Introduction

For most of the 340B program’s life, a covered entity that thought it was being overcharged had exactly one place to go, and it wasn’t a courthouse. Congress wrote no private right of action into Section 340B, and in Astra USA, Inc. v. Santa Clara County, 563 U.S. 110 (2011), the Supreme Court closed the contract route as well, holding that covered entities can’t sue manufacturers as third-party beneficiaries of their pricing agreements with the government. That left administrative dispute resolution as the only forum, and it has remained a narrow channel while the program itself has grown. So covered entities have been looking for another one. Adventist Health System of West found it in the False Claims Act — not by suing for what it overpaid, but by pointing out that Medicaid and Medicare reimburse providers based on cost, which means the government overpaid right alongside it. The district court called that an end-run around the ban on a 340B private right of action decided in Astra, and dismissed with prejudice. The Ninth Circuit reversed. And while the appeal was pending, the Supreme Court set down its own question about whether covered entities can reach manufacturers at all, on the September 28 conference list. The search for a forum continues.

Executive Summary

In United States ex rel. Adventist Health System of West v. AbbVie Inc., 169 F.4th 1137 (9th Cir. 2026), the Ninth Circuit reversed the dismissal under Federal Rule of Civil Procedure 12(b)(6) of a qui tam complaint brought by a 340B covered entity against pharma manufacturers AbbVie, AstraZeneca, Novartis, and Sanofi. The Ninth Circuit held that the absence of a private right of action under Section 340B does not foreclose False Claims Act claims by covered entities, because an FCA action is independent of the statute whose violation supplies the underlying facts. Adventist wasn’t seeking to recover amounts it allegedly had been overcharged; instead, it was alleging that the manufacturers’ inflated prices caused covered entities to submit inflated reimbursement claims for those drugs to Medicare and Medicaid, and that the government paid them. The court also held that falsity was plausibly pled, and declined to affirm on the manufacturers’ alternative argument, which it treated as a merits question for discovery.

Background

The program and the price

Congress created the 340B Drug Pricing Program in 1992 to improve access to care for low-income and uninsured patients at safety-net hospitals and clinics. Veterans Health Care Act of 1992, Pub. L. No. 102-585, 106 Stat. 4943. Manufacturers opt in by signing a pharmaceutical pricing agreement, or PPA, with the Secretary of Health and Human Services, and in exchange for that agreement they may not charge covered entities more than a statutory ceiling price. 42 U.S.C. § 256b(a)(1). The Health Resources and Services Administration (HRSA), a unit of HHS, administers the program, including a dispute resolution mechanism. 42 U.S.C. § 256b(d)(3); 42 C.F.R. §§ 10.3, 10.21.

The statutory formula can produce a ceiling at or below zero. When it does, the “penny pricing” policy caps the charge at $0.01 per unit. HRSA formally adopted that position in written guidance in 2011 — Clarification of Penny Pricing Policy, Policy Release No. 2011-2 — and then issued a final rule imposing civil monetary penalties for non-compliance, 83 Fed. Reg. 61563 (Nov. 30, 2018), effective January 1, 2019. The timing matters to the falsity question below.

Adventist alleged that it only discovered the overcharges after the penny pricing guidance came into effect and the prices manufacturers were charging for many drugs precipitously dropped to a penny, suggesting that before that manufacturers were ignoring the statutory formula for calculating the ceiling price.

The allegations

Adventist Health System of West is a nonprofit that operates clinics and facilities in several states and qualifies as a 340B covered entity. It bought drugs from the defendants for its patients, and Medicaid and Medicare reimbursed it based on the prices the defendants charged. See 42 C.F.R. § 447.502; 42 U.S.C. § 1395m(g)(1).

The amended complaint alleged that the manufacturers knowingly charged “materially false, unlawfully inflated prices” that “bore no relation to the statutory formula,” for years, and changed course only when the 2019 rule attached penalties. Adventist said it discovered the scheme when prices “dropped precipitously to $0.01 per unit” shortly after January 2019 — a drop it contended market forces and formula changes could not explain. The complaint alleged the fraud “caused the federal and state governments to wrongly pay hundreds of millions of dollars.”

The dismissal

The manufacturers moved to dismiss based on Astra, arguing that there is no private right of action under 340B. Because Astra holds that a covered entity must use the administrative ADR process to challenge a manufacturer’s pricing, they argued, a covered entity cannot sue under the FCA on facts that amount to a 340B pricing violation. The district court agreed, dismissed the amended complaint with prejudice, and reasoned that allowing the claims would disrupt the administrative scheme Congress built. Adventist appealed.

How the overcharge reaches federal money

Here is what made this an FCA case, not a pricing dispute. Adventist was not asking to be paid back for what it was overcharged — that’s what the ADR process is for, and Astra held that was the only route. Adventist said the overcharge did not stop with the covered entity. It was passed through to the government, because that’s how these programs are structured. The complaint identified three channels.

