J&J and HRSA argue over drug prices of $340 billion for Stelara and Xarelto

Johnson & Johnson is proposing sweeping changes to the way certain hospitals procure two of their best-selling products under the 340B drug pricing program – but the federal government is resisting the move.

J&J announced changes on Friday about its 340B rebate policy, noting that qualifying hospitals will only be able to obtain the drug company's anti-inflammatory antibody Stelara (ustekinumab) and blood thinner Xarelto (rivaroxaban) through a rebate program starting Oct. 15, 2024. Under the plan, hospitals will have to pay the full price of the drugs initially and receive rebates later, subject to “validation” by the drug company — rather than receiving the 340B rebate up front.

As part of the rebate process, hospitals must submit other data in addition to their rebate application, including medical claims data and other information related to the purchase of Stelara and Xarelto. J&J's announcement on Friday did not detail the required data, only noting that it is “standard information” that hospitals “collect, report and retain in the normal course of business.”

Hospitals must submit their rebate requests within 45 days of dispensing. Rebates will be granted “once the number of validated units dispensed matches the number of units in the pack size purchased,” J&J said in the statement.

However, the Health Resources and Services Administration issued a statement saying that J&J's proposed rebate program was “inconsistent with 340B” and that the proposed changes had not been approved by the Secretary of Health and Human Services, according to the American Hospital Association.

Created in 1992, the 340B program allows health care providers – primarily hospitals – to buy drugs at a discounted price to prescribe to patients below the federal poverty level. Pharmaceutical companies have recently tried to restrict the program. Limitation of discounts which they grant when the covered hospitals commission third-party manufacturers to dispense the medications.

340B Health, a nonprofit organization with over 1,500 public and private hospitals as members, criticized J&J’s plan in a letter to HRSA, arguing that “the rebate approach fails to provide 340B pricing at the time of drug purchase,” and noting that it also opens up the possibility of denying 340B rebates “based on the decision of the manufacturer and not HRSA.”

“Such an approach violates Act 340B, which requires in the manufacturer's drug pricing agreement 'that the manufacturer must offer covered outpatient drugs to each covered entity for purchase at or below the applicable maximum price if such drug is offered to any other purchaser at any price,'” 340B Health's statement said.

A J&J spokesman in a statement to STAT News called the company's proposed changes “common sense, standard business practices” aimed at “helping the 340B program better serve vulnerable patients.” In its current form, “the 340B program is not meeting its original goal” and “patients are not receiving the full benefit of the 340B program due to rampant abuse and misuse,” the spokesperson said.