Drugmakers sue to block Missouri law on federal prescription discounts

Three major pharmaceutical companies and their national lobbying organization are suing Missouri to block enforcement of a new state law requiring them to give medical providers unlimited access to discounted drugs for their pharmacies.

In four federal lawsuits filed over the past month, Novartis, AstraZeneca, Abbvie and PhRMA, the lobbying arm of the pharmaceutical industry, argue that Missouri lawmakers unconstitutionally intruded into interstate commerce with the bill passed this year.

Under the bill, drugmakers must accept orders to deliver medications to providers eligible for discounts under the 340B program, named for the section of law where it is authorized. The bill allows eligible providers to have an unlimited number of contracts with pharmacies to dispense their prescriptions of drugs purchased under the program.

“Under the Supremacy Clause of the United States Constitution, Missouri has no authority to define who has access to 340B-priced drugs,” states the lawsuit filed last week by PhRMA in the Western District of Missouri.

The law took effect Wednesday, Aug. 28. The plaintiffs in each case have asked for a preliminary injunction to block enforcement, but no hearings on the requests have been scheduled and only one case, filed Aug. 2 by Novartis, has had enough activity for the judge to schedule any proceedings.

Abbvie went first, filing its lawsuit July 22 in the Eastern District — 10 days after Gov. Mike Parson declined to sign the bill and instead allowed it to become law despite his misgivings. The other three cases are filed with the Western District, which includes Jefferson City.

The lawsuits name Attorney General Andrew Bailey and members of the state Board of Pharmacy, which is responsible for enforcing the law. The board is given authority to investigate violations of the law and the attorney general has enforcement powers through the state Merchandising Practices Act.

“It is difficult to convincingly argue that doing what a federal program requires is an irreparable harm,” Maria Lanahan, deputy solicitor general in the attorney general’s office, wrote in a filing arguing against a preliminary injunction in the Novartis lawsuit. “To the contrary, when Novartis complies with S.B. 751, it is helping covered entities that serve vulnerable populations.”

Bailey’s office did not respond to an email seeking comment on the cases.

The board is relying on Bailey to respond to the lawsuit. The law is self-enforcing and the board could write rules about how it is to be followed, executive director Kimberly Grinston said.

“The board does not have a timeline to promulgate rules and has not made a decision on whether rules would be promulgated,” she said.

The Missouri Hospital Association and the Missouri Primary Care Association have asked to intervene in the Novartis lawsuit and will likely seek to join the other three, hospital association spokesman Dave Dillon said Monday, Aug. 26.

“We are evaluating each case and intend to reinforce the work done by the General Assembly on behalf of Missouri’s hospitals, other providers and the communities they serve,” Dillon said.

The 340B program was created in 1992. It had two components — drug manufacturers had to deliver their products at a discount to eligible providers and eligible providers could only use the program to provide prescriptions to patients they treated directly.

Eligible providers included children’s hospitals, as well as hospitals that were sole providers in their community or designated “critical access hospitals” by providing care that would otherwise be absent, and those serving large numbers of indigent patients known as “disproportionate share hospitals”.

Other qualifying providers include federally qualified health care centers — clinics that receive grants to support operations so they can base charges on ability to pay — as well as clinics that serve AIDS patients, black lung victims and other debilitating diseases.

The use of contract pharmacies started in 1996, when the U.S. Department of Health and Human Services began allowing one contractor per provider as recognition that many providers did not have in-house pharmacies. But a change to allow unlimited contracting increased the number of contract pharmacies from 2,321 in 2010 to 205,340 in 2024, according to data from PhRMA provided to The Independent in June.

Nationally, pharmaceutical manufacturers sold nearly $100 billion in discounted drugs in 2021 and 2022. Discounts averaged 60% from regular wholesale prices, the lobbying organization stated.

The pharmaceutical companies focus their criticism on the disproportionate share hospitals, who often contract with for-profit pharmacies to dispense the drugs. Those hospitals account for about 80% of all drugs purchased through the 340B program, $41.8 billion in 2022 and $34.3 billion the year before.

Pharmaceutical companies complain that the discounts are rarely passed on to patients. Instead, insurance companies and consumers pay retail prices and the extra profit is often split between the pharmacy and the provider.

“Make no mistake, the boom in contract pharmacies has been fueled by the prospect of outsized profit margins on 340B-discounted drugs,” AstraZeneca’s lawyers wrote in the complaint filed last week. “In short, the widespread proliferation of contract pharmacy arrangements since 2010 has transformed the 340B program from one intended to assist vulnerable patients into a multi-billion-dollar arbitrage scheme.”

The drugmakers have fought the expansion of contract pharmacies in a variety of ways. When Novartis sought in 2020 to limit the contracts to pharmacies within 40 miles of an eligible provider, the U.S. Department of Health and Human Services issued a notice that it considered the limit a violation of the program’s rules.

An advisory opinion on contracting, later withdrawn, said the 340B program required delivery to a pharmacy on “the lunar surface, low-earth orbit, or a neighborhood. …”

The 3rd U.S. Circuit Court of Appeals in Pennsylvania ruled in January 2023 in a case against the federal agency that pharmaceutical companies could impose limits on the number of pharmacies they would allow to purchase the discounted drugs.

After the 2023 ruling, Novartis tightened its rules to allow only one contracted pharmacy per covered provider, but only if the provider did not have an in-house pharmacy. Other manufacturers have imposed variations on the Novartis policies.

State efforts to counter the limits have ramped up in the past two years. Missouri is one of eight states to pass laws requiring drugmakers to deliver discounted medications to contract pharmacies.

Arkansas was one of the first. In March, the 8th Circuit Court of Appeals in St. Louis upheld the Arkansas law requiring drugmakers to allow covered providers to have an unlimited number of contract pharmacies.

In the motion to dismiss the Novartis lawsuit, the Missouri Attorney General’s Office relied heavily on that ruling, writing that it shows federal law does not prevent Missouri from passing a similar law.

The four lawsuits use a variety of legal theories to assail Missouri’s new law. Along with allegations of interfering with interstate commerce and regulating in an area reserved for federal action, the Abbvie lawsuit argues that its property rights are being violated.

“These abuses of the federal 340B program raise obvious concerns because the U.S. Constitution prohibits the government from forcing the transfer of property at confiscatory prices to private parties for their own private benefit,” the lawsuit states.

In the filing seeking to intervene in the Novartis case, the hospitals and primary care associations argued that the revenue from profits on 340B medications are essential support for their operations.

“Reducing access to those savings,” the filing states, “means hospitals are unable to underwrite critical but under-reimbursed services lines.”

Missouri Independent is part of States Newsroom, the nation’s largest state-focused nonprofit news organization.