A federal appellate court upheld an Arkansas law prohibiting drug manufacturers from restricting 340B drug discounts for providers using contract pharmacies. In 2020, several drug manufacturers began implementing restrictions prohibiting 340B covered entities from contracting with third-party pharmacies. For example, some manufacturers wouldn’t give 340B hospitals a discount on the purchase of drugs if the pharmacy they contracted with was more than 40 miles away from the hospital. Those restrictions triggered Arkansas’ law and have led to more than a dozen of other states filing similar legislation, including some AHPA states.

The Ruling

Pharmaceutical Research and Manufacturers of America (PhRMA) argued in its 2021 complaint that 340B is a federal program and that the state law’s requirements for manufacturers “conflict with explicit requirements in both the federal 340B statute.” The judges disagreed, noting that Congress was aware of pharmacies and state pharmacy law when implementing 340B and that its silence on the issue “indicates that Congress did not intend” to override related state legislation. A spokesperson for PhRMA said the group disagreed with the decision but didn’t indicate whether it would ask the full 8th Circuit or the Supreme Court to review it.

Federal Legislation

On Tuesday, Rep. Doris Matsui (D-California), introduced new federal legislation that would prohibit drug manufacturers from imposing restrictions on the use of contracted pharmacies, with noncompliance punished with a penalty of up to $2 million per day. AHPA is supportive of this bill but is uncertain, given other policy discussions related to the 340B program, whether it will pass this year.

State Legislation

Sixteen states in 2023 considered 340B legislation and eight of those enacted laws, according to an Avalere Health analysis. Arkansas and Louisiana are the only states that have enacted laws that protect contract pharmacy arrangements. The 8th Circuit Decision reinforcing the validity of the Arkansas law may spur even more states to propose similar legislation in the coming months. Below are the states that have formally introduced legislation at this time.