J&J tells hospitals to pay full price upfront in drug discount program, get rebates later
After its two drugs were discounted in the Medicare Drug Price Negotiation program, Johnson & Johnson told hospitals on Friday they need to pay full price for Stelara and Xarelto, then apply for rebates later.
Johnson & Johnson told certain hospitals in the U.S. in a notice on Friday that they will have to pay full price for two drugs – Stelara and Xarelto – that the drugmaker has been selling at a discount under the 340B drug discount program. However, the hospitals can apply at a later date for a rebate.
Stelara, a drug used for Crohn’s disease, and Xarelto, a blood thinner, are two of the first 10 drugs included in the Medicare Drug Price Negotiation Program, which the Biden administration announced earlier this month that it just completed agreements with top pharmaceutical manufacturers, including J&J, Merck, Novartis and others.
This J&J drug discount notice, effective Oct. 15, is a departure from the ongoing practice of providing the hospital discount upfront. Hospitals must now file a rebate request within 45 days and rebates will be granted “once the number of validated dispenses units equals the number of units in the purchased package size,” says the notice. J&J is also allowing “an additional grace period” of six months “to adjust to the new policy.”
However, the Health Resources & Services Administration (HRSA), which administers the 340B program, has already told J&J that is cannot use a rebate model to replace upfront discounts in the drug discount program because the changes are “inconsistent” with the federal statute, according to the American Hospital Association.
The 340B drug discount program was created more than 30 years ago to support safety-net hospitals caring for a disproportionate number of low-income populations by requiring drugmakers to give those providers discounts on outpatient drugs. The program generates revenue for hospitals, clinics and pharmacies by requiring drugmakers to provide discounts on medications. These discounts can be as much as 20%-50% off the list price.
Related: Drugmakers, hospitals spar over new 340B drug discount ‘dispute resolution’ process
However, hospitals are not required to share how they use revenue and manufacturers say safety-net hospitals sell drugs to covered hospitals at steep discounts. Researchers have also uncovered funds that were used for purposes unrelated to patient care, in a JAMA review.
In June, a new dispute resolution process was put in place to make dispute resolution more accessible and efficient, according to the HRSA.