This week, Powers won an important case in the Eighth Circuit Court of Appeals that will protect access to 340B-discounted drugs in Arkansas and potentially many other states.  The Eighth Circuit affirmed the federal district court’s decision upholding Arkansas Act 1103, which prohibits drug companies from refusing to ship 340B-discounted drugs to pharmacies under contract with health care providers. Powers represents Community Health Centers of Arkansas (CHCA) and Piggot Community Hospital (PCH), which intervened in the case to defend Arkansas Act 1103.

The 340B program requires drug companies to provide discounted drugs to certain health care providers, known as “covered entities,” as a condition of the manufacturers’ drugs being covered by Medicaid and Medicare Part B.  Since 1996, covered entities have been able to order discounted drugs for shipment to community pharmacies, where they are dispensed to the covered entities’ patients.  In 2020, manufacturers began restricting or denying access to 340B discounted drugs shipped to contract pharmacies.  In response, Arkansas enacted Act 1103, which requires pharmaceutical manufacturers to deliver 340B drugs to 340B contract pharmacies to dispense on behalf of covered entities.

In response, the Pharmaceutical Research and Manufacturers of America (PhRMA) sued Arkansas to invalidate the law, arguing principally that the 340B statute preempts Act 1103.  After CHCA and PCH intervened, the district court granted Powers’ motion for summary judgment and upheld the law.  PhRMA appealed to the Eighth Circuit.  Powers principal Ron Connelly argued the case before the Eighth Circuit on behalf of CHCA and PCH.

The Eighth Circuit held that Act 1103 is not preempted by the federal 340B statute, stating that Congress’s silence on pharmacies and 340B drug delivery in the 340B statute demonstrates that it did not intend to preempt state drug distribution laws. The court rejected PhRMA’s claim that Act 1103 adds contract pharmacies as covered entities, clarifying that pharmacies do not purchase 340B drugs or receive discounts.

Furthermore, the court affirmed that Act 1103 is not an obstacle to the 340B program; instead, it assists in fulfilling its purpose. Lastly, the court concluded that Act 1103 is not preempted by the Federal Food, Drug, and Cosmetic Act (FFDCA), as covered entities must ensure that their contracted pharmacies are authorized to dispense FFDCA-regulated drugs.

Act 1103 is administered by the Arkansas Insurance Department, which is now free to enforce the Act. This should provide needed relief to Arkansas-covered entities that depend on 340B discounts to serve vulnerable patients.

Ron Connelly, said the opinion is an “important victory for safety net health care providers and the communities they serve.”

“Since enactment of 340B, contract pharmacies have been regulated by state law,” Connelly said in a statement to Bloomberg Law, “The court’s decision supports the longstanding framework of the 340B program and foundational principles of federalism.”

In addition to Mr. Connelly, Powers attorneys Bill von Oehsen, Barbara Straub Williams, Peggy Tighe, Mark Ogunsusi, Fernando Montoya, and Hannah Hauer represented CHCA and PCH.

Read more about the case on Bloomberg Law here.

The case is Pharm. Research and Mfrs of America v. McClain, 8th Cir., No. 22-3675., opinion 3/12/24.

Powers is a renowned Washington, DC-based law and government relations firm specializing in healthcare and regulatory matters, education, and the law of tribal nations. Powers’ 340B program practice has been at the forefront of defending and advancing the 340B program, advocating for the needs of safety net providers and their patients for several decades. Powers assists 340B covered entities and other 340B stakeholders – including Ryan White Clinics, Federally Qualified Health Centers, children’s hospitals, disproportionate share hospitals, rural hospitals, retail and specialty pharmacies and contract pharmacy administrators. William von Oehsen helped draft the original 340B legislation as well as significant amendments to the statute under the Affordable Care Act of 2010.

Leave a Reply