The pharmaceutical industry won. The hospital industry lost.
After a lobbying fight for the ages between the Pharmaceutical Researchers and Manufacturers of America and the Minnesota Hospital Association over a mysterious prescription drug discount program called 340B, word emerged from the state Capitol Sunday that House Republicans killed the bill that hospitals wanted.
Sunday is the final day legislators can pass bills.
The legislation died even after the Senate passed the bill in question on a 42-24 vote, with eight Republicans joining every DFLer. And, this week, multiple House Republicans expressed their support for the measure, including the co-chair of the House Health Finance and Policy Committee, and (ahem) the sponsor of the bill.
“It’s hard to believe that we didn’t pass this bill this year,” said Rep. Robert Bierman, DFL-Apple Valley and co-chair of the Health Finance Committee. “Republicans talked a big game about supporting their local hospitals, and their actions did the exact opposite.”
“The question is why is it buried?” Bierman added. “They refused to answer questions for a long time, and now the bill can’t pass. Unbelievable.”
Rep. Natalie Zeleznikar, R-Fredenberg Township and House sponsor of the bill, indicated that it was a decision made by legislative leaders and so was out of her hands.
A message left Sunday afternoon with House Speaker Lisa Demuth was not immediately returned. Via a spokesperson, Demuth stated earlier this week that she had not taken a position on the bill.
The Pharmaceutical Researchers and Manufacturers of America commended the Legislature.
“Hospitals are buying medicines at steep discounts, charging full price, and keeping the difference, with little accountability for how those profits are used,” the group said in a statement Sunday.
A federal law, the 340B program lets qualified nonprofit hospitals buy drugs at a discount from pharmaceutical companies and then charge full price to patients or (more likely) insurers, Medicare or Medicaid for the drugs, generating revenue in the process.
In 2024, Minnesota hospitals generated $1.3 billion in 340B revenue, a perhaps disproportionate amount of which was netted by large urban hospitals.
Related: Health deserts, hospital windfalls, and a phalanx of pharma lobbyists: Inside 340B, the most controversial healthcare program you never heard of
Pharmaceutical companies want to decrease this revenue. One way to do that is limit the amount of pharmacies that hospitals coordinate with to dispense these drugs.
Courts are split over whether drugmakers can only have one 340B contract between hospitals and pharmacies, or are compelled to follow all contracts.
The legislation by Zeleznikar and Sen. Matt Klein, DFL-Mendota Heights, would have mandated that drugmakers follow all of the hospital’s contracts with pharmacies. It was modeled after an Arkansas law that the pharmaceutical lobby sued over but was upheld in federal appeals court.
“Eleven states across the political spectrum have enforcement powers for the drug pricing program, and, in those states, pharma follows the law,” Klein noted on Sunday.
Klein, a physician who is running for Congress, argued that, “Establishing state enforcement powers for the federal 340B drug pricing protection program would help keep hospitals open, and care and medications accessible to Minnesotans across the state, especially in rural communities.”
But experts on the 340B program note that hospitals have agendas, too, and that they do not necessarily use the revenue to provide charity care. There are also claims, though a direct causation has never been proved, that the discount program forces drugmakers to raise their overall prices and insurers to hike their premiums.
The loss for hospitals comes in a legislative session where healthcare providers appear to have racked up major victories. For example, a $500 million reserve fund has been set aside for Hennepin County Medical Center and other hospitals on the brink of collapse.
Also, a final health care policy bill was expected to increase Medicaid reimbursements for critical access care hospitals.
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