• Medicaid. Covered entities are reimbursed on what they actually paid for the drug. See 42 C.F.R. § 447.502. Inflate the acquisition cost, and you inflate the reimbursement claim that follows it.
• Medicare. Critical access hospitals bill at 101% of drug cost under 42 U.S.C. § 1395m(g)(1). An inflated cost passes straight through — with another one percent riding on top of it.
• Direct federal purchase. Government-funded prisons and clinics bought the drugs themselves and paid the inflated prices directly. No intermediary at all.

Cost-based reimbursement is the mechanism converting a private overcharge into a loss for the federal fisc, thus implicating the False Claims Act. With it, every covered entity that bought a drug and billed for it became an unwitting conduit. The claims the government paid weren’t Adventist’s 340B claims. They were reimbursement claims, submitted by entities with no reason to know the price they passed along was wrong.

Why this is an FCA claim

The manufacturers never submitted a direct claim to Medicare or Medicaid. Adventist argued instead that the manufacturers were liable under § 3729(a)(1)(A), which reaches anyone who “knowingly presents, or causes to be presented,” a false or fraudulent claim for payment, and § 3729(a)(1)(B) reaches anyone who makes or uses a false record or statement material to such a claim. The alleged false claims were the covered entities’ reimbursement claims. The manufacturers’ alleged conduct — charging above the ceiling price, for years — was what made those downstream claims inflated. That was the causal architecture, and it was ordinary FCA law rather than anything peculiar to 340B.

Adventist, the Ninth Circuit stated, “seeks redress for the alleged false claims, not for the alleged violations of Section 340B’s ceiling price formula,” and the court quoted United States ex rel. Sutton v. Double Day Office Services, Inc., 121 F.3d 531 (9th Cir. 1997), for the necessary corollary: “[t]he violation of a statute does not itself create a violation of the FCA.” A 340B pricing violation is not automatically an FCA case. It becomes one when it causes a false claim to be presented — and pleading that chain is the relator’s burden, on remand as much as on appeal.

The remedy confirmed the characterization. Adventist sought civil penalties and treble damages on behalf of the government under § 3729(a)(1) and a relator’s share under § 3730(d)(2). It was not seeking the overcharges it paid out of its own pocket.

Legal Analysis

• The absence of a private right of action under Section 340B is immaterial to an FCA claim. The Ninth Circuit treated FCA claims as “free-standing and independent of Section 340B.” Because Adventist was not seeking reimbursement for overcharges or otherwise seeking relief for a 340B violation, it did not matter that Section 340B gives covered entities no mechanism to sue. The court drew on Sutton, where a relator’s FCA claim survived even though the Service Contract Act supplied no private right of action.
• Astra bars repackaged contract claims, not fraud claims. Astra held that suits to enforce Section 340B and suits to enforce the PPAs are “in substance one and the same,” and that covered entities may not sue as third-party beneficiaries of those agreements. The Ninth Circuit distinguished it on the ground that Adventist did not allege the manufacturers were liable merely for violating Section 340B. The claim was that they caused false claims to be submitted to Medicare and Medicaid — a different wrong, seeking a different remedy, on behalf of a different party.
• The remedies available under the FCA did real work. Following Sutton, the court reasoned that if the action were equivalent to a 340B action, the damages would be Adventist’s own overcharges. They were not. Adventist sought statutory damages plus penalties for the government, and a statutory share of any recovery under § 3730(d)(2). “Standing in the shoes of the government,” the Ninth Circuit wrote, Adventist sought statutory damages, not compensatory damages for its own losses.
• No implied preemption, because there is no “positive repugnancy.” Barring the claims would require holding that Section 340B impliedly preempts the FCA. Repeals by implication are disfavored, and neither statute contains language displacing the other, so the court gave effect to both. It also invoked the presumption that Congress says in a statute what it means — Congress wrote no 340B exception into the FCA, and the Ninth Circuit declined to write one in.
• Falsity was plausibly pled for the pre-2019 period. The manufacturers argued that no penny-pricing obligation existed before the 2019 final rule. The Ninth Circuit disagreed, because Adventist plausibly alleged that the plain text of the statutory formula did not authorize any price above $0.01 regardless of the guidance, and because HRSA’s 2011 written guidance had already directed manufacturers to charge $0.01 when the formula yielded a negative ceiling price. The 2019 rule added penalties; it did not create the obligation.
• The alternative ground was left for remand. The manufacturers also argued that HRSA’s price reporting and verification system rendered the allegations implausible under Ashcroft v. Iqbal, 556 U.S. 662 (2009), and Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). The court declined to affirm on that basis, calling it a merits argument that turned on factual disputes and required discovery. It remained available below.

