(Updated to reflected Senate committee action on bill with comments from lawmakers)
Kansas hospitals are lining up against the pharmaceutical industry over a bill that would bar drug manufacturers from limiting safety-net providers from accessing a federal discount program for prescription drugs.
Joined by a state network of community-based health clinics, the hospitals are asking the Legislature to pass a bill that would fight back against a practice they say undermines patient access to the 340B Drug Discount Program that’s been in place since 1992.
The bill also would bar drug manufacturers from requiring covered entities under the 340B program to submit health information, claims data or other purchasing information unless voluntarily provided or required by other laws.
The bill means potentially heavy fines of up to $50,000 per package of 340B drugs.
The Senate financial institutions committee on Tuesday voted to send the bill to the full chamber for consideration even as lawmakers conceded they needed to understand the complex subject matter further.
It’s unclear how much further the bill might get this year given that the regular legislative session is nearing an end, although it would still be in play next session.
“This is an important bill for rural hospitals,” said Republican state Sen. Mike Argabright of Olpe.
“Will it save them? Probably not,” Argabright said. “But it will definitely help and we need our rural hospitals.”
But even as the bill was sent to the full Senate, some lawmakers on the committee were not fully embracing the idea.
Even those who agreed to pass out the bill said they might not vote for the bill when it reaches the floor because they need more information this late in the session.
“To not allow some sort of debate and getting this out and getting more information based on what I am hearing from my district, it’s a little unsettling to just not go anywhere on this,” said Republican state Sen. Rick Kloos of Berryton.
“I still have a lot of questions that need to be answered in really looking at this,” Kloos said. “Although I would entertain moving this out of committee, I want it understood that a vote here, doesn’t mean I’m a yes on the floor.
“There’s more to digest,” he said.
Republican state Sen. Kellie Warren of Leawood said she thought the committee had more work to do on the bill to better grasp its implications.
“I, for one, would like to get some more information,” she said. “To me, it just doesn’t seem ready for prime time for something this serious.”
The 340B program allows eligible hospitals and other safety-net providers to purchase outpatient prescription drugs at discounted prices.
The health care providers say the pharmaceutical manufacturers are limiting safety-net providers’ ability to access 340B pricing to only one contract pharmacy.
Hospitals say that they serve patients from various regions across the state who have to travel long distances for medicine if they can’t use their local pharmacy for a drug covered by the 340B programs.
But over the last several years, they say pharmaceutical manufacturers have “erroneously” restricted hospitals’ ability to contract with more than one pharmacy, leaving their patients to suffer.
“It is essential that hospitals retain the existing ability to contract with more than one pharmacy so that patients can receive the healthcare that they need close to home,” said Tara Mays, vice president of state legislative relations for the Kansas Hospital Association.
“Your committee can protect our state hospitals, clinics, and local pharmacies rather than increasing profits of pharmaceutical companies,” Mays said in written testimony.
“You can do this at no expense to the Kansas taxpayers by holding the drug companies to the agreements that they already made at the federal level to enable 340B savings at all contract locations and pharmacies throughout Kansas.”
The industry sees it very differently, saying they don’t think the legislation will serve its intended purpose and that the 340B program revenues are only benefiting hospitals, not patients.
Since it started 23 years ago, the 340B program has mushroomed both in the number of participating health care providers and in the volume of drugs they purchase.
The Commonwealth Fund, a health care think tank, reported that the program has expanded from 8,100 provider sites – both hospitals and pharmacies – in 2000 to 50,000 by 2020.
It reported that data released in August 2022 by the Health Resources and Services Administration suggests discounted purchases under the 340B program reached about $44 billion in 2021, about 16% more than in 2020.
The Commonwealth Fund reported that the growth is attributable to the passage of the Affordable Care Act in 2010.
The law expanded the type and number of organizations eligible for the 340B program. Also contributing to the growth is a change in policy to allow a hospital or clinic to use an unlimited number of contract pharmacies, instead of just one.
