Update: Senate Bill 124 passed on a vote of 42-23; Senate Bill 71 passed on a vote of 57-8. SB 124 must head back to the Senate for review of amendments; SB 71 heads to the governor. 

Two one-time competing bills attempting to reform Colorado’s 340B, a discount federal drug program, both won preliminary votes of approval in the House on Monday.

The 340B program, named for its section of federal law, allows eligible health care organizations to purchase outpatient drugs at a discounted rate. According to the American Hospital Association, hospitals use 340B savings to provide free care for uninsured patients, free vaccines, services in mental health clinics, and implement medication management and community health programs.

When the program began in 1992, 45 health care centers nationwide received 340B status. As of 2024, that number has ballooned to nearly 3,000, accounting for 57% of all hospitals in the country.

The two bills that were once at odds are Senate Bill 124 and Senate Bill 71.

As introduced, SB 124 would require nonprofit hospitals to use their 340B profits to decrease direct out-of-pocket costs for low-income patients. It also requires covered hospitals to report information related to their 340B participation, such as how profits are being used, payments to third parties, and any use of contract pharmacies, to the Colorado Department of Public Health and Environment.

As amended, the bill lists the ways that a nonprofit hospital in the 340B program cannot use those funds, such as for compensation, tax penalties or fines, expenses for advertising or public relations, lobbying costs, travel expenses for the hospital’s board and gifts or entertainment expenses.

SB 124 was primarily backed by unions, pharmaceutical companies, groups representing people of color and elected officials from those communities. It was opposed by urban and rural hospitals, pharmacies, and the League of Women Voters of Colorado.

Last month, one of the SB 124 sponsors, Sen. Barbara Kirkmeyer, R-Brighton, said, “The program, meant to help rural hospitals and safety-net clinics, has expanded at an exponential rate–but unfortunately, this does not mean reduced costs for Colorado families who are struggling with the costs of health care.”

On Saturday, the House Health & Human Services Committee added a requirement to SB 124 that 80% of 340B net revenue be spent on patients or capital improvements. But it stripped out all the enforcement and “teeth” from the bill, according to Rep. Eliza Hamrick, D-Centennial, who tried but failed to add that language back in when the bill came up for second reading Monday in the House.

Rep. Matt Soper, R-Delta, who sits on a hospital district board, defended the program. He said that adding more to what hospitals must comply with is frustrating. If Congress wanted the 340B program to apply directly to patients, as a pass-through, they could have designed it that way, he added. Instead, they created the program for a drug-purchasing discount for hospitals. Without it, hospitals would have to cut certain services and programs; in Delta, losing 340B could cost the hospital its oncology unit, he said.

Rep. Kyle Brown, D-Louisville, the bill’s co-sponsor, said it will promote better accountability and transparency in the 340B program. The program provides significant revenue for safety net clinics and health care providers, he told the House.

Brown said that for too long, pharmaceutical companies have raked in massive profits while everyday people are forced to choose between life-saving medications and necessities. This bill ensures that the money is spent on patients and that the state knows the size of the program, how much is being spent on overhead, and how many prescriptions are being written at the 340B entities.

The bill also won support from Rep. Matthew Martinez, D-Monte Vista, who sponsors the one-time competing measure, SB 71. Martinez said thanks to the work of the sponsors and stakeholders, the bills are now complementary, not competitive.

Senate Bill 71 would prohibit pharmaceutical manufacturers from imposing limitations or restrictions on covered hospitals, contract pharmacies, federally qualified health centers, or other facilities participating in the 340B program. It would also bar those manufacturers from requiring covered entities or pharmacies to submit health information unless it is directly related to a claim under a federal health care program.

Martinez said that starting in 2020, pharmaceutical manufacturers began prohibiting 340B entities from contracting with contract pharmacies to dispense 340B drugs to patients. This limited where those patients could get those prescriptions. SB 71 ensures that those manufacturers are prohibited from restricting the pharmacies with which a hospital can contract.

In the San Luis Valley, smaller pharmacies operate independently and aren’t part of a hospital. Martinez said that having only one pharmacy in an entire county puts the pharmacy at risk.

Martinez said the savings are intended to best meet a community’s needs and are not an expansion of the program.

There are 68 nonprofit hospitals certified as 340B providers; of those, 89% are operating at a non-sustainable margin of 4%, said co-sponsor Rep. Rick Taggart, R-Grand Junction. Twenty federally qualified health centers are also certified in 340B, and 65% had negative margins, he said. Several closed and more will close without the support of the 340B program, he told the House.

That this goes to hospital profits is false, Taggart said.

Most of the groups that opposed SB 124 supported SB 71, and most of the groups that supported SB 124 opposed it.

But the amended version of SB 124, and the claims that the bills are complimentary, drew heavy criticism from those who backed SB 124. In a press release Monday, they said SB 71 represents “a betrayal of trust—especially for those who believed they had a champion in Rep. Kyle Brown. Brown originally introduced SB 124 to address the exact lack of transparency and oversight now entrenched in SB 71. He was expected to guide underserved stakeholders through a tough but fair policy process. Instead, he urged silence from those communities throughout the process, gutted his own transparency bill, and in the 11th hour, flipped to support SB 71—the very measure he once stood against,” the release said.