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Senate HELP Committee Holds Hearing on 340B
The Senate Health, Education, Labor & Pensions Committee (HELP Committee) held a hearing on October 23, 2025, (the full hearing can be found here) as a continuation of the ongoing discussion regarding reform to the 340B Program. This follows the HELP Committee's report which we reported on in our April newsletter. The hearing revealed bipartisan support for the need for reform, but both Republican and Democrat senators expressed concern that sweeping reforms may harm rural hospitals and health centers, which rely on 340B to remain operational. The HELP Committee was generally in consensus on the need for increased oversight of the 340B Program, which includes increased funding for the Health Resources and Services Administration, in part to allow for a more robust auditing function, increased monitoring and reporting obligations for 340B Covered Entities, and transparency into how 340B Covered Entities utilize the savings realized from the 340B Program.
When any proposed legislation will be introduced to Congress is currently unclear. Sen. Roger Marshall (R-KS) pushed for a bill to be drafted by the end of the year, alluding that the HELP Committee may be close to a draft bill. However, other senators seemed reticent during the hearing, and industry stakeholders, including hospital systems and drug companies, are sure to pressure Congress on any proposed reforms.
California Bill Regulating PBMs Signed into Law
On October 11, 2025, California Governor Gavin Newsom approved a new law, Senate Bill 41 (SB 41), remaking the regulatory landscape for pharmacy benefit managers (PBMs) operating in the state and aiming to reduce healthcare costs. SB 41 creates one of the country's most aggressive regimes for regulating PBMs, which negotiate drug prices between drug manufacturers, health insurers, and pharmacies. Some of the new law's key provisions are outlined below.
SB 41 focuses on ensuring PBMs deal fairly with both affiliated and nonaffiliated pharmacies. To that end, PBMs must adhere to the following:
- PBMs must allow all nonaffiliated pharmacies to participate in their provider networks if such pharmacies are willing to accept the terms and conditions of participation applicable to affiliated pharmacies.
- PBMs may not impose restrictions prohibiting patients from utilizing unaffiliated pharmacies or inducing the transfer of prescriptions to affiliated pharmacies.
- PBMs may not refuse to contract with pharmacies on the basis of their nonaffiliated status or impose discriminatory terms and conditions or lower reimbursement rates on such pharmacies.
SB 41 also aims to curb rent seeking by imposing certain requirements affecting drug prices, including the following:
- PBMs may not engage in spread pricing (i.e., charging health plans more for drugs than they pay to pharmacies).
- PBMs must pass all drug costs and dispensing fees that health plans or payment programs pay through to the pharmacies or providers dispensing such drugs.
- PBMs are prohibited from imposing retroactive reductions of pharmacy payments, including through "reconciliation" mechanisms.
Last, SB 41 imposes significant disclosure obligations on PBMs. PBMs are required to submit quarterly and annual financial disclosures to the California Department of Managed Health Care. They must also, if requested by contracted health insurers, make quarterly disclosures of aggregate acquisition costs, rebates, payments to affiliated and nonaffiliated pharmacies, manufacturer administrative fees, and drug utilization information.
The law authorizes the state attorney general to recover civil penalties and receive equitable relief for violations of the law.
Providers Faced with Difficult Financial Decision as COVID-19-Era Medicare Flexibilities Have Lapsed
Effective October 1, 2025, two COVID-19-era Medicare programs — flexible telehealth benefits and in-home hospital care — were abruptly halted. Both programs were implemented to increase access to care during the public health emergency and have since been extended on numerous short-term bases. Funding for each program has expired, however, as Congress failed to come to an agreement on federal funding by September 30.
