Copay coupons, offered by branded drug manufacturers and distributed through various channels including physicians’ offices, magazines, direct mail, and websites, pay some or all of a commercially-insured patient’s cost sharing for the manufacturer’s drug. These coupons aim to reduce the out-of-pocket costs for branded drugs, thereby increasing patient adherence. In recent years, however, these programs have come under fire by insurance companies, Pharmacy Benefit Managers (“PBMs”), state legislatures, and healthcare reform advocates. Opponents argue that the use of copay coupons stymies the rate of generic substitution, impeding efforts to control rising healthcare costs. One strategy used in efforts to eliminate these coupon programs is the implementation of a favorite tool of the insurance industry and PBMs– “copay accumulators.” Copay accumulator programs provide that although manufacturers can still provide coupons to patients at the point of sale, these payments no longer count toward the patient’s annual cost-sharing requirements (such as deductibles and maximum out-of-pocket spending). In other words, the patient is still required to meet their out-of-pocket costs obligations before significant insurance coverage kicks in. According to a 2023 report from The AIDS Institute, nearly two-thirds of health plans in the country include a copay accumulator policy. Ironically, however, the strongest opposition to these efforts comes from the very groups that the reformers intend to benefit the most – patient groups that advocate on behalf of chronically ill persons who require access to high-cost specialty drugs.
This battle has continued to play out in federal court and state legislatures.
HIV and Hepatitis Policy Institute et al v. HHS
The Biden administration implemented a Trump-era rule, the “Notice of Benefit and Payment Parameters for 2021” (85 Fed. Reg. 29164, 29230-35, 29261 (May 14, 2020)) (the “2021 NBPP”) that permitted health insurance issuers and group health plans to not count copay coupons from pharmaceutical manufacturers toward patients’ deductibles and out-of-pocket maximums (ostensibly through the use of copay accumulators). The plaintiffs in HIV and Hepatitis Policy Institute et al v. HHS, patient advocacy groups including the HIV and Hepatitis Policy Institute and the Diabetes Patient Advocacy Coalition, challenged the agency’s position on accumulator programs. They asserted that manufacturer copay support should count towards calculating patients’ cost sharing obligations, rather than being subject to an exclusion.
In ruling in favor of the plaintiffs on their motion for summary judgment, the Court sided with the plaintiffs, striking down the 2021 NBPP that allowed health insurers to not count drug manufacturer copay assistance towards a beneficiary’s out-of-pocket costs. Specifically, the U.S. District Court held that the 2021 NBPP rule’s language was contradictory and conflicted with both the Affordable Care Act’s (“ACA”) statutory definition of “cost sharing” and the agencies’ pre-existing regulatory definition of “cost sharing.” HHS had previously defined “cost sharing” in a 2012 regulation as “any expenditure required by or on behalf of an enrollee with respect to essential health benefits,” which by its terms includes “deductibles, coinsurance, copayments, or similar charges, but excludes premiums, balance billing amounts for non-network providers, and spending for non-covered services.” See 45 C.F.R. 155.20. The Court agreed with the plaintiffs that the regulation treats cost sharing as an “expenditure” by or on behalf of a plan enrollee and includes manufacturer copay assistance support, since cost-sharing is defined as “any expenditure required by or on behalf of an enrollee”. The Court also remanded to HHS the need to interpret the definition of “cost sharing.”
As a result of the District Court’s invalidation of the 2021 NBPP, health insurers and PBMs defaulted to an earlier 2020 version of the rule, which allowed insurers to exclude from cost-sharing caps only copay support coupons for branded drugs that have available generic equivalents (unless otherwise prohibited by state law); if there is no generic equivalent, under the 2020 version of the rule, manufacturer copay support must be counted toward the annual cost sharing limit.
