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Mar 29, 2011

Legal Challenges to Healthcare Reform Threaten Biopharmaceutical Legislation

Initiatives detailed in the Act, like those to boost personalized medicine and comparative effectiveness research, could be lost.

Legal Challenges to Healthcare Reform Threaten Biopharmaceutical Legislation

Judge Vinson’s ruling that the Patient Protection and Affordable Care Act is unconstitutional is under appeal. [Scott Maxwell - Fotolia.com]

  • Less than a year after President Barack Obama signed the Patient Protection and Affordable Care Act, the administration had to appeal a ruling that the entire Act was unconstitutional. Legal challenges stand to negate several provisions in the Act that support domestic biopharmaceutical R&D.

    On March 23, 2010, President Obama signed the Act into law revising the management and financing of healthcare in the U.S. While not specifically directed to the biopharmaceutical industry, there are indeed some mandates that could help the biopharmaceutical industry, e.g., the development of personalized medicine, comparative effectiveness research, and regulation of biosimilars.

    On the same day that the Act was signed, more than 13 states, through their Attorney Generals, filed a lawsuit in the Northern District of Florida against the U.S. Department of Health and Human Services (HHS), the U.S. Department of Treasury, and the U.S. Department of Labor, to stay implementation of the Act on the ground, inter alia, it violates Article I and the Tenth Amendment of the United States Constitution.

    The plaintiffs alleged that the requirement that all citizens carry qualifying healthcare coverage or pay a tax penalty (also known as “the individual mandate”) is a violation of the Commerce Clause of the Constitution (Article 1, § 8, cl. 3). Further alleged is that the Tenth Amendment is violated by the financial burden imposed on the states to comply with the Act. Additionally, the tax penalty required under the Act was alleged to be an unlawful direct tax in violation of Article I, §§ 2 and 9 of the Constitution.

    On January 31, 2011, Judge Roger Vinson of the Northern District of Florida granted plaintiffs’ motion for summary judgment (in part) on the grounds that the individual mandate of the Act violates the Commerce Clause. In the same decision he held the entire Act unconstitutional and void because the individual mandate provision is not severable from the remainder of the Act. This article reviews several key provisions of the Act that would be lost to the biotechnology industry should plaintiffs ultimately prevail.

  • Personalized Medicine

    Personalized medicine seeks to identify the most effective preventive and therapeutic care for each individual patient. Several key provisions of the Act support future R&D that may, in turn, advance the availability and implementation of personalized medicine.

    Section 3011 of the Act prioritizes the establishment of a national strategy to improve the delivery of healthcare services, patient healthcare outcomes, and population health. The national strategy must, in part, enhance the use of healthcare data to improve quality and efficiency and address gaps in quality, efficiency, comparative effectiveness information, and health outcome measures as well as the collection of data.

    Section 3013 of the Act authorizes the HHS Secretary to give funding priority to the development of quality measures that allow the assessment of several factors related to the efficiency and quality of care. Factors include health outcomes and the functional status of patients as well as the experience, quality, and use of information provided about treatment options to make decisions. The Act allows for the appropriation of $75 million for each of fiscal years 2010 through 2014, with amounts appropriated to remain available until expended.

    Under Section 3113, the Secretary can conduct a pilot project to allow separate payment under Medicare Part B at rates to be determined by the Secretary for complex diagnostic tests (as defined by the Act) that link a patient’s genetic makeup to a cancer chemotherapy where no alternative test is available having equivalent performance characteristics and under certain limited circumstances. While the pilot project will be limited to tests on patient samples collected during hospitalization but performed after hospitalization, it will ultimately result in a report to Congress with an assessment of the project’s impact on access to care, quality of care, health outcomes, and Medicare expenditures (including savings).

    Studies in comparative effectiveness are supported in Section 6301 of the Act. It establishes a nonprofit corporation, to be known as the Patient-Centered Outcomes Research Institute, to assist in the analysis of the health outcomes and the clinical effectiveness, risks, and benefits of diagnostic tools as well as pharmaceutical drugs and biologics. The research funded under this section must take into account the potential for differences in the effectiveness of healthcare treatments in various subpopulations. Results of the studies are to be published in a format that is comprehensible to patients and providers, with safeguards to protect patient privacy and confidentiality of study subjects.

    Finally, Section 1201 of the Act prohibits denial of healthcare coverage to an individual based on the individual’s genetic information.

  • Biosimilars

    The Act also amended the Public Health Services Act (PHS Act) to create a framework for the approval by the FDA of biosimilar products. As defined by the Act, a biosimilar is any biological product that is highly similar to a reference product (notwithstanding minor differences in clinically inactive components) and for which there are no clinically meaningful differences between the biological product and the reference product in terms of safety, purity, and potency.

    A key provision of the amended PHS Act is the establishment of exclusivity periods that are independent of patent protection. For example, a 12-year market exclusivity period from the date of licensure of the reference product is provided by the Act. In addition, FDA will not accept an application for a biosimilar of the licensed product during the first four years of the 12-year market exclusivity period. Each of these terms can be extended for an additional six months for biologics that treat pediatric populations.

    If a reference product was approved as an orphan drug, the licensure of a biosimilar may occur after the latter of the expiration of any applicable seven-year orphan drug exclusivity or the 12-year market exclusivity. Each of these periods can be extended by an additional six months for biologicals that treat pediatric patients.

    Similar to patent protection, these exclusivity periods encourage the development of new biological products by providing a period of time for the innovator to recoup the cost of research, development, and licensure of the new biological product. Development and licensure of biosimilar products are likewise encouraged since an abbreviated licensure process is now available for these products thereby reducing the cost and time to bring a biosimilar drug to the market.

  • The Road Ahead

    On March 3, 2011, Judge Vinson stayed his summary judgment order on defendants’ motion to clarify that his prior order was intended to void the entire Act without relieving state governments of their obligation to comply with the law while his ruling is appealed. The stay was conditioned upon the defendants filing their anticipated appeal within seven calendar days of the order and seeking an expedited appellate review, either in the Court of Appeals or within the Supreme Court under Rule 11 of that Court.

    As expected, defendants appealed the ruling to the Eleventh Circuit. On March 11, 2011, the Eleventh Circuit granted in part defendant-appellants’ motion to expedite the disposition of the appeal. All briefing by the parties must be completed by May 25, 2011 and no extensions will be granted. Provided the expedited schedule, resolution of the appeal is likely this summer.

    Should plaintiffs prevail and the entire Act fall, the benefits bestowed upon the biopharmaceutical industry would be lost until new legislation could be implemented. This would be a lengthy and uncertain process with no guarantee that any replacement legislation would contain identical or similar provisions of benefit to the industry. Those in the industry are encouraged to monitor this and similar lawsuits and hope that the benefits of the Act won’t be lost in the legal cross fire.


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