As federal lawmakers engage in efforts to target high prescription drug prices, states have also taken actions intended to reduce drug prices and make drugs more affordable for consumers. States have enacted a variety of legislative measures, including some that restrict drug manufacturers from pricing their drugs at certain levels, and others that regulate the business practices of pharmacy benefit managers (PBMs), pharmacies, and other participants in the pharmaceutical supply chain. In some instances, pharmaceutical manufacturers and other stakeholders have sued to challenge various state drug pricing laws, and in general, plaintiffs in these cases claim that such laws violate certain constitutional provisions and doctrines that restrict state authority and sovereignty. This report reviews selected state efforts to enact prescription drug pricing legislation and analyzes related legal challenges. To combat excessive or so-called “unconscionable” prescription drug prices, some states have enacted laws prohibiting drug manufacturers from increasing their prices beyond certain levels. Drug manufacturers and pharmaceutical trade associations have challenged at least three state “price-gouging” laws on the basis that they are unconstitutionally vague and invalid under the Dormant Commerce Clause. In one case, an appeals court held that a Maryland state law was unconstitutional under the extraterritoriality principle of the Dormant Commerce Clause, because the state law regulated wholly out-of-state transactions. See Association for Accessible Medicines (AAM) v. Frosh, 887 F.3d 664 (4th Cir. 2018). By comparison, in a different lawsuit, an Illinois district court has denied a motion to preliminarily enjoin an Illinois price-gouging law, finding that the plaintiff was not likely to succeed on the merits of its case because the state law did not violate the extraterritoriality principle of the Dormant Commerce Clause. See AAM v. Raoul, 805 F. Supp. 3d 854 (N.D. Ill. 2025). Prescription Drug Affordability Boards (PDABs) are independent, state-level boards that review prescription drug costs. Some states have authorized their PDABs to take additional actions to lower the prices of certain drugs. A drug manufacturer filed lawsuits to challenge the actions of Colorado’s PDAB, and these cases have involved the Board’s decisions to set a payment limit on the manufacturer’s products. See, e.g., Amgen Inc. v. Mizner, No. 24-CV-00810, 2025 WL 947474 (D. Colo. Mar. 28, 2025). The manufacturer has claimed, in part, that the state PDAB law runs afoul of the Fourteenth Amendment’s Due Process Clause, because the law interferes with the company’s patents, and the law violates the Dormant Commerce Clause, because it generally controlled commerce occurring outside state boundaries. Congress created the 340B Drug Discount Program to enable certain health care providers to purchase outpatient prescription drugs at lower costs. As part of the program, manufacturers sign a contract under which they are required to “offer” to sell certain drugs at a “ceiling price” to certain covered entities. Covered entities may make 340B drugs available to patients through the use of “contract pharmacies.” Several states have enacted legislation to limit drug manufacturers from restricting contract pharmacy use by covered entities in their state, and these state laws have spurred several lawsuits. Drug manufacturers and trade industry groups have challenged the laws, arguing they are preempted by the 340B statute and violate the Dormant Commerce Clause. At least three federal appeals courts have held that the state 340B laws are not preempted by the 340B statute because they regulate in-state pharmacies and drug distribution inside the state, but one federal circuit court disagreed. See, e.g., PhRMA v. McClain, 95 F.4th 1136 (8th Cir. 2024) (holding state law was not preempted); PhRMA v. McCuskey, 171 F.4th 675, reh'g en banc granted, 176 F.4th 830 (4th Cir. 2026) (holding state law was preempted). PBMs are entities that play many roles in the drug distribution chain. As states have enacted measures to regulate PBMs, PBMs and other parties have challenged the validity of such measures, commonly on the basis that they are preempted by the Employee Retirement Income Security Act (ERISA), a federal law that regulates private-sector, employment-based health plans. Plaintiffs allege that ERISA preempts the state PBM laws because such laws have a direct regulatory effect on ERISA-governed plans, plan design, and how plans manage drug benefits. In Rutledge v. Pharmaceutical Care Management Ass’n (PCMA), 592 U.S. 80 (2020), the Supreme Court addressed the interplay between state PBM laws and ERISA preemption and held that ERISA did not preempt an Arkansas statute that regulated PBM pharmacy reimbursement practices. Following Rutledge, lower courts have examined ERISA preemption challenges to a variety of state PBM laws, with mixed results.
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