State Actions to Lower Drug Prices: Selected Legal Issues
Congressional research reportAug 31, 2026
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State Actions to Lower Drug Prices:
Selected Legal Issues
August 31, 2026
Congressional Research Service
https://crsreports.congress.gov
R49329
SUMMARY
State Actions to Lower Drug Prices:
Selected Legal Issues
R49329
August 31, 2026
Hannah-Alise Rogers
Legislative Attorney
As federal lawmakers engage in efforts to target high prescription drug prices, states have also
taken actions intended to reduce drug prices and make drugs more affordable for consumers.
States have enacted a variety of legislative measures, including some that restrict drug
Jennifer A. Staman
manufacturers from pricing their drugs at certain levels, and others that regulate the business
Legislative Attorney
practices of pharmacy benefit managers (PBMs), pharmacies, and other participants in the
pharmaceutical supply chain. In some instances, pharmaceutical manufacturers and other
stakeholders have sued to challenge various state drug pricing laws, and in general, plaintiffs in
these cases claim that such laws violate certain constitutional provisions and doctrines that
restrict state authority and sovereignty. This report reviews selected state efforts to enact prescription drug pricing legislation
and analyzes related legal challenges.
To combat excessive or so-called “unconscionable” prescription drug prices, some states have enacted laws prohibiting drug
manufacturers from increasing their prices beyond certain levels. Drug manufacturers and pharmaceutical trade associations
have challenged at least three state “price-gouging” laws on the basis that they are unconstitutionally vague and invalid under
the Dormant Commerce Clause. In one case, an appeals court held that a Maryland state law was unconstitutional under the
extraterritoriality principle of the Dormant Commerce Clause, because the state law regulated wholly out-of-state
transactions. See Association for Accessible Medicines (AAM) v. Frosh, 887 F.3d 664 (4th Cir. 2018). By comparison, in a
different lawsuit, an Illinois district court has denied a motion to preliminarily enjoin an Illinois price-gouging law, finding
that the plaintiff was not likely to succeed on the merits of its case because the state law did not violate the extraterritoriality
principle of the Dormant Commerce Clause. See AAM v. Raoul, 805 F. Supp. 3d 854 (N.D. Ill. 2025).
Prescription Drug Affordability Boards (PDABs) are independent, state-level boards that review prescription drug costs.
Some states have authorized their PDABs to take additional actions to lower the prices of certain drugs. A drug manufacturer
filed lawsuits to challenge the actions of Colorado’s PDAB, and these cases have involved the Board’s decisions to set a
payment limit on the manufacturer’s products. See, e,g., Amgen Inc. v. Mizner, No. 24-CV-00810, 2025 WL 947474 (D.
Colo. Mar. 28, 2025). The manufacturer has claimed, in part, that the state PDAB law runs afoul of the Fourteenth
Amendment’s Due Process Clause, because the law interferes with the company’s patents, and the law violates the Dormant
Commerce Clause, because it generally controlled commerce occurring outside state boundaries.
Congress created the 340B Drug Discount Program to enable certain health care providers to purchase outpatient prescription
drugs at lower costs. As part of the program, manufacturers sign a contract under which they are required to “offer” to sell
certain drugs at a “ceiling price” to certain covered entities. Covered entities may make 340B drugs available to patients
through the use of “contract pharmacies.” Several states have enacted legislation to limit drug manufacturers from restricting
contract pharmacy use by covered entities in their state, and these state laws have spurred several lawsuits. Drug
manufacturers and trade industry groups have challenged the laws, arguing they are preempted by the 340B statute and
violate the Dormant Commerce Clause. At least three federal appeals courts have held that the state 340B laws are not
preempted by the 340B statute because they regulate in-state pharmacies and drug distribution inside the state, but one
federal circuit court disagreed. See, e.g., PhRMA v. McClain, 95 F.4th 1136 (8th Cir. 2024) (holding state law was not
preempted); PhRMA v. McCuskey, 171 F.4th 675, reh'g en banc granted, 176 F.4th 830 (4th Cir. 2026) (holding state law
was preempted).
PBMs are entities that play many roles in the drug distribution chain. As states have enacted measures to regulate PBMs,
PBMs and other parties have challenged the validity of such measures, commonly on the basis that they are preempted by the
Employee Retirement Income Security Act (ERISA), a federal law that regulates private-sector, employment-based health
plans. Plaintiffs allege that ERISA preempts the state PBM laws because such laws have a direct regulatory effect on ERISAgoverned plans, plan design, and how plans manage drug benefits. In Rutledge v. Pharmaceutical Care Management Ass’n
(PCMA), 592 U.S. 80 (2020), the Supreme Court addressed the interplay between state PBM laws and ERISA preemption
and held that ERISA did not preempt an Arkansas statute that regulated PBM pharmacy reimbursement practices. Following
Rutledge, lower courts have examined ERISA preemption challenges to a variety of state PBM laws, with mixed results.
Congressional Research Service
State Actions to Lower Drug Prices: Selected Legal Issues
Contents
Introduction ..................................................................................................................................... 1
Legal Bases for Challenges to State Drug Pricing Laws ................................................................. 2
Federal Preemption of State Law .............................................................................................. 2
Dormant Commerce Clause ...................................................................................................... 4
The Fifth Amendment’s Takings Clause ................................................................................... 7
The Due Process Clause of the Fourteenth Amendment ........................................................... 9
Contract Clause ....................................................................................................................... 10
Varied State Actions Addressing Drug Prices ................................................................................11
State Laws Banning Price Gouging ........................................................................................ 12
The Fourth Circuit Invalidates Maryland Law ................................................................. 12
The Eighth Circuit Invalidates the Minnesota Law .......................................................... 14
A Federal District Court Upholds the Illinois Law ........................................................... 16
Selected Legal Considerations .......................................................................................... 17
State Laws Creating Prescription Drug Affordability Boards ................................................. 17
Amgen Challenges Colorado PDAB Law ........................................................................ 19
Selected Legal Considerations .......................................................................................... 21
State Laws Addressing the 340B Drug Discount Program ..................................................... 22
The Eighth Circuit Upholds the Arkansas and Missouri Laws ......................................... 24
The Fifth Circuit Upholds the Louisiana and Mississippi Laws ....................................... 26
The Fourth Circuit Pauses West Virginia’s Law ............................................................... 29
Selected Legal Considerations .......................................................................................... 31
State Laws Regulating Pharmacy Benefit Managers .............................................................. 32
Pharmacy Benefit Managers and State Regulation ........................................................... 32
ERISA Preemption ............................................................................................................ 33
Supreme Court Upholds Arkansas PBM Law: Rutledge v. Pharmaceutical Care
Management Association (PCMA) ................................................................................ 35
Litigation After Rutledge Shows Mixed Results............................................................... 35
Selected Legal Considerations .......................................................................................... 39
Contacts
Author Information........................................................................................................................ 41
Congressional Research Service
State Actions to Lower Drug Prices: Selected Legal Issues
Introduction
At the federal level, the 119th Congress has engaged in efforts to lower prescription drug prices
and make drugs more affordable for patients and providers.1 At the same time, the executive
branch has taken various actions to attempt to lower drug prices, including by advocating for
Congress to codify most-favored-nation pricing, launching its own platform to facilitate direct-toconsumer sales, and creating new demonstration programs to test new drug payment models for
Medicare and Medicaid.2
Against this backdrop, states have also engaged in efforts to reduce drug prices via various
legislative mechanisms. States have taken a variety of approaches, ranging from directly
regulating the price that manufacturers may charge for particular drugs, to regulating the business
practices of pharmacy benefit managers (PBMs), pharmacies, and other participants in drug
supply and payment chains. As discussed in this report, some of these state efforts have been
challenged by pharmaceutical companies and other industry stakeholders, and the outcomes in
these cases have been mixed. Some of these legal challenges have presented constitutional
questions related to state authority to enact laws that directly affect drug prices, while other
lawsuits involve complex questions about the interaction between state and federal law.
This report reviews recent selected examples of state efforts to enact prescription drug pricing
legislation and analyzes related legal challenges. The report first introduces the constitutional
provisions, including Supreme Court precedent, that are relevant to the challenges against the
state laws, in order of prevalence in the discussed cases. The report provides legal background on
the doctrines of federal preemption, the Dormant Commerce Clause, the Fifth Amendment
Takings Clause, the Fourteenth Amendment Due Process Clause, and the Contracts Clause. The
report then reviews lawsuits brought against various state efforts to regulate drug prices,
including through price-gouging laws, laws establishing Prescription Drug Affordability Boards
(PDABs), laws attempting to protect pharmacies and covered entities in the 340B Drug Discount
Program, and laws that attempt to influence the business practices of PBMs. Each section of the
report concludes with selected legal considerations for Congress in light of the ongoing legal
challenges and outstanding constitutional questions.
1 Making Medicines More Affordable: How Competition Can Lower Drug Prices: Hearing Before the S. Comm. On
Health, Ed., Lab. & Pensions, 119th Cong. (2026); Lowering Health Care Costs for All Americans: An Examination of
the Prescription Drug Supply Chain: Hearing Before the H. Subcomm. on Health, 119th Cong. (2026); Medicines and
IP: Balancing Innovation and Access: Hearing Before the H. Subcomm. on Cts., Intell. Prop., A.I. and the Internet,
119th Cong. (2026); see also Consolidated Appropriations Act, 2026, Pub. L. No. 119-75, §§ 6701–6702, 140 Stat.
173, 703–37 (amending Medicare Part D statute to add additional oversight to certain pharmacy benefit managers
(PBM) services).
2 Exec. Order No. 14297, 90 Fed. Reg. 20749 (May 12, 2025); CRS In Focus IF13281, TrumpRx: Background and
Implementation, by Laura A. Wreschnig and Michele L. Malloy (2026); see also Fact Sheet, President Donald J.
Trump Launches TrumpRx.gov to Bring Lower Drug Prices to American Patients, WHITE HOUSE (Feb. 5, 2026),
https://www.whitehouse.gov/fact-sheets/2026/02/fact-sheet-president-donald-j-trump-launches-trumprx-gov-to-bringlower-drug-prices-to-american-patients/ [https://perma.cc/F3RK-ZFQ3] (explaining TrumpRx); GENEROUS
(GENErating Cost Reductions for U.S. Medicaid) Model, CTR. FOR MEDICARE & MEDICAID SERVS. (June 12, 2026),
https://www.cms.gov/priorities/innovation/innovation-models/generous [https://perma.cc/5QJ7-QGX6] (explaining
new Medicaid Model to implement most-favored-nation pricing).
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State Actions to Lower Drug Prices: Selected Legal Issues
Legal Bases for Challenges to State Drug Pricing
Laws
In the United States, both the federal government and states regulate entities involved in the U.S.
pharmaceutical supply chain. Relying on their traditional powers to regulate for the health, safety,
and welfare of residents, states have enacted laws that aim to protect residents from high drug
prices.3 The federal government also shares certain concurrent authority over the pharmaceutical
supply chain emanating from its enumerated powers in the Constitution, and these provisions may
limit a state’s ability to enact legislation to impact drug prices. The range of lawsuits filed in
recent years over state attempts to regulate drug prices reflects this overlapping authority. This
section provides background on the relevant federal case law interpreting constitutional
provisions and federal statutes, which are presented in their order of prevalence in the cases
discussed herein.
Federal Preemption of State Law
The preemption doctrine derives from the Supremacy Clause of the Constitution, which
establishes that the laws of the United States “shall be the supreme Law of the Land; and the
Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State
to the Contrary notwithstanding.”4 In general terms, federal preemption occurs when a validly
enacted federal law supersedes a conflicting state law.5 As a result, when federal and state laws
are in conflict, the state law is generally supplanted, leaving it void and without effect.6 The
preemption doctrine is a key element of the United States’ system of federalism, and it has been
recognized as the “most common constitutional ground upon which state laws are judicially
invalidated.”7 In analyzing the preemptive effect of federal law, the Supreme Court has indicated
that “pre-emption claims turn on Congress’s intent,” and Congress may express such intent
through explicit preemption language, as well as through a statute’s structure and purpose.8
There are two general categories of preemption: express preemption and implied preemption.
With respect to the first category, a federal statute may displace existing state law through direct
3 See, e.g., MD. CODE ANN., HEALTH−GEN. § 2-803(d) (West 2017) (Maryland statute prohibiting price-gouging of
certain generic drugs); LA. REV. STAT. ANN. § 40:2884 (2023) (Louisiana law prohibiting drug manufacturers from
denying, restricting, or otherwise interfering with “acquisition . . . or delivery of a 340B drug” to a contract pharmacy).
4 See U.S. CONST. art. VI, cl. 2. For a general discussion of the Supremacy Clause and federal preemption, see Libr. of
Cong., Overview of Supremacy Clause, CONSTITUTION ANNOTATED,
https://constitution.congress.gov/browse/essay/artVI-C2-1/ALDE_00013395/ (last visited June 25, 2026).
5 See generally Murphy v. Nat’l Collegiate Athletics Ass’n (NCAA), 584 U.S. 453, 479 (2018) (“[P]reemption . . .
concerns a clash between a constitutional exercise of Congress’s legislative power and conflicting state law.”) (citing
Crosby v. Nat’l Foreign Trade Council, 530 U.S. 363, 372, n.6 (2000)). For more information on federal preemption,
see CRS Report R45825, Federal Preemption: A Legal Primer, by Bryan L. Adkins, Alexander H. Pepper, and Jay B.
Sykes (2023).
6 See Maryland v. Louisiana, 451 U.S. 725, 746 (1981) (Under the Supremacy Clause, state laws that conflict with
federal law are “without effect.”); Wickard v. Filburn, 317 U.S. 111, 124 (1942) (“[N]o form of state activity can
constitutionally thwart the regulatory power granted by the commerce clause to Congress.”); see also Mut. Pharm. Co.,
Inc. v. Bartlett, 570 U.S. 472, 480 (2013) (“Under the Supremacy Clause, from which our pre-emption doctrine is
derived, any state law, however clearly within a State’s acknowledged power, which interferes with or is contrary to
federal law, must yield.” (quoting Gade v. Nat’l Solid Wastes Mgmt. Ass’n, 505 U.S. 88, 108 (1992))).
7 See GREGORY E. MAGGS & PETER J. SMITH, CONSTITUTIONAL LAW: A CONTEMPORARY APPROACH 286 (4th ed. 2018).
8 See, e.g., N.Y. State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 655 (1995) (holding
that state law imposing surcharges on certain employer sponsored health care plans was preempted by Employee
Retirement Income Security Act (ERISA)).
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language in a congressional enactment, often called an express preemption clause.9 In those
instances, determining the scope of the preemption clause is generally a matter of statutory
interpretation.10 For the second category, implied preemption, congressional intent to preempt
state law may be inferred, including in cases in which there is a conflict between federal and state
law. Such implied conflict preemption may occur if it is “impossible for a private party to comply
with both state and federal requirements,”11 or if implementation of state law “stands as an
obstacle to the accomplishment and execution of the full purposes and objectives of Congress.”12
In addition, state action is preempted in instances in which Congress has evidenced its intent to
occupy a given field.13 Field preemption of state law “occurs when a federal law occupies a ‘field’
of regulation ‘so comprehensively that it has left no room for supplementary state legislation.’”14
Historically, the Supreme Court has “addressed claims of pre-emption with the starting
presumption that Congress does not intend to supplant state law.”15 This canon of construction,
referred to as the “presumption against preemption,” generally instructs that courts should not
read federal law to preempt state law, particularly in cases involving states’ historic police
powers,16 “unless that was the clear and manifest purpose of Congress.”17 Judicial decisions in the
9 See Pac. Gas & Elec. Co. v. State Energy Res. Conservation & Dev. Comm’n, 461 U.S. 190, 203 (1983) (“It is well-
established that within Constitutional limits Congress may preempt state authority by so stating in express terms.”
(citing Jones v. Rath Packing Co., 430 U.S. 519, 525 (1977))); see also Nat’l Meat Ass’n. v. Harris, 565 U.S. 452
(2012) (unanimously holding that the Federal Meat Inspection Act expressly preempted the challenged state law).
10 See, e.g., Chamber of Com. v. Whiting, 563 U.S. 582, 594 (2011) (“When a federal law contains an express
preemption clause, we ‘focus on the plain wording of the clause, which necessarily contains the best evidence of
Congress’ preemptive intent.’” (quoting to CSX Transp., Inc. v. Easterwood, 507 U.S. 658, 664 (1993))).
11 English v. Gen. Elec. Co., 496 U.S. 72, 79 (1990); see also Mut. Pharm. Co., 570 U.S. at 480 (holding that federal
drug labeling requirements preempted a state law tort claim against a drug manufacturer, as it was impossible for the
manufacturer to comply with both a state-law duty to enhance the warnings on a particular drug label and also a
federal-law duty not to alter the label).
12 Hines v. Davidowitz, 312 U.S. 52, 67 (1941); see also Geier v. Amer. Honda Motor Co., Inc., 529 U.S. 861, 881–86
(2000) (state tort lawsuit that depended on claim that manufacturers had a duty to install an airbag was preempted by
federal regulation on motor vehicle safety standard because suit would stand as an obstacle to the accomplishment of
the objectives of that standard, which was to seek a gradually developing mix of alternative passive restraint devices for
safety-related reasons).
13 See, e.g., Pac. Gas & Elec. Co., 461 U.S. at 212–13 (holding that California law regarding the construction of
nuclear powerplants was not preempted by federal law).
14 Murphy v. NCAA, 584 U.S. 453, 479 (2018) (quoting R.J. Reynolds Tobacco Co. v. Durham County, 479 U.S. 130,
140 (1986)); see also Pennsylvania v. Nelson, 350 U.S. 497, 502, 504 (1956) (citing one test of preemption of state
power as “(t)he scheme of federal regulation (is) so pervasive as to make reasonable the inference that Congress left no
room for the States to supplement it” and holding that Congress intended to occupy the field of sedition laws.
(alteration in original) (quoting Rice v. Santa Fe Corp., 331 U.S. 218, 230 (1947)).
15 N.Y. State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 654 (1995) (“Indeed, in
cases like this one, where federal law is said to bar state action in fields of traditional state regulation, we have worked
on the ‘assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that
was the clear and manifest purpose of Congress.’” (citations omitted) (quoting Rice, 331 U.S. at 230))); see also CTS
Corp. v. Waldburger, 573 U.S. 1 (2014) (“It follows that ‘when the text of a pre-emption clause is susceptible of more
than one plausible reading, courts ordinarily “accept the reading that disfavors pre-emption.”’” (quoting Altria Grp.,
Inc. v. Good, 55 U.S. 70, 77 (2008))).
