• SCOTUS Briefs: Is the minimum coverage provision a tax?

    If the MCP (individual mandate) is a tax described in the Constitution, then Congress had authority to enact it, without regard to the Commerce Clause.  A related but distinct argument is whether it is a tax for purposes of the Anti-Injunction Act; if it satisfies this second definition, then injunctions are improper and this litigation will be delayed until after the first person pays the MCP penalty in 2015 and sues for a refund. (prior TIE coverage here and discussion of the 4th Circuit opinion agreeing with this argument here)

    Nevertheless, the Government and the plaintiffs have all agreed that the MCP isn’t a tax under the Anti-Injunction Act. The Obama Justice Department isn’t running from this fight; nor are they willing to simply kick the can down the road a couple years. Health care markets need to know the constitutional landscape now, not in 2015.  (Court-appointed amici argue otherwise, saying the Court doesn’t have jurisdiction over the MCP in this brief)

    On the Constitutional issue, in addition to the Commerce Clause, the Taxing Power is an independent source of Congressional power under Article I, Section 8. If it is a constitutional tax, forget about broccoli and inactivity – the MCP is constitutional.

    So the Supreme Court asked for briefing on whether the MCP is constitutional under Article I.  Yesterday, I posted on the Commerce Clause sections of the US Government merits brief. Today, let’s look at the tax issue.

    The brief takes a strong stance on the tax issue, starting with the sacred ground of the Question Presented at the beginning of the brief, where they describe the MCP thusly:

    “…nonexempted federal income taxpayers who fail to maintain a minimum level of health insurance for themselves or their dependents will owe a penalty, calculated in part on the basis of the taxpayer’s household income and reported on the taxpayer’s federal income tax return, for each month in which coverage is not maintained in the taxable year. 26 USCA 5000a.”

    The brief sets the MCP in the larger context of the many special tax breaks given to health insurance, especially employer-provided health insurance and the new tax credits under the ACA. The brief does a particularly good job of describing the negative tax consequences imposed on people who self-insure, a point that will be developed further in an amicus brief that will be filed on Friday by Prescription Policy Choices.

    The USG brief proclaims that the MCP “is fully integrated into the tax system, will raise substantial revenue, and triggers only tax consequences for non-compliance.” While Plaintiffs have made much of President Obama’s attempts to hide from the tax label, the brief reminds the Court that in the Congress it was clearly understood as derived under the Taxing Power.  In short:

    “The Court has never held that a revenue-raising provision bearing so many indicia of taxation was beyond Congress’s taxing power, and it should not do so here.”

    For more, see Tim Jost in Health Affairs blog and Brad at ACALitigationBlog

    KO

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  • New series on the ACA SCOTUS briefs

    I’ve been on a break from TIE, celebrating my 25th wedding anniversary.

    But now I’m back, and the Supreme Court briefs on the ACA are rolling in.  The Court accepted argument on 3 issues:

    • Whether the minimum coverage provision (MCP) (aka the individual mandate) is a valid exercise of Congress’ powers under Article I of the Constitution (ie, under either the Tax or Commerce Clause);
    • Whether the Medicaid expansion was coercive to states (the Spending Power coercion issue);
    • If some provisions of ACA are found to be unconstitutional, how much of the law should be struck down (the “severability” issue).

    Today, I’ll just look at the U.S. merits brief for the petitioners, filed last Friday.

    The brief is a clear, fact-based description of the need for health care reform.  It’s the sort of explanation that has been absent from political discussion for a while.  The brief is filled with quotes from Justices Scalia and Kennedy, potential swing votes on the MCP. It also deploys some traditionally conservative themes, such as judicial restraint and law & economics. The brief also embraces the argument that the MCP is a tax, but that will require another post. Some highlights:

    1. The individual mandate was a Republican idea:

    … based on recommendations by the Heritage Foundation and a group of health care economists and lawyers associated with the American Enterprise Institute, both of which supported the mandatory purchase of private insurance so that the sale of insurance and delivery of health care would take advantage of private-sector market efficiencies.

    2. The brief is another example of law & econ at SCOTUS, a discussion that assumes some basic micro:

    In sum, the uninsured as a class presently externalize the risks and costs of much of their health care; the minimum coverage provision will require that they internalize them (or pay a tax penalty).  This is classic economic regulation of economic conduct.

    And:

    They also shift present risk to other market participants, which in monetized in the form of higher insurance premiums now, not later, for those with insurance.  The point of obtaining insurance is to internalize risk, which occurs when the insurance is obtained and the premium paid.  Conversely, the failure to obtain insurance externalizes risk, and that externalization occurs at the time the insurance is not obtained.

