Hospitals, clinics and insurers disagree on 340B fixes as Vermont considers H.266

Lawmakers heard competing testimony on H.266, a bill aimed at preserving access to federal 340B drug discounts for covered entities, including hospitals and federally qualified health centers (FQHCs). Hospital and clinic leaders said manufacturer restrictions on 340B contract pharmacies have sharply reduced revenue and forced difficult program and rate decisions; insurer representatives urged the committee to remove provisions that would impose new reporting or liability requirements on health plans.

Jordan Esty, director of government affairs for MVP Health Care, told the committee that insurers are not party to the 340B program and generally cannot determine from claims whether a drug was acquired under 340B. “This is a manufacturer and a provider program,” Esty said, adding that insurers do not have access to purchase-discount information and that proposed lawsuit or “interference” provisions aimed at insurers could create unintended legal exposure.

Hospital witnesses described steep revenue losses after manufacturers limited contract-pharmacy access. Jonathan Reynolds, vice president of clinical operations at Rutland Regional Medical Center, said manufacturer restrictions caused immediate financial pressure that contributed to a 2 percentage-point increase the hospital sought in a recent commercial rate request; he estimated the hospital’s annual 340B revenue loss at $8 million to $9 million and said those funds help cover underpayment from Medicare and Medicaid for inpatient and outpatient services.

Jeff McKee, CEO of Community Health Centers of Burlington (CHC), described a parallel effect at FQHCs: contract pharmacy revenue peaked in fiscal 2022 and has declined since; CHC projected about a $1.8 million decline in 340B revenue for fiscal 2025. McKee said 340B revenue goes into general operating budgets and supports outreach, behavioral-health and primary-care services and that without it many thin-margin services and rural outreach programs would be financially unsustainable. “Without 340B, contract pharmacy revenue, we have a loss going back every year,” McKee said.

Witnesses stressed a technical distinction regulators and lawmakers should note: “mixed-use” 340B drugs dispensed from a covered entity’s pharmacy to patients in clinics or infusion centers are distinct from contract-pharmacy fills (drugs dispensed at retail or mail-order pharmacies). Several witnesses asked the committee to ensure H.266’s language focuses on contract-pharmacy restrictions by manufacturers, which they said were the principal cause of recent revenue declines.

Rutland Regional and CHC urged reasonable transparency measures but warned against patient-notification rules that would simply produce confusion. Rutland Regional said its 340B reductions forced a temporary increase in a commercial rate filing and that restored contract-pharmacy access would permit lower future rate requests. Community clinics and Planned Parenthood of Northern New England said they depend on 340B pricing for contraceptive supplies and sliding-fee services; Jessica Barbas of Planned Parenthood said the organization can procure certain intrauterine devices for about $100 under 340B pricing compared with a manufacturer list price near $981 and that preserving 340B is essential to keeping services affordable.

Esty suggested the committee consider focusing legislation on manufacturer conduct and urged more study of outpatient drug pricing trends before imposing insurer-specific obligations. He pointed to transparency proposals and potential Green Mountain Care Board study as less disruptive alternatives.

Lawmakers asked witnesses to provide written summaries and data. The committee paused for a scheduled break after the testimony; no formal action or vote occurred during the hearing.