# State Actions to Lower Drug Prices: Selected Legal Issues > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/crs%3AR49329 ## Record - **Collection:** Congressional research report - **Document type:** Reports - **Published:** August 31, 2026 - **Citation:** R49329 ## Text 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). Congressional Research Service 1 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)). Congressional Research Service 2 State Actions to Lower Drug Prices: Selected Legal Issues 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...) Congressional Research Service 3 State Actions to Lower Drug Prices: Selected Legal Issues 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.”). Congressional Research Service 4 State Actions to Lower Drug Prices: Selected Legal Issues 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)). Congressional Research Service 5 State Actions to Lower Drug Prices: Selected Legal Issues 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. (continued...) Congressional Research Service 6 State Actions to Lower Drug Prices: Selected Legal Issues 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 (continued...) Congressional Research Service 7 State Actions to Lower Drug Prices: Selected Legal Issues 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). Congressional Research Service 8 State Actions to Lower Drug Prices: Selected Legal Issues 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 (continued...) Congressional Research Service 9 State Actions to Lower Drug Prices: Selected Legal Issues 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). Congressional Research Service 10 State Actions to Lower Drug Prices: Selected Legal Issues 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). Congressional Research Service 11 State Actions to Lower Drug Prices: Selected Legal Issues 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)). Congressional Research Service 12 State Actions to Lower Drug Prices: Selected Legal Issues 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. Congressional Research Service 13 State Actions to Lower Drug Prices: Selected Legal Issues 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). Congressional Research Service 14 State Actions to Lower Drug Prices: Selected Legal Issues 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). Congressional Research Service 15 State Actions to Lower Drug Prices: Selected Legal Issues 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)). Congressional Research Service 16 State Actions to Lower Drug Prices: Selected Legal Issues 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). Congressional Research Service 17 State Actions to Lower Drug Prices: Selected Legal Issues 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). Congressional Research Service 18 State Actions to Lower Drug Prices: Selected Legal Issues 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. Congressional Research Service 19 State Actions to Lower Drug Prices: Selected Legal Issues 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. Congressional Research Service 20 State Actions to Lower Drug Prices: Selected Legal Issues 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. Congressional Research Service 21 State Actions to Lower Drug Prices: Selected Legal Issues 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). Congressional Research Service 22 State Actions to Lower Drug Prices: Selected Legal Issues 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). Congressional Research Service 23 State Actions to Lower Drug Prices: Selected Legal Issues 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. Congressional Research Service 24 State Actions to Lower Drug Prices: Selected Legal Issues 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. Congressional Research Service 25 State Actions to Lower Drug Prices: Selected Legal Issues 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) (p [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/crs%3AR49329. Public record. Not legal advice.