The lawsuits reflect rising tensions among drugmakers, hospitals and the Health Resources and Services Administration, which oversees the 340B program. The program allows hospitals that serve low-income and uninsured populations to purchase outpatient drugs at discounted prices. Drugmakers must participate in the program if they wish to have their products covered under Medicaid and Medicare Part B.
The drugmakers argue their rebate plans will improve program transparency and ensure cost savings are passed onto patients. Meanwhile, hospitals and HRSA contend that the rebate plans violate 340B statute, create additional administrative burdens and threaten some hospitals’ financial stability.
Nine key developments in the unfolding legal battle:
1. In August, J&J announced plans to end upfront discounts for two drugs sold to disproportionate-share hospitals under the 340B program, replacing them with a rebate process. The new rebate system would require 340B hospitals to buy its blood thinner Xarelto and anti-inflammatory drug Stelara drugs at commercial prices. Once the drugs are administered, hospitals would need to submit claims data via an online portal to qualify for a rebate.
2. Various healthcare groups, including the American Hospital Association and American Society of Health-System Pharmacies, condemned the plan. The groups argued that the plan violates the 340B statute and would create more financial strain on hospitals, especially safety-net facilities. J&J defended its rebate plan, saying it “will help the 340B program meet its original intent, and better ensure discounts are more directly benefiting vulnerable patients,” in an August statement to Advisory Board.
3. J&J ceased implementation of its rebate plan Sept. 30 after facing federal pushback. HRSA said that drug rebates are illegal under the 340B program and warned the drugmaker it could face significant fines or lose its eligibility for Medicaid or Medicare Part B participation if it proceeds with the plan.
4. On Nov. 12, J&J filed a lawsuit against HHS and HRSA. The drugmaker is requesting a federal judge declare its rebate plan legal and block federal authorities from taking any enforcement action against its implementation.
5. Just two days later, Eli Lilly filed a similar lawsuit against the federal government over the denial of its own rebate plan. Under Lilly’s plan, 340B hospitals would pay full price for drugs up front and then receive a cash rebate every week. Eli Lilly argues the model would offer hospitals faster payments, improve cash flow for covered entities and increase transparency.
6. On Nov. 22, Sanofi notified 340B entities that it would roll out a new credit model in early 2025. The model would require hospitals to pay for drugs at the wholesaler acquisition cost and then submit purchase and claims data to a third-party tool, which would determine whether to issue a credit based on the difference between the wholesale cost and 340B price.
7. Meanwhile, Bristol Myers Squibb filed a lawsuit against HRSA on Nov. 26, requesting a federal judge regard its own 340B rebate plan as lawful.
8. On Dec. 13, HRSA sent Sanofi a warning letter, urging the drugmaker to halt its rebate model. Sanofi has paused implementation and is challenging HRSA in a federal suit filed Dec. 16.
9. The HRSA declined to comment on the lawsuits.
