As previously discussed here, Johnson & Johnson (J&J) recently announced its intention to change its 340B Drug Pricing Program discount available to disproportionate share hospital (DSH) Covered Entities on purchases of STELARA and XARELTO. However, the Health Resources and Services Administration (HRSA) notified J&J that its rebate model was contrary to the 340B statute and had not been approved by the U.S. Department of Health and Human Services (HHS).
In a letter to J&J on September 17, HRSA directed J&J to cease implementation of its rebate proposal immediately. Among other things, HRSA stated that the model is not approved by HHS and violates J&J’s obligations under the 340B statute because it would require DSH Covered Entities to purchase STELARA and XARELTO at prices in excess of what they are required to pay.
J&J’s position is that the new rebate model is similar to “replenishment” processes and therefore does not violate the 340B statute. HRSA disagrees because under a replenishment structure, a covered entity usually makes an initial purchase at a higher price and subsequent purchases at the 340B price, whereas the J&J model requires payment of the higher price for every purchase of the drugs. Also, covered entities voluntarily choose to use replenishment processes; J&J’s proposed model is not voluntary.
J&J is required to inform HRSA no later than September 30 that it has ceased implementation of the rebate model. Potential consequences for failing to comply include termination of J&J’s Pharmaceutical Pricing Agreement and the imposition of civil monetary penalties.
