Why Sandoz Appeal to High Court is Important for Biosimilars
As many expected, Sandoz Inc. filed a petition for a writ of certiorari asking the Supreme Court to review the Federal Circuit’s decision in Amgen Inc. v. Sandoz Inc.1,2 Amgen will have an opportunity to not only oppose Sandoz’s petition but also to file a conditional cross petition.3 Amgen is the first Federal Circuit decision to substantively interpret the Biologics Price Competition and Innovation Act of 2009 (“BPCIA”), so whether the Court decides to hear the case will be closely monitored by the biologics industry because it will have a significant economic impact on both reference product sponsors and biosimilar applicants, as well as the general public.4
In its fragmented July 21, 2015 opinion that generated two different dissents, the Federal Circuit held that: (1) a biosimilar applicant does not have to participate in the elaborate patent exchange procedure contemplated by § 351(l) of the PHSA;5 and (2) a biosimilar applicant must provide the reference product sponsor with 180 days’ notice of commercial marketing that is not effective until after the FDA licenses the biosimilar application.6
Sandoz’s petition challenges the Federal Circuit’s second holding relating to notice of commercial marketing. Sandoz contends that a biosimilar applicant can provide the reference product sponsor with notice of commercial marketing prior to the FDA’s licensure of the proposed biosimilar application. Sandoz phrased the question presented as:
Whether notice of commercial marketing given before FDA approval can be effective and whether, in any event, treating Section 262(l)(8)(A) [of Title 42 of the United States Code] as a stand-alone requirement and creating an injunctive remedy that delays all biosimilars by 180 days after approval is improper.7
Pursuant to Supreme Court Rule 15.3, Amgen may file a brief opposing Sandoz’s petition “within 30 days after the case is placed on the docket.” Moreover, Amgen has the same timeframe to file a conditional cross petition pursuant to Supreme Court Rule 12.5. Absent an unduly long extension being granted to Amgen, we expect that the Court will rule on whether to hear the case before its summer recess. If Sandoz’s petition is granted, oral argument will likely be heard during the Court’s October Term 2016, and a decision will not be rendered until 2017.
A. Without An Amgen Cross Petition, Biosimilar Applicants Are Not Required To Participate In The Patent Exchange Procedure
Absent a conditional cross petition by Amgen that is granted by the Court, the Federal Circuit’s holding in Amgen relating to the patent exchange procedure will continue to control the procedures under the BPCIA. As such, biosimilar applicants may elect to not participate in the patent exchange procedure contemplated by § 351(l) of the PHSA.8 The majority opinion authored by Judge Lourie reasoned that the statute should be viewed as a whole and that the BPCIA “explicitly contemplates” that a biosimilar applicant has the right to forgo participation in the patent exchange procedure.9 As noted by the court, § 351(l)(9)(C) provides for a declaratory judgment action when a biosimilar applicant fails to engage in the patent exchange procedure.10 In such circumstances, a reference product sponsor is limited to the remedies provided by § 351(l)(9)(C) and 35 U.S.C. § 271(e).11
Judge Newman, who concurred in part and dissented in part, disagreed with the majority opinion on this issue. According to Judge Newman, the patent exchange procedure is “fundamental to the BPCIA purposes of efficient resolution of patent issues.”12 Responding to the majority opinion, Judge Newman noted that the declaratory judgment provision of § 351(l)(9)(C) does not adequately address a reference product sponsor’s needs because it is only directed to composition and method of use claims and not manufacturing and process claims.13 Thus, under Judge Newman’s view, a biosimilar applicant must engage in the patent exchange procedure and must provide notice of commercial marketing after its application is licensed.
As a practical matter, the Federal Circuit’s holding gives a biosimilar applicant more control over the patent disclosure and litigation process. Biosimilar applicants who believe that their product does not infringe the reference product sponsor’s patents, or that such patents are invalid or unenforceable, may elect to avoid the patent exchange procedure and face a declaratory judgment action. Reference product sponsors will not have the benefit of the patent exchange procedure to learn about the proposed biosimilar product and its manufacturing process(es). Consequently, it will be more difficult for reference product sponsors to meet the heightened pleading requirements now required for a patent-infringement suit leading to potential motion practice.14
B. In The Absence Of Supreme Court Review, Notice Of Commercial Marketing Is Required And Is Only Effective After A Biosimilar Application Is Licensed By The FDA
The majority in the Federal Circuit opinion found that the statutory language in § 351(l)(8)(A) of the PHSA supported its second holding that a biosimilar applicant is required to provide the reference product sponsor with 180 days’ notice of commercial marketing, and that this notice is only effective after the biosimilar application has been licensed by the FDA. Section 351(l)(8)(A) provides that “[t]he 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).”15 The court relied on the use of the word “licensed,” which indicates that the biosimilar application must have already been approved.16
In finding that the notice of commercial marketing is mandatory, the court noted that “[p]aragraph (l)(8)(A) [of § 351 of the PHSA] is a standalone notice provision in subsection (l) . . . .”17 As a standalone provision, “nothing in subsection (l) excuses the [biosimilar] applicant from its obligation to give notice of commercial marketing to the [reference product sponsor] after it has chosen not to comply with paragraph (l)(2)(A).”18
Judge Chen disagreed with the majority that § 351(l)(8) of the PHSA is a standalone provision.19 In his view, when the statute is read as a whole, § 351(l)(8) “is simply part and parcel of the integrated litigation management process contemplated in (l)(2)–(l)(7).”20 Thus, if a biosimilar applicant fails to participate in the patent exchange procedure, the notice of commercial marketing provisions of § 351(l)(8) “cease to matter.”21 Accordingly, under Judge Chen’s view, a biosimilar applicant is either subject to all of § 351(l) or none of it.
In its petition, Sandoz contends that a biosimilar applicant should be permitted to provide the reference product sponsor with notice of commercial marketing prior to the FDA’s licensure of the proposed biosimilar application. Sandoz argues, “[t]he text and purpose of Section 262(l)(8)(A) [of Title 42 of the United States Code] call for notice 180 days before commercial marketing; nothing requires that the applicant wait until after FDA approval to provide that notice of commercial marketing.”22 Sandoz reasons that the statute’s use of the word “licensed” in 42 U.S.C. § 262(l)(8)(A) “merely refers to the biosimilar product that will be marketed, which will be licensed by the time of marketing,” and not that the FDA must first license the biosimilar application before an applicant can give notice of commercial marketing.23 Sandoz further argues that the Federal Circuit “compounded its error” of requiring notice after FDA approval by “disconnecting the notice provision from the BPCIA’s patent resolution regime and creating an extra-textual injunctive remedy.”24 Sandoz concludes that the Supreme Court “should grant review because the Federal Circuit has interpreted the BPCIA’s notice of commercial marketing provision so as to grant a 180-day ‘exclusivity windfall’ to reference product sponsors.”25
As it stands now, reference products that no longer have any statutory exclusivity remaining receive an extra-statutory exclusivity period of 180 days.26 By mandating 180 days’ notice after FDA approval, the Federal Circuit’s opinion provides reference product sponsors time to prepare a preliminary injunction motion and have it heard and decided by the district court before an at-risk launch of the biosimilar product.
If the Supreme Court were to grant certiorari on Sandoz’s petition and agree with Sandoz, biosimilar applicants could begin marketing their products immediately after their application is licensed by the FDA for reference products that are no longer protected by statutory exclusivity. This will require reference product sponsors to preemptively prepare a motion for a preliminary injunction. It would also add pressure on district court judges to quickly rule on a motion for a preliminary injunction since the biosimilar applicant is launching its product at risk.