State 340B Contract-Pharmacy Protections Not Preempted: Fifth Circuit Reaffirms AbbVie and Applies the Presumption Against Preemption

1. Introduction

This case arises from ongoing disputes between drug manufacturers and states over the federal “340B” drug discount program, codified at 42 U.S.C. § 256b. Under Section 340B, manufacturers that participate in Medicaid and Medicare Part B must provide discounted prices on covered outpatient drugs to qualifying “covered entities” (e.g., certain hospitals and clinics).

The Health Resources and Services Administration (HRSA), which administers the program, has long interpreted Section 340B to permit covered entities to dispense 340B drugs through “contract pharmacies.” The Fifth Circuit cited HRSA’s interpretive notices: Notice Regarding Section 602 of the Veterans Health Care Act of 1992; Contract Pharmacy Services, 61 Fed. Reg. 43549 (Aug. 23, 1996) and Notice Regarding 340B Drug Pricing Program- Contract Pharmacy Services, 75 Fed. Reg. 10272 (Mar. 5, 2010).

In response to manufacturer restrictions on contract-pharmacy dispensing, Mississippi enacted H.B. 728, which prohibits a manufacturer from “deny[ing], restrict[ing], prohibit[ing], or otherwise interfer[ing] with” the acquisition or delivery of 340B-priced drugs to contract pharmacies. Novartis sued Mississippi’s Attorney General (Lynn Fitch, in her official capacity), asserting that H.B. 728 is preempted by federal law and seeking preliminary injunctive relief to block enforcement while litigation proceeds.

The key issue on appeal was narrow but consequential: whether Novartis showed a substantial likelihood of success on its Supremacy Clause preemption claim—an essential prerequisite for a preliminary injunction.

2. Summary of the Opinion

The Fifth Circuit affirmed the district court’s denial of a preliminary injunction. Applying de novo review to legal questions and clear-error review to factual findings, the court concluded that Novartis failed to show a substantial likelihood of success on the merits of its preemption theories.

The court held that its earlier decision in AbbVie, Inc. v. Fitch, 152 F.4th 635 (5th Cir. 2025), had already rejected materially identical preemption arguments against Mississippi’s H.B. 728. Under the circuit’s “rule of orderliness,” a later panel must follow the earlier panel’s decision absent an intervening change in the law. Because AbbVie, Inc. v. Fitch controlled, Novartis could not establish likely success, and the preliminary injunction was properly denied.

3. Analysis

3.1 Precedents Cited (and How They Shaped the Decision)

• Anibowei v. Morgan, 70 F.4th 898 (5th Cir. 2023)
  Used for the standard of review on appeal from a preliminary injunction: abuse of discretion overall, with de novo review for legal determinations and clear error for factual findings. This framed the appellate lens and reinforced that the central question was legal (preemption) rather than fact-intensive.
• AbbVie, Inc. v. Fitch, 152 F.4th 635 (5th Cir. 2025)
  The decisive authority. The court treated AbbVie, Inc. v. Fitch as having already determined: (i) the presumption against preemption applies because the statute regulates traditional state domains (public health/consumer protection), (ii) Section 340B does not “occupy the field” of drug distribution to patients or pharmacies, and (iii) H.B. 728 does not conflict with Section 340B’s objectives or enforcement scheme. The present opinion largely functions as an application of that binding analysis to Novartis’s substantially similar challenge.
• Jones v. Tex. Dep't of Crim. Just., 880 F.3d 756 (5th Cir. 2018)
  Cited (via AbbVie, Inc. v. Fitch) for the familiar four-factor preliminary injunction test, emphasizing the threshold role of “likelihood of success.”
• Arizona v. United States, 567 U.S. 387 (2012)
  Provided the Supreme Court formulations for: field preemption (pervasive federal regulation/dominant federal interest) and conflict preemption (“obstacle” preemption). These standards were the doctrinal yardstick for evaluating Novartis’s Supremacy Clause arguments.
• Janvey v. Democratic Senatorial Campaign Comm., Inc., 712 F.3d 185 (5th Cir. 2013)
  Cited to support the Fifth Circuit’s articulation of field preemption principles, complementing the Supreme Court’s formulation in Arizona v. United States.
• Deanda v. Becerra, 96 F.4th 750 (5th Cir. 2024)
  Cited for the presumption against preemption in areas of traditional state regulation and the requirement of a “clear and manifest” congressional intent to displace state law. This presumption was pivotal because it raised the bar for Novartis to show preemption in a domain tied to health and pharmacy practice.
• AbbVie, Inc. v. Murrill, 166 F.4th 528 (5th Cir. 2026)
  Reinforced that AbbVie, Inc. v. Fitch controls materially indistinguishable state statutes (there, a Louisiana law), and reiterated the characterization of such laws as regulating public health and consumer protection—traditional state police powers. The court used AbbVie, Inc. v. Murrill to show continuity and breadth of the circuit’s approach.
• Jacobs v. Nat'l Drug Intel. Ctr., 548 F.3d 375 (5th Cir. 2008)
  Quoted for the Fifth Circuit “rule of orderliness”: one panel cannot overrule another absent an intervening legal change (statutory amendment, Supreme Court decision, or en banc action). This doctrine effectively foreclosed Novartis’s attempt to relitigate issues already decided in AbbVie, Inc. v. Fitch.

3.2 Legal Reasoning

The court’s reasoning proceeds in a structured preemption analysis—then ends with binding-precedent discipline.

