Novartis Sues to Block Maryland's New Drug Discount Law

Novartis AG NVS has reportedly filed a lawsuit to block a Maryland law requiring drugmakers to offer discounts on drugs dispensed by third-party pharmacies contracting with hospitals and clinics serving low-income populations.

The complaint, filed in Baltimore federal court, argues that the law, set to take effect on July 1, attempts to regulate interstate commerce outside of Maryland and conflicts with the federal 340B drug discount program.

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The 340B program mandates that drugmakers receiving funds from government health insurance programs like Medicare and Medicaid offer discounted drugs to eligible hospitals and clinics.

These providers often use external pharmacies to dispense medications to avoid maintaining in-house pharmacies.

In 2010, the U.S. Department of Health and Human Services expanded guidance, allowing 340B providers to use an unlimited number of these contract pharmacies.

However, starting in 2020, Reuters noted that the drugmakers began imposing restrictions on 340B drug sales through contract pharmacies.

Novartis specified that it would only deal with contract pharmacies within 40 miles of a 340B provider, while other companies imposed various restrictions.

Drugmakers argue that the widespread use of multiple contract pharmacies complicates recordkeeping and transparency, leading to potential double discounts and diversion of 340B drugs to non-340B patients.

Previously, Novartis challenged federal guidance requiring drugmakers to work with contract pharmacies under the 340B program.

Following similar victories by other drugmakers, states including Maryland, Kansas, Mississippi, and West Virginia passed laws to protect the use of contract pharmacies.

Novartis contends that the use of contract pharmacies lacks transparency, increasing the likelihood of unintended discounts.

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Price Action: NVS shares are up 2.16% at $102.88 at last check Friday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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