State lawmakers are pushing a measure to expand a controversial federal program that gives hospitals hefty discounts on drugs as the Trump administration seeks to curtail spending within the program.
Legislators have introduced a bill to expand the 340B program, an initiative that gives safety-net hospitals a large discount on outpatient drugs while offering a full-price federal reimbursement. The U.S. government created the program in 1992 to offer financial assistance to safety-net hospitals so they could dedicate more funding to provide free or discounted care to low-income patients. But critics of the program say that it has grown exponentially, and that there are few requirements in place to ensure that patients benefit from drug discounts.
The 340B prescription drug anti-discrimination act, sponsored by Health Chairman Sen. Gustavo Rivera, bans pharmaceutical companies from imposing administrative burdens on hospitals or pharmacies that could reduce their savings through the program. The bill, which was on the table during the last legislative session, would make it easier for pharmacies to participate in 340B, a shift proponents say could deliver more benefits to patients.
Supporters of the measure, including hospitals and pharmacy groups, say it will improve care for vulnerable communities at no cost to the state and ban discriminatory practices from drugmakers. But critics, including pharmaceutical companies, say the bill will actually rack up costs by opening up the floodgates for more pharmacies to contract with hospitals to get a piece of the pie.
“Pharmacies are making a lot of money off of this program,” said Dr. Robert Popovian, chief science policy officer at the Global Healthy Living Foundation and biopharmaceutical consultant. “The margins are huge.”
Rivera did not respond to questions about the bill or criticisms of his effort to expand the 340B program.
The state push to grow 340B comes as the Trump administration has signaled plans to reduce payments to hospitals through the program. Trump issued an executive order last week that directs the U.S. Department of Health and Human Services to study 340B costs and come up with rules to align drug payments with Medicare rates, building on an effort during his first administration to reduce federal spending on the program.
High costs of the 340B program led New York to make major reforms on the state-level in 2023. The state changed the way it administered drug benefits for Medicaid patients, partly because the costs of the program grew by 200% between 2017 and 2020, state data shows.
Opponents of efforts to grow the program estimate that the bill to expand the program could increase the state’s costs. 340B currently costs employers and workers in New York more than $446 million per year – an expense that could grow to $563 million if the measure passes, according to an estimate from IQVIA.
As some lawmakers seek to expand 340B, others have called for more transparency to ensure the program is working. Assemblywoman Amanda Septimo introduced a bill that would require hospitals that participate in the program to report how much revenue they earn from the drug discount program as well as how much they spend on charity care to evaluate whether the program is serving low-income patients.
“You can’t responsibly be in a place of growing capacity of the program without knowing its capacity,” Septimo said in an interview. “Where are those funds going?”
Brian Conway, a spokesman for the Greater New York Hospital Association, which lobbies on behalf of more than 200 regional hospitals, said the group opposes the transparency bill because it introduces requirements that are not a part of the federal law.
“Just like manufacturers and other participants in the drug supply chain should not impose requirements on safety net providers that are not founded in the 340B law, we do not think the state should impose such requirements,” Conway said.
