By letter dated March 21, 2021, Johnson & Johnson (J&J) announced that, effective May 2, 2022, it will no longer honor bill-to/ship-to orders for contract pharmacy arrangements with hospitals unless the hospital submits 340B contract pharmacy claims through the 340B ESP platform or qualifies for one of the exceptions described below. J&J’s policy applies to the 29 products listed in Attachment A of the letter. J&J states that it “tried to limit the scope of [the] program to the areas where the duplicate discount and diversion risks are likely greatest.”
J&J’s policy is very similar to those of other manufacturers, although the exception for providing 340B discounts at wholly-owned pharmacies is more limited than that of other manufacturers and may preclude many hospitals from taking advantage of that exception. J&J will recognize the following exemptions from its new restrictive contract pharmacy policy:
- Federal Grantees: Federal grantees in the 340B program will be able to order 340B drugs through their contract pharmacies without submitting contract pharmacy claims data to 340B ESP. They do not have to take any further steps for this exemption to apply.
- No In-House Pharmacy: Hospitals that do not have an in-house outpatient pharmacy capable of dispensing 340B priced drugs to their patients may designate a single contract pharmacy location to dispense 340B drugs on the hospital’s behalf. Contract pharmacy designations must be made through 340B ESP at 340besp.com/designations. Hospitals that request this exception are not required to register for an account with 340B ESP or submit claims data through the 340B ESP program. In order for the designation to take effect on May 2, 2022, hospitals must designate a single contract pharmacy location by April 18, 2022.
- Wholly Owned Pharmacies: Not-for-profit contract pharmacies that are wholly owned by a hospital and located within the same parent or child site as the bill-to location will continue to receive bill-to/ship-to replenishment orders for 340B drugs. The wholly owned or commonly owned pharmacy must be registered in OPAIS as a contract pharmacy of the hospital. J&J is the first manufacturer to require that the wholly-owned contract pharmacy be a not-for-profit entity and located within the same parent or child site as the bill-to location. This policy is problematic because it excludes any wholly-owned, for profit or standalone contract pharmacies from qualifying. 340B hospitals that qualify for this exemption must apply for a wholly owned contract pharmacy exemption at 340Besp.com/wholly_owned_application.
Four of the drugs listed in Attachment A are used to treat pulmonary arterial hypertension (Opsumit (macitentan), Tracleer (bosentan), Uptravi (selexipag), and Veletri (epoprostenol)) and are already subject to J&J’s pre-existing limited distribution network. Hospitals that choose not to submit claims data to 340B ESP may designate a single specialty pharmacy that is part of J&J’s limited distribution network to continue to receive 340B prices for these four drugs. This is in addition to the contract pharmacy location a hospital may designate for all other J&J drugs. A hospital that submits claims data to 340B ESP will continue to receive 340B prices for pulmonary arterial hypertension drugs at any specialty pharmacy within J&J’s limited distribution network.
Another unique aspect of the J&J policy is its application to non-340B drugs. Under the Non-Profit Institutions Act, a manufacturer is permitted to offer preferential pricing on pharmaceuticals without violating federal anti-discrimination requirements as long as the purchaser is a non-profit institution, like a non-profit hospital, and the discounted drugs are limited to the institution’s “own use”. The Federal Trade Commission has clarified that non-profit hospitals are allowed to establish contract pharmacy arrangements for non-340B “own use” drugs if the use is a part of and promotes the hospital’s intended institutional operation. J&J apparently intends to apply its 340B contract pharmacy restrictions to contract pharmacy arrangements involving non-340B “own use” drugs. We are not aware of any other manufacturer that has taken that step.