Last month, Johnson & Johnson announced that it would stop providing discounts for two of its drugs for disproportionate share hospitals (DSH hospitals) participating in the federal 340B prescription drug discount program.  Instead, the company would require the hospitals to purchase the two popular drugs – Stelara and Xarelto – at full price and offer rebates later.

Community safety-net hospitals and others were immediately alarmed because this is contrary to how the 340B program has operated since its inception in 1992.

Federal regulators agree.  On Tuesday, the Centers for Medicare & Medicaid Services’ Health Resources and Services Administration wrote to Johnson & Johnson to convey its displeasure with the company’s plans.

In its letter, CMS wrote that “If J&J implements its rebate proposal without Secretarial approval, it will violate Section 340B(a)(1) of the Public Health Service (PHS) Act” and that “In correspondence with HRSA, J&J asserts that their proposed rebate model is similar to ‘replenishment’ processes and that this authorizes J&J to unilaterally impose its proposed rebate model without violating the 340B statute. This is incorrect.”

The HRSA letter adds that “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)” and concludes that “HRSA expects J&J to cease implementation of its rebate proposal immediately and to inform HRSA no later than September 30, 2024, in order to provide adequate notice to covered entities.”

Community safety-net hospitals are so concerned because 340B is a vital part of their overall approach to serving the low-income residents of the communities in which they are located.  It enables community safety-net hospitals to provide prescription drugs to patients who otherwise could not afford them and generates savings that these hospitals reinvest in services for the low-income, underinsured, and uninsured residents of their communities.  The Alliance of Safety-Net Hospitals has asked Congress to convey its support for 340B and its opposition to the Johnson & Johnson plan in a letter to Health and Human Services Secretary Becerra.

Learn more about the situation from the Fierce Healthcare article “J&J’s move to tweak 340B policy for Stelara, Xarelto denounced by HHS” and find HRSA’s letter to Johnson & Johnson here.