# Drummond

> District Court, W.D. Oklahoma · October 31, 2025

URL: https://www.frixlaw.com/law-library/cases/11182457

## Case

- **Full name:** AbbVie Inc., et al. v. Gentner Drummond, in his official capacity as Attorney General; Novartis Pharmaceuticals Corporation v. Gentner Drummond, in his official capacity as Attorney General
- **Court:** District Court, W.D. Oklahoma
- **Decided:** October 31, 2025
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/11182457

## How later opinions describe it (automated extraction)

- holding that a provision labeled a penalty is a valid exercise of Congress’s taxing power despite the label
- holding that a “so-called tax” was in substance a penalty to coerce activities otherwise outside Congress’s ability to regulate

## Opinion text

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF OKLAHOMA

ABBVIE INC., et al., )
)
Plaintiffs,
)

)
v.
) Case No. CIV-25-726-PRW

)
GENTNER DRUMMOND, in his official
)
capacity as ATTORNEY GENERAL,
)

)
Defendant.

NOVARTIS PHARMACEUTICALS )
COPRORATION, )
)
Plaintiff,
)

)
v.
) Case No. CIV-25-727-PRW

)
GENTNER DRUMMOND, in his official
)
capacity as ATTORNEY GENERAL,
)

)
Defendant.
)
ASTRAZENECA )
PHARMACEUTICALS LP )
)
Plaintiff,
)

)
v.
) Case No. CIV-25-1156-PRW

)
GENTNER DRUMMOND, in his
)
official capacity as ATTORNEY
)
GENERAL, et al.
)

)
Defendants.
ORDER
Before the Court are three motions for preliminary injunction (Case No. CIV-25-

726, Dkt. 7; Case No. CIV-25-727, Dkt. 15; and Case No. CIV-25-1156, Dkt. 13). Plaintiffs
AbbVie Inc., et al., Novartis Pharmaceuticals Corporation, and AstraZeneca
Pharmaceuticals LP each moved for a preliminary injunction under Federal Rule of Civil
Procedure 65. Defendant Gartner Drummond, in his official capacity as Attorney General
of Oklahoma, filed responses in opposition to AbbVie and Novartis’s Motions. For the
reasons that follow, Plaintiffs’ Motions are GRANTED IN PART AND DENIED IN

PART.
Background1
In 1992, Congress created what would become the most important drug pricing
scheme virtually no one has heard of: the 340B Program. The 340B Program, unlike
Medicare and Medicaid, was designed for the direct benefit of healthcare providers rather

than their patients.2 Indeed, a patient would generally have no reason to know that the 340B
Program played any role in their prescription. The patient pays the same price, for the same
drug, from the same pharmacy as they would if their prescription wasn’t covered by the
340B Program.
Congress enacted the 340B Program as part of the Veterans Health Care Act to help

qualifying healthcare providers (“covered entities”) stay afloat by allowing them to

1 Unless otherwise noted, the information in this section is drawn from the uncontested
statements of facts in the parties’ pleadings.
2 Sanofi Aventis U.S. LLC v. HHS, 58 F.4th 696, 699 (3rd Cir. 2023).
purchase certain outpatient drugs from manufacturers who participate in Medicaid and
Medicare Part B at a discount negotiated by the Secretary of Health and Human Services.3

The 340B Program requires drug manufacturers to subsidize covered entities by forcing
the drug manufacturers to sell deeply discounted drugs to those entities, who then turn
around and sell them to their patients at full price and pocket the difference. And when
those covered entities bill their patients’ insurance providers for qualifying 340B drugs, the
insurance companies reimburse the covered entities at the non-discounted price, and again,
the covered entities pocket the spread. Covered entities are not obligated to pass any of this

windfall on to patients. They are free to do whatever they like with it, whether that be
putting the profits towards general operating expenses or new capital projects.
There are sixteen different categories of covered entities, ranging from
Disproportionate Share Hospitals (“DSHs”), which essentially are non-profit or public
hospitals serving high numbers of Medicare or Medicaid recipients,4 to Indian health

centers and Ryan White HIV/AIDS Program grantees.5 Commercial pharmacies are not
covered entities.
The Health Resources and Services Administration (“HRSA”), an agency of the
United States Department of Health and Human Services (“HHS”), administers the

3 Sanofi, 58 F.4th at 699–700.
4 Health Res. & Servs. Admin., Disproportionate Share Hospitals: Eligibility, U.S. Dep’t
of Health & Hum. Servs., https://www.hrsa.gov/opa/eligibility-and-
registration/hospitals/disproportionate-share-hospitals (last visited Oct. 9, 2025).
5 Health Res. & Servs. Admin., 340B Eligibility: Who Can Participate in the 340B Drug
Pricing Program, U.S. Dep’t of Health & Hum. Servs.,
https://www.hrsa.gov/opa/eligibility-and-registration (last visited Oct. 9, 2025).
program. Initially, the covered entities were distributing 340B drugs from their inhouse
pharmacies, but in 1996, acknowledging that not every covered entity could support a

pharmacy, HRSA allowed each covered entity to begin working with one outside “contract
pharmacy” (think Walgreens or CVS), so long as the covered entity did not transfer title to
any discounted drugs to the contract pharmacy.6 In 2010, HRSA allowed covered entities
to begin contracting with an unlimited number of contract pharmacies for purposes of 340B
prescription fulfillment.7
After that 2010 change, the average number of contract pharmacies engaged with

each covered entity began to rapidly rise, reaching 20.7 by 2024.8 Coinciding with the
relaxed rules around contract pharmacies, covered entities themselves began proliferating.9
Offshoots of covered entities, such as separately located urgent care centers, are in some
cases deemed “child sites” and eligible for 340B pricing.10 These child sites, it turns out,
are often not located in socioeconomically challenged areas.11 As of 2023, only 30% of

