J&J Sues U.S. Over Hospital Drug-Discounting Program

The Wall Street Journal – Tuesday, November 12, 2024
By Peter Loftus

Johnson & Johnson launched a legal challenge against a federal health agency blocking the company’s quest to tighten the way it provides lucrative drug discounts to hospitals.

J&J filed a lawsuit in federal court in Washington on Tuesday against the heads of the U.S. Department of Health and Human Services and one of its agencies, seeking a court ruling that says J&J’s plan is legal and to prevent the agency from rejecting it.

The lawsuit escalates the pharmaceutical industry’s fight to rein in the federal drug-discount program known as 340B. The program, created in 1992, requires drugmakers to provide steep discounts on outpatient drugs to hospitals and clinics that serve uninsured and low-income patients.

The pharmaceutical industry has argued that the 340B program has strayed from its original purpose of helping safety-net hospitals. Manufacturers say they sell medicines to covered hospitals at steep discounts, but some large hospitals mark up the prices charged to both uninsured patients and insurers.

Drugmakers typically provide 340B discounts at the time of purchase. In August, J&J proposed changing the timing of the discounts by requiring that hospitals pay full price upfront, and then apply for rebates of some of that money by submitting claims data to verify appropriate use of the drugs.

J&J’s lawsuit alleges that the efforts of the Health Resources and Services Administration, the HHS agency that oversees the 340B program, to block the rebate plan are at odds with the 340B law, and that HRSA’s rejection is based on an incorrect interpretation of the 340B law.

“Johnson & Johnson is taking action to bring much needed transparency essential to helping the 340B Program achieve its original intent to support prescription drug access for vulnerable patients,” the company said in a statement. “Johnson & Johnson remains strongly committed to the original intent of the 340B Program.”

HRSA declined to comment.

The proposed rebates would apply to two J&J drugs: the blood thinner Xarelto and Stelara, a treatment for psoriasis and gut disorders. The new rebate requirement would apply to certain hospitals that serve low-income and uninsured patients, but not to other types of 340B participants like children’s hospitals.

Hospitals have argued J&J’s plan would strap them financially by forcing them to hand over significant sums and then wait to get money back to realize the discount. HRSA notified J&J that it considered the rebate plan illegal and that J&J would face fines and other penalties if it went ahead with it. J&J said in September it would drop the plan and try to work with HRSA.

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