Innovating healthcare through research and policy.
At Johnson & Johnson, we are leading where medicine is going
J&J is advancing the next era of medical innovation through our continuous R&D investments, totaling $77.7 billion since 2016.1 However, patients’ cost exposure and access challenges are increasing because of distorted insurance benefit design and regulatory hurdles.
J&J’s R&D investments: Making the hope of innovation a reality for patients in the next decade…and beyond
How J&J is advancing the next era of healthcare advancements for patients:
$12B
In 2023, J&J Innovative Medicine invested $12 billion to develop pharmaceutical treatments and cures1
>124%
In 2023, J&J Innovative Medicine spent over 124% more on pharmaceutical R&D than sales and marketing1
70+
J&J aims to launch or file more than 70 novel therapies and expanded treatment options for patients by 20302
But patients still face significant barriers to access
When health insurance works as intended, insured patients can affordably access their treatments when they need to. But for millions of Americans, health insurance does not fulfill this basic purpose.3
Pharmacy benefit managers (PBMs) create barriers to access by implementing restrictive programs like prior authorization, step therapy and formulary exclusions, which hinder provider and patient healthcare decision-making.4 Additionally, distortions in health insurance benefit design and underinsurance leave many patients financially exposed and unable to afford necessary treatments, disproportionately impacting vulnerable populations.3
Pharmacy benefit managers (PBMs) create barriers to access by implementing restrictive programs like prior authorization, step therapy and formulary exclusions, which hinder provider and patient healthcare decision-making.4 Additionally, distortions in health insurance benefit design and underinsurance leave many patients financially exposed and unable to afford necessary treatments, disproportionately impacting vulnerable populations.3
Our responsibility to patients
At J&J, we understand our dual responsibility to patients: (1) to develop the next generation of medicines across a vast continuum of diseases for the patients of tomorrow and (2) to help support affordable access to our medicines.
To meet these responsibilities we have to patients, the healthcare system and society, we consider three factors when pricing our medicines:
The value they bring to patients, the healthcare system and society
The need to further support patient access
The need to continue innovating and developing new and novel medicines for the patients of today and tomorrow
Drug list prices are simply a starting point
Manufacturers like Johnson & Johnson support patients' access to their medicines through vigorous private market negotiations with health insurance companies, PBMs and other intermediaries that dispense medications (e.g. hospitals and clinics).
Our net prices have declined by nearly 20% over the past seven years.6 Despite lower net prices paid by insurers for our medicines, millions of patients are still facing higher costs and barriers to access, and some are even having patient assistance taken from them.
Our net prices have declined by nearly 20% over the past seven years.6 Despite lower net prices paid by insurers for our medicines, millions of patients are still facing higher costs and barriers to access, and some are even having patient assistance taken from them.
One way J&J supports patient access: Rebates, discounts and fees
In 2023, we provided $42.8 billion in rebates, discounts and fees to insurers, pharmacy benefit managers (PBMs), hospitals, government programs and other healthcare entities.6
Patients are not directly benefiting from lower net prices
We negotiate lower net prices to expand access and to make drugs more affordable for patients, not to benefit middlemen and other intermediaries.
The gap between U.S. list prices, which is what we charge insurance companies, and net prices for brand name medicines, which is after rebates and discounts provided to private insurers and other intermediaries, grew by 45% from 2017 to 2022.7
The gap between U.S. list prices, which is what we charge insurance companies, and net prices for brand name medicines, which is after rebates and discounts provided to private insurers and other intermediaries, grew by 45% from 2017 to 2022.7
Supporting affordable access:
Three ways to lower patient costs
Three ways to lower patient costs
01
Remove barriers to patient access to medicines by changing distorted insurance benefit design
02
Prevent middlemen from diverting patient assistance away from patients
03
Base patient cost-sharing on lower net prices accounting for discounts given to payers
The real impact of rising out-of-pocket costs
The summary
42% of all discounts, rebates and fees goes to government programs6
Nearly 1/3 of discounts, rebates and fees goes to health insurers and PBMs6
Patients are not directly benefiting from these growing savings
Policy challenges to the innovation ecosystem
Incentivizing risk-taking is a critical part of advancing medicine for patients, but many policies (either enacted or under consideration) could severely undermine the innovation ecosystem that has delivered healthcare advancements for patients.
