State “Non-Interference” Protections for 340B Contract Pharmacies Are Not Preempted and Survive Takings, Contracts Clause, and Vagueness Challenges

I. Introduction

In Pharm Research and Mfr v. Murrill (consolidated with manufacturer challenges brought by AbbVie and AstraZeneca), the U.S. Court of Appeals for the Fifth Circuit reviewed Louisiana’s Act 358, a statute that prohibits drug manufacturers and distributors from “deny[ing], restrict[ing], prohibit[ing], or otherwise interfer[ing]” with a 340B covered entity’s acquisition of, or delivery of, discounted drugs through a contract pharmacy.

The appellants—multiple manufacturers and the trade association Pharmaceutical Research and Manufacturers of America (PhRMA)—argued that Act 358 is preempted by the federal 340B statute, 42 U.S.C. § 256b, and that it also violates distinct constitutional protections (Takings Clause, Contracts Clause, and due-process vagueness). Louisiana, represented by its Attorney General Liz Murrill, defended Act 358. The Louisiana Primary Care Association intervened in support of the State.

The key legal issues were:

  • Jurisdiction: whether federal courts have subject-matter jurisdiction over a suit seeking to enjoin state enforcement on preemption grounds.
  • Preemption: whether § 340B impliedly preempts state laws regulating manufacturer conduct affecting contract-pharmacy distribution.
  • Takings: whether Act 358 compels a physical taking or effects a regulatory taking of manufacturers’ property.
  • Contracts Clause: whether Act 358 substantially impairs manufacturers’ federal Pharmaceutical Pricing Agreements (PPAs).
  • Vagueness: whether “interfere” is so indefinite that Act 358 is void for vagueness.

II. Summary of the Opinion

The Fifth Circuit affirmed summary judgment for Louisiana on all claims. It held:

  • Federal-question jurisdiction exists because this is a classic Ex parte Young action seeking prospective relief from allegedly preempted state regulation.
  • Act 358 is not preempted by § 340B under field, conflict, or obstacle preemption.
  • Act 358 does not effect a physical taking or a regulatory taking.
  • Act 358 does not violate the Contracts Clause because it does not substantially impair AstraZeneca’s PPA with the federal government.
  • Act 358 is not void for vagueness; “interfere” is sufficiently clear in context, and the facial challenge fails.

A central feature of the court’s reasoning is that Congress and § 340B are silent on “delivery logistics” and the “role of pharmacies,” leaving states room to regulate drug distribution through traditional police powers.

III. Analysis

A. Precedents Cited

1. The Fifth Circuit’s controlling 340B state-law precedent

The opinion treats AbbVie, Inc. v. Fitch, 152 F.4th 635 (5th Cir. 2025) (per curiam), as effectively dispositive. In Fitch, the Fifth Circuit upheld (at the preliminary-injunction stage) Mississippi’s “materially indistinguishable” statute against the same categories of preemption and takings theories. The court here explicitly adopts Fitch’s reasoning on the basis that the relevant questions are legal (what § 340B regulates, what Act 358 regulates), not dependent on disputed facts.

2. Federal 340B statutory interpretation and the “silence” on contract pharmacies

The court situates Act 358 against the backdrop of federal decisions rejecting HHS’s attempt to require contract-pharmacy delivery:

  • Sanofi Aventis U.S. LLC v. U.S. Dep't of Health & Hum. Servs., 58 F.4th 696 (3d Cir. 2023) — described § 340B as “silent about delivery” to patients and contract pharmacies; held HHS lacked statutory authority to mandate broad contract-pharmacy delivery.
  • Novartis Pharms. Corp. v. Johnson, 102 F.4th 452 (D.C. Cir. 2024) — likewise described § 340B as “silent about delivery conditions” and rejected HHS’s asserted authority.

The Fifth Circuit’s move is to convert those holdings into a pro-state inference: the circuits limited agency power, not state power. Put differently, a lack of delegated authority to HHS is not an implied congressional intent to extinguish state police powers.

The court reinforces this conclusion by citing:

  • Pharm. Rsch. & Mfrs. of Am. v. McClain, 95 F.4th 1136 (8th Cir. 2024) — noting “Congressional silence on pharmacies” and rejecting preemption of Arkansas’s similar statute.

3. Jurisdiction: distinguishing defensive preemption from affirmative preemption suits

Louisiana argued the district court lacked jurisdiction, relying on Elam v. Kansas City Southern Railway Co., 635 F.3d 796 (5th Cir. 2011), for the proposition that “defensive preemption does not create federal jurisdiction.” The Fifth Circuit distinguished Elam because it involved preemption as a defense in a state-law tort action. Here, the manufacturers sought prospective relief against state enforcement—an Ex parte Young posture.

