For more than three decades, Section 340B of the Public Health Service Act has required drug manufacturers to provide significant drug discounts to qualifying covered entities serving vulnerable populations. Because most covered entities historically lacked in-house pharmacies, the program increasingly came to depend on contract pharmacies that dispense 340B drugs on a covered entity’s behalf. Over the years, the number of contract pharmacies grew rapidly, and manufacturers responded by imposing unilateral restrictions on how many contract pharmacies they would supply.
Those restrictions triggered a wave of state laws protecting covered entities’ ability to partner with multiple contract pharmacies. To date, more than 20 states have enacted legislation prohibiting manufacturers from limiting the delivery of 340B drugs to contract pharmacies partnering with a covered entity. Missouri’s Senate Bill 751 (S.B. 751) is one of them.
What Senate Bill 751 Does
S.B. 751 bars a manufacturer from denying, restricting, or prohibiting, directly or indirectly, the acquisition or delivery of a 340B drug to a pharmacy that is under contract with, or otherwise authorized by, a Missouri covered entity, unless the U.S. Department of Health and Human Services (HHS) itself prohibits the delivery. A violation is treated as an unlawful trade practice under Missouri law. In practical terms, the statute requires manufacturers to ship 340B drugs to all of a covered entity’s contract pharmacies, overriding manufacturer policies that cap deliveries at a single outside pharmacy.
Why Manufacturers and Covered Entities Disagree Over Contract Pharmacies
States and covered entities argue these laws are critical to preserving the original intent of the 340B program; namely, providing access to care for low-income and rural patients who might otherwise go without. They contend that these manufacturer restrictions significantly hamper covered entities’ ability to access the 340B discounts Congress created specifically for this purpose.
Manufacturers see it differently. They argue that Section 340B is silent on drug delivery and therefore preserves a manufacturer’s ability to impose reasonable delivery conditions. They contend that the “replenishment model” used by contract pharmacies invites duplicate discounts and diversion, and that laws prohibiting manufacturers from imposing contract pharmacy limitations burden interstate commerce and intrude on a federally governed program. Novartis advanced all of these theories before the U.S. Court of Appeals for the Eighth Circuit in its challenge to Missouri’s S.B. 751.
The Eighth Circuit Sides With Missouri
On July 1, 2026, a panel of three judges appointed to the Eighth Circuit unanimously upheld a lower court’s denial of Novartis’s motion for a preliminary injunction preventing S.B. 751 from taking effect. Generally, a party seeking an injunction must demonstrate (among other things) they are likely to succeed on the merits of their challenge. Here, Novartis argued that S.B. 751 violated the Dormant Commerce Clause and was therefore unconstitutional because it attempted to regulate out-of-state transactions. Novartis further argued that S.B. 751 was preempted by Section 340B, which according to Novartis, implicitly allowed manufacturers to limit the delivery of 340B drugs to a single contract pharmacy. The Eighth Circuit found neither argument persuasive.
In particular, the panel concluded that S.B. 751 was narrowly tailored to regulate only the delivery of 340B drugs to contract pharmacies located in Missouri. Any spillover effect on out-of-state dealings is incidental and therefore permissible under established law. The Court also rejected Novartis’s preemption argument, concluding that Section 340B sets the price of drugs, but says nothing about delivery of those drugs to contract pharmacies. According to the panel, S.B. 751 “regulates the delivery of 340B drugs in a manner consistent with federal law and does not stand as an obstacle to the drug pricing objectives of Section 340B.”
It is important to note, however, that this decision should not be construed as a final ruling on the merits of S.B. 751. Instead, it simply affirms the lower court’s denial of Novartis’s request for a preliminary injunction, which is reviewed under the highly deferential abuse-of-discretion standard. The case will proceed in the lower court until the case is dismissed or reaches a final ruling on the merits.
The 340B Legal and Regulatory Landscape Continues to Evolve
The Eighth Circuit’s decision is significant not only for Missouri but also because it adds to the growing body of appellate authority that may influence challenges to similar laws enacted in other states. Whether manufacturers can limit the delivery of 340B drugs to contract pharmacies is merely one dispute in an ongoing feud between manufacturers and covered entities. The 340B landscape continues to evolve on several fronts, all at once. This includes, for example, manufacturer demands for covered entity claims data (and the intense debates around those demands); the steady march of state 340B legislation; proposed federal rebate models; and emerging litigation alleging that certain program participants have quietly siphoned off 340B savings owed to covered entities. Meanwhile, HRSA has largely declined to issue any kind of binding, durable guidance that might bring order to what has become the “Wild West” of 340B.
For manufacturers, covered entities, pharmacies, and their advisors, the only safe assumption is that the landscape will keep shifting. Stakeholders should continue monitoring legislative, regulatory, and judicial developments closely to keep their policies and practices current. In the world of 340B, today’s settled expectation may become tomorrow’s litigation.
How Frier Levitt Can Help
The legal and regulatory landscape surrounding the 340B Program is evolving rapidly, particularly as states enact new contract pharmacy laws and litigation challenging those laws moves through the courts. Frier Levitt regularly advises covered entities, contract pharmacies, manufacturers, and other healthcare stakeholders on 340B compliance, regulatory developments, contract pharmacy arrangements, and litigation affecting the program. Whether you are evaluating the impact of new state legislation or navigating ongoing 340B disputes, our team can help you assess risk and develop practical legal strategies.
