By Frank Jemley
Rejecting bad legislation is always better than enacting a bad law. That’s why Kentuckians should be thankful for the wisdom shown during this year’s General Assembly session by the leaders of our House of Representatives, who stood firm against bad legislation that many of their well-intentioned colleagues considered a good idea.
The issue? The proposed expansion here in Kentucky of the federal government’s 340B Drug Pricing Program (“340B”), the cost of which has been exploding for years. 340B was created by Congress in 1992 with a laudable goal: help safety-net hospitals stretch scarce resources to offer low-income patients greater access to affordable prescription medications. It has morphed into something very different.
Kentucky’s hospital leaders asked the General Assembly to expand 340B here – beyond what federal law allows, alone a troubling idea – even though they know 340B’s price tag is climbing like a SpaceX rocket, making the program a major cost driver and source of cost-shifting (from those who should pay to those who shouldn’t) in our healthcare system.
Let’s be clear: we all support the dedicated Kentuckians, the nurses, doctors, and other staff members, who make our hospitals so invaluable by providing important, often life-saving care, and by contributing so much overall to our communities and quality of life.
But the importance of our hospitals doesn’t relieve them of their responsibility to provide accountability and transparency (still sorely lacking in American healthcare) for the cost of the care and services they provide – something they could not do regarding 340B in Kentucky or their proposed expansion of it.
The ever-rising cost of healthcare is a major challenge to Kentucky manufacturers and other employers, and to manufacturers nationwide, magnified by the sizable workforce challenges our Commonwealth and country face. Healthcare cost and quality are at the heart of those concerns. Kentucky families and businesses are increasingly burdened by America’s complicated, opaque healthcare system.
340B is a big part of that problem. It has become a huge revenue source for hospitals, so-called contract pharmacies, and consulting firms advising hospitals and healthcare systems on how to maximize (“optimize,” to quote some of those firms) their 340B revenues. They exploit the program by buying medications low, selling them high (without revealing the discount), to maximize (“optimize”) their profits, in a massive Wall Street-style arbitrage funded by American families, businesses, and taxpayers.
What Congress intended to be a modest program has become America’s second largest prescription drug program, behind only Medicare Part D. 340B grew 129% from 2018 to 2023 to $124 billion in sales, using what experts call the wholesale acquisition cost pricing of the medications, with the average drug discount being 55%. Little wonder 340B has become so popular with hospitals and other parts of America’s healthcare system.
Which gets to why we should be thankful for the leadership of House Speaker David Osborne, his House majority leadership colleagues, and House Health Services Committee Chairwoman Kimberly Moser. They recognized, despite 340B’s popularity with hospital executives, the extent of the problem this runaway program has created for Kentucky and insisted on learning 340B’s current and projected costs before voting to expand it. Lots of Kentucky business leaders appreciate their choosing that more politically difficult path.
Chairwoman Moser’s 340B transparency bill, her answer to the expansion proposal that instead would have required the accounting and transparency that taxpayers and policymakers deserve, also did not become law. But it has sparked a much bigger discussion about the need for 340B oversight in Kentucky and across the nation.
We commend Speaker Osborne, Chairwoman Moser, and their leadership colleagues in the Kentucky House for insisting on accountability for a popular program.
Congress must now fix 340B. Thankfully, Kentucky Congressman Brett Guthrie, the chair of the U.S. House Energy and Commerce Committee, is a leader on 340B reform. He understands the importance of requiring transparency and accountability so 340B can achieve its original goal of increasing Americans’ access to affordable medicines. The same is true of Louisiana Senator Bill Cassidy, a physician who chairs the U.S. Senate Health, Education, Labor and Pensions Committee, and who last week released his committee’s highly critical investigation of the 340B program, together with recommendations for reform.
Momentum seems to be building in Washington to fix this program that has clearly strayed far off course. Doing so will be good for America.
Frank Jemley is KAM’s President and CEO and lives in Louisville.
