J&J Drops Plan to Dispense Discounted Drugs Through Rebate Model

Johnson & Johnson will suspend its plans for providing discounted drugs through a rebate model rather than an up-front discount to hospitals treating low-income and uninsured patients after the move met fierce resistance from the Biden administration.

The drug company Monday announced in a letter to the US Health Resources and Services Administration that it will forgo the implementation of its proposed rebate model to dispense its blood thinner Xarelto and anti-inflammtatory drug Stelara to certain health-care providers under the 340B Drug Pricing Program.

Drugmakers under the federal program are required to discount drugs for qualifying hospitals, clinics, and providers that treat low-income and uninsured patients, also known as covered entities. The providers currently purchase drugs at a steep discount, but under J&J’s plan, disproportionate share hospitals would need to purchase the drugs at a commercial price and then submit data to receive a rebate for the discounted price.

“J&J is proud of its strong and unwavering commitment to its patients,” the company wrote. “Due to HRSA’s unwarranted threats of excessive and unlawful penalties, J&J has no choice but to forgo implementation of the Rebate Model pending resolution of these issues.”

A J&J spokesperson said the company will “continue to constructively engage with HRSA, and all stakeholders, to explore solutions to modernize the 340B Program with more transparency, accountability, and oversight.”

The announcement comes after HRSA sent letters to the company asking it to forgo its rebate proposal.

In the latest letter, sent Sept. 27, the agency warned if J&J does not cease implementation of its rebate proposal by Sept. 30, HRSA will begin the process outlined in J&J’s pharmaceutical pricing agreement related to terminating the agreement.

“HRSA’s decision to respond to J&J’s planned implementation of the Rebate Model by moving to terminate J&J’s Pharmaceutical Pricing Agreement (‘PPA’) is severely detrimental to vulnerable patients across the country,” the company wrote.

“If HRSA took this unprecedented step, it would mean that millions of Medicare and Medicaid patients throughout the nation would lose access to life-saving and life-enhancing medicines made by J&J—including therapies that treat cancer, cardiovascular disease, mental illness, and autoimmune conditions,” the company said.

HRSA did not respond to immediate request for comment.

J&J also wrote it continues to believe that the rebate model is “not only legally permissible but sorely needed to improve the integrity of the 340B Program and provide an effective mechanism for manufacturers to comply with their obligations under the Inflation Reduction Act’s de-duplication and 340B price effectuation requirements.”

Under the Inflation Reduction Act’s Medicare Drug Price Negotiation Program, there is a 340B nonduplicaton provision.

“The Rebate Model targets duplicate discounts, not 340B-eligible claims. Duplicate discounts are prohibited by the 340B statute—and yet HRSA’s own covered entity audits demonstrate the rampant abuse occurring in the program today,” J&J wrote.