This is a guest post by Katie Mladinich, a J.D. student at Stanford Law School. She received her Ph.D. in microbiology from the University of Wisconsin–Madison.
The Supreme Court will hear arguments this morning in its first cases involving the Biologics Price Competition and Innovation Act (BPCIA), Amgen v. Sandoz and Sandoz v. Amgen. Passed as part of the Affordable Care Act in 2010, the BPCIA was intended to create an FDA approval pathway for generic versions of complex biologic drugs, biosimilars, much as the 1984 Hatch-Waxman Act has facilitated generic approvals for small-molecule drugs. The BPCIA was a hard-fought legislative compromise between those favoring stronger incentives for biologic pioneers and those seeking to rein in spiraling healthcare costs with more affordable generic drugs. The statute resolved a number of key issues, such as setting a twelve-year data exclusivity period before a biosimilar may be approved, but the policy battle over many smaller details has now moved to the courts. Amgen filed suit against Sandoz for seeking approval of a biosimilar of Amgen’s filgrastim drug, Neupogen, based on two sections of the BPCIA. Amgen claims (1) that Sandoz failed to provide Amgen a copy of its abbreviated Biologics License Application (aBLA) as required to begin the BPCIA “patent dance” under § 262(l)(2)(A), and (2) that Sandoz did not grant Amgen the required 180-day notice of commercial marketing by providing notice prior to FDA approval as required by § 262(l)(8)(A). The Northern District of California ruled in Sandoz’s favor on both issues, but the Federal Circuit overturned the district court on the second issue—while quoting Churchill in describing the statute as “a riddle wrapped in a mystery inside an enigma.” The Supreme Court is now faced with unraveling this riddle.
Is the patent dance mandatory?
At the heart of the first issue of whether an applicant is required to give the original manufacturer its aBLA is the statutory interpretation of the phrase “shall provide.” Amgen argues that statutory text, statutory purpose, and legislative history all demonstrate that “shall provide” requires applicants to start the patent dance by providing manufacturers with their aBLAs. In particular, Amgen notes that § 262(l)(2)(B) contains text that says an applicant “may provide,” in contrast to § 262(l)(2)(A)’s “shall provide” language, and that § 262(l)(9) refers to “the application and information required under §262(l)(2)(A).” Both illustrate that “shall provide” was meant to be a requirement, not an option that applicants “may” choose to do. Furthermore, allowing applicants to withhold their aBLAs forces manufacturers to bring suit against any patents the manufacturer thinks the applicant may have violated. This outcome is counter to what Amgen claims is the purpose of the BPCIA, expediting the resolution of patent disputes. Finally, Amgen argues that in earlier drafts of the BPCIA, Congress used more permissive language, and therefore the meaning of “shall provide” must not be interpreted as such.
In contrast, Sandoz maintains that “shall provide,” when taken in the context of the entire statute, is a condition precedent to engage in the patent dance. The language provides an applicant the choice to participate in the patent dance. Other provisions specifically state the consequence should the applicant fail to provide its aBLA—the manufacturer may bring an infringement action under 42 U.S.C. § 262(l)(9)(C) and 35 U.S.C. § 271(e)(2)(C)(ii)—indicating that an applicant need not participate as long as it accepts this consequence. Furthermore, if “shall” were mandatory, then § 262(l)(6) would mean that manufacturer must bring a patent infringement suit against the applicant. Sandoz argues that this interpretation of “shall” cannot be right. However, Sandoz agrees with Amgen that if an applicant does choose to participate in the patent dance, then the applicant is required to provide the manufacturer with its aBLA. Sandoz argues that its interpretation of “shall provide” is consistent with its interpretation of the purpose of the BPCIA, to create pre-approval patent litigation proceedings. Lastly, Sandoz rejects Amgen’s reliance on unenacted bills as lacking persuasive significance in most circumstances.
The district court, the Federal Circuit, and the United States (as amicus curiae) all have been more persuaded by Sandoz’s argument, indicating the strength of this position on the legal merits. As a policy matter, however, it is not immediately apparent what impact such a holding would have. The option to withhold an aBLA seemingly benefits the biosimilar applicant because the aBLA will have proprietary information on the applicant’s manufacturing processes. However, in most cases, how § 262(l)(2)(A) is interpreted will merely delay the manufacturer from acquiring the applicant’s aBLA. Currently, if the applicant refuses to give their aBLA, the manufacturer may bring a patent infringement suit immediately. The manufacturer can then obtain the aBLA in discovery, as Amgen was able to do during the district court proceedings. What real benefit the applicant gains by withholding their aBLA for a few months before discovery is not clear.
May the 180-day notice-of-commercial-marketing period begin before FDA approval?
Under § 262(l)(8)(A), a biosimilar applicant must provide notice to the original manufacturer “not later than 180 days before the date of the first commercial marketing” of the biosimilar. The second issue before the Supreme Court is whether applicants must wait until after FDA approval to provide this notice, which would effectively provide the original manufacture with twelve years plus 180 days of exclusivity. Amgen relies on statutory arguments to defend its position. Specifically, Amgen argues that the use of the phrase, “biological product licensed under” in § 262(l)(8)(A) (emphasis added), indicates that Congress intended that the biosimilar must first be licensed before an applicant can give the manufacturer its 180-day notice. This additional 180-day exclusivity period further allows for the two distinct litigation phases provided by § 262(l) (immediate and later litigation) and therefore supports the “orderly, pre-launch” patent dispute resolution purpose of the BPCIA.
In contrast, Sandoz claims that the statutory text reveals that an applicant may provide the manufacturer notice prior to FDA approval. Instead of being used as a verb, indicating that the biosimilar must be licensed prior to notice, Sandoz argues that “licensed” in § 262(l)(8)(A) is used as an adjective to merely distinguish the biosimilar product from the manufacturer biologic product. Use of the term “applicant” instead of “holder” in § 262(l)(8)(A) further indicates that the biosimilar need not be licensed prior to notification. Thus, under Sandoz’s interpretation, an applicant need only provide the manufacturer notice “180 days before the date of the first commercial marketing.” The United States agrees with Sandoz’s interpretation in its amicus brief. Like Amgen, Sandoz argues that its interpretation does not preclude the purpose of the BPCIA, to facilitate patent disputes “before [FDA] approval.” Sandoz and Amgen therefore differ on when the BPCIA functions to expedite patent litigation, before FDA approval or before market launch.
The policy tradeoff involved with the Supreme Court’s decision on this issue is more straightforward than with the first issue. An extra 180-day exclusivity period equates to hundreds of millions or even billions of dollars in profits for the best-selling biologic drugs—a huge benefit for the companies that invest in bringing these high-cost, high-risk drugs to market, but also a huge cost for the consumers who are denied access to more affordable medication. Although the statutory text is far from clear, my guess is that the Supreme Court will overturn the Federal Circuit and prevent biologic manufacturers from claiming, as Judge Chen described in his dissent at the Federal Circuit, an “extra-statutory exclusivity windfall” that is separate from the original twelve-year compromise. Expanding access to biologic drugs was undoubtedly the goal of Congress when it enacted the BPCIA, and overturning the Federal Circuit on this issue will expedite biosimilar market entry.
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