AUGUSTA — Maine could soon shed a 2003 law designed to protect consumers from high drug costs and fraud perpetrated by pharmacy benefit managers, the corporate middlemen between insurance providers and employers and pharmaceutical companies and wholesalers.

Pharmacy benefit managers are contracted by employers who provide health insurance to process and pay prescription drug claims.

In two votes that broke mostly along party lines, the Republican-controlled Legislature gave preliminary approval to repeal the law, arguing that it was unnecessary and increased patient drug costs.

Rep. Meredith Strang Burgess, R-Cumberland, sponsored the bill that repeals the law. She said the Maine Attorney General’s Office could handle oversight of the industry.

During Wednesday’s debate in the House of Representatives, Strang Burgess said that while the protections and transparency in Maine law sounded like a good idea, the additional regulation had discouraged pharmacy benefit managers from doing business here.

She said the result was less competition and higher drug prices.

But opponents said repealing the law would remove a host of protections for consumers and independent pharmacies.

They say the existing law prevents benefit managers from switching patients to more expensive drugs and protects them from co-payments when the actual drug price is cheaper.

The law also requires benefit managers to promptly pay independent pharmacies and to negotiate drug prices in good faith.

Several independent pharmacies testified against the repeal bill in the public hearing.

Repeal proponents included the PBM industry. The Maine Merchants Association also favored the bill. The association said the current law hamstrung employers attempting to negotiate contracts with PBMs.

However, Rep. Sharon Treat, D-Hallowell, wondered why the Legislature would want to repeal a law that established “predatory pricing protections.”

Treat noted that 25 other states regulate PBMs. She acknowledged that Maine’s law was one of the most comprehensive.

Several Democrats joined the Republican majority supporting LD 1116 in the House.

The Senate vote, 21-14, broke along party lines with Sen. Richard Woodbury, U-Yarmouth, voting with the Democratic minority.

Sen. Margaret Craven, D-Lewiston, attempted to introduce an amendment that would prohibit public or quasi-municipal agencies from contracting with a PBM if the company had committed fraud or had been penalized $500,000 by a state or federal agency within the previous three years of the contract.

Craven said she couldn’t imagine why other senators would want the state or another public agency to contract with a PBM that had been fined for misconduct.

Craven’s amendment was tabled by Republican leaders.

The pharmacy benefit managers industry has paid $371 million in damages over the past several years to several states for false claims, kickbacks and overcharging patients for generic drugs.

Maine’s law regulating PBMs was adopted eight years ago at the urging of former Maine Attorney General Steven Rowe. He believed providers in the largely unregulated industry should register with the state and disclose their dealings with pharmaceutical companies, including kickbacks to PBMs for promoting certain drugs, before doing business here.

The law was precipitated by a lawsuit against Medco Health Solutions, a PBM sued by Maine and 19 other states for violating consumer protection and mail fraud laws for “drug-switching,” the practice of changing patients’ drug prescriptions to similar drugs of therapeutic value but that pay the benefit managers higher rebates.

Medco, a New Jersey-based company, denied any wrongdoing but paid $29.3 million in a 2004 settlement. It also agreed to disclose the rebates it received from pharmaceutical companies.

 The PBM industry, which manages the pharmacy benefits of more than 95 percent of Americans with health insurance, has fought the Maine law for years and succeeded in temporarily delaying its implementation in 2004.

The current repeal bill was backed by Medco, the company involved in the 2004 lawsuit, CVS Caremark and the Pharmaceutical Care Management Association. The PCMA represents the largest PBMs, including Medco, CVS, AdvancePCS and Express Scripts.

Two of those companies were active in the 2010 election. Medco donated more than $25,000 to candidates and political-action committees, as well as to Gov. Paul LePage. The contributions were evenly distributed between Democrats and Republicans, with significant portions going to leadership PACs.

CVS Caremark spent $6,750 in 2010.

Medco has also spent more than $8,500 through April lobbying several bills, including LD 1116. The bill was also lobbied by Express Scripts, which spent $2,000 over that same period.

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