D.C. Court Strikes Down Copay Accumulator Rule

October 10, 2023By Sophia R. Gaulkin & Faraz Siddiqui & Jeffrey N. Wasserstein

The U.S. District Court for the District of Columbia has vacated the Notice of Benefits and Payment Parameters (NBPP) rule issued in May 2020 (2020 NBPP Rule) which allowed health insurers and pharmacy benefit managers to use copay accumulators to exclude drug manufacturers’ copay assistance when calculating patients’ out-of-pocket costs and cost-sharing ceilings under the Affordable Care Act (ACA).

We previously blogged about this lawsuit last year.  Three patient advocacy groups sued the Department of Health and Human Services (HHS) and the Centers for Medicare and Medicaid Services (CMS), challenging the agencies’ 2020 NBPP Rule as plainly unlawful on the grounds that it conflicts with the definition of “cost sharing” in both the ACA and the agencies’ existing regulations, and is arbitrary and capricious.

The ACA sets an annual cap on the amount that insurers can require insured individuals to pay out of pocket for their medical expenses.  Once an individual reaches this annual cap, the insurer is solely responsible for covering the individual’s remaining medical expenses that year.  To help patients afford the copays and deductibles for specific medications, some drug manufacturers offer direct financial assistance, often as coupons, to subsidize the patient’s purchase of the drug at the point of sale.  This financial assistance directs the pharmacy to bill all or part of the patient’s copayment obligations to the manufacturer instead of the patient.  Insurers have resisted patient assistance programs using copayment accumulator adjustment programs, whereby insurers do not count manufacturer-provided assistance towards patients’ copay obligations, annual deductible, or out-of-pocket maximum.  The insurer still accepts the manufacturer payment, but also collects the full deductible from the patient.  The patient is left high and dry—no closer to meeting the deductible than before, with full benefits and more affordable drugs the same distance out of reach.

The 2020 NBPP Rule permitted insurers to use copay accumulators.  The ACA defines “cost sharing” to include: “(i) deductibles, coinsurance, copayments, or similar charges; and (ii) any other expenditure required of an insured individual which is a qualified medical expense. . .”  The agencies defined the term by regulation as “any expenditure required by or on behalf of an enrollee with respect to essential health benefits; such term includes deductibles, coinsurance, copayments, or similar charges, but excludes premiums, balance billing amounts for non-network providers, and spending for non-covered services.”  As applied to manufacturer assistance, CMS did not adopt a single interpretation of the statutory or regulatory definition of “cost sharing.”  The 2020 NBPP Rule instead allowed insurers to choose whether to include such assistance toward patients’ annual cost sharing cap, and thus whether to include such assistance in the definition of “cost sharing.”

The Court vacated the rule as arbitrary and capricious “based on its contradictory reading of the same statutory and regulatory language and the fact that the agencies have yet to offer a definitive interpretation of this language that would support the rule.”  The Court specifically concluded that the rule “rests on two contradictory interpretations of the statute” and “conflict[s] with the regulatory definition.”  Noting the “interpretive depths. . .that have yet to be plumbed” in the definition of “cost sharing,” the Court remanded the rule to allow the agencies to interpret the term’s meaning.

The decision does not guarantee that the agencies will adopt plaintiffs’ position and force insurers to change their practices, but it is a necessary first step toward doing so.  As of this summer, 20 states and Puerto Rico have enacted legislation to restrict the use of copay adjustment programs.  It remains to be seen whether the use of such programs will be prohibited nationwide.