In the absence of federal legislation on the 340B Drug Pricing Program, state legislatures have seen an uptick. Responding to covered entities’ concerns, an increasing number of states have introduced and passed contract pharmacy protections, as well as laws that aim to combat discriminatory payer practices to ensure that providers can continue stretching scare resources. In addition, sometimes in conjunction with actions to protect covered entities, some states seek to increase transparency and reporting requirements for 340B providers.
Contract Pharmacy Protections
A growing number of states are prohibiting drug manufacturers from restricting 340B drug access to covered entities and their contract pharmacies in the state.
West Virginia Gov. Jim Justice (R) signed contract pharmacy protections into law on March 27. West Virginia is the third state to enact 340B contract pharmacy laws, following Arkansas in 2021 and Louisiana in 2023, both of which have been tied up in lawsuits since passage.
At least 20 state legislatures have introduced 340B contract pharmacy bills in the 2024 legislative session, including Connecticut, Kansas, Kentucky, Maryland, Mississippi, Virginia, and West Virginia, where bills have cleared a legislative chamber.
On March 12, the U.S. 8th Circuit Court of Appeals upheld Arkansas’ 340B Drug Pricing Nondiscrimination Act against a constitutional challenge brought by the Pharmaceutical Research and Manufacturers of America, ruling that neither the 340B statute nor the Federal Food, Drug, and Cosmetic Act preempts the state law. Manufacturer AstraZeneca immediately responded by filing another lawsuit in Arkansas federal district court challenging enforcement of the law as contrary to other federal and state laws.
While litigation is ongoing, the 8th Circuit ruling likely will encourage more states to introduce similar legislation and already has led multiple manufacturers to end restrictions in Arkansas. Louisiana’s contract pharmacy law also faces several ongoing federal lawsuits.
Meanwhile, lawsuits continue related to the Health Resources and Services Administration’s federal enforcement actions against manufacturers imposing contract pharmacy restrictions. The 3rd Circuit issued a decision in manufacturers’ favor in 2023, and decisions by the 7th and District of Columbia circuits are still pending.
Prohibitions on Pharmacy Benefit Manager Discrimination
By the end of 2023, almost 30 states had enacted legislation to protect 340B providers from discriminatory pharmacy benefit manager (PBM) practices. While the scope of legislation varies, the laws generally prohibit PBMs — and, in some states, insurers, third party administrators, and other third-party payers — from engaging in certain behaviors, including:
- Reimbursing 340B covered entities or their contract pharmacies at a lower rate than non-340B entities.
- Charging fees to 340B covered entities or their contract pharmacies that are not charged to non-340B entities.
- Imposing provisions that interfere with a person’s choice to receive 340B drugs from a covered entity or contract pharmacy.
- Imposing administrative requirements specific to 340B covered entities or contract pharmacies.
California became the latest state to enact such legislation in October 2023.
340B Covered Entity Reporting
Minnesota, Maine, and Washington passed 340B provider reporting requirements in 2023.
Minnesota requires covered entities to submit annual reports, the first of which was due April 1, that include the following, broken down by payer type (including commercial insurance, Medicaid, and Medicare):
- Aggregate acquisition cost for 340B prescription drugs.
- Aggregate payment received for 340B drugs.
- Aggregate payment made to 340B contract pharmacies to dispense 340B drugs.
- The number of claims for 340B drugs.
Maine‘s legislation, based on existing hospital voluntary stewardship principles, requires annual reports from 340B hospitals (no other covered entities), including:
- A description of how savings are used to benefit the community.
- Annual estimated savings on 340B drugs, in total and as a share of total drug expenditures.
- Examples of the hospital’s top 340B drugs.
- A description of internal oversight processes.
Washington’s legislation requires annual reporting by all covered entities. This reporting is part of a requirement for the Medicaid agency to analyze the potential impact of alternative models for providing prescription drugs to Medicaid patients, including carving drugs out of the Medicaid managed care program, and assess how those changes affect reduced reimbursement to covered entities. In addition to the amount of discounts, the statute asks for community benefit attributable to 340B providers.
In March 2024, Minnesota lawmakers introduced legislation to expand the state’s existing 340B provider reporting requirements. The legislation adds two collection elements included by the administrative agency upon implementation and adds new enforcement provisions.
America’s Essential Hospitals continues to track state 340B developments and previously published a State Snapshot summarizing 340B state policy, specifically pertaining to combating discriminatory payer practices.
Contact Director of Policy Rob Nelb, MPH, at rnelb@essentialhospitals.org or 202.585.0127 with questions.
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