On November 27, 2023, HHS filed a motion to clarify the scope of the Court’s order, stating that it “does not intend to take any enforcement action against issuers or plans based on their treatment of such manufacturer assistance” and subsequently filed an appeal with the United States Court of Appeals for the D.C. Circuit. Crucially, HHS also stated its intention to “address, through rulemaking, the issues left open by the [District Court’s] opinion, including whether financial assistance provided to patients by drug manufacturers qualifies as ‘cost sharing’ under the Affordable Care Act.” On December 22, 2023, the Court issued a second ruling in response to the defendant’s Motion to Clarify and expressly stated that the 2020 Accumulator Rule was reinstated by the September 29, 2023, ruling. The Court further noted that it was not opining on the 2020 Accumulator Rule or its legality, as those issues were not properly before the Court. On January 16, 2024, the parties jointly stipulated the dismissal of the government’s appeal.
State Legislative Action
While legal issues continue to play out in federal court, many states continue to step in to protect copay coupon programs. According to Navigating Healthcare, as of July 21, 2023, 19 states have passed laws that ban or restrict the use of accumulators in individual and small group healthcare plans. These state laws apply only to fully insured plans and those purchased through a health insurance marketplace. For 2024, at least 19% of the total U.S. commercial market—26.5 million individuals—are estimated to be enrolled in plans that must count any form of copay assistance toward patient cost sharing limits. These efforts are gathering steam – on February 8, 2024, Assembly member Akilah Weber, M.D. (D-La Mesa) introduced legislation to protect patient access to prescription medications. AB 2180 would ensure that California health plans, insurers, and PBMs count the value of copay assistance that is paid by a patient assistant program on behalf of a chronically or terminally ill patient, toward that patient’s deductible and out-of-pocket maximum expenses.
Impact On Manufacturers
In the wake of the HIV and Hepatitis Policy Institute, et al. decision, the apparent intention of HHS to exclude copay coupons from cost-sharing calculations, and on-going state initiatives to bar the use of the accumulators, HHS Secretary Xavier Beccera sat for three days of testimony discussing key Administration priorities. Per an April 2024 report in Fierce Pharma, Secretary Beccera challenged claims by Rep. Buddy Carter (R-Ga.) that copay accumulators negatively impact patient’s access to care. “Give me a case where patients have been denied their drugs,” he countered. The Administration in fact has failed to provide an adequate explanation of why HHS is not enforcing the Court’s ruling. In light of the Supreme Court’s June 28, 2024 decision in Loper Bright Enterprises v. Raimond[1], overturning Chevron USA v. National Resources Defense Council[2] holding that the federal judiciary must defer to agencies’ reasonable interpretation of ambiguous federal laws, manufacturers now have the opportunity to challenge HHS and its failure to comply with the Court ruling. Although it is unclear how courts will apply Loper to a particular statutory scheme, the door is open to new challenges to agency action or, as in this case, inaction.
The impact on manufacturers of a revamped and revised 2021 NBPP rule is clear –
- decreased patient satisfaction;
- declining levels of medication adherence, increased therapy abandonment, and poor outcomes;
- patient financial stress; and
- adverse reputational impact on the brand and manufacturer.
Manufacturers should continue to monitor on-going efforts by HHS to implement a revised version of the 2021 NBPP rule, as well as the potential for enforcement of the Court’s ruling cited above. In addition, manufacturers must continue to remain vigilant with respect to efforts by PBMs and plans to divert funds from their copay support programs. Also, although many copay maximizer and alternative funding programs likely won’t be affected by the ruling, to the extent these tools have features similar to copay accumulators, they may also be subject to the ruling.
How Frier Levitt Can Help
Frier Levitt stays abreast of federal and state regulatory changes and represents manufacturers, providers and patient advocacy groups. We evaluate each parties’ obligations, reporting obligations, and compliance with current rules. Furthermore, we draft and negotiate PBM rebate agreements and are ready to assist manufacturers in litigation against health plans and PBMs that institute copay accumulator programs and, in the post-Chevron world, bring actions challenging agency regulations and enforcement. If you have questions about proposed or recent federal and state legislative activity, reporting obligations, or are looking to develop a compliant copay coupon or patient assistance program, contact us today.
[1] No. 22–451, 603 U.S. __ (2024).
[2] 467 U.S. 837 (1984)