The court anchored federal jurisdiction in:

  • Ex parte Young, 209 U.S. 123 (1908)
  • Reed v. Goertz, 598 U.S. 230 (2023)
  • Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983)
  • Planned Parenthood of Hou. & Se. Tex. v. Sanchez, 403 F.3d 324 (5th Cir. 2005)

4. Preemption doctrine framework and the presumption against preemption

The court drew on canonical preemption authorities, including: Crosby v. Nat'l Foreign Trade Council, 530 U.S. 363 (2000); Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1 (1824); Oneok, Inc. v. Learjet, Inc., 575 U.S. 373 (2015); and the presumption against preemption in traditional state domains from Rice v. Santa Fe Elevator Corp., 331 U.S. 218 (1947), and the Fifth Circuit’s en banc decision Franks Inv. Co. LLC v. Union Pac. R.R. Co., 593 F.3d 404 (5th Cir. 2010) (en banc).

For field preemption standards, the opinion cited: English v. Gen. Elec. Co., 496 U.S. 72 (1990), City of El Cenizo v. Texas, 890 F.3d 164 (5th Cir. 2018), and De Canas v. Bica, 424 U.S. 351 (1976).

The court also invoked O'Melveny & Myers v. FDIC, 512 U.S. 79 (1994), for the principle that what Congress leaves unaddressed in a detailed federal scheme is “presumably left” to state law.

5. Takings and Contracts Clause lines of authority

For takings doctrine, the court cited: Cedar Point Nursery v. Hassid, 594 U.S. 139 (2021), Pa. Coal Co. v. Mahon, 260 U.S. 393 (1922), and Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104 (1978). Fitch supplies the applied analysis: Act 358 imposes a negative “non-interference” duty rather than a compelled transfer of property.

For the Contracts Clause, the court relied on: Sveen v. Melin, 584 U.S. 811 (2018), Allied Structural Steel Co. v. Spannaus, 438 U.S. 234 (1978), Energy Rsrvs. Grp., Inc. v. Kan. Power & Light Co., 459 U.S. 400 (1983), and Fifth Circuit applications including NextEra Energy Cap. Holdings, Inc. v. Lake, 48 F.4th 306 (5th Cir. 2022), and United Healthcare Ins. Co. v. Davis, 602 F.3d 618 (5th Cir. 2010).

6. Vagueness doctrine authorities

The court cited: United States v. Davis, 588 U.S. 445 (2019), United States v. Lanier, 520 U.S. 259 (1997), Connally v. Gen. Constr. Co., 269 U.S. 385 (1926), Coates v. City of Cincinnati, 402 U.S. 611 (1971), and for civil facial-vagueness standards, Vill. of Hoffman Estates v. Flipside, Hoffman Estates, Inc., 455 U.S. 489 (1982). It used interpretive tools and related cases—Yates v. United States, 574 U.S. 528 (2015); Easom v. US Well Servs., Inc., 37 F.4th 238 (5th Cir. 2022); United States v. Williams, 553 U.S. 285 (2008); plus Fifth Circuit decisions Tex. Democratic Party v. Abbott, 961 F.3d 389 (5th Cir. 2020), Groome Res. Ltd. v. Par. of Jefferson, 234 F.3d 192 (5th Cir. 2000), and Echo Powerline, L.L.C. v. Occupational Safety & Health Rev. Comm'n, 968 F.3d 471 (5th Cir. 2020).

B. Legal Reasoning

1. The court’s core structural move: separating (i) what § 340B regulates from (ii) what states may regulate

The opinion repeatedly emphasizes that § 340B regulates pricing and eligibility (ceiling prices, covered-entity status, diversion/duplicate discounts, auditing and enforcement mechanisms) but is silent on delivery logistics and the role of pharmacies. That silence is treated as an implicit confirmation that states remain free to legislate on distribution mechanics—especially in traditional police-power areas like public health and consumer protection.

2. Field preemption rejected: no “complete ouster of state power”

Applying English and the “complete ouster” caution from De Canas, the Fifth Circuit found no congressional intent to occupy the field of drug distribution to patients or pharmacy operations. Because Act 358 fits within “public health and consumer protection,” the Rice presumption against preemption applies with force.

3. Conflict and obstacle preemption rejected: no impossibility and no improper “expansion” of covered entities

The manufacturers argued Act 358 effectively expands the class of “covered entities” by forcing discounted sales to contract pharmacies. The court rejected that characterization as a misunderstanding of the 340B transaction: covered entities purchase and hold title to 340B drugs; contract pharmacies are dispensing intermediaries. Thus, Act 358 does not require manufacturers to discount drugs to pharmacies as independent beneficiaries; it prevents manufacturers from blocking covered entities’ chosen distribution channel after purchase.

The court also rejected the claim that Act 358 conflicts with HHS’s exclusive enforcement authority because the state statute and federal regime address different subjects: the federal enforcement scheme addresses covered entities’ ability to purchase at or below the ceiling price, while Act 358 addresses manufacturer conduct that obstructs delivery to contract pharmacies—an area where § 340B is “silent.”

4. Agency-power decisions do not set a ceiling on state power

The opinion addresses the manufacturers’ strongest rhetorical point: if HHS cannot mandate unlimited contract-pharmacy delivery (per Sanofi and Novartis), how can Louisiana do it? The answer: those cases are about delegation and the bounds of agency statutory authority. The lack of delegated federal administrative power does not itself imply Congress intended to preempt states’ historic police powers in adjacent domains.

