Miranda Esparza Testimony in Kansas: Transparency and Accountability for the 340B Program

ALEC Health and Human Services Task Force Director Miranda Esparza testified before the Kansas Special Committee on the 340B Program.

Read her testimony below:

Dear Chairman Gossage and Members of the Committee,

Thank you for the opportunity to testify today on behalf of the American Legislative Exchange Council, America’s largest nonpartisan, voluntary membership organization of state legislators dedicated to the principles of limited government, free markets and federalism. As the Director of the ALEC Health and Human Services Task Force, I am happy to join you to discuss the 340B program, the issues within it, and action taking place in other states.

As you know, 340B is a federal program requiring drug manufacturers to provide steep discounts to eligible safety-net providers, with the intention of passing those savings to low-income and uninsured patients. However, since the passage of the Affordable Care Act, this program has been grossly abused by hospitals, pharmacies, and pharmacy benefit managers to increase profits without supporting the populations it was intended for.

The ACA statutorily included more categories of hospitals as covered entities and made it easier for hospitals to qualify for serving high proportions of Medicaid patients. This already greatly expands and protects access to 340B pricing for the hospitals and other covered entities, including those in the rural and low-income areas that the program is meant to support.

But there was another change made, through unenforceable guidance, that allowed unlimited use of contract pharmacies to dispense those drugs. The idea was to make it easier for patients who did not use a hospital’s in-house pharmacy. Instead, there has been an explosion of contract pharmacies despite minimal or no benefit to the intended populations.

According to the 340B OPAIS database, there were seven active contract pharmacies among Kansas covered entities in 2010. Today, there are 1,807 active contract pharmacies — a nearly 28,000% increase. Of these currently active contracts, 970 (nearly 54%) are out-of-state. In 2024, the Pioneer Institute reported that 47% of Kansas contract pharmacies are in affluent areas, and that Kansas 340B hospitals provided less charity care (1.7%) than non-340B hospitals (2.17%).

A recent IQVIA report gives even more insight. In 2025, Kansas lost $146 million in drug rebates on 340B acquired drugs, meaning that the state and its residents were still charged the full claim price and cost-sharing amounts instead of benefitting from the discounts that the covered entity received. Even more striking is that the largest rebate losses occurred in commercial insurance and state employee plans, not Medicaid. That means most 340B drugs are benefitting individuals who are neither low‑income nor uninsured. If the program was serving its intended population, Medicaid would show the biggest losses, but it does not.

Despite this evidence for the detrimental impact of this federal guidance, some states have passed laws to prevent manufacturers from limiting the number of pharmacies they deliver to. As I previously mentioned, the use of unlimited contract pharmacies is not in federal statute and only exists in HRSA guidance, which the HRSA itself acknowledges is unenforceable due to the 2023 Third Circuit decision. Being a federal program, changes must be made at the federal level, and serious action is already being considered in Congress with the SUSTAIN Act that was discussed beginning of the hearing.

Rather than overstepping and possibly conflicting with the federal government, states should pass laws that require transparency and accountability for 340B covered entities. Nine states have passed laws, similar to the ALEC 340B 340B Transparency and Accountability Act policy, which requires covered entities to report the acquisition cost for all 340B drugs, the amount received for them, the payment made to pharmacies, and how the savings from the program were used. This commonsense policy is the most effective, legally sound, and patient‑focused reform states can adopt. It shines a light on the program so the state can have more transparency and accountability for programs like Medicaid or state employee health plans, and most importantly, to ensure that 340B serves the low‑income and uninsured patients it was created for.

Thank you again for the opportunity to speak with you today and I am happy to answer any questions.