DPC Applauds Court Ruling Against North Dakota Legislature’s Attempted 340B Abuse

The Domestic Policy Caucus applauds an April 27 ruling by U.S. District Court Judge Daniel M. Traynor that quashes the North Dakota Legislature’s attempt, through the recently passed House Bill 1473, to “facilitate and sanction the graft” associated with abuse of the 340B drug pricing program.

The 340B program, established in 1992, compels prescription drug manufacturers to provide deeply discounted drugs to certain clinics and hospitals, with the understanding that the clinics and hospitals will either pass along the saving to patients, or charge insurers the full price and then use the profits to provide additional charity care. Participating in the 340B program is required for manufacturers who want to participate in federal Medicaid and Medicare programs.

With no restrictions on how 340B funds are used and few reporting requirements, many hospital systems are abusing the program and using it to amass huge profits at the expense of patients, employers, unions, and taxpayers.

In a sharply worded summary judgment in favor of AbbVie Inc. and Pharmaceutical Research and Manufacturers of America (PhRMA), Judge Traynor agreed with pharmaceutical companies that while the law purports to “protect the underdogs,” it illegally interferes with the federal drug-pricing regime. 

Judge Traynor said, “The states defending these laws say those populations [poor, underinsured, vulnerable] are the ones hurt when pharmaceutical companies put certain restrictions on delivery under the 340B program… However, a program meant to help American poor is being abused to provide a windfall to hospital conglomerates and participating pharmacies… North Dakota’s law attempts to facilitate and sanction the graft by interfering with an area of federal law… Here is what is really going on: a coordinated collusion between the state’s covered entities and contract pharmacies to exploit Congress’ inattention to a federal program. As a result, pharmacies and third-party administrators pocket billions of dollars each year… Manufacturers should [not] be fleeced by enterprising states and hospital conglomerates that wield power in legislative lobbies… Ultimately, it’s the patients who suffer… The 340B drug pricing program was meant to help the needy who require medication to live. H.B. 1473 benefits hospital conglomerates and Joe Paycheck sees no difference in the price of his meds… H.B. 1473 is an infringement on federal programs masquerading as state governance.”

Read the full LAW360 article about the decision here.

The court ruling represents an excellent example of the checks and balances that our nation’s founders envisioned. In this case, a federal judge has quashed overreach by the rogue North Dakota legislature, to the benefit of American patients, employers, unions, and taxpayers.

The Domestic Policy Caucus applauds Judge Traynor’s judgment.