On June 12, 2017, the Supreme Court issued a unanimous opinion in Sandoz v. Amgen, interpreting key provisions of the Biologics Price Competition and Innovation Act (BPCIA) in favor of biosimilar manufacturers (applicants).[1] In particular, the Court held that (1) a federal injunction is not available to compel biosimilar applicants to disclose application and manufacturing information as contemplated by the BPCIA, and (2) biosimilar applicants may provide statutory 180-day notice of commercial marketing after or before receiving FDA approval.

The BPCIA “patent dance”

The BPCIA was approved by Congress in 2010 for the purpose of creating an abbreviated approval pathway for biosimilars, or follow-on biologics. In contrast to conventional chemically synthesized drugs, biologics are isolated from natural sources such as animals or microorganisms and may include such diverse products as vaccines, recombinant proteins or somatic cells.[2] Biosimilar manufacturers may take advantage of the BPCIA’s abbreviated approval pathway to piggyback on the safety, purity and potency showings of a previously licensed reference product. In exchange, the BPCIA allows for up to 12 years of regulatory exclusivity for the reference product after the date the product was first licensed, regardless of whether there is patent protection.

Broadly speaking, the BPCIA establishes an elaborate exchange of information relating to patent disputes, triggered by the submission of an abbreviated biologics license application (aBLA) to the Food and Drug Administration (FDA).[3] However, the so-called “patent dance” under the BPCIA has been criticized for being overly complex and was famously characterized by the Federal Circuit as “a riddle wrapped in a mystery inside an enigma.”[4]

The dispute

The dispute between Amgen and Sandoz concerns the biologic filgrastim, a recombinant DNA product indicated for treating side effects of certain forms of cancer therapy. Amgen has marketed filgrastim under the trade name Neupogen since 1991. Sandoz, a biosimilar manufacturer, sought permission to market a biosimilar filgrastim product with the brand name Zarxio, naming Neupogen as the reference product. Instead of complying with the preliminary exchanges as detailed under the BPCIA and providing Amgen with its commercial manufacturing information, Sandoz submitted an application to the FDA and notified Amgen that it planned to market Zarxio immediately upon receiving FDA approval.

The lower court decisions

Amgen sued Sandoz in the United States District Court for the Northern District of California for patent infringement and for state law claims of unfair competition and conversion. Amgen sought injunctions to compel Sandoz to comply with the BPCIA provisions as well as for restitution, attorney’s fees, costs and expenses. Sandoz counterclaimed, seeking declaratory judgment of noninfringement and invalidity, and further seeking declaratory judgment that it correctly interpreted its obligations under the BPCIA.

The district court granted partial judgment on the pleadings, (1) dismissing with prejudice Amgen’s state law claims of unfair competition and conversion, (2) granting judgment on the pleadings to Sandoz on its counterclaim for a declaratory judgment that it correctly interpreted the BPCIA and (3) denying Amgen’s motion for preliminary injunction based on its state law claims.[5] Amgen appealed to the Federal Circuit, which granted an injunction against commercial marketing of Zarxio® pending appeal.

The Federal Circuit affirmed in part, vacated in part and remanded. The Federal Circuit determined that applicants may opt out of the BPCIA, interpreting the BPCIA’s mandate that an applicant “shall provide” application and manufacturing process information within 20 days after acceptance of applicant’s aBLA[6] to mean that the applicant is required to disclose the information only if it avails itself of the BPCIA. Failure to disclose the required information is an act of infringement under 35 U.S.C. §271(e), and the manufacturers of the biological reference product (sponsors) may sue for patent infringement and access the information through discovery. In the same opinion, the Federal Circuit favored sponsors by interpreting 42 U.S.C. § 262(l)(8)(A) to require that an applicant give notice of commercial marketing after the FDA licenses the product, which may result in an extra 180 days of exclusivity for the sponsor.

The Supreme Court granted Sandoz’s petition for certiorari and Amgen’s conditional cross-petition for certiorari.

The Supreme Court’s decision

A. Federal injunctions are not available to enforce compliance with the BPCIA’s information disclosure requirements

The Supreme Court first considered what recourses are available to the sponsor when an applicant fails to provide the sponsor with its application and manufacturing information as required by §262(l)(2)(A). Agreeing with the Federal Circuit’s conclusion, though not its reasoning, the Court determined that an injunction under federal law is not available to enforce §262(l)(2)(A). In particular, the Court determined that the Federal Circuit erred in reasoning that failing to disclose the required information is an act of artificial infringement under §271(e)(4). Instead, the Court held that a sponsor is entitled to bring a declaratory judgment action for artificial infringement under §271(e)(2)(C)(ii), thereby depriving the applicant of the opportunity to bring a declaratory judgment action prior to marketing. The Court remanded for a determination as to whether an injunction is available under state law, leaving open the question of whether failing to comply with the BPCIA is “unlawful” under California’s unfair competition law. The Federal Circuit is also charged with determining whether the BPCIA preempts any additional state law remedy for failure to comply with §262(l)(2)(A).

B. Applicants may give notice of commercial marketing before licensure

Next, the Supreme Court considered whether 42 U.S.C. § 262(l)(8)(A) requires the applicant to provide the sponsor with 180 days’ notice of commercial marketing after licensure but before it begins marketing its biosimilar product. The Court held that the applicant may elect to give “notice” at least 180 days before the date of first commercial marketing. In so holding, the Court interpreted the statute merely to require that a product be licensed at the time it is commercially marketed, not that a product be licensed at the time notice is given. The Court noted that both sides presented “a host” of policy arguments in favor of or against prelicensure notice, but concluded that even the most persuasive policy arguments could not overcome the “plain language” of the statute.

The holding is a blow to biologics manufacturers, which stood to benefit from the extra 180 days of exclusivity that might result if the applicant were prevented from providing notice of commercial marketing until after receiving FDA approval. Some biologic products generate revenues in the billions of dollars a year, so an extra 180 days of market exclusivity might translate into hundreds of millions of dollars in additional revenue.

Overall, the Court’s decision favors biosimilar applicants by allowing them considerable flexibility in choosing how and when to address patent disputes. In situations where branded biologic products have already lost the 12 years of regulatory exclusivity provided for by the BPCIA, biosimilar applicants may choose to bypass the BPCIA altogether. The patent dance could last more than two years before a patent infringement suit is filed, making bypassing the BPCIA in favor of litigating the patents quickly an attractive alternative that could allow biosimilars to reach the market sooner. However, for those products that are still within the 12-year exclusivity period, the Court’s determination that applicants may provide notice of commercial marketing before licensure may incentivize applicants to take advantage of the BPCIA to resolve all patent disputes before the expiration of the regulatory exclusivity period. Even traditional branded pharmaceutical companies have recognized the value of biosimilar products, and many, including Amgen, have biosimilar products in the pipeline.