Contributor: Laura W. Smalley
The Northern District of California Holds that the Biologics Price Competition and
Innovation Act Doesn’t Require the Biosimilar Applicant to Provide the Reference Product
Sponsor with its Biologics License Application and that the Applicant Can Provide Notice
of Commercial Marketing Prior to License Approval
The United States District for the Northern District of California issued a ruling on the
Biologics Price Competition and Innovation Act (“Act”) in the pending Amgen Inc. v. Sandoz,
Inc. case on March 19, 2015. Judge Richard Seeborg held that the Act permits the biosimilar
applicant to withhold its license application from the reference product sponsor, and the
sponsor’s sole remedy in that case is an immediate declaratory judgment action. While the Act
provides a process for resolving patent disputes arising from biosimilars, whereby applicants and
sponsors may participate in a series of disclosures and negotiations aimed at narrowing or
eliminating the prospect of patent litigation, the applicant can in essence opt out of that statutory
“patent dance” and forego the litigation safe harbor afforded by the Act. The Court also held that
a biosimilar applicant can provide its 180-day notice of commercial marketing prior to its
biosimilar being approved by the FDA. Partial judgment was entered, and the matter is currently
being appealed to the Federal Circuit Court of Appeals.
The ruling favors biosimilar manufacturers. It permits a biosimilar applicant to either
follow the disclosure and negotiation procedures of the Act, or trigger immediate litigation,
which the reference product sponsor will have to initiate without a copy of the license
application or information regarding the manufacturing processes used. In some instances, this
choice may hinder litigation by reference product sponsors who may have to decide whether to
initiate litigation without a full understanding of which patents may apply to the new biosimilar.
Further, applicants may provide notice of commercial marketing as soon as a license application
is filed, in essence allowing the FDA approval process and any infringement litigation to
proceed concurrently rather than sequentially.
A.
Background
In the pending litigation, plaintiffs Amgen Inc. and Amgen Manufacturing Ltd.
(“Amgen”) moved for judgment as a matter of law seeking a determination that: (1) Sandoz, Inc.
(“Sandoz”) was required to provide Amgen with its Biologics License Application
(“Application”) under 42 U.S.C. § 262(l)(2)(A) of the Act after the FDA accepted the
Application for review; and (2) Sandoz’s notice of commercial marketing was ineffective
because its Application had not been approved by the FDA when the notice was made. Sandoz
cross-moved for judgment as a matter of law that it was not required to provide its Application to
Amgen under the Act and that its notice of commercial marketing was effective. Amgen also
moved for a preliminary injunction on its state law claims (predicated on a determination that
Sandoz violated the Act) to prevent Sandoz from marketing its filgrastim biosimilar. That
motion sought to maintain the status quo pending the Court’s determination on the motions for
judgment as a matter of law regarding the parties’ interpretation of the Act’s patent information
exchange and notice of commercial marketing provisions.
As described in the parties’ papers, the Act created an “abbreviated pathway” to
licensure of a biological product upon determination that the product is demonstrated to be
“biosimilar” to a reference product that has already been licensed by the FDA under 42 U.S.C. §
262(a). Sandoz seeks approval of its biological product filgrastim as a biosimilar to Amgen’s
Neupogen® (filgrastim) under subsection (k) of 42 U.S.C. § 262. Its Application was accepted
by the FDA on July 7, 2014.
The procedure contemplated by the Act is that, within 20 days after an application for a
biosimilar is filed, the applicant must disclose its biosimilar license application “and such other
information that describes the process or processes used to manufacture the biological product
that is the subject of such application” to the developer of the original, approved biologic product
(the “product sponsor”). 42 U.S.C. § 262(l)(2)(A). The purpose of this disclosure is allowing
the product sponsor to determine “whether a claim of patent infringement could reasonably be
asserted if the . . . applicant engaged in the manufacture, use, offering for sale, sale, or
importation into the United States of the biological product that is the subject of the application
under subsection (k).” 42 U.S.C. §§ 262(l)(1)(D), (l)(2)(A).
There follows, on a strict schedule, an exchange of the patents the parties believe could
be infringed by the proposed biosimilar and statements regarding the parties’ positions on the
infringement, validity and enforceability of those patents. The parties negotiate which patents
should be the subject of patent infringement litigation, and thereafter the patent owner is required
to bring an “immediate” patent infringement action based upon the agreed-upon list or
simultaneously exchanged lists. The purpose of this regimented procedure is to facilitate the
prompt resolution of patent disputes and encourage licensing discussions.
