Judge strikes down CMS’ Medicaid copay rule, handing PhRMA major win

MM Curator summary

[MM Curator Summary]: No, you can not include co-pay assistance to members in best price calculations (says the judge).


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A federal judge struck down a controversial rule that requires drug companies to include copay assistance like coupons into Medicaid rebates, handing the pharmaceutical industry a major win. 

The ruling, delivered Tuesday in the U.S. District Court for the District of Columbia, deals a major blow to insurers and pharmacy benefit managers (PBMs) that have adopted copay accumulator programs that limit the impact of drugmaker assistance from counting toward the deductible and out-of-pocket caps, arguing that the assistance is meant to drive patients to more expensive drugs. 

The ruling focuses on a Centers for Medicare & Medicaid Services rule finalized in December 2020 under the Trump administration. The regulation, which goes into effect next year, said that any copay assistance like coupons or other cost-sharing help must be included in the calculation of the best price of the drug. 


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Drug companies agree to offer rebates to Medicaid to get their products covered by the program. The rebate must be 23.1% of the average sales price of a brand-name drug and 13% for a generic. 

But how that average sales price is calculated has caused a major stir among payers and PBMs. 

Insurers and PBMs charge that the drug manufacturers rely on coupons and other assistance to steer patients toward more expensive and unnecessary drugs as opposed to more affordable options, according to the PBM industry group Pharmacy Care Management Association (PCMA).

“Since the use of copay coupons reduces the utilization of more affordable medication options, overall prescription drug costs will continue to increase dramatically,” PCMA said on its website. 

But the pharmaceutical industry counters the assistance is vital to ensure financial assistance for patients who may not afford certain products.

The industry group Pharmaceutical Research and Manufacturers of America (PhRMA) sued the Department of Health and Human Services (HHS) back in May 2021 over the rule, claiming it contradicts federal rebate law. HHS argued that PhRMA lacked the legal standing to sue over the regulation.

But District Court Judge Carl Nichols found that PhRMA does have the standing to sue as the rule would affect its member companies. The Trump appointee also found that HHS did not have the statutory authority to impose the rule. 

“A manufacturer’s financial assistance to a patient does not qualify as a price made available from a manufacturer to a best-price-eligible purchaser,” the ruling said. “Rather, a manufacturer’s financial assistance is available from the manufacturer to a best-price-eligible purchaser. And a patient is not a best-price-eligible purchaser.”

Nichols was also concerned that the rule would make the calculation of the best price turn on information that only insurers possess.

“Under the proposed rule, manufacturers would need to conduct transaction-by-transaction investigations into the operations of accumulator adjustment programs even though manufacturers have no control (and sometimes no information concerning) those programs,” the ruling said. 

It would make it difficult under such circumstances for drugmakers to report the best price to the federal government as the manufacturers would have to complete such investigations.

Because the rebate statute only refers to the best price made to the insurer and not the patient, the final rule contradicts the federal law and must be struck down, Nichols ruled.

HHS did not immediately return a request for comment on whether it will appeal the ruling.


Clipped from: https://www.fiercehealthcare.com/payers/judge-strikes-down-cms-medicaid-copay-rule-handing-phrma-major-win