The Fourth Circuit decision affects West Virginia's S.B. 325, which prohibited drug manufacturers participating in the federal 340B program from restricting deliveries to contract pharmacies or requiring utilization data as delivery conditions. The 340B program requires manufacturers to offer discounted drugs to safety-net healthcare providers in exchange for access to the massive Medicaid market, with discounts reaching as low as a penny per unit.
Judge Richardson, writing for the majority, found that West Virginia impermissibly targeted federal program participants for additional burdens. 'S.B. 325 does not subject the industry to any obligations or restrictions independent of the federal 340B program,' Richardson wrote. The court held that Congress had 'ousted States from this field' by creating a carefully balanced spending-power bargain that preserved manufacturers' ability to negotiate delivery terms.
The case consolidated three district court challenges by pharmaceutical manufacturers and trade groups against West Virginia officials including Attorney General John McCuskey. The district court had granted preliminary injunctions in 2024, finding federal preemption likely. Judge Benjamin dissented, arguing the majority improperly relied on spending power analysis not briefed by the parties.
The ruling deepens a circuit split over state laws targeting 340B manufacturers' contract pharmacy policies, with the Fifth and Eighth Circuits previously finding similar laws not preempted. The decision could affect similar legislation in other states and may influence ongoing disputes over contract pharmacy arrangements that have expanded dramatically since 2010.