A U.S. district court judge has struck down a CMS rule that would have narrowed the exclusions from Medicaid best price for manufacturer-provided patient-assistance programs. The rule, which was set to go into effect on Jan. 1, would have required drugmakers to determine exactly where their patient assistance is going. If 100% of it was not reaching the patient — particularly via copayment accumulators and maximizers when payers are taking this assistance rather than allowing it to count toward patients’ deductibles and out-of-pocket maximums — that assistance would need to have been included in Medicaid best price and average manufacturer price (AMP) calculations for prescription drugs. This decision, as well as a recent pharma lawsuit against a maximizer company, may spur more pushback against these copay programs, one industry expert tells AIS Health, a division of MMIT.
The Medicaid rebate rule allows state Medicaid programs to get the same discounts on drug prices that manufacturers offer commercial plans purchasing prescription drugs. Manufacturers pay rebates to Medicaid programs that are calculated based on drugmakers’ best price, which is the lowest price the manufacturer gives to most providers of health care services or items, including hospitals, HMOs and MCOs — but not patients. It includes any price adjustments, such as discounts and rebates, but not manufacturer-provided assistance to patients.
Traditionally, when a manufacturer provides copay assistance for one of its drugs, that dollar amount would count toward the patient’s deductible and out-of-pocket maximum. But copay accumulator programs prevent those funds from applying to the deductible and out-of-pocket limit. Instead, when members have used all of the copay assistance available to them, their payments then start counting toward their deductible and out-of-pocket costs. A similar type of approach is a copay maximizer program, which will distribute 100% of available manufacturer copay offset funds over 12 months. These payments also do not count toward members’ deductibles and out-of-pocket max.
A CMS final rule (CMS-2482-F) — referred to as the Accumulator Rule — published Dec. 31, 2020, and scheduled to take effect on Jan. 1, 2023, would have required that:
(1) Manufacturers must ensure that their assistance programs’ benefits “are provided entirely to the consumer.…If any of the manufacturer-sponsored assistance is diverted to the plan, those amounts should be included when a manufacturer calculates its best price,” and
(2) When manufacturer assistance is not applied to a patient’s deductible or other cost-sharing obligations, “the assistance becomes a price concession to the health plan by delaying the point at which the health plan’s contribution toward the patient’s cost sharing begins, or reducing the value of the assistance to the patient, and thus should be counted in best price and, in certain cases, the calculation of the AMP.”
According to Larry Kocot, principal and national leader for the Center for Healthcare Regulatory Insight at KPMG, “CMS regulations have always required that the value of patient assistance be received or passed through to the patient in order for those amounts to be excluded from best price and AMP calculations. With the advent of PBMs being able to identify these amounts and exclude them from deductible and/or out-of-pocket accumulators, and the manufacturer complaints about these practices, CMS could no longer ignore the fact or appearance that manufacturers have not been fully compliant.”
PhRMA: Patients Are Not Best Price-Eligible Entities
On May 21, 2021, the Pharmaceutical Research and Manufacturers of America (PhRMA) filed a lawsuit (No. 1:21-cv-01395) seeking “a declaration that the Accumulator Rule is invalid, an injunction preventing the Defendants from implementing or enforcing the Accumulator Rule, and other relief as the Court deems appropriate.”
In its lawsuit, PhRMA notes that patients are not included among the providers eligible for best price, “presumably because Congress did not want to discourage manufacturers from offering discounts or other assistance to patients.” In 2007 regulations, CMS declared that “manufacturer-sponsored drug discount card programs, coupons and co-pay assistance” were excluded from best price calculation when those benefits go to patients. “Sales to patients are best price exempt,” asserted PhRMA in a summary of the lawsuit. “By statute, assistance provided to patients must not affect best price for purposes of a manufacturer’s Medicaid rebates.”
According to the lawsuit, “CMS’s final rule contradicts the plain text of the Medicaid rebate statute by improperly requiring manufacturers to treat financial assistance that they provide to patients to help defray their co-pays and other out-of-pocket costs as part of the ‘price’ a manufacturer offers to commercial health insurers. Because this portion of the rule is inconsistent with the statute’s plain text and would be harmful to patient health, it is unlawful and invalid under the Administrative Procedure Act.”
