The case involves West Virginia's S.B. 325, which prohibits drug manufacturers from restricting delivery of 340B-discounted medications to locations authorized by covered entities like safety-net hospitals and clinics. The law was enacted after federal courts ruled that manufacturers could limit deliveries to contract pharmacies without violating the 340B program, which requires drugmakers to offer discounted prices to covered entities in exchange for Medicaid market access.
Judge Richardson wrote for the majority that S.B. 325 "directly changes the terms of drug manufacturers' federally created 340B relationships with covered entities" by singling out federal program participants for additional burdens. "West Virginia seeks—likely impermissibly—to reshape the contractual bargain Congress made with private manufacturers," Richardson explained. The court found Congress had "ousted States from this field" because the 340B program represents a careful federal spending-power bargain that states cannot unilaterally modify.
The pharmaceutical companies, including AbbVie and Novartis, sued in federal district court after West Virginia enacted the law in 2024. Judge Thomas Johnston granted a preliminary injunction in the Southern District of West Virginia, finding the manufacturers were likely to succeed on preemption grounds and would suffer irreparable harm from compliance costs and penalties of up to $50,000 per violation.
The ruling deepens a circuit split on whether state laws targeting 340B delivery restrictions are preempted by federal law. The Fifth and Eighth Circuits have rejected preemption arguments in similar cases, while district courts in other states have reached conflicting conclusions. The decision could affect covered entities' ability to generate revenue from the 340B program through multiple contract pharmacy arrangements.