    3. Warning SCOTUS against substituting their own policy preferences:

    Congress enacted the Affordable Care Act, and chose to include the minimum coverage provision, after years of careful consideration and after a vigorous national debate.  That was a policy choice the Constitution entrusts the democratically accountable branches to make, and the Court should respect it.

    And:

    Instead of deferring to Congress’s judgments, the Court of Appeals made its own de novo assessment and concluded that, in its view, the minimum coverage provision will not adequately accomplish Congress’s objectives because of its exemptions and enforcement mechanisms.  Pet. App. 151A-152A.  That analysis was “startlingly like strict scrutiny review” and has no place in review of an Act of Congress under the Commerce Power. Id. At 218A (Marcus, J).  It is for Congress, not the courts, to decide how to balance its legislative goals with other concerns.

    Finally, congrats to health law professors Mark Hall & Wendy Mariner for their citations in this brief. They plan to file an amicus brief on Friday.

    KO

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  • Antibiotics as neglected medicines

    On the frequently interesting E-drug listserve last week, the moderator asked whether antibiotics are neglected essential medicines and reports on GSK’s new campaign to ask for higher reimbursement prices for antibiotics. (Bioworld article here, via e-drug)

    We have substantial evidence that antibiotics are indeed too cheap – that the private value is far less than the social value (shorter Health Affairs version here; much longer Yale J Health Policy Law & Ethics version here).

    The most important proviso – any new incentives must be conditioned on companies meeting antibiotic conservation targets.  Otherwise, we are just boosting incentives to quickly exhaust a precious resource. Unlike all other intellectual property, antibiotic IP is exhaustible.  Unlike every other drug class in history, for anti-infectives we want carefully sequenced innovation.

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  • 11th Circuit hands FTC another hospital merger defeat

    The Phoebe Putney decision is here.  Prior TIE coverage of this case here. From the 11th Circuit opinion Dec 9:

    Memorial’s (and thus PPHS’s and PPMH’s) only real competitor is Palmyra Park Hospital, Inc. (“Palmyra”), a subsidiary of HCA, Inc. established in Albany in 1971. Palmyra consists of 248 beds and provides essentially the same services as Memorial. Memorial controls 75 percent and Palmyra 11 percent of their geographic market.

    Nevertheless, the merger was approved under the “state action” doctrine – which exempts states from antitrust law when they act in a sovereign capacity. In this case, the state actor was the local hospital authority rather than the State of Georgia.

    This is an important and unfortunate decision, allowing local hospital districts to facilitate state action mergers. The state action doctrine makes more sense if the state’s residents are paying the bills for monopolies, but in health care, many of the bills are paid by CMS and the rest by private health plans.

    The 11th Circuit simply assumed that Georgia knew what it was doing when it authorized local hospital authorities:

    [T]he Georgia legislature must have anticipated anticompetitive harm when it authorized hospital acquisitions by the authorities…  The legislature could hardly have thought that Georgia’s more rural markets could support so many hospitals that acquisitions by an authority would not harm competition. We therefore conclude that, through the Hospital Authorities Law, the Georgia legislature clearly articulated a policy authorizing the displacement of competition.

    Our hospital antitrust system is broken – every year we have effective competition in fewer geographic areas.

    h/t to Karen Chueng at Fierce Healthcare

    KO

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  • The Grinch almost stole Christmas

    The original briefing schedule for the PPACA Supreme Court cases had many of the parties filing their Petitioner’s briefs in the week between Christmas and New Year’s, with amici due the week after. I’m working on some of these briefs, so I wanted to know what my work commitments would look like in late December. My kids were already expecting the Grinch.

    Happy to report that the primary parties and appointed amici wrote a letter and the Court agreed to delay the briefing blizzard by a week.  See the order for the full details on who files when.

    Nice to see everyone getting along, at least on a procedural matter.

    h/t to Richard Taffe, my BU press guru

    KO

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  • TIE in Australia

    For the next week, I’ll be in Australia, giving talks on tobacco, trade and public health at ANU and U Melbourne.  I’ll also be give a separate talk at ANU on the legal ecology of resistance.  Any Aussie TIE readers are welcome to attend.

    I’m also happy to bleg for food tips, especially on the drive from Canberra to Melbourne.