Stop government price-setting
At the federal level, concerns are mounting that government-mandated prices could upend the process of drug discovery and development or tie U.S. drug prices to those in foreign countries. At the state level, prescription drug affordability boards (PDABs) and upper payment limits (UPLs) on branded medications have gained momentum — but these policies have significant drawbacks. Read more here.
Preserve the value of innovation
Current law has many provisions to protect abuse of patent practices. Limiting the ability to protect inventions or enforce patent rights associated with pharmaceutical innovation is an unnecessary measure and would upend the R&D innovation ecosystem that advances treatments for patients today, as well as pharmaceutical innovations for years to come.
- Intellectual property rights: Limiting the ability to protect inventions or enforce patent rights associated with pharmaceutical innovation would upend the R&D innovation ecosystem that advances treatments for patients today, as well as pharmaceutical innovations for years to come.
- “Marching in”: The 1980 Bayh-Dole Act was passed to promote the use of inventions and spur collaboration between government funded entities and innovative companies with the expertise and capabilities necessary to develop and commercialize innovative products,11 It was never intended to be used as a price setting mechanism, nor as a tool to seize intellectual property rights based on a government dictated “reasonable” price. If the government “marches in” and licenses patent rights to widely available treatments, public-private sector collaboration and the innovation ecosystem will suffer.12
Keep decisions up to patients & providers
Misaligned incentives in the market and in programs like 340B have strengthened middlemen like PBMs, whose growing use of restrictions and opaque operating models are creating significant hurdles for providers and patients to make the right healthcare decisions. Policies should protect the patient-physician relationship and eliminate the undue influence of commercial payers on patient health decisions.
R&D: A process of inherent risk
The innovation ecosystem also needs policies and regulations that bolster scientific advancement. Discovering and developing life-saving medicines requires significant resources and cooperation between researchers and regulators.
On average, it takes more than 12 years and $4 billion, including cost of capital for the total lifecycle, to bring a new medicine to market.14, 15
On average, it takes more than 12 years and $4 billion, including cost of capital for the total lifecycle, to bring a new medicine to market.14, 15
The 340B program was designed by Congress to be a very limited, targeted program enabling manufacturers to restore deep discounts that manufacturers historically had provided voluntarily to safety net providers. However, the program has grown out of control as for-profit pharmacy chains and larger health systems have used it to boost profits without directly benefiting patients.
Read our 340B brief to learn more about the growing problems with the 340B program — and how to fix them.
Read our 340B brief to learn more about the growing problems with the 340B program — and how to fix them.
Making healthcare policy work for patients
We pursue health solutions that keep patients at the center. We also consider the experiences of our patients, who use our medicines every day, the perspectives of our scientists and researchers discovering the next medical breakthrough and our concerns about the misaligned incentives in the marketplace. Specifically, we think the following is needed:
Reform PBMs to prevent patient access hurdles, lower patient costs and promote patient-provider decision making
Reform the 340B program to support its original intent, building increased transparency and accountability
Stop patient assistance diversion programs and prevent the spread of alternative funding programs (AFPs)
Enact policies that preserve the innovation ecosystem that enables the discovery and development of cures
Looking back at the Orphan Drug Act: What better policy can deliver for patients
To encourage manufacturers to address unmet patient needs for orphan drugs, which treat rare diseases, in 1983 the federal government passed the Orphan Drug Act (ODA). Under the ODA, a company may qualify for research grants, tax credits for qualified clinical trials and potential seven-year market exclusivity after a drug’s approval.19
The result: Before the ODA was passed, the FDA had approved just 38 orphan drugs to treat rare diseases. Today, more than 650 orphan drugs have been approved by the FDA—with more in development.18
The result: Before the ODA was passed, the FDA had approved just 38 orphan drugs to treat rare diseases. Today, more than 650 orphan drugs have been approved by the FDA—with more in development.18
Valuing pharmaceuticals in the U.S.
When the U.S. innovation ecosystem works as intended, supported by policies that promote innovation, it leads to more effective and personalized treatments that are available faster, earlier intervention and smarter, less invasive healthcare for patients today and in the future.
What value looks like for patients
U.S. patients benefit from the earliest access to the broadest, most innovative set of therapies in the world, helping patients more easily find the treatments that work for them the best.