Who showed up

The amicus lineup is worth noting. The United States appeared in support of Adventist, through the Civil Division and the United States Attorney for the Central District of California, and the Ninth Circuit quoted the government’s brief for the proposition that the FCA is “the federal government’s primary tool to combat fraud and recover losses due to fraud in federal programs.” The Anti-Fraud Coalition and Ryan White Clinics for 340B Access also supported the relator; the Pharmaceutical Research and Manufacturers of America appeared on the other side. The government’s participation is consistent with its usual position of arguing against limitations on the False Claims Act.

Holding

Adventist asserted cognizable claims for relief under the FCA and had satisfied the applicable pleading requirements. The dismissal was reversed and the case remanded for further proceedings. The Ninth Circuit treated the FCA and its state-law analogues together, no party having argued that the differences mattered. Petitions for rehearing were denied on May 27, 2026.

What to Watch

• On remand, the merits questions that were never reached. Falsity, scienter, materiality and causation now have to be proven across three distinct payment channels, on a factual record that must be developed.
• The Supreme Court’s own 340B question, September 28, 2026. AstraZeneca Pharmaceuticals LP v. Mosaic Health, Inc., No. 25-1070, has been distributed for the long conference. It asks whether safety-net providers have antitrust standing under Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), to sue manufacturers over the withdrawal of contract-pharmacy discounts. Different doctrine, same pressure: covered entities looking for a forum that Section 340B and the administrative ADR process did not give them.
• Whether other circuits follow. This is a published Ninth Circuit opinion on a question that has mostly been litigated in district courts. If the FCA is a durable route around Astra, manufacturer exposure under 340B stops being primarily administrative — and the exposure changes character, from ordered reimbursement of overcharges to penalties and treble damages.

What it means for resolving these disputes

For a neutral, the useful observation is that this ruling doesn’t narrow anything. It widens the field at the pleading stage. A manufacturer facing a covered-entity relator now has to litigate a multi-year pricing history across Medicaid, Medicare and direct federal purchasers, with treble damages and per-claim penalties at the end of it, and with the government watching closely enough to have filed a brief. A relator, for its part, faces a causation chain it has to prove entity by entity and claim by claim, having survived a motion to dismiss and nothing more.

That is not a narrowed range of outcomes. It is a wide one, expensive at both ends, with genuine uncertainty on both sides of the caption — which is the profile of a dispute that tends to resolve, and tends to resolve better when the parties get a neutral involved before the discovery bill arrives rather than after. Cases like this one settle on the strength of the causation chain, and that is precisely the thing neither side can price until they’ve spent a great deal of money finding out.

Cases cited in this brief: United States ex rel. Adventist Health Sys. of W. v. AbbVie Inc., 169 F.4th 1137 (9th Cir. 2026) (No. 24-2180), rev’g and remanding No. 2:21-cv-04249-DSF-SK (C.D. Cal.) | Astra USA, Inc. v. Santa Clara Cnty., 563 U.S. 110 (2011) | United States ex rel. Sutton v. Double Day Off. Servs., Inc., 121 F.3d 531 (9th Cir. 1997) | Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977) | Ashcroft v. Iqbal, 556 U.S. 662 (2009) | Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007)

John Libby is an arbitrator, mediator, and settlement counsel with LibbyADR LLC. This post contains his own summaries of the decisions discussed, prepared for general informational purposes only. The summaries are not intended to be a complete statement of any court’s reasoning, nor should they be taken to indicate how he would rule as an arbitrator in any particular case. In addition, the summaries are not legal advice, nor should they be construed as legal advice. Readers should not act on these posts, but should review the decisions themselves and consult with legal counsel.

Executive Summary

Roughly two dozen states have enacted statutes barring drug manufacturers from restricting delivery of 340B-discounted drugs to a covered entity’s contract pharmacies, and the manufacturers have challenged nearly all of them mostly on preemption grounds, as well as other arguments. The Fifth and Eighth Circuits have upheld those statutes four times between them. The Fourth Circuit, on the other hand, found these state restrictions preempted in two separate cases. However, rehearing en banc has been granted, and thus both of these Fourth Circuit decisions have been vacated. While there is no operative circuit split at this moment, one could develop depending on the outcome of the Fourth Circuit rehearing or in other circuits which have not yet reached the issue. Meanwhile the district courts have overwhelmingly refused to enjoin these statutes, with one notable exception in the Western District of Oklahoma. And in August the Southern District of Mississippi held, on a full summary-judgment actual record, that how the 340B program operates in practice does not change the preemption analysis based on a facial review of the federal and state statutes. Colorado is now the most heavily litigated of these states: three judges of that district have dismissed three separate challenges to its contract-pharmacy statute, two of them within two days of each other, and the first is now on appeal to the Tenth Circuit.

