HRSA calls on Johnson & Johnson to scrap its 340B drug rebate plan

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According to the American Hospital Association, the Health Resources & Services Administration has told Johnson & Johnson that the company cannot replace rebates with a discount model in its 340B drug pricing program.

On August 23, Johnson & Johnson announced that it would change the way it provides 340B pricing for two of its most popular products, Stelara and Xarelto. Starting October 15, J&J would require all disproportionate share hospitals participating in the 340B drug pricing program to purchase those drugs at full price and submit data to J&J. After verifying the drug's 340B status, DSH hospitals would receive a discount on the discounted 340B price.

The American Hospital Association said it contacted the Health Resources and Services Administration about the policy and, once HRSA became aware of it, informed J&J that its rebate model was inconsistent with Act 340B. In addition, HRSA said the model had not been approved by the Secretary of the Department of Health and Human Services, the AHA said.

HRSA also informed AHA that it had notified J&J that it would take appropriate action if necessary.

340B Health also contacted the Health Resources & Services Administration and filed a formal request, arguing that such a policy change would violate the 340B Act and harm safety-net hospitals.

No one at J&J was initially available for comment.

WHY THIS IS IMPORTANT

Disproportionately large hospitals serve large numbers of vulnerable patients and benefit from Act 340B, which requires manufacturers to offer these hospitals a reduced price for prescription drugs.

However, drug manufacturers point out that the system is subject to abuse through diversion and duplication in the distribution of drugs by pharmacies.

In 2020, several pharmaceutical companies began implementing policies that deny 340B rebates on medications when dispensed to 340B patients in contract pharmacies.

When HRSA took steps to end this practice, several companies filed suit.

In May, an appeals court affirmed a lower court ruling on 340B that sided with the drug manufacturers. The D.C. Circuit said the law does not categorically prohibit manufacturers from imposing conditions on the distribution of covered drugs and that restricting access to contract pharmacies does not violate 340B.

At the same time, another drug manufacturer, Kalderos, filed a lawsuit challenging HRSA's interpretation of the law that said manufacturers cannot impose conditions, including rebates, on 340B prices, according to 340B. That lawsuit was stayed pending final appeal after the DC Circuit ruled on the drug company's challenge to HRSA's position.

ORIENTED DATA

Maureen Testoni, president and CEO of 340B Health, said, “Moving to a rebate system would violate the 340B Act's requirement that drug manufacturers make eligible drugs available 'for purchase at or below the applicable maximum price,' and would be inconsistent with HRSA's longstanding interpretation of that language to require upfront rebates. This move would impose tremendous financial and administrative burdens on 340B hospitals serving vulnerable patients and underserved communities.”

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