16 The term police power has been used to refer to the states’ general power of governing, such as regulating to promote
public health, safety, and welfare. See, e.g., Nat’l Fed’n of Indep. Bus. v. Sebelius, 567 U.S. 519, 536 (2012) (“Our
cases refer to this general power of governing, possessed by the States but not by the Federal Government, as the
‘police power.’”).
17 Rice, 331 U.S. at 230 (1947); see also, e.g., Wyeth v. Levine, 555 U.S. 555, 565 (2009) (“[I]n all pre-emption cases,
and particularly in those in which Congress has ‘legislated ... in a field which the States have traditionally occupied,’ ...
we ‘start with the assumption that the historic police powers of the States were not to be superseded by the Federal Act
(continued...)
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past decade have cast doubt on whether the presumption against preemption applies in all cases.
For example, in the context of implied preemption, in a 2026 decision, three Justices of the
Supreme Court reaffirmed that the presumption against preemption applies in areas that “[s]tates
have traditionally occupied,”18 while in other cases, the Court has resolved implied preemption
questions without referencing the canon.19 In 2016, the Court suggested in a majority opinion that
the presumption may not apply in express preemption cases,20 and lower courts have reached
varying conclusions about the application of this decision.21
Dormant Commerce Clause
The Commerce Clause of the Constitution provides that “[t]he Congress shall have Power . . . To
regulate Commerce with foreign Nations, and among the several States, and with the Indian
Tribes.”22 Although a literal reading of the Commerce Clause grants Congress the authority to
regulate interstate, foreign, and Tribal commerce, the Supreme Court has long interpreted the
Clause to also have a negative or “dormant” aspect that restrains the states’ power to regulate
interstate commerce (even in the absence of preempting congressional legislation).23
The Supreme Court first articulated the doctrine that would become known as the Dormant
Commerce Clause in 1824, when the Court struck down a state-created monopoly on the basis
that it was preempted by an existing federal law.24 In the decision, the Court acknowledged that
the Constitution granted Congress the exclusive power to regulate interstate commerce, but
explained that such power would have to be balanced with the state’s authority to regulate matters
that could influence commerce.25 In early Dormant Commerce Clause cases, the Court also
provided an additional justification for the doctrine, namely that states should not be able to enact
laws that would constrain the national government and economy as a whole.26
unless that was the clear and manifest purpose of Congress.’” (alterations in original) (quoting Medtronic, Inc. v. Lohr,
518 U.S. 470, 485 (1996))).
18 See Hencely v. Fluor Corp., 146 S. Ct. 1086, 1102 (2026) (Alito, Roberts, and Kavanaugh, JJ., dissenting) (quoting
Wyeth, 555 U.S. at 565).
19 See, e.g., Hughes v. Talen Energy Mktg., LLC, 578 U.S. 150 (2016) (holding state public service commission’s order
providing subsidies to new electric generators was preempted by the Federal Power Act).
20 Puerto Rico v. Franklin Cal. Tax-Free Tr., 579 U.S. 115 (2016) (“[B]ecause the statute ‘contains an express preemption clause,’ we do not invoke any presumption against pre-emption but instead ‘focus on the plain wording of the
clause, which necessarily contains the best evidence of Congress’ pre-emptive intent.’” (quoting Chamber of Com. of
United States v. Whiting, 563 U.S. 582, 594 (2011))).
21 Compare, e.g., Triumph Foods, LLC v. Campbell, 156 F.4th 29, 50 (1st Cir. 2025) (“When a federal statute has an
express preemption clause, ‘we do not invoke any presumption against [preemption].’” (alteration in original) (quoting
Nw. Selecta, Inc. v. González-Beiró, 145 F.4th 9, 15 (1st Cir. 2025))), with Lupian v. Joseph Cory Holdings LLC, 905
F.3d 127, 131 n.5 (3d Cir. 2018) (“[W]e have determined that, because [Franklin California] . . . did not address claims
involving areas historically regulated by states, we would continue to apply the presumption against preemption to
express preemption claims.”).
22 U.S. CONST. art. I, § 8, cl. 3.
23 Libr. of Cong., Overview of Dormant Commerce Clause, CONSTITUTION ANNOTATED,
https://constitution.congress.gov/browse/essay/artI-S8-C3-7-1/ALDE_00013307/ (last visited June 25, 2026).
24 Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1 (1824).
25 Id. at 209. For more information about early Dormant Commerce Clause jurisprudence, see Libr. of Cong., Early
Dormant Commerce Clause Jurisprudence, CONSTITUTION ANNOTATED,
https://constitution.congress.gov/browse/essay/artI-S8-C3-7-3/ALDE_00013309/ (last visited June 25, 2026).
26 E.g., Minnesota Rate Cases, 230 U.S. 352, 400 (1913) (noting that “states are not permitted directly to regulate or
restrain that which, from its nature, should be under the control of the one authority, and be free from restriction, save
as it is governed in the manner that the national legislature constitutionally ordains.”).
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The Court has since articulated two overarching principles that govern its Dormant Commerce
Clause jurisprudence. First, the Court has held that state laws which discriminate against out-ofstate actors are per se invalid under the Dormant Commerce Clause, unless the state can show
that its law is narrowly tailored and advances a legitimate local purpose.27 Second, with respect to
state laws that do not facially discriminate against out-of-state actors (i.e., laws that are applied
“evenhandedly” both in- and out-of-state), the Court will uphold the law “unless the burden
imposed on such commerce is clearly excessive in relation to the putative local benefits.”28
In addition to these two principles, some courts and legal scholars have pointed to a third tenet of
Dormant Commerce Clause jurisprudence known as “the extraterritoriality principle,”29 although
other courts and scholars have argued that the extraterritoriality principle is not or should not be a
stand-alone doctrine.30 The extraterritoriality doctrine—drawn from Supreme Court cases
including Baldwin v. G.A.F. Seelig, Inc., Brown-Foreman Distillers Corp. v. New York State
Liquor Authority, and Healy v. Beer Institute31—provides that states may not directly regulate
wholly out-of-state transactions. These cases generally concern state laws that attempted to
regulate extraterritorial, or wholly out-of-state, transactions, and which the Supreme Court
declared invalid under the Dormant Commerce Clause.32
For example, in Healy, the State of Connecticut enacted a “contemporaneous” statute that
required out-of-state shippers to affirm that the prices for their beer shipments to Connecticut
wholesalers were not higher than the prices charged to states that border Connecticut.33 The
Court’s majority concluded that the state law violated the Dormant Commerce Clause, reasoning
that the statute undeniably attempted to control “commercial activity occurring wholly outside the
boundary of the State,” and whose practical effect “is to create just the kind of competing and
interlocking local economic regulation that the Commerce Clause was meant to preclude.”34
The Healy majority also distilled the Court’s previous Dormant Commerce Clause cases into
three principles to describe the extraterritoriality doctrine. First, the Court found that the Dormant
Commerce Clause “precludes the application of a state statute to commerce that takes place
wholly outside of the State’s borders, whether or not the commerce has effects within the state.”35
The Court noted specifically that the extraterritoriality doctrine did not allow the state to legislate
27 South Dakota v. Wayfair, 585 U.S. 162, 173 (2018). The Court has also found that economic protectionism is not a
legitimate state purpose and will effectively result in an automatic ruling against the discriminating state. See Nat’l
Pork Producers Council (Pork Producers) v. Ross, 598 U.S. 356, 369 (2023) (collecting cases).
28 Pike v. Bruce Church, Inc., 397 U.S. 137, 142 (1970) (citing Huron Portland Cement Co. v. City of Detroit, 362 U.S.
440, 443 (1960)).
29 See, e.g., Ass’n of Accessible Meds. (AAM) v. Frosh, 887 F.3d 664 (4th Cir. 2018) (holding state law prohibiting
generic drug price gouging violated extraterritoriality principle of the Dormant Commerce Clause); but see also Energy
& Env’t Legal Inst. v. Epel, 793 F.3d 1169, 1172 (10th Cir. 2015) (describing the extraterritoriality principle as “the
least understood of the Court’s three strands of dormant commerce clause jurisprudence.”).
30 See, e.g., Dawinder Sidhu, Interstate Commerce x Due Process, 106 IOWA L. REV. 1801 (2021) (arguing Dormant
Commerce Clause jurisprudence should be understood within a due process framework); see also AAM v. Raoul, 805
F. Supp. 3d 854, 860 (N.D. Ill. 2025), appeal docketed, No. 25-2960 (7th Cir. Oct. 31, 2025) (finding that the Supreme
Court’s decision in Pork Producers “cast[s] doubt” on the extraterritoriality doctrine elaborated earlier in Baldwin and
Healy).
31 Baldwin v. G.A.F. Seelig, Inc., 294 U.S. 511 (1935); Brown-Foreman Distillers Corp. v. N.Y. State Liquor Auth.,
476 U.S. 573 (1986); Healy v. Beer Inst., 491 U.S. 324 (1989).
32 Baldwin, 294 U.S. at 511; Brown-Foreman Distillers Corp., 476 U.S. at 573; Healy, 491 U.S. at 324.
33
Healy, 491 U.S. at 326.
34 Id. at 337.
35 Id. at 336 (quoting Edgar v. MITE Corp., 457 U.S. 624, 642–43 (1982) (plurality opinion)).
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the “scale of prices” that are used by other states.36 Second, the Healy Court cited the BrownForeman decision to support the assertion that statutes directly controlling wholly out-of-state
transactions are invalid, even if the extraterritorial effects were unintended.37 Third, the Court said
that the “practical effect” of the state law in question must be evaluated on both the consequences
of the statute itself as well as the potential implications if other states adopted similar
legislation.38 Taken together, the Court said, the Connecticut statute regulating beer prices based
on prices charged out-of-state could not stand.39
Over the years following the 1989 Healy decision, the Court has applied a more limited version
of the extraterritoriality principle. For example, in 2003, the Court held in Pharmaceutical
Research and Manufacturers of America (PhRMA) v. Walsh that a Maine statute requiring the
state to attempt to negotiate additional Medicaid rebates from drug manufacturers did not violate
the Dormant Commerce Clause.40 One of PhRMA’s arguments against the Maine law was that it
violated the extraterritoriality principle, citing Baldwin and Healy.41 The Walsh majority
distinguished Baldwin and Healy on the basis that Maine’s statute did not require the
manufacturers to sell their drugs to a wholesaler at any particular price, and it did not tie the price
of a drug sold in Maine to a product sold out-of-state.42 The Court also held that Maine’s
prescription drug program would not “impose a disparate burden on any competitors.”43 In the
aftermath of Walsh, some federal appellate courts interpreted the decision as having “cast[] doubt
on the continued viability of the broad extraterritoriality principle.”44
The Supreme Court most recently discussed the extraterritoriality doctrine in the 2023 case
National Pork Producers Council v. Ross, wherein a majority of the Court appeared to further
limit the scope of the extraterritoriality principle.45 The plaintiffs in Pork Producers challenged a
California law requiring humane production conditions for pork sold inside of the state, arguing
that there was an “almost per se rule” against state laws that “have the ‘practical effect of
controlling commerce outside the State’, even when those laws do not purposely discriminate
against out-of-state economic interests.”46 The Court disagreed with the plaintiffs’
36 Id. (quoting Baldwin, 294 U.S. at 528).
37 Id. (citing Brown-Foreman Distillers Corp., 476 U.S. at 573).
38 Id.
39 Id. at 337.
40 PhRMA v. Walsh, 538 U.S. 644 (2003) (plurality opinion). Seven justices signed on to Parts I, II, III, and VI of the
opinion. Id. at 648. With respect to the remainder of the opinion, only a plurality of justices signed Parts IV, V, and
VII. Id.
41 Id. at 669 (citing Baldwin, 294 U.S. at 521; Healy, 491 U.S. at 324).
42 Id.
43 Id. at 670.
44 Ward v. United Airlines, Inc., 986 F.3d 1234, 1240 (9th Cir. 2021). The court explained in Ward, “We have read the
Court’s decision in Pharmaceutical Research as holding that the extraterritoriality principle derived from the Healy
line of cases now applies only when state statutes have the practical effect of dictating the price of goods sold out-ofstate or tying the price of in-state products to out-of-state prices.” Id.; accord Energy and Env’t Legal Inst. v. Epel, 793
F.3d 1169, 1174–75 (10th Cir. 2015); see also Ass’n des Eleveurs de Canards et d’Oies du Quebec v. Harris, 729 F.3d
937, 951 (9th Cir. 2013) (distinguishing Baldwin and Healy because state law banning foie gras sales from force fed
geese did not mandate a price for any particular product and did not tie the in-state price to an out-of-state price).
45 Nat’l Pork Producers Council v. Ross, 598 U.S. 356 (2023). The Court further noted that almost all of the pork
consumed in the State of California is imported from other states. Id. For more information about the Court’s ruling in
Pork Producers, see CRS Legal Sidebar LSB11031, Supreme Court Narrows Dormant Commerce Clause and Upholds
State Animal Welfare Law, by Kate R. Bowers (2023).
46 Pork Producers, 598 U.S. at 371 (quoting Brief for Petitioners at 19, Pork Producers, 598 U.S. 356 (2023) (No. 21468)). In support of this argument, the petitioners cited the Court’s rulings in Healy, Baldwin, and Brown-Foreman. Id.
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characterization of an “almost per se rule,” distinguishing its rulings in Baldwin, BrownForeman, and Healy on the basis that the state laws at issue in those cases “‘plainly
discriminated’ against out-of-staters,” and “amounted to ‘simple economic protectionism.’”47
Here, the plaintiffs conceded that the California law was not discriminatory.48 The Court did not
elaborate further on the parameters of the extraterritoriality principle, and divergent
interpretations of the Court’s ruling in Pork Producers have emerged.49
The Fifth Amendment’s Takings Clause
The Takings Clause of the Fifth Amendment provides that “private property” shall not “be taken
for public use, without just compensation.”50 The Supreme Court has clarified that the Takings
Clause “does not prohibit the taking of private property, but instead places a condition on the
exercise of that power” by requiring the government to fairly compensate someone whose
property rights are taken.51 To prove a taking has occurred, a party must demonstrate that the
claimed property at issue is protected by the Takings Clause, and that it was “taken” by the
government.52 To show that the taking was unconstitutional, the party must prove either that (1)
the taking was not for public use, or (2) that the party has not received just compensation.53
The Takings Clause applies only to “private property” interests protected under the Fifth
Amendment.54 Relevant to this report, personal property (such as a drug) is protected,55 but
whether patents related to a drug are property protected by the Takings Clause is a much-debated
issue.56 Assuming that the property at issue is constitutionally protected, a court would next
On the matter of these three prior rulings, the majority remarked, “A close look at those cases, however, reveals
nothing like the rule petitioners posit. Instead, each typifies the familiar concern with preventing purposeful
discrimination against out-of-state economic interests.” Id.
The California law at issue in Pork Producers specifically barred the sale of pork from animals that are confined not in
accordance with California state standards. Id. at 363.
47 Id. at 371–72 (first quoting Dean Milk Co. v. Madison, 340 U.S. 349, 354 (1951); and then quoting Brown-Forman
Distillers Corp. v. N.Y. State Liquor Auth., 476 U.S. 573, 580 (1986)).
48 Id. at 370–71 (“petitioners disavow any discrimination-based claim,” writing that “‘the dormant Commerce Clause ...
bar on protectionist state statutes that discriminate against interstate commerce ... is not in issue here.’”) (quoting Brief
for Petitioners at 2 n.2, Pork Producers, supra note 27).
49 Compare AAM v. Ellison, 140 F.4th 957, 960 (8th Cir. 2025) (distinguishing Pork Producers and enjoining the state
law on the basis that it had a “specific impermissible extraterritorial effect” of controlling prices outside of the state),
with AAM v. Raoul, 805 F. Supp. 3d 854, 860–61 (N.D. Ill. 2025) (concluding that Pork Producers “does not squarely
address whether the dormant Commerce Clause itself prohibits a state from regulating out-of-state transactions based
on their downstream consequences”), appeal docketed, No. 25-2960 (7th Cir. Oct. 31, 2025).
50 U.S. CONST. amend. V.
51 Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 536 (2005) (quoting First Eng. Evangelical Lutheran Church of
Glendale v. County of Los Angeles, 482 U.S. 304, 314 (1987)); For more information about the Takings Clause, see
Libr. of Cong., Public Use and Takings Clause, CONSTITUTION ANNOTATED,
https://constitution.congress.gov/browse/essay/amdt5-9-2/ALDE_00013281/ (last visited June 25, 2026).
52 See, e.g., Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1000–01 (1984).
53 Kelo v. New London, 545 U.S. 469, 483 (2005) (“For more than a century, our public use jurisprudence has wisely
eschewed rigid formulas and intrusive scrutiny in favor of affording legislatures broad latitude in determining what
public needs justify the use of the takings power.”), superseded by statute, Property Rights Protection Act, 26 PA.
CONS. STAT. §§ 201–208 (2026), as stated in Wolfe v. Reading Blue Mountain, 320 A.3d 1164 (Pa. Aug. 20, 2024).
54 See Ruckelshaus, 467 U.S. at 1001.
55 See Horne v. Dep’t of Agric., 576 U.S. 350 (2015).
56 In Horne, the Court reiterated its previous observation that “[[a] patent] confers upon the patentee an exclusive
property in the patented invention which cannot be appropriated or used by the government itself, without just
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analyze whether it has been “taken” under two doctrinal frameworks: per se takings or regulatory
takings.
