United States: Could The 'Dance' Already Be Over? ACA Repeal And Biosimilars

As President Donald Trump completes his first several weeks in office, he has made clear that one of his top priorities is repealing the Patient Protection and Affordable Care Act (ACA). What is less clear is the mechanism by which Congress will achieve that goal. What does this mean for the Biologics Price Competition and Innovation Act (BPCIA), the ACA component that provides a litigation pathway for generic biosimilars? The effects could be wide-reaching, not just on the seven pending biosimilar district court cases, but on the biosimilar industry as a whole. This piece reviews relevant events that have already taken place in the executive, legislative, and judicial branches; previews what might happen next; and offers proposed solutions to preserve the expectations of all interested parties.

Enactment of the ACA and the BPCIA

The arduous legislative process that gave the U.S. the ACA is beyond the scope of this article. From the beginning of this process, however, members of Congress from both houses and from both parties recognized that an expedited path for biosimilar approval, somewhat parallel to that found in the Hatch-Waxman Act for small molecules, would be a necessity. Indeed, Sen. Orrin Hatch (R-Utah) co-proposed the amendment to the ACA that helped enact the pathway in the Senate version of the BPCIA, along with Sen. Kay Hagan (D-N.C.) and Sen. Mike Enzi (R-Wyo.). On the Senate floor during debates, Sen. Chris Dodd (D-Conn.) noted that the biosimilar amendment ''was approved with bipartisan support for this very critical and important issue . . . a significant part of this bill.'' Rep. Jay Inslee (D-Wash.), who introduced a similar amendment in the House version of the bill, lauded the amendment as a way to "create a pathway that provides patients with lower-cost medicine without sacrificing safety or eliminating incentives to create breakthrough medicines." In the end, the amendments survived the conference process and made it into the enacted ACA under Title VII, "Improving Access to Innovative Medical Therapies." It was billed as a win-win, "balancing innovation and consumer interests."

The full BPCIA is enacted as § § 7001-7003 of the ACA (codified at 42 U.S.C. § § 262(k)-(l)). Section 7002 sets forth an "Approval Pathway for Biosimilar Biological Products," and introduced a number of changes to regulations and statutes to erect a Food and Drug Administration approval pathway and patent litigation structure akin to that of the Hatch-Waxman Act. Though the ACA was challenged repeatedly in the courts, culminating in two U.S. Supreme Court decisions in 2012 (Nat'l Fed. of Independent Bus. v. Sebelius) and 2015(King v. Burwell), the law survived each time intact. Regulations and guidance across numerous government agencies actually enacting the pathway have been slower in coming; for example, final guidance on the FDA's determination of "biosimilarity" was not promulgated until Dec. 28, 2016, and draft initial guidance on ''interchangeability'' did not arrive until Jan. 17, 2017—just three days before the end of President Obama's term.

The BPCIA 'Dance'

The two portions of the BPCIA address regulatory aspects and patent litigation aspects, respectively. Together, the law creates a regime similar to that of the Hatch-Waxman Act for small-molecule generic drug approval through an Abbreviated New Drug Application (ANDA), but with several key differences. First, the exclusivity periods are longer for a manufacturer of the reference biologic: no abbreviated Biologics License Application (aBLA) may be filed for a biosimilar until four years after the reference product was first licensed, and no biosimilar aBLA may be approved until 12 years after the first licensure. Second, a drug may be either "biosimilar" or "interchangeable"; the distinction is significant because the statute affords additional market protections to the first biologic interchangeable with a branded reference product. Third, methods of manufacture patent claims may be litigated for biosimilars, unlike small molecules.

The most critical difference in the BPCIA regime versus ANDA litigation is how patent litigation may impact the approval and launch of a follow-on biologic. As set forth in 42 U.S.C. § 262(l), a "patent dance" is contemplated consisting of several "rounds" of disclosure and information exchange. Unlike the Hatch-Waxman Act, there is no automatic 30-month stay of FDA approval for the biosimilar application while litigation is underway; the longer exclusivity provisions for reference product sponsors attempt to address this issue.

The dance starts quickly; within just 20 days of acceptance of an aBLA by the FDA, the biosimilar applicant must provide confidential access to its full aBLA application to the sponsor of the reference product, as well as the patent holder if different. If not already present in the application, the biosimilar applicant must provide the reference product sponsor with detailed information about how the product will be made. Sixty days after this initial exchange, the reference product sponsor must provide the biosimilar applicant with a list of unexpired patents for which a claim of infringement could reasonably be made, as well as any licensing offers.

The next round comes 60 days later, when the biosimilar applicant must provide detailed invalidity, unenforceability, and/or non-infringement contentions for each of the patents on the list. These contentions are followed by a responsive set from the reference product sponsor. After this exchange, the parties have 15 days to negotiate in good faith regarding patents for an initial district court litigation; after that period, the innovator then has 30 days to bring suit. If agreement fails, the parties must draw up their own lists of patents, and then the innovator has 30 days to sue on any patent on either list. Per 35 U.S.C. § 271(e)(6), as amended by the ACA, should the innovator fail to meet either 30-day deadline, only a reasonable royalty may be pursued as damages.

