Committee hears lawmakers and providers push for state protections and transparency for 340B drug discounts

Colleen Meiman, a policy consultant with the Bi‑State Primary Care Association, told the Senate Health & Welfare Committee on April 4 that the federal 340B program is “the backbone of the primary care safety net” in Vermont and elsewhere. She said 340B providers — including federally qualified health centers (FQHCs) and critical access hospitals — rely on discounted drug acquisition to stretch scarce resources and support services beyond pharmaceuticals.

The first witness framed the mechanics for lawmakers. “340B discounts are funded entirely by drug makers, not by taxpayers,” Meiman said, and the program allows health centers to buy drugs at a lower acquisition cost and, in many cases, be reimbursed at higher insurer rates so the difference funds services such as dental care, substance‑use treatment and mobile units. Meiman noted mandatory discounts are 13 percent for generic drugs and 23 percent for brand drugs, and an additional penalty discount can apply when manufacturers raise prices faster than inflation.

The committee heard that actions by manufacturers and pharmacy benefit managers (PBMs) have cut into 340B savings. Meiman said manufacturers are increasingly refusing to ship 340B‑priced drugs to contract pharmacies and that HRSA and HHS efforts to reverse the practice have been delayed in litigation. “We now have 37 manufacturers that ban contract pharmacies for hospitals and 24 for FQHCs,” she said, and the impact has forced some centers to close sites or lay off staff.

Calvin Pugh, 340B state policy director for the Community Access National Network, urged caution about expanding contract pharmacy arrangements without guardrails. He emphasized the program’s importance for HIV and hepatitis care and warned that hospital systems can acquire physician practices and bill insurers at full price while buying drugs at 340B prices. “I urge you to put patients first before third party profiteering, before greedy C‑suites,” Pugh said.

Charles Becker of the Health Care Advocates (HCA) said the HCA “cautiously supports the contract pharmacy language” in H.266 but urged stronger transparency requirements for hospitals. Becker urged the committee to require hospitals to report aggregated acquisition costs and payments by payer type so the state can quantify the amount of 340B revenue and who ultimately bears those costs (patients, employers, insurers or public payers). He pointed to Minnesota’s transparency work as a helpful model.

Witnesses and some legislators discussed litigation in other states that has followed similar statutes. Meiman and Becker noted that multiple states have passed contract‑pharmacy protections; some were litigated, and courts have reached different results in certain circuits. Committee members asked staff for follow‑up materials about the litigation record.

Why this matters: committee members said 340B revenue historically funds nonpharmaceutical services that expand access for medically underserved patients and that a change in how manufacturers or PBMs treat contract pharmacies can materially affect rural hospitals and health centers. Lawmakers flagged the need to balance provider stability with concerns about whether hospitals are using 340B revenue for community benefit.

Committee next steps: witnesses asked legislators to preserve the current requirement that discounts be given at point of sale rather than via retroactive rebates, to adopt contract‑pharmacy protections similar to those in other states, and to design reporting so hospitals show how 340B savings are used. No formal votes or motions were taken during the hearing; the committee signaled it will consider edits to H.266 during bill markup.

Speakers listed in this report spoke during the H.266 discussion: Colleen Meiman (policy consultant, Bi‑State Primary Care Association), Mary Kate Mollman (Bi‑State Primary Care Association), Calvin Pugh (340B state policy director, Community Access National Network), Charles Becker (Health Care Advocates), Senator Jenny Lyons (chair, Senate Health & Welfare Committee), and several committee members who questioned witnesses.

Ending: The committee collected witness slides and asked legal and policy staff to supply follow‑up materials, including court decisions and state reporting examples, ahead of bill markup.