340B-eligible child sites are located in counties with either poverty rates higher than
Oklahoma’s statewide poverty rate or with median incomes lower than the state’s median
income.12 Meanwhile, 52% of 340B-eligible hospitals and federal grantees are located in

6 61 Fed. Reg. 43549, 43551–53 (Aug. 23, 1996).
7 75 Fed. Reg. 10272, 10273 (Mar. 5, 2010).
8 Chen Expert Rep. (Case No. CIV-25-726, Dkt. 7, Ex. 24), at 20.
9 Id. at 19.
10 Id. at 6.
11 Id. at 30.
12 Id. at 37.
such counties.13 Further, covered entities are no longer contracting with just local
pharmacies. The University of Oklahoma Medical Center, for example, has its 340B-

discounted drugs shipped to contract pharmacies in far-flung places like Orlando, Florida;
Las Vegas, Nevada; and Carolina, Puerto Rico.14
Unsurprisingly, this proliferation attracted third parties looking to share in the
profits from the rapidly growing 340B market. A cottage industry of “third-party
administrators” began offering their services to covered entities to cull through records
from prescription sales by contract pharmacies to match those sales up with possible 340B

eligibility.15 Then, the covered entities purchase drugs from the manufacturers that are
delivered to the contract pharmacies at 340B prices to backfill the inventory depleted as a
result of qualifying 340B customer sales. The new inventory of drugs purchased at 340B
prices is comingled with the rest of the inventory not purchased through the 340B Program.
The contract pharmacies, third-party administrators (often subsidiaries of the contract

pharmacies), and the covered entities each divvy up the profits from the 340B sales.16 This
has been termed the “replenishment model.” In 2023, Walgreens made $382 million dollars
just through its third-party data processing subsidiary for administering the 340B

13 Id.
14 Plf.s’ Ex. 43 (Case No. CIV-25-726, Ex. 43), at 3–5.
15 Chandra Expert Rep. (Case No. CIV-25-726, Dkt. 7, Ex. 25), at 42–43.
16 Id.
Program.17 What’s more, fees accounting for as much as 20% of the reimbursements paid
by insurers are paid out to the contract pharmacies.18

Drug manufacturers complained about what they perceived as a lack of transparency
in the process by which these third-party administrators were identifying qualifying 340B
prescriptions.19 After all, part of the bargain Congress struck in creating the 340B Program
was that manufacturers would be required to “offer” their drugs at a discounted price to the
covered entities,20 not their contract pharmacies.21 And in exchange for offering that
discount, the drug manufacturers could participate in Medicaid and Medicare Part B, but

covered entities would not be able to double-dip and claim a Medicaid rebate from the
manufacturer on top of the discounted price from the manufacturer.22 Nor would covered
entities be able to sell (“divert”) the discounted drugs to patients not eligible to participate
in the 340B Program.23 The manufacturers complained that the lack of transparency in the
replenishment model put them at a disadvantage by making it impossible for them to

determine if double-dipping and diversion of discounted drugs was occurring. And some
was occurring. Some 15% of HRSA audits had identified diversion violations, 6% had

17 Id. at 42
18 Id. at 42–43.
19 Pl.s’ Mot. Summ. J. (Dkt. 7), at 5–6.
20 42 U.S.C. § 256b(1).
21 Id.
22 42 U.S.C. § 256b(a)(5)(A)(i).
23 42 U.S.C. § 256b(a)(5)(B).
identified double-dipped discounts, and almost 30% of HRSA audits had identified a
combination of both.24

Congress responded to these complaints by granting both the HHS Secretary and
manufacturers the ability to audit covered entities.25 When an audit shows that a covered
entity diverted discounted drugs or double-dipped on a discount and rebate, the covered
entity can be required to pay a fine to the manufacturer or even face expulsion from the
340B Program or exclusion from Medicaid.26 Further, Congress required that covered
entities and manufacturers participate in administrative dispute resolution in the event they

face disagreements over pricing, payment, diversion, or double-dipping with Medicaid
rebates.27 A prerequisite to ADR, however, is a manufacturer’s audit of the covered
entity.28
Drug manufacturers also began both limiting the number of contract pharmacies
with which covered entities could engage for filling of 340B prescriptions and requiring

certain claims data in exchange for transferring the 340B drugs to those contract
pharmacies.29 HHS moved to halt these efforts by the manufacturers, issuing an advisory

