Riddle Me This: The Federal Circuit Provides a Measure of Clarity to the Enigmatic Biosimilar Approval Pathway

In Amgen Inc. v. Sandoz Inc. (No. 2015-1499), a fractured panel of the Federal Circuit Court of Appeals recently decided two issues of first impression relating to the Biologics Price Competition and Innovation Act of 2009 (“BPCIA”), the statutory scheme establishing an abbreviated pathway for regulatory approval of follow-on biological products. Both the biosimilar applicant (Sandoz) and the reference product sponsor (Amgen) emerged partly victorious, with one two-judge majority agreeing with Sandoz that a biosimilar applicant is not required to disclose its application and manufacturing process to the reference product sponsor, and a different two-judge majority agreeing with Amgen that a biosimilar applicant cannot provide the required 180-day notice of commercial marketing prior to FDA approval, or “licensing,” of the biosimilar product. All three members of the panel joined together, however, in calling out the complexity of the BPCIA, likening it—as Winston Churchill once said of Russia—to “a riddle wrapped in a mystery inside an enigma.”

The BPCIA establishes an abbreviated pathway, analogous to that created by the Hatch-Waxman Act for generic pharmaceutical drugs, that allows a company to seek regulatory approval for a follow-on biological product without the rigor required of the original biologics license. Whereas a biologics license application (“BLA”) requires extensive clinical data establishing the safety and efficacy of the original product, an abbreviated biologics license application (“aBLA”) requires only that the follow-on applicant (also known as a “subsection (k) applicant”) establish that its product is either “biosimilar” to or “interchangeable” with the previously licensed biologic (known as the “reference product”). Compare 42 U.S.C. § 262(a) with id. § 262(k). However, Congress also provided a twelve-year period of exclusivity for the reference product from the date of its first licensure, such that no follow-on product may be sold during that interval, regardless of patent protection. Id. § 262(k)(7)(A). In fact, an application for a biosimilar cannot even be submitted until four years after first licensure of the reference product. Id. § 262(k)(7)(B). In this way, the BPCIA seeks to balance the interests of those engaging in original biologics discovery with the public’s desire for lower cost medical treatment.

The BPCIA also establishes a regime for the reference product sponsor and subsection (k) applicant to narrow and resolve patent infringement disputes. In addition to creating an artificial act of infringement, again not unlike that created by the Hatch-Waxman Act for generic pharmaceutical drugs, the BPCIA also establishes a complex process, often referred to as the “patent dance,” for the exchange of information between the subsection (k) applicant and reference product sponsor. See generally 42 U.S.C. § 262(l). First, within 20 days after an aBLA is accepted by the FDA for review, the BPCIA specifies that a subsection (k) applicant “shall provide to the reference product sponsor a copy of the application submitted... under subsection (k), and such other information that describes the process or processes used to manufacture the biological product that is the subject of such application.” Id. § 262(l)(2)(A). Subsequent to that exchange, the BPCIA also establishes a schedule for the parties to provide each other with lists of patents they believe applicable, along with their respective positions on infringement and validity. Id. § 262(l)(3). The BPCIA then allows the reference product sponsor to bring an action for patent infringement. Id. § 262(l)(6). Finally, a subsection (k) applicant “shall provide notice to the reference product sponsor not later than 180 days before the date of first commercial marketing of the biological product licensed under subsection (k),” thus allowing the reference product sponsor to seek a preliminary injunction prohibiting such activity pursuant to any patent listed by either party as part of the patent dance but excluded from the § 262(l)(6) infringement action. Id. § 262(l)(8)(A)–(B).

