2 more pharmaceutical groups sue North Dakota over new law

BISMARCK, N.D. (North Dakota Monitor) — Three pharmaceutical groups have sued North Dakota in federal court over a new law that aims to stop pharmaceutical companies from limiting hospitals’ access to discount drugs.

The law, House Bill 1473, makes it a class B misdemeanor for manufacturers to adopt policies that “deny, restrict, prohibit, or otherwise interfere” with pharmacies’ ability to obtain and dispense medication on behalf of hospitals participating in a federal program for low-income Americans known as 340B.

The 340B program was created by Congress in 1992 to bring down health care costs for poor  communities. Under the program, drug companies offer discounted products to qualifying hospitals and other medical facilities. Drug manufacturers that are part of Medicaid must participate in 340B.

Some supporters of the 340B program feel federal law doesn’t go far enough to protect patients and hospitals’ access to discount drugs.

Lawmakers introduced House Bill 1473 earlier this year to address these perceived shortcomings.

According to testimony on the bill, some drug manufacturers have adopted policies to limit how many pharmacies can participate in the program. Representatives of North Dakota hospitals say this has harmed their ability to get discounted drugs to their patients.

Drug manufacturers have sued the state over the law, arguing that it violates the U.S. Constitution and will harm their profits.

The first of the three lawsuits challenging House Bill 1473 was filed in April by drug manufacturer AbbVie — less than a week after Gov. Kelly Armstrong signed it into law. Another manufacturer, AstraZeneca, and an industry association, Pharmaceutical Research and Manufacturers of America, filed additional suits earlier this month.

According to North Dakota Attorney General Drew Wrigley, states that have passed similar laws are also facing lawsuits from drug companies.

“This was anticipated when the legislation passed,” said Wrigley, whose office is in charge of defending the law in court.

Many of the claims in the three lawsuits overlap.

All of the cases allege that the state law violates the Supremacy Clause of the U.S. Constitution by encroaching on federal regulations.

The pharmaceutical groups say that when Congress designed the 340B program, it intended for drug companies to be able to adopt the kinds of policies that House Bill 1473 outlaws. While 340B requires participating manufacturers to sell their medication at a discount, the companies can still require hospitals to abide by additional conditions to access those products, the plaintiffs claim.

The groups also argue that pharmacies and hospitals are the ones enriching themselves off the 340B program, not drug manufacturers. They say that many hospitals and pharmacies use 340B to purchase medication at a discount, only to turn around and sell it to patients at full price.

AbbVie and Pharmaceutical Research and Manufacturers of America also allege that the law violates the constitution by attempting to regulate business in other states. Some North Dakota hospitals get drugs from out-of-state pharmacies, which in turn get their supply from out-of-state pharmaceutical companies.

Additionally, the suits brought by AbbVie and AstraZeneca claim that House Bill 1473  violates the companies’ Fifth Amendment rights by forcing them to sell their property to a private party.

All three court cases are still in their early stages.

The state has only filed an answer in the AbbVie lawsuit. In the filing, attorneys for North Dakota denied all of AbbVie’s claims that the law is unconstitutional.

The penalty for a class B misdemeanor is 30 days in jail, a maximum fine of $1,500, or both. The North Dakota Board of Pharmacy can also impose civil penalties on violators, according to testimony on the bill.

In legislative hearings, proponents of the bill said 340B is an essential program for many North Dakota communities. The program reduces costs for low-income patients and allows hospitals to provide a wider range of services, they said.

Rep. Jon Nelson, a Rugby Republican and the bill sponsor, in testimony on House Bill 1473 called 340B “a lifeblood” to rural hospitals.

North Dakota Monitor reporter Mary Steurer can be reached at msteurer@northdakotamonitor.com.