24 Chen Expert Rep. (Case No. CIV-25-726, Dkt. 7, Ex. 24), at 29.
25 42 U.S.C. § 256b(a)(5)(C).
26 42 U.S.C. § 256b(d)(1).
27 42 U.S.C. § 256b(d)(3).
28 42 U.S.C. § 256b(d)(3)(B)(iv).
29 These limitations imposed upon covered entities and contract pharmacies do not increase
the prices patients pay for drugs. Remember, the patient and insurance company always
pay normal market prices in the 340B Program—it’s the covered entities who purchase the
drugs at a discount and who are entitled to pocket the spread between the discounted
purchase and sales prices. And unless a covered entity outright refused to write a
opinion prohibiting manufacturers from limiting contract pharmacy arrangements.30 Drug
manufacturers responded with lawsuits, and the Third Circuit and D.C. Circuit both
ultimately sided with the manufacturers.31 The Third Circuit held that the language of

Section 340B does not require manufacturers to offer drugs to contract pharmacies at a
discount. HHS relied on the silence of the statute to support its order, but the Third Circuit
disagreed. “If drug makers make drugs available to anyone at any price, they must ‘offer’
those drugs to ‘covered entities’ at a discount.”32 The text of Section 340B does not
contemplate contract pharmacies.33 In light of this silence, the Third Circuit found that

covered entities are not entitled to force manufacturers to “deliver goods wherever and to
whomever the buyer demands.”34 The D.C. Circuit employed similar reasoning in its
subsequent decision.35
In 2025, Oklahoma followed a slew of states that enacted legislation attempting to
do what those federal courts had said HHS could not lawfully do. The Oklahoma

Legislature enacted House Bill 2048 and overrode a governor’s veto of its efforts. The

prescription for filling at a pharmacy from which it didn’t reap a 340B profit, these
manufacturer-imposed restrictions in no way make it harder for patients to get their
prescriptions filled.
30 HHS Advisory Opinion No. 20-06 (Dec. 30, 2020), https://tinyurl.com/2ca6rmnm.
31 Sanofi, 58 F.4th at 696; Novartis Pharmaceuticals Corp. v. Johnson, 102 F.4th 452 (D.C.
Cir. 2024).
32 Sanofi, 58 F.4th at 703.
33 Id.
34 Id.
35 Novartis, 102 F.4th at 461.
relevant portion of the statute is codified at 36 O.S. § 5400 et seq., which goes into effect
on November 1, 2025. Oklahoma argues its law merely regulates delivery of drugs in a

legislative void left by Congress’s silence on the issue. Oklahoma fills that void by
requiring manufacturers to deliver drugs at the 340B discount to as many contract
pharmacies a covered entity wishes to designate. H.B. 2048 also creates its own
enforcement scheme whereby violations of H.B. 2048 can result in both civil fines of up to
$10,000 per violation and criminal sanctions. In short, H.B. 2048 expands drug
manufacturer’s obligations under the federal 340B program, which consequently raises a

manufacturer’s price of admission to participate in Medicaid and Medicare Part B.
AbbVie, Novartis, and AstraZeneca, in separate cases, now seek a preliminary
injunction against H.B. 2048, arguing that it is constitutionally infirm.
Analysis
The purpose of a preliminary injunction is “to enjoin, pending the outcome of the

litigation, action that [the movant] claims is unlawful.”36 A preliminary injunction is an
“extraordinary remedy” that is never “awarded as of right.”37 An injunction is appropriate
only when monetary or other traditional remedies are inadequate, and “the right to relief
[is] clear and unequivocal.”38
The Court may enter a preliminary injunction if (1) Plaintiffs are substantially likely

to succeed on the merits; (2) Plaintiffs will suffer irreparable injury if the injunction is

36 Grupo Mexicano de Desarrollo, S.A. v. All. Bond Fund, Inc., 527 U.S. 308, 314 (1999).
37 Winter v. Natural Res. Def. Council, 555 U.S. 7, 24 (2008).
38 Schrier v. Univ. of Colo., 427 F.3d 1253, 1258 (10th Cir. 2005).
denied; (3) Plaintiffs’ threatened injury outweighs the injury Defendant will suffer under
the injunction; and (4) the injunction would not be adverse to the public interest.39 “The
third and fourth prongs ‘merge when the Government is the opposing party.’”40 As the

movants, it is Plaintiffs’ burden to establish that each factor tips in its favor.41
I. Plaintiffs are substantially likely to succeed on the merits.
a. H.B. 2048 is preempted.
The Constitution empowers Congress to pass legislation, as “the supreme Law of
the Land[,]” preempting state law.42 However, before courts determine that state law is

preempted by federal law, courts presume that “the historic police powers of the States,”
are undisturbed by federal law, barring “the ‘clear and manifest’ intent of Congress.”43 In
every question of preemption, then, “congressional intent [is] ‘the ultimate
touchstone[.]’”44 Courts thus ascertain congressional intent either “‘through a statute’s
express language” or infer it “‘through its structure and purpose.’”45

