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June 18, 2021

Rutledge and the Future of State Laws Prohibiting 340B Two-Tier Pricing

This Briefing is brought to you by AHLA’s Payers, Plans, and Managed Care Practice Group.
  • June 18, 2021
  • Donald P. Walker , K&L Gates LLP
  • Leah D’Aurora Richardson , K&L Gates LLP
  • Victoria K. Hamscho , K&L Gates LLP

Congress enacted the 340B Drug Pricing Program (340B Program) to help safety net providers stretch scarce federal resources by requiring drug manufacturers to sell covered outpatient drugs to participating providers at or below a defined 340B ceiling price. Payers and pharmacy benefit managers (PBMs) have been increasingly implementing “two-tier” pricing models under the 340B Program, providing lower reimbursement rates for providers participating in the 340B Program than non-participating providers. Providers have challenged this practice in court and resorted to their state legislatures, arguing that two-tier pricing impacts their ability to serve patients and offer more comprehensive services. In response, several states have enacted laws prohibiting PBMs from imposing two-tier pricing models under the 340B Program.

Last year, in Rutledge v. Pharmaceutical Care Management Ass’n, the U.S. Supreme Court unanimously supported the validity of state laws that regulate the reimbursement rates PBMs pay to pharmacies. At issue was Arkansas’s Act 900 (Act) requiring PBMs to reimburse pharmacies at a rate equal to or greater than the pharmacies’ acquisition costs. The Supreme Court upheld the Act, concluding that the Act was not preempted by the Employee Retirement Income Security Act of 1974 (ERISA) even though the Act regulates the price at which PBMs must reimburse pharmacies for drugs covered by prescription drug plans.

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