Drugmakers Lose Appeal Over Arkansas 340B Law

The US Supreme Court on Monday declined to review an appeal by the Pharmaceutical Research and Manufacturers of America (PhRMA) challenging an Arkansas 340B law that requires pharmaceutical companies to provide discounts on drugs that would benefit low-income communities.

PhRMA, along with several drugmakers, filed lawsuits in recent months against state lawsuits designed to ensure that hospitals will be able to contract pharmacies while participating in the federal 340B drug discount program.

The 340B program mandates that drug manufacturers offer discounts to hospitals and clinics that care for low-income patients, in exchange for participating in government health insurance programs such as Medicare and Medicaid.

Arkansas Attorney General Tim Griffin praised the Supreme Court’s decision, calling it “a big win for Arkansas’s drug access law.”

He said the law helped address a gap in federal regulations that allowed drugmakers to restrict access to affordable medications for rural populations.

PhRMA spokesman Reid Porter, however, expressed disappointment in the Court’s refusal to hear the case, reiterating the group’s stance that the Arkansas law and similar state laws are incompatible with federal regulations.

He also argued that the use of contract pharmacies in the 340B program can lead to “abuse” and called for federal intervention to address what he described as weaknesses in the program.

Many of these facilities, in an effort to reduce costs, contract with third-party pharmacies to dispense medications instead of operating their own in-house pharmacies.

In 2010, the US Department of Health and Human Services issued new guidance allowing an unlimited number of contract pharmacies for 340B providers, which replaced previous rules that limited hospitals to just one.

Drug manufacturers have long argued that the widespread use of contract pharmacies leads to a lack of transparency and increases the risk of “duplicate discounts” or other misuse. In response, many drug companies began placing restrictions on sales of 340B-discounted drugs through these pharmacies starting in 2020.

In 2021, Arkansas became the first state to pass a law prohibiting drugmakers from imposing such restrictions.

PhRMA sued, claiming that the state law was preempted by federal law governing the 340B program, which does not mandate the use of contract pharmacies.

However, both a district court and the 8th US Circuit Court of Appeals sided with Arkansas, ruling that while the 340B law requires discounted drug sales, it does not specify how those drugs should be dispensed, leaving room for state-level regulation.

The Supreme Court, following its customary procedure, did not provide an explanation for its decision to decline the case.

Other states, including Maryland, West Virginia, Mississippi, Kansas, and Louisiana, have also passed laws to protect the use of contract pharmacies in the 340B program.