39 Fish v. Kobach, 840 F.3d 710, 723 (10th Cir. 2016).
40 Does 1-11 v. Board of Regents of University of Colorado, 100 F.4th 1251, 1267 (10th
Cir. 2024) (quoting Nken v. Holder, 556 U.S. 418, 435 (2009).
41 Heideman v. S. Salt Lake City, 348 F.3d 1182, 1188 (10th Cir. 2003).
42 Bradshaw v. American Airlines, Inc., 123 F.4th 1168, 1173 (10th Cir. 2024) (citing
Arizona v. United States, 567 U.S. 387, 399 (2012)).
43 Id. at 1173 (quoting Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947)).
44 Id. (quoting Wyeth v. Levine, 555 U.S. 555, 565 (2009)).
45 Id. (quoting Altria Grp., Inc. v. Good, 555 U.S. 70, 76 (2008)).
Preemption comes in different flavors,46 but central to the claims here are theories
of field and conflict preemption. Courts infer a statute is preempted under a theory of field

preemption “where ‘a framework of regulation’ of a field is ‘so pervasive’ that it leaves no
space for state supplementation or where the federal interest is ‘so dominant’ that the
existence of a federal scheme can ‘be assumed to preclude enforcement of state laws on
the same subject.’”47 Conflict preemption, on the other hand, “forces a state law to yield to
federal law either when it is impossible to comply with both laws or when the state law
thwarts the federal law’s purposes and intended effects.”48

i. H.B. 2048’s delivery requirement is preempted.
It is undisputed that Congress did not expressly preempt H.B. 2048.49 Instead, the
Court must determine if H.B. 2048 is implicitly pre-empted.50 Both in its briefs and at oral
arguments, Oklahoma has asserted that H.B. 2048 is a “delivery” regulation, not a “pricing”
regulation.51 This matters because the Eighth Circuit recently relied on that distinction in

concluding that a similar Arkansas law was not preempted by federal law.52

46 State of Kan. ex. rel. Todd v. United States, 995 F.2d 1505, 1509 (10th Cir. 1993).
47 Bradshaw, 123 F.4th at 1173 (quoting Arizona, 567 U.S. at 399).
48 Pharmaceutical Care Management Association v. Mulready, 78 F.4th 1183, 1193 (10th
Cir. 2023) (citing Arizona, 567 U.S. at 399–400).
49 ONEOK, Inc., v. Learjet, Inc., 575 U.S. 373, 376 (2015).
50 Id.
51 See, e.g., Def.’s Resp. (Case No. CIV-25-726, Dkt. 26), at 11–12.
52 Pharmaceutical Research and Manufacturers of America v. McClain, 95 F.4th 1136,
1139 (8th Cir. 2024).
Arkansas’s law provides that:
(c) A pharmaceutical manufacturer shall not:
(1) Prohibit a pharmacy from contracting or participating with an
entity authorized to participate in 340B drug pricing by denying
access to drugs that are manufactured by the pharmaceutical
manufacturer; or
(2) Deny or prohibit 340B drug pricing for an Arkansas-based
community pharmacy that receives drugs purchased under a 340B
drug pricing contract pharmacy arrangement with an entity authorized
to participate in 340B drug pricing.53
The Eighth Circuit echoed an observation from the Third Circuit that “the 340B Program
‘is silent about delivery’ and distribution of pharmaceuticals to patients.”54 The Eighth
Circuit casts the Arkansas law as one that simply prohibits manufacturers from either
“interfering in a covered entity’s agreement with a contract pharmacy by denying the
pharmacy access to a covered entity’s 340B drugs[]” or “interfering in a covered entity’s
agreement with a contract pharmacy by denying 340B drug pricing to covered entities who
use contract pharmacies for distribution.”55 Because, according to the Eighth Circuit,
“[contract p]harmacies do not purchase 340B drugs, and they do not receive the 340B price
discounts[,]”Arkansas’s law is simply aimed at regulating pharmacy, a field traditionally
within the province of a state’s police power.56 This supposed distinction between
“delivery” and “price” regulations, however, strikes this Court as artificial.

53 Id. at 1142–43 (quoting Ark. Code. Ann. § 23-92-604(c)).
54 Id. at 1142 (quoting Sanofi, 58 F.4th at 703)).
55 Id. at 1143.
56 Id. at 1144.
First of all, how Oklahoma describes its regulation doesn’t end the matter;57 an
examination of how the regulation actually operates is necessary. A hypothetical might

help illustrate the point: imagine if Congress passed a law requiring pizza parlors to sell
pizzas at a 50% discount to anyone named John. If a state then passed a law requiring those
pizza parlors to also deliver half-priced pies to any other person that John told them to,
could that state law possibly be described as a mere “delivery” regulation? Of course not;
the effect of the law is to reduce the price of pies that would otherwise be sold to non-
John’s at full price. That’s a law regulating pricing, and H.B. 2048 is just that kind of law.

