Johnson & Johnson has decided to terminate implementation of its 340B rebate plan, according to an internal email 340B Health shared with Becker's.
In late August, the drugmaker planned to replace upfront 340B discounts with a rebate plan.
The Health Resources and Services Administration notified J&J that it would initiate proceedings to terminate the company's participation unless it halts its 340B rebate policy, which the agency said violates federal law, according to a Sept. 27 news release.
This warning follows a Sept. 17 letter from HRSA demanding that J&J cease plans to implement 340B rebates for certain drugs, specifically Stelara and Xarelto. Under the proposed model J&J planned to implement Oct. 15, some hospitals would be required to purchase the drugs at wholesale acquisition cost instead of under the 340B ceiling cost.
HRSA rejected this approach, stating that it would force hospitals to pay more than the 340B ceiling price, in violation of the program's regulations.
The agency's letter demanded that J&J halt its plans, warning failure to comply could result in millions of dollars in federal fines or removing J&J drugs from qualifying for Medicaid or Medicare Part B coverage, according to a news release 340B Health shared with Becker's.
The drugmaker stated it remains committed to the original intent of the 340B program, which is to serve vulnerable patients and emphasizes the need for transparency to ensure that discounts benefit those patients.
"While J&J still firmly believes its rebate model is lawful and necessary for addressing important compliance concerns with the 340B program, J&J is unwilling to risk Medicare and Medicaid patients' access to our medicines," the drugmaker said in a Sept. 30 email to 340B Health.
America's Essential Hospitals praised the action in an email shared with Becker's stating, "The decision by Johnson & Johnson to back down from its illegal plan for rebates in the 340B Drug Pricing Program shows how swift and firm federal action and vigorous advocay by essential hopsitals can stop harmful drug industry behaviors that would put our health care safety net at risk."
Rick Pollack, American Hospital Association president and CEO also issued a statement saying, "The AHA is pleased that Johnson & Johnson has decided to cease implementation of its 340B rebate proposal, which would have harmed patients and 340B providers. We are especially appreciative of HRSA's efforts to convince J&J to put an end to this unlawful proposal and those members of Congress who demonstrated their firm support of the 340B program."
J&J did not respond to Becker's request for comment.