States are moving to curb copay accumulators as federal government pulls back from regulation.
In recent years, the federal and state legal requirements governing drug distribution and reimbursement have become increasingly discordant. This has stemmed in part from a politically divided Congress, which has made it difficult to pass comprehensive federal legislation, and the fact that many states have pioneered ahead with ambitious reforms. It also stems from the differing incentives and concerns facing federal and state lawmakers. While the federal government is the sole funder of Medicare and a large portion of Medicaid, and therefore acts primarily as a payer, state governments regulate insurance on the local level and are more susceptible to the influences of patients and prescribers.
This federal-state dynamic has become especially pronounced with regard to the copay coupons promoted by drug manufacturers and the copay accumulator and maximizer programs that health plans and pharmacy benefit managers (PBMs) have employed to mitigate the negative effects that coupons can have on their costs. On the one hand, coupons are prohibited under federal healthcare programs, but the U.S. government has afforded plans significant leeway to implement accumulators and maximizers.
At the same time, coupons are generally permitted at the state level, but a growing number of states have quietly passed laws prohibiting fully insured plans from using accumulators and maximizers. As a result, the industry battle between drug manufacturers and payers continues to play out over an increasingly complicated and inconsistent compliance landscape.
Drug copay coupons, which may be used to reduce patients’ out-of-pocket costs, are used by drug manufacturers to promote access to branded drugs. By 2015, drug manufacturers were offering coupons to boost sales for more than 700 branded drug products, and manufacturers are estimated to have provided approximately $13 billion in copay coupons in 2018. Health plans and PBMs have vigorously opposed coupons due to concerns they may undermine cost-sharing requirements designed to incentivize economical drug prescribing and purchasing choices.
State legislatures have, understandably, struggled with the role that copay coupons play in healthcare because they present difficult trade-offs. Providers and patient advocacy groups have fiercely defended coupons as essential to facilitating access to expensive drugs, especially for beneficiaries in high-deductible health plans. The countervailing argument from health plans and PBMs is that coupons are a marketing tool that can incentivize the use of higher cost therapies and lead to higher premiums. Several states have considered legislation that would curb coupon use, and California and Massachusetts have enacted laws that would restrict coupons in circumstances where generic alternatives are available.
As health plans, PBMs and employer group sponsors have increasingly employed copay accumulators and maximizer programs in recent years, the controversies associated with copay coupons have deepened. Under a copay accumulator program, the health plan prevents a copay coupon from counting against the beneficiary’s deductible or out-of-pocket maximum. Once the coupon’s value is exhausted, the beneficiary must cover the entire amount of their deductible before plan benefits are triggered. With copay maximizers, the plan increases a drug’s copay amount so that it approximates the copay coupon’s monthly value. The total value of the coupon is applied evenly throughout the benefit year but is not applied against the beneficiary’s cost-sharing obligations.
Health plans have embraced these new benefit designs as a means to reduce their financial liability by drawing from the value of the coupon and the beneficiary cost-sharing amounts before providing drug coverage. However, opponents have raised concerns that beneficiaries may lack adequate understanding of how these programs work and be surprised by having to pay high deductibles once their coupons are exhausted. Accumulators have been especially criticized for abruptly shifting a large portion of costs to beneficiaries. Maximizer programs, which have more varied and flexible designs, are often tailored to apportion costs in a more equitable manner among the plan, beneficiary and manufacturer. Nonetheless, accumulators and maximizers are alike in that they prevent the coupon from applying in some manner to the cost-sharing obligations.
In 2019, CMS issued a rule restricting the use of accumulators by health plans subject to the Patient Protection and Affordable Care Act’s essential health benefits rules. However, CMS subsequently reversed course by issuing a new rule in May 2020 that removed these restrictions to “enable issuers and group health plans to continue long-standing practices with regard to how and whether direct drug manufacturer support accrues toward an enrollees’ annual limitation on cost sharing.” Accordingly, under federal law, commercial health plans and PBMs enjoy substantial leeway in how they structure accumulator programs.
