wa-law.org > bill > 2025-26 > SB 5981 > Second Substitute
The legislature finds that the federal 340B drug pricing program is essential for providing health care access to low-income and uninsured populations. The 340B drug pricing program requires drug manufacturers to offer discounts on outpatient medications to eligible providers that serve these populations. They include federally qualified health centers, Ryan White (HIV) clinics, tribal and urban Indian health centers, critical access hospitals, and other safety net hospitals that meet stringent federal criteria.
Congress created the 340B drug pricing program in 1992, stating that the program's benefits enable covered "entities to stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services." (H.R. Rep. No. 102-384 (II), at 12 (1992)). The 340B drug pricing program allows certain safety net providers to sustain underfunded services and reinvest savings into essential community benefits, such as financial assistance for low-income patients, no-cost wellness visits, screenings, vaccinations, transportation to appointments, health education classes, case management, medication adherence services, and workforce development programs.
The federal health resources and services administration permits 340B covered entities to contract with pharmacies to enable access to life-saving drugs and drugs that preserve quality of life to eligible patients, including for those who otherwise have limited access.
The 340B drug pricing program and contract pharmacies are crucial to Washington's safety net providers by ensuring patients can access their prescribed medications, while providing additional resources to 340B covered entities to serve vulnerable and underserved populations.
More than 20 other states have recognized the importance of contract pharmacies to the 340B drug pricing program and have taken action to prohibit drug manufacturers from imposing restrictions on 340B covered entities' ability to serve patients through contract pharmacies.
Federal courts, including the fifth and eighth circuit courts of appeals, have upheld states' authority to legislate on the distribution of 340B drugs through contract pharmacies.
The current restrictions imposed by drug manufacturers not only limit a patient's access to affordable medication but also jeopardize the financial savings that safety net providers depend on to reinvest in their operations, expand services, and support underserved communities.
The legislature, therefore, finds that prohibiting drug manufacturers from imposing restrictions on 340B covered entities is necessary to ensure the integrity of the 340B program and protect Washington's vulnerable patients, their access to medications, and safety net providers' ability to serve their patients.
The legislature also finds that there is a vested state and public interest in providing transparency across the spectrum of 340B program participants to ensure the program is operating within the original intent set forth by congress.
The legislature, therefore, finds that 340B program reporting capturing covered entities, contract pharmacies, and manufacturers is necessary to ensure the integrity of the program.
The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
"340B drug" means a drug that has been subject to an offer for reduced prices by a manufacturer under 42 U.S.C. Sec. 256b and is purchased by a covered entity.
"Covered entity" means an entity authorized to participate in the federal 340B drug pricing program, as defined in 42 U.S.C. Sec. 256b(a)(4) as of the effective date of this section.
"Manufacturer" means a person, corporation, or other entity engaged in the manufacture of drugs or devices. It includes an agent, contractor, or affiliate of a manufacturer.
"Package" has the same meaning as in 21 U.S.C. Sec. 360eee(11)(A) as of the effective date of this section.
"Pharmacy" has the same meaning as in RCW 18.64.011.
"Third-party logistics provider" has the same meaning as in 21 U.S.C. Sec. 360eee(22) as of the effective date of this section.
A manufacturer or a distributor or third-party logistics provider of a manufacturer's drugs may not, directly or indirectly, deny, restrict, or prohibit the acquisition of a 340B drug by, or delivery of a 340B drug to, a covered entity, a pharmacy that is under contract with a covered entity to receive and dispense a 340B drug on behalf of the covered entity, or any location authorized by a covered entity to receive such 340B drug, unless federal law prohibits receipt of the 340B drug.
A manufacturer or a distributor or third-party logistics provider of a manufacturer's drugs may not, directly or indirectly, require a covered entity to submit any claims, utilization, purchasing, or other data as a condition for allowing the acquisition of a 340B drug by, or delivery of a 340B drug to, a covered entity, a pharmacy that is under contract with a covered entity to receive and dispense a 340B drug on behalf of the covered entity, or any location authorized by a covered entity to receive such 340B drug, unless federal law requires such data sharing.
In addition to any other remedy provided by law, a covered entity may file a civil action against a manufacturer, distributor, or third-party logistics provider for a violation of this chapter. If a court finds that the manufacturer, distributor, or third-party logistics provider violated this chapter, the court may enjoin the violation and award a civil penalty of up to $5,000 per day for each violation, as well as reasonable attorneys' fees and costs. Each package of 340B drugs subject to a prohibited act under this chapter constitutes a separate violation.
The attorney general may bring an action in the name of the state, or as parens patriae on behalf of persons residing in the state, to enforce this chapter. For actions brought by the attorney general to enforce the provisions of this chapter, the legislature finds that the practices covered by this chapter are matters vitally affecting the public interest for the purpose of applying the consumer protection act, chapter 19.86 RCW. For actions brought by the attorney general to enforce this chapter, a violation of this chapter is not reasonable in relation to the development and preservation of business and is an unfair or deceptive act in trade or commerce and an unfair method of competition for the purpose of applying the consumer protection act, chapter 19.86 RCW.