Background: How Contract Pharmacies Became the Battleground

Congress created the 340B program in 1992. As a condition of having their products covered under Medicaid and Medicare Part B, pharma manufacturers must agree to offer certain drugs to “covered entities” — principally federally or state-funded hospitals and community health centers serving low-income patients — at no more than a statutory “ceiling price.” 42 U.S.C. §§ 256b(a)(1), 1396r-8(a)(1), (5).

The statute places four key restrictions on covered entities: a bar on duplicate 340B and Medicaid discounts, § 256b(a)(5)(A); a bar on diversion — a covered entity “shall not resell or otherwise transfer” a discounted drug “to a person who is not a patient of the entity,” § 256b(a)(5)(B); an audit obligation, requiring covered entities to let HHS and manufacturers examine their records for compliance with the first two restrictions, § 256b(a)(5)(C); and recovery liability — a covered entity that violates either ban “shall be liable” to the manufacturer for the amount improperly received, § 256b(a)(5)(D). AbbVie, Inc. v. Fitch, 152 F.4th 635, 640 (5th Cir. 2025). Congress therefore put the substantive compliance duties on covered entities but gave manufacturers the audit and recovery rights. The manufacturer is the party expected to detect the problem and pursue it. That allocation worked tolerably when the number of dispensing points was small. The manufacturers argue that this allocation stopped working when the number of contract pharmacies used by covered entities exploded.

The statute is silent about the issue of delivery, that is, how drugs get from manufacturer to patient. The Health Resources and Services Administration (HRSA), the Department of Health and Human Services unit tasked with administering the 340B program, stepped into the issue in 1996 when it limited a covered entity that lacked an in-house pharmacy to contracting with just a single outside pharmacy. In 2010 it reversed course, permitting covered entities — including those with in-house pharmacies — to contract with an unlimited number of outside pharmacies to receive and dispense drugs under the 340B program. “After the 2010 guidance, the use of contract pharmacies skyrocketed.” Sanofi Aventis U.S. LLC v. U.S. Dep’t of Health & Hum. Servs., 58 F.4th 696, 700 (3d Cir. 2023). As the Government Accountability Office noted, the number of contract pharmacies used by covered entities surged from about 1,300 at the beginning of 2010 to around 23,000 in 2019. U.S. Gov't Accountability Off., GAO-20-212, 340B Drug Discount Program: Oversight of the Intersection with the Medicaid Drug Rebate Program Needs Improvement 2 (Jan. 2020).

In 2020 manufacturers responded unilaterally, limiting 340B delivery to a covered entity’s in-house pharmacy or a single designated contract pharmacy. HHS issued an advisory opinion declaring that 340B requires delivery to any contract pharmacy a covered entity chooses. The manufacturers sued and prevailed: the Third Circuit in Sanofi and the D.C. Circuit in Novartis Pharms. Corp. v. Johnson, 102 F.4th 452 (D.C. Cir. 2024), both confirmed that 340B is silent on delivery and does not compel shipment to unlimited contract pharmacies. HHS withdrew the opinion. That is when the states stepped in, invoking their police power over healthcare and pharmacy practice to accomplish by state law what HHS could not accomplish by advisory opinion. Arkansas went first with Act 1103 in 2021 — PhRMA sued that September — and roughly two dozen states followed with materially similar statutes. The litigation now before the courts is not about what HHS may require of manufacturers. It is about what a State may require of them.

Understanding the manufacturers’ position in opposition to these state laws requires understanding how contract pharmacies actually stock 340B drugs. The D.C. Circuit’s description in Johnson, 102 F.4th at 457–58, is the one the later opinions quote:

“While some contract pharmacies maintain separate inventories of section 340B drugs, most fill prescriptions from inventories that intermingle discounted and non-discounted drugs. Only after dispensing the drugs do these pharmacies attempt to discern whether individual customers were patients of covered entities . . . . Many pharmacies outsource this determination to third-party administrators, who often receive a larger fee for every prescription deemed eligible for the discount. Once the pharmacy or the administrator categorizes a certain number of prescriptions as eligible, the pharmacy places an order to replenish its section 340B purchases. The covered entity, the pharmacy, and the third-party administrator often divvy up the spread between the discounted price and the higher insurance reimbursement rate. Each of these actors thus has a financial incentive to catalog as many prescriptions as possible as eligible for the discount.”

The replenishment model is thus simply an inventory-accounting method: dispense from a commingled inventory, determine eligibility afterward, reorder at the 340B price to backfill.

