A federal court on Friday struck down a rule that sharply increased out-of-pocket prescription costs for many patients with complex conditions.
The rule, issued in 2020 under the Trump administration and left in place by the Biden administration, allowed health insurers to exclude the value of financial assistance drugmakers provide patients when calculating whether patients have met their cost-sharing obligations — raising many people’s out-of-pocket drug costs by thousands of dollars a year.
Several patient-advocacy groups last year sued the federal government in an effort to overturn the rule, arguing that it conflicts with the Affordable Care Act and provides a windfall to insurers, which can collect amounts well above the cost-sharing maximum that would apply if the patients got financial assistance from another source.
The U.S. District Court for the District of Columbia decided Friday that the rule should be set aside, saying that it is arbitrary and capricious and relies on contradictory interpretations of the law.
“We are thrilled that the court has taken the side of patients who have been struggling to afford their prescription drugs,” Carl Schmid, the executive director of the HIV+Hepatitis Policy Institute, one of the patient-advocacy groups behind the case, said in a statement. The Biden administration should immediately enforce the decision, Schmid added, and “not take any further steps to undermine the copay assistance that allows patients to access their essential medications.”
The Centers for Medicare and Medicaid Services, which issued the rule and was a defendant in the lawsuit, said Monday that it is reviewing the court’s decision. The federal government previously said in a court filing that the rule is consistent with the law and is intended to provide flexibility to health insurers and states.
While many patients rely on drugmakers’ financial assistance to offset the cost of their medications, health insurers have raised concerns that the assistance can steer patients toward pricier drugs. Copay assistance from pharmaceutical companies trimmed patient costs by nearly $19 billion in 2022 and nearly $80 billion over the last five years, according to the life-sciences research firm IQVIA Holdings Inc.
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In response to all the drugmaker financial assistance, many insurers have implemented “copay accumulator” programs that leave out the value of that assistance when calculating patients’ progress toward meeting their deductibles and annual cost-sharing maximums. A patient with a $2,000 monthly drug cost, $4,000 in drugmaker financial assistance and a $6,000 cost-sharing maximum, for example, would pay a total of $2,000 annually out of pocket without a copay-accumulator program — but with a copay-accumulator program, the patient’s yearly out-of-pocket cost jumps up to $6,000, the court noted.
“The insurer thus collects $10,000 in cost-sharing payments as opposed to the $6,000 it would have collected in the absence of the copay accumulator,” D.C. District Court Judge John Bates wrote in his opinion.
The health-insurance trade group AHIP said in a statement Monday that copay assistance for brand-name drugs lets drugmakers “set ever higher prices and avoid negotiating discounts with insurers to lower cost-sharing.” The group added that “coupon accumulators hold manufacturers responsible for the list price of their drugs without increasing patient cost-sharing.”
Patient advocates say the court decision sets the clock back to 2020, when copay accumulators were allowed only for brand-name drugs that have a generic equivalent, and only where permitted under state law.
As of this summer, 20 states had laws that address copay-accumulator programs by requiring that any payments made on a patient’s behalf be applied toward annual out-of-pocket cost-sharing requirements, according to the National Conference of State Legislatures.
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