Court Strikes Down CMS’s Accumulator Adjustment Rule That Threatened Manufacturer Patient Savings Programs
Last June, we blogged about a lawsuit brought by the Pharmaceutical Research and Manufacturers of America (PhRMA) challenging CMS’s ill-conceived Accumulator Adjustment Rule (“final rule”), which amended the Medicaid Rebate best price regulation. The final rule, which was set to go into effect on January 1, 2023, would have significantly narrowed the exclusions from best price for patient savings programs such as co-pay coupons, vouchers, consumer rebates, and free drug programs, which would, in turn, have discouraged manufacturers from offering such programs.
On Tuesday, May 17, 2022, the D.C. District Court granted PhRMA’s motion for summary judgment and struck down the final rule, holding that it exceeded CMS’s statutory authority. The court also denied the government’s cross-motion and refused to find that Chevron deference applied.
Since 2007, the best price regulation has contained exclusions for patient saving programs so long as the savings are passed on to the consumer, and do not represent a price concession to the pharmacy or other entity involved in the redemption or administration. See 42 C.F.R. §§ 447.505(c)(8)-(12). Insurers argue that the savings programs cause patients and their physicians to favor brand drugs over generics or cheaper formulary alternatives. In order to discourage such programs, commercial insurance plans and their pharmacy benefit managers (PBMs) have, in recent years, implemented “accumulator adjustment programs,” whereby the insurers refuse to count the manufacturer assistance dollars towards the patient deductibles or out-of-pocket maximums. The effect of this is to eliminate the benefit of the savings to the patient, who must ultimately pay those amounts to plans in order to meet their deductibles or copay maximums.
The CMS final rule was ostensibly designed to decrease the impact of accumulator programs siphoning off the benefit of manufacturer assistance. But instead of restricting accumulator programs, the final rule would have required a manufacturer to “ensure” that the full value of the assistance or benefit is passed on to the consumer or patient. Thus, CMS imposed upon manufacturers the onus of somehow determining whether a particular patient’s insurance plan has an accumulator program and then negating it.
PhRMA argued that manufacturers cannot structure their patient assistance programs to avoid accumulator programs because they do not know whether a particular patient’s health plan operates an accumulator program; even most patients are unaware of them. PhRMA argued that manufacturers will either be forced to conduct extensive investigations of health plans or claim adjudications for each transaction, somehow gain the cooperation of health plans, or withdraw their assistance programs altogether to avoid significantly higher Medicaid rebates.
In its decision, the court first addressed PhRMA’s standing to sue. CMS argued that the harm PhRMA members allege cannot be traced to this rule, but rather to CMS’s 2007 and 2016 rules that included an obligation to account for accumulator programs in BP calculations. The court disagreed, holding that the final rule would add significantly greater obligations for PhRMA members because of its requirement to “ensure” that patients receive the full benefit of savings programs. The court noted that the government recognized this additional burden on manufacturers when it delayed the effective date of implementing the final rule by two years.
On the merits, the court decided that the statute does not give CMS the authority to adopt the final rule. According to the court, the statute defines “best price” as the lowest price available to certain specified types of entities. See 42 U.S.C. § 1396r-8(c)(1)(C). As CMS acknowledged, patients do not qualify as best-price-eligible entities. See 85 Fed. Reg. 87000, 87052 (Dec. 31, 2020). Therefore, “[a] manufacturer’s financial assistance to a patient does not count as the lowest price available from a manufacturer to a best-price-eligible purchaser.” As a result, the court found that HHS lacks the statutory authority to adopt the accumulator adjustment rule. See Opinion at 10.
The court also agreed with PhRMA that it was infeasible for manufacturer to “ensure” that the patient’s health plan does not have an accumulator program, because that information is in the sole possession and control of commercial health insurers. Manufacturers would have to conduct transaction-by-transaction investigations into programs over which they have no control and about which they have no information.
It is uncertain whether the government will appeal the District Court’s decision. If not, or if the court’s decision is upheld on appeal, the opinion would represent another defeat of Trump-era drug pricing and payment regulations, most of which have been struck down by the courts (see here and here) or delayed or withdrawn by the Biden administration or Congress (see here and here). The Biden administration’s own drug pricing agenda has so far focused on legislation, with little success. It remains to be seen whether the current administration pivots to regulatory strategies of its own.