Historically, the Court has recognized certain physical invasions of property under a per se rule:
an appropriation of property, even if minor, is a taking that requires compensation.57 For example,
in Loretto v. Teleprompter Manhattan CATV Corp., the Court held that a law requiring landlords
to permit cable companies to install equipment on the exterior of their buildings constituted a per
se taking, because the law authorized a permanent, if only minimal, physical occupation of the
property.58 Other instances in which the Court has recognized a per se taking are when the
government took title to a share of a farm’s agricultural crop,59 or when an owner was deprived of
all of his property’s economic use or value.60
When the per se framework does not apply, the Court has still recognized a “regulatory taking”
when a government action significantly affects property rights, holding that if the regulation
“goes too far[,] it will be recognized as a taking.”61 The Court has avoided a “set formula” to
determine where regulation ends and a taking begins,62 instead noting that regulatory takings
cases require “essentially ad hoc, factual inquiries.”63 In Penn Central Transportation Co. v. City
of New York, the Court established some general principles for determining whether a government
regulation amounts to a taking. The Court considered factors including (1) “the economic impact
of the regulation”; (2) whether the regulation interfered with “distinct investment-backed
expectations”; and (3) the character of the government’s action.64
The Court applied the Penn Central framework in Ruckelshaus v. Monsanto, which concerned
public disclosure of trade secrets that were submitted by a pesticide manufacturer to the
Environmental Protection Agency (EPA).65 The Court acknowledged that the manufacturer held a
property interest in the data containing trade secrets, but it held that the EPA regulation requiring
disclosure did not constitute a taking when a manufacturer did not have a “reasonable investment-
compensation, any more than it can appropriate or use without compensation land which has been patented to a private
purchaser.” Id. at 359–60 (first alteration in original) (quoting James v. Campbell, 104 U.S. 356, 358 (1882)). Some
legal scholars have argued, however, that patents should not be considered “private property” for purposes of the Fifth
Amendment. See, e.g., Robin Feldman, Patents as Property for the Takings, 12 N.Y.U.J. INTELL. PROP. & ENT. L. 198
(2023) (arguing that patents should not fall within the purview of the Fifth Amendment’s Compensation Clause).
57 See, e.g. Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 434–35 (1982) (“In short, when the
‘character of the governmental action’ is a permanent physical occupation of property, our cases uniformly have found
a taking to the extent of the occupation, without regard to whether the action achieves an important public benefit or
has only minimal economic impact on the owner.” (citation omitted) (quoting Penn Cent. Transp. v. City of New York,
438 U.S. 104, 124 (1978))).
58 Id.
59 Horne v. Dep’t of Agric., 576 U.S. 351, 361 (2015).
60 See Agins v. City of Tiburon, 477 U.S. 255, 260 (1980); Lucas v. S.C. Coastal Council, 505 U.S. 1003 (1992).
61 Pa. Coal Co. v. Mahon, 260 U.S. 393, 415 (1922). For more information on regulatory takings, see Libr. of Cong.,
Early Jurisprudence on Regulatory Takings, CONSTITUTION ANNOTATED,
https://constitution.congress.gov/browse/essay/amdt5-9-5/ALDE_00013284/ (last visited June 25, 2026).
62 Penn Cent. Transp. Co., 438 U.S. at 124.
63 Id.
64 Id. at 124. For more information about the Penn Central analysis and how it is used to evaluate regulatory takings,
see Libr. of Cong., Regulatory Takings and Penn Central Framework, CONSTITUTION ANNOTATED,
https://constitution.congress.gov/browse/essay/amdt5-9-6/ALDE_00013285/#ALDF_00022171 (last visited June 25,
2026). Regarding the third factor, the Court explained that “a ‘taking’ may more readily be found when the interference
with property can be characterized as a physical invasion by a government, than when interference arises from some
public program adjusting the benefits and burdens of economic life to promote the common good. Id. (citation omitted).
65 Ruckelshaus v. Monsanto Co., 467 U.S. 986, 990 (1983).
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backed expectation” that the data would remain confidential.66 The Court reasoned that
manufacturers voluntarily participated in a regulatory scheme that required their products to be
registered with the federal government in order to be sold on the U.S. market.67 The Court also
found that the disclosure requirement was rationally related to the legitimate government interest
of ensuring safety in the sales and use of pesticides.68 For these reasons, the Court held that the
manufacturer did not have a “reasonable investment-backed expectation” in some of the data it
submitted, and thus that no taking of that data occurred.69
The Due Process Clause of the Fourteenth Amendment
The Due Process Clause of the Fourteenth Amendment provides that a state may not “deprive any
person of life, liberty, or property, without due process of law.”70 The concept of due process
prevents states from making laws that unfairly deprive citizens of their right to life, liberty, or
property, and individuals may challenge state laws that curtail such rights.71 For example, a drug
company that claims to be harmed by a state or federal law related to the drug’s price might argue
that the state has not provided adequate procedures or process such that a deprivation of the
company’s property could constitutionally occur.72 In the civil context, the Supreme Court has set
forth a three-factor balancing test to evaluate whether specific procedures satisfy the Due Process
Clause.73 The first factor looks at the private interest affected by the government’s proposed
action; the second weighs the likelihood that a deprivation of life, liberty, or property will occur if
the government’s procedure is used and the probable value of additional procedural safeguards.74
The third factor evaluates the government’s interest, including any fiscal or administrative burden
in providing additional procedural safeguards.75 Courts have used these factors in a wide range of
civil cases to balance the interests of the government against those of individuals.76
66 Id. at 1005.
67 Id. The Court observed, “[A]s long as [the manufacturer] is aware of the conditions under which the data are
submitted, and the conditions are rationally related to a legitimate Government interest, a voluntary submission of data
by an applicant in exchange for the economic advantages of a [product] registration can hardly be called a taking.” Id.
at 1007.
68 Id. at 1005.
69 Id. at 1006. The Court also held that when the company had a reasonable expectation that EPA would protect the
trade secret data it submitted, the government’s unauthorized disclosure of that data constituted a regulatory taking
when just compensation was not provided. Id. at 1011.
70 U.S. CONST. amend. IVX.
71 Fuentes v. Shevin, 407 U.S. 67, 81 (1972). The Supreme Court has interpreted the Due Process Clause as protecting
both procedural and substantive rights. Given the subject matter of this report and the challenges that pharmaceutical
companies and industry groups have brought against state laws regulating drug prices, only procedural due process is
discussed. For more information about the Due Process Clause generally, see Libr. of Cong., Due Process Generally,
CONSTITUTION ANNOTATED, https://constitution.congress.gov/browse/essay/amdt14-S1-3/ALDE_00013743/ (last
visited June 25, 2026).
72 See, e.g., Boehringer Ingelheim Pharms., Inc. v. U.S. Dep’t of Health & Hum. Servs., 150 F.4th 76 (2d Cir. 2025)
(drug manufacturer argued that selection of its drug for price negotiation in the Medicare Drug Price Negotiation
Program violated its right to procedural due process, among other claims); Complaint, Amgen Inc. v. Mizner, No. 253452 (D. Colo. Oct. 30, 2025), Dkt. No. 1 (drug manufacturer claimed that a state law setting an upper price limit on
the sale of its drug violated its right to procedural due process).
73 Matthews v. Eldridge, 424 U.S. 319, 335 (1976).
74 Id.
75 Id.
76 See, e.g., Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532 (1985) (regarding the termination of a government
employee); Brock v. Roadway Express, Inc., 481 U.S. 252 (1987) (plurality opinion) (regarding government regulation
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As part of Due Process Clause jurisprudence, the Supreme Court has recognized that a statute
may be so vague that it deprives a person of due process, a concept known as the void-forvagueness doctrine.77 To avoid being void-for-vagueness, a reasonable person must be able to
understand what kind of conduct a statute prohibits. Although the doctrine is most often discussed
in the criminal law context, it can arise in civil cases as well.78 The Supreme Court has held that a
civil statute violates the Due Process Clause when it is “so vague and indefinite as really to be no
rule or standard at all.”79 On the other hand, “a non-criminal statute is not unconstitutionally
vague ‘if persons of reasonable intelligence can derive a core meaning from [the] statute.’”80 The
burden for demonstrating vagueness is high, and the Supreme Court has noted that a statute in
question must “strip a participant of his rights to come within the principle of the [case law].”81
Contract Clause
The Contract Clause, found in Article I of the Constitution, provides that “No state shall . . . pass
any . . . Law impairing the Obligation of Contracts.”82 The Supreme Court has interpreted this
clause to limit a state’s power to enact legislation that (1) breaches or modifies an existing state
contract; or (2) impermissibly regulates a private contract.83 The general purpose of the Contract
Clause is to “encourage trade and credit by promoting confidence in the stability of contractual
obligations,”84 which is balanced with the state’s power to “safeguard the vital interests of its
people.”85 Much of the Court’s Contract Clause jurisprudence considers how best to balance the
state versus federal interests at issue in the regulation of contracts.86
of private employment); City of Los Angeles v. David, 538 U.S. 715 (2003) (regarding waiting period before a
hearing).
77 For more information on the void-for-vagueness doctrine, see Libr. of Cong., Void for Vagueness, CONSTITUTION
ANNOTATED, https://constitution.congress.gov/browse/essay/amdt14-S1-7-3/ALDE_00000261/ (last visited June 25,
2026).
78 See, e.g., Gentile v. State Bar of Nev., 501 U.S. 1030 (1991) (holding that a state supreme court rule prohibiting an
attorney from making certain statements to the media was void for vagueness); Keyishian v. Bd. of Regents, 385 U.S.
589, 603–04 (1967) (holding state statute requiring state employees to certify that they were not communists implicated
employees’ First Amendment rights and was void for vagueness). Although, as one court put it, “The void-forvagueness doctrine operates in much reduced force outside of its core area of application, criminal law.” Griffin v.
Bryant, 30 F. Supp. 3d 1139, 1170 (D.N.M. 2014).
79 Boutilier v. Immigr. & Naturalization Servs., 387 U.S. 118, 123 (1967) (quoting A.B. Small Co. v. Am. Sugar Refin.
Co., 267 U.S. 233, 239 (1925)).
80 Cotton States Mut. Ins. Co. v. Anderson, 749 F.2d 663, 669 n.9 (11th Cir. 1984) (alteration in original) (quoting High
Ol' Times, Inc. v. Busbee, 673 F.2d 1225, 1228 (11th Cir. 1982)).
81 Boutilier, 387 U.S. at 123.
82 U.S. CONST. art. I, § 10, cl. 1. For a more detailed overview of the Contract Clause, see Libr. of Cong., Overview of
Contract Clause, CONSTITUTION ANNOTATED, https://constitution.congress.gov/browse/essay/artI-S10-C1-61/ALDE_00013037/ (last visited June 25, 2026).
83 U.S. Tr. Co. v. New Jersey, 431 U.S. 1, 19–20 (1977). While the federal government must abide by the constitutional
requirements of due process, the Supreme Court has made clear that the Contract Clause does not apply to the federal
government. Union Pac. R.R. Co. v. United States (Sinking-Fund Cases), 99 U.S. 700, 718–19 (1878).
84 U.S. Tr. Co., 431 U.S. at 15 (citing Home Bldg. & Loan Ass’n v. Blaisdell, 290 U.S. 398, 427–28 (1934)).
85 Blaisdell, 290 U.S. at 434; see also El Paso v. Simmons, 379 U.S. 497, 509 (1965) (holding state statute regarding
forfeiture of lands did not violate the Contract Clause).
86 See, e.g., Blaisdell, 290 U.S. at 436 (“The states retain adequate power to protect the public health against the
maintenance of nuisances despite insistence upon existing contracts”); see also Allied Structural Steel Co. v. Spannaus,
438 U.S. 234, 242–45 (1978) (holding that the Contract Clause imposes limits on a state’s ability to alter its contractual
obligations even when the state would otherwise be validly exercising its police power).
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To evaluate whether a state law is invalid under the Contract Clause, the Court will first
determine whether the statute impairs a contractual obligation of the state.87 If a contractual
obligation is impaired, the Court will next decide whether the Contract Clause prohibits the
impairment.88 The Court has recognized that states “must possess broad power to adopt general
regulatory measures without being concerned that private contracts will be impaired, or even
destroyed, as a result.”89 The Court has simultaneously acknowledged, however, that a state’s
police power and public interest in legislating “is not always sufficient” to overcome the Contract
Clause’s limitation.90
The Court has considered several factors to determine whether a state statute violates the Contract
Clause. For example, in Allied Structural Steel Co. v. Spannaus, the Court struck down a
Minnesota law requiring employers with more than 100 workers to retroactively make
contributions to employees’ pension plans under certain circumstances.91 In finding that the law
substantially impaired the contractual relationship between the employer and its employees, the
Court observed that in contributing to the fund, the company relied on the fact that its employees
could not have a vested interest in the plan unless they met the company’s terms.92 Additionally,
the Court characterized the effect of the law on the employer as “severe” because it retroactively
modified the amount of money that the company agreed to pay employees over a period of more
than ten years.93 Moreover, the Court found that the state failed to show “that this severe
disruption of contractual expectations was necessary to meet an important general social
problem.”94 For these reasons, the Court held that the state law violated the Contract Clause.
Varied State Actions Addressing Drug Prices
The U.S. pharmaceutical supply chain involves many players, including drug manufacturers,
wholesalers, pharmacies, health plans, and consumers, and the prices consumers pay for drugs are
often influenced by the complex relationships among these entities.95 This section reviews
selected mechanisms enacted by state legislatures to control drug prices and explores the legal
challenges to those mechanisms filed by various industry stakeholders. The section first addresses
state initiatives that have targeted drug prices directly, including price-gouging statutes and
PDABs. The outcomes of litigation related to the constitutionality of price-gouging statutes,
which were first enacted in 2017, may have consequences for more recent cases addressing
whether state PDABs may set price limits on “unaffordable” drugs. Other state initiatives have
attempted to regulate the complex arrangements between the entities that make up the drug
87 U.S. Tr. Co., 431 U.S. at 17. The Court has observed that generally, “a statute is itself treated as a contract when the
language and circumstances evince a legislative intent to create private rights of a contractual nature enforceable
against the State.” Id. at 17 n.14 (comparing Dodge v. Bd. of Educ., 302 U.S. 74, 78–79 (1937), with Indiana ex rel.
Anderson v. Brand, 303 U.S. 95, 104–05 (1938)).
88 U.S. Tr. Co., 431 U.S. at 21. The Court has observed, “[t]he severity of the impairment measures the height of the
hurdle the state legislation must clear.” Spannaus, 438 U.S. at 245.
89 U.S. Tr. Co., 431 U.S. at 22.
90 Id. at 21.
91 Spannaus, 438 U.S. at 238.
92 Id. at 245–46.
93 Id. at 246.
94 Id. at 247.
95 See CRS Report R44832, Frequently Asked Questions About Prescription Drug Pricing and Policy, by Laura A.
Wreschnig et al. (2021).
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supply chain, including 340B covered entities and PBMs. The outcomes of these cases raise
questions about the extent to which states may regulate alongside concurrent federal laws.
State Laws Banning Price Gouging
To combat what they view as excessive prescription drug prices, some states have enacted laws
banning drug manufacturers from increasing their prices beyond certain levels, often over a set
period of time. According to data from the National Academy of State Health Policy, between
2018 and 2025, at least twenty-one states considered some type of legislative ban on price
gouging for prescription drugs.96 These state proposals varied in scope and regulatory
mechanism, and not all succeeded in becoming law; for example, in 2019, New Jersey considered
but did not enact legislation that would have banned drug manufacturers from charging excessive
prices for drugs developed with public funding.97 That same year, New York considered a bill that
would have made it unlawful for a drug manufacturer or wholesaler to sell any pharmaceutical at
an “unconscionably excessive price,” which was to be determined by a court.98
Some of the state legislation aimed at stopping price gouging was enacted. For example, the
Illinois legislature first considered a bill to ban manufacturer price gouging of generic drugs and
biosimilars in 2018,99 and a similar measure was eventually enacted in 2024.100 After their
enactments, at least three state price-gouging laws were challenged by drug manufacturers and
pharmaceutical trade associations on the basis that they are unconstitutionally vague and are
invalid under the Dormant Commerce Clause.101
This section explores three court opinions in three different cases challenging state prescription
drug price-gouging statutes, focusing on legal questions surrounding the boundaries of the
Dormant Commerce Clause and the application of the extraterritoriality principle. All three
lawsuits were brought by the Association for Accessible Medicines (AAM), a trade industry
group that represents drug manufacturers that produce generics and biosimilars.
The Fourth Circuit Invalidates Maryland Law
In 2017, the State of Maryland enacted one of the first state drug price-gouging laws, which
prohibited drug manufacturers and wholesalers from “price gouging in the sale of an essential offpatent or generic drug.”102 A drug would become subject to the law if it was made available for
96 This number is based on CRS’s analysis of National Academy of State Health Policy data on State Legislation to
Lower Prescription Drug Costs in the years 2018 through 2025. See 2026 State Legislation to Lower Prescription Drug
Costs, NAT’L ACAD. OF STATE HEALTH POL’Y (July 17, 2026), https://nashp.org/state-tracker/2026-state-legislation-tolower-prescription-drug-costs/ [https://perma.cc/T796-NJBE].
97 A.B. 5950, 218th Gen. Assemb., 2d Annual Sess. (N.J. 2019); A.B. 1590, 218th Gen. Assemb., 1st Annual Sess.
(N.J. 2019); A.B. 3987, 218th Gen. Assemb., 1st Annual Sess. (N.J. 2019).
98 S.B. 141, 2019–2020 Senate, Reg. Sess. (N.Y. 2019).
99 H.B. 4900, 100th Gen. Assemb., Reg. Sess. (Ill. 2018).
100 H.B. 3957, 103d Gen. Assemb., Reg. Sess. (Ill. 2024); 2023 Ill. Laws 367.
101 See, e.g., AAM v. Frosh, 887 F.3d 664 (4th Cir. 2018) (challenging Maryland price-gouging statute); AAM v.
Ellison, 140 F.4th 957, 960 (8th Cir. 2025) (challenging Minnesota price-gouging statute); AAM v. Raoul, 805 F.
Supp. 3d 854, 860–61 (N.D. Ill. 2025) (challenging Illinois price-gouging statute), appeal docketed, No. 25-2960 (7th
Cir. Oct. 31, 2025).
102 Frosh, 887 F.3d at 666 (quoting MD. CODE ANN., HEALTH–GEN. § 2-802(a) (West 2017)). The law was passed over
the Maryland Governor’s veto. Id. The law defined price gouging as “an unconscionable increase in the price of a
prescription drug,” and unconscionable increase was further defined as an increase to the price of a drug that is not
justified on the basis of production costs and results in a consumer lacking a meaningful choice about whether or not to
purchase the drug at such an excessive price. Id. (quoting MD. CODE ANN., HEALTH−GEN. § 2-801(c) (West 2017)).
