Supreme Court Deliberations on the ACA: Impact on Employers’ Biosimilar Strategy

F. Randy Vogenberg, PhD

This week, veteran employer benefit consultant F. Randy Vogenberg, PhD, RPh, writes about how the Supreme Court’s upcoming decision in State of Texas v. USA can affect self-funded and fully funded employers and how they need to prepare for its ramifications.

There seems to be a common interest in lowering the high costs of pharmaceuticals these days. The specifics of what emerges through legislation, regulation, or litigation is part of the sausage making in Washington, DC. The Trump administration’s removal of drug rebate safe harbors for part D drugs, its most-favored nations rule for part B drug pricing, and its continued attack on the Affordability Care Act (ACA) present all types of potential outcomes that can pharmaceutical access, pricing, and competition.

Which scenarios need to be planned for? Clearly, all of them. Each stakeholder will have to spend time adjusting potential strategies and scenario planning for the 2021–2022 plan years. For the rebate rule and potential fall-out from a nonseverability decision by the Supreme Court in State of Texas v. USA, a transition period of two to three years may allow for existing pharmaceutical contracts to expire or be modified. This will avoid problems in patients being able to access their medications. Whereas an abrupt shift could happen, a catastrophe-like this hasn’t occurred in the past. It is unlikely in the future as programs typically adjust or unwind.  

However, ending the ACA altogether could create chaos in other parts of the health care system that were directly or indirectly changed under the law’s multitude of provisions. But let’s specifically address the biosimilars approval pathway as collateral damage if the Supreme Court’s decision results in the worst-case scenario.

F. Randy Vogenberg

Questions addressed against ACA tend to be narrowly written, avoiding the direct question about ACA constitutionality. A mixed decision will result in winners and losers short-term, and reopen an opportunity for the incoming administration to take presidential license to issue executive orders in the absence of Congressional action.

Should the court strike down the ACA entirely, biosimilars on the U.S. market or in the FDA approval pipeline would have to either be grandfathered in or face a regulatory wind-down. The more likely scenario is that some vestige of a biosimilar pathway will continue without much disruption. One possibility is that manufacturers will be able to continue selling biosimilars while they reapply for approval through either the 351(k) or the 351(a) pathway. The need for additional clinical trials would be unnecessary, given the availability of post-approval real-world evidence for marketed biosimilars. Approved but not marketed biosimilars in the US would have to cobble EU-based real-world data for use with an applied model (e.g., the Employer Value Assessment Tool®). Another distinct possibility is that Congress could step in and pass legislation essentially reauthorizing the Biologics Price Competition and Innovation Act as a free-standing piece of legislation.

Good business practice dictates that employers and health plan sponsors be prepared for the possibility of the ACA, and thus the BPCIA, being struck down. That means being prepared for the best or worst and everything in between. Consider the case of a 10,000-member self-funded employer and how their (1) rebate streams of revenue from their third-party vendor can be disrupted, (2) their policies about biosimilar use will have to be flexible and/or rewritten—in a hurry, (3) the potential effect on C-suite functions (say health care benefit disruption), and (4) the potential effect on company bottom line financials (unknown effect on premiums if ACA is struck down).

If the biosimilar pathway is no longer available, this could affect payer coverage and cause disruptions in patient treatment. Policies should be readied in advance to handle any required shift from biosimilar treatment back to a reference product. This will avoid point-of-care issues and ensure continued optimal access to the biologic. This could also affect marketing as it relates to employer plan coverage policies, out-of-pocket costs to patients, and reimbursement rules in the medical or pharmacy network in-place, missing, or blocking change.

Should that scenario occur, there likely would be a gradual transition process that includes the FDA along with other health care agencies at the federal level, including the Department of Labor, which is responsible for Employee Retirement Income Security Act (ERISA) regulatory oversight. Under ERISA, employers can offer interstate or multistate health insurance plans independent from an individual state’s Insurance Commission’s rules. Plan designs and some coverage policies could run afoul of regulatory requirements of self-funded plans in addition to other related privacy or member coverage provisions by federal or state departments, such ash, finance, or insurance. Coordination of that worst-case scenario would likely play out over years, due to the adverse economic effect of losing a relatively lower-cost product option in the plan sponsor (funded and fully-funded) marketplace. Should the rebate safe harbor also be removed, then economic incentives shift again.

Employers are sometimes slower than others to anticipate or react to fast-paced change in healthcare benefits. They don’t often do enough scenario planning around the healthcare benefits off-cycle. Typical planning cycles take from 12 to 18 months, with most effort occurring in second  or fourth quarters of each year. Timing is further complicated by fewer human resources employees on-staff these days due to the pandemic or other efforts to increase business efficiency through outsourcing.

Healthcare remains a complex marketplace with many direct and indirect stakeholders, so change has been glacial. Biosimilars have just gained some momentum, but now face a different adversary to their use, the litigation to strike down the ACA.

Added to the unique clinical or personal behavior aspects of drug taking of biologics is the important economic impacts of any change in healthcare as it remains one of the biggest sectors of our economy. As a result, any coverage decisions are inherently complex, and more politically charged. In trying to make rapid employer change around healthcare during this everchanging economic rollercoaster ride year of 2020, patience and persistence are required along with a strong value proposition that resonates directly with employers as plan sponsors.

F. Randy Vogenberg, PhD, is Principal of the Institute for Integrated Healthcare and Board Chair, Employer-Provider Interface Council Greenville, SC. He focuses on commercial employee benefits, care delivery and outcomes research, education, and strategic benefit consulting on medical-legal, clinical, or economic issues in commercial health care. He currently serves as Co-Leader, National Employer Biologics & Specialty Initiative with the Midwest Business Group on Health.

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