Per PhRMA, “In the Accumulator Rule, CMS treats assistance offered by manufacturers to patients as if it were a price discount to health insurers, just because the insurers have figured out a way to take that assistance away from the patients for whom it was intended. That is simply not what the word ‘price’ means. A ‘price’ is the amount that a seller intentionally offers and voluntarily agrees to accept from a buyer. But here, the manufacturer does not intend to offer the financial assistance at issue to the health insurers, but rather wants it to fully benefit patients. The health insurers are acting against the manufacturers’ will. That is not what the law means when it says ‘lowest price available.’”
If the final rule were to be enacted, some stakeholders had contended that it potentially would have a chilling effect on pharma-provided patient-assistance programs. “Smaller biotechs may discontinue using these programs because they don’t have the administrative capacity to gather the data and report accurately, which, in turn, will impact patients and caregivers who have to pay high deductibles,” said Reta Mourad, Pharm.D., vice president of the access experience team at PRECISIONvalue. “Providers could also be indirectly impacted, as they may need to look for alternatives for patient support through foundations or other means.”
In the final rule, however, CMS disagreed that the policy would result in manufacturers cutting back on their patient-assistance offerings.
Judge Agreed With PhRMA
Ultimately Judge Carl J. Nichols of the U.S. District Court for the District of Columbia agreed with PhRMA in a May 17 ruling setting aside the Accumulator Rule. “A manufacturer’s financial assistance to a patient does not qualify as a price made available from a manufacturer to a best-price-eligible purchaser,” he wrote. “Rather, a manufacturer’s financial assistance is available from the manufacturer to the patient. And a patient is not a best-price-eligible purchaser. As a result, HHS lacks the statutory authority to adopt the accumulator adjustment rule. That conclusion holds true even though commercial health insurers have developed accumulator adjustment programs intended to capture some (or all) of a manufacturer’s financial assistance to a patient.”
The rule, Nichols wrote, “would make the calculation of the best price turn on information often in the sole possession of commercial health insurers. Under the proposed rule, manufacturers would need to conduct transaction-by-transaction investigations into the operations of accumulator adjustment programs even though manufacturers have no control over (and sometimes no information concerning) those programs.”
“Today’s decision to vacate the patient assistance penalty — a provision of a Medicaid rule finalized in 2020 — is a win for patients,” said PhRMA President and CEO Stephen J. Ubl in a statement. “Manufacturers provide patient assistance to do just that — assist patients and address gaps in insurance — but instead insurers are siphoning that money away for themselves. We will continue to work with policymakers on solutions that make medicines more affordable and lower what Americans pay out of pocket.”
“There seemed to be too many unknowns in the proposed ruling for it to be put into effect at all, let alone to be put into effect by Jan. 1, 2023,” Mourad tells AIS Health. “Manufacturer copay-assistance programs have long been criticized by PBMs and payers, viewing these programs as manufacturer strategies for patients to continue using higher-cost, branded drugs in therapeutic areas where lower-cost and clinically appropriate alternatives are available.
“On the other hand, payers who have implemented accumulator and maximizer programs have been criticized for these programs as ultimately taking the benefits away from the patients who are directly impacted by these programs,” she continues. “Fundamentally, the conversation is around the high cost of drugs, but the CMS ruling, in trying to address some of these issues, did not provide enough detail and guidance on how the manufacturers would need to prove that patients were receiving the full benefit of the financial assistance when manufacturers are not at all privy to the inner workings of such accumulator programs. The judge’s decision makes complete sense based on the information set forth in this case.”
According to Rick Ford, chief product officer at InfinityRx and president of Biocel Access Solutions, “the intent of the Medicaid Drug Rebate Program (MDRP) is to ensure that Medicaid receives drug pricing that is not more than pricing available from drug manufacturers to best price-eligible entities for affected drugs. ‘Medical spend’ is a well-defined term that is used in a broad range of health care regulation and generally defines health plan direct costs for covered services. The court’s decision provides an unintended pathway for medical spend incurred by Medicaid to exceed medical spend incurred by best price-eligible entities for affected drugs. This decision likely exposes deficiencies in regulatory processes or judicial interpretation; it is unlikely that the intent of the MDRP is consistent with outcomes that will result from this decision.”
