Background
Congress created the Section 340B Drug Pricing Program to provide discounted drugs to covered entities serving low-income patients. While the federal statute regulates pricing and eligibility, it remains silent on how drugs must be dispensed. Some manufacturers restricted covered entities from using contract pharmacies, prompting Louisiana to enact Act 358 to ensure access to discounted medications through such pharmacies. Pharmaceutical manufacturers challenged the state law, alleging federal preemption and constitutional violations.
The court’s reasoning
The court applied a presumption against preemption, noting that public health and consumer protection are traditional state police powers. The court found that the federal Section 340B Program does not occupy the field of drug distribution logistics, leaving room for state supplementation. Regarding the Takings Clause, the court determined 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 federal pricing agreements did not address delivery logistics, and manufacturers entered the program with notice of potential state regulation. The court also rejected the vagueness challenge, finding the statute provided clear standards of conduct.
What it means going forward
The decision validates state laws that require pharmaceutical manufacturers to allow covered entities to use contract pharmacies for dispensing Section 340B drugs, ensuring continued access to discounted medications for vulnerable populations.