Committee advances bill to require 340B discounts for pharmacies contracting with covered entities

FRANKFORT — The Senate Standing Committee on Health Services on Monday advanced Senate Bill 14, a measure supporters say will ensure Kentucky hospitals and their contract pharmacies receive federally discounted 340B drug prices that manufacturers have increasingly denied to some contract pharmacies.

Supporters told the committee the 340B program underpins cancer care, addiction recovery and other services in rural counties and that manufacturers’ restrictions on deliveries to contract pharmacies have reduced savings that hospitals use to fund those programs. "This is a very critical program for our hospitals and for access to care in rural communities," Nancy Galvani, president and CEO of the Kentucky Hospital Association, said in testimony.

The bill would, in effect, require manufacturers that offer 340B pricing in other states to provide comparable pricing for drugs delivered to pharmacies that contract with 340B-covered entities in Kentucky. Sponsors said the change responds to manufacturers who have refused to ship discounted drugs to contract pharmacies, creating losses for rural hospitals. "Without the savings from the 340B program, critical health services that are being supported from those savings will become unaffordable," said Angela Portman, chief executive officer of Breckenridge Health Incorporated, a 25-bed critical access hospital.

Hospital witnesses described programs funded from 340B savings. Don Lloyd, CEO of UK Sinclair (Morehead regional referral center), told the committee his system used savings for chronic care, oncology and medication-access programs and to subsidize transportation to care. Brian Springgate, CEO of ARH Hazard Regional Medical Center, said changes by manufacturers have cost his system nearly $12 million annually in lost 340B savings and that audits and documentation requirements are extensive.

Opponents — including industry and purchaser groups — argued the bill would expand the federal 340B program beyond Congress’s intent and could increase costs for employers and payers. Russell Polk, director of government affairs for BIO (the Biotechnology Innovation Organization), said SB 14 "codifies contract pharmacies in statute" and "does not help patients lower their out-of-pocket cost." Jenny Goins, chief of staff for the National Alliance of Healthcare Purchaser Coalitions, urged more transparency about program fiscal effects and said employers bear potential cost risk.

Pharmaceutical industry witnesses also warned of legal uncertainty. Christina Morehead, deputy vice president of state policy for PhRMA, told the committee the bill would redefine the federal "covered entity" concept in state law and that similar state laws are the subject of ongoing litigation nationwide.

Committee discussion emphasized the bill’s intent to preserve services in rural communities rather than to change federal law. Senator Berg said the program "is to keep the doors open for those places that people need to be able to receive health care" and urged colleagues to consider local hospital impacts. Senator Rawlings, who announced a no vote in committee, said constituent concerns center on whether discounts are passed through to individual patients.

The committee voted to advance SB 14 with a favorable recommendation (tally reported as 9 yes, 1 no, 1 present/pass). Supporters and opponents told members they want additional transparency on how savings are used if the bill moves forward.

Aides and witnesses pointed committee members to written testimony and noted that several other states have enacted or considered similar laws; proponents said at least 19 states are working on comparable legislation and several states, including Arkansas, Mississippi, Louisiana, Missouri and Maryland, have passed related measures.