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Pharma, pharmacies debate drug price reform in Michigan house committee

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(The Center Square) – A Michigan house bill aimed at medical access for low-income and uninsured residents met opposition after recent investigations into the affiliated federal 340B drug pricing program.

House Bill 5350, introduced by Rep. Alabas Farhat, D-Dearborn, would require drug manufacturers to deliver 340B discounted drugs to every contract pharmacy that a 340B participating Michigan hospital clinic has, whether the pharmacy is in the state or outside of the state.

The 340B program requires most pharmaceutical manufacturers to sell medications to health care organizations that care for uninsured or low-income patients at steeply reduced prices. These organizations would then theoretically charge their patients a lower price than usual for outpatient drugs.

A 2021 report from Pacific Research and a 2022 New York Times report both claimed a number of hospitals nationwide have abused the program by buying the drugs from manufacturers for cheap, selling them to patients at the regular price through contract pharmacies and pocketing the discount.

In response, some drug manufacturers had started notifying hospitals they will limit the number of affiliated contract pharmacies that can access the drug for the discount price, actions which prompted the Michigan bill.

Farhat said Wednesday that HB 5350 is “part of the solution to tackling prescription drug prices in our state…what we seek to do here is enable the hospital to connect with a local provider closest to that patient, and be able to deliver care closer to that patient.”

While the number of contract pharmacies has increased, the discounts aren’t being shared with patients, according to a report by IQVIA that showed “drug manufacturers provide more than $54 billion in discounted product. Yet only 1.4% of patients received a discount on their 340B prescriptions at contract pharmacies through the program.”

Trinity Health Michigan submitted testimony supporting the bill, arguing the “intent of contract pharmacies is to extend the reach of the safety net hospital and help patients access their prescription drugs…[allowing] patients to access their medications in the convenience of their local community pharmacy.”

The International Cancer Advocacy Network opposes the bill on the grounds that “Instead of reforming the [340B] program so that uninsured and low-income patients do receive those discounts, HB 5350 would basically require that drug manufacturers send their product to most, if not all, pharmacies who, in turn, would sell the drugs at the discounted price.”

A federal hearing Tuesday discussed increasing oversight of the 340B Program after a 2023 report revealed the widespread abuse among the nation’s 16 largest 340B-participating hospital systems. The main problem with the program is that while it dictates how much drug manufacturers can charge 340B participating organizations, it never specifies the amount that those organizations could charge their patients for the drugs. This loophole has enabled corrupt practices that price gauge the patient and cost taxpayers extra billions each year in escalated health insurance premiums, according to recent estimates.

Dr. Bill Smith from the Pioneer Institute argued at the federal hearing that program transparency and reform are necessary. “The hospitals’ ability to buy low and sell high can create misaligned incentives that tend to steer the 340B program off its mission of serving vulnerable populations,” said Smith.

Smith also testified at the Lansing hearing, arguing that HB 5350 would exacerbate rather than fix the issues surrounding 340B implementation. “I would recommend Michigan not pass this bill under consideration, but instead require hospitals to file and disclose how much revenue they secure from 340B, and exactly how they spend the funds,” said Smith.

The American Hospital Association strongly opposes reforming the 340B program. “Efforts to decrease the scope of the 340B program solely benefit drug companies and their bottom lines at the expense of patient access to quality care and other community benefit programs…340B hospitals provide substantial benefits to the patients and communities they serve,” it said in a statement.

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