, from

prohibitive or burdensome regulations.”).19

       Plaintiff alleges a number of ways Access Rx could conceivably affect interstate

commerce. See P.Mem. 40. But plaintiff’s guesses are entirely “attenuated and speculative” as to

the ultimate effect of the law. PhRMA v. Thompson, 362 F.3d 817, 827 (D.C. Cir. 2004). Such a

slim showing is plainly insufficient to demonstrate a violation of the Commerce Clause.



       18
              The Supreme Court subsequently upheld the 1st Circuit’s Commerce Clause
analysis. PhRMA, 538 U.S. at 669–70.
       19
               Indeed, the Supreme Court has bluntly found that “The [financial] impact on
[drug manufacturers of the Maine law] is not relevant because any transfer of business to less
expensive products will produce savings for the Medicaid program[,]” the stated goal of the
legislation. PhRMA, 538 U.S. at 668 (emphasis added).


                                              - 33 -
       Finally, under the balancing test required by Pike v. Bruce Church, 397 U.S. 137, 142

(1970), if a statute regulates evenhandedly and has only incidental effects on interstate

commerce, as Access Rx plainly does, a court must balance the alleged burden on interstate

commerce against the putative local benefit. As the Rowe court aptly put it: “In this Court’s

view, the potential benefit to Maine consumers in reducing the enormous burden of [the cost of]

prescriptive medication substantially outweighs the incidental impact [the law] may have upon

interstate commerce.” Rowe I, 307 F.Supp.2d at 177.20

       Moreover, state laws, like Access Rx here, that purport to regulate “the health, life, and

safety” of its citizens are entitled to special deference in Commerce Clause analysis. Head v.

New Mexico Bd. of Examiners in Optometry, 374 U.S. 424, 428 (1963), accord, Gen’l Motors

Corp. v. Tracy, 519 U.S. 278, 306 (1997) (Commerce Clause was “never intended to cut the

States off from legislating on all subjects relating to the health, life, and safety of their citizens,

though the legislation might indirectly affect the commerce of the country.”) (quoting Huron

Portland Cement Co. v. Detroit, 362 U.S. 440, 443–44 (1960) (additional citations omitted)).

       The “benefits” of Access Rx are reflected in the legislative history. See Comm. Rep. at

10–11. See also District of Columbia v. Beretta USA Corp., 847 A.2d 1127, 1149 (D.C. 2004)



       20
                The Attorney General of Maine subsequently moved to amend the preliminary
injunction order, arguing that Maine’s “severability” law required the court to invalidate only
those portions of the statute found problematic. See PCMA v. Rowe, 2004 U.S. Dist. LEXIS 7732
(D.Maine May 3, 2004). The court declined to do so, and directed the parties to further brief the
issue of severability. Id. The Maine legislature later amended the law in an attempt to eliminate
its earlier defects, see id., and again moved to amend or vacate the preliminary injunction order.
The court denied the motion, finding, inter alia, that, even as amended, the law had an
“impermissible connection with” ERISA. Rowe, 2004 U.S.Dist. LEXIS 12869 (D.Maine July 7,
2004). The court also assumed, without deciding, that eliminating the unconstitutional disclosure
section of the law would not destroy the law’s underlying purpose, but the court could not
determine, based on the record before it, how the law could be enforced with parts of it
invalidated, in light of the court’s preliminary ERISA preemption findings. Id.



                                                - 34 -
(D.C. Court of Appeals rejected Commerce Clause challenge to District’s strict-liability law for

gun manufacturers because the “strong governmental interest” is not “clearly excessive” in

relation to the “fanciful” effects on interstate commerce feared by the manufacturers). Plaintiff’s

Commerce Clause challenge must fail.



       B.      Plaintiff Has Suffered No Irreparable Harm.

       An essential prerequisite to injunctive relief is a sufficient showing by the plaintiff that it

will suffer irreparable harm if the injunctive relief is not granted. See, e.g., Davenport v. Int’l

Brotherhood of Teamsters, 166 F.3d 356, 360 (1999). See also Sampson v. Murray, 415 U.S. 61,

88–90 (1974). Plaintiff fails to make any showing of imminent, irreparable harm and therefore its

motion must fail.

