PhRMA Loses Another Legal Battle as Court Sides with Arkansas Over Drug Discount Program

Courthouse_iStock, Mariakray

Pictured: Signage above the entrance of a U.S. courthouse/iStock, Mariakray

The U.S. Court of Appeals for the Eighth Circuit on Tuesday ruled against industry group Pharmaceutical Research and Manufacturers of America, upholding an Arkansas law that enables healthcare providers to dispense drugs—obtained at a discounted price via a federal program—through certain pharmacies.

The ruling would also allow Arkansas to prohibit drugmakers from limiting the availability of their products on contract pharmacies and could potentially embolden other states to enact similar laws.

Arkansas participates in the Section 340B program. Established by Congress in 1992, the program incentivizes pharmaceutical companies to give healthcare providers discounts on certain products that are prescribed to patients who fall below the federal poverty level.

The healthcare providers, in turn, work with outside entities such as contract pharmacies to help ship and distribute the 340B medicines. The program has helped providers cut costs while also dispensing treatments closer to where the low-income patients live, according to the court ruling.

In 2020, pharma companies disallowed or otherwise limited their beneficiary healthcare providers from using outside pharmacies to dispense the 340B drugs. In response, Arkansas in 2021 passed Act 1103, which prevents drugmakers from blocking the providers from contracting with outside pharmacies.

Pharmaceutical Research and Manufacturers of America (PhRMA) sued Arkansas in the same year, claiming that Act 1103 Is unconstitutional because it is pre-empted by Section 340B itself as well as by the Federal Food, Drug, and Cosmetic Act.

The trade group’s legal challenge focused on the use of these outside pharmacies, which it claimed contravened Congress’ intention to create a “closed system” of drugmakers and healthcare providers. PhRMA also alleged that Act 1103, a state law, interferes with federal law.

However, the court in Tuesday’s 13-page ruling disagreed with the industry group, noting that the involvement of the contract pharmacies does not interfere with the 340B system. “Pharmacies do not purchase 340B drugs, and they do not receive the 340B price discounts,” the court said, pointing out that the covered healthcare providers still maintain the title over the discounted drugs.

“Act 1103 does not create an obstacle for pharmaceutical manufacturers to comply with 340B, rather it does the opposite: Act 1103 assists in fulfilling the purpose of 340B,” the court document stated. “PhRMA presents no evidence of an obstacle.”

The ruling comes amid an increasingly heated face-off between the federal government and the industry regarding drug pricing. At the center of the controversy is the Inflation Reduction Act’s Drug Price Negotiation Program, which empowers Medicare to negotiate prices for some of the most widely prescribed medicines.

Several pharma companies and industry groups, including PhRMA, have filed lawsuits seeking to block the program but have so far been unsuccessful. PhRMA’s own legal challenge was dismissed by a Texas judge last month.

Tristan Manalac is an independent science writer based in Metro Manila, Philippines. Reach out to him on LinkedIn or email him at tristan@tristanmanalac.com or tristan.manalac@biospace.com.

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