Before the COVID-19 pandemic, Medicare coverage for telehealth services was limited. Generally, telehealth services were covered only for patients that lived in rural areas and traveled to an approved clinic to receive remote care. During the pandemic, Congress waived these restrictions and made telehealth services generally available to seniors from their homes. In 2020, Congress also launched the Acute Hospital Care at Home (Hospital-at-Home) initiative, which allowed more than 400 hospitals in 39 states to deliver acute, hospital-level care to patients in their homes. Each of these flexibilities has survived previous threats of expiration and has been renewed, albeit on numerous short-term bases, since its respective implementation. Now, despite bipartisan support for extending both programs, each has lapsed because of a broader political fight over government funding.
With the expiration of the Medicare programs, providers are now faced with a difficult decision — continue normal operations with the hope that the flexibilities will be reinstated and services will be reimbursed retroactively to October 1 or cease services that were conducted under these flexibilities altogether.
While there is widespread belief that Congress will reinstate the Medicare telehealth flexibilities and retroactively reimburse services provided during the shutdown, not all providers are willing or able to take that risk. As a result, some providers are refusing to schedule virtual visits for Medicare beneficiaries, while others are informing beneficiaries that they may receive a bill for the services if governmental funding does not come through.
There is less certainty as to the fate of the Hospital-at-Home initiative. For the first time, the Centers for Medicare & Medicaid Services (CMS) provided a notice directing participating hospitals to discharge all inpatients or return them to the hospital on September 30, 2025. The notice specifically states any noncompliance with the previously waived requirements would be addressed through a plan of correction. CMS also notes that as of September 30, it is no longer accepting requests for participation in the Hospital-at-Home initiative.
Goodwin is continuing to monitor the state of these programs during ongoing government funding negotiations.
Democrats Seek to Reduce Orphan Drug Exemption
Senate Democrats are seeking to reduce the expanded carve out for orphan drugs created under the budget reconciliation bill. Prior to the budget reconciliation bill, drugs with a single orphan drug designation were exempt from the Medicare Drug Negotiation Program. This carve out applied only to drugs that treated patient populations of less than 200,000. Under the budget reconciliation bill, drugs with multiple orphan designations (e.g., through addressing multiple diseases) would also be exempt from price negotiations.
The Congressional Budget Office (CBO) originally estimated the cost of the expanded carve out as $4.9 billion between 2025 and 2034. This original estimate did not include three drugs targeting cancer, which, when factored into the CBO's analysis, increased the estimate to $8.8 billion. The CBO estimates that the financial impact could be even higher depending on which formulations of the three drugs are exempt from the negotiation program.
Democrats have responded to the CBO's revised analysis by proposing limits on drugs eligible for the expanded carve out. Under the proposed bill, drugs that receive more than $400 million per year in Medicare spending are ineligible for the carve out and are subject to negotiation. The proposed legislation, named the "No Big Blockbuster Bailouts Act," may result in some orphan drugs that were previously exempt from negotiation prior to the budget reconciliation bill becoming subject to the program if they fall within the proposed threshold.
Health System Brings Suit Against UHG over Claims Denials
Ballad Health, a nonprofit health system that operates 19 hospitals in Tennessee and Virginia, filed a lawsuit against UnitedHealth Group (UHG) in the U.S. District Court for the Eastern District of Tennessee on October 21, 2025. In a press release, Ballad Health asserts that UHG "has systematically denied, delayed or underpaid for care that physicians determined to be medically necessary, while also overstating to the federal government how sick its members are to collect higher taxpayer-funded payments through the Medicare Advantage Program."
Approximately three-quarters of Ballad Health's patients are beneficiaries of Medicare or Medicaid or are uninsured, and the vast majority of its Medicare patients — 72% — are covered by Medicare Advantage plans. In its complaint, Ballad Health alleges that UHG's actions caused more than $65 million in damages to Ballad over the last five years.
UHG has previously been the subject of scrutiny related to its denials of coverage for care provided to Medicare Advantage patients. A lawsuit was filed in 2023 against UHG related to allegations that it used an algorithm to deny coverage for post-acute care for Medicare Advantage patients, and the Senate Permanent Subcommittee on Investigations issued a report in 2024 finding that UnitedHealthcare — along with Humana and CVS — denied prior authorization requests for post-acute care at significantly higher rates than other types of care.