       Wisconsin Gas Co. v. FERC, 758 F.2d 669, 674 (D.C. Cir. 1985), sets forth the guiding

principles for determining whether irreparable harm exists that (1) the injury must be both certain

and great, not something merely feared as likely to occur at some indefinite time; (2) the injury

must be of such imminence that there is a “clear and present” need for relief to prevent it; and (3)

economic loss is insufficient to constitute irreparable harm unless the plaintiff’s very existence is

threatened. See also Sampson, 415 U.S. at 88–90.

       All of the threatened harms alleged by plaintiff are entirely speculative and exclusively

financial in nature. The factual support presented by plaintiff, in the form of several hundred

pages of self-serving, speculative declarations, merits little attention. Nine out of eleven of the

proffered declarations are from the PBMs’ sales, marketing, or lobbying personnel, laying out a

“parade of horribles” of what might happen if the PBM’s secret deals are disclosed. See

Plaintiff’s Exhibits (“PEx.”) No. 1 to 12. The competence of plaintiff’s “factual” support is




                                               - 35 -
further called into question because no fewer than seven of the declarations are based, in part, on

hearsay. See PEx. Nos. 2–8 (each declaration contains the phrases “discussions with

knowledgeable employees of” and “review of records of”).

       Aside from the self-serving declarations, there are also several hundred pages of

documents of marginal utility. But surely this mountain of paper does little but question the

reasons behind the Council’s actions, with no concrete support for the conjectural “injuries”

Access Rx will allegedly entail.

       That there can be no irreparable harm from financial losses, even if substantial, has been

firmly established by the Supreme Court, the D.C. Circuit, and nearly every federal court of

appeals. That overwhelming precedent holds that loss of income and its attendant financial

consequences do not, as a matter of law, constitute irreparable harm. Sampson v. Murray, 415

U.S. at 90–91; Virginia Petroleum Jobbers Ass’n, 259 F.2d at 925; Davenport v. International

Brotherhood of Teamsters, 166 F.3d at 367; National Treasury Employees Union v. United

States, 927 F.2d 1253, 1256 (1991); Taylor v. RTC, 56 F.3d 1497, amended by 66 F.3d 1226

(D.C. Cir. 1995); Chilcott v. Orr, 747 F.2d 29 (1st Cir. 1984); Jayaraj v. Scappini, 66 F.3d 36

(2nd Cir. 1995); Guitard v. Sec’y of Navy, 967 F.2d 737 (2nd Cir. 1992); Guerra v. Scruggs, 942

F.2d 270 (4th Cir. 1991); Smallwood v. Jefferson County, Ky., 1996 U.S. App. LEXIS 24221 (6th

Cir. 1996); Hetreed v. Allstate, 135 F.3d 1155 (7th Cir. 1998); Adam-Mellang v. Apartment

Search, Inc., 96 F.3d 297 (8th Cir. 1996); Christie v. Garrett, 1992 U.S. App. LEXIS 7108 (9th

Cir. 1992).

       Plaintiff has failed to establish the factual predicate underlying its claims of irreparable

injury—that it is (or will soon be) in violation of the law. Moreover, there is no “imminence”




                                              - 36 -
here in any sense of the word. Access Rx has been effective since May 18, 2004 (i.e., for over

two months), plaintiff did not file suit or seek emergency injunctive relief until June 29.

         In addition, even if the disclosure provisions of Title II are found to be a “taking,”

monetary damages will completely compensate PCMA for its injuries. See n.17, supra, and

accompanying text.

         Plaintiff has failed to establish imminent, irreparable harm.