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sale in Maryland, and the law could be enforced by the Maryland Attorney General via a civil fine
or legal action to enjoin the drug’s sale.103 AAM challenged this law in AAM v. Frosh, arguing, in
part, that it violated the Dormant Commerce Clause.104 The thrust of AAM’s argument in Frosh
was that the state law violated the extraterritoriality principle, because the law effectively
regulated drug sales outside of Maryland and concerned drugs that never entered the state.105
After a Maryland District Court partially granted the state’s motion to dismiss, AAM appealed the
decision to the U.S. Court of Appeals for the Fourth Circuit (Fourth Circuit).106 A divided threejudge panel of the Fourth Circuit held that the state law was unconstitutional under the
extraterritoriality principle of the Dormant Commerce Clause because it regulated wholly out-ofstate transactions.107 The Fourth Circuit expressed that the Supreme Court’s Dormant Commerce
Clause jurisprudence was driven by two main concerns: “economic protectionism” and the
prevention of state regulations that are “designed to benefit in-state economic interests by
burdening out-of-state competitors.”108 Citing the Supreme Court’s decisions in Healy, BrownForeman, and the plurality in Edgar, the majority explained that the extraterritoriality principle
was “derived from the notion that ‘a State may not regulate commerce occurring wholly outside
of its borders.’”109
Although the state argued that the price-gouging law applied only to transactions that occurred in
Maryland, the Fourth Circuit majority determined that the plain language of the law allowed
Maryland “to enforce the Act against parties to a transaction that did not result in a single pill
being shipped to Maryland,” and that the “upstream” sales that the act was intended to regulate
would take place outside of Maryland.110 Moreover, the majority found that the “unconscionable”
price that the statute prohibited was not about the price that a consumer would pay but instead
was based on the drug’s wholesale acquisition cost.111 Therefore, the majority said, the law “seeks
to compel manufacturers and wholesalers to act in accordance with Maryland law outside of
Maryland.”112 The majority characterized the law as “effectively a price control statute,” rather
than an “upstream pricing impact,” because it “attempts to dictate the price” that a manufacturer
might charge outside the state.113
The Fourth Circuit majority distinguished the Supreme Court’s decision in Walsh, where the
Court found that a Maine law that allowed the state to negotiate additional rebates for Medicaid
drugs from drug manufacturers or subject their sales to a prior authorization procedure did not
103 Id. (citing MD. CODE ANN., HEALTH−GEN. § 2-803(d) (West 2017)).
104 Id. at 667.
105 Id. at 670.
106 Id. at 667. The district court granted the state’s motion to dismiss the Dormant Commerce Clause challenge, but it
denied the part of the state’s motion directed to AAM’s claim that the law was unconstitutionally vague, finding
AAM’s argument “at least plausible.” AAM v. Frosh, No. 17-CV-01860, 2017 WL 4347818 (D. Md. Sep. 29, 2017),
rev’d, 887 F.3d 664 (4th Cir. 2018).
107 Frosh, 887 F.3d at 674–75.
108 Id. at 667 (quoting Brown v. Hovatter, 561 F.3d 357, 363 (4th Cir. 2009)).
109 Id. (quoting Star Sci., Inc. v. Beales, 278 F.3d 339, 355 (4th Cir. 2002)); see Healy v. Beer Inst., 491 U.S. 324, 335–
36 (1989); Brown-Foreman Distillers Corp. v. N.Y. State Liquor Auth., 476 U.S. 573 (1986); Edgar v. MITE Corp.,
457 U.S. 624, 642–43 (1982) (plurality opinion).
110 Frosh, 887 F.3d at 671.
111
Id.
112 Id. at 672.
113 Id.
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violate the Dormant Commerce Clause.114 The Fourth Circuit reasoned that the logic of Walsh did
not apply because Maryland’s law effectively sought to control the price at which a manufacturer
sold a drug to a wholesaler, whereas Walsh concerned the state’s ability to negotiate Medicaid
rebates.115 The Fourth Circuit majority also noted that the Maryland law could frustrate interstate
prescription drug sales, because if other states imposed price-gouging statutes, then Maryland’s
pricing might be different than that of another state, which could preclude a drug manufacturer
from simultaneous compliance with both states’ laws.116
One judge dissented, arguing that the Maryland price-gouging law did not violate the Dormant
Commerce Clause and was well within the state’s general police powers.117 The dissent agreed
with the state’s argument that the law did not have an extraterritorial effect, because it would not
reach “any stream of commerce that does not end in Maryland.”118 The dissent also argued that
“‘modern’ dormant Commerce Clause jurisprudence ‘is driven by concern about economic
protectionism—that is, regulatory measures designed to benefit in-state economic interests by
burdening out-of-state competitors.’”119 The dissent contended that the Supreme Court’s
extraterritoriality jurisprudence, as well as Fourth Circuit case law, “do not support equating a
single transaction with commerce,” the latter a more expansive concept under the Supreme
Court’s case law.120 As a result, the dissent would have concluded that Maryland’s price-gouging
statute did not regulate “commerce,” as the term is used by the Supreme Court, because the law
applied “only to upstream sales in streams of transactions that end in Maryland.”121
The Eighth Circuit Invalidates the Minnesota Law
Five years after the Fourth Circuit decided Frosh, the State of Minnesota enacted a prescription
drug price-gouging statute in 2023 that aimed to prohibit manufacturers of generic drugs from
causing “excessive price increase[s].”122 That same year, the Supreme Court elaborated on the
limitations imposed by the Dormant Commerce Clause in Pork Producers.123 As discussed above,
114 PhRMA v. Walsh, 538 U.S. 644 (2003). The Court concluded that “unlike [the] price control or price affirmation
statutes [at issue in Baldwin, Healy, and Brown-Foreman], ‘the Maine Act does not regulate the price of any out-ofstate transaction, either by its express terms or by its inevitable effect.’” Id. at 669 (quoting PhRMA v. Concannon, 249
F.3d 66, 81–82 (1st Cir. 2001)). The Court noted that the state was “not tying the price of its in-state products to out-ofstate prices.” Id. (quoting Concannon, 249 F.3d at 81–82). The Court also found that the Maine law did not run afoul of
the Dormant Commerce Clause because it did not “insist that manufacturers sell their drugs to a wholesaler for a
certain price.” Id. (quoting Concannon, 249 F.3d at 81–82).
115 Id. at 672.
116 Id. at 673.
117 Frosh, 887 F.3d at 675 (Wynn, J., dissenting).
118 Id. at 677 (Wynn, J., dissenting) (quoting Memorandum in Support of Defendants Motion to Dismiss at 23, AAM v.
Frosh, No. 17-CV-01860 (D. Md. Aug. 14, 2017), Dkt. No. 29-1).
119 Id. at 680 (Wynn, J., dissenting) (quoting Dep’t of Rev. of Ky. v. Davis, 553 U.S. 328, 3337–38 (2008)).
120 Id. at 681–82 (Wynn, J., dissenting). Judge Wynn quoted Justice Marshall’s definition of commerce as more than
just a “single exchange of goods,” but rather a description of “the commercial intercourse between nations, and parts of
nations.” Id. at 682 (Wynn, J., dissenting) (quoting Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1, 189–90 (1824)).
121 Id. at 683 (Wynn, J., dissenting). Moreover, the dissent distinguished Maryland’s price-gouging statute from the
state laws at issue in Baldwin, Healy, and Brown-Foreman on the basis that Maryland’s law is nondiscriminatory,
regulates “upstream transaction[s]”, and was not regulating “‘wholly’ out-of-state ‘commerce.’” Id. at 684 (Wynn, J.,
dissenting) (citing Baldwin v. G.A.F. Seelig, Inc., 294 U.S. 511 (1935); Healy v. Beer Inst., 491 U.S. 324 (1989);
Brown-Foreman Distillers Corp. v. N.Y. State Liquor Auth., 476 U.S. 573 (1986)).
122 AAM v. Ellison, 140 F.4th 957, 959 (8th Cir. 2025) (quoting MINN. STAT. § 62J.842, subdiv. 1 (2026)). Under the
act, an “excessive price increase” was defined, in part, as one that exceeded a certain percentage of the wholesale
acquisition cost (WAC). MINN. STAT. § 62J.842, subdiv. 2.
123 598 U.S. 356 (2023).
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the case concerned a California law that banned the in-state sale of pork if the animals were
“confined in a cruel manner.”124 In upholding the California statute, the Supreme Court rejected
the plaintiffs’ argument that state laws having the “practical effect of controlling commerce
outside the state” were “almost per se” invalid, even when they did not discriminate against outof-state interests.125
As was the case with the Maryland price-gouging statute, AAM challenged the Minnesota law as
invalid under the Dormant Commerce Clause and requested that the district court issue a
preliminary injunction to stop the law from going into effect.126 The district court granted the
motion, finding that the statute likely ran afoul of the Dormant Commerce Clause, and the
decision was appealed to the U.S. Court of Appeals for the Eighth Circuit (Eighth Circuit).127
In its decision upholding the preliminary injunction, the Eighth Circuit discussed the Supreme
Court’s then-recent ruling in Pork Producers, concluding that it did not save Minnesota’s pricegouging statute.128 The Eighth Circuit characterized the California law at issue in Pork Producers
as having “a specific impermissible ‘extraterritorial effect.’”129 The Eighth Circuit found that
Minnesota’s price-gouging law was more like the laws at issue in Baldwin, Brown-Foreman, and
Healy, because it prevented out-of-state manufacturers from “whatever competitive advantages
they may possess,” and had the “impermissible extraterritorial effect of controlling prices outside
of Minnesota.”130
The Eighth Circuit also cited its agreement with the Fourth Circuit that Minnesota’s law—like the
Maryland law at issue in Frosh—violated the Dormant Commerce Clause because it attempted to
control prices outside the state.131 Relying on similar reasoning as Frosh, the Eighth Circuit
concluded that the Minnesota law is best characterized as a price control statute that effectively
regulates an out-of-state transaction and therefore has a “specific impermissible extraterritorial
effect.”132 The Eighth Circuit also agreed that the Minnesota law was distinguishable from the
Maine law at issue in Walsh, because Minnesota was “regulat[ing] the price of out-of-state
transactions, insist[ing] that out-of-state manufacturers sell their drugs to wholesalers for a certain
price, and t[ying] the price of in-state products—prescription drugs—to the price that out-of-state
manufacturers charge their wholesalers.”133 The Eighth Circuit denied Minnesota’s motion for a
rehearing en banc.134
124 See discussion supra “Dormant Commerce Clause.”
125 Pork Producers, 598 U.S. at 371 (quoting Brief for Petitioners, supra note 46, at 2 n.2).
126 Ellison, 140 F.4th at 958–59.
127 AAM v. Ellison, 704 F. Supp. 3d 947 (D. Minn. Dec. 4, 2023), aff’d, 140 F.4th 957 (8th Cir. 2025). The case was
later dismissed after the parties filed a stipulation agreeing that the state law violated the Dormant Commerce Clause.
Stipulation, AAM v. Ellison, No. 23-CV-02024 (D. Minn. Nov. 20, 2025), Dkt. No. 61.
128 Ellison, 140 F.4th at 960 (citing Pork Producers, 598 U.S. at 371).
129 Id. (quoting Pork Producers, 598 U.S. at 374).
130 Id. (quoting Pork Producers, 598 U.S. at 374).
131 Id. Because the Fourth Circuit decided Frosh in 2018 before Pork Producers was decided, that case did not explore
the effect of Pork Producers on the analysis of state laws banning drug price gouging. See AAM v. Frosh, 887 F.3d
664, 666 (4th Cir. 2018).
132
Ellison, 140 F.4th at 960 (citing Frosh, 887 F.3d at 672).
133 Id. at 961 (citing PhRMA v. Walsh, 538 U.S. at 669 (2003)).
134 Order, AAM v. Ellison, No. 24-1019, 2025 WL 2178535 (8th Cir. Aug. 1, 2025).
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A Federal District Court Upholds the Illinois Law
Although the Eighth Circuit agreed with the Fourth Circuit’s analysis in Frosh and distinguished
Pork Producers, at least one federal district court has held that Pork Producers changes the
extraterritoriality analysis of state prescription drug price-gouging laws.135 In AAM v. Raoul, the
U.S. District Court for the Northern District of Illinois denied a motion to preliminarily enjoin a
2023 Illinois price-gouging law, finding that the plaintiff was not likely to succeed on the merits
of its case because the state law did not violate the extraterritoriality principle of the Dormant
Commerce Clause.136 The district court’s decision rested on its interpretation of the Supreme
Court’s ruling in Pork Producers; the court emphasized that Pork Producers rejected the “almost
per se rule” argument that state laws that effectively control out-of-state commerce were
invalid.137 In the district court’s view, the Illinois price-gouging law presented an “inverse” of the
California law in Pork Producers,138 because the Illinois law regulates “upstream commerce
based on downstream effects,” whereas the California law regulates “in-state commerce based on
upstream conduct.”139 This distinction was significant, the district court said, because it meant
that Pork Producers did not answer the question of whether the Dormant Commerce Clause
“prohibits a state from regulating out-of-state transactions based on their downstream
consequences,” as Illinois was trying to do.140 The district court further observed that the Illinois
price-gouging law does not discriminate against out-of-state interests, does not benefit or favor
in-state businesses, and does not otherwise discourage consumers from participating in interstate
commerce.141
The district court also reasoned that other U.S. Court of Appeals for the Seventh Circuit (Seventh
Circuit) precedent cited by AAM that discussed the extraterritoriality principle was undermined
by Pork Producers, because the Seventh Circuit had relied on the Supreme Court’s decision in
Baldwin to support the premise that states were forbidden from regulating “wholly out-of-state
commerce”—a premise which Pork Producers rejected.142 The district court read Pork Producers
to call into question the Fourth Circuit’s reasoning in Frosh, pointing to Judge Wynn’s dissent that
the Supreme Court’s “principle concerns” in articulating its Dormant Commerce Clause
jurisprudence were “economic protectionism, discrimination against interstate commerce, and
State regulation of a stream of transactions that never crosse[d] through the State’s borders.”143
The district court also concluded that AAM’s reliance on the plurality in Edgar could not alone
justify its request for a preliminary injunction because Pork Producers “cast doubt on whether the
state law in Edgar posed a dormant Commerce Clause issue at all, or if it instead implicated
horizontal separation of powers more broadly.”144 AAM appealed the district court’s ruling in
135 AAM v. Raoul, 805 F. Supp. 3d 854 (N.D. Ill. 2025), appeal docketed, No. 25-2960 (7th Cir. Oct. 31, 2025).
136 Id. Like other state price-gouging laws, the Illinois price-gouging law prohibits generic and biosimilar
manufacturers from “engaging in price gouging,” and bases the price on a percentage of the WAC. 410 ILL. COMP.
STAT. 725/10(a) (2024). The law was enacted in July 2023 and took effect on January 1, 2024. Id.
137 Raoul, 805 F. Supp. 3d at 858 (quoting Nat’l Pork Producers Council v. Ross, 598 U.S. 356, 371 (2023)).
138 Id. at 858–59.
139 Id. at 859.
140 Id. (citing Bradley W. Joondeph, The “Horizontal Separation of Powers” After National Pork Producers Council v.
Ross, 61 SAN DIEGO L. REV. 45, 78–79 (2024)).
141 Raoul, 805 F. Supp. 3d at 860.
142 Id.; see Legato Vapors v. Cook, 847 F.3d 825 (7th Cir. 2017); Midwest Title Loans, Inc. v. Mills, 539 F.3d 660 (7th
Cir. 2010).
143 Raoul, 805 F. Supp. 3d at 861 (citing AAM v. Frosh, 887 F.3d 664, 684 (4th Cir. 2018) (Wynn, C.J., dissenting)).
144 Id. at 682 (citing Nat’l Pork Producers Council v. Ross, 598 U.S. 356, 376 n.1 (2023)); Edgar v. MITE Corp., 457
U.S. 624 (1982) (plurality opinion)).
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Raoul to the Seventh Circuit in October 2025, where it remains pending as of the date of this
writing.145
Selected Legal Considerations
Unlike the state PDAB laws discussed below, many of which target high-priced, name brand
drugs, state price-gouging statutes typically target generic drug prices.146 Because generic drugs
are not patented (which requires a federal process), targeting generic prices via price-gouging
statutes allows a state to avoid Supremacy Clause and federal patent preemption challenges.147 At
the same time, much of a state’s ability to ban prescription drug price gouging in the future will
depend on how courts apply the Dormant Commerce Clause jurisprudence, and particularly, the
extraterritoriality principle.148 As of this writing, courts have found legislation banning price
gouging constitutional in at least one state (Illinois), while price-gouging legislation was found
unconstitutional for states in the Fourth and Eighth Circuits.149 Future cases regarding the
constitutionality of state price-gouging statutes could lead to more circuit courts deciding the
constitutionality of those laws, raising the potential of Supreme Court review. Should the
Supreme Court decide to review any price-gouging legislation decisions, it could address the
issue of whether the Dormant Commerce Clause permits states to legislate in this way. If so, the
Court could potentially clarify its recent decision in Pork Producers, or it could otherwise provide
further insight into how the extraterritoriality principle may apply. Given the complexity of the
domestic pharmaceutical supply chain and its interstate nature, the future of state price-gouging
bans could be affected by subsequent rulings that clarify the extraterritoriality principle.
As part of Congress’s consideration of prescription drug costs and related issues, it may consider
the extent to which state legislatures are able to regulate prescription drug price through pricegouging bans. Whether existing Dormant Commerce Clause doctrine allows states to enact these
laws may affect the perceived opportunity for congressional action on drug prices. In other words,
if courts universally interpret the Dormant Commerce Clause to prohibit states from enacting
price-gouging bans, then only Congress would be able to enact legislation to constrain the
practice.
State Laws Creating Prescription Drug Affordability Boards
Prescription Drug Affordability Boards (PDABs) are independent, state-level boards that review
prescription drug costs and make recommendations aimed at improving affordability.150 Some
state PDABs may also set price ceilings (UPLs, or upper payment limits) for in-state payers for
certain high-cost drugs, although not all PDABs are authorized to set UPLs.151 As of August
145 Plaintiff’s Notice of Appeal, AAM v. Raoul, No. 25-2960 (7th Cir. Oct. 31, 2025), Dkt. No. 1.
146 Many states began targeting the prices of generic drugs after a 2007 Federal Circuit ruling that D.C.’s Prescription
Drug Excessive Pricing Act, which targeted the prices of brand name drugs, was conflict preempted by federal patent
law. Biotech Indus. Org. (BIO) v. District of Columbia, 496 F.3d 1362 (Fed. Cir. 2007).