Nothing in this chapter is to be construed or applied to conflict with federal law and related regulations, including 21 U.S.C. Sec. 355-1, or other laws of this state, if the state law is compatible with applicable federal law.
Before April 1st of each year, a covered entity located in Washington that is a federally qualified health center as defined in 42 U.S.C. Sec. 1396d(l)(2)(B) or a hospital defined in 42 U.S.C. Sec. 256b(a)(4)(L) through (O) shall report the following information to the authority concerning the covered entity's participation in the 340B program for the previous calendar year:
The following information for the covered entity:
Name;
Service address;
340B program identification number;
Designation of entity type, as specified in 42 U.S.C. Sec. 256b(a)(4); and
The national provider identification number;
The aggregate acquisition cost for all 340B drugs obtained under the 340B program and dispensed or administered to patients;
The aggregate payment amount received for all 340B drugs obtained under the 340B program and dispensed or administered to patients;
The aggregate acquisition cost for 340B drugs, and payments made to pharmacies that are under contract with the covered entity to receive and dispense 340B drugs on behalf of the covered entity;
The number of claims for prescription drugs described in (c) of this subsection;
How the covered entity uses any savings from participating in the 340B program, including the amount of savings used for the provision of charity care, community benefits, or a similar program of providing unreimbursed or subsidized health care;
The aggregate payments made to any other entity that is not a covered entity and is not a contract pharmacy as described in (d) of this subsection for managing any aspect of the covered entity's 340B program;
The aggregate payment made or expense for administering the 340B program;
The percentage of the covered entity's pharmacy claims that were for prescription drugs obtained under the 340B program; and
The number and percentage of low-income patients of the covered entity that were served by a sliding fee scale for a prescription drug dispensed or administered under the 340B program.
The information required to be reported under subsection (1) of this section must be reported by payer type, if the information is available to the covered entity, including the following:
Commercial;
Medicaid;
Medicare; and
Uninsured.
The authority shall prepare a template reporting form for covered entities to use to fulfill the reporting requirements of this section.
The authority may issue a fine, in accordance with RCW 43.71C.090, of $1,000 per day for a covered entity that fails to provide the information required by this section by the date required.
For manufacturers and covered entities required to report 340B data to the authority under section 5 of this act and RCW 43.71C.050, the authority may establish a filing fee to support costs to administer the 340B data collection and reporting required by this chapter.
The filing fee shall be set by the authority at a level necessary to cover the cost to the authority for collecting and reporting the 340B data. Manufacturers and covered entities located in Washington shall pay the fee annually, in a form and manner determined by the authority.
The authority may adopt rules to implement this section.
The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
"340B drug" means a drug that has been subject to an offer for reduced prices by a manufacturer under 42 U.S.C. Sec. 256b and is purchased by a covered entity.
"Authority" means the health care authority.
"Covered drug" means any prescription drug that:
A covered manufacturer intends to introduce to the market at a wholesale acquisition cost of $10,000 or more for a course of treatment lasting less than one month or a 30-day supply, whichever period is longer; or
Is currently on the market, is manufactured by a covered manufacturer, and has a wholesale acquisition cost of more than $100 for a course of treatment lasting less than one month or a 30-day supply, and, taking into account only price increases that take effect after July 28, 2019, the manufacturer increases the wholesale acquisition cost at least:
Twenty percent, including the proposed increase and the cumulative increase over one calendar year prior to the date of the proposed increase; or
Fifty percent, including the proposed increase and the cumulative increase over three calendar years prior to the date of the proposed increase.
"Covered entity" means an entity authorized to participate in the federal 340B drug pricing program, as defined in 42 U.S.C. Sec. 256b(a)(4) as of the effective date of this section and is located in Washington.
"Covered manufacturer" means a person, corporation, or other entity engaged in the manufacture of prescription drugs sold in or into Washington state. "Covered manufacturer" does not include a private label distributor or retail pharmacy that sells a drug under the retail pharmacy's store, or a prescription drug repackager.
"Health care provider," "health plan," "health carrier," and "carrier" mean the same as in RCW 48.43.005.
"Pharmacy benefit manager" means the same as in RCW 48.200.020.
"Pharmacy services administrative organization" means an entity that contracts with a pharmacy to act as the pharmacy's agent with respect to matters involving a pharmacy benefit manager, third-party payor, or other entities, including negotiating, executing, or administering contracts with the pharmacy benefit manager, third-party payor, or other entities and provides administrative services to pharmacies.
"Prescription drug" means a drug regulated under chapter 69.41 or 69.50 RCW, including generic, brand name, specialty drugs, and biological products that are prescribed for outpatient use and distributed in a retail setting.
"Qualifying price increase" means a price increase described in subsection (3)(b) of this section.
"Wholesale acquisition cost" or "price" means, with respect to a prescription drug, the manufacturer's list price for the drug to wholesalers or direct purchasers in the United States, excluding any discounts, rebates, or reductions in price, for the most recent month for which the information is available, as reported in wholesale price guides or other publications of prescription drug pricing.
