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Supreme Court’s ‘Sandoz v. Amgen’ Decision Favors Biosimilars

September 18, 2017Articles New Jersey Law Journal

On June 12, the Supreme Court of the United States issued a unanimous (9-0) opinion in Sandoz v. Amgen (No. 15-1039), a highly anticipated case concerning key provisions of the Biologics Price Competition and Innovation Act (BPCIA), part of the larger Patient Protection and Affordable Care Act of 2009 (PPACA).

At the heart of the decision lay a fight between two major biopharmaceutical manufacturers over claims of patent infringement brought by Amgen Inc. against Sandoz Inc. on a blockbuster drug representing hundreds of millions in sales each year. Amgen has marketed filgrastim, a synthetically produced therapeutic protein, under the trade name Neupogen® since 1991, when it was approved for use by the Food and Drug Administration (FDA). In 2014, Sandoz sought FDA approval for a compound "biosimilar" to filgrastim, dubbed filgrastim-sndz, under the trade name Zarxio®.

Biosimilar compounds can be thought of as "generic" biopharmaceutical compounds that are "highly similar," structurally and functionally, to a previously FDA-approved "reference product" (as defined by the statute). Notably, Sandoz sought FDA approval for Zarxio® under the BPCIA, which sets forth regulations concerning an abbreviated approval pathway for FDA-approval of biosimilar compounds, as well as the procedural framework concerning patent litigation that arises from the filing of an application for a biosimilar compound. These patent regulations are often referred to as the "patent dance" due to the back-and-forth nature of sharing patent lists, confidential information, and resolution negotiations between the biosimilar applicant (termed "subsection (k) applicant" in the statute) and the patent holder ("reference product sponsor" in the statute).

The two provisions of the BPCIA at issue in Sandoz v. Amgeninvolved the mandatory nature (or lack thereof) of participating in the so-called patent dance and what remedies exist for failing to participate, as well as the timing of obtaining licensure (approval) by the FDA for the biosimilar, involving issues of providing notice of "commercial marketing" by the biosimilar applicant. Regarding the patent dance, the BPCIA provides in part that the biosimilar applicant shall provide to the patent holder "a copy of the [biosimilar] application" and "such other information that describes the process or processes used to manufacture the biological product." Regarding notice of "commercial marketing", the BPCIA provides that the biosimilar applicant shall provide notice to the patent holder "no later than 180 days before the date of the first commercial marketing of the biological product licensed under subsection (k)." The BPCIA is silent as to whether the notice of commercial marketing may occur prior to FDA-approval, or if it may only occur after.

Sandoz did not provide a copy of their biosimilar application or manufacturing data to Amgen, nor did Sandoz follow any of the patent dispute resolution procedures in the BPCIA. However, Sandoz did provide notice of commercial marketing to Amgen, but it was prior to the eventual FDA approval of Zarxio® in 2015. The only remedy for failing to comply with the patent dance explicitly set forth in the BPCIA is to immediately bring a declaratory judgment action. Amgen, however, brought suit against Sandoz in the Northern District of California (N. D. Cal), alleging patent infringement, seeking an injunction compelling Sandoz to comply with the patent dance framework, and additionally alleged several violations of California's unfair competition law due to Sandoz's "unlawful" conduct relating to the failure to comply with the BPCIA's patent dance and commercial marketing regulations.

More specifically, Amgen alleged that: participation in the patent dance is mandatory due to the presence of the term "shall" and should be enforceable by injunction; that a declaratory injunction is not the sole remedy for failing to participate in the patent dance; and that effective notice of commercial marketing cannot be given until after FDA approval has occurred. The issue of commercial marketing was of particular importance due to the 180-day waiting period set forth in the BPCIA. Under Amgen's interpretation, Sandoz could not have begun to market Zarxio® until at least six months after FDA approval, which would have extended Amgen's regulatory exclusivity (which is currently 12 years for new biologics under the BCPIA) by that much longer. Regulatory exclusivity is distinct from the exclusive rights granted in a patent, and refers to the FDA's ability to review and approve a biosimilar compound for commercial use, rather than the right of a patent holder to sue for patent infringement.

The district court sided with Sandoz on the above issues by denying Amgen's request for a preliminary injunction and dismissing the unfair competition claims, holding that the BPCIA's patent dance provisions are optional and that notice of commercial marketing does not require prior FDA-approval to be effective. The opinion stated that the existence of a remedy set forth in the BPCIA for failing to participate in the patent dance meant that participation was non-mandatory as the drafters of the BPCIA had provided for such instances. Furthermore, the notice of commercial marketing could be given prior to FDA approval, because it was "nonsensical" to suggest otherwise from both a "plain meaning" stance and because such an interpretation would impact regulatory exclusivity.

Amgen appealed the district court ruling to the Federal Circuit. The Federal Circuit, in a fragmented opinion, sided with Sandoz regarding the patent dance being optional, but sided with Amgen regarding the notice of commercial marketing, by reversing the district court and instead holding that the 180-day notice may not be provided before FDA approval. The Federal Circuit reasoned that requiring FDA approval, as a matter of policy, ensured "the existence of a fully crystallized controversy," preventing situations where the patent holder "would be left to guess the scope of the approved license and when commercial marketing would actually begin."

Amgen and Sandoz cross-petitioned for certiorari to the Supreme Court on the issues of the patent dance and commercial marketing, respectively. In an opinion that largely sided with Sandoz, the Supreme Court vacated-in-part the federal circuit's opinion, holding once again that participating in the patent dance is optional, the sole remedy for failure to participate under federal law is declaratory judgment as other federal remedies were precluded, and notice of commercial marketing may be given prior to, or after, FDA approval. The opinion largely resembled a condensed summary of the reasoning and arguments set forth in the district court opinion. However, the Supreme Court did leave open at least the possibility that an injunction might be available under the state (California) unfair competition laws. The Supreme Court thus remanded the case to the federal circuit to resolve whether or not any state law remedies were precluded under the BCPIA.

It remains to be seen if the Federal Circuit will find that the state cause of action is not pre-empted by federal law. As of August 2017, the Federal Circuit has received supplemental briefing from both Amgen and Sandoz on the state law issues. Assuming that it does not, overall the Supreme Court handed biosimilar applicants a major and decisive victory by siding with Sandoz. The biggest benefit to biosimilar applicants is almost certainly the holding that notice of commercial marketing may be given prior to FDA approval. As previously noted, had the Supreme Court sided with Amgen, the regulatory exclusivity for biologics, such as filgrastim, would have been extended by an extra half year (180 days), which could have meant tens to hundreds of millions of dollars in lost revenue for the biosimilar applicant.

For example, after the first four months on the market, Zarxio® had taken nearly a quarter share of the market. As regarding the patent dance, even when the framework is followed, the biosimilar applicant has a considerable degree of control. By allowing the patent dance to be optional, the Supreme Court essentially allows biosimilar applicants to direct the course of patent litigation. They may choose to either follow the framework and receive some of the benefits involved, such as controlling patent lists and gaining potentially greater regulatory exclusivity for the biosimilar (if interchangeable), or ignore the framework entirely and either defer or speed up the patent litigation, or seek alternate venues such as an inter partesreview (IPR), depending on the circumstances.

As biosimilar development continues to heat up at a rapid pace, there will undoubtedly be further developments regarding the BPCIA.

Reprinted with permission from the September 18 issue of the New Jersey Law Journal. (c) 2017 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.