Sept 23 (Reuters) - A federal judge on Tuesday refused

to block Maine from enforcing a new state law requiring

drugmakers to offer discounts on drugs dispensed by third-party

pharmacies that contract with hospitals and clinics serving

rural, low-income populations.

The ruling by U.S. Magistrate Judge John Nivison in Portland

marked the latest setback in the pharmaceutical industry's

efforts to challenge similar laws that about 20 states have

adopted to safeguard access to the federal 340B Drug Pricing

Program.

The judge declined to issue a preliminary injunction sought

by drugmakers Novartis and AbbVie ( ABBV ) that would prevent the Maine

Protect Health Care for Rural and Underserved Communities Act

from taking effect on Wednesday as scheduled.

The companies did not respond to a request for comment.

Democratic-led Maine's law, like its counterparts

nationally, was designed to ensure hospitals can use contract

pharmacies while participating in the federal 340B discount

program.

The program requires drugmakers to offer discounts on drugs

to hospitals and clinics serving low-income populations as a

condition to receive funds from government health insurance

programs like Medicare and Medicaid.

Many hospitals and clinics eligible for the 340B program

contract with outside pharmacies to dispense prescription drugs,

so that they do not have to maintain in-house pharmacies.

The drugmakers argue that the rising use of contract

pharmacies has resulted in improper discount claims,

contributing to spending on the 340B program jumping from $6.6

billion in 2010 to $124 billion by 2024.

In 2020, many drugmakers began imposing restrictions on 340B

drug sales using contract pharmacies.

After courts ruled that the Health Resources and Services

Administration, a division of the U.S. Department of Health and

Human Services, lacked the authority to bar such policies,

states including Maine began adopting their own laws.

Lawyers for Novartis and AbbVie ( ABBV ) argued that Maine's law was

preempted by the federal law governing the 340B program, which

does not include any requirement that hospitals be allowed to

use contract pharmacies.

But Nivison noted the statute's silence on how 340B drugs

are delivered and pointed to rulings by two federal appeals

courts in similar cases "as reflecting that Congress did not

intend to preclude state involvement."

Those rulings came in decisions by the 5th and 8th U.S.

Circuit Courts of Appeals, which rejected industry challenges to

similar laws adopted by the states of Arkansas and Mississippi.

Nivison said the state and federal laws worked in "harmony,"

as the state law was designed to prevent limits on the methods

of distribution of drugs while the 340B program was designed to

ensure eligible health care providers could obtain medications

at discounted prices for under-served patients.

"The Court discerns nothing in 340B to suggest that Congress

intended to limit the number of patients for whom covered

entities may prescribe drugs at the discounted rate," Nivison

wrote.

The case is AbbVie Inc ( ABBV ) v Frey, U.S. District Court for the

District of Maine, No. 1:25-cv-00416.

For Novartis: Susan Cook of Hogan Lovells

For AbbVie ( ABBV ): Matthew Owen of Kirkland & Ellis

For Maine: Sean Magenis of the Maine Office of the Attorney

General

Read more:

Judge blocks West Virginia's 340B contract pharmacy law

US Supreme Court will not hear drug industry challenge to

Arkansas contract pharmacy law

Judge won't block Maryland law mandating discounts for

hospitals' outside pharmacies

Judge won't block Mississippi law on discounts for

hospitals' contract pharmacies

Lawsuits pile up over state laws on discounts for hospitals'

contract pharmacies

(Reporting by Nate Raymond in Boston)