OPINION:
Last year, America’s pharmacy benefit managers and insurers pocketed a whopping $7 billion in co-pay assistance meant for patients. Through deceptive policies and regulatory loopholes, they have turned patient co-pay assistance into a growing profit center for themselves.
Although the Labor Department’s recently proposed rule on transparency for pharmacy benefit managers is a welcome step toward exposing the predatory practices of these health care middlemen, it missed a crucial opportunity to address a harmful scheme affecting patients: the essential health benefits loophole.
Under federal law, insurers are required to cover 10 essential health benefits, including prescription drugs, and ensure that patient spending on these items counts toward their maximum out-of-pocket limit.
This system is designed to make it easier and more cost-effective for patients, especially those with complex or chronic diseases who rely on specialty medications, to access the treatments they need.
Insurers, pharmacy benefit managers and third-party vendors have engineered a workaround that allows them to cash in at patients’ expense.
In this scenario, insurers and industry middlemen reclassify certain covered drugs as “nonessential” to avoid patient cost-sharing protections under the essential health benefits provision of federal law.
Often, these are specialty medications for serious conditions such as HIV, hepatitis, cancer and autoimmune diseases. Even though the medications remain covered under the plan, the “nonessential” designation means patient out-of-pocket costs don’t count toward their deductible or annual out-of-pocket maximum.
Under the essential health benefits loophole, patients can be left to bear the burden of high costs while plans, pharmacy benefit managers and third-party vendors cash in on the value of the co-pay assistance.
In 2024, the Centers for Medicare & Medicaid Services closed the loophole for individuals and small-group health insurance markets and promised to extend protections to large-group and self-funded plans.
Yet, in the absence of federal regulation, pharmacy benefit managers and insurers have continued to leverage this scheme to designate drugs as “nonessential” and divert the value of co-pay assistance away from patients who may have limited or no other means to afford their essential medicines.
Last year, 47% of pharmacy benefit managers and insurers in large group markets used “co-pay maximizer” programs that exploit the loophole. That was more than double the rate of 2020.
This scheme harms patients in two distinct ways. First, it diverts critical funds away from the people who need them most. Drug manufacturer co-pay assistance programs exist to help patients afford medications when insurance cost-sharing is prohibitively expensive. When pharmacy benefit managers and insurers pocket this assistance rather than applying it to patient cost-sharing, they are essentially intercepting financial aid intended for vulnerable populations.
With the 2027 maximum cost-sharing limit climbing 13% to $12,000 for individuals and $24,000 for families, co-pay assistance has become essential for patients who can’t afford to reach these staggering limits. For some patients, it can be the difference between accessing lifesaving care and going without.
Second, the financial burden forces patients who cannot afford their medications to delay treatment or stop taking their drugs altogether. For people living with HIV, hepatitis or other chronic conditions, treatment interruptions can have devastating health consequences.
The Trump administration’s focus on transparency for pharmacy benefit managers and eliminating the middlemen demonstrates recognition of the problem, and the Labor Department’s proposed rule is a meaningful step toward protecting American patients.
Still, broadly pushing for “transparency” alone won’t protect patients if the underlying rules allow insurers and pharmacy benefit managers to continue exploiting loopholes such as this. The proposed 2027 Notice of Benefit and Payment Parameters rule also failed to include long-promised regulations that would ensure co-pay assistance counts toward patient cost-sharing.
Combined, these regulatory efforts fail to address a problem that has long empowered health plans and pharmacy benefit managers to profit. The administration must go further.
Whether through the Labor Department rulemaking process, the final Notice of Benefit and Payment Parameters rule or another regulatory vehicle, the Trump administration must close the essential health benefits loophole to prohibit insurers and pharmacy benefit managers from profiteering and ensure that co-pay assistance benefits the patients it is intended to help.
The administration has shown it is willing to take on pharmacy benefit managers. Until we take concrete action to close the essential health benefits loophole, billions of dollars will continue to be diverted from patients who desperately need them.
• Carl Schmid is the executive director of the HIV+Hepatitis Policy Institute.
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