On July 21, 2015, in Amgen Inc. v. Sandoz Inc., No. 15-1499, (Fed. Cir. July 21, 2015), the U.S. Court of Appeals for the Federal Circuit issued a long-anticipated decision concerning the necessity and timing of certain disclosures by companies seeking an FDA license to market a biosimilar drug. In short, the split decision holds that (a) the so-called “patent dance,” i.e., the disclosure of the biosimilar application and identification of patents, is not mandatory, and (b) the biosimilar applicant’s notice of commercial marketing cannot be made until FDA actually grants a license for the biosimilar product. The decision is a partial victory for Amgen, providing a 180-day extension of its exclusivity period for its product Neupogen®, but it is also a significant victory for biosimilar applicants who hope to delay disclosure of their biosimilar applications and manufacturing information. Of course, the parties will likely seek rehearing en banc, so the legal issues are far from settled.

The Biologics Price Competition and Innovation Act of 2009 (BPCIA)

Congress enacted the BPCIA to address concerns about a perceived lack of competition in the biologics drugs market. The BPCIA includes three major elements. First, the BPCIA establishes a pathway for submitting an abbreviated biologics license application (aBLA) for approval of competing versions of previously marketed biologics. Specifically, the BPCIA regulates follow-on biologics, or “biosimilars.” The Food and Drug Administration (FDA) plays a central role in determining the particular standards for establishing “biosimilarity” and “interchangeability” for individual products. Second, the BPCIA allows FDA-administered periods of regulatory exclusivity for certain brand name drugs and follow-on products. The BPCIA also creates a term of regulatory exclusivity for the applicant that is the first to demonstrate that its product is interchangeable with the brand name product. Finally, the BPCIA creates a distinct patent dispute resolution procedure for use by brand name and follow-on biologic manufacturers.

The Patent Dance Is Not Mandatory Because “Shall” Means “May”

The Federal Circuit first addressed the question of whether a biosimilar applicant is required to disclose its aBLA and manufacturing information in accordance with 42 U.S.C. § (l)(2)(A). The majority (Lourie and Chen) concluded that it was not, despite the use of “shall,” while Judge Newman dissented.

The applicable provision states that “the subsection (k) applicant shall provide to the reference product sponsor a copy of the application submitted to the Secretary under subsection (k), and such other information that describes the process or processes used to manufacture the biological product that is the subject of such application.” 42 U.S.C. § (l)(2)(A). The majority concluded that “shall,” when “read in isolation,” requires mandatory disclosure by the stated deadline. But other sections of the BPCIA gave context that the disclosure was not mandatory. Under 42 U.S.C. § 262(l)(9)(C) and 35 U.S.C. § 271(e)(2)(C)(ii), if the biosimilar applicant fails to make the disclosure, the Reference Product Sponsor (RPS) may bring a declaratory judgment infringement action. Thus, the fallback option expressly contemplated a scenario in which the biosimilar applicant would not make the disclosure under § (l)(2)(A). Under the majority’s view, “mandating compliance with paragraph (l)(2)(A) in all circumstances would render paragraph (l)(9)(C) and 35 U.S.C. § 271(e)(2)(C)(ii) superfluous” and thus incorrect.1

In dissent, Judge Newman wrote that “[t]his designated exchange of information is fundamental to the BPCIA purposes of efficient resolution of patent issues.”2 Judge Newman also took issue with the majority’s footnote suggesting that an RPS could assert a process patent in a declaratory judgment action brought pursuant to 42 U.S.C. § 262(l)(9)(C) and 35 U.S.C. § 271(e)(2)(C)(ii).

This ruling has important implications and will affect strategic decisions for biosimilar applicants and reference product sponsors. A company will have to decide whether resolution of the biosimilar patent issues is best resolved through the “patent dance” process established by the BPCIA or through traditional district court litigation via a declaratory judgment action. Moreover, the possibility of asserting process patents in the declaratory judgment action may be a significant factor in deciding which route to choose.

The Marketing Notification Cannot Be Made Until FDA Approves the aBLA, But the Notification is Mandatory Because “Shall” Means “Shall”

The second main issue concerned the marketing notification requirement set forth at 42 U.S.C. § 262(l)(8)(A). Under this provision, the biosimilar 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).” Here, the question was whether Sandoz’s early notice—provided before the FDA approved a license for Sandoz’s biosimilar product—satisfied the mandate. The majority held that early notification did not count. Thus, under the majority’s ruling, the reference product sponsor will have an extra 180 days of exclusivity.

The majority (this time, Lourie and Newman) agreed with Amgen’s argument that the provision’s use of the term “licensed” meant that the product must have already received a license, and not merely a product for which an application was pending.

We agree with Amgen that, under paragraph (l)(8)(A), a subsection (k) applicant may only give effective notice of commercial marketing after the FDA has licensed its product. The statutory language compels such an interpretation. It means that notice, to be effective under this statute, must be given only after the product is licensed by the FDA.3

The majority recognized that other sections of the BPCIA distinguished between “biological product licensed under subsection (k)” and “the biological product that is the subject of” an application. The court also concluded that “Congress intended the notice to follow licensure, at which time the product, its therapeutic uses, and its manufacturing processes are fixed.”4

In this case, Sandoz had provided its initial notice of marketing in July 2014, the day after FDA accepted Sandoz’s aBLA application for review. That notice, under the court’s holding, was “premature and ineffective.” Sandoz also provided a “further” notice of commercial marketing on March 6, 2015, the day the FDA approved Sandoz’s aBLA. The court held that this second notice was “operative and effective.” Thus, Sandoz may not market its product until September 2, 2015.

As with § 262(l)(2)(A), supra, the provision for the marketing notice uses the word “shall.” But with the marketing notice provision, the court viewed “shall” to be mandatory because it did “not find any provision in the BPCIA that contemplates, or specifies the consequence for, noncompliance with paragraph (l)(8)(A) here, which would be the case if Sandoz attempts to launch in disregard of the requirement of paragraph (l)(8)(A).”5

The court concluded that “Paragraph (l)(8)(A) is a standalone notice provision in subsection (l),” relying in part on Sandoz’s concession at oral argument.6 The court therefore held “that, where, as here, a subsection (k) applicant completely fails to provide its aBLA and the required manufacturing information to the RPS by the statutory deadline, the requirement of paragraph (l)(8)(A) is mandatory.”7

Judge Chen dissented on the notice requirement issue. Chen concluded that when the biosimilar applicant “fails to comply with (l)(2), the provisions in (l)(3)-(l)(8) cease to matter.” Chen criticized the majority, asserting that it created an “extra-statutory exclusivity windfall” having “no basis in the statutory language.”8