What happened
The Fifth Circuit on Monday replaced an earlier opinion but left Louisiana’s win intact in a closely watched challenge to a state law barring drug manufacturers from blocking 340B drug deliveries through contract pharmacies.
The panel granted the Louisiana Primary Care Association’s petition for panel rehearing, denied rehearing en banc, withdrew its Feb. 9 opinion and substituted a new one affirming summary judgment for Louisiana on all counts. The ruling keeps in place Act 358, which the court said does not run afoul of federal preemption principles, the Takings Clause, the Contracts Clause or due process limits on vague laws.
The dispute arose after AbbVie, AstraZeneca and the Pharmaceutical Research and Manufacturers of America challenged Act 358 in separate suits against Louisiana Attorney General Liz Murrill. The cases were consolidated after a Western District of Louisiana judge denied the manufacturers’ summary judgment motions and entered judgment for the state and the Louisiana Primary Care Association.
The case sits at the intersection of the federal 340B Drug Pricing Program and state efforts to protect safety-net providers’ use of outside pharmacies. The Fifth Circuit described 340B as a program requiring participating manufacturers to sell covered outpatient drugs at ceiling prices to designated providers, many of which serve low-income, uninsured, rural or otherwise vulnerable patients.
Louisiana enacted Act 358 after manufacturers adopted policies limiting distribution of 340B drugs through contract pharmacies. The statute bars manufacturers and distributors from denying, restricting, prohibiting or otherwise interfering with acquisition or delivery of 340B drugs to pharmacies that contract with covered entities, unless federal health officials prohibit that receipt.
On preemption, the Fifth Circuit said the law regulates drug distribution to patients rather than the 340B Program itself, placing the measure within areas traditionally regulated by states, including public health and consumer protection. The panel rejected the manufacturers’ field, conflict and obstacle preemption theories and said Congress had not clearly displaced that state authority.
The panel also rejected AstraZeneca’s Contracts Clause argument, reasoning that the company’s federal pricing agreement did not address delivery to contract pharmacies. Because delivery logistics were not part of the federal pricing agreements, the court said Act 358 did not alter the contractual bargain between AstraZeneca and the federal government.
PhRMA’s vagueness challenge failed as well. The court said the word “interfere,” read in context with terms such as deny, restrict and prohibit, reaches conduct that obstructs or impedes acquisition or delivery of 340B drugs, and that the statute clearly covers its core target: a manufacturer’s refusal to deliver 340B drugs to a covered entity’s contract pharmacy.