Johnson & Johnson has called off plans to implement a new rebate model for 340B drug price discounts following threats from the federal government.
While continuing to defend the legality of the plan, J&J said the government’s “unwarranted threats of excessive and unlawful penalties” left it no choice.
J&J said last month that starting in October, some hospitals serving low-income patients would no longer receive 340B upfront discounts on its drugs Xarelto and Stelara. Instead, the hospitals would recoup the discounts via rebates after validating certain data. J&J said the plan was intended to curb “rampant abuse” of the program, which has grown significantly in recent years.
The Health Resources and Services Administration, which oversees 340B, came down hard on J&J’s plan, threatening penalties such as the termination of J&J’s pharmaceutical pricing agreement, which drugmakers must sign to participate in Medicaid.
“If HRSA took this unprecedented step, it would mean that millions of Medicare and Medicaid patients throughout the nation would lose access to life-saving and life-enhancing medicines made by J&J — including therapies that treat cancer, cardiovascular disease, mental illness, and autoimmune conditions,” J&J said in a letter to HRSA Administrator Carole Johnson on Friday.
As such, the company said it had “no choice but to forgo implementation of the rebate model.”
J&J maintained that its rebate model is “not only legally permissible but sorely needed to improve the integrity of the 340B Program,” and invited HRSA to “continue engagement” on the matter.
The company also said that the rebate model would “provide an effective mechanism” to prevent duplicate discounts under the Inflation Reduction Act. Drugmakers are not required to pay discounts negotiated by Medicare under the IRA on top of 340B discounts, nor are they required to pay inflation rebates on drugs with 340B pricing.
HRSA did not respond to a request for comment at press time.