From the manufacturers’ standpoint, the proliferation of contract pharmacies accounting for 340B pricing after the fact creates an enforcement problem and affects their ability to vindicate their audit and recovery rights to police diversion and duplicate discounts. But under a replenishment system spread across an unlimited number of contract pharmacies, the manufacturer is auditing a retrospective eligibility determination made by someone else, about a dispensing event that has already happened, in an inventory where 340B and non-340B units were never physically distinguished. Every additional contract pharmacy multiplies those determinations while making each one harder to verify. Whether or not one credits the manufacturers’ estimates of the resulting abuse, the structural point is sound: Congress gave manufacturers a policing role, and the explosion in the number of contract pharmacies made that role progressively harder to perform. That is why manufacturers describe these state statutes as doing something more than regulating delivery logistics.

Action in The Circuits: Which One Held What, and Where Things Stand

As we have seen, the Third Circuit in Sanofi and the D.C. Circuit in Johnson decided whether HHS could compel unlimited contract-pharmacy delivery. The issue of whether a State may prohibit manufacturers from restricting the use of contract pharmacies was not before these courts. They are the backdrop to the split, not part of it. The potential division regarding state efforts in the contract pharmacy issue follows:

• Eighth Circuit — statutes upheld, twice. Pharmaceutical Research & Manufacturers of America v. McClain, 95 F.4th 1136 (8th Cir. 2024), affirmed summary judgment for Arkansas on Act 1103. Novartis Pharms. Corp. v. Hanaway, 180 F.4th 1097 (8th Cir. 2026), affirmed denial of a preliminary injunction against Missouri’s S.B. 751. Status: certiorari denied in McClain on December 9, 2024, 145 S. Ct. 768 (2024); no rehearing or petition reflected in the record in Hanaway as of this writing.
• Fifth Circuit — statutes upheld, twice. AbbVie v. Fitch, 152 F.4th at 640, affirmed denial of a preliminary injunction against Mississippi’s H.B. 728. AbbVie, Inc. v. Murrill, 180 F.4th 747 (5th Cir. 2026), affirmed summary judgment for Louisiana on Act 358 — a full merits record rather than a preliminary posture. Status: no rehearing en banc or certiorari petition reflected in the record as of this writing. An earlier Murrill panel opinion issued February 9, 2026; the July 6 decision is the operative one.
• Fourth Circuit — statutes likely preempted, twice — but both decisions are vacated and rehearing granted. Pharmaceutical Research & Manufacturers of America v. McCuskey, 171 F.4th 675 (4th Cir. 2026) (argued Sept. 9, 2025), reh’g en banc granted (4th Cir. June 2, 2026), affirmed a preliminary injunction against West Virginia’s S.B. 325; Judge Richardson wrote for the majority, Judge Benjamin dissented. Two weeks later, AbbVie, Inc. v. Brown, 2026 WL 1005576 (4th Cir. Apr. 14, 2026) (unpublished), reh’g en banc granted (4th Cir. June 2, 2026), vacated a district court’s denial of an injunction against Maryland’s H.B. 1056 and remanded in light of McCuskey. Those grants vacated the panel opinions. No argument date has been announced as of this writing.

Legal Analysis

The litigation over the state statutes highlights several legal and factual issues. First, while the manufacturers have raised several other legal theories, the primary challenge to these state statutes has been preemption. The first appellate court case to address the issue was McClain, 95 F.4th at 1142, which affirmed summary judgment upholding Arkansas’s Act 1103 against Pharma’s challenges. Pharma argued that Act 1103 was preempted under all three preemption doctrines – field, obstacle and impossibility — and the court rejected all three arguments. The obstacle-preemption passage is the one later courts keep returning to: Act 1103 “does not create an obstacle for pharmaceutical manufacturers to comply with 340B, rather it does the opposite: Act 1103 assists in fulfilling the purpose of 340B.” McClain, 95 F.4th at 1144–45. The reasoning is narrow — Act 1103 neither requires manufacturers to extend 340B pricing to contract pharmacies nor sets or enforces discount pricing at all. The Supreme Court denied certiorari on December 9, 2024, 145 S. Ct. 768 (2024) — at a time when no circuit had disagreed.

Second, the preemption issue highlights the prevailing view (to date) that courts have viewed the states as regulating something different than the federal statute. Murrill held that Congress left the delivery-and-distribution space conspicuously silent, defeating field, conflict and obstacle preemption, and declined to read Sanofi and Johnson as limiting state, as opposed to federal agency, authority. In this view, federal agency authority over the program and state police power over distribution conduct operate independently. Thus, states can legislate in a space a federal agency was told it could not reach by advisory opinion. AstraZeneca Pharmaceuticals LP v. Fitch, 2026 WL 2455376 (S.D. Miss. Aug. 21, 2026), adopted the formulation from Murrill, 180 F.4th at 761: the state law “does not regulate prices; it regulates conduct.” AstraZeneca argued the inverse — that price is the only thing distinguishing a 340B drug from any other drug, so a law reaching 340B drugs necessarily regulates price. The court’s answer was that the 340B statute sets the price and Mississippi’s H.B. 728 governs only where a covered entity’s patient may pick the drug up: “[t]hese drugs would cost the same amount if they were picked up at a covered entity’s in-house pharmacy.” 2026 WL 2455376, at *9. Everything else in this area turns on whether that distinction holds.

