Lawmakers debate 340B program: senator backs anti-discrimination bill; others urge transparency study

Senate Bill 14 and a related proposal for state-level reporting on the 340B drug-discount program drew extended debate in the House Standing Committee on Health Services, with witnesses and members sharply divided on whether to codify protections or first require greater transparency.

Sen. Steve Meredith, the bill sponsor, told the committee Senate Bill 14 would bar manufacturers from “discriminat[ing] or caus[ing] others to discriminate against a 340B entity by refusing or withholding 340B pricing” where the manufacturer offers the same discounted price in other states. Meredith framed the measure as a protection for rural hospitals and other not-for-profit “covered entities” that use 340B-generated revenue to subsidize community health services. “This is a lifeline for our communities,” he said, warning that some manufacturers have withheld discounts and that losses could total “$250,000,000 in Kentucky” if 340B pricing is not protected.

Other witnesses, including Bill Smith of the Pioneer Institute, Jenny Goins of the National Alliance of Healthcare Purchaser Coalitions, Frank Gemley of the Kentucky Association of Manufacturers, and local life-sciences representatives, urged a different approach: require state-level transparency and data collection before expanding or codifying program protections at the state level.

Bill Smith described the program’s evolution and argued that 340B has grown into a very large federal program with substantial sales volume and complicated incentives. He told committee members that while some hospitals use 340B revenue for charity care, national studies show charity-care levels among 340B hospitals are declining even as program revenue has grown. Smith said Kentucky’s 340B hospitals as a group show lower charity-care rates than the national average and that many contract pharmacies tied to 340B are located in affluent areas, which he said signals an incentive to serve insured patients to “arbitrage” the discount.

The National Alliance and employer groups said state reporting would help identify where 340B revenue flows and how hospitals use it. Jenny Goins noted national reports showing large markups on oncology drugs when hospitals billed state employee health plans and employers and said state studies in Minnesota and North Carolina had revealed that large systems, not small rural clinics, were often the primary beneficiaries of expanded 340B activity.

Sen. Meredith and other supporters said they are not advocating elimination of transparency or oversight, but that immediate protection from discriminatory manufacturer actions is necessary to prevent the sudden loss of revenue that funds services in rural communities. He said Arkansas successfully sued manufacturers in a case that was not taken up by the U.S. Supreme Court and that many states have passed or considered similar measures.

Committee members asked questions about auditing and federal oversight. Witnesses said HRSA audits currently focus on compliance metrics and do not always examine hospital spending or whether 340B revenue is used for charity care. Several members urged both more data and caution: Representative Bridal recounted how a small community hospital relies on 340B funds to sustain oncology and school-based telehealth services.

Representative Mosier said she supports collecting data and “protecting the original intent of the program” while ensuring the federal program’s operation is understood. Several members asked the Pioneer Institute and other witnesses for more detailed data about how hospitals in Kentucky use revenue from 340B discounts.

Outcome and next steps: The committee heard extensive testimony but did not take a final vote on Senate Bill 14 or the related reporting proposal (House Bill 685) during the meeting. Lawmakers expressed interest in pursuing state-level data collection (to mirror Minnesota and North Carolina efforts) while also weighing emergency protections supporters seek for rural providers.

Why it matters: 340B is a federal program that allows eligible hospitals and clinics to purchase certain outpatient drugs at discounted prices. Supporters argue the revenue helps fund care for low-income patients and keep rural hospitals afloat; critics and employer advocates argue the program’s incentives have shifted and that transparency is needed to ensure discounts benefit low-income patients rather than producing market arbitrage for hospitals and contract pharmacies.

Members requested follow-up information and said they will weigh both statutory protections and reporting requirements in further deliberations.