Pharma and insurers clash over H.266 340B changes; Blue Cross urges transparency as drug markup in Vermont hospitals alarms payers

The Senate Health and Welfare Committee heard competing testimony April 10 on H.266, a bill that would alter 340B contract-pharmacy arrangements and add state-level protections and transparency. Witnesses sharply disagreed about whether the proposed changes would protect safety-net providers or lock in a model that benefits middlemen.

Morgan Halloran, director for state policy at Pharmaceutical Research and Manufacturers of America (PhRMA), testified that Section 1 of H.266 would “codify a broken model of the 340B program,” saying contract pharmacy arrangements have been increasingly dominated by vertically integrated pharmacy benefit managers (PBMs). Halloran cited studies and industry data saying 69 percent of contract-pharmacy arrangements involve three PBMs and that the program’s expansion has reduced manufacturer rebates to insurers, potentially increasing premiums.

Blue Cross and Blue Shield of Vermont urged the committee to add more transparency. A Blue Cross representative told lawmakers the insurer lost about $12,600,000 in manufacturer rebates last year because drugs were shifted through 340B arrangements, and that commercial payers often pay markedly higher prices for drugs administered in hospitals than through PBM channels. Blue Cross cited a RAND analysis showing Vermont hospital commercial drug prices well above the national average and presented internal data indicating Vermont hospital prices for certain infused drugs can exceed average sales price by multiples, with substantial concentration at the University of Vermont Health Network.

PhRMA witnesses warned that the bill’s limits on manufacturers’ access to claims-level data and the creation of a private right of action against manufacturers could undermine federally authorized audit rights and program integrity. PhRMA urged the Legislature to require a fact-finding and transparency effort—similar to work done in Minnesota and North Carolina—before enshrining unlimited contract pharmacy arrangements in state law.

Blue Cross and other payers called for a state-level transparency or advisory process so the Legislature can see where 340B revenue and contract-pharmacy flows are occurring, how much revenue is leaving the state, and what impact the current arrangements have on commercial rebates and premiums.

Committee members sought further data and said they may request more detailed analyses and options for targeted transparency language. No final vote was taken on H.266; sponsors and opponents agreed more fact-finding and narrower transparency language could be a path forward.