A federal judge declined to block a Colorado law that requires drugmakers to offer discounted medications to more pharmacies, but a lawsuit challenging the legislation can still proceed.
Drugmaker AbbVie sued the state in June because of Senate Bill 71, which forbade drug companies from limiting how many pharmacies can participate in 340B, a federal discount program.
The company’s best-known products include the arthritis drug Humira, the migraine treatment Botox and the antidepressant Lexapro.
Congress created the 340B program, which required drugmakers to sell medications to certain clinics and hospitals at steep discounts, in 1992. The recipients could then sell the medications at full price and keep the difference, subsidizing the care they provide to uninsured people. They could also provide the drugs to low-income patients for free or at a discount.
Initially, most of the recipients were federally qualified health centers and hospitals serving large numbers of uninsured patients. Only those without an in-house pharmacy could contract with others to dispense the drugs. But in 2010, the federal government changed its guidance, allowing all 340B clinics and hospitals to use as many contract pharmacies as they wanted.
Contract pharmacies collect the difference between the discounted drug price and whatever the patient or their insurance company pays. They split the money with the qualifying clinic or hospital, but no one knows how much goes to pay for services to low-income people.
Significant money is at stake. In 2024, sales under the 340B program totaled about $124 billion. If fewer contract pharmacies participate, the odds increase that patients will pick up their medications at a location where drugmakers don’t have to provide a heavy discount, allowing the companies to collect more.
AbbVie set its own limits, allowing hospitals and clinics to choose one contract location if they don’t have an in-house pharmacy. Other drugmakers took similar steps. The U.S. Department of Health and Human Services ordered the drug companies to provide the discounts to all contract pharmacies, but lost in court when the drugmakers sued. That ruling effectively cleared the way for restrictions on 340B discounts.
Senate Bill 71 prohibited drugmakers from restricting 340B sales to contract pharmacies. AbbVie asked U.S. District Court Judge William Martinez to issue an order stopping Colorado’s law from taking effect.
“This state-imposed harm — compelling manufacturers to transfer their drugs at discounted prices on terms not required by federal law and to which AbbVie would not agree — cannot stand because it violates the United States Constitution,” the complaint said.
Martinez wasn’t persuaded that Congress had prevented states from regulating some parts of 340B, however. He also didn’t believe AbbVie had demonstrated that the state was illegally taking something from it. To prevent a law from taking effect, the plaintiff has to show they have a high likelihood of succeeding in their lawsuit and would be harmed without a delay.
“Because a preliminary injunction is an ‘extraordinary remedy never awarded as of right’ … the movant must make a ‘clear and unequivocal’ showing it is entitled to such relief,” he wrote in the ruling.
The Colorado Hospital Association, which filed a “friend of the court” brief in the case, said it was pleased with the decision.
“Instead of diverting resources to legal challenges, drug manufacturers should focus on supporting patients and the health care providers who care for them,” it said in a statement.
Sign up for our weekly newsletter to get health news sent straight to your inbox.