Hospitals relieved by Johnson & Johnson reversal on rebate plan, but 340B battle goes on

After heavy protests from hospitals and warnings from the federal government, Johnson & Johnson has dropped its plan to require health systems to apply for rebates in the 340B drug discount program.

The drug company informed the Health Resources & Services Administration that it is dropping the plan to ask hospitals to request rebates for two popular drugs: Xarelto, a blood thinner, and Stelara, a drug for Crohn’s disease and colitis.

Under the federal 340B drug discount program, hospitals and health systems can buy certain outpatient drugs at lower prices. The program is designed to help hospitals caring for underserved communities.

Typically, hospitals simply buy the 340B drugs at lower prices. Johnson & Johnson proposed having hospitals pay the full price for the medications, and qualifying providers would receive a rebate on their purchase. Outraged hospitals protested the plan and said it would force them to spend significantly more up front in hopes of getting a discount in the future.

The Health Resources & Services Administration took exception to the drug company’s plans. HRSA sent a letter warning Johnson & Johnson that if it moved ahead with the rebate plan, the government could consider removing the company’s drugs from Medicare & Medicaid programs. The agency warned that potential consequences include termination of J&J’s Pharmaceutical Pricing Agreement.

This week, Johnson & Johnson said that it is abandoning the rebate plan, even though the company also defended the rebate model and said it would ensure rebates went for the intended purposes of the 340B program.

“Due to HRSA’s unwarranted threats of excessive and unlawful penalties, J&J has no choice but to forgo implementation of the Rebate Model pending resolution of these issues,” the company said in a letter to HRSA.

‘Would have harmed patients’

Bruce Siegel, MD, president and CEO of America’s Essential Hospitals, welcomed the news and thanked HRSA for its pressure on Johnson & Johnson.

“The decision by Johnson & Johnson to back down from its illegal plan for rebates in the 340B Drug Pricing Program shows how swift and firm federal action and vigorous advocacy by essential hospitals can stop harmful drug industry behaviors that would put our health care safety net at risk,” Siegel said in a statement.

Rick Pollack, president and CEO of the American Hospital Association, also hailed the news that Johnson & Johnson has scrapped the rebate proposal.“The AHA is pleased that Johnson & Johnson has decided to cease implementation of its 340B rebate proposal, which would have harmed patients and 340B providers,” Pollack said in a statement.

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