Federal Court Strikes Down HHS Rule on Copay Accumulator Programs


Last month, in HIV and Hepatitis Policy Institute et al v. HHS, Case No. 1:22-cv-02604-JDB (D.C. Sept. 29, 2034),  the U.S. District Court for the District of Columbia struck down a Department of Health and Human Services (“HHS”) rule established under the Trump Administration that permitted (but did not require) health plans and insurers to decline to count towards a health plan participant’s annual cost-sharing obligations financial support provided by drug manufacturers to help participants pay for specific prescription drugs (e.g., discount cards, coupons, copay assistance programs). These “copay accumulator” programs are often used by insurers and pharmacy benefit managers (“PBMs”) as a way to control drug spending and prevent overutilization; however, they can operate to make participants pay more out-of-pocket for certain prescription drugs.

As background, the Affordable Care Act (“ACA”) sets an annual cap on the amount that plans and insurers can require participants to pay out of pocket for their medical expenses. Once this annual cost-sharing limit is reached, the health plan and/or insurer is responsible for covering the participant’s remaining medical expenses for the year. For this purpose, the ACA defines “cost sharing” to include: (i) deductibles, coinsurance, copayments, or similar charges; and (ii) any other expenditure required of an insured individual, which is a qualified medical expense with respect to essential health benefits covered under the health plan.

Drug manufacturers have long provided various forms of assistance to help participants afford their prescription drugs, including discount cards, coupons, and copay assistance programs (wherein the drug manufacturer covers a portion of the patient’s cost-sharing obligation in order to assist the participant in meeting the health plan’s annual cost-sharing limit). In response to this, plans and insurers began to implement “copay accumulators” as a way to avoid counting drug manufacturer assistance towards a participant’s annual cost-sharing obligations. Generally, under these copay accumulator programs, participants are permitted to use the  assistance to purchase their prescription drugs, but the value of the assistance is not be credited toward their annual cos-sharing limit. In such cases, once the drug manufacturer assistance is exhausted, participants are still required to satisfy the health plan’s cost-sharing limit before the health plan and/or insurer will cover any additional prescription drug costs for the year.

Federal law was silent on this practice until 2019; however, in addition to the ACA’s definition of cost sharing, the regulatory definition of “cost sharing” similarly covers “any expenditure required by or on behalf of an enrollee with respect to essential health benefits, which includes deductibles, coinsurance, copayments, or similar charges, but excludes premiums, balance billing amounts for non-network providers, and spending for non-covered services.” In 2019, HHS issued guidance on copay accumulators (through the HHS Notice of Benefit and Payment Parameters for 2020, 84 Fed. Reg. 17454 (April 25, 2019) (“2020 NBPP”)), which provided that plans and insurers could, unless inconsistent with state law, decline to count the value of any drug manufacturer assistance for drugs that have an “available and medically appropriate generic equivalent” against a participant’s annual cost-sharing limit. There was confusion, however, about whether the 2020 NBPP permitted insurers to exclude all drug manufacturer assistance from a participant’s annual cost-sharing limit (rather than only for circumstances where a generic equivalent is available). In response, HHS explained that in circumstances where there is no generic equivalent available, drug manufacturer assistance must be counted toward a participant’s annual cost-sharing limit. This clarification was not included in the 2020 NBPP, which resulted in further confusion.

Subsequently, in 2020, HHS issued additional guidance (through HHS Notice of Benefit and Payment Parameters for 2021, 85 Fed. Reg. 29164 (May 14, 2020) (the “2021 NBPP”) to further clarify its stance on copay accumulators. The 2021 NBPP provided that unless it was inconsistent with state law, plans and insurers could (but are not required to) decline to credit drug manufacturer assistance for specific drugs when calculating whether participants have met their annual cost-sharing obligations (regardless of whether or not the drug had a generic equivalent). Moreover, the 2021 NBPP provided that if plans and insurers elect to credit such assistance, it should be included in the definition of “cost sharing” and considered part of the overall charges incurred by the participant (and vice versa if they elect not to credit assistance). Essentially, the 2021 NBPP left health plans and insurers with the discretion to define “cost sharing” and to apply or not apply assistance toward a health plan participant’s annual cost-sharing limit.

Patient advocacy groups thereafter sued HHS and the Centers for Medicare and Medicaid Services seeking to invalidate the 2021 NBPP. The plaintiffs argued that the 2021 NBPP conflicts with the statutory and regulatory definitions of “cost sharing,” and the 2021 NBPP is arbitrary and capricious for several different reasons.

The Court sided with the plaintiffs and set aside the 2021 NBPP on the basis that its language is contradictory and conflicts with both the ACA’s statutory definition of “cost sharing” and the agencies’ preexisting regulatory definition of “cost sharing.” First, the Court explained that by authorizing plans and insurers to either count, or not count, assistance toward the annual cost-sharing limit—that is, to treat it as either within or without the definitions of “cost sharing”—the 2021 NBPP adopts two different, contradictory readings of the same statutory and regulatory text and allows the regulated parties to choose their preferred meaning, which is something that the Supreme Court has previously rejected.

Next, the Court explained that because drug manufacturer assistance is “an expenditure” by drug manufacturers made “on behalf of” a participant, the 2021 NBPP’s discretion regarding whether assistance is “cost sharing” conflicts with the statutory and regulatory definitions thereof, which cover deductibles, coinsurance, copayments, similar charges, andany expenditure” required by or made “on behalf of” a participant with respect to essential health benefits.

Following the Court’s invalidation of the 2021 NBPP, plans and insurers now must adhere to the 2020 NBPP, which as detailed above, permits the use of copay accumulators for drugs that have a generic equivalent (unless otherwise prohibited by state law). Consequently, plans and insurers are prohibited utilizing copay accumulators for drugs that lack generic equivalents, and in such situations, drug manufacturer assistance must be counted toward the annual cost-sharing limit. The Court also remanded the issue to HHS to allow the agency the opportunity to issue further guidance regarding on co-pay accumulators.

This ruling is a significant win for patient advocacy groups and will impact many employer-sponsored health plans, insurers and PBMs, as well as participants, as it relates copay accumulator programs and prescription drug affordability. Many plans, insurers, and PBMs may have to adjust their current copay accumulator programs to allow participants to count toward their annual cost-sharing limit drug manufacturer assistance for their high-priced specialty drugs that do not have a generic equivalent. Any such changes in this regard will require communications to participants regarding the impact on their cost-sharing obligations. While it is unclear whether there will be an appeal in this case, patient advocacy groups have made it clear they intend to continue to advocate for a comprehensive state and federal level ban on copay accumulator programs, signaling that this issue is not yet settled.

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