February 11, 2025

Utah State Legislature
East Senate Building
Senate Committee on Business and Labor
120 East Capitol Street, Suite 120 
Salt Lake City, Utah 84103                                                                                   

Dear Senator,

On February 13, 2025, the Senate Committee on Business and Labor will hold a hearing on SB 69.  On behalf of the 13,554 members and supporters of the Council for Citizens Against Government Waste (CCAGW) in Utah, I urge you to oppose SB 69, which will change how the federal 340B Drug Pricing Program operates in Utah.  Congress created 340B in 1992 to fix a problem it created in 1990 when it implemented price controls in Medicaid.  It requires pharmaceutical companies that participate in Medicaid to give discounts of between 20-50 percent to certain federally funded facilities and disproportionate share hospitals.  But 340B does not define “patient” or require covered entities to pass on drug savings to patients.

A January 23, 2025, fiscal analysis of SB 69’s 340B contract pharmacy mandate 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.”  There is no reason to risk Utah taxpayer’s money by enacting this legislation.

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.

On November 25, 2024, the Minnesota Department of Health (DOH) issued the first report on how the program 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 Utah 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 69.  

Sincerely,
Tom Schatz
President, CCAGW