A major drugmaker’s plan to trade out upfront 340B discounts for rebates has found swift pushback from both hospitals participating in the drug subsidy program and the government administration that oversees it.
Friday, Johnson & Johnson issued a notice that beginning Oct. 15 it would no longer be processing wholesaler chargebacks for two of its drugs, Stelara and Xarelto, for certain program participants.
To receive the program’s discounts, disproportional share hospital covered entities would need to submit claims for a rebate through an online platform within 45 days of dispensing (with an initial grace period of over six months).
The 32-year-old 340B program was enacted by Congress to help subsidize safety-net care providers by manufacturer discounts on most drugs administered in the outpatient setting by covered entities.
With about a third of the country’s hospitals now participating—and government data suggesting a 22% jump in wholesale purchase discounts from 2021 to 2022 alone—pharmaceutical industry groups have critiqued and sought to circumvent what they view as providers’ abuse of the program.
Over the past couple of years, that effort has often taken the form of back-and-forth courtroom duels over hospitals’ practice of extending the subsidies to contracted pharmacies. J&J said its new approach has similar goals of cutting down misuse.
“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 wrote in its notice.
Shortly after the company delivered the notice, 340B Health, an association of more than 1,500 hospitals that participate in the program, released a statement calling on the Health Resources and Services Administration (HRSA), which oversees the program, to step in. J&J’s decision, 340B Health said, is at odds with the program’s statute and “undermines” its goals by imposing greater burden on safety-net hospitals.
“It would force these financially strapped hospitals to incur significant costs and float revenue to drug companies by paying full price for 340B-eligible drugs,” 340B Health President and CEO Maureen Testoni said in the statement. “These hospitals would go without vital resources they need to treat their patients in need while drugmakers and third parties determine when—and whether—to approve 340B rebates.”
HRSA appears to be of a similar mind. In an emailed statement, the administration said it has already communicated to the drugmaker that its proposal is running afoul of the law.
“Their proposal to implement a 340B rebate model is inconsistent with the 340B statute, which requires Secretarial approval of any such proposal,” HRSA said. “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.”
J&J’s change specifically relates to disproportionate share hospitals, which comprise the bulk of the 340B program’s spending but also provide a majority of the industry’s uncompensated care and about three-quarters of all care to the more costly Medicaid population, per 340B Health.
Though HRSA and the broader Department of Health and Human Services have often fallen on the side of the hospital industry in 340B disputes, the pharmaceutical industry’s position has found an ear in Congress. Legislators on both sides of the aisle, though more often than not Republicans, have raised concerns that the program has become a revenue stream for the hospital industry’s larger and more financially secure health systems.