Johnson and Johnson sues HRSA for blocking 340B plan
HRSA informed J&J in August that its rebate model was inconsistent with the 340B statute.
Photo: Pichsakul Prumrungsee Eyeem/Getty Images
Drugmaker Johnson and Johnson is suing the Department of Health and Human Services and the Health Resources and Services Administration for blocking its new 340B rebate model, and is seeking to verify the legality of its plan.
The lawsuit, filed in District Court for the District of Columbia, is requesting that a federal judge give the green light to its plan for the federal drug discount program, which is to swap 340B discounts for after-the-fact rebates.
A judgment in J&J's favor, the company said, would allow it to verify 340B claims are actually purchased and dispensed by a 340B entity.
On August 23, Johnson & Johnson announced that it would change the way it makes 340B pricing available for two of its most popular products, Stelara and Xarelto. J&J said it would require all disproportionate share hospitals participating in the 340B Drug Pricing Program to purchase these drugs at full price and submit data to J&J. Upon verification of the drug's 340B status, the DSH hospitals will receive a rebate for the discounted 340B price.
"J&J's transparency model is legally permissible, uses commercially standard data validation practices, and will help ensure compliance with the Inflation Reduction Act's requirements, while ultimately protecting patients' access to care," the company said in a statement. "J&J's proposed transparency model is a narrowly tailored and legally permissible model focusing on two products (Stelara and Xarelto) and for a limited set of the largest covered entities – Disproportionate Share Hospitals. This model will also ensure prompt payments, within seven to 10 days of timely claims submission."
WHAT'S THE IMPACT
J&J's 340B rebate model policy only applies to 340B DSH hospitals and only to Stelara and Xarelto. J&J said it would continue to offer 340B pricing on all covered outpatient drugs; the only change is that the 340B price for Stelara and Xarelto will be offered through a rebate to 340B DSH hospitals after valid claims data is processed. 340B pricing on all other covered outpatient drugs will remain available.
The 340B statute specifically references rebates as a mechanism for offering the 340B price. J&J said the statute does not require 340B prices to be offered through an up-front discount. Accordingly, manufacturers retain the discretion to offer 340B pricing to covered entities through multiple mechanisms, including a rebate model.
According to J&J, the government's own data spotlights how the rapid growth of the 340B Program can result in cases of diversion or duplicate discounts.
Federal government audits have yielded more than 500 diversion-related findings among covered entity audits over an eight-year period, the drugmaker said, and the Government Accountability Office found more than 400 instances of noncompliance related to duplicate discounts among audited covered entities, which is prohibited by the 340B statute.
Additionally, the risk of further duplicate discount abuse is heightened with the implementation of the Inflation Reduction Act (IRA), J&J said. The IRA statutorily requires manufacturers to certify that no duplicate discounts are occurring.
J&J said it continues to engage with HRSA on the program's potential implementation.
THE LARGER TREND
The HRSA told J&J in August that it can't use a rebate model to replace upfront discounts in the 340B program.
The American Hospital Association said it contacted the HRSA about the policy and as soon as the latter was made aware, it informed J&J that its rebate model was inconsistent with the 340B statute. Also, HRSA said the model had not been approved by the HHS secretary, according to the AHA.
HRSA further informed the AHA that it has told J&J that it would take appropriate action as warranted.
Jeff Lagasse is editor of Healthcare Finance News.
Email: jlagasse@himss.org
Healthcare Finance News is a HIMSS Media publication.
