April 30, 2025

The Honorable William Lee   
Governor of the State of Tennessee
Tennessee State Capitol, First Floor  
600 Dr. Martin L. King, Jr. Boulevard
Nashville, Tennessee 37243

Dear Governor Lee,

On behalf of the 5,436 members and supporters of the Council for Citizens Against Government Waste (CCAGW) in Tennessee, I urge you to veto SB 1414, which will change how the federal 340B Drug Pricing Program operates in the Volunteer State.  

The late Sen. Everett Dirksen said, “A billion here, a billion there, and soon you are talking about real money.”  While he was discussing the federal budget, the same concept applies to states but in the millions.  The House’s decision to remove the fiscal note from SB 1414 and ignore the projected $7 million cost is not only fiscally irresponsible but also opens the door to similar decisions for other legislation, and it is real money to Tennessee taxpayers. 

In 2023, forgone rebates on prescriptions filled with 340B pricing increased Tennessee commercial employer costs by $123 million and state and local government healthcare plans by $18 million.  340B contract pharmacy mandate bills like SB 1414 would likely increase costs by $25.2 million for commercial employers and $3.7 million for state and local government plans.

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 Tennessee to forgo changes to the program until they analyze how it impacts patients and taxpayers.

For the above reasons, I ask you to veto SB 1414.  Rather than acting on legislation that impacts a federal program, I urge you to contact Tennessee’s congressional delegation and ask them to reform 340B.   

Sincerely,
Tom Schatz
President, CCAGW