J&J Sues HHS Over Threat to Rebate Model in Drug Discount Plan

Johnson & Johnson is challenging a federal health agency for blocking its plan to discount drugs through a rebate model rather than up-front discounts to hospitals treating low income and uninsured patients.

J&J filed a lawsuit Tuesday in the US District Court for the District of Columbia alleging the US Health Resources and Services Administration acted unlawfully when it warned the drugmaker against rolling out a plan to discount drugs under the 340B Drug Pricing Program through a rebate model.

“HRSA’s attempts to bar J&J from bringing transparency to the 340B Program through implementation of the Rebate Model are fundamentally at odds with the 340B statute, the Administrative Procedure Act, and HRSA’s own stated program integrity goals,” J&J wrote.

“They are also entirely inconsistent with the approach that HRSA has taken regarding the replenishment models that covered entities unilaterally implemented more than a decade ago, even though replenishment models have many of the same features and operate in materially the same manner as J&J’s proposed Rebate Model,” the company wrote in the complaint.

Drugmakers under the federal 340B 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 J&J in August proposed a plan that would require disproportionate share hospitals to buy its blood thinner drug Xarelto and anti-inflammtatory drug Stelara at a commercial price and then submit data to receive a rebate for the discounted price.

HRSA, which operates under the US Department of Health & Human Services and administers the 340B program, sent letters to J&J on Aug. 14, Sept. 17, and Sept. 27 warning that the company should forgo its rebate model plans because it violates the federal 340B statute.

In the latest letter, the agency warned if J&J didn’t cease implementation of its rebate proposal, HRSA would have begun the process outlined in J&J’s pharmaceutical pricing agreement related to terminating the agreement.

J&J in September suspended its plans over the fierce resistance from the Biden administration.

The drugmaker on Tuesday asked the court to declare HRSA’s letters purporting to prohibit J&J from adopting the rebate model are unlawful; set the letters aside; and enjoin HRSA from commencing any enforcement action against J&J relating to or arising from the implementation of the rebate model.

HRSA said it had no comments in response to the lawsuit.

Arnold & Porter Kaye Scholer LLP represents J&J.

The case is Johnson & Johnson Health Care Systems Inc. v. Becerra, D.D.C., No. 1:24-cv-03188, complaint filed 11/12/24.