The Honorable Bill Lee
Governor of Tennessee
State Capitol, 1st Floor
600 Dr. Martin L. King Jr. Blvd
Nashville, TN 37243
Dear Governor Lee:
On behalf of National Taxpayers Union (NTU), America’s oldest taxpayer advocacy organization, I respectfully urge you to veto SB 1414, a contract pharmacy mandate that fundamentally alters the operation of the federal 340B Drug Pricing Program in Tennessee.
The 340B program was originally designed to provide affordable medications to low-income and uninsured patients. However, since its inception in 1992, the program has become highly controversial, with mounting evidence that certain providers are exploiting its structure to generate revenue rather than assisting vulnerable patients as intended.
What does this mean? The 340B program has expanded significantly over the years with little transparency or accountability, allowing entities that receive discounted drugs from manufacturers to profit from the price difference—rather than passing those savings on to patients.
Instead of primarily benefiting low-income communities, there has been a proliferation of 340B pharmacies in wealthier neighborhoods, often affiliated with for-profit Pharmacy Benefit Managers (PBMs) and chain drugstores. A 2024 Pioneer Institute Report found 46% of 340B pharmacies supposedly serving the poor are in affluent neighborhoods in Tennessee.
I urge you to carefully scrutinize the potential financial implications of SB 1414 for Tennessee’s state-funded healthcare programs. Three separate fiscal notes issued on SB 1414 provide contradictory assessments of the bill’s financial implications. It is my humble opinion that many serious questions have not been asked, and a more thorough investigation of this policy’s impact on your state budget must take place. Depending on the fiscal note, SB 1414 could cost the state between $7.4 million and $29.8 million. The latest fiscal note claims the bill’s impact on the state is “not significant” and then proceeds to report the bill will result in increased expenditures to the State Group Insurance Program. These are glaring inconsistencies that must be addressed before moving forward.
Lessons can be learned from other states that have introduced similar 340B legislation. A recent fiscal analysis in Utah found that a 10% increase in drugs purchased through 340B would result in a loss of nearly $2 million in drug rebates—a cost that ultimately falls on taxpayers.
In North Carolina, state health plan patients covered under 340B contracts are being charged significantly higher prices, with copays based on inflated list prices rather than the discounted acquisition costs. A recent report from North Carolina State Treasurer Dale Folwell found that hospitals in the 340B program were overcharging cancer patients at rates averaging five times the cost of the actual drugs—a burden borne not just by patients but by taxpayers as well. The North Carolina State Health Plan now faces an unfunded healthcare liability of $32 billion.
Similar concerns have been raised in Minnesota, where a 2023 report from the Minnesota Department of Health revealed that 340B hospitals generated at least $630 million in net revenue—likely only half of the true amount—with the state’s largest 340B hospitals benefiting the most.
Beyond the financial concerns, there are also serious constitutional issues with SB 1414. The 340B Drug Pricing Program is federally regulated, and states lack the authority to impose additional mandates. Already, multiple states are embroiled in lawsuits over this issue, and, in December, the U.S. District Court for the Southern District of West Virginia blocked a similar state 340B law, ruling that federal law preempts state regulation.
Rather than expanding the 340B program without oversight, I suggest you focus on transparency and accountability within the program—especially for hospitals and pharmacies participating in the state’s health plan. The 340B Drug Pricing Program is a federal program, and state law should not be codified around a deeply flawed system. NTU has long advocated for meaningful reform at the federal level rather than state-level mandates that will ultimately increase costs for taxpayers.
Given these serious concerns, I strongly urge you to veto SB 1414 and instead focus on evaluating and addressing the deficiencies of the 340B program. I humbly offer this advice as both a former pediatric nurse practitioner who worked with the very patients for whom the 340B Drug Pricing Program was intended, and as a former Wisconsin state senator who understands how contentious and challenging it is to allocate taxpayer dollars wisely.
Please do not hesitate to contact me if you have any questions.
Yours respectfully,
Leah Vukmir
Senior Vice President of State Affairs
National Taxpayers Union