Lessons from Two State Legislatures and What They Mean for 340B Stakeholders

By Ted Slafsky

As many 2023 state legislative sessions come to an end, it is a good time to take a closer look at two states—one in the South and one in the Northeast—to see how they are tackling some of the most pressing matters impacting 340B stakeholders.

First, let’s turn to Louisiana. On June 12, Louisiana became only the second state to pass legislation requiring pharmaceutical manufacturers to honor 340B contract pharmacy arrangements. Specifically, the Louisiana law prohibits actions by a drug manufacturer or distributor that would deny, restrict, prohibit, or otherwise interfere with the acquisition of a 340B discounted drug to a pharmacy that is under contract with a 340B entity.

It also prohibits practices by a health insurance issuer, pharmacy benefit manager, or other third-party payor that would limit or impose conditions that would indirectly lower the amount of reimbursement for 340B drug dispensed by a 340B entity or its contract pharmacies. According to Ryan White Clinics for 340B Access, 27 states have passed one or more laws since 2019 addressing discriminatory 340B drug reimbursement. This includes approximately a half dozen in 2023.

The amount of support for the legislation in the Louisiana state legislature was striking. First it passed the Republican controlled House in April by a 97-2 margin. Then, it cruised through the GOP majority Senate by a vote of 38-0 in early June and was signed into law by conservative Democratic Gov. John Bel Edwards on June 12.

Contrast between State and U.S. Lawmakers

The contract pharmacy element is notable considering how difficult it has been to enact similar legislation to Arkansas’ first of its kind law in 2021. In addition, Louisiana’s two U.S. Senators are two of the most vocal critics of the program and have introduced various bills to limit its scope and reduce savings for Louisiana covered entities. Sen. Bill Cassidy, the ranking Republican on the Senate HELP Committee which has jurisdiction over the 340B program, has introduced various bills considered by 340B providers to be highly problematic.

Sen. Cassidy also has aggressively grilled those who have testified before his committee on the 340B program. So much so that he told then U.S. Health and Human Services Secretary nominee Xavier Becerra in March 2020 that he would be opposing his nomination due to Becerra’s “lack of familiarity of the 340B program.” Just a few months earlier, Becerra, who was California U.S. Attorney General at the time, led a bipartisan letter signed by 28 state attorney generals to the Trump administration urging HHS to take immediate action to block and sanction drug manufacturers who were not providing 340B pricing to contract pharmacies.

Louisiana’s other U.S. senator, John Kennedy (R), introduced a bill this session to require 340B providers to bill all patients at acquisition cost including insured patients. The bill appears to be the first one introduced in decades that would prohibit 340B covered entities from retaining any savings from 340B purchases. The bill also would require entities to report annually to HHS the total amount they paid for 340B drugs and the total amount they received for such drugs.  The bill is unlikely to get traction but is noteworthy, nonetheless.

Meanwhile in Connecticut

Neighboring Arkansas in 2021 was the first state to enact a law similar to Louisiana’s. Pharmaceutical Research and Manufacturers of America is suing the state in an attempt to have the law declared unconstitutional. Its case is before the U.S. Eighth Circuit Court of Appeals in St. Louis. PhRMA has aggressively and successfully lobbied state legislatures in an effort to block similar bills. Take Connecticut for instance.

As you may recall from my February column, Connecticut Gov. Ned Lamont (D) had introduced the most comprehensive state 340B law ever. The bill addressed the three key pillars that many lawmakers from both sides of the aisle would like to tackle. It would have:

• prohibited drug manufacturers from placing contract pharmacy restrictions
• protected 340B providers from what providers perceive as discriminatory reimbursement and other alleged discriminatory practices by PBMs and insurers
• required hospitals to provide detailed reporting to the state to ensure they are being good stewards of the 340B program.

Compromises were made, including scaling back what hospital groups thought were overly burdensome reporting requirements. However, just days before the Nutmeg State was poised to enact the law, the drug manufacturer contract pharmacy provisions were removed from the bill. And hours before the final bill passed the legislature, the reporting requirements, which now were going to apply to all covered entities, also were removed. The final legislation, which was signed into law by Gov. Lamont on June 21, just includes protections against alleged discriminatory practices by PBMs against 340B providers.

Key Lessons

What are the key takeaways from these developments? The fact that ruby red Louisiana was able to easily pass legislation that is strongly opposed by the drug industry while the blue state of Connecticut failed, underscores that at least at the state level, political party does not matter when it comes to support for the 340B program. In addition, Connecticut’s failed attempt at a bold 340B reform compromise foreshadows the challenges ahead in getting a national consensus on thorny 340B issues.

Ted Slafsky is the Publisher and CEO of 340B Report, the only news and intelligence service exclusively covering the 340B program.  Slafsky, who has over 25 years of leadership experience with the 340B program, is also Founder and Principal of Wexford Solutions.  Ted can be reached at ted.slafsky@340Breport.com.

Disclaimer: The views and opinions expressed in this blog are those of the authors. They do not necessarily reflect the official policy or position of any other agency, organization, employer, or company.