States Push to Expand Access to Cheaper Medications Under Federal Drug-Discount Program

A pharmacist assists a customer at MAC Pharmacy in Cleveland. Some states are pushing drugmakers to continue selling cheaper medications to more pharmacies through a federal drug-discount program, aiming to reduce prescription drug costs.

Kansas and other states are making drugmakers sell discounted medications to thousands of pharmacies under the 340B program. This 32-year-old program requires pharmaceutical companies that participate in Medicaid to offer outpatient drugs at reduced prices to clinics, health centers, and hospitals that primarily serve low-income patients. The savings, ranging from 20% to 50% off the normal price, are intended to help these facilities expand their services.

However, many of these facilities lack in-house pharmacies, so in 2010, the federal government allowed more external pharmacies, known as contract pharmacies, to dispense the discounted drugs on behalf of health centers and hospitals. A recent study found that 71% of the top four pharmacy chains (Walmart, CVS, Rite Aid, and Walgreens) participate in the 340B program.

Drugmakers argue that the 340B program has expanded beyond its original purpose, with some hospitals reportedly keeping the savings instead of investing in more services. Research supports this claim. In 2020, several major pharmaceutical companies limited or stopped selling 340B drugs to contract pharmacies, a move that isn’t required by federal law. By September of last year, 25 drugmakers had imposed such restrictions.

Nicole Longo, from the Pharmaceutical Research and Manufacturers of America, stated that while the industry continues to provide discounts, there is concern that patients aren’t benefiting from improved access or lower costs.

In response, states like Kansas, Maryland, Minnesota, Mississippi, Missouri, and West Virginia have passed laws this year requiring drugmakers in Medicaid to sell discounted drugs to contract pharmacies. Arkansas and Louisiana have similar laws, and other states are considering such legislation.

West Virginia state Senator Tom Takubo, who sponsored the law in his state, said, “We passed a bill to ensure drugmakers continue delivering medications to these pharmacies. If they don’t comply, they’ll face fines.”

The 2010 expansion of the 340B program has significantly increased access to discounted drugs, with the number of participating retail pharmacies growing from 789 in 2009 to 25,775 in 2022. Patient spending on 340B drugs also rose from $6.6 billion in 2010 to $43.9 billion in 2021.

Karen Mulligan, a research professor at the University of Southern California, acknowledged valid arguments on both sides of the debate. She noted that the program is meant to support community health centers and rural hospitals, not subsidize drugs for low-income patients. However, she pointed out that some well-funded hospitals have also benefited from the program, raising concerns about whether savings are being used to improve patient care.

Joey Mattingly, a pharmacy professor at the University of Utah, said that the revenue from 340B helps hospitals stay open, particularly in underserved areas. He noted that many hospitals and clinics use the savings to offer free or subsidized drugs, which can improve patient outcomes.

Aimee Kuhlman from the American Hospital Association emphasized that the 340B program generates billions in savings, which hospitals use to benefit patients. She argued that pharmaceutical companies prefer to keep the savings for themselves.

Pharmaceutical companies can opt out of Medicaid if they don’t want to provide 340B discounts, said Greg Havard, CEO of a hospital in Mississippi. He explained that the 340B program helps hospitals cover costs and keep their doors open, especially during challenging times like the COVID-19 pandemic.

Vacheria Keys, from the National Association of Community Health Centers, argued that 340B savings are crucial because federal funding doesn’t stretch as far as it used to. Meanwhile, pharmaceutical companies are challenging new state laws in court. A recent ruling in Mississippi upheld the state law, and drugmaker Novartis plans to appeal.

Robert Dozier, from the Mississippi Independent Pharmacies Association, praised the new law, saying it allows more brand-name drug manufacturers to participate, helping more people in the community.