John Linehan

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, John Linehan explained the complex and often confusng history of drug coupon accumulators and maximizers and the halting effort to regulate them. Today Linehan is using a hypothetical example to show how they work. 

The patient is prescribed a drug that costs $36,000 per year, or $3,000 per month. She gets a copay card from the manufacturer that is valued at $12,000 per year.  Patient’s benefit plan has a $3,000 deductible and, after the deductible has been met, a monthly copay of $500. The benefit plan has an annual maximum out-of-pocket (MOOP) of $9,000.
	 


	Patient uses the copay coupon to cover the monthly drug costs through April - and has no out-of-pocket expenses during the first four months of the year.  However, because accumulator prevents coupon from applying toward cost-sharing requirements, she must pay the full deductible amount ($3,000) in May and monthly copays of $500 per month thereafter until the $9,000 MOOP may be reached. The health plan’s financial liability is reduced to at least $17,500 by the coupon's value and the beneficiary's full cost-sharing payments (deductible and copays).    
	
	


	Benefit plan’s maximizer increases patient’s monthly copay to slightly more than the coupon’s monthly value, say, to $1,200 per month. Coupon value is applied evenly across year at $1,000 per month, so patient is responsible for a copayment of $200 per month. But the coupon does not count toward meeting the deductible of $3,000 or MOOP of $9,000.  The plan makes monthly $1,800 payments that sum to $21,600; the plan’s financial liability is reduced by the combination of the coupon’s value and the beneficiary’s copay payments. 

Usually, but not always, accumulators are a better deal for health plans than maximizers, although there are other reasons plans might prefer maximizers.

John "Jack" S. Linehan is a member of the health care and life sciences group of Epstein Becker & Green. 

Articles

Payers have used accumulators and maximizers to counteract drug coupons.

Coupon Accumulators and Coupon Maximizers, Explained 

While not a topic in most household kitchens, copay coupon accumulator programs (and their closely associated maximizer programs) have stirred up a range of controversies, operational difficulties, and policy tradeoffs. Accumulators and maximizers are archetypes of the larger issue drug pricing reform.

At first blush, it seem simple-who doesn’t want to lower costs for U.S. consumers? But difficult questions arise upon close inspection.  How should costs be shifted, and to whom?  Can an effective policy be implemented and enforced? Can the burdens and benefits be equitably distributed among stakeholders without compromising industry innovation?

During the past year, government policymakers have waded into the murky area of drug copay coupons and accumulators. In April 2019, CMS released a final rule (“2019 Final Rule”) governing the use of accumulators by health plans subject to the ACA’s essential health benefits (“EHB”) rules. However, due to confusion and objections raised by plans and employers, CMS suspended the policy several months later, pending their plan to revisit the issue in 2020. In the meantime, multiple states have passed laws prohibiting accumulator programs for fully insured plans. Finally, in May 2020, CMS issued a new rule (“2020 Final Rule”) with a reworked policy that affords health plans wide latitude to employ accumulators - a scenario that will look eerily familiar to many stakeholders.

While CMS’s new policy is relatively easy to summarize, the history of how we got back to where we are now, the details of ensuring compliance, and the potential ramifications require closer analysis.  

The controversies generated by accumulators and maximizers stem from copay coupons, which drug manufacturers have offered to patients. Their appeal is obvoius: They effectively shield them from out-of-pocket costs. But heath plans and PBMs have opposed coupons, saying that cost sharing is an important tool in managing their formularies and curbing  more expensive utilization. 

Health plans and PBMs have also been frustrated by their inability to track coupons, which may be processed at the pharmacy point-of-sale through what are effectively shadow claims systems and other means of disguise. In recent years, though, they have developed new technologies to detect the use coupons and counteract their negative plan effects ib . 

With a copay accumulator program, the health plan prevents the value of a copay coupon from counting toward the beneficiary’s deductible or annual maximum out-of-pocket (MOOP) limit.  After the coupon’s value is exhausted, the beneficiary is on the hook for the entire amount of his or her deductible before plan benefits kick-in.

Plans have also developed maximizers - sometimes called variable copay programs -  that are similar to accumulators but have important operational differences. With a maximizer program, the plan increases a drug’s copay amount so that it approximates the coupon’s monthly value and the value of the coupon is then applied evenly throughout the benefit year to cover a portion of drug costs.

Plans have used accumulator and maximizer programs to deter coupons while also leveraging their value to reduce plan liabilities. Accumulators are easier to administer and can save payers more money than maximizers, but they often abruptly foist a larger amount of costs on to beneficiaries. Maximizers are more complicated to administer but can be more flexibly designed to meet plan goals and more equitably apportion costs among the beneficiary, the plan, and manufacturer. 

With the increase in pricey specialty medications, matched by more expansive drug manufacturer assistance, industry battle lines have been drawn between manufacturers and patient advocacy groups on one side and insurers and PBMs on the other over coupon and accumulator programs. But as these program took off, they entered uncharted legal territory.

CMS’s 2019 Final Rule was designed to create a regulatory framework in this area but, perhaps unintentionally, it roiled the waters rather than calmed them.  The rule permitted health plans to exclude the value of coupons for branded drugs that had medically appropriate generics from counting toward the beneficiary’s annual MOOP. The agency’s measure was designed to give health plans the latitude to use accumulators to counteract formulary-eroding coupons for branded drugs that have generic equivalents.  However, it could be inferred from the rule that in other circumstances (i.e., where a branded drug lacks a generic equivalent), plans must count coupons against the MOOP. Therefore, on balance, CMS’s coupon policy was seen as restrictive rather than permissive of accumulator programs, which ran counter to the agency’s communicated purpose to provide plans with more flexibility over formulary controls. 

