Hospitals seek fines against Johnson & Johnson in 340B battle
By Michael McAuliff / August 29, 2024
Hospital groups are calling for the federal government to take action after Johnson & Johnson warned it will require 340B-eligible providers to pay full price up front for two widely prescribed medications and seek legally required discounts later.
Johnson & Johnson informed hospitals in the 340B drug program last week that it was instituting a new system in October for the Crohn's disease treatment Stelara and anticoagulant Xarelto. After purchasing the medications at list price and dispensing them to patients, hospitals will have to submit rebate claims to a J&J-designated platform, the company said.
Through the 340B program, providers that treat low-income and uninsured patients are eligible for discounts of around 25% to 50% on outpatient pharmaceuticals. Drugmakers have attempted to curb the growth of the program, including through legal action seeking to impose limits on the contracted pharmacies hospitals can use to dispense drugs.
Rather than discount the Stelara and Xarelto prices up front, Johnson & Johnson will validate that the drugs were purchased by and dispensed from eligible locations before issuing the required rebate, according to notifications sent to 340B hospitals Friday.
A spokesperson for the Health Resources and Services Administration, which runs the 340B program, said in a statement that Health and Human Services Secretary Xavier Becerra must approve the kind of rebate model Johnson & Johnson has outlined.
"As the Health Resources and Services Administration has communicated to Johnson & Johnson, [its] proposal to implement a 340B rebate model is inconsistent with the 340B statute, which requires secretarial approval of any such proposal," the statement said. "The secretary has not approved J&J’s rebate model."
"HRSA has communicated this information to J&J and will take appropriate actions as warranted," the statement continued. The spokesperson did not specify what such actions might entail.
Johnson & Johnson believes the 340B program is not meeting its original goal of enabling hospitals to obtain discounted drugs for patients in need, a company spokesperson said in a statement.
"To help the 340B program better serve vulnerable patients, J&J is implementing reasonable, standard business practices used across other government programs and contracts," the spokesperson said.
The spokesperson said the "limited-scope" rebate model is "fully consistent" with the 340B statute.
In letters to HRSA sent Wednesday, the American Hospital Association and America's Essential Hospitals called for a swift federal response.
"HRSA should immediately impose civil monetary penalties on J&J to send a clear message that drug companies cannot take unilateral action at the expense of 340B hospitals and the vulnerable patients they serve," wrote AHA General Counsel Chad Golder.
"HRSA must assert its statutory authority to hold drug companies accountable," America's Essential Hospitals CEO Dr. Bruce Siegel wrote. "It is not in the purview of pharmaceutical manufacturers to validate compliance for the purpose of providing rebates, as J&J proposes."
Golder quoted the legislative report accompanying the 340B law, which affirmed the HHS secretary would have discretion to determine the mechanism of reducing drug prices.
Both organizations noted the two drugs in question — Stelara and Xarelto — are included in the list of drugs for which Medicare has negotiated prices. They argue Johnson & Johnson is trying to recoup some of its losses at the expense of safety-net hospitals.
"J&J is yet again engaging in 340B vigilantism. While J&J may contend that this new policy is needed to improve program transparency, Congress did not permit drug companies to take the law into their own hands," Golder wrote. "This new rebate policy — like the drug companies’ contract pharmacy policies that preceded it — is a money-making scheme dressed up as a program integrity measure."