A coalition of major pharmaceutical manufacturers and an industry trade organization have dropped a lawsuit challenging a Kansas law barring them from limiting discounts to pharmacies operating under a federal drug discount program.
Abbvie Inc., Novartis, AstraZeneca and the Pharmaceutical Research and Manufacturers of America filed a legal challenge last summer to a budget proviso requiring drug manufacturers to sell outpatient drugs at a discount to safety-net providers and certain hospitals with low-income patients.
Last month, the pharmaceutical companies and trade group reached an agreement with the state to dismiss the case without prejudice, meaning it could still return in the future. They agreed in their stipulated dismissal that there was no controversy to resolve.
The lawsuit focused on a budget proviso adopted last year that would have required drug manufacturers to honor 340B pricing at contract pharmacies under the Kansas Consumer Protection Act.
The litigation asked a court to stop the state from enforcing violations of the law by drug manufacturers enrolled in the federal drug discount program.
The 340B Drug Discount Program enables eligible hospitals and other safety-net providers to purchase outpatient prescription drugs at discounted prices.
The 340B statute requires the U.S. Health and Human Services secretary to enter into purchase price agreements with drug manufacturers who participate in federal health care programs.
The agreements require manufacturers to offer to sell certain outpatient prescription drugs at a ceiling price, which is calculated based on a statutory formula.
During the of summer 2020, the Congressional Research Service reported that some drug manufacturers began announcing restrictions on 340B covered entities that distribute 340B drugs using contract pharmacies.
“These restrictions vary, but they generally aim to limit covered entities to distribution to one contract pharmacy,” the research service reported.
“Manufacturers say that the restrictions are necessary to prevent duplicate discounting and unlawful distribution of 340B drugs to nonpatients…, arguing that such practices have grown more prevalent in recent years” and they aren’t are policed by the government.
The Kansas Hospital Association had supported the budget proviso, accusing drug manufacturers of trying to decimate the 340B program by limiting the number of pharmacies in which a hospital may contract.
“The actions taken by drug manufacturers are jeopardizing the ability of Kansans to access needed prescriptions and other vital health services,” Chad Austin, president and CEO of the Kansas Hospital Association said in a opinion piece last summer.
There have been a growing number of lawsuits brought by the pharmaceutical industry against state laws that require drugmakers to discount drugs dispensed by pharmacies that contract with hospitals and clinics serving the less affluent, according to Reuters.
In the first half of last year, Reuters reported there were at least four lawsuits that had been filed contesting state laws requiring drugmakers to offer those type of discounts on drugs dispensed by pharmacies.
In the lawsuit filed against Kansas, the pharmaceutical industry claimed that the budget proviso was preempted by federal law, was an unconstitutional taking of property rights under the U.S. Constitution, was unconstitutionally vague and violated the Kansas Constitution’s single-subject law.
In a seeking a judgment in its favor, the state argued that the proviso in the budget presented no legal controversy to settle.
The state argued that budget proviso did not address the price or volume at which a 340B drug can or must be sold nor did it address the distribution of 340B drugs in Kansas or elsewhere.
The state said the budget proviso only appropriated money and directed the attorney general to enforce the Kansas Consumer Protection Act.
“Plaintiffs cannot, however, run afoul of (the proviso) as that the appropriation bill points to the (consumer protection act) and plaintiffs do not allege that they are committing (or intend to commit) deceptive or unconscionable acts or practices,” the state argued.
The state argued that the court should pay attention to what the budget proviso did and didn’t do.
In short, the budget proviso appropriated money to the Kansas attorney general and directed him to enforce the consumer protection law this year and next, the state argued.
The state’s consumer protection law “neither requires plaintiff manufacturers to sell their product to any particular consumer nor does it forbid the sale of their product to any particular consumer,” the state argued.
“The denial, restriction, prohibition, or interference with the acquisition of a 340B drug by or delivery of a 340B drug to a pharmacy that is under contract with a 340B-covered entity is simply not part” of the consumer protection law, the state contended.
