Health Insurers and PBMs Should Brace for a Copay Programs Shift

Drugmakers’ victory in HIV and Hepatitis Policy Institute v. HHS will change how insurers and pharmacy benefit managers interact with patient copay assistance programs, as well as affect the many companies that contract with insurers to provide health coverage for their employees.

The US District Court for the District of Columbia’s Sept. 29 ruling struck down the federal government’s rule that expanded use of copay accumulator programs, which insurers wielded to counteract drugmaker copay assistance programs.

The drugmaker programs cover some of the cost-sharing obligations, such as copayments, coinsurance, or deductibles, for a commercially insured patient until the patient’s out-of-pocket maximum is met for the year.

Despite drugmakers promoting these programs as an important way for patients to access important medications, insurers have long argued that drugmaker copay assistance programs are just marketing tools to steer patients toward expensive brand drugs—while shifting the bulk of the cost to insurers.

Insurers contend these programs circumvent long-accepted plan benefit strategies, such as formulary design and cost-sharing, that are meant as incentives for members to use lower-cost products.

In some cases, drugmakers’ copay assistance can subsidize a member’s cost-sharing obligations for the entire year, meaning the member has no incentive to use a more cost-effective therapy. By insulating a member entirely from the cost of the drug, these programs can eliminate the purpose of cost-sharing in the first place—to prevent overuse and to steer patients toward more cost-effective therapies.

Copay accumulators were a response to this copay assistance. They worked by altering the status of certain high-priced specialty drugs so manufacturer copay assistance payments no longer applied toward a member’s deductible or other out-of-pocket costs.

Federal law was silent on whether copay accumulators were permitted until rulemaking by the Centers for Medicare & Medicaid Services.

For plan year 2020 onward, CMS permitted insurers to use copay accumulators for brand drugs with an available and medically appropriate generic equivalent.

In subsequent rulemaking for plan year 2021 onward, CMS removed the requirement that there be an available and appropriate generic equivalent and allowed use of copay accumulators in all circumstances, greatly expanding the drugs that could be subject to copay accumulators.

The D.C. Circuit case successfully challenged this subsequent rulemaking, meaning the rulemaking in 2020 is currently the operative law, and copay accumulators can be used only for brand drugs with an available and medically appropriate generic equivalent.

As a result, health insurers and pharmacy benefit managers should review their copay accumulator programs to determine the extent to which they’re still permitted.

Most copay assistance programs target brand name drugs without a generic equivalent, so the ruling will affect many, but not all, copay accumulators. Health insurers that use copay maximizers and alternative funding programs should carefully consider the extent the ruling impacts those programs.

While many industry stakeholders don’t expect the ruling to affect copay maximizers or alternative funding programs, some of these programs—despite what they’re called—may contain elements of copay accumulators that could subject them to the ruling.

Even if many copay maximizers and alternative funding programs won’t be affected by the ruling, future CMS rulemaking triggered by the ruling may impact these programs as well.

Health plans and pharmacy benefit managers also should assess the financial implications, reevaluate formulary and benefit designs for managing drug costs, and ensure any changes are communicated clearly to ensure members understand their cost-sharing responsibilities.

Similarly, companies that purchase health insurance, or use insurers to manage their self-insured employer plans, should consider the financial impact of the ruling as well.

The case is HIV & Hepatitis Pol’y Inst. v. HHS, D.D.C. No. 22-2604.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Theresa Carnegie is a member at Mintz advising clients on all aspects of the pharmaceutical supply chain.

David R. Gilboa is an associate at Mintz and focused on transactional, compliance, privacy, and regulatory matters.

Xavier Hardy is an associate at Mintz with focus on health-care regulatory compliance, fraud and abuse, and reimbursement issues.

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