HRSA to J&J: Cease implementation of proposed 340B rebate model

The Health Resources and Services Administration Sept. 17 told Johnson & Johnson that the company's publicly announced plans to implement a 340B rebate model "violates J&J's obligations under the 340B statute, and HRSA expects J&J to cease implementation of it."

"Because J&J's rebate proposal, if implemented, violates J&J's obligations under the 340B statute, it subjects J&J to potential consequences, such as termination of J&J's Pharmaceutical Pricing Agreement (PPA)," HRSA wrote Sept. 17. In addition, HRSA told J&J that the 340B statute provides for "[t]he imposition of sanctions in the form of civil monetary penalties" on "any manufacturer with an agreement under this section that knowingly and intentionally charges a covered entity a price for purchase of a drug that exceeds the maximum applicable price under subsection (a)(1)."

Specifically, HRSA asked J&J to cease implementation immediately and inform the agency no later than Sept. 30, in order to provide adequate notice to covered entities. On Aug. 23, J&J announced that it would be upending its approach to 340B pricing for two of its most popular products, Stelara and Xarelto. Historically, J&J offered upfront discounts to 340B hospitals when they purchased these drugs. Starting on Oct. 15, however, J&J said it requires all disproportionate share hospitals participating in the 340B Program to purchase these drugs at full price and apply for a rebate from J&J. Under the new program, these hospitals would be required to submit certain data to J&J when they purchase the drugs at full price. After J&J verifies the drug's 340B status, it will send disproportionate share hospitals a rebate for the difference between the amount paid and the discounted 340B price.

Right after J&J's announcement, AHA expressed concern and said HRSA should take "immediate enforcement action," including assessing civil monetary penalties on J&J for intentionally overcharging 340B hospitals.