Even as Johnson & Johnson prepares to weather the impact of negotiated Medicare drug prices on two of its top medicines, the company is aiming to change a different government pricing framework with a new policy for hospital payments under the 340B drug discount program.
Under J&J’s new rebate model, eligible hospitals and healthcare organizations will have to seek rebates on the company’s big-selling Stelara and Xarelto only after purchasing the drugs at commercial prices. Currently, the eligible providers get the 340B discounts at the time of purchase.
The drugmaker outlined the policy in a notice issued on Aug. 23, stipulating that the tweaks would take effect on October 15. Covered entities under the program must submit rebate claims data within 45 days of when the drug is dispensed, although a grace period allows for claims submissions outside of the 45-day window through March 10, 2025.
“We believe this update will significantly improve program integrity while at the same time enabling covered entities to obtain the 340B price on eligible 340B sales,” J&J said in its notice.
However, the U.S. Department of Health and Human Services (HHS)’s Health Resources and Services Administration (HRSA) was quick to disagree.
The agency notified the American Hospital Association (AHA) that it had informed J&J that the rebate model is “inconsistent with the 340B statute” and has not been approved by HHS Secretary Xavier Becerra. HRSA will take “appropriate action as warranted,” the AHA confirmed in its own release.
In recent years, drugmakers have contested the 340B program, which was set up in the 1990s to help providers that serve low-income patients. In lawsuits and public statements, companies have argued that there is widespread abuse in the government-mandated program.
"Some entities that participate in the program, such as large, well-resourced hospitals, have taken advantage of the program’s lack of clarity at the expense of the patients that the program is meant to serve," according to the Alliance to Save America’s 340B Program, a group that includes prominent pharma lobbying group the Pharmaceutical Research and Manufacturers of America (PhRMA).
The alliance advocates for policy changes that would make 340B a "true safety-net program" for patients.
Several manufacturers began pushing back against the system in 2020 by introducing various policy changes, which the National Association of Community Health Centers has outlined in a detailed list. Since then, a web of litigation has ensued between states, drugmakers and the government.
Meanwhile, J&J’s Stelara and Xarelto will soon be subject to Medicare price cuts under the Inflation Reduction Act. The negotiated price reductions were recently unveiled and will take effect in 2026.