February 6, 2025

North Dakota State Capitol
House Committee on Industry, Business, and Labor
Capitol Room JW327C
600 East Boulevard Avenue
Bismarck, North Dakota 58505

Dear Representative,

The House Committee on Industry, Business, and Labor will soon hold a hearing on HB 1473.  On behalf of the 4,186 members and supporters of the Council for Citizens Against Government Waste (CCAGW) in North Dakota, I urge you to oppose HB 1473, which will change how the federal 340B Drug Pricing Program operates in North Dakota.  Congress created 340B in 1992 to fix a problem it created in 1990 when it implemented price controls in Medicaid.  It requires pharmaceutical companies that participate in Medicaid to give discounts of between 20-50 percent to certain federally funded facilities and disproportionate share hospitals.  But 340B does not define “patient” or require covered entities to pass on drug savings to patients.

A November 2021 Xcenda study, “340B and Health Equity: A Missed Opportunity in Medically Underserved Areas,” showed how 340B boosts hospitals’ coffers and their contract pharmacies’ profits located in areas that do not serve low-income people.  An IQVIA study, “The 340B Drug Discount Program Exceeds $100B in 2022,” found ongoing misuse of the funds by hospitals and contract pharmacies.

On November 25, 2024, the Minnesota Department of Health (DOH) issued the first report on how the program works in a state.  The hospitals received at least $630 million in 340B revenue in 2023, which may only be half of the total.  The largest hospitals, or 13 percent of participating hospitals, received more than $500 million, or 80 percent of the revenue.  The highest profit was $129 million at M Health Fairview University of Minnesota Medical Centers while federal safety-net grantee clinics generated the least revenue. 

The Minnesota DOH report should be a wake-up call not only for Congress to move forward with 340B reform as CCAGW has recommended, including defining a patient as indigent, not eligible for Medicaid, and lacking insurance, as well as verification of patient eligibility by covered entities, but also for states like North Dakota to forgo changes to the program at least until they analyze how it is impacting patients and taxpayers within their borders.  A January 23, 2025, fiscal analysis of 340B contract pharmacy mandate legislation in Utah similar to HB 1473 found that, “Enactment of this legislation could also increase pharmacy costs for the Public Employees Health Program (PEHP).  Assuming ten percent more drugs are purchased through 340B pricing, PEHP statewide costs could increase by $1,987,700, ongoing in FY 2026 from the General Fund, Income Tax Fund and Other Financing Sources.”

Rather than acting on legislation that impacts a federal program, I urge you to contact your congressional delegation and ask them to reform 340B.  Again, I ask that you oppose HB 1473.  

Sincerely,
Tom Schatz
President, CCAGW