States May Bar Manufacturer “Interference” with 340B Contract-Pharmacy Distribution Without Federal Preemption (and Without Takings/Contracts/Vagueness Violations); Intervention Requires a Distinct Defense

Case: AbbVie v. Murrill (consolidated with Nos. 24-30651 & 24-30673)
Court: United States Court of Appeals for the Fifth Circuit
Date: February 9, 2026
Disposition: Summary judgment for Louisiana affirmed; intervention by Louisiana Primary Care Association reversed (in AbbVie’s case).

I. Introduction

This consolidated appeal sits at the intersection of federal drug-discount policy and state control over pharmacy practice and drug distribution. Congress’s Section 340B Drug Pricing Program (“340B”) requires drug manufacturers that participate in Medicaid and Medicare Part B to sell certain outpatient drugs at or below a statutory “ceiling price” to specified safety-net providers (“covered entities”), such as federally qualified health centers and other institutions serving low-income and rural patients. As the opinion emphasizes, Congress did not specify how 340B drugs must be dispensed.

Over time, many covered entities—especially in rural or underserved areas—relied on contract pharmacies to dispense 340B drugs. After HRSA’s 2010 guidance permitted an unlimited number of contract-pharmacy arrangements, manufacturers increasingly adopted policies restricting covered entities’ use of contract pharmacies, asserting concerns about “arbitrage.”

Louisiana responded with Act 358 (La. Stat. Ann. § 40:2884), which prohibits manufacturers/distributors from “deny[ing], restrict[ing], prohibit[ing], or otherwise interfere[ing]” with a covered entity’s acquisition of 340B drugs or delivery of those drugs to a contract pharmacy, and separately prohibits interference with a contract pharmacy itself. AbbVie (and related entities), AstraZeneca, and PhRMA sued Louisiana’s Attorney General, raising: (1) federal preemption; and various constitutional challenges (Takings Clause, Contracts Clause, and vagueness). The district court rejected all claims and permitted intervention by the Louisiana Primary Care Association (“LPCA”). The Fifth Circuit largely affirmed on the merits but reversed as to intervention.

II. Summary of the Opinion

  • Jurisdiction: Federal-question jurisdiction exists because the manufacturers brought a classic preemption-based Ex parte Young action seeking prospective relief against a state official.
  • Preemption: Act 358 is not preempted by § 340B under field, conflict, or obstacle preemption; the Fifth Circuit treated AbbVie, Inc. v. Fitch as controlling.
  • Takings (AbbVie): No physical or regulatory taking; Act 358 imposes a “negative obligation of non-interference” and does not compel additional discounted sales beyond § 340B.
  • Contracts Clause (AstraZeneca): No substantial impairment of AstraZeneca’s pharmaceutical pricing agreement (PPA) with HHS because the PPA is silent on delivery logistics and Act 358 does not rewrite federal contract terms.
  • Vagueness (PhRMA): Act 358’s use of “interfere” is sufficiently definite, especially read in context with “deny, restrict, prohibit,” applying noscitur a sociis.
  • Intervention (LPCA): Reversed in AbbVie’s case; LPCA failed to show Louisiana would inadequately represent its interests or that LPCA would offer any defense distinct from the State.

III. Analysis

A. Precedents Cited (and How They Drive the Result)

1. The 340B Program’s structure and limits

  • Astra USA, Inc. v. Santa Clara Cnty. (563 U.S. 110 (2011)) is used to frame 340B as a “straightforward bargain” and to emphasize that Congress vested compliance oversight in HHS, with PPAs functioning as uniform instruments that “recite” statutory duties rather than negotiated contracts. This supports the court’s view that Congress carefully specified certain obligations (pricing, diversion, duplicate discounts, audits) while leaving other operational questions open.
  • HRSA guidance is treated as historically important context (1996 single-contract-pharmacy permission; 2010 expansion), but not as a source of federal statutory commands that could themselves preempt state law.
  • The court situates Louisiana’s law against the backdrop of federal appellate decisions rejecting HHS’s attempt to require delivery to unlimited contract pharmacies: Sanofi Aventis U.S. LLC v. U.S. Dep't of Health & Hum. Servs. (58 F.4th 696 (3d Cir. 2023)) and Novartis Pharms. Corp. v. Johnson (102 F.4th 452 (D.C. Cir. 2024)). Those cases, in the Fifth Circuit’s telling, demonstrate federal “silence” on delivery logistics rather than a federal prohibition on state regulation.

