Editor’s Note: This month, we offer commentary on two topics around Pharma Industry Trends in 2024: the CMS September Final Rule Overview and a Controversial 340B Rebate Policy. As always, if you have questions on any of the content found in this or previous market updates, please reach out to your IntegriChain Consulting Lead or consulting@integrichain.com and we would be happy to talk you through it.

Table of Contents

• CMS Final Rule Overview
• Johnson & Johnson Reverses Course on Controversial 340B Rebate Policy

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CMS September 2024 Final Rule Overview

The Medicaid Program “Misclassification of Drugs, Program Administration and Program Integrity Updates Under the Medicaid Drug Rebate Program” was published on September 26, 2024. This final rule implements certain changes that will have implications for the Medicaid and 340B programs, though some meaningful aspects of the proposed rule were not finalized at this time.

Of note, the following provisions seen in the proposed rule were not part of this Final Rule.

·         Changes to Best Price Stacking

·         Broadening the definition of “Manufacturer”

·         Defining “Vaccine”

·         “High-Cost” Drug Surveys

Here are some of the topic highlights from the September Final Rule:

Expansion of Covered Outpatient Drug (COD) Definition

ICOD has been updated to include drugs that can be separately identified and priced within a DRG bundled payment. services. 

Enacted short deadline to correct misclassifications of drugs (S/I/N)

Manufacturers have 30 days to correct the data from notification and just 30 additional days to pay any additional rebate amounts due.

New definition of “Market Date”

CMS clarified that market date is now “the date on which the [COD] was first sold by any manufacturer” rather than the date the drug was first available for sale. They also noted that the first sale need not be to an AMP eligible customer.

Update to the definition of “N” Drug

CMS removed the phrase “was not originally marketed” and replaced it with “is not marketed.” This brings the structure of the definition in line with regulatory definitions.

Established the ability to suspend MDRP agreements for late reporting

This allows CMS to suspend or terminate MDRP agreements if a manufacturer fails to provide timely drug pricing or product information, such as AMP and BP, to the agency.

This rule had many more provisions that may be of interest to you as a manufacturer. If you’d like to discuss the Final Rule in additional detail, please contact your Account Manager or Advisory lead.

Sources:

• Medicaid Program; Misclassification of Drugs, Program Administration and Program Integrity Updates Under the Medicaid Drug Rebate Program

Johnson & Johnson Reverses Course on Controversial 340B Rebate Policy

Johnson & Johnson (J&J) has informed the Health Resources and Services Administration (HRSA) that it will forgo implementation of its controversial 340B policy change plan. Back in late August, J&J announced its 340B policy change wherein eligible 340B Covered Entities were required to purchase Stelara and Xarelto at wholesale acquisition cost (WAC) and then seek rebates after the purchase, a shift from the current practice of receiving 340B discounts at the time of purchase. This new policy had been slated to go into effect on October 15, 2024.

Prior to J&J’s policy withdrawal, HRSA warned the company in multiple letters that its plan went against the 340B statute because it did not receive approval from the government, which is a requirement outlined in section 340B(a)(1) of the Public Health Service Act. In addition, HRSA said that J&J’s plan would be unlawful because it would require hospitals to purchase Stelara and Xarelto at prices above the 340B price. HRSA also rejected J&J arguments that the rebate plan would be similar to replenishment models, which is a fully voluntary model elected at the discretion of the CE wherein hospitals buy drugs at a higher price initially before subsequent purchases are made at the lower 340B price, given the rebates would be mandatory and apply to every purchase of the drugs.

340B Health, a trade group representing hospitals participating in the 340B Program, also argued that J&J’s plan could give J&J an opportunity to deny rebates after the point of sale, which would conflict with HRSA’s long-standing interpretation that the 340B statute requires upfront discounts. In addition, it would mean hospitals are floating revenue to manufacturers until they approve rebates, instead of saving money when purchasing drugs, causing financial strain on 340B hospitals, many of which operate on thin margins.

J&J argued that this change would allow them to cut down on waste and abuse in 340B.

In its final warning, sent on Friday, September 27, HRSA threatened to terminate its Pharmaceutical Pricing Agreement (PPA) with J&J and refer the manufacturer to the Health and Human Services (HHS) Office of Inspector General (OIG) for investigation if it did not call off the rebate plan by September 30.

J&J did just that in a letter sent to HRSA Administrator Carole Johnson, though it stressed that the decision came under duress.

IntegriChain continues to monitor the various litigations associated with the 340B program. If you have any questions, please reach out to your IntegriChain Account Manager or Advisory lead.

Sources:

• J&J gives up controversial plan for 340B rebates ‘due to HRSA’s unwarranted threats’
• HRSA to J&J: Cease implementation of proposed 340B rebate model

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