This article appeared on Law360 on June 4, 2015 and reprinted with permission.
On June 3, 2015, the Federal Circuit heard oral arguments in the closely watched Amgen Inc. v. Sandoz Inc. case, 2015-1499, where Amgen is appealing the Northern District of California’s determination that the “patent dance” provisions of the Biologics Price Competition and Innovation Act are optional, and that Sandoz was justified in providing notice of its intent to market a biosimilar at the time it filed its application at the U.S. Food and Drug Administration.
In ruling that the disclosure and notice provision of the BPCIA was not mandatory, the district court found that: (1) Sandoz was not required, but rather could elect whether to engage in the “patent dance” set out in the BPCIA after it filed its biologics license application seeking abbreviated approval from the FDA to market ZARXIO, a biosimilar version of Amgen’s NEUPOGEN; (2) Sandoz was not required to wait until after the FDA “licensed” ZARXIO to give Amgen (the reference product sponsor) notice under 42 U.S.C. § (l)(8)(A) of Sandoz’s intent to market, but rather properly did so immediately after the FDA accepted Sandoz’s BLA; and (3) the sole remedy available to Amgen (and other RPSs) is a declaratory judgment action under 42 U.S.C. § 262(l)(9).
In its briefing, Amgen argued that the BPCIA was enacted to strike “a balance between two competing policy interests: (1) inducing pioneering research and development of new drugs; and (2) enabling competitors to bring low-cost, generic copies of those drugs to market.” Amgen Open. Br. at 21, 26, 44. As such, posits Amgen, the “patent dance” set forth at 42 U.S.C. § 262(l)(2) is mandatory to maintain that balance without depriving the RPS of the patent and market protections afforded by the BPCIA. A plain reading of the statutory language, including its repeated uses of “shall,” reveals the mandatory nature, argued Amgen. Amgen Open. Br. at 36-41. In opposition, Sandoz maintains that when read in its entirety, the BPCIA’s “patent dance” is not mandatory. Indeed, the statute’s use of “shall” is merely a “condition precedent” for the parties to benefit from the safe harbor protections afforded by the BPCIA. See Sandoz’s Opp. Br. at 26-32. And, because the BPCIA expressly provides for remedies available to both the applicant and the RPS if the other opts out, Congress expressly contemplated that the framework provided by the statute was elective, rather than mandatory. See Sandoz’s Opp. Br. at 32-37.
Similar to its argument regarding “shall,” Amgen argued that a plain reading of the “licensed under subsection (k)” language in 42 U.S.C. § 262(l)(8)(A) requires that the FDA approve, i.e., license the biosimilar before the applicant may provide notice that starts the 180-day clock for marketing. Amgen Open. Br. at 46-47. According to Amgen, there are important policy reasons that require this result, including the uncertainty of what happens if: (1) the FDA requires changes to the applicant’s process before licensure; or (2) the RPS obtains additional patents while the biosimilar is awaiting approval from the FDA.
Sandoz responded that if notice is not allowed until after the FDA licenses the biosimilar, it would impermissibly extend by six months the 12-year period of exclusivity granted to the RPS by statue. “Congress’ pairing of ‘licensed’ with ‘commercial marketing’ simply reflects the fact that a product cannot legally be ‘commercial[ly] market[ed]’ unless it is ‘licensed,’” argued Sandoz, not that it must wait until FDA licenses to provide the required notice. Sandoz’s Opp. Br. at 39 (emphasis and brackets in original).
The third major point raised on appeal was whether a declaratory action under subsection 262(l)(9) is the sole remedy available to the RPS if the applicant fails to participate in the BPCIA’s “patent dance.” Amgen argued that neither the statute nor federal preemption mandate that declaratory judgment is the sole remedy available for Sandoz’s failure. Amgen Open. Br. at 57-61. Thus, argues Amgen, the district court erred in granting Sandoz summary judgment on Amgen’s California Unfair Competition Law and conversion claims. Sandoz responded that “a federal court does not have ‘[b]road [p]ower’ to invent a ‘cause of action’ to provide a ‘remedy’ for purported violations of federal statutes.” Sandoz’s Opp. Br. at 50. Moreover, argued Sandoz, because it has not violated the BPCIA, Amgen has no claim under California law. Id. at 54-58. And, even if it had, federal preemption precludes Amgen’s state causes of action. Id. at 58-59.
“Pulitzer Prize for Complexity”
Judges Pauline Newman, Alan Lourie and Raymond Chen presided over the argument, all three of whom peppered both Amgen and Sandoz’s counsel with questions. From the outset, the Federal Circuit recognized the complexity of the BPCIA, with Judge Lourie commenting that it should receive the “Pulitzer Prize for complexity.”
