In a Victory for Covered Entities, Fifth Circuit Upholds Louisiana’s 340B Contract Pharmacy Protection Law

2/11/2026 – In a Victory for Covered Entities, Fifth Circuit Upholds Louisiana’s 340B Contract Pharmacy Protection Law

In a consolidated decision involving AbbVie, AstraZeneca, and the Pharmaceutical Research and Manufacturers of America (PhRMA), a three-judge panel of the U.S. Fifth Circuit Court of Appeals unanimously upheld the constitutionality of Louisiana’s 340B contract pharmacy protection law (Act 358). Powers represented the Louisiana Primary Care Association (LPCA), which intervened in this case to help defend Act 358.

This is the second federal appeals court decision upholding the constitutionality of a state’s 340B contract pharmacy protection law. However, this is not the Fifth Circuit’s first encounter with 340B contract pharmacy protection laws as it affirmed a lower court’s decision denying a preliminary injunction against Mississippi’s 340B contract pharmacy protection law (HB 728) in September 2025.

No federal appeals court has sided with pharmaceutical manufacturers in their legal challenges of state contract pharmacy protection laws.

Background

In 2023, Louisiana enacted Act 358 which provides that “[a] manufacturer… shall not deny, restrict, prohibit, or otherwise interfere with, either directly or indirectly, the acquisition of a 340B drug by, or delivery of a 340B drug to, a pharmacy that is under contract with a 340B entity.” The law further bars manufacturers from “interfere[ing] with a pharmacy contracted with a 340B entity.” LA. Stat. Ann. § 40:2884(A)(2023). AbbVie, AstraZeneca and PhRMA individually filed lawsuits challenging the constitutionality of Act 358. The U.S District Court for the Western District of Louisiana denied AbbVie, AstraZeneca, and PhRMA’s Motion for Summary Judgment, finding that Act 358 is not preempted under the Supremacy Clause, is not vague under the Due Process Clause, does not violate the Contract Clause, and does not violate the Takings Clause. AbbVie, AstraZeneca and PhRMA appealed.

Decision

On February 9^th, 2026, in a three-judge panel, the Fifth Circuit affirmed the District Court’s ruling, reiterating that “states regulate pharmacies – and the distribution of drugs to those pharmacies – everyday. Act 358 fits comfortably within that tradition (emphasis added).” The court heavily relied on its previous decision permitting implementation of Mississippi’s contract pharmacy protection law in rejecting arguments that state contract pharmacy laws are preempted by federal law. The court emphasized that “Act 358 does not regulate the 340B Program itself. It regulates the distribution of drugs to patients and the role of pharmacies in this distribution – areas left free under the 340B Program for state supplementation (emphasis added).” The court also found that AbbVie’s Takings Clause argument is foreclosed by the same earlier decision, finding that Act 358 does not amount to a physical or regulatory taking.

The court further rejected AstraZeneca’s Contract Clause challenge, finding that “where Act 358 addresses acquisition and delivery of discounted drugs to contract pharmacies, [manufacturers’ 340Bpharmaceutical pricing agreements] are silent.” AstraZeneca relied heavily on the D.C. Circuit and Third Circuit decisions, which rejected the authority of HHS to require that drugmakers provide 340B pricing through unlimited contract pharmacies. See Novartis Pharms. Corp v. Johnson, 102 F. 4^th 452, 458 (D.C. Cir. 2024); Sanofi Aventis U.S. LLC v. U.S. Dep’t of Health & Hum. Servs., F.4^th 696,700 (3^rd Cir. 2023). The court, however, found that the D.C. Circuit and Third Circuit decisions “held only that HHS lacks authority under §340B to mandate delivery to unlimited contract pharmacies. They did not hold – nor suggest- that State lack authority to regulate delivery through their traditional police powers.”

Finally, the court rejected PhRMA’s vagueness challenge, finding that the word “interfere” is readily comprehensible even if the term is somewhat imprecise.

Final Notes

The Fifth Circuit reversed the District Court’s decision to grant intervention to LPCA. The court found that LPCA “failed to show that it would offer any defense distinct from the state, or that its divergent interests otherwise affect this litigation.”

AbbVie, AstraZeneca and PhRMA may request a rehearing by the three-judge panel that issued the decision; a rehearing by the full Fifth Circuit; and/ or file a petition for review with the U.S. Supreme Court. In 2024, the Supreme Court rejected PhRMA’s request to consider its legal challenge of Arkansas’ contract pharmacy protection law after the law was upheld by the Eight Circuit.

Powers will continue to monitor developments on litigation around state 340B contract pharmacy protection laws. Please contact Powers’ drug pricing team, or your lead Powers attorney, if you have any questions.