1. Presumption against preemption applies.
   Novartis argued Mississippi’s statute does not regulate traditional state police powers, seeking to avoid the presumption against preemption. The court rejected that argument based on AbbVie, Inc. v. Fitch and AbbVie, Inc. v. Murrill, which characterize H.B. 728 as regulating drug distribution to patients and the role of pharmacies—classic public health and consumer protection territory. With the presumption in place, Novartis needed a “clear and manifest” congressional intent to displace state regulation; it did not show that.
2. No field preemption: Section 340B does not occupy the distribution/pharmacy field.
   Relying on AbbVie, Inc. v. Fitch, the court distinguished between (a) federal regulation of pricing/eligibility/compliance under Section 340B and (b) the “distribution of [340B priced] drugs to patients and the role of pharmacies.” Because Congress did not comprehensively regulate the latter category in Section 340B, the panel reasoned it left room for state law. The presumption against preemption further reinforced the conclusion that Congress did not intend exclusive federal occupation.
3. No conflict (obstacle) preemption shown.
   Novartis contended H.B. 728 “dramatically expands” Section 340B and interferes with federal requirements by forcing discounts beyond federal law. The court, tracking AbbVie, Inc. v. Fitch, rejected the premise: H.B. 728 does not force manufacturers to “offer” 340B drugs to contract pharmacies as federal law compels offers to covered entities. Rather, it prevents manufacturers from interfering with a covered entity’s chosen delivery mechanism (contract pharmacies) for drugs the covered entity is entitled to obtain at 340B prices. The court also emphasized (again via AbbVie, Inc. v. Fitch) that the state and federal “enforcement schemes” do not conflict because they regulate different subject matter.
4. Attempted factual/record distinctions do not overcome controlling precedent.
   Novartis argued that, unlike AbbVie, Inc. v. Fitch (where the record was said to be insufficient to show diversion risk), the present case shows the law forces manufacturers to extend discounts. The panel responded that AbbVie, Inc. v. Fitch had already rejected the key legal theory—H.B. 728 does not compel offering discounts to contract pharmacies. Once that legal characterization holds, record nuances do not change the binding preemption analysis at the preliminary-injunction stage.
5. Rule of orderliness locks in the result.
   The panel closed by invoking the Fifth Circuit’s rule of orderliness: absent an intervening legal change, it must follow AbbVie, Inc. v. Fitch. Therefore, Novartis could not show likelihood of success, and the preliminary injunction was properly denied.

3.3 Impact

Although unpublished, the decision matters because it consolidates a consistent Fifth Circuit approach across multiple manufacturer challenges:

• Stabilization of state 340B contract-pharmacy statutes within the Fifth Circuit. After AbbVie, Inc. v. Fitch and AbbVie, Inc. v. Murrill, this case signals that similar pre-enforcement preemption challenges are unlikely to succeed at least at the preliminary-injunction stage, absent a meaningful change in federal law or controlling Supreme Court guidance.
• Higher hurdle for manufacturers seeking early injunctive relief. By anchoring the “likelihood of success” analysis to binding circuit precedent, the opinion makes it difficult for similarly situated plaintiffs to obtain preliminary injunctions even where they assert program-integrity concerns (e.g., diversion/duplicate discounts).
• Encouragement of legislative experimentation by states. The court’s framing—Section 340B as primarily a pricing/eligibility regime leaving distribution mechanics to state regulation—invites states to regulate pharmacy distribution channels, provided they do not directly contradict an express federal requirement.
• Foreshadowing: the real battleground shifts to federal reform or different theories. If manufacturers cannot prevail via preemption, pressure may move toward (i) congressional amendments to Section 340B, (ii) federal agency action with clearer statutory grounding, or (iii) litigation theories other than preemption (e.g., state constitutional claims, administrative challenges to state enforcement, or as-applied challenges based on concrete enforcement facts).

4. Complex Concepts Simplified

• Section 340B (what it is): A federal program requiring participating manufacturers to sell certain outpatient drugs at discounted prices to specified safety-net providers (“covered entities”).
• Contract pharmacy: A retail or other pharmacy that dispenses drugs on behalf of a covered entity, under contract, often used when the covered entity lacks an in-house pharmacy.
• Drug “diversion” and “duplicate discounts” (federal guardrails): Section 340B prohibits covered entities from diverting discounted drugs to nonpatients and from obtaining both a 340B discount and a Medicaid rebate for the same drug. These are compliance constraints within the federal program.
• Preemption (Supremacy Clause): When federal law overrides state law. Two key types discussed here:
  • Field preemption: Congress so thoroughly regulates an area that there is no room left for states.
  • Conflict (obstacle) preemption: A state law is invalid if it frustrates (“stands as an obstacle to”) the objectives of federal law.
• Presumption against preemption: If a state law addresses traditional state concerns (like public health), courts assume Congress did not intend to displace it unless Congress clearly indicates otherwise.
• Rule of orderliness: In the Fifth Circuit, later panels must follow earlier panel decisions unless a higher authority (Supreme Court), the en banc court, or a statutory change intervenes. This prevents re-litigation of the same legal question panel-to-panel.
• Preliminary injunction standard: A temporary order issued early in a case. The movant must show (among other factors) a substantial likelihood of success on the merits—often the decisive factor when binding precedent is adverse.

5. Conclusion

Novartis Pharmaceuticals Corporation v. Fitch reinforces a Fifth Circuit line of authority treating state laws like Mississippi’s H.B. 728 as exercises of traditional state power over public health, pharmacy practice, and drug distribution—areas not comprehensively occupied by Section 340B’s federal pricing regime.

The opinion’s practical significance lies less in novel doctrinal development and more in institutional discipline: by applying AbbVie, Inc. v. Fitch through the rule of orderliness, the court makes clear that, within the Fifth Circuit, pre-enforcement Supremacy Clause challenges to materially similar 340B contract-pharmacy protection statutes face steep odds absent an intervening change in law.