Johnson & Johnson signage in front of building
Johnson & Johnson is poised to become the first drug maker to place a condition on 340B sales and deliveries to covered entity in-house pharmacies.

J&J Announces Major Expansion of 340B Contract Pharmacy Limits; Pushback Is Likely

Johnson & Johnson, the world’s biggest drug company, yesterday announced a major expansion of the drug industry’s campaign to set limits on 340B drug sales.

On March 7, it is poised to become the first drug maker to place a condition on 340B sales and deliveries to covered entity in-house pharmacies. Until now, drug manufacturer conditions and the lawsuits they have spawned have focused on 340B sales and deliveries to contract pharmacies.

J&J’s 340B pricing policy update released late yesterday “is really big,” a leading 340B policy expert who asked not to be identified said. “It could be a tipping point.”

J&J’s media relations office did not immediately respond to a request this morning for comment.

Its announcement came 15 days after the U.S. Third Circuit Court of Appeals ruled that “Congress never said that drug makers must deliver discounted Section 340B drugs to an unlimited number of contract pharmacies.” (The court indicated that manufacturers may not bar all use of 340B contract pharmacies). Bayer and EMD Serono announced conditions on 340B pricing involving drug shipments to contract pharmacies two days after the court ruling.

Covered entities began receiving J&J’s 340B policy update by email late yesterday afternoon. It takes effect March 7.

J&J’s current policy has been in place since May 2, 2022, and applies to hospital covered entities only. Grantee entities are exempt. The existing policy also applies to just 29 products. Yesterday J&J added lung cancer drug Rybrevant to the list.

Under J&J’s current policy, hospitals can buy the listed drugs at a 340B price for shipment to multiple contract pharmacies only if they provide associated claims data to drug industry vendor 340B ESP. If they decline to provide the data and lack an in-house pharmacy, they can designate a single contract pharmacy for shipments. Hospitals’ nonprofit, onsite, wholly owned contract pharmacies are exempt.

Under J&J’s new policy, if a hospital lacks an in-house pharmacy, it may designate a single contract pharmacy for 340B bill to / ship to orders of the 30 drugs on J&J’s list. However, the hospital now must provide claims data to 340B ESP for the contract pharmacy, and the contract pharmacy must be located within 40 miles of the hospital parent site.

In another change, if a hospital has an in-house pharmacy, it now may designate a single contract pharmacy for 340B bill to / ship to orders of the 30 drugs on J&J’s list. But it must provide claims data to 340B ESP for both that contract pharmacy and the in-house pharmacy, and the contract pharmacy must be located within 40 miles of the hospital parent site.

340B experts across the provider/manufacturer divide agreed that, since the fight over manufacturer conditions on 340B pricing began more than two years ago, no manufacturer has conditioned 340B pricing on an entity’s provision of claims data for drugs dispensed at an entity’s in-house pharmacy. 

J&J also is changing its policy exemption for hospitals’ wholly owned contract pharmacies. Going forward, hospitals will have to submit claims data to 340B ESP for these pharmacies and they will have to be located within 40 miles of the hospital parent site.

In a footnote, J&J said information obtained under its 340B claims data submission requirements “will be used to identify duplicate discounts and diversion that we could not identify without this data.”

J&J’s new policy is silent about what will occur if a hospital declines to provide claims data under any circumstances. Hospital pharmacy officials reached this morning said they do not know if, going forward, the only way to access 340B pricing for an in-house pharmacy is to designate a contract pharmacy within 40 miles of the parent site and give 340B ESP claims data for both the contract pharmacy and in-house pharmacy.

J&J’s notice said hospitals “must take action by February 26, 2023 (regardless of whether the covered entity is currently submitting limited claims data) in order for its eligible contract pharmacy location designation to take effect on the effective date of this policy update.”

The notice also said in several places that claims must be submitted within 45 days of date of dispense to the patient.

“Under this updated policy, subject to the exceptions described above, wholesalers and distributors will be required to ensure that all end customers—340B or non-340B—do not direct shipment or delivery to a Ship To location that is not part of the Bill To entity,” the notice said.

Hospital groups are expected to strongly object to J&J’s new requirements and to ask federal officials to block them.

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