Health Law Daily Wrap Up, PRESCRIPTION DRUGS—8th Cir.: Denial of preliminary relief affirmed in Novartis challenge to Missouri 340B drug delivery law, (Jul 9, 2026)

By Justin Marcus Smith, J.D.

Novartis was clearly unhappy about state legislation that effectively expands cash transfers, but the fact that covered entities profit from 340B discounts is nonetheless consistent with the purpose of the 340B program.

Drug manufacturer Novartis Pharmaceuticals Corporation did not show a likelihood of success on the merits of its challenge to a Missouri state law that requires delivery of 340B program discounted drugs, held the U.S. Court of Appeals for the Eighth Circuit, in affirming a district court denial of preliminary injunctive relief. Novartis did not make a preliminary showing that the Missouri law likely violates the dormant Commerce Clause by extraterritorial application, by discriminating against interstate commerce, or by imposing excessive burdens on interstate commerce. Altogether, the district court did not abuse its discretion in denying the Novartis motion for a preliminary injunction. As for the Novartis field and conflict preemption claims, the court analyzed it had jurisdiction to consider them, even though Novartis did not appeal the partial dismissal. The preemption claims were inextricably intertwined with the denial of preliminary injunctive relief, but there was no error in the partial dismissal of them because an earlier Eighth Circuit decision had foreclosed them (Novartis Pharmaceuticals Corp. v. Hanaway, No. 25-1619 (8th Cir. July 1, 2026)).

Background. Missouri Senate Bill 751 (SB 751) created protections for the delivery of drugs to contract pharmacies on behalf of covered entities under the federal Section 340B discounted drug program. Drug manufacturers participating in the 340B program have been resisting the efforts of, up to this point, 22 state legislatures to require delivery of 340B program drugs in situations where covered entities have more than one contract pharmacy. Friction with the states began to emerge after the Health Resources and Services Administration (HRSA) issued updated guidance in 2010 that permitted covered entities to have unlimited contract pharmacies distribute 340B program drugs. Drug manufacturers do not want to deliver 340B program drugs to unlimited contract pharmacies. They have stated concerns that the typical “replenishment model” contract pharmacies use, such that 340B discounted drugs are commingled with non-340B program drugs in pharmacy stock, is leading to abuse of the 340B program. There does not seem to be much disagreement that the expansion of contract pharmacies has caused a corresponding rise in demand for drugs acquired through the 340B program and a proportional reduction in manufacturer profits.

Novartis challenged SB 751 by bringing a lawsuit against the Attorney General of the State of Missouri and multiple Missouri Board of Pharmacy officials. The SB 751 delivery mandate conflicts with Novartis’s current policy of restricting 340B drug delivery to a covered entity’s in-house pharmacy or a single contract pharmacy designated by the covered entity. Novartis alleged three counts seeking declaratory relief that SB 751 is unconstitutional and for injunctive relief barring its enforcement. Count I alleged SB 751 is preempted by federal patent and drug exclusivity laws under the Supremacy Clause. Count II alleged SB 751 is preempted by federal 340B law under the Supremacy Clause. Finally, Count III alleged SB 751 violates the dormant Commerce Clause.

In February 2025, the U.S. District Court for the Western District of Missouri denied a Novartis motion for a preliminary injunction. The district court concluded Novartis did not show a likelihood of success on the merits; did not show irreparable harm; and that the balance of equities and public interest weighed against preliminary relief.

The district court also granted the Missouri officials’ motion to dismiss in part. The court dismissed the Novartis preemption claims on the basis that SB 751 did not conflict with the federal drug and patent exclusivity laws or the federal 340B statutory scheme, and that Eighth Circuit precedent foreclosed Novartis’s field preemption claim. However, the court denied the motion to dismiss Novartis’s dormant Commerce Clause claim on the basis that Novartis plausibly alleged that SB 751 discriminates against out-of-state entities and places an undue burden on interstate commerce (see Pharmaceutical manufacturer’s challenge to Missouri 340B statute survives dismissal, Feb. 20, 2025).

Novartis appealed the denial of preliminary injunctive relief to the U.S. Court of Appeals for the Eighth Circuit. Novartis contended the district court erred by concluding that Novartis was not likely to prevail on the merits of its dormant Commerce Clause and preemption claims, and that the other preliminary injunction factors did not support preliminary relief. However, the Eighth Circuit affirmed after applying the deferential abuse of discretion standard to the denial of preliminary injunctive relief and de novo clear error review of the factual determinations and conclusions of law.

Dormant Commerce Clause. The Eighth Circuit affirmed that Novartis was not likely to prevail on the merits of its extraterritoriality challenge. Novartis argued SB 751 violates the dormant Commerce Clause because it regulates wholly out-of-state transactions between Novartis and its wholesalers who sell 340B drugs to covered entities in Missouri, but the Eighth Circuit said Novartis misconstrued the statute. The statute only regulates the delivery of 340B program drugs to contract pharmacies that have partnered with a Missouri covered entity. Any incidental effect on out-of-state transactions was unavoidable in practice. Most state laws have some practical effect of controlling extraterritorial behavior without violating the Commerce Clause.

Distinguishable case law dealt with transactions or conduct that was specifically extraterritorial, whereas the instant matter resembled the law upheld in National Pork Producers Council v. Ross, 598 U.S. 356 (2023). In Pork Producers, the Supreme Court concluded that even though the disputed law had some effects on out-of-state conduct, it did not violate the dormant Commerce Clause because it did not have a specific impermissible extraterritorial effect. The Supreme Court held the statute was a permissible exercise of California’s legislative power to act on persons and property within its own territory.