U.S. Patients Have Medicines Sooner
Of the 37 drugs the U.S. Food and Drug Administration (FDA) approved in 2022, 68% were first approved in the U.S.20
U.S. patients have more options
78% of drugs launched by G20 nations between 2012 and 2021 were available in the U.S. within one year of their launch, compared to just 38% in the United Kingdom and 21% in Canada.21
U.S. patients battling cancer benefit from better access
Of the 124 new cancer medicines approved globally from 2012 to 2021, American patients have access to 94% of these treatments, compared to the average of 46% in other G20 countries.21
Patients’ needs should determine value
At Johnson & Johnson we are guided by Our Credo. Our first responsibility is to “the patients, doctors and nurses, to mothers and fathers and all others who use our products and services.”22 We need a system that supports clinically nuanced, patient-centric access to medicines so that each individual person can easily obtain the therapy that they and their doctor determine is best.
Patient-centered:
A patient-centered approach is fundamental to achieve the most efficient use of medicines, not waste resources and ensure that access to treatments is nondiscriminatory. This approach respects patient autonomy by placing every patient’s outcome at the forefront of decision-making.
Decentralized and locally relevant:
Valuations must consider the specific needs of local health systems. Treatment needs in rural areas or underserved communities, for instance, may differ significantly from treatment needs in metropolitan areas or communities that are adequately resourced.
Deliberative and flexible:
Valuations should be done in a deliberative way and not use strict decision rules or oversimplified metrics, like the discriminatory quality-adjusted life year (QALY), expected value of life years gained (evLYG) or healthy years in total (HYT). Instead, the full diversity of healthcare values must be considered, prioritizing those of patients.
Holistic:
Valuations must not rely on information from a small set of simple summary statistics, such as average life expectancy and average cost, but instead consider the full range of impacts to the patient, healthcare system and society. Valuations that are incomplete will distort the marketplace, resulting in both today’s and tomorrow’s patients receiving suboptimal care.
Clinically driven:
Clinically driven valuations best preserve the opportunity to maximize the health of every patient and should prioritize their health and safety. Financing of medicines should be considered separately and addressed through insurance solutions.
Citations
Introduction
1. Figure according to Johnson & Johnson internal financial accounting. Values may have been rounded.
2. Johnson & Johnson. “J&J Innovative Medicine Business Overview.” Slide 6. December 2023. https://jnjbusinessreview.q4ir.com/files/doc_downloads/2023/12/innovative-medicine-presentation.pdf. Accessed May 2024.
3. Sara R. Collins, Lauren A. Haynes, and Relebohile Masitha. “The State of U.S. Health Insurance in 2022.” Commonwealth Fund Biennial Health Insurance Survey, The Commonwealth Fund. September 29, 2022.https://www.commonwealthfund.org/publications/issue-briefs/2022/sep/state-us-health-insurance-2022-biennial-survey.Accessed May 2024.
4. PhRMA. “Insurers and Middlemen Force Many of the Sickest Patients to Face High Out-of-Pocket Costs.” https://phrma.org/resource-center/Insurance-Coverage/Insurance-Coverage-and-PBMs.Accessed May 2024.
5. Robbins R, Abelson R. "The Opaque Industry Secretly Inflating Prices for Prescription Drugs." The New York Times. https://www.nytimes.com/2024/06/21/business/prescription-drug-costs-pbm.html.Published June 21, 2024. Accessed July 2024.
2. Johnson & Johnson. “J&J Innovative Medicine Business Overview.” Slide 6. December 2023. https://jnjbusinessreview.q4ir.com/files/doc_downloads/2023/12/innovative-medicine-presentation.pdf. Accessed May 2024.
3. Sara R. Collins, Lauren A. Haynes, and Relebohile Masitha. “The State of U.S. Health Insurance in 2022.” Commonwealth Fund Biennial Health Insurance Survey, The Commonwealth Fund. September 29, 2022.https://www.commonwealthfund.org/publications/issue-briefs/2022/sep/state-us-health-insurance-2022-biennial-survey.Accessed May 2024.
4. PhRMA. “Insurers and Middlemen Force Many of the Sickest Patients to Face High Out-of-Pocket Costs.” https://phrma.org/resource-center/Insurance-Coverage/Insurance-Coverage-and-PBMs.Accessed May 2024.
