Arkansas state lawmakers this week passed what is thought to be the first bill in the nation to address drug manufacturers' denials of 340B pricing on drugs dispensed by contract pharmacies. | Jim Bowen/Flickr

Arkansas Passes First-of-its-Kind Bill to Counter Pharma’s 340B Contract Pharmacy Moves

The Arkansas legislature on Tuesday passed what is believed to be the first bill nationally to address pharmaceutical manufacturer denials of 340B pricing on drugs when they are dispensed by contract pharmacies.

The state Senate passed the bipartisan bill, HB 1881, by a 35-0 vote on April 27, sending it to Gov. Asa Hutchinson (R) for his signature. The state House voted 65 to 14 to pass the bill on April 20.

HB 1881’s main thrust is to prohibit discriminatory contracting by commercial payers and pharmacy benefit managers (PBMs) as it relates to the 340B program. It is one of several such 340B non-discrimination bills under consideration in statehouses this year.

The Arkansas bill, however, also addresses how the state is affected by the national battle over whether drug manufacturers that participate in the 340B program must offer covered entities 340B pricing when entities contract with pharmacies to dispense 340B-purchased drugs.

HB 1881 says that pharmaceutical manufacturers shall not:

  • Prohibit a pharmacy from contracting or participating with an entity authorized to participate in 340B drug pricing by denying access to drugs that are manufactured by the pharmaceutical manufacturer; or
  • Deny or prohibit 340B drug pricing for an Arkansas-based community pharmacy that receives drugs purchased under a 340B drug pricing contract pharmacy arrangement with an entity authorized to participate in 340B drug pricing.

Since June 2020, six drug manufacturers—Eli Lilly, Sanofi, Novartis, Astra Zeneca, Novo Nordisk, and United Therapeutics—either have stopped offering 340B discounts nationwide on drugs dispensed by nearly all contract pharmacies, or conditioned the discounts on covered entities’ turning over their 340B contract pharmacy claims data so it can be checked for duplicate 340B discounts and Medicaid, Medicare Part D, and commercial rebates on the same products. Lilly, Sanofi, AstraZeneca, and Novo Nordisk are suing federal health officials to stop them from enforcing a legal advisory opinion that holds that what the manufacturers are doing is contrary to the 340B statute.

“These discounts are meant to stay in local communities, and not go to the middleman,” LaShannon Spencer, CEO of Community Health Centers of Arkansas (CHCA), told the state House Insurance and Commerce Committee during an April 14 hearing on the bill. “Also, this legislation prohibits pharmaceutical manufacturers from blocking hospitals or clinics from partnering with local pharmacies.”

“This is to ensure that local pharmacies continue to maintain the local business while they’re taking care of the patient,” said Spencer, who testified together with the bill’s primary sponsor, state Rep. Michelle Gray (R). “We are working with the pharmacy association. We want to make sure of, not only protection for patients and the community, but for local pharmacies as well.”

State Rep. Justin Boyd (R), co-owner of an independent pharmacy in Alma, Ark., asked Gray and Spencer to clarify if the bill “is about ensuring local access to provider choice, whether that’s the 340B clinic, or the 340B choice to participate with a pharmacy in that community, and this is going to preserve that potential access?”

“Yes sir,” Spencer answered. “It’s local community, local patients, local pharmacy/provider.”

Colleen Meiman, national policy adviser for state and regional community health center associations, told 340B Report yesterday that “Arkansas’ actions highlight the vacuum that has been created by the federal government’s failure to step in” to stop drug manufacturers’ refusal to provide 340B discounts based on where drugs are shipped.

“It is discouraging that 340B providers have been waiting for almost a year for HHS to penalize manufacturers for these actions, even though HHS’ lawyers clearly stated last year that they violate the federal statute,” Meiman said. “This enforcement role should not be thrust upon states.”

HB 1881’s Anti-Discrimination Provisions

The bulk of HB 1881 is devoted to stopping discriminatory contracting in the 340B program by commercial insurers and pharmacy benefit managers (PBMs).

“The crux of what I’m trying to do is make sure that all pharmacies, all entities that participate in 340B, are treated equally across the board, and no special treatment is given to a pharmacy that might be owned by a PBM where there might be a conflict of interest,” state Rep. Gray said about her bill during the April 14 House committee hearing.

The bill does not apply to the state Medicaid program, provider-led insurance networks in Arkansas for individuals with severe intellectual and physical medical needs, or self-insured governmental plans. Its provisions include:

  • Patients could not be forced to use mail-order pharmacies, and could not be stopped from using pharmacies that participate in 340B
  • Private insurers, PBMs, and managed care organizations could not transfer the benefit of 340B drug pricing savings from one entity to another.

Payors and PBMs could not:

  • Pay less for 340B-purchased drugs than for the same, non-340B-purchased drugs
  • Refuse to cover 340B-purchased drugs
  • Refuse to let pharmacies that participate in 340B participate in their networks
  • Charge more than fair market value or seek profit sharing for services involving 340B drug pricing
  • Discriminate, lower reimbursement, or impose separate terms upon pharmacies based on participation in 340B
  • Require a pharmacy to reverse, resubmit, or clarify a 340B drug-pricing claim after the initial adjudication unless these actions are in the normal course of pharmacy business and not related to 340B drug pricing. A different clause in the bill says all pharmacy claims processed by a pharmacy that participates in 340B drug pricing are final at the point of adjudication.
  • Require a billing modifier to indicate that the drug or claim is a 340B drug-pricing claim unless the drug or claim is being billed to the fee-for-service Arkansas Medicaid Program
  • Base the drug formulary or drug coverage decisions upon the 340B drug-pricing status of a drug, including price or availability, or whether a dispensing pharmacy participates in 340B drug pricing.

Meiman said the wave of state bills like Arkansas’s “points to the urgent need for federal legislation to stop pick-pocketing and related practices that transfer 340B benefits from covered entities and their medically underserved patients, to large for-profit organizations.”

“Barring federal action, there will soon be a checkerboard approach to this crisis, with the ability of CHCs and their patients to benefit from the federal 340B program varying based on where they are located,” she said.