February 23 , 2022

House Business and Labor Committee
350 North State, Suite 350                                                                                                               
Salt Lake City, Utah 84114

Dear Representative,

On behalf of the 13,554 members and supporters of the Council for Citizens Against Government Waste (CCAGW) in Utah, I am writing to express our concerns and opposition to HB 308, which would institute a manufacturer mandate, which constitutes a government price control, thus further distorting the medical marketplace. 

CCAGW has long had concerns over the federal 340B drug discount program, which 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 non-profit entities disappeared.

The 1992 law created two new price control programs, the VA Federal Ceiling Price program and the 340B Drug Discount Program, excluding 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 program was initially intended as a safety net for indigent and uninsured run by the Health Resources and Services Administration (HRSA). Today, the program has expanded eligibility to more Americans under the guise of the Affordable Care Act. The program has grown from $9 billion in 2014 to $29.9 billion in 2019 and represents more than 8 percent of all drug sales. Excessive expansion of the program has resulted in a lack of accountability and misuse by non-profit hospitals and for-profit pharmacies lining their pockets instead of passing on cost savings to the patients, as there is no current federal requirement to do so. 

In addition, a November 2021 Xcenda report confirmed that the 340B program is not being used to lower costs for patients as the program originally intended and that the hospitals and pharmacies that are profiting from the program are predominantly 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. 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 Utah legislature to expand and support such a failed program.

Utah risks a similar lawsuit as Arkansas's, which enacted similar legislation last year and was brought to court on September 29, 2021. The pricing mandate provisions violate federal law and are currently the subject of litigation in the U.S. District Court for the Eastern District of Arkansas.  

If legislators aim is to lower prescription drug costs for patients, the solution is not to expand a failing program and institute more government price controls. For the above reasons, CCAGW respectfully asks you to oppose HB 308. 

Sincerely,
Tom Schatz
President, CCAGW