Part 2: Axinn Patent Attorneys Discuss Fallout From Challenges to the ACA

The Center for Biosimilars®: Hello, I'm Matthew Gavidia today on the MJH Life Sciences News Network. The Center for Biosimilars® is pleased to welcome Ted Mathias, a partner with Axinn, Veltrop & Harkrider LLP, and Stacie Ropka, also a partner with Axinn, Veltrop & Harkrider LLP.

Stacie, assuming the decision that there is unconstitutionality in the ACA [Affordable Care Act], can the Supreme Court render a surgical ruling that keeps the body of law alive?

Ropka: That question really has 2 layers. There's the question of whether the mandate can be severed from the other provisions in the ACA that are directed to the US health care system—that is, Title I. Second, there's the question of whether provisions of the ACA, like the BPCIA [Biologics Price Competition and Innovation Act] that really have nothing to do with systemic reforms to the country's health care system, are severable. Now as we discussed, the ACA is comprised of these 10 titles and the individual mandate is part of Title I. Also, Judge [Reed] O'Connor [US District Court for the Northern District of Texas] held that the individual mandate was unconstitutional but also concluded that the individual mandate was so interwoven, so entangled with the rest of the ACA, that it could not be severed from any other provision of the ACA. Judge O'Connor's nonseverability holding, had it been affirmed, would've effectively declared the BPCIA unconstitutional.

This decision was appealed to the Fifth Circuit and the Fifth Circuit did agree that the individual mandate is unconstitutional, but they sent the question of whether the individual mandate is severable from the remainder of the ACA back to Judge O'Connor, asking him to provide a further analysis regarding what provisions are inseverable. Of course, now that the Supreme Court has agreed to hear the case, Judge O'Connor's opinions on severability have been put on hold. The petitioners are asking the Supreme Court to address a couple of questions. One of them is, in fact, whether the individual mandate provision is severable from the rest of the ACA. Of course, the Supreme Court could conclude that the individual mandate is constitutional, [which means that] the BPCIA survives. The Supreme Court could also conclude that the individual mandate is unconstitutional, but that it can be severed from the rest of Title I. [That would mean] the rest of the titles, including the BPCIA, in Title VII could survive.

If the Supreme Court concludes that the individual mandate is unconstitutional and cannot be severed, then at least Title I would likely be unconstitutional. The new question, then, is can Titles II through X be severed from Title I? The Supreme Court could decide to [speak] only on the issues of severability within Title I, because Title I really is the focus of this review. So, if the Supreme Court's opinion is sort of narrow and does not address a severability among the titles, I would expect the remand back to Judge O'Connor to go forward, and perhaps we would see additional cases filed in other district courts to get clarity if any of the ACA would remain after such a Supreme Court opinion, especially from biosimilar developers who have invested much time and money to pursuing these biosimilar products based on the provisions of the BPCIA.

Now, the question of severability is very fact specific. Sometimes an act will actually include language about when certain provisions can be severed, and sometimes it is silent. It's not that the ACA is completely devoid of language that would allow us severability in general—that 2012 Supreme Court decision that first addressed the ACA, during that decision, it was recognized that there was a severability clause that was applicable to Title II. So, the unconstitutional portion of the Medicaid provisions could be severed from the remainder of the act and the rest of the ACA survives.

Now, when we think of Title VII, the BPCIA provision, it does not have an explicit severability clause, and when there's no explicit severability clause, severability turns on the intent of Congress. Basically, did Congress intend for the entire act to rise and fall together? Usually, the question centers around the links among the provisions. Are they interwoven or entangled, such that if 1 provision is found unconstitutional, Congress would not intend for the rest of the provisions to stand alone? For example, in 2017, when Congress removed that enforcement mechanism for the individual mandate but left the rest of the ACA intact, one could credibly argue that in so doing, Congress considered the coverage requirement dispensable, and so it could be severed. That is, Congress intended to allow severability even without an explicit severability clause. Looking at the BPCIA, it was originally debated as, and is intended to be, a standalone bill with provisions that are not interwoven with any other provisions of the ACA. It was sort of shoehorned into the ACA at the last minute. Thus, there's a credible argument that Congress intended the BPCIA to remain intact even if other provisions of the ACA are found unconstitutional. Unfortunately, as we've discussed, we may have to wait until as late as mid-2021 to see how the Supreme Court is going to address these issues before we will know what the next steps are in keeping the BPCIA intact, if any are required.

