Background

In May 2014, Sandoz filed a biologics license application under the abbreviated pathway of the Biologics Price Competition and Innovation Act (BPCIA) at 42 U.S.C. §262(k) (biosimilar application or aBLA) seeking approval by the U.S. Food and Drug Administration (FDA) to market Zarxio™, a biosimilar of Amgen’s Neupogen® (filigrastim) product. On July 8, 2014, Sandoz notified Amgen that it had filed a biosimilar application referencing Neupogen®; it believed that the application would be approved in the first/second quarter of 2015 and it intended to launch its biosimilar product immediately upon FDA approval. On July 24, 2014, Sandoz became the first company to announce that the FDA had accepted a biosimilar application.

According to the patent dispute resolution provisions of the BPCIA (also known affectionately as the “patent dance”), once notified by FDA of acceptance of its application for review, Sandoz had 20 days to provide Amgen with a copy of its application and other manufacturing information. After this initial disclosure, certain other exchanges and disclosures of information were to occur between the parties based on a tight time schedule. However, Sandoz refused to provide this initial or other information alleging that participation in the patent dance was not mandatory. As a result, because Sandoz failed to: (1) provide Amgen with a copy of its application and manufacturing information within the 20 day period, (2) follow any of the other patent dispute resolution procedures of the statute (such as develop a list of patents to enable Amgen to know which, if any, of its patents Zarxio™ might infringe) and (3) provide Amgen with notice 180 days before the first commercial marketing of Zarxio™, Amgen sued Sandoz in the U.S. District Court in the Northern District of California on October 24, 2014. In its complaint, Amgen alleged various state law claims (unfair competition (under Cal. Bus. & Prof. Code §17200 et seq.) and conversion) and infringement of U.S. Patent No. 6,162,427. Amgen also requested a preliminary injunction to prevent Sandoz from marketing Zarxio™.

On March 6, 2015, the FDA approved Zarxio™ for the same five indications approved for Neupogen®. On the same date, although maintaining it gave operative notice of commercial marketing in July 2014, Sandoz gave a further notice of commercial marketing to Amgen.

On March 19, 2015, the District Court denied Amgen’s request for a preliminary injunction agreeing with Sandoz’s interpretation that the BPCIA’s patent dance provisions were optional. Final judgment was entered by the District Court on March 25, 2015 and Amgen appealed to the Federal Circuit on the same day. On March 27, 2015, Amgen sought another preliminary injunction from the District Court pending appeal, or alternatively, an injunction lasting until the Federal Circuit could rule on the appeal. On April 15, 2015, the District Court denied the motion on both grounds.

On April 17, 2015, Amgen filed an emergency motion for an injunction pending appeal with the Federal Circuit pursuant to Fed. R. App. P. 8(a). In its motion, Amgen argued that it would likely succeed on the merits because the District Court erred in its interpretation of the BPCIA. According to Amgen, the District Court, by converting the provisions of the BPCIA from mandatory to optional, “toppled the statutory balance in favour of the Applicant and allowed Applicants to game the system”. Sandoz filed its opposition to the motion on April 24, 2015. On May 5, 2015, the Federal Circuit granted Amgen’s emergency motion, stalling at least temporarily, Sandoz’s commercial launch of Zarxio™. The Federal Circuit expedited Amgen’s appeal and held an oral hearing on June 3, 2015.

Federal Circuit Decision

On Tuesday, July 21, 2015, the Federal Circuit rendered its eagerly awaited decision holding that: (1) a biosimilar applicant is not required to disclose its biosimilar application and manufacturing information to the reference product sponsor (RPS) by the statutory deadline (making participation in the patent dance “optional”); and (2) a biosimilar applicant can only comply with the obligation to provide notice of commercial marketing once the FDA has licensed the biosimilar product for commercial marketing. In addition to deciding issues of first impression relating to the BPCIA, the decision is interesting because it was fractured with each of the three judges writing separately. Judge Lourie wrote the decision and was joined by Judge Chen regarding the interpretation of whether the disclosure of biosimilar application and manufacturing information was mandatory. Judge Lourie was joined by Judge Newman holding that compliance with the commercial marketing notice could only occur once the FDA licensed the biosimilar product.

