Introduction

Johnson & Johnson, a New Jersey-based multinational pharmaceutical company, is suing the US federal government for challenging its model for reducing drug prices. Previously, the US Health Resources and Services Administration (HRSA), a federal agency for healthcare services, rejected the rebate plan of J&J in the 340B drug reduction program. Instead, it instructed the company to provide reduced drug prices on the upfront discounts to reduce the chances of unfair advantage to a small number of hospitals. This drug pricing dispute is now under trial. 

Detailed Picture

The HRSA is a subagency of HHS (Department of Health and Human Services) and oversees the 340B program. According to this U.S. hospital drug discount program, drugmakers must provide the 340B price to hospitals at the time of purchase. However, J&J devised its plan in August to give hospitals rebates for two prescribed drugs on the 340B program. Stelara (for plaque psoriasis) and Xeralto ( a blood thinner) are among the widely-used drugs under the 340B program and J&J intended to provide rebates for these two drugs. 

However, this plan became controversial immediately. It was against the hospital drug discount policy of the 340B program and would also benefit hospitals that comprise less than half of 340B hospitals but purchase over 80% of these drugs. The hospitals were also skeptical of this move and argued that this change would allow the drugmaker to delay the payment for a longer duration or refuse to pay any discount taking advantage of any new law in the future. 

The HRSA accepted these allegations and ordered J&J to abide by the 340B rules and regulations. The administration also warned the pharmaceutical company that it may face steep fines and possibly lose its approval status in Medicare and Medicaid programs, if it sticks with rebates. 

This matter didn’t remain confined to the pharmacy company and health agency. In late September, around 200 congressmen wrote a letter in opposition to the rebate plan. As a consequence, J&J moved from its rebate proposal the same month. However, the drugmaker has now decided to stick with the idea and has taken HRSA to a Washington D.C. district court to solve the issue in its favor. 

What J&J Says?

Johnson & Johnson argues in its complaint that there is no specific price mechanism in the 340B program for issuance of discounts by drugmakers. Therefore, it is unfair to reject the rebate proposal of the company. Additionally, it claimed that the rebating plan will enable the company to check the purchasing and distribution records of hospitals, which will ultimately increase the integrity of the 340B program. 

Opinion of 340B Hospitals

The HRSA declined to comment on the Johnson & Johnson lawsuit but 340B rejected the allegations of J&J on hospitals. The association representing 340B hospitals says that the rebate proposal will prove disastrous and will increase an unbearable financial and administrative burden on these hospitals. They have also sided with HRSA on the healthcare discount program legal challenge. 

What is the 340B Program?

The government introduced the 340B program in 1992. This healthcare program recommends drug manufacturers to provide discounts on selected drugs to hospitals and clinics that receive high numbers of people with low incomes. Visit Benefits by State for more insights.