A second phase of the dance begins with a second notification by the biosimilar applicant that it will launch its product within 180 days. Both parties can initiate new litigation after this "notice of commercial marketing"; innovators can bring actions for injunctive relief based on new previously-unlisted patents, and applicants can bring declaratory judgment actions for invalidity, unenforceability, and/or non-infringement against any innovator patent not pursued during the first phase. To date, no "second-phase" litigation has been initiated in the U.S.

Utilization of the BPCIA

Although signed into law in 2010, implementation and actual use of this BPCIA pathway took several years, with the FDA issuing its first guidance documents in 2014, and the first biosimilar application being filed by Sandoz that same year. Sandoz's application was subsequently approved in March 2015. Utilization of the BPCIA procedures have since steadily increased, with at least four aBLAs currently before the FDA for review and three to four more pending. To date, the FDA has approved four biosimilars, and two (Sandoz's Zarxio, a biosimilar filgastrim product of Amgen's Neupogen, and Inflecta, a Pfizer/Celltrio biosimilar for Janssen's Remicade infliximab product) are on the market today.

In addition to increased regulatory use of the BPCIA, biosimilar litigations have also increased, with seven litigations currently pending in the district courts. How the patent dance plays out in reality is far from settled, with each litigation having different levels of "dance completion." Various biosimilar applicants sued by innovators have either partially or fully refused to participate in the dance provisions. The first litigation to proceed to the Federal Circuit on these topics, Amgen v. Sandoz, set the initial guidance as to how parties should interpret the provisions of 42 U.S.C. § 262(l). The Federal Circuit held that, as a matter of first impression, biosimilar applicants were not required to participate in the dance at all. However, applicants are required to give innovators the 180-day notice of commercial marketing, and that notice cannot be given until the FDA approves the aBLA. The Federal Circuit denied panel and en banc rehearing in October 2015. The U.S. Supreme Court granted certiorari to review the Federal Circuit decision on Jan. 13, 2017, and will decide both issues this term.

Left unanswered is the effect of potential ACA repeal on the pending district court cases and on the Supreme Court's review. If the BPCIA "dance" ends at the hands of Congress, are the litigations surrounding it mooted? Or could the cases be stayed pending potential resurrection of the BPCIA in a subsequent bill?

Looming Congressional ACA Repeal—Dueling Proposals

ACA repeal was largely a pipe dream before January 2017 since there was no possibility of President Barack Obama signing any bill from Congress repealing what was arguably his signature legislation. Those circumstances did not stop the House from voting to repeal the ACA more than 60 times since its passage. Now, however, with both chambers of Congress and the White House controlled by Republicans, ACA repeal suddenly becomes a much more salient proposition. The devil, however, will be in the details: although Republican members of Congress appear relatively united in their desire to repeal the ACA, exactly how that would be achieved legislatively—or to what extent, if any, provisions of the law will be replaced or left alone—is far less certain. As such, the fate of the BPCIA is not yet settled.

A multitude of Republican members from both chambers of Congress have introduced their own versions of ACA repeal bills, each of which vary in how that would take place. Among the most prominent proposals include: (1) House Speaker Paul Ryan's (Wis.) "Better Way" agenda, which as of the end of January had not yet been formally introduced as a bill; (2) Sen. Ted Cruz's (Texas) "ObamaCare Repeal Act," S. 106; (3) the 170-plus member House Republican Study Committee's "American Health Care Reform Act of 2017," H.R. 277; and (4) Rep. Steve King's (Iowa) own "ObamaCare Repeal Act," H.R. 175. Though not yet introduced in the current Congress, newly confirmed Health and Human Services Secretary Tom Price has also repeatedly introduced numerous bills since the passage of the ACA titled the "Empowering Patients First Act." Notably, not a single one of these bills and proposals specifically address the BPCIA at all—with the only possible inference being that if passed and signed into law, they would repeal the BPCIA provisions along with the rest of the ACA.

Rep. Price was confirmed as head of the Department of Health and Human Services on Feb. 10. Accordingly, the bill Rep. Price sponsored may serve as a key preview of how a Republican Congress might seek to effect ACA repeal. The bill is more comprehensive than many of his colleagues' other proposals; its text stretches for nearly 250 pages detailing how key elements of the ACA might be repealed, semi-retained, or amended. Like many of these other proposals, however, Rep. Price's bill begins largely the same way: "Effective as of the enactment of the Patient Protection and Affordable Care Act (Public Law 111–148), such Act is repealed, and the provisions of law amended or repealed by such Act are restored or revived as if such Act had not been enacted." (emphasis added). The implication is clear: Rep. Price believes the best approach is to tear the entire law down and start rebuilding from scratch. Due to the absence of any BPCIA references, tearing the ACA down would take the BPCIA—and its biosimilar regulatory and litigation pathways—along with it.

