On December 9, 2024, the U.S. Supreme Court denied pharmaceutical industry group’s, PhRMA, petition for certiorari in Pharmaceutical Research and Manufacturers of America (PhRMA) v. McClain. PhRMA, a large pharmaceutical manufacturer advocacy group, petitioned the Supreme Court to review the decisions of the Eighth Circuit that previously upheld the Arkansas 340B Drug Pricing Discrimination Act (Act 1103). Act 1103 protects Covered Entities and their contract pharmacies from pharmaceutical manufacturer restrictions limiting the utilization of 340B contract pharmacies. Although the Supreme Court’s decision declining to review the lower court’s decision does not mean the Supreme Court necessarily agrees with the Eighth Circuit’s decision, it may signal an increase in further litigation surrounding these state contract pharmacy anti-discrimination laws.
Background
In March 2024, the United States Court of Appeals for the Eighth Circuit upheld Act 1103, which prohibited pharmaceutical manufacturers from restricting the provision of 340B drugs to covered entities who utilized contract pharmacies to dispense 340B-eligible prescriptions. Specifically, Act 1103, also known as the 340B Drug Pricing Nondiscrimination Act, effectively prohibited pharmaceutical manufacturers’ policies that (1) prohibited a pharmacy from contracting or participating with an entity authorized to participate in 340B drug pricing by denying access to drugs that are manufactured by the pharmaceutical manufacturer; or (2) denied or prohibited 340B drug pricing for an Arkansas-based community pharmacy that receives drugs purchased under a 340B drug pricing contract pharmacy arrangement with an entity authorized to participate in the 340B drug pricing.
In response to Act 1103, PhRMA initiated lawsuits and has argued at both the federal district court and court of appeals level that Act 1103 is preempted by federal law (namely, the 340B statute). The U.S. District Court for the Eastern District of Arkansas held that the Arkansas law was not preempted by the federal 340B statute, as no provision in the statute addressed the manner in which 340B drugs are acquired or delivered to covered entities, i.e. whether a covered entity uses a contract pharmacy to dispense 340B drugs or dispensed through an entity-owned pharmacy. The district court was then appealed to the Eighth Circuit, which ultimately affirmed the decision and similarly found no preemption.
In response, on July 31, 2024, PhRMA submitted a petition for a writ of certiorari to the Supreme Court. On December 9, 2024, the Supreme Court denied PhRMA’s writ, meaning that the ruling by the Eighth Circuit continues to stand and be in effect.
What Does This Mean?
While the Supreme Court’s decision to deny certiorari does not necessarily mean that the Supreme Court agrees with the Eighth Circuit’s opinion, rather, it means that the fewer than four Supreme Court Justices determined that the circumstances warranted further review by the Supreme Court. Normally, the Supreme Court will grant certiorari (or review) of cases involving circuit splits or broad issues of constitutionality.
Thus, in light of the Supreme Court’s denial of certiorari, Arkansas has effectively won its lawsuit, and the Eighth Circuit’s decision is directly binding and is enforceable, at least within the Eighth Circuit. However, because the Supreme Court did not issue an opinion, other courts outside of the Eighth Circuit could still reach other conclusions on the issue of preemption in other cases. That said, the Eighth Circuit’s decision may nevertheless be “persuasive authority” for other courts interpreting the same or similar issues.
What’s Next?
More than nine states have passed or have introduced legislation including 340B contract pharmacy protections. At the same time, PhRMA and individual drugmakers have filed a series of similar lawsuits in recent months over other state laws meant to ensure that hospitals can use contract pharmacies while participating in the federal 340B discount program. These lawsuits are currently pending in West Virginia, Maryland and Mississippi – none of which are located within the Eighth Circuit. If the courts in those cases reach different conclusions than in Pharmaceutical Research and Manufacturers of America v. McClain, it could set up the possibility of a “circuit split,” in which case the Supreme Court may be more inclined to take up an appeal to resolve inconsistent application of federal preemption rules.
Until then, given the Eighth Circuit’s acceptance of Act 1103 and the Supreme Court’s decision not to grant certiorari, more states are likely to attempt to enact similar protections for 340B contract pharmacy arrangements. At the same time, from the perspective of manufacturers challenging these laws, this decision puts more focus on federal legislative efforts and federal litigation (including the recently filed Johnson & Johnson v. Becerra).
How Frier Levitt Can Help
Frier Levitt attorneys have experience in assisting a variety of stakeholders navigate the 340B program, including developing policies and procedures, structuring contract arrangement with other stakeholders, and reviewing applicable manufacturer restrictions. Contact us today for assistance.
