North Dakota's 340B Drug-Pricing Law Struck Down as Unconstitutional

BISMARCK (LN) — A North Dakota federal judge on Sunday permanently enjoined the state's 340B drug-pricing law, ruling that H.B. 1473 — which made it a class B misdemeanor for manufacturers to restrict contract-pharmacy deliveries or demand claims data — is unconstitutional under both the Supremacy Clause and the dormant Commerce Clause.

U.S. District Judge Daniel M. Traynor declared that the law "does not promote or regulate the health and safety of its citizens; it only concerns the balance sheet of in-state entities," and that "H.B. 1473 is an infringement on federal programs masquerading as state governance."

The plaintiffs — AbbVie Inc. and affiliated entities, the Pharmaceutical Research and Manufacturers of America, and AstraZeneca Pharmaceuticals LP — challenged the law on multiple constitutional grounds after it took effect August 1, 2025. H.B. 1473 made it a class B misdemeanor, punishable by up to 30 days in jail and a $1,500 fine, for a manufacturer to restrict delivery to a single contract pharmacy, deny access to a drug, or require claims data as a condition of sale.

On field preemption, Traynor held that the 340B program — a federal spending-power arrangement under which manufacturers offer steep discounts to qualify for Medicare and Medicaid reimbursement — left no room for state supplementation. "The offer a 340B manufacturer makes to a 340B covered entity is governed by the 340B program and Congress," he wrote. "States have no part in that relationship."

North Dakota leaned heavily on the Eighth Circuit's 2024 decision in PhRMA v. McClain, which upheld Arkansas's similar statute as a delivery regulation falling within traditional state pharmacy authority. Traynor rejected that comparison, noting that Arkansas formally defined its law as an acquisition-and-delivery statute and told the Eighth Circuit it would only be enforced as to delivery. North Dakota, by contrast, never promulgated a limiting rule and argued in its own briefing that H.B. 1473 "can only plausibly refer to pre-sale conditions imposed on distribution of drugs available to be purchased at 340B program prices" — a concession, the court held, that the law reached manufacturer offers, not just pharmacy deliveries.

The dormant Commerce Clause provided an independent basis for invalidating the law. Traynor held that the statute directly regulated out-of-state transactions — specifically the chargebacks that manufacturers pay to wholesalers after 340B-eligible prescriptions are identified — not merely the in-state delivery of pills. "By prohibiting these manufacturer policies, the law directly regulates the amount and price of sales between out-of-state manufacturers and out-of-state wholesalers," he wrote, rejecting North Dakota's argument that any extraterritorial effects were mere ripples.

The court also declined to sever any portion of the statute, holding that "the entire law's focus and operation violates the Commerce Clause and the Supremacy Clause by singling out entities solely because they participate in a federal program enacted under the Spending Clause."

AstraZeneca's case was severed from the consolidated proceeding and will continue on its remaining counts, including patent-law preemption, conflict preemption, a Contracts Clause claim, and a Takings claim — all of which survived North Dakota's motion for judgment on the pleadings.

AbbVie estimated that North Dakota's law cost the company $10 million in 2025 and projected another $35 million in discounted sales it would not make in 2026 but for the law. The court cited those figures in holding that the law's interference with manufacturer participation in the federal program was especially strong given the added criminal penalties — a feature that distinguished H.B. 1473 from the Arkansas statute the Eighth Circuit upheld.

Traynor noted that manufacturer Bausch Health had already withdrawn from the 340B program entirely in October 2025 because of statutes like North Dakota's, meaning its drugs are no longer available for Medicaid and Medicare coverage. "Ultimately, it is the patients who suffer as a result," he wrote. "Patients now must pay out-of-pocket prices that are far greater than their insurance copays."