On March 11, 2009, Congressman Henry Waxman (D-CA) introduced the latest version of a bill to provide for an abbreviated FDA approval pathway for “biosimilar” or “biogeneric” versions of innovator biological drug products. The bill, Promoting Innovation and Access to Life-Saving Medicine Act (H.R. 1427), builds upon many of the concepts from prior follow-on biologics bills, but it also includes several controversial new concepts which raise important legal and policy questions that should be of particular interest to both innovator companies, and those hoping to pursue biosimilar products in the future.

Will Confidential Data in BLA Files Be Open to the Public?

As a longstanding legal and policy matter, the critical data contained in New Drug Applications (NDAs) and Biologics License Applications (BLAs) are strictly protected as confidential commercial trade secret information under the federal Food, Drug, and Cosmetic Act, the Trade Secrets Act, and the Freedom of Information Act. Thus, competitors are not entitled to gain access to or use such information for their own purposes, and FDA officials are prohibited from disclosing such information, at the risk of criminal prosecution. H.R. 1427 contains a provision that could potentially eviscerate these protections.

By way of background, under the Hatch-Waxman amendments, a generic drug may be approved if it is shown to be the same as the reference innovator drug with respect to five key parameters (active ingredient, strength, dosage form, route of administration, and bioequivalence). Where these sameness criteria are met, the law allows FDA to rely on its prior conclusion that the reference drug is safe and effective to conclude that the equivalent generic drug is also safe and effective. Because none of the underlying sameness parameters is a confidential trade secret, and bioequivalence is shown by the generic applicant’s own testing, FDA’s approval conclusion is reached without the need for either the generic applicant or the FDA to access or refer to the confidential data in the NDA file.

For biologics, however, the scientific question of whether the active ingredient of a follow-on product is the same as, or sufficiently similar to, the active ingredient of the innovator product is much more difficult, and in large part may depend upon comparisons of the underlying formulation and manufacturing process data for the two products. Such comparisons cannot be made under current law without violating the trade secret protections described above. For this reason, one key provision of H.R. 1427 raises an intriguing question of whether confidential BLA files will be made available to competitors and the agency in connection with abbreviated biological product applications (ABPA).

Specifically, under this bill, an ABPA is defined as an application “that relies in part on data or information in an application for another biological product.” This is a dramatic change from Waxman’s 2007 biosimilar bill, H.R. 1038, which would allow reliance only on “publicly-available information with respect to the reference product” or “publicly-available information regarding the Secretary’s previous determination that the reference product is safe, pure, and potent.” No comparable provision exists under Hatch-Waxman, so a critical question is whether this provision is intended, or would be interpreted by FDA or the courts, to allow a biosimilar applicant to request and obtain direct access to, or for FDA to directly review and compare, the heretofore protected confidential trade secret data in a reference product BLA. If such an interpretation of this provision were to emerge, a serious constitutional issue would likely arise.

The 5th Amendment to the Constitution provides that “…nor shall private property be taken for public use without just compensation.” Under well-established “takings” jurisprudence, when government action interferes with a “reasonable investment-backed expectation” of a property owner, a “taking” has occurred. For decades NDA and BLA sponsors have had a legally based vested expectation that the critical safety, efficacy, and manufacturing process information for their products would remain confidential. Thus, if H.R. 1427 results in that expectation being altered, a taking would likely occur.

However, that would not be the end of the analysis, because the Constitution does not prohibit takings, it only prohibits takings “without just compensation.” Thus, the question would be whether other provisions of law provide just compensation for such a taking. One way in which compensation might be possible would be to provide adequate regulatory exclusivities to sponsors whose data confidentiality is breached as part of a biosimilar approval pathway. As described below, Congressman Waxman has previously taken a hard line against exclusivities for innovator biologic products, although in the new bill he now proposes several exclusivity opportunities. Given the value of the data generated by BLA sponsors that could potentially be “taken” by operation of the proposed ABPA mechanism, the value and limitations of the proposed exclusivity provisions is of critical importance both as an immediate political and economic matter, and as a matter for potential future legal challenges.

A Concession on Innovator Exclusivity?

