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Could Johnson & Johnson's conditions on 340B drug sales to hospitals involving contract pharmacy be the thunderclap that rouses Congress?

Could J&J’s Decision to Limit 340B Contract Pharmacy Spur Congress to Act?

Yesterday, we broke the news that Johnson & Johnson announced conditions on 340B drug sales to hospitals on a host of pharmacy inventory staples including immunosuppressants, monoclonal antibodies, blood thinners, and treatments for diabetes, cancer, HIV, mental disorders, pulmonary arterial hypertension, and chemotherapy-induced anemia. Federal grantee covered entities are exempt.

J&J is the world’s biggest drug company. Its decision to restrict 340B pricing is significant financially and symbolically. With the federal court fight over 340B contract pharmacy years away from resolution, and the U.S. Health and Human Services Department (HHS) having taken no 340B enforcement action against drug companies since September, J&J’s policy could be a thunderclap that rouses Congress.

In a letter to customers yesterday afternoon, J&J said it believes its new policy “will help to reduce diversion and inappropriate claims for discounts and rebates.”

“The government itself has repeatedly expressed concerns about diversion and duplicate discounts involving contract pharmacies,” the company wrote. “Unfortunately, despite years of efforts by [J&J] and other stakeholders to address 340B program integrity and compliance concerns, the program has been seriously challenged by contract pharmacy transactions that are not required by or consistent with the statute. In addition, we are disappointed that contract pharmacy transactions direct 340B discounts to large, for-profit entities—while failing to extend meaningful discounts to patients.”

Hospital group 340B Health condemned J&J’s new policy. It said the move “will harm the health care safety net and the millions of Americans with low incomes who rely on it for their care.”

“We will continue to work with the administration and Congress to put an end” to J&J and other drug manufacturers’ 340B contract pharmacy actions “before the damage to the safety net becomes extreme,” 340B Health President and CEO Maureen Testoni said.

Last month, Testoni said 340B Health is “prepared to go in [the] direction” of Capitol Hill considering the long time it can take for court decisions about manufacturers’ 340B contract pharmacy actions to be appealed.

The American Hospital Association did not issue a statement yesterday in response to J&J’s announcement. Last week, in a statement submitted to the Senate Finance Committee for a hearing on drug pricing, AHA said “it is imperative” that drug companies’ “pernicious” 340B contract pharmacy actions “be stopped immediately.”

“It is imperative for Congress to continue its bipartisan support of the program and ensure that eligible hospitals and their patients can continue to benefit from the 340B program,” AHA said.

Covered entities, particularly hospitals, historically have resisted reopening the 340B statute out of fear that the drug industry would take control of the process and make changes detrimental to providers. The enactment of a federal spending bill last week with language helpful to 340B hospitals has changed some 340B provider advocates’ minds about the danger of revising 340B.

Policy’s Highlights

J&J’s policy applies initially to 29 drugs: Stelara, Tremfya, Simponi Aria, Simponi, Remicade, Xarelto, Invokamet, Invokamet XR, Invokana, Darzalex, Darzalex Faspro, Erleada, Invega Hafyera, Invega Sustenna, Invega Trinza, Invega, Opsumit, Uptravi, Tracleer, Veletri, Symtuza, Prezcobix, Prezista, Zytiga, Procrit, Edurant, Elmiron, Topamax, and Yondelis. It said newly introduced medicines or other products could be added to the list later.

Hospital covered entities can direct delivery of these drugs to multiple contract pharmacies as ship-to locations only if they provide “specified, limited claims data on contract pharmacy transactions” for those drugs to drug industry vendor 340B ESP, J&J’s letter said.

Hospitals that do not provide claims data “may designate a single contract pharmacy location if they lack an in-house outpatient pharmacy,” the letter said. “A covered entity may place bill to/ship to orders for not-for-profit contract pharmacies wholly-owned by the covered entity and located within the same parent or child site as the bill to location,” it said. “Covered entities need not provide limited claims data for such contract pharmacies.”

For the four pulmonary arterial hypertension drugs on J&J’s list—Opsumit, Tracleer, Uptravi, and Veletri—hospitals can place orders through a specialty pharmacy at any location that is part of the drugs’ limited distribution system “if the covered entity provides the requested limited claims data,” J&J said. If a hospital declines to submit the claims data, it can designate one specialty pharmacy from the system as a contract pharmacy for the four drugs.

Growing Number of Entities Submitting Claims Data

Hospital and grantee groups argue that conditioning 340B pricing on the provision of claims data is illegal, largely due to concerns over HIPAA violations. They also have raised concerns over the added burden of sharing the claims information. In addition, covered entities are concerned that by sharing this type of data, third party payors will ultimately reduce reimbursement to 340B pharmacies. 

Nonetheless, 340B Report has learned that a growing number of providers are submitting claims data to continue accessing 340B discounts. However, covered entities have reported that some of their retail pharmacy partners have not agreed to share the data, leaving the providers in limbo.