Federal Government Backs Manufacturers in State Contract Pharmacy Litigation 

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On February 25, the Trump Administration filed amicus curiae briefs in the First and Tenth Circuits that sided with pharmaceutical manufacturers in their challenges to state laws restricting manufacturer limitations on covered entities’ use of contract pharmacy arrangements under the federal 340B drug discount program. The briefs, filed in cases challenging and respective contract pharmacy protection laws, argue that such state laws violate the Supremacy Clause of the U.S. Constitution by discriminating against manufacturers that participate in a federal program and by supplanting a congressionally authorized enforcement scheme.

Courts that have upheld state contract pharmacy laws—including the and Circuits—reasoned largely that because Congress was silent on contract pharmacy arrangements, states were free to regulate them. HHS’s amicus briefs directly counter this logic, arguing instead that congressional silence does not authorize states to impose additional burdens on federal program participants. Notably, prior federal litigation resulted in courts holding that HHS itself lacked authority to require manufacturers to ship drugs to an unlimited number of contract pharmacies.

The Administration’s new position—opposing state authority in this space—could result in a significant change in covered entities’ use of contract pharmacy arrangements. If neither HHS nor the states can dictate these arrangements, manufacturers would be left with broad discretion to set their own contract pharmacy terms, a vacuum they have already begun to fill through manufacturer-specific limitations. Whether HHS is signaling an intent to eventually occupy this space through new federal actions, or simply asserting that it is exclusively federal ground, remains to be seen. What is clear is that the federal government's intervention has sharpened a potentially emerging circuit split. The Fifth and Eighth Circuits have already upheld state contract pharmacy protection laws, and with the Trump Administration now presenting a new constitutional argument, the First and Tenth Circuits could reach the opposite conclusion—potentially setting the stage for Supreme Court review.

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