On March 31, 2026, the U.S. Court of Appeals for the Fourth Circuit, in a 2-1 decision, upheld a preliminary injunction blocking enforcement of West Virginia’s 340B contract pharmacy law. The statute prohibited drug manufacturers from restricting delivery of 340B-priced prescription drugs to pharmacies that contract with 340B-covered entities for dispensing drugs to patients. The Fourth Circuit concluded that federal law likely preempts the West Virginia statute.

The decision is significant as it diverges from prior rulings by four other federal courts of appeals, including two (in Mississippi and Louisiana) that had previously upheld state laws like West Virginia’s law against comparable challenges. In doing so, the Fourth Circuit’s ruling appears to have created a circuit split, increasing the likelihood that the U.S. Supreme Court may be asked to step in and resolve the issue. 

For health centers, hospitals, Ryan White programs, and other federal grantees participating in the 340B Drug Pricing Program, the ruling is an important development in the ongoing litigation over manufacturers’ restrictions on contract pharmacy distribution.

340B Contract Pharmacy Background

Section 340B of the Public Health Service Act, 42 U.S.C. § 256b, requires drug manufacturers seeking to have prescription drugs covered by Medicaid to make those drugs available for purchase by specified safety-net providers (known as “covered entities”). The statute requires that covered entities be offered drugs at or below a ceiling price calculated using a formula similar to the Medicaid rebate.

To participate in the 340B Program, drug manufacturers must enter into a Pharmaceutical Pricing Agreement (PPA) with the Department of Health and Human Services (HHS). The U.S. Supreme Court has clarified “PPAs are not transactional, bargained-for contracts,” but rather they “recite the responsibilities § 340B imposes … on drug manufacturers.” Astra USA, Inc. v. Santa Clara Cty., 563 U.S. 110, 113 (2011).

For decades, 340B covered entities have contracted with pharmacies for the delivery and dispensing of drugs purchased at 340B pricing. Beginning in 2020, manufacturers began imposing restrictions on locations to which 340B-priced drugs purchased would be delivered. In response, and following a series of federal court decisions addressing manufacturers’ authority under the statute, twenty-two states have enacted laws similar to West Virginia’s. 

The Fourth Circuit’s Ruling

The Fourth Circuit grounded its opinion on Congress’s spending authority, reasoning the West Virginia law “changes the terms of the drug manufacturers’ federally created 340B relationships with covered entities.” Since Congress made HHS the sole enforcer of the 340B program, the Fourth Circuit concluded there was no enforcement gap for the State to fill.

The Fourth Circuit’s decision significantly deepens the divide among federal courts of appeals on the validity of state 340B contract pharmacy laws. The ruling is difficult to reconcile with prior circuit decisions, it heightens the likelihood of Supreme Court review.

Key Takeaways

Covered entities should be aware that:

• The enforceability of state 340B contract pharmacy protections now varies more sharply by jurisdiction
• The Fourth Circuit’s reasoning could influence challenges to similar laws in other states
• Supreme Court review is now more likely, though not guaranteed
• Litigation strategy, contract pharmacy operations, and advocacy efforts may need to adapt as the legal landscape continues to evolve.

The Feldesman team will monitor developments related to the 340B program. If you have questions about how this ruling may affect your organization, please contact Steve Kuperberg.