USDC Little Rock courtroom interior
A federal court decision about the legality of an Arkansas law that requires drug makers to honor 340B contract pharmacy arrangements might come sooner than originally thought.

Development May Expedite Ruling on Widely Watched State Law Intended to Require Rx Manufacturers to Provide 340B Discounts

A federal district judge has accepted a plan that might speed up a decision in the drug industry’s lawsuit challenging an Arkansas law that requires drug makers to honor 340B contract pharmacy arrangements.

U.S. Senior District Judge Billy Roy Wilson on Aug. 12 granted a joint motion by all parties to the suit to focus the case on the industry’s claim that state law is preempted by federal law.

Pharmaceutical Research and Manufacturers of America (PhRMA) claims that the state law is both illegal and unconstitutional. The trade association, the state defendants, and 340B covered entities that intervened in the case told Wilson last week they agree that advancing PhRMA’s preemption claim ahead of its constitutional claim is more efficient and could expedite a decision.

PhRMA and the state defendants tried earlier to get Wilson to buy into the idea. They wanted all briefs to be filed before the end of April. Under the original schedule the judge announced in October 2021, all briefs were to have been filed by late November this year followed by a hearing in early January 2023.

On Aug. 6, two months ahead of schedule, PhRMA filed a brief arguing why the state law should be struck down and vacated on preemption grounds. Then last Friday, the parties filed their motion to change the case’s schedule and Wilson granted it the same day.

Under the new schedule, the state and the covered entities will file briefs on Sept. 9, PhRMA on Oct. 7, and the state and entities again on Nov. 4. There is no mention of a hearing.

PhRMA’s Latest Brief

PhRMA’s new brief fleshes out arguments it made in September 2021 when it sued Arkansas over the law. The statute says pharmaceutical manufacturers shall not:

  • Prohibit a pharmacy from contracting or participating with an entity authorized to participate in the 340B program by denying access to drugs that are manufactured by the pharmaceutical manufacturer; or
  • Deny or prohibit 340B drug pricing for an Arkansas-based community pharmacy that receives drugs purchased under a 340B drug pricing contract pharmacy arrangement with an entity authorized to participate in 340B drug pricing.

Unique Law

No other state has passed a law like Arkansas’ that explicitly prohibits manufacturers from denying 340B pricing or denying access to drugs when entities contract with outside pharmacies. Michigan hospitals say a state law enacted in February can be interpreted to bar drug companies from withholding 340B pricing if a covered entity refuses to hand over its contract pharmacy claims data. Several state legislatures this year considered bills with language comparable to Arkansas’. But the bills either failed or the language was stripped out.

In its new brief, PhRMA said the Arkansas’ law “impermissibly wades into a solely federal program, and does so in a way that creates numerous direct conflicts with the federal scheme.”

“Congress did not intend anyone other than covered entities and their patients to benefit from the [340B] program,” PhRMA said, but the Arkansas law requires manufacturers to provide 340B-discounted drugs to contract pharmacies that are neither entities nor patients. “Because contract pharmacies retain part of the discounts (i.e. profits) intended to benefit direct-care providers’ patients (those Congress intended to benefit from the program), this expansion undermines the purpose of the 340B program,” it said.

PhRMA said the law conflicts with the administrative process Congress established to resolve disputes over the 340B program between entities and manufacturers and with limits Congress set on civil monetary penalties against manufacturers for violating 340B requirements. Arkansas’ law “expands the potential liability and consequences of participating in the 340B program to such a degree that manufacturers may be dissuaded from agreeing to participate (particularly if other states follow suit)—putting the viability of the entire 340B program at risk,” PhRMA said.

Finally, PhRMA said the law runs afoul of the federal Food, Drug, and Cosmetic Act “by mandating how federally regulated drugs may be distributed in Arkansas.” Manufacturers, it said, could be required under the law to ship 340B drugs with Risk Evaluation and Mitigation Strategies to contract pharmacies “whether or not those pharmacies are permitted to receive shipments of the drugs under federal law.”

Manufacturers will be forced to choose between violating federal or Arkansas law and federal or state penalties, PhRMA said.

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