In a setback to the pharmaceutical industry, a U.S. appeals court has upheld an Arkansas law that allows hospitals participating in a controversial federal discount program to ship medicines to certain pharmacies. As a result, other states can now be expected to pursue similar laws.
The closely watched decision comes amid a long-running battle over the program, which was designed three decades ago to help hospitals and clinics care for low-income and rural patients. To ensure the program, known as 340B, achieves this goal, drugmakers that want to take part in Medicare or Medicaid must offer their medicines at a discount to participating hospitals and clinics.
There are roughly 12,400 hospitals and clinics that participate across the U.S. and their number has grown over the years. Consequently, the program has become a big market for pharmaceutical companies, which must agree to sell their medicines at discounts — typically at 25% to 50% — if they want them covered and reimbursed by Medicaid and Medicare Part B outpatient insurance.