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June 03, 2022

Growing Momentum at State and Federal Level for 340B Protections

Ted Slafsky
Founder and Principal of Wexford Solutions, Publisher and CEO, 340B Report

With the nation’s capital remaining largely gridlocked, a growing number of safety net providers have turned to the states to address challenges to the 340B program. As we get close to the end of most state legislatures’ sessions, it is a good time to take a closer look at the efforts, evaluate their success, and see how the legislative movement has evolved.

In just four years, an impressive 21 states have passed or modified state laws preventing pharmacy benefit managers (PBMs) and other commercial payers from reimbursing 340B providers at a lower rate than other pharmacies. As the advocacy group Ryan White Clinics for 340B Access (RWC-340B) points out, “the legislative history of the 340B statute makes clear that the purpose of giving safety net providers access to 340B pricing is to enable them to stretch their scarce resources so that they may ‘reach more eligible patients’ and ‘provide more comprehensive services.' "This purpose cannot be achieved if 340B providers have to pass their savings to third-party payers.”

RWC-340B Counsel Peggy Tighe, one of a handful of national leaders who have been active on the issue, says the laws have been refined over the past few years to focus more broadly than just on discriminatory reimbursement. Other areas addressed in most of the new laws include but are not limited to: 

  • Preventing PBMs and other payers from imposing additional requirements or restrictions on 340B covered entities
  • Restricting a 340B covered entity’s or contract pharmacy’s access to the third-party payer’s pharmacy network
  • Prohibiting requirements that a 340B covered entity or contract pharmacy contract with a specific pharmacy or health coverage plan to access the third-party payer’s pharmacy network
  • Imposing a restriction or an additional charge on a patient who obtains a prescription from a 340B covered entity or contract pharmacy

These recent 340B protection efforts have been bolstered by a December 2020 U.S Supreme Court decision that ruled that states can regulate PBM behavior.

States Challenging Drug Industry Contract Pharmacy Actions

The anti-discrimination bills have been enacted with wide support in conservative, progressive, and swing states. Some states are widening the scope to include drug manufacturer restrictions on contract pharmacies. In May 2021, Arkansas became the first state in the nation to pass a 340B anti-discrimination law that applies not only to PBMs but also requires drug manufacturers to continue participation in the contract pharmacy program. PhRMA is suing to block the law in federal court, and the state has agreed not to enforce the law as the litigation plays out.

In what could be an important development, the federal judge overseeing the case recently granted Arkansas’s state health center association and an Arkansas hospital permission to intervene. The groups argued that their interests and the state’s interests are not entirely aligned. They pointed to a proposed rule to implement the law that would require covered entities to proceed first through the federal 340B administrative dispute resolution (ADR) process before bringing a claim against a manufacturer. This requirement appears nowhere in the state law, the Arkansas 340B groups said. The groups also pointed out that the state has stayed in the enforcement of the law at PhRMA’s request over their objections. Now that 340B covered entities have a seat at the table, some legal experts believe that the Arkansas law has a better chance of survival.

On May 23, the California Senate passed SB-939, which prevents PBMs from imposing discriminatory practices against 340B providers but also would prohibit drug manufacturers from imposing conditions on covered entities’ 340B drug purchases. The bill, which passed with a 24-9 majority, is significant because California is the most populous state in the country. It is often at the forefront of policy initiatives that get adopted nationally. It now goes to the State Assembly for a vote, and its passage remains unclear.

At least four other states have tried to take on drug manufacturer contract pharmacy actions in this legislative session without success. Connecticut came the closest with a Senate committee amending its anti-discrimination bill to include a section prohibiting manufacturer restrictions on 340B pricing. However, the bill died when the legislature adjourned for the year on May 4.

The Need for National Solution

Despite this success, there continues to be instances where payors try to reduce reimbursement or impose burdensome requirements on 340B pharmacies. Advocates say that while the state action has been helpful, there is still a need for a federal remedy. Jason Reddish, a partner at Feldesman Tucker who has worked with the National Association of Community Health Centers and state primary care organizations in drafting state bills, says there are several reasons why Congress needs to address the matter. They include too many different sets of state rules with a patchwork of protections, and the safeguards arguably don’t apply to the Medicare market.  

Fortunately, there is growing support for the Protect 340B Act, a bipartisan bill introduced by Reps. Spanberger (D-VA) and McKinley (R-WV). H.R. 4390, which now has 92 co-sponsors, prevents a range of discriminatory practices, including reduced reimbursement, imposition of increased pharmacy fees, exclusion from PBM networks, interference with patient choice, and application of onerous claims reporting requirements. The legislation also applies to the Medicare markets.

The bill includes another important feature: the establishment of neutral third-party clearinghouse to resolve instances of duplicate discounts in the Medicaid area. The Protect 340B Act requires the government to contract with a third party to serve as a claims data clearinghouse that will protect drug manufacturers from giving Medicaid rebates and 340B discounts on the same drugs. A clearinghouse chosen by HHS, rather than pharmaceutical manufacturers, is considered a fairer arbiter. In addition, the claims submissions requirement is limited to Medicaid because the 340B statutory protection against duplicate discounts only applies to Medicaid.

What to expect next? I envision more states enacting or revising their PBM anti-discrimination laws. I also envision momentum growing for a national resolution to this matter as well as for manufacturer efforts to impose their own rules when it comes to the contract pharmacy program. Whether we will see a resolution before the November elections remains uncertain.

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The views and opinions expressed in this blog are those of the authors and do not necessarily reflect the official policy or position of any other agency, organization, employer, or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author(s). These views are always subject to change, revision, and rethinking at any time and may not be held in perpetuity.