While the House Insurance and Financial Services Committee only had one item on its agenda on Wednesday, there was a packed roster.
Representatives of the pharmaceutical industry and various health care networks sparred over a policy that would bar manufacturers from denying access to prescriptions to organizations participating in a federal drug affordability program.
House Bill 5350 prohibits drug manufacturers from impeding the purchase, order, delivery or receipt of drugs purchased by entities participating in 340B, a federal program requiring manufacturers to sell outpatient drugs at a reduced price to organizations that care for uninsured or low-income patients. It also prohibits a pharmacy from contracting with a 340B entity by denying 340B pricing, access to a manufactured drug, or based on a pharmacy’s relationship to a 340B entity.
State Rep. Alabas Farhat (D-Dearborn), who sponsored the bill, said it would expand people’s access to prescription drugs at a discounted price in a place that is accessible to them.
“340B is a federally designated program, designated to get pharmaceutical manufacturers to discount some of the most expensive drugs you can think of and ensure that there’s access to them at rural community centers, at cancer centers for those patients who need them,” Farhat said.
“What we seek to do here is enable the hospital to connect with a local provider closest to that patient and be able to deliver care closer to that patient. So now you can go to your local next door pharmacy or even a chain branch, sure, but you can go somewhere closer to you and be able to get your prescription drugs at a discounted price,” he said.
To receive that discount, one must be a qualified 340B patient at a provider who meets the program’s requirements, Farhat said.
According to an infographic submitted to the committee by the Michigan Health and Hospital Association (MHHA), entities including cancer centers, children’s hospitals, rural referral centers, sole community hospitals, hospitals serving a high percentage of patients on Medicaid and a number of community health centers and specialty clinics qualify for 340B drug pricing.
MHHA says the program allows hospitals flexibility to invest savings back into local healthcare needs through programs such as mobile health clinics, financial assistance programs for low-income patients, supporting high-cost lines of service needed within a community, or providing access to low-cost drugs.
However, Kristin Parde, deputy vice president of state advocacy for the Pharmaceutical Research and Manufacturers of America (PhRMA), argued the bill would help codify a major flaw in the federal program: a lack of accountability to patients. It would also benefit the bottom line for large hospital systems, chain pharmacies and pharmacy benefit managers, she said.
“The goal of HB 5350 and similar legislation is often misrepresented as a prescription access issue, but scripts [that] are provided to a patient from a 340B covered entity can now and have always been able to be billed at any pharmacy. Since there is no requirement for 340B hospitals or the pharmacies they contract with to share the significant discounts they receive on prescription drugs directly with patients, they typically do not,” Parde said.
While the purchase of drugs at 340B prices has more than tripled in the past decade, there has not been any corresponding growth in patient populations or improved affordability of medications, Parde said.
Research has found the number of retail pharmacies participating in 340B increased from 1.3% in 2010 to 40.9% of all retail pharmacies in 2022, while contracts with safety-net hospitals and clinics have dropped from 95% in 2009 to 54% in 2022. Several studies have also found participants in 340B, particularly hospitals, are establishing contracts in areas with fewer uninsured and more wealthy patients.
This trend has prompted scrutiny from U.S. Sen. Bill Cassidy (R-La.), Parde noted, as well as action from U.S. Sen. Debbie Stabenow (D-Lansing) and other senators supporting bipartisan efforts to reform the program.
William Smith, senior fellow and director of the Pioneer Life Sciences Initiative at the Pioneer Institute for Public Policy Research, a free-market think tank, said that while 340B began as a modest program, it has exploded since hospitals realized they could arbitrage the discounts, or buy drugs at low prices through the program and obtain generous reimbursement from commercial payers and Medicare at much higher price.
While dispensing with the federal program would have devastating consequences for many hospitals, the program needs more transparency, Smith said. Rather than advancing House Bill 5350, Smith recommended lawmakers require hospitals to file and disclose how much revenue they secure from 340B and how they spend the funds.
However, several Michigan health centers pushed back against these arguments.
“To hear the program described as profit, I’m comfortable saying it’s the pharmaceutical interests’ profit to their shareholders but this program is about savings to our patient,” said Marc Corriveau, a former Democratic House member who’s now chief government relations officer at Henry Ford Health.
“Congress established the 340B program and the intent was very clear. In a committee report on the bill, Congress states that its intention for the savings from these discounted prices is to stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services,” Corriveau said.
While critics argued against health centers capturing the savings from the program, those savings go back into the system and back out into the community through hundreds of millions of dollars in community benefit, Corriveau said.
“They talk about the arbitrage and this program as if it’s a clandestine effort to take some of the profit that they realize from shareholders and heaven forbid it’s passed on through our system,” Corriveaeu said, noting that Henry Ford Health uses the savings from the program to reduce costs for medical and behavioral health across its system to uninsured and underinsured individuals, as well as funding and staffing community health centers, and operate school-based community health programs.
Although House Bill 5350 won’t expand the federal savings program, it will stifle efforts from the pharmaceutical industry to restrict 340B, Corriveau said before acknowledging the efforts of Stabenow, U.S. Rep. Jack Bergman (R-Watersmeet) and other bipartisan members of Congress to protect rural providers through 340B.
Maureen D’Agostino, vice president of corporate 340B programs for McLaren Healthcare Corporation, noted that the program has seen a reduction in savings in recent years due to restrictions placed by drug manufacturers on providing reduced pricing at contract pharmacies.
Thirty-three drug manufacturers have imposed restrictions on McLaren as new companies continue to follow suit, D’Agostino said, arguing these restrictions have threatened the ability of participating health care organizations to offer various patient care services.
“Manufacturer restrictions initially were imposed in October of 2020, and in 2023 McLaren saw a reduction of $33.3 million in savings due to restrictions. Over the first four months of 2024 we have been impacted by a loss of $27 million already in 340B savings because of these restrictions,” D’Agostino said.
“We urge this committee to be thoughtful in their decision so we can continue to support our communities in a time of need. Without this support — which costs $0 to taxpayers — this vital community need will continue to dissipate, driving health care costs up because [of] a lack of community support that we at McLaren are so proud to provide,” she said.
Ben Frederick, a GOP former House member who’s now the associate vice president of advocacy and government relations at Memorial Healthcare acknowledged that the 340B program has grown, attributing it to increased need and access as well as the rise of drug costs.
“So, yes, the cost if you will, to the pharmaceutical sector has grown as the cost of the drugs underlying the social safety net program has grown tremendously,” Frederick said.
Sean Gehle, regional vice president of advocacy and government relations for Trinity Health also noted that the programs funded by 340B savings are also subject to audit by the Health Resources Services Administration to ensure the programs meet necessary legal requirements.
While the committee did not vote on Wednesday, Committee Chair Brenda Carter (D-Pontiac) said the committee would consider the wide breadth of testimony and would anticipate seeing stakeholders again as the committee prepares to vote on the policy, or if it should need additional hearings.
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