5. Robbins R, Abelson R. "The Opaque Industry Secretly Inflating Prices for Prescription Drugs." The New York Times. https://www.nytimes.com/2024/06/21/business/prescription-drug-costs-pbm.html.Published June 21, 2024. Accessed July 2024.
Our responsibility to patients
6. Figure according to Johnson & Johnson internal financial accounting. Values may have been rounded.
7. Adam Fein, “Gross-to-Net Bubble Update: 2022 Pricing Realities at 10 Top Drugmakers.” Drug Channels. June 2023. https://www.drugchannels.net/2023/06/gross-to-net-bubble-update-2022-pricing.html. Accessed July 2024.
8. Peterson-KFF Health System Tracker. “How has U.S. spending on healthcare changed over time?” December 15, 2023. https://www.healthsystemtracker.org/chart-collection/u-s-spending-healthcare-changed-time/#Average%20annual%20expenditures%20growth%20rate%20for%20select%20service%20types,%201970-2022. Accessed May 2024.
9. Kalorama Information. "Out-of-Pocket Healthcare Expenditures in the United States, 5th Edition." August 2, 2021. https://kaloramainformation.com/product/out-of-pocket-healthcare-expenditures-in-the-united-states-5th-edition/. Accessed May 2024.
10. IQVIA. “The Use of Medicines in the U.S. 2023, Usage and Spending Trends and Outlook to 2027.” May 2, 2023. https://www.iqvia.com/insights/the-iqvia-institute/reports-and-publications/reports/the-use-of-medicines-in-the-us-2023. Accessed January 2024.
7. Adam Fein, “Gross-to-Net Bubble Update: 2022 Pricing Realities at 10 Top Drugmakers.” Drug Channels. June 2023. https://www.drugchannels.net/2023/06/gross-to-net-bubble-update-2022-pricing.html. Accessed July 2024.
8. Peterson-KFF Health System Tracker. “How has U.S. spending on healthcare changed over time?” December 15, 2023. https://www.healthsystemtracker.org/chart-collection/u-s-spending-healthcare-changed-time/#Average%20annual%20expenditures%20growth%20rate%20for%20select%20service%20types,%201970-2022. Accessed May 2024.
9. Kalorama Information. "Out-of-Pocket Healthcare Expenditures in the United States, 5th Edition." August 2, 2021. https://kaloramainformation.com/product/out-of-pocket-healthcare-expenditures-in-the-united-states-5th-edition/. Accessed May 2024.
10. IQVIA. “The Use of Medicines in the U.S. 2023, Usage and Spending Trends and Outlook to 2027.” May 2, 2023. https://www.iqvia.com/insights/the-iqvia-institute/reports-and-publications/reports/the-use-of-medicines-in-the-us-2023. Accessed January 2024.
Policy challenges to the innovation ecosystem
11. PhRMA. “The Role of The Bayh-Dole Act in Fostering Technology Transfer And Implications for Innovation.” February 2020. https://www.phrma.org/-/media/Project/PhRMA/PhRMA-Org/PhRMA-Org/PDF/A-C/Bayh-Dole-Whitepaper-FINAL---21820.pdf. Accessed January 2024.
12. PhRMA. “Proposed march-in framework would chill American innovation.” February 7, 2024. https://phrma.org/Blog/Proposed-march-in-draft-framework-would-chill-American-innovation.Accessed May 2024.
13. Dowden H, Munro J. “Trends in clinical success rates and therapeutic focus.” July 16, 2019. https://www.nature.com/articles/d41573-019-00074-z.epdf?no_publisher_access=1&r3_referer=nature. Accessed May 2024.
14. Neumann U, Proudman D, Martin S, and Grabowski HG. "Public Sector Replacement of Privately Funded Pharmaceutical R&D: Cost and Efficiency Considerations." May 5–8, 2024. https://www.ispor.org/docs/default-source/intl2024/j-j-access-policy-research---ispor-2024---government-and-industry-r-d-funding-lit137838-pdf.pdf?sfvrsn=32dc4f6b_0. Accessed May 2024.
15. McKinsey & Company. "Fast to first-in-human: Getting new medicines to patients more quickly." https://www.mckinsey.com/industries/life-sciences/our-insights/fast-to-first-in-human-getting-new-medicines-to-patients-more-quickly. Accessed July 2024.
