Rule”), setting forth proposals applicable to qualified health plans (QHPs) offered on health insurance exchanges as well as certain proposals applicable to health plans more broadly. In the 2021 NBPP Proposed Rule, CMS proposes changes to existing policy governing how pharmaceutical manufacturer coupons accrue with respect to non-grandfathered health plan enrollees’ annual limit on cost-sharing. Specifically, CMS proposes that, to the extent consistent with state law, plans may, but are not required to, count financial support offered by pharmaceutical manufacturers to enrollees toward the annual limit on cost-sharing.

Background

Public Health Service (PHS) 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 (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.

In the final Notice of Benefit and Payment Parameters for 2020 (“2020 NBPP Final Rule”), CMS addressed how direct financial support offered by pharmaceutical manufacturers to enrollees for certain brand prescription drugs may be counted toward an enrollee’s annual limit on cost-sharing. Specifically, the 2020 NBPP Final Rule finalized a policy providing that, for plan years beginning on or after January 1, 2020, 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 a health savings account. The Departments stated that HHS, in consultation with the Departments of Labor and the Treasury, would address this concern in the 2021 NBPP Proposed Rule. The Departments further stated that, pending the completion of the 2021 NBPP rulemaking, they would not initiate enforcement action if a plan excludes the value of pharmaceutical manufacturer coupons from the annual limit on cost-sharing, including in circumstances where no medically appropriate generic equivalent is available. 

Proposed revised treatment of manufacturer coupons

In the 2021 NBPP Proposed Rule, CMS proposes to revise the policy finalized in the 2020 NBPP Final Rule to provide that 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. Specifically, CMS proposes “to revise 45 C.F.R. § 156.130(h) in its entirety to provide that, notwithstanding any other provision of the annual limitation on cost sharing regulation, and to the extent consistent with applicable state law, amounts paid toward reducing the cost sharing incurred by an enrollee using any form of direct support offered by drug manufacturers to enrollees for specific prescription drugs are permitted, but not required, to be counted toward the annual limitation on cost sharing. Under this proposal, plans and issuers have the flexibility to determine whether to include or exclude coupon amounts from the annual limitation on cost sharing, regardless of whether a generic equivalent is available.” Under the proposal, states have discretion to require state-regulated issuers and health plans to count direct support offered by manufacturers toward the annual limit on cost-sharing, including where there is a medically appropriate generic equivalent for a drug.

In support of this proposal, CMS further proposes to interpret the existing definition of “cost sharing” to exclude expenditures covered by pharmaceutical manufacturer coupons. In light of this proposed interpretation, plans would not be required to count the value of these coupons toward the annual limit on “cost-sharing.” CMS explained that, “[u]nder this interpretation, and to the extent consistent with applicable state law, issuers of non-grandfathered individual and group market coverage, and all non-grandfathered group health plans subject to section 2707(b) of the PHS Act, would have flexibility to determine whether to include or exclude drug manufacturer coupon amounts from the annual limitation on cost sharing, regardless of whether a medically appropriate generic equivalent is available. This proposal would enable issuers and group health plans to continue longstanding practices with regard to how and whether drug manufacturer coupons accrue towards an enrollee’s annual limitation on cost sharing.” 

CMS stated that it “encourage[s] issuers and group health plans to consider utilizing this proposed flexibility to find innovative methods to address the market distortion that occurs when consumers select a higher-cost brand name drug when an equally effective, medically appropriate generic drug is available.” In a footnote, CMS mentioned that it also encourages plans to consider using this proposed flexibility to promote the use of biosimilars over the use of their reference biological product.

CMS warned that it would expect plans to be transparent with enrollees and potential enrollees with respect to whether the value of pharmaceutical manufacturer coupons accrues to the annual limit on cost-sharing, 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.