And while the record is not yet clear whether the agreements between the covered
entities and contract pharmacies in Oklahoma that participate in the 340B Program require
the covered entities to maintain title in the 340B discounted drugs when they are at the
contract pharmacies (Plaintiffs believe they don’t), the practical effect either way is that
H.B. 2048 requires manufacturers to deliver drugs to contract pharmacies at a discounted

price when they would otherwise be delivered at full price. And why? Because Oklahoma
wants drug manufacturers to maximally subsidize Oklahoma covered entities.
This artificiality of this pricing/delivery distinction is underscored by the fact that
federal law doesn’t use the term “340B drug,” and that’s because that term is really a
misnomer. The drug is the same whether sold under the 340B Program or otherwise. All

57 See Bailey v. Drexel Furniture Co., 259 U.S. 20, 36 (1922) (holding that a “so-called
tax” was in substance a penalty to coerce activities otherwise outside Congress’s ability to
regulate) and N.F.I.B. v. Sebelius, 567 U.S. 519, 563–64 (2012) (holding that a provision
labeled a penalty is a valid exercise of Congress’s taxing power despite the label).
the 340B Program does is set the price for certain sales of drugs. So when H.B. 2048 defines
a “340B drug” as a “drug that has been subject to any offer for reduced prices by a

manufacturer pursuant to [42 U.S.C. § 256b] and is purchased by a covered entity as
defined in [42 U.S.C. § 256b(a)(4).],”58 it does so in recognition of the fact that the only
difference between a “340B drug” and a non-340B drug is…it’s price. H.B. 2048’s
mandate that “[a] manufacturer shall not deny, restrict, prohibit, or otherwise interfere with,
either directly or indirectly, the acquisition of a 340B drug by, or delivery of a 340B drug
to a 340B entity, unless such receipt is prohibited by [HHS]” thus isn’t really regulating

the delivery of drugs to those contract pharmacies, but rather the price at which those drugs
must be sold.59
In a similar case, the United States District Court for the Southern District of West
Virginia granted a preliminary injunction after concluding that if a comparable West
Virginia law “is an attempt to enforce 340B’s pricing scheme, then the statute would be

preempted according to existing Supreme Court precedent.”60 The District Court also noted
that while district courts considering similar statutes had generally upheld those laws, those

58 36 O.S. § 5401(1).
59 36 O.S. § 5403(A).
60 Pharmaceutical Research and Manufacturers of America v. Morrisey, 760 F. Supp. 3d
439, 455 (S.D.W. Va. 2024). That Supreme Court precedent was a 2011 decision in a non-
preemption case where the Court concluded that third parties—in this instance, a county
operating 340B entities—could not enforce the 340B Program because Congress
“‘centralized enforcement [of the pharmaceutical pricing agreements between
manufacturers and HRSA] in the [federal] government.’” Astra USA, Inc. v. Santa Clara
Cnty., 563 U.S. 110 (2011) (citation omitted).
courts hadn’t considered the implications of the replenishment model,61 and that matters
because the replenishment model significantly muddies the waters as to who is the actual

purchaser of the 340B drugs: the contract pharmacy or the covered entity? Recall, there are
only sixteen designated types of covered entities and contract pharmacies are not among
them.62 And the 340B Program does not require drug manufacturers to offer discounted
drugs to anyone other than covered entities. So where H.B. 2048 effectively expands the
definition of “covered entity” to include contract pharmacies, that expansion is “contrary
to federal law,” and accordingly “must yield.”63

Congress, after all, struck a delicate balance with the federal 340B Program. The
Program is a bargain between drug manufacturers and the federal government whereby, in
exchange for access to the lucrative Medicaid and Medicare Part B markets, manufacturers
help subsidize certain healthcare providers.64 Because drug manufacturers aren’t forced to
participate, Congress limited the scope of the 340B Program to ensure that the price of

admission wasn’t too high, which might have the deleterious effect of causing drug
manufacturers to opt out of Medicaid and Medicare Part B.65 No statute “pursues its

61 Morrisey, 760 F. Supp. 3d at 456.
62 Health Res. & Servs. Admin., 340B Eligibility: Who Can Participate in the 340B Drug
Pricing Program, U.S. Dep’t of Health & Hum. Servs.,
https://www.hrsa.gov/opa/eligibility-and-registration (last visited Oct. 9, 2025).
63 Remund v. State Farm Fire and Cas. Co., 483 Fed. Appx. 403, 407 (10th Cir. 2012)
(quoting Felder v. Casey, 487 U.S. 131, 138 (1962)).
64 Morrisey, 760 F. Supp. 3d at 452 (noting the “twin federal purposes” of the program).
65 Transcript (Case No. CIV-25-726, Dkt. 78), at 62 (noting that one manufacturer has done
just that, due to the rising costs of the 340B Program).
purposes at all costs,” and that is especially so with respect to the 340B Program’s subsidy
scheme.66

Further, the District Court in Morrisey found that a state attempt to enforce 340B
Program’s pricing requirements would likewise impinge on Congress’s intent to
“‘centralize[] enforcement in the government[.]’”67 In Astra, the Supreme Court rejected
an attempt by a county government to enforce the 340B Program by way of a third-party
beneficiary theory in contract, which the Court deemed “in essence a suit to enforce the
statute itself,” which wasn’t allowed.68 Accepting that Oklahoma’s delivery regulation in

the context of the replenishment model operates as a price regulation, Oklahoma stands
functionally in the same place that the county did in Astra, enforcing the 340B Program
itself, in contravention of what “Congress contemplated when it ‘centralized enforcement
in the government.’”69 And under the replenishment model, in the event that a
manufacturer “den[ies], restrict[s], prohibit[s], or otherwise interfere[s] with . . . the

acquisition of a 340B drug by, or delivery of a 340B drug to a 340B entity,” Oklahoma
regulators won’t be questioning whether the drug reached a pharmacy—they’ll be
questioning the price at which it was delivered. This is materially the same as the

