By Karin Rives
June 5, 2009 – Johnson & Johnson Consumer Services Division’s decision last year to withdraw from the Medicaid and 340B programs raises questions about whether 340B pricing will continue to be available on a widespread basis for prescribed over-the-counter drugs, or OTCs.
J&J’s pull-out, believed to be a first in the federal drug discount program’s history, resulted in the loss of 340B pricing for commonly prescribed drugs such as Tylenol and Motrin. These and other products that were discontinued were all previously covered as brand-name and generic drugs produced by other manufacturers.
J&J’s withdrawal is significant because, for the first time, a 340B-participating manufacturer was permitted to exempt a subset of its prescription products from 340B pricing by spinning off those drugs into a non-participating corporate subsidiary. Normally, a pharmaceutical pricing agreement (PPA) requires that 340B pricing be provided for all of a participating manufacturer’s products.
Office of Pharmacy Affairs (OPA) Director Jim Mitchell acknowledged that the J&J exit could inspire other manufacturers to follow suit.
“What they did was within their legal right, drug companies have the right to discontinue their pricing agreements,” he said. “Does this create a framework for…drug companies to discontinue participation? Well, that’s the American way. All these drugs are highly competitive and given the marketplace we have today, this will probably happen again.”
OPA Asked for Delay
J&J held a meeting with OPA in January 2008 to request that its 340B pharmaceutical pricing agreement (PPA) be cancelled and to provide a list of the drugs that would no longer be available for 340B pricing. It was allowed to withdraw its Consumer Services division from the 340B program in March 2008, after promising to continue to provide 340B discounts for prescribed OTCs for an additional calendar quarter, until June 30, 2008.
In addition to Motrin and Tylenol, the J&J Consumer Services division Web site lists among its OTC products Zyrtec, Sudafed, Benedryl, Imodium, Mylanta, Nicorette, and Pepcid.
“This sets a precedent for manufacturers that may want to pull out of the 340B program,” said Don Davies, pharmacy government programs coordinator at Clarian Health Partners in Indianapolis, Ind.
J&J did not return calls seeking comment.
Pharmacies Were Not Informed
The cancellation came as a surprise to 340B pharmacies, because OPA never communicated the change to providers. Nor did, apparently, J&J. OPA acknowledged the oversight, saying it has an obligation to disseminate such information to stakeholders. “We should have put it on our Web site and we stand to be accountable there,” Mitchell said.
Amy Camp, pharmacy reimbursement specialist at the University of Missouri Hospital and Clinics in Columbia, Mo., said she contacted Apexus, the 340B prime vendor program, this spring to find out what had happened to J&J’s 340B prices. She was told that Apexus had received several inquiries from providers wondering the same thing. Apexus sent out a notice soon after about J&J’s withdrawal to its customers, suggesting that they switch their patients to generics.
University of Missouri Hospital’s seven pharmacies have seen a big drop in Tylenol sales since the pricing changed, and the drug is no longer affordable for many of its Medicaid and indigent patients. Big, 700-1,000-tablet bottles that used to sell for $10 or $14, depending on tablet strength, can’t sell with the pharmacy purchase price now topping $30, Camp said. Sales of smaller quantities of Tylenol have decreased as well.
“We had a lot of patients and employees who came in here to get their Tylenol because of our pricing,” Camp said. “They can get generic products, but a lot of people prefer brands that they know. We had to keep explaining to them that the pricing changed.”
Pressure from Generics
J&J’s Consumer Healthcare Division said in correspondence to Apexus/340B PVP that it decided to withdraw from the 340B program “due to internal pricing strategies and business decisions.”
The company made a business decision that was reasonable in a market where generics are undercutting prices on over-the-counter brand-name drugs, said Chris Hatwig, Apexus’ vice president. “I would assume there is little incentive for J&J to continue to sell these products in the 340B market when Medicaid and commercial health plans frequently require the dispensing of generic alternatives,” he said.
But Davies of Clarian Health is concerned.
“There’s now a precedent that will allow any division of a company, or the entire company, to decide whether to sign a PPA and chose not to participate in 340B on their drug portfolio,” he said. “The manufacturers have found a loop hole to get out of the program.”