As Federal Drug Pricing Program Reforms Lag, Virginia Senator’s Bill Seeks State-Level Solutions

After The New York Times reported in 2022 that a national hospital chain with roots in Virginia had taken advantage of a federal drug pricing program called 340B, federal lawmakers assembled a workgroup in 2023 to explore how they could both protect the program and ensure it isn’t abused.

But national solutions to the problem have yet to materialize, and some Virginia state lawmakers who are tired of waiting are taking matters into their own hands during this year’s legislative session.

Sen. Kannan Srinivasan, D-Loudoun, who sponsored a bill that originally would have mandated that pharmaceutical companies registered in Virginia not limit the number of contract pharmacies or covered entities that they ship 340B-covered drugs to. Now the amended measure calls for a workgroup to study the issue. (Photo by Shannon Heckt/Virginia Mercury)

Senate Bill 278 by Sen. Kannan Srinivasan, D-Loudoun, originally would have mandated that pharmaceutical companies registered in Virginia not limit the number of contract pharmacies or covered entities to which they ship 340B-covered drugs.

As the bill stands now, it would merely set up a state-level workgroup to explore how the program operates in Virginia.

“One of these days, we’ll get the feds to be able to fix this, but right now, we need to try to address it at the state level, and I think this is the best process,” said Del. Keith Hodges, R-Middlesex, when Srinivasan was presenting the latest iteration of his bill to a Health and Human Services subcommittee this week.

Srinivasan said he believes a workgroup can foster satisfaction between hospitals, pharmaceutical companies, and public health safety nets like Federally Qualified Health Centers that treat underserved patients.

Meanwhile, others lamented the idea of reducing Srinivasan’s original bill to a workgroup at a time when Congress’s workgroup has worked for years with little to show for it.

“We wanted that bill. Our patients needed that bill, and now we have a study,” Virginia Community Healthcare Association CEO Tracy Douglas said Wednesday.

VCHA represents Federally Qualified Health Centers around the state, and Douglas noted the growing strain the safety net organizations have been under.

“Let’s be clear about what the study is really about – it’s not about FQHCs. This is a fight between two powerful forces: Big Hospital and Big Pharma,” Douglas said. “While they battle it out, the safety net continues to suffer. Our patients get caught in the crossfire while others negotiate positions of power.”

How does 340B work, and what went wrong?

Under 340B, qualifying clinics or hospitals that treat underserved populations buy prescription drugs at steep discounts while charging insurers full price, pocketing the difference. The process helps health care providers stretch their dollars to continue caring for underinsured populations.

On paper, it helped Richmond Community Hospital in the city’s East End stay in operation to serve its predominantly low-income patients. In reality, the hospital’s owner, Bon Secours, slashed services at the East End hospital and directed resources to its affluent locations, the Times reported in 2022. It was also revealed that the Ohio-based Cleveland Clinic had also abused 340B to rake in extra cash.

Some lawmakers surmised that 340B’s exponential growth contributed to the program’s ability to be abused. After expanding slowly since its 1990 inception, more groups have tapped into it since the passage of the 2010 Affordable Care Act broadened eligibility.

Groups like Federally Qualified Health Centers or health-focused nonprofits, for example, have attributed the program to helping patients get the medications they need and keeping the doors open.

​​”Without 340B, we would not exist,”  Norfolk’s LGBT Life Center CEO Stacie Walls said in an interview.

The program allows the nonprofit organization to operate an in-house pharmacy for its clients and is one of several federal programs that have helped the LGBT Life Center stretch its dollars over the years to provide health care, housing assistance, support groups, and a free pantry. The center is also a critical access point for people living with HIV or AIDS in the Hampton Roads area.

As 340B has helped nonprofits and FQHCs around the country, some hospital systems have joined the program by exploiting loopholes.

For instance, the Cleveland Clinic otherwise didn’t qualify for 340B, and though it is based in the middle of a city, it managed to be designated as a “rural-referral center.” Such centers have lower barriers to qualify for 340B.

Likewise, Bon Secours’ Richmond Community Hospital, surrounded by public housing projects, is meant to serve financially-strapped patients with the aid of 340B.

Former Richmond Community Hospital ER worker Dr. Lucas English told the New York Times: “Bon Secours was basically laundering money through this poor hospital to its wealthy outposts. It was all about profits.”

Federal action on the horizon

U.S. Sen. Tim Kaine, D-Virginia, speaks at a rally in Norfolk for Democratic gubernatorial nominee Abigail Spanberger on Nov. 1, 2025. (Photo by Charlotte Rene Woods/Virginia Mercury)

While Virginia considers setting up its own state-level workgroup, proposals from the federal one are pending.

U.S. Sen. Tim Kaine, D-Virginia, who serves on the workgroup, said on a recent call with the Mercury that Congress could fine-tune the program to help it “grow at a normal rate” and “curb abuse.”

While he didn’t pinpoint when draft legislation might be released, he said that it will build on the conversations the workgroup has had over the past year with pharmaceutical companies and various providers that have utilized the program.

Concurrently,  President Donald Trump’s administration has sought a pilot to shift to a rebate model for 340B.

But, Kaine said, providers like small clinics or FQHCs that need 340B in the first place don’t typically have the upfront cash flow larger entities might have.

“If you make them pay the full price up front and then say ‘you can get a rebate back at your back end,’ how are they going to do that?” he said.

The matter was challenged in courts and last month a federal judge ruled that Trump’s pilot could not move forward. In lieu of an appeal, his administration has since released a request for information asking for input on whether or not the rebate proposal could be implemented.

While various entities sort through the matter in Washington, others could potentially explore state-level nuances if Srinivasan’s bill becomes law.

“We can’t assume that the feds are going to do anything productive at this point,” Del. Cia Price, D-Newport News, said as she voted to advance the bill.

While Douglas, in representing the FQHCs, has been adamant in the need for federal reform and expressed support for Srinivasan’s original bill, pharmaceutical companies have celebrated the state workgroup plan.

Calling the federal program “broken,” Pharmaceutical Research and Manufacturers of America deputy vice president of public affairs Tom Wilbur said that the state workgroup is an opportunity for “transparency and accountability.”

The trade group represents pharmaceutical manufacturers across the country. Meanwhile, Virginia Bio CEO John Newby has alleged that Srinivasan’s original bill would have allowed “unchecked expansion” of 340B.

“By allowing a stakeholder working group to conduct a comprehensive review, lawmakers can ensure that any resulting legislation would best serve Virginia patients,” he said in a statement. “Meaningful federal 340B reform is long overdue, and greater transparency and accountability are needed to ensure the program works as intended.”

The bill, which has already cleared the Senate, is advancing through the House’s health committee. It must win the approval of the full chamber before it can be sent to Gov. Abigail Spanberger for signature, amendment, or rejection via veto.

by Charlotte Rene Woods, Virginia Mercury

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