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  • Smoking the First Amendment

    Over at NEJM, my perspective piece on Tobacco and the First Amendment went online last night.  In a pair of federal lawsuits, most of the tobacco industry is challenging the new FDA graphic warnings and package allocation rules, which together require the top 50% of the front and back of all cigarette packaged to bear striking images of tobacco’s health effects.

    This is yet another example of powerful global corporations using the First Amendment to attack public health regulations. Australia has introduced plain packaging rules for cigarettes, which the companies are challenging under a bilateral investment treaty.

    For the full story, plus a slide show of the graphic images, see the NEJM.

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  • Global trade in generic medicines

    In the Philips Electronics & Nokia cases, the European Court of Justice recently affirmed that patents and trademarks are not enforced against goods in-transit through Europe (C-466/09).  European IP owners are unhappy with the ruling and some academics are unhappy as well (IPKat, for example). The EC has been working on a new tougher Regulation for some time (see Vrins’ article in JIPL&P 2011). But for global health, this is the right ruling.

    In 2009, generic drugs were shipped from India to Africa and Brazil.  Sometimes the most direct route isn’t the cheapest, so these drugs ended up “in-transit” in the Netherlands on their way to Africa and Brazil.  The drugs fully complied with all intellectual property laws in India and Brazil, but the patents had not yet expired in Europe.  The Dutch authorities seized the drugs and triggered a firestorm.  (MSF letter here; my related academic paper here).  If these drugs had been destined for sale in Europe, they would have infringed the patents and trademarks.  But they were just moving through a port in the global stream of commerce.

    Global IP law recognizes that IP rights are territorial, and that each country will apply patent, trademark and copyright rules somewhat differently.  Law can protect the companies’ legitimate expectations of profits in wealthy countries without blocking global trade in fully legal generic medicines.

    The ECJ got it right.

    KO

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  • Pharmacies file Sherman Act antitrust suit against Wyeth, Teva

    Bloomberg reports that Walgreens, Krogers, Safeway and other stores are suing Wyeth and Teva for conspiring to keep a generic version of the Effexor XR antidepressant off the shelf by buying junk patents, adding them to the Orange Book and suing to block generic entry with full knowledge the patents were not being infringed.  Teva is in the suit as it was the first to file for generic status and agreed to a “pay for delay” deal (FTC background paper here; Scott Hemphill’s academic paper here).

    Drug companies call these activities “product lifecycle management.” This case alleges it is a violation of the Sherman Antitrust Act. I pulled the complaint from PACER, which alleges Wyeth made $2.5 billion from these sham patents:

    “11. As a result of Defendants’ exclusionary conduct, generic versions of Effexor XR were illegally blocked from the marketplace from June 2008 through at least June 2010.  During this period of foreclosure, U.S. annual sales of Effexor XR topped $2.5 billion.  Direct purchasers paid significantly more for extended release venlafaxine hydrochloride capsules during this two year window (and continue to pay more for Effexor XR and its generic equivalents) than they would have paid in the absence of Defendants’ illegal and anticompetitive acts.”

    The complaint alleges that Wyeth defrauded the US Patent and Trademark Office in order to abuse the FDA Hatch-Waxman process:

    “46. Wyeth submitted six sequential applications that led to three method of use patents, the ‘171, ‘958, and ‘120 patents.  All three patents are, and have always been, unenforceable; they only issued because Wyeth defrauded the PTO.  These patents prevented generics from coming to market in June of 2008.”

    In addition to the drug stores, the suit is also brought “as the assignee” of the big 3 drug wholesalers – Cardinal Health; AmerisourceBergen; and McKesson. What will they say about Merck Pfizer’s lifecycle extension plans for Lipitor?

    KO

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  • Bilateral monopoly litigation, Pittsburgh edition

    What happens when an unstoppable force meets the immovable object? The Governor threatens to pass a law.

    Duopoly Bilateral monopoly litigation between the largest health system and the largest insurer in western Pennsylvania is turning into a nasty battle.  An update from KHN:

    Last week during a speech at the Pennsylvania Press Club in Harrisburg, Gov. Tom Corbett said he’s “deeply” concerned.

    “In my mind, they are both charities and they are both nonprofits and something is getting lost in between,” he said. “And I will work with the Legislature, if necessary, to address this.”

    The real story here is that Highmark tried to inject some competition into the Pittsburgh market for health care services. Usually the duopolists bilateral monopolists get along just fine, to the detriment of consumers.

    For a round up on most pending major health care antitrust litigation, including this case, see my TIE post from June.

    h/t to Brad F. for the KHN pointer

    UPDATE:  Austin points out that I really meant bilateral monopoly

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