GOP lawmaker moves to overhaul bill protecting drug discounts critical to some KY hospitals

by Deborah Yetter, Kentucky Lantern
February 12, 2025

A Northern Kentucky lawmaker has proposed a new version of a bill meant to protect a program that generates income for charity health care that some Kentucky hospitals say is essential for their survival.

“This is a very critical program for our hospitals and access to care in rural communities,” Nancy Galvagni, president of the Kentucky Hospital Association, told a legislative committee Feb. 5, referring to the federal 340B Drug Pricing Program.

But Sen. Gex Williams, R-Verona, has filed an amendment to Senate Bill 14 to replace it with a measure he said is critical to getting more information about how much money from the program, subsidized by the pharmaceutical industry, is generated and spent before further legislative action.

“It tries to collect some data so we can better understand what we’re dealing with,” said Williams, whose legislative page describes him as an engineer and technology consultant. “The data we collect will enable us to better ascertain the fiscal impact on the state of Kentucky.”

The program, which generates income for charity care from deep discounts drug manufacturers provide hospitals and other entities, such as health clinics, has come under fire from consumer advocates and the pharmaceutical industry for what they say is its rapid growth and lack of oversight.

“When hospitals, other covered entities and their contract pharmacies have free rein to mark up medicines, patients, employers and taxpayers across Kentucky pay the price,” Reid Porter, a spokesman for Pharmaceutical Research and Manufacturers of America, or PhRMA, said in an emailed statement. “Transparency and accountability are needed to ensure 340B is being used appropriately.”

PhRMA, along with other groups including the Kentucky Association of Manufacturers, oppose SB 14 as filed by Sen. Stephen Meredith, R-Leitchfield and a former hospital CEO.

Meredith did not respond to a request for comment about the changes Williams proposes to SB 14. He has argued his SB14 would preserve an essential income stream especially important to rural hospitals in Kentucky.

At the Feb. 5 meeting of the Senate Health Services Committee he chairs, Meredith said his bill simply mirrors legislation passed in a handful of other states that prevents pharmaceutical companies from restricting drugs sold in Kentucky at discounts of up to 50%. He said some companies have begun imposing such restrictions that limit revenue to Kentucky providers.

“Why should we not be allowed to have this funding when other states do?” asked Meredith, who said it brings in about $122 million a year for Kentucky hospitals, clinics and other entities that serve low-income patients.

The Kentucky Hospital Association, which supports Meredith’s bill, agrees.

While Williams’ proposal may be “intended to be helpful,” it doesn’t account for how the program generates savings for hospitals by requiring manufacturers to provide them drugs “at the same price the drug companies charge their best customers,” said Jim Musser, senior vice-president with the association.

“The savings generated from that discounted price allow the hospitals to put the savings toward stretching scarce resources,” he said.

Several supporters of the bill testified the 340B program is especially helpful for expanding access to costly cancer infusion drugs which can cost tens of thousands of dollars.

KY health care providers depend on drug discount program that’s facing fire on several fronts

Williams said he hadn’t discussed his amendment to SB 14 with Meredith other than to notify him he planned to file it.

“I’m presuming we’ll discuss it in caucus,” Williams said, referring to the meeting of the Republican majority that controls the Senate. He said he doesn’t know when it might be called on the floor for a vote after committee passage Feb. 5.

Williams’ amendment would strip out Meredith’s language from SB 14 and replace it with a bill that would require all hospitals and any affiliated facilities, such as health clinics, to file a detailed annual report with the Cabinet for Health and Family Services about how much money they gain from the program and how they use it.

The bill also would apply to “contract” or outside pharmacies used by those hospitals and clinics which critics say have expanded rapidly to include major drugstore chains and industry middlemen known as pharmacy benefit managers or PBMs.

Williams said the legislature could consider changes to state law after it determines details about how much money the program generates and where it goes.

“I don’t know how we can make a decision … without data,” he said.

Williams’s proposal does not apply to clinics not affiliated with hospitals such as the state’s system of “safety-net” health clinics authorized by the federal government to provide care for low-income and uninsured patients.

Advocates for the about 30 such clinics across Kentucky had expressed alarm at potential reduction of the funds they say are vital to care they provide.

Molly Lewis, executive director of the Kentucky Primary Care Association, said the 340B program brings in about $19 million a year to the community health clinics, funds she said are essential to caring for patients who can’t pay for services.

“We support Senate Bill 14,” she said, referring to Meredith’s original bill.

Meanwhile, some advocates continue to seek reforms at the federal level since the federal government oversees the program.

Meredith has said he agrees overall change must come from Congress, which is considering proposals to tighten controls and improve oversight of the 340B program. His bill, he said, is meant to protect Kentucky health providers in the meantime.

“I don’t think there’s a person involved in health care that doesn’t realize there need to be some changes, some adjustments to it,” he said at the Feb. 5 hearing. “But that’s not why we’re here today.”

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