A bill to ensure that Minnesota hospitals can access an array of discount prescription drugs cleared the state Senate Tuesday with the support of every DFLer and eight Republicans.
“This is a David and Goliath moment,” bill author Matt Klein, DFL-Mendota Heights, trumpeted to reporters after the Senate adjourned for the day; David in this case being 204 hospitals across Minnesota that qualify for the drug rebate program and Goliath being pharmaceutical manufacturers, which have vociferously lobbied against the measure. “Without these funds, Hennepin County Medical Center would close. Rural hospitals across our state would close.”
But companion House legislation is foundering. What seemed like a rare issue of critical importance and bipartisan consensus may devolve into little more than a soundbite for the 2026 campaign trail.
Related: Minnesota hospitals profit from law meant to provide drug discounts
Explaining what Klein’s bill actually does involves more than a little throat clearing. Take a seat.
Why hospitals get discounted drugs in the first place
So, there is a 34-year-old federal law with the uncatchy moniker of “340-B” meant to help hospitals who care for low-income patients, who are often on Medicaid or lack health insurance.
This federal program allows hospitals that qualify to buy prescription drugs at a rebate from pharmaceutical makers. Then, these hospitals can charge insurers or Medicare or Medicaid the full, market rate of these drugs instead of the reduced rate and pocket the difference.
According to the state Department of Health, Minnesota hospitals generated over $1.3 billion in total revenue during 2024 from the 340-B program.
Why states have to consider their own laws about this federal program
DFLers and slingshot-bearing lobbying groups like the American Hospital Association say that health providers ought to get substantially more revenue than they do, except Big Pharma is inventing reasons to not follow federal law.
The main reason is that hospitals tend to contract with many pharmacies who supply these discounted drugs. For example, Scenic Rivers Health in Eveleth contracts with pharmacies across the Iron Range to dispense its discounted drugs.
“Scenic Rivers has a service area bigger than the state of New Jersey and they have several contract pharmacies so that patients can go to the location closest to them,” noted a House DFL spokesperson.
But pharmaceutical companies say they only have to offer discounts to one pharmacy per hospital. There has been litigation around this. From this litigation, it is pretty clear that states have the power to pass laws that compel drug makers to offer discounts at every pharmacy associated with a qualified hospital.
(Indeed, such laws have cropped up in red and blue states.)
Hence, the state law Klein passed off the Senate floor Tuesday. It lifts the 2027 sunset on an existing statute that, indeed, compels drug makers to offer discounts at every pharmacy associated with one of these 340-B hospitals.
And — unlike the current law — it gives the state attorney general enforcement power to see that drug companies comply.
What is the roadblock to Klein’s bill passing the House
Republicans including Jordan Rasmusson, R-Fergus Falls, pointed out that not all hospitals that qualify for the 340-B program are necessarily exemplars of charity care, and arguably exploit drug makers instead of the other way around.
For example, Fairview Health Services generated $335 million in 2024 revenue from the program, but only spends $17 million a year in charity care. Plus, Fairview’s CEO James Hereford draws a nearly $5 million annual salary.
“Are we giving a blank check to health care executives?” Rasmusson said.
These are some of the concerns that animate Natalie Zeleznikar, R-Fredenberg Township, and author of the House companion legislation — in which Zeleznikar has removed the bill’s enforcement provision.
In an interview Tuesday, Zeleznikar made clear that she supports the program in principle, calling it a lifeline to rural hospitals. However, she would like to see data on how hospitals spend their 340-B revenue.
DFLers say that Zeleznikar — who was for enforcement before she was against it — is just doing the pharmaceutical lobby’s bidding.
Related: With HCMC’s survival threatened, staff and leaders call for state action
“That’s ridiculous,” Zelezinikar replied, stating that she has not once talked to the Pharmaceutical Researchers and Manufacturers of America, or other lobbying groups this session and that DFLers are “just throwing arrows across the aisle.”
Republicans have stood in lockstep with Zeleznikar. Efforts to add an enforcement provision to her bill failed in a tied vote in the House Health Finance and Policy Committee and on the House floor. In each instance, every DFLer voted to add enforcement, all GOP lawmakers elected not to.
“The timing may not be right on this,” Zeleznikar said.
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