Despite the rhetoric surrounding repeal of the ACA, many commentators, and even some members of Congress, have discounted the possibility that the BPCIA provisions would disappear. Indeed, Sen. Bill Cassidy (R-La.), himself a sponsor of ACA repeal legislation, responded to a question on the subject in December 2016, stating that "I can imagine this provision will be carved out, if you will . . . I can imagine this would be one of those things that would be kept." But others are less certain, with one anonymous pharmaceutical industry representative confiding to an industry publication that "If it were to be a complete repeal [of the ACA], then the biosimilar pathway goes too, as BPCIA is Title VII [of the law]." Taking into consideration the bipartisan effort and support for the BPCIA, and its current use by the biosimilar industry, carve-out of the BPCIA would seem to garner support from both parties, if any bipartisan cooperation remains possible today.

Executive and Regulatory Headaches

Another contributing and complicating variable that must be considered in the fate of the biosimilar approval pathway are directives coming from the executive branch. President Trump has shown no shyness in issuing presidential actions, with seven executive orders and 11 presidential memoranda coming down in the administration's first 10 days. At least three of those orders could impact biosimilars in the aftermath of any mode of repeal and replacement of the ACA.

First, President Trump underscored how high a priority ACA repeal is for his administration within hours of taking his oath: his very first executive order issued Jan. 20, 2017, was titled "Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal." The order's purpose is made clear in its opening words: "It is the policy of my Administration to seek the prompt repeal of the Patient Protection and Affordable Care Act (Public Law 111-148), as amended." The order proceeds to authorize agency heads, including the HHS secretary, to "waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the Act that would impose a fiscal burden on any State or a cost, fee, tax, penalty, or regulatory burden on individuals, families, healthcare providers, health insurers, patients, recipients of healthcare services, purchasers of health insurance, or makers of medical devices, products, or medications." Interpretation of this order and any concrete effects it may have on the biosimilar industry is yet to come and would likely be subject to multiple, perhaps conflicting interpretations.

A second potentially significant executive action also was issued on President Trump's first day in office: an executive memorandum from Chief of Staff Reince Priebus titled "Regulatory Freeze Pending Review." On its face, the memorandum appears poised to follow its title, as it mandates that (1) no further regulations should be sent to the Office of the Federal Register until a Senate-confirmed department or agency head nominated by President Trump reviews and approves them; (2) regulations that have been submitted but not
published in the Federal Register are to be withdrawn; and (3) regulations that have published in the Federal Register are to have their effective dates postponed by at least sixty days.

For biosimilars, one immediate impact of this regulatory freeze could be on the FDA's Jan. 17, 2017, draft guidance on interchangeability requirements. Under the freeze memorandum, how will the FDA proceed with the comment period on its draft guidance, and, more importantly, issue final guidance for industry on this issue? Since the guidance did publish in the Federal Register on Jan. 18, 2017, the guidance may fall into the third category above, where the effective date would be postponed. The memorandum leaves doubt about the future of rules such as these, noting that any regulation that "raise[s] substantial questions of law or policy" must be reviewed by the department/agency head as well as the director of the Office of Management and Budget.

And how will a third Jan. 30, 2017, executive order titled "Reducing Regulation and Controlling Regulatory Costs" impact the implementation in regulatory standards for interchangeable biosimilars? The order instructs federal agencies that "for every one new regulation issued, at least two prior regulations be identified for elimination." Given the volume of new rules and regulations that will inevitably follow Congressional action on the ACA, and the speed at which those rules will need to be proposed, evaluated, and enacted in order to avoid a health-care crisis, the Jan. 30 order presents a potential headache for any agency head that the ACA's purview touches. Because implementation of any new regulations would require the identification of two regulations for elimination, any attempt to rebuild a clone of the BPCIA would face a tough road.

In light of these executive branch actions, with more sure to come, restoration of the BPCIA in full, or an ab initio carve-out by Congress, appear to be the most straightforward means of preserving the status quo. With discord brewing among all three branches of government, nothing short of express, full preservation of the BPCIA's text ensures its ongoing survival at the level necessary to maintain the settled expectations of the parties impacted by the law.

Conclusion

If the first weeks of the Trump administration have taught us anything, it's to expect the unexpected. The fates of the ACA, and by extension, the biosimilar regulatory and litigation pathways of the BPCIA, are no exception. Untying the ACA's Gordian knot piece-by-piece would be most optimal, and would create the greatest opportunity to keep the BPCIA provisions as-is. However, the current tension and volatility in Washington may make the necessary coordination among the three branches of government difficult. Parties with interests related to biologics and/or biosimilars may be best served to take a "wait and see" approach, and be poised to take regulatory or enforcement actions as soon as the landscape is clarified.

Reproduced with permission from BNA's Life Sciences Law & Industry Report, 11 LSLR 04, February 17, 2017.

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.