BILL ANALYSIS

C.S.H.B. 3265

By: Darby

Insurance

Committee Report (Substituted)

BACKGROUND AND PURPOSE

The bill author has informed the committee that for over 30 years, the federal 340B Drug Pricing Program has helped federally qualified health centers, rural hospitals, and other safety-net providers in Texas offer affordable medications and essential health care services to underserved communities by allowing them to purchase outpatient drugs at reduced prices without taxpayer funding. The bill author has further informed the committee that the program is critical for ensuring access to low-cost medication, but certain actions by drug manufacturers and pharmacy benefit managers threaten the program's integrity. C.S.H.B. 3265 seeks to address this issue by prohibiting certain discriminatory practices by health benefit plan issuers, pharmacy benefit managers, and third-party payors and certain prescription drug manufacturers, distributors, and related persons with respect to entities participating in the program.

CRIMINAL JUSTICE IMPACT

It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.

RULEMAKING AUTHORITY

It is the committee's opinion that rulemaking authority is expressly granted to the executive commissioner of the Health and Human Services Commission in SECTION 1 of this bill.

ANALYSIS

C.S.H.B. 3265 prohibits certain discriminatory practices by a health benefit plan issuer, pharmacy benefit manager, and third-party payor and certain prescription drug manufacturers, distributors, and related persons with respect to entities participating in the federal 340B Drug Pricing Program.

Health Benefit Plan Issuers, Pharmacy Benefit Managers, and Third-Party Payors

C.S.H.B. 3265 amends the Insurance Code to prohibit a health benefit plan issuer, pharmacy benefit manager, or third-party payor from doing the following:

· reimbursing a covered entity or a pharmacist or pharmacy that is under contract with the entity for a prescription drug at a rate lower than the rate paid to a non-covered entity for the same drug;

· requiring a covered entity or a pharmacy or pharmacist under contract with the entity to include with a claim for a prescription drug dispensed by the entity an identification, billing modifier, attestation, or other indication that the drug is a 340B drug in order to be processed or resubmitted;

· imposing a term on a covered entity that differs from the terms applied to non-covered entities on the basis that the entity is a covered entity, including either of the following:

o a fee, chargeback, or other adjustment that is not placed on non-covered entities; or

o a restriction or requirement regarding participation in a health benefit plan issuer, pharmacy benefit manager, or third-party payor network, including a requirement that a covered entity enter into a contract with a specific pharmacy or pharmacist; or

· discriminating against, creating a restriction applicable to, or imposing an additional charge on a patient who chooses to receive a prescription drug from a covered entity.

The bill makes the prohibition against requiring a covered entity or a pharmacy or pharmacist under contract with the entity to include with a claim for a prescription drug dispensed by the entity an identification, billing modifier, attestation, or other indication that the drug is a 340B drug in order to be processed or resubmitted inapplicable to a reporting requirement imposed by the U.S. Department of Health and Human Services (HHS) or the Department of State Health Services (DSHS).

C.S.H.B. 3265 specifies the sources of coverage to which those provisions apply and establishes exceptions to that applicability for the state Medicaid program, including the Medicaid managed care program, and the Texas HIV medication program. The bill defines the following terms for the purposes of those provisions:

· "340B drug" as a covered outpatient drug within the meaning of federal law limiting the prices of drugs purchased by covered entities that has been subject to any offer for reduced prices by a manufacturer under the 340B program and is purchased, or is intended to be purchased, by a covered entity;

· "340B program" as the federal drug discount program established by the federal Public Health Service Act;

· "covered entity" by reference to that federal act;

· "manufacturer" by reference to the meaning assigned by the Texas Food, Drug, and Cosmetic Act provisions relating to wholesale distributors of prescription drugs;

· "non-covered entity" as an entity that is not a covered entity;

· "pharmacy benefit manager" by reference to the meaning assigned by statutory provisions relating to third-party administrators with respect to pharmacy benefit plans; and

· "third-party payor" as any person, other than a pharmacy benefit manager, health benefit plan issuer, patient, or individual paying for a patient's drugs on the patient's behalf, that makes payment for drugs dispensed by a pharmacist or pharmacy or administered by a health care professional.

C.S.H.B. 3265 establishes that its Insurance Code provisions apply only to a health benefit plan delivered, issued for delivery, or renewed on or after January 1, 2026.

Prescription Drug Manufacturers, Distributors, and Related Persons

C.S.H.B. 3265 amends the Health and Safety Code to prohibit a manufacturer, repackager, logistics provider, third-party logistics provider, wholesale distributor, or agent of a prescription drug from, either directly or indirectly, doing any of the following:

· discriminating against a covered entity, a pharmacist or pharmacy that is under contract with the covered entity, or another entity that is authorized under the contract to receive the drug on behalf of the covered entity;

· denying, restricting, prohibiting, or otherwise limiting the acquisition of a 340B drug by, or delivery of the drug to, a covered entity, a pharmacist or pharmacy that is under contract with the covered entity, or another entity that is authorized under the contract to receive the drug on behalf of the covered entity; or

· requiring a covered entity, a pharmacist or pharmacy that is under contract with the covered entity, or another entity that is authorized under the contract to receive a 340B drug on behalf of the covered entity to submit any claim or utilization data as a condition for the acquisition of a 340B drug by, or delivery of a 340B drug to, the covered entity, pharmacist or pharmacy under contract with the covered entity, or other entity authorized to receive the drug, as applicable.