Beginning October 1, 2019, a covered manufacturer must submit to the authority the following data for each covered drug:
A description of the specific financial and nonfinancial factors used to make the decision to set or increase the wholesale acquisition cost of the drug. In the event of a price increase, a covered manufacturer must also submit the amount of the increase and an explanation of how these factors explain the increase in the wholesale acquisition cost of the drug;
The patent expiration date of the drug if it is under patent;
Whether the drug is a multiple source drug, an innovator multiple source drug, a noninnovator multiple source drug, or a single source drug;
The itemized cost for production and sales, including the annual manufacturing costs, annual marketing and advertising costs, total research and development costs, total costs of clinical trials and regulation, and total cost for acquisition of the drug; and
The total financial assistance given by the manufacturer through assistance programs, rebates, and coupons.
For all qualifying price increases of existing drugs, a manufacturer must submit the year the drug was introduced to market and the wholesale acquisition cost of the drug at the time of introduction.
If a manufacturer increases the price of an existing drug it has manufactured for the previous five years or more, it must submit a schedule of wholesale acquisition cost increases for the drug for the previous five years.
If a manufacturer acquired the drug within the previous five years, it must submit:
The wholesale acquisition cost of the drug at the time of acquisition and in the calendar year prior to acquisition; and
The name of the company from which the drug was acquired, the date acquired, and the purchase price.
Except as provided in subsection (6) of this section, a covered manufacturer must submit the information required by this section:
At least 60 days in advance of a qualifying price increase for a covered drug; and
Within 30 days of release of a new covered drug to the market.
For any drug approved under section 505(j) of the federal food, drug, and cosmetic act, as it existed on July 28, 2019, or a biosimilar approved under section 351(k) of the federal public health service act, as it existed on July 28, 2019, if submitting data in accordance with subsection (5)(a) of this section is not possible 60 days before the price increase, that submission must be made as soon as known but not later than the date of the price increase.
Before April 1st of each year, a manufacturer shall report the following information concerning the manufacturer's participation in the federal 340B drug pricing program, as established in 42 U.S.C. Sec. 256b, for the previous calendar year in a manner and format prescribed by the authority:
The number of units, by drug, of 340B drugs distributed to each covered entity and contract pharmacy in Washington; and
The aggregate discounts, by drug, provided to each covered entity and contract pharmacy on 340B drugs reported in (a) of this subsection.
Except for information reported under subsection (7) of this section, the information submitted pursuant to this section is not subject to public disclosure under chapter 42.56 RCW.
The authority may assess a fine of up to $1,000 per day for failure to comply with the requirements of RCW 43.71C.020 through 43.71C.080 and section 5 of this act. The assessment of a fine under this section is subject to review under the administrative procedure act, chapter 34.05 RCW. Fines collected under this section must be deposited in the medicaid fraud penalty account created in RCW 74.09.215.
The authority shall compile and analyze the data submitted by health carriers, pharmacy benefit managers, manufacturers, and pharmacy services administrative organizations pursuant to this chapter and prepare an annual report for the public and the legislature synthesizing the data to demonstrate the overall impact that drug costs, rebates, and other discounts have on health care premiums. The authority shall include all information provided by manufacturers under RCW 43.71C.050(7) and covered entities under section 5 of this act in the annual report.
(a) Except as provided in (b) of this subsection, the data in the report must be aggregated and must not reveal information specific to individual health carriers, pharmacy benefit managers, pharmacy services administrative organizations, individual prescription drugs, individual classes of prescription drugs, individual manufacturers, or discount amounts paid in connection with individual prescription drugs.
Beginning January 1, 2021, and by each January 1st thereafter, the authority must publish the report on its website.
Except for the report, and as provided in subsection (5) of this section, the authority shall keep confidential all data submitted pursuant to RCW 43.71C.020 through 43.71C.080.
For purposes of public policy, upon request of a legislator, the authority must provide all data provided pursuant to RCW 43.71C.020 through 43.71C.080 and any analysis prepared by the authority. Any information provided pursuant to this subsection must be kept confidential within the legislature and may not be publicly released.
For the purpose of reviewing drug prices and conducting affordability reviews, the prescription drug affordability board, as established in chapter 70.405 RCW, and the health care cost transparency board, established in chapter 70.390 RCW, may access all data collected pursuant to RCW 43.71C.020 through 43.71C.080 and any analysis prepared by the authority.
(a) Except as provided in (b) of this subsection, the data collected pursuant to this chapter is not subject to public disclosure under chapter 42.56 RCW. Any information provided pursuant to this section must be kept confidential and may not be publicly released. Recipients of data under subsection (6) of this section shall:
i. Follow all rules adopted by the authority regarding appropriate data use and protection; and
ii. Acknowledge that the recipient is responsible for any liability arising from misuse of the data and that the recipient does not have any conflicts under the ethics in public service act that would prevent the recipient from accessing or using the data.
If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.