The Medicaid rebate statute3 requires drug manufacturers, as a condition of federal funding for Medicaid coverage of their products, to pay rebates to state Medicaid programs with respect to “covered outpatient drugs” reimbursed by the states. For brand drugs, the amount of the rebate is based in part on the greater of (i) 23.1 percent of the drug’s “average manufacturer price” or (ii) the difference between the manufacturer’s “average manufacturer price” for a drug and its “best price” for a drug. The Medicaid statute generally defines the “best price” as “the lowest price available from the manufacturer during the rebate period to any wholesaler, retailer, provider, health maintenance organization, nonprofit entity, or governmental entity within the United States.”4 Historically, CMS regulations provided that sales to patients did not affect best price, and that various forms of manufacturer patient support did not affect best price as long as the amounts were passed through to the patient and did not represent discounts to best price-eligible purchasers.5
In recent years, manufacturer patient support programs have expanded the amount of available patient cost sharing assistance for deductibles, copayments, coinsurance, or other uncovered amounts, especially with respect to specialty drugs. From the manufacturers’ perspective, these amounts help facilitate patients’ access to needed and emerging new therapies. Payors, on the other hand, have criticized such support as sustaining higher product prices and potentially undercutting the utilization management incentives inherent in cost sharing benefit designs.
In response to these concerns, many payors have adopted “accumulator” programs and other similar mechanisms as part of their benefit designs. Under an accumulator program, payors identify deductible or out-of-pocket maximum amounts paid on behalf of patients by manufacturers, but do not count those amounts toward the patient’s satisfaction of their deductible or out-of-pocket maximum. As a result, while the patient may be able to initiate therapy due to manufacturer support, when that support is exhausted, they still owe their full deductible, and the insurer’s obligation to pay benefits is effectively deferred. Manufacturers have criticized accumulator programs as inappropriate cost shifting that raises the risk that patients may discontinue therapeutic regimens.
In December 2020, CMS amended its best price regulations to require that manufacturers “ensure” that all manufacturer support under coupon or copay assistance programs is passed through to the patient, “and the pharmacy, agent, or other entity does not receive any price concession,” in order for such amounts to be excluded from the calculation of best price.6 In the preamble to that rule, CMS explicitly indicated that amounts “captured” under accumulator programs would be viewed as benefits to “best price-eligible entities” (health plans), and would therefore reduce the manufacturer’s best price.7 CMS deferred application of the rule until January 1, 2023, in the expectation that manufacturers would be able to obtain information from plans concerning accumulator programs so as to facilitate compliance with the rule. PhRMA challenged this rule under the APA in May 2021, on the ground that the agency lacked statutory authority to treat patient support as concessions affecting best price.