Published in Massachusetts Lawyers Weekly
On July 21 the U.S. Court of Appeals for the Federal Circuit issued an opinion interpreting key provisions of the Biologics Price Competition and Innovation Act of 2009 in Amgen, Inc. v. Sandoz, Inc. The BPCIA allows the Food and Drug Administration to approve new biological drugs, or biologics, that function identically to previously-licensed biologics. The BPCIA creates an abbreviated approval pathway that enables an applicant for a so-called “biosimilar” to rely on much of the clinical data used during approval of the drug that the biosimilar is intended to imitate, i.e., the reference biologic.
On March 6 the FDA granted the first biosimilar license in the U.S. to Sandoz’s Zarxio, which is biosimilar to Amgen’s Neupogen. Due to the Federal Circuit’s decision in Amgen, however, Sandoz will not be able to launch Zarxio until September. A primary objective of the BPCIA is to lower the cost of biologics by encouraging the development of biosimilars to compete with existing biologics in the relevant markets. The BPCIA is modeled on the Drug Price Competition and Patent Term Restoration Act of 1984, commonly called the “Hatch-Waxman Act,” which has been highly successful at creating a market for generic competition to chemical drugs, i.e., synthetically-derived compounds, often called “small-molecule” drugs.
The Hatch-Waxman Act provides an expedited mechanism for FDA approval of new small-molecule drugs that are structurally identical to previously-licensed drugs. The BPCIA seeks to emulate the success of the Hatch-Waxman Act while addressing the unique issues that arise in the approval process for biologics, which are inherently more complex than small-molecule drugs.
An important difference between the Hatch-Waxman Act and the BPCIA pertains to the requirements for disclosure of patents that protect approved drugs. Under the Hatch-Waxman Act, the sponsor of an approved drug must disclose all patents that cover the drug’s structure and method of use. The patents, along with other information about the drug, are listed in a public compendium commonly called the “Orange Book.”
Care to Dance?
An applicant for approval of a generic small-molecule drug must certify that marketing of its product would not create liability for infringing any of the listed patents that protect the approved, brand-name version. In contrast, the approval pathway for novel biologics does not require sponsors to disclose patents related to their products.
Consequently, the BPCIA establishes a mechanism in which patent information is exchanged privately between a biosimilar applicant and the reference product sponsor, or RPS. This novel and complex process, sometimes called the “patent dance,” was at the core of the dispute in Amgen.
The first BPCIA-related issue in Amgen was whether a biosimilar applicant is required to participate in the patent dance. According to the BPCIA, a biosimilar applicant “shall provide to the reference product sponsor a copy of the application” within 20 days of receiving notice that the FDA has accepted the application for review. Sandoz was informed that its Zarxio application, which referenced Neupogen, had been accepted for review on July 7, 2014. The following day Sandoz notified Amgen of the filing but did not provide a copy of the application. When Amgen requested a copy, Sandoz responded that it had “opted not to provide” the application within the statutory time frame. A separate provision of the BPCIA states that a biosimilar applicant that fails to provide the application to the RPS constructively infringes any patent that claims the biologic or its use. Consequently, Amgen sued Sandoz in October 2014 for patent infringement as well as unfair competition and conversion.
In a split decision, two members of the Federal Circuit’s three-judge panel held that the BPCIA does not require Sandoz to engage in the patent dance. Writing for the majority, Judge Alan D. Lourie noted that the subsection of the statute containing the relevant provision uses the verb “shall,” whereas the following subsection uses the verb “may.” Lourie conceded that such a language distinction would support a reading that the “shall” provision is mandatory if the provision were taken in isolation. According to Lourie, however, this provision “cannot be read in isolation.”
As indicated above, other sections of the statute allow the RPS to sue for patent infringement if the biosimilar applicant fails to disclose the application within the prescribed period. Thus, Lourie reasoned, the BPCIA contemplates that a biosimilar applicant might take such a course of action because the statute affords the RPS recourse for when it occurs. Consequently, compliance with the statutory provision to provide the biosimilar application to the RPS is optional, and Sandoz had the right not to share its application with Amgen.
Also contested in Amgen was the BPCIA’s provision on notice of commercial marketing. Under the BPCIA, a biosimilar applicant “shall provide notice to the reference product sponsor not later than 180 days before the date of the first commercial marketing of the biological product licensed under subsection (k).”
The first issue related to this provision was whether notice could be provided before the biosimilar has received FDA approval. In its communication to Amgen on July 8, 2014, Sandoz indicated that it intended to market Zarxio immediately upon approval. When Zarxio was approved on March 6, Sandoz again notified Amgen of its intent to market the biosimilar. Sandoz argued, however, that it had fulfilled the statutory requirements with its July 2014 notice and was therefore entitled to begin marketing Zarxio in March.
On the only issue on which the panel was unanimous, the Federal Circuit held that Sandoz’s July 2014 notice of commercial marketing was ineffective. According to the court, the BPCIA requires a biosimilar applicant to give notice to the RPS after the biosimilar has been approved. The court noted that the provision for notice of commercial marketing refers to “the biological product licensed under subsection (k),” whereas other provisions related to the patent dance describe “the biological product that is the subject of [the] application.” The court also observed that products can change during the application process. Consequently, an RPS may not know which of its patents to assert until the biosimilar and its uses have been finalized.
A related issue was whether providing notice of commercial marketing is mandatory for a biosimilar applicant. The majority answered this question in the affirmative. Here Lourie found that the “shall provide” language of the provision was not countervailed by other provisions that specify the consequences of failing to do so.
In contrast to the provisions relating to the patent dance, the provisions on notice of commercial marketing provide no remedy to the RPS for the applicant’s failure to disclose its plans. Thus, because the BPCIA does not contemplate noncompliance with this provision, it is obligatory. Adopting this interpretation, the court found that Sandoz had not fulfilled its notice obligations until its communication on March 6 and therefore could not market Zarxio until Sept. 2.
Perhaps the most surprising outcome of Amgen is its effect on patent-independent market exclusivity of biologics. The BPCIA forbids FDA approval of a biosimilar until 12 years after licensure of the reference biologic. Amgen effectively extends this period of market exclusivity by nearly six months. Nonetheless, given the complexity of the BPCIA and the divergent opinions of the Amgen panel members, it seems unlikely that we’ve heard the final word on this case.
Mark E. Nickas is an associate at McLane, Graf, Raulerson & Middleton, where he specializes in patent prosecution and client counseling in the life sciences. He holds a doctorate in biology.