Missouri SB 751 operates “in a similar manner.” It has incidental effects on out-of-state transactions, but it does not have a specific impermissible extraterritorial effect. It only directly regulates the delivery of 340B drugs to covered entities and their contract pharmacies consistent with the power of Missouri to regulate conduct within its borders.

Moving to Novartis’s next argument, SB 751 did not facially discriminate against interstate commerce because it did not refer to in-state or out-of-state manufacturers or otherwise indicate a preference for in-state entities. Novartis urged that no drug manufacturers have a physical presence in Missouri, such that the entire burden lies elsewhere, but the court disagreed. Missouri’s entire drug supply is out-of-state, hence there was no preference for in-state entities. The disparate treatment claim therefore was meritless.

Novartis maintained that SB 751 favored in-state hospitals and pharmacies at the expense of out-of-state manufactures, but the court said this misapplied the required comparison between similar entities under the dormant Commerce Clause. Novartis countered that Association for Accessible Medicines v. Frosh, No. 17-2166 (4th Cir. 2018), suggested that a state law regulating pharmacies could unconstitutionally discriminate against drug manufacturers. However, the instant court said Novartis extended Frosh too far as to dissimilarity of entities. Unlike the Maryland statute in Frosh, SB 751 regulates distribution without affecting price. Novartis did not have a likelihood of success on the merits because it did not show discriminatory purpose or effect.

Lastly, Novartis argued that even if SB 751 was nondiscriminatory and only had incidental effects on interstate commerce, it still violated the dormant Commerce Clause because it placed an excessive burden on local commerce under the Pike balancing test. See Pike v. Bruce Church, Inc., 397 U.S. 137 (1970). The Missouri officials contended this argument failed as a matter of law because Pork Producers abrogated Pike where the courts lack judicially comparable standards for balancing economic and noneconomic benefits and harms.

The court said Pike balancing remained a valid approach, but the Supreme Court split on whether courts can balance economic burdens against noneconomic benefits. Even so, the instant court analyzed that a majority of the Supreme Court approved Pike balancing against noneconomic benefits. Novartis may chafe under an expanding “patchwork” of 22 state laws that now govern 340B drug delivery, but the instant court said the Supreme Court rejected a similar patchwork argument in Exxon Mobil Corp. v. Governor of Maryland, 437 U.S. 117 (1978). Exxon challenged the cumulative effect of states’ legislation, but the Supreme Court said the evil Exxon perceived was not about differing regulations, it was about unfavorable ones. In the 340B context, various state regulations will undoubtedly affect the volume of 340B drugs delivered in interstate commerce, but the regulatory burden was not enough to prevail on Pike balancing.

Novartis maintained that there were no local benefits to SB 751, just a direct cash transfer from out-of-state manufacturers to in-state hospitals, clinics, and for-profit pharmacies, but the court said that was consistent with the purpose of the 340B program. Even if Novartis was correct that some covered entities, in the court’s words, “pocket the entire profit from the sale of 340B drugs, many other covered entities use 340B drug revenues to provide better services to their patients.” The court concluded its dormant Commerce Clause analysis with a ruling that Novartis did not show that SB 751 burdens exceeded potential benefits. Novartis was not likely to prevail on Pike balancing.

Preemption. Novartis also challenged SB 751 for both field preemption and conflict preemption, but the Eighth Circuit disagreed in both instances.

The court had to first decide whether it had jurisdiction to consider preemption inasmuch as Novartis did not appeal the partial dismissal. The court analyzed it could consider the preemption claims to the extent the district court analyzed them in denying preliminary relief. The preemption claims were pendent, coterminous, subsumed-in, and inextricable with the denial of preliminary relief. A conclusion that Novartis was entitled to a preliminary injunction on its preemption claims would mean the part dismissal was in error. The court concluded it had jurisdiction.

As for field preemption, the Eighth Circuit cited how it has previously held that Section 340B does not involve field preemption as to either regulation or enforcement. See Pharmaceutical Research & Manufacturers of America v. McClain, 95 F.4th 1136 (8th Cir. 2024). McClain noted that the federal government has traditionally treated state drug laws as complementary, and Congress had only vested HHS with limited enforcement authority. Novartis urged that McClain was wrong and ought to be overturned, but the court declined reconsideration. Eighth Circuit panel decisions are binding on subsequent panels, so McClain foreclosed Novartis’ field preemption claims. The court found no abuse of discretion in the district court’s denial of preliminary injunction.

Turning to conflict preemption, Novartis argued SB 751 thwarted the purpose and objectives of the 340B program in connection with drug manufacturer delivery restrictions. McClain foreclosed this argument, too, and recent Fifth Circuit decisions reinforced this conclusion. See AbbVie, Inc. v. Fitch, 152 F.4th 635 (5th Cir. 2025), and AbbVie, Inc. v. Murrill, 166 F.4th 528 (5th Cir. 2026). The state laws requiring manufacturers to deliver 340B drugs to an unlimited number of contract pharmacies are no obstacle to manufacturer compliance with federal law because the state laws only impose delivery restrictions, they do not impose drug pricing obligations that conflict with federal law.

The case is No. 25-1619.

Judge: Erickson, R.

Attorneys: Charles W. Hatfield (Stinson LLP) for Novartis Pharmaceuticals Corp. John Michael Patton, Office of the Attorney General, for Catherine L. Hanaway.

Companies: Novartis Pharmaceuticals Corp.

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