Obscure drug discount program unleashes a full-fledged influence war at the State Capitol

ST. PAUL, Minn. (Minnesota Reformer) — Hospitals and drug companies are engaged in an expensive influence battle at the State Capitol this year over an obscure provision known as 340B, with each side lining up an army of dark-suited lobbyists, and Big Pharma even spending on billboards in rural Minnesota, as well as TV and Instagram ads.

The high-priced battle is over a bill at the Legislature to strengthen and extend 340B, which lets hospitals that treat low-income patients buy drugs at a discount and keep the savings.

With days remaining in the 2026 session, 340B advocates are worried the bipartisan bill, which hospitals say they need to survive, will fail to make it to the governor’s desk.

Many rural hospitals say the program, which was established in 1992, is helping keep their doors open because the savings bolster operations and patient care amid increasingly precarious finances. President Donald Trump’s signature tax cut law passed last year also included hundreds of billions of dollars in long-term Medicaid cuts.

“There’s no plan B for this. If this goes away, we don’t have other options,” said Richard Ash, CEO of United Hospital District in Blue Earth, Minnesota, at a Capitol press conference. “If the Legislature waits until more rural hospitals are gone and services are gone, it will not be a policy failure. It will be a moral failure.”

Ash said United Hospital District’s cost of pharmaceuticals from 2024 to 2025 rose 24%, even with the 340B program discounts. The savings are helping the hospital cover costly services like emergency care and obstetrics, he said.

PhRMA, the trade group representing drug manufacturers, says that hospitals are not passing the savings to consumers.

“Minnesota’s 340B mandate isn’t about access to medicines — this is about interfering with federal policy so hospital administrators can maximize profits through inflated drug costs, while patients, taxpayers and employers bear the hidden costs,” said PhRMA spokesperson Reid Porter in a statement. “With no clear direct benefits for patients, patients lose through higher out‑of‑pocket costs and premiums, and as taxpayers.”

Minnesota hospitals netted over $1.3 billion in 2024 thanks to 340B, the Minnesota Department of Health found in a recent report. Minnesota’s largest hospitals received over 80% of the savings, according to the report.

The Minnesota Legislature in 2024 passed a law to prohibit drug manufacturers from restricting access to medications covered under the 340B program. The current version is scheduled to sunset next year.

Drug companies have not followed the requirements of the Minnesota law and are still restricting access to the discounted drugs, hospitals and lawmakers argue. This is mostly because there is no enforcement mechanism, so the drug manufacturers face no consequences if they make the discounted drugs difficult to acquire.

Now, a bipartisan coalition of legislators are hoping to give government some enforcement muscle. The bill would grant authority to the Minnesota Office of Attorney General to sue a drug manufacturer for unfair or deceptive trade practices if they restrict delivery of 340B drugs to contract pharmacies.

The Minnesota Senate passed the bill 42-24 with bipartisan support.

All 67 Democratic-Farmer-Labor members in the House are in favor of the bill (HF 3609), which includes the attorney general enforcement. Partisan allegiances on the issue are scrambled, with some rural Republicans backing the bill in an effort to help their struggling local hospitals.

GOP members urged House leadership to get the bill moving and passed this year. A handful publicly — if gently — urged House Speaker Lisa Demuth, R-Cold Spring, to get the bill moving.

“I think that our speaker and leadership on both sides are dealing with a lot of issues right now. We want to elevate this one as being a real, critical one,” said Rep. Dave Baker, R-Wilmar.

House DFL leader Zack Stephenson, DFL-Coon Rapids, told the Reformer that House GOP leadership has been unwilling to move the bill forward. Stephenson said House GOP leaders have provided no rationale.

Demuth told the Reformer that the 340B bill is still being negotiated with the governor and legislative leaders.

Election year politics lurk in the background in a year when all 201 legislative seats and the constitutional offices are on the ballot.

Demuth is a leading candidate for the Republican nomination for Minnesota governor. Days after the session ends on May 18, she will be headed up to Duluth to court delegates to endorse her as the GOP candidate. Any sign of capitulation to Democrats could be disqualifying among the delegates, who tend to be the most dogmatically partisan.

Republicans are also loathe to give Attorney General Keith Ellison — whose office would be empowered to sue drug companies for failing to abide by 340B discount rules — any victories this legislative session as he seeks a third term in November. Doing so could activate the right-wing grassroots, which in recent years has challenged incumbent Republicans with primary campaigns.

The Republicans’ conflicted view of the bill was evident earlier this session when its chief author, Rep. Natalie Zeleznikar, R-Freeborn, tried to eliminate the attorney general enforcement provision from her own bill. Zeleznikar said she did so as a compromise, but Democrats opposed the amendment.

The pharmaceutical industry is also a prodigious campaign contributor, to both sides. One study found the industry had given $5 million in 2019-20 to the campaigns of state lawmakers around the country.

The hospitals are hardly wallflowers at the Capitol, however. Hennepin County Medical Center won a $200 million cash infusion this week, and the Mayo Clinic once threatened to take big investment dollars elsewhere unless legislators complied with the nonprofit giant’s wishes.

The hospitals have a heavier lift, however, as passing legislation is typically much harder than blocking it.