Blue Cross tells Health Care committee 340B discounts are linked to higher commercial drug prices in Vermont

Tom Whitley, chief medical officer at Blue Cross and Blue Shield of Vermont, told the Health Care committee on Feb. 26 that the federal 340B drug‑pricing program has contributed to higher costs for people with commercial insurance in Vermont.

Whitley said hospitals that participate in 340B obtain discounts from drug manufacturers but then charge commercially insured patients marked‑up prices, and insurers lose manufacturer rebates on those claims. "Commercial members end up paying more for 340B drugs and a higher drug loss results in higher insurance premiums," Whitley said.

The company presented state and national comparisons it said illustrate the effect. The RAND data cited showed Vermonters receiving drugs at hospitals with 340B pharmacies paying substantially more than the average sales price (ASP). Whitley said Vermont’s average appears to be about 500 percent of ASP, and that Blue Cross members in Vermont are an outlier nationally for hospital drug pricing. Using Remicade as an example, Whitley said members were paying roughly 1,112 percent of the ASP at UVM Medical Center and that the company’s internal calculation showed a 56 percent increase in the billed price over time; he noted that the Green Mountain Care Board approved rate increases for UVM Medical Center of roughly 52 percent over a similar period.

Blue Cross presented comparative pricing for infusion drugs across settings — academic hospitals, community physician offices, independent infusion sites and a pharmacy provider (Optum). The presentation showed large discrepancies: one slide showed UVM Medical Center at much higher billed prices compared with Novella Infusion Center in South Burlington and Optum’s pharmacy. The company said its data indicate that, on average, for every one of its members per month the insurer paid $32 more because of infused medication pricing in hospitals.

Whitley and Sarah Tichau of Blue Cross and Blue Shield of Vermont framed the problem as threefold: 1) hospitals set higher chargemaster prices and apply those to insured patients; 2) when a drug is obtained through a 340B‑eligible pharmacy the insurer typically loses manufacturer rebates; and 3) state law and recent legislation limit insurers’ ability to direct patients to lower‑cost channels. "We don't know what they pay. We don't know what they save. We don't know what those profits are," Whitley said, describing the company's primary ask as increased transparency.

Blue Cross presented specific figures the company said illustrate the rebate/rejection problem: an estimated rebate rejection rate above 45 percent at UVM Medical Center, about 17 percent at Dartmouth, and roughly 5 percent through Optum, and estimated that if Dartmouth and UVM had accepted the insurer’s rebate arrangements, members would have saved about $12,600,000 in 2024.

Company witnesses described policy constraints that limit insurer options. Whitley noted a state law banning "white‑bagging" that he said prevents insurers from supplying some drugs directly to infusion sites and thereby directing patients to lower‑cost sources.

Blue Cross proposed a transparency requirement that would go beyond the bill on the table (H.202) by requiring 340B participants to report: the discount price paid to manufacturers for individually identified drugs; the amount charged to insurers for each claim; and the uses of the financial margins generated by 340B pricing (for example, community health programs, charity care or hospital operations). The company said insurers already report drug‑by‑drug data to the Attorney General’s office and the Green Mountain Care Board and urged similar reporting by 340B participants.

Committee members asked clarifying questions about which hospitals the data covered, how infusion sites and physician offices compare, whether federally qualified health centers and Planned Parenthood were included in the comparisons, and how pharmacy benefit manager formularies and prior authorization interact with site‑of‑care pricing. Blue Cross said it could provide additional hospital‑level and FQHC data on request.

The presentation closed with committee members and Blue Cross agreeing to follow up: committee staff said they would send questions back to Blue Cross and consider how H.202 and other transparency measures relate to the issues raised.