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Federal courts are divided over whether states can stop prescription drug manufacturers from limiting pharmacy access to discounted drugs, a dispute that could reach the Supreme Court and affect medication access for older adults with low incomes.
Congress enacted the 340B Prescription Drug Pricing Program, codified at 42 U.S.C. § 256(b), to require participating drug manufacturers to sell covered outpatient drugs to qualifying safety-net providers, known as “covered entities,” at or below a statutory ceiling price. Covered entities include rural clinics, community health centers, not-for-profit hospitals, and other federally funded clinics serving low-income, uninsured, underinsured, and rural communities. See AbbVie, Inc. v. Fitch, 152 F.4th 635, 639 (5th Cir. 2025); 42 U.S.C. § 256(b). Drug manufacturers take part in the 340B program as a condition of participating in Medicaid and Medicare Part B. 340B discounts are substantial, often reducing drug acquisition costs by 20 to 50 percent. See Amgen, Inc. v. Kennedy, No. 24-3571 (JEB), 2025 WL 2206948, at *1 (D.D.C. Aug. 4, 2025). The program helps uninsured and underinsured patients access lower-cost medications. It also allows covered entities to use the difference between discounted acquisition costs and insurer reimbursements to support access to medication, uncompensated care, and other safety-net services. Id. at *1.
Because many covered entities do not operate their own pharmacies, they often contract with outside pharmacies to dispense covered medications to eligible patients. In 2010 guidance, the Department of Health and Human Services (HHS) recognized that covered entities may use more than one contract pharmacy to deliver 340B drugs. 75 Fed. Reg. 10272, 10277 (Mar. 5, 2010). Covered entities responded by contracting with more pharmacies. Contract pharmacies can be especially important for patients who rely on nearby pharmacies because of transportation barriers, rural access gaps, disability, mobility limitations, or chronic health needs. As one court noted, “[o]ver 70% of patients choose their pharmacy based on its location.” Brandywine Hosp., LLC v. CVS Health Corp., No. 23-1458, 2026 WL 607526, at *1 (E.D. Pa. Mar. 3, 2026).
In 2020, several drug manufacturers responded to the growth in contract-pharmacy arrangements by restricting the number of contract pharmacies that could receive 340B drugs and how far those pharmacies could be from a covered entity. See Pharm. Rsch. & Manufacturers of Am. v. Frey, No. 25-CV-00469-JCN, 2026 WL 184504, at *3 (D. Me. Jan. 23, 2026). HHS opposed those restrictions and, in December 2020, issued an advisory opinion stating that drug manufacturers were required to deliver 340B drugs to contract pharmacies. See U.S. Dep’t Health & Hum. Servs., Adv. Op. 20-06, Contract Pharmacies Under the 340B Program (Dec. 30, 2020). Although HHS later rescinded the advisory opinion, it continued to pursue enforcement consistent with that view. The U.S. Courts of Appeals for the Third and D.C. Circuits rejected HHS’s position, holding that the 340B statute does not expressly require drug manufacturers to deliver discounted drugs to an unlimited number of contract pharmacies and that HHS lacked authority under the current statutory text to require otherwise. See Sanofi Aventis U.S. LLC v. U.S. Dep’t of Health & Hum. Servs., 58 F.4th 696, 701, 703 (3d Cir. 2023), judgment entered, No. 21-3167, 2023 WL 1325507 (3d Cir. Jan. 30, 2023); Novartis Pharms. Corp. v. Johnson, 102 F.4th 452, 459 (D.C. Cir. 2024). While these decisions limited HHS’s enforcement authority, they did not resolve a separate question that has now divided the federal courts: whether states may protect contract-pharmacy access through their own state laws.
In response to drug manufacturer-imposed restrictions, several states enacted laws to protect covered entities’ contract-pharmacy arrangements by prohibiting manufacturers from limiting acquisition or delivery of 340B drugs to pharmacies that contract with covered entities. Colorado’s 340B Contract Pharmacy Protection Act is one example. See S. Bill 25-071 § 6-29-105(1) (Co. 2025). At least 21 states have passed laws like this one, each safeguarding the delivery of discount medicine to contracted pharmacies and ensuring access to essential, sometimes lifesaving, medications.
Drug manufacturers have challenged these state laws as preempted by federal law, creating a meaningful circuit split. Preemption means that federal law overrides state law. Manufacturers argue that because Congress did not require delivery to unlimited contract pharmacies, states cannot impose that obligation. See, e.g., Pharm. Rsch. & Manufacturers of Am. v. McCuskey, 171 F.4th 675, 692 (4th Cir. 2026), reh’g en banc granted, 176 F.4th 830 (4th Cir. 2026). States and covered entities respond that pharmacy access and drug distribution are traditional areas of state regulation, and that the 340B statute’s silence on contract-pharmacy delivery leaves room for state regulation. See, e.g., AbbVie, Inc. v. Murrill, No. 24-30645, 2026 WL 1947948, at *5-9 (5th Cir. July 6, 2026).
The Fifth and Eighth Circuits have upheld state protection laws. The Fifth Circuit upheld Mississippi’s and Louisiana’s laws against preemption and related constitutional challenges. See AbbVie, 152 F.4th at 642-43; AbbVie, No. 24-30645 at *5-13. The Eight Circuit similarly upheld Arkansas’s Act 1103, reasoning that 340B regulates pricing, eligibility, duplicate discounts, diversion, and compliance, but does not bar states’ regulation of pharmacy delivery. Pharm, Rsch. & Manufacturers of Am. v. McClain, 95 F.4th 1136, 1146 (8th Cir. 2024), cert. denied, 145 S. Ct. 768 (2024). By contrast, a Fourth Circuit panel in McCuskey held that West Virginia S.B. 325 was likely preempted because it imposed additional 340B-specific obligations on manufacturers and altered the bargain Congress struck in the federal statute. See McCuskey, 171 F.4th at 695. The Fourth Circuit has since granted rehearing en banc, meaning the full court will reconsider the case, and the panel decision is no longer the court’s final word. Id. The en banc court could eliminate the circuit split by aligning with the Fifth and Eighth Circuits or affirm the panel’s preemption analysis and deepen the conflict. Supreme Court intervention is likely in the latter scenario. If the Fourth Circuit ultimately holds West Virginia’s law is preempted by federal law while the Fifth and Eighth Circuits continue to uphold similar laws, drug manufacturers, covered entities, pharmacies, and patients will face different rules depending on where they reside. That inconsistency in a national federal program could make the issue a strong candidate for Supreme Court review.
The outcome of this issue matters for older adults with low incomes. Roughly 2.9 million adults age 65 and older receive care from health centers participating in the 340B program, and many rely on those providers for medication access and related support. If courts invalidate state contract-pharmacy protections, drug manufacturers may have greater ability to limit deliveries to contract pharmacies, reducing pharmacy access points and weakening safety-net provider resources. For older adults managing chronic conditions, multiple medications, transportation barriers, or rural access gaps, the consequences could include delayed prescriptions, longer travel distances, reduced medication support, and fewer services from trusted providers. At bottom, the 340B contract-pharmacy dispute is not just a technical preemption fight; it is a fight over whether states may protect access to medications for safety-net patients, including older adults with limited incomes who already face serious barriers to health care.
2026 Supreme Court Preview
The Supreme Court often hears cases affecting the lives of people over 50. Read our review of key cases coming before the Court this year and likely to come in the future.
2026 Supreme Court Preview
The Supreme Court often hears cases affecting the lives of people over 50. Read our review of key cases coming before the Court this year and likely to come in the future.