This article will be updated.
Oregon Health & Science University is grappling with an audit it says could lead to a major company trying to boot it from its drug discount program, with “calamitous” results for the hospital system.
On June 17, a federal judge in Washington, D.C. dismissed a suit filed by OHSU that challenged federal approval of an audit launched by drugmaker Johnson & Johnson over OHSU’s receipt of federally mandated drug discounts. The ruling came despite a filing by the university’s attorney contending the university “will suffer calamitous and irreparable harm” if the judge didn’t block the audit.
Known as 340b, the decades-old federal drug discount program has become the subject of increasing controversy. Drugmakers contend it’s being used not to help those intended — poor people — but to boost profits for providers who get discounts on drugs for which they are receiving full reimbursements from insurers. For years, independent oncologists have said a desire for lucrative profits on cancer drugs under the program have fueled a push by hospitals to purchase oncologist practices — increasing overall costs, according to one study.
Supporters of the program, however, including health systems and advocacy groups, have pushed states including Oregon to pass laws that block pharmaceutical companies from restricting the flow of the drug discounts, saying those efforts hurt patients while boosting Big Pharma profits.
Adding to the push and pull over the program, the Trump administration has adopted rules that could limit drugmakers’ obligations to provide the discounts.
It is unclear if the university intends to appeal. An OHSU spokesperson declined to comment, citing the pending litigation. It receives large sums through drug discounts — so much that it booked $43 million last year in savings just through better administration of the program.
Johnson & Johnson, meanwhile, makes an array of costly and important drugs — and has been pursuing measures to try to minimize discounts.
Initial email was part of a setup, university claims
According to court filings, the university received an email from auditors representing J&J in April 2024. In May the company asked federal regulators for permission to conduct an audit, which was approved.
Filed in July 2024, OHSU’s suit cited regulations saying an audit should only follow good-faith negotiations, which did not occur before J&J’s audit.
However, J&J argued that it had tried to have a discussion with OHSU, but the university cancelled their meeting. The company said it needed to audit because OHSU’s utilization of drug discounts for one particular drug, Stelara, had jumped by 70% in a short amount of time. It said the audit was necessary to combat what it said was abuse of the 340b program.
“Instead of supporting uninsured or indigent patients, it now primarily benefits sophisticated, well-resourced hospital systems and major for-profit retail pharmacy chains and their affiliated pharmacy benefit managers. A lack of transparency has also subjected the program to rampant abuse, to the detriment of patients.”
OHSU, however, said the audit was overly broad and burdensome, and leaks were likely given the drugmaker’s efforts to limit 340b payments and prompt changes in its administration.
Auditors used by the company “set an aggressive audit timeline, demanding voluminous sensitive documents in the minimum time,” the OHSU filing added.
“The harm to Plaintiff will .. be irreparable, including likely damage to Plaintiff’s reputation among the public and other 340B Program stakeholders and inevitable damage to its legal standing in any challenge to J&J’s audit findings ... Plaintiff reasonably believes that J&J will misuse the audit process to further its own pecuniary interests and publicly damage Plaintiff’s reputation.”
In his ruling, Judge Rudolph Contreras, an Obama appointee, called the university’s arguments premature and “befuddling.” At the same time he rejected similar suits filed by several other hospital systems.