While the legal landscape for accumulators has become clearer at the federal level, it has gotten cloudier at the state level. Patient advocacy and provider groups have begun to have some success shaping state-level laws and policy regarding accumulators. In the past two years, bills have been introduced in close to 20 states that would affect accumulator programs, and five states — Arizona, Georgia, Illinois, Virginia and West Virginia — have enacted laws.
The state accumulator laws are largely alike in that they require plans to consider payments made by a beneficiary, or on behalf of a beneficiary, when calculating their overall contribution to any cost-sharing obligations. This serves to broadly restrict accumulator and maximizer programs by prohibiting plans from blocking the value of a manufacturer coupon (i.e., a payment made on behalf of a beneficiary) from counting against a beneficiary’s deductible or annual maximum out-of-pocket limit. Some slight differences in wording among the various pieces of legislation could impact their scope and application. For instance, the laws in Arizona and Georgia include exceptions that would allow plans to apply accumulators when there is a medically appropriate generic. Some of the state laws only seem to refer to outpatient prescription drugs, whereas others appear to apply more broadly to drugs reimbursed under both a plan’s pharmacy and medical benefits. Finally, some of the laws specifically reference PBMs, whereas others only refer to health plans. Nevertheless, plans affected by these laws may need to ensure that any contracting PBMs similarly comply with prescribed restrictions when administering their drug benefits.
So far there has been strong bipartisan support for accumulator restriction bills in state legislatures, indicating that a growing number of states will likely be considering and adopting these laws. This is testament to the power that patient and prescriber advocacy groups have had in influencing state lawmakers with stories about how patients can be disadvantaged, sometimes unexpectedly, by accumulators. By contrast, plan and PBM opposition to coupons and support for accumulators and maximizers have been based on more abstract arguments relating to the need to manage costs and promote economical prescribing practices.
If additional states join the ranks of those states restricting accumulator programs, then the place for coupons will be increasingly secure, at least with respect to beneficiaries covered under fully insured plans regulated under state insurance codes. In the meantime, a growing legal asymmetry is arising as health plans (particularly self-insured plans) will have significant latitude to impose accumulators and maximizers under federal law but fully insured plans will need to thoroughly understand state laws before administering them. In addition, health plans must grapple with the nuances of other laws and regulations, including but not limited to IRS rules governing high-deductible health plans eligible for health savings accounts, disclosure rules under the Employment Retirement Income Security Act of 1974 and a variety of consumer protection, anti-discrimination and benefit uniformity standards.
Looking forward, stakeholders should expect more uncertainty and fluctuation in the legal treatment of coupons and accumulators as well as in other areas impacting drug reimbursement and distribution. If commercial health plans and PBMs are restricted in their ability to use accumulators and maximizers to mitigate the effects of coupons, then some premiums may increase and formulary offerings may narrow. If this were to happen, some lawmakers may decide to reverse course by pulling back on the accumulator restrictions that have been put in place. On this and other matters concerning pharmaceutical pricing, reimbursement and distribution, applicable laws may continue to zig and zag with uneven cost-shifting effects for competing stakeholders.
John “Jack” Linehan is a member of the health care and life sciences practice group at the law firm Epstein Becker & Green.
 Coupons have long been barred under federal healthcare programs because they can be categorized as unlawful inducements under the Anti-Kickback Statute and beneficiary inducement provision of the Civil Monetary Penalties Law. Accordingly, copay coupons have been directed to patients taking branded drugs who are reimbursed in the private insurance market.
 See Jonathan Gray, Manufacturer Coupons and Patient Assistance Programs, The Actuary (May 2020), available at https://theactuarymagazine.org/manufacturer-coupons-and-patient-assistance-programs/.
 Cal. Health & Safety Code §132000 et seq.; Mass Gen. Laws, ch. 17.5H, §3(b)(2).
 85 Fed. Reg. 29164, 29231 (My 14, 2020).
 See, e.g., Va. Code Ann. § 38.2-3407.20(B) (“To the extent permitted by federal law and regulation, when calculating an enrollee’s overall contribution to any out-of-pocket maximum or any cost-sharing requirement under a health plan, a carrier shall include any amounts paid by the enrollee or paid on behalf of the enrollee by another person.”).
 State insurance codes generally do not apply to self-insured employer-sponsored group plans governed by the Employment Retirement Income Security Act.