Johnson & Johnson became the latest major drugmaker to plan to cut off sales of 340B-discounted products to covered entities’ contract pharmacies, shrugging off the possibility of fines from the federal government.
Johnson & Johnson became the 16th drugmaker to install or propose contract pharmacy restrictions. The latest decision comes as the Biden administration and several other drugmakers fight in court over similar moves.
J&J announced in a notice to its customers that starting May 2 it will no longer offer 340B-discounted products to contract pharmacies with some exceptions.
“The government itself has repeatedly expressed concerns about diversion and duplicate discounts involving contract pharmacies,” the drugmaker said in a notice to customers that was provided by the advocacy group 340B Health.
J&J said the program has been “seriously challenged by contract pharmacy transactions that are not required by or consistent with the statute.”
The drugmaker told Fierce Healthcare that the 340B program has grown “exponentially in recent years,” and it imposed the restrictions to reduce duplicative discounts with Medicaid and diversion “in the system in order to ensure its long-term sustainability.”
J&J added that it will not alter the ability of covered entities to get outpatient drugs.
But 340B advocates charge that is exactly what J&J and other drug companies are doing via the restrictions to contract pharmacies, which are third-party entities that dispense the drugs on behalf of the covered provider.
“By limiting access to mandatory price discounts, J&J will harm the healthcare safety net and the millions of Americans with low incomes who rely on it for their care,” said Maureen Testoni, president and CEO of the group 340B Health, in a statement.
340B requires drugmakers to offer product discounts to safety net providers in exchange for participation in Medicare and Medicaid. The program has drawn the ire of the pharmaceutical industry, which charges it has grown too fast and the benefits are not reaching the patient, but advocates and the hospital industry counter the discounts are vital for safety net providers that operate on thin margins to stay afloat amid high price hikes.
Several drugmakers started to cut off access to 340B contract pharmacies in summer 2020, sparking action from the Health Resources and Services Administration (HRSA).
HRSA last year moved to fine six drugmakers—Eli Lilly, Sanofi, Novartis, AstraZeneca, United Therapeutics and Novo Nordisk—for the restrictions. But five of the drugmakers have sued, arguing in several lawsuits that HRSA does not have the authority to install fines and didn’t give proper notice and comment.
The Biden administration and the drugmakers continue to be locked in a legal battle across multiple fronts, with some judges ruling in favor of the companies and others for HRSA.
As the legal battle continues, several drugmakers have shown they are not afraid to face similar retaliation from the federal government.
Drug companies Bristol Myers Squibb and GlaxoSmithKline announced restrictions earlier this year on contract pharmacies.