Will the BPCIA go down with Health Care Reform?

by Dechert LLP
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As the Supreme Court’s week of arguments on the constitutionality of the individual mandate provisions of the 2010 health care reform act progressed, the pundits have seemed more and more certain that the Court will find these provisions unconstitutional.  But what does that mean for the rest of the Act, and from our perspective, does that mean anything for biosimilars?

The Biologics Price Competition Act (BPCIA) was enacted as part of the Patient Protection and Affordable Care Act, currently under the Supreme Court’s scrutiny.  Theoretically, if the Supreme Court holds any aspect of the Act unconstitutional, it can strike it from the books in its entirety.  Alternatively, the Court can sever the suspect provisions, and leave the rest of the Act intact.  The Court devoted its session on Wednesday to this issue of severability.

The plaintiffs (>20 States and some individuals) argued that the entire Act should be struck down:  “If the individual mandate is unconstitutional, then the rest of the Act cannot stand.”  Paul Clement, 3/28/12 Transcript at 4.  From their questions to counsel, it seems that most of the Justices believe the Court has the power to sever provisions of the Act.  The debate was should they sever, and if so, how?  As shown in the quotes below, at least a couple Justices seem to think it’s unwise or infeasible for the Court to pick and choose provisions of the Act to preserve.

Several of the Justices explicitly called out the biosimilar provisions as unrelated to the constitutionally suspect mandates for individuals to purchase health insurance.  For example, J. Breyer identified the BPCIA, as well as some other provisions as being able to stand on their own:

I would say the Breast Feeding Act, the getting doctors to serve underserved areas, the biosimilar thing and drug regulation, the CLASS Act, those have nothing to do with the stuff that we’ve been talking about yesterday and the day before, okay? So if you ask me at that level, I would say, sure, they have nothing to do with it, they could stand on their own. The Indian thing about helping the underserved Native Americans, all that stuff has nothing to do. Black lung disease, nothing to do with it, okay? So that’s – do you know what you have there? A total off-the-cuff impression. So that’s why I am asking you, what should I do?  Tr. at 23.  See also Tr. at 14 (Ginsberg).

Nonetheless, two influential Justices, Scalia and Kennedy, at least seemed to be leaning against severing and preserving any provisions, which would lead to the demise of the BPCIA:

J. Scalia:
“My approach would say if you take the heart out of the statute, the statute’s gone. That enables Congress to – to do what it wants in – in the usual fashion. And it doesn’t inject us into the process of saying: This is good, this is bad, this is good, this is bad. It seems to me it reduces our options the most and increases Congress’s the most.”  Tr. at 73.  See also Tr. at 10, 35, 38.

J. Kennedy:
When you say judicial restraint, you are echoing the earlier premise that it increases the judicial power if the judiciary strikes down other provisions of the Act. I suggest to you it might be quite the opposite. We would be exercising the judicial power if one Act was – one provision was stricken and the others remained to impose a risk on insurance companies that Congress had never intended. By reason of this Court, we would have a new regime that Congress did not provide for, did not consider. That, it seems to me, can be argued at least to be a more extreme exercise of judicial power than to strike – than striking the whole. …  I just don’t accept the premise.  Tr. at 36.

Of course, two Justices do not make a majority, and it’s possible that even these Justices, particularly J. Kennedy, were focused on other provisions that directly relate to health care funding.  And, severability only becomes an issue if the Court rules that the mandate provisions are unconstitutional.  On the other hand, several other Justices, although apparently certain that the “peripheral” provisions should be severed, expressed concerns over the practicality of the Supreme Court pouring over the 2700-page Act to identify what’s appropriate to preserve.  So, in a nutshell, there seems like there’s a small, but real chance that the entire act, including the BPCIA, will be struck down.  That possibility would leave the stakeholders in the biosimilars space with either the exciting opportunity or the terrifying risk of Congress redesigning the BPCIA from the ground up.  One thing is for sure — if the BPCIA is struck down, the long path to the first approval of a biosimilar will get much, much longer.

 

 

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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