That process was not followed in this case. After the acceptance of its Application,
Sandoz did not provide the Application and information about the manufacture of its product
under 42 U.S.C. § 262(l)(2)(A) but offered the Application under different terms than those set
forth in that subsection. Sandoz later stated that it had opted not to provide Amgen with its
Application within 20 days of FDA’s notice of acceptance. Sandoz took the position that the
Act did not mandate provision of the biosimilar license application to the product sponsor and
that the sponsor has a statutory remedy – the right to bring an immediate patent infringement
action – if the applicant chooses not to provide its application.
The parties also sought a determination as to whether Sandoz provided Amgen with an
effective notice of commercial marketing under the Act. The Act states that “The 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).”
42 U.S.C. § 262(l)(8)(A). Sandoz provided notice of its intent to market filgrastim commercially
on July 8, 2014. Amgen argued that the alleged commercial notice did not comply with the Act
because Sandoz’s Application had not been approved by the FDA. Sandoz argued that the Act
did not address the timing of the notice relative to FDA approval and that, under Amgen’s
interpretation of the Act, the reference product sponsor is given an additional six months of
market exclusivity which was not intended by the Act.
B.
The Ruling
The Court ruled in Amgen’s favor, denying (1) Sandoz’s motion for judgment on the
pleadings or for partial summary judgment, and (2) its motion for a preliminary injunction. The
Court dismissed Amgen’s state law claims for unlawful business practices and conversion based
on its determination that Sandoz’s actions did not violate the Act. The Court noted that, through
its amendments to both 42 U.S.C. § 262 and 35 U.S.C. § 271, the Act “enabled a process for
resolving patent disputes arising from biosimilars, whereby applicants and sponsors may
participate in a series of disclosures and negotiations aimed at narrowing or eliminating the
prospect of patent litigation.” While following that process “creates a temporary safe harbor
from declaratory judgment actions, a party’s failure to participate permits the opposing party to
commence patent litigation.” Sandoz, therefore, was within its rights to not engage in 42 U.S.C.
§ 262’s disclosure and dispute resolution process.
As noted by the Court, subsection 262(l) “sets forth a process and timeline by which an
applicant and reference product sponsor ‘shall’ participate in a series of informational exchanges
regarding potential disputes over patent validity and infringement.” If both parties continue to
comply with process, then neither party may bring a declaratory judgment action regarding
patent validity, enforceability or infringement against the other until the applicant provides
notice of its upcoming first commercial marketing. 42 U.S.C. § 262(l)(9)(A)-(C). 35 U.S.C. §
271, which governs patent infringement, provides that the submission of a subsection (k)
application constitutes infringement of patents the product sponsor identified (or could have
identified) as infringed by the applicant’s biosimilar product under subsection (l). 35 U.S.C. §
271(e)(2)(c). The remedies for the infringement in submitting an application include an
injunction, but not monetary damages unless there has been commercial manufacture, use, offer
to sell or sale of an infringing product within the United States. 35 U.S.C. § 271(e)(4)(B)-(D).
Where the infringed patent appears on the parties’ agreed-upon list of patents that should be
subject to an infringement action, 42 U.S.C. § 262(l)(4), or their respective lists of such patents,
42 U.S.C. § 262(l)(5), and the sponsor fails to sue within the timeframe prescribed in subsection
(l), had its suit dismissed without prejudice or did not prosecute its suit to judgment in good
faith, a reasonable royalty is the “sole and exclusive remedy” for infringement. 35 U.S.C.
§271(e)(6).
The Court stated, “[t]ogether, 42 U.S.C. § 262(l) and 35 U.S.C. § 271(e) reflect an
integrated scheme that provides consequences for the choice either party makes at each step of
subsection (l)’s information exchange to carry on the process, or end it and allow patent litigation
to commence.” The tradeoffs include being subject to an immediate declaratory judgment action
for failing to make the required disclosures, or being limited to a reasonable royalty for failing to
bring suit in a timely manner. 42 U.S.C. § 262(l)(6); 35 U.S.C. § 271(e)(6)(A).
While the Court noted that the statutory provisions use the word “shall” to describe the
parties’ obligations to exchange information and negotiate, it found Sandoz’s interpretation –
that the disclosure was not mandatory – “more persuasive.” The term “shall” does not imply that
the detailed action is mandatory in all contexts: “It is fair to read subsection (l) to demand that, if
both parties wish to take advantage of its disclosure procedures, then they ‘shall’ follow the
prescribed procedures; in other words, these procedures are ‘required’ where the parties elect to
take advantage of their benefits, and may be taken away when parties ‘fail.’” As noted by the
Court, its reading of the Act is bolstered by the fact “[t]hat compliance allows an applicant to
enjoy a temporary safe harbor from litigation and, potentially, to resolve or narrow patent
disputes outside court proceedings. . . .” Rather than providing product sponsors specific
remedies, such as a claim for relief and damages, the Act authorized institution of a declaratory
judgment act as the remedy.