The now vacated Fourth Circuit opinions took a different view on the structure of the program. The McCuskey majority did not principally hold that West Virginia was regulating price. Its theory was that West Virginia’s S.B. 325 “springs obligations on manufacturers specifically by virtue of their participation in a federal program,” does not apply equally to all manufacturers selling drugs in the State, and therefore “targets a federal domain.” McCuskey, 171 F.4th at 689. Drawing on Buckman Co. v. Plaintiffs’ Legal Comm., 531 U.S. 341 (2001), the court reasoned that the statute injects the State into a relationship between a federal agency and its regulated entities that is “inherently federal in character.” It then treated Section 340B as spending-power legislation “much in the nature of a contract,” id., and asked whether the State had added uninvited conditions to a federal bargain.

In AbbVie Inc. v. Drummond, 2025 WL 3048930 (W.D. Okla. Oct. 31, 2025), District Judge Wyrick enjoined enforcement of Oklahoma’s H.B. 2048, codified at Okla. Stat. tit. 36, §§ 5403, 5404(B), essentially on these grounds, addressing the delivery/price distinction with a colorful analogy: if Congress required pizza parlors to sell at a 50% discount to anyone named John, and a State then required those parlors to deliver half-priced pies to anyone John designated, “could that state law possibly be described as a mere ‘delivery’ regulation? Of course not.” 2025 WL 3048930, at *5. In other words, the state statutes ostensibly about delivery sneak price through the back door, thus encroaching on 340B’s territory. Federal law does not use the term “340B drug” at all, the court observed, because the drug is the same either way — “[a]ll the 340B Program does is set the price for certain sales of drugs.” Id. at *6.

Judge Wyrick went on to address another factual question about the way contract pharmacies operate: who actually owns the drug sitting on the contract pharmacy’s shelf? This question bears directly on the replenishment model. McClain rests on the premise that contract pharmacies “do not purchase 340B drugs, and they do not receive the 340B price discounts” — the covered entity purchases and holds title, and the pharmacy merely dispenses. McClain, 95 F.4th at 1144. Drummond found the record did not establish that Oklahoma covered entities in fact retain title while the drugs sit at contract pharmacies and held that replenishment “significantly muddies the waters as to who is the actual purchaser of the 340B drugs.” Drummond, 2025 WL 3048930, at *6. If the contract pharmacy is the real purchaser, a statute compelling discounted delivery to it effectively expands the statutory list of covered entities — and contract pharmacies are not among the sixteen designated types. The title question is factual, and it has not been developed in most of these cases.

However, a recent district court opinion was unimpressed, essentially holding that facts about the actual operation of the 340B program did not preclude summary judgment finding that the Mississippi statute at issue there was not preempted. In AstraZeneca v. Fitch, the manufacturer did what Drummond suggests is necessary: it took discovery aimed at showing that Mississippi’s H.B. 728 is preempted based on how the program actually operates, and that earlier courts had incorrectly ruled about how replenishment works and who holds title. Judge Guirola granted the State summary judgment anyway, denied the cross-motion, found the motion to exclude AstraZeneca’s expert moot, and dismissed AstraZeneca’s challenge with prejudice. The reasoning is short and consequential: “The Court’s focus in this case is the language and intent of 340B and H.B. 728, not testimony and evidence related to the manner in which entities operate under those statutes.” 2026 WL 2455376, at *12. The discovery material “has not changed this determination.” Id. at *8. The escape hatch Drummond left open is, at least in this district, shut.

Colorado has now produced three decisions, and it is the state to watch. The first came in AbbVie, Inc. v. Weiser, 2026 WL 1678085 (D. Colo. June 10, 2026) (slip copy), where Judge Martínez dismissed AbbVie’s challenge to the Colorado 340B Contract Pharmacy Protection Act, SB25-71. AbbVie’s Section 340B preemption and Takings claims were dismissed with prejudice for failure to state a claim, and amendment held futile. Its remaining claim is the more interesting one: AbbVie argued the Act was preempted not by Section 340B but by HRSA’s rebate pilot. That claim was dismissed without prejudice for lack of standing, because the pilot had not begun when AbbVie filed suit — the comment period had not closed and AbbVie had not yet applied to participate — and standing is measured at filing, so later approval to participate could not supply it after the fact. The court never reached the merits of that theory. AbbVie has appealed to the Tenth Circuit, which has yet to rule on these issues.

