Two drugmakers file lawsuits to block Kansas' attempt to tinker with discount drug program • Kansas Reflector

TOPEKA — The Kansas Legislature and Gov. Laura Kelly adopted a potentially unconstitutional budget provision forbidding pharmaceutical manufacturers from inhibiting the sale of discounted medications to pharmacies such as CVS or Walgreens under contract with hospitals or clinics.

Two drugmakers have challenged a proviso tucked into Senate Bill 28 — signed by the governor in April — that said the companies couldn’t limit the ability of pharmacies working with eligible health providers from acquiring outpatient prescription drugs at discounts of 25% or more through a federal cost-cutting program.

The objective of the federal 340B program has been to offer indirect financial benefits to the country’s safety-net health providers by lowering drug prices. Many of Kansas’ financially strapped rural hospitals take part in the program.

“Unfortunately, drug manufacturers have recently started decimating the 340B drug discount program by limiting the number of pharmacies a hospital may contract with,” said Chad Austin, president of the Kansas Hospital Association. “These actions are jeopardizing Kansans’ ability to access needed prescriptions and other vital health services. Fortunately, Kansas lawmakers recognized the drug manufacturers’ harmful actions and have appropriately responded to ensure the further reduction of the 340B drug discount program is paused.”

After adopting SB 28 during this year’s session, however, the Legislature had second thoughts about leveraging the Kansas Consumer Protection Act against drug manufacturers at this time. Under House Bill 2551, in an apparent victory for drugmakers, the Legislature told Attorney General Kris Kobach to delay enforcement of SB 28 until the U.S. Supreme Court settled questions about obligations of drug manufacturers in the 340B program.

Kelly, however, line-item vetoed that part of HB 2551 in May. She said the Legislature’s follow-up maneuver was “premature and contradictory to the protections” in SB 28.

In early July, pharmaceutical companies AstraZeneca and AbbVie filed lawsuits against the state of Kansas.

The companies asserted SB 28 enabled off-site, for-profit pharmacy chains operating under contract with Kansas clinics and hospitals to buy the manufacturers’ drugs at discounted prices. The plaintiffs claimed Congress didn’t intend for these pharmacies to be covered by the low-cost program.

Wichita attorney Michael Jones, who was among at least seven lawyers working for plaintiffs in the AstraZeneca suit, said the budget provision in SB 28 was in conflict with the supremacy clause of the U.S. Constitution. Jones and his colleagues said prior rulings in federal court made clear the federal 340B statute “does not obligate manufacturers to deliver discounted drugs to unlimited contract pharmacies.”

“No state may engraft new, costly obligations under state law onto an existing federal benefits program, especially not one like the 340B program that involves nationally uniform standards and exclusive enforcement by federal agencies,” the AstraZeneca’s attorneys said.

The company’s lawyers claimed SB 28 was contrary to federal patent law, violated the contracts and takings clauses of the U.S. Constitution and broke the “one-subject rule” in the Kansas Constitution. The single-subject mandate was designed to prevent legislators from “logrolling” unrelated matters into a single bill. In terms of drug manufacturers, AstraZeneca said, SB 28 created new substantive requirements “not purely a matter of appropriations.”

A spokesperson for the Kansas attorney general didn’t respond to a request for comment on the lawsuits seeking to nullify the prescription drug portion of SB 28.

The Kansas Department of Health and Environment says the federal program has been an instrumental tool of health clinics and hospitals seeking to stretch resources as far as possible while providing outpatient medications to covered entities at significantly reduced prices.