Principal on the court’s mind was whether in fact the requirements of subsections (l)(2)-(l)(6) were mandatory or elective. Amgen argued that biosimilar applicants had one of two choices: (1) follow the provision of 42 U.S.C. § 262(a), which requires full clinical testing and FDA approval; or (2) follow the abbreviated pathway of subsection (k), which mandates that the “k applicant” follow the framework set out in subsection (l), i.e. the “patent dance.”
Thus, maintained Amgen, if the k applicant chooses the abbreviated pathway, as Sandoz did here, it must provide the information required by subsection (l)(2)-(l)(6) of the BPCIA. Judge Chen focused on subsection’s (l)(9)(C)’s “if provision,” asking “if a (k) applicant fails to provide to follow through on (l)(2), then the consequence of failing to file that requirement is that you, the patent owner, can now file a patent infringement suit,” implying that the requirements of (l)(2)-(l)(6) may be elective. Amgen responded that despite (l)(9)(c)’s language, Sandoz could not avoid the requirements of (l)(2)-(l)(6) to put itself in a better position than it would have been had it followed the Act’s requirements.
Sandoz in turn argued that Amgen was selectively reading subsection (l), and ignoring those portions of the statue that cut against its argument. The court should instead interpret the statute using a holistic approach, which includes reading subsection (l)(9)(C)’s “if” language to mean that a k applicant can opt out of the provisions of subsection (l)(2)-(l)(6), from the beginning, or at various points through the process, posited Sandoz. Judge Chen said he did not see any “choose your own adventure” language for the k applicant in the statute. He asked whether subsection (l)(9)(C) was to provide a mechanism to protect the patent owner in case the k applicant failed to comply with the requirement of (l)(2)-(l)(6). Judge Lourie asked what if subsection (l)(9) did not exist. Sandoz again responded that the provisions of subsection (l) must be read as a whole, but conceded that if subsection (l) did not exist, it would be a “harder issue for us.” Given the language of the statute, however, the provisions were elective, not mandatory, maintained Sandoz.
During Amgen’s rebuttal, the court observed that the facts of this case were atypical. Amgen acknowledged as much, but stated that it was concerned that if clarity was not provided now, other patent owners would similarly run to the courts with burdensome, fire-drill lawsuit. To this, the court responded that if the purpose of the statute was to avoid burdensome litigation, it had failed miserably.
The court next asked whether the act of infringement under the BPCIA occurred when the k applicant filed the BLA, provided notice to the RPS or failed to provide the information under subsections (l)(2)-(l)(6). Amgen responded that it was with the filing of the BLA at the FDA; Sandoz did not disagree with that interpretation.
The court also spent a good amount of time addressing whether notice under subsection (l)(8)(A) can be given with the filing of the BLA at the FDA, or whether it cannot be provided until after the FDA approves the biosimilar application. Amgen argued that if k applicants are permitted to provide notice with the filing of the application, even before the FDA has indicated whether it will accept or approve the application, then it essentially “reduces to zero” the period for the RPS to seek a preliminary injunction prohibiting the k applicant from engaging in commercial manufacture of the biosimilar which might violate some of the “phase two” patents.
Sandoz responded that notice was properly given when it filed the application. Judge Chen asked how Sandoz could give notice when it was “entirely speculative” whether the FDA would approve the application, i.e., it was purely “aspirational.” Sandoz said it provided notice based on its belief that it would receive approval. Judge Lourie followed that when Sandoz presented its application, there was no implication that it would be approved. Sandoz again responded that it provided notice regarding what it believed it would receive. Sandoz added that the statutory language is what is being interpreted, and that says that notice must be given 180 days before commercial marketing; it says nothing about approval. Sandoz provided notice in July 2014 and has not yet marketed. Sandoz also “re-gave notice” after approval in March 2015, which means that in this case, Sandoz has complied under both parties’ theories regarding notice. Sandoz also argued that different from the Hatch-Waxman Act, approval of biosimilars is not tied to patent litigation.
The court briefly touched on the preliminary injunction and the preemption issues, although these were not extensively discussed.
No Clear Answers
In the end, the Federal Circuit tested both parties’ positions regarding whether subsections (l)(2)-(l)(6) are mandatory, not clearly indicating if they were leaning one way or the other. The court seemed more skeptical of Sandoz’s arguments regarding the applicant’s ability to provide notice at the time the BLA is filed at the FDA. The questions seem to indicate that the court is leaning toward an interpretation that effective notice under subsection (l)(8)(A) can only be given after the FDA approves the biosimilar, not at the time the application is filed.
What is clear is that the Federal Circuit recognizes the complexity of the issues and the difficulties they present. Everyone in the life sciences industry will be watching this important case of first impression, which we hope will clarify these important BPCIA provisions.
If you have any questions about this article or would like to discuss the topic further, please contact the authors, Michael Amon or Dr. Tasha Francis.