Novartis, AbbVie Score Win to Block West Virginia Drug Limit Law

The pharmaceutical industry notched a victory in its fight against a West Virginia law requiring it to distribute discounted drugs to an unlimited number of pharmacies under the federal 340B Drug Pricing Program.

Novartis AG, AbbVie Inc., and the Pharmaceutical Research and Manufacturers of America have shown that they will suffer irreparable harm in the absence of preliminary relief under West Virginia’s law (S.B. 325), Judge Thomas E. Johnston of the US District Court for the Southern District of West Virginia ordered Tuesday.

At issue before the court was whether S.B. 325 is preempted by federal law as it prohibits drugmakers who participate in the federal 340B Drug Pricing Program from enforcing distribution restrictions on contract pharmacies, which are used to dispense outpatient drugs for health providers that treat a disproportionate number of low-income and uninsured patients.

“The 340B Program certainly did not establish a system where the fox guards the hen house. By restricting a practice that the industry utilizes in order to take the first step toward accessing the 340B Program dispute resolution system, S.B. 325 creates an impermissible obstacle to executing the federal program,” Johnston wrote.

“These harms are more than speculative,” he added.

The preliminary injunction means West Virginia is blocked from enforcing S.B. 325 against Novartis and AbbVie while the cases play out.

The industry argued a gamut of claims, including that the law violates the supremacy clause of the US Constitution and is preempted under the federal 340B statute and federal laws governing patent protection and regulatory exclusivity periods for drug products.

West Virginia moved to dismiss the case, claiming that the plaintiffs are unlikely to face harm and that PhRMA lacks associational standing. The state also argued that S.B. 325 does not prohibit manufacturers from obtaining information regarding the dispensing of 340B drugs.

Johnston, however, found that the law “stands as an obstacle to achieving the federal objective of preventing fraud in the 340B Program.” He ruled that the plaintiffs are likely to succeed on the merits in regards to the law’s no-audits and enforcement provisions.

The no-audits provision restricts a drugmaker’s ability to acquire claims and utilization data from 340B entities. The enforcement provision enacts penalties for manufacturers failing to comply with West Virginia’s statute, which includes a fine of $50,000 per violation for each package of drugs.

“Being subjected to fines and being forced to spend resources on compliance with a law ultimately struck down has been sufficient to meet irreparable harm,” Johnston wrote.

He also found that S.B. 325 regulates price and not delivery, which has been up for debate in other federal courts analyzing drugmaker lawsuits seeking to block state laws.

‘Distinguishable’ Case

Johnston’s order is a major win for the industry, as other federal courts so far have rejected industry arguments.

Notably, the US Supreme Court denied on Dec. 9 to hear a case from PhRMA in its challenge against Arkansas’ Act 1103 in Pharmaceutical Research and Mfrs of America v. Alan McClain.

However, the court “finds this case distinguishable,” Johnston wrote. “The concern for differing adjudications by differing sovereigns looms larger here than in McClain.”

Johnston also found “it makes little sense” to say the manufacturers failed to demonstrate that there are no circumstances where a law targeting drug manufacturers can be legitimately applied.

“Swap in any of PhRMA’s, or Novartis’s, or AbbVie’s peers and the result is the same—the law is still an obstacle to the federal scheme,” Johnston wrote. If S.B. 325 is an obstacle preempted by federal law, it will be an obstacle preempted no matter who the plaintiff is.”

The court ordered West Virginia to file an answer to PhRMA’s complaint within 14 days of this opinion.

The cases are Novartis Pharmaceuticals Corporation v. Morrisey, S.D. W.Va., No. 2:24-cv-00272; Pharmaceutical Research and Manufacturers of America v. Morrisey, S.D. W.Va., No. 2:24-cv-00271; AbbVie Inc. v. Morrisey, S.D. W.Va., No. 2:24-cv-00298.