In response to stakeholder questions regarding the 2019 Final Rule the Departments of Labor (DOL), Health and Human Services (HHS), and Treasury (the “Departments”) issued an FAQ document on August 26, 2019.  The departments temporarily suspended the policy announced in the 2019 Final Rule because of a supposed conflict with a separate set of rules that govern the qualification of high deductible health plans (HPDPs) as health savings accounts (HSAs) (“HSA-eligible HDHPs”). They claimed that existing guidance from a 2004 Internal Revenue Bulletin notice (“2004 Q&A guidance”)  “requires an HDHP to disregard drug discounts…in determining if the minimum deductible for an HDHP has been satisfied and only allows amounts actually paid by the individual to be taken into account for that purpose.” 

As a result, HSA-eligible HDHPs may not be able to simultaneously comply with both the IRS rule, which would seem to require accumulators in the pre-deductible phase, and the CMS rule that accumulators not be used to prevent coupons from counting against MOOPs in the absence of a generic alternative.  To resolve this apparent conflict, HHS proposed to update its policy in 2020.  In the meantime, plans were given the green light to continue using accumulators, as before, to prevent coupons from applying to the MOOP in all circumstances, including when there is no medically appropriate generic available. 

In the recently issued 2020 Final Rule, CMS announced its refurbished coupon policy.  Acknowledging that its prior rulemaking “may have caused confusion,” the agency stated that plans would be permitted - but not required - to employ accumulators to prevent coupons from accruing to a member’s MOOP. The new policy affords flexibility to “enable issuers and group health plans to continue longstanding practices with regard to how and whether direct drug manufacturer support accrues towards an enrollees’ annual limitation on cost sharing.” Such flexibility is designed to give plans latitude to develop tailor-made coupon policies and comply with any applicable legal requirements, such as those imposed under state law or the IRS rules for HSA-eligible HDHPs. Nevertheless, CMS noted that plan policies regarding the treatment of coupons “must apply in a uniform, nondiscriminatory manner,” thereby invoking the ACA’s nondiscrimination rules.

As stakeholders pore over the 2020 Final Rule, seeking to decipher its meaning and real world application, they should consider the greater context. Rather than usher in a new paradigm for coupon regulation, CMS is authorizing a return to the status quo ante, which prevailed before the 2019 Final Rule, in which drug manufacturers and health plans have engaged in business warfare in a largely unregulated arena at the federal level.

Having dipped its toes into this murky area with its 2019 Final Rule, CMS is now pulling them out quickly with the 2020 Final Rule. As a result, health insurers and PBMs, will enjoy substantial leeway in how they structure accumulator programs - just as drug manufacturers have been largely free to design coupon programs. The battle lines over coupons and accumulators/maximizer programs will remain - and are likely become more entrenched than ever.

If the story surrounding coupons, accumulators, and government policy seems confusing, it’s because it is. The mechanics of how accumulators and maximizers work, and how they may affect beneficiaries, plans, and manufacturers have led to frequent head-scratching.

Even harder to follow and understand is their legal status, which primarily depends, somewhat arbitrarily, on the context in which they may be employed. While coupons and accumulators are generally allowed in the commercial setting, coupons are flatly prohibited under government healthcare programs, and since last year, a growing number of states have issued laws heavily restricting accumulators. Finally, adding to the complexity is the government’s rationale for its latest rulemaking, which is based on the IRS’s recent, and yet heretofore unstated, interpretation of its 2004 Q&A guidance.  

One could argue that the IRS insistence that coupons be applied to deductibles does not necessarily follow from the Q&A’s actual language. Also, such a requirement seems strange, given that many plans have lacked the technological capability to administer accumulators until the past few years; in fact, many plans are still unable to reliably identify coupon use by their members.

Despite the confusion, stakeholders may focus on the 2020 Final Rule’s key takeaway - that commercial plans will once again enjoy wide latitude to employ accumulators. Still, specific questions requiring more nuanced analysis may arise. Here are a few examples:

• How can accumulators/maximizers be structured so they don’t run afoul of state law? 
	• How can copay maximizers (aka variable copay) programs be structured in compliance with current law?
	• How, and under what circumstances, can HSA-eligible HDHPs employ accumulators or maximizers?
	• How can plans administer accumulators/maximizers in a uniform and nondiscriminatory manner?
	• What is “direct support offered by drug manufacturers,” and what legal rules govern the treatment of indirect manufacturer support, charity payments, or support originating from non-manufacturer sources? 
	• What sorts of specific disclosures are plans required to make to satisfy transparency to beneficiaries?  

The government has signaled its intent to continue monitoring the area of drug coupons and accumulators. For instance, CMS indicated it would consider financial support from, or routed through, nonmanufacturer sources (identified to include, for example, crowdfunding amounts, waived medical debt, and support toward the purchase of durable medical equipment) for potential future rulemaking. It also noted that the IRS is reviewing comments on administrative issues in this area as they relate to HDHPs - guidance that many would welcome.

Stakeholders should remain similarly vigilant in assessing how applicable law and guidance may continue to evolve. In the meantime, unless or until new regulations are enacted, observers will likely see continued combat between drug manufacturers and health plans over drug copay coupons, accumulators, and maximizers.  

John "Jack" S. Linehan is a member of the health care and life sciences group of Epstein Becker & Green.  

John S. Linehan of Epstein Becker & Green provides an in-depth analysis of drug coupons, coupon accumulators and maximizers and the federal government's halting efforts to regulate them.

Author | John Linehan

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