This overview is excerpted from Manatt on Health, Manatt’s subscription service that provides in-depth insights and analysis focused on the legal, policy and market developments. For more information on how to subscribe and to activate a complimentary one week trial to Manatt on Health, please reach out to Barret Jefferds.
On August 23, Johnson & Johnson (J&J) issued a written notice to disproportionate share hospitals that participate in the prescription drug discount program established under section 340B of the federal Public Health Service Act, advising them that, beginning on October 15, it would no longer offer 340B discounts at the time of purchase on two of its drugs, the plaque psoriasis drug Stelara and the blood thinner Xarelto. Instead, such hospitals would be required to purchase the drugs at non-340B prices and then submit claims data to a third-party vendor in order to receive the 340B discount via a rebate.
The rebate claim data J&J is requiring hospitals to provide is described as “standard information about the product dispense or administration that [340B] Covered Entities collect, report, and maintain in the normal course of business.” After an initial grace period that extends through March 10, 2025, hospitals will be required to submit claims data within 45 days of dispense. J&J states that rebates will typically be paid within 7 to 10 days “after accumulation of validated rebate claims.” J&J also states that the rebate payment will equal the difference between wholesale acquisition cost and the 340B ceiling price, suggesting that, among other things, hospitals will no longer be able to access sub-ceiling prices for the two drugs in question. J&J’s existing 340B contract pharmacy policy will remain in place for all other J&J products.
The Health Resources and Services Administration (HRSA), which administers the 340B program, pushed back on J&J’s rebate model almost immediately. A HRSA spokesperson was quoted in the media as saying that “[J&J’s] proposal to implement a 340B rebate model is inconsistent with the 340B statute, which requires Secretarial approval of any such proposal,” and that “the Secretary has not approved J&J’s rebate model.” They also stated that “HRSA has communicated this information to J&J and will take appropriate actions as warranted.”
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