Judge at drug industry's urging blocks North Dakota discounted medications law

Novartis AG

28/04/2026 23:04

Repeats to additional customers, no change to text

Judge  rules North Dakota law preempted by federal 340B program

Similar state laws have faced mixed outcomes in courts

8th Circuit had upheld similar law in Arkansas

By Nate Raymond

April 28 (Reuters) - A federal judge has blocked North Dakota from enforcing a new state law requiring drugmakers to offer discounts on drugs dispensed by third-party pharmacies that contract with hospitals serving rural, low-income populations.

Monday's ruling by U.S. District Judge Daniel Traynor in Bismarck marked a rare legal victory for the pharmaceutical industry's efforts to challenge similar laws adopted by 22 states to safeguard medication discounts under the federal 340B Drug Pricing Program.

North Dakota's 2025 law had been challenged in a trio of lawsuits by drugmakers AbbVie and AstraZeneca, as well as the industry trade group Pharmaceutical Research and Manufacturers of America (PhRMA), which argued it was preempted by federal law.

 Traynor, who was appointed by Republican President Donald Trump, agreed, saying the state law interferes with federal law to allow the 340B program to be "abused to provide a windfall to hospital conglomerates and participating pharmacies," which it was allowed to do because "big pharma garners little sympathy."

"North Dakota’s law attempts to facilitate and sanction the graft by interfering with an area of federal law," he wrote.

PhRMA spokesperson Reid Porter, in a statement, said the group was "pleased to see the court take a critical look at North Dakota's 340B manufacturer mandate law and find that it violates the Supremacy Clause and Commerce Clause."

A spokesperson for North Dakota's attorney general did not respond to a request for comment.

Republican-led North Dakota's law, like its counterparts nationally, was designed to ensure hospitals can use contract pharmacies while participating in the federal 340B discount program.

The program requires drugmakers to offer discounts on drugs to hospitals and clinics serving low-income populations as a condition to receive funds from government health insurance programs like Medicare and Medicaid.

Many hospitals and clinics eligible for the 340B program contract with outside pharmacies to dispense prescription drugs, so that they do not have to maintain in-house pharmacies.

The drugmakers argue that the rising use of contract pharmacies has resulted in improper discount claims, contributing to discounted drug purchases through the 340B program soaring to a record $81.4 billion in 2024, the most recent year for which data is available.

In 2020, many drugmakers began imposing restrictions on 340B drug sales using contract pharmacies, prompting many states to begin adopting laws to counter them, beginning with Arkansas in 2021.

Its law was upheld in 2024 by the 8th U.S. Circuit Court of Appeals, which found that the federal 340B law requires the discounted sale of drugs but is silent on how those drugs are delivered, leaving states free to step in.

The 8th Circuit has jurisdiction over North Dakota, whose law made it a misdemeanor for drug manufacturers to adopt policies that “deny, restrict, prohibit, or otherwise interfere” with pharmacies' ability to obtain discounted prescriptions on behalf of hospitals in the 340B program.

But Traynor said that unlike Arkansas' statute, North Dakota's law regulated not the delivery of drugs to state-licensed pharmacies but governed drugmakers in the 340B program, rendering it preempted.

The case is AbbVie Inc v Wrigley, U.S. District Court for the District of North Dakota, No. 1:25-cv-00081.

For AbbVie: Matthew Owen of Kirkland & Ellis

For AstraZeneca: Allon Kedem of Arnold & Porter Kaye Scholer

For PhRMA: Erin Murphy of Clement & Murphy

For North Dakota: Robert Smith of Katten Muchin Rosenman

Read more:

Novartis, Abbvie lose bid to block Maine law on federal drug discount program

Judge blocks West Virginia's 340B contract pharmacy law

US Supreme Court will not hear drug industry challenge to Arkansas contract pharmacy law

Judge won't block Maryland law mandating discounts for hospitals' outside pharmacies

Judge won't block Mississippi law on discounts for hospitals' contract pharmacies

Lawsuits pile up over state laws on discounts for hospitals' contract pharmacies

 (Reporting by Nate Raymond in Boston)