Biden Administration Drops Appeal of Prescription Drug Copay Accumulator Program Lawsuit
On January 16, 2024, the U.S. Department of Justice moved to withdraw its appeal of a recent decision of a D.C. federal district court regarding the use of prescription drug copay accumulator programs. Specifically, by not pursuing an appeal, the Biden Administration will not seek to reinstate a rule that explicitly allowed group health plans to exclude prescription drug manufacturer copay assistance from participants’ out-of-pocket maximums (a practice known as a “copay accumulator program”). The D.C. federal district ruling means that the 2020 Notice of Benefit and Payment Parameters rule (the “2020 NBPP rule”) will remain in effect until the Department of Health and Human Services (“HHS”) issues a new rule.
The 2020 Notice of Benefit and Payment Parameters Rule
Under the 2020 NBPP rule, group health plans are required to count prescription drug manufacturer copay assistance toward health plan participants’ out-of-pocket maximums if the drugs do not have a medically appropriate generic equivalent. In other words, the 2020 NBPP rule only allows the exclusion of prescription drug manufacturer copay assistance from a participant’s out-of-pocket maximum if there is a medically appropriate generic equivalent available.
Background: HIV and Hepatitis Policy Institute v. HHS and the 2021 Notice of Benefit and Payment Parameters Rule
In HIV and Hepatitis Policy Institute v. HHS, the D.C. federal district court set aside the 2021 Notice of Benefit and Payment Parameters rule (the “2021 NBPP rule”), which affirmatively permitted—but did not require—group health plans to exclude certain financial assistance provided to patients by drug manufacturers when calculating whether those patients had met the limit on out-of-pocket maximums under the ACA. Specifically, the D.C. federal district court reasoned that the 2021 NBPP rule was based on two contradictory interpretations of the term “cost-sharing” under the ACA. That is, the 2021 NBPP allowed some group health plans to treat manufacturer copay assistance as cost-sharing—but also allowed other group health plans to exclude copay assistance as cost-sharing—based on the same definition of the term.
The Future
The D.C. federal district court ultimately remanded the issues of copay accumulator programs and their effect on out-of-pocket maximums to HHS for further consideration. In response, the Biden Administration has announced its intent to issue a new rule to address copay accumulator programs consistent with the D.C. federal district court’s decision. Further, the Biden Administration announced that until the new rule is issued, HHS does not intend to initiate enforcement actions against group health plans that maintain copay accumulator programs.
While the D.C. federal district court vacated the 2021 NBPP, the court did not rule on whether manufacturer copay assistance must be included in the out-of-pocket maximum calculation under the ACA. So, at this point, group health plans may want to take a “wait and see” approach before making any changes to their existing copay accumulator program practices until HHS issues its new rule.
Covered Drugs as Essential Health Benefits
In addition to copay accumulator programs, another tactic promoted by some third-party companies that partner with group health plan sponsors to save the plans money is to categorize certain drugs under the plans as non-essential health benefits. By doing so, these companies contend that the plans are not required to count copay assistance or the participant’s contributions toward meeting a participant’s out-of-pocket maximum under the ACA. However, this tactic is currently being challenged in court. See, e.g., Johnson & Johnson v. Save On SP, LLC, District of New Jersey, Case No. 2:22-CV-02632.
In its complaint, Johnson & Johnson alleges that the Save On SP program—which uses a state benchmark plan to classify certain drugs as non-essential health benefits—interferes with the contractual relationship between Johnson & Johnson and the patients to whom it provides copay assistance. The Save On SP case has already survived a motion to dismiss by Save On SP, and the case is currently in the discovery stages.
In addition, it is our understanding that the Departments of Labor and Treasury are of the opinion that virtually all prescription drugs are essential health benefits, regardless of the chosen state benchmark plan. So, using a state benchmark plan to classify certain drugs as non-essential health benefits may no longer be viable in the future. As a result, employers should be cautious about using this tactic, and closely monitor any upcoming guidance from the Departments of Labor and Treasury on this issue.
If you have any questions about the HIV and Hepatitis Policy Institute v. HHS lawsuit, prescription drug copay accumulator programs, or covered drugs as essential health benefits, please contact a member of the Miller Johnson Employee Benefits and Executive Compensation Practice Group.