147 See, e.g., NASHP’s Proposal for Protecting Consumers from Prescription Drug Price Gouging, How can Patent
Preemption Problems be Avoided, NAT’L ACAD. FOR STATE HEALTH POL’Y (July 6, 2020), https://nashp.org/nashpsproposal-for-protecting-consumers-from-prescription-drug-price gouging/ [https://perma.cc/48J9-3MBW] (an aid to
states to avoid patent preemption problems when regulating prescription drug prices).
148 See Frosh, 887 F.3d at 664; AAM v. Ellison, 140 F.4th 957 (8th Cir. 2025); Raoul, 895 F. Supp. 3d at 854.
149 See Frosh, 887 F.3d at 664; Ellison, 140 F.4th at 962; Raoul, 895 F. Supp. 3d at 854.
150 For more background information on PDABs, see CRS Legal Sidebar LSB11390, Litigation over State Attempts to
Lower Drug Costs: Prescription Drug Affordability Boards (PDABs), by Hannah-Alise Rogers (2026).
151 Compare COLO. REV. STAT. § 10-16-1407 (2023) (authorizing PDAB to set a UPL), with N.J. STAT. ANN. § 45:1482.11 (2023) (no authorization for PDAB to set a UPL).
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2026, there are at least ten states with active PDABs, with several other state legislatures
considering legislation to create a PDAB.152 Colorado became the first state to establish a price
ceiling for a drug when it set a UPL on Enbrel (interacept), a drug manufactured by Amgen and
approved by the FDA to treat various autoimmune inflammatory diseases, in 2025.153 As of the
date of this writing, at least one other state PDAB has established a UPL.154
While there is variation in state laws with respect to PDABs and UPL authority, this report uses
Colorado as an illustrative example of the process. To establish a UPL, Colorado law first
requires the board to conduct an affordability review to determine if the drug is “unaffordable for
Colorado consumers.”155 Only if a drug is “unaffordable” may the state decide to set a UPL.156
The state established a UPL for Amgen’s drug Enbrel in October 2025, after an affordability
review found the drug “unaffordable” for Colorado consumers; the UPL was set at $600 per
50mg unit.157
152 Prescription Drug Affordability Boards: Potential Risks to Pharmacy Reimbursement, NAT’L ALLIANCE OF STATE
PHARM. ASS’N (Aug. 13, 2026), https://naspa.us/resource/pdab/ [https://perma.cc/2RVG-FKF9].
In January 2026, after a new state governor took office, the Commonwealth of Virginia became the latest state to
advance PDAB legislation when the state House passed H.B. 483, but it was vetoed by the new governor in May 2026.
H.B. 483, 2026 Gen. Assemb., Reg. Sess. (Va. 2026). Similar legislation that would have created a Virginia PDAB was
twice vetoed by the previous state governor. Brandon Jarvis, Youngkin Vetoes Prescription Drug Affordability Board,
VA. SCOPE (Mar. 24, 2025), https://www.virginiascope.com/youngkin-vetoes-prescription-drug-affordabilty-board/
[https://perma.cc/Y3TT-R548].
153 Sara Wilson, Colorado Becomes First State to Cap Price of Prescription Drug, COLO. NEWSLINE (Oct. 7, 2025),
https://coloradonewsline.com/2025/10/07/colorado-first-state-cap-price-prescription-drug/ [https://perma.cc/8295HWY9].
154 In April 2026, the Maryland PDAB voted in favor of establishing a UPL for the diabetes drug Jardiance after
finding that the drug was unaffordable for Maryland consumers. Further, in May 2026, the PDAB voted in favor of
setting a UPL on Ozempic. These prices are scheduled to take effect in 2027. See MD. PDAB, OZEMPIC: UPPER
PAYMENT LIMIT FRAMEWORK (2026),
https://pdab.maryland.gov/Documents/Cost%20Review/2026/Ozempic.Upper%20Payment%20Limit%20Framework.v
.2.0.pdf [https://perma.cc/N3XT-ZUCW]; PDAB Staff, Jardiance: Upper Payment Limit Framework, Presentation at
Maryland PDAB Meeting (Nov. 17, 2025),
https://pdab.maryland.gov/Documents/meetings/2025/2025.11.17.Jardiance.UPL%20Framework%20Presentation.pdf
[https://perma.cc/TY2A-M6KA].
155 COLO. REV. STAT. § 10-16-1406 (2026). During the affordability review, the board is required to consider a variety
of information, including a drug’s WAC, the availability and cost of any therapeutic alternatives, a comparison of the
relative financial effects on health, medical, and social services costs compared to those of the drug’s therapeutic
alternatives, the effect of the price on access to state consumers, typical patient cost-sharing for the drug, the impact on
340B safety net providers, and orphan drug status. Id. § 10-16-1406(4)(a)–(g). The board is also required to consider
input from the medical and scientific community, patients, and the state’s rare disease advisory council. Id.§ 10-161406(4)(h).
156 Id. § 10-16-1407(1)(a).
157 Press Release, Colo. Consumer Health Initiative, Consumer Advocates Praise Prescription Drug Affordability
Board’s Decision to Set First-in-Nation Upper Payment Limit on the Expensive Drug Enbrel Colo. Consumer Health
Initiative (Oct. 3, 2025), https://cohealthinitiative.org/media-releases/consumer-advocates-praise-prescription-drugaffordability-boards-decision-to-set-first-in-nation-upper-payment-limit-on-the-expensive-drug-enbrel/
[https://perma.cc/HMY9-BJF7].
The state UPL mirrors the maximum fair price for Enbrel under the Medicare Drug Price Negotiation Program.
Selected Drugs and Negotiated Prices, CTR. FOR MEDICARE & MEDICAID SERVS. (May 22, 2026),
https://www.cms.gov/priorities/medicare-prescription-drug-affordability/overview/medicare-drug-price-negotiationprogram/selected-drugs-negotiated-prices [https://perma.cc/4LKV-QTW7]. For more information about the Medicare
Drug Price Negotiation Program, see CRS Report R47555, Implementation of the Medicare Drug Price Negotiation
Program: Centers for Medicare and Medicaid Guidance and Legal Considerations, by Hannah-Alise Rogers (2023).
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Amgen Challenges Colorado PDAB Law
To date, Amgen has brought two cases against the Colorado PDAB. Amgen brought its first
lawsuit after Colorado found the drug “unaffordable” for Colorado consumers, but before the
state set a UPL.158 The first case was dismissed in 2025, after a federal district court ruled that the
company could not establish third-party standing to challenge the law.159 Although Amgen
appealed the district court’s findings to the U.S. Court of Appeals for the Federal Circuit (Federal
Circuit), the company dismissed the appeal after Colorado set a UPL for Enbrel.160 Amgen’s
second lawsuit was filed in October 2025, directly challenging Enbrel’s UPL, which the PDAB
had set a few weeks earlier.161 As was the case in its first lawsuit, Amgen asserted three claims:
first, that the Colorado PDAB law is preempted by federal patent law; second, that the law
violates the Due Process Clause of the Fourteenth Amendment; and third, that the law violates the
Dormant Commerce Clause.162
In its second lawsuit, Amgen attempted to establish that it has standing to challenge Colorado’s
PDAB law. The company first argues that the plain meaning of the statute applies the UPL for
Enbrel directly to Amgen, “so long as the drug is eventually dispensed or administered in
Colorado.”163 In other words, Amgen argues that it has standing because it is directly regulated by
the Colorado PDAB law. The company further states that even if the UPL applies only to
“downstream transactions” and not to drug manufacturers, Amgen will still “suffer substantial,
irreparable harm” as a result of the UPL on Enbrel.164 Amgen argues that when the UPL takes
effect, even if it does not apply directly to drug wholesalers (who typically purchase drugs from
manufacturers at wholesale acquisition cost [WAC]), the company will still be harmed because
“wholesalers will not agree to purchase a product [from Amgen] for more than what they can
lawfully recover from reselling that product.”165 Amgen also asserts that the UPL will cause the
158 Amgen Inc. v. Mizner, No. 24-CV-00810, 2025 WL 947474 (D. Colo. Mar. 28, 2025), appeal dismissed, No. 25-
1641, 2026 WL 262636 (Fed. Cir. Feb. 2, 2026).
In a two-part analysis, the court first found that the drug company was not directly regulated by the law, because the
UPL set by the state PDAB applied “only to downstream transactions for the actual sales and reimbursements of the
prescription drug dispensed to Colorado consumers.” Id. at *6. The court also observed that the legislative history of
the state’s PDAB statute indicated that the UPL was meant to “apply specifically to the state and municipalities,
contractors and vendors, commercial health plans, providers, and pharmacies.” Id. For these reasons, the court found,
Amgen was required to establish standing as a third party, because the company was not directly regulated by the law.
Id. at *7.
The district court then held that Amgen could not establish third-party standing, because the company could not show a
“predictable chain of events leading from the government action to the asserted injury.” Id. (quoting FDA v. All. for
Hippocratic Med., 602 U.S. 367, 385 (2024)).
159 Id. The district court disagreed with Amgen’s argument that “basic economics and common sense” supported its
third-party standing, finding that the company merely assumed that any UPL set for Enbrel (in the future) would be
lower than the WAC. Id. In addition, the court said that the company did not factor into its standing argument the
“complexity of the [drug distribution] supply chain,” including rebates and other discounts that could also impact
pricing. Id.
160 Plaintiffs’ Notice of Appeal, Amgen Inc. v. Colo. PDAB, No. 25-1641 (Fed. Cir. Apr. 14, 2025), Dkt. No. 1; see
also Joint Stipulation to Voluntarily Dismiss Appeal, Amgen Inc., No. 25-1641 (Fed. Cir. Jan. 9, 2026), Dkt. No. 41
(dismissing first case).
161 Complaint, Amgen Inc. v. Mizner, No. 25-CV-03452 (D. Colo. Oct. 30, 2025).
162 Id. at 36, 40, 42.
163
Id. at 30.
164 Id.
165 Id. at 31.
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company to incur further lost revenue in the form of administrative costs for renegotiating
contracts with wholesalers and modifying its payment systems.166
On the merits, Amgen relies on the Federal Circuit’s ruling in Biotechnology Industries
Organization (BIO) v. District of Columbia to argue that the Colorado’s PDAB law is preempted
by federal patent law.167 In BIO, the Federal Circuit held that the District of Columbia’s
Prescription Drug Excessive Price Act, which prohibited drug manufacturers from charging
“excessive” prices for certain drugs, was preempted by federal patent law because it interfered
with patent exclusivity rights.168 Amgen argues that patent law is exclusively a matter of federal
law and that “Congress has taken special care to safeguard [drug development] incentives for
innovation in the pharmaceutical field and has struck a careful and deliberate balance . . . while
encouraging generic and biosimilar competition after the end of the relevant patent terms.”169
Amgen further argues that because the PDAB statute does not contain an exception for patented
drugs, it interferes with the balance Congress set in federal patent laws, including the Drug Price
Competition and Patent Term Restoration Act of 1984 (Hatch-Waxman Act) (which governs the
entry of generic drugs).170
In addition to arguing that the Colorado PDAB statute is preempted by federal patent law, Amgen
also claims that the state law runs afoul of the Fourteenth Amendment’s Due Process Clause.
Amgen argues that the law interferes with the company’s property rights in its patents on Enbrel,
which include a right to determine the price at which it will sell its drug.171 The drugmaker argues
that the PDAB statute violates the Due Process Clause because it does not provide adequate
standards for the determination of “unaffordab[ility]” or UPLs.172 Amgen refers to the Supreme
Court’s decision in Mathews v. Eldridge, guaranteeing property owners the right to be heard “at a
meaningful time and in a meaningful manner,” which the company claims includes “meaningful
standards to limit and channel the exercise of governmental power.”173
Finally, Amgen claims that Colorado’s PDAB law runs afoul of the Dormant Commerce Clause,
because it “directly controls commerce occurring wholly outside the boundaries of a State.”174
The company points to the Fourth Circuit’s 2018 decision in Frosh to support its argument that
the state law violates the principle of extraterritoriality, because it regulates drug sales that “occur
entirely outside the State of Colorado.”175 According to Amgen, because the UPL set by the
Colorado PDAB applies to all purchases of Enbrel that are dispensed to in-state patients, this
means that the UPL applies “even to wholly out-of-state, upstream transactions, as long as the
drug is eventually dispensed . . . in Colorado.”176
Colorado answered the complaint in January 2026, generally denying Amgen’s claims.177 Amgen
filed a motion for a preliminary injunction to pause the Colorado PDAB law while the underlying
166 Id. at 34.
167 Id. at 37; see BIO v. District of Columbia, 496 F.3d 1362, 1372 (Fed. Cir. 2007).
168 BIO, 496 F.3d at 1372.
169 Complaint, supra note 161, at 37–38.
170 Id.; see, e.g., Pub. L. No. 98-417, 98 Stat. 1585.
171 Complaint, supra note 161, at 40.
172 Id. at 41. Amgen also points to other cases addressing adequate due process in the context of price control statutes.
Id. at 41–42; see, e.g., Mich. Bell Tel. Co. v. Engler, 257 F.3d 587, 592–93 (6th Cir. 2001).
173 Complaint, supra note 161, at 40–41 (quoting Mathews v. Eldridge, 424 U.S. 319, 333 (1976)).
174 Id. at 43 (quoting Healy v. Beer Inst., 491 U.S. 324, 336 (1989)).
175
Id. at 5, 43 (citing AAM v. Frosh, 887 F.3d 664, 668 (4th Cir. 2018)).
176 Id. at 43–44.
177 Answer, Amgen Inc. v. Mizner, No. 25-CV-03452 (D. Colo. Jan. 16, 2026), Dkt. No. 45.
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merits of the suit are being resolved.178 The court granted the preliminary injunction in July 2026,
holding that Amgen was likely to suffer substantial irreparable harm from the UPL, that it was
likely to succeed on the merits of its claim that the UPL is preempted by federal patent law, and
that the balance of the equities and the public interest did not outweigh the fact that UPL was
likely unconstitutional.179 The court reasoned that the Federal Circuit’s decision in BIO controlled
here, because in setting the UPL for Enbrel, Colorado was attempting to rebalance the patent
system, which was something only Congress can do.180
Selected Legal Considerations
As more states are moving to establish both PDABs and UPLs, additional lawsuits against such
actions may be filed. For example, in April 2026, the Maryland PDAB voted to establish a UPL
on Jardiance, a brand name drug that is used to treat type 2 diabetes, among other conditions.181
Because Jardiance is currently protected by patents, the manufacturers (Eli Lilly and Boehringer
Ingelheim) could challenge Maryland’s PDAB on preemption, due process, or Dormant
Commerce Clause grounds, just as Amgen did against Colorado’s PDAB law.182 If such a suit is
filed, drug manufacturers might rely on the Fourth Circuit’s decision in Frosh to argue that
Maryland’s PDAB statute, like the Maryland drug price-gouging ban at issue in Frosh, is invalid
under the Dormant Commerce Clause.183
A court’s analysis of whether the Maryland drug pricing law violates the Dormant Commerce
Clause could depend on how the court characterizes the state’s PDAB law; for example, if a court
were to conclude that the law impacts “upstream” sales (i.e., sales outside of the state), then the
court might find, as it did in Frosh, that such state law’s structure violates the Dormant
Commerce Clause.184 On the other hand, it is possible that a court could distinguish the pricegouging ban in Frosh from Maryland’s PDAB law. Unlike the price-gouging ban, which the
Frosh court said tied the “‘unconscionable’ price” charged by the manufacturer to the WAC
(which is based on out-of-state sales), the Maryland PDAB’s statutory scheme is focused on
affordability and requires more administrative input from the state.185 For example, before
Maryland can establish a UPL, the board is required to study the pharmaceutical payment and
distribution systems across the state, identify “affordability challenges” for in-state consumers,
and conduct cost reviews.186 If the cost review concludes that the drug’s price will lead to
“affordability challenges,” only then may the state actually set a UPL for a drug.187 Thus, in
178 Plaintiffs’ Motion for Preliminary Injunction, Amgen Inc., No. 25-CV-03452 (D. Colo. Nov. 21, 2025), Dkt. No. 18.
179 Amgen, Inc. v. Mizner, No. 25-CV-03452, 2026 WL 1943512 (D. Colo. July 1, 2026), appeal docketed, No. 26-
2111 (Fed. Cir. Aug. 4, 2026).
180 Id. at *3. The preliminary injunction order was based only on Amgen’s patent preemption claims; the court does not
address Amgen’s other arguments, including the due process and Dormant Commerce Clause claims. Id. at *1.
181 See Karl Hille, Maryland Caps Diabetes Drug Costs for Government Health Plans, BALT. SUN (Apr. 14, 2026, at
2:37 EST), https://www.baltimoresun.com/2026/04/13/diabetes-drug-jardiance/.
182 The Maryland PDAB’s investigation of Jardiance found that there are eleven patents listed in the FDA’s Orange
Book that cover the drug. MD. PDAB, JARDIANCE (EMPAGLOFOZIN) DOSSIER (2025),
https://pdab.maryland.gov/Documents/Dossiers/July%2023%2C%202025/JARDIANCE%20DOSSIER.2025.07.23.110
0.V2.1.FINAL%20%281%29.pdf [https://perma.cc/RL38-MZGR].
183AAM v. Frosh, 887 F.3d 664 (4th Cir. 2018).
184 Id. at 671.
185 See id; see also MD. CODE ANN., HEALTH−GEN. § 21-2C-02 (West 2026) (creating the Maryland PDAB as an
independent entity and providing that the purpose of the PDAB is to “protect” state actors from “the high costs of
prescription drug products”).
