To close out the year, two federal judges issued conflicting opinions regarding the likelihood of success in challenges to state 340B contract pharmacy laws.  In the first major siding with manufacturers in their lawsuits to invalidate such laws, a judge in West Virginia ruled on December 17 that the state’s contract pharmacy law (“Act 325”) cannot be enforced while the case is being litigated.  That decision does not mean that the Court has determined that the law is invalid.  Rather, the judge found that PhRMA and two manufacturers (Novartis, and AbbVie) will likely be successful in their lawsuits to invalidate Act 325.  In stark contrast, and less than a week after the West Virginia decision, a judge in Mississippi ruled that Mississippi’s contract pharmacy law (“H.B. 728”) can be enforced pending the outcome of a challenge to the validity of that state’s law in a lawsuit brought by AstraZeneca.  The Mississippi court’s decision is consistent with prior federal court rulings in Arkansas, Louisiana, Maryland and the Mississippi court’s own prior rulings against the same litigants for which the West Virginia court issued a favorable decision.

West Virginia’s Unprecedented Ruling

West Virginia’s Act 325 requires that manufacturers honor all contract pharmacy arrangements and prohibits them from placing conditions on the delivery of 340B drugs, including data submission requirements.  Like all state contract pharmacy laws, the state has the authority to enforce Act 325.

The Court’s ruling demonstrates a misunderstanding of Act 325 and the 340B statute, as well as the federal 340B administrative dispute resolution (“ADR”) process and the replenishment inventory accounting model.  The Court reasoned that Act 325’s prohibition on manufacturers requiring claims and utilization data prevents them from conducting audits as a precursor to the ADR process, both of which are addressed under the 340B statute.  The Court also stated that Act 325’s enforcement provision is unlawful because the remedies under the 340B statute are exclusive, leaving no room for state enforcement.  In short, the Court failed to understand that the 340B statute is a pricing statute and Act 325 is a distribution statute, each with its own separate requirements and remedies.

West Virginia may decide to appeal the decision to the Fourth Circuit.  Already pending before the Fourth Circuit is a manufacturer appeal from a court ruling on the Maryland contract pharmacy law, which dismissed manufacturers’ motions for preliminary injunction earlier in 2024.

Mississippi’s Consistent Ruling

Mississippi’s H.B. 728 requires manufacturers to honor all 340B contract pharmacy arrangements and prohibits them from interfering with lawful distribution of 340B drugs.  Unlike West Virginia’s law, the Mississippi law does not prohibit manufacturers’ data requirements as conditions of drug delivery.

The Mississippi court concluded that AstraZeneca’s legal arguments are unlikely to prevail.  Unlike the West Virginia opinion discussed above, the Mississippi court recognized that its legislature wrote and intended the law to serve as a complement to federal law and that the federal law did not preempt Mississippi’s law.  Interestingly, the Mississippi court noted the contrary West Virginia decision.