Legal Opinion: BPCIA Is Likely to Survive Latest ACA Challenge

All eyes in the world of biologics and biosimilars are on the Supreme Court as it decides a constitutional challenge to the Affordable Care Act (ACA) in California v Texas. In addition to the insurance and health care-related provisions of the ACA, at stake is the future of the Biologics Price Competition and Innovation Act (BPCIA), which was signed into law on March 23, 2010 as Title VII to the ACA and provides a pathway to market for biosimilar products. For biologic and biosimilar stakeholders, the focus is on whether the Supreme Court will let the BPCIA stand even if it finds provisions of the ACA to be unconstitutional.

The Constitutional Challenge: Can Congress Require a Tax of Zero Dollars?

The ACA was intended to lower insurance premiums and overall health care costs by broadening the insurance pool with the individual mandate, which required individuals to maintain insurance coverage or pay the Internal Revenue Service a “shared responsibility payment.”

In National Federation of Independent Business [NFIB] v Sebelius, the Supreme Court in 2012 upheld the ACA’s individual mandate under the taxing power of Congress. But in 2017, Congress amended the ACA to set the shared responsibility payment to $0. A number of states and private citizens sued. They argued that the now nonexistent shared responsibility payment cannot be a constitutional exercise of Congress’s power to tax. But that is not the end of the line for the BPCIA. If the individual mandate is unconstitutional, the Supreme Court will have to decide whether it can be “severed” from the rest of the ACA, allowing other provisions of the ACA, including the BPCIA, to remain in place.

Severability, a/k/a Judicial Jenga

Severability, a doctrine that goes back at least to Chief Justice John Marshal in the early 1800s, allows a court to save statutes with unconstitutional provisions by cutting out the invalid part of the law. The basic question is whether Congress would have intended the entire statute to remain without the unconstitutional provision. During Justice Amy Coney Barrett’s recent confirmation hearing, she explained that severability is like a game of judicial Jenga. Once a court identifies an unconstitutional provision, the court must pull out that unconstitutional block. But if the statutory “tower” cannot stand without that block, then the court cannot use severability to save the remainder of the statute.

Many conservative justices have questioned how the severability doctrine can be applied to the ACA. The late Justice Scalia is one example. In a dissent in the NFIB case, he stated that the ACA was not severable, comparing the ACA to a Christmas tree with each member of Congress adding ornaments, making it impossible to discern what should remain if the tree were taken away.

Oral Argument: Playing “Gotcha” With the BPCIA?

There was almost no mention of the BPCIA during the Supreme Court’s oral argument Tuesday in California v Texas. Counsel for the state of California did raise, however, the biosimilar provision in passing as one provision in the statute on which the public relies. Although not the focus of the argument, that reference will not go unnoticed, especially in light of an amicus brief focused directly on the severability of the BPCIA filed by the Association for Accessible Medicines.

Justice Barrett did not show her cards during oral argument. She had, however, stated during her confirmation hearing that she held in a moot (simulated) court competition for law students that the individual mandate could be severed from the ACA. Although a moot court judge’s hypothetical ruling in an academic exercise is not a good basis to predict how she will rule in the actual case, 2 of the conservative-leaning justices made strong statements Tuesday about severability during oral argument.

Chief Justice John Roberts asked whether Congress would “want the rest of the law to survive if the unconstitutional provision were severed.” The chief justice said that there was “compelling evidence on the question,” namely that in 2017 when Congress set the shared responsibility payment to $0, “Congress left the rest of the law intact.”

Justice Brett Kavanaugh also seemed inclined to sever the individual mandate. In an earlier case, he, wrote “Constitutional litigation is not a game of gotcha against Congress, where litigants can ride a discrete constitutional flaw in a statute to take down the whole, otherwise constitutional statute.”¹ During the argument by counsel for the House of Representatives, who echoed that thinking, Justice Kavanaugh stated that the severability question was “very straightforward under [Supreme Court] precedents, meaning that we would excise the mandate and leave the rest…in place.”

If Chief Justice Roberts and Justice Kavanaugh side with Justices Stephen Breyer, Sonia Sotomayor, and Elena Kagan, who are widely expected to vote for severability if the court says that the ACA is unconstitutional, then the BPCIA could survive this latest challenge to the ACA. After oral argument, the initial consensus has been that severability is likely if the court holds the individual mandate of the ACA unconstitutional. But as veteran court watchers know, it is not unheard of for the justices to make statements in favor of a position only to vote against it later. Biosimilar manufacturers should continue to advance contingency plans for a post-BPCIA world, just in case the Supreme Court yells “Jenga!”

Reference

1. Barr v Am. Ass’n of Political Consultants, Inc, 140 US 2335, 2351 (2020)