New legal and legislative battles affecting the 340B Program

The dispute between safety-net hospitals and drug manufacturers has officially entered its fourth year, and we continue to see additional manufacturers fall in line with revising their policies to restrict 340B Program pricing for drugs dispensed through contract pharmacies.  

Currently, there are 39 drug manufacturers that have imposed distribution limitations on covered outpatient drugs dispensed through the 340B Program: 

In response to the restrictions, 18 states have passed legislation to prohibit drug companies from restricting access to 340B Program pricing through contract pharmacies: 

Below is a summary of the current legal and legislative battles affecting the 340B Program.  You can read about previous updates here. 

Manufacturer updates 

May 19: Bristol Myers Squibb and Novartis appeal federal court decision 

Bristol Myers Squibb and Novartis filed notices appealing a federal court decision that stops pharmaceutical companies from unilaterally imposing their own 340B rebate schemes. BMS and Novartis asked the U.S. Court of Appeals for the District of Columbia Circuit to overturn the May 15, 2025, decision from the U.S. District Court for the District of Columbia holding that the federal government may prohibit manufacturers from implementing 340B rebates that the government has not approved. This decision prevents drug companies from unilaterally introducing rebate structures without federal oversight until the higher court considers the appeal. 

May 22: Genentech updates contract pharmacy policy 

Beginning May 31, 2025, Genentech will start requiring claims data submission as a condition of receiving 340B pricing. Under the updated policy, Genentech now requires hospitals to submit claims data for their designated pharmacy location through the 340B ESP platform to continue accessing the discounted pricing. 

The revised Genentech policy also included a new provision on 340B drug “redistribution.” It reads: “Covered entities may ship 340B drugs only through Genentech-authorized distribution channels and only to the location of actual dispense of the 340B drug. Any drug product subject to other, non-transparent arrangements affecting a 340B drug (including but not limited to “banking” orders outside of the reasonable window, virtual return, alternative distribution models, consolidated replenishment, central fill, or virtual credit) falls outside of this policy and Genentech does not consider qualified as a 340B drug and may result in chargeback reversal or other action.” 

June 4: Bristol Myers Squibb extends restrictions to accessing 340B pricing 

Beginning July 1, 2025, BMS will extend its contract pharmacy restrictions to the drug Augtyro (repotrectinib). The change allows covered entities without in-house pharmacies to designate up to five 340B contract pharmacies for the five categories of drugs that BMS restricts. 

Legislative updates 

The following are key 340B-related legislative actions that have occurred since November and considerations for healthcare organizations for how to prepare for and respond to the changes. 

May 5: Tennessee enacts contract pharmacy protections 

Tennessee enacted a law protecting covered entities’ access to 340B pricing on drugs dispensed at contract pharmacies. The ban does not apply to restrictive policies that were already in place as of June 1, 2025. Covered entities in Tennessee will still be subject to contract pharmacy restrictions that were in effect as of May 5, 2025. 

The Tennessee statute prohibits “denying, restricting, prohibiting, discriminating against, or otherwise limiting the acquisition of a 340B drug by, or delivery of a 340B drug to, a 340B entity or other location that is under contract with, or otherwise authorized by, a 340B entity to receive 340B drugs on behalf of the 340B entity unless such receipt is prohibited by the U.S. Department of Health and Human Services or state law.” In addition, the Tennessee law prohibits manufacturers from requiring covered entities to submit any data as a condition of acquiring or receiving deliveries of 340B drugs unless federal or state law mandates such data.  

May 6: Indiana mandates 340B reporting from covered entities 

Indiana’s Governor Mike Braun signed legislation requiring 340B covered entities to submit annual reports to the state related to 340B drug acquisition costs, payments received, payments made to contract pharmacies, and the use of their savings. The law takes effect July 1, 2025, and will make Indiana the fifth state to mandate reporting requirements related to the 340B Program. Other states include Idaho, Maine, Minnesota, and Washington. The information each covered entity submits will not become public, but the state health department will publish an annual report by Nov. 15, 2025, that aggregates all the data. 

May 15: HRSA approval over 340B rebates 

In a decision from a federal judge in the District of Columbia, the court ruled that the Health Resources and Services Administration can require preapproval before pharmaceutical manufacturers can replace upfront 340B discounts with back-end rebates. The decision rejects arguments from several drug companies that the government lacks the authority to block manufacturers from imposing a rebate model. 

