Hospitals protest Johnson & Johnson’s planned changes to 340B drug discounts

Hospitals are pushing back against Johnson & Johnson’s planned changes to price breaks through the federal 340B drug discount program.

Hospitals are criticizing Johnson & Johnson’s planned changes to price breaks through the 340B drug discount program. Bruce Siegel, president and CEO of America’s Essential Hospitals, said asking hospitals to apply for rebates will hurt safety-net hospitals.

Johnson & Johnson is planning to change its policy on two drugs: Xarelto, a blood thinner, and Stelara, a drug for Crohn’s disease and colitis. Instead of giving hospitals in the 340B program reduced prices at the time of purchase, Johnson & Johnson says hospitals will now need to submit applications for rebates and the company will reimburse them. The company is making the new policy effective Oct. 15.

Both Xarelto and Stelara are among the first group of drugs subject to Medicare price negotiations by the Biden administration.

Health systems want the pharmaceutical giant to continue offering lower prices through the program without the added task of applying for reimbursements. They say the company’s plans to shift the administration of price breaks are improper, and they’re asking the government for help.

The American Hospital Association and America’s Essential Hospitals are urging the federal government to take action. Hospitals say the drug company is overcharging hospitals in the 340B Drug Pricing Program, which provides discounts on drug prices for hospitals with a high percentage of patients with lower incomes and in underserved communities.

Chad Golder, general counsel of the American Hospital Association, wrote a letter to the Health Resources & Services Administration asking the agency to prevent Johnson & Johnson from implementing the policy. Golder wrote that the company is upending the practice it followed for 30 years.

“J&J is yet again engaging in 340B vigilantism,” Golder wrote in a letter to the government.

Hospitals say that Johnson & Johnson is instituting the new rebate policy to offset a drop in revenue since it’ll soon have to charge Medicare patients less for Xarelto and Stelara. Golder called it a “tit-for-tat response.”

“J&J’s adoption of this rebate model is yet another example of a drug company seeking to squeeze every possible penny from the hospitals and health systems that care for America’s underserved patients,” Golder added.

Bruce Siegel, MD, president and CEO of America’s Essential Hospitals, wrote in a separate letter to HRSA that the policy will hurt hospitals and patients.

“J&J’s proposed rebate model is nothing less than an attempt to line drug company pockets at the expense of patient care,” Siegel wrote. “Under the proposal, 340B-eligible hospitals would be required to purchase drugs at higher list prices and then wait for the manufacturer to distribute a rebate to receive the statutorily required 340B price. Such a delay imposes a meaningful economic hardship on essential hospitals, many of which have limited cash on hand.”

Hospitals are chafing under the prospect of delays, or potential denials, of lower prices for the two popular drugs. Johnson & Johnson plans to review the application of hospitals to ensure they are eligible for discounts in the 340B program, and will then send rebates after confirming eligibility.

While it may seem like a minor change in the process, hospitals will face higher administrative costs in complying with Johnson & Johnson’s policy, Golder wrote.

“This flies in the face of Congress’ intent in establishing the 340B program and could jeopardize patients’ access to these drugs,” Golder wrote. “In addition, disproportionate share hospitals, which already operate on the thinnest of margins, will be forced to develop pricey administrative mechanisms to make and track rebate requests.”

In the notice announcing the new policy, Johnson & Johnson said it “remains deeply committed to the 340B program. We believe this update will significantly improve program integrity while at the same time enabling covered entities to obtain the 340B price on eligible 340B sales.”

The Health Resources & Services Administration has told Johnson & Johnson that the rebate policy doesn’t reflect 340B regulations and hasn’t been approved by the U.S. Department of Health & Human Services, the AHA said.

Hospitals have been wrestling with drug companies over the 340B drug discount program more and more in recent years.

In May, the U.S. Court of Appeals in Washington, D.C. ruled in favor of two drug companies in a dispute over the 340B Drug Pricing Program. Hospitals have argued that drug companies are improperly putting restrictions on drugs in the program.

Hospitals have said the 340B program provides essential support to help patients from disadvantaged communities, in urban and rural areas. Hospitals fought back when the government reduced 340B payments several years ago, taking their case to the U.S. Supreme Court and winning a unanimous decision from the high court.

Conversely, drug companies and some patient advocates say the 340B program has grown beyond its intended purpose of helping hospitals with a high volume of patients with lower incomes.

Critics, including The Alliance for Integrity and Reform of 340B, have argued that hospitals participating in the 340B program aren’t delivering enough charity care. Critics have also argued that patients aren’t seeing sufficient discounts on drug prices.