J&J announces changes to 340B pricing for 2 of its drugs

The 340B program was launched in 1992 to help hospitals and clinics provide care for low-income and rural patients. Through the program, drug companies that participate in Medicare or Medicaid must offer their medications at a discount to participating hospitals.

The program has grown significantly since it was first launched, and there are now around 55,000 participating entities. In 2023, discounted 340B prices reached $124 billion, a 16% increase from $107 billion in 2022, according to data from IQVIA.

Last week, J&J announced that it would change its pricing model for two of its medications, Stelara and Xarelto, for disproportionate share hospitals, which make up around 1,200 of the roughly 2,700 hospitals in the 340B program.

Instead of being able to buy the two drugs at a discount, these hospitals would have to pay full price and then could later apply for a rebate. J&J said that the change is slated to take effect Oct. 15.

According to a J&J spokesperson, "the 340B program is not meeting its original goal of allowing safety net providers to obtain discounted medicines for vulnerable patients. Patients are not realizing the full benefit of the 340B program because of rampant abuse and misuse."

"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. "J&J's use of reasonable, standard and time sensitive business practices will help the 340B program meet its original intent, and better ensure discounts are more directly benefiting vulnerable patients."

The spokesperson added that using rebates is "fully consistent with the 340B statute, which specifically references rebates as a payment mechanism."

Reaction

According to Advisory Board's Lindsey Paul, this development "represents one new piece in the huge, messy, ongoing dispute between pharmaceutical manufacturers and 340B-covered entities."

Hospital industry officials say that moving from direct discount to rebates could have a negative impact on them financially, since they would have to wait months to receive the rebates. Hospitals that are already struggling financially, such as safety-net hospitals, would be the hardest hit by the change.

J&J's decision was an "example of big drug companies taking unilateral actions to advantage themselves at the expense of hospitals that care for America's most vulnerable patients," the American Hospital Association (AHA) said.

"This move undermines the very foundation of the 340B program, which is designed to provide discounted pricing at the time of purchase," said Maureen Testoni, president and CEO of the advocacy group 340B Health. "Any deviation from the upfront discount model not only contradicts the 340B statute but also jeopardizes the ability of safety-net hospitals to deliver care."

AHA and other hospital advocacy organizations have also reached out to the Health Resources and Services Administration (HRSA) about the decision.

In response to the decision, HRSA said J&J was mistaken about its rebate model. J&J's "proposal to implement a 340B rebate model is inconsistent with the 340B statute, which requires secretarial approval of any such proposal," an agency spokesperson said. "The HHS Secretary has not approved J&J's rebate model. HRSA has communicated this information to J&J and will take appropriate actions as warranted."

According to lawyers representing 340B hospitals, courts will likely have to step in to settle any disputes related to J&J's decision to move to a rebate model for some of its drugs.

"The bigger picture is that there will continue to be pressure on 340B-covered entities as pharma companies find new and creative approaches to restrict 340B reimbursement, court cases make their way through the judicial system, and both state and federal legislatures create their own policies around 340B access and eligibility," Paul said. (Silverman, STAT+ [subscription required], 8/23; Evans/Loftus, Wall Street Journal, 8/23; AHA News, 8/23; Morse, Healthcare Finance, 8/23)

CMS proposed a rule to reimburse over 1,600 hospitals an estimated $9 billion following a decision that deemed Medicare 340B payment cuts to be "unlawful." Advisory Board's Chloe Bakst, Julia Elder, and Lindsey Paul reflect on the future of the 340B program, what they got right following the court ruling, and their predictions on what's next.