United States: Federal Circuit Rules That BPCIA Preempts State Law

Last Updated: January 10 2018
Article by John L. Welch

Introduction

Last week, the Federal Circuit issued its opinion on remand in Amgen Inc. v. Sandoz Inc., holding that the Biologics Price Competition and Innovation Act of 2009 (BPCIA) preempts state law remedies for a biosimilar applicant's refusal to comply with information disclosure requirements. Accordingly, to the extent a biosimilar applicant opts, as Sandoz did in this case, not to provide a reference product sponsor (RPS) with its biosimilar application per the timelines set forth in the BPCIA, the sponsor's only recourse is to bring a declaratory judgment action against the biosimilar applicant. Per the Federal Circuit's holding yesterday, an RPS may not pursue state law claims such as unfair competition, conversion, or injunctive relief based on such state law claims, to penalize a biosimilar applicant for declining to comply with federal requirements.

Background

The dispute giving rise to last week's Federal Circuit opinion has been winding through various courts, including the Federal Circuit and the Supreme Court, for several years. A more thorough background on the BPCIA and the facts in this case can be found in our June 2017 Client Alert.

Of most relevance to last week's opinion, in May 2014, Sandoz submitted an application with the FDA seeking approval to market a biosimilar of Amgen's brand-name biologic therapy, Neupogen®. Though BPCIA § 262(l)(2)(A) directs that an applicant "shall provide" the sponsor with a copy of its biosimilar application, Sandoz declined to provide Amgen with its application and manufacturing information. Sandoz's inaction thus avoided triggering the remainder of the "patent dance" requirements set forth in the BPCIA.

Amgen sued Sandoz in the Northern District of California, asserting patent infringement as well as California state law claims for unfair competition and conversion, and argued that Sandoz's failure to comply with § 262(l)(2)(A) warranted injunctive relief both under the BPCIA and California law. In a first round of review, the Federal Circuit held that the remedies contained in the BPCIA are the exclusive federal remedies for an applicant's failure to comply with § 262(l)(2)(A) and that such remedies do not permit enjoining a biosimilar applicant and compelling compliance with § 262(l)(2)(A). Last spring, the Supreme Court affirmed as to the question of federal injunctive relief but remanded to the Federal Circuit to determine whether noncompliance with § 262(l)(2)(A) warrants other remedies under California state law.

Federal Circuit Opinion 

In last week's opinion, the Federal Circuit analyzed whether the BPCIA preempts state law remedies under either "field preemption" (has Congress intended to occupy an entire field?) or "conflict preemption" (is it impossible to comply with both state and federal law or does the state law stand as an obstacle to the accomplishment of the federal law?). The court determined that both were satisfied in this case.

As to field preemption, the Federal Circuit found that "the BPCIA's comprehensive, carefully calibrated 'scheme of federal regulation . . . [is] so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it.'" Moreover, the court found that the "detailed enforcement scheme" already present in the BPCIA provides strong evidence that Congress did not intend to authorize other remedies but rather intended the BPCIA to exclusively occupy the field of patent dispute resolution triggered by the filing of a biosimilar application.

As to the question of conflict preemption, the court noted that Amgen seeks through state law to impose penalties on Sandoz unavailable under the BPCIA for failure to comply with § 262(l)(2)(A)'s disclosure requirements. Such a conflict in the "method of enforcement" between the BPCIA and state law creates "an obstacle to the regulatory system Congress chose." Ultimately, the Federal Circuit recognized that where, as here, "Congress made a deliberate choice not to impose certain penalties for noncompliance with federal law, state laws imposing those penalties 'would interfere with the careful balance struck by Congress.'"

Takeaway

The Federal Circuit's opinion last week was straightforward and served to clarify the scope of recourse available to a brand-name biologic sponsor when a biosimilar applicant refuses to partake in the disclosure and information exchange requirements set forth in the BPCIA. In such a case, under § 262(l)(9)(C), the RPS is entitled to control the timing and venue of an infringement case by bringing a declaratory judgment action for artificial infringement as defined in § 271(e)(2)(C)(ii). However, the RPS cannot compel compliance with the "patent dance" scheme set forth in the BPCIA.

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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