J&J Hits Back on 340B as the 'Rebate Model' Heads to Federal Court

I warned yesterday that the news flow around pricing -- reduced to a trickle by the election attention -- was going to come flooding back one of these days. 

Today is apparently that day. Thanks for your patience. Lots of important stuff to process.

When last we left the J&J 340B saga, the company had pulled back from its plan to move 340B sales of two of its medicines, Xarelto and Stelara, to a rebate model following a threat by the government to bar the company from the Medicare and Medicaid program if they moved forward. 

The rebate model would have required that large, nonprofit hospitals submit basic information to J&J to allow the company to make sure that the prescriptions weren’t filled under some other discount or program, an issue that will get more complex next year, when Medicare price controls for Xarelto and Stelara kick in. Once the claims were checked, J&J would promptly pay the hospitals. 

That didn’t work for HRSA, the government agency that oversees 340B, which instead leveled the nuclear-level threat. 

So today, J&J struck back, asking a court to overturn HRSA’s reasoning. 

The WSJ story is here. If you’re really into this, the filing is worth a read. A summary really won’t do it justice. 

But here’s my attempt, anyway: the upshot of the J&J argument is twofold. 

First, the company made a pretty compelling case that the program is broken. There’s good evidence that multiple discounts are being paid on 340B claims -- something that’s explicitly illegal -- and that efforts by J&J to ot get to the bottom of the issue (via audits) were being stymied right and left. 

Layer on to this the looming issues with IRA price controls, and it was clear that 340B had problems, and that no one else in the system was offering solutions. Enter the rebate model, which would address all of those concerns in one fell swoop, all without changing the 340B price or limiting the scripts that would receive that price. 

Second, the company argues that there’s nothing in the statute that would bar them from using a rebate model (indeed, the word “rebate” appears in the law itself). HRSA is arguing that it has the power to veto the mechanism by which those rebates are applied, but J&J thinks that reasoning is unsupported by a basic reading of the text.

I have a long tradition of staying in my lane and not making legal predictions. But, in my mind, regardless of the legal merits, the remains one huge question for the government: if a rebate model isn’t the right answer, what is? 

Because the status quo is not remotely OK.

It’s been a week since the election, and my stance on what the outcome means for drug-pricing policy has remained the same: No one knows anything. 

Donald Trump didn’t campaign on the issue and none of his closest allies seem to have a rooting interest in any particular set of solutions. 

Still, I figured there were breadcrumbs somewhere. So I re-read Project 2025 from the perspective of a person now living in a country where Trump is the president-elect. 

I realize that there is some debate about the degree of alignment between Trump and the Project 2025 agenda, but my assumption is that it represents the deeply considered policy recommendation of enough of what is, in 2024, the Republican establishment that it probably ought to be taken seriously.** 

Except, as it turns out, on drug pricing. 

I was surprised at how little there was. On the big drug-pricing policy effort of our time***, the IRA, Project 2025 spends exactly 136 words: 

Other than calling for the repeal of negotiations, there’s less than nothing here. Every single one of the “reforms” cited in the passage above -- the reforms that “should be pursued” -- have already been implemented as a part of the IRA. 

My suspicion is this was boilerplate language and that those most closely aligned with Project 2025 don’t really care deeply about this topic. The citation for the “reforms” pulls up a Heritage Foundation piece from 2019 in response to H.R. 3, an earlier, far more aggressive price-control bill, as opposed to a more contemporary critique.

If you told me that the Project 2025 bit on Part D was AI generated,**** I would be inclined to believe you. 

The upshot: Project 2025 offers little predictive value on drug pricing. 

No one knows anything, QED. 

** In the interest of a fuller understanding of the state of play, please know there are plenty of Republicans in health policy, even those that have signed off on the Project 2025 document, that have more expansive views.

Joe Grogan, one of the signatories, said Project 2025 was a “red herring.” (In the original version of that STAT story, Grogan said he’d never even read the Project 2025 document, though future versions of STAT’s article removed that detail.) Grogan is associated with the Paragon Health Institute, which has a more fulsome take on these issues, and I’ll get into that later in the week.

*** The Project 2025 document does, very briefly, touch on 340B, noting without elaboration that policymakers should “Restructure 340B drug subsidies toward beneficiaries rather than hospitals.” That’s a fairly provocative statement, but the lack of any discussion makes me think that there’s no one pushing

**** For giggles, asked ChatGPT to think on this topic. The prompt: “In 136 words or less, please offer a set of recommendations from a conservative point of view on how Medicare Part D should be reformed.”

The response: 

I don’t think the ChatGPT answer is necessarily good, but it might be … better than what’s in Project 2025?

Last week, the CDC released its quarterly numbers on the uninsured rate for 2Q24 (they’re a tick higher than 2Q23 but still near historic lows). As far as I can tell, Modern Healthcare is the only outlet that covered the CDC’s release. 

This will be an interesting metric in light of the current vogue among those in Trump’s circle to fundamentally change Medicaid and ACA marketplace subsidies. But I’m most curious not in whether the number goes up (or by how much), but how the media reacts to future releases. 

If this figure becomes a regular part of the political discourse, it will be a sign that health care is again emerging as a potent political topic. If it doesn’t, it’ll signal the end of health policy as a meaningful part of the conversation. Stay tuned. 

ELSEWHERE: 

• I’m trying to avoid doing too much palace-intrigue speculation, but it caught my eye that the University of Chicago’s Casey Mulligan is being listed by the Washington Post as a top candidate to lead Trump’s Council of Economic Advisors. Mulligan is probably the most prominent pro-PBM academic out there, FWIW. 

• Last week, the folks at NPC published a paper looking at ICER’s effort to examine at cost-effectiveness through a “shared savings” lens, in which therapies that lower the cost of health care over the long term (think gene therapies) are assessed under a standard that doesn’t give the innovator full credit for those savings. NPC found that ICER’s approach generally disadvantages rare diseases, severe diseases, and conditions that impact children.

• Whenever I post about the ill effects of utilization management, I hear from an apologist for payers that suggests that most UM is a common-sense way to ensure cost-effective care. The problem is that examples keep emerging of places where payers keep barriers high even when prices fall. Last week brought this agonizing example of how UM remains stringent on a high-value antiemetic with falling prices for cancer patients. 

• CMS does a fairly lousy job of making sure that their Part D website accurately captures the formularies of the various plans, per an eagle-eyed LinkedIn post from Jennfier Snow. In about 25% of cases, what was displayed on the CMS page had “discrepencies.” Many of these were minor (ID number errors and the like), but it feels like the target rate of “discrepencies” should be zero. 

• Doctors Without Borders is trying to boost access to insulin autoinjectors by asking that insulin companies provide them for $1 a pen. I’m not tracking super-closely on the issue, but I’m curious if those devices are still covered by patents. If not, the logical question is whether someone -- anyone -- can manufacture the medicines to meet MSF’s goals.

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