Part 1: Axinn Patent Attorneys Talk ACA Pushback and the BPCIA

The Center for Biosimilars®: Hello, I'm Matthew Gavidia. Today on MJH Life Sciences News Network, The Center for Biosimilars is pleased to welcome Ted Mathias, a partner with Axinn, Veltrop, and Harkrider LLP and Stacie Ropka, also a partner with Axinn, Veltrop, and Harkrider LLP. Can you both introduce yourselves and tell us a little bit about your work?

Mathias: Thanks, Matt. I am Ted Mathias and I'm a trial attorney and I focus on patent litigation and specifically life sciences patent litigation. So, I've done a variety of pharmaceutical biologic and medical device cases.

Ropka: My name is Stacie Ropka and I am a patent attorney at Axinn, Veltrop, and Harkrider LLP. My practice focuses on the life sciences technologies, I provide a lot of client counseling and patent litigation in the pharmaceutical space, in the biologic space, and in human tissue culture space.

CfB: So, for the first question, Stacie, can you please describe the relationship between the Affordable Care Act [ACA] and the Biologics Price Competition and Innovation Act [BPCIA]?

Ropka: Sure, the Affordable Care Act is a comprehensive health care reform law that went into effect in March of 2010. The ACA is comprised of 10 sections or titles. Title I is known as the quality affordable health care for all Americans, and it lays out the provisions for providing affordable health care insurance to more Americans. A key feature of Title I is the individual mandate that requires all individuals to maintain health insurance coverage, and as we'll discuss later, this mandate is at the heart of challenges to the constitutionality of the ACA. Now, while most Americans are familiar with these insurance provisions that you find in Title I, the vast majority of Americans are unaware of title VII, which is called Improving Access to Innovative Medical Therapies and this includes the provisions of the Biologics Price Competition and Innovation Act of 2009, also abbreviated as the BPCIA. Now, some people may be familiar with generic drugs. Generic drugs are copies of brand drugs that are approved by the FDA, using an abbreviated approval pathway. With fewer regulatory hurdles for obtaining FDA's approval, generic drugs are provided to patients at greatly reduced costs over the brand drug, also known as the reference product. While Hatch-Waxman provides a legal framework for an abbreviated approval pathway for what we call "small molecule drugs," the conceptually similar BPCIA provides a legal framework for an abbreviated approval pathway for a different class of medications. They're called biologics, and these are typically your large protein-based molecules like Humira [adalimumab] or Herceptin [trastuzumab]. Under the BPCIA, biologics approved by FDA using the abbreviated approval pathway are known as either biosimilars or interchangeable, like the Hatch-Waxman pathway for the generic drugs. The BPCIA encourages companies to offer lower price alternatives to biologics by eliminating some of those regulatory hurdles for and thus the cost of approval. Now, in addition to the abbreviated approval pathway, both Hatch-Waxman and the BPCIA provide a path to patent dispute resolution. This process is 1 factor for determining when a generic drug or biosimilar can actually enter the marketplace. Currently, FDA has approved about 26 biosimilars, and I think [17] of them are currently on the market, providing patients with this lower-cost alternative. Now, since the BPCIA is actually part of the ACA, the concern is if any of the provisions of the ACA are found unconstitutional, the BPCIA will cease to be, which means that there will be no more abbreviated approval pathways for some of our most expensive medications.

CfB: Now Ted, can you describe the current challenge to the ACA and the developments that have put the BPCIA at risk?

Mathias: Yes, opponents of the Affordable Care Act have repeatedly targeted the individual mandate provision’s constitutionality in the hopes of invalidating the ACA. And the mandate barely survived a challenge back in 2012. A majority of the Supreme Court held that compelling individuals to purchase health insurance exceeded the scope of Congress' powers under the Commerce Clause of the Constitution. But a different group of 5 justices back in 2012 did hold that the mandate was a constitutional exercise of Congress' taxing power. The latest challenge to the ACA arose when Congress passed legislation in December of 2017 that reduced the shared responsibility payment that Stacey described, the payment for failure to acquire the insurance, reduced that payment obligation to zero—as in nothing, no dollars—and that became effective in January 2019. Now, in this current challenge, a number of states and private citizens are arguing that with the shared responsibility payment set at 0 dollars, a mandate is no longer constitutional, because it doesn't generate any revenue and it can't be considered a tax, which was the reason why the Supreme Court upheld the mandate back in 2012. They considered it a valid tax. A district court in Texas agreed with this latest challenge to the law and held that the individual mandate was unconstitutional, and that same court also held that the mandate could not be severed from any other provisions of the ACA unless the entire act was unconstitutional. The district court's judgment was stayed pending approval, and the Fifth Circuit Court of Appeals took up the case and agreed with the district court that the mandate was in fact, unconstitutional. The court held that the mandate didn't qualify as a tax, and there were no other constitutional provisions, such as the Commerce Clause, that could save it. The Fifth Circuit did not affirm the district court's decision on severability, but instead remanded the case back to the district court. But before the case could go back to the district court, the states who were defending the law appealed the Fifth Circuit's decision to the Supreme Court, which has now agreed to hear the case. So, we can expect a decision sometime in 2021.

CfB: Just to build off that Ted, how strong is this challenge to the constitutionality of the ACA?

Mathias: The constitutionality of the individual mandate is, at least, in very serious doubt. The District Court and the Court of Appeals have held it unconstitutional. But perhaps even more importantly, the Supreme Court's prior decision upholding the mandate as a valid exercise and Congress' taxing power was only by a 5 to 4 margin. And one of the 5 who upheld the law, Chief Justice Roberts, wrote back in 2012, for the majority that an essential feature of any tax is that it produces at least some revenue for the government. But now, with the shared responsibility payment set at 0, the mandate just doesn't produce any revenue for the government. So, to the extent that the revenue generation remains an essential feature of the tax. It's hard to see how Chief Justice Roberts could uphold the mandate as a tax. And although the makeup of the court has changed some since 2012, it seems pretty unlikely that the other 4 members of the court’s conservative wing would conclude that the mandate is permissible as a tax. There are at least 2 other ways that the justices could save the mandate. First, there's the Commerce Clause argument. In 2012, a big problem with the mandate was that it compelled individuals to purchase something, namely health insurance, and that was considered by 5 of the justices to be beyond Congress' power. With these complicated decisions you’re always reduced to counting justices to see how all these various questions are going to play out. So, with the amendment to the mandate, there's no penalty for failing to acquire health insurance, but technically the law still mandates that individuals acquire insurance. I don't expect the court to uphold the law as a valid regulation of interstate commerce in view of the 2012 decision. The other argument is a standing argument, and if the penalty for failure to purchase insurance is $0, then how does the mandate really hurt anyone? An injury is a requirement to show standing, and standing in turn is a requirement for any party to bring a lawsuit. All that said, the standing argument also seems likely to fail. There is evidence that's been introduced in the case that at least some individuals felt compelled to purchase insurance because of the mandate even though the penalty for failing to purchase the insurance was nonexistent. And the argument is that those individuals were thus injured for purposes of a standing analysis. There are also the state plaintiffs, the other group of plaintiffs, who have challenged the ACA in this current litigation. The Fifth Circuit found that the state plaintiffs had standing because, as employers, they had to issue these forms verifying which employees had health coverage through the state. While it's not exactly a terrible burden, standing is generally a very low bar, and for the Fifth Circuit, the administrative costs involved in issuing those forms was deemed to be enough.