In February 2026, the Department of Justice filed amicus briefs supporting pharmaceutical manufacturers, asserting that Rhode Island and Colorado’s 340B laws conflict with the federal 340B Program and are preempted under the Supremacy Clause, which makes valid federal law override conflicting state law.
By siding with manufacturers, DOJ signals a potential shift in how the federal government views the 340B Program, the role of states, and the balance of authority between the Health Resources and Services Administration (HRSA) and state regulators.
The 340B program and state laws
Section 340B of the Public Health Service Act requires pharmaceutical manufacturers to offer certain outpatient drugs to “covered entities”—such as hospitals and clinics that serve rural or low‑income communities—at or below a set ceiling price as a condition of Medicaid participation (and, through related provisions, Medicare Part B coverage). Many of these providers do not have their own pharmacies and instead contract with outside pharmacies (called “contract pharmacies”) to dispense 340B drugs to patients.
Initially, HRSA guidance allowed covered entities to work with only one contract pharmacy. In 2010, HRSA allowed the use of an unlimited number of contract pharmacies, expanding both the program and these pharmacy networks. By 2024, the 340B Program accounted for more than $80 billion in purchases—over 16% of U.S. drug spending. Manufacturers, based on concerns over diversion (drugs going to patients who are not eligible) and duplicate discounts (stacking Medicaid rebates and 340B discounts on the same drug), began limiting the number and type of contract pharmacies they would recognize and adding data‑sharing and other conditions.
States responded with laws aimed at stopping these limits. Rhode Island’s and Colorado’s laws generally prohibit manufacturers and certain intermediaries from denying, restricting or otherwise limiting the acquisition or delivery of 340B drugs to covered entities or their contract pharmacies. A company that violates these laws also violates state consumer protection laws for which State AGs can seek substantial civil penalties.
Litigation background
Manufacturers have had mixed success challenging 340B laws. In the D.C. and Third Circuits, they persuaded courts that Section 340B's silence on delivery does not require manufacturers to ship discounted drugs to an unlimited number of contract pharmacies and that HHS lacked authority to force such shipments through guidance and enforcement letters. Those courts held that, because the statute does not speak to delivery, at least some manufacturer conditions on contract pharmacies are consistent with Section 340B’s requirement to offer covered outpatient drugs at or below the ceiling price. Manufacturers now rely on that reasoning to argue that Colorado and Rhode Island’s 340B statutes conflict with federal law by effectively banning delivery conditions on which Section 340B is silent.
By contrast, the Fifth and Eighth Circuits rejected similar arguments against other state 340B laws. Those courts found that the federal program governs ceiling prices and certain compliance obligations, but says nothing about how drugs must be distributed or what role pharmacies play. Because the state laws at issue focused on how drugs are delivered and how pharmacies operate—not on the 340B price itself—the courts concluded that those laws did not conflict with and were not preempted by the 340B statute. Takings Clause claims also failed because the laws did not require manufacturers to sell more drugs at 340B prices than federal law already mandates.
DOJ’s recent amicus briefs, which adopt many of the manufacturers’ preemption arguments, deepen this split and increase the chances of further appeals and possible Supreme Court review, making a uniform national approach to 340B and contract pharmacies harder to achieve.
DOJ's arguments
DOJ argues that Colorado and Rhode Island’s 340B statutes dictate how manufacturers must deliver drugs under the 340B Program, and that blocking manufacturers from using contract pharmacy conditions that federal courts have already allowed is unlawful. Thus, these state laws add extra requirements on top of the federal 340B framework and interfere with the structure Congress designed, so they are preempted under the Supremacy Clause.
DOJ also argues that states should not be able to single out or burden manufacturers solely because they participate in federal 340B pricing agreements, and by doing so, discourage manufacturers from staying in the program.
DOJ relies on the same reading of Section 340B that the D.C. and Third Circuits used: the statute does not require manufacturers to ship discounted drugs to an unlimited number of contract pharmacies, and the silence on delivery leaves room for some manufacturer‑imposed conditions.
From the DOJ’s perspective, states cannot ban contract pharmacy restrictions that federal courts have already said are consistent with Section 340B’s text. Its briefs also implicitly reinforce HRSA’s role as the main federal enforcer of manufacturer compliance, suggesting that any expansion of 340B duties on manufacturers should come through federal tools—such as guidance, the administrative dispute resolution process or formal rulemaking—rather than through a patchwork of state‑by‑state rules.
Why this matters for stakeholders, and what to watch
For manufacturers, covered entities and contract pharmacies, the stakes are high. If courts continue to uphold broad state authority, companies may face increasingly different requirements across states and more aggressive enforcement under consumer protection and unfair practices laws. If DOJ’s preemption theory gains ground, state power to regulate contract pharmacy arrangements will narrow, and attention will shift back to HRSA and federal policymakers to define what kinds of 340B practices are acceptable.
In this environment, stakeholders should continue to assess how changing state 340B and contract pharmacy laws fit with their nationwide policies, and test patient access, contracting and revenue models under both state‑favorable and DOJ‑favorable outcomes. How courts resolve the tension between state regulation and federal preemption will shape 340B contracting, and data‑sharing expectations for years to come.
Chris Carlson, Lauren Fincher and Timothy Shyu are lawyers at Troutman Pepper Locke who advise clients on regulatory compliance at the state and federal levels. Carlson and Fincher are partners at the firm, and Shyu is an associate.