66 Rodriguez v. United States, 480 U.S. 522, 525–526 (1987).
67 Morrisey, 760 F. Supp. 3d at 457 (citation omitted).
68 Astra, 563 U.S. at 118.
69 Morrisey, 760 F. Supp. 3d at 456 (quoting Astra, 563 U.S. at 119).
unconstitutional third-party enforcement scheme that the Supreme Court dispatched with
in Astra.70

Oklahoma has also stipulated that H.B. 2048 prohibits manufacturers from
conditioning the delivery of the 340B discount on the provision of claims data from
covered entities and contract pharmacies.71 Plaintiffs argue that this creates a conflict with
federal law in inhibiting their ability to access the 340B Program’s ADR process.
Recall, before a manufacturer may access the federal ADR scheme, 42 U.S.C. §
256b(d)(3)(A) requires the manufacturer to seek an audit in compliance with §

256b(a)(5)(C). And in order to trigger an audit, a manufacturer must first demonstrate
there is “reasonable cause” to believe a covered entity is violating the terms of the
conditions of 340B participation either through diversion or double-discounting.72 At an
evidentiary hearing, AbbVie provided compelling testimony supporting its argument that
claims data is necessary to establish the reasonable cause required to trigger an audit.73

Essentially, AbbVie argues that the claims data clarifies otherwise opaque transaction
information that has been used recently to determine that 340B transactions have been

70 Astra, 563 U.S. at 113.
71 Def.’s Resp. (Dkt. 26), at 17.
72 61 Fed. Reg. 65,406 (Dec. 12, 1996).
73 Transcript (Case No. CIV-25-726, Dkt. 78), at 53–54.
unlawfully duplicated.74 Without the claims data from the covered entity, such detection
would be “impossible.”75

Oklahoma responds that (1) the implementing regulation does not require claims
data in order to trigger an audit and (2) HRSA has never actually utilized the “reasonable
cause” standard to deny a manufacturer’s request for an audit. But that response ignores
the obvious: without suspicion-raising claims data, how would a manufacturer know to
ever ask for an audit? The claims data, as far as the Court can tell, would be the way to
detect possible diversion or double-dipping on discounts. The barrier to access that data

created by H.B. 2048 thus stands in direct conflict with the 340B Program’s dispute
resolution mechanism.76
Accordingly, the Court finds that Plaintiffs are likely to prevail on their claim that
36 O.S. § 5403 is preempted by federal law.
ii. H.B. 2048’s parallel enforcement provision is preempted.

Finally, Plaintiffs argue that Oklahoma’s separate enforcement scheme, vested in
the Attorney General, creates another conflict. 77 As previously stated, the Supreme Court
has found that Congress provided HHS with the sole authority to “oversee compliance with

74 Id.
75 Id.
76 Atchison, Topeka and Santa Fe Ry. Co. v Lennen, 732 F.2d 1495, 1506 (10th Cir. 1984).
77 While AstraZeneca has named the Insurance Commissioner as a defendant, the Court
notes that the provision, 36 O.S. § 5404(A), providing the Commissioner with enforcement
power would not reach AstraZeneca, as that provision is aimed at “health insurers.”
the 340B Program,”78 and gave the HHS Secretary the authority to promulgate rules “in
order to prevent overcharges[.]”79 The Secretary subsequently implemented rules vesting

the power to adjudicate “[c]laims by covered entities that may have been overcharged for
covered outpatient drugs purchased from manufacturers” as well as “[c]laims by
manufacturers of 340B drugs, after a manufacturer has conducted an audit of a covered
entity . . . that a covered entity may have violated the prohibitions against duplicate
discounts or diversion[,]” in the 340B ADR Panel.80
H.B. 2048 meanwhile vests in the Oklahoma Attorney General the authority to

investigate violations of its requirements and punish those with both civil fines of up to
$10,000 and criminal sanctions.81 And disputes under H.B. 2048 related to the delivery of
a “340B drug” necessarily raise a question as to whether the covered entity or contract
pharmacy in question was delivered drugs at the discounted rate, which is an attempt by
Oklahoma to police potential overcharges.