It is not mandatory that biosimilar applicants turn over their application and manufacturing information to the RPS by the statutory deadline

In determining that a biosimilar applicant is not required to disclose its application and manufacturing information to the RPS by the statutory deadline, the court began by examining 42 U.S.C. §(l)(2)(A) which provides:

Not later than 20 days after the Secretary notifies the subsection (k) applicant that the application has been accepted for review, the subsection (k) applicant shall provide to the reference product sponsor a copy of the application submitted to the Secretary 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…. (emphasis added)

The court noted that when read in isolation, the term “shall” in the above paragraph appeared to mean that a biosimilar applicant (namely, the subsection (k) applicant) was required to disclose its application and manufacturing information to the RPS no later than 20 days after the FDA notified the applicant that its application had been accepted for review. However, the court noted that the “shall” provision could not be read in isolation. Instead, the court noted that this paragraph had to be read in conjunction with other provisions in the BPCIA that explicitly contemplated that a biosimilar applicant might not disclose the required information by the statutory deadline and provided consequences in the event of such failure. Specifically, the court examined 42 U.S.C. §(l)(9)(C) which provides that:

If a subsection (k) applicant fails to provide the application and information required under paragraph (2)(A), the reference product sponsor, but not the subsection (k) applicant, may bring an action under section 2201 of Title 28, for a declaration of infringement, validity or enforceability of any patent that claims the biological product or a use of the biological product. (emphasis added)

The court also examined 35 U.S.C. §271(e)(2)(C)(ii) which was amended by the BPCIA to provide that:

It shall be an act of infringement to submit…if the applicant for the application fails to provide the application and information required under section 351(l)(2)(A) of such Act, an application seeking approval of a biological product for a patent that could be identified pursuant to section 351(l)(3)(A)(i) of such Act…. (emphasis added)

The court noted that paragraph 271(e)(2)(C)(ii), created an artificial “act of infringement” in situations where a biosimilar applicant failed to provide the required information under paragraph (l)(2)(A). In such a circumstance, the RPS could bring an infringement action on any patent that claimed a biological product or a use of a biological product. Interestingly, in a footnote, the court stated that although paragraph 271(e)(2)(C)(ii) recited that an infringement action could be brought on any biological product or use patents and did not appear to include process patents, this section in fact, did allow a RPS to assert process patents. Also, the court noted that once a RPS brings an infringement suit under these provisions, it can access the required information (namely, the biosimilar application and manufacturing information) through discovery.

In support of its interpretation, the court stated that requiring a biosimilar applicant to provide the required information under paragraph (l)(2)(A) under all circumstances would render paragraph (l)(9)(C) and 35 U.S.C. §271(e)(2)(C)(ii) superfluous, and statutes are to be interpreted to avoid rendering any provision superfluous.

The court concluded that when a biosimilar applicant fails to comply with the disclosure requirement by the statutory deadline, 42 U.S.C. §262(l)(9)(C) and 35 U.S.C. §271(e) expressly provide the only remedies – which is a claim of patent infringement. Because Sandoz took a path expressly contemplated by the BPCIA, it did not violate the BPCIA by not disclosing its application and manufacturing information by the statutory deadline.

Notice of Commercial Marketing

The obligation of a biosimilar applicant to give notice of commercial marketing is found in 42 U.S.C. §262(l)(8)(A) which provides that:

[t]he subsection (k) 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). (emphasis added)

In its decision, the court agreed with Amgen that under the above paragraph a biosimilar applicant could only give effective notice of commercial marketing after the product is licensed by the FDA (namely, approved). The court stated that the above paragraph referred to the product as “the biological product licensed under subsection (k), while all the other provisions in subsection (l) referred to the product as “the biological product that is the subject of” the application. According to the court, had Congress intended paragraph (l)(8)(A) to permit effective notice before the product was licensed, it would have used the “subject of” language. Specifically, the court stated:

[W]e believe that Congress intended the notice to follow licensure, at which time the product, its therapeutic uses, and its manufacturing processes are fixed. When a subsection (k) applicant files its aBLA, it likely does not know for certain when, or if, it will obtain FDA licensure. The FDA could request changes to the product during the review process, or it could approve some but not all sought-for uses. Giving notice after FDA licensure, once the scope of the approved license is known and the marketing of the proposed biosimilar product is imminent, allows the RPS to effectively determine whether, and on which patents, to seek a preliminary injunction from the court.