Amgen began marketing the biological product filgrastim, branded Neupogen®, in 1991. Sandoz filed an aBLA in May 2014 seeking approval for a biosimilar version of filgrastim and, upon receiving notification from the FDA that its aBLA had been accepted for review, notified Amgen on July 8, 2014 that it intended to launch its biosimilar immediately upon FDA approval of the follow-on product. When Sandoz shortly thereafter elected not to engage in the patent dance, Amgen brought suit in the Northern District of California asserting claims of unfair competition and conversion under California state law, premised on Amgen’s allegation that Sandoz violated the BPCIA by failing to disclose its aBLA and manufacturing information and by prematurely providing notice of commercial marketing prior to licensure by the FDA. Amgen also claimed infringement of its U.S. Patent No. 6,162,427, which claims a method of using filgrastim, under federal law. The FDA approved the aBLA filed by Sandoz on March 6, 2015, on which day Sandoz (again) provided notice of commercial marketing to Amgen.

The district court agreed with Sandoz’s interpretation of the BPCIA, holding that the subsection (k) provision regarding the exchange of information was permissive and not mandatory and further that Sandoz’s notice of its intent to commercially market a filgrastim follow-on product was effective despite being given prior to the FDA’s approval. After the district court dismissed Amgen’s unfair competition and conversion claims and entered final judgment as to that portion of the case, Amgen appealed.

On the first issue, the first panel majority, consisting of Judges Lourie and Chen, agreed with the district court that a follow-on applicant is not required to engage in the patent dance. That majority found that when read in context, the word “shall” in paragraph (l)(2)(A) cannot mean “must” because the BPCIA elsewhere contemplates that a subsection (k) applicant may fail to disclose the information detailed in paragraph (l)(2)(A). Specifically, paragraph (l)(9)(C) provides a remedy for a subsection (k) applicant’s failure to comply with paragraph (l)(2)(A), pursuant to which the reference product sponsor may bring an action for declaratory judgment on any patent. The first majority noted that this would allow the reference product sponsor to obtain the same information specified in paragraph (l)(2)(A) through discovery, which in point of fact Amgen had already done. The majority thus concluded that because Sandoz had taken “a path expressly contemplated by the BPCIA, it did not violate the BPCIA by not disclosing its aBLA and the manufacturing information by the statutory deadline.”

With respect to the timing of a subsection (k) applicant’s notice of commercial marketing, the second panel majority, consisting of Judges Lourie and Newman, concluded that the district court had erred in holding that such notice may be given prior to FDA approval of a biosimilar product. Instead, the panel majority found that the statutory language compelled an interpretation pursuant to which effective notice can be given only after a biosimilar product has been licensed by the FDA. In particular, the majority relied on Congress’s use of the term “biological product licensed under subsection (k)” in paragraph (l)(8)(A), in contrast to other BPCIA provisions that instead use the term “the biological product that is the subject of” the application, reasoning that Congress used “licensed” instead of “subject of” because it intended a different meaning. By requiring that final FDA approval be granted prior to any notice of commercial marketing, Congress sought to ensure that any controversy between the subsection (k) applicant and reference product sponsor would be “fully crystallized,” and thus that the reference product sponsor would not be “left to guess the scope of the approved license and when commercial marketing would actually begin.” The second majority therefore concluded that “under paragraph (l)(8)(A), a subsection (k) applicant may only give effective notice of commercial marketing after the FDA has licensed its product.”

It remains to be seen how long the panel’s guidance on these two issues of first impression remains dispositive, as the fractured decision reveals conflicting judicial opinions that may convince the Federal Circuit to engage in en banc review if requested by either party. In the meantime, neither brand-name biologic companies nor biosimilar companies are left entirely happy. Should other biosimilar companies follow in Sandoz’s footsteps and refuse to share manufacturing information, brand-name biologic companies will be forced to rely on expensive litigation discovery procedures to fully understand which of their patent rights may even be applicable. On the other hand, brand-name biologic companies may now gain an extra six months of exclusivity where FDA licensure of a biosimilar occurs towards the end of the statutory twelve-year term. Only time will tell whether the panel decision in Amgen v. Sandoz identified an effective solution to two of the many riddles posed by the BPCIA.