More Developments on Copay Accumulator Programs as Biden Administration Drops Appeal of Vacated Rule

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Late last year, 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) “copay accumulator programs” (HIV & Hepatitis Policy Institute et al. v. U.S. Dep’t of Health & Human Services et al., No. 1:22-cv-02604 (D.D.C. Sept. 29, 2023). Copay accumulators are programs wherein health plans and insurers can decline to count towards a health plan participant’s annual cost-sharing obligations, financial support provided by drug manufacturers to participants in order to help participants pay for specific prescription drugs (e.g., discount cards, coupons, copay assistance programs). Following a series of legal developments, the rule (summarized below) remains vacated, and plans and insurers now have more certainty that adjustment to their copay accumulator programs will likely be required in the near future. 

Background. At issue in the original case was HHS guidance on copay accumulators (specifically, HHS Notice of Benefit and Payment Parameters for 2021, 85 Fed. Reg. 29164 (May 14, 2020)) (the “2021 NBPP”). The 2021 NBPP provided that unless 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 the assistance). Essentially, the 2021 NBPP left health plans and insurers with the discretion to define “cost sharing” and to apply or not apply the assistance toward a health plan participant’s annual cost-sharing limit.

The Court set aside the 2021 NBPP on the basis that its language was contradictory and conflicted with both the ACA’s statutory definition of “cost sharing” and the agencies’ preexisting regulatory definition of “cost sharing.” The Court also remanded the issue to HHS to allow the agency the opportunity to issue further guidance regarding on co-pay accumulators.

Following the Court’s invalidation of the 2021 NBPP, it was unclear as to what rule applied to plans and insurers. It appeared that plans and insurers would be required adhere to the prior rule, the 2020 NBPP, which permitted the use of copay accumulators for drugs that have a generic equivalent (unless otherwise prohibited by state law). Consequently, plans and insurers were seemingly prohibited from utilizing copay accumulators for drugs that lack generic equivalents, and in such situations, they would be required to count drug manufacturer assistance toward the annual cost-sharing limit.

HHS Response. Following the Court’s ruling, in November 2023, HHS first filed a motion to clarify the scope of the Court’s order striking down the 2021 NBPP. More specifically, HHS sought clarification on whether the order required any other relief in addition to striking down the 2021 NBPP. In this motion, HHS also confirmed that it intended to address, through new rulemaking, the issues left open by the order, including whether drug manufacturer assistance qualifies as “cost sharing” under the ACA.  Notably, HHS confirmed that until it issues this new rulemaking, it would not be taking any enforcement action on copay accumulators; meaning, plans and insurers can continue to utilize copay accumulator programs as they have been under the 2021 NBPP without concern of violating the Court’s order. Subsequent to its motion to clarify, HHS also filed an appeal of the Court’s order.

Following HHS’s motion to appeal, federal lawmakers from both parties formally requested HHS drop its appeal. In a letter dated December 20, 2023, 19 Republican and Democratic Senators voiced support for the Court’s ruling vacating the use of copay accumulator programs and encouraged HHS to adopt policies in line with the 2020 NBPP, which required plans to count copay assistance toward the annual cost-sharing limit if the drug does not have a generic equivalent.

Subsequently, on January 16, 2024, the Department of Justice withdrew its appeal, essentially confirming that the Biden Administration will not seek to reinstate the 2021 NBPP vacated by the Court. Ultimately, this action means that the 2020 NBPP will generally apply until HHS issues a new rule (which it plans to do). As mentioned above, under the 2020 NBPP, plans must count manufacturer copay assistance toward health plan participants’ annual cost-sharing limit if the prescription drug does not have a medically appropriate generic equivalent (and thus, plans and insurers can use copay accumulators for those drugs with generics available). Of course, however, HHS will not take any enforcement action until the new rule is issued, which provides plans and insurers some cover to continue to use copay accumulator programs in line with the 2021 NBPP. Ultimately, with the rule in limbo for the time being, it is likely that, until new rules are issued, some plans and insurers will continue to operate under the 2021 NBPP in order to exclude such assistance from a participant’s cost-sharing limit.

Next Steps. Regardless of the position an employer-sponsored plan takes in the interim (e.g., continue to exclude copay assistance under the 2021 NBPP, or count/include copay assistance when no generic is available under the 2020 NBPP), plan sponsors should be prepared to answer participant questions on their plan’s treatment of copay assistance and use of copay accumulators. This issue directly affects participants, and it is something they are following closely. If a plan continues to exclude copay assistance under the 2021 NBPP until a new rule is issued, it should be prepared to explain this position to participants who raise questions about the continued exclusion. Although such plan sponsors may not be facing the risk of enforcement from HHS, they could face significant pushback from participants that could negatively affect employee relations. Sponsors should continue to follow the developments resulting from this case and be prepared to implement HHS’s new rule, whatever that may be, when issued in the near future.