Requiring that a product be licensed before notice of commercial marketing ensures the existence of a fully crystallized controversy regarding the need for injunctive relief. It provides a defined statutory window during which the court and the parties can fairly assess the parties’ rights prior to the launch of the biosimilar product. If a notice of commercial marketing could be given at any time before FDA licensure, the RPS would be left to guess the scope of the approved license and when commercially marketing would actually begin. Indeed, filing an aBLA only suggests that a subsection (k) applicant intends to commercially market its product someday in the future.

The court also considered whether or not the notice provision of (l)(8)(A) was mandatory. According to the court, in circumstances where a biosimilar applicant fails to provide its application and required manufacturing information to the RPS by the statutory deadline, compliance with the notice provision was mandatory. This reasoning seems to suggest that under circumstances where the application and manufacturing information are timely provided that compliance with the notice provision may not be mandatory.

The court also provided reasoning why requiring licensure by the FDA before notice of commercial marketing did not necessarily conflict with the twelve-year exclusivity period provided by the statute. Specifically, the court stated:

[I]t is true that in this case, as we decided infra, Amgen will have an additional 180 days of market exclusion after Sandoz’s effective notice date; that is because Sandoz only filed its aBLA 23 years after Amgen obtained FDA approval of its Neupogen product. Amgen had more than an ‘extra’ 180 days, but that is apparently the way the law, business and the science evolved. That extra 180 days will not likely be the usual case, as aBLAs will often be filed during the 12-year exclusivity period for other products. (emphasis added)

As a result, the court concluded that the notice of commercial marketing given by Sandoz in July 2014, prior to FDA approval of Zarxio™, was “premature and ineffective”. However, the supplemental notice given to Amgen the day the product was approved was operative and effective. As a result, Sandoz will not be able to market Zarxio™ until September 2, 2015.

Dissents

Judge Newman disagreed with the majority opinion that compliance with paragraph (l)(2)(A) was not mandatory. Specifically, she did not agree that this provision excused compliance by a biosimilar applicant, even when an action for infringement was brought. Additionally, she noted that “[S]ubsection (l)(9)(C) provides declaratory jurisdiction only for product or use claims. Absent adequate factual support in a complaint for manufacturing method claims, declaratory jurisdiction may be unsupported.”

Judge Chen disagreed with the majority opinion view of paragraph (l)(8)(A) as a “standalone provision”. According to Judge Chen, the 180-day notice provision was not mandatory. In addition, he stated that paragraph (l)(C)(9) provided the RPS with the sole course of action for failure of the biosimilar application to provide the requisite notice (namely, the right to pursue immediate patent infringement litigation). Judge Chen further stated that the majority’s opinion implicitly provided the RPS with a 180-day injunction beyond the express twelve-year statutory exclusivity period. This amounted to the RPS receiving an extra-statutory windfall.

Key Takeaways

1. If requested, en banc review by the Federal Circuit seems likely. While it is unknown whether Sandoz, Amgen or both will seek review of this decision, if en banc review is requested, it seems likely to be granted given that: (1) this case was the first appellate review of the provisions of the BPCIA; (2) the court admitted to having difficulties in interpreting the statute; (3) the opinion was fractured between the three judges; and (4) this case is of enormous importance to the biopharmaceutical industry.

2. It is unclear whether or not the 180-day notice period is mandatory. While the court was clear that the 180-day notice period was mandatory for a biosimilar applicant that failed to supply its application and manufacturing information by the statutory deadline, the decision was unclear whether or not such notice is required if a biosimilar applicant complies with the patent dance.

3. Time will tell whether or not the extra 180-days of exclusivity will or will not be the “usual” case. Judge Lourie stated in the opinion that the extra 180-days was not likely to be the “usual” case. It will be interesting to watch whether or not this statement proves to be correct.

4. It is unclear what effect the decision will have on the patent dance. Will the decision cause a reduction in patent dance delays in the future? Again, time will tell.

5. Process patents are important. As discussed above, the court stated (in a footnote) that infringement suits brought by a RPS against a biosimilar applicant that failed to supply its application and manufacturing information by the statutory deadline could be brought not only on biological product and use patents, but also process patents.