Health Law Daily Wrap Up, PRESCRIPTION DRUGS—D.D.C.: Hospitals and non-profit allowed to intervene in J&J 340B drug rebate lawsuit, (May 19, 2025)

By Donielle Tigay Stutland, J.D.

The Proposed Intervenors established standing and a legally protected interest based on the burden of paying more for 340B drugs.

The federal district court in Washington, D.C. granted a motion to intervene brought by two hospitals and a non-profit organization, in a suit by Johnson & Johnson Health Care Systems Inc. (“J&J”) filed against the Department of Health and Human Services (“HHS”), HHS’s Health Resources and Services Administration (“HRSA”) challenging the 340B Drug Pricing Program. J&J brought a legal challenge after HRSA informed J&J that it did not approve of J&J’s rebate model for the 340B Drug Pricing Program. 340B Health (a nonprofit representing over 1,600 hospitals), UMass Memorial Medical Center, and Genesis HealthCare System moved to intervene as defendants under Federal Rule of Civil Procedure 24(a) (collectively, the “Proposed Intervenors”). The court concluded that the Proposed Intervenors had “established standing and a legally protected interest based on the burden of paying more for 340B drugs.” The court denied the motion of the Proposed Intervenors to file an amicus brief as moot (Johnson & Johnson Health Care Systems Inc. v. Kennedy, No. 24-3188 (RC) (D.D.C. May. 15, 2025)).

Background. In November 2024, Johnson & Johnson Health Care Systems Inc. (“J&J”) filed suit against the Department of Health and Human Services (“HHS”), HHS’s Health Resources and Services Administration (“HRSA”), and the heads of those agencies regarding the 340B Drug Pricing Program, 42 U.S.C. § 256b. J&J brought its legal challenge after HRSA informed J&J that it did not approve of J&J’s rebate model for the 340B Drug Pricing Program.

The 340B Program requires pharmaceutical drug manufacturers who participate in Medicaid and Medicare Part B, including J&J, to sell drugs to certain statutorily covered healthcare providers at lower prices. In 2024, J&J proposed a limited-scope rebate program instead, which would require some covered entities to pay more up front but be entitled to a rebate on the back end when purchasing two of J&J’s drugs. HRSA rejected J&J’s proposal and informed J&J that proceeding with the rebate program could result in adverse actions. J&J brought suit, taking the position that the 340B statute authorizes its rebate program.

340B Health, UMass Memorial Medical Center (“UMass”), and Genesis HealthCare System (“Genesis”) (collectively, “Proposed Intervenors”) have moved to intervene as defendants as a matter of right under Federal Rule of Civil Procedure 24(a), and, in the alternative, for permissive intervention under Rule 24(b). J&J opposes the action. The Proposed Intervenors also filed a motion for leave to file an oversized amicus brief. The Proposed Intervenors argue that J&J’s rebate model would impose significant financial and administrative burdens, such as diverting resources to cover upfront costs and hiring additional staff.

Standing. The court began its analysis by addressing whether the Proposed Intervenors could demonstrate Article III standing by showing injury in fact, causation, and redressability. The court concluded that each of the Proposed Intervenors established Article III standing. The parties did not dispute that the two hospitals, UMass and Genesis, are covered entities, entitled to reduced drug pricing through the 340B Program. The court highlighted that UMass and Genesis submitted declarations supporting that they will be injured if J&J prevails in this case because J&J’s rebate program will require them to divert resources to front the full price of drugs, hire additional staff, pause or end other programs, and pay more to administer and comply with J&J’s rebate program. The court determined that this was a financial injury that is both concrete and particular. The court determined that the injuries here “would be directly caused by J&J’s rebate program, and would be redressed by the Court denying J&J’s present action for declaratory and injunctive relief.”

With respect to 340B Health, of which UMass and Genesis are members, the court concluded that it has “associational standing.” The court outlined that: “[A]n association has standing to bring suit on behalf of its members when: (a) its members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the organization’s purpose; and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit.” Here, 340B Health seeks to intervene “to ensure 340B hospitals have adequate access to 340B drugs . . . so that they can continue to provide high quality medical care to their underserved patients and communities.” As the “claim and relief here do not require individual member participation because the members’ claims involve a shared objection to J&J’s proposed rebate model,” rather than “individualized grievances,” the court found that 340B Health also has standing.

Rule 24(a). The court next turned to whether the Proposed Intervenors met the Rule 24(a) requirements for intervention. The court outlined that its Circuit requires four elements for a party to intervene as of right under Federal Rule of Civil Procedure 24(a): “1) timeliness of the application to intervene; 2) a legally protected interest; 3) that the action, as a practical matter, impairs or impedes that interest; and 4) that no party to the action can adequately represent the potential intervenor’s interest.”

The court found that here, the motion to intervene was timely, filed before summary judgment motions, causing no undue disruption. Additionally, the Proposed Intervenors’ standing established their interest in avoiding the financial burden of the rebate model. Additionally, the Proposed Intervenors asserted that a J&J victory would impede their interests by making it harder to revert to the discount model. Finally, the court determined that the government’s representation was insufficient, as the Proposed Intervenors and the government each urged the court to adopt different constructions of the statute at issue in this case. The court concluded that the Proposed Intervenors satisfied the requirements of intervention as of right.

J&J argued that under Astra USA, Inc. v. Santa Clara County, the Supreme Court precludes 340B covered entities from intervening. J&J argued that because the Supreme Court held that covered entities cannot sue to enforce § 340B—under the statute or as third-party beneficiaries of Pharmaceutical Pricing Agreements between the government and manufacturers—covered entities are deprived of both constitutional standing and, correspondingly, a legally protected interest. The court rejected this argument, noting that the standards for whether a party has a cause of action as a plaintiff and whether a party can intervene, here as a defendant, are different: “as Rule 24’s plain text indicates, ‘intervenors of right need only an “interest” in the litigation—not a “cause of action” or “permission to sue.”’ The court concluded that the Proposed Intervenors had “established standing and a legally protected interest based on the burden of paying more for 340B drugs.”

The case is No. 24-3188 (RC).

Judge: Contreras, R.

Attorneys: Paula Rachel Ramer (Arnold & Porter Kaye Scholer LLP) for Johnson & Johnson Health Care Systems Inc. John Bardo, U.S. Department of Justice, for Robert F. Kennedy, Jr., U.S. Department of Health and Human Services, Carole Johnson and Health Resources and Services Administration.

Companies: Johnson & Johnson Health Care Systems Inc.; U.S. Department of Health and Human Services; Health Resources and Services Administration

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