Specialty pharmacies have, presumably, been preparing to implement new workflows to accommodate the anticipated January launch of new CMS regulations related to copay accumulator transactions. However, in the wake of a pharma lawsuit, a federal court has vacated the new rule leaving the marketplace unsure what changes, if any, will be required.
The Rule would have required drug manufacturers to implement mechanisms by January 1, 2023, to ensure that financial assistance for drug copays is passed on directly to patients. Such actions would also have resulted in pharmacies implementing new procedures on their end. As detailed below, one scenario would have pharmacies retro-processing rebate / refunds to patients….. which might be an operational nightmare….. let alone associated reporting.
The government has until mid-July to appeal the court’s decision. If not, the Rule will not go into effect in January.
Federal District Court Vacates Copay Accumulator Adjustment Rule: Programs Remain the Same for Now
On May 17, the U.S. District Court for the District of Columbia issued a decision vacating the Accumulator Adjustment Rule, regulations issued by the Centers for Medicare and Medicaid Services (CMS) in December 2020 as part of a Final Rule that addressed drug copay accumulator adjustment programs (the Rule).
Background on Accumulator Adjustment Rule
CMS promulgated the Rule to address concerns over accumulator adjustment programs – called copay accumulator or maximizer programs – implemented by insurers and their pharmacy benefit managers (PBMs). In a Proposed Rule issued in June 2020, CMS indicated that PBMs believe manufacturer financial assistance programs intended to reduce out-of-pocket costs encourage patients to use more expensive drugs. To avoid paying higher costs, PBMs implement copay accumulator programs to prevent the financial assistance offered by drug manufacturers from counting toward patients’ deductibles, thereby discouraging patients from using more expensive drugs. The Proposed Rule addressed the issue through proposed changes to Medicaid drug rebate program (MDRP) policies, which were intended to encourage manufacturers to take steps that would ensure copay assistance programs accrue to patients. However, manufacturers argued they were not able to circumvent PBM copay accumulator programs to ensure patients received the assistance.
To meet this stated goal, the Rule would have required drug manufacturers to report the copay assistance in their calculation of a drug’s “best price” for MDRP purposes, to the extent that the value of the financial assistance was not passed on to the patient. Under the MDRP, drug manufacturers must pay rebates to state Medicaid programs for brand name drugs that are calculated, in part, based on a drug’s “best price,” or the lowest price available from the manufacturer. Including financial assistance in the best price would lower the best price, resulting in increased rebate liabilities. The hope was that manufacturers would ensure that financial assistance is passed on to patients to avoid paying higher rebates.
However, manufacturers expressed concern that they are not in a position to ensure that their financial assistance is being passed on directly to patients and not to payors. Nevertheless, CMS finalized its proposal, although the agency delayed the effective date to January 1, 2023, in response to manufacturer concerns. CMS indicated that the delayed effective date would give manufacturers more time to implement mechanisms to ensure that financial assistance goes directly to patients. Specifically, CMS outlined several potential mechanisms that manufacturers could use to meet these goals. For example, manufacturers could contract with vendors to track financial assistance provided at the point of sale, or they could require patients to pay for their drugs and then request the assistance from the manufacturer afterward, in the form of a rebate.
Pharmaceutical Research and Manufacturers of America (PhRMA), the trade association for brand name drug manufacturers, filed a lawsuit challenging the Rule in May 2021. PhRMA argued that the Rule was inconsistent with the Medicaid Statute and violated the Administrative Procedure Act (APA). The challenge focused on the statutory definition of “best price” under the MDRP and whether financial assistance programs offered by drug manufacturers to patients are transactions that can be included in the best price calculation.
The court sided with PhRMA, finding that the statute defines best price as the lowest price available from the manufacturer to specific best-price eligible purchasers – including wholesalers, retailers, providers, health maintenance organizations, nonprofit entities, or governmental entities – and patients are not best-price eligible purchasers.
CMS contended that manufacturer financial assistance to patients is effectively a price given to insurers, which are best-price eligible purchasers because insurers access the benefit of copay financial assistance when they prevent the assistance from counting toward deductibles. However, the court rejected this argument, finding that the assistance is going to the patient, not the insurer. The court granted PhRMA’s motion for summary judgment and vacated the Rule.
Implications for the Specialty Pharmacy Industry and Next Steps
Pharmacies, hubs, copay vendors, and drug manufacturers have been following developments related to implementation of the Rule. In particular, CMS indicated that one potential mechanism that manufacturers could implement would involve patients paying full price at the point of sale and then submitting a rebate request to the manufacturer for financial assistance. Under such mechanisms, pharmacies could play a role in collecting payments from patients and submitting rebate requests or refunding patients in some way to ensure that the financial assistance is passed on directly to patients.
The government has 60 days to decide whether to appeal the decision. In the meantime, if the court’s decision stands, stakeholders will not need to update copay collection procedures prior by the January 1, 2023 effective date, as planned.