The federal government is challenging Johnson & Johnson’s plan to change how some hospitals receive drug price discounts under the 340B program.
Last week, J&J announced that beginning Oct. 15, disproportionate share hospitals serving low-income patients will receive 340B discounts on Xarelto and Stelara through rebates, rather than upfront discounts. That means hospitals would only receive lower prices under the program after validating certain medical claims, purchase and dispensing data.
A J&J spokesperson told Endpoints News Monday that the plan is intended to curb “rampant abuse and misuse.” The 340B program was created to help hospitals serving low-income populations, and it has grown significantly in recent years. But drugmakers have scrutinized the program, launching legal campaigns over their participation requirements.
The Health Resources and Services Administration, which oversees 340B, said it’s against J&J’s rebate model, telling Endpoints that it’s “inconsistent with the 340B statute,” which requires prior approval of such proposals.
“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 agency said.
A J&J spokesperson said the model is “fully consistent with the 340B statute, which specifically references rebates as a payment mechanism, and is expected to mitigate legally prohibited program abuses by improving transparency.”
Drug pricing expert and Drug Channels Institute president Adam Fein said J&J’s decision may have been motivated in part by the Inflation Reduction Act. Drugmakers are not required to pay discounts negotiated by Medicare under the IRA on top of 340B discounts, nor are they required to pay inflation rebates on drugs with 340B pricing. Fein said the rebate model could be a way for drugmakers to ensure they aren’t giving out duplicate discounts.
“This clearly is a system that would solve those problems,” Fein said.
340B Health, a membership organization for more than 1,500 340B hospitals, blasted J&J’s plan in a letter to HRSA Administrator Carole Johnson last week.
“Rather than saving on covered outpatient drug costs at the time of purchase, 340B hospitals will be forced to incur higher carrying costs for these drugs, essentially floating revenue to drug manufacturers, until the manufacturer approves and remits rebate payments,” the organization wrote. “Many smaller covered entities that already are operating on razor thin margins would be unable to handle these upfront costs.”