## Johnson & Johnson Takes on US Government Over Controversial 340B Program
In a significant development, Johnson & Johnson (JNJ), a leading pharmaceutical company, has filed a lawsuit against a US government agency over a contentious disagreement concerning the 340B Drug Pricing Program. This program, designed to provide discounted medications to hospitals serving vulnerable patients, has become a point of contention between pharmaceutical companies and the government.
At the heart of the dispute lies J&J’s claim that the 340B program has strayed from its original intent and has been exploited by entities not initially intended as beneficiaries. These include large pharmacy chains and pharmacy benefit managers, leading to abuses that undermine the program’s purpose of providing benefits to patients in need.
The 340B program was established in 1992 to support low-income and uninsured patients by allowing certain healthcare providers to purchase outpatient drugs at reduced prices. Manufacturers, including J&J, must enter into a Pharmaceutical Pricing Agreement (PPA) with the Department of Health and Human Services (HHS) to sell drugs at discounted rates, enabling them to qualify for Medicare and Medicaid reimbursements.
However, J&J argues that the program, now the second-largest federal drug initiative after Medicare, has been exploited by entities that weren’t originally intended to be beneficiaries. This has sidelined the patients who were supposed to benefit the most.
In response to growing concerns over the program’s integrity, J&J proposed a new rebate-based pricing model in August 2024. This model would shift from upfront discounts to rebates issued upon verification of purchase and dispense data, aiming to curb duplicate discounting and improve transparency. Initially, the rebate model would apply only to two of J&J’s drugs and to disproportionate share hospitals (DSH), large, resource-rich hospitals that, despite comprising less than 10% of covered entities, account for nearly 78% of 340B purchases.
J&J points to findings from audits conducted by the Health Resources and Services Administration (HRSA), the government agency responsible for overseeing the program, which revealed significant non-compliance by covered entities. These audits revealed unauthorized use of 340B-priced drugs and duplicate discounts. From 2012 to 2019, HRSA audits found hundreds of violations involving diversion of drugs and overlapping Medicaid rebates.
J&J’s attempts to audit covered entities also met resistance, with several entities refusing to produce records despite statutory obligations, further highlighting program abuses.
However, HRSA resisted J&J’s proposed rebate model, threatening to terminate the company’s PPA and impose significant penalties. This prompted J&J to suspend the model’s implementation, citing HRSA’s “severe and disproportionate” sanctions.
J&J contends that HRSA’s stance contradicts statutory provisions and the agency’s stated goals for program transparency. The company’s lawsuit seeks a declaration that HRSA’s attempts to block the rebate model are unlawful and an injunction to prevent enforcement actions related to the proposed model.
J&J emphasizes that program abuses will continue without adjustments like its rebate plan, ultimately harming the very patients the program was designed to serve.
This legal battle raises significant questions about the integrity of the 340B program and its effectiveness in serving its intended purpose. The outcome of this lawsuit could have a major impact on the future of the 340B program and the accessibility of affordable medications for vulnerable patients.