2. The controlling Fifth Circuit preemption anchor

  • AbbVie, Inc. v. Fitch (152 F.4th 635 (5th Cir. 2025) (per curiam)) is the opinion’s centerpiece. The court treats Fitch as binding and directly on point because Mississippi’s statute was “materially indistinguishable.” Fitch supplies the core doctrinal move: § 340B regulates pricing and covered-entity eligibility but is “silent” on “the distribution of drugs to patients” and “the role of pharmacies in this distribution,” leaving room for state supplementation.

3. Field/conflict/obstacle preemption framework and the presumption against preemption

  • The court relies on classic preemption principles: Oneok, Inc. v. Learjet, Inc. (575 U.S. 373 (2015)) (express/implicit preemption), Rice v. Santa Fe Elevator Corp. (331 U.S. 218 (1947)) (clear-and-manifest intent; police powers), and Fifth Circuit authority emphasizing the presumption against preemption in traditional state domains, including Franks Inv. Co. LLC v. Union Pac. R.R. Co. (593 F.3d 404 (5th Cir. 2010) (en banc)).
  • For field preemption, the court draws on English v. Gen. Elec. Co. (496 U.S. 72 (1990)) (pervasiveness), De Canas v. Bica (421 U.S. 351 (1976)) (hesitation absent “complete ouster”), and Fifth Circuit precedent, including City of El Cenizo v. Texas (890 F.3d 164 (5th Cir. 2018)).
  • For conflict and obstacle preemption, the opinion cites Barrosse v. Huntington Ingalls, Inc. (70 F.4th 315 (5th Cir. 2023)). Fitch supplies the key application: no impossibility and no unacceptable obstacle because Act 358 governs delivery conduct post-purchase, whereas § 340B governs pricing and covered-entity eligibility.
  • The court also aligns with the Eighth Circuit’s treatment of an analogous statute: Pharm. Rsch. & Mfrs. of Am. v. McClain (95 F.4th 1136 (8th Cir. 2024), cert. denied, 145 S. Ct. 768 (2024)), particularly to reject the claim that these state laws are “pricing regulation in disguise.”

4. Jurisdiction over preemption suits (Supremacy Clause as “sword”)

  • Louisiana’s jurisdictional argument relied on Elam v. Kansas City Southern Railway Co. (635 F.3d 796 (5th Cir. 2011)), but the Fifth Circuit distinguishes it as involving defensive preemption in a state-law action.
  • The court applies Planned Parenthood of Hou. & Se. Tex. v. Sanchez (403 F.3d 324 (5th Cir. 2005)), quoting Shaw v. Delta Air Lines, Inc. (463 U.S. 85 (1983)), to reaffirm that preemption claims seeking injunctive relief against state officials present a federal question.
  • It labels the posture “a classic Ex parte Young suit” (209 U.S. 123 (1908)), also citing Reed v. Goertz (598 U.S. 230 (2023)).

5. Takings doctrine

  • The court frames physical-access and physical-appropriation takings through Cedar Point Nursery v. Hassid (594 U.S. 139 (2021)), and regulatory takings through the Penn Cent. Transp. Co. v. City of New York (348 U.S. 104 (1978)) factors, while acknowledging the “goes too far” maxim from Pa. Coal Co. v. Mahon (260 U.S. 393 (1922)).
  • Substantively, AbbVie, Inc. v. Fitch is again controlling: Act 358 does not compel affirmative transfers to pharmacies or require more discounted sales than § 340B; it prevents manufacturer interference with how covered entities route drugs after purchase.

6. Contracts Clause framework

  • The court applies the modern two-step test from Sveen v. Melin (584 U.S. 811 (2018)), invoking Allied Structural Steel Co. v. Spannaus (438 U.S. 234 (1978)) as the paradigm of unconstitutional, retroactive rewriting of private obligations.
  • It uses Fifth Circuit authority—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))—to emphasize reasonable expectations in regulated markets.
  • The opinion analogizes to Energy Rsrvs. Grp., Inc. v. Kan. Power & Light Co. (459 U.S. 400 (1983)), highlighting that pervasive regulation undermines any expectation of regulatory stasis and that states may supplement regulation even where federal controls exist.

