Johnson & Johnson must scrap a pharmaceutical rebate initiative for hospitals participating in the 340B Drug Discount Program or risk federal sanctions, the Health Resources and Services Administration wrote in a letter to Chair and CEO Joaquin Duato.
The drugmaker notified 340B hospitals last month that it would implement a new reimbursement process for the anticoagulant Xarelto and the Crohn's disease medication Stelara, prompting the American Hospital Association and America's Essential Hospitals to seek relief from HRSA. There is no generic equivalent to Xarelto, while Alvotech and Teva's Pharmaceutical's Selarsdi and Amgen's Wezlana are biosimilar substitutes for Stelara.
Related: Hospitals seek fines against Johnson & Johnson in 340B battle
Safety-net hospitals that treat large numbers of uninsured or low-income patients are eligible for discounts on prescription drugs as high as 50% through 340B. But Johnson & Johnson planned to require these hospitals to pay the full price upfront and then file for rebates, starting Oct. 15. That may be incompatible with 340B law and would have to be OK'd by regulators, HRSA Administrator Carole Johnson wrote Duato on Tuesday.
"By way of this correspondence, HRSA provides warning that this unapproved rebate proposal violates J&J’s obligations under the 340B statute," Johnson wrote. "HRSA expects J&J to cease implementation of its rebate proposal immediately and to inform HRSA no later than Sept. 30, 2024, in order to provide adequate notice to covered entities."
Johnson & Johnson could be fined or kicked out of 340B if it attempts to move forward with its rebate plan, Johnson wrote. Drug companies removed from 340B are excluded from the program for a year and can be fined up to $5,000 per infraction.
Johnson & Johnson did not respond to a request for comment.
America's Essential Hospitals cheered HRSA's action. “We thank HRSA for taking a strong stand against this patently illegal plan," Senior Vice President of Policy and Advocacy Beth Feldpush wrote in an email. "Johnson & Johnson’s rebate scheme is just another shameful ploy by a big drug company to pad its bottom line at the expense of safety net care and low-income patients.”
