Mid-Atlantic Health Law TOPICS

Maryland has become one of the most recent battleground states for litigation regarding the federal 340B drug program initiated by pharmaceutical companies looking to curb the discounts they argue have expanded far beyond the program’s original intent. 

The 340B Program

The 340B program allows hospitals and other covered providers to purchase outpatient drugs from pharmaceutical manufacturers at discounted rates. The covered providers maintain that such discounts are necessary to offset the expense of caring for low-income communities, while the pharmaceutical companies suggest that the discounts the program requires them to provide have resulted in billions of dollars of lost profit while many providers have pocketed the drug cost savings rather than passing them on to patients and insurers.

Contract Pharmacies

The Maryland lawsuit, filed by three pharma-ceutical companies and a pharmaceutical trade group, focused on a Maryland law that requires manufacturers who participate in the 340B program to continue to deliver discounted drugs to “contract pharmacies,” which are used by facilities participating in the 340B program treating low-income or uninsured patients that do not have in-house pharmacies. 
 
Contract pharmacies have been a main target of 340B critics as their numbers have sharply increased over the last 15 years. In 2010, there were just under 2,000 contract pharmacies compared to the 33,000 in existence by 2020. 

In recent years, drug manufacturers have informed 340B participants that they would drastically limit drug shipments to these contract pharmacies. Maryland is one of several states that passed a law requiring pharmaceutical companies to continue to deliver drugs to contract pharmacies. 

Courts have, thus far, viewed these laws favorably. While the pharmaceutical companies argued, among other claims, that Maryland exceeded its authority by interfering in the federal program, a federal court denied a motion from the pharmaceutical companies requesting a preliminary injunction, which would have paused the implementation of the law.  

However, the initial judicial victory for the Maryland law is just the opening act in what will likely be extensive litigation. The pharmaceutical companies have already filed an appeal.
 

Alexandria K. Montanio
410-576-4278 • amontanio@gfrlaw.com