Ballad Health stated that it will not renew its Medicare Advantage contract with UHG when it expires in 2027, but it will continue to work with UHG on its commercial, Medicaid, and exchange insurance plans when those agreements are up for renewal.
States Form Public Health Initiative
On October 15, 2025, the governors of 14 states and one US territory announced that they had established a new, public-health-focused initiative. The Governors Public Health Alliance includes the governors of California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maryland, Massachusetts, New Jersey, New York, North Carolina, Oregon, Rhode Island, Washington, and the territory of Guam, and it is described on its website as "a nonpartisan, non-profit coalition of governors that works together to protect public health."
The initiative is supported by the Governors Action Alliance (GovAct), "a nonpartisan nonprofit initiative that supports governors in championing fundamental freedoms." This is the third of GovAct's alliances; it has previously formed the Reproductive Freedom Alliance and Governors Safeguarding Democracy. The Alliance is "guided by a bipartisan set of public health advisors," such as former CDC Director Dr. Mandy Cohen. The Alliance "will serve as a unified, cross-state liaison with the global health community and will facilitate cross-state collaboration by bringing together regional and other groups to share best practices and surface common challenges, elevating national considerations for vaccine policy and regulatory solutions to keep science front and center."
In announcing the Alliance, Washington Governor Bob Ferguson stated: "We can no longer rely on the information coming out of Washington, D.C., but our states are coming together to unequivocally state that science still matters. Diseases don't stop at state borders — and preparedness shouldn't either. By joining forces, we will act faster and communicate better to ensure our communities stay healthy." New York Governor Kathy Hochul described the role of the Alliance as follows: "From undermining vaccine access and abortion rights to slashing billions in Medicaid funding from those in need, the federal government is wreaking havoc on public health and the institutions we rely on. The Governors Public Health Alliance will allow our states to share resources, coordinate with global partners, and deploy the tools and information needed to meet public health threats and protect the American people."
This follows the formation of two regional public health alliances, the Northeast Public Health Collaborative and the West Coast Health Alliance, with which the Governors Public Health Alliance plans to coordinate.
State Abortion Law Updates
We previously reported on the Texas attorney general filing a suit against a New York physician, accusing the physician of unlawfully providing a Texas resident with abortion-inducing drugs in January's newsletter and provided updates on the case in February and July. Our most recent update came after a default judgment was entered against the New York physician when the acting county clerk in Ulster County, New York, repeatedly rejected the Texas attorney general's attempts to impose summary judgment.
In a further development in the case, the state of Texas sued the acting county clerk, and the New York attorney general has moved to intervene in the case. The state filed a petition for a writ of mandamus in New York state court on July 25, 2025, seeking a motion to compel the clerk to file the motion for summary judgment. On September 18, New York Attorney General Letitia James moved to intervene.
The Office of the New York State Attorney General wrote in a press release that it intervened to defend the constitutionality of New York's shield law. Attorney General James stated: "Our shield law exists to protect New Yorkers from out-of-state extremists, and New York will always stand strong as a safe haven for health care and freedom of choice. I will fight every last attempt to roll back our rights and turn back the clock on reproductive freedom."
This is not the only update out of Texas — Attorney General Ken Paxton's office has taken other recent action to enforce Texas' abortion ban, which is one of the strictest in the country. On August 14, the office sent cease-and-desist letters to Plan C, Her Safe Harbor, and California physician Dr. Remy Coeytaux of Aid Access. The letters claim that the organizations are "in violation of multiple state and federal laws" and demands that they cease and desist from "mailing abortion-inducing drugs into the State of Texas." These letters follow the initiation of a wrongful death lawsuit filed in the Southern District of Texas against Dr. Coeytaux. This lawsuit was filed by an individual who alleged that Dr. Coeytaux mailed abortion-inducing drugs to his girlfriend, which she used to terminate her pregnancy.
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