Further, Plaintiffs have raised non-speculative concerns about the possibility of state
and federal regulators providing conflicting interpretations of federal law. For instance, in
a situation where a manufacturer denies a 340B discount to an entity suspected of illegally
diverting drugs to non-340B patients, an Oklahoma regulator and a federal regulator might
reach a conflicting conclusion as to the patient’s 340B eligibility. This isn’t a farfetched

78 Astra, 563 U.S. at 117.
79 42 U.S.C. § 256b(d)(1)(A).
80 42 C.F.R. § 10.3 (2024).
81 36 O.S. § 5404(B).
scenario, as Novartis has convincingly argued that such eligibility is subject to “a number
of malleable factors” that could very easily lead to differing determinations.82 Because the

analysis is not a mere mechanical application of federal law, the potential for conflicting
determinations raises the specter that Congress’s intended uniform scheme would be
derailed.83
Accordingly, the Court finds that Plaintiffs are likely to succeed on the merits of
their claim that 36 O.S. § 5404 is preempted by federal law.

b. H.B. 2048 forces sales at confiscatory prices, resulting in unconstitutional
takings.
“The Takings Clause of the Fifth Amendment provides that private property shall
not ‘be taken for public use, without just compensation.’”84 Nor can the government “avoid
the categorical duty to pay just compensation for a physical taking of property by reserving
to the property owner a contingent interest in a portion of the value of the property, set at
the government’s discretion.”85
When Congress created the 340B Program, it offered drug manufacturers the choice
of participating in the Program as a cost of admission to the broader Medicaid and Medicare

Part B markets. That exchange of value (i.e., offer discounted drugs to certain buyers for

82 Plf.’s Brief (Case No. CIV-25-727, Dkt .16), at 24–25.
83 See Colorado Public Utilities Com’n v. Harmon, 951 F.2d 1571, 1583 n. 14 (10th Cir.
1991).
84 Murr v. Wisconsin, 582 U.S. 383, 392 (2017) (quoting U.S. Const. amend. V).
85 Horne v. Department of Agriculture, 576 U.S. 350, 362–63 (2015) (internal quotation
marks omitted).
access to the government-created market) meant the Takings Clause wasn’t a barrier. H.B.
2048, however, isn’t Oklahoma charging admission to a market of its own creation, but

rather Oklahoma demanding a ransom in exchange for continued access to another’s
market. There is no exchange of value because Oklahoma isn’t giving the drug
manufacturers anything they don’t already have (i.e., access to the federal market) as
compensation for forcing them to make discounted sales, for prohibiting them from
requiring claims data, and for making them subject to civil and criminal penalties (amongst
other things). Oklahoma is instead raising the cost of exercising a “basic and familiar use[]

of property”—its sale, while offering nothing in return. The Supreme Court has made clear
that selling one’s product in interstate commerce “although certainly subject to reasonable
government regulation, is . . . not a special governmental benefit that the Government may
hold hostage, to be ransomed by the waiver of constitutional protection.”86
Nor is the Court satisfied that there is adequate evidence to conclude that this taking

is being done for a public, rather than private, purpose. Even in Kelo v. City of New London,
the high watermark of government takings power, the Supreme Court was satisfied that the
City of New London’s economic development plan that undergirded the city’s
condemnation claims of the petitioners’ properties “was not adopted to benefit a particular
class of identifiable individuals.”87 And the lower courts in Kelo had found “no evidence

86 Horne, 576 U.S. at 366.
87 Kelo v. City of New London, 545 U.S. 469, 478 (2005) (quoting Hawaii Housing
Authority v. Midkiff, 467 U.S. 229, 245 (1984)) (internal quotation marks omitted).
of an illegitimate purpose”—i.e., “to bestow a private benefit.”88 But even under Kelo’s
permissive definition of “public use,” H.B. 2048 seems to effectuate a taking for purposes

of bestowing a private benefit.89 Oklahoma is taking away property from A, the
pharmaceutical manufacturers, and giving it to B, the covered entities (or the contract
pharmacies) to sell for windfall profits and with no requirement to put those profits towards
any particular public good. The evidentiary hearing made abundantly clear that the contract
pharmacies and third-party administrators keep a slice of those profits, which those private
businesses do whatever they want with. The hospitals are not required to deploy 340B

profits towards charity care, nor is there convincing evidence before the Court that covered
entities would cease to serve high-needs patients but for the 340B profits from sales at
unlimited numbers of contract pharmacies. H.B. 2048 is thus a transfer of property
“adopted[,]” to some extent, “to benefit a particular class of identifiable individuals.”90
This is verboten.

Further, even if the Court were convinced there was sufficient evidence before it to
conclude that H.B. 2048 served a Kelo-kosher public purpose, there is still the question of
just compensation. The heavily discounted prices set by the 340B Program (up to 100%
discounts) are confiscatory when required by Oklahoma for the merely incremental
purpose of not being subject to state penalties.91

88 Kelo, 545 U.S. at 478.
89 Id. at 483.
90 Id. at 478 (quoting Midkiff, 467 U.S. at 245).
91 See Horne, 576 U.S. at 362–63.
Accordingly, the Court finds that Plaintiffs have established a likelihood of success
on the merits of their claim that 36 O.S. § 5403 effects an unconstitutional taking.

