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Next week, North Dakota HB 1473 will be heard in the Industry Business and Labor Committee of the North Dakota House of Representatives. Americans for Tax Reform (ATR) and our supporters across North Dakota strongly oppose HB 1473 which would expand the second largest federal drug program: 340B. Expanding 340B would result in taxpayers footing the bill against costly lawsuits as well as a number of unintended negative consequences for patients across North Dakota.
Today, 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. Introducing even more layers of government intervention and bureaucratic red tape at the state level would only exacerbate the current problems and 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.
Specifically, HB 1473 would require 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. The legislation makes no effort to address concerns about patient access and would only exacerbate existing problems with the 340B program.
While the 340B program was originally designed to help hospitals serve vulnerable populations, its unintended consequences have been dramatic. The norm has become that instead of directing savings towards patient care, hospitals use 340B to buy drugs at discounted prices and then bill significantly higher amounts to patients with commercial and employer-based insurance. This practice has inflated healthcare costs for both these patients and their employers. According to a 2024 report from the North Carolina State Auditor, North Carolina hospitals in the 340B program billed the North Carolina State Health Plan, the plan which covers teachers and state employees, at an 84.8% higher price markup than hospitals outside of the program. A recent analysis by IQVIA similarly showed that the 340B program has not saved costs as intended. According to the analysis, the 340B program increased state and local governments’ health care costs by $1.9 billion in 2022 alone.
Additionally, the program has evolved into a giveaway for pharmacy benefit managers, who often negotiate deals with hospitals to further profit from discounted prices.
Continued escalation of 340B – far greater than originally intended – would leave manufacturers with even fewer resources available to invest in research and development for the next generation of lifesaving, life-improving medications. This would jeopardize pharmaceutical innovation as well as access to current medicines, resulting in the people of North Dakota being left with even fewer, lower-quality choices. Despite the remarks of those in favor of HB 1473 and other similarly passed legislation across the country, expanding 340B would actually lead to higher healthcare costs over the long term.
HB 1473 would also require manufacturers to ship 340B drugs to all contract pharmacies that contract with 340B covered entities and by extension offer 340B pricing at these locations. Currently, there is ongoing litigation in two other states which passed similar legislation over the question of whether manufacturers can be required to ship drugs to contract pharmacies for 340B providers. Expanding the 340B program before there is a judgment in these other lawsuits will guarantee costly legal battles for the state of North Dakota, bills foot by the North Dakota taxpayer.
Americans for Tax Reform strongly opposes expanding the 340B program and urges all North Dakota legislators to vote against HB 1473.