Trump administration reversal would take away FDA’s authority to approve biosimilars

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[co-author: Stephanie Agu]

On June 25, 2020, the Department of Justice (DOJ) filed a brief in the United States Supreme Court that reverses the government’s prior position by arguing that none of the provisions of the Patient Protection and Affordable Care Act (ACA) may be severed from any unconstitutional provisions of the ACA. Because the Biologics Price Competition and Innovation Act of 2009 (BPCIA) was enacted as part of the ACA, this reversal highlights the possibility that the BPCIA could be declared inseverable from the ACA, and therefore invalid, taking away FDA’s authority to approve and regulate products that are “biosimilar” to approved biological drug products.

Background

In December 2017, Congress enacted the Tax Cuts and Jobs Act (TCJA). It amended the ACA by eliminating the tax penalty levied on taxpayers who failed to maintain minimum essential coverage.[1] Texas, several other states, and two individuals subsequently brought suit in 2018, challenging the constitutionality of the ACA’s individual mandate provision and the validity of the remaining provisions of the ACA. The plaintiffs argued that, because the individual mandate provision was upheld as an exercise of Congress's taxing power,[2] the TCJA’s elimination of the tax penalty for failure to maintain minimum essential coverage renders that provision without any constitutional basis. They further argue that the entirety of the ACA is invalid because, in their view, the remaining provisions of the ACA may not be severed from the individual mandate provision.

At the time suit was initially brought, DOJ took the position that although the individual mandate provision is now unconstitutional, the remainder of the ACA (with the exception of certain core provisions, not including the BPCIA provisions) is severable from the unconstitutional provision. The government’s brief in 2018 stated that many of the “‘minor’ provisions” of the ACA “serve purposes far removed from the individual mandate,” and thus the absence of the individual mandate provision would not affect the functioning of these provisions.[3] The district court, however, sided with the plaintiffs and rendered the entire ACA invalid.[4]

DOJ’s position reversal

In March 2020, the Supreme Court granted certiorari to review, among other issues, whether all other provisions of the ACA can stand without the individual mandate provision. In its brief to the Court, DOJ notably reversed its position on the severability of the other ACA provisions from the individual mandate provision. Not only are the core provisions inseverable from the individual mandate, the government argued, but so is every other provision of the law because they would not exist but for the individual mandate provision. Even where a provision could operate in isolation from such health insurance-related provisions, “minor,” ancillary provisions that were tacked on to the bill should be held inoperative once the core provisions have been struck down because “[t]here is no reason to believe that Congress would have enacted them independently.”[5] One of those so-called “minor” provisions included in the ACA is the BPCIA, which raises the possibility that the BPCIA would be declared invalid if the Court were to agree with the government’s position.

Impact on the BPCIA

Despite DOJ’s position, there remain strong arguments in favor of the BPCIA’s severability. Supreme Court precedent establishes a “presumption in favor of severability” unless the inseverable provisions are “so interwoven” with the intended operation of the other provisions.[6] In a case decided on June 29, 2020, the Court declared that, “generally speaking, when confronting a constitutional flaw in a statute, we try to limit the solution to the problem, severing any problematic portions while leaving the remainder intact . . . . [P]rovisions within the legislative power may stand if separable from the bad.”[7] Finding the BPCIA severable would be consistent with this principle, because the BPCIA has little relationship to the health insurance context and is intended to operate independently from the individual mandate. Additionally, in another case decided on July 6, 2020, the Court reaffirmed its preference for “surgical severance rather than wholesale destruction” and noted that it is “fairly unusual for the remainder of a law not to be operative” after the removal of the offending provision.[8]

Further, although the government is asking the Court to declare the law invalid in its entirety, the scope of the requested relief is narrow. DOJ asks the Court to limit its remedy to “enforcement of the insurance reforms and other ACA provisions that injure the individual plaintiffs.”[9] The injuries referenced by the plaintiffs are the financial harms imposed by the health insurance reforms and therefore have no connection to the BPCIA.[10]

If, however, the Supreme Court were to hold the individual mandate unconstitutional and find the BPCIA inseverable, Congress could always simply reenact the BPCIA by itself. However, several significant provisions of the BPCIA are controversial and may impede a swift re-adoption of the Act, particularly during a time when Congress must focus on matters more directly associated with the COVID-19 crisis. For example, the drafting of a new BPCIA would reignite vigorous debates over the length of market exclusivity granted to pioneer biologic manufacturers, as well as other innovator benefits.

During a period in which there may be a lapse of statutory authority, FDA would be expected to stop approving new biosimilars and application supplements. Before BPCIA was enacted, FDA had repeatedly taken the position that the agency lacked statutory authority to approve biosimilar products. FDA would likely maintain this view as to new approvals, but would exercise enforcement discretion to allow the continued marketing of currently approved biosimilars during the interim period until Congress provided a legislative solution. Such agency action would be consistent with judicial precedents allowing the FDA to establish enforcement priorities in similar situations.[11]

 

[3] Federal Defendants’ Memorandum in Response to Plaintiffs’ Application for Preliminary Injunction at 18, Texas v. United States, No. 4:18-cv-167 (Jun. 07, 2018). Minor provisions are those removed from the individual mandate, the guaranteed-issue and community-rating requirements, and the purchase of health insurance in general. Id.

[7] Seila Law LLC v. Consumer Fin. Prot. Bureau, 591 U.S. —– , —– (2020) (slip op., at 32) (internal citations omitted). Here the Court severed the constitutionally defective provision of the law but allowed the remainder of the statute to stand. We note, however, that the statute in question had a severability clause. The ACA does not.

[8] Barr v. Am. Assn. of Political Consultants, Inc., 591 U.S. —– , —– (2020) (slip op., at 15, 17). The Court severed the unconstitutional restriction from the statute in accordance with the statute’s severability clause. The Court stated that even if the severability clause did not apply, the presumption of severability would require severability. Id. at 18.

[11] See, e.g., Jerome Stevens, Inc. v. Food & Drug Admin., 402 F.3d 1249, 1257-58 (D.C. Cir. 2005) (validating FDA’s exercise of enforcement discretion for marketing unapproved levothyroxine under timeframes defined in guidance).

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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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