Federal drug discount expansion proposal may cost Illinois millions,
agency head says
[May 16, 2026]
By Peter Hancock
SPRINGFIELD — A proposal that would expand access to a federal program
that discounts the price of prescription drugs could end up costing
Illinois employers an additional $89 million a year, including more than
$12 million a year for the state of Illinois itself.
That’s according to a memo, dated May 12, from the Department of Central
Management Services, the state agency that administers the state
employee health plan, to Rep. Travis Weaver, R-Edwards, who requested
the information following a meeting of the legislative Commission on
Government Forecasting and Accountability, or COGFA.
Capitol News Illinois obtained a copy of the memo through a third party.
But groups representing healthcare organizations quickly disputed its
findings.
The proposal, contained in a Senate amendment to House Bill 2371, is
intended to give Federally Qualified Health Centers, Ryan White AIDS
clinics, safety-net hospitals and other healthcare providers that serve
large volumes of Medicaid patients greater access to what’s known as the
340B Drug Pricing Program.
What is the 340B program?
That’s a federal program, established in 1992, that requires drug
manufacturers to provide drugs to those facilities at substantially
discounted prices. Those facilities then mark the price back up when
they dispense or prescribe the drugs to their patients. That spread
between their acquisition cost and the price they charge becomes an
indirect revenue stream that helps feed their bottom line.
The bill pending in the General Assembly, which awaits a final vote in
the House, would prohibit drug companies from restricting the ability of
those hospitals and clinics to acquire those discounted drugs through
contract pharmacies.
That’s something many clinics and safety-net hospitals say they’ve
experienced in recent years, limiting their ability to acquire drugs at
the discounted prices.
The bill would also prohibit drug manufacturers from requiring
340B-qualified hospitals and clinics to report ingredient cost or
pricing data, to report how they manage inventory of 340B drugs or to
submit any data or information not required by state or federal law as a
condition of participating in the 340B program.
The bill has generated enormous lobbying campaigns on both sides of the
issue, shedding light on the complexities of how prescription drugs are
priced in the United States and how a seemingly small change in one area
can have far-reaching unintended consequences.
During an April 14 COGFA hearing, Shawn Gremminger, president and CEO of
the National Alliance of Healthcare Purchaser Coalitions, explained how
the 340B program has grown beyond what anyone expected when it was
created.
“It was a program designed to be so small, they didn’t bother giving it
a name,” he said. “Literally, it’s called 340B because it just sits at
section 340B of the Public Health Service Act.”
Over the years, he said, as Medicaid programs expanded, so too did the
number of hospitals that were able to qualify for the 340B drug program.
And as those hospitals became eligible, Gremminger said, all of their
affiliated clinics and medical practices became eligible, too.
Today, Gremminger said, the 340B program is the second-largest drug
purchasing program in the country, behind Medicare Part D, and growing
by an average 15% to 20% each year.
In Minnesota, he said, one hospital operated by the University of
Minnesota earns more money through the 340B program than all of the
state’s rural hospitals, community health centers and Ryan White AIDS
clinics combined.
But groups representing the healthcare organizations who would benefit
from HB 2371 questioned the memo and called attention to the expensive
lobbying campaign aimed at killing it.
“The memo released this week by CMS simply regurgitated Big Pharma’s
testimony from the April 14th COGFA hearing,” Illinois Health and
Hospital Association president and CEO AJ Wilhelmi said in a statement.
“The footnotes in the memo clearly indicate that the research referenced
in the memo was funded by Big Pharma. So, unsurprisingly, Big Pharma is
trying to misrepresent the government’s position on the legislation.”
Groups including the Illinois Council of Health-System Pharmacists and
the Illinois Pharmacists Association say Illinois’ legislation
“preserves the original intent” of the 340B program, rather than expands
it.
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A billboard truck urges lawmakers to “say no to 340B abuse” as it
makes its rounds in the neighborhood surrounding the Illinois State
Capitol. (Capitol News Illinois photo by Jerry Nowicki)
Impact on other health plans
The problem for many health insurance plans like Illinois’ State
Employees Group Insurance Program, or SEGIP, is that when their members
go to a 340B-qualifying hospital or clinic, those plans pay the full
marked-up price for any drugs their members receive. But the plans no
longer receive any manufacturer’s rebate for the drugs they purchase,
thus raising the net cost of prescription drugs for patients enrolled in
those health plans.
“Effectively, our rebates are crowded out by the 340B rebate,”
Gremminger said.
“The 340B program was created by Congress to help low-income and
uninsured patients access medicines, but it is difficult for Illinois to
confirm that its patients are benefiting as intended or to understand
the impact on taxpayers and employers,” Will May of the pharmaceutical
trade organization PhRMA said in a statement.
Following that meeting, Weaver requested additional information from
CMS, including an estimate of the fiscal impact passage of HB 2371 would
have on the state employee health plan.
“Independent analysis estimates that the current 340B program costs
Illinois employers approximately $224 million annually, with the
proposed legislation expected to increase those costs by an additional
$89 million,” CMS said in the memo. “For SEGIP specifically, lost
rebates are estimated at $31 million annually, with an additional
projected impact of $12.4 million under the proposed legislation.”
The memo cites an analysis published in 2024 by the health industry
research and technology firm IQVIA. The health care groups, however, say
that study was funded by the National Pharmaceutical Council and thus
provides untrustworthy data.
“The focus of this conversation should remain on the Illinois patients
and providers who depend on the 340B program, not on the financial
interests of the pharmaceutical industry,” Ollie Idowu, President & CEO,
Illinois Primary Health Care Association, said in a statement.
Pending legislation
As debate over HB 2371 continues, lawmakers will be asked to weigh the
estimated cost to employers, including the state of Illinois itself,
with the cost currently being borne by community health clinics and
other providers who were originally intended to benefit from the
program.
Cyrus Winnett, executive director of the Illinois Primary Health Care
Association, a group that represents Federally Qualified Health Centers,
said during an interview in March that under current law, drug
manufacturers have been able to restrict the number of pharmacies or
suppliers where clinics can acquire 340B-discounted drugs, thus limiting
their ability to reap the financial benefit.
“What pharmaceutical manufacturers began doing was limiting the
distribution of these drugs to a single location,” he said. “And when I
say single location, I don’t mean Walgreens chain or CVS or a local
independent. I mean one physical location, which for our organizations
and their patients that have wide service areas, that’s extremely
limiting.”
The proposed legislation originated in the Senate as an amendment to a
bill that had previously passed the House. That amendment passed the
Senate on May 29, 2025, by a vote of 55-0. It then went back to the
House for a vote to concur in the Seate amendment, but so far the House
has not taken further action.
Sen. Dave Koehler, D-Peoria, who sponsored the amendment last year, said
during the April 14 COGFA hearing that the current system of pricing and
delivering drugs in the healthcare marketplace is imperfect, but that
lawmakers can only work with the tools they have.
“Is this the best way to cover rural hospitals or FQHCs? No, it’s not,”
he said. “But you know what? Congress gives us the tools that we have to
use. And when we have rural hospitals in our area, or FQHCs, or poor
people that are now being kicked off of Medicaid, we have to respond to
our constituents.”
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