Johnson & Johnson’s proposed changes to the hospital drug discount program are inconsistent with the federal statute, according to the Health Resources and Services Administration.
Johnson & Johnson is proposing major changes to the way certain hospitals procure two of its biggest selling products under the 340B drug pricing program—but the federal government is pushing back.
J&J announced modifications on Friday to its 340B discount policy, noting that starting October 15, 2024, qualified hospitals can only obtain the pharma’s anti-inflammatory antibody Stelara (ustekinumab) and blood thinner Xarelto (rivaroxaban) through a rebate program. Under the plan, hospitals will first have to pay for the full price of the drugs and will later receive rebates, subject to the pharma’s “validation”—instead of receiving the 340B discount upfront.
As part of the rebate process, hospitals must also submit other data alongside their rebate request, including medical claims data and other information related to the purchase of Stelara and Xarelto. J&J’s notice on Friday did not specifically itemize the data that it will require, only stating that these are “standard information” that hospitals “collect, report, and maintain in the normal course of business.”
Hospitals must file their rebate requests within 45 days of dispense. Rebates will be granted “once the number of validated dispensed units equals the number of units in the purchased package size,” according to J&J’s notification.
However, the Health Resources and Services Administration issued a statement declaring that J&J’s planned rebate program is “inconsistent” with 340B and that the proposed changes have not been approved by the Secretary of the Department of Health and Human Services, according to the American Hospital Association.
Established in 1992, the 340B program allows healthcare providers—mainly hospitals—to purchase medicines at a discount to then prescribe to patients below the federal poverty level. Pharma companies have recently tried to limit the program, restricting the discounts that they give when covered hospitals contract third-party manufacturers to dispense the drugs.
340B Health, a nonprofit organization with a membership of over 1,500 public and private hospitals, criticized J&J’s plan in a letter to HRSA arguing that “the rebate approach denies 340B pricing at the time the drug is purchased,” noting it also opens up the possibility of denying 340B rebates “based on the manufacturer’s, and not HRSA’s, determination.”
“Such an approach violates the 340B statute which requires the manufacturer’s pharmaceutical pricing agreement ‘to require that the manufacturer offer each covered entity covered outpatient drugs for purchase at or below the applicable ceiling price if such drug is made available to any other purchaser at any price,’” according to 340B Health.
A J&J spokesperson in a statement to STAT News called the company’s proposed changes “reasonable, standard business practices,” which are designed “to help the 340B program better serve vulnerable patients.” In its current form, the 340B program “is not meeting its original goal” and “patients are not realizing the full benefit of the 340B program because of rampant abuse and misuse,” according to the spokesperson.
