As we get deeper into Trump 2.0, it feels like the heat is being turned up underneath 340B, driven by proposed rebates, increasing attacks by Big Pharma, the proliferation of state laws protecting contract pharmacy access, and the administration’s growing interest in lowering drug prices. Our safety net healthcare program seems poised for change while being shrouded in uncertainty.
In May, Health and Human Services Secretary Robert F. Kennedy made his first public comments about 340B during separate appearances before House and Senate panels. In his first appearance before a House subcommittee, Kennedy declined to answer a question about shifting program oversight from HRSA to the Centers for Medicare and Medicaid Services, citing a court gag order. But he said that “the patients, themselves, seldom get the benefits of the drug reduction.”
He continued, ““But we also recognize that (340B) is the lifeblood of rural hospitals right now, so we can’t mess with that program without giving those rural hospitals something else that is going to support them.”
Speaking before a Senate subcommittee six days later, Kennedy called 340B “very controversial” but added, “we understand the importance of that program to rural hospitals.”
While not exactly a ringing endorsement, Kennedy’s comments suggest that he understands the key role 340B plays in the healthcare safety net for rural America. That’s key when Republicans, who tend to represent rural areas, have such a lock on power, controlling the House, Senate and White House.
It also underlines how critical it is that rural hospitals lobby their elected representatives about the importance of the 340B program to keep their doors open.
Rebates hit a snag
A federal judge sided with the government’s position that HHS must first grant approval before drugmakers can convert upfront 340B discounts to a rebate model, delivering at least a partial win to covered entities.
U.S. District Judge Dabney Friedrich dismissed the claims from Bristol Myers Squibb, Eli Lilly, Novartis and the drug industry technology vendor Kalderos that HHS unlawfully denied their rebate proposals. (Friedrich gave Sanofi a partial victory, ruling that HHS had not adequately explained why it rejected its proposal but warning the company its rebate model still needed approval from the agency before implementing it.)
Meanwhile, in a May 2 legal notice, HHS said it would issue guidance on 340B rebates within 30 days. And a different federal judge allowed 340B Health and two member hospitals to intervene in a separate rebate lawsuit from Johnson & Johnson.
Friedrich’s ruling is a win in that we won’t see rebates follow the lead of manufacturer restrictions on 340B contract pharmacies, which have proliferated over HRSA’s objections. But she refused to declare that the statute explicitly prohibits rebates, leaving the door open to them in some form in the future.
Most favored nation 2.0?
In other news Big Pharma will hate, President Trump issued an executive order directing HHS to set targets for drug price reductions more in line with what consumers pay in select European countries. If negotiations with drug companies don’t bear fruit, the administration would institute a “most favored nation” policy to lower prices.
"Big Pharma will either abide by this principle voluntarily or we'll use the power of the federal government to ensure that we are paying the same price as other countries to accelerate these price restrictions and reductions," Trump said, per Axios.
Sens. Josh Hawley (R-Mo.) and Peter Welch (D-Vt.) recently introduced bipartisan legislation that has similar aims.
Trump tried to implement MFN in his first term but was blocked by the courts, and the proposal was rescinded by the Biden administration in 2021. As with previous executive orders, nothing takes effect until Congress enacts a law or federal agencies take steps within their administrative purview to implement the plan. It’s not yet clear what effect this proposal could have on 340B.
340B news
There was major drama in the Sooner State as state lawmakers voted in the final hours of the legislative session to override Oklahoma Gov. Kevin Stitt’s veto of a contract pharmacy access bill that had overwhelmingly passed both the House and Senate. The new law, which also bars PBMs from discriminating in reimbursement against covered entities, takes effect Nov. 1.
Once again, the legislation was a target of advertising from dark-money groups, including Building America’s Future. That prompted the bill’s two Republican co-sponsors to decry what they called “blatant lies and misinformation” that would hurt rural providers. By easily clearing the two-thirds majority needed to override Stitt’s veto, Oklahoma becomes the 15th state to prohibit contract pharmacy restrictions.
Meanwhile, Indiana became the fifth state to require hospitals and their child sites to file annual reports detailing their 340B program activities after Gov. Mike Braun signed a measure into law that takes effect July 1.
The Hoosier State seems hostile to 340B. U.S. Rep. Victoria Spartz, a Republican whose suburban Indianapolis district is near the headquarters of Eli Lilly, introduced a bill that would require covered entities to pass along all 340B savings to patients. It would also reduce Medicare reimbursements for 340B drugs to the ceiling price, eliminating any savings.
In other state-level news:
- State lawmakers in Colorado and Hawaii sent measures that combine contract pharmacy access with 340B reporting requirements to their respective governors to sign.
- Tennessee Bill Lee signed legislation that will prohibit any new contract pharmacy restrictions by drugmakers starting July 1. The law will not apply to manufacturer policies in place before then.
- Lawmakers in Vermont sent Phil Scott a bill that combines contract pharmacy protections, hospital reporting requirements and a controversial cap, for certain hospital types, on outpatient drugs at 120% of their average sales price.
Other news items:
- Remember 340B Working Table, the lobbying group launched by South Dakota-based Sanford Health, South Carolina-based Carolina Health Centers and drugmaker Genentech? They’ve added Boston Medical Center and Japanese manufacturer Takeda Pharmaceuticals America, according to lobbying disclosures seen by 340B Report. The organization is lobbying for comprehensive 340B reforms.
- The pharma-funded group ADAP Advocacy, which promotes the AIDS Drug Assistance Programs, is out with a new national ad campaign alleging 340B may be the next “too big to fail” industry, an echo of the phrase from the 2008 financial crisis. “Observers worry that waste, fraud and abuse run deep because the program lacks meaningful accountability and transparency standards, especially among hospitals,” a narrator says in the minute-long ad.
- Lastly, Genentech announced it will begin requiring 340B hospitals to submit claims data as part of its contract pharmacy restrictions. The company also said it would grant 340B pricing only to drugs shipped through authorized distribution channels — an apparent crackdown on alternate distribution channels and other mechanisms meant to avoid contract pharmacy restrictions.
Stay strong and keep doing good work. We’re in this battle together!
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