J&J Loses Fight Over Drugmaker Rebate Model in Federal Court

Johnson & Johnson failed to convince a federal judge that the US government acted unlawfully when it rejected the company’s proposal to discount medicines through a rebate model to health providers that treat lower-income and uninsured patients.

The US Health Resources and Services Administration “provided multiple reasons why J&J’s rebate model is different from replenishment models,” Judge Rudolph Contreras wrote in an opinion filed Friday in the US District Court for the District of Columbia.

“Because HRSA reasonably explained key differences that justify different treatment of the models, J&J’s argument that the differential treatment was arbitrary and capricious is without merit,” he wrote.

A spokesperson for J&J said the court’s ruling “contradicts the statute and allows for the continuing abuse and potential fraud that undermines the 340B Program’s original intent to provide medicines at discounted prices to vulnerable patients.” The company intends to appeal the order and “is working to bring more transparency to help the 340B Program achieve its original intent to support prescription drug access for vulnerable patients,” the spokesperson said in a statement.

At issue before the court was whether the government acted illegally when it denied the drugmaker’s bid to discount medicines through a rebate model rather than up front to covered entities under the federal 340B Drug Pricing Program.

Drugmakers under 340B are required to discount drugs for covered entities, which are qualifying hospitals, clinics, and providers that treat a disproportionate number of low-income and uninsured patients. The covered entities currently purchase drugs at a steep discount, but under J&J’s proposal, providers would buy medicines at commercial price and then submit data to receive a rebate.

The company was the first to share a plan about its 340B rebate model and the first to challenge HRSA’s rejection of its model after facing fierce resistance from the government.

The court, however, rejected J&J’s arguments that HRSA’s decision was arbitrary and capricious.

“Because the parties dispute the proper interpretation of the 340B statute, the Court first analyzes the text, structure, purpose, and history of that statute,” Contreras wrote. “These tools of statutory construction all support Defendants’ interpretation: the parenthetical phrase ‘taking into account any rebate or discount, as provided by the Secretary’ gives the Secretary the discretion to provide for a rebate model, or not.”

The government also had the “best interpretation,” based on the plain and unambiguous language of the 340B statute, Contreras wrote.

“HRSA was not required to address every concern J&J had raised to determine it had not approved rebates broadly,” he wrote. “Because Defendants have the better argument on these points as discussed below, their motion for summary judgment is granted.”

The order is another win for HRSA, which has so far scored victories in similar lawsuits filed by Bristol Myers Squibb Co., Novartis AG, Eli Lilly & Co., Sanofi SA, and health tech company Kalderos Inc.

The case is Johnson & Johnson Health Care Systems Inc. v. Kennedy, D.D.C., No. 1:24-cv-03188, opinion 6/27/25.