Lawmakers, insurer and Green Mountain Care Board debate H.266 cap on hospital drug payments

Lawmakers at a Vermont legislative committee hearing on H.266 heard testimony about a proposed 120% cap on hospital payments for certain drugs and related reporting requirements that supporters say would increase price transparency and could lower health-care costs.

Catherine O'Neil, director of prescription drug pricing at the Green Mountain Care Board, told the committee the board does not currently regulate prescription drug costs and said the board supports greater transparency. "Currently, the Green Mountain Care Board does not regulate prescription drug costs," O'Neil said. She described new budget guidance requiring hospitals to report more detail on revenue and expenses tied to the 340B program and specialty pharmacy lines, and said the bill would ask for still more detailed hospital reporting if enacted.

The proposal to cap hospital payments at 120% of the average sales price (ASP) for certain drugs prompted questions about savings and service impacts. A Blue Cross Blue Shield of Vermont representative told the committee that one mechanism often discussed, "white bagging," could produce meaningful savings but would be complex to administer. "If we could white bag every single drug, we estimate to save $46,000,000 across the whole book of business," the Blue Cross representative said, adding that the savings would not flow uniformly to all commercial and public payers.

The insurer representative also described capital and reserve considerations that affect how much premium relief can follow from cost reductions. "We feel that we need to contribute 7% for to our capital," the representative said, noting that any savings above that contribution could be used to lower rates. The representative cited an internal estimate that achieving a smaller rate increase would require finding roughly $200,000,000 in savings within the qualified health plan line of business.

Committee members pressed on who would benefit if the cap or white-bagging were adopted. The Blue Cross representative said administrative and benefit-design differences make it difficult to translate all savings directly into lower premiums for every enrollee. Catherine O'Neil said improved, hospital-level reporting would help the board and lawmakers understand current pricing and where hospitals currently sit relative to ASP and 340B pricing.

Several legislators raised concerns that a statutory cap could strain smaller or rural hospitals and potentially affect service availability. Mike Fisher, a committee member who cited students' research provided to the committee, described one analysis showing hospital 340B purchases at roughly 65% of ASP and noted the implication for current markups: "[That] gives hospitals a 55% markup," Fisher said, describing the students' math on how a 20% ASP cap relates to current margins. Committee members asked for hospital-level ASP data before setting a final cap number.

Members also debated trade-offs between white-bagging, which shifts drug distribution to pharmacies and pharmacy benefit managers, and an ASP cap, which would reduce hospital reimbursement directly. O'Neil told the panel the Green Mountain Care Board is open to additional reporting authority included in the bill that would allow flexibility in the form and manner of future hospital reporting.

No formal vote was taken at the hearing. Committee members and witnesses agreed on the need for additional data — notably hospital-level comparisons to ASP and detail on 340B and specialty pharmacy revenue and profits — before the committee sets a statutory cap or other binding requirements.

The discussion also included broader system topics raised by members during the hearing, including reference-based pricing work at the Green Mountain Care Board, concerns about losing services such as birthing centers in some communities, and proposals for regionalizing specialty services to balance access and sustainability. Several members said those longer-term reforms are relevant but distinct from the immediate choices the committee faces about H.266 and reporting requirements.