Pharmaceutical giant sues Kansas for law supporting 340B discounted drugs in pharmacies

A major pharmaceutical manufacturer is suing Kansas Attorney General Kris Kobach to prohibit his office from enforcing violations of the Kansas Consumer Protection Act on drug manufacturers enrolled in Medicaid’s 340B drug pricing program.

The budget provision didn’t have a fiscal impact, costing $0 to the state, but its language did direct the Attorney General’s Office to take action against drug manufacturers that “deny, restrict, prohibit or otherwise interfere” with the procurement of 340B subsidized drugs to pharmacies that contract with “covered entities.”

Abbvie, the plaintiff and sixth largest biomedical company by revenue, is asking the U.S. District Court for the District of Kansas to vacate the language in the budget bill that puts drug manufacturers at risk. The company alleged that “covered entities,” which include hospitals and health centers that treat low-income patients, have increasingly used off-site pharmacies to distribute medication, often for retail prices.

“Instead of serving the covered entities’ uninsured and low-income patients, the for-profit contract pharmacies acquire manufacturers’ drugs at the federally discounted price, sell them to patients (including indigent patients) at full price, and pocket the difference,” Abbvie said in court documents.

Abbvie announced in December 2021 that it would not sell 340B-discounted products to contract pharmacies unless the companies submitted data to the company. Advocates for the 340B program claimed Abbvie’s request would violate federal law and increase drug prices.

“The federal government has made it clear that drug companies cannot impose unilateral conditions on the 340B drug discounts that the law mandates. Drugmaker demands for millions of patient drug claims through a process that exposes hospitals to potential federal privacy law violations and other legal risks is a prime example of an unlawful condition,” Maureen Testoni, president and CEO of 340B Health, said in a statement.

Abbvie: Provision deprives company of property without due process

Abbvie said the provision would deprive drug manufacturers of property without due process by forcing 340B participating manufacturers to sell to groups that use contract pharmacies. It also claims the federal government’s policy on the 340B program supersedes the state’s rule.

“S.B. 28 impermissibly injects the Attorney General of Kansas, armed with state law penalties and other remedies, into what Congress intended to be an exclusively federal scheme,” the lawsuit says.

They also claimed the statute is unconstitutionally vague for not clearly defining what “interfering” with contract pharmacies means, or indicating what is prohibited under law.

Lastly, they say the bill violates Kansas’s one-subject law, which limits each bill to contain no more than one subject. The one-subject rule, however, does have a carveout for appropriation bills like the one Abbvie is challenging.

What have the courts ruled in the past?

Kansas’s insertion of consumer protection law onto drug manufacturers that provide 340B-discounted drugs is similar to what other states have adopted. In May 2021, Arkansas passed a law prohibiting drug manufacturers from interfering in a covered entity’s agreement with a contract pharmacy.

A group called the Pharmaceutical Research and Manufacturers Association challenged the law immediately, and sued later that year saying that federal statutes supersede Arkansas’ law. The case made it up the Federal Eighth Circuit Court, which ruled against the pharmaceutical companies.

But manufacturers have had some success in court. In January 2023, the Third Circuit court ruled that government agencies don’t have the authority to demand drugmakers deliver to contracted pharmacies.

This article originally appeared on Topeka Capital-Journal: Pharmaceutical giant sues Kansas for law supporting 340B discounted drugs in pharmacies