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Subcommittee backs bill to protect 340B covered entities' contract pharmacy arrangements; stakeholders split in testimony
Summary
House Bill 1242, which would bar manufacturers from restricting contract pharmacy arrangements and limit manufacturer data requests for 340B covered entities, passed the Insurance Subcommittee 6-0 after testimony from pharmaceutical industry and safety-net providers.
House Bill 1242, which sponsors say would protect covered entities' ability to use 340B contract pharmacies and limit excessive data requests by drug manufacturers, passed the Insurance Subcommittee on Feb. 26 and will advance to the full Insurance Committee.
Sponsor Representative Geraldine Haynes told the committee that the federal 340B program, established in 1992, "allows eligible health care providers called covered entities to purchase outpatient drugs at discounted rates to stretch federal resources, increase access, and provide comprehensive care to the most vulnerable patients, low income, under insured, and uninsured." Haynes said the amendment to HB 1242 is "clarifying in nature" and that the bill would ensure drug manufacturers cannot "interfere with or restrict safety net providers' contract pharmacy arrangements" or shift the program from an upfront-discount model to a post-sale rebate model.
Two witnesses with opposing views testified. Sarah Balog, senior director of state policy at a pharmaceutical industry trade group, testified in opposition and described 340B as a large federal program whose growth has outpaced original intent. Balog said contract pharmacies "are a primary driver of the growth in the 340B program" and argued many participating entities do not reinvest markup profits into charity care. She cited a fiscal note that, she said, shows the state could see more than $7,000,000 in recurring annual costs if the bill passes and said legal challenges have followed similar laws in other states.
Dr. Shannon Berger, CEO of Simpa Community Care and a board member of the Tennessee Primary Care Association, testified in support. Berger said Tennessee's covered entities are not-for-profit safety-net providers that are subject to audits by HRSA and other entities and argued the bill is necessary because manufacturers have recently imposed restrictions that limit access to contract pharmacies and are attempting to convert front-end discounts into back-end rebate schemes. Berger said 340B savings help rural and underserved patients by enabling safety-net providers to offer services such as sliding-fee scales and in-house pharmacies.
Committee members asked about transparency, markups and litigation. Balog said other states with similar bills have seen litigation and that manufacturers and pharmaceutical trade groups have challenged such laws in court. Berger said 340B entities are subject to multiple audits, that not-for-profits file IRS Form 990s, and that front-end discounts prevent rebates from flowing to for-profit intermediaries such as PBMs.
An amendment (drafting code 3956) was adopted and the committee voted to pass HB 1242 as amended; the clerk recorded a 6-0 vote. The transcript includes statements from witnesses and committee members but does not include the bill's full text or the complete fiscal analysis; the fiscal note cited by one witness was referenced but not read into the record during the excerpt. HB 1242 will proceed to the full Insurance Committee.