7. Vagueness doctrine and textual canons

  • The opinion grounds vagueness in due process and emphasizes the high bar in civil contexts, citing United States v. Lanier (520 U.S. 259 (1997)) (quoting Connally v. Gen. Constr. Co. (269 U.S. 385 (1926))), Coates v. City of Cincinnati (402 U.S. 611 (1971)), and Fifth Circuit authority including Tex. v. Democratic Party v. Abbott (961 F.3d 389 (5th Cir. 2020)) and Groome Res. Ltd. v. Par. of Jefferson (234 F.3d 192 (5th Cir. 2000)).
  • It narrows “interfere” with noscitur a sociis, citing Yates v. United States (574 U.S. 528 (2015)), United States v. Williams (553 U.S. 285 (2008)), and Fifth Circuit application in Easom v. US Well Servs., Inc. (37 F.4th 238 (5th Cir. 2022)).
  • It further notes that “fair and reasonable warning” (not maximal precision) is the constitutional demand, citing Echo Powerline, L.L.C. v. Occupational Safety & Health Rev. Comm'n (968 F.3d 471 (5th Cir. 2020)).

8. Intervention as of right when the State is already defending

  • The court applies Rule 24(a)(2) through Texas v. United States (805 F.3d 653 (5th Cir. 2015)) and Hopwood v. Texas (21 F.3d 603 (5th Cir. 1994)), emphasizing the presumption that a State represents its citizens in matters of sovereign interest and that a proposed intervenor must show a materially distinct interest and potentially inadequate representation.
  • While acknowledging a general pro-intervention policy (e.g., Wal-Mart Stores, Inc. v. Texas Alcoholic Beverage Comm'n (834 F.3d 562 (5th Cir. 2016)), Sierra Club v. Espy (18 F.3d 1202 (5th Cir. 1994)), Brumfield v. Dodd (749 F.3d 339 (5th Cir. 2014))), the court holds LPCA failed the “inadequate representation” prong because it did not identify any distinct defense Louisiana would not raise.

B. Legal Reasoning

1. Why Act 358 is not preempted

The court’s preemption analysis is structured around two related premises: (1) states possess traditional police power over public health, pharmacies, and consumer protection; and (2) § 340B is specific about price ceilings and covered-entity eligibility but silent about the logistics of dispensing and delivery.

  • No field preemption: § 340B’s scheme is not so “pervasive” as to exclude all state supplementation. The opinion lists what § 340B regulates (price ceilings, eligibility, diversion/duplicate-discount prohibitions, audits/enforcement) and contrasts what it does not regulate: delivery to patients and the role of pharmacies. Act 358 is located precisely in that “unaddressed” space.
  • No conflict/impossibility preemption: Compliance with both regimes is possible because they regulate different things: HHS enforces the 340B statutory framework; Louisiana enforces a state rule prohibiting manufacturer interference with covered entities’ contract-pharmacy delivery choices. The court repeatedly characterizes this as a “distinct spheres”/“no overlap in the enforcement Venn Diagram” problem.
  • No obstacle preemption: The court rejects the claim that Act 358 is “pricing regulation.” The statute targets interference with acquisition/delivery to contract pharmacies; it does not set prices or compel a different price than § 340B’s ceiling price. Nor does it “skew” Congress’s objectives, because Congress left delivery conditions unregulated—effectively allocating that domain to the states unless Congress later amends § 340B.

2. Why there is no Taking

AbbVie argued Act 358 effects a physical taking by compelling transfer of property to private parties who can profit. The court—tracking AbbVie, Inc. v. Fitch— reframes Act 358 as a non-appropriative rule: it prevents interference with a covered entity’s chosen distribution method after the covered entity purchases the drugs at the 340B price. Because the manufacturer still receives the discounted price it is entitled to under § 340B (and the statute does not compel additional discounted sales beyond § 340B’s requirements), the “physical taking” label does not fit.

As to regulatory takings, the court applies the Penn Cent. Transp. Co. v. City of New York factors and finds for Louisiana: limited economic impact (manufacturers still receive “a large percentage of the market price” for most drugs), foreseeable expectations given decades of contract-pharmacy practice, and a public-regarding character (access to medications for low-income and rural patients).

3. Why there is no Contracts Clause violation

AstraZeneca anchored its Contracts Clause claim in its PPA with HHS, arguing Act 358 imposes new obligations tied to entering the federal agreement. The court rejects this at step one of Sveen v. Melin: no “substantial impairment” because Act 358 does not change the PPA’s terms. The PPA is silent on delivery; Act 358 addresses delivery to contract pharmacies. The statute therefore does not “rewrite” the federal bargain, unlike Allied Structural Steel Co. v. Spannaus.

The court further reasons that manufacturers in a heavily regulated pharmaceutical market cannot reasonably expect a static landscape, analogizing to Energy Rsrvs. Grp., Inc. v. Kan. Power & Light Co..

