This week, the Health Resources & Services Administration (“HRSA”), the agency responsible for administering the federal 340B Program, issued a letter to Johnson & Johnson (“J&J”) regarding its proposed 340B rebate model for purchases of STELARA and XARELTO by Disproportionate Share Hospitals (“DSH”).
On August 23, 2024, J&J issued a notice stating that, effective October 15, 2024, it would only make 340B discounts available on STELARA and XARELTO to DHS Covered Entities through a rebate model, whereby the DSH Covered Entities would purchase the drugs at a non-340B price, such as the wholesale acquisition cost (“WAC”). Following the dispensing or administration of STELARA or XARELTO to eligible patients, J&J would require DSH Covered Entities to submit timely rebate claim data to J&J’s rebate administrator to receive a rebate payment, which, if deemed eligible by J&J, would be equal to the difference between (i) WAC and (ii) the 340B ceiling price. Notably, J&J did not provide a timeframe for issuing such rebate payment upon receipt of the DHS Covered Entity’s claims data, which suggests the rebate payment is subject to J&J’s sole discretion.
Following the issuance of J&J’s notice regarding its proposed rebate model, HRSA made only informal comments that the model was inconsistent with the 340B statute and not approved by the Secretary of the Department of Health & Human Services (“DHHS”). However, on September 17, 2024, HRSA issued and published a formal letter to J&J calling upon J&J to cease implementation of the 340B rebate program, which HRSA maintains violates the 340B statute. Specifically, HRSA noted that the 340B statute provides that the amount a Covered Entity is required to pay a manufacturer shall not exceed the statutory 340B ceiling price. Thus, HRSA concluded that J&J’s rebate proposal requiring DHS Covered Entities to purchase 340B drugs at prices that exceed the ceiling price (by using WAC pricing) violates the 340B statute. Moreover, HRSA also highlighted that the 340B statute explicitly limits rebate models to those that have been approved by the Secretary, and J&Js model has not received such approval.
In its concluding remarks, HRSA stated that if the J&J rebate proposal is implemented, J&J would be subject to termination of its pharmaceutical pricing agreement (“PPA”), as well as subject to civil monetary penalties. According to HRSA’s letter, J&J has until September 30, 2024 to notify HRSA that it ceased implementation of the rebate proposal.
In light of previous 340B litigation, J&J may challenge HRSA’s letter through litigation, especially as some courts have been receptive to manufacturers’ more restrictive 340B policies. Frier Levitt attorneys have experience in assisting 340B covered entities and contract pharmacies navigate 340B policies and procedures based on HRSA rules as well as manufacturer policies. Stakeholders are encouraged to consult with qualified counsel if they are subjected to abusive manufacturer practices or are otherwise in need of their own compliance “check up.”
