On May 14, 2020 the Department of Health and Human Services (HHS) finalized the Notice of Benefit and Payment Parameters for 2021 (2021 NBPP Final Rule) that addressed whether drug manufacturer coupons must be applied towards the annual limitation on out-of-pocket costs (cost sharing). As finalized, direct support offered by a drug manufacturer for specific prescription drugs may be counted toward an enrollee’s annual limitation on cost sharing provided the support does not conflict with any state law. Insurance companies and states are provided flexibility in choosing whether to exclude or count direct manufacturer support for any prescription drug toward the annual limits. The final rule goes into effect on July 13, 2020.
Background
In April of 2019, HHS finalized its Notice of Benefit and Payment Parameters for 2020 (2020 NBPP Final Rule) that included a provision that permitted individual market, small group, large group and self-insured group plans, including non-grandfathered group plans the authority to exclude certain drug manufacturer coupons from an enrollee’s annual cost sharing (commonly referred to as copay accumulator adjustment programs). Specifically, coupons for “brand drugs that have an available and medically appropriate generic equivalent…” could be excluded, but the plans could count the discounts toward the annual limit as long as there were no conflicts with state law. In the preamble, HHS clarified that where no available or medically appropriate generic equivalent was available, the plans were prohibited from excluding the discount.
Following implementation of the 2020 NBPP Final Rule, issues arose between an interpretation of the provision and a 2004 notice (see Q&A-9) issued by the Internal Revenue Service (IRS) concerning high deductible health plans (HDHPs) with a health savings account. In response, HHS, the Department of Labor (DOL), and the Treasury issued a joint FAQ in August of 2019 (FAQ Part 40). The Departments stated they received feedback suggesting that the coupon provision could be read to imply that group health plans and sponsors were required to count coupons for drugs with no medically appropriate generic equivalent toward the annual limit. However, the IRS notice does not permit HDHPs with a health savings account to count the value of the discount toward an individual’s annual limit.
Thus, the dilemma arose where an issuer or sponsor of an HDHP would be put in difficult position of either complying with the HHS rule or the IRS guidance, as well as complying with both rules simultaneously. Because of this conflict, the HHS, DOL, and Treasury stated they would address the conflict in the Notice of Benefit and Payment Parameters for 2021. The Departments also said they would not take enforcement action against health insurance issuers if they excluded the value of a coupon for a drug with no medically appropriate generic equivalent and allowed states to adopt a similar enforcement policy.
2021 NBPP Final Rule
In the proposed rule, HHS decided to overhaul the coupon provision in its entirety by allowing plans to exclude discounts, including discounts for drugs that have no available or medically appropriate generic equivalent. Additionally, instead of changing the regulatory definition for “cost sharing” (see 45 C.F.R. §§ 155.20, 156.20), HHS proposed that it would interpret that the definition excludes expenditures covered by drug manufacturer coupons.
Notable commenters from the pharmaceutical and biotechnology industry included the Pharmaceutical and Research Manufacturers of America (PhRMA), the Biotechnology Innovation Organization (BIO), Eli Lilly and Company, Gilead Sciences, Bayer US, Johnson & Johnson, AbbVie, and Amgen. These commenters expressed their unanimous concern that the proposed rule was a complete reversal from the rule established under the 2020 NBPP Final Rule and was contrary to the Trump Administration’s position on reducing out-of-pocket costs for patients.
In the preamble to the 2021 NBPP Final Rule, HHS explained that it generally finalized the policy as proposed. The finalized provision was revised in its entirety with the exception of a non-substantive change to the title to “Use of direct support offered by drug manufacturers” (a comparison of the previous and finalized provisions can be found below). HHS did not finalize its proposed interpretation of the definition of cost sharing and instead left it to states and insurance companies to decide on their own interpretation.
HHS clarified that the finalized provision provides flexibility to states and issuers and group health plans and allows them to count or exclude the drug manufacturer coupon amount toward annual cost sharing limitations. HHS did not agree with commenters that the finalized provision could force consumers to pay higher out-of-pocket costs for the use of brand name drugs, provided issuers and group health plans “continue longstanding practices with regard to how and whether direct drug manufacturer support accrues towards an enrollee’s annual limitation on cost sharing.” In fact, HHS encouraged issuers and group health plans to consider excluding direct manufacturer support for brand name drugs that have “an equally effective, medically appropriate generic drug.”
HHS acknowledged that issuers and group health plans may make changes to their policies and encouraged issuers to be transparent (e.g., by “prominently includ[ing] this information on websites and in brochures, plan summary documents, and other collateral material that consumers may use to select, plan, and understand their benefits”). However, those that are not transparent, HHS warned that it “may consider future rulemaking to require that issuers provide this information in plan documents and collateral material.” HHS also reminded issuers that its policies on how it counts direct manufacturer support “must apply in a uniform, non-discriminatory manner.”
As it concerns any conflict between the finalized rule and the IRS guidance concerning HDHPs with a health savings account, HHS stated that “the HDHP is not permitted to credit the deductible in a manner that does not reflect the actual cost of medical care to the individual.” Thus to remain compliant, “an HDHP may only take into account that net amount when determining whether the individual has satisfied the deductible.” HHS believed the finalized rule “provide[s] maximum flexibility and allow issuers to avoid this type of conflict for those situations where it may arise.”
| Previous Provision | Finalized Provision |
| 45 C.F.R. § 156.130(h) Use of drug manufacturer coupons. Notwithstanding any other provision of this section, and to the extent consistent with state law, amounts paid toward cost sharing using any form of direct support offered by drug manufacturers to enrollees to reduce or eliminate immediate out-of-pocket costs for specific prescription brand drugs that have an available and medically appropriate generic equivalent are not required to be counted toward the annual limitation on cost sharing (as defined in paragraph (a) of this section). | 45 C.F.R. § 156.130(h) Use of direct support offered by drug manufacturers. Notwithstanding any other provision of this section, and to the extent consistent with State law, amounts paid toward reducing the cost sharing incurred by an enrollee using any form of direct support offered by drug manufacturers for specific prescription drugs may be, but are not required to be, counted toward the annual limitation on cost sharing, as defined in paragraph (a) of this section.
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Takeaway
It is clear that HHS has provided states and insurance companies the green light to continue or implement copay accumulator adjustment programs (CAAPS) regardless if a drug does or does not have a generic alternative. While it remains to be seen the true impact the finalized rule will have on patients, a recent report published by the AIDS Institute, a national nonpartisan/nonprofit organization, sheds light on why HHS should not have reversed course. This report shows how the use of CAAPS by states and insurance companies are expanding throughout the nation to the detriment of patients, especially those with chronic conditions.