The Court noted that “Sandoz’s decision not to comply with subsection (l) reflected how
the statute’s overall scheme operates to promote expedient resolution of patent disputes.” An
applicant can benefit from complying with subsection (l)’s procedures, including learning which
patents the product sponsor believes are valid and infringed before litigation, the opportunity to
assess the factual and legal support for the sponsor’s infringement claims and a certain amount of
control over the timing of the litigation. “An applicant with a high (or unknown) risk of liability
for infringement could benefit considerably from this process: it would be able to undergo the
information exchange while protected by the statute’s safe harbor from litigation, and if
necessary, delay its product launch to protect the investment made in developing its biosimilar.”
On the other hand, the process contemplated by subsection (l) can be slow (up to 230
days may pass before litigation may commence). An applicant who believes it is likely to prevail
in litigation – for example, it believes that no unexpired patents relate to its biosimilar – may
want to forgo the opportunity to obtain information about relevant patents and their validity from
the product sponsor and instead have litigation initiated as soon as possible. That decision does
not deprive the sponsor of the ability to obtain the application and information about the
manufacturing process for the biosimilar because that material can be obtained in discovery in
the immediate lawsuit the sponsor is entitled to bring.
The Court remarked that, had the parties followed subsection (l)’s disclosure and
negotiation procedures, the infringement action filed in October 2014 would not have
commenced until mid-March 2015. Sandoz, therefore, traded in the chance to narrow the scope
of potential litigation with Amgen through subsection (l) for the expediency of an immediate
lawsuit. The Court stated that “The Act’s plain language and overall statutory scheme support a
reading that renders this decision entirely permissible.”
The Court also determined that notice of commercial marketing could be provided
before the biosimilar was approved by the FDA. As noted above, 42 U.S.C. § 262(l)(8)(A)
requires the applicant to “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).” Upon receiving such notice, the product sponsor may seek a court order
enjoining market entry until a court can decide issues of patent validity and/or infringement,
and/or it may initiate a declaratory judgment action. 42 U.S.C. § 262(l)(8)(B), (9)(B). Amgen
argued that the word “licensed” dictated that an applicant may not give the required notice to the
product sponsor until after FDA approval, resulting in a mandatory 180 day post-FDA approval
waiting period prior to biosimilar market entry.
The Court rejected Amgen’s arguments, noting that the “more persuasive interpretation
accounts for the fact that FDA approval must proceed market entry.” Amgen’s reading of the
statute would have a significant impact on the overall statutory scheme, giving it an
unconditional extra six months of market exclusivity over and above the 12 years the product
sponsor is already provided by 42 U.S.C. § 262(k)(7)(a). The Court held that Congress would
have been far more explicit had it intended to create such an extension of the exclusivity period.
The Court held that Sandoz correctly gave Amgen its 180 days’ notice of commercial marketing
pursuant to subsection (l)(8)(a) in July 2014 in advance of receiving FDA approval.
Amgen also contended that 42 U.S.C. § 262(l)(9)(c) barred Sandoz’s counterclaims for
declaratory judgment of non-infringement and invalidity because it had not provided its
Application and manufacturing process information as required by the Act. That subsection
provides that, if the applicant does not provide the required disclosure, “the reference product
sponsor, but not the subsection (k) applicant, may bring an action under section 2201 of Title 28,
[United States Code], for a declaration of infringement, validity, or enforceability of any patent
that claims the biological product or a use of the biological product.” The Court held that
asserting a counterclaim is not the equivalent of commencing a lawsuit and that the Act only
addressed the applicant’s ability to bring an action.
C.
Next Steps
The parties jointly moved for entry of partial judgment under Rule 54(b), and the Court granted
the motion and entered judgment on March 25. Amgen appealed the judgment on the same day.
Amgen moved for an injunction pending appeal, which the parties have briefed. The Federal
Circuit granted the parties’ request to expedite the briefing, which will be completed by the end
of April. Amgen has already filed its opening brief. The parties indicated in the papers that they
are requesting the Federal Circuit to rule on the motion for an injunction by May 11, and hope to
have the appeal scheduled for the June term.
Laura W. Smalley
lsmalley@harrisbeach.com
Harris Beach PLLC
99 Garnsey Road
Pittsford, NY 14534