Affordable Care Act Survives Supreme Court Review Largely Unscathed, Clearing Way for Biosimilars

by McDonnell Boehnen Hulbert & Berghoff LLP

[author: James DeGiulio]

Supreme Court Building #2In a history-making decision, the Supreme Court today in National Federation of Independent Business v. Sebelius upheld the Patient Protection and Affordable Care Act (PPACA) as constitutional under the taxation clause of the Constitution.  The individual mandate provision of the PPACA, which establishes the requirement that nearly all Americans secure "minimum essential" health insurance (26 U.S.C. § 5000A), has received most of the media attention.  Lost in the political buzz surrounding this case, however, is the impact of the decision on U.S. regulatory and patent law.  In contrast with the Court's decision in Mayo Collaborative Services v. Prometheus Laboratories, Inc., it was what the Supreme Court did not do today that provided the impact.  Justice Ginsburg summarizes the surprising result in her concurring opinion:  "In the end, the Affordable Health Care Act survives largely unscathed."  While perhaps not as headline-worthy as the individual mandate provision, the survival of the Biologics Price Competition and Innovation Act (BPCIA), which created a new approval pathway in the U.S. for biosimilar products, is still big news to the biotech/pharma world.  And it should be, for biologics totaled $112.93 billion in worldwide sales in 2011, which constituted a $5 billion, or 4.6 percent, increase over 2010 sales.

In the company of the individual mandate provision, the BPCIA could be considered a minimally controversial provision.  None of the opinions expressed in this case discussed biologic drugs or biosimilars, and the BPCIA was barely acknowledged during oral argument, with Justice Bryer referring to it as "the biosimilar thing."  Following oral argument on March 26-28, the general feeling was that the PPACA would be substantially modified by the Supreme Court, and because the PPACA lacks a severability clause, the bill in its entirety was at risk of being struck down.  Should that have occurred, biosimilar producer representatives had indicated that they would lobby the President and Congress to move quickly to pass new biosimilars legislation.  Under the current political regime this could take years, and several of the exclusivity periods may have been shortened in the process (see "President's Latest Budget Proposal Seeks Decrease of Data Exclusivity Period and Elimination of Pay-for-Delay Agreements").  During that time, the U.S. would have fallen even farther behind the rest of the world with biosimilars.  Europe, in particular, has had a biosimilar pathway in place for nine years (since 2003), and has approved at least fourteen biosimilar products so far.  If the uptake of biosimilars in Europe is any indication, there is plenty of incentive to enter the U.S. market as soon as possible.  For example, Hospira's epoetin alfa (EPO) biosimilar Retacrit, used to treat anemia resulting from kidney failure and chemotherapy, is already in use in Europe and Australia, and worldwide EPO sales totaled $3.73 billion last year.  Overall, the European biosimilars market generated revenues of approximately $172 million in 2010 and is expected to reach almost $4 billion by 2017.  Despite these profit incentives, and despite the framework being in force for over two years already, no biosimilars have been approved in the U.S., and most indications are that none are close (as of February, the FDA had yet to receive its first ABLA application).

Biotechnology Industry Organization (BIO)Today's Supreme Court decision erases any hesitation biosimilar producers may have had in using the BPCIA due to the uncertainty of its survival.  With the biosimilars framework intact, efforts to shape the implementation of the pathway will certainly surge:  the Biotechnology Industry Organization (BIO) has already issued a statement reconfirming its efforts to collaborate with the FDA on implementing the biosimilars pathway in such a way that will "ensure patient safety, expand patient access and competition, and provide necessary and fair incentives that will help spur continued biomedical breakthroughs."  Biosimilar producers can now move forward full steam with their biosimilar products without fear of legislative overhaul and potential disruption of their FDA approval progress.  The result is certainly a relief for biosimilar producers who have already invested resources in seeking biosimilar approval from the FDA.  Pioneer biosimilar producers such as Sandoz and Hospira are already in Phase III human testing, and they have relied on the BPCIA to provide some clarity as to how biosimilars will be regulated in the U.S.  The survival of the BPCIA is welcome news for biologics patient consumers as well, who hope to see lower prices in the near future on these important and typically costly drugs.  How much lower the prices will fall is unclear, but by way of example, Hospira has predicted that upon a generic EPO entering the U.S. market, the initial discount would probably be about 35 percent or 40 percent below the reference product price.


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McDonnell Boehnen Hulbert & Berghoff LLP

McDonnell Boehnen Hulbert & Berghoff LLP on:

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