Why It Matters
Washington state’s newly signed drug pricing law has drawn immediate legal challenges from two of the world’s largest pharmaceutical manufacturers, setting up a federal court battle that could determine how billions of dollars in discounted medications flow to safety-net hospitals and low-income patients across the state. The outcome could affect the financial stability of rural clinics, community health centers, and facilities that serve uninsured populations throughout Washington.
What Happened
On March 30, 2026, Governor Bob Ferguson signed Senate Bill 5981 into law, which targets the federal 340B drug pricing program by adding transparency requirements and prohibiting drug manufacturers from restricting which pharmacies can dispense their medications to eligible providers.
The same day the governor signed the bill, pharmaceutical companies Novartis and AbbVie filed separate lawsuits against Washington state in federal court in the Western District of Washington. Both companies allege the new law will not result in lower drug costs for patients and that it threatens to cost them millions of dollars annually in lost revenue.
The legislation passed the state Senate along party lines, with Democrats voting in support. It received some bipartisan backing in the House and is scheduled to take effect in June 2026.
Background: What Is the 340B Program?
Established by Congress in 1992, the federal 340B drug pricing program requires pharmaceutical manufacturers to provide heavily discounted outpatient drugs to qualifying safety-net providers. These include rural hospitals, federally qualified health centers, and facilities that disproportionately serve low-income or uninsured patients.
Under the program’s structure, eligible providers receive drugs at steep discounts but can bill insurers at standard market rates. The difference in price generates revenue that participating hospitals and clinics use to fund expanded services, including care for patients who cannot afford to pay.
At the Moses Lake Community Health Center, for example, 340B revenue supports care for patients managing chronic diseases and funds mental health services, according to a letter the center’s chief executive sent to the governor urging him to sign the bill.
Pharmaceutical companies have increasingly placed restrictions on which contract pharmacies can dispense 340B-discounted medications, a practice that safety-net providers say undermines the program’s intent. Washington’s new law is designed to limit those restrictions within the state.
By the Numbers
- The federal 340B program channels billions of dollars in discounted pharmaceuticals to eligible providers nationally each year.
- Senate Bill 5981 is set to take effect in June 2026, approximately two months after signing.
- The bill passed the Senate along party lines, with the Democratic majority in support and some Republican votes added in the House.
- Drug manufacturers including AbbVie, Pfizer, and AstraZeneca submitted formal requests to the governor to veto the legislation prior to signing.
- Similar 340B-related laws in multiple other states have faced legal challenges, with courts largely upholding those statutes.
Zoom Out
Washington is not alone in legislating around the 340B program. Several states have enacted laws in recent years aimed at curbing pharmaceutical manufacturers’ ability to restrict contract pharmacy arrangements, and courts have generally upheld those statutes against industry legal challenges.
The dispute in Washington reflects a broader national conflict between hospital systems and drug manufacturers over the structure and administration of the 340B program. Hospitals argue the program is essential to sustaining services for vulnerable populations, while pharmaceutical companies contend that the revenue generated does not always reach patients directly.
Advocates note the stakes are elevated at a time when health care providers are preparing for potential reductions to Medicaid funding at the federal level, making 340B revenue more important than ever for facilities serving low-income patients.
What’s Next
The federal lawsuits filed by Novartis and AbbVie will proceed in the U.S. District Court for the Western District of Washington. The companies are expected to seek a preliminary injunction to delay the law’s implementation before its June effective date.
If the law survives legal challenge, Washington providers enrolled in the 340B program would gain new protections around pharmacy dispensing arrangements. State officials and health advocates supporting the law are expected to mount a defense in federal court in the weeks ahead.