One of the world's largest pharmaceutical companies is suing the state of Rhode Island.
In June of 2025, the Rhode Island General Assembly passed legislation that helps protect a program known as "340B" that "prohibits insurers, pharmacy benefits managers and other payors from engaging in discriminatory practices against community hospitals, clinics and other health care provider agencies that purchase prescriptions through the federal 340B discount program".
The big Pharma company, Novartis Pharmaceuticals, is suing Rhode Island to block the new law.
What exactly is "340B"? The 340B program is a federal program created in 1992 to "stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services". It's named after section 340B of the Public Health Service Act. Specifically, the 340B prescription drug program helps fund clinics and hospital systems that provide care to underserved communities, including people without insurance. The 340B program allows eligible "covered entities" such as a healthcare clinic to purchase prescription medication at a discounted 340B price from pharmaceutical manufacturers. The program allows the clinic to receive reimbursement from commercial insurers for the full price of the medication and utilize the "savings" - or the difference between the two prices - to fund safety net healthcare services for the populations it serves. Clinics and other entities rely on 340B savings to fund the comprehensive healthcare services they provide.
For cheaper medications, the savings may not be much. For example, a clinic may purchase a common blood pressure medication at a 340B discounted price of $5, and be reimbursed $15 by a commercial insurer, yielding $10 in savings per prescription per patient. The pharmacy gets a percentage of the savings, leaving the clinic with the rest. For cheaper medications, a clinic may not receive much in 340B savings and may even lose money. However, for more expensive medications such as the newer weight loss medications (i.e., GLP-1 receptor agonists), a clinic might purchase these medications for hundreds of dollars but be reimbursed more than $1,000. That allows the clinic to generate hundreds of dollars per 30-day prescription per patient for its safety net services. This can add up.
It is important to note that only certain healthcare organizations and clinics can participate in 340B. These include federally qualified health centers (i.e., community health centers), HIV clinics funded by federal Ryan White funding, hospitals that provide care to underserved communities, and other specialized clinics (i.e., STI clinics, Title X family planning clinics, etc.). This is in keeping with the spirit of the program to help support organizations that care for underserved communities.
However, pharmaceutical companies have long opposed 340B programs because it cuts into their profits. As GoLocal reported, Novartis, in the lawsuit, claims that "Covered entities have no obligation to pass on 340B savings to their patients, and they generally do not."
This is absolutely not true. As a physician at a 340 B-supported clinic called Open Door Health (a program of Rhode Island Public Health Institute), we leverage 340B to directly fund patient care similar to other safety-net clinics. Without it, we wouldn't be able to offer care to people without insurance, to those who are under-insured, or provide additional services to people who struggle to stay engaged in care (i.e., support staff such as patient navigators). This source of funding is especially critical for those of us in healthcare who work on the frontlines, providing care to people who have difficulty engaging in care.
Without it, we wouldn't be able to provide care except to people with insurance and who could otherwise always pay for services.
Although not well known, the 340B program is one of the most important sources of safety-net funding for community clinics and other healthcare organizations. Protecting this program is critical not just for community-based clinics like Open Door Health, but also for our entire hospital systems in the state. We need it to continue to protect the 340B program and ensure access to care for underserved communities in Rhode Island.