11/14/2024 – J&J Sues HHS and HRSA Over HRSA’s Opposition to J&J’s Proposed Rebate Model

On November 12, 2024, Johnson and Johnson Health Care System Inc. (J&J) filed a lawsuit against HRSA in the D.C. District Court to defend the rebate model J&J proposed on August 23, 2024. The lawsuit is J&J’s response to HRSA’s letter unequivocally stating the illegality of the model. The HRSA letter to J&J calls for the company to cease implementation of its rebate proposal immediately and threatened to terminate J&J’s participation in Medicaid and Medicare Part B, if it did not withdraw its rebate proposal by September 30, 2024.

Under J&J’s rebate model, disproportionate share hospital (DSH) covered entities would no longer have access to up-front 340B pricing for Stelara and Xarelto. Instead, the hospitals would be required to purchase drugs at non-340B pricing, to submit claims and medical data through a J&J software platform, and to receive a rebate alleged to reflect the 340B ceiling price rather than the purchase price. While J&J withdrew its proposal on September 30, 2024, it described HRSA’s letter as containing “unwarranted threats of excessive and unlawful penalties.”  HRSA noted that it has repeatedly made clear that “the 340B statute requires Secretarial approval of any rebate mechanism” and it does not grant such approval for this model.

The J&J lawsuit is the second lawsuit brought against the government in support of a 340B rebate model. Kalderos also has a pending lawsuit. The J&J complaint alleges that the 340B statute gives manufacturers discretion in the methods by which they extend 340B prices to covered entities. It challenges the legality of HRSA’s letters prohibiting J&J from implementing the rebate model, alleging that the letters violate the federal Administrative Procedure Act because they are “arbitrary, capricious and not in accordance with law.” Further, J&J analogizes its rebate model to the replenishment model that many covered entities use to distribute 340B-priced drugs to contract pharmacies, a model which HRSA has historically supported.  J&J asks the court to vacate HRSA’s letters, to declare the rebate model lawful, and to prohibit HRSA from taking any enforcement actions against J&J related to the model.

The Powers 340B team will continue to monitor developments related to J&J’s lawsuit and 340B rebate models.