One of the major political obstacles to reaching a consensus on biosimilar legislation has been the issue of market exclusivity for innovator biologic products. The biotechnology industry and some members of Congress have called for up to 14 years of exclusivity, but Congressman Waxman’s prior FOB bills have never included any innovator exclusivity period. In H.R. 1427, however, Waxman appears to make a concession to exclusivity advocates by including 5-year and 3-year exclusivity periods, with two mechanisms for extending those exclusivities by up to another year. In this way, and others, the structure of H.R. 1427 appears to parallel that of the 1984 Hatch-Waxman amendments. Closer scrutiny, however, reveals significant limitations that make these incentives less like those in Hatch-Waxman, and more of a concern for innovators. These differences include:

No Data Exclusivity. Under H.R. 1427 a biologic approved under a full BLA is eligible for a 5-year exclusivity period if, among other requirements, it does not contain any “major substance” or “highly similar major substance” previously approved under a BLA. Unlike Hatch-Waxman, this is not a “data exclusivity” because biosimilar applicants and FDA are free to rely “on data or information in an application for another biological product” immediately upon approval of that application, and FDA may approve a biosimilar application immediately upon expiration of the 5-year exclusivity period. In contrast, under Hatch-Waxman the 5-year exclusivity applies by barring the submission of an abbreviated application, and thus operates as a form of data protection. The practical difference is that Hatch-Waxman provides a de-facto market exclusivity period of up to 7 years (because the FDA review period for a generic application cannot begin until the data exclusivity expires) whereas H.R. 1427 provides no more than 5 (barring any extensions discussed below).

Open-Ended Exemption. Under H.R. 1427 eligibility for the 5-year exclusivity also requires that the reference product application “could not and did not rely on any clinical safety, purity, or potency study” from a previously approved biologic or drug. This open-ended limitation potentially opens the door for FDA to deny exclusivity based on the existence of data that FDA decides – after the fact – could have been used in support of the application. To hypothesize, for example, a biochemically novel molecule might, either as a therapeutic mechanism of action or as a temporary side effect, significantly alter some physiological function or process, or the biochemical balance of the body. An obvious issue for approval would be to understand the risks of that therapy-induced change. If a previously-approved but otherwise unrelated drug or biological induced a similar effect and the studies on the prior product showed that doing so posed minimal patient risk, FDA might decide that the sponsor of the new BLA product “could” have relied on that prior study to help demonstrate safety, and on that basis deny 5-year exclusivity. If this limitation survives in any final legislation, biosimilar product sponsors would be well served to scour the scientific literature to identify prior studies that could negate a reference biologic’s exclusivity.

No 3-Year Exclusivity For New Indication Supplements. Unlike Hatch-Waxman, which provides 3-year exclusivity (based on essential new clinical studies) for both new applications for non-NCE drugs, and for supplemental NDAs for new uses of approved drugs, H.R. 1427’s 3-year exclusivity only applies to new original applications for biologics containing previously approved “major substances.” For supplemental applications resulting in new approved uses of a sponsor’s own product, H.R. 1427 provides at most a 6-month extension of the 5- or 3-year exclusivity periods. This extension only applies for changes approved more than one year before expiration of the exclusivity to be extended, and are only applicable to changes that are deemed to be “a significant therapeutic advance.” Moreover, this extension can be reduced to 3 months if the product is deemed a blockbuster – i.e., has greater than $1 billion in gross annual sales in the year before the change is approved.

No Transitional Rights. The 5- and 3-year exclusivity periods are limited to innovator products approved after enactment of the legislation. In contrast, Hatch-Waxman provided transitional provisions to provide at least some protection for recently approved innovator drug products. Other recent biosimilar bills have also included transitional exclusivity provisions. Critics of transitional exclusivity typically argue that no exclusivity incentive is needed for products that have already been approved and marketed, but such arguments overlook the constitutional issue of whether transitional exclusivity is necessary to provide “just compensation” for any “taking” of the original sponsors BLA data.

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In addition to the crucial questions raised by the ABPA approval mechanism and the proposed innovator exclusivity provisions, other provisions of H.R. 1427 raise interesting and important questions, and new strategic opportunities for stakeholders on all sides of the debate, including those discussed below.

A Limited Approach to Bio-Generic Exclusivity.

