A recent ruling in HIV and Hepatitis Policy Institute v. HHS has triggered major implications for how insurers and pharmacy benefit managers interact with patient copay assistance programs, a judgement that affects numerous companies who contract with insurers for employee health coverage.
The US District Court for the District of Columbia, with its September 29 judgement, has rejected the federal regulation that broadened the use of copay accumulator programs, mechanisms employed by insurers to offset the impact of drugmaker copay assistance schemes.
Despite drug manufacturers marketing these programs as vital means for patients to access necessary medications, insurers maintain that these programs primarily function as marketing tools designed to drive patients towards costlier brand-name drugs, essentially shifting the bulk of the cost onto the insurers.
These programs, insurers argue, bypass long-standing benefit plan strategies, including formulary design and cost-sharing, designed to incentivize members to opt for more affordable products. In certain instances, the drug manufacturers’ copay assistance can cover a member’s cost-sharing obligations for a full year, removing the incentive for the member to use a more cost-effective therapy, thereby defeating the purpose of cost-sharing in the first place.
In response to these copay assistance initiatives, insurers developed copay accumulator programs, which worked by adjusting the status of certain high-priced specialty drugs so that manufacturer copay assistance payments wouldn’t contribute towards a member’s deductible or other out-of-pocket costs. It was not until the rulemaking efforts by the Centers for Medicare & Medicaid Services that federal legislation addressed the use of copay accumulators.
Starting with the plan year 2020, CMS enabled insurers to implement copay accumulators for brand drugs that have a medically appropriate and accessible generic equivalent. The agency later removed the requirement for an available generic equivalent for the plan year 2021 and onwards, enabling the use of copay accumulators across the board, thereby substantially extending the range of drugs that could be subject to copay accumulators.
The current law, as a result of the D.C. Circuit case, is the 2020 rulemaking effort, meaning that copay accumulators can only be utilized for brand drugs with a medically appropriate and available generic equivalent.
With this backdrop, health insurers and pharmacy benefit managers should revaluate their use of copay accumulator programs to determine to what extent they remain permitted. Not all such programs will be impacted since many target brand name drugs without generic equivalents. Health insurers employing copay maximizers and alternative funding schemes should also consider the potential impact of this ruling on their programs.
While not all copay maximizers and alternative funding schemes are expected to be affected by this ruling, future rulemaking in CMS provoked by this ruling may impact such programs too.
Health plans and pharmacy benefit managers should assess the financial implications of this ruling, revising formulary and benefit designs to better manage drug costs, and ensuring any changes are communicated clearly to members to underscore their cost-sharing responsibilities. Similarly, companies purchasing health insurance or employing insurers to manage their self-insured employer plans should consider the potential financial impact of the ruling.