Louisiana Attorney General Liz Murrill
NEW ORLEANS – Louisiana Attorney General is praising a federal appeals court ruling against several large drug companies trying to strike down a state law limiting drug prices to rural and low-income patients.
The Fifth Circuit Court of Appeals ruled February 9 that federal law does not supercede Louisiana Act 358.
“The court unanimously rejected Big Pharma’s challenge to Louisiana Act 358 (The Defending Affordable Prescription Drug Costs Act) – a law that protects the delivery of medicine to rural and low-income patients,” Murrill said of the ruling. “This is a great win for the people of Louisiana.”
Act 358, which was passed in 2023, prohibits companies from reimbursing certain pharmacies and hospitals, called “covered entities” under federal law, at a rate lower than other providers. These “covered entities” include federally qualified health centers, family-planning projects, state-operated AIDS facilities, black lung clinics, and other safety-net institutions that serve low income and uninsured patients.
PhRMA, AstraZeneca and AbbVie all sued Murrill in 2023, saying the federal 340B Program preempted Louisiana’s law. The plaintiffs also said the state law was unconstitutionally vague, that it violated the Contracts Clause and that it constituted a taking under the Fifth Amendment. The federal court ruled for the state in September 2024, and the drug companies appealed to the Fifth Circuit.
The federal 340B Program requires drug manufacturers that participate in Medicaid to offer to sell outpatient prescription drugs to eligible “covered entities” at discount prices. The law allows covered entities to sell these drugs to their patients as though they paid a higher price, thereby generating “340B savings.”
In its unanimous ruling, the court said Louisiana law’s intent was the same as the federal one, which is to “stretch scarce healthcare dollars and expand access to essential medications for vulnerable communities.”
“In practice, many covered entities lack the resources to operate inhouse pharmacies,” the opinion states. “To bridge that gap — particularly in rural and underserved areas — they purchase discounted drugs and partner with independent contract pharmacies to dispense them.
“Some manufacturers, however, have bristled at that arrangement, characterizing it as an ‘arbitrage opportunity’ for pharmacies rather than a lifeline for patients. Acting on that view, certain manufacturers adopted policies restricting covered entities’ use of contract pharmacies. …
“States regulate pharmacies — and the distribution of drugs to those pharmacies — every day. Act 358 fits comfortably within that tradition. …
“We hold that it is not preempted by federal law and does not violate the Takings Clause, the Contracts Clause or the Due Process Clause’s prohibition on vagueness.”
