AbbVie and Novartis each sued Illinois Aug. 7 in the Northern District of Illinois, seeking to block the state’s new 340B contract pharmacy law. Three days later, a federal judge in South Dakota dismissed three lawsuits from AbbVie, AstraZeneca and the Pharmaceutical Research and Manufacturers of America (PhRMA), challenging that state’s nearly identical law.
Over the past 18 months, the drug discount program has turned into one of the most litigated corners of healthcare, on two separate fronts. Drugmakers are suing states that bar manufacturers from restricting which contract pharmacies can dispense 340B drugs. At the same time, hospitals are suing drugmakers, PBMs and HHS over practices they say are draining hundreds of millions of dollars out of the program. Becker’s has been tracking the litigation and policy shifts all year. Here’s where both fights stand now.
Drugmakers vs. states
At least 21 states have enacted “contract pharmacy access” laws barring manufacturers from limiting which pharmacies covered entities can use for 340B drugs as of this spring, according to the National Association of Community Health Centers. Manufacturers say those laws let 340B function as a broad rebate rather than the targeted safety-net discount Congress created in 1992, and that contract pharmacy arrangements risk “duplicate discounts” under the Inflation Reduction Act.
AbbVie and Novartis, often joined by PhRMA, have sued multiple states that passed one, arguing the laws are preempted by federal law or amount to an unconstitutional taking. Here’s the breakdown so far, by circuit:
- 4th Circuit — drugmakers won, but it’s not final. A panel sided with manufacturers on Maryland’s law and, on March 31, upheld an injunction blocking West Virginia’s law too, ruling the states’ requirements were “likely preempted by federal law.” However, neither ruling is settled. On May 29, the full 4th Circuit agreed to rehear both cases en banc, meaning the panel decisions are no longer final and both states’ laws remain in limbo pending the full court’s review.
- 5th Circuit — states winning. The court upheld Mississippi’s law at the preliminary injunction stage in September 2025, and a federal judge made it stick on June 3, when AbbVie’s challenge was dismissed with prejudice. The 5th Circuit also upheld Louisiana’s law in February 2026, rejecting preemption, takings and vagueness arguments each time.
- 8th Circuit — split within itself. The circuit upheld Arkansas’ law outright in 2024, and the Supreme Court later declined to disturb that ruling. On July 1, it upheld Missouri’s law too, reasoning the statute “regulates the delivery of 340B drugs rather than their pricing.” South Dakota’s law survived a dismissal Aug. 10 on similar grounds — the judge cited the state’s “legitimate interest in regulating the delivery of 340B drugs ultimately dispensed to its citizens.” However, the same court denied North Dakota’s bid to pause that ruling while its appeal to the 8th Circuit proceeds, noting the state waited two and a half months to even ask for a stay. AbbVie says the North Dakota law would otherwise have cost it $35 million in discounts in 2026, on top of $10 million in 2025.
- 9th and 10th Circuits — still working through it. Washington’s newest 340B law drew a suit from Novartis, AbbVie, AstraZeneca and PhRMA within days of Gov. Bob Ferguson signing it in March. A district judge denied their bid to block it June 9, and Novartis, AbbVie and PhRMA appealed immediately. Oklahoma’s law was blocked outright, a day before it took effect, and the state has said it will appeal. Colorado’s law survived an AbbVie challenge, backed by a DOJ amicus brief, and is now on appeal too. Both circuits have more cases pending in the second half of 2026, including AbbVie’s challenges to Oregon’s, Colorado’s and Oklahoma’s laws.
- Elsewhere: Tennessee’s law drew AHA backing and survived an AbbVie challenge. A federal judge separately dismissed AbbVie’s broader Tennessee suit in February. Hawaii’s law survived too. Nebraska’s law drew backing from healthcare groups after AbbVie sued in the same April 2025 wave that hit North and South Dakota. And Illinois became the newest target Aug. 7, when AbbVie and Novartis sued over the state’s brand-new contract pharmacy and reporting laws, signed by Gov. JB Pritzker this summer after the contract pharmacy bill cleared the Illinois House 113-1.
More rulings are coming. There are currently nine pending appellate cases in the 1st, 4th, 9th and 10th circuits set to be argued in the second half of 2026 — AbbVie, Novartis and PhRMA against officials in West Virginia, Rhode Island, Oklahoma, Colorado and Oregon.
This isn’t the states’ first attempt to get ahead of drugmakers, either. Utah, Colorado, Arkansas, Maine and Nebraska all introduced their own 340B protection bills back in early 2025, aiming to curb pharmaceutical restrictions and add transparency requirements before the current wave of contract pharmacy access laws and lawsuits took off. Washington, Minnesota and Connecticut have picked up the thread in 2026, advancing new or strengthened contract pharmacy legislation of their own.
Health systems vs. drugmakers, PBMs and HHS
Hospitals are fighting back on a separate front, arguing manufacturers, pharmacy benefit managers and federal regulators are the ones actually undermining the program.
The biggest-dollar case so far targets CVS Health. Mount Sinai Health System, Michigan Medicine and the University of Kansas Health System each sued CVS, Caremark and related entities May 21, alleging a scheme to divert roughly $250 million in 340B savings between 2020 and 2025 through deflated pharmacy reimbursement rates. The University of Kansas Health System’s general counsel said CVS also refused a contractually required audit and terminated its pharmacy agreement. Henry Ford Health filed its own suit July 16, alleging more than $29 million in diverted savings. CVS called Henry Ford’s complaint “riddled with erroneous accusations” and said it would defend itself.
A separate fight centers on how 340B discounts get paid out. J&J moved in 2024 to swap upfront discounts for a post-purchase rebate model on two drugs. Eli Lilly, Sanofi, Bristol Myers Squibb, Novartis, AstraZeneca, Novo Nordisk and Janssen have since floated or adopted similar rebate approaches.
The data side of that fight also escalated this summer. Lilly told hospitals in June they had five business days to start submitting claims-level data on in-house pharmacy dispensing or lose 340B pricing, citing duplicate-discount concerns under the IRA. The AHA called Lilly’s policy unlawful, and 340B Health called it “a huge kick in the face to the nation’s safety-net hospitals.”
AbbVie has also taken its fight straight to HHS. The company sued in April over decades-old federal guidance defining who counts as a 340B “patient,” arguing the 1996 standard lets covered entities claim discounts on prescriptions with only a loose tie to facility-based care. AbbVie wants a narrower rule requiring an in-person visit within the past 12 months.
Why now
Two things are driving the surge. 340B has grown far larger than it was in 1992, thanks in large part to contract pharmacy networks, and manufacturers increasingly argue it functions more like a rebate on total sales than a targeted safety-net benefit. Meanwhile, the Inflation Reduction Act’s Medicare rebate rules opened up a real legal gray area around “duplicate discounts” — and both sides are using it to push for opposite outcomes. Manufacturers want tighter restrictions and more data. Hospitals want the discounts protected and delivered the way they always have been.
With rulings pending in five circuits and a new HRSA rebate model, neither fight is close to over.
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