On July 21, 2015, brand-name biologics companies and companies developing biosimilars received a split in a significant decision with industry-wide ramifications in the high-stakes battle about how and when biosimilar products may be brought to market. In Amgen Inc. v. Sandoz Inc. (Appeal No. 2015-1499), a divided panel of the Court of Appeals for the Federal Circuit confirmed that some – but not all – of the elaborate “patent dance” procedures set out in the Biologics Price Competition and Innovation Act (“BPCIA”) for those filing abbreviated biologics license applications (“aBLAs”) with the Food and Drug Administration are optional, providing its stamp of approval for such biosimilar applicants to follow an alternate path to potential market. The decision means that an aBLA applicant will have a more complicated calculus to perform – one that weighs and compares the potential benefits and harms of following two different approval paths. At the same time, the appellate court mandated that an aBLA applicant that opts out of the patent dance path must provide notice of commercialization 180-days in advance, but only after having received FDA license approval – potentially giving the brand-name biologic companies an additional 180 days of exclusivity beyond the 12 years already allotted under the law.

The Federal Circuit’s decision is the first appellate decision to address the BPCIA’s provisions concerning the interaction of aBLA applicants with brand-name biologic companies during the FDA approval process. The two main issues on appeal were whether or not (1) a subsection (k) applicant (a “biosimilar applicant”) is required to disclose to the reference product sponsor (“RPS”) its aBLA and manufacturing information under 42 U.S.C. § 262(l)(2)(A); and (2) a biosimilar applicant must wait for the FDA to approve its aBLA before providing the required statutory notice to the RPS of the biosimilar applicant’s first commercial marketing under § 262(l)(8)(A). The court’s decision on each of these issues came down to the meaning of the word “shall,” and it interpreted that term differently under each of the two mentioned sub-sections.

The first issue centered on provisions in the BPCIA pathway that call for biosimilars makers to supply their aBLAs and manufacturing information to brand-name counterparts shortly after applying for FDA approval. Forty-two U.S.C. § 262(l)(2)(A) states that the aBLA applicant “shall provide to the reference product sponsor a copy of the application . . . and such other information that describes the process or processes used to manufacture the biological product” within 20 days after the applicant has been notified that the aBLA is accepted for review. This exchange of information begins a complicated, detailed process between the two companies of identifying patents and negotiating about them to determine which potentially infringed patents should be the subject of a patent infringement suit even before the biosimilar has come to market. Two of the three judges on the Federal Circuit panel, however, found that “the ‘shall’ provision in [this paragraph] cannot be read in isolation”; that the “latter provisions [of the section] indicate that ‘shall’ in (l)(2)(A) does not mean ‘must”’; and thus, a biosimilar applicant need not comply with the provisions of (l)(2)(A) – i.e., that the provisions were optional, not mandatory. Choosing not to comply subjects the applicant to certain consequences. Chief among them is that the RPS can immediately sue the applicant for patent infringement on as many patents as it deems assertable.

The divided panel, however, went on to interpret the “shall” provision in the notice-of-commercial-marketing paragraph of § 262(l)(8)(A) to be mandatory, at least where the biosimilar applicant has opted out of the “patent dance” procedures. Forty-two U.S.C. § (l)(8)(A) states that the biosimilar applicant “shall provide notice to the [RPS] not later than 180 days before the date of the first commercial marketing of the biological product licensed under subsection (k)”. According to the court, “where . . . a subsection (k) applicant completely fails to provide its aBLA and the required manufacturing information . . . the requirement of paragraph (l)(8)(A) is mandatory.” Of key significance is the court’s conclusion that this mandatory notice cannot be given until the biosimilar applicant has obtained its applied-for license. Since the BPCIA says that approval of a biosimilar may not be made effective by the FDA until after a mandatory 12-year exclusivity period ends, it would appear that the mandatory notice in such a situation effectively guarantees the brand-name biologic company an additional 180 days of exclusivity, at least for that particular biosimilar (although it is arguable that the 180-day period could begin to run as soon as the FDA issues a tentative approval).

Given the particular facts of the Amgen v. Sandoz appeal, a still-open question is whether or not the 180-day notice is mandatory if a biosimilar applicant chooses to undergo the BPCIA’s patent dance procedures. It may be that no such notice is required in that situation, as Judge Chen contended in his dissent.

In sum, biosimilars applicants now have an approved alternative path that they may follow if they are concerned about the delay in the filing of any patent infringement action by the relevant brand-name biologic company that might be caused by undertaking the patent dance. That path, however, comes with its own obligations and risks that may not be present otherwise, including a requirement to provide 180 days’ notice of commercialization. While an en banc rehearing that could dramatically change the rules cannot be ruled out, for the moment the decision tree for biologics companies on both sides of the brand-name/biosimilars fence is increasingly complicated. Given the dollars at stake, making a less-than-ideal choice can indeed be costly.