Federal drug discount expansion proposal may cost Illinois millions, agency head says

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.

Read more: 340B Responses – CMS

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.

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.”

Capitol News Illinois is a nonprofit, nonpartisan news service that distributes state government coverage to hundreds of news outlets statewide. It is funded primarily by the Illinois Press Foundation and the Robert R. McCormick Foundation.