In a setback to the pharmaceutical industry, a U.S. appeals court has upheld an Arkansas law that allows hospitals participating in a controversial federal discount program to ship medicines to certain pharmacies. As a result, other states can now be expected to pursue similar laws.
The closely watched decision comes amid a long-running battle over the program, which was designed three decades ago to help hospitals and clinics care for low-income and rural patients. To ensure the program, known as 340B, achieves this goal, drugmakers that want to take part in Medicare or Medicaid must offer their medicines at a discount – typically, 25% to 50% – to participating hospitals and clinics.
There are roughly 12,400 hospitals and clinics that participate across the U.S. and their number has grown over the years. Consequently, the program has become a big market for pharmaceutical companies. In 2022, discounted purchases under the program reached $53.7 billion, up $9.8 billion, or 22%, from the previous year, according to the U.S. Health Resources and Services Administration.
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