March 4, 2025

South Dakota House of Representatives  
South Dakota State Capitol    
500 East Capitol Avenue
Pierre, South Dakota 57501

Dear Representative,

On behalf of the 5,480 members and supporters of the Council for Citizens Against Government Waste (CCAGW) in South Dakota, I urge you to oppose SB 154, which will change how the federal 340B Drug Pricing Program operates in South Dakota.  I also urge you to approve an amendment to the legislation to require the South Dakota Legislative Research Council to complete a fiscal note, which will provide a fuller understanding of the impact this bill would have on South Dakotans. 

In 2023, forgone rebates on prescriptions filled with 340B pricing increased South Dakota commercial employer costs by $57 million and state and local government healthcare plans by $9 million.  340B contract pharmacy mandate bills like SB 154 would likely increase costs by $23 million for commercial employers and $3.7 million for state and local government plans.

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.

A January 23, 2025, fiscal analysis of 340B contract pharmacy mandate legislation in Utah 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.” 

On November 25, 2024, the Minnesota Department of Health (DOH) issued the first report on how 340B 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 South Dakota to forgo changes to the program until they analyze how it impacts patients and taxpayers.

For the above reasons, I ask you to oppose SB 154 and support an amendment to require a fiscal note.  Rather than acting on legislation that impacts a federal program, I urge you to contact your congressional delegation and ask them to reform 340B.   

Sincerely,
Tom Schatz
President, CCAGW