Background
Public Health Service Act section 2707, as added by the Affordable Care Act (ACA), provides that issuers of non-grandfathered individual and small group market health insurance coverage, as well as non-grandfathered group health plans, must ensure that any cost-sharing imposed under the plan does not exceed the annual limit provided for under section 1302(c)(1) of the ACA. A grandfathered health plan is a health plan that existed on March 23, 2010, and has not since undergone certain changes (see, e.g., 45 C.F.R. § 147.140). Today, most health plans are non-grandfathered. Under section 1302(c)(1), an enrollee’s maximum annual cost-sharing for essential health benefits is limited, for plan years beginning in 2020, to $8,150 for self-only coverage and $16,300 for family coverage.
Prior to the 2020 Notice of Benefit and Payment Parameters final rule (“2020 NBPP Final Rule”), CMS had not addressed whether plans have the flexibility to determine how to count manufacturer assistance with enrollee cost-sharing toward the annual limit on cost-sharing. In the 2020 NBPP Final Rule, CMS addressed this issue, providing that, for plan years beginning on or after January 1, 2020, and consistent with state law, plans are permitted, but not required, to exclude the value of pharmaceutical manufacturers’ coupons from counting toward the annual limit on cost-sharing where a medically appropriate generic equivalent to the relevant drug is available (our summary of the 2020 NBPP Final Rule is online here).
On August 26, 2019, the Departments of Health and Human Services (HHS), Labor, and the Treasury (the “Departments”) issued guidance stating that it had come to their attention that the finalized policy could be understood to imply that, in circumstances other than where a medically appropriate generic equivalent is available, plans are required to count pharmaceutical manufacturer coupon amounts toward the annual limit on cost-sharing. The Departments noted that such an understanding could create a conflict with certain rules governing high deductible health plans that are intended to allow eligible individuals to establish health savings accounts. The Departments stated that HHS, in consultation with the Departments of Labor and the Treasury, would address this concern in the 2021 NBPP rulemaking process. The Departments further stated that, pending the completion of the 2021 NBPP rulemaking, they would not initiate enforcement action if a plan were to exclude the value of pharmaceutical manufacturer coupons from the annual limit on cost-sharing, including in circumstances where no medically appropriate generic equivalent is available.
Modified treatment of manufacturer coupons
In the proposed 2021 Notice of Benefit and Payment Parameters (“2021 NBPP Proposed Rule”), CMS proposed to modify the policy finalized in the 2020 NBPP Final Rule to provide that, consistent with any applicable state law, plans are permitted, but not required, to count any form of direct financial support offered by pharmaceutical manufacturers to enrollees to reduce out-of-pocket costs for specific prescription drugs toward the annual limit on cost-sharing, regardless of the availability of a medically appropriate generic equivalent.[1] CMS finalized this proposal in the 2021 NBPP Final Rule. Specifically, CMS finalized its proposal to revise 45 C.F.R. § 156.130(h) to provide that, notwithstanding any other provision of the annual limitation on cost-sharing regulation, and to the extent consistent with applicable state law, direct support by drug manufacturers for specific prescription drugs to reduce the cost-sharing of an enrollee is permitted, but not required, to be counted toward the annual limitation on cost-sharing. CMS explained that, under this policy, plans have the flexibility to determine whether to include or exclude coupon amounts from the annual limit on cost-sharing, regardless of whether a generic equivalent is available. Under this policy, states have discretion to require state-regulated plans to count direct support offered by manufacturers toward the annual limit on cost-sharing. States similarly have flexibility to require exclusion of such amounts from the annual limit on cost-sharing.
In the 2021 NBPP Proposed Rule, CMS proposed to interpret the definition of “cost sharing” at 45 C.F.R. § 155.20 to exclude expenditures covered by pharmaceutical manufacturer coupons. CMS did not finalize this proposed interpretation. CMS instead concluded that it is “subject to interpretation” whether pharmaceutical manufacturer coupons fall within the definition of “cost sharing.” CMS stated that, by not finalizing its proposed interpretation, it is “provid[ing] maximum flexibility for states and issuers to decide if and how to factor in direct drug manufacturer support towards the annual limitation on cost-sharing.”
For plans that choose to exclude pharmaceutical manufacturer coupons from the annual limit on cost-sharing, CMS encouraged transparency with enrollees, for example, by prominently including this information on websites and in brochures, plan summary documents, and other collateral material that consumers may use to select and understand their benefits. CMS stated that, if it finds that plans fail to provide such transparency, it may consider future rulemaking to require that plans provide this information. CMS also warned plans that they must ensure that policies regarding the application of pharmaceutical manufacturer coupons toward the annual limit on cost-sharing comply with regulations governing uniform, non-discriminatory benefit design.
If you have any questions about the 2021 NBPP Final Rule, please contact any of the authors of this alert or the Hogan Lovells lawyer with whom you regularly work.
Authored by Ken Choe, Margaux Hall, Melissa Bianchi, Eliza Andonova, Jessica Hanna, and Mahmud Brifkani
[1] Manufacturers’ ability to offer copay assistance or other reductions in a patient’s cost-sharing obligations when there are therapeutic equivalents available may be limited by state law, such as in California and Massachusetts. See our alert on the California law here.
