A pharmacist at Mayo Pharmacy in Bismarck, N.D., reviews completed pharmaceutical orders in January 2026. (Photo by Michael Achterling/North Dakota Monitor)
BISMARCK, N.D. (North Dakota Monitor) – A federal district court judge is skeptical that low-income North Dakotans actually benefit from a state law intended to safeguard medication discounts.
The 2025 law makes it a class B misdemeanor for drug manufacturers to adopt policies that “deny, restrict, prohibit, or otherwise interfere” with pharmacies’ ability to obtain and dispense discounted prescriptions on behalf of hospitals participating in a federal program known as 340B.
Drug manufacturers sued the state over the law last year, claiming it has allowed hospitals and pharmacies to exploit them for millions of dollars. The companies want the federal court to strike down the statute.
U.S. District Court Judge Dan Traynor on Thursday held a hearing on motions for summary judgment in the suit by the plaintiffs and defense. Attorneys for the pharmaceutical companies and North Dakota both want Traynor to decide the case in their favor without a trial.
The 340B program, created by Congress in 1992, is supposed to make health care more accessible for poor Americans. Under the program, drug companies offer discounted products to qualifying hospitals and other medical facilities. Drug manufacturers that are part of Medicaid and Medicare must participate in 340B.
Attorneys for pharmaceutical companies and the state have agreed that the program has not always worked as intended, though they disagreed on who’s to blame.
The state says that drug manufacturers have adopted policies to minimize the amount of products they must sell at 340B prices, thereby depriving hospitals and patients of the discounts they’re entitled to.
These practices are what North Dakota’s law, House Bill 1473, is meant to prevent, North Dakota Solicitor General Phil Axt said in a Thursday court hearing.
Attorneys for manufacturers said these policies are not nefarious and protect them from having to provide potentially limitless discounts to hospitals. The discounts 340B requires them to offer are so steep that at times they must sell some products at less than 1% of retail price, they said.
By making 340B more expensive for pharmaceutical groups, North Dakota is also making it more expensive for the companies to take part in Medicare and Medicaid, the plaintiffs said — which they argued is not constitutional.
Traynor during the hearing characterized the law as an unprecedented attempt by the state to control agreements between the federal government and private companies.
North Dakota through House Bill 1473 is “inserting itself into a preexisting relationship with which the state has no business,” he said.
It’s generally not lawful for states to pass statutes regulating contracts between the federal government and private companies unless the federal law has explicitly invited them to, said Matthew Rowen, an attorney representing one of the plaintiffs.
The plaintiffs also allege the law violates the U.S. Constitution by attempting to regulate business in other states, and by forcing them to sell their property to a private party under threat of criminal penalty.
Attorneys for the state said that courts have previously found that regulations like House Bill 1473 are constitutional. The state is within its rights to regulate gaps in federal law, they said.
The main type of policy that House Bill 1473 targets is drug manufacturers’ practice of refusing to sell 340B-discounted drugs to more than one pharmacy per hospital, which attorneys said became widespread after 2010.
These policies have made it harder for patients to get discounted medication, as well as taken away profits that rural hospitals rely on to keep their doors open, Axt said. He said this is especially harmful to rural North Dakota communities, where access to health care is limited.
Hospitals also use the money they make from 340B to fund charity services for low-income patients, representatives from North Dakota health care providers told state lawmakers in testimony on the bill last year.
Axt said that if drug companies feel the 340B program should be structured differently, they should ask Congress to change the law.
Attorneys for drug companies disputed this characterization. They say that because hospitals and pharmacies are pocketing the profits made by selling the discounted drugs, patients aren’t actually benefiting from 340B.
Pharmaceutical manufacturers also said that the North Dakota legislation has made it impossible for them to prevent misuse and abuse of the program.
The statute bars drug companies from requiring hospitals and pharmacies to send them claims data as a condition for providing the medication. The companies say this information is important for them to be able to verify that the recipients of 340B discounts actually qualify for them.
“It prevents my clients from learning the facts that could suss out violations of federal law,” Rowen said.
He said this also harms pharmaceutical manufacturers by forcing them to make more discounted drug sales than they should.
Axt said that the drug companies haven’t been able provide any evidence of hospitals refusing to turn over this data. He said that it’s prohibitively expensive for hospitals to continually have to provide this information.
The U.S. Department of Justice, in a recent friend-of-the-court brief filed in a lawsuit challenging a similar law in Colorado, took the position that such policies could discourage drug companies from participating in Medicare and Medicaid — which in turn harms low-income Americans.
The North Dakota case was originally three separate lawsuits brought by different groups: AbbVie, AstraZeneca and the trade association Pharmaceutical Research and Manufacturers of America. Traynor in January combined the suits since their claims against the state overlap.
Traynor questioned why the interests of low-income Americans are not represented in the lawsuit, despite the purpose of the 340B program being to benefit them.
“Why is it Big Pharma on this side of the table and not Joe Paycheck?” he asked the plaintiffs.
The pharmaceutical companies said that they’re aware of some advocacy groups lobbying Congress to make the program better for consumers.
Traynor said Thursday he will take the parties’ requests under advisement.
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