February 14, 2022

Committee on Health Coverage, Insurance and Financial Services
Cross Building, Room 220
Maine State Capitol
210 State Street
Augusta, ME 04333

Dear Representative,

On behalf of the 9,518 members and supporters of the Council for Citizens Against Government Waste (CCAGW) in Maine, I am writing to express our concerns and opposition to LD 1938, “An Act to Prohibit Discriminatory Practices Related to the 340B Drug Pricing Program.”

The federal 340B drug discount program has been problematic for many years. LD 1939 would fail to solve any of those problems and further distort the medical marketplace by instituting more government mandates.

The 340B program was created as part of the 1992 Veterans Health Care Act due to how Congress implemented the Medicaid Drug Rebate program in 1990. When the Medicaid drug benefit was written, the rebate value was based on the average manufacturer price (AMP) or the difference between the AMP and the lowest price charged to any entity in the U.S. Although Congress was alerted in hearings that using an all-inclusive AMP would be a problem, they did not factor in the significant discounts that pharmaceutical companies had been voluntarily giving the Department of Veterans Affairs (VA) and non-profit entities that served the indigent and uninsured. As a result, the generous discounts provided to the VA and nonprofit entities disappeared.

The 1992 law created two new price control programs, the VA Federal Ceiling Price program and the 340B Drug Discount Program and excluded their prices from the Medicaid rebate calculus. These price control programs, along with those found in the Medicare Part D coverage gap, have distorted the pharmaceutical marketplace in the U.S.

The 340B was intended as a safety net for indigent and uninsured run by the Health Resources and Services Administration (HRSA). It has grown from $9 billion in 2014 to $29.9 billion in 2019 and represents more than 8 percent of all drug sales. One of the biggest problems with the program is how nonprofit hospitals and for-profit pharmacies have been lining their pockets instead of passing on cost savings to the patients.  A November 2021 Xcenda report found that the 340B program is not being used to get low-cost drugs to the individuals it is intended to serve, and that the hospitals and pharmacies that are profiting from the program are largely not located in areas that serve low-income people.  These findings echo a 2018 New England Journal of Medicine study that “found compelling evidence that financial gains for hospitals were not associated with expanded care or lower mortality among low-income patients.  In fact, the analysis suggested hospitals use the 340B program for financial gain and act contrary to the goals of the program to serve low-income patients.”  It makes no sense for the Maine legislature to expand and support such a failed program.

The price controls outlined in this bill would further distort the medical marketplace and can be challenged as being unconstitutional. The state of Arkansas enacted similar legislation, which was challenged in the U.S. District Court for the Eastern District of Arkansas on September 29, 2021, based in part that the pricing mandate provisions violate federal law. 

The original intent of the 340B program to provide a safety net for patients is not what the program represents today. Inserting more mandates into this troubled program will not lower costs for patients.

State legislators should oppose any efforts to institute price controls or amend the flawed 340B program. For the above reasons, we respectfully ask you to oppose LD 1938.

Sincerely,
Tom Schatz
President, CCAGW

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