Colorado state lawmakers are playing doctor with a federal drug program they have no business fixing. SB 71, a bill currently snaking its way through the statehouse, aims to expand the troubled 340B Drug Pricing Program—but instead of helping low-income patients, it could end up lining the pockets of big hospitals and pharmacies. Rather than throwing more state money at a flawed system, lawmakers should focus on transparency and accountability. Because the last thing taxpayers need is another prescription for disaster.
What is the 340B Drug Pricing Program?
The 340B Drug Pricing Program was created with good intentions, but it’s been exploited. Does it need reform? Absolutely. Should Colorado lawmakers be the ones to fix it? Not a chance. Here’s why . . .
Despite good intentions, lawmakers—at every level of government—fail to predict unintended consequences that can undermine the original spirit of a law. A prime example? The 340B Drug Pricing Program itself. With time, flaws in the original policy became apparent and special interest groups found ways to circumvent the spirit and the letter of the law to their own advantage.
How 340B Went Off the Rails
Since its inception in 1992, the program was designed to allow eligible hospitals, clinics, and other safety-net organizations to purchase outpatient prescription drugs at a significant discount and use the savings to expand healthcare access to vulnerable and underserved populations. Sounds like a noble and straight-forward concept, right? So what went wrong?
Over time, the program has become highly controversial, with mounting evidence that certain providers are exploiting its structure to generate revenue rather than assisting vulnerable patients as intended. In Colorado, nearly half (45%) of 340B pharmacies operate in high-income areas—despite the program being designed to serve the poor. The 340B program has expanded significantly over the years with little transparency or accountability, allowing entities that receive discounted drugs from manufacturers to profit from the price difference—rather than passing those savings on to patients.
Follow the Money: Who Really Benefits from 340B Expansion?
Instead of ensuring low-income patients benefit, many 340B providers have partnered with for-profit Pharmacy Benefit Managers (PBMs) and chain drugstores. A 2024 Pioneer Institute report found that a disproportionate number of 340B pharmacies, which are supposed to serve the poor, are instead concentrated in more affluent areas—including in Colorado.
State lawmakers would be wise to learn lessons from other states trying to “fix” the federal drug program with bills similar to SB 71. Fiscal analyses in the states of North Carolina, Utah, and Minnesota found glaring flaws in the program that would put state taxpayers on the hook for millions of dollars.
The Constitutional Problem with SB 71
Beyond the financial concerns, there’s a bigger constitutional problem: states don’t have the authority to regulate 340B. The 340B program is federally regulated, and states lack the authority to impose additional mandates. In fact, multiple states are embroiled in lawsuits over this issue, and, in December, the U.S. District Court for the Southern District of West Virginia blocked a similar state 340B law, ruling that federal law preempts state regulation.
A Smarter Solution: Transparency, Not Expansion
Rather than expanding the 340B program without oversight, Colorado lawmakers should focus on implementing transparency and accountability measures within the program—especially for hospitals and pharmacies participating in the state’s health plan.
Colorado’s own U.S. Senator, John Hickenlooper, is currently working on a bipartisan proposal to increase transparency in the 340B Drug Pricing Program. That’s where the real fix should come from—not from a misguided state-level attempt that will only create more confusion for patients and cost taxpayers money.
If lawmakers push SB 71 forward, the only ones benefiting will be the middlemen profiting off a broken system.