Expanding the 340B Program: A Costly Mistake for North Dakota

This Wednesday, the North Dakota Senate Human Services Committee will hold hearings regarding HB 1473, legislation that would expand the second largest federal drug program: 340B. Although legislators may have good intentions in expanding the program, doing so will lead to unintended consequences for patients across North Dakota while ignoring the program’s fundamental flaws. 

Specifically, HB 1473 requires biopharmaceutical manufacturers to ship 340B drugs to all contract pharmacies that contract with 340B “covered entities” and, by extension, offer 340B pricing at these locations. As a result, these pharmacies would be able to offer 340B pricing at their locations, effectively broadening the program’s reach without addressing—and likely exacerbating—concerns about patient access, oversight, transparency, or the potential for misuse. 

The 340B program was originally designed to help hospitals serve vulnerable populations. However, a recent analysis found that two-thirds of 340B disproportionate share hospitals are not even located in medically underserved areas. In North Dakota specifically, only 38% of contract pharmacies operate in such areas. Instead of directing these savings towards patient care, hospitals purchase drugs at discounted 340B prices and then charge significantly higher rates to patients with commercial or employer-based insurance. By taking advantage of the gap between the lower 340B cost and the higher reimbursement from insurers and patients, these hospitals generate substantial profits from expensive medications. 

An IQVIA analysis found that commercial employers in North Dakota shoulder an estimated $53 million in additional healthcare costs due to lost rebates under the 340B program, while state and local governments face an extra $10 million. If passed, HB 1473 would further increase these costs by $14 million for commercial employers and $2 million for state and local government plans in North Dakota. 

The biopharmaceutical industry is one of the most heavily regulated industries in the United States. It costs more than $2.5 billion and can take over a decade for just one new drug to make it through the Food and Drug Administration (FDA) approval process. Adding onto this massive regulatory framework by piling on with even more government intervention at the state level would only make pharmaceutical development that much more costly and complicated.  

Additionally, the 340B program is a comprehensive federal program that is governed exclusively by federal law – not state law. State governments do not have the authority to create new requirements that are not in the federal statute or that conflict with requirements in said statute. 

Currently, ongoing litigation exists in other states that have passed legislation similar to HB 1473. Both Maryland and West Virginia are facing legal challenges over concerns that their laws conflict with the federal enforcement framework of the 340B program and lack the necessary levels of transparency. Expanding the 340B program before these lawsuits are resolved could potentially lead to North Dakota taxpayers bearing the costs of defending against similar legal challenges. 

Further expansion of the 340B program—beyond its original intent—would reduce the resources available to manufacturers for investing in research and development of the next generation of lifesaving and life-improving medications. This could hinder pharmaceutical innovation and limit access to current treatments, ultimately leaving the people of Tennessee with fewer, lower-quality options. As a result, expanding 340B could drive up healthcare costs in the long term. Americans for Tax Reform opposes efforts to expand 340B and urges you to vote no on HB 1473.