Faced with potential monetary fines, Johnson & Johnson said Monday it is abandoning a proposed 340B rebate plan for hospitals involving two of its blockbuster drugs, Stelara and Xarelto.
Johnson & Johnson has decided not to implement controversial changes to how it offers drug discounts to hospitals under the 340B program, after the Health Resources and Services Administration threatened the pharma with sanctions.
J&J last month proposed sweeping changes to how it would offer drug discounts under the federal 340B program. Instead of offering the price cuts upfront, the pharma intended to first require hospitals and other beneficiaries to purchase the covered products—the anti-inflammatory therapy Stelara and the anticoagulant Xarelto—at full price. Rebates would then be provided later, subject to J&J’s validation. The proposal was supposed to take effect on Oct. 15.
However, J&J on Monday informed the Health Resources and Services Administration (HRSA) that it was not going forward with the plan.
“Due to HRSA’s unwarranted threats of excessive and unlawful penalties, J&J has no choice but to forgo implementation of the rebate model pending resolution of these issues,” Scott White, COO of North America Innovative Medicines at J&J, wrote in a letter to the agency.
The decision comes on the heels of HRSA threatening last month that it would terminate J&J’s Pharmaceutical Pricing Agreement and/or impose civil monetary penalties if it didn’t halt the implementation. HRSA warned at the time that if J&J implemented its plan, the company would be in violation of its original obligations under the federal discount program for hospitals.
J&J insists that its proposed rebate plan is not only lawful but also serves to protect the integrity of the 340B program. White argued in his letter to HRSA that the rebate model “changes neither the scope of 340B-eligible prescriptions nor the 340B ceiling price for J&J’s medicines.”
White also slammed HRSA’s response to the rebate proposal as “detrimental to patients, unlawful, and punitive.” Had the HRSA terminated J&J’s participation under 340B, it would have imperiled “millions of Medicare and Medicaid patients” who would have lost access to several “life-saving and life-enhancing” therapies from the pharma, according to White.
The 340B program went into effect in 1992 and provides drug discounts for certain hospitals that serve patients below the federal poverty level. Pharma companies have increasingly been challenging the program, including the growing use of contract pharmacies to dispense the discounted drugs.
Last week, Sen. Bill Cassidy (R-La.) upped his investigation into the matter, asking the CEOs of Eli Lilly and Amgen for more information regarding their restrictions on these third-party distributors.
