United States: N.D. Cal Interprets The Biological Price Competition Act

Last Updated: April 9 2015
Article by Monte Cooper

Amgen Inc., et al. v. Sandoz Inc., et al., No. 14-cv-04741RS

On March 19, the Northern District of California became the first court to interpret two key provisions of the Biological Price Competition Act: whether biosimilar applicants must disclose their applications to patentees and how far in advance they must provide notice of their intent to enter the market.

The BPCIA, which was enacted as part of the Affordable Care Act, provides an abbreviated FDA licensing application pathway for producers of "biosimilars," biologic products that have been shown to be substantially similar to a product that has already been on the market for at least twelve years (so-called "reference products").  Pursuant to the BPCIA, the biosimilar's manufacturer may obtain FDA approval to sell its product by relying on safety, purity, and potency data the reference product's manufacturer (or "sponsor") provided to the FDA when it sought approval for the reference product.  This scheme allows the biosimilar applicant to save years of research and millions of dollars in costs in bringing a drug to market.

The BPCIA also provides a process designed to obviate or narrow patent litigation, under which an applicant may confidentially disclose its Biologic License Application ("BLA") and manufacturing information to the reference product sponsor within 20 days of the receiving notice that the FDA has accepted the application for review, thereby allowing the parties jointly to determine which patents the biosimilar may infringe so as to (hopefully) negotiate a consensual license agreement.  While engaged in this process, the applicant enjoys a safe harbor from declaratory judgment actions.  On the other hand, if the applicant elects not to provide the contemplated confidential disclosures, the opposing party may commence patent litigation.

In July 2014, Sandoz applied to the FDA to begin the BPCIA abbreviated approval process for its biosimilar, filgrastim, without disclosing its BLA to Amgen, the maker of the reference product Neupogen.  Amgen filed suit, alleging that this failure gave rise to claims under California's Unfair Competition Law (for not disclosing the application), for conversion (as a result of using Amgen's reference product data), and for infringement of U.S. Patent No. 6,162,427.  Sandoz counterclaimed for declaratory judgment that its conduct did not constitute either unfair competition or conversion, and for noninfringement and invalidity of the '427 patent.

Ruling on Cross-Motions for Judgment on the Pleadings filed by each of the parties, Judge Seeborg dismissed Amgen's unfair competition and conversion claims with prejudice.  In so doing, he resolved two important questions regarding the effect of the BPCIA.

First, Judge Seeborg ruled that the disclosure and negotiation process it provides is optional, rather than mandatory.  Amgen argued that the application disclosure process was a prerequisite for Sandoz to take advantage of the abbreviated application process.  Amgen focused on the statute's repeated use of the arguably mandatory "shall" in each of the provisions of 42 U.S.C. § 262(l)(2)-(8), which describe the parties' obligations under the disclosure and negotiation provisions.  Other provisions relating to the disclosure process use the permissive "may," thereby suggesting that the use of "shall" implies an action is required.  Sandoz meanwhile argued that these provisions only set out what the parties were required to do should they choose to disclose and negotiate, but that an applicant could choose not to disclose its application to a sponsor and instead run the risk of an immediate declaratory judgment action.

Judge Seeborg agreed with Sandoz, finding that the procedures set forth in 42 U.S.C. § 262(l)(2)-(8) only are "required" where the parties takes advantage of their benefits, and may be taken away when the parties "fail."  The District Court felt that the fact that compliance allows an applicant to enjoy a temporary safe harbor from litigation and potentially to resolve or narrow patent disputes outside court proceedings bolstered this reading.  Moreover, other provisions of the BCPIA, such as 42 U.S.C. § 262(l)(9)(B) and (C) contemplate scenarios where an applicant does not comply at all with the compliance procedures, or fails to follow through after having begun the process.  In such circumstances, they allow the reference product holder to immediately initiate patent infringement litigation.  There also was no indication Congress intended to expand the patent holder's substantive rights with additional remedies beyond those offered by the patent statutes.

The second question that Judge Seeborg resolved regarded how much advance notice an applicant must provide to a sponsor before putting its biosimilar on the market.  The BPCIA provides that an applicant "shall provide notice to the reference product sponsor not later than 180 days before the date of the first commercial marketing of the [biosimilar]."  42 U.S.C. § 262(l)(8)(A).  When the sponsor receives such notice, it can initiate a declaratory judgment action and seek an order enjoining sales of the biosimilar.  Amgen, noting that the provision uses the past tense verb "licensed" in referring to when the 180 day notice must be offered, urged an interpretation that required an applicant to first obtain FDA approval and then wait an additional 180 days.  This interpretation had been suggested by the Northern District of California (Judge Chesney) in dicta in another case between Sandoz and Amgen in which Amgen had been the party seeking declaratory judgment.  Amgen further noted that the latter case had been affirmed by the Federal Circuit.

Judge Seeborg noted however that the Federal Circuit had affirmed that prior ruling from Judge Chesney on standing grounds and expressly declined to address the dicta position.  Judge Seeborg thus found the statement unpersuasive, particularly since it seemed to create impacts at odds with BCPIA's scheme by potentially adding an additional unconditional six months of exclusivity to the reference product sponsor's existing market exclusivity.  Accordingly, he agreed with Sandoz that the applicant may provide the required 180-day notice prior to the FDA approving the biosimilar.

As a result of this important and new ruling, a BCPIA applicant potentially can elect not to disclose its biosimilar application within 20 days from when it receives notice from the FDA that it has accepted the application for review, while also potentially side-stepping the risk of an immediate declaratory judgment action by virtue of its not having to disclose the actual BLA and manufacturing information with the reference product sponsor.  And because the applicant can amend its application at any time prior to FDA approval, the 180-day clock may start ticking before a sponsor can be certain which of its patents the biosimilar actually infringe.  This puts sponsors in the position of potentially having to quickly file declaratory judgment actions with limited access to reliable information as to whether or how a biosimilar infringes.  That fact creates a need for biologic innovators to diligently police filings made by biosimilar manufacturers while simultaneously placing pressure for counsel to quickly—but as thoroughly as possible—ensure that there exists a Rule 11 basis for filing suit.

Coda: Citing Judge Seeborg's decision and the fact that there is ongoing litigation, the FDA on March 25 denied a citizen petition from Amgen requesting that the FDA require biosimilar manufacturers to share their applications and manufacturing processes with sponsors.  The FDA left open the possibility that it may revisit the issue when the Amgen/Sandoz litigation has run its course.

The Affordable Care Act already has been the source of much public and political commentary, not to mention contentious litigation.  As Judge Seeborg's opinion and the FDA's reaction reflect, it appears that the extent of the controversies the Acts has created now includes patent litigation.  At a time when Congress already is mulling significant changes to the patent laws, there is one certainty about the effect of the Affordable Care Act on ongoing patent litigation in the pharmaceutical and life sciences fields – it is both certain to increase it and to attract the attention of the nation's lawmakers.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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