A recent federal court decision has dealt a significant setback to state efforts to expand 340B contract pharmacy access, marking a pivotal development in ongoing litigation over the scope of the 340B Drug Pricing Program. The ruling addresses contract pharmacy arrangements and the extent to which states can regulate manufacturer distribution obligations. In AbbVie Inc. et al. v. Wrigley et al., the U.S. District Court for the District of North Dakota invalidated House Bill 1473 (HB 1473), holding that the law impermissibly interferes with the federal 340B statutory framework.
The 340B Drug Pricing Program requires pharmaceutical manufacturers to provide discounted outpatient drugs to eligible healthcare providers, known as covered entities, which typically serve vulnerable patient populations.
HB 1473: State Efforts to Expand Contract Pharmacy Access
North Dakota’s HB 1473 sought to expand the distribution of 340B-discounted drugs to contract pharmacies. The law effectively required manufacturers to deliver discounted drugs not only to covered entities but also to their designated pharmacy partners, subject to enforcement penalties for noncompliance.
Manufacturers, including AbbVie and the Pharmaceutical Research and Manufacturers of America (PhRMA), challenged the statute, arguing that it unlawfully expanded their obligations under federal law and violated constitutional protections.
The Court’s Holding: Federal Preemption Limits State 340B Contract Pharmacy Laws
The court sided with the manufacturers, concluding that HB 1473 is preempted by federal law and therefore unenforceable.
Central to the court’s analysis was the distinction embedded in the 340B statute itself: manufacturers are required to offer drugs to covered entities at discounted prices, but the statute does not mandate distribution to contract pharmacies or impose specific delivery conditions.
The court rejected North Dakota’s characterization of HB 1473 as merely regulating drug delivery, finding instead that the law substantively altered the balance of obligations established under federal law.
Notably, the court expressed concern that the 340B program is being leveraged in ways that may benefit intermediaries (such as hospital systems and contract pharmacies) rather than the patients these programs were designed to serve. While not dispositive, the court’s commentary on issues outside the legal questions presented reflects the mounting criticism and unfavorable narrative taking hold against 340B-qualified providers.
Implications for Hospitals and Covered Entities
This ruling adds to the growing body of litigation addressing the role of contract pharmacies in the 340B program. While covered entities have relied heavily on these arrangements to expand access, courts may continue to limit the extent to which states can compel manufacturer participation.
North Dakota is one of several states that have enacted or considered legislation aimed at restricting manufacturer limitations on 340B distribution. Manufacturers, including AbbVie, have aggressively challenged these state laws on the same grounds outlined above. These cases have produced divergent decisions in both federal district and appellate courts, creating a circuit split that may ultimately require the Supreme Court’s intervention.
To ensure compliance in this evolving legal landscape, 340B-qualified providers must monitor these state laws and related court decisions impacting their enforceability.
This decision signals increasing judicial skepticism toward state efforts to expand 340B contract pharmacy access and may shape how courts evaluate similar laws nationwide.
How Frier Levitt Can Help
Frier Levitt’s Healthcare and Life Sciences practice group regularly counsels covered entities on 340B program compliance, contract pharmacy structuring, 340B litigation risk, and regulatory strategy.
As courts and regulators continue to scrutinize contract pharmacy arrangements, providers should proactively evaluate their current structures and assess potential exposure. Our team works with clients to navigate evolving legal requirements, respond to enforcement risks, and develop strategies to protect and sustain 340B program participation.
If your organization relies on contract pharmacy arrangements, now is the time to reassess your approach. Contact us to discuss how this ruling, and the broader legal landscape, may impact your operations.
[1] The consolidated cases are AbbVie Inc. et al. v. Drew Wrigley et al., No. 1:25-cv-00081; AstraZeneca Pharmaceuticals LP v. Drew Wrigley et al., No. 1:25-cv-00182; and Pharmaceutical Research and Manufacturers of America v. Wrigley et al., No. 1:25-cv-00204, all in the U.S. District Court for the District of North Dakota.
[2] 42 U.S.C. § 256b.
Frequently Asked Questions
What did the court decide about 340B contract pharmacies?
The court held that North Dakota’s law requiring manufacturers to distribute 340B drugs to contract pharmacies is preempted by federal law and therefore unenforceable.
Can states require manufacturers to deliver 340B drugs to contract pharmacies?
This decision suggests states may have limited authority to impose such requirements where they conflict with the federal 340B statutory framework.
What does this mean for 340B covered entities?
Covered entities should closely monitor ongoing litigation and reassess their contract pharmacy arrangements in light of evolving legal risks.
