On September 12, 2025, the United States Court of Appeals for the Fifth Circuit in AbbVie, Inc v. Fitch, upheld the lower court’s denial of a group of pharmaceutical manufacturers’ motion for a preliminary injunction as to Mississippi’s 340B anti-discrimination law, H.B. 728. This decision serves as an indicator to the potential viability of the state regulation of distribution channels for 340B drugs.
Background on H.B. 728
Generally, H.B. 728. prohibits drug manufacturers from denying, restricting, prohibiting, or otherwise interfering with a 340B Covered Entity’s use of contract pharmacies for dispensing eligible 340B prescriptions. In Fitch, manufacturers argued that H.B. 728 was unconstitutional on two grounds: (1) the law constituted a physical or regulatory “taking” by the government; and (2) the state law was preempted by federal law, i.e. the federal 340B statute.
Takings Claims
As to the takings claim, the Fifth Circuit held that no physical taking occurred because H.B. 728 does not impose an obligation on pharmaceutical manufacturers to transfer or sell their drugs to anyone, nor does the state law require manufacturers to sell discounted drugs in larger quantities than the federal 340B statute otherwise requires. Moreover, the Fifth Circuit did not find a regulatory taking, because although H.B. 728 could increase the number of drugs for which the manufacturer would have to provide the 340B discount (which would cut into the manufacturers’ profits), the state law: (1) did not interfere with the manufacturers’ reasonable investment-backed expectations and (2) was passed to promote important public interests in providing increased access to health care and safety net provider expansion.
Preemption Claims
As to the federal preemption claims, the Fifth Circuit found that there was no field preemption, as the 340B statute is not so pervasive that it left no room for state supplementation. And, the Fifth Circuit similarly found no conflict preemption, as H.B. 728 only requires manufacturers to provide 340B discounted drugs to pharmacies that maintain contract pharmacy relationships with 340B covered entities. Further, the state law does not conflict with federal enforcement, as the state law only penalizes manufacturers’ interference with 340B drug distribution which does not “concern the same subject matter” as the 340B statute (nor does it conflict with it).
Court’s Commentary
Although the Fifth Circuit disagreed with all of the manufacturers’ key arguments, the Fifth Circuit did recognize that an expansion of contract pharmacy use could cause 340B Covered Entities to place larger orders for 340B drugs than they are actually entitled to in order to increase Covered Entity profits. However, the Fifth Circuit highlighted that this is a mere “bug” of the law, and that the manufacturers have failed to provide evidence to support such claims. This commentary by the Fifth Circuit could potentially serve as an acknowledgement of the court’s openness to manufacturer challenges of state regulation of the 340B program, and perhaps, the 340B program and use of contract pharmacies in general.
How Frier Levitt Can Help
Frier Levitt attorneys have experience assisting 340B covered entities and contract pharmacies navigate 340B policies and procedures based on HRSA rules, state legislation, manufacturer policies, and current and pending litigation. 340B stakeholders are encouraged to consult with qualified counsel as to how recent legislative and litigation updates can impact their models. Contact us today to speak with an attorney.
