Covered entities already face significant burdens from the onerous contract pharmacy restrictions and claims-submission requirements imposed by manufacturers. Now, the world’s largest drugmaker by revenue has found a new line of attack on 340B.
Johnson & Johnson, which earned $13.3 billion in 2023 on revenues of $85.2 billion, told disproportionate share hospitals it would launch a rebate model for 340B discounts for two of its best-selling drugs, plaque psoriasis treatment Stelara and blood thinner Xarelto (more on both below), effective Oct. 15.
The unilateral move means 340B hospitals will be forced to purchase the drugs at WAC pricing and then submit claims data within 45 days of dispensation to be evaluated for program compliance. This gives J&J unprecedented power to determine 340B pricing eligibility.
While the company says the move “will significantly improve program integrity,” hospital groups have been quick to condemn it.
“This move undermines the very foundation of the 340B program,” Maureen Testoni, the president and CEO of 340B Health, said in a statement. “Moving to a rebate system would be a violation of the 340B statute’s requirement that drugmakers provide eligible drugs ‘for purchase at or below the applicable ceiling price’ and would conflict with HRSA’s longstanding interpretation of that language as requiring upfront discounts.”
To date, HRSA has issued only one exemption allowing 340B rebates, for state AIDS Drug Assistance Programs (ADAPs) in 1998 — and only after obtaining extensive regulatory approval from the Department of Health and Human Services. Because some ADAPs do not purchase drugs directly and instead reimburse pharmacies, HRSA intended the exemption as “an optional alternate means of accessing” 340B discounts. The ADAP exemption should establish a precedent that 340B is not intended as a rebate program.
We applaud HRSA for quickly informing J&J that “their proposal to implement a 340B rebate model is inconsistent with the 340B statute, which requires Secretarial approval of any such proposal,” agency spokesperson David Bowman told various news outlets. “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,” he added.
In addition, both the American Hospital Association and America’s Essential Hospitals have since urged HRSA to move quickly and take enforcement actions against J&J.
One imagines this will ultimately end up in court. For now, however, hospital covered entities may have little choice but to comply with J&J’s demands. It means shouldering additional financial burden by having to purchase drugs at WAC and waiting for J&J to decide if they’ll honor a 340B price and provide the rebate.
The fear is that, just as we saw with contract pharmacy restrictions, there will be a ripple effect, and more manufacturers will follow suit, which could inflict untold damage on 340B. Keep an eye on the other manufacturers from the list of the initial 10 drugs subject to price negotiation under the Inflation Reduction Act.
Meanwhile, the war on 340B continues on multiple fronts:
- Drug industry platform 340B ESP said it will “encourage” covered entities to include eight new contentious data points in their contract pharmacy claims submissions starting Sept. 3. The policy is voluntary….. for now.
- Sanofi is asking certain hospitals for data related to 340B purchases of Dupixent, a possible precursor to an audit.
- Two 340B hospitals have sued HRSA alleging the agency failed to require Johnson & Johnson to notify them of the reason for an audit by the manufacturer. J&J is also asking entities to share their agreements with 340B TPAs. As a reminder, vendors including The Craneware Group require obtaining approval before sharing any confidential contract details with any third party.
Federal fixes needed
If nothing else, these developments should underline the urgent need for Congress to flesh out the many gray areas of the 340B statute. And sure enough, the latest scuttlebutt is that the Senate bipartisan “gang of six” plans to unveil its long-awaited 340B SUSTAIN Act in September (though in fairness, its release has been promised and postponed several times already).
Of course, the chances of Congress acting on any of the various 340B bills during what’s left of this session, in a presidential election year, are slim to none. And two members of the “gang of six” — Sens. Debbie Stabenow of Michigan and Ben Cardin of Maryland, both Democrats — plan to retire at the end of this year.
But the “gang of six” has been around for years and will live on with new members. The hope is that the legislation they introduce, shaped by solicited feedback from program stakeholders, will serve as a model for a bill in the next Congress.
Medicare price negotiations
The Biden administration announced that price negotiations have wrapped up on the first 10 drugs selected for Medicare Part D starting in 2026 under the IRA, pegging the estimated savings at around $6 billion based on last year’s data.
It’s probably no coincidence that J&J’s Stelara will see its price drop 66% to $4,695 for a one-month supply, while the price of Xarelto was slashed 62% to $197. (A third J&J product, Imbruvica, saw its price cut by 38% under the IRA but is not included in the new rebate policy.)
Also of interest: An unnamed source told 340B Report that four of the 10 drugs have newly negotiated prices that are below current 340B pricing. Under the IRA, drugmakers must offer covered entities purchasing under Part D 340B pricing or maximum fair pricing, whichever is lower.
Other news
- 340B Health and the American Society of Health-system Pharmacists (ASHP) released model 340B contract pharmacy protection legislation for states.
- HRSA is seeking public comment, due by Oct. 7, on the filing of initial petition with the Office of Pharmacy Affairs.
- AbbVie is ending its voluntary 340B pricing for its orphan drugs for the four hospital covered entity types subject to the exclusions.
Finally, a friendly reminder that the recertification window for 340B program participation closes Sept. 9. The stakes are too high to let this deadline slip by unnoticed.
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