Why It Matters
States are increasingly turning to drug pricing laws to lower prescription costs, but conflicting federal court rulings are creating uncertainty over how far they can go without running afoul of federal law.
A recent Congressional Research Service report on state drug pricing laws reveals a legal landscape in flux, with federal courts actively adjudicating competing claims over state authority to regulate pharmaceutical costs. Federal appeals courts have reached differing conclusions over whether state restrictions on drug manufacturer practices and contract pharmacy usage violate federal law, creating uncertainty that could either embolden or constrain state-level drug pricing initiatives.
Meanwhile, the executive branch has been pursuing its own agenda to lower drug costs through most-favored-nation pricing models and direct-to-consumer platforms, raising additional questions about the interaction between federal and state approaches.
The Big Picture
States have enacted legislative measures to restrict drug manufacturers from pricing their drugs at certain levels and to regulate the business practices of pharmacy benefit managers, pharmacies and other participants in the pharmaceutical supply chain. At least 10 states have active Prescription Drug Affordability Boards, independent state-level entities that review prescription drug costs, some of which have been authorized to take additional actions to lower prices of certain drugs.
Colorado became the first state to set an upper payment limit, capping the price of Amgen's Enbrel at $600 per 50-milligram unit in October 2025. Amgen sued Colorado on three grounds: federal patent law preemption, Fourteenth Amendment Due Process violations and Dormant Commerce Clause violations. In July, a federal district court granted Amgen a preliminary injunction, finding that Amgen was likely to succeed on its patent preemption argument.
Several states have enacted laws prohibiting manufacturers from restricting contract pharmacy use under the 340B program. The Fifth and Eighth circuits have upheld state 340B laws against federal preemption challenges, while a Fourth Circuit panel reached the opposite conclusion in a case involving West Virginia. The Fourth Circuit agreed to rehear the West Virginia contract pharmacy case en banc in June, setting aside the panel's ruling while the full court considers the case.
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. An appeals court previously 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.
The Bottom Line
Multiple federal courts are actively adjudicating state drug pricing issues, meaning Congress and the states are operating in a rapidly shifting legal environment. The Department of Justice's February amicus brief in the Tenth Circuit sided with AbbVie in challenging Colorado's 340B contract pharmacy law, arguing that the state law imposes additional conditions on manufacturers' participation in the federal program and is preempted.
The Consolidated Appropriations Act added new federal PBM transparency and rebate pass-through requirements, while the Centers for Medicare & Medicaid Services is implementing the GENEROUS Model to test international reference pricing in Medicaid. With circuit splits unresolved and a preliminary injunction already issued against Colorado's drug payment limit, lawmakers face pressure to clarify federal preemption boundaries before the courts do.
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