CfB: So, as a question for both of you, what are the potential repercussions on biosimilar availability that would result from a full appeal? Stacie, can you give us an insight into the impact on biosimilars in development and those already in the approvals review process?

Stacie: Well, as we discussed earlier, the authority for FDA to accept and review abbreviated applications for a biosimilar or an interchangeable biologic is derived solely from the BPCIA provisions in the ACA. [If] Title I of the ACA is unconstitutional and the BPCIA is not severable, FDA will no longer have the authority to accept and review abbreviated applications. So, any biosimilar currently in development will not be able to obtain approval using that abbreviated pathway. Similarly, for biosimilar applications that have been legitimately accepted by the FDA, but when FDA loses their ability to approve them, those biosimilars will also not be approved using the pathway provided in the BPCIA. Now, it's possible that these biosimilar developers could try and seek approval under the traditional pathway, but that is, of course, is going to require more regulatory hurdles, and because the patent dispute resolution pathway would no longer exist, the developer might be faced with launching any product at risk. So, it's really hard to see what kind of benefit these biosimilar developers would gain if they decided to go on a more traditional approval pathway.

CfB: And Ted, can you discuss how biosimilars that have been approved but not yet launched, and those that have already been launched, would be potentially impacted by the repeal?

Mathias: Yes, that's a trickier issue. There's not a lot of law on this issue. But the general rule is that court decisions declaring a statute unconstitutional are given retroactive effect. If that general rule is applied here, applying the ruling retroactively would mean that FDA never really had authority to approve biosimilars and that the approvals or licenses that it has granted since December 2017 to biosimilars are null and void. There are some exceptions to the general rule of retroactivity, and courts have some latitude to consider other factors. Although, the law hasn't really sketched out very well when a court is entitled to consider those factors.

Now, if the courts are permitted to do so, some of those factors could provide some aid and comfort to follow-on developers. Courts in the past have considered whether parties have relied on agency determinations and here, that consideration has been limited to the most compelling circumstances. But you can imagine follow-on developers making arguments that they've invested in manufacturing facilities, for example, to make the biosimilar and commercial quantities, and therefore relied on FDA's approval. Courts have also considered other policy justifications.

You can imagine some fairly compelling policy arguments here that a biosimilar developer would have. The cost savings that are realized by biosimilars have been approved and are on the cusp of launching into the market. For biosimilars that are on the market, you know, patients could be forced to switch [away from] the biosimilar they've grown accustomed to using. And then there's the fact that really nothing in the mandate has anything to do with the approval decisions FDA has made. Any decision the Supreme Court might render on the constitutionality doesn't have anything to do with the safety or efficacy of the biosimilars. Therefore, FDA's approval or nonapproval decision really has nothing to do with the constitutional problem that the court will potentially find.

Now, the last consideration that the courts have been able to consider are finality considerations, and this is pretty similar to the reliance and policy considerations. We want follow-on developers to have confidence that when FDA grants approval, there's some finality to that approval. So, that gives the developers confidence that they can invest in building sales and their approved products and also investing in new follow-on biologics.

All of that said, these considerations carry less weight when you have only an approval and no product launch. I think where you have an actual product launch and biosimilars are in the market and competing, there are stronger arguments against applying retroactivity and stronger arguments in favor of the reliance policy and finality concerns that I outlined. Now all that said, there is a strong incentive for Congress to step in quickly and say that prior approvals shall not be undone as a result of any Supreme Court decision invalidating the ACA, whether they will be able to step in quickly and do that seems like a relatively easy legislative fix, but that's anybody's guess. It probably depends on a lot of factors that have absolutely nothing to do with this issue.