4. Why “interfere” is not unconstitutionally vague

PhRMA focused on “interfere” as an open-ended standard that could chill legitimate audit-related conduct. The court reads “interfere” in context, applying noscitur a sociis: paired with “deny, restrict, prohibit,” the term reaches obstructive conduct aimed at blocking acquisition or delivery, not ordinary communications or lawful compliance efforts. Given the especially high bar for civil vagueness challenges, Act 358 provides sufficient notice.

5. Why LPCA’s intervention was improper

The intervention holding turns on the “inadequate representation” element of Rule 24(a)(2). With Louisiana already defending its statute, LPCA had to show materially distinct interests and that Louisiana “may be” an inadequate representative. The court—relying heavily on Hopwood v. Texas— finds LPCA offered only a different emphasis (members’ business interests) but no distinct legal defense or litigation position that the Attorney General would not advance. “Additional defender” is not enough to overcome the presumption that the State represents its citizens in a sovereign-interest case.

C. Impact

  • Strengthening state “contract-pharmacy protection” statutes in the Fifth Circuit: By treating AbbVie, Inc. v. Fitch as controlling and extending its logic to Louisiana’s Act 358 on a summary-judgment record, the Fifth Circuit further entrenches the view that states may regulate post-purchase delivery/distribution mechanics for 340B drugs without being displaced by § 340B.
  • Confining manufacturer constitutional challenges: The opinion signals skepticism toward attempts to recast non-interference/delivery statutes as (i) compelled transfers (takings), (ii) rewritten federal bargains (Contracts Clause), or (iii) standardless prohibitions (vagueness), particularly where the statute is tethered to traditional health and consumer protection domains.
  • Federalism allocation in the 340B space: A key practical consequence is that the “silence” recognized by Sanofi Aventis U.S. LLC v. U.S. Dep't of Health & Hum. Servs. and Novartis Pharms. Corp. v. Johnson does not disable states; instead, it may invite them. Unless Congress amends § 340B to address delivery/contract pharmacies expressly, the Fifth Circuit reads that gap as available for state law.
  • Intervention discipline in public-law defenses: The reversal on intervention cautions trade groups and associations that—when a state is already defending—intervention as of right will require a concrete showing of divergence that matters to the defense (distinct arguments, evidence, or litigation objectives), not merely a narrower or more intense policy preference.

IV. Complex Concepts Simplified

  • 340B “covered entities” and “ceiling prices”: Covered entities are specified safety-net providers eligible to buy certain outpatient drugs at or below a statutory maximum (“ceiling”) price.
  • Contract pharmacies: Pharmacies that dispense drugs on behalf of a covered entity. In the model described by the court, covered entities buy and retain title to the drugs; the pharmacy dispenses as a distribution intermediary.
  • Preemption (field vs. conflict vs. obstacle):
    • Field: Congress so fully occupies a regulatory area that states have no room to act.
    • Conflict: It is impossible to comply with both federal and state law.
    • Obstacle: State law stands as an unacceptable obstacle to Congress’s objectives.
  • Ex parte Young suits: A way to sue state officials in federal court for prospective (forward-looking) relief to stop enforcement of an allegedly unconstitutional or preempted state law.
  • Takings (physical vs. regulatory): A physical taking involves compelled occupation or appropriation; a regulatory taking involves restrictions on use that, under Penn Cent. Transp. Co. v. City of New York, may require compensation depending on economic impact, expectations, and the character of the action.
  • Contracts Clause “substantial impairment”: Not every law affecting contracts violates the Clause; courts ask first whether the law substantially alters the bargain and undermines reasonable expectations, especially in regulated industries.
  • Void-for-vagueness and noscitur a sociis: A law is vague only if people of common intelligence must guess at what it requires. Noscitur a sociis narrows meaning by reading a word alongside its neighbors (here, “interfere” is informed by “deny, restrict, prohibit”).
  • Intervention as of right (Rule 24(a)(2)): A non-party may join if it has a protectable interest that may be impaired and is inadequately represented. When the State is already a party, the would-be intervenor must show meaningful divergence and potential inadequacy, not mere alignment plus added enthusiasm.

V. Conclusion

AbbVie v. Murrill reinforces a clear Fifth Circuit rule: state laws that prohibit manufacturers from interfering with covered entities’ use of contract pharmacies—framed as regulation of drug distribution and pharmacy practice—are not displaced by § 340B’s pricing-focused federal scheme, and they generally withstand Takings Clause, Contracts Clause, and vagueness attacks when they impose non-interference duties rather than new federal pricing terms. Separately, the decision tightens intervention doctrine in public-law defenses: when a State is already defending its statute, an intervenor must show a truly distinct defense or a meaningful risk of inadequate representation, not merely a different (or more concentrated) policy interest.