Policy Resolution HHS-26-03

WHEREAS, in 1992 Congress enacted Section 340B under the Public Health Service Act, administered by the federal government, intended to help vulnerable patients in medically underserved areas (MUAs) gain better access to medicines at certain qualifying hospitals and clinics; MUAs are defined as communities in the United States with too few primary care providers, high infant mortality, high rates of poverty, and/or high elderly population, as defined by the Health Resources and Services Administration (HRSA);

WHEREAS, 340B covered entities are defined in federal law and include certain qualifying hospitals and safety-net clinics known as grantees;

WHEREAS, 340B hospital eligibility is intended for non-profit hospitals based, in part, on how many low-income Medicare and Medicaid patients a hospital admits (an inpatient metric) and other safety-net characteristics;

WHEREAS, covered entities buy eligible outpatient drugs at a discounted rate of on average 57%, but 340B prices can be as low as one penny, there were roughly 2,700 hospitals that participated in 340B, and there were more than 60,000 total covered entity sites in 2024 according to the Health Resources and Services Administration;

WHEREAS, under the guidance of HRSA, covered entities are making contracts with an unlimited number of pharmacies (including for-profit retail pharmacies) which allow pharmacies to distribute 340B prescriptions;

WHEREAS, around 65% of covered entity hospitals are not in medically underserved areas;

WHEREAS, in its July 2023 report to Congress on Open Matters for Congressional Consideration, the General Accountability Office noted that to “protect beneficiaries from unwarranted financial burden… Congress should consider eliminating the incentive to prescribe more drugs or more expensive drugs than necessary to treat Medicare Part B beneficiaries at 340B hospitals” as had been described in previous reports;

WHEREAS, several policy actions have been proposed in Congress to reform 340B into a program that supports safety net providers by providing for low-income individuals and ensuring that the program benefits vulnerable communities.

WHEREAS, these recommendations include:

• strengthening the definition of “patient” to encourage optimal benefit to patients in medically underserved areas (MUAs) and/or uninsured or underinsured;
• ensuring negotiated discounts benefit uninsured and underinsured patients to lower drug costs; and
• encouraging transparent cost reporting of 340B-designated medicines by setting up a public data and reporting system to create enhanced accountability, oversight, and transparency; and

WHEREAS, this resolution continues NBCSL’s efforts to improve prescription drug affordability and transparency, expanding on HHS-22-59, HHS-24-28, and HHS-18-25, which called for lower out-of-pocket costs, stronger oversight, and equitable access to medicines.

THEREFORE BE IT RESOLVED, that the National Black Caucus of State Legislators (NBCSL) supports the 340B program and urges Congress to reform the program execution to better serve medically underserved areas (MUAs) and communities and to ensure that low income and uninsured patients have access to 340B discounted prices for their medicines;

BE IT FURTHER RESOLVED, that the NBCSL urges Congress to fund HRSA’s audit capabilities to ensure the nonprofit nature of 340B hospitals and to allow auditors to truly assess that all covered entities are providing 340B drugs to low-income individuals, and prioritizing that contracted pharmacies are located in medically underserved areas or serve a specific covered population;

BE IT FURTHER RESOLVED, that the NBCSL urges states to examine their contracts with covered entities to include provisions that prioritize health care services to low-income individuals, and implement compliance and transparency mechanisms; and

BE IT FINALLY RESOLVED, that a copy of this resolution be transmitted to the President of the United States, the Vice President of the United States, members of the United States House of Representatives and the United States Senate, and other federal and state government officials as appropriate.

• Resolution ID: HHS-26-03
• Sponsored by: Rep. Billy Mitchell (GA)
• Policy Committee: Health and Human Services Policy Committee