Tennessee lawmakers this week passed a 340B non-discrimination bill, sending it to Gov. Bill Lee for his signature.

340B Non-Discrimination Bills Signed in Arkansas and Indiana and Passed in Tennessee

Arkansas’s and Indiana’s governors have signed bills in recent days to prevent pharmacy benefit managers (PBMs) from discriminating against 340B covered entities, and a similar bill is awaiting the Tennessee governor’s signature.

Arkansas Gov. Asa Hutchinson (R) signed his state’s 340B non-discrimination bill, HB 1881, on Tuesday. In addition to stopping discriminatory contracting in the 340B program by commercial insurers and pharmacy benefit managers (PBMs), it includes language to stop drug manufacturers from denying 340B pricing on drugs distributed by contract pharmacies. The latter provisions are believed to be the first of their kind in the nation. We reported in greater depth on the bill last week.

Indiana Gov. Eric Holcomb (R) signed his state’s 340B bill, HB 1405, on April 29. It includes language specifically aimed at stopping payers and PBMs from requiring 340B covered entities’ patients to obtain specialty drugs exclusively from the payer or PBM’s chosen pharmacy, not an entity’s in-house pharmacy or contract pharmacies—an issue of growing importance to hospital groups nationally. We reported on state House committee action on the bill in February.

Tennessee’s legislation is a beefed-up version of a bill introduced during the legislature’s 2020 session. Last June, a Senate committee paused further consideration by designating it for further study.

The state House on Tuesday passed the updated bill by an 88-1 vote. The Senate then approved it 28-4, sending it to Gov. Bill Lee (R).

The bill prohibits health insurance issuers, managed health insurance issuers, pharmacy benefits managers (PBMs), and other third-party payers from

  • Reimbursing a 340B entity for pharmacy-dispensed drugs at a rate lower than the rate paid for the same drug to pharmacies that are not 340B entities
  • Assessing a fee, chargeback, or adjustment upon a 340B entity that is not equally assessed on non-340B entities
  • Excluding 340B entities from its network of participating pharmacies based on criteria that is not applied to non-340B entities
  • Requiring a claim for a drug by national drug code number to include a modifier to identify that the drug is a 340B drug
  • Discriminating against a 340B entity in a manner that
    • Does not let them participate as a participating provider in a policy under the same conditions offered to other providers and preventing policy beneficiaries from selecting the participating pharmacy of their choice
    • Prevents or interferes with the patient’s choice to receive 340B purchased drugs from the 340B entity.

The bill further prohibits PBMs from

  • Charging a covered entity an amount greater than the reimbursement paid by a PBM to a contracted pharmacy for the prescription drug or device
  • Reimbursing a contracted pharmacy for a prescription drug or device an amount that is less than the actual cost to that pharmacy for the prescription drug or device.

“I commend our legislators for passing this bill so that organizations like Cempa across our great state can continue to eliminate health barriers and disparities through the 340B program,” said Shannon Stephenson, CEO of Cempa Community Care, a Chattanooga-based federally qualified health center look-alike that participates in 340B and lobbied for the bill’s passage. “We have fought tooth and nail against predatory Pharmacy Benefit Managers (PBMs) who’ve wanted to undercut the program to capture revenue for their own coffers. I now urge Gov. Lee to sign this bill into law so that we can continue to promote a safer and healthier Tennessee.”