Two more followed in the space of two days. In AstraZeneca Pharms. LP v. Weiser, 2026 WL 2568299 (D. Colo. Aug. 31, 2026) (slip copy), Judge Brimmer granted the State’s motion to dismiss AstraZeneca’s challenge to the same statute, rejecting several theories put forward by AstraZeneca, including conflict and field preemption. The court dismissed the argument that SB25-71 regulates price and delivery, noting that the state law says nothing about price and denying the distinction's significance in any event. The court also noted that the replenishment model, far from relating to price, “is a means of efficient distribution” and does not implicate the price or discount under 340B. Finally, the court also rejected AstraZeneca’s arguments that SB25-71 interfered with federal enforcement mechanisms under 340B and that the claims-data restriction would prevent it from establishing the “reasonable cause” needed to commence the audits to which it is entitled under 340B.

A day later, in Pharmaceutical Research & Manufacturers of America v. Weiser, 2026 WL 2582197 (D. Colo. Sept. 1, 2026) (slip copy), Judge Rodriguez dismissed PhRMA’s parallel challenge to the same statute with prejudice. The magistrate judge had recommended dismissal without prejudice for lack of associational standing; the court instead found standing satisfied — PhRMA’s members had individually engaged in conduct that SB25-71 now proscribes — and adopted the recommendation on alternative grounds, overruling PhRMA’s objection and reaching the merits. It then held that Section 340B does not occupy the field, that the presumption against preemption applies to state regulation of health matters, that PhRMA had alleged no actual conflict with Section 340B, and that its extraterritoriality claim failed. The dismissal was with prejudice because no additional facts could cure the defects.

Holdings and Current Consensus

The Eighth Circuit held Arkansas’s Act 1103 preempted under neither field, obstacle nor FDCA impossibility theories (McClain), and held Novartis had not shown a likelihood of success on its dormant Commerce Clause or preemption claims against Missouri’s S.B. 751 (Hanaway). The Fifth Circuit held Louisiana’s Act 358 not preempted and violative of neither the Takings Clause, the Contracts Clause nor vagueness doctrine (Murrill), having earlier affirmed denial of a preliminary injunction against Mississippi’s H.B. 728 (AbbVie v. Fitch). The Southern District of Mississippi held H.B. 728 preempted by neither the 340B statute nor federal patent law, violative of neither the Contracts Clause nor the Takings Clause, and that discovery into the program’s practical operation did not alter the analysis; summary judgment for the State, claims dismissed with prejudice (AstraZeneca v. Fitch). The Western District of Oklahoma reached the opposite conclusion and enjoined Oklahoma’s statute (Drummond). The Fourth Circuit twice held these statutes likely preempted on a spending-power-bargain theory (McCuskey; Brown) — but both panel opinions are vacated pending rehearing en banc. The District of Colorado has now dismissed three separate challenges to Colorado’s SB25-71 — two by manufacturers, one by a trade association — and the theories rejected differ case by case. In AbbVie v. Weiser, the Section 340B preemption and Takings claims were dismissed with prejudice while a preemption claim resting on HRSA’s rebate pilot went out without prejudice for lack of standing; that case is on appeal to the Tenth Circuit. In AstraZeneca v. Weiser, field and conflict preemption, patent preemption, the Contracts Clause and the Takings Clause were all rejected and the claims dismissed with prejudice. In PhRMA v. Weiser, field preemption, conflict preemption and extraterritoriality were rejected, again with prejudice.

The consensus therefore favors the states. The Eighth Circuit has upheld these statutes twice and the Fifth Circuit twice; Judge Benjamin’s dissent in Brown catalogues at least eleven district courts that have refused to preliminarily enjoin comparable statutes, including in Colorado, Hawai’i, Maine, Mississippi, Rhode Island, Tennessee and Maryland, see Brown, 2026 WL 1005576, at *3 n.2 (Benjamin, J., dissenting); district courts within the Fifth and Eighth Circuits are following (see AbbVie Inc. v. Jackley, 2026 WL 2280929 (D.S.D. Aug. 7, 2026)); the Supreme Court declined the question in 2024; and the manufacturers’ factual theory has now failed on a full record. Drummond is the conspicuous outlier, and the West Virginia district court whose injunction the Fourth Circuit affirmed is the other. Colorado, which appears in that dissent among the districts that declined to enjoin, has since dismissed all three challenges before it.

Where We Are Now

For manufacturers, the litigation posture at the appellate level rests with the Fourth Circuit en banc ruling and the hope that it can create a circuit split interesting to the Supreme Court. The statutory arguments have lost in two circuits, the Supreme Court declined the question in 2024 when there was no split, and the fact-based theory has now failed on a developed record. What remains is the Fourth Circuit sitting en banc — and, newly, the Tenth, where AbbVie has appealed the first of the Colorado dismissals to a court that has not yet spoken. Several district court cases in other circuits are also pending, any of which could upend the game board and create new splits on preemption or other issues.

