Within the past few weeks, drugmaker Johnson & Johnson went head-to-head with 340B hospitals and the federal government over the company’s plan to stop paying upfront 340B discounts on two of its top-selling drugs. 340B Health Senior Counsel Amanda Nagrotsky joins us to explain how that conflict played out.

HRSA Warns Johnson & Johnson of Strong Punitive Actions

In letters to J&J, the Health Resources & Services Administration (HRSA) warned the drugmaker that replacing 340B rebates with discounts only would be allowed if approved by the Health and Human Services (HHS) secretary. HRSA gave the company until the end of September to announce that it was going to walk away from its plan or face both civil monetary penalties and the termination of its pharmaceutical pricing agreement (PPA). Nagrotsky said the threat to end the PPA was unprecedented, noting that it would cause the company to lose access to Medicaid and Medicare Part B coverage for all its drugs.

Johnson & Johnson Backs Down Under Pressure

J&J announced at the end of September that it would walk back its plan to implement rebates in mid-October, bowing to pressure from federal health officials and a bipartisan group of nearly 200 members of Congress who opposed the J&J strategy. The company maintained that it disagreed with HRSA’s reasoning and noted that it was reserving all legal rights with respect to rebates. That stance indicates the company is likely to continue its push to implement rebates.

The Battle Against Rebates Continues

Despite the win for hospitals on the J&J rebate scheme, efforts from the drug industry to change the 340B discount structure continue. Drug industry consultant Kalderos is part of ongoing litigation in a federal court in Washington, D.C., over the right to impose rebates. HRSA’s references to the concept of HHS approval of rebate proposals also leaves open the door for companies to seek federal consent for such a model.

Resources

1. 340B Hospitals Prevail on J&J Rebate Plans, But Fight Is Not Over
2. Bipartisan U.S House Letter to HHS, Sept. 27 
3. HRSA Letter to Johnson & Johnson, Sept. 27
4. J&J Response to HRSA, Sept. 30