Estimated read time: 4-5 minutes
- Pharmaceutical company AstraZeneca sues Utah over SB69, claiming it contradicts federal drug pricing laws.
- The company argues SB69 unlawfully expands the Section 340B drug discount program, violating the supremacy clause.
- AstraZeneca seeks a halt on the law's enforcement, citing financial harm and reputational damage.
SALT LAKE CITY — The pharmaceutical drug company AstraZeneca filed a lawsuit against the Utah attorney general, claiming Utah's new law on limiting prescription drug prices goes against a federal health care program and would cost the company millions of dollars.
A federal discount drug program was established in 1992 by Section 340B of the federal Public Health Service Act. It requires pharmaceutical manufacturers that participate in the Medicaid program to sell covered outpatient drugs at greatly discounted prices to specific "covered entities," or health care providers and programs that meet eligibility requirements of serving high numbers of low-income patients.
Section 340B does not include off-site, for-profit pharmacy chains, such as CVS or Walgreens, in the list of covered entities, AstraZeneca claims in its suit, filed last month. Utah's new law SB69, however, violates that federal provision by modifying the requirements for Section 340B, the lawsuit alleges.
"The Utah statute requires manufacturers to make 340B-discounted drugs available for sales at any and all pharmacies that are 'authorized by a 340B entity to receive the drug.' SB69 thus extends Section 340B's price caps beyond the scope of the federal program to reach unlimited contract pharmacy sales — in effect, vastly expanding discounts under the federal 340B program to an entirely new category of transactions not covered by Section 340B itself," the lawsuit states.
The Utah Attorney General's Office declined to comment on the lawsuit. State Insurance Commissioner Jon Pike is also named as a defendant in the lawsuit.
In a March letter to the Utah Legislature, Gov. Spencer Cox announced he would not sign SB69 over some concerns about the program not serving its intended purpose and transparency in how cost savings would be used. But he ultimately allowed the veto-proof bill to go into law without his signature.
AstraZeneca explained it has already gone to court in other states where federal courts have decided against efforts to force manufacturers to provide 340B-discounted drugs at 'so-called contract pharmacies," the lawsuit says. This means Utah's law directly conflicts with federal law requirements, the company said.
"Apparently dissatisfied with the scope of federal law, the state of Utah has enacted a statute seeking to achieve under state law precisely the same result that federal courts have resoundingly rejected," the lawsuit says.
The pharmaceutical company argues SB69 is unconstitutional as it violates the federal supremacy clause by unlawfully expanding the federal drug pricing program and violates federal patent law through regulating the price of patented goods.
"(SB69) requires manufacturers like AstraZeneca to offer steeply discounted prices for the sale of their patented drugs, thereby extending federal price caps to an additional category of patented drug sales (contract pharmacy sales) that federal courts have held fall outside of the 340B program," the suit says.
SB69 "impermissibly interferes with important federal policies and objectives" and imposes costly new obligations for manufacturers, AstraZeneca claims.
AstraZeneca has 26 drugs on the market that are either patented or still within a regulatory exclusivity period. The company makes products available at 340B-discounted prices for all covered entities, but also sells products with typical market prices at pharmacies not included in the covered entities.
The drug company spent $14 billion in 2024 to research and develop new drugs. The Utah law could hinder the company's ability to further research and develop new drugs, as it's projected to lose approximately $3 million a month if all products must be sold at deeply discounted prices, significantly lessening the company's revenue from branded product sales, the lawsuit states.
Along with the lawsuit, AstraZeneca filed a motion for a preliminary injunction Monday, asking the U.S. District Court in Utah to halt enforcement of SB69 while its constitutionality is determined. The company argues that even if SB69 is eventually invalidated, there is no legal way to recoup the losses from being forced to sell the products at the discounted prices.
The company is already suffering irreparable financial harm from the Utah law since it took effect on May 7, AstraZeneca Vice President Chris Mancill said in a court declaration.
"I further understand that the effect of Utah's law is to require AstraZeneca to offer its patented drugs at steeply discounted prices before their patent and exclusivity periods have expired and in a manner that conflicts with federal requirements," Mancill said. "AstraZeneca thus stands to lose tens of millions of dollars during the period between the filing of its complaint and the final resolution of this case, absent injunctive relief."
The company also argues that the law causes it to endure reputational damage.
SB69 could cause AstraZeneca to be "labeled either a criminal, a violator of trade practices, or both. These labels carry a stigma that will undermine consumer — and collaborator — trust and confidence in AstraZeneca," Mancill said.
AstraZeneca is now forced to choose between complying with the Utah law, which it claims is against federal law and causes financial loss for the company, or risk civil and criminal sanctions, Mancill said.
"AstraZeneca's ability to invest in pipeline products and engage in innovative research efforts is accordingly hampered by state laws that require AstraZeneca to offer its products at the 340B price in transactions that are outside the scope of the federal 340B Program," Mancill said.
