In late December 2023, the U.S. District Court for the District of Columbia issued an order that has important implications for pharmaceutical manufacturers that offer co-pay assistance for eligible patients. Specifically, the court clarified that its September 2023 vacatur of a 2021 final rule by the Department of Health and Human Services (HHS) and the Centers for Medicare & Medicaid Services (collectively, the agencies) — which had broadly allowed private health insurers to utilize copay accumulator programs — reinstated a prior rule that allows private health plans to exclude the value of manufacturer cost-sharing support from patients’ annual cost-sharing limits only if a generic equivalent is available and medically appropriate. However, the court made this clarification in response to a motion from the agencies suggesting that even if the prior rule is in effect, they do not intend to enforce it. Following the court’s order, manufacturers, patient advocacy groups, and other patient access stakeholders should continue to monitor this issue, as accumulator adjustment programs may attempt to operate under the more expansive — now vacated — 2021 final rule, at least until future rulemakings are instituted or further legal challenges are mounted.
The regulatory history of the agencies’ rules on copay accumulator programs is discussed in prior Sidley updates, here and here. In short, the 2020 final rule initially permitted accumulator programs only when a generic medicine was available. But the agencies quickly reversed course with their 2021 final rule, allowing private health plans to apply such programs to manufacturer copay assistance regardless of a generic’s availability.
In August 2022, a group of plaintiffs challenged the 2021 final rule. The lawsuit — ultimately brought by a collection of patient groups and patients — argued that the 2021 final rule conflicted with the Affordable Care Act’s statutory definition of “cost sharing,” diverged from the agencies’ preexisting regulatory definition of “cost sharing,” and was arbitrary and capricious because it gave the same statutory and regulatory language different meanings while lacking adequate justification. On September 29, 2023, the district court granted plaintiffs’ motion for summary judgment, agreeing that the 2021 final rule was arbitrary and capricious because it adopted different and contradictory readings of the same statutory and regulatory text.
On November 27, 2023, the agencies filed their motion for clarification. The agencies explained that they intended to address, through rulemaking, any issues left open by the court’s order and that in the meantime, they would not take any enforcement action against insurers for the copay accumulator programs they choose to offer — by implication, even if those programs are inconsistent with the 2020 final rule. The agencies further sought confirmation that the court’s prior opinion did not require HHS to take any such enforcement action against insurers.
Plaintiffs objected to the agencies’ plans to implement a “nonenforcement policy.” According to plaintiffs, vacatur of the 2021 final rule reinstated the 2020 final rule, which disallowed accumulator programs in the absence of generic equivalents. Plaintiffs further asserted that nonenforcement of the 2020 final rule is itself subject to notice-and-comment requirements, which the agencies did not meet. On December 22, 2023, the court granted the motion for clarification, explaining that the 2020 final rule had been reinstated, but expressing no opinion on the agencies’ nonenforcement policy, reasoning that this issue was not before the court and thus the court could not rule on the merits through the vehicle of a motion for clarification.
The court’s most recent order thus makes clear that the 2020 final rule was reinstated by the court’s prior September 2023 order. Accordingly, private insurance plans may exclude the value of direct manufacturer cost-sharing support from a patient’s annual cost-sharing limit, provided that a generic equivalent is available and medically appropriate. Both parties filed notices of appeal to the D.C. Circuit. However, on January 16, 2024, the agencies withdrew their appeal. Accordingly, given the agencies’ announced nonenforcement policy and the court’s declination to review that policy as part of the current lawsuit, it is unclear whether the limitation regarding generic availability will have any teeth absent additional legal action.
Manufacturers, patient advocacy groups, and other patient access stakeholders should continue to observe this issue, as accumulator adjustment programs remain prevalent and pose significant patient access concerns. And in light of the agencies’ nonenforcement policy, some plans may apply broader accumulator programs, even when a generic equivalent is not available. The agencies’ stated intention in court filings to engage in future rulemaking on the issue indicates that a new rule may be forthcoming in the near term.