5. Takings: “non-interference” is not compelled transfer; Penn Central factors also favor the State

On physical takings, the court followed Fitch: Act 358 creates a negative duty not to obstruct, and does not require manufacturers to transfer property or sell more at a discount than § 340B already requires; manufacturers still receive the discounted amounts contemplated by federal law.

On regulatory takings, the court applied the Penn Cent. factors (as framed in Cedar Point Nursery) and found: (i) limited economic impact because the manufacturer still receives much of the market price; (ii) limited interference with investment-backed expectations given contract pharmacies’ decades-long presence; and (iii) a strong public-purpose character—access to medicines for vulnerable populations.

6. Contracts Clause: no substantial impairment because PPAs contain no delivery terms

Applying the two-step framework from Sveen v. Melin, the court stopped at step one: no “substantial impairment.” Act 358 does not alter AstraZeneca’s PPA rights or obligations because the PPA is silent on contract-pharmacy delivery logistics. The court distinguished Allied Structural Steel Co. v. Spannaus as a case involving abrupt, retroactive rewriting of contractual duties. By contrast, Act 358 operates in a historically regulated industry where parties can expect regulation, consistent with Energy Rsrvs. Grp., Inc. v. Kan. Power & Light Co..

7. Vagueness: “interfere” is cabined by context and facial challenge fails

The court used noscitur a sociis to read “interfere” alongside “deny, restrict, prohibit,” limiting it to obstructive conduct affecting acquisition/delivery, not ordinary compliance communications (including auditing inquiries). It also held that, outside the First Amendment, PhRMA’s facial challenge must show vagueness in all applications under Vill. of Hoffman Estates. Because the statute clearly reaches a core application—refusal to deliver to a contract pharmacy—it cannot be facially void.

C. Impact

  • Strengthened state authority in the 340B ecosystem: The Fifth Circuit adds a merits-stage affirmance to its earlier Fitch reasoning, reinforcing that states may bar manufacturer “non-interference” with contract-pharmacy distribution even when federal law does not affirmatively require such delivery.
  • Preemption litigation posture clarified: The jurisdiction discussion confirms that affirmative preemption suits for prospective relief against state officials are properly in federal court under Shaw v. Delta Air Lines, Inc., despite the “defensive preemption” limit discussed in Elam v. Kansas City Southern Railway Co..
  • Constitutional backstops narrowed for manufacturers: By characterizing these statutes as non-compelled-transfer “non-interference” rules, the court makes Takings Clause challenges harder, especially where the economic impact is incremental and the regulatory field is long-established.
  • Model for drafting and defending similar statutes: The court’s emphasis that Act 358 regulates conduct (interference with delivery) rather than price-setting provides a roadmap for states to frame these laws as distribution regulation rather than price regulation.
  • Spending Clause preemption caution signal: In dicta, the court flags the question noted in Moyle v. United States about spending-power statutes and preemption, and indicates courts should be cautious about expanding preemption based on silence in that context.

IV. Complex Concepts Simplified

340B “covered entity”
A safety-net provider (often clinics/hospitals serving low-income or rural patients) that is entitled to buy certain outpatient drugs at or below a federal ceiling price.
Contract pharmacy
A pharmacy that dispenses 340B drugs on behalf of a covered entity, typically because the covered entity lacks an in-house pharmacy. The covered entity buys the drug; the contract pharmacy dispenses it as an intermediary.
Preemption (field, conflict, obstacle)
  • Field preemption: Congress intended to occupy the entire regulatory area, leaving no room for states.
  • Conflict preemption: It is impossible to comply with both state and federal law.
  • Obstacle preemption: State law stands as an obstacle to Congress’s objectives, even if dual compliance is possible.
Ex parte Young suit
A federal lawsuit seeking to stop a state official from enforcing a state law alleged to violate federal law (including by being preempted), typically seeking prospective declaratory/injunctive relief.
Physical taking vs. regulatory taking
  • Physical taking: Government directly appropriates or occupies property.
  • Regulatory taking: Government regulation so burdens property use/value that compensation is required; analyzed using the Penn Central factors.
Void for vagueness (civil)
A due-process doctrine requiring laws to provide fair notice and workable standards; in civil contexts the threshold is high, and facial challenges generally require vagueness in all applications.

V. Conclusion

Pharm Research and Mfr v. Murrill cements, within the Fifth Circuit, a durable rule: state laws preventing manufacturers from interfering with 340B covered entities’ use of contract pharmacies are generally compatible with § 340B and the Constitution when framed as regulation of drug distribution logistics—an area the federal statute leaves unaddressed.

The court’s reasoning turns on three linked propositions: (1) § 340B is “silent” on delivery and pharmacies; (2) that silence does not imply federal exclusivity, especially given the presumption against preemption in public health; and (3) Act 358 operates as a “non-interference” rule that neither confiscates property, rewrites federal contracts, nor fails basic due-process clarity requirements. The decision thus strengthens state regulatory space around the practical operation of 340B contract-pharmacy distribution.