16. IQVIA. “The 340B Drug Discount Program Grew to $124B in 2023.” May 2024. https://www.iqvia.com/-/media/iqvia/pdfs/us/white-paper/2024/iqvia-update-on-size-of-340b-program-report-2024.pdf. Accessed May 2024.
17. Adam Fein, "Exclusive: The 340B Program reached $54 billion in 2022 - Up 22% vs. 2021." Drug Channels. September 24, 2023. https://www.drugchannels.net/2023/09/exclusive-340b-program-reached-54.html. Accessed August 2024.
18. Rare Disease Company Coalition. “Building on 40 Years of the Orphan Drug Act.” December 2022. https://www.rarecoalition.com/wp-content/uploads/ODA-Overview.pdf. Accessed May 2024.
19. JNJ.com. “What is an orphan drug?” February 28, 2024. https://www.jnj.com/innovation/what-is-an-orphan-drug. Accessed May 2024.
12. PhRMA. “Proposed march-in framework would chill American innovation.” February 7, 2024. https://phrma.org/Blog/Proposed-march-in-draft-framework-would-chill-American-innovation.Accessed May 2024.
13. Dowden H, Munro J. “Trends in clinical success rates and therapeutic focus.” July 16, 2019. https://www.nature.com/articles/d41573-019-00074-z.epdf?no_publisher_access=1&r3_referer=nature. Accessed May 2024.
14. Neumann U, Proudman D, Martin S, and Grabowski HG. "Public Sector Replacement of Privately Funded Pharmaceutical R&D: Cost and Efficiency Considerations." May 5–8, 2024. https://www.ispor.org/docs/default-source/intl2024/j-j-access-policy-research---ispor-2024---government-and-industry-r-d-funding-lit137838-pdf.pdf?sfvrsn=32dc4f6b_0. Accessed May 2024.
15. McKinsey & Company. "Fast to first-in-human: Getting new medicines to patients more quickly." https://www.mckinsey.com/industries/life-sciences/our-insights/fast-to-first-in-human-getting-new-medicines-to-patients-more-quickly. Accessed July 2024.
16. IQVIA. “The 340B Drug Discount Program Grew to $124B in 2023.” May 2024. https://www.iqvia.com/-/media/iqvia/pdfs/us/white-paper/2024/iqvia-update-on-size-of-340b-program-report-2024.pdf. Accessed May 2024.
17. Adam Fein, "Exclusive: The 340B Program reached $54 billion in 2022 - Up 22% vs. 2021." Drug Channels. September 24, 2023. https://www.drugchannels.net/2023/09/exclusive-340b-program-reached-54.html. Accessed August 2024.
18. Rare Disease Company Coalition. “Building on 40 Years of the Orphan Drug Act.” December 2022. https://www.rarecoalition.com/wp-content/uploads/ODA-Overview.pdf. Accessed May 2024.
19. JNJ.com. “What is an orphan drug?” February 28, 2024. https://www.jnj.com/innovation/what-is-an-orphan-drug. Accessed May 2024.
Valuing pharmaceuticals in the U.S.
20. U.S. Food And Drug Administration. "New Drug Therapy Approvals 2022: Advancing Health through Innovation." January 2023. https://www.fda.gov/drugs/new-drugs-fda-cders-new-molecular-entities-and-new-therapeutic-biological-products/new-drug-therapy-approvals-2022.Accessed January 2024.
21. PhRMA. “Global Access to New Medicines Report.” April 2023. https://phrma.org/-/media/Project/PhRMA/PhRMA-Org/PhRMA-Refresh/Report-PDFs/A-C/2023-04-20-PhRMA-Global-Access-to-New-Medicines-Report-FINAL-1.pdf.Accessed January 2024.
22. Johnson & Johnson. Our Credo. 2023. https://www.jnj.com/our-credo.Accessed July 2024.
21. PhRMA. “Global Access to New Medicines Report.” April 2023. https://phrma.org/-/media/Project/PhRMA/PhRMA-Org/PhRMA-Refresh/Report-PDFs/A-C/2023-04-20-PhRMA-Global-Access-to-New-Medicines-Report-FINAL-1.pdf.Accessed January 2024.
22. Johnson & Johnson. Our Credo. 2023. https://www.jnj.com/our-credo.Accessed July 2024.