Michigan House health panel hears hospital testimony on 340B cuts, pharma warns of broader system effects

At a Michigan House Health Policy Committee meeting, hospital and industry representatives gave detailed testimony about the federal 340B drug-pricing program, describing how manufacturer restrictions and program changes have reduced savings hospitals use to fund local services and warning of wider cost effects across payers.

The program allows eligible safety-net providers to purchase certain outpatient drugs at discounted prices and to reinvest savings in local care, presenters said. Elizabeth Cutter of the Michigan Health & Hospital Association told the committee that 340B "is an essential safety net program that supports access for vulnerable communities and healthcare providers that care for them." She said the benefit "stays in your community with the local hospital who participates" and that savings fund services such as cancer care, labor and delivery, nursing-home care and charity programs.

Representatives from McLaren Health Care and Memorial Healthcare described how their systems use 340B savings. Deidre Wilson, senior vice president for government relations at McLaren, and Maureen D'Agostino, McLaren vice president for accreditation and regulatory programs, said McLaren has nine hospital organizations participating and works with 36 rural clinics. D'Agostino said McLaren used program savings for patient assistance funds, free naloxone distribution and local oncology support (noting McLaren Oakland dispensed 1,213 boxes of Narcan through the emergency department in 2024). She said the system provided 3,870 prescriptions in 2024 through a patient assistance fund and that those prescriptions retained about $1,450,000 in local funding through the 340B program.

Ben Frederick, associate vice president for advocacy and government relations for Memorial Healthcare, described Memorial as an independent rural hospital serving Shiawassee County and said more than 60% of its patients are covered by Medicare or Medicaid. Frederick and Dr. Joe Monroe, Memorial's director of pharmacy and 340B compliance lead, said the program helps sustain services including obstetrics, maternity care, oncology infusion and behavioral health. Monroe described the program's intensive compliance requirements, including monthly internal audits, annual external audits and adherence to HRSA patient-definition guidance, and warned that manufacturers' restrictions already have reduced realized savings and imperiled service lines.

Committee members pressed witnesses on quantification and tracking. Witnesses said hospitals submit claims data to 340B data platforms and must follow HRSA guidance on patient eligibility; they also noted nonprofit hospitals report community benefit measures and charity care on cost reports. McLaren witnesses said the system budgets pharmaceutical purchases and tracks every 340B prescription, but that the exact revenue realized from 340B can fluctuate as manufacturer policies change.

Joining by videoconference, Kelly Ryan (pharma state-policy lead) presented an industry perspective and national data. Ryan said 340B has grown substantially and raised concerns about lack of consistent public transparency and the role of contract pharmacies. She summarized national figures: the program represents roughly $66 billion in discounted purchases, hospitals account for about 80% of program purchases, and the program has recently grown about 20–23% year over year. Ryan said HRSA guidance allowing unlimited contract pharmacy arrangements contributed to a rise from roughly 1,700 contract relationships in 2010 to about 212,000 in 2024. She described evidence (citing state studies such as Minnesota and IQVIA analyses) that some program-related revenues are retained by third parties and that commercial payers and employers can face higher costs through foregone rebates; she warned that state-level contracts or statutory language that locks in unlimited contract pharmacy arrangements could entrench current problems.

When asked by lawmakers how communities would be affected if manufacturers further restrict 340B, hospital witnesses said reductions in program benefit can force cuts to local services — including rural obstetrics and oncology infusion — and in some cases have led hospitals to close or convert status where 340B eligibility would be lost. McLaren and Memorial gave specific examples (losses in 2024 and early 2025 that reduced realized savings and forced service-line decisions).

The committee also completed unrelated committee business: Representative Schmaltz moved to report House Bill 4032 with recommendation; the clerk called the roll and the motion passed 15–0. The committee chair said the 340B presentations were educational and that the subject would likely return for further testimony and follow-up sessions.

The testimony produced a mix of bipartisan questioning focused on program oversight, the mechanics of tracking 340B claims and revenue, the role of contract pharmacies, and the consequences of manufacturer restrictions for rural and low-income patients. Witnesses on both sides asked for additional follow-up testimony and data from each other and the committee indicated it would convene further hearings to explore technical and statutory options.

Sources: verbal testimony to the Michigan House Health Policy Committee, presenters Elizabeth Cutter (Michigan Health & Hospital Association), Deidre Wilson and Maureen D'Agostino (McLaren Health Care), Ben Frederick and Dr. Joe Monroe (Memorial Healthcare), and Kelly Ryan (pharma industry witness).