Patient groups sue HHS over co-pay assistance program

Groups representing HIV and diabetes patients are trying to scrap a Medicare rule they say leaves sick patients stuck with higher drug costs, by preventing them from applying billions of dollars in assistance against their insurance deductibles.

The big picture: A federal suit filed by the groups on Tuesday takes up the bigger question of whether pharmaceutical companies can cover copays for expensive drugs, or whether covering patients' costs that way amounts to a bribe.

Zoom in: The suit in U.S. District Court for the District of Columbia centers around "copay coupons" offered by drug companies to offer patients a better deal and ultimately boost sales of their drugs — at least, until their insurance deductibles are met.

• Insurers have begun using so-called co-pay accumulators to stop patients from applying those discounts toward their deductibles.
• But the patient groups — including the HIV+Hepatitis Policy Institute, Diabetes Leadership Council (DLC), and the Diabetes Patient Advocacy Coalition (DPAC), argue federal regulations define cost-sharing as "any expenditure required by or on behalf of an enrollee with respect to essential health benefits."
• "It should not matter whether the assistance comes from a friend, charity, or drug manufacturer," they write.

A CMS spokesperson said the agency does not comment on pending litigation.

What they're saying: Due to increasing deductibles and cost-sharing requirements, patients often rely on copay assistance to help them afford their prescriptions, said Carl Schmid, executive director of the HIV+Hepatitis Policy Institute.

• "They are taking the copay assistance provided by drug companies, which last year totaled $12 billion ... that is meant for the patients but not counting it toward the patient's deductible or out-of-pocket obligations," Schmid said in a call with reporters.

The other side: Studies have shown drug coupons raise costs across the board, by encouraging patients to seek specific companies' drugs. Physicians are willing to prescribe them, knowing patients won't be burdened by cost. But taxpayers could pick up the bulk of the tab.

• Medicare prohibits copay coupons, essentially calling them kickbacks.

This is part of an elaborate dance between drug companies and insurers that extends beyond Medicare to private insurance, Ge Bai, an accounting and health policy professor at Johns Hopkins University, told Axios.

• Insurers use co-pays and coinsurance to steer patients away from more expensive drugs. So manufacturers offer co-pay assistance schemes, Bai said.

• Insurers can no longer easily steer patients to cheaper alternatives, so they turn to co-pay accumulators, she said.
• "We're talking about pharmaceutical manufacturers ... seeking to circumvent cost-sharing mechanisms that have some ability to constrain pharmaceutical prices and direct utilization to more cost-effective care," Leemore Dafny, a health economist at Harvard, told Axios.
• "That's not to say cost-sharing doesn't have big downsides," she said. "What it means is the pharmaceutical companies shouldn't be the ones who are setting it."

This can ultimately "incentivize drug manufacturers to inflate list prices and PBMs to distort drug formularies to favor high list price and high-rebate therapies," the authors write.

• A separate battle has raged over eliminating in Medicare the rebates that drug companies pay to pharmacy benefit managers in exchange for preferred formulary placement. These rebates then get passed on to insurers, resulting in lower premiums for enrollees.
• The Inflation Reduction Act delayed the implementation of a Trump-era that would have quashed certain manufacturer rebates paid to Medicare drug coverage plans until 2032.

The bottom line: "This war will continue. Both parties will keep creating new schemes," Bai said.