Uncle Sam Brings Hammer Down on Big Pharma

We applaud the Health Resources and Services Administration for demanding that Johnson & Johnson desist in an illegal plan that would choke safety-net healthcare providers by raising medication prices.

The move comes not a moment too soon.

On August 15, the Biden administration announced that 10 drugs would now be negotiated by Medicare. A few days later, Johnson & Johnson raised the purchase price on two of these drugs, Xarelto and Stelara, for nonprofit hospitals in the 340B Drug Discount Program. Even worse, the company is illegally requiring the drugs to be discounted only through rebates. This action forces hospitals to buy medicines at a higher cost and then wait for industry determination of possible discounts later.

That’s NOT how Congress wrote the 340B program in 1992. The statute clearly states drug companies must provide discounted medications up front to nonprofit hospitals and clinics that serve high numbers of low-income patients and meet HRSA requirements. In return for these discounts, Congress allowed the pharmaceutical industry to sell its drugs into the ultra-lucrative Medicare and Medicaid markets and make untold billions in profits.

In a Sept. 17 letter, HRSA administrator Carole Johnson informed Johnson & Johnson CEO Jaoquin Duato the company is poised to break the law: “If J&J implements its rebate proposal without Secretarial approval, it will violate Section 340B(a)(1) of the Public Health Service (PHS) Act.” That authorization has not been granted. Even more important, Johnson reminded Duato that the rebate scheme could lead to the company losing its federal Pharmaceutical Pricing Agreement. With out a PPA, Johnson & Johnson would be blocked from selling drugs to Medicare and Medicaid.

Big Pharma hates 340B because it cuts into its oversized profits. It has spent the last few years starving the 340B program by illegally denying discounts to pharmacies that partner with safety-net healthcare providers. With eight states recently passing laws blocking such discrimination, this latest tactic is clearly meant as an end run.

The company has until September 30th to comply. But, if the past is prologue, Johnson & Johnson is likely to ignore the warning and look to fight it out in the courts, buying it time on the backs of US hospitals which will be robbed of more savings that help pay for medicines and services for those in most need.

340B is a critical lifeline in low-income communities and helps fund behavioral health, substance abuse, maternal and child health, health screening, diabetes management, and patient transportation services. That’s in addition to no-cost and low-cost medications for underserved patients.

We encourage Johnson to hold J&J to account and to revoke its PPA if necessary. It’s the one punishment that will bring Big Pharma to heel.