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Ky. Legislature could ensure pharmaceutical companies give hospitals prescription discounts

A prescription bottle is shown with the cap off and pills spread across a table.
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A Kentucky bill that would ensure discounted prescriptions for eligible hospitals won its first vote.

A Kentucky bill aims to ensure pharmaceutical companies give eligible hospitals a discount on medications through a federal program. It has bipartisan support.

Kentucky lawmakers advanced legislation Wednesday that’s meant to ensure certain hospitals and clinics get lower pricing on various medications — and the financial savings that generates — under a federal program.

The 340B Drug Pricing Program has been around since 1992. It requires pharmaceutical manufacturers that participate in Medicaid to charge “covered entities” — which include an array of hospitals that serve a lot of low-income patients — much cheaper prices than usual for outpatient medications.

That arrangement means more revenue for eligible hospitals. The hospitals can use the savings to make meds more affordable for patients or invest in health services they otherwise couldn’t afford to offer. They also can use the money to shore up their overall operations.

Senate Bill 27 would forbid pharmaceutical manufacturers from withholding low prices for specific medications to eligible Kentucky health care providers under the 340B program if it offers the discount in another state.

Leitchfield Republican Sen. Stephen Meredith, the bill’s lead sponsor, said pharmaceutical companies “rather arbitrarily” decided not to honor 340B discounts for some “covered entities,” including various Kentucky hospitals.

That means less savings for the providers.

“In my particular district, I’ve got three hospitals — small hospitals — and the cuts have been substantial,” Meredith said at a legislative meeting Wednesday. “For one facility, it was $700,000. For another, it was $1.3 million. For another, it was $1.6 million. And these are funds they’re using for the operation of outreach clinics, but also for day-to-day covered expenses.”

The Senate Health Services Committee greenlit Meredith’s bill at Wednesday’s meeting in a unanimous, bipartisan vote.

SB 27 connects to a national policy debate over the 340B program that’s playing out in court, in Congress and in state legislatures.

Current federal policy allows hospitals and other health care providers participating in 340B to work with multiple contract pharmacies to dispense covered medications to patients.

The Kentucky Hospital Association, which supports SB 27, said in a policy paper that over 20 pharmaceutical manufacturers “have begun refusing to ship medications to the contracted pharmacies of 340B safety-net hospitals.”

“As a result of the restrictions being imposed by drug manufacturers, Kentucky’s safety-net hospitals will lose millions of dollars in drug savings that they rely on to keep their doors open and support other valuable services for their patients,” the KHA said.

SB 27 would circumvent such restrictions by pharmaceutical companies.

A national trade group, Pharmaceutical Research and Manufacturers of America, opposes the bill.

Kipp Snider, a staffer with the group, told Kentucky lawmakers last month that the legislation would require “manufacturers to ship products at 340B prices to unlimited numbers of pharmacies” that have contracts with covered providers.

He said contract pharmacies, by themselves, wouldn’t qualify for the reduced pricing. He added that SB 27 “does nothing to guarantee savings for patients.”

“A vote for this bill really is a vote to place mandates on private companies. To essentially force them to ship, at 340B pricing, to contract pharmacies, without regard to any terms and conditions that they want to try to … put in place accountability,” he said.

With Wednesday’s committee approval, SB 27 can come up for a vote by the full Kentucky Senate.

Morgan is LPM's health & environment reporter. Email Morgan at mwatkins@lpm.org.

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