Background
Congress created the Section 340B Drug Pricing Program to provide discounted drugs to covered entities serving low-income and rural patients. While the federal statute regulates pricing and eligibility, it remains silent on how drugs must be dispensed. The Health Resources and Services Administration has permitted covered entities to use contract pharmacies, but some manufacturers restricted this practice. Louisiana enacted Act 358 to prohibit manufacturers from interfering with covered entities’ use of contract pharmacies. Pharmaceutical manufacturers and trade associations sued, claiming the state law was preempted by federal law and violated the Takings Clause, Contracts Clause, and Due Process Clause.
The court’s reasoning
The court applied a presumption against preemption in areas of traditional state police power, such as public health and consumer protection. It found that Congress did not manifest a clear intent to preempt state laws regulating drug distribution logistics, as the Section 340B statute is silent on the role of contract pharmacies. The court distinguished federal agency limitations from state police powers, noting that the absence of federal authority to mandate delivery does not restrict state authority. Regarding the Takings Clause, the court held the law imposes a negative obligation of non-interference rather than a physical taking. Under the Contracts Clause, the court found no substantial impairment because the law regulates relationships between covered entities and pharmacies, which are not parties to the federal Pharmaceutical Pricing Agreements. Finally, the court rejected the vagueness challenge, finding the term interfere provides a comprehensible standard of conduct.
We hold that it is not preempted by federal law and does not violate the Takings Clause, the Contracts Clause, or the Due Process Clause’s prohibition on vagueness.
Opinion at 2
What it means going forward
The ruling validates state laws like Louisiana Act 358 that ensure access to discounted medications through contract pharmacies, preventing pharmaceutical manufacturers from restricting distribution channels in ways that could limit patient access.