Asked if there was anything particularly interesting and/or surprising about the decision, Mourad replies, “from the perspective of someone who has sat on both sides of the fence, as a former payer and now on the market access side, it did surprise me that such a ruling would have been approved or set to be in motion without so many of the details on the ‘how’ would be accomplished.”
“I found the judge’s statement that ‘…a manufacturer’s financial assistance to a patient does not qualify as a price made available from a manufacturer to a best-price-eligible purchaser. Rather a manufacturer’s financial assistance is available from the manufacturer to the patient, and a patient is not a best-price-eligible purchaser’ interesting in that it sets precedent for future rulemaking for the U.S. Department of Health and Human Services (HHS)/CMS around best price,” states Ryan Cox, R.Ph., vice president and director of the access experience team at PRECISIONvalue.
“What is interesting is that the decision allows for a broad range of regulatory response,” says Ford. “Consider that the conduct of copayment assistance programs has been previously addressed by the government. The HHS OIG [i.e., Office of Inspector General] issued a Special Advisory Bulletin dated September 2014 [that] states as follows: ‘…the offerors of coupons ultimately bear the responsibility to operate these programs in compliance with Federal law.’ The final rule that was vacated addressed matters that may not be relevant under a doctrine of strict liability for program compliance. This may provide significant incentive for the parties to reach a cooperative conclusion.”
Sources tell AIS Health that they do not expect CMS to appeal the decision.
Mourad says she “would be surprised” if that were to happen. “The ruling did not have much support from any key stakeholders, as it likely would have had such significant impacts on manufacturers, potential impacts on payers and, ultimately, impacts on patients, and many were advocating for the repeal of this ruling. I would expect that unless there is much more structure provided around the ruling with increased stakeholder support, CMS will not appeal this.”
“The government’s final statement in closing arguments [that] ‘…manufacturers are still required to make sure that the patients are accruing the full value of the discount…’ indicates that it does not believe the final rule is required to pursue enforcement,” maintains Ford. “For this reason, an appeal appears less likely than other options to achieve the relative impact on Medicaid and best price-eligible-entity medical spend that is consistent with the intent of the MDRP.”
“Regulatory options to pursue this matter, including enforcement in a criminal venue, likely make cooperation between the parties an attractive option,” he adds. “There are viable models that adequately address the interests of both parties, as well as the interests of patients. These models are a good means by which to consider how the intent of the MDRP can be achieved within the framework of existing regulation.”
Fourteen states have enacted laws banning accumulator programs. According to Avalere Health, more than 10% of the commercial market — or 14.8 million people — are enrolled in plans that are required to count copay assistance toward patient cost-sharing limits (see chart).
At least one industry expert expects the number of states with such legislation to rise in part due to this decision. “I would expect more states to begin banning the use of copay accumulator programs, given the attention this case raised,” says Cox. “Furthermore, there was a lawsuit filed by Johnson & Johnson against SaveOnSP, ESI’s [i.e., Express Scripts’] copay maximizer partner. It will be interesting to watch how this case develops and if additional manufacturers and/or PhRMA joins in or files additional lawsuits.”
10% of Commercial Enrollees Live in States With Copay Accumulators Ban
By Jinghong Chen
An Avalere Health analysis found that 14.8 million individuals — comprising 10% of the total commercial market — live in one of 14 states that have enacted laws banning payers’ use of copay accumulator programs. Overall, more than 83% of commercial enrollees are in plans that have copay accumulator programs and 73% are in plans that have copay maximizer programs. Copay accumulators work by preventing any monetary assistance that pharmaceutical companies offer commercially insured patients from counting toward their deductible or out-of-pocket maximum. Copay maximizers take the total amount of a manufacturer’s copay offset program and divide it by 12, making that amount the new monthly copayment for all patients on any given drug over the course of a year.
NOTE: Puerto Rico has also implemented a copay accumulator ban.
SOURCE: “State Copay Accumulator Bans Impact 10% of US Commercial Lives,” Avalere Health.
This infographic was reprinted from AIS Health’s biweekly publication RADAR on Drug Benefits.