Assessing the Legal and Practical Implications of Copay Accumulator and Maximizer Programs

John S. Linehan, JD
Epstein Becker & Green

In 2018, the debate over prescription drug costs and pricing reforms raged in legislative halls, corporate boardrooms, and household kitchens throughout the United States. In the meantime, two novel drug benefit designs emerged that are introducing their own share of controversy: copay accumulator and copay maximizer programs. Health plans, pharmacy benefit managers, and employer group sponsors have begun to embrace these designs as a way to blunt the negative effects of drug manufacturer copay coupons on plan costs. Nevertheless, health plans and entities sponsoring or implementing accumulator or maximizer programs should tread cautiously. These programs present unique legal and practical issues, which, if not properly managed, could lead to negative consequences for plans and their beneficiaries.

Accumulators vs. maximizers

John S. Linehan

John S. Linehan

Copay coupons have been stirring up controversy in the world of drug distribution and reimbursement for well over a decade. Drug manufacturers have relied on coupons to promote access to branded drugs by reducing patients’ out-of-pocket costs. Insurers and PBMs, on the other hand, have opposed coupons because they undermine the effectiveness of cost-sharing requirements and benefit designs that incentivize cost-effective drug prescribing and purchasing choices. Because they can serve as an economic inducement, coupons are barred by the Anti-Kickback Statute and beneficiary inducement provision of the Civil Monetary Penalties statute for use under federal health care programs (OIG 2014a, OIG 2014b). California and Massachusetts prohibit the provision of manufacturer coupons under certain circumstances when generic alternatives are available (California code, Massachusetts law). Despite these restrictions, copay coupons have been ubiquitously employed by drug manufacturers for branded drugs in the commercial setting.

Until recently, plans had few weapons to resist coupons other than outright prohibitions or formulary exclusions. Plans typically resorted to these measures only when the coupons were designed to steer beneficiaries to branded products despite the availability of cheaper generic or therapeutically equivalent alternatives. However, in recent years, plans and PBMs have found new ways to ascertain when coupons are being applied at the pharmacy and have used that information to apply more targeted deterrents.

Under copay accumulator programs, the plan prevents the coupon from counting against the beneficiary’s deductible or out-of-pocket maximum. Upon exhaustion of the coupon’s value, the beneficiary must pay the entire amount of his or her deductible before plan benefits kick in.

Under a copay maximizer (also called a variable copay program), the plan increases the copay amount for a drug so that it approximates the copay coupon’s monthly value. The total value of the coupon is applied evenly throughout the benefit year but does not count against the beneficiary’s cost-sharing obligations.

Through these programs, health plans reduce their financial liability by leveraging the value of the coupon and the beneficiary cost-sharing amounts. Stakeholders believe that these programs may deter manufacturers from providing coupons or incentivize manufacturers to reduce list prices or provide other forms of discounts to plans, beneficiaries, or both.

Many health plans have eagerly implemented these options, while many others have the capacity to administer them but are holding off. In response to client demands, major PBMs are offering an array of accumulator and maximizer program options, with differing scopes of application. According to research from Zitter Health Insights, more than a third of commercially insured individuals are enrolled in health plans that have implemented accumulators or maximizers. A survey by the National Business Group on Health found that about a quarter of employers currently utilize these programs and as many as half plan to do so in the next two years. So far, accumulators have had greater uptake among plans than maximizers, largely because accumulators are less complex and are capable of achieving greater cost savings than maximizers.

Bracing for controversy

Despite the monetary benefits of accumulator and maximizer programs, plans and employer sponsors should carefully consider whether—and to what extent—they will employ these controversial measures. For one thing, they have received a lot of media attention, much of it negative. Opponents of these programs argue that beneficiaries who lack adequate notice or understanding of how they work could be shocked by facing steep deductible amounts once they hit their coupon ceilings. Failure to meet out-of-pocket expenses, which can be considerable for high-priced specialty drugs, may cause certain beneficiaries to abandon their regimens and thereby undermine adherence.

In addition to inviting negative attention and beneficiary discomfort, plans and their sponsors can get into legal hot water if they fail to consider the details of their programs and how they are administered.

Of primary importance to health plans and sponsors is that they understand the array of program options as well as their modes of operation and potential impact on beneficiaries. For example, while accumulators are simpler to administer and capable of achieving greater savings, they shift a larger portion of costs to the beneficiary—often in an abrupt manner. Maximizers, on the other hand, while still providing net advantages for the plan, may more equitably apportion drug costs between the beneficiary and the plan. In contrast to accumulators, maximizer programs have more varied and flexible designs that can be tailored to apportion costs in accordance with plan goals and can serve to moderate negative impacts on beneficiaries. Regardless of the selected program design, health plans should consider supplementing their programs with beneficiary outreach regarding the effects of the programs, as well as any less-costly alternatives or charity assistance options.

In addition to the administrative and practical effects of accumulator and maximizer programs, plans and sponsors should carefully consider their potential legal risks. Among other things, these programs, which depend on information relating to a patient’s fulfillment of his or her copayment obligation during a pharmacy transaction, could implicate the privacy rules under the Health Insurance Portability and Accountability Act. They could also affect nondiscrimination rules under HIPAA, as well as consumer protection and nondiscrimination rules under state laws.

Self-insured employer group plans should consider compliance with the Employee Retirement Income Security Act of 1974 and the fiduciary duties imposed on plan sponsors. Certain program designs may further trigger rules imposed through the ACA, including the maximum out-of-pocket limits that apply to non­grandfathered plans and the minimum value calculation conditions that apply to large employers.

Finally, plans and sponsors should consider the IRS rules for Health Savings Accounts and the eligibility criteria for high-deductible health plans. Notably, these rules prohibit a plan’s provision of benefits prior to a beneficiary’s satisfaction of his or her deductible, subject to certain exceptions, such as the provision of benefits (e.g., services, medications) for “preventive” care.

Although they have been eagerly adopted by many health plans and sponsors, copay accumulator and maximizer programs remain in a legal gray area. This is because of their recent origin, the lack of existing precedent, and the fact that the legal analysis is highly dependent on a program’s unique facts and structure. Plans and sponsors seeking to maximize compliance would be well served to ensure that they adequately disclose the nature and effect of copay accumulator and maximizer programs to beneficiaries. In addition to mitigating legal risks, robust disclosure can prevent beneficiary shock when facing outstanding cost-sharing obligations. Disclosure in a timely fashion can also allow beneficiaries to seek supplementary forms of manufacturer or charity assistance when needed to satisfy cost-sharing obligations for branded products.

About one year after attracting media attention, copay accumulator and maximizer programs have gained traction because they can help health plans and sponsors to control escalating drug costs, especially for emerging specialty drugs. However, scrutiny of these programs is only going to increase. Meanwhile, manufacturers are beginning to devise counter measures, and some critics have petitioned state insurance agencies to determine whether these programs violate consumer protection rules (FAPP 2018). Plans and sponsors should prepare accordingly for significant challenges in 2019, which could include tougher manufacturer negotiations, lawsuits, and potential state agency and legislative inquiries. Despite the benefits of accumulators and maximizers, without careful consideration of a program’s practical and legal implications, a plan or sponsor may invite unwanted problems both for itself and its beneficiaries.

John “Jack” Linehan is a member of the health care and life sciences practice group of Epstein Becker & Green.



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