December 6, 2024

Michigan State Senate
Lansing, Michigan 48933

Dear Senator,

The Senate Oversight Committee will hold a hearing on December 10, 2024, on SB 1179, which will change how the federal 340B Drug Pricing Program operates in Michigan.  On behalf of the 55,582 members and supporters of the Council for Citizens Against Government Waste (CCAGW) in Michigan, I urge you to oppose this legislation.  Congress created 340B in 1992 to fix a problem it created in 1990 when it implemented government set price controls, or rebates, in the Medicaid drug benefit program.  To participate in Medicaid, pharmaceutical companies must partake in the 340B program by giving discounts between 20-50 percent to certain federally funded facilities and disproportionate share hospitals.  But the statute does not define “patient” or require covered entities to pass on drug savings to patients.

A January 2018 House Energy and Commerce Committee report on 340B identified insufficient oversight, unreliable data, and inadequate reporting requirements, as well as unclear statutory intent and no definition of an eligible patient.  A November 2021 Xcenda study, “340B and Health Equity: A Missed Opportunity in Medically Underserved Areas,” showed how 340B fails to help low-income individuals get access to low-cost prescription drugs.  Instead, it is boosting 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, and patients still failing to get their benefits.

On November 25, 2024, the Minnesota Department of Health (DOH)  issued the first report on how the program works in a state.  While hospitals in Minnesota received at least $630 million in 340B revenue in 2023, that may only be half of the total based on national data for the program.  The largest hospitals, which equal 13 percent of the participating hospitals, received more than $500 million, or 80 percent of the revenue.  The highest profit from 340B was $129 million at M Health Fairview University of Minnesota Medical Centers.  That was not the case for federal safety-net grantee clinics, which generated the least net 340B revenue, and some showed a loss. 

The Minnesota DOH report provides more transparency and exposes the abuses of the program.  It 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 Michigan to forgo changes to the program at least until they analyze how it is impacting patients and taxpayers within their borders. 

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 SB 1179.  

Sincerely,
Tom Schatz
President, CCAGW