The new legislation would also provide for potential exclusivity for certain biosimilar products, but in this case abbreviated application sponsors may find the incentives less than ideal. Under Hatch-Waxman, the first generic applicant to challenge a listed patent for an innovator drug becomes eligible for a 180-day exclusivity period as against all subsequent generic challengers. In H.R. 1427, the generic exclusivity is available only to the first biosimilar product that receives an FDA designation of interchangeability with the innovator product. Interchangeability requires the sponsor to demonstrate that “a patient can be switched one or more times between the reference product and the [generic] biological product without an expected increase in the risk of adverse effects…or diminished effectiveness….”

Meeting the interchangeability standard may be difficult, expensive, and rare, yet if a product is deemed interchangeable, the value of the biosimilar exclusivity may be limited. Specifically, the biogeneric exclusivity only delays FDA’s ability to make a similar interchangeability determination for a subsequent follow on biologic product. It does not bar immediate FDA approval of other biosimilar versions of the same product without an interchangeability determination. This limitation may be partially offset, however, by the fact that the bill would also prohibit reference product sponsors from marketing a “rebranded interchangeable” (i.e., “authorized generic”) version of their own product during a biogeneric applicant’s exclusivity period.

Backdoor Interchangeability?

A biosimilar product may only be deemed interchangeable if it is demonstrated that a “patient can be switched one or more times between the reference product and the [biosimilar] biological product without an expected increase in the risk of adverse effects…or diminished effectiveness….” However, when FDA makes a determination that a product is approvable but not interchangeable, the agency would be required to publish a statement that “interchangeability has not been established, but the approved [biosimilar] product is as safe and effective for its intended uses as the reference product.” This absolute and unqualified statement of equal safety and efficacy is a major change from Waxman’s prior bill, H.R. 1038, which would have required FDA to state only that “interchangeability has not been established.” More importantly, the new required FDA statement would appear to be inconsistent with the determination FDA must necessarily make when determining that the biosimilar product is not interchangeable. To the extent physicians, health plans, and state pharmacy regulators would interpret the required FDA statement as an endorsement of interchangeability, patients could be put at risk.

Patent Provisions

H.R. 1427 provides for a regulatory/judicial process for resolving patent disputes. In many respects it is similar to Waxman's previous bill (H.R. 1038) with some notable differences. There are also provisions that differ significantly from the current Hatch-Waxman Act procedures for ANDAs.

First and foremost, control of patent litigation under H.R. 1427 would be in the hands of biosimilar applicants. This is because it is entirely within the applicant’s discretion whether to request patent information from the sponsor of the reference product BLA in order to initiate potential litigation, and whether to challenge any patents identified by the BLA sponsor. Of course, the market realities likely dictate that applicants will continue to attempt to resolve patent issues prior to launch, thereby avoiding injunctions and monetary damages.

Moreover, patent owners are strictly limited to suing only on patents specifically challenged by the biosimilar applicant (until after commercial marketing has begun), and perhaps most significantly, there is no automatic stay of litigation once the innovator files a patent infringement suit. In other words, absent a court-ordered injunction, FDA approval of the biosimilar application will proceed unhindered by any litigation and the applicant will be free to launch its product at risk.

In addition, proposed amendments to the damages section of the Patent Act (35 U.S.C. 271) would in certain circumstances limit an innovator's remedies to only a reasonable royalty. Because this limitation appears to be limited to those patents that the applicant certified against, but were not made part of the initial infringement action by the innovator, the effect will be to encourage patent owners to aggressively assert every challenged patent.

Finally, there are proposed changes to the venue statute (28 U.S.C. § 1404) that provide biosimilar applicants with a new mechanism and improved chances of having a case transferred from a venue selected by the patent owner. This may prove to be a sensitive tactic in practice, because the primary factor for venue change under HR 1427 is that another court would provide more expeditious resolution of cases. A motion to transfer under this provision thus could be seen as an implicit criticism of the original court’s case management record. And, this provision could make “rocket docket” courts like the Eastern District of Virginia, or the Eastern District of Wisconsin, favored venues for biosimilar patent litigation despite the fact that relatively few biosimilar applicants or innovators are based in these jurisdictions.

In short, whatever form this statutory scheme takes in the future, new and difficult strategic calculations by biosimilar applicants and patent owners alike will be required.