Health Law Daily Wrap Up, ADMINISTRATION OF MEDICARE/MEDICAID PROGRAMS—D. Vt.: No preliminary injunction in PhRMA suit against Vermont’s 340B drug law, (Oct 6, 2026)

By Sherri M. Schroeder, J.D.

The court first denied PhRMA a preliminary injunction because it could not establish preemption and then dismissed one of PhRMA’s claims because Vermont successfully argued that the statute in question was not impermissibly vague.

The Vermont federal district court has denied a motion for preliminary injunction filed by Pharmaceutical Research and Manufacturers of America (PhRMA) against the Commissioner of Health for the state of Vermont (Vermont) over Vermont House Bill 266. H.B. 266 prohibits drug manufacturers from interfering with the acquisition or delivery of a 340B drug to a contract pharmacy of a 340B entity and from interfering with the ability of a contract pharmacy to dispense 340B drugs to eligible Medicare and Medicaid patients. Although PhRMA argued that H.B. 266 was preempted under both field and conflict preemption principles, the court found that Congress did not intend for Section 340B to preempt the field and that H.B. 266 did not create any conflict regarding the scope of 340B obligations, access to claims data, or the federal enforcement regime. The court granted Vermont’s partial motion to dismiss Count II of the complaint, which argued that H.B. 266 was void for vagueness under the Due Process Clause because it failed to define the term “interfere,” because H.B. 266 provided sufficient notice of prohibited conduct and was not impermissibly vague (Pharmaceutical Research & Manufacturers of America v. Arel, No. 2:25-cv-00600 (D. Vt. Sept. 30, 2026)).

Preliminary injunction. The court first found that PhRMA had not demonstrated that it was likely to succeed on the merits of its claims because it could not establish either field or conflict preemption. PhRMA argued that H.B. 266 was field preempted because the bill attempted to alter the bargained-for consideration of an exclusively federal contract by requiring drug manufacturers to offer steeply reduced pricing even when the 340B program did not require them to do so. Vermont argued that Congress’ deliberate decision not to address the issue of delivery of drugs and pharmacy distribution indicated that the Section 340B Program was not “so pervasive that Congress left no room for the States to supplement it.” The court sided with Vermont, joining “the many district courts and circuit courts that have also held Congress did not intend for Section 340B to preempt the field.” The court based this holding mainly on Pharm. Rsch. & Mfrs. of Am. v. McClain, which found that Congress knew the role of pharmacies and state law and that its “silence of pharmacies” meant Congress did not intend to preempt the field.

As for conflict preemption, PhRMA argued that H.B. 266 impermissibly expanded the scope of federal Section 340B obligations, it unlawfully limited access to claims data, and it conflicted with the federal enforcement regime. However, the court found H.B. 266 prohibited a manufacturer from preventing or placing limits on a contract pharmacy or a location otherwise authorized by a 340B covered entity from obtaining 340B-priced drugs, which did not conflict with Section 340B’s mandate. Rather, they worked together to provide more comprehensive services and reach more eligible patients. The court also found that H.B. 266 did not cut off access to claims data completely. In the court’s eye, it merely precluded the manufacturers from requiring the submission of claims data as a precondition to the acquisition or delivery of a 340B-priced drug. “It does not prevent manufacturers from participation in the audit process when the manufacturers have ‘reasonable cause’ to believe that a violation has occurred,” stated the court. On the federal enforcement question, the court stated that the enforcement actions authorized by H.B. 266 do not authorize enforcement of the discount pricing of the 340B program but rather authorize a cause of action to protect the distribution and delivery of the drug. Therefore, PhRMA’s argument merely demonstrated a tension between the state and federal laws and not the irreconcilable conflict required for preemption.

Partial motion to dismiss. H.B. 266 prohibits drug manufacturers from “interfer[ing] with, directly or indirectly, the acquisition of a 340B drug by or delivery of a 340B drug to a contract pharmacy” or “interfer[ing] with the ability of a pharmacy contracted with a 340B covered entity[.]” Vermont moved to dismiss Count II of the complaint, which argued that H.B. 266 was void for vagueness under the Due Process Clause because it failed to define the term “interfere.” According to the court, the degree of permissible vagueness in a statute varies depending on the type of statute, and economic regulations are subject to a relaxed vagueness test, as opposed to the stricter test for laws with criminal penalties and the strictest test of all for laws that might infringe constitutional rights. Although PhRMA argued that a stricter vagueness standard applied because the statue implicated speech, the court found that PhRMA failed to explain how this statue implicated speech. Instead, PhRMA put forth a list of behaviors that it asserted would constitute interference under the statute. The court did not find that any of those listed behaviors were prohibited by the statute. Therefore, the less stringent vagueness standard applied.

The question for the court then became whether the statute’s use of the term “interfere” or “interference,” without additional definition, failed to provide adequate notice of prohibited conduct. According to precedent, “interference” meant “the act or process of obstructing normal operations or intervening or meddling in the affairs of others.” Per the court, the text of H.B. 266 “clearly intends to prohibit drug manufacturers from preventing the contract pharmacies of 340B entities from acquiring, delivering, or dispensing 340B-priced drugs to eligible patients.” Because “no more than a reasonable degree of certainty can be demanded,” especially in the context of economic regulation governing a business, the court found that H.B. 266 provided sufficient notice of prohibited conduct and was not impermissibly vague.

Therefore, the court denied PhRMA’s motion for preliminary injunction and granted Vermont’s motion to dismiss.

The case is No. 2:25-cv-00600.

Judge: Lanthier, M.

Attorneys: Abid R. Qureshi (Latham & Watkins LLP) for Pharmaceutical Research and Manufacturers of America. David A. Boyd, Vermont Attorney General's Office, for Julie Arel.

Companies: Pharmaceutical Research and Manufacturers of America

MainStory: TopStory CaseDecisions CMSNews DrugBiologicNews GCNNews GeneralNews PartCNews PartDNews ProviderNews VermontNews