186 MD. CODE ANN., HEALTH−GEN. §§ 21-2C-07, 21-2C-08 (West 2026).
187 Id. §§ 21-2C-13, 21-2C-14.
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determining the UPL, the state is not relying on out-of-state sales, meaning that a court may not
characterize the law as regulating “upstream” transactions.188
Only federal courts can dispositively resolve the debates about whether UPLs set by state PDABs
violate the Dormant Commerce Clause. Apart from that constitutional issue, Congress could
address the patent law preemption issue by clarifying whether and to what extent the Patent Act
preempts state attempts to regulate patented pharmaceuticals.189
State Laws Addressing the 340B Drug Discount Program
Congress created the 340B Drug Discount Program (340B program, or the program) through the
Veterans Health Care Act of 1992 to enable certain health care providers serving low-income and
uninsured patients to purchase outpatient prescription drugs at lower costs.190 The program is
administered by the Health Resources and Services Administration (HRSA), a division of the
U.S. Department of Health and Human Services (HHS).191 In accordance with the statute, HHS
and drug manufacturers sign a contract (PPA, or purchase price agreement) in which
manufacturers are required to “offer” to sell certain drugs at a “ceiling price,” which is calculated
based on a statutory formula.192 Manufacturers must offer covered outpatient drugs to covered
entities either at or below this ceiling price, if the drugs are available to any other purchaser at
any price.193
So-called covered entities are those that are eligible to purchase the discounted drugs; a list of
340B covered entities is found in the statute and includes Federally Qualified Health Centers,
Disproportionate Share Hospitals, and other providers that care for rural or underserved
populations.194 Covered entities may generate significant revenue from the 340B program by
reselling discounted drugs to their patients and receiving reimbursement from the patient’s
insurance (if applicable) as though the covered entity paid full price for the drug. Covered entities
may make 340B drugs available to patients either through their own in-house (or on-site)
pharmacy or by contracting with third-party retail pharmacies, which have come to be known as
“contract pharmacies.”195
The statute prohibits covered entities from receiving duplicate discounts from both the Medicaid
and the 340B programs, and covered entities are also prohibited from selling or otherwise
distributing drugs to anyone who is not a patient196 of the covered entity (a practice known as
diversion).197 Since 2020, legal disputes have arisen between HRSA, drug manufacturers, and
covered entities regarding how HRSA enforces the statute, including the statutory provisions
188 See Frosh, 887 F.3d at 671.
189 Cf. BIO v. District of Columbia, 496 F.3d 1362, 1372 (Fed. Cir. 2007) (recognizing that “[t]here is no express
provision in the patent statute that prohibits states from regulating the price of patented goods,” but that, in regulating
drug prices, a state cannot frustrate the “the full purposes and objectives of Congress.” (quoting Hines v. Davidowitz,
312 U.S. 52, 67 (1941))).
190 Pub. L. No. 102-585, § 602(a), 106 Stat. 4943, 4967 (codified as amended at 42 U.S.C. § 256b).
191 340B Drug Pricing Program, HRSA (Aug. 2026), https://www.hrsa.gov/opa [https://perma.cc/Y79Q-U56C].
192 42 U.S.C. § 256b(a)(1).
193 Id.
194 Id. § 256b(a)(4).
195 Contract Pharmacy Services, HRSA (June 2024), https://www.hrsa.gov/opa/implementation-contract
[https://perma.cc/H3MC-YKZZ].
196 At least one federal court has invalidated HRSA’s definition of patient as applied to a specific covered entity. See
Genesis Healthcare, Inc. v. Becerra, 701 F. Supp. 3d 312 (D.S.C. 2023).
197 42 U.S.C. § 256b(a)(5)(A)(i) (prohibition on duplicate discounting); id. § 256b(a)(5)(B) (prohibition on diversion).
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prohibiting duplicate discounting and diversion.198 Several federal appellate courts have held that
drug manufacturers may limit the sale of 340B drugs to covered entities that use contract
pharmacies.199 As a result, covered entities purchasing certain drugs are unable to generate 340B
revenue from an unlimited number of contract pharmacies.
As a result of the litigation regarding contract pharmacy use, several states began considering
legislation to stop drug manufacturers from restricting contract pharmacy use by covered entities
in their state.200 While these state laws may differ slightly in scope, they generally aim to stop
manufacturers from interfering with contracts between covered entities and their dispensing
pharmacies. For example, in May 2021, Arkansas became the first state to enact a state-level
contract pharmacy law, which provided that manufacturers could not “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.”201 Other state laws soon followed.
For example, in 2023, Louisiana enacted a law prohibiting drug manufacturers from denying,
restricting, or otherwise interfering with “acquisition . . . or delivery of a 340B drug” to a contract
pharmacy, unless otherwise prohibited by HHS.202 Violations of the prohibition are considered
violations of Louisiana’s Unfair Trade Practices and Consumer Protection Law.203 Colorado’s law
goes one step further than Louisiana’s, prohibiting manufacturers and other entities not only from
denying or restricting 340B drug acquisition or delivery to a covered entity or its contract
pharmacy, but also from requiring covered entities to submit claims data to manufacturers.204
West Virginia’s contract pharmacy law is similar to Colorado’s, as it prevents manufacturers from
limiting 340B drug distribution to in-state pharmacies contracted with a covered entity, and also
prohibits manufacturers from requiring covered entities to submit claims data as a condition of
receiving a 340B drug.205
Individual drug manufacturers and PhRMA have challenged these and other state contract
pharmacy laws in federal district courts around the country.206 These lawsuits assert a number of
different legal theories, including that the state laws are preempted by the 340B statute and that
they are invalid under the Dormant Commerce Clause.207 This section explores the legal
198 For more information about 340B legal disputes, see CRS Report R48696, The 340B Drug Discount Program:
Litigation Topics and Trends, by Hannah-Alise Rogers (2025).
199 Sanofi Aventis U.S. LLC v. HHS, 58 F.4th 696 (3d Cir. 2023), judgment entered, No. 21-3167, 2023 WL 1325507
(3d Cir. Jan. 30, 2023); Novartis Pharms. Corp. v. Johnson, 102 F.4th 452 (D.C. Cir. 2024). One appeal remains
pending at the Seventh Circuit. See Notice of Appeal, Eli Lilly & Co. v. HHS, No. 21-3405 (7th Cir. Dec. 30, 2021).
200
NAT’L ASS’N OF CMTY. HEALTH CTRS., STATE-LEVEL 340B LAWS AND LEGISLATION TRACKER (2026),
https://www.nachc.org/wp-content/uploads/2026/04/4_15_26_nachc_state-level-340b-laws-and-legislation_tracker.pdf
[https://perma.cc/99H6-AZCY].
201 ARK. CODE ANN. § 23-92-604(c)(2) (West 2021).
202 LA. REV. STAT. ANN. § 40:2884 (2023).
203 Id. § 40:2885.
204 COLO. REV. STAT. § 6-29-105(1)(a) (2026). The law forbids manufacturers from requiring Colorado covered entities
to turn over “health information, claims or utilization data, purchasing data, payment data, or other data that does not
relate to a claim submitted to a federal health care program,” unless a covered entity voluntarily provides the
information. Id. § 6-29-105(1)(b). The law is enforced by the state Attorney General. Id. § 6-29-105(3)(a).
205 W. VA. CODE § 60A-8-6a (2024).
206 See, e.g., PhRMA v. Fitch, No. 24-CV-160, 2024 WL 3277365 (S.D. Miss. July 1, 2024), aff’d, No. 24-60340, 2026
WL 963501 (5th Cir. Apr. 9, 2026).
207 See PhRMA v. McClain, 95 F.4th 1136 (8th Cir. 2024) (Arkansas); AbbVie, Inc. v. Fitch, 152 F.4th 635 (5th Cir.
2025) (per curiam) (Mississippi); PhRMA v. McCuskey, 171 F.4th 675, reh'g en banc granted, 176 F.4th 830 (4th Cir.
2026) (mem.) (West Virginia).
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challenges brought against the state laws, focusing specifically on the federal appellate court
rulings.
The Eighth Circuit Upholds the Arkansas and Missouri Laws
Both Arkansas and Missouri enacted state laws prohibiting drug manufacturers from limiting the
delivery of 340B drugs to an in-state covered entity’s contract pharmacy.208 The laws were
challenged by drug manufacturers and PhRMA on the basis that they were preempted by the
340B statute and violated the Dormant Commerce Clause, and both district court decisions made
their way to the Eighth Circuit on appeal.209 The Eighth Circuit decided the Arkansas case
(PhRMA v. McClain) first, holding that the state law was not preempted by the 340B statute or the
Food, Drug, and Cosmetic (FD&C) Act.210 A few years later, the court reviewed the Missouri law
(Novartis Pharmaceuticals Corp. v. Hanaway) on an appeal from a decision on a motion for a
preliminary injunction and concluded that there was likely no preemption; the court also held that
the state 340B law likely did not violate the Dormant Commerce Clause.211
Appeals Court Says 340B Statute Does Not Preempt State 340B Laws
PhRMA and drug manufacturer Novartis challenged the Arkansas and Missouri contract
pharmacy laws, respectively, on the basis that they were preempted by the 340B statute.212 The
federal district court in Arkansas held that the 340B statute did not preempt the Arkansas law;
similarly, the federal district court in Missouri agreed that the state was likely to succeed on the
merits, because the Missouri law was likely not preempted by the 340B statute.213 In both cases,
the Eighth Circuit recognized that the 340B statute was “silent” with respect to the delivery of
340B drugs, but it acknowledged that contract pharmacies were an important part of the 340B
pharmaceutical supply chain, because they deliver the drugs to patients.214
In McClain, the Eighth Circuit first addressed field preemption, quoting the Supreme Court’s
decision in Arizona v. U.S., which held that field preemption occurs when Congress leaves “no
room for the states to supplement” federal law.215 Noting that the text of the 340B statute does not
mention drug delivery, the court found that “Congress’s decision not to legislate the issue of
pharmacy distribution indicates that Section 340B is not intended to preempt the field.”216
Although the Arkansas contract pharmacy law empowers the state to penalize drug manufacturers
who refuse to distribute drugs to covered entities’ contract pharmacies, the Eighth Circuit said
that such enforcement authority does not interfere with HRSA’s jurisdiction over the program,
which concerns disputes between manufacturers and covered entities regarding the price of drugs,
208 ARK. CODE Ann. § 23-92-604 (West 2026); MO. REV. STAT. § 376.414.3 (2024).
209 PhRMA v. McClain, 95 F.4th 1136 (8th Cir. 2024); Novartis Pharms. Corp. v. Bailey, No. 24-4131, 2025 WL
595189 (W.D. Mo. 2025), aff’d sub nom., Novartis Pharms. Corp. v. Hanaway, 180 F.4th 1097 (8th Cir. 2026).
210 McClain, 95 F.4th at 1139; see FD&C Act, 21 U.S.C. §§ 301–399j.
211 Hanaway, 180 F.4th at 1111.
212 PhRMA v. McClain, 645 F. Supp. 3d 890 (E.D. Ark. 2022) aff'd, 95 F.4th 1136 (8th Cir. 2024); Bailey, 2025 WL
595189. Additionally, both plaintiffs argued that the state laws were preempted by the FD&C Act. In McClain, the
parties agreed to stay litigation on the Dormant Commerce Clause issue pending the resolution of the preemption issue.
645 F. Supp. 3d at 894.
213 McClain, 645 F. Supp. 3d at 890; Bailey, 2025 WL 595189, at *1.
214 McClain, 95 F.4th at 1142 (quoting Sanofi Aventis U.S. LLC v. HHS, 58 F.4th 696, 703 (3d Cir. 2023)); accord
Hanaway, 180 F.4th at 1103. The McClain court characterized contract pharmacies as “agent[s] of the covered entity,”
which both purchase and assume legal responsibility for the drugs. McClain, 95 F.4th at 1142.
215 McClain, 95 F.4th at 1143 (quoting Arizona v. United States, 567 U.S. 387, 399 (2012)).
216 Id.
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rather than their distribution.217 In Hanaway, the Eighth Circuit reiterated its reasoning in
McClain, declining to reconsider that decision and rejecting the drug manufacturers’ field
preemption argument.218
The Eighth Circuit also held in McClain that Arkansas’s contract pharmacy law was not
unconstitutional due to obstacle preemption. Rather than creating an obstacle to 340B
compliance, the Eighth Circuit found that the Arkansas law “assists in fulfilling the purpose of
340B” by protecting the relationship between contract pharmacies and covered entities and
ensuring that covered entities can distribute their drugs to patients.219 The court concluded that the
law is “simply deterring . . . manufacturers from interfering with a covered entity’s contract
pharmacy arrangements,” so manufacturers can simultaneously comply with both the 340B
statute and the state law.220 In Hanaway, Novartis tried to avoid the reasoning in McClain by
making a slightly different argument about obstacle preemption, contending that the Missouri law
hampered manufacturers’ ability to impose delivery restrictions on covered entities and conflicted
with federal law by requiring manufacturers to deliver 340B drugs to an unlimited number of
contract pharmacies.221 However, the Eighth Circuit again pointed to its reasoning in McClain,
concluding that the analysis of the two state laws was similar, because they both “regulate an area
beyond the purview of federal law” and do not create a compliance obstacle with federal law for
drug manufacturers.222 The Eighth Circuit further pointed to the U.S. Court of Appeals for the
Fifth Circuit’s decisions in AbbVie, Inc. v. Fitch and AbbVie, Inc. v. Murrill to “reinforce” its
conclusion against obstacle preemption.223
Appeals Court Says That State 340B Laws Do Not Violate the Dormant
Commerce Clause
The Eighth Circuit also held in Hanaway that Novartis failed to show that it was likely to succeed
on the merits of its claim that Missouri’s contract pharmacy law violated the Dormant Commerce
Clause, rejecting Novartis’s arguments that the law violated the extraterritoriality principle, that it
discriminated against interstate commerce, and that it failed the Pike balancing test.224 The court
held that the Missouri law did not violate the extraterritoriality principle, because its effect on
transactions outside the state was “merely incidental,” making the law distinguishable from the
price-gouging statute at issue in Frosh.225 Instead of the law regulating “upstream transactions,”
the Eighth Circuit found that the Missouri 340B law applied only to Missouri’s covered entities
217 Id. at 1144.
218 Hanaway, 180 F.4th at 1112–13.
219 McClain, 95 F.4th at 1144–45.
220 Id. at 1145. The court also found that the state law was not preempted by the FD&C Act, because while it is true that
covered entities are responsible for meeting the FD&C Act’s risk evaluation and mitigation strategies (REMS)
requirements, “just because a medication is subject to multiple legal requirements does not make it impossible to
comply” with state law. Id. at 1145–46.
221 Hanaway, 180 F.4th at 1112–13.
222 Id. at 1113–14 (citing McClain, 95 F.4th at 1145).
223 Id. at 1114 (citing AbbVie, Inc. v. Fitch, 152 4th 635 (5th Cir. 2025); AbbVie, Inc. v. Murrill, 166 F.4th 528 (5th
Cir. 2026)). Both Fitch and Murrill are discussed infra “The Fifth Circuit Upholds the Louisiana and Mississippi
Laws.”
224 180 F.4th at 1106–11.
225 Id. at 1107. Because it regulated transactions between drug manufacturers and drug wholesalers, the Frosh court
found that Maryland’s prescription drug law targeted “upstream” transactions, even when those transactions did not
result in drugs being sold in Maryland. AAM v. Frosh, 887 F.3d 664, 671 (4th Cir. 2018). The Eighth Circuit also
observed that “[u]nlike the Maryland [price-gouging statute] in Frosh, [the Missouri law] regulates the distribution of
340B drugs without affecting their price.” Hanaway, 180 F.4th at 1111.
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and contract pharmacies.226 The Eighth Circuit further characterized Missouri’s law as similar to
the California statute in Pork Producers, because while the law “may incidentally bear on [an]
out-of-state transaction[],” it does not have “a specific impermissible extraterritorial effect.”227
Similarly, the court held that the Missouri law did not discriminate against interstate commerce
because it does not extend a preference to drug manufacturers within the state.228
The Eighth Circuit also rejected Novartis’s claim that even if the Missouri law had no
extraterritorial effect and did not discriminate against out-of-state actors, it violated the Dormant
Commerce Clause for failing the Pike balancing test.229 The court acknowledged that various
states’ contract pharmacy laws could “affect the volume of 340B drugs Novartis delivers in
interstate commerce,” but it held that increased expenses as the result of complying with state
laws was not an insufficient burden on interstate commerce for purposes of Pike balancing.230
Novartis also argued that the burdens of the Missouri law outweighed its benefits by
characterizing it as a “direct cash transfer from out-of-state drug manufacturers to in-state
hospitals,” but the Eighth Circuit disagreed, noting that the purpose of the 340B program was to
generate revenue for covered entities.231
The Fifth Circuit Upholds the Louisiana and Mississippi Laws
After Louisiana enacted its contract pharmacy law in 2023, and Mississippi enacted its law in
2024, PhRMA, AbbVie, and several other drug manufacturers challenged both laws on the basis
that they were preempted by the 340B statute.232 Together, the plaintiffs made a variety of claims,
including that the laws constituted a taking under the Fifth Amendment, violated the Contract
Clause, and were unconstitutionally vague under the Fourteenth Amendment Due Process
Clause.233 The district courts found in favor of the states on all counts, and both rulings were
appealed to the Fifth Circuit.234
Appeals Court Says Federal 340B Statute Does Not Preempt State 340B Laws
The Fifth Circuit approached the appeals similarly, applying the reasoning of its initial decision in
Fitch, which addressed the Mississippi law, to its later decision in Murrill, which addressed the
226 Hanaway, 180 F.4th at 1107–08.
227 Id. at 1108; see Nat’l Pork Producers Council v. Ross, 598 U.S. 356, 374 (2023).
228 Hanaway, 180 F.4th at 1108–09. Novartis also argued that the law discriminated against out-of-state actors because
the company did not have a physical presence in Missouri, and because the law favored in-state 340B covered entities
and pharmacies over an out-of-state drug manufacturer. Id. The court rejected these arguments, finding that drug
manufacturers were not “substantially similar” to hospitals and pharmacies, and thus that the two could not be
compared for purposes of a Dormant Commerce Clause analysis. Id. (quoting Dep’t of Revenue of Ky. v. Davis, 553
U.S. 328, 341 (2008)).
229 Id. at 1111. Even when a state law is “even-handed[],” and only incidentally affects interstate commerce, it can
violate the Dormant Commerce Clause when the burden on interstate commerce outweighs the local benefits. Pike v.
Bruce Church, Inc., 397 U.S. 137, 142 (1970).
230 Hanaway, 180 F.4th at 1110.
231 Id. (quoting Plaintiff-Appellant Novartis Pharmaceuticals Corporation’s Opening Brief at 45, Hanaway, 180 F.4th
1097 (No. 25-1619)).
232 See AbbVie, Inc. v. Fitch, 152 F.4th 635 (5th Cir. 2025) (per curiam) (Mississippi); AbbVie, Inc. v. Murrill, 166
F.4th 528 (5th Cir.), opinion withdrawn and superseded on reh'g, 180 F.4th 747 (5th Cir. 2026) (Louisiana).
