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ACA Strike-Down: Salvaging the BPCIA via Severability

02 January 2019 Health Care Law Today

Justice Reed O’Connor’s recent decision, Texas et al. v. U.S. et al., No. 4:18-cv-00167-O (E.D. Tex. Dec. 14, 2018), to strike down the entire Patient Protection and Affordable Care Act, 42 U.S.C. § 18001 et seq. (2010) (the ACA) as unconstitutional not only threatens to dismantle health coverage for millions of Americans and protections for people with pre-existing conditions, but the decision could also invalidate the Biologics Price Competition and Innovation Act (BPCIA) of 2009, which was included in the ACA. The decision concludes that ACA provisions are not severable, thus the entire ACA is unconstitutional, which would include the BCPIA.

The BPCIA created an approval pathway for FDA to approve biosimilars. Under the BPCIA, an innovator biologic enjoys 12 years of market exclusivity upon FDA approval. After such time and upon demonstration that a biological product is highly similar to the reference product despite minor differences in clinically inactive components; has an acceptable toxicity profile as determined by animal studies; and the requisite safety, purity, and potency for one (1) or more appropriate conditions of use for which the reference product is licensed; and a determination that the biological product is Interchangeable with the reference product, a biosimilar applicant may be accorded one year of market exclusivity from date of first licensure of the reference product.

Should appellate courts uphold Judge O’Connor’s decision, the BCPIA may have to be reauthorized. Although there would be tremendous pressure for Congress to reenact the BPCIA because the BPCIA has the potential to create savings in the billions of dollars for Medicare alone, a second look at the BPCIA would almost certainly result in renewed debate regarding its more controversial aspects and lobbying efforts by industry and consumer protection groups alike. Central to the discussion would be innovator incentives and the appropriateness of according a pioneer biologic sponsor 12 years or market exclusivity upon approval by the FDA. As recently as 2016, the Price Relief, Innovation, and Competition for Essential Drugs (PRICED) Act was introduced in the U.S. House of Representatives (H.R. 5573) and Senate (S. 3094), which, if enacted, would have reduced the exclusivity period for pioneer biologics from 12 years to seven years.

On appeal, a reviewing court could choose to uphold O’Connor’s holding that the individual mandate of the ACA is unconstitutional while reversing the sweeping move made by O’Connor’s inseverability ruling, which resulted in invalidating the ACA in its entirety. In essence, on appeal, one option for a reviewing court would be to sever the unconstitutional aspects of the ACA while preserving the features of the ACA that do not raise constitutional issues. Key to a severability analysis is whether Congress would have enacted BPCIA absent the other aspects of the ACA. The provision’s procedural history, which evidences passage of the BPCIA without extensive hearings, suggests that Congress would have passed the BPCIA as a standalone bill. Indeed, at the time of its passage, there was strong bipartisan support for the BPCIA, which remains true today. When challenged, Republican congressman have consistently stated that their attempts at dismantling the ACA through legislative efforts would include salvaging the BPCIA.

In the modern era of passing multi-purpose legislation, severability is a key judicial tool to avoid re-litigating constitutional components of unconstitutional bills. The difficulty with this severability approach is that multi-purpose legislation is often a reflection of several rounds of protracted negotiations between both sides of the political aisle. In other words, the final legislation may be a “package deal” reflecting accommodation of various stakeholders with tradeoffs resulting in provisions that are important – perhaps critically so – to different legislators and their constituencies. The legislative history of a bill may or may not accurately reflect whether a bill, in the form in which it was passed, would have been passed absent the other titles within a single bill. Nonetheless, where there is, as there is here, brief yet relatively uncontroversial history and continued bipartisan support for constitutional aspects of an otherwise unconstitutional bill, courts are well within their rights and powers to preserve the constitutional aspects of a bill, such as in the case of the BPCIA in the context of the larger ACA. In doing so, courts could, should the ACA be held unconstitutional in part, avoid a costly shutdown of the biosimilar approval process while the BPCIA is re-assessed, re-debated, and ultimately reauthorized.