News at a Glance – Jun 2015

U.S. Supreme Court Upholds Nationwide Individual Insurance Subsidies. The United States Supreme Court issued its ruling in King v. Burwell, maintaining income-based subsidies that allow millions of Americans to purchase individual health insurance policies from the federal healthcare.gov insurance exchange. In a 6-3 decision, authored by U.S. Chief Justice John G. Roberts, Jr., the Court deferred to the legislative intent of Congress when it drafted and passed the Affordable Care Act more than five years ago. The case centered around one sentence in the law suggesting that subsidies should only be offered through health insurance exchanges established by individual states. Declaring that sentence ambiguous, the Court said it must look to the “broader structure of the Act” to interpret its meaning. In doing so, the Court found interpreting the language to exclude subsidies for individuals enrolling in the federal exchange would “destabilize” state insurance markets and “likely create the very ‘death spirals’ that Congress designed the Act to avoid.” Roughly two-thirds of states rely on the federal exchange for individual health insurance policies. A study released last year by the Urban Institute concluded that an adverse ruling in King v. Burwell would have eliminated subsidies worth $28.8 billion to 9.3 million people, likely causing many to give up their coverage.

Health Diagnostic Laboratory Files for Bankruptcy Protection. Health Diagnostic Laboratory filed for bankruptcy protection earlier this month. The Virginia-based HDL entered into the Chapter 11 filing on June 7 in the Eastern Virginia district of U.S. Bankruptcy Court. Last June 25, the U.S. Department of Health and Human Services’ Office of the Inspector General issued a fraud warning regarding the payments by laboratories to physicians to process samples, warning those payments could constitute an illegal kickback. Less than three months later, the Wall Street Journal published a front-page story highlighting the fraud alert and putting HDL in the spotlight. In April of this year, the company entered into a $47 million settlement with the U.S. Department of Justice regarding how it would process samples. “The confluence of these events and associated media coverage, as well as certain payer issues and changes in billing practices in certain states that affected the fees earned by HDL from each sample test, caused significant disruption to the Company’s business and negatively impacted HDL’s recent financial performance,” the company said in its bankruptcy filing.

Sequenom Loses Patent Dispute on Appeal. The Federal Circuit appeals court upheld a trial court decision that Sequenom’s Patent No. 6,258,540 (referred to as the ‘540 Patent) relating to cell-free fetal DNA (cffDNA) didn’t assert claims that were patent eligible and was thus invalid. The decision addresses claims by Sequenom that Ariosa Diagnostics, Inc., Natera Inc., and DNA Diagnostics Center, Inc. had infringed that patent. The court agreed with Ariosa that the patent claims addressed a natural phenomenon that wasn’t patentable subject matter. Relying on Supreme Court decisions regarding patentable subject matter in Mayo Collaborative Services v. Prometheus Laboratories, Inc. and Association for Molecular Pathology v. Myriad Genetics, the appeals court explained the ‘540 Patent “focused on the use of a natural phenomenon in combination with well-understood, routine, and conventional activity”— that is, routine methods applied in using the cffDNA found in maternal plasma and serum.

Quoting the Myriad decision, the court concluded that “‘groundbreaking, innovative or even brilliant discovery’” and significant contributions to the medical field aren’t automatically patentable. (Ariosa Diagnostics, Inc. v. Sequenom, Inc., Fed. Cir., No. 2014-1139, No. 2014- 1144, 6/12/15).