233 Fitch, 152 F.4th at 641; Murrill, 180 F.4th at 755–56. In Murrill, the various plaintiffs brought different challenges
to Louisiana’s law; the district court resolved all of the cases via a single opinion, and the Fifth Circuit consolidated the
appeals. PhRMA v. Murrill, No. 23-CV-00997, 2024 WL 4361597 (W.D. La. Sept. 30, 2024), aff'd sub nom., AbbVie,
Inc. v. Murrill, 166 F.4th 528 (5th Cir. 2026).
234 Fitch, 152 F.4th at 639; Murrill, 180 F.4th at 753–54.
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Louisiana law.235 In both cases, the court was unpersuaded by the manufacturers’ arguments that
the state contract pharmacy laws were preempted by the 340B statute.236 Like the Eighth Circuit
in McClain, the Fifth Circuit characterized both the Louisiana and Mississippi laws as regulating
not the 340B program itself, but the delivery of 340B drugs to patients and a contract pharmacy’s
role in that distribution.237 The Fifth Circuit first held that the state laws were not field preempted,
because the 340B statute is not “so pervasive that Congress left no room for state
supplementation.”238 Furthermore, the Fifth Circuit held that the state laws regulated pharmacies,
which “do not purchase 340B drugs, and . . . do not receive the 340B price discounts.”239 Citing
the Eighth Circuit’s decision in McClain, the Fifth Circuit agreed that because Congress has not
addressed the issue of contract pharmacies in the 340B statute, it is presumed that the state may
regulate them.240
The Fifth Circuit similarly found that the state laws were not conflict preempted, because
“[w]hile ‘it is true that Congress made HHS the sole enforcer of Section 340B,’ it is also true that
Louisiana’s Attorney General enforces [the state law]. The two regimes operate in distinct
spheres.”241 Because there is no overlap in enforcement of the state laws and the 340B statute, the
Fifth Circuit found that there was no conflict with the 340B statute in either state law.242 So too,
the Fifth Circuit rejected the plaintiffs’ obstacle-preemption arguments; namely, that the state law
regulates pricing because a violation would occur if a drug manufacturer failed to sell a drug to a
covered entity at the 340B price.243 For example, in Murrill, the court described such reasoning as
“circular,” and characterized the state law as regulating conduct, not prices.244 The court also
disagreed with the plaintiffs’ argument that the state law “skew[ed]” the 340B program’s
objectives, observing that the state law “does not disturb the federally regulated relationship
between manufacturers and covered entities.”245
Appeals Court Says State 340B Laws Do Not Constitute a Fifth Amendment
Taking
The Fifth Circuit also rejected the plaintiffs’ arguments that the 340B state laws constituted either
physical or regulatory takings of property under the Fifth Amendment.246 While the plaintiffs
claimed that the state laws constituted a physical taking because it compelled drug companies to
transfer their private property (i.e., drugs) to private parties that will then sell them, the Fifth
Circuit found that the state laws do not require manufacturers to sell their products at all, and
manufacturers are still compensated for the drugs (albeit at the discounted 340B amount).247
Similarly, the Fifth Circuit found that no regulatory taking had occurred, because the Penn
Central factors—the laws’ economic impacts, their interference with manufacturers’ investment235 See, e.g., Murrill, 180 F.4th at 758 (citing Fitch, 152 F.4th at 646–47).
236 Murrill, 180 F.4th at 758; Fitch, 152 F.4th at 647.
237 Fitch, 152 F.4th at 647.
238 Murrill, 180 F.4th at 759 (quoting Fitch, 152 F.4th at 646).
239 Id. at 760 (citing PhRMA v. McClain, 645 F. Supp. 3d 890 (E.D. Ark. 2022)); accord Fitch, 152 F.4th at 646.
240 Murrill, 180 F.4th at 760 (quoting McClain, 95 F.4th at 1144).
241 Id. (footnote omitted) (quoting Fitch, 152 F.4th at 647); accord Fitch, 152 F.4th at 647–48.
242 Murrill, 180 F.4th at 760–61; accord Fitch, 152 F.4th at 647.
243 Murrill, 180 F.4th at 761; accord Fitch, 152 F.4th at 647.
244 Murrill, 180 F.4th at 761.
245
Id. at 761–62.
246 Id.; Fitch, 152 F.4th at 641.
247 Murrill, 180 F.4th at 763 (citing Fitch, 152 F.4th at 643).
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backed expectations, and the character of the government action—all weighed in favor of the
states.248 Further, the court observed in Murrill that the Louisiana law “advances a core public
purpose: ensuring that low-income and rural patients have access to discounted medications.”249
Appeals Court Says State 340B Laws Do Not Violate the Contract Clause
In Murrill, the Fifth Circuit also addressed the claim that the Louisiana contract pharmacy law
violated the Contract Clause, because the law “substantially impair[ed] [AstraZeneca’s]
contractual relationship with the federal government.”250 Specifically, the drug company
contended that the state law unlawfully extended 340B covered entity status to retail pharmacies,
which imposed new obligations under its PPA.251 The Fifth Circuit disagreed, reasoning that the
state law concerns the relationships between covered entities and their contract pharmacies, and
drug companies are not a party to those contracts; the state law, the court found, does not “alter
the terms, rights, or obligations” of AstraZeneca’s PPA.252
In ruling against the drug manufacturer’s claims, the Fifth Circuit distinguished the Supreme
Court’s ruling in Allied Structural Steel Company v. Spannaus, in which the Court held that a
state law requiring private employers to pay a “pension funding charge” violated the Contract
Clause.253 In Spannaus, the state argued that the law was within the state’s police power, even
though it “substantially altered” the contractual relationship between a private business and its
employees.254 In overturning the state law, Spannaus grappled with the tension between the
Contract Clause and a state’s authority under its police power.255 The Fifth Circuit said that the
Louisiana contract pharmacy law was unlike the state law at issue in Spannaus, which regulated
pensions, because the Louisiana contract pharmacy law implicated “traditional general areas of
state regulation and police power”—namely, pharmacies, which is typically a state-regulated
entity.256 Moreover, drug manufacturers could have reasonably anticipated that the landscape of
their business could be changed by a state, as the prescription drug industry is already heavily
regulated.257
248 Id. at 763–64; accord Fitch, 152 F.4th at 644.
249 Murrill, 180 F.4th at 763–64.
250 Id. at 764.
251 Id. at 764–65.
252 Id. at 765. In its analysis, the Fifth Circuit also distinguished the state law contract pharmacy cases from other cases
challenging HRSA’s attempted regulation of contract pharmacies through guidance. Id. The Fifth Circuit pointed out
that the Third and D.C. Circuit decisions in the Sanofi Aventis and Novartis cases, respectively, were not dispositive in
this case, because the Third and D.C. Circuit decisions addressed a different issue—namely, whether HRSA could
require drug manufacturers to deliver 340B drugs to an unlimited number of contract pharmacies. Id. (referencing
Sanofi Aventis U.S. LLC v. HHS, 58 F.4th 696 (3d Cir. 2023); Novartis Pharms. Corp. v. Johnson, 102 F.4th 452 (D.C.
Cir. 2024)). Those cases, the court said, “did not hold—nor suggest—that States lack authority to regulate delivery
through their traditional police powers.” Id. (citing Novartis, 102 F.4th at 460, 464; Sanofi Aventis, 58 F.4th at 703)).
For more information on the Third and D.C. Circuit decisions in the contract pharmacy litigation, see CRS Report
R48696, The 340B Drug Discount Program: Litigation Topics and Trends, by Hannah-Alise Rogers (2025).
253 Murrill, 180 F.4th at 765 (citing Allied Structural Steel Co. v. Spannaus, 438 U.S. 234 (1978)).
254 Spannaus, 438 U.S. at 240.
255 Id. at 242 (“If the Contract Clause is to retain any meaning at all, however, it must be understood to impose some
limits upon the power of a State to abridge existing contractual relationships, even in the exercise of its otherwise
legitimate police power.”).
256 Murrill, 180 F.4th at 765 (quoting AbbVie, Inc. v. Fitch, 152 F.4th 635, 646 (5th Cir. 2025) (per curiam)).
257 Id.
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The Fourth Circuit Pauses West Virginia’s Law
West Virginia’s contract pharmacy law, enacted in 2024, prohibited manufacturers from
restricting in-state covered entity contract pharmacy use; another part of the law, known as the
“[n]o-[a]udits [p]rovision,” prohibited drug manufacturers from requiring covered entities to
submit claims data as a condition of receiving the 340B price.258 PhRMA and several other drug
companies challenged the state law on the basis that it was preempted by the 340B statute.259 In a
preliminary ruling, the district court agreed, granting PhRMA’s request for a preliminary
injunction and prohibiting the law from taking effect until the underlying merits of the suit were
resolved.260
The court held that the no-audits provision was an obstacle to the 340B statute, because without
it, manufacturers would be unable to audit covered entities.261 The district court also held that the
state law was preempted because, in order to enforce it, a state official would have to apply and
interpret federal law.262 West Virginia appealed the district court’s preliminary injunction ruling to
the Fourth Circuit, arguing that its law was “a classic pharmacy regulation that does not change
the 340B discount or its availability.”263 The Fourth Circuit’s initial ruling, discussed below, was
set aside in June 2026, after the court agreed to rehear the case en banc, meaning that all fifteen of
the Fourth Circuit’s judges would participate in issuing a new ruling.264 As of the date of this
writing, the court is working to schedule the hearing in fall 2026.
The Fourth Circuit panel majority agreed with the district court and held that West Virginia’s
contract pharmacy law was likely preempted.265 The majority first addressed whether the
presumption against preemption266 applied by looking at whether and under what conditions a
state may interfere with “federal prerogatives.”267 The framework for the court’s analysis looked
first at the type of state law, and then, because Congress created the 340B statute using its
258 W.VA. CODE § 60A-8-6a(b)(2) (2026).
259 PhRMA v. Morrisey, 760 F. Supp. 3d 439 (S.D. W.Va. 2024), aff'd sub nom., PhRMA v. McCuskey, 171 F.4th 675
(4th Cir.), reh'g en banc granted, 176 F.4th 830 (4th Cir. 2026); see W.VA. CODE § 60A-8-6a (2026).
260 Morrisey, 760 F. Supp. 3d at 446.
261 Id. at 451. The court held that the West Virginia law’s no-audits provision frustrated the purpose of the 340B statute
because the court said that conducting an audit is a prerequisite for a drug manufacturer to have access to the program’s
alternative dispute resolution process. Id. at 452.
262 Id. at 454. Specifically, the court agreed with drug manufacturers that to determine if a drug was “delivered” in
accordance with the West Virginia statute, a state official would first need to determine whether the drug in question
was a 340B drug and whether it was sold at the 340B price. Id. Moreover, the district court characterized the West
Virginia law as actually regulating price, rather than drug distribution. Id. at 455.
263 McCuskey, 171 F.4th at 682.
264 Amended Order, PhRMA v. McCuskey, No. 25-1054 (4th Cir. June 2, 2026), Dkt. No 167.
265 McCuskey, 171 F.4th at 687 (ruling set aside).
266 Id. at 688. The presumption against preemption is a canon of construction created by the Supreme Court which
instructs that a federal law should not be read to preempt a state law when the state is exercising its police power. See
Rice v. Santa Fe Corp., 331 U.S. 218, 230 (1947). The use of the doctrine has been inconsistent over the years. See,
e.g., Mut. Pharm. Co. v. Bartlett, 570 U.S. 472 (2013) (holding that federal law preempted state law without
mentioning the presumption against preemption). For more information about the presumption against preemption, see
CRS Report R45825, Federal Preemption: A Legal Primer, by Bryan L. Adkins, Alexander H. Pepper, and Jay B.
Sykes (2023).
267 McCuskey, 171 F.4th at 688.
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authority under the Spending Clause, the specific financial arrangement between the federal
government and the states.268
The Fourth Circuit relied on the Supreme Court’s 2005 decision in Bates v. Dow Agrosciences
LLC, which held that the presumption against preemption applies only to instances in which the
state is legislating in an “‘area[] of traditional state regulation,’ such as health and safety.”269 The
Fourth Circuit majority reasoned that the West Virginia contract pharmacy law was not best
characterized as “a traditional health-and-safety regulation,” but instead as a law that regulates the
pharmaceutical industry by “inject[ing] the State into ‘the relationship between a federal agency
and the entity it regulates.’”270 The court said the state law does not apply to all drug
manufacturers equally but rather targets those that have executed 340B PPA agreements with the
government.271
Regarding whether the West Virginia law interfered with the Spending Clause bargain between
the government and drug manufacturers, the Fourth Circuit majority observed that the 340B
program was a collaboration between the state and federal governments, and thus a state law
could only “supplement, rather than interfere with, the federal scheme.”272 The court concluded
that the West Virginia contract pharmacy law “seeks to add conditions, uninvited, to a federal
[340B] spending-power bargain” with state pharmacies.273 For these reasons, the court said, the
presumption against preemption did not apply.274
The Fourth Circuit majority then went on to hold that the West Virginia law was field preempted,
reasoning that “the field” of preemption was specifically the 340B program’s requirements; in
addition, the court observed that the West Virginia law targets only manufacturers with a 340B
PPA agreement and imposes restrictions on those manufacturers.275 In this way, the court said, the
law “alters the fundamental bargain” that Congress created.276 The court also observed that the
state law created an unfair element of surprise for 340B manufacturers, because “complying with
myriad state 340B delivery regimes [would] introduce additional burdens ‘not contemplated by
Congress in enacting . . . [the 340B statute].’”277 In addition to “hampering the spending-power
bargain,” the court noted that West Virginia’s law would likely interfere with other aspects of the
340B program, pointing to the Supreme Court’s decision in Astra USA, Inc. v. Santa Clara
County, that HHS is the “sole enforcer” of the statute.278 Finally, the majority agreed with the
268 Id. at 688. Regarding the majority’s preemption analysis as framed in Congress’s authority under the Spending
Clause, the dissent disagreed, arguing that “there is no binding or persuasive authority requiring a different preemption
analysis for laws passed under the Spending Clause.” Id. at 697 (Benjamin, J., dissenting).
269 Id. at 688. (quoting Bates v. Dow Agrosciences LLC, 544 U.S. 431, 449 (2005)).
270 Id. at 689 (quoting Buckman Co. v. Plaintiffs’ L. Comm., 531 U.S. 341, 347 (2001)).
271 Id.
272 Id. at 689–90.
273 Id. at 690.
274 Id.
275 Id. at 691.
276 Id. at 692. The court further stated, “Congress has ousted States from this field. Section 340B did not merely set a
floor to which states may add additional obligations. Instead, Congress struck a careful bargain. Recall that Congress
incentivized drug manufacturers to offer their products at discounted prices in exchange for access to the massive
Medicaid market. . . . Courts have already made clear that Congress did not require manufacturers to distribute drugs to
an unlimited number of contract pharmacies as part of the 340B program. Yet, unsatisfied with that bargain, West
Virginia now seeks to add its own downsides, without offering any additional upside to compensate.” Id. at 692
(citation omitted) (citing Sanofi Aventis U.S. LLC v. HHS, 58 F.4th 696, 703–04 (3d Cir. 2023)).
277 Id. at 693 (quoting Buckman Co. v. Plaintiffs’ L. Comm., 531 U.S. 341, 350 (2001)).
278 Id. (citing Astra USA, Inc. v. Santa Clara County, 563 U.S. 110, 120 (2011)). The court reasoned that the state law
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district court that the state law would likely interfere with a drug manufacturer’s auditing process
under the statute, which ties to its ability to request alternative dispute resolution proceedings.279
Although the majority reached the opposite conclusion as the Eighth and Fifth Circuits on the
issue of preemption, the court did not distinguish any of these other precedents. 280
Selected Legal Considerations
The potential for diverging federal circuit court opinions on the constitutionality of similar statelevel 340B contract pharmacy laws could affect the ability of covered entities in different states to
access 340B prices. For example, if a drug manufacturer enacted a policy that it would not honor
the 340B price unless the covered entity agreed to use only one contract pharmacy, such a policy
would prohibit covered entities in states without a legally effective state-level contract pharmacy
regime (e.g., West Virginia) from generating 340B savings at more than one contract pharmacy.281
However, that same drug manufacturer’s policy would likely be blocked in a state that has
successfully enacted and defended a legally effective state-level contract pharmacy law (e.g.,
Arkansas, Mississippi, or Louisiana).282 Moreover, given the diverging decisions that have arisen
among the Eighth, Fifth, and Fourth Circuits, it is also possible that the U.S. Supreme Court could
intervene by granting a petition for certiorari.283
Litigation concerning whether state laws regulating contract pharmacies and covered entities in
the 340B program are preempted by the 340B statute is likely to continue. In addition to the
Eighth, Fifth, and Fourth Circuit decisions issued on the state contract pharmacy law issue so far,
there are several more state contract-pharmacy-law-related appeals pending at the U.S. Court of
Appeals for the Tenth Circuit (Tenth Circuit),284 that resulted from decisions in several district
courts in Colorado285 and Oklahoma.286 The drug companies that challenged the Oklahoma and
was preempted because before a state official could determine whether to impose a penalty, it must decide if an offer
was made under the 340B statute, which is a question left to HHS’s enforcement discretion. Id. at 694.
279 Id. In support of this assertion, the court pointed to HRSA’s guidance, which provides that to audit a covered entity,
a manufacturer must provide a “clear description of why it has reasonable cause to believe” that a covered entity had
violated the statute. Id. (quoting Manufacturer Audit Guidelines and Dispute Resolution Process 0905-ZA-19, 61 Fed.
Reg. 65406, 65410 (Dec. 12, 1996)).
280 Id. at 700 (Benjamin, J., dissenting).
281 See id. at 675.
282 See AbbVie, Inc. v. Fitch, 152 F.4th 635 (5th Cir. 2025) (per curiam) (Mississippi); AbbVie, Inc. v. Murrill, 166
F.4th 528 (5th Cir. 2026), opinion withdrawn and superseded on reh'g, 180 F.4th 747 (5th Cir. 2026) (Louisiana);
PhRMA v. McClain, 95 F.4th 1136 (8th Cir. 2024) (Arkansas).
283 PhRMA filed a petition for certiorari with the Supreme Court, requesting that the Court hear its appeal from the
Eighth Circuit’s ruling in PhRMA v. McClain, but the Court denied PhRMA’s petition. PhRMA v. McLain, 145 S. Ct.