For covered entities, hospital associations and their counsel, there is a durable template in the Fifth and Eighth Circuits, tempered by some risk concentrated in the Fourth, and developments to come in other circuits where similar cases are percolating.

What to Watch

First, the Fourth Circuit en banc in McCuskey and Brown — that is where this area gets decided next, and an argument date has not yet been announced. Second, AstraZeneca Pharms. LP v. Mosaic Health, Inc., No. 25-1070 (U.S.), distributed for the Supreme Court’s September 28, 2026 long conference and relisted twice; it presents an antitrust-standing question under Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), rather than preemption, but a grant could potentially put 340B contract-pharmacy economics before the Court for the first time. Third, whether the manufacturers seek certiorari from Murrill or Hanaway, a petition filed while the Fourth Circuit sits en banc would present the Court with an unusually well-developed record of disagreement. Fourth, AbbVie’s appeal to the Tenth Circuit from the June dismissal in Colorado — the first of these state-statute cases to reach a court of appeals outside those that have already ruled, and another potential source for a circuit split. Fifth, and on a different front altogether, HRSA has issued its 340B Rebate Model Pilot Program, 91 FR 48883-01 (Aug. 3, 2026). The pilot would let qualifying manufacturers deliver the 340B ceiling price for a limited set of drugs as a post-sale rebate rather than an up-front discount, with manufacturer plans due August 24, 2026, and a January 1, 2027, effective date. HRSA notes that a post-sale rebate program, coupled with standardized submission of claims data, would make duplicate discounts and diversion easier to prevent. The implementation of this approach could also change the preemption analysis by some courts — and the attempt has already been made. AbbVie pleaded the rebate pilot as an independent preemption theory in Colorado and lost it on standing rather than on the merits, because the pilot had not yet begun when it filed. That theory is untested, not rejected, and could return once the pilot is running.

Cases and agency materials cited in this blog: AbbVie, Inc. v. Brown, 2026 WL 1005576 (4th Cir. Apr. 14, 2026), reh’g en banc granted (4th Cir. June 2, 2026) | AbbVie, Inc. v. Drummond, 2025 WL 3048930 (W.D. Okla. Oct. 31, 2025) | AbbVie, Inc. v. Fitch, 152 F.4th 635 (5th Cir. 2025) | AbbVie, Inc. v. Jackley, 2026 WL 2280929 (D.S.D. Aug. 7, 2026) | AbbVie, Inc. v. Murrill, 180 F.4th 747 (5th Cir. 2026) | AbbVie, Inc. v. Weiser, 2026 WL 1678085 (D. Colo. June 10, 2026) (slip copy), appeal filed (10th Cir. June 25, 2026) | AstraZeneca Pharms. LP v. Fitch, 2026 WL 2455376 (S.D. Miss. Aug. 21, 2026) | AstraZeneca Pharms. LP v. Mosaic Health, Inc., No. 25-1070 (U.S.) | AstraZeneca Pharms. LP v. Weiser, 2026 WL 2568299 (D. Colo. Aug. 31, 2026) (slip copy) | Buckman Co. v. Plaintiffs’ Legal Comm., 531 U.S. 341 (2001) | Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977) | Novartis Pharms. Corp. v. Hanaway, 180 F.4th 1097 (8th Cir. 2026) | Novartis Pharms. Corp. v. Johnson, 102 F.4th 452 (D.C. Cir. 2024) | Pharmaceutical Research & Manufacturers of America v. McClain, 95 F.4th 1136 (8th Cir. 2024), cert. denied, 145 S. Ct. 768 (2024) | Pharmaceutical Research & Manufacturers of America v. McCuskey, 171 F.4th 675 (4th Cir. 2026), reh’g en banc granted (4th Cir. June 2, 2026) | Pharmaceutical Research & Manufacturers of America v. Weiser, 2026 WL 2582197 (D. Colo. Sept. 1, 2026) (slip copy) | Sanofi Aventis U.S. LLC v. U.S. Dep’t of Health & Hum. Servs., 58 F.4th 696 (3d Cir. 2023) Agency material: Notice Regarding 340B Rebate Model Pilot Program, 91 FR 48883-01 (HHS/HRSA Aug. 3, 2026).

John Libby is an arbitrator, mediator, and settlement counsel with LibbyADR LLC. This post contains his own summaries of the decisions discussed, prepared for general informational purposes only. The summaries are not intended to be a complete statement of any court’s reasoning, nor should they be taken to indicate how he would rule as an arbitrator in any particular case. In addition, the summaries are not legal advice, nor should they be construed as legal advice. Readers should not act on these posts, but should review the decisions themselves and consult with legal counsel.