Banking Commerce and Insurance

Bill would regulate discount drug program

The Banking, Commerce and Insurance Committee heard testimony Feb. 27 on a bill meant to protect certain hospitals and other health care facilities in Nebraska that purchase drugs at discount prices through a federal program.

Sen. Brian Hardin
Sen. Brian Hardin

LB984, sponsored by Sen. Brian Hardin of Gering, would prohibit drug manufacturers or wholesale drug distributors from directly or indirectly denying, restricting, prohibiting, refusing, withholding or otherwise interfering with the acquisition of a 340B drug by any pharmacy that is under contract with a participating entity.

Hardin said the federal 340B program was created by Congress in 1992 to authorize eligible critical-access and “safety-net” hospitals and federally qualified health centers to purchase certain outpatient medications at discount prices to help offset the cost of providing Medicaid and Medicare services. The savings that health facilities realize through the federal program are then reinvested in local programs that increase access to care for Nebraskans, he said.

Most rural hospitals do not have in-house pharmacies, Hardin said, so over half of the state’s hospitals contract with community and specialty pharmacies. Manufacturers and wholesalers have begun placing restrictions on those partnerships, he said, and the result is a significant narrowing of the 340B program.

“LB984 does not seek to change the federal 340B program; it simply seeks to regulate the delivery of drugs from a manufacturer or wholesaler through a contract pharmacy,” Hardin said, adding that Arkansas and Louisiana recently passed similar legislation.

Olivia Little testified in favor of the bill on behalf of the Johnson County Hospital and the Nebraska Hospital Association. The 340B program allows small, rural hospitals to continue offering services such as home health, she said, which keeps people out of assisted living facilities and nursing homes without using Nebraska taxpayer dollars.

“Critical-access hospitals are already operating on a very thin margin while supporting needed services in our community that operate at a loss,” Little said.

Also testifying in support was Kathy Nordby, CEO of Midtown Health Center, which is a federally qualified health center in Norfolk with satellite clinics in Madison and West Point. Midtown — which does not have an in-house pharmacy — serves more than 8,200 patients in 14 different counties in northeast Nebraska, she said, providing in-person and telehealth behavioral health resources, psychiatric consultations and other services.

Nordby said more than 80% of the people Midtown serves are at or below 200% of the poverty level and nearly one quarter are uninsured. Placing more restrictions on which pharmacies the center can contract with puts medication access for low-income Nebraskans at risk, she said.

“If I have one pharmacy to serve our entire area … how are people going to get their refills?” Nordby said.

Jed Hansen, president of the Nebraska Rural Health Association, also spoke in favor of LB984. Almost every rural health system is impacted by the 340B program, he said, and 87% of rural Nebraska hospitals have seen their program discounts reduced because of new restrictions by manufacturers and distributers.

“The sustainability of this program is paramount to the health of our communities,” Hansen said.

Jordan Wildermuth testified in opposition to the bill on behalf of the Healthcare Distribution Alliance, which represents wholesale drug distributors. Distributors do not determine the price of 340B drugs, he said, but simply pack and ship them for manufacturers. Other states that have passed similar bills have not included wholesalers in their legislation, Wildermuth said, and he encouraged the committee to consider amending wholesalers out of LB984.

Also opposed to the bill was Katelin Lucariello, deputy vice president of state advocacy for PhRMA, the Pharmaceutical Research and Manufacturers of America. Lucariello agreed that the 340B program is critical for Nebraska hospitals and said manufacturers are committed to its success. Any reform, however, should be done at the federal level, she said, adding that recent legislation passed in Arkansas and Louisiana currently is being litigated.

“We see a federal fix as necessary,” Lucariello said, “because it is a program that requires systematic change rather than creating a kind of a patchwork of state policy.”

The committee took no immediate action on LB984.

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