The bill makes these prohibitions inapplicable to the receipt of a 340B drug that is prohibited by the FDA, the submission of a claim or utilization data that is required by HHS or DSHS, or the Texas HIV medication program. Additionally, the bill makes the prohibition against requiring submission of any claim or utilization data as a condition for the acquisition or delivery of a 340B drug inapplicable to a pharmaceutical manufacturer audit that meets the following conditions:

· pertains directly to a covered entity's compliance with specified federal requirements; and

· is conducted in accordance with procedures established by HHS.

C.S.H.B. 3265 authorizes a person who has reasonable cause to believe another person has violated those prohibitions applicable to prescription drug manufacturers, distributors, and related persons to submit a complaint to DSHS and authorizes DSHS to investigate the complaint. The bill requires DSHS, if DSHS finds that the person subject to the complaint committed a violation, to refer the complaint to the attorney general and authorizes DSHS, upon such finding and in accordance with the authorization to refuse a license under the Texas Food, Drug, and Cosmetic Act, to suspend or revoke a wholesale drug distribution license held by the person subject to the complaint.

C.S.H.B. 3265 establishes that a person who violates the prohibitions applicable to prescription drug manufacturers, distributors, and related persons commits a false, misleading, or deceptive act or practice under the Deceptive Trade Practices-Consumer Protection Act, except that a civil penalty may be assessed in an amount not greater than $50,000 for each violation. The bill establishes that a person commits a separate violation for each package of 340B drugs that is the subject of a violation.

C.S.H.B. 3265 requires the executive commissioner of the Health and Human Services Commission to adopt rules necessary to implement the bill's Health and Safety Code provisions. Those provisions expressly do not create a private cause of action against a person who violates the provisions.

C.S.H.B. 3265 prohibits its Health and Safety Code provisions from being construed or applied to be less restrictive than any federal law as to any person regulated by the bill or in conflict with federal law or a related regulation or any law of Texas that is compatible with applicable federal law. The bill, for the purposes of those provisions, defines "340B drug" and "covered entity" by references to the meanings assigned by the bill's Insurance Code provisions, defines "pharmacist" and "pharmacy" by reference to the Texas Pharmacy Act, and defines "package" by reference to the meaning assigned by the federal Food, Drug, and Cosmetic Act with respect to requirements applicable to pharmaceutical distribution supply chains.

C.S.H.B. 3265 establishes that its Health and Safety Code provisions apply only to a prescription drug manufactured on or after the bill's effective date.

Severability

C.S.H.B. 3265 establishes legislative intent that every provision, section, subsection, sentence, clause, phrase, or word in the bill, and every application of the provisions in the bill to every person, group of persons, or circumstances, is severable from each other. If any application of any provision in the bill to any person, group of persons, or circumstances is found by a court to be invalid for any reason, the remaining applications of that provision to all other persons and circumstances must be severed and may not be affected.

EFFECTIVE DATE

September 1, 2025.

COMPARISON OF INTRODUCED AND SUBSTITUTE

While C.S.H.B. 3265 may differ from the introduced in minor or nonsubstantive ways, the following summarizes the substantial differences between the introduced and committee substitute versions of the bill.

Health Benefit Plan Issuers, Pharmacy Benefit Managers, and Third-Party Payors

The substitute revises the introduced version's provisions establishing the sources of coverage to which the bill's Insurance Code provisions apply, as follows:

· omits the following benefits and programs from the list of applicable sources:

o nonprofit agricultural organization health benefits offered by a nonprofit agricultural organization;

o health benefits provided by or through a church benefits board;

o the state Medicaid program, including the Medicaid managed care program; and

o CHIP; and

· includes the following as exceptions to those provisions:

o the state Medicaid program, including the Medicaid managed care program operated under state law; and

o the Texas HIV medication program established under applicable Health and Safety Code provisions.

The substitute includes a provision not present in the introduced making the prohibition against requiring a covered entity or a pharmacy or pharmacist under contract with the entity to include with a claim for a prescription drug dispensed by the entity an identification, billing modifier, attestation, or other indication that the drug is a 340B drug in order to be processed or resubmitted inapplicable to a reporting requirement imposed by HHS or DSHS.

Prescription Drug Manufacturers, Distributors, and Related Persons

With respect to exceptions to the bill's prohibitions applicable to prescription drug manufacturers, distributors, and related persons, the substitute includes provisions not present in the introduced that do the following:

· make all those prohibitions inapplicable to the submission of a claim or utilization data that is required by DSHS and to the Texas HIV medication program; and

· make the prohibition against submission of any claim or utilization data as a condition for the acquisition or delivery of a 340B drug inapplicable to a pharmaceutical manufacturer audit that pertains directly to a covered entity's compliance with specified federal requirements and is conducted in accordance with procedures established by HHS.