Panel hears H.266 to block discrimination against 340B covered entities and contract pharmacies

A Vermont legislative committee heard testimony on H.266, a proposed law that would add a new subchapter to state prescription drug cost-containment statutes to protect 340B covered entities and 340B contract pharmacies from certain actions by drug manufacturers, insurers and pharmacy benefit managers.

The bill, explained Jen Kirby of the Office of Legislative Counsel, would define 340B covered entities and contract pharmacies and prohibit manufacturers and payers from denying, restricting or otherwise interfering with acquisition or delivery of 340B drugs to contract pharmacies "unless receipt by the 340B contract entity is prohibited by the U.S. Department of Health and Human Services." Kirby said the bill would also bar manufacturers or their agents from offering 340B pricing as a rebate rather than a discount at the time of purchase, and would make conforming changes to state pharmacy benefit manager statutes. "We are looking at H.266, which is an act relating to protections for 340B covered entities and 340B contract pharmacies," Kirby said.

Why it matters: witnesses told the committee that 340B drug discounts are an essential revenue source for safety-net providers and that recent manufacturer and payer practices have eroded those savings. Colleen, a policy expert for federally qualified health centers who testified about on-the-ground effects, told the panel that 340B savings "are essential to the financial stability of a lot of safety net providers," and said that in Vermont 340B savings account for about 25% of net patient revenue at health centers. Witnesses and written materials also described national trends — manufacturers limiting shipments to contract pharmacies, pharmacy benefit manager practices that reduce 340B gains, and proposals by manufacturers to shift discounts into post‑sale rebate models — that they say threaten clinic and hospital finances and patient access.

Key provisions and limits described in testimony - Definitions and scope: The bill would add a 340B subchapter to Title 18, chapter 91 of Vermont law and adopt definitions for "340B covered entity," "340B contract pharmacy," "340B drug," "discount," "rebate," "health insurer," "manufacturer," and "pharmacy benefit manager." Kirby tied the 340B covered entity definition to the federal program established in federal law (42 U.S.C., commonly cited as section 340B of the Public Health Service Act). - Prohibitions on manufacturers: Testimony summarized language that would prevent a manufacturer or its agent from denying or limiting acquisition or delivery of 340B drugs to contract pharmacies except when federal law or HHS prohibits it, and from conditioning participation on submission of claims, utilization, encounter or purchase data unless HHS requires such reporting. - Protections against payer discrimination: The bill would forbid insurers, PBMs or other third‑party payers from reimbursing a 340B covered entity or contract pharmacy at a lower rate than non‑340B pharmacies for the same drug, imposing fees or clawbacks that are not applied to non‑340B entities, or requiring billing modifiers or attestations identifying a drug as 340B-only unless CMS or the state Agency of Human Services requires it. The text as presented also states that Medicaid is unaffected. - Rebate model and reporting concerns: Witnesses described proposals by some manufacturers to convert 340B discounts into post‑sale rebates that would require extensive data submission and create cash‑flow and administrative burdens for providers; the bill includes language intended to prevent a shift to rebate-only pricing for 340B purchases. - Enforcement: Under the draft text summarized by counsel, a private right of action would allow an injured 340B covered entity, contract pharmacy or other person to sue in superior court for injunctive relief, compensatory and punitive damages, costs, and reasonable attorney's fees. Kirby noted the bill would take effect on passage and would make conforming edits to existing PBM statutes.

What witnesses said - Colleen (policy expert for federally qualified health centers) described the 340B program as "funded through discounts provided by drugmakers" not general tax dollars, and said the program allows safety‑net providers to stretch limited resources into services such as dental care, mobile units and substance‑use treatment. She said Vermont health centers rely heavily on the program: "In Vermont, those 340B savings account for 25% of net patient revenue." She warned that rapid erosion of 340B savings has forced some centers nationally to cut services.

- Georgia Meharris of the Bi‑State Primary Care Association helped introduce health center witnesses and said the committee would hear multiple perspectives on the program.

- Devin Green of the Vermont Association of Hospitals and Health Systems said hospitals also rely on 340B revenue and described a local example: as 340B restrictions took effect, Rutland Regional Medical Center was losing about $8 million a year. Green supported protecting 340B entities in state law and said the bill's private right of action was narrowly targeted to specialty provider types.

- Kelly Ryan Buck, representing brand manufacturers, urged caution and said the program has "grown" beyond its original design; she cited research showing the national 340B program totaled roughly $66 billion in 2023 and said independent studies have found state costs from foregone commercial rebates. Buck said manufacturers seek meaningful federal reform, and warned that locking federal guidance into state statute could perpetuate problematic elements of the current system.

Numbers and examples discussed - National: Witnesses cited an estimate that the 340B program was about $66 billion in 2023 and represented roughly 7–9% of total drug spending that year. Testimony and materials said the average discount in the program can be about 57% below list price, noting statutory minimums of about 23.1% for brand drugs and 13.1% for generics, with additional inflation‑based adjustments in some cases. - Vermont and local: Witnesses said Vermont FQHCs have 93 sites across the state, and estimated 340B revenue for Vermont FQHCs at about $46 million annually; they said 340B savings were about 25% of net patient revenue for health centers in Vermont. - Market practices: Presenters reported that 37 manufacturers have banned contract pharmacies for hospitals and 24 have done so for FQHCs in some form; third‑party administrators and other fees were said to consume a notable share of 340B gross revenue in some state analyses (Minnesota report cited figures such as about 16% of gross 340B revenue going to program administrators and up to 10% of grantees having net negative revenue after fees).

Distinguishing discussion from action The committee hearing was a fact‑finding and testimony session; no committee vote or formal action on H.266 was recorded in the transcript. Counsel said the draft would take effect on passage and would make conforming edits to state PBM law; witnesses urged the committee to weigh state enforcement tools against ongoing federal litigation and guidance from HRSA and CMS.

Next steps and procedure Committee members said they would hear additional witnesses later in the day and return after a brief floor period to finish the hearing and to hear testimony from other parties, including Blue Cross Blue Shield. Several witnesses asked the committee to craft reporting requirements that allow health centers to explain how they use 340B savings without creating a burdensome data submission process that could be used against them by payers or manufacturers.

Ending The hearing provided lawmakers with detailed descriptions of H.266's proposed statutory language and a range of perspectives from health centers, hospitals and manufacturers on how state law might protect or reshape 340B participation. Committee staff and counsel said they would provide bill language and follow up materials for further review; no vote occurred at the session recorded in the transcript.