This bill amends the Health and Safety Code to prohibit discrimination by health benefit plan issuers, pharmacy benefit managers, third-party payors, and certain prescription drug manufacturers, distributors, and related persons participating in a federal drug discount program. This bill would amend the Insurance Code to impose certain prohibitions, restrictions, and requirements on health benefit plan issuers; pharmacy benefit managers; and third-party payors relating to the 340B Drug Pricing Program (340B). This bill authorizes a civil penalty for non-compliance. This bill would take effect September 1, 2025.

HHSC is prohibited by federal law from duplicating discounts resulting from manufacturers providing a drug at a discounted 340B price and Child Health Insurance Plans (CHIP) collecting a drug rebate for the same drug. HHSC's Vendor Drug Program (VDP) currently uses codes and modifiers on outpatient drug and clinician administered drug claims to comply with federal law. The VDP requires the submission of these modifiers on all fee-for-service and managed care claims filled with 340B purchased drugs. Claims with these modifiers are excluded from the drug rebate system invoicing process and duplicate discounts are avoided. This approach allowed HHSC to collect revenue in drug rebates annually on non-340B drugs dispensed by covered entities. Without using a modifier then all claim submissions from the 340B provider will be considered 340B stock and not eligible for rebates. In addition, all pharmacy claims for covered entities would have to be reimbursed at the 340B price because federal law requires payment at no more than the 340B ceiling for 340B drugs.

Supposing non-340B drugs provided by covered entities could no longer be identified, in addition to no longer being able to collect rebates, HHSC would have to reimburse covered entities at the lower 340B cost. According to HHSC, at this time the agency is unable to determine the savings or the loss of revenue to the state related to the implementation of the provisions of this bill. Additionally, HHSC is unable to determine whether a covered entity would choose to stop providing non-340B drugs to avoid the lower reimbursement or continue to participate in the program.

According to the UT System, the implementation of the provisions of this bill could realize a significant increase in cost savings to the state; however, the exact amount cannot be determined at this time.

A violation of Section 431.416 of the Health and Safety Code, as provided by the bill, would be subject to a civil penalty not greater than $50,000 per package of 340B drugs. The number of violations and associated penalty revenue cannot be determined.

According to the Comptroller of Public Accounts, the number of violations that would result in civil penalty revenue, as well as any reduction in CHIP drug costs, are unknown; therefore, the related fiscal impact on the state cannot be estimated.

This analysis assumes the Office of Court Administration, Office of the Attorney General, Teacher Retirement System, Employees Retirement System, Department of Insurance, Department of State Health Services, Board of Pharmacy, and Texas A&M University System Administration can implement provisions of this bill within existing agency resources.

LEGISLATIVE BUDGET BOARD
Austin, Texas

FISCAL NOTE, 89TH LEGISLATIVE REGULAR SESSION


April 27, 2025

TO:	Honorable Jay Dean, Chair, House Committee on Insurance

FROM:	Jerry McGinty, Director, Legislative Budget Board

IN RE:	HB3265 by Darby (relating to 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 certain entities participating in a federal drug discount program; providing a civil penalty.), Committee Report 1st House, Substituted