768 (2024) (mem.).
284 Novartis Pharms. v. Drummond, No. 25-6182 (10th Cir. filed Nov. 13, 2025); AstraZeneca Pharms. v. Drummond,
No. 25-6183 (10th Cir. filed Nov. 13, 2025); AbbVie, Inc. v. Drummond, No. 25-6184 (10th Cir. filed Nov. 13, 2025).
285 In Colorado, three different Colorado District Court decisions denied drug manufacturers’ motions for preliminary
injunctions to stop the states’ contract pharmacy law from taking effect. Order Denying Plaintiff’s Motion for
Preliminary Injunction [hereinafter AbbVie Order], AbbVie v. Weiser, No. 25-CV-01847 (D. Colo. Oct. 31, 2025), Dkt.
No. 115; Order [hereinafter AstraZeneca Order], AstraZeneca Pharms. LP v. Weiser, No. 25-CV-02685 (D. Colo. Oct.
31, 2025), Dkt. No. 72; Order [hereinafter PhRMA Order], PhRMA v. Weiser, No. 25-CV-02437 (D. Colo. Mar. 18,
2026), Dkt. No. 65. In all three cases, the district courts were unpersuaded by the plaintiffs’ arguments that the
Colorado law was likely preempted by the 340B statute and federal patent law, and one district court held the state law
was not a taking under the Fifth Amendment. AstraZeneca Order, supra, at 8; AbbVie Order, supra, at 13, 16, 25, 29
(rejecting plaintiff’s argument that the law “effects a per se taking” under the Takings Clause); PhRMA Order, supra, at
14.
286 AbbVie Inc. v. Drummond, 808 F. Supp. 3d 1266 (W.D. Okla. 2025). In Oklahoma, before the law became
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Colorado contract pharmacy laws made similar arguments to those discussed above, including
that the 340B state laws are preempted by the 340B statute and that they violate the Fifth
Amendment Takings Clause.287 As of this writing, all of the cases remain pending before the
Tenth Circuit.288
Until 2026, the United States had not taken a position in any of the lawsuits concerning state
contract pharmacy laws. In February 2026, the U.S. Department of Justice filed an amicus brief in
support of AbbVie in its appeal before the Tenth Circuit.289 In its brief, the government argued
that Colorado’s 340B law imposes additional conditions on drug manufacturers’ participation in
340B and is thus preempted.290 The government also argued that if states are permitted to enact
such laws, they risk disincentivizing drug manufacturers from participating in the Medicare and
Medicaid programs.291
Congress always has the option of retaining the existing federal framework, allowing the
judiciary to adjudicate ambiguities. If Congress seeks to alter potential outcomes of the pending
litigation, it has a variety of legislative options. For example, it could amend the 340B statute to
expressly preempt states from enacting laws that affect the 340B program, or it could amend the
statute to expressly allow states to create such laws. Alternatively, Congress could sidestep the
question of state law preemption altogether and amend the statute to clarify how many contract
pharmacies a covered entity could use or what kinds of restrictions, if any, manufacturers may
place on their offers to sell 340B drugs to covered entities. Congress could also amend the statute
to give HRSA additional rulemaking authority, which the agency could use to clarify the
parameters of the 340B program and obviate state-level “protection” laws.
State Laws Regulating Pharmacy Benefit Managers
Pharmacy Benefit Managers and State Regulation
PBMs are organizations that facilitate the purchase of drugs through the U.S. pharmaceutical
distribution and payment chains.292 Serving as intermediaries between health care payers,293 drug
manufacturers, and pharmacies, PBMs may negotiate prescription drug prices with
manufacturers, design and manage drug formularies, administer prescription drug benefits, and
effective, the district court issued a ruling granting the drug manufacturers’ request for a preliminary injunction, finding
that the plaintiffs were likely to succeed on the merits of their claim because the state law was preempted by the 340B
statute and constituted a taking for purposes of the Fifth Amendment. Id. at 1274–80.
287 AbbVie, Inc, 808 F. Supp. 3d 1266. As is the case with the other state laws, a group of drug manufacturers (AbbVie,
AstraZeneca, and Novartis) sued the State of Oklahoma after the legislature enacted, over the governor’s veto, a 340B
contract pharmacy law, which was scheduled to take effect on November 1, 2025. Id.
288 Novartis Pharms., No. 25-6182 (10th Cir. filed Nov. 13, 2025); AstraZeneca Pharms., No. 25-6183 (10th Cir. filed
Nov. 13, 2025); AbbVie, Inc., No. 25-6184 (10th Cir. filed Nov. 13, 2025); AstraZeneca Pharms. v. Weiser, No. 251466 (10th Cir. filed Dec. 22, 2025); AbbVie, Inc. v. Weiser, No. 26-1244 (10th Cir. filed June 25, 2026); PhRMA v.
Weiser, No. 26-1086 (10th Cir. filed Mar. 20, 2026).
289 Brief for the United States as Amicus Curiae in Support of Appellants, AbbVie v. Weiser, No. 25-1439 (10th Cir.
Feb. 25, 2026), Dkt. No. 32. As of the date of this writing, the government has not filed a similar brief in support of
plaintiffs AstraZeneca or PhRMA in their appeals before the Tenth Circuit.
290 Id. at 11.
291 Id. at 16.
292 See generally Meredith Freed et al., What to Know About Pharmacy Benefit Managers (PBMs) and Federal Efforts
at Regulation, KFF (Feb. 9, 2026), https://www.kff.org/other-health/what-to-know-about-pharmacy-benefit-managerspbms-and-federal-efforts-at-regulation [https://perma.cc/YJM9-MDTJ] (discussing PBM business practices).
293 As used here, health care payers include private health insurance plans or government health programs such as
Medicare Part D or Medicaid.
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contract with pharmacies to dispense drugs to health plan enrollees.294 Beginning around 2017,
federal and state lawmakers have scrutinized PBMs and their practices, examining issues such as
the impacts that PBMs—and the means by which they generate revenue—may have on
prescription drug coverage, pricing, and pharmacy reimbursement.295
Relying on traditional powers to regulate health, safety, and other matters, states have established
requirements related to PBMs, and these laws vary in nature and scope.296 State laws address, for
example, required information disclosure or reporting, the structure of PBM revenue, and the
elements of agreements between PBMs and pharmacies.297 As states have enacted such measures
in an effort to address certain concerns raised by PBMs’ roles and functions in the pharmaceutical
marketplace, PBMs, their advocates, and other parties have challenged the validity of several
state measures, commonly on the basis that such measures are preempted by the Employee
Retirement Income Security Act (ERISA).298
ERISA Preemption
ERISA is a key federal law that regulates employee benefit plans, including health and retirement
plans, offered by private-sector employers.299 Under ERISA, health plans must comply with
various standards, including plan fiduciary standards, reporting and disclosure requirements, and
numerous private health insurance market standards established by the Patient Protection and
Affordable Care Act and other federal laws.300 Department of Labor reports from 2026 estimate
that there are roughly 2.8 million ERISA-regulated health plans nationwide that cover 135 million
plan participants and their families.301
According to the Supreme Court, Congress, through ERISA, federalized the regulation of
employee benefit plan administration “to minimize the administrative and financial burden of
complying with conflicting directives among States or between States and the Federal
Government.”302 This goal is carried out in part through a critical feature of ERISA: its express
preemption clause at Section 514(a) in Title I of ERISA.303 This express preemption clause
294 See Carrie LeBlanc Jones, The Role and Regulation of Pharmacy Benefit Managers: A Legal Perspective from
Louisiana, 73 LA. BAR J. 86 (2025).
295 See, e.g., State Action on Pharmacy Benefit Managers (PBMs) to Address Prescription Drug Pricing, NAT’L ACAD.
FOR STATE HEALTH POL’Y (July 24, 2023), https://nashp.org/state-action-on-pharmacy-benefits-managers-pbms-toaddress-prescription-drug-pricing/ [https://perma.cc/XQ84-SE25] (providing an overview of states’ oversight of PBMs
in various contexts).
296 See State Pharmacy Benefit Manager Legislation, NAT’L ACAD. FOR STATE HEALTH POL’Y (Mar. 10, 2026),
https://nashp.org/state-tracker/state-pharmacy-benefit-manager-legislation/ [https://perma.cc/C4AD-W93K].
297 See id.
298 See, e.g., Rutledge v. Pharm. Care Mgmt. Ass’n (PCMA), 592 U.S. 80 (2020); see generally Allison Garcia, ERISA
Preemption and State PBM Reform: Navigating the Balance of Power, 35 ANNALS HEALTH L. ADVANCE DIRECTIVE
168 (2025) (discussing ERISA preemption jurisprudence and state PBM regulation). Additionally, plaintiffs have
challenged state PBM laws on a variety of other grounds, including preemption under the Medicare Part D statute. See,
e.g., PCMA v. Wehbi, 18 F.4th 956 (8th Cir. 2021); see also 42 U.S.C. § 1395w-112(g) (incorporating id. § 1395w26(b)(3)). Discussion of these additional claims is beyond the scope of this report.
299 See ERISA, Pub. L. No. 93-406, 88 Stat. 829 (1974) (codified as amended at 29 U.S.C. §§ 1001–1461).
300 For more information about ERISA’s requirements, see CRS Report R48470, ERISA: Legal Framework and Recent
Supreme Court Litigation, by Jennifer A. Staman (2025).
301 DEP’T OF LAB., 2026 REPORT TO CONGRESS: ANNUAL REPORT ON SELF-INSURED GROUP HEALTH PLANS n.7 (2026),
https://beta.dol.gov/research-data/report/2026-report-congress-annual-report-self-insured-group-health-plans#f7
[https://perma.cc/B73C-MDHM].
302 See Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 142 (1990).
303 See id.; see § 514(a), 88 Stat. at 897.
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broadly preempts “any and all State laws insofar as they may now or hereafter relate to any
employee benefit plan.”304
In numerous opinions, the Supreme Court has interpreted the “relate to” language as applying to
any state law that “has a connection with or reference to such a plan.”305 The Court has observed
that a state law has an impermissible “connection with” an ERISA plan if it “governs . . . a central
matter of plan administration,” or “interferes with nationally uniform plan administration.”306 A
state law has a “reference to” an ERISA plan if it acts “immediately and exclusively” on ERISA
plans, or if the existence of such a plan is essential to the law’s operations.307 Pursuant to this
clause, ERISA may supersede state laws that, for example, aim to regulate plan benefits, or the
administration, operation, or structure of employee benefit plans.308
The Supreme Court’s 2016 decision in Gobeille v. Liberty Mutual Insurance Co. illustrates how
ERISA’s express preemption provision can limit state efforts to enact health care regulatory
initiatives.309 In Gobeille, the Court examined a Vermont law that required health insurers—
including employer-sponsored health plans governed by ERISA—and other entities that provide
and pay for health care services to report health care claims information for inclusion in an allpayer claims database.310 In a 6-2 decision, the Supreme Court concluded that Vermont’s
reporting law was preempted to the extent it applied to ERISA plans.311 Citing ERISA’s extensive
reporting, disclosure, and recordkeeping requirements, the Court held that Vermont’s reporting
regime “imposes duties that are inconsistent with the central design of ERISA, which is to
provide a single uniform national scheme for the administration of ERISA plans without
interference from laws of the several States.”312 Even though the Vermont law’s objective was to
improve health care costs and outcomes, not to regulate employee benefit plan reporting, the
Court’s majority reasoned the state law’s reporting scheme had the effect of a “direct regulation
of a fundamental ERISA function,” and that any difference in purpose did not convert this
regulation “into an innocuous and peripheral set of additional rules.”313
Despite ERISA Section 514(a)’s broad scope, the Supreme Court has articulated that “[s]ome
state actions may affect employee benefit plans in too tenuous, remote, or peripheral a manner to
warrant a finding that the law ‘relates to’ the plan.”314 For instance, in New York State Conference
of Blue Cross & Blue Shield Plans v. Travelers Insurance Co., insurance companies providing
health coverage to ERISA-governed plans challenged a state law that required patients with such
coverage to be subject to a hospital surcharge that did not apply to patients covered by Blue Cross
304 29 U.S.C. § 1144(a).
305 See, e.g., Rutledge, 592 U.S. 80 at 86 (quoting Egelhoff v. Egelhoff, 532 U.S. 141, 147 (2001)).
306 Egelhoff, 532 U.S. at 148.
307 See Cal. Div. of Lab. Standards Enf’t v. Dillingham Constr., 519 U.S. 316, 325 (1997).
308 See, e.g., Soehnlen v. Fleet Owners Ins. Fund, 844 F.3d 576, 589 (6th Cir. 2016) (ERISA preempts state laws that,
among other things, “mandate employee benefit structures or their administration” or “bind employers or plan
administrators to particular choices or preclude uniform administrative practice, thereby functioning as a regulation of
an ERISA plan itself.” (quoting Penny/Ohlmann/Nieman, Inc. v. Miami Valley Pension Corp., 399 F.3d 692, 698 (6th
Cir. 2005))).
309 See Gobeille v. Liberty Mut. Ins. Co., 577 U.S. 312 (2016).
310 Id. All-payer claims database data can generally be used by researchers to study the cost, use, and quality of health
care within a state. See id. at 315.
311 Id. at 326–27.
312
Id. at 326.
313 Id. at 325.
314 Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 100 n.21 (1982).
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& Blue Shield, Medicaid, and certain other coverage arrangements.315 Although the state law
triggered higher costs for ERISA plans, the Court upheld the law, concluding it had an “indirect
economic influence” that did not bind administrators to particular choices with respect to a
plan.316 In the wake of Gobeille, Travelers, and other cases, lower courts have grappled with
applying the Court’s ERISA precedent and determining whether state legislation survives ERISA
preemption, including in the context of state PBM laws.
Supreme Court Upholds Arkansas PBM Law: Rutledge v. Pharmaceutical Care
Management Association (PCMA)
PBM advocates and others have filed several legal challenges to state PBM laws, alleging ERISA
preempts such laws because they have a direct regulatory effect on ERISA plan design and how
plans manage drug benefits. In 2020, the Supreme Court addressed the interplay between one
state’s PBM law and ERISA preemption in Rutledge v. PCMA.317 At issue in Rutledge was an
Arkansas statute with mechanisms designed to anchor PBM pharmacy reimbursement rates to
pharmacies’ drug acquisition costs, to address “concerns that the reimbursement rates set by
PBMs were often too low to cover pharmacies’ costs.”318 A PBM trade association sued the state,
claiming, among other things, that ERISA preempted the Arkansas state law as it applied to
PBMs that provide drug benefit services to ERISA plans.319
In rejecting the trade association’s claims and concluding that ERISA does not preempt
Arkansas’s PBM law, the Supreme Court employed the Court’s traditional test for ERISA
preemption: whether the state law has “a connection with or reference to” an ERISA plan.320 In
discussing why the Arkansas law lacked a prohibited “connection with” an ERISA plan, the Court
explained that ERISA is “primarily concerned with pre-empting laws that require providers to
structure benefit plans in particular ways,” such as requiring payment for a specific benefit.321
Relying on Travelers, the Court maintained that ERISA does not preempt state requirements that
“merely increase costs or alter incentives for ERISA plans without forcing plans to adopt any
particular scheme of substantive coverage.”322 However, the Court also recognized limits on this
flexibility and generally explained that state laws cannot compel ERISA plans to offer a certain
type of coverage or administer benefits in a particular manner.323 The Court further concluded that
the Arkansas law did not impermissibly “refer to” ERISA plans because ERISA plans are
unrelated to the state law’s operation—the law applies to PBMs regardless of whether they
manage ERISA plans or not.324
Litigation After Rutledge Shows Mixed Results
Following Rutledge, lower courts have examined ERISA preemption challenges to a variety of
state PBM laws, with mixed results. For instance, in PCMA v. Wehbi, the Eighth Circuit
315 N.Y. State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co, 514 U.S. 645 (1995).
316 See id. at 659–60.
317 Rutledge v. PCMA, 592 U.S. 80 (2020).
318 See id. at 83–85; 2015 Ark. Acts 900.
319 Rutledge, 592 U.S. at 85.
320 Id. at 86 (quoting Egelhoff v. Egelhoff, 532 U.S. 141, 147 (2001)).
321 Id. at 86–88.
322
Id. at 88 (citing N.Y. State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co, 514 U.S. 645, 668 (1995)).
323 Id. at 89.
324 See id. at 88–89.
Congressional Research Service
35
State Actions to Lower Drug Prices: Selected Legal Issues
concluded that ERISA did not preempt North Dakota provisions that required PBMs to take
certain actions (for instance, provide particular information to health plan sponsors upon request),
and to refrain from engaging in certain arrangements (such as those preventing pharmacies from
charging a fee for mailing or delivering prescriptions, or those requiring pharmacies to satisfy
accreditation standards more stringent than those imposed by North Dakota law).325 Citing
Rutledge and other cases, the Eighth Circuit concluded that the state provisions failed the
“connection with” test for ERISA preemption, as they generally constituted, “at most, regulation
of . . . noncentral ‘matter[s] of plan administration’ with de minimis economic effects and impact
on the uniformity of plan administration across states.”326 The Eighth Circuit also indicated that
the state laws failed the “reference to” test, as the state provisions applied to PBMs “not only
insofar as they administer ERISA plans but also insofar as they administer non-ERISA plans.”327
In a case with a similar outcome, Central States Southeast and Southwest Areas Health and
Welfare Fund v. McClain, a multiemployer health plan sued Arkansas’s insurance commissioner,
alleging that ERISA preempted a state insurance rule that could require PBMs, in connection with
ERISA-governed health plans and other entities, to report to the commissioner certain pharmacy
compensation information and pay certain dispensing fees to pharmacies as part of drug benefit
plan operation (in an effort to foster fair and reasonable pharmacy reimbursement rates).328
Plaintiffs argued that ERISA preempted the rule because it constituted direct regulation of ERISA
health plans, and interfered with key aspects of plan design and administration.329 Citing
Rutledge, the Seventh Circuit held that plaintiffs failed to allege a credible ERISA preemption
claim, expressing that the dispensing fee requirement “‘regulates’ only in the manner the Supreme
Court blessed in Rutledge: cost.”330 While the appeals court acknowledged that the ERISA
preemption question related to the compensation reporting requirement presented a “closer call,”
given the Supreme Court’s holding in Gobeille (in which the Court held that ERISA preempted a
state reporting law), the appeals court explained that the Arkansa
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