NEW ORLEANS — A federal appeals court has upheld Louisiana's restrictions against pharmaceutical companies who wanted to limit the number of drug stores that can offer discounted medicines. 

The 5th U.S. Circuit Court of Appeals on Monday said states possess the right to rule on public health and consumer protection issues, so Louisiana wasn't out of line when it sued two major drugmakers over access to discounted rugs.

The 1992 Veterans Health Care Act said that, if drugmakers wanted to take part in Medicaid and Medicare Part B programs, they had to offer discounts on outpatient drugs to a group of "safety-net hospitals and clinics." The facilities included health centers, family planning projects, AIDS clinics, black lung clinics and other institutions serving low-income or uninsured patients.

Initially, if a covered hospital or clinic didn't have its own in-house pharmacy, it could contract with a single outside pharmacy to obtain the discounted drugs. The guidance changed in 2010, letting facilities use an unlimited number of drug stores, and the number of pharmacies with discounted drugs available jumped from 1,300 in 2010 to 20,000 in 2017.

In 2020, a number of pharmaceutical companies imposed restrictions on who could obtain some of their drugs, and in 2023, Louisiana lawmakers passed a law saying the drug companies couldn't interfere with pharmacies that held contracts with the safety-net facilities.

AbbVie and AstraZeneca sued, along with a trade association. Among their various arguments was that the Louisiana law was vague and also amounted to an unconstitutional taking. 

A federal judge ruled for the state last year and on Monday the 5th U.S. Circuit Court of Appeals upheld the decision. It said the "historic police powers" of the states could not be superseded by federal law unless Congress expressed a specific intent to do so. In 1992, Congress acted to make discounted drugs available.