“Due to weak oversight, the program has expanded substantially since 1992,” Katelin Lucariello, deputy vice president of state policy for the Pharmaceutical Research and Manufacturers of America.
“As a result of the growth, there have been covered entities using those revenues from the 340B program in ways that benefit them and other middle men in the program,” Lucariello told the committee Monday morning.
“The program has grown dramatically, but corresponding growth in measures of patient benefit have not grown with the growth of the program,” she said.
She said that 88% of Kansas hospitals are falling below the national average of providing charity care to less affluent patients, a point disputed by the Hospital Association.
“You heard testimony today that there are very important programs propped up by the revenues of the 340B program,” she said.
“While some revenues from the program are, indeed, being used as they’re intended to, there is very substantial evidence that many are not,” she said.
“In fact, revenues are being used for things like marketing, advertising, acquisition of practices in wealthier areas, all to generate revenue from discounts in the program.”
The opponents to the bill included Pfizer, Amgen, Merck Human Health, the Kansas Chamber of Commerce and the National Taxpayers Union.
“The 340B program is broken and growing out of control,” said Yancy Williams, Pfizer’s state government relations director.
“There is scant evidence that expansion of the program is improving access to care, improving the quality of care, or lowering cost for patients most in need,” Williams said in written testimony.
The hospitals, meanwhile, said they can demonstrate how revenues from the 340B are being used to benefit Kansans.
Ascension Via Christi submitted examples in its written testimony, including free medication to the less affluent, the opening of charitable care pharmacies in Pittsburg and Manhattan, special ambulatory clinics and increased care for cancer patients in Pittsburg and cystic fibrosis pharmacy services.
Chad Austin, president and CEO of the Kansas Hospital Association, disagreed with the idea that hospitals are using the revenues for something other than patient care.
“Kansas hospitals and health care providers provide hundreds of millions of dollars in charity care each and every year,” Austin said in an interview after the hearing
“I believe that the 340B program ensures that we’re able to provide some of those services in our local communities,” he said.
Austin said there are 91 facilities in Kansas that participate in the 340B program, many of which are county or city hospitals.
“Those hospitals are taking those 340B savings and helping provide drugs to their community members as well as using those savings to be able to ensure that we’re able to provide maternity care in local communities, making sure that we’re able to provide programs in terms of charity care for our local hospitals,” Austin said.
“I would say that any savings from the 340B program from our not-for-profit hospitals in essence are being reinvested into local communities,” he said.
“If pharma is able to decimate and reduce the 340B savings…that’s not benefiting Kansas.
“That’s benefiting drug manfacturers that are based in New Jersey or international pharmacy companies,” he said. “This is a way to keep dollars in Kansas.”
This year’s legislation is an offshoot of a budget proviso adopted last year that would have required drug manufacturers to honor 340B pricing at contract pharmacies under the Kansas Consumer Protection Act.
Abbvie Inc., Novartis, AstraZeneca and the Pharmaceutical Research and Manufacturers of America filed a legal challenge to the budget proviso.
In December, they reached an agreement with the state to dismiss the case without prejudice, meaning it could still return in the future. They agreed in their stipulated dismissal that there was no controversy to resolve.
The Kansas Hospital Association supported the budget proviso, accusing drug manufacturers of trying to decimate the 340B program by limiting the number of pharmacies in which a hospital may contract.
“The actions taken by drug manufacturers are jeopardizing the ability of Kansans to access needed prescriptions and other vital health services,” Austin wrote in an opinion piece last summer.
During the of summer 2020, the Congressional Research Service reported that some drug manufacturers began announcing restrictions on 340B covered entities that distribute 340B drugs using contract pharmacies.
“These restrictions vary, but they generally aim to limit covered entities to distribution to one contract pharmacy,” the research service reported.
“Manufacturers say that the restrictions are necessary to prevent duplicate discounting and unlawful distribution of 340B drugs to nonpatients…, arguing that such practices have grown more prevalent in recent years” and they aren’t are policed by the government.
