A federal court has invalidated a 2021 U.S. Department of Health and Human Services (HHS) regulation as arbitrary and capricious. The regulation changed the relationship between direct financial support from drug manufacturers and the Affordable Care Act (ACA) annual limits on cost-sharing. The case is HIV and Hepatitis Policy Inst. v. HHS, 2023 WL 6388932 (D.D.C. 2023).
Drug manufacturers often provide direct financial assistance to patients using their drugs. A common form of this assistance is a coupon that the patient uses to have the manufacturer pay all or part of the patient’s copayment for the drug. The 2021 HHS regulation permitted but did not mandate that plans count the direct financial assistance provided by drug manufacturers toward the patient’s annual limits on cost-sharing under the ACA. The regulation provided this option regardless of whether a generic equivalent to the drug was available for the patient.
Some individuals and patient advocacy groups sued, arguing that cost-sharing provisions in the ACA and previous HHS regulations required direct manufacturer assistance to count toward those annual limits.
The judge vacated the provision in the 2021 HHS regulation, finding that the ACA did not clearly define whether cost-sharing included manufacturer assistance. In the court ruling, the judge also noted that the agencies had not adopted a uniform interpretation of the issue, as the regulation allowed plans to either count or not count the assistance. As a result, the court directed the agencies to clarify the statutory definition of cost-sharing to determine whether it included drug manufacturer assistance. The provision, as written, was arbitrary and capricious because it allowed plans to interpret cost-sharing in two different ways.
The implications of this ruling are particularly important for HSA-compatible high-deductible health plans (HDHPs). HDHP rules only allow amounts paid by the individual to count toward the individual’s deductible, which excludes direct manufacturer assistance. As a result, this decision may present a conflict for individuals with HDHPs.
HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.
Hall Benefits Law, LLC
Latest posts by Hall Benefits Law, LLC (see all)
- Fifth Circuit Considers Arbitration Clause in ERISA Claim - March 20, 2026
