HHS Finalizes Regulation on Co-Pay Accumulator Programs

*Please see our September 5, 2019 Update, Federal Government Retreats From Finalized Policy; Will Allow Broader Use of Co-Pay Accumulator Programs for 2020 Plan Year, for additional information regarding this policy development.

On April 25, 2019, the U.S. Department of Health and Human Services (HHS) finalized its proposal to allow private insurance plans to exclude the value of certain direct manufacturer cost-sharing support (such as co-pay coupons) from a patient’s annual cost-sharing limit.¹  HHS purportedly promulgated the rule pursuant to its authority under the Patient Protection and Affordable Care Act (PPACA) to implement the law’s annual limit on cost sharing.² 

On its face, the final rule explicitly authorizes the types of novel accumulator adjustment programs that prevent manufacturer cost-sharing support from counting toward patients’ annual cost-sharing limits and that have been implemented by insurers with increasing frequency in recent years. Importantly, however, HHS has also clarified that accumulator programs are prohibited if a generic equivalent is not available or medically appropriate, thereby aligning the regulation with several states that are considering or have passed legislation on accumulator programs. 

In the final rule, HHS added a new subsection to 45 C.F.R. § 156.130, which reads as follows: 

(h) Use of drug manufacturer coupons. … (1) Notwithstanding any other provision of this section, and to the extent consistent with state law, amounts paid toward cost sharing using any form of direct support offered by drug manufacturers to enrollees to reduce or eliminate immediate out-of-pocket costs for specific prescription brand drugs that have an available and medically appropriate generic equivalent are not required to be counted toward the annual limitation on cost sharing (as defined in paragraph (a) of this section).³

This addition will apply to plan years beginning on or after January 1, 2020. Below we summarize certain key provisions and relevant HHS guidance for the final regulation.

• Scope. The regulation applies to individual market, small group, large group and self-insured group plans, including non-grandfathered group plans.⁴
   
  In addition, the preamble to the final rule and the title of the regulatory section indicate that the regulation applies broadly to “drug manufacturer coupons,” though that term is not defined or otherwise used in the regulation. 

• The regulation is “permissive.” HHS noted several times in the preamble that plans are not required to exclude manufacturer cost-sharing support from a patient’s annual cost-sharing limit.⁵

• However, accumulator programs are prohibited if a generic equivalent is not available or is not medically appropriate. In response to public comment, HHS unequivocally stated that if a generic equivalent is not available or is not medically appropriate, plans “must” count manufacturer cost-sharing support toward a patient’s annual cost-sharing limit.⁶ To clarify this point, HHS added the phrase “available and medically appropriate” to the final regulatory text.⁷
   
  Interestingly, HHS did not define the terms “available” or “medically appropriate.” There was some preamble discussion that determinations of availability and medical appropriateness could be made in the appeals process at § 147.136 and the drug exception process under § 156.122(c),⁸ but HHS did not require such determinations as part of the new regulation. Nor did HHS provide other examples or set standards for what constitutes “available” and “medically appropriate” for purposes of applying the new regulation at §156.130(h)(1). As a result, there could be challenges with implementation and patient access, particularly if parties disagree as to whether a generic equivalent is sufficiently available in a certain market or if there are unduly stringent standards or processes for determining the medical appropriateness of generics for certain patients.
   
• State laws can further restrict the use of accumulator programs. The new regulation applies only “to the extent consistent with state law,” and HHS clarified in the preamble that “states can require that [manufacturer cost-sharing support] be counted toward the annual limit on cost sharing.”⁹
   
  Several states are considering legislation on accumulators, and a few have passed laws that explicitly prohibit the use of accumulator programs regardless of generic availability. Namely, Virginia and West Virginia have passed laws in recent weeks that require health plans to include “any amounts paid by the enrollee or paid on behalf of the enrollee by another person” when calculating an enrollee’s contribution to his or her out-of-pocket maximum or other applicable cost-sharing requirement.¹⁰
   
  Arizona recently passed its own law as well but follows HHS’s approach and requires inclusion only if a drug does not have a generic equivalent or the patient has obtained access to the drug through prior authorization, step therapy or the plan’s exceptions and appeals process.¹¹

Stakeholders should continue to monitor developments regarding coupons, accumulators and patient access issues as a patchwork of legislation may continue to unfold in the coming months.

¹ HHS, Notice of Benefit and Payment Parameters for 2020; Final Rule, 84 Fed. Reg. 17454 (April 25, 2019), available here.
² See id. at 17544 (“While the PPACA does not speak directly to the accounting and use of drug manufacturer coupons to the annual limitation on cost sharing, we believe that the overall intent of the law was to establish annual limitations on cost sharing that reflect the actual costs that are paid by the enrollee.”); see also id. at 17545 (“[T]his proposal … would also apply to non-grandfathered group health plans, to which the annual out-of-pocket limitation applies under PHS Act section 2707(b) as incorporated into the Code and ERISA.”)
³ Id. at 17567-68.
⁴ See supra note 2; see also HHS, Final Notice of Benefit and Payment Parameters for 2020 Fact Sheet, at 1, available here.
⁵ 84 Fed. Reg. at 17545-46.
⁶ Id. at 17545.
⁷ Compare 84 Fed. Reg. 227, 320 (January 24, 2019), with 84 Fed. Reg. at 17568; see also 84 Fed. Reg. at 17545.
⁸ 84 Fed. Reg. at 17545.
⁹ Id. at 17546.
¹⁰ Virginia HB 2515, available here (emphasis added); see also W. Virginia HB 2270, available here (including minor variations in wording from Virginia HB 2515).
¹¹ Arizona HB 2166, available here.