May 29: Oklahoma enacts contract pharmacy protections 

Oklahoma became the 14th state to enact a law protecting covered entities’ access to 340B pricing on drugs dispensed at contract pharmacies. Similar statutes have been enacted in various states, which resulted in changes in manufacturers’ policies restricting access to 340B pricing. 

The Oklahoma law prohibits drug manufacturers and distributors from denying or restricting the delivery of 340B drugs to covered entities in Oklahoma. This includes interfering with or limiting the number of pharmacies in the state with which covered entities can contract. In addition, the Oklahoma law bans pharmacy benefit managers, health insurers, and third-party payors from paying Oklahoma covered entities less for drugs or imposing other discriminatory conditions based on their participation in 340B. 

May 30: Plan to transfer 340B oversight to CMS 

In the fiscal year 2026 health budget proposal to Congress, the administration plans to transfer 340B oversight from HRSA to the Centers for Medicare & Medicaid Services. 

Per the “Justification of Estimates for Appropriations Committees” document: “Within the Make America Healthy Again edifice, certain work elements that are currently completed by the Health Resources and Services Administration (HRSA) are planned to be strategically shifted to CMS. Particularly, the 340B Drug Pricing Program, which plays a crucial role in enhancing healthcare outcomes and ensuring affordability, is planned to reside within CMS.” 

May 30: Hawaii enacts contract pharmacy protections 

Hawaii’s Governor Josh Green signed legislation prohibiting drug manufacturers and their affiliates from directly or indirectly denying or restricting acquisition or delivery of 340B drugs to a Hawaii covered entity or any of its contract pharmacies in the state. The law includes provisions expressly permitting drugmakers to require covered entities to submit claims data as a condition of receiving 340B drugs. The data can be no more than three years old and would be deemed necessary to investigate potential diversion, duplicate discounts, or eligibility for Medicaid or commercial rebates. 

June 11: Vermont enacts contract pharmacy protections 

Vermont’s Governor Phil Scott signed legislation protecting covered entities’ access to 340B pricing on drugs dispensed at contract pharmacies. The law prohibits drug companies or third parties working on their behalf from denying or restricting the acquisition or delivery of 340B drugs for a Vermont covered entity or any of its contract pharmacies in the state. The law also bans drugmakers from requiring covered entities to submit claims data as a condition of receiving 340B drugs. 

In addition, the law will require hospitals in the state to publicly provide annual 340B data, including aggregated acquisition costs for 340B drugs dispensed or administered to patients and payments received for 340B drugs, among other 340B data. The law also requires a hospital to report how it uses 340B savings to fund services that support the community, including access to care that the hospital could not continue without 340B. 

June 11: Oregon enacts contract pharmacy protections 

Oregon’s Governor Tina Kotek signed legislation protecting covered entities’ access to 340B pricing on drugs dispensed at contract pharmacies. The law prohibits drug companies or third parties working on their behalf from denying or restricting the acquisition or delivery of 340B drugs for an Oregon covered entity or any of its contract pharmacies in the state. The law bans drugmakers from requiring covered entities to submit claims data or utilization data as a condition of receiving 340B drugs. In addition, the law authorizes the Oregon Board of Pharmacy to impose fines of up to $5,000 per violation per day for drug manufacturers that do not comply with the law. 

Considerations for healthcare organizations

• Engage internal and/or external legal counsel to assess legal implications of each manufacturer’s exception policy and the risks associated with sharing data with manufacturers. Assess prescription claims data to determine the impact of these manufacturers’ limited distribution models on your 340B Program savings over the past year. 
• File overcharge notices with HRSA for manufacturers who charge more than the ceiling price for a covered outpatient drug. Apexus has provided a template for submitting overcharges, which can be found here.  
• Continue advocacy and education efforts around how your covered entity is meeting the true intent of the 340B Program by using savings generated from purchasing discounted drugs to provide comprehensive care to more patients within your community.  
• Help raise awareness of the financial impact to your organization from drug company restrictions on contract pharmacies by sharing financial impact data with your elected officials in Washington. Urge them to push for an end to these drug company actions.  
• Use social media platforms and/or consider working with your local media to create an opinion piece from your organization regarding the impact manufacturer actions have had on prescription drug savings and your organization’s ability to serve patients. Correlate how 340B benefit loss affects patient care and healthcare service offerings.  

There’s a lot to keep track of with 340B. If you have questions about the information in this article, or if Kodiak can assist you with managing your 340B compliance program, please reach out to Susan Brankin.