         C.     The Balance of Equities Favors Denying Injunctive Relief.

         Plaintiff asks this Court to take the extraordinary act of forbidding the District from

exercising its authority to enact laws to protect its citizens. The balance of equities tips decidedly

in favor of the defendants where plaintiff essentially is asking this Court to issue a mandatory

injunction at the onset of the case. In other words, plaintiff seeks the ultimate relief at the

beginning of the litigation. An injunction would substantially injure the District, its citizens, and,

potentially, the legislative process. “[A]ny time a State [or local government] is enjoined by a court

from effectuating statutes enacted by the representatives of its people, it suffers a form of irreparable

injury.” New Motor Vehicle Board of California v. Orrin W. Fox Co., 434 U.S. 1345, 1351 (1977)

(Rehnquist, J., in chambers); District of Columbia v. Greene, 806 A.2d 216, 233 (D.C. 2002) (per

curiam) (quoting New Motor Vehicle).

         In these circumstances, the District of Columbia enjoys the balance of the equities in its

favor.




                                                 - 37 -
       D.      The Public Interest Favors the District.

       It should go without saying that the public interest is served by allowing the District to

attempt to protect its citizens from the spiraling costs of health care. Access Rx represents the

legislature’s reasonable action taken in the public interest. The District of Columbia, like Maine

before it, acts in its role “as a guardian and trustee for its people.” White v. Mass. Council of

Constr. Employers, 460 U.S. 204, 207 n.3 (1983). The District is attempting to tackle a complex

issue of great public importance, the regulation of prescription drug prices.

       It is plaintiff’s financial self-interest, not the public interest, which is at the root of this

complaint. The public interest here therefore favors the denial of injunctive relief.



                                          III. Conclusion

       “The problems confronting society in these areas are severe, and state governments, in

cooperation with the Federal Government, must be allowed considerable latitude in attempting

their resolution.” PhRMA, 538 U.S. at 667 (quoting New York State Dept. of Social Servs. v.

Dublino, 413 U.S. 405, 413 (1973)).

       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 economic experiments without risk to the rest of the country. This
       Court has the power to prevent an experiment. [B]ut, 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.


New State Ice Co. v. Liebmann, 285 U.S. 262, 310 (1932) (Brandeis, J., dissenting)

(footnote omitted).




                                                - 38 -
       Plaintiff has failed to satisfy the requisite elements of the four-part test for emergency

injunctive relief. Accordingly, its motion for a preliminary injunction should be denied.


DATE: July 22, 2004                   Respectfully submitted,


                                      ROBERT J. SPAGNOLETTI
                                      Attorney General for the District of Columbia


                                      GEORGE C. VALENTINE
                                      Deputy Attorney General
                                      Civil Litigation Division


                                      ______________________________________________
                                      RICHARD S. LOVE, D.C. Bar No. 340455
                                      Chief, Equity I Section
                                      Office of the Attorney General for the District of Columbia
                                      441 Fourth Street, N.W., 6th Floor South
                                      Washington, D.C. 20001
                                      Telephone: (202) 724-6635
                                      Facsimile: (202) 727-0431


                                      ______________________________________________
                                      ANDREW J. SAINDON, D.C. Bar No. 456987
                                      Assistant Attorney General
                                      Equity 1 Section
                                      441 Fourth Street, N.W., 6th Floor South
                                      Washington, D.C. 20001
                                      Telephone: (202) 724-6643
                                      Facsimile: (202) 727-0431




                                              - 39 -
                              UNITED STATES DISTRICT COURT
                              FOR THE DISTRICT OF COLUMBIA

____________________________________
                                    )
PHARMACEUTICAL CARE                 )
MANAGEMENT ASSOCIATION,             )
                                    )
                  Plaintiff,        )
                                    )
      v.                            )                 Civil Action No. 04-1082 (RMU)
                                    )
DISTRICT OF COLUMBIA, et al.,       )
                                    )
                  Defendants.       )
____________________________________)


                                             ORDER

        This case is before the Court for consideration of Plaintiff’s Application for a Preliminary

Injunction, Defendants’ Memorandum Of Points And Authorities In Opposition thereto, and

Plaintiff’s Reply. After review of the parties’ submissions, oral argument of counsel, and the

entire record herein, it is hereby:

        ORDERED, that Plaintiff’s Application for a Preliminary Injunction be, and the same is

hereby, DENIED.

        SO ORDERED.



DATE: ___________________                             ___________________________________
                                                      RICARDO M. URBINA
                                                      United States District Judge

								
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