c. The Court delays ruling on Plaintiffs’ other claims.
Plaintiffs put forward a variety of other claims for relief, including arguments that
H.B. 2048 violates the dormant Commerce Clause, violates the Contracts Clause, is void
for vagueness, and is preempted by federal patent law. Because Plaintiffs have

demonstrated a likelihood of success on the merits such that the Court is able to grant
interim relief on the conflict preemption and Fifth Amendment claims, the Court reserves
a decision on the other substantive claims for the merits stage.
II. Plaintiffs will suffer irreparable harm in the event H.B. 2048 goes into effect.
Plaintiffs risk civil fines of up to $10,000 and possible criminal sanctions for

violating H.B. 2048 after it goes into effect on November 1, 2025. If Plaintiffs choose to
avoid doing business in Oklahoma, Plaintiffs risk disqualification from Medicare Part B
and Medicaid. If Plaintiffs submit to H.B. 2048, they face large financial losses with little
practical likelihood of recovering in the event the Court permanently enjoins enforcement
of H.B. 2048 against them. Moreover, deprivation of a constitutional right is a prototypical
irreparable injury.92

92 Free the Nipple-Fort Collins v. City of Fort Collins, 916 F.3d 792, 806 (10th Cir. 2019).
Oklahoma argues that the state will suffer its own irreparable injury by being barred
from enforcing state law.93 But the Court is already persuaded that there’s a substantial

showing that H.B. 2048 violated the Constitution. So that’s not enough to counsel against
a preliminary injunction.94 Oklahoma next argues that an injunction threatens the health
and safety of Oklahomans by cutting off a revenue stream for covered entities, but
Oklahoma offered no credible evidence in support.95
Accordingly, the Court finds that Plaintiffs will suffer irreparable harm such that
interim relief is necessary.

III. The public interest weighs in favor of granting a preliminary injunction.
Finally, Plaintiffs have demonstrated that the public interest weighs in favor of
enjoining H.B. 2048’s various provisions pending final resolution of this case. As
previously stated, the state lacks “an interest in enforcing a law that is likely
constitutionally infirm[.]”96 Plus, the 340B Program does not automatically lead to

discounted drugs or more access to drugs to participating patients. So, the status quo here,
allowing the manufacturers to continue to impose restrictions that are valid under federal
law, is unlikely to harm Oklahoma patients. The ball is in the covered entities’ courts to

93 Def.’s Resp. (Case No. CIV-25-726, Dkt. 26), at 24) (quoting Abbott v. Perez, 585 U.S.
579, 602 n.17 (2018).
94 See Chamber of Commerce v. Edmondson, 594 F.3d 742, 771 (“Oklahoma does not have
an interest in enforcing a law that is likely constitutionally infirm.”).
95 See, e.g., Chandra Expert Rep. (Case No. CIV-25-726, Dkt. 7, Ex. 25), at 34–35 (finding
that increased 340B profits do not lead to better patient outcomes).
96 Edmondson, 594 F.3d. at 771.
decide whether they will write scripts to be fulfilled at the pharmacies individual patients
prefer. Further, because 340B participants (as well as the contract pharmacies and their

third-party administrators) are free to do whatever they choose with 340B profits, it does
not follow that loss of the additional profits Oklahoma seeks to funnel those entities will
harm the public, and Oklahoma has provided no evidence establishing a likelihood of such
harm.
IV. The Court only enjoins 36 O.S. §§ 5403, 5404(B).
As to severability, “[t]he question of whether an unconstitutional provision of

state law is severable from the remainder of the enactment is a matter of state law.”97 H.B.
2048 provides:
If any provision of this act, an amendment made by this act, or the application
of such provision or amendment to any person or circumstance is held to be
unconstitutional, the remainder of this act, the amendments made by this act,
and the application of the provisions of such to any person or circumstance
shall not be affected thereby.98
The Court reads this provision to allow it to enjoin only 36 O.S. §§ 5403, 5404(B).
The remainder of the statute, by all appearances, will be able to operate without the two
enjoined provisions going into effect on November 1, 2025, as the remainder of the law is
aimed at “health insurance issuer[s], pharmacy benefits manager[s], other third-party
payor[s], or [their] agent[s.]”99
Conclusion

97 Bishop v. Smith, 760 F.3d 1070, 1093 (10th Cir. 2014) (citations omitted).
98 36 O.S. § 5405.
99 36 O.S. § 5402(A).
For the reasons stated above, the Court GRANTS IN PART AND DENIES IN
PART Plaintiffs’ various motions for preliminary injunctions (Case no. 25-cv-726, Dkt. 7;
Case no. 25-cv-727, Dkt. 15; Case no. 25-cv-1156, Dkt. 13), DISMISSES Defendant’s
Motion for Judgment on the Pleadings (Case no. 25-cv-726, Dkt. 36), and ENJOINS the
Attorney General from enforcing 36 O.S. §§ 5403, 5404(B) against Plaintiffs while these
cases are pending.
Because it would be impossible, based on the record before the Court, to quantify
the damage done, if any, to Defendant as a result of this injunction, the Court ORDERS
that the security bond required by Federal Rule of Civil Procedure 65(c) be set at ZERO. □□

IT IS SO ORDERED this 31st day of October 2025.

12
UNITED STATES DISTRICT JUDGE

100 ETP Rio Rancho Park, LLC v. Grisham, 522 F. Supp. 3d 966, 1014 (D.N.M 2021).
26

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/11182457. Public record. Not legal advice.