Get to Know 340B: State Legislation to Protect 340B

Legislation to prohibit third parties from engaging in discriminatory reimbursement in the 340B program in Tennessee is moving through the General Assembly. Tennessee is one of several states to pursue legislation to protect the 340B program in recent years. Learn more about what is behind this trend:
Why are states taking action to protect 340B?
The federal 340B statute does not prohibit the practice of discriminatory reimbursement from third parties such as Pharmacy Benefit Managers (PBMs), insurers, and contract pharmacies. 

Discriminatory reimbursement occurs when third parties engage in practices that allow them to keep savings from the 340B program that are intended to benefit community health centers and other covered entities. Since federal law does not protect 340B covered entities from discriminatory reimbursement, state legislatures across the country have introduced bills to prohibit these practices. 

Several states already passed legislation to prohibit PBMs from engaging in discriminatory reimbursement within the past couple of years including Minnesota, Montana, West Virginia, Utah, Oregon, Massachusetts, Rhode Island, South Dakota, Georgia, and Ohio.1
How does the Supreme Court come into play?
Although many states already had legislation the works prior to 2021, a Supreme Court decision catalyzed action at the state level. In December of 2020, the U.S. Supreme Court ruled that Arkansas could regulate the rates Pharmacy Benefit Mangers (PBMs) reimburse pharmacies, despite objections by PBMs that the Employee Retirement Income Security Act of 1974 (ERISA) prohibited the state from doing so.2

The Arkansas law at issue prohibits PBMs from reimbursing pharmacies less than the pharmacies' acquisition cost, what the pharmacy paid a wholesaler for the drug.3

The decision affirmed the ability of states to regulate PBMs by preventing them from reimbursing 340B-priced medications at rates that are lower than non-340B priced drugs.4  
What is the status of Tennessee's legislation?
Tennessee is one of the states addressing discriminatory reimbursement in 2021 with two bills: 

SB1205/HB1348, sponsored by Senator Briggs and Representative Helton, will prohibit Pharmacy Benefit Managers (PBMs) and other third parties from engaging in discriminatory reimbursement. 
  • HB1348 passed the full House on an 89-0 vote.
  • On March 30, the Senate companion bill, SB1205 passed the Senate Commerce & Labor Committee and was sent to the Senate Calendar Committee. 
SB1617/HB1398, sponsored by Senator Reeves and Representative Helton, contains the language of SB1205/HB1348, along with additional provisions related to PBMs.
  • HB1398 passed the House Insurance Committee and was referred to the House Finance, Ways, and Means Subcommittee.
  • The Senate companion bill, SB1617 passed the Senate Commerce & Labor Committee on March 23 and will be considered by the Senate Finance Committee.
[1] 340B Report. 2020. SCOTUS Ruling Lifts Cloud Over State Laws To Stop 340B "Pickpocketing.”
[2] JD Supra. 2020. Supreme Court Green Lights Arkansas Law Regulating PBM Pricing Practices. Retrieved from
[3] Ibid.
[4] 340B Report. 2020. SCOTUS Ruling Lifts Cloud Over State Laws To Stop 340B "Pickpocketing.”



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