PhRMA wins lawsuit challenging final rule on drug cost assistance

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The Pharmaceutical Research and Manufacturers of America has won its lawsuit against the Department of Health and Human Services challenging a portion of a final rule that required drug manufacturers to ensure that patient financial assistance is provided entirely to patients.

PhRMA challenged the accumulator adjustment rule, contending health insurers could use it to siphon the cost-sharing assistance from counting toward deductibles or out-of-pocket maximums for patient. The final rule contradicted the Medicaid rebate statute by improperly requiring manufacturers to treat financial assistance that they provide to patients to help defray their co-pays and other out-of-pocket costs as part of the "price" a manufacturer offers to commercial health insurers, the lawsuit said. 

Judge Carl Nichols vacated the accumulator adjustment in a decision handed up in U.S. District Court for the District of Columbia on May 17. The court rejected the government's contention that PhRMA lacked standing.

PhRMA president and CEO Stephen J. Ubl said, "(The) decision to vacate the patient assistance penalty – a provision of a Medicaid rule finalized in 2020 – is a win for patients. Manufacturers provide patient assistance to do just that – assist patients and address gaps in insurance – but instead insurers are siphoning that money away for themselves."

WHY THIS MATTERS: ACCUMULATOR ADJUSTMENT PROGRAM

States offer outpatient prescription drug coverage as part of their Medicaid plans. To manage the cost, Congress requires drug manufacturers to participate in the Medicaid Drug Rebate Program, which requires them to enter rebate agreements.

Under these agreements, manufacturers rebate to states a portion of a drug's cost purchased through the state's Medicaid plan. 

The Medicaid rebate statute requires manufacturers to provide their drugs to state Medicaid programs at prices at least as favorable as the prices offered to certain commercial purchasers. The provision strives to ensure that the Medicaid program does not pay more for drugs than private entities in the commercial market.

The amount of the rebates for innovator drugs is based in part on the manufacturer's "best price," defined as the lowest price available from the manufacturer during the rebate period.

The financial assistance provided by pharmaceutical manufacturers helps patients pay copay and out-of-pocket costs needed for medications. However, the lawsuit claims commercial health insurers have been able to refuse the assistance from counting towards an annual deductible and copayment.

On December 31, 2020, HHS finalized the accumulator adjustment rule that required manufacturers to ensure the full value of the assistance is passed on to the patient and for this financial assistance not count toward the best price. 

The agency, however, delayed the effective date of the change until January 1, 2023, because manufacturers had voiced concerns that the assistance was going to the patient, and not being passed through to the health plan.

The delayed effective date, CMS said, would "give manufacturers time to implement a system that will ensure the full value of assistance under their manufacturer-sponsored assistance program is passed on to the patient," the lawsuit said.

Starting on January 1, 2023, manufacturers would have to ensure the full value of the assistance stays with the patient, imposing numerous compliance requirements on drug manufacturers, the court said.

THE LARGER TREND

PhRMA filed the lawsuit in May 2021 challenging the December 21, 2020 final rule updating and expanding several regulations governing the Medicaid Drug Rebate Program.

Such manufacturer assistance to patients has grown in importance. On top of higher premiums, patients face greater out-of-pocket costs, because health plans are imposing ever increasing deductibles, co-pays, coinsurance and other costs, particularly with respect to prescription medications